Patrick Industries, Inc. Reports Fourth Quarter And Twelve Months 2009 Financial Results
Income from continuing operations in the fourth quarter of 2009 was positively impacted by a $0.6 million adjustment related to an intraperiod tax allocation between continuing and discontinued operations. The tax expense reflected in discontinued operations resulted in a like amount of tax benefit applied to continuing operations. No net tax benefit or tax expense resulted from the tax allocation on a consolidated basis. The income tax benefit for fourth quarter and twelve months 2008 reflected the establishment in the fourth quarter of 2008 of an $18.0 million deferred tax asset valuation allowance against all of the Company's deferred tax assets and virtually all state deferred tax assets. The tax valuation allowance was increased by $1.1 million in 2009 for deferred tax assets net of deferred tax liabilities.
The tax valuation allowance does not impact the Company's ability to utilize its net operating loss carryforwards to offset taxable earnings in the future. At December 31, 2009, the Company had a federal net operating loss carryforward of approximately $31.8 million that will not begin to expire before 2027.
Fourth Quarter Commentary
Net sales were $53.4 million in fourth quarter 2009 compared to $55.9 million in 2008. Net sales during the quarter benefited from an approximate 76% increase in RV wholesale unit shipments, which was partially offset by continued weakness in the MH and residential housing markets. MH unit shipments were down approximately 27% in the fourth quarter of 2009 compared to the prior year, representing the fifteenth consecutive quarter of declining shipments compared to prior periods.Operating income for fourth quarter 2009 was $1.9 million compared to an operating loss of $70.9 million in 2008. Fourth quarter 2008 operating income included non-cash impairment charges and inventory write-downs of approximately $64.0 million, of which $7.3 million negatively impacted gross profit. Focused reductions in fixed and variable overhead, selling, general and administrative expenses, and warehouse and delivery expenses contributed to the increase in operating income in 2009 compared to the prior year. Twelve Months Commentary Net sales were $212.5 million in 2009 compared to $325.2 million in 2008. Net sales were negatively impacted by the lagging impact of the credit crisis and overall economic uncertainty, restricted credit conditions, and low consumer confidence resulting in reductions in end market demand, particularly during the first three quarters of the year, and reductions in RV and MH retailer and manufacturer inventory levels. According to industry associations, RV wholesale unit shipments were down approximately 30% for twelve months 2009 compared to the prior year, while MH unit shipments were down approximately 39% for the same period. The RV and MH markets represent approximately 81% of the Company's consolidated sales in 2009. Operating income for twelve months 2009 was $1.3 million compared to an operating loss of $70.2 million in the prior year. Twelve months 2009 operating income included a $1.2 million pretax gain on the sale of fixed assets. The twelve months 2008 operating loss included non-cash impairment charges and inventory write-downs of approximately $64.7 million, and $1.7 million of restructuring charges and other acquisition and financing related costs that were partially offset by a $4.6 million pretax gain on the sale of fixed assets. Focused reductions in fixed and variable overhead, selling, general and administrative expenses, and warehouse and delivery expenses in 2009 helped to offset the decline in gross profit that resulted from lower revenues. "Throughout the majority of 2009, RV and MH retailers and manufacturers continued to aggressively manage their inventory levels in response to restricted credit conditions and weakening economic trends, which in turn reduced demand and negatively impacted the sale of Patrick's products. To keep in line with anticipated demand, the Company continued to take aggressive steps to reduce costs and preserve liquidity," said Mr. Cleveland. "In 2009, we proactively explored, initiated and completed a number of necessary cost reduction and efficiency improvement initiatives including the closing and consolidation of facilities, further reducing our workforce, and successfully completing the divestiture of certain non-core businesses including American Hardwoods and the aluminum extrusion operation. These initiatives were designed to reduce our leverage position, keep operating costs aligned with our revenue base, and keep our overhead structure at a level consistent with our operating needs given current economic conditions," Cleveland further stated. Liquidity and Capital Resources For the full year 2009, the Company paid down approximately $14.5 million in principal on its long-term debt. The debt payments were funded by the net proceeds from the sales of the American Hardwoods and Florida buildings and the aluminum extrusion operation, and by utilizing cash on hand. In addition, net proceeds of $3.0 million from the sale of the aluminum extrusion operation and cash on hand were used to reduce borrowings under the Company's revolving line of credit. In addition, during the first quarter of 2010, the Company sold its operating facility located in Woodburn, Oregon. Approximately $4.0 million of the net proceeds from the sale of this facility were used to immediately pay down principal on the Company's term loan. "As we navigate through 2010 in anticipation of improving market conditions in the RV industry, we continue to focus our efforts on debt reduction, cash management, revenue expansion and new product development. The sacrifices made by our team members, the continued support of our banking group, reductions in fixed and variable overhead expenses, available capacity, and production and cost efficiencies gained in the last 24 months, have positioned the Company to increase revenues in all of the markets that we serve upon improvement in the overall economic environment. We plan to vigorously work to improve our RV and MH unit content and expand our product offerings through the addition of new product lines and the execution of our organizational strategic agenda with a focused "customer first" performance oriented culture," said Mr. Cleveland.
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