Good morning ladies and gentlemen and welcome to the Patrick Industries Incorporated Second Quarter 2016 Earnings Conference Call. My name is Adrian and I'll be your operator for this call. At this time, all participants are in a listen only mode. Following the prepared remarks we'll conduct a question and answer session. Please note this conference is being recorded. I now turn the call over to Julie Ann Kotowski from investor relations. Mrs. Kotowski, you may begin.

Good morning everyone and welcome to Patrick Industries' Second Quarter 2016 Conference Call. I am joined on the call today by Todd Cleveland, CEO; Andy Nemeth, President; and Josh Boone, CFO. On the call this morning we are going to discuss our second quarter and 6 months 2016 results and provide an update on our business outlook,. and the markets that we serve. 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 statement. These factors are identified in our press releases, our form 10-K for the year ended 2015, 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 deluded earnings per share amounts are non gap measures. We undertake no obligations 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 we will briefly be discussing our company's second quarter and 6 month 2016 results, and provide an update on the major markets we serve. I will conclude on providing an update on our acquisition pipeline and our overall business outlook. The company's performance in the second quarter and first half of 2016 continued to be in line with our expectations, and reflected increased revenue and improved profitability. On the top line, our revenues increased 35% in the second quarter and 30% in the first 6 months over the prior year periods. On the bottom line, our net income for deluded share in the second quarter and first half of 2016 grew 41% and 39% respectively over the prior year. The overall revenue growth we experienced in the second quarter was attributed to a solid first half of 2016 in all three of the primary end markets we serve, as well as continued execution of our strategic plan related to the impact and successful integration of seven acquisitions we completed in the past 18 months, along with solid gains in market share. Now I will turn the call over to Andy who will further review our markets and performance.

Thank you, Todd. Our second quarter 2016 results reflect the continued expansion of our markets as well as the execution of our capital allocation strategy to drive revenues and content in all the industries we serve and position ourselves to be able to take advantage of expected continued growth trends in the marketplace. With the full impact of our 2015 acquisitions, and those completed thus far in 2016, we project our full year 2016 consolidated revenues to approach $1.2 billion dollars. At the operating income level and on the bottom line, we continue to leverage our cost structure to drive efficiencies, and improve our net income in deluded earnings per share which increased 38% and 41% for the second quarter, respectively, over the prior year. In addition, we are selectively adding capacity where appropriate in anticipation of our continued expectation of our performance in each of the industries we serve. Our sales to the R.V. sector of our business, including the impact of acquisitions, which represents our largest market, comprising 75% of our revenues grew 33% in the quarter off of a 12% increase in industry wide R.V. wholesale shipments. Wholesale shipments of travel trailers - which represent approximately 74% of the total's market lead the way, increasing approximately 14% versus the prior year. Contributing to our sales improvement was an overall increase in content per unit, new product offerings and market share gains. The beginning of the second quarter of 2016 marked approximately 1 year since the industry began to see a shift in buying patterns towards a larger concentration of entry level less expensive towable units, particularly in the travel trailer sector. This trend is still continuing today, however we are seeing less of an impact quarter-over-quarter in terms of our content per unit growth. We remain excited…

Thanks, Andy. Our net sales for the second quarter increased 82 million, or 35%, over the prior year period to 315 million, reflecting a combination of acquisition, industry, and market share growth despite the shift in consumer buying patterns towards smaller, less expensive towable units. Our RV revenues were up 33% in the second quarter, reflecting the impact of acquisitions and a 12% increase in wholesale unit shipments in addition to overall content growth. Our RV unit content, on trailing 12 month basis, continues to see strong growth and increased 17% from $1,707 per unit in 2015 to $1,998 per unit in 2016. Our MH revenues increased 26% for the quarter on estimated unit shipment improvements of approximately 12%. Our estimated content per unit on a trailing 12 month basis increased 3% from $1,790 per unit in 2015 to $1,844 per unit in the second quarter of 2016. Our industrial revenues were up 57% in the quarter driven by acquisitions and the continued penetration into new sales territories and market share gains. For the first half of 2016, our revenues were up 30% or 137 million from the previous year to 594 million, primarily as a result of factors previously mentioned. Our gross margin grew 20 basis points in the second quarter to 17.5% from 17.3%, primarily reflecting improved volumes, leveraging of our fixed costs, and the positive contribution of acquisition related revenue. On a year-to-date basis, our gross margin increased 30 basis points to 16.9% from 16.6%. Operating expenses increased slightly to 8.7% of sales in the second quarter of 2016 compared to 8.6% in the prior year period. Warehouse delivery and SG&A expenses were down 10 basis points, offset by increased intangible asset amortization of 20 basis points related to acquisition activity over the past two years. Operating…

Thanks, Josh. Overall we're pleased with our sales and earnings growth results for the first half of 2016 and are optimistic about the continued growth as we head into the second half of the year both in the short and long term as we continue to build on the momentum of the industries we serve. The strategic acquisitions we made in 2015 and thus far in 2016 both increased our scale in existing markets and opened doors to new markets within our North American footprint which is now expanded to 15 states. Our acquisition pipeline continues to be full with acquisition opportunities across all three markets we serve and we have the capacity to continue to grow our business and bring new, innovative product lines to our existing customer base and to customers we've not yet reached. In terms of our business outlook for the second half of 2016, as we head into the third quarter and the RV show season, we expect to see similar seasonal patterns experienced in prior years including sequential softening in Q3 as dealers anxiously await new products for 2017. Our discipline execution goals continue to be focused around driving our organizational strategic agenda and utilizing our capital allocation strategy to strategically grow our business, increase customer awareness in the breadth of products we provide, expand operations in targeted regional territories, and drive shareholder value by generating improved operating income, net income, earnings per share, and free cash flow. I'm confident in the ability of our team members to continue to execute on our strategic plan. In addition, the ongoing support we received from our customers, 4,000 plus team members, suppliers, board of directors, banking partners, and our shareholders, who are privileged to serve, have afforded us the opportunity to strive to our goals of providing the highest level of quality, service, and shareholder value. This is the end of our prepared remarks. Thank you for your time today. We are now ready to take questions.

Thank you. We'll now begin the question and answer session. [Operator Instructions] Our first question comes from Dan Moore of CJS Securities, please go ahead.

Good morning, thanks for taking the question.

Good morning.

Good morning. Hi, Dan.

I know the official numbers aren't out yet, but I'm wondering what your sense is for how retail demand for towables has held up in June and the fourth of July.

Hi, Dan. It's Todd. Everything that we're hearing kind of across the board whether it's from the O.E's or also dealers as the momentum continues to be very strong. Retail traffic's very good, so we're anticipating June to be as strong or stronger than what we've seen in previous months.

Very good, and you talked about this in the prepared remarks, but we're now just about anniversarying kind of the start of the mix shift to lower price points, units, travel trailers. Are you seeing that trend start to normalize at all as the gap between growth and fifth wheel travel trailers narrowed? I realize it's only a couple of months of data points since the end of -- in addition to Q2 but just kind of your expectations in the near-term for that trend.

Dan this is Andy. Yes, we are seeing that start to normalize. We saw that happen mid to late second quarter, and did realize some improvement as expected towards the end of the second quarter related to our content and our organic growth.

Excellent, appreciate it. And if we look at the few shifting gears, the last few acquisitions, Cana, Mishawaka and L.S., generally speaking, have the multiples remained in that five to seven range that you historically target, and are you seeing more opportunities in that range outside of the R.V. space?

This is Andy again, yes. Deal multiples that we're seeing today and are being disciplined too are in that five to seven times multiples we had talked about, and we stayed pretty close to our acquisition strategy and capital allocation strategy, and really focused on discipline. So we're getting that and the pipeline today continues to reflect those types of multiples for the deals that we're looking at.

OK and maybe one more and I'll stay on the M&A theme, I think year to date you're already acquired over 100 million of incremental revenue on an annualized basis. Do you expect the pace of acquisitions maybe to slow a little in H2 now that you've already gotten to your sort of full year target range, or with the incremental capacity and the credit facility? Are you in the same position in terms of being willing and able to be opportunistic over the next two to three quarters?

Dan this is Todd. Yes, I think we're, as Andy mentioned, we're very disciplined in our approach but I think also we decided to [focus on] the energy with that organization and the management team in place to take these things on as we're facing the second half. If the right acquisitions come along we're definitely going to take advantage of them. [indiscernible]. Not only from just the business in and of itself, but new product base and potential spend but also expansion opportunities like we're seeing us take off along here in 2016.

Okay. I'll jump back in queue, otherwise look forward to seeing you at the open house in September.

Thank you Dan, thank you.

And your next question comes from Scott Stember from C.L. King, please go ahead.

Good morning guys.

Good morning.

Good morning.

Knowing that we're seeing the -- the trend of shipping to lower priced units starting to abate. Could you just tell us what the organic sales number was, plus or minus in the second quarter? I believe it that it was down the last few quarters but it sounds as if it's starting to flatten out?

It is, and this is Andy, we don't give out that organic sales number. What I can tell you is that we did see it normalize and we are down just a little bit in queue, but we have seen again that the trend normalize and expect that to continue to improve as we head into Q3.

Got you. Good to see. And just talking about some of the new facilities that you talked about in Mississippi and in Pennsylvania. Maybe just talk about what's going to be produced, notably that the one in Pennsylvania, what's going to be produced there and maybe just talk about some of the startup costs and are they new facilities, are they from the ground up? Maybe just give a sense on the cost.

Sure, Andy again, the new facilities in Pennsylvania, both in Pennsylvania and Mississippi, we don't green field. Both of these are leased facilities. But we have [Technical Difficulties] with our existing customer base which we kind of launch off of, and look to expand our product to the adjacent markets. And so in Pennsylvania, we're seeing a larger integration of industrial market opportunities. And in the Mississippi area right after we've got opportunities that's existing and then new opportunities to capitalize on the industrial side of the business as well. So it's really, the strategy is a combination of market synergy opportunity. As far as costs, in general spend is in the $250,000 to $300,000 range as it relates to equipping the facility, getting things started up. So not a huge impact and then like I said, we're generally leasing the facilities.

Okay and just one last question. What was the debt ratio in the second quarter?

So our second quarter debt leverage ratio is going to be under two time.

Got you, that's all I have right now, thank you.

Thank you, Scott.

And our next question comes from Tristan Thomas with Sidoti & Company. Please go ahead.

Good morning, how is everyone?

Good, thank you Tristan.

Couple of questions. One, [Thor] mentioned they were approaching capacity on some of their brands, where you stand in terms of capacity?

Yes Tristan, this is Todd. I think in most of our facilities, I would say we have ample capacity - there's a couple of facilities and product lines where obviously, based on the R.V. shipment numbers that we've seen in June, and what we're feeling here in July and August, we're pressing it. We're having to work some Saturdays in order to meet demands. We're taking actions as far as equipment and getting prepared for 2017 with some, filling some bottlenecks that we have. But overall I think our attitude is that we're in a good position overall with our capacities and are looking forward to 2017.

OK. Kind of on a similar manner, I was just curious to kind of get your thoughts regarding the Jayco acquisition in terms of how it might affect yourself and some of the other suppliers, if at all?

Yes, I mean I think it's a little early to tell, but obviously I think most of us that are familiar with the industry know how [Thor] is operated on a very decentralized way. And I think all indications are is their plan is to do the same with Jayco. Jayco is an outstanding organization with a great reputation, and as it relates to how we view things, our relationship with [Thor] is fabulous. We appreciate the relationship we have with them, and what we've been able to continue to help each other build and we're looking forward to those similar opportunities in the months to come here with the Jayco acquisition.

OK. One, just final question for me, and I believe you mentioned you do expect kind of the industry mix shift to abate relatively soon as people do upgrade to larger, more expensive units? And do you have any idea in terms of a timeframe in terms of the average person, how long that typically takes?

This is Andy. As it relates, I just want to clarify, we're expecting that this trend to normalize, so we've anniversaryed and would expect this trend to continue for a short period of time in the short term. Our view would be it's probably a little bit of a longer window as it relates to it abating and kind of moving back towards higher end units. So we can't really put a mark on it, but in the near term we see kind of a normalized trend here on lower end units.

Okay, great. Thank you guys.

Thank you.

Thank you.

[Operator Instructions] And we have no further questions at this time, I'll turn the presentation back over to Julie Ann Kotowski.

Thanks Adrian. We appreciate everyone for being on the call today and we look forward to talking to you again at our third quarter 2016 conference call. A replay of today's call will be archived on Patrick's website, www.patrickind.com under investor relations. I'll now turn the call back over to our operator.

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