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Patrick Industries, Inc. (PATK)
Q1 2014 Results Earnings Conference Call
April 24, 2014 10:00 AM ET
Julie Ann Kotowski - Investor Relations
Todd Cleveland - President and CEO
Andy Nemeth - Chief Financial Officer
Daniel Moore - CJS Securities
Scott Stember - Sidoti & Company
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I would now like to turn the call over to Julie Ann Kotowski from Investor Relations. Ms. Kotowski, you may begin.
Julie Ann Kotowski
Good morning, everyone, and welcome to Patrick Industries 2014 first quarter conference call. I am Julie Ann Kotowski, Patrick’s Director of Investor Relations, and I am joined on the call today by Todd Cleveland, President and CEO, and Andy Nemeth, CFO.
As you know, we published our earnings release earlier this morning. On the call today, we are going to discuss our first quarter 2014 results and provide an update on our business outlook and the markets that we serve. However, before we do so, it is my responsibility to inform you that certain statements made in today’s conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the securities laws.
As a result, I must caution you that there are number of factors many of which are beyond the company’s control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors are identified in our press releases, our Form 10-K for the year ended 2013, and in our other filings with the Securities and Exchange Commission.
Also please note that certain financial numbers we may use on this call, such as adjusted net income and the related diluted earnings per share amounts are non-GAAP measures. We undertake no obligation to update these statements after this call. Copies of documents filed with the SEC may be obtained from the SEC or by visiting the Investor Relations section of our website.
I would now like to turn the call over to Todd Cleveland.
Thank you, Julie Ann and thank you all for joining us on the call today. This morning I would like to briefly discuss the company’s first quarter results for the period ending March 30, 2014 in the major markets we serve. Andy will then provide specific details on our financial performance and I will conclude by providing an update on our business outlook.
The company continue to perform well during the quarter with increased revenue, improved profitability and cash flows and market share gains. On the top-line, we achieved net sales of a $170 million in the first quarter, a 20% increase over the prior year. On the bottom-line, we reported net income per diluted share in the first quarter of 2014 of $0.64 compared to $0.55 in the same quarter of 2013.
Turning to the performance of our markets. The RV Industry which represents more than 75% of our first quarter 2014 revenue base started off the year as expected with increased shipment levels in each month in the first quarter over the prior year. The inclement weather conditions in the Midwest and some of our regional locations did have an impact on our shipping days during the quarter as we and other suppliers and OEMs were forced to deal with winter weather conditions to cause up to 4 days where we could not run production on certain plants. The RV OEMs continue to push production into the weekends over the course of the quarter to be able to meet strong retail demands. We’re anticipating that these production schedules will carry into the second quarter.
Additionally, another challenge that the OEMs are currently dealing with is the shortage of drivers to transport units to the retail lots. While we have not noticed a significant impact at this point, we will continue to monitor the situation.
As it relates to the correlation between retail inventory levels and overall production levels, industry reports indicate the RV dealer inventory levels continue to look to be in line with that of retail demand. We continue to believe that the future looks promising for the RV industry based on factors including shipment growth experienced over the last four years, positive industry demographic trends, anticipated increasing demand levels and improving strength in the overall economic environment among others. As well we believe that both RV OEMs and RV dealers either currently have or will be adding sufficient capacity to support the additional expected growth. The manufactured housing for MH market began the year with a reasonably solid start as evidenced by the estimated 4% increase in wholesale unit shipments from the first quarter of 2013, especially when compared to the first quarter of 2013, where shipments increased only 0.2% from 2012.
We believe this industry was more materially impacted during the first quarter from the difficult weather conditions and expect stronger seasonal patterns in second, third quarters when compared to the 2014 first quarter activity. Additionally, we expect to see continued year-over-year improvement with limited downside risk in the near term especially if volumes maintain their historical relationship with new housing starts.
Historically MH unit shipments have averaged approximately 10% of single family housing starts over the last 10 years and therefore we believe there is a potential for this market to grow at a much higher rate in the future, especially given historical trends when compared to residential housing starts and continued pent-up demand in single family housing.