Patrick Industries, Inc. Reports Third Quarter and Nine Months 2010 Financial Results

Oct 28, 2010, 08:03 ET from Patrick Industries, Inc.

ELKHART, Ind., Oct. 28 /PRNewswire-FirstCall/ -- Patrick Industries, Inc. (Nasdaq: PATK), a major manufacturer and distributor of building and component products for the recreational vehicle (RV), manufactured housing (MH) and industrial markets, today reported its financial results for the third quarter and nine months ended September 26, 2010.  

For the third quarter of 2010, Patrick reported an increase in net sales of approximately $14.5 million, or 25%, to $72.8 million from $58.3 million in the 2009 period, based largely on continued year to date strength in the RV industry.  According to industry associations, wholesale unit shipments in the RV industry, which represented approximately 56% of the Company's sales in the quarter, increased approximately 19% in the third quarter of 2010 compared to the prior year period.  The Company estimates that unit shipments in the MH industry, which represented approximately 30% of sales in the third quarter of 2010, were down approximately 1% from the third quarter of 2009.  The industrial market sector, which is tied to the residential housing market, accounted for approximately 14% of the Company's third quarter sales.  The quarterly and year to date sales increases also reflected the contributions of two acquisitions completed during the year.

The Company reported a net loss of $0.6 million or $0.07 per diluted share in both the third quarter of 2010 and 2009.  The third quarter 2010 net loss included a non-cash credit of approximately $0.1 million or $0.01 per diluted share related to mark-to-market accounting for common stock warrants.  The third quarter 2009 net loss included a non-cash charge of approximately $0.9 million or $0.10 per diluted share related to stock warrant accounting.  This non-cash charge was partially offset by the positive impact of income from discontinued operations of approximately $0.1 million or $0.01 per diluted share.

"While our sales levels improved in the quarter over the prior year, our operating results were negatively impacted by production inefficiencies and labor variances in one of our significant manufacturing operating units as a result of dramatic increases in total volumes from month to month at this facility.  As a result, our gross margin for the third quarter decreased to 10.7% from 12.7% in the 2009 quarter," said Todd Cleveland, President and CEO.  Mr. Cleveland further noted, "We have been vigorously working to manage these issues and made organizational changes to improve profitability at this facility on a go-forward basis.  Notwithstanding the issues related to this particular operation, we believe the impact of the acquisition of several new product lines during 2010, including the cabinet door business we acquired earlier this year, and the wiring, electrical and plumbing products distribution business we acquired at the end of August, will provide positive contribution to our operating profitability in the upcoming quarters.  In addition, we continue to gain product content per unit in the RV industry."    

For the first nine months of 2010, Patrick reported a 38% increase in net sales to $220.2 million from $159.1 million in 2009.  The RV industry, which represented approximately 58% of the Company's year to date sales, saw wholesale unit shipments increase 60% in the first nine months of 2010 compared to the prior year.  The Company estimates that unit shipments in the MH industry, which represented approximately 28% of sales in the first nine months of 2010, were up approximately 5% from 2009.  The industrial market sector, which accounted for approximately 14% of the Company's nine months sales, saw an increase in new housing starts of approximately 9% for the first nine months of 2010 when compared to the prior year.  The new housing starts increase is not expected to impact the Company's industrial revenue base until late in 2010 and into 2011 as our sales to this market generally lag new residential housing starts by six to twelve months.  

For the first nine months of 2010, Patrick reported net income of $2.2 million or $0.22 per diluted share reflecting an increase of $7.6 million, or $0.81 per diluted share, over the net loss of $5.4 million or $0.59 per diluted share reported in 2009.  Nine months 2010 net income included a net gain of approximately $2.8 million or $0.28 per diluted share, on the sale of the Company's Oregon and California facilities, and a non-cash credit of approximately $0.2 million or $0.02 per diluted share related to stock warrant accounting. The nine months 2009 net loss included a non-cash charge of approximately $1.3 million or $0.15 per diluted share related to stock warrant accounting, which was partially offset by the positive impact of income from discontinued operations of approximately $0.9 million or $0.10 per diluted share.

"We are pleased with our improved year to date profitability versus 2009 reflecting the impact of increased sales of approximately 38% and the related improved contribution as a result of the absorption of fixed costs over a larger sales base.  We remain focused on controlling our manufacturing and overhead expenses given the rise in demand for our products across all facets of our business and believe that we can accommodate a significant increase in revenues without adding significant incremental fixed costs," Cleveland further stated.  

"As anticipated, we expect conditions to soften in the RV and MH industries through the balance of 2010 due primarily to the normal seasonal cycle coupled with the stronger than expected ramp up in the beginning of the year.  We will continue to focus our efforts throughout the remainder of this year and into 2011 on sales growth levers that include market share growth, product development and new product introductions, and strategic acquisitions.  At the same time, we will continue to maximize our efforts on enhancing production efficiencies and controlling costs, and continue our focus on debt reduction, cash management, and improved net income. Moreover, the achievement of our organizational strategic objectives and success of our 'Customer First' performance oriented culture remain at the forefront of our vision at Patrick," said Mr. Cleveland.  

About Patrick Industries

Patrick Industries, Inc. (www.patrickind.com) is a major manufacturer of component products and distributor of building products serving the recreational vehicle, manufactured housing, kitchen cabinet, household furniture, fixtures and commercial furnishings, marine, and other industrial markets and operates coast-to-coast through locations in 12 states.  Patrick's major manufactured products include decorative vinyl and paper panels, wrapped profile mouldings, cabinet doors and components, interior passage doors, slotwall and slotwall components, and countertops.  The Company also distributes drywall and drywall finishing products, electronics, adhesives, wiring, electrical and plumbing products, cement siding, interior passage doors, roofing products, laminate flooring, and other miscellaneous products.  

Forward-Looking Statements  

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors.  Potential factors that could impact results include:  the impact of any economic downturns especially in the residential housing market, pricing pressures due to competition, costs and availability of raw materials, availability of commercial credit, availability of retail and wholesale financing for residential and manufactured homes, availability and costs of labor, inventory levels of retailers and manufacturers, levels of repossessed residential and manufactured homes, the financial condition of our customers, the ability to generate cash flow or obtain financing to fund growth, future growth rates in the Company's core businesses, interest rates, oil and gasoline prices, the outcome of litigation, adverse weather conditions impacting retail sales, our ability to remain in compliance with our credit agreement covenants, and our ability to refinance or replace our credit facility.  In addition, national and regional economic conditions and consumer confidence may affect the retail sale of recreational vehicles and residential and manufactured homes.  The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.  Further information regarding these and other risks, uncertainties and factors is contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and in the Company's Form 10-Qs for subsequent quarterly periods, which are filed with the Securities and Exchange Commission ("SEC") and are available on the SEC's website at www.sec.gov.





(thousands except  per share data)

THIRD QUARTER

ENDED


NINE MONTHS

ENDED

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Sept. 26,

2010


Sept. 27,

2009


Sept. 26,

2010


Sept. 27,

2009

NET SALES

$  72,785


$  58,342


$  220,150


$  159,135

Cost of goods sold

65,021


50,918


196,172


142,002

      Gross profit

7,764


7,424


23,978


17,133

Operating expenses:








   Warehouse and delivery

3,110


2,602


8,884


7,789

   Selling, general and administrative

3,785


3,045


11,190


9,669

   Amortization of intangible assets

125


87


377


263

   (Gain) loss on sale of fixed assets

26


(16)


(2,794)


(44)

       Total operating expenses

7,046


5,718


17,657


17,677

OPERATING INCOME (LOSS)

718


1,706


6,321


(544)

       Stock warrants revaluation

(127)


932


(192)


1,340

       Interest expense, net

1,474


1,599


4,348


5,036

Income (loss) from continuing operations before income tax benefit

(629)


(825)


2,165


(6,920)

       Income tax benefit

-


(77)


-


(564)

Income (loss) from continuing operations

(629)


(748)


2,165


(6,356)

Income from discontinued operations

-


203


-


1,486

      Income taxes  

-


77


-


564

Income from discontinued operations, net of tax

-


126


-


922

NET INCOME (LOSS)

$    (629)


$    (622)


$   2,165


$   (5,434)









BASIC NET INCOME (LOSS) PER COMMON SHARE:








     Continuing operations

$   (0.07)


$   (0.08)


$     0.23


$     (0.69)

     Discontinued operations

-


0.01


-


0.10

     Net income (loss)

$   (0.07)


$   (0.07)


$     0.23


$     (0.59)









DILUTED NET INCOME (LOSS) PER COMMON SHARE:








     Continuing operations

$   (0.07)


$   (0.08)


$     0.22


$     (0.69)

     Discontinued operations

-


0.01


-


0.10

     Net income (loss)

$   (0.07)


$   (0.07)


$     0.22


$     (0.59)









Weighted average shares outstanding – Basic

9,401


9,237


9,335


9,173

                                                                Diluted

9,401


9,237


9,869


9,173



(thousands)




CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Sept. 26,  

2010


Dec. 31,

2009


(Unaudited)



CURRENT ASSETS




 Cash and cash equivalents

$       903


$          60

 Trade receivables, net

20,437


12,507

 Inventories

26,120


17,485

 Prepaid expenses and other

1,923


1,981

 Assets held for sale

-


4,825

      Total current assets

49,383


36,858





Property, plant and equipment, net

23,957


26,433

Goodwill and other intangible assets, net

11,054


9,187

Deferred financing costs, net

391


1,463

Other non-current assets

3,147


3,096

     TOTAL ASSETS

$  87,932


$  77,037





CURRENT LIABILITIES




 Current maturities of long-term debt

$  18,925


$  10,359

 Short-term borrowings

23,000


13,500

 Accounts payable

12,385


5,874

 Accrued liabilities

7,578


5,275

     Total current liabilities

61,888


35,008





Long-term debt, less current maturities and discount

-


18,408

Deferred compensation and other

5,839


5,963

Deferred tax liabilities

1,309


1,309

     TOTAL LIABILITIES

69,036


60,688





SHAREHOLDERS' EQUITY

18,896


16,349

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$  87,932


$  77,037








SOURCE Patrick Industries, Inc.



RELATED LINKS

http://www.patrickind.com