Good morning, ladies and gentlemen, and welcome to the Patrick Industries Inc. Fourth 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. 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' fourth quarter 2015 conference call. I'm joined on the call today by Todd Cleveland, CEO and Andy Nemeth, President and Josh Boone, CFO. On the call this morning, we are going to discuss our fourth quarter and full-year 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. Before we begin, I would first like to acknowledge Andy Nemeth with the beginning of the year assumed the role of President for Patrick Industries. As you know, Andy previously held a CFO role and as the businesses continue to grow and become more complex, we wanted to ensure we maintain the internal capacity, continue to execute on a long-term strategic goals and objectives. We are excited about the future as Andy, Jeff Rodino our COO and myself work together to drive the business model in alignment with our strategic plan and related capital allocation strategy. In addition, Andy and I would like to welcome our newly appointed CFO, Josh Boone. Josh joined Patrick as a Director of finance in July 2014 and as a welcome addition to the senior management team. We are looking forward to the positive impact, he will have an organization in his new role. This morning, Andy will provide a brief overview of the company's fourth quarter and full-year results for the year ending December 31, 2015 and then provide an update on the major market we serve. Josh will then provide specific details on our financial performance and I will conclude by providing an update on the business outlook for 2016 and beyond. Now, I'll turn the call over to Andy.

Thank you, Todd. Overall, we are pleased with the teams continued performance and the company's financial performance during the quarter, as we reported increased revenues, profitability and cash flows. The RV industry outperformed the latest industry association estimates for both the fourth quarter and the year, which were aligned with our internal expectations. We also saw double-digit MH wholesale shipment growth during the fourth quarter and our industrial team continue to penetrate the market and capture market share. On the top-line, our revenues increased 31% in the fourth quarter and 25% for the full-year over the prior year period. With the full impact of our 2015 acquisitions, we project our full-year 2016 accelerated revenues to exceed $1 billion. On the bottom line, our net income per diluted share for the fourth quarter and full-year 2015 grew 70% and 42% respectively. We continue to gain market share in all the industries we serve as we drive our focus to successfully integrate the acquisitions we've completed over the past two-years. And we are selectively adding capacity where appropriate, in advance to projected demand and expectations for our continued expectation of outperformance in each of the industries we serve. Our sales for the RV sector of our business which represents our largest market comprising 75% of our revenues, grew 32% in the quarter in comparison to a 4% increase in industry wide wholesale unit shipments during that same time period when compared to 2014. Contributing to the sales improvement was an overall increase in content per unit, numerous new product offerings, market share gains and our continued focus on driving our customer first culture and product awareness with the Patrick's regular products to our customers. On a full-year basis, the growth in wholesale unit shipments of 5% in 2015, marked the sixth consecutive…

Thanks, Andy and thank you to all for your earlier introduction. I'm excited to join all of you on the call today and look forward to working with our senior management team as we continue to execute on our business model and serve our customers at the highest levels. I would now like to review some highlights of our financial results for the fourth quarter and full-year 2015. Our net sales for the fourth quarter of 2015 increased $59 million or 31% over the prior year period to $249 million, reflecting a combination of industry, acquisition and market share growth, despite the continued mixed shift towards smaller units in, both towables and motorized sectors of the RV industry. Our RV revenue base, which accounts for 75% of the fourth quarter sales, was up 32% in the fourth quarter of 2015 over the prior year, reflecting a 4% increase in wholesale unit shipments during the quarter, but more so our continued acquisition and overall content growth. Our RV unit content grew 20% from $1,536 per unit in 2014 to $1,845 per unit in 2015. Our MH revenue base which accounts for 14% of fourth quarter sales, continued to outpace the industry, increasing 21% for the quarter, on unit shipment improvements of 14%. Our content per unit continues to show positive trending as it increased 8%, from $1,692 per unit in 2014 to $1,825 per unit in 2015, reflecting the further penetration within our existing customer base as well as additional market share gains. We continue to be well-positioned for improvement in this market sector as the MH industry grows at a steady space. Our industrial revenue base, which accounts for the remaining 11% of fourth quarter sales, was up 41% in the quarter over the prior year period, driven by acquisition…

Thanks, Josh. Overall we're very pleased with the sales and earnings growth results of 2015 and are optimistic about continued growth in 2016 both in the short and long-term as we continue to build on the momentum in the industry that we serve. Our investments and strategic acquisitions during 2015 that both expanded our core competencies and opened the door to new markets as well as investments related to additional capacity customer service, operating efficiencies and personnel helped a foundation for both the near and long-term profitability growth of our company. We're well position to serve and bring value to our customers, offer new products, enhance our value of our company for our shareholders, team members and our many business partners. Our disciplined execution of goals for 2016 and beyond continue to be focused around strategically growing our business, increasing customer awareness of the breath of products we provide, surgically expanding operations to targeted regional territories and driving shareholder value through invest in an acquisitions, infrastructure and capital expenditures and generating improved operating income, net income, earnings per share and cash flow. Acquisition is continue to be a part of our strategic growth plan and capital allocation strategy. In 2015, we acquired approximately $233 million with annualized revenues attributable to the three acquisitions we completed in 2015. North America in early September and that of SCI and Better Way both acquired in the first half of 2015. All of these acquired businesses are performing at or better than expected in aggregate of contributing approximately $101 million to our 2015 consolidated sales. Our focus on the successful integration of these acquisitions as well as others acquired over the past several years, in accordance to our plan and expectations has resulted in organic market share growth, accretion to earnings, addition of high…

Good morning. Congratulations to Andy and Josh.

Thank you.

Thank you.

I wanted to maybe just spend an extra minute or two, update us on the performance of North American Forest products, now that has been in the portfolio for the first few months. And maybe just takes a step back or remind us a little bit about the business and the opportunity for growth and expansion that you see there over the next couple of years?

This is Todd. North Americans comes together very well, the management team there's culturally blended in well and they're meeting expectations what we had originally planned. If you recall both - that those business is made up of two businesses really the legacy kind of lamination business we've been in for a number of years here at Patrick and then the softwood business that provide softwood products to the RV industry and the manufactured housing industry along with ceiling [indiscernible] for the RV and manufactured housing industry. I guess that overall, they've done an excellent job, the teams blended well with organization and we're looking forward to opportunities, as it relates to opportunity growth, opportunities, we definitely see the capability of expanding the footprint with the softwood line and hope to do that I would say in late 2016 or early 2017.

Very helpful. Andy, you spent a lot of time in the prepared remarks maybe little bit more than usual I think talking about both MH as well as industrial and are we likely to see higher percentage of acquisitions in those areas going forward?

Yes Dan this is Andy. We're certainly looking at acquisitions both in the RV space and in the industrial space currently. I think we're excited as we continue to look at the opportunities for industry growth in both of those sectors, in particular in the industrial sector and the commercial side of the business, we're about 48% or so at this point in time residential on about 52% commercial in the industrial side of our business. So, yes, we're going to continue to look at opportunities in both those spaces that's what we see the biggest opportunity for growth for us.

Helpful and maybe just one more and I'll jump back in queue. You concentrated on the number of areas geographically where you're adding capacity, just talk about the product line, where you are either pumping up against the capacity or see the greatest opportunity for growth?

Yes this is Todd. Basically we're looking at starting off with some basic legacy Patrick product lines and countertop, lamination, solid surface and then our industrial product lines in those areas and then our plan will be to grow those product lines along the lines of what we have here located in the all cart market.

Okay. Thank you to the color and again I'll jump back in queue.

And our next question comes from Scott Stember from C.L. King. Your line is open.

Good morning, guys and congratulations again to Andy and Josh. Maybe just talk about Andy you made a comment on about north of $1 billion in sales for 2016, just maybe talk about bigger picture how we get there. And maybe just talk about so far this year within the RV space, what you guys are seeing and what gives you confidence beyond the acquisitions that you guys can easily get to that figure?

Okay. Certainly, first of all on the revenues side of the business, on an annualized basis we're over a $1 billion, the fourth quarter is traditionally one of the softer quarters of the year and so as we kind of launch in to the first half of the year, which generally represents about 55% of the industry shipments on trended basis. In particular in the RV space, we expect to see things kind of ramp up here consistent with prior year. So our view is certainly that we expect to see kind of this continued slow and steady growth in the markets which we feel have been pretty consistent with our expectations and certainly we expect to continue to take market share not only from an organic perspective, but overall from an acquisition perspective as well as. That's part of our strategic growth plan in capital allocation strategy. So we feel pretty confident in our ability to breach that $1 billion mark certainly for 2016. Overall, again I think the markets feel positive, we're looking for slow and steady growth and we're comfortable with that. Again, that allows us to continue to execute on our business model, continue to execute on our fixed cost structure and then continue to drive through our gross strategy with that acquisition perspective. So again I think we feel pretty confident today in where the markets are at.

Great and just touching base on the expansion plans at out west in Idaho and in California, can you maybe just touch on what the overall opportunity there is. And maybe just remind us how much of opportunity that is meaning how much production in the RV industry is taking place in those areas versus where you're currently located right now Indiana?

Yes, certainly where we're focused right now is in that Pacific Northwest and Southern California are our two primary targets today that are going to be up in running very quickly. Overall, we think there's a combination of both RV potential and industrial potential out there with our product lines solid surface, fiber glass, lamination, countertops you know certainly things that we can to a broader market channel than just the RV space. Overall the RVs are about 85% or so located in the mid-west from a production perspective another 15% takes place out in the west coast and specific northwest. So the opportunity again I think, we're looking at it from both an RV perspective and an industrial perspective and just with the existing expansion opportunities that we're looking at today in those territories that Todd mentioned on the call earlier. We estimate total potential market of about $160 million for those particular product categories.

$160 million, that's a total opportunity

Yes.

Got you. And just last question on the margin, you guys did a fantastic job again this year on the gross margins and warehousing and delivery, I know a lot of that has to do with your focus on controlling cost and efficiencies and acquisitions. But on the SG&A side, I know that you've been hiring in order to support the growth for the company and can you maybe just talk about that line where we look for 2016? Is this another year of investment I imagine, since we will be opening more facilities that will probably be the case for this year?

We've got a phenomenal team Scott and we've got team that's also got capacity, so our expectation is to really capitalize on that expertise and the talent that we've got internally. So we're not anticipating that we're going to make significant investment, we feel like we've got the right infrastructure in place. Like I said, the team is just phenomenal in their abilities, their capabilities, their market knowledge, their supply knowledge. So they are going to be the ones that are going to be utilizing that capacity to really drive kind of the expansion growth for 2016. So again, we don't expect to see significant investment in the overhead structure beyond what kind of we've shown historically, certainly as it relates SG&A perspective and our goal is always to capitalize on our overhead structure and increase efficiencies each year. So again, I would say that trends that you've seen in the past that what we expect consistent with 2016.

Got you, I'll jump back in the queue and let others ask some questions. Thanks.

Thank you.

[Operator Instructions] And we have Dan Moore from CJS Securities on line. Your line is open.

Thank you again. You threw out a number, I think it was around 475,000 to 476,000 units as being ballpark to the next potential peak. Do you expect the mix shift that we've seen over the last couple of quarters to continue for the next few years as we move to that peak? Do you think travel trailers and lower price point units will likely continue to outpace or do you see that normalizing at some point?

We would see that normalizing Dan at some point in time, we're expecting really through the first quarter to continue to see a little bit of that mix shift and that anniversary for 2016. We started to experience that in the second quarter of 2015 and really kind of carried through the remaining three quarters. And so again, I think we've got another quarter of this, maybe into the first half of the year, but our expectation would be that will see that normalized at some point. And really that’s something that we feel that the OEMs have done a phenomenal job of managing their production levels and production schedules to match up with retail demand and so again we look at this continued slow and steady growth. But I would expect at some time or we would expect at some time to see this normalize and flatten out.

Very helpful and how much of a benefit in Q4 would you estimate that input cost deflation was to margins and do you expect continued tailwinds as we move over the next couple of quarters?

Sure, so input costs have remained pretty steady throughout most of the year in 2015 and really in to 2016, we have completion in all of our product lines and so, we're pricing at market and most of our synergies and margin realization comes from capitalizing on our overhead structures. As Josh mentioned acquisition synergies being able to manage between the lines from a cost perspective is what we really focus on. And so yes the input costs are at a low point, but certainly in our commodity based markets, we have competition and so we do have to price at market. So I would tell you again, what we've seen is - and what we really focused on is managing our cost structure, optimizing efficiencies, leveraging our overhead structure to really drive those synergies.

I appreciate it. And maybe one and half more there, but what kind of organic growth have we seen thus far in the first six weeks of the year and just housekeeping what tax rate Josh do you expect roughly for 2016

On the tax rate Dan, we would expect to 2016 to kind of be back in that 37% to 37.5% ballpark, for 2015, we've realized some R&D tax credit that we can’t guarantee will continue going forward. so we would expect it to be in that 37% to 37.5% which is where we were for 2014.

And on the organic growth Dan for the first six weeks, we've seen a nice slow and steady start to 2016 so far. So again I think, as I mentioned we expect to see this mix shift continue really through the first quarter, but as well, we've got some initiatives in place to gain organic market share not only through expansion, but through the introduction of new products line expansions but as well as taking market share from organic perspective. But we do expect the impact of the mix shift to continue through the first quarter.

This is Todd. Also Dan, I would say that when you look at the overall retail traffic at the shows that have been taking place really all across the country, all the reports back are phenomenal. I mean at the very least people are saying attendances at last year's levels in many cases just recently a show up in Michigan retail attendance was up 15% over the prior year. So I think we're seeing really good signs for things organically in the first quarter or so.

Great, Todd. Andy, I appreciate the color very much.

Thank you.

Our next question comes from Kevin Sonnett from RK Capital. Your line is open.

So you guys continue to really manage working capital well, you made more progress in 2015, would you expect in 2016 to give a little bit of that progress back on inventory returns and cash conversion cycle or do you think just even a little more progress to make there?

Kevin this is Andy, we think there is more progress to make there. That's actually one of the synergies that we generally gain from an acquisition perspective is our focus and ability to drive inventory turns, post closing make some adjustments, but from working capital perspective, it's something that we expect to continue to drive improvement on.

Okay, thanks and if I missed this, I apologize, but you still have some dry powder and the cash you are going to likely generate 2016 is going to help as well. Can you talk a little bit about what you are seeing currently as far as acquisition opportunities. if you look back historically, you have done a lot of deals where you picked up $25 million to $50 million in revenue and one much larger one. What do you have the pipeline today and understanding you never know until it's done, what you can close, what would be kind of base case expectations for the next year, so on that front?

Yes Kevin this is Todd. I think that the pipeline as I mentioned is very strong, right now pipeline is full of mostly the smaller deals as you described, kind of $25 million to $40 million type number both in the RV and in industrial space. Obviously, our goal is to manage our capital allocation strategy and take advantage of a number of different things, but on average I would say we are targeting kind of somewhere between that $100 million and $125 million of revenue to acquire over the course of the next year.

Okay and any reason at all to think the evaluations that you would be able to find would be different than what you done in the last year or two, or do you feel like you can continue to buy things. What looks like at least after you realize some synergies kind of probably works out five, six time on EBITDA or something in that ballpark?

Yes, I think that's kind of where we are seeing things currently. Obviously, we are looking to take advantage of things on synergy standpoint after the closing, but that is kind of where the market is. I would say that the recent decline in the equity markets has made a few buyers nervous, but there is nothing there that has caused them to be out there panicking. You got to keep in mind that all these guys for the most part that we're talking to are making - their businesses are running well. They have got solid management teams and they are looking to capitalize, utilize us to expand those growth opportunities, but they can sit back and kind of see things through at least for the businesses that we're looking at

Okay, thanks guys.

Thank you.

Thank you.

And our next question comes from Scott Stember from CL King. Your line is open.

Yes, I had one follow-up question related to the manufactured housing side of the business. As it was alluded to before this segment is really - it seems like it's coming alive as of late and I know a lot of it that has to do with some of the content thing that you guys have been able to put through. Can you maybe just talk about what some of those gains are, future opportunities down the road and maybe just flush that a little bit more?

Scott this is Andy. We do see some uptake, I would say that we are not expecting to see significant gains at this point in 2016, but we've been able to gain market share in a couple of different product lines in the MH space, which again our team continues to focus on driving that. We've got available capacity in all of our regional operations to really drive some synergies and optimize the overhead structure and so that's what gets us very excited about the uptick on the MH side. We just don't have to invest significantly in overhead to support a significant amount of increased revenues in that space and I think what we're seeing market continued pent-up demand, continued drive in multifamily housing and capacity levels being constrained in that particular sector. At some point our view is that that's going to kind of really push forward and open up at some point and really drive towards that single family sector. And so once that opens up again, I think that's where we get back to the opportunity for the MH side of the business. So we're excited about really the product lines that we have, the team and the relationships that we have in the space, we are really positioned well to capitalize on that MH industry when it does pick up.

And to that point on capacity utilization within the MH space, I know this is an area where out of the three divisions you probably had the most excess capacity maybe just talk about the incremental profits that are coming through in that segment? How it stacks up versus the other two groups and the opportunity there for 2016?

Sure, so we are probably running 30% to 35% capacity at this point on our outlying MH operations and our operating profitability continues to improve as we continue to see a slight uptick, even 10% a year on the MH space, again we just don't have to add incremental overhead to support that. So we are seeing improving profitability out of our MH locations.

Got it, that’s all I have. Thanks a lot guys.

Thank you.

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 Yolanda. We appreciate everyone for being on the call today and we look forward to talking to you again at our first quarter 2016 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.