Patrick Industries, Inc. Reports Third Quarter and Nine Months 2011 Financial Results

ELKHART, Ind., Oct. 27, 2011 /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 third quarter and nine
months ended September 25, 2011.

Net sales for the quarter were $77.4 million compared to $72.8 million in the
same quarter of 2010, an increase of $4.6 million or 6.4%. The increase was
primarily attributable to the contributions of three business acquisitions
completed since August 2010, higher raw material commodity prices, and improved
retail fixture sales in the industrial market. Softer than expected conditions
in the MH industry partially offset the sales increase in the quarter. According
to industry associations, wholesale unit shipments in the RV industry, which
represented 59% of the Company’s sales in the quarter, decreased approximately
3% in the third quarter of 2011 compared to the prior year period. The Company
estimates that wholesale unit shipments in the MH industry, which represented
26% of the Company’s third quarter sales, were down approximately 5% from the
third quarter of 2010. The industrial market sector, which is primarily tied to
the residential housing market and accounted for 15% of the Company’s third
quarter 2011 sales, saw a 6% increase in new housing starts in the quarter
compared to the prior year.

As previously announced, Patrick acquired Syracuse, Indiana-based A.I.A.
Countertops, LLC (“AIA”) in September 2011. AIA, a fabricator of countertops,
backsplashes, tables, signs, and other products for the RV and commercial
markets, was the Company’s second acquisition of the year following the
acquisition of the manufacturing and distribution business of Praxis Group
(“Praxis”) in June 2011. Together, AIA and Praxis accounted for approximately
$1.3 million of the sales increase in the third quarter of 2011. In addition,
the acquisition of Blazon International Group (“Blazon”) during the third
quarter of 2010 contributed only a partial quarter’s results in the prior year
period compared to a full quarter in 2011.

For the third quarter of 2011, Patrick reported net income of $4.5 million or
$0.44 per diluted share, compared to a net loss of $0.6 million or $0.07 per
diluted share in the third quarter of 2010. Third quarter 2011 and 2010 net
income each included the positive impact of a non-cash credit of $0.1 million or
$0.01 per diluted share related to mark-to-market accounting for common stock
warrants.

The impact of the acquisition of new product lines during 2010, in particular
the acquisition of the distribution business of Blazon, positively contributed
to gross profit and net income during the third quarter of 2011. Continued
improved profitability at two of the Company’s Midwest manufacturing divisions,
one of which had underperformed in 2010 compared to historical levels, also
contributed to the increase in net income. Both divisions benefited from margin
improvements that were in line with the Company’s expectations and ongoing
organizational and process changes that enhanced labor efficiencies, reduced
scrap and returns, and increased material yields.

“While we have been negatively impacted by continuing soft market conditions in
the MH industry, we have increased our market share in both the RV and
industrial market sectors through new product introductions and line extensions
to further drive sales levels,” said Todd Cleveland, President and Chief
Executive Officer. “In addition, we believe the impact of the acquisitions of
Praxis and AIA in 2011 will provide positive contributions to our operating
profitability and allow us to gain additional penetration in the RV and
industrial market sectors.”

Net sales for the first nine months of 2011 were $229.5 million, an increase of
$9.3 million or 4.3%. Similar to the third quarter, the year-to-date increase
was primarily attributable to the contributions of the three acquisitions
described above, higher raw material commodity prices, and improved retail
fixture business. The sales increase was partially offset by continued softness
in the MH and residential housing markets. According to industry associations,
wholesale unit shipments in the RV industry, which represented 62% of the
Company’s year-to-date sales, increased approximately 3% in the first nine
months of 2011 compared to the prior year period. The Company estimates that
wholesale unit shipments in the MH industry, which represented 23% of the
Company’s nine months sales, were down approximately 10% from 2010. The
industrial market sector, which accounted for 15% of the Company’s nine months
sales, saw new housing starts decrease by approximately 2% for the first nine
months of 2011 compared to the prior year.

For the first nine months of 2011, Patrick reported net income of $7.0 million
or $0.68 per diluted share, compared to net income of $2.2 million or $0.22 per
diluted share in the prior year period. Net income for the first nine months of
2011 benefited from the impact of improved profitability at two of the Company’s
Midwest manufacturing divisions and the product line acquisitions as discussed
above.

Nine months 2011 net income included non-cash charges related to the refinancing
of Patrick’s previous credit facility, including $0.6 million or $0.06 per
diluted share for the write-off of the remaining unamortized loss on interest
rate swaps that were terminated and paid off during the first quarter and the
write-off of $0.6 million or $0.06 per diluted share of financing costs. The
costs were partially offset by a net gain on the sale of fixed assets and on the
acquisition of a business of $0.3 million or $0.03 per diluted share, and a
non-cash credit of approximately $0.1 million or $0.01 per diluted share related
to stock warrant accounting. Net income for the first nine months of 2010
included a net gain on the sale of fixed assets of $2.8 million or $0.28 per
diluted share, and a non-cash credit of approximately $0.2 million or $0.02 per
diluted share related to stock warrant accounting.

“We are pleased with our improved third quarter and year-to-date profitability
compared to 2010 as we are realizing both the benefits of strategic and
operational initiatives executed in late 2010 and early 2011, and the related
improved contribution as a result of the absorption of fixed costs over a larger
sales base. However, we expect conditions to soften in the RV and MH industries
through the balance of 2011 due primarily to the normal seasonal cycle and
concerns over the state of the economic recovery. In addition, we are excited to
work with the AIA team and be afforded the opportunity to continue to bring new
products to our existing customer base and potentially to other customers
outside of the RV industry. As we move through the balance of 2011 and into
2012, we will continue to focus our efforts on searching for opportunities to
expand our portfolio of product offerings through the addition of new product
lines and strategic acquisitions and continue to maximize our efforts to enhance
production and labor efficiencies, control costs, and improve net income,” said
Mr. Cleveland.

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 12 states. Patrick’s major manufactured
products include decorative vinyl and paper panels, countertops, wrapped profile
mouldings, cabinet doors and components, interior passage doors, and slotwall
and slotwall components. The Company also distributes drywall and drywall
finishing products, wiring, electrical and plumbing products, electronics,
cement siding, interior passage doors, roofing 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,
the ability to generate cash flow or obtain financing to fund growth, future
growth rates in the Company’s core businesses, 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 to reflect circumstances or events that occur after the date hereof
or otherwise. 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, 2010, 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.

THIRD QUARTER NINE MONTHS
————- ———–
(thousands
except
per
share
data ENDED ENDED
———- —– —–

CONSOLIDATED
STATEMENTS
OF
OPERATIONS Sept. Sept. Sept.
(Unaudited) 25, 26, 25, Sept. 26,
2011 2010 2011 2010
—- —- —- —-
NET SALES $77,439 $72,785 $229,544 $220,150
Cost of
goods
sold 64,248 65,021 196,446 196,172
—— —— ——- ——-
Gross
profit 13,191 7,764 33,098 23,978
—— —– —— ——

Operating
expenses:
Warehouse
and
delivery 3,537 3,110 10,155 8,884
Selling,
general
and
administrative 4,226 3,785 12,157 11,190
Amortization
of
intangible
assets 195 125 538 377
(Gain)
loss on
sale of
fixed
assets
and
acquisition
of
business (11) 26 (263) (2,794)
— — —- ——
Total
operating
expenses 7,947 7,046 22,587 17,657

OPERATING
INCOME 5,244 718 10,511 6,321
Stock
warrants
revaluation (69) (127) (76) (192)
Interest
expense,
net 777 1,474 3,589 4,348
— —– —– —–
Income
(loss)
before
income
taxes 4,536 (629) 6,998 2,165
Income
taxes – – – -
— — — —
NET
INCOME
(LOSS) $4,536 $(629) $6,998 $2,165
====== ===== ====== ======

BASIC NET
INCOME
(LOSS)
PER
COMMON
SHARE $0.46 $(0.07) $0.72 $0.23
===== ====== ===== =====

DILUTED
NET
INCOME
(LOSS)
PER
COMMON
SHARE $0.44 $(0.07) $0.68 $0.22
===== ====== ===== =====

Weighted
average
shares
outstanding
– Basic 9,865 9,401 9,673 9,335
Diluted 10,387 9,401 10,230 9,869

(thousands)
———–
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION Sept. 25, Dec. 31,
2011 2010
—- —-
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $240 $1,957
Trade receivables, net 23,624 10,190
Inventories 25,656 22,723
Prepaid expenses and other 1,708 2,258
Total current assets 51,228 37,128

Property, plant and equipment, net 22,639 23,172
Goodwill and other intangible assets, net 15,624 10,867
Deferred financing costs, net 2,005 325
Other non-current assets 573 3,325
— —–
TOTAL ASSETS $92,069 $74,817
======= =======

CURRENT LIABILITIES
Current maturities of long-term debt $1,000 $16,983
Short-term borrowings – 19,250
Accounts payable 19,539 8,204
Accrued liabilities 7,458 5,628
—– —–
Total current liabilities 27,997 50,065

Long-term debt, less current maturities and
discount 32,004 -
Deferred compensation and other 3,916 5,290
Deferred tax liabilities 1,326 1,326
—– —–
TOTAL LIABILITIES 65,243 56,681

SHAREHOLDERS’ EQUITY 26,826 18,136
—— ——
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $92,069 $74,817

SOURCE Patrick Industries, Inc.