Good morning, ladies and gentlemen, and welcome to the Patrick Industries, Incorporated Third Quarter 2014 Earnings Conference Call. My name is Joe and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Following prepared remarks, we will conduct a question-and-answer session. Please note that this conference is also being recorded. I will now like to 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 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. On the call this morning, we are going to discuss our third quarter and nine 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. 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 third quarter and nine month results 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 continued to perform well during the quarter with increased revenues, improved profitability and cash flows. On the top-line, our net sales in the third quarter increased 28% over the prior year and 22% on a year-to-date basis. On the bottom-line, we reported net income per diluted share in the third quarter of 2014 of $0.68 compared to $0.51 in 2013. For the comparable nine months, our net income per diluted share was $2.18 versus $1.76. Overall, we’re pleased with growth in all three end markets we serve. We’ve added capacity where appropriate in advanced and projected demands assuring that we can fulfill our customers’ orders on a timely basis and continue to leverage our fixed cost over our sales base. We also continue to gain market share in all industries we serve as well as successfully integrating our recent acquisitions. In addition, the positive sentiment exhibited by both dealer and OEMs during the recent RV manufacture open house that was held in Elkhart Indiana in September, have been coupled with capacity expansion initiatives at several RV OEMs in anticipation of continued momentum in the industry as we head into the fourth quarter of 2014 and first quarter of 2015. Turning to the performance of our markets, on a seasonal basis, we saw shipment levels in both RV and MH industry continue to trend in line with expectations for both the quarter and year-to-date. The RV industry experienced continuing monthly…

Thanks, Todd and welcome everyone. I would like to review some highlights of our financial results for the third quarter and first nine months of fiscal 2014. Our net sales for the third quarter of 2014 increased 42 million or 28% over the prior year period to 188 million, primarily reflecting a combination of industry and acquisition growth. Our RV revenue base which accounts for approximately 73% of our third quarter sales was up approximately 34% in the third quarter 2014 over the third quarter of 2013, reflecting an 8% increase in wholesale unit shipments during the quarter, coupled with continued organic and acquisition growth. We did experience some normal competitive pricing situations in the market in the third quarter which nominally impacted organic growth, as a result of model year change-overs and reduced commodity prices on certain raw materials. However, we were able to increase gross margins by not pursuing or chasing low and negative margin base. Our RV unit content grew 17% from $1,271 per unit in the third quarter of 2013 to $1,488 per unit in 2014. Our MH revenue base, which accounts for approximately 16% of third quarter sales, increased 12% for the quarter and 10% for the year on estimated shipment improvements of 8% and 6% respectively. And our content per unit continues to show stability to positive trending as we are well positioned for improvement in this market sector. Our MH unit content increased 1.3% from $1,599 per unit in the third quarter 2013 to $1,619 per unit in 2014. Our industrial revenue base which accounts for the remaining 11% of third quarter sales reflected continued market share gains as well, with sales up 19% for the quarter and 22% year-to-date from the prior periods. New sales territories are adding to faster incremental growth…

Thanks, Andy. Overall, the first nine months of 2014 were strong as we had anticipated based on our 2014 operating plan. We continue to execute on our strategy plan and capital allocation strategy that will drive our business over the next five year period. In terms of our business outlook for the remainder of 2014 and into 2015, our execution goals continue to be focused around driving our organizational strategic agenda and utilizing our capital allocation strategy to increase our top-line both organically and through acquisitions generating an improved operating income, net income, earnings per share and cash flow. Our continued success in 2014 would not be possible without the continued support of our customers who are privileged to serve and the continued hard work, drive, passion, dedication and leadership exhibit by each of our Patrick team members who we are extremely proud to work with. I’m excited about the opportunities that exist in the marketplace and I’m confident in the abilities to execute and the ability of our team members to continue to serve our customers at the highest level. 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]. Our first question here comes from Daniel Moore from CJS Securities. Please go ahead. Daniel Moore – CJS Securities: Good morning. Thanks for taking the questions.

Good morning, Dan. Daniel Moore – CJS Securities: Andy, you alluded to operating margins and some of the investments that you’ve made on the G&A side to expand your capacity for growth. As we look at ‘15, if we do continue to see solid moderate growth in the overall industry, do you see an opportunity to start a show a little bit of leverage not only in the gross margin line but the operating income line?

Yes, we’ve done some investments in ‘14 to prepare for that so we’re experiencing a little bit of lag on that on ‘14 but I expect us to be able to leverage that going into ‘15 as we continue to see growth. Daniel Moore – CJS Securities: Okay. Looking at the cash flow statements, solid, but haven’t quite kept up with net income growth. Wondering now that you’re in the motive of consolidating some of these acquisitions if there are not opportunities to take out a little bit of working capitals just trying to get a sense of how the cash flow should trend as we move forward from here?

Yeah that’s a good question and we just completed two acquisitions at the end of June it takes us just couple of months to get everything kind of transitioned and put some processes in place. But we do expect to be able to continue to improve working capital, reduce inventories with those acquisitions as we move forward. So we would expect that to improve in ‘15. Daniel Moore – CJS Securities: Okay, very helpful. And just looking at the moving to M&A a little bit, may be Todd could talk a little bit about either Foremost Fabricators or any of the deals that you’ve made to-date, how is business performing relative to your expectations? And what may be some highlights of what they offer you in terms of opportunity to leveraging those businesses under the Patrick platform?

Sure. Well obviously we’ve made a number of acquisitions over the course of last if we take a step back just a year probably, there’s been five or six. But I would say overall all have performed in line or exceeded our expectations as it relates to how we’ve been kind of been able to integrate them, get the team kind of accustomed to what our expectations are from a metric measurement standpoint. And once we get that solidified, what we really try to do is utilize with financial support of Patrick and also the customer relationships with Patrick to allow them to expand their product lines which we’ve seen particularly for example Frontline Manufacturing where it took us to few months to get the right management team in place there, get things rolling along which when you are going into it not at that established. They make a number of fiber glass products and we can certainly look at other fiber glass lines that are used in the RV industry such as front ends, back ends and we can expand further from where we’re at from just showers and tubs. Also when you look at the Precision Painting Group, great team again management team is very solid, experienced, knows codings has a lot of focus on the Class A, Class C area. We believe there is a lot of opportunity to see paint move down into its currently moved into the high end fifth wheels, but we believe it can even move down further into the mid-range travel trailers and with the team’s talents and expertise we believe we can put together some products and processes that will allow us to reach down into that area. So coupled examples of things that I believe provide us some opportunities not only from what we acquired but also where we are going in the future. Daniel Moore – CJS Securities: Very helpful. One more and I’ll jump back in queue. May be M&A going forward you mentioned your focus on RV as well as industrial, curious given the strong growth outlook that you have for MH and why that’s not may be a little bit more of a focus or is it just the function of dearth of opportunities there? And then longer term as we look at last five years plus you’ve flip flopped from 25% RV to 75%. Five years from now do you see it more balanced mix do you see RV to be the same, talk about your sort of longer term view of balancing the portfolio?

Sure. I would say that the main reason we’re not I guess focusing our efforts on the MH side as much as the RV and the industrial side is simply centered around acquisition opportunities that we believe fit within kind of the box that we’ve outlined for ourselves. With the manufacturing housing industry currently being a lot of the deals that have been available are scenarios where owners are still bullish on the manufacturing housing industry and believe that their businesses are worth a lot more what their current earnings are apt to-date. So, I think as we see the manufactured housing industry improve those opportunities be more attractive to us. Obviously, our goal to try to pick those up at the early stages of the recovery, but overall I think that’s the real driver behind why perhaps we’re not focusing our efforts so much on the manufactured housing side to date. As it relates to our concentration mix, obviously, we do believe in the manufactured housing industry and have seen some very good things happen in the design side of what the OEMs are doing. I think overall, we just need the housing industry to continue to recover which is anticipated in the next couple of years. Once that happens, MH has always been part of the recovery and part of the housing industry, we believe it’s going to continue to be that way as that increases obviously we’ll continue to gain our share there and obviously the mix is all going to be determined at the growth rate at which we do our business in the MH side of the industry improves and that compared to where the RV industry growth rate comes from in H2. So, I think without a doubt with the improvement of the manufactured housing industry, the RV mix will be lower as it relates to timing of that. It’s all driven – a lot driven by recovery of the housing industry and the residential housing market overall. Daniel Moore – CJS Securities: Very helpful again as I said I’ll jump back in queue. Thank you again and congrats on a very solid quarter.

Thank you, Daniel.

Thank you. And our next question here comes from Scott Stember from Sidoti. Please go ahead sir. Scott Stember – Sidoti & Company: Good morning and thanks for taking my call as well.

Good morning, Scott. Scott Stember – Sidoti & Company: Question on the gross margin, up very nicely year-over-year. Last quarter after you completed the Foremost and Precision acquisitions you indicated that there were lower margin businesses. So with this growth that we saw this quarter that would imply that the core business saw some very, very strong operating performances. Could you may be just talk about how you’re getting there? And may be just talk about how the labor markets and how that’s – how you’re handling that as well?

Sure. This is Andy. That’s correct, Scott. The margin profile of the acquisitions that we picked up is consistent with what we had talked about. We did have some solid results in our core business. We had some improvements in certain operations and as we indicated kind of in our discussion, we didn’t chase, we sacrificed a little bit of market share do not share some low margin business where we could have retained the business or we believe we could have retained the business, we chose not to pursue that. So, we maintained some margin disciplines in the third quarter, but as well I’ll tell you their core business performance was a little bit better than expected. So, we’ll continue to focus on that. As it relates to the labor component, it is still very tight labor market here especially in the Midwest so we’ve been, our operations guys have done a phenomenal job of managing their labor force. We’ve been able to and have been kind of focused on managing the labor market by trying to reduce the number of contract employees and bring more on full time so that we’re not paying contract premiums as well we’ve kind of flexed down a little bit our direct labor force during softer times but overall turning to retain skilled labor force to be able to kind of manage through certain soft periods in the third quarter to the dealer. So it’s a tight market without question and we are very focused on it. We got to remain diligent as we kind of move into fourth quarter and into ‘15 because we expect continued positive trending, but our team has done a nice job as I said again focusing on bringing on and hiring full time employee as it relates to employee base and kind of shifting away from the contract labor force. Scott Stember – Sidoti & Company: Great. And next question on the industrial side, Todd, I believe you said that you’re gaining by moving into more sales territories. Can we may be talk about that opportunity and how underpenetrated are you within the country and the overall opportunity to really expand upon that?

Our industrial team has done a great job and actually we’ve continued to I guess add representation across the country most recently in kind of the Texas area. As growth as continued across the country commercial side of our business more side of our business and actually the residential side of our business has seen nice growth. As far as the potential really the potential lies in our abilities to continue to position people in the right areas and provide the right product lines to allow our sales team to continue to capture shares. So I do believe that’s a very solid opportunity for us going forward. Our main focus to-date has really been centered around kind of cabinetry store fixtures countertops those type of things probably beginning to expand that even further into some new product lines things we’re looking at in the future. Scott Stember – Sidoti & Company: Okay. And just last question then I’ll jump back in the queue as well. Last couple of quarters, you’ve seen some nice growth in industrial in the office furniture side. Are you still seeing traction in that sub-segment and may be just comment on that?

Yeah I mean we continue to see nice growth in that area. Obviously one of the – we picked up a major customer in the Pennsylvania area last year about this time so we’ve seen the benefits stream across 2014. Since that time we’ve continued to grab a share in opportunities and continue to believe that it is a good place for us to be. Scott Stember – Sidoti & Company: Gotcha. That’s all I have right now. Thank you.

Thanks, Scott.

Thank you. [Operator Instructions]. We have another question here from Mr. Dan Moore with CJS Securities. Please go ahead. Daniel Moore – CJS Securities: Thank you again just curious in terms of content for RV increased about $218 year-over-year. The average size of RV system has been declining modestly as smaller units and more affordable units are increasing. Wondering if you on an organic basis have been able to maintain or even grow marginally your content for RV over the last year?

Yes, we have Dan as a result a lot of acquisition the acquisition content improvement has been really in the RV space obviously but we are impacted by the downside thing as you mentioned the shift in the RV mix. But we’ve been able to offset that so as we kind of continue to move forward the acquisitions that are key to strategy, but then we have been able to gain additional content even with that decline in and I wouldn’t say that’s a huge decline, but even with shift from larger units to smaller units. Daniel Moore – CJS Securities: Excellent. You mentioned you’ve been adding capacity what are some of the areas that you’ve been focusing on and adding on either other that you still need as you look after 2015 you think you need to build out?

So we primarily add capacity as it relates to pieces of equipment within our facilities where we might have a backlogs and bottlenecks. And so that’s really what we focus. I wouldn’t say that’s anything overly significant that we’ve done. We’ve added some additional capacity related to equipment but as well we’ve maintained kept up with the technology in order to remain efficient and continue to produce at high levels that we expect to be able to produce that. And as we head into to ‘15, I don’t see anything it’s really in main pieces of equipment throughout the operations again facilitates streamline processes and eliminate those bottlenecks. Daniel Moore – CJS Securities: And lastly, you mentioned in the release here very comfortable with your leverage position provides flexibility to grow. Our estimates are about may be 1.5 or 1.6 times pro forma net debt EBITDA how higher are you comfortable going and if the right deals comes along where is the range that you like to run out on a sustainable basis?

Sure. So right now we’re running at 1.5 for the third quarter that’s a very comfortable range for us I would tell you that we’re comfortable here as a management team at 2.5 and a little bit above that. The banks today are really focused around three times leverage and in our goal and in our plan as it relates to kind of using our leverages to pursue acquisitions we might see that leverage spiked during the initial stages of the acquisition but we expect to be able to de-lever pretty quickly as we kind of mentioned in the stay in this very, very comfortable range that we’re at today. So 1.5 is very, very comfortable for us. Daniel Moore – CJS Securities: And the deals in the pipeline you’re seeing bigger deals larger or is that a mix smaller tuck-ins?

It’s been a combination of both. We’ve actually reviewed about 13 acquisitions so far in 2014 and obviously we have only closed on three of them. But I would say going forward, the way we are looking at things, we’re looking at opportunities, we are trying to understand the management team, the product lines. They range from anywhere between $7 million to $8 million to as high as $30 million to $40 million range and we’d be comfortable doing anything in that kind of that range. Daniel Moore – CJS Securities: Very good. Thank you again.

Thanks, Dan.

Thank you. Our next question comes from Sasha Kostadinov with Shaker Investments. Please go ahead. Sasha Kostadinov – Shaker Investments: Yes. Thank you. I also want to congratulate you on your strong margins shown this quarter. I was wondering if you could give me any guidance on potentially how high you think your gross margin can get provided that business flow through is you’re currently expecting it to?

So Sasha, we will expect to see – we won’t expect to see the same gross margin in the fourth quarter based on historical trending second and third quarter is generally produced the highest gross margin than with the number of days being down in the fourth quarter we would expect to see a little bit of lag from the third quarter’s margins that we saw but we expect to be able to continue to grow year-over-year margins on a consistent basis and that’s kind of our overall strategic planning. I can’t give you some specific gross margin targets but our expectation in interest base is related to our operating plans to continue gross margins on an annualized basis from an annual basis year-over-year. Sasha Kostadinov – Shaker Investments: Okay. Thanks.

Thank you.

Thank you. Our next question here comes once again from Scott Stember with Sidoti. Please go ahead. Scott Stember – Sidoti & Company: Just a follow up question little bit higher level. We’ve been hearing that in recent months that the higher fifth wheel market has been seeing some nice outsized retail gains. Have you seen that come through from your end from the shipping activity? And may be just talk about the content opportunities that you possibly see that comes to fruition?

Yeah, we’ve seen some of that. We’ve got a very balanced portfolio as it relates to product lines that we serve. So, a slight increase in those fifth wheels you are not going to see significant movement in our content or sales levels just again due to the fact that we’re penetrated across all vehicle classes but we have seen that the OEM continues to try and built their units to be more like homes. They try to upscale them I continue to see that to be the case going forward at least in the near term and into ‘15 and I believe that is going to provide some opportunities to continue to increase content where we see that. Scott Stember – Sidoti & Company: Great. That’s all I had and thanks again for taking my questions.

Thanks, Scott.

Thanks, Scott.

[Operator Instructions]. And at this time, I’m showing no further questions from the audience I would now like to return the call back over to Julie Ann for closing remarks.

Thanks, Joe. On behalf of Todd and Andy, we appreciate everyone for being on the call today and we look forward to talking to you again at our conference call on February to discuss our fourth quarter and fiscal year 2014 financial results. A replay of today’s call will be archived on Patrick’s website www.patrickind.com under Investor Relations. I would now turn the call back over to our operator, Joe.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and you may now disconnect.