Patrick Industries, Inc. Reports Fourth Quarter and Full Year 2013 Financial Results and Announces Increased Share Repurchase Authorization

ELKHART, Ind., Feb. 27, 2014 /PRNewswire/ — Patrick Industries, Inc. (NASDAQ:
PATK), a major manufacturer and distributor of building and component products
for the recreational vehicle (“RV”), manufactured housing (“MH”) and industrial
markets, today reported its financial results for the fourth quarter and full
year ended December 31, 2013, and announced that its board of directors has
authorized an increase in the amount available to be acquired under its existing
share repurchase program to $20 million. The 2013 results included the highest
fourth quarter revenues, net income and net income per diluted share in the
Company’s history as well as record full year revenues. Net income and net
income per diluted share for full year 2013 were exceeded only by 2012’s results
due to a non-cash income tax credit recorded in that year.

Fourth Quarter 2013 Financial Results
Net sales for the fourth quarter of 2013 increased $40.5 million or 38.1%, to
$146.6 million from $106.1 million in the same quarter of 2012. The increase was
primarily attributable to a 43% increase in the Company’s revenue from the RV
industry, which represented approximately 71% of the Company’s fourth quarter
2013 sales. Sales to the MH industry increased 13%, while sales to the
industrial markets increased 57%. Wholesale unit shipments to the RV industry
increased approximately 13% in the fourth quarter of 2013 compared to the prior
year. Additionally, wholesale unit shipments to the MH industry, which
represented approximately 16% of fourth quarter 2013 sales, rose approximately
15% from the fourth quarter of 2012. The industrial market sector, which is
primarily tied to the residential housing and commercial and retail fixtures
markets, accounted for 13% of the Company’s fourth quarter 2013 sales, and
reflected an approximate 13% increase in new housing starts in the fourth
quarter of 2013 compared to the prior year. The Company estimates that
approximately 60% of its industrial market sales are linked to the residential
housing sector and its sales to the industrial markets generally lag new housing
starts by approximately six to nine months.

Excluding the revenue contributions of acquisitions completed in 2012 and 2013,
the Company estimates its organic growth in the fourth quarter of 2013 at
approximately 23%, or $24.9 million of its total revenue increase. The Company
estimates that this organic growth was comprised of growth resulting from market
share gains of approximately 12% and growth tied to overall industry improvement
of approximately 11%. The remaining $15.6 million of the revenue increase in the
fourth quarter of 2013 was attributable to the incremental contribution of the
2012 and 2013 acquisitions (including related market share and industry growth),
resulting in incremental growth of approximately 15%.

Todd Cleveland, President and Chief Executive Officer, said, “We are pleased
with our fourth quarter revenue and profitability growth compared to 2012 as we
continue to realize the benefits of our strategic and operational initiatives
executed in 2012 and 2013 as well as growth in all three of the end markets we
serve. Our gross margin in the fourth quarter of 2013 improved over the prior
year quarter reflecting the positive contribution of acquisitions, market share
gains, and an increase in our RV industry unit content.” Mr. Cleveland further
noted, “Our results are a reflection of the continued drive and passion of our
team members who are humbly dedicated to the goal of consistently performing at
the highest level to provide exceptional customer service as part of our
‘Customer 1st’ performance-oriented culture and mission.”

Patrick reported operating income of $8.6 million in the fourth quarter of 2013,
an increase of $4.0 million or 87.2%, from the $4.6 million reported in the
prior year. Fourth quarter 2013 net income was $5.0 million or $0.47 per diluted
share, which reflected an effective tax rate of 38%. This compares to net income
of $3.2 million or $0.30 per diluted share in the fourth quarter of 2012, when
the Company reported an income tax credit of approximately $0.2 million or $0.02
per diluted share related to the reversal of the valuation allowance against its
deferred tax assets.

In addition to the tax credit mentioned above, fourth quarter 2012 net income
included a non-cash charge of $0.7 million or $0.06 per diluted share for the
write-off of the remaining unamortized debt discount on the senior secured
subordinated notes (the “Notes”) that were prepaid in full during the fourth
quarter of 2012 and a charge of $0.3 million or $0.02 per diluted share for
premiums paid in conjunction with the prepayment of the Notes. Exclusive of
these items, together totaling a net charge of $0.8 million or $0.06 per diluted
share, and assuming the same estimated effective tax rate of 38% that was
recorded in the fourth quarter of 2013, adjusted net income in the fourth
quarter of 2012 would have been $2.5 million or $0.23 per diluted share.

Full Year 2013 Financial Results
Net sales for the twelve months of 2013 increased $157.5 million or 36.0%, to
$594.9 million from $437.4 million in 2012. For the full year 2013, the
Company’s revenue from the RV industry, which represented approximately 72% of
its 2013 sales, increased by 44%. Wholesale unit shipments to the RV industry
increased approximately 12% in 2013 compared to the prior year. Additionally,
revenues from the MH industry, which represented 16% of the Company’s 2013
sales, rose 13% compared to the prior year as wholesale unit shipments increased
by approximately 10%. Revenues from the industrial market increased 33% and
benefited from improved retail fixture and residential cabinet and furniture
sales. The industrial market, which accounted for 12% of the Company’s 2013
sales, saw new housing starts increase by approximately 18% for 2013 compared to
the prior year.

Excluding the revenue contributions of the 2012 and 2013 acquisitions, the
Company estimates its organic growth for the full year 2013 at approximately
19%, or $82.6 million of its total revenue increase. The Company estimates that
this organic growth was comprised of growth resulting from market share gains of
approximately 8% and growth tied to overall industry improvement of
approximately 11%. The remaining $74.9 million of the revenue increase in 2013
was attributable to the incremental contribution of the 2012 and 2013
acquisitions (including related market share and industry growth), resulting in
incremental growth of approximately 17%.

The Company’s RV content per unit for the full year 2013 increased 28% to $1,338
from $1,048 for 2012. The MH content per unit increased approximately 2% to
$1,582 in 2013 from $1,556 in the prior year.

For the full year 2013, Patrick reported operating income of $40.9 million, an
increase of $13.9 million or 51.4%, from the $27.0 million reported in 2012.
Twelve months 2013 net income was $24.0 million or $2.23 per diluted share,
which reflected an effective tax rate of 38%. For the full year 2012, the
Company reported net income of $28.1 million or $2.64 per diluted share,
including a non-cash income tax credit of $6.8 million or $0.64 per diluted
share as described below.

Exclusive of an after-tax gain on sale of fixed assets and an after-tax gain
related to the recovery of a previously reserved receivable, together totaling
$0.4 million or $0.04 per diluted share, twelve months 2013 adjusted net income
would have been $23.6 million or $2.19 per diluted share.

As mentioned above, twelve months 2012 net income was positively impacted by a
non-cash income tax credit of $6.8 million or $0.64 per diluted share related to
the reversal of the tax valuation allowance against its deferred tax assets as
well as a net gain on the sale of fixed assets and the acquisition of a business
of $0.2 million or $0.02 per diluted share. In addition, full year 2012 net
income was reduced by a non-cash charge of $1.7 million or $0.16 per diluted
share related to stock warrant accounting, the non-cash charge of $0.7 million
or $0.06 per diluted share for the write-off of the remaining unamortized debt
discount on the Notes, and the charge of $0.3 million or $0.02 per diluted share
for the premiums paid in conjunction with the prepayment of the Notes both as
described above. Exclusive of these items, together totaling a net gain of $4.3
million or $0.42 per diluted share, and assuming the same estimated effective
tax rate of 38% that was recorded in the twelve months of 2013, full year 2012
adjusted net income would have been $14.7 million or $1.38 per diluted share.

In 2011, as a result of the generation of taxable income, the Company began to
utilize its federal and state net operating loss carry forwards (the “NOLs”) of
more than $29 million and $34 million, respectively, to offset taxable earnings
for federal and state tax purposes. At December 31, 2012, the Company had gross
federal NOLs remaining of approximately $9.8 million that it fully utilized in
the first half of 2013. In addition, at December 31, 2012, the Company had gross
state NOLs remaining of approximately $12.6 million, of which approximately $4.5
million were remaining to be utilized as of December 31, 2013. The utilization
of these federal and state NOLs to offset taxable earnings over the past several
years significantly enhanced the Company’s cash flows from operations that were
available to be invested in capital expenditures and acquisitions, as well as to
complete stock repurchases and reduce debt.

“We continue to be energized by our full year 2013 performance which is a
reflection of our team’s efforts to execute on a number of strategic and
operational initiatives,” stated Mr. Cleveland. “In 2013, as part of our overall
strategic plan, we invested approximately $16.5 million in the acquisitions of
Frontline Mfg., Inc., Premier Concepts, Inc. and West Side Furniture, which
expanded the depth and breadth of our product lines and capabilities, both in
our core markets and in related markets. These three acquisitions had annualized
revenues of approximately $42 million, of which approximately $12 million was
included in our full year 2013 operating results.”

“Additionally, in 2013 we were able to successfully integrate the businesses we
acquired at the end of 2012, utilize our manufacturing and distribution
capabilities to grow our revenue base and to increase our market share and per
unit content within the RV industry, and grow our net income and earnings per
share. We also re-invested approximately $8.7 million into our businesses
through capital expenditures, which included the ongoing replacement of our
current management information systems, the acquisition of an operating facility
in the Midwest that we had previously been leasing, and the replacement and
upgrading of existing production equipment at several of our manufacturing
operations to increase efficiency and capacity levels in anticipation of future
growth,” Mr. Cleveland further stated.

In February 2013, the Company’s Board of Directors authorized a stock repurchase
program for the purchase of up to $10.0 million of the Company’s common stock
from time to time through open market or private transactions over the following
12 months. As of December 31, 2013, the Company had repurchased 407,330 shares
at an average price of $14.92 per share for a total cost of approximately $6.1
million.

On February 13, 2014, the Company’s Board of Directors authorized an increase in
the amount of the Company’s common stock that may be acquired under the stock
buyback program over the next 12 months to $20.0 million, including
approximately $3.9 million available under the previous authorization.

Patrick’s total assets approximated $174.2 million at December 31, 2013 compared
to $143.5 million at December 31, 2012, primarily reflecting the impact of
acquisitions and overall growth from year to year. Furthermore, total debt
outstanding at December 31, 2013 increased to $55.0 million compared to $49.7
million at December 31, 2012 primarily reflecting the funding of acquisitions,
stock repurchases and capital expenditures during the year net of debt
reduction.

“The combination of the capital investments we made in our businesses, the
dedication, leadership, and entrepreneurial spirit of our team members, the
execution of our organizational strategic agenda, and the strong cash flows
resulting from our revenue growth and operating profitability in 2013 have
provided a solid base to drive the continued success of the organization in the
coming year. The increase in our stock repurchase authorization reflects the
confidence we have in Patrick’s outlook, as well as our expectation for
improving overall economic conditions, and is consistent with our capital
allocation strategy. We will continue to focus our efforts on the addition of
new product lines, strengthening our balance sheet, managing and maintaining an
appropriate leverage position to optimize utilization of our resources, and
reinvesting in our business through capital expenditures, stock repurchases and
strategic acquisitions,” said Mr. Cleveland.

Conference Call Webcast
As previously announced, Patrick Industries will host an online webcast of its
fourth quarter 2013 earnings conference call that can be accessed on the
Company’s website, www.patrickind.com under “Investor Relations,” on Thursday,
February 20, 2014, at 10:00 a.m. Eastern time.

About Patrick Industries
Patrick Industries, Inc. (www.patrickind.com) is a major manufacturer of
component products and distributor of building products serving the recreational
vehicle, manufactured housing, kitchen cabinet, household furniture, fixtures
and commercial furnishings, marine, and other industrial markets and operates
coast-to-coast through locations in 11 states. Patrick’s major manufactured
products include decorative vinyl and paper laminated panels, countertops,
wrapped profile mouldings, slide out trim and fascia, cabinet doors and
components, hardwood furniture, fiberglass bath fixtures, interior passage
doors, exterior graphics, and slotwall panels and components. The Company also
distributes drywall and drywall finishing products, electronics, wiring,
electrical and plumbing products, cement siding, interior passage doors, roofing
products, laminate and ceramic flooring, shower doors, furniture, fireplaces and
surrounds, interior and exterior lighting products, and other miscellaneous
products.

Forward-Looking Statements
This press release contains certain statements related to future results, or
states our intentions, beliefs and expectations or predictions for the future,
which are forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
involve a number of risks and uncertainties that could cause actual results to
differ materially from either historical or anticipated results depending on a
variety of factors. Potential factors that could impact results include: the
impact of any economic downturns especially in the residential housing market,
pricing pressures due to competition, costs and availability of raw materials,
availability of commercial credit, availability of retail and wholesale
financing for residential and manufactured homes, availability and costs of
labor, inventory levels of retailers and manufacturers, levels of repossessed
residential and manufactured homes, the financial condition of our customers,
retention and concentration of significant customers, the ability to generate
cash flow or obtain financing to fund growth, future growth rates in the
Company’s core businesses, the ability to effectively manage the costs and the
implementation of the new enterprise resource management system, the successful
integration of acquisitions, stock price fluctuations, interest rates, oil and
gasoline prices, the outcome of litigation, adverse weather conditions impacting
retail sales, and our ability to remain in compliance with our credit agreement
covenants. In addition, national and regional economic conditions and consumer
confidence may affect the retail sale of recreational vehicles and residential
and manufactured homes. The Company does not undertake to update forward-looking
statements, except as required by law. Further information regarding these and
other risks, uncertainties and factors is contained in the section entitled
“Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012, and in the Company’s Form 10-Qs for subsequent quarterly
periods, which are filed with the Securities and Exchange Commission (“SEC”) and
are available on the SEC’s website at www.sec.gov.

(thousands except per share data) FOURTH QUARTER TWELVE MONTHS

ENDED ENDED

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2013
2013 2012 2012
—- —- —-

NET SALES $146,612 $106,128 $594,931 $437,367

Cost of goods sold 125,008 91,560 503,908 371,623

Gross profit 21,604 14,568 91,023 65,744
—— —— —— ——

Operating expenses:

Warehouse and delivery 5,619 4,041 20,158 15,782

Selling, general and administrative 6,568 5,381 27,979 21,637

Amortization of intangible assets 783 531 2,371 1,523

Gain on sale of fixed assets & acquisition of business (6) (1) (430) (238)
— — —- —-

Total operating expenses 12,964 9,952 50,078 38,704

OPERATING INCOME 8,640 4,616 40,945 27,040

Stock warrants revaluation – – – 1,731

Interest expense, net 556 1,572 2,171 4,037
— —– —– —–

Income before income taxes (credit) 8,084 3,044 38,774 21,272

Income taxes (credit) 3,072 (173) 14,734 (6,823)
—– —- —— ——

NET INCOME $5,012 $3,217 $24,040 $28,095
====== ====== ======= =======

BASIC NET INCOME PER COMMON SHARE $0.47 $0.30 $2.24 $2.66

DILUTED NET INCOME PER COMMON SHARE $0.47 $0.30 $2.23 $2.64
===== ===== ===== =====

Weighted average shares outstanding – Basic 10,656 10,809 10,733 10,558

Diluted 10,710 10,891 10,786 10,637

(thousands)

CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION Dec. 31, Dec. 31,

2013 2012
—- —-

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents $34 $434

Trade receivables, net 22,644 17,858

Inventories 56,510 46,992

Deferred tax assets 3,762 5,149

Prepaid expenses and other 4,749 3,237
—–

Total current assets 87,699 73,670

Property, plant and equipment, net 42,117 37,069

Goodwill and other intangible assets,
net 42,106 29,581

Deferred tax assets – 676

Deferred financing costs, net 1,283 1,612

Other non-current assets 982 861
— —

TOTAL ASSETS $174,187 $143,469
======== ========

CURRENT LIABILITIES

Accounts payable $18,826 $17,336

Accrued liabilities 13,585 11,816
—— ——

Total current liabilities 32,411 29,152

Long-term debt 55,000 49,716

Deferred compensation and other 2,546 3,193

Deferred tax liabilities 1,920 –

TOTAL LIABILITIES 91,877 82,061

SHAREHOLDERS’ EQUITY 82,310 61,408
—— ——

TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY $174,187 $143,469

SOURCE Patrick Industries, Inc.

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