Good morning, ladies and gentlemen, and welcome to the Patrick Industries Inc. Third Quarter 2015 Earnings Conference Call. My name is Yolanda, and I’ll 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 would now turn the call over to Julie Ann Kotowski from Investor Relations. Ms. Kotowski, you may begin.

Good morning, everyone, and welcome to Patrick Industries' Third Quarter 2015 Conference call. I'm joined on the call today by Todd Cleveland, President and CEO and Andy Nemeth, CFO. On the call this morning, we are going to discuss our third quarter and nine months 2015 results and provide an update on our business outlook in 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 2014, and in our other filings with the Securities and Exchange Commission. Also please note that certain financial measures 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. 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 will be discussing the company's third quarter and nine month results for the period ending September 27, 2015, and then provide an update on 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. Overall, we’re pleased with the company's performance as the industries that we serve continued to improve. The third quarter of 2015 reflected a normal seasonality trends that we anticipated in the three primary markets, and in particular, the changing demand patterns resulting from the start of the dealer show season for 2016’s model year units in the RV industry. On the top line, our revenues increase 14% in the third quarter and 23% for the first nine months over the prior year periods, with annualized consolidated revenues pushing over $1 billion. On the bottom line, our net income per diluted share in the third quarter and for the first nine months of 2015 grew 29% and 34%, respectively. We also continue to gain market share in all the industries we serve, as well as successfully integrating the acquisitions we completed over the past two years. On the RV side of the business, which represents our largest market comprising approximately 72% of our revenue, we continue to increase our overall content per unit product offering and market share. Both dealers and OEMs reflected positive sentiment during the recent RV manufacturer open house that were held in Elkhart, Indiana in late September. In late October, we began to see normal seasonal demand patterns and order rates start to increase. We currently expect continued momentum in the industry and project a slight tick-up in…

Thanks Todd, and welcome everyone. I would now like to review some highlights of our financial results for the third quarter and first nine months of 2015. Our net sales for the third quarter of 2015 increased approximately $27 million or 14% over the prior year period to $215 million, reflecting a combination of industry, acquisition and market share growth, which was partially offset by the continued mix shift towards smaller units in, both towables and motorized sectors of the RV industry and declines in certain commodity input costs which were passed onto customers late in the second quarter and through the third quarter. Our RV revenue base, which accounts for approximately 72% of our third quarter sales, was up approximately 13% in the third quarter of 2015 over the prior year, reflecting a 4% increase in wholesale unit shipments during the quarter, coupled with continued acquisition and overall content growth. Our RV unit content on a TPM basis grew 17% from $1,488 per unit in 2014 to $1,739 per unit in 2015. Our MH revenue base which accounts for approximately 16% of third quarter sales, continued to outpace the industry, increasing 14% for the quarter, on estimated unit shipment improvements of approximately 8%. Our content per unit continues to strengthen and show positive trending as our MH unit content on a TTM basis increased 13%, from $1,614 per unit in 2014 to an estimated $1,817 per unit in 2015, reflecting additional market share gains and penetration with our existing customer base. We continue to be well-positioned for improvement in this market sector as the MH industry continues to recover. Our industrial revenue base, which accounts for the remaining 12% of third quarter sales, was up approximately 26% the third quarter of 2015 over the prior year, as our industrial…

Thanks, Andy. Overall as I previously noted, we're pleased with the operating results for the first nine months of 2015 and our business outlook for the remainder of 2015 is positive as we are optimistic about the future of all three of the market sectors, both in the short and long-term. As the RV lifestyle continues to attract new buyers in the market, particularly in North America, our team continues to be focused on meeting the needs of all of our customers and is well positioned to meet challenges head-on with the goal of always striving to provide the highest level of customer service and high-quality innovative products. Our execution goals for 2015 and beyond continue to be focused around driving our organizational strategic agenda and utilizing our capital allocation strategy to drive shareholder value by increasing the top line, both through acquisition and organically, and generating improved operating income, net income, earnings per share and free cash flow. In addition, I believe the ongoing support that we received from our Board of Directors, our five banking partners, our 3,800 plus team members and our customers who we're privileged to serve have afforded us the opportunity to be a successful organization in the marketplace today and on an ongoing basis. I'm confident in our ability of our management team and all our team members to continue to execute on our strategic plan and take the company forward, and continue to provide shareholder value. This is the end of our prepared remarks. Thank you for your time today. We're now ready to take questions.

Thank you. My name is Richard and I’ll be moderating the question-and-session for today’s call. [Operator Instructions] And our first question on the line comes from Mr. Dan Moore from CJS Securities. Please go ahead.

Good morning. Thanks for taking the questions again.

Good morning Dan.

If I missed it, I apologize. How much revenue did North American Forest products contribute during Q3?

We just had one month - Dan, this is Andy - of North American, and just a partial month of that. So approximately $12 million of revenue during the month.

Got it. And then, maybe just talk a little bit more broadly about that acquisition. You talked about the opportunity to expand further geographically in softwood, may be elaborate on that opportunity and how that product set in end-markets fits into your like legacy businesses?

Sure Dan, this is Andy again. So there is two components to the North American acquisition. There is the primarily lamination segment of that business and then there is the softwood component which we've talked about. The lamination component is clearly in our legacy business fold. We've been doing that for years and years. We know that business very well. So that opportunity to continue to harmonize between us as it relates to just the market knowledge that we have in that particular market is we feel very strong. And then the real opportunity though to expand is in the softwoods, where that business is primarily just located here in the Midwest. We've got operations out in the West Coast and regionally that we clearly have opportunity to take that profile and move it out to those locations. So we're very excited about that opportunity.

Okay, helpful. Appreciate it. I know you don't give guidance, maybe just discuss a little bit more near-term, what you're seeing in terms of the pick-up in orders post the RV open house, and then contrast that with the fact that last year shipments were up 20% for the industry in terms of towables for Q4. Do you still expect that sort of pull forward demand, is it too early to tell, maybe just talk about some of the crosscurrents we should expect over the next couple of months?

Sure. So we've heard a lot of excitement coming out of the September show season from virtually all the OEMs. We've seen the normal uptick in run rates and production rates for the first month of October so far. So we’re anticipating that we’ll continue to see improvement year-over-year for the fourth quarter. At this point, I think it's a little early to tell whether we'll see the same growth rates that we saw last year in November and December, but our expectation is that we will see this continued slow and steady growth year-over-year.

Very helpful. And one more and I'll jump back in queue. You’re seeing really good market share gains in MH. How much of that is from acquired products versus penetrating new customers, just talk about that opportunity and how you've been able to grow your content there?

Most of that content, Dan, is organic growth. There has been very little MH acquisition revenue that we've acquired. Most of the acquisition revenues have been in the RV marine and industrial side of the business. So virtually all of it is - I won't say all of it is, but most of that business is organic.

Okay. And last one and I'll jump back in queue. SG&A was lower than we've modeled. Expense controls remain really, really strong. How much of the million-five or so year-over-year increase in SG&A was organic and how much was acquired, and obviously it sounds like you still expect to see additional synergies or operating margin upside going forward. Maybe just talk about that a little bit?

Yes, we don't disclose separately all our acquisitions combined as it relates to the increment from an operating expense perspective. However, what I tell you is we expect to continue to be able to operate between the lines for the controllable items that we have. And so our expectation is that we'll continue to able to be delever operating expenses in line with our revenue stream up or down.

Okay. Thank you again. I'll jump back in queue.

Thank you. [Operator Instructions] Our next question on line comes from Mr. Scott Stember from C.L. King. Please go ahead.

Good morning.

Good morning, Scott.

Did you guys disclose how much acquisitions from a revenue standpoint contributed in the quarter?

We did not. It's part of our overall content growth, so we did not disclose acquisition growth.

Okay, got you. And you made a comment about the - or at least in the press release there was commentary about price givebacks, I guess, you could say, because of raw materials. It sounds like it started late second quarter. Can you maybe just talk about the extent of that? How much that cut into your organic growth and maybe what we should be looking for in the magnitude of that going forward?

Yes, Scott, I'll talk a little bit about what we’ve seen and then as it relates to how it impact us financially, I'll let Andy talk a little bit about that. But overall we’ve seen commodity price decreases in almost all of our raw materials as you might expect, vinyl [ph] aluminum and the softwoods as that came through on the North American side, all impacted it. On a go forward basis I think we're going to continue to see softer raw material prices going forward, but as it relates to the overall impact, I can let Andy give your perspective on that.

Yes. So Scott, the preponderance of the organic growth and decline as it relates to just an organic perspective is really attributable to the kind of move towards lower end units and decontenting of the units as we are seeing them. Like we've talked about in our news release, that's the biggest thing that's impacted us. From an overall market share perspective, we've not lost market share. And we've had a little bit of impact in Q3 as it relates to the commodity price declines, but it's the preponderance of it again has been really due to lower end and smaller units. And so again from our perspective that’s something that we continue to manage on the commodity side of the business as it relates to the price increases are declines, we've passed those onto our customers. So those are things that have nominally impacted Q3 but most of it’s been really the decontenting as we've seen it.

Okay, got you. And just - again maybe just looking at all of your acquisitions, I know that the last one that you had made is a biggie. It's probably one of the biggest ones that you've ever made. And maybe just talk about - I know you just made some commentary about the margins and what to expect going forward, but what the overall view is from an operating margin standpoint with the acquisitions in place and over time that the potential from synergies that you can get out of that?

Sure. So this is Andy again. As it relates to our overall acquisition model, there are certainly opportunities as we view each acquisition to be able to capitalize on synergies, whether it be cost reduction synergies or operational synergies based on our knowledge and know-how from an operating perspective. So we expect to continue to be able to drive operating margins on a go forward basis and drive incremental operating margin improvement on a go forward basis with all of our acquisitions and as a consolidated group as a whole.

Got it. And that's it I have all for right now. I'll get back into the queue. Thanks a lot.

Thanks.

Thank you, Scott.

[Operator Instructions] We have Mr. Stember in line with a question. Please go ahead.

Yes, this relates to the industrial side of the business. You continue to put up really, really strong numbers there. Maybe just talk about - obviously you're growing in line with what we’re seeing in the new housing starts, but maybe talk about some of the other verticals. I know that office furniture has been an area that you've been moving into. Is there anything else that's coming to the fold that's helping to push that needle going forward?

This is Andy again. Yes, it's - we've been really focused on the commercial fixtures and office furniture side of the industrial market. So we’re seeing obviously the growth in the residential housing side, which we expect to participate. Again, both in new construction and remodel, and as well, we participate in both single and multi-family on that side. So that's been solid but really where we've seen the most growth so far has been our penetration into the commercial fixture and furniture side. So our team has been aggressive. We expect to continue to drive those revenues. We're really pleased with what’s been going on the industrial side of the business.

Okay. And one final question on the acquisition environment. Could you maybe just talk about what your pipeline looks like just compared to where it’s been in the past of potential candidates and your appetite for making acquisitions versus paying down debt in the near-term?

Yes, this is Todd. Obviously spent most of the third quarter working on the North American deal and then integrating in. And that's kind of our plan really kind of for the next couple of months as to make sure the cultures and the synergies realizations that we believe are there, we capitalize on. We've continued to analyze acquisitions both on the RV and industrial space through the third quarter in addition to North American and we continue to look at things today. But I would say also that our focus is making sure we are able to maximize the synergy values, not only in the North American deal but also in the other acquisitions that we made in 2014 and ‘15. As it relates to the pipeline, there continues to be opportunities out there. I think it’s just evaluating the value through acquisition strategy of understanding what it brings to the table and where it falls in line compared to what we can do internally. Obviously we are going to continue to evaluate acquisitions on a go-forward basis, and if one comes along, I’d anticipate us taking advantage of it if we believe it's right.

Scott, I'll add something as well from a leverage perspective. Consistent with our plan and our strategy, even with the North American acquisition which we just recently completed, we've been able to delever very quickly post-closing on the acquisition as well. So we are back into a place where we are comfortable from a leverage position. We continue to execute on our ability to generate the cash flows we need to be able to manage that leverage position. So from an overall debt perspective, we are going to continue to utilize balance of paying down debt but certainly we’re hoping and looking at actively evaluating acquisitions even at this time. So we’re back in the place where we are comfortable making acquisitions if one comes along here.

Great. That's all I have. Great job, and thanks for taking my calls - my questions.

Thank you.

We have a follow-up question from Dan Moore. Please go ahead.

Thank you. Just to follow-up on that line of thought, in terms of prior to North American Forest, you had been buying back stock at a regulator clip. Is your leverage down to a place where you'd be comfortable once again being opportunistic to get your own stock becomes, let's say, more attractive at a potential acquisition candidate?

The answer is yes. We continue to keep our capital allocation strategy in balance and be opportunistic in all three areas that we’ve talked about. So at the end of the day, our perspective is that we’re going to continue to be opportunistic. We're going to continue to do what’s right as it relates for our capital allocation strategy and we're definitely in a place today where we can execute on utilizing that balanced approach on all three of the primary initiatives in that strategy. So we’re not precluded, and the answer is yes, we are looking at all three options.

And then one more. Just going back to the mix shift and maybe putting a little bit of pressure on content, at least in the very short run. Longer term perspective, remind us, since we are still in baseball season, what inning you think we’re in terms of Patrick’s ability to drive increased content per RV over the longer term?

This is Todd. I think we are still in a very good position to do so. Obviously we've proven that we can do that over time and there is still ample products that are out there to take advantage of on the RV side. As it relates to innings, I think I would say late seventh inning, early-eighth inning, as it relates to the numbers go. I think we truly believe that with the new buying groups coming in, younger buyers coming into the mix, baby boomers that are retiring on a daily basis, it's really positioned the industry well to continue to grow even past - significantly past prior peaks and you couple that with - the great job that RV has done and promoting RV as a lifestyle think are seeing a lot of that going on today and I think we'll continue to see it in the future.

Just to clarify the innings that you mentioned, that refers to the industry ship - overall industry shipments but your content as you mentioned still a fair amount of runway. Is that a fair assessment?

That's correct.

Okay, thanks. Once again appreciate it. Good quarter.

Thank you.

[Operator Instructions] We have no further questions at this time. I would like to return the presentation back over to Julie Ann Kotowski.

Thanks Richard. We appreciate everyone for being on the call today and we look forward to talking to you again in our fourth quarter 2015 conference call. A replay of today's call will be archived on Patrick's website www.patrickind.com under Investor Relations. I will now turn the call back over to our operator.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.