PATRICK INDUSTRIES, INC. is a manufacturer and supplier of building products and materials to the manufactured housing and recreational vehicle industries. In addition, they are expanding as a supplier to certain other industrial markets, such as furniture manufacturing, marine and the automotive aftermarket. They manufacture decorative vinyl and paper panels, cabinet doors, countertops, aluminum extrusions, drawer sides and wood adhesives. Patrick Industries Inc. has a market cap of $22.3 million; its shares were traded at around $2.45 with and P/S ratio of 0.1.
Highlight of Business Operations:In July 2009, the Company completed the sale of certain assets of its aluminum extrusion operation. Certain accounts payable and accrued liabilities totaling approximately $1.7 million were assumed by the buyer pursuant to the definitive purchase agreement. Net cash proceeds from the sale were $7.4 million. In the third quarter of 2009, approximately $4.4 million of the net cash proceeds were used to pay down an additional $1.1 million in principal on the Companys term loan and pay off the remaining $3.3 million of principal on the Economic Development Revenue Bonds related to this facility. The remaining $3.0 million of proceeds were used to reduce borrowings under the Companys revolving line of credit. The Company recorded a pretax gain on the sale of approximately $0.5 million for the nine months ended September 27, 2009.
Cost of Goods Sold. Cost of goods sold declined $17.5 million or 25.6%, to $50.9 million in third quarter 2009 from $68.4 million in 2008. For the nine months ended September 27, 2009, cost of goods sold decreased $96.5 million or 40.5%, to $142.0 million from $238.5 million in the prior year period. For the quarter and year-to-date periods, the cost of materials purchased declined by approximately $15.1 million and $83.3 million, respectively, in correlation to the impact of lower sales volumes. In addition, a reduction in direct labor costs of approximately $1.0 million and in total overhead expenses of approximately $1.4 million contributed to the decline in cost of goods sold during the third quarter of 2009. As a percentage of net sales, cost of goods sold during the quarter decreased to 87.3% from 89.2% reflecting improved raw material pricing and improved production efficiencies.
Gross Profit. Gross profit decreased $0.8 million or 9.2%, to $7.4 million in third quarter 2009 from $8.2 million in 2008. As a percentage of net sales, gross profit increased to 12.7% in 2009 from 10.7% in the same period in 2008. For the nine months, gross profit decreased $12.9 million or 42.9%, to $17.1 million in third quarter 2009 from $30.0 million in 2008. As a percentage of net sales, gross profit decreased to 10.8% in 2009 from 11.1% in the same period in 2008. The change in gross profit from period to period is attributable to the factors described above.
SG&A expenses decreased $9.6 million or 49.8%, to $9.7 million in the first nine months of 2009 from $19.3 million in 2008. As a percentage of net sales, SG&A expenses were 6.1% in 2009 compared to 7.1% in 2008. Administrative, office, and sales wages declined approximately $5.8 million in the nine months primarily reflecting the reductions in base compensation mentioned above. The decrease in SG&A expenses was partially offset by a $0.8 million increase in the allowance for doubtful accounts in the first nine months of 2009. SG&A expenses in the first nine months of 2008 included the impact of $0.3 million in costs associated with certain vesting of employee retirement obligations incurred as a result of the change of control provisions associated with the completion of the rights offering in June 2008, and stock compensation of $0.4 million related to attaining certain milestone objectives as mentioned above.
For nine months 2009, after-tax income from discontinued operations was $1.5 million or $0.16 per diluted share which was comprised of $0.8 million of income from operations related to the aluminum extrusion operation, and a $0.7 million net gain related to the completion of the two divestitures. For nine months 2008, after-tax income from discontinued operations was $0.2 million or $0.02 per diluted share. See Note 3 to the Condensed Consolidated Financial Statements for further details.
Net Loss. The net loss was $0.6 million or $0.07 per diluted share for third quarter 2009 compared to a net loss of $2.3 million or $0.26 per diluted share for 2008. For the nine months, the net loss was $5.4 million or $0.59 per diluted share in 2009 compared to a net loss of $2.3 million or $0.31 per diluted share in 2008. The changes in the net loss reflect the impact of the items previously discussed.
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