Good morning ladies and gentlemen and welcome to the Patrick Industries Inc. First Quarter 2017 Earnings Conference Call. My name is Jason and I will be your operator. 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 is being recorded. I will 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' first quarter 2017 conference call. I am joined on the call today by Todd Cleveland, CEO; Andy Nemeth, President; and Josh Boone, CFO. Certain statements made in today's conference call regarding Patrick Industries and its operations may be considered forward-looking statements under the security's laws. There are a number of factors, many of which that 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 2016, and in our other filings with the Securities and Exchange Commission. We undertake no obligations to update these statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. 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 we would like to discuss the company's first quarter 2017 results and provide an update on the major markets we serve. I will then conclude by providing an update on our overall business outlook. The first quarter of fiscal 2017 started out strong and right in line with our expectations. We're very pleased with our revenue and profitability growth which reflected the continued successful execution of our strategic operational and tactical initiatives and the positive impact of robust demand patterns in the RV and MH industries. On the topline, our revenues increased 24% and our net income per diluted share was $1.12 representing a 32% increase from the prior year period. These improvements to both the top and bottom line also reflected the achievement of certain synergies related to the successful integration of eight companies we acquired in 2016 and the focus and dedication of our 5000+ team members on assuring that our customers are always our top priority and are provided the highest level of quality service. As we anticipate, continued retail demand strength heading into the height of the RV selling season and a current tailwind in the MH industry, we expect continued improved performance in execution on our 2017 organizational strategic objectives. Now, I'll turn the call over to Andy who will further review our markets and performance.

Thank you, Todd. Our first quarter results are reflection of and are consistent with the strong start to the year in all three of our primary markets. In addition to our ongoing efforts thus far in 2017, to strategically invest in capacity, talent engagement and retention and certain overhead to support the growing demand in expectations in all three primary markets we serve. Fresh off of the 2016 year with RV wholesale shipments at their highest rate than any other time in the past 40 years. The first quarter of 2017 continued to outperform with strong retail shows and favorable demographic patterns continue to drive and support increased production levels. Full-year RV shipments are as well expected to once again increase in 2017 versus 2016 which if achieved will mark the eight consecutive year gains. Economic indicators including equity market strength, consumer confidence and housing starts all support continued strength in the space and demographic patterns including increased participation in the RV and leisure lifestyle industries by the two largest generations in U.S. history, retiring baby boomers and first time millennial buyers who continue to drive we believe is an extended runway for further upside trajectory in the space. Current estimates indicate that the number of consumers between the ages of 55 and 74 is projected a total 79 million by 2025, a 15% increase over 2015. While the number of consumers between the ages of 30 and 45 will total 72 million or 13% higher than 2015. Indicators including improving consumer credit, low in employment, wealth creation and continuation of wage and job growth further support the recreational leisure lifestyle. The MH industry appears to be gaining strength and began fiscal 2017 in similar fashion as it did in 2016 with a strong start to the year. Unit shipments…

Thanks, Andy. Our net sales for the first quarter increased $67 million or 24% over the prior year period to $345 million, reflecting growth in all three of our primary markets, the impact of acquisitions completed in 2016, as well as market share, geographic and product expansion efforts. In an immaterial impact to our first quarter revenues due to the timing of our latest acquisition of Medallion Plastics which occurred in the latter half of March 2017. Our RV revenues were up 21% in the first quarter, reflecting an increase in wholesale shipments at 12%. On a trailing 12 months basis our RV content per unit increased 14% from $1,904 per unit to $1,167 per unit. Our MH revenues increased 36% for the quarter on estimated unit shipment equipment of 20%. Our MH content per unit on a trailing 12 months basis increased an estimated 14% from $1,787 per unit to $2,044 per unit. And finally our industrial revenues were up 35% in the quarter, the increased industrial revenues were driven by a steady increase in new housing starts up 8% for the first quarter of 2017, the acquisitions we completed in 2016 in our continued focus on leveraging growth synergies across the organization expanding our product portfolio and entering new markets in geographic regions. Our gross margin in the first quarter was 16.7% up 40 basis points from 2016. Factors contributing to the increased gross margin include the leveraging of our fixed cost on increased revenues certain 2016 acquisition gross margin profile and related revenues and the ongoing effects of our deployment of strategic capital investments which began in the second half of 2016 designed to continue to open up capacity in our growing markets and help combat a tight labor market in particular the Midwest. We expect to…

Thanks Josh. As we've discussed, first quarter of 2017 represented a solid start to the fiscal year and we continue to be optimistic about the opportunities to strategically grow our business, gain market share and expand our operations into targeted regional territories all of which will ultimately drive shareholder value. The positive demographics, strong retail trends and demands in the leisure and recreational lifestyle markets and consumer confidence all play significant role on the ongoing [indiscernible] we anticipate. As we look toward to the rest of the year, we expect to continue to make capital investments to support our existing and new business initiatives provide capacity to support our customers as they continue to expand their operations and maintain a balanced approach to leveraging our operating platform with the goal of broadening our sales and innovation efforts introducing new products and product line extinctions and executing on our organic and acquisition related objectives. Additionally, our geographic expansion initiatives and those of our customers will allow us to continue to fully support our customers with additional value added products and services and as well capitalized in the commercial and industrial synergies in selected regions to support the growth of our company. Our acquisition pipeline is full of opportunities to continue to drive our brand value proposition that is centered around fostering and supporting the entrepreneurial spirit that has been paramount to the industries we serve. Our focus on the successful integration of the nine companies we acquired in aggregate between 2016 and thus far in 2017 as well as others acquired over the past several years has resulted in synergy realization, organic market share growth, creation of earnings and the addition of high quality team members to the Patrick organization. In addition, it is the extreme talent, dedication, strength and abilities of our team members that allows us to continue to execute on our strategic plan and facing the challenges head on with the ultimate goal to always serve our customers at the highest level and provide quality service and shareholder value for the years to come. This is the end of our prepared remarks. Thank you for your time today. We are now ready to take questions.

Thank you. We will now begin the question and answer session. [Operator Instructions] And our first question comes from Scott Stember from C.L. King & Associates.

Good morning gentlemen and congrats on a nice quarter.

Thank you, good morning.

Could you talk about the incremental acquisition revenue that took place in the quarter just trying to nail down what the organic sales were in the quarter?

Yes, Scott this is Josh. So, our organic revenues net of acquisitions were 12% and organic net revenue net [indiscernible] in industry growth is estimated about 1%. So I will pick up a point there even with smaller less expensive shipments kind of leading the growth year-over-year.

And maybe just talk about that point a little bit we see that the fifth wheel shipments have been perking up as of late, what are you seeing as we stand right now as far as the orders that are coming in from OEM customers? Is it fair to say that we've seen the worst of that impact and maybe just where things stand right now?

Yes, Scott this is Todd. I would say that the worst is probably behind us. I do think that demand in smaller units continues to be the significant driver right now with first time buyers coming in and the exciting thing as we've talked about is the future here as the first time buyers looked upgrade but I do think with the uptick that we've seen and kind of consistency of dealer inventories I do believe that the worst is behind us as far as percentage and we think the lower end units are going to continue to dominate.

Okay and just a couple last ones, I know the geographical expansion has been big emphasis for you guys. Can you maybe talk about where we stand with that? How much of we've seen over the last couple of quarters and what lies ahead?

Josh, this is Andy. We're continuing to gain traction on the geographic expansion. We're out in Idaho when we're fully up and running down there more in the Southeast as well with [indiscernible] service and as well in Southern California. So I would say from a maturity perspective of those expansion initiatives we started those, really started getting those from in the first quarter and second quarter of last year and so continuing to gain traction as well we're going to we're moving into some expansion issue that as well. So we expect to continue to traction as we move through ’17 here and really starting to pick up in the second quarter and third quarters.

Okay, this last question on operating expenses. You outlined some of the factors which have gone into the rise that we saw this last quarter, can you may be just talk about the timing and when you think that some of these costs will abate and just overall for the full year what your expectations are for the operating margin as a whole?

Sure Scott. This is Andy again. When we kind of look at it as a rise in the first quarter we really were positioning ourselves to continue to be able to execute on our strategic plan and so we put some things in place applied to talent planning and retention and we put some compensation or some equity incentive plan in place for our team members and so we really kind of invested especially as we think about in addition to the equity offering that we did on the expansion of the credit facility, and we really looking forward to the future and the opportunities in front of us. So we expect these things to gain traction here pretty quickly and started to begin to abate here in Q2 and Q3.

That’s all I have. Thanks for taking my questions.

Thank you and our next question comes from Tim Conder from Wells Fargo Securities.

Thank you and gentlemen congrats on a great quarter. A couple of here to follow up on Scott's questions. Can you quantify the year over year impact of those incremental initiatives that flow through the P&L here whether it's on the labor front whether it's the other things to help expand capacity, enhance capacity again the things that flowed through the P&L not necessarily on the capital side?

Yes, this Josh. So the strategic CapEx we invested that we have talked about of last year and continue to invest in the first quarter here. We really felt the effects of that the benefit on the gross margin line have not alleviated all of it so I would say there was a 20 basis point impact negatively to the gross margin line that we feel like will continue to realize the benefit of that investment throughout the remainder of the year.

The 20 basis point Josh in the quarter here or on a year-over-year basis?

On a year-over-year basis in the quarter correct, negative.

And then what about…

I am sorry, go ahead.

What about the balance of the year that impact here on the P&L for the balance of the year?

So for the balance of the year, we would expect to pick up those margin improvement with those investment and year-over-year basis particularly in the back half of the year where we really felt the impact of the strong industry shipments and we really started deploying the capital to alleviate those bottleneck to constrain the kind of labor inefficiency that we felt.

Okay, so I guess the takeaway then is as you see things now and the strength of the industry and the investment should may we feel be sufficient do not having to make incremental investments beyond what you've already put in place?

No and beyond at this point time from what we're seen not beyond 60 million plan CapEx we have for 2017.

In addition to the above the line expansions the [indiscernible] that Josh alluded 20:30 basis points that we're invested in Q1 and that we expect throughout the rest of the year on the operating side.

I am sorry Andy you guys broke up there a little bit that you're saying about the balance of the year?

Yes, I expect this to return on the those investments as we move through the balance of the year.

Okay and then any input cost is that factored into that 20 basis points or was there any year over year input cost pressures as a way to quantify that.

We have seen a slight impact in commodity cost particularly on the aluminum and the copper and the petroleum based products. But I would say it’s an immaterial impact and we have that plan forward for what we just talked about for the remainder of the year.

Okay. And then gentlemen, I know your supply to your end customers, this is more of an issue for them but anything that you are picking up seeing through those conversations with the OEMs whether it's on housing front or RV side, from the end consumer lending standards whether being relaxed, curtailed, just anything on your perspective I guess really the underwriting standards and whether that's somewhat restraining or somewhat enhancing the growth that we are seeing in the end markets?

Yes Tim, this is Todd. I would say that we have seen consistent lending practices really over the course of last two to three years. I think in environment we are currently in, with the interest rates I think increasing, potential increasing more I think the banks are and the lending institutions are doing a nice job of managing inventories with the dealers and working with the OEs to make sure inventories and lending practices are staying in check. So our feedback has been pretty solid and consistent over the past six months to a year.

Okay. Thank you gentlemen and again congrats on the quarter.

Thank you, Tim.

Thank you. And our next question comes from Daniel Moore from CJS Securities.

Morning. Thanks for taking my questions gentlemen.

Thanks Dan.

I guess first just the revenue contribution from acquisitions Josh in the quarter?

So, we don't really disclose the prior year revenue acquisitions in the quarter but our revenues were up 24% in our organic growth net-back acquisition was up 12%.

Organic 12. Okay. Perfect. MH specifically, with things seemingly picking up or accelerating there and talk about what leverage you can pull areas you would like to get into to continue to increase your organic your content for MH and what the M&A environment feels like in that piece of your business right now?

Sure Dan. This is Andy. We are feeling a little bit of tailwind on the MH side. There is increased optimism coming out of the first quarter. Shipments were obviously up. There is a little bit of impact that happened in Q3 and Q4 of last year that pushed backlog out a little bit and so that's contributing a little bit to the increase. But overall, we are feeling some decent tailwind as it relates to the MH space. We are very well situated to be able to take advantage of that. We have got available capacity in our facilities to be able to accommodate the uptick on the MH side of the business and we have got a breadth of products and product opportunities that we are continuing to initiate to gain traction on to be able to continue to penetrate that space. So we are very optimistic about what we see on the MH side of the business as it relates to acquisition opportunities that we’re still in the fall as it relates to our pipeline we are continuing to explore opportunities across all three of our primary market sectors and so again we are going to continue to evaluate those and stay disciplined to our approach but without question we are looking at and kicking the tires on acquisitions in all these market sectors.

Very helpful. Talking about this in terms of gross margin, in terms of operating margin down a little bit year-over-year maybe just your expectations for improvement and incremental leverage in Q2 and the remainder of the year?

Sure. So this is Andy, Dan. We are expecting to gain incremental leverage as we continue to move throughout the year. Q2 and Q3 are very strong quarters for us and so it's still our goal to be able to gain and improve incremental leverage year-over-year between 30 and 50 basis points on the operating side. So like I said we have made some investments in Q1. We had a little bit of inefficiencies as it relates to the labor market here that we were addressing and aggressively addressing so again we are expecting kind of this Q1 kind of investment in the operating platform across the board to be able to again traction as we head throughout the rest of the year.

So, the risk of pinning you down do you think this year you can get to that range again on the full year basis of 30 to 50 basis points improvement?

We believe we can.

Okay. Very helpful. Couple of other quick housekeeping, just fully diluted shares count sort of think, as we are now currently post the offering?

Yes about 16.4 million.

16.4. Perfect.

On annualized basis.

Got it. And maybe I have already asked this, but I will say just slightly a different way. In terms of opportunistic financing the pipeline of M&A, it sounds like it’s still robust just maybe your confidence in either your ability to put the majority of that capital to work or over time frame would be your hope or expectation?

Sure Dan. This is Andy. As I talked about a little bit earlier we are going to stay very disciplined to our approach. Our acquisition pipeline is full with opportunity in all three market sectors and in some adjacent sectors as well. We were able to, we put some of the cap -- to use in the first quarter related to medallion plastics and we are looking to continue to drive our capital allocation strategy consistent with what we have done in the past. So last year we bought eight companies with over $160 million in revenues annualized revenue. It's still our goal to be able to continue to execute and drive the business and grow the business. As it relates to timing we are going to stay, again stay disciplined. We are going to do what makes sense and we are going to stay true to our model of being able to bring on the right businesses at the right time but we fully expect to be able to continue that and execute on that strategy.

Appreciate the color again. And that's it from me. So thank you.

Thank you and our next question comes from Stephen O'Hara from Sidoti & Company.

Hi. Good morning.

Good morning.

Just a quick question, I mean it seems like the confidence in the cycle is fairly wide spread and I guess I was wondering should there be a hiccup in the cycle do you think your game plan would change in terms of acquisitions. Do you think it would become more aggressive, I mean, I’d assume valuations would improve or would it be kind of the same type of I guess methodical structure that I think we have seen so far?

Steve this is Andy. It would be our goal to be able to continue to execute I think again as we talked about related to positioning ourselves with the capital structure to be able to do that we feel very good about timing of what we are able to put in place related to the equity offering, related to our credit facility. So our goal would be able to be able to stay disciplined and we fully expect to be able to do that in the event of continued uptick in the market which we are very excited about and optimistic about as well if we do see a hiccup. We would expect to be able to continue it to execute that in that time frame as well. So I would categorize it as staying disciplined to our approach but in up and down market.

Okay. And then, just quick question on the taxes, I mean the adjustment there we expect kind of materially lower tax rate in the first quarter going forward or is this more of a just an adjustment type issue that should be, adjusted results should be $0.90 things like that. What your opinion on that maybe?

Hi Steve this is Josh. So the anniversary of divesting for our share-based compensation usually occurs in Q1 which is why we are seeing this benefit in Q1 consistent with the restatement last year. So on a go forward basis as those share-based compensation based, we would expect to see some type either a benefit or deficiency in Q1. As far as our expected tax rate still consistent around 36.5% absent any of the share-based compensation benefit.

Okay, great. And then, just maybe one more, again on the acquisitions. I mean, as you guys grow it would seem that the smaller acquisitions would be less additive to results I mean, I guess what your, how do you think about going large on acquisitions and the valuations better on the smaller size is that why you stick with these or is it a management issue. You think you can manage it better just a little color there would be great? Thank you.

Steve this is Andy. From our perspective I would say that we are going to stay consistent to what we have been able to do in the past. Stay disciplined to our approach whether it be the smaller acquisitions or the larger acquisitions. We really look for tremendous brand value and that brand value proposition and so the opportunities to be able to bring on new product opportunities and capitalize on our existing platform with additive product space and management talent is what we really look for. And so, I would say that we are going to continue to look at [indiscernible] acquisition candidates in size and we are going to continue to capitalize on that entrepreneurial spirit that's really allowed our brand portfolio to gain lot of traction and be very successful. So we are going to continue to do we have done in the past it would be our expectation.

Steve, I was just going to say I think to add on what Andy is saying I think the smaller acquisitions as we analyze them, we look for those things and opportunities to synergize those lot of times smaller acquisitions are built on to existing product line that we have where we can take advantage of things behind the scenes from a operational standpoint without impacting the customer which obviously generates value to the entire organization. So it's really one of those things that as Andy put it, it's very strategic and thought out and we intend to stay disciplined to the way we have operated in the past.

Okay. Thank you very much.

Yes. Thank you.

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

Thanks Jason. Thank you everyone for being on the call today and we look forward to talking to you again at our second quarter 2017 conference call. A replay of today's call will be archived on Patrick's website www.patricksind.com under Investor Relations. I'll now turn the call back to our operator.

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