Patrick Industries, Inc. (PATK)

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Patrick Industries, Inc. (PATK)

Q2 2014 Earnings Conference Call

July 29, 2014 10:00 AM ET


Julie Ann Kotowski – IR

Todd Cleveland – President and CEO

Andy Nemeth – EVP, Finance, CFO, and Secretary-Treasurer


Daniel Moore – CJS Securities

Scott Stember – Sidoti & Company



Good morning, ladies and gentlemen, and welcome to the Patrick Industries, Inc. Second Quarter 2014 Earnings Conference Call. My name is Christine and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. Please note that this conference call is being recorded.

I will 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 second quarter 2014 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 second quarter and six months 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.

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 second quarter and six month results for the period ending June 29, 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 continues to perform well during the quarter with increased revenues, improved profitability and cash flows and market share gains. On the top-line, we achieved net sales of a $188 million in the second quarter, an 18% increase over prior year. On the year-to-date basis we reported net sales of 358 million, a 19% increase from 2013. On the bottom-line, we reported net income per diluted share in the second quarter of 2014 of $0.86 compared to $0.70 in the same quarter of 2013. For the first six months, our net income per diluted share was a $1.50 compared to a $1.25 in 2013.

Turning to the performance of our market, the RV industry which represents approximately 75% of our second quarter and first six month 2014 revenue base experienced increased shipment levels in each month thus far in 2014 compared to 2013 and the RVIA recently increased its 2014 full year shipment projections from approximately 340,000 units to approximately 350,000 units.

As we discussed during our first quarter earnings call, the OEMs experienced weather related challenges primarily in the Midwest that cause production and shipping delays throughout the RV industry. For the most part these challenges were tempered by the end of the first quarter and into the first half of the second quarter as the OEMs continued to meet strong retail demand levels.

As it relates to the correlation between retail inventory levels and overall production levels, industry reports indicate RV dealer inventories continue to look to be in line with that of retail demand. We continue to believe that future looks promising for the RV industry based on the factors including shipment growth experienced over the last four years, positive industry demographic trends, anticipated increasing demand levels and improving strength of the overall economic environment.

As well we believe both the RV OEMs and the RV dealers either currently have or will be adding sufficient capacity to support the additional expected growth.

The manufactured housing or MH market, we estimate that wholesale unit shipments for the second quarter 2014 increased approximately 3% from the comparable 2013 period an increase of approximately 4% for the six months. As we emphasize in our last earnings call we felt that this industry was more maturely affected by the difficult weather conditions in the first quarter with strengthening in the seasonal patterns in the second quarter. 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.

Based on historical trends we believe there is the potential for the MH market to grow at a much higher rate in the future when compared to residential housing starts and continued to pent-up demand and single family housing. We also believe we are well positioned to capitalize on the upside potential in the MH market and are optimistic about the future of the industry, especially given the combination of our nationwide and geographic footprint available capacity in our current MH concentrated locations and our current content of nearly $1600 per unit,

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