UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

 

( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 29,JUNE 28, 2015

 

OR

 

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ……………… to ………………

 

Commission file number 000-03922

 

PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

 

INDIANA

35-1057796

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

107 WEST FRANKLIN STREET,P.O. Box 638,ELKHART, IN

46515

(Address of principal executive offices)

(ZIP Code)


(574) 294-7511
(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]

 Accelerated filer [X]

 Non-accelerated filer [  ]

 Smaller reporting company [  ] 

                      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

As of AprilJuly 24, 2015, there were 10,293,21615,451,854 shares of the registrant’s common stock outstanding.

 

 
 

 

 

 PATRICK INDUSTRIES, INC.

 

TABLE OF CONTENTS

 
 
 Page No

PART I. FINANCIAL INFORMATION

 
 

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Financial Position

March 29, 2015 and December 31, 2014

3Page No.

Condensed Consolidated Statements of Income

   First Quarter Ended March 29, 2015 and March 30, 2014

4

Condensed Consolidated Statements of Cash Flows 

Three Months Ended March 29, 2015 and March 30, 2014

5

Notes to Condensed Consolidated Financial Statements 

6

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Financial Position (Unaudited)

June 28, 2015 and December 31, 2014

3

Condensed Consolidated Statements of Income (Unaudited)

   Second Quarter and Six Months Ended June 28, 2015 and June 29, 2014

4

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 28, 2015 and June 29, 2014

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

17

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

3029

ITEM 4. CONTROLS AND PROCEDURES

3029

  

PART II. OTHER INFORMATION

 
  

ITEM 1A.  RISK FACTORS

3130

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

3130

ITEM 6.  EXHIBITS

3230

SIGNATURES32  31

 

 

 

PART 1: FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

 

 

As of

  

As of

 

(thousands)

 

Mar. 29, 2015

  

Dec. 31, 2014

  

June 28, 2015

  

Dec. 31, 2014

 

ASSETS

                

Current Assets

                

Cash and cash equivalents

 $69  $123  $6,606  $123 

Trade receivables, net

  68,718   32,637   51,345   32,637 

Inventories

  74,284   71,020   73,428   71,020 

Deferred tax assets

  3,654   4,563   4,427   4,563 

Prepaid expenses and other

  2,648   6,453   3,097   6,453 

Total current assets

  149,373   114,796   138,903   114,796 

Property, plant and equipment, at cost

  125,740   120,439 

Less accumulated depreciation

  64,909   63,086 

Property, plant and equipment, net

  60,831   57,353   61,466   57,353 

Goodwill

  47,107   31,630   49,551   31,630 

Other intangible assets, net of accumulated amortization(2015: $11,728; 2014: $10,069)

  63,856   49,544 

Deferred financing costs, net of accumulated amortization(2015: $1,871; 2014: $1,770)

  956   1,024 

Other intangible assets, net

  77,245   49,544 

Deferred financing costs, net

  2,420   1,024 

Other non-current assets

  1,198   1,214   1,232   1,214 

TOTAL ASSETS

 $323,321  $255,561  $330,817  $255,561 
                

LIABILITIES AND SHAREHOLDERS’ EQUITY

                

Current Liabilities

                

Current maturities of long-term debt

 $10,714  $- 

Accounts payable

 $43,506  $29,754   36,429   29,754 

Accrued liabilities

  15,916   15,388   17,131   15,388 

Total current liabilities

  59,422   45,142   64,274   45,142 

Long-term debt

  149,759   101,054 

Long-term debt, less current maturities

  139,286   101,054 

Deferred compensation and other

  2,213   2,239   2,177   2,239 

Deferred tax liabilities

  3,790   4,358   3,688   4,358 

TOTAL LIABILITIES

  215,184   152,793   209,425   152,793 
                

SHAREHOLDERS’ EQUITY

                

Common stock

  54,740   54,769   55,911   54,769 

Additional paid-in-capital

  8,568   7,459   8,579   7,459 

Accumulated other comprehensive income

  31   31   31   31 

Retained earnings

  44,798   40,509   56,871   40,509 

TOTAL SHAREHOLDERS’ EQUITY

  108,137   102,768   121,392   102,768 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 $323,321  $255,561  $330,817  $255,561 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  

Second Quarter Ended

  

Six Months Ended

 
  

June 28,

  

June 29,

  

June 28,

  

June 29,

 

(thousands except per share data)

 2015 (1)  2014 (1)  2015 (1)  2014 (1) 
                 

NET SALES

 $233,481  $187,855  $456,869  $358,005 

Cost of goods sold

  193,088   156,036   381,082   299,039 

GROSS PROFIT

  40,393   31,819   75,787   58,966 
                 

Operating Expenses:

                

Warehouse and delivery

  6,826   6,659   13,485   12,771 

Selling, general and administrative

  11,219   8,765   22,738   17,265 

Amortization of intangible assets

  1,982   841   3,641   1,628 

(Gain) loss on sale of fixed assets

  (5)  37   (11)  24 

Total operating expenses

  20,022   16,302   39,853   31,688 
                 

OPERATING INCOME

  20,371   15,517   35,934   27,278 

Interest expense, net

  898   507   1,702   1,056 

Income before income taxes

  19,473   15,010   34,232   26,222 

Income taxes

  7,400   5,779   13,009   10,095 

NET INCOME

 $12,073  $9,231  $21,223  $16,127 
                 

BASIC NET INCOME PER COMMON SHARE

 $0.79  $0.57  $1.39  $1.00 

DILUTED NET INCOME PER COMMON SHARE

 $0.78  $0.57  $1.37  $1.00 
                 

Weighted average shares outstanding - Basic

  15,312   16,061   15,319   16,057 

 - Diluted

  15,513   16,142   15,498   16,132 

(1) Net income per common share and weighted average shares outstanding, on both a basic and diluted basis, reflectthe impact of the three-for-two common stock split paid on May 29, 2015.

  

First Quarter Ended

 
  

March 29,

  

March 30,

 

(thousands except per share data)

 

2015

  

2014

 
         

NET SALES

 $223,388  $170,150 

Cost of goods sold

  187,994   143,003 

GROSS PROFIT

  35,394   27,147 
         

Operating Expenses:

        

Warehouse and delivery

  6,659   6,112 

Selling, general and administrative

  11,519   8,500 

Amortization of intangible assets

  1,659   787 

Gain on sale of fixed assets

  (6)  (13)

Total operating expenses

  19,831   15,386 
         

OPERATING INCOME

  15,563   11,761 

Interest expense, net

  804   549 

Income before income taxes

  14,759   11,212 

Income taxes

  5,609   4,316 

NET INCOME

 $9,150  $6,896 
         

BASIC NET INCOME PER COMMON SHARE

 $0.90  $0.64 

DILUTED NET INCOME PER COMMON SHARE

 $0.89  $0.64 
         
Weighted average shares outstanding        

- Basic

  10,218   10,702 

- Diluted

  10,318   10,815 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

Three Months Ended

  

Six Months Ended

 

(thousands)

 

March 29, 2015

  

March 30, 2014

  

June 28, 2015

  

June 29, 2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

                

Net income

 $9,150  $6,896  $21,223  $16,127 

Adjustments to reconcile net income to net cash provided by (used in)operating activities:

        

Adjustments to reconcile net income to net cash provided byoperating activities:

        

Depreciation

  1,891   1,324   3,819   2,688 

Amortization of intangible assets

  1,659   787   3,641   1,628 

Stock-based compensation expense

  1,024   733   2,194   1,626 

Deferred compensation expense

  83   83   164   165 

Deferred income taxes

  341   900   (534)  (16)

Gain on sale of fixed assets

  (6)  (13)

Decrease in cash surrender value of life insurance

  23   23 

(Gain) loss on sale of fixed assets

  (11)  24 

(Increase) decrease in cash surrender value of life insurance

  (5)  45 

Deferred financing amortization

  101   87   215   174 

Change in operating assets and liabilities, net of business acquisitions:

                

Trade receivables

  (31,691)  (20,198)  (12,554)  (17,780)

Inventories

  (1,301)  (3,170)  (129)  (4,329)

Prepaid expenses and other

  3,841   2,423   3,410   1,820 

Accounts payable and accrued liabilities

  12,124   17,672   6,104   14,678 

Payments on deferred compensation obligations

  (80)  (76)  (174)  (164)

Net cash provided by (used in) operating activities

  (2,841)  7,471 

Net cash provided by operating activities

  27,363   16,686 
                

CASH FLOWS FROM INVESTING ACTIVITIES

                

Capital expenditures

  (1,866)  (914)  (3,235)  (2,368)

Proceeds from sale of property, equipment and facility

  26   19 

Proceeds from sale of property and equipment

  17   37 

Business acquisitions

  (39,579)  -   (60,513)  (55,027)

Other

  (7)  (7)  (13)  (61)

Net cash used in investing activities

  (41,426)  (902)  (63,744)  (57,419)
                

CASH FLOWS FROM FINANCING ACTIVITIES

                

Long-term debt borrowings (payments), net

  48,705   (7,606)

Borrowings on revolver and term loan, net

  48,946   46,685 

Payment of deferred financing costs

  (33)  (1)  (1,611)  (4)

Stock repurchases under buyback program

  (5,650)  -   (5,650)  (3,683)

Realization of excess tax benefit on stock-based compensation

  1,204   1,037   1,215   1,071 

Proceeds from exercise of stock options, including tax benefit

  16   26   16   26 

Payments on capital lease obligations

  (29)  (36)  (52)  (73)

Net cash provided by (used in) financing activities

  44,213   (6,580)

Decrease in cash and cash equivalents

  (54)  (11)

Net cash provided by financing activities

  42,864   44,022 

Increase in cash and cash equivalents

  6,483   3,289 

Cash and cash equivalents at beginning of year

  123   34   123   34 

Cash and cash equivalents at end of period

 $69  $23  $6,606  $3,323 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

PATRICK INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

 

1.

BASIS OF PRESENTATION

In the opinion of Patrick Industries, Inc. (“Patrick” or the “Company”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position as of March 29,June 28, 2015 and December 31, 2014, and its results of operations and cash flows for the three and six months ended March 29,June 28, 2015 and March 30,June 29, 2014.

 

Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The December 31, 2014 condensed consolidated statement of financial position data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the firstsecond quarter and six months ended March 29,June 28, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015.

 

In preparation of Patrick’s condensed consolidated financial statements as of and for the second quarter and six months ended March 29,June 28, 2015, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q for potential recognition or disclosure in the consolidated financial statements. See Notes 6, 8 and 13 for events that occurred subsequent to the balance sheet date.

 

The number of shares and per share amounts have been retroactively adjusted to reflect the three-for-two stock split of the Company's common stock, which was effected in the form of a common stock dividend paid on May 29, 2015.

2.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued new accounting guidance on revenue from contracts with customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

 

The guidance permits two methods of transition upon adoption: full retrospective and modified retrospective. Under the full retrospective method, prior periods would be restated under the new revenue standard, providing a comparable view across all periods presented. Under the modified retrospective method, prior periods would not be restated. Rather, revenues and other disclosures for periods prior to the effective date would be provided in the notes to the financial statements as previously reported under the current revenue standard.

 

The guidance was originally effective for annual and interim periods beginning after December 15, 2016 and early adoption was not permitted. In AprilJuly 2015, the FASB proposedissued final revised guidance that if adopted, defers the effective date of the revenue recognition standard to be for annual and interim periods beginning after December 15, 2017. Under the proposedfinal revised guidance, an entity would, however, be permitted to elect to adopt the amendments as of the original effective date. The impact from the adoption of this guidance on the Company's Condensed Consolidated Financial Statementscondensed consolidated financial statements cannot be determined at this time. The Company is also working to determine the appropriate method of transition to the guidance.


 

Stock Compensation 

In June 2014, the FASB issued revised guidance on accounting for share-based payments that will require that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. The revised guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the provisions of this guidance and has not yet determined the impact, if any, that the implementation of this guidance will have on its results of operations orcondensed consolidated financial condition.statements.

 

Debt Issuance Costs

In April 2015, the FASB issued guidance that would require that debt issuance costs related to a recognized debt liability be presented in the statement of financial position as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2015 and early adoption is permitted.

The guidance should be applied on a retrospective basis in which the statement of financial position of each period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (i.e., debt issuance cost asset and the debt liability). Upon adoption of the new guidance, assets related to deferred financing/debt issuance costs will be reclassed and presented net of debt outstanding.

Inventory

In July 2015, the FASB issued new accounting guidance for measuring the value of inventory. The Companycore principal of the guidance is currently evaluatingthat an entity should measure inventory at the provisionslower of thiscost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is being measured using the Last-In, First-Out (LIFO) or the retail inventory method.

The guidance is effective for financial statements issued for annual and has not yet determined the impact, if any, that the implementationinterim periods beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. The adoption of this guidance will not have a material impact on its results of operations orthe Company’s condensed consolidated financial condition.statements.

 


3.

INVENTORIES

 

3.      INVENTORIES

Inventories are stated at the lower of cost (First-In, First-Out (FIFO) Method) or market and consist of the following classes:

 

(thousands)

 

Mar. 29, 2015

  

Dec. 31, 2014

  

June 28, 2015

  

Dec. 31, 2014

 

Raw materials

 $40,265  $39,283  $39,450  $39,283 

Work in process

  5,873   5,607   5,817   5,607 

Finished goods

  4,460   4,897   4,852   4,897 

Less: reserve for inventory obsolescence

  (1,485)  (1,288)  (1,681)  (1,288)

Total manufactured goods, net

  49,113   48,499   48,438   48,499 

Materials purchased for resale (distribution products)

  26,067   23,049   26,037   23,049 

Less: reserve for inventory obsolescence

  (896)  (528)  (1,047)  (528)

Total materials purchased for resale (distribution products), net

  25,171   22,521   24,990   22,521 

Total inventories

 $74,284  $71,020  $73,428  $71,020 


 

4.GOODWILL ANDOTHERINTANGIBLE ASSETS       

Goodwill and other intangible assets are allocated to the Company’s reporting units at the date they are initially recorded. Goodwill and indefinite-lived intangible assets are not amortized but are subject to an impairment test based on their estimated fair value performed annually in the fourth quarter (or under certain circumstances more frequently as warranted). Goodwill impairment testing is performed at the reporting unit level, one level below the business segment. segment.The Company’s Manufacturing segment includes goodwill originating from the acquisitions of Gravure Ink (acquired in the Adorn Holdings, Inc. acquisition), Quality Hardwoods Sales (“Quality Hardwoods”), A.I.A. Countertops, LLC (“AIA”), Infinity Graphics, Décor Mfg., LLC (“Décor”), Creative Wood Designs, Inc. (“Creative Wood”), Middlebury Hardwood Products, Inc. (“Middlebury Hardwoods”), Frontline Mfg., Inc. (“Frontline”), Premier Concepts, Inc. (“Premier”), Precision Painting Group (“Precision”), Foremost Fabricators, LLC (“Foremost”), PolyDyn3, LLC (“PolyDyn3”), Charleston Corporation (“Charleston”), and Better Way Partners, LLC d/b/a Better Way Products (“Better Way”), and Structural Composites of Indiana, Inc. (“SCI”). While Gravure Ink, AIA, Infinity Graphics, Décor, Creative Wood, Middlebury Hardwoods, Frontline, Premier, Precision, Foremost, PolyDyn3, Charleston, and Better Way and SCI remain reporting units of the Company for which impairment is assessed, Quality Hardwoods is assessed for impairment as part of the Company’s hardwood door reporting unit. The Company’s Distribution segment includes goodwill originating from the acquisitions of Blazon International Group (“Blazon”), John H. McDonald Co., Inc. d/b/a West Side Furniture (“West Side”), and Foremost, which remain reporting units for which impairment is assessed.


 

Finite-lived intangible assets that meet certain criteria continue to be amortized over their useful lives and are also subject to an impairment test based on estimated undiscounted cash flows when impairment indicators exist. The Company assesses finite-lived intangible assets for impairment if events or changes in circumstances indicate that the carrying value may exceed the fair value.

 

No impairment was recognized during the firstsecond quarter and six months ended MarchJune 28, 2015 and June 29, 20152014 related to goodwill, indefinite-lived intangible assets or finite-lived intangible assets. There have been no material changes to the method of evaluating impairment related to goodwill, and indefinite-lived intangible assets or finite-lived intangible assets during the first quartersix months of 2015.

 

In February 2015, the Company acquired the business and certain assets of Better Way. The purchase was determined to be a business combination and the intangible assets recorded as a result of the acquisition included (in thousands): customer relationships - $11,505;$15,935; trademarks - $1,882;$3,340; non-compete agreements - $2,534;$630; and goodwill - $15,477.$11,177. The goodwill recognized in this transaction is expected to be deductible for income tax purposes. Better Way is included in the Manufacturing segment. See Note 5 for further details.

 

In May 2015, the Company acquired the business and certain assets of SCI. The purchase was determined to be a business combination and the intangible assets recorded as a result of the acquisition included (in thousands): customer relationships - $9,301; trademarks - $1,723; non-compete agreements - $363; and goodwill - $6,744. The goodwill recognized in this transaction is expected to be deductible for income tax purposes. SCI is included in the Manufacturing segment. See Note 5 for further details.

Goodwill

Changes in the carrying amount of goodwill for the threesix months ended March 29,June 28, 2015 by segment are as follows:

 

(thousands)

 

Manufacturing

  

Distribution

  

Total

  

Manufacturing

  

Distribution

  

Total

 

Balance - December 31, 2014

 $25,309  $6,321  $31,630  $25,309  $6,321  $31,630 

Acquisitions

  15,477   -   15,477   17,921   -   17,921 

Balance - March 29, 2015

 $40,786  $6,321  $47,107 

Balance - June 28, 2015

 $43,230  $6,321  $49,551 

 

OtherIntangible Assets

Other intangible assets are comprised of customer relationships, non-compete agreements and trademarks. Customer relationships and non-compete agreements represent finite-lived intangible assets that have been recorded in the Manufacturing and Distribution segments along with related amortization expense. As of March 29,June 28, 2015, the other intangible assets balance of $63.9$77.2 million is comprised of $10.9$14.1 million of trademarks which have an indefinite life, and therefore, no amortization expense has been recorded, and $53.0$63.1 million pertaining to customer relationships and non-compete agreements which are being amortized over periods ranging from two to 19 years.

 


For the finite-lived intangible assets attributable to the 2015 acquisitionacquisitions of Better Way and SCI, the useful life pertaining to non-compete agreements and customer relationships was five years and three years, respectively, and the useful life pertaining to customer relationships for both of these acquisitions was 10 years, respectively. Trademarks have an indefinite life, and therefore, no amortization expense has been recorded.years.


 

Other intangible assets, net consist of the following as of March 29,June 28, 2015 and December 31, 2014:

 

(thousands)

 

Mar. 29,

2015

 

Weighted

Average

Useful Life

 

Dec. 31,

2014

 

Weighted

Average

Useful Life

 

June 28,

2015

  

Weighted

Average

Useful Life

(years)

  

Dec. 31,

2014

  

Weighted

Average

Useful Life

(years)

 

Customer relationships

 $55,774 

11 years

 $44,269 

11 years

 $69,505   10  $44,269   11 

Non-compete agreements

  8,934 

3 years

  6,350 

3 years

  7,393   3.5   6,350   3 

Trademarks

  10,876    8,994    14,057       8,994     
  75,584    59,613    90,955       59,613     

Less: accumulated amortization

  (11,728)   (10,069)   (13,710)      (10,069)    

Other intangible assets, net

 $63,856   $49,544   $77,245      $49,544     

 

Changes in the carrying value of other intangible assets for the threesix months ended March 29,June 28, 2015 by segment are as follows:

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Balance - December 31, 2014

 $36,491  $13,053  $49,544 

Acquisitions

  31,342   -   31,342 

Amortization

  (2,815)  (826)  (3,641)

Balance - June 28, 2015

 $65,018  $12,227  $77,245 

 

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Balance - December 31, 2014

 $36,491  $13,053  $49,544 

Acquisitions

  15,971   -   15,971 

Amoritization

  (1,246)  (413)  (1,659)

Balance - March 29, 2015

 $51,216  $12,640  $63,856 

5.ACQUISITIONS

General

The Company completed a total of four acquisitions in 2014 and one acquisitiontwo acquisitions in the first quartersix months of 2015 as discussed below. Each of the acquisitions was funded through borrowings under the Company’s credit facility in existence at the time of acquisition. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s condensed consolidated statements of financial position at their estimated fair values as of the respective dates of acquisition.

 

For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which represents the value of leveraging the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, revenue impact, market share growth, and net income. Intangible asset values were estimated using income based valuation methodologies. See Note 4 for information regarding the amortization periods assigned to finite-lived intangible assets.

 

For the firstsecond quarter ended March 29June 28, 2015, revenue and operating income of approximately $6.5$13.8 million and $0.8$2.2 million, respectively, was included in the Company’s condensed consolidated statements of income pertaining to the businesstwo businesses acquired in 2015. There were no businesses acquired in the first quarterThe comparable six months period included revenue and operating income of 2014.approximately $20.3 million and $3.0 million, respectively. Acquisition-related costs associated with the businessbusinesses acquired in 2015 were immaterial.


For both the second quarter and six months ended June 29, 2014, revenue of approximately $1.6 million was included in the Company’s condensed consolidated statements of income pertaining to the two businesses acquired in the second quarter of 2014. Operating income for both the comparable periods was immaterial. Acquisition-related costs associated with the businesses acquired in 2014 were immaterial.

 

2015 AcquisitionAcquisitions

SCI

In May 2015, the Company acquired the business and certain assets of Ligonier, Indiana-based SCI, a manufacturer of custom molded fiberglass large front and rear caps and roofs, primarily used in the RV market, and specialty fiberglass components for the transportation, marine and other industrial markets, for a net purchase price of approximately $20.1 million.

The acquisition of SCI provides the opportunity for the Company to further expand its presence in the fiberglass components market and increase its product offerings, market share and per unit content. The results of operations for SCI are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the second half of 2015. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

(thousands)

    

Trade receivables

 $1,303 

Inventories

  450 

Property, plant and equipment

  750 

Prepaid expenses

  20 

Accounts payable and accrued liabilities

  (591)

Intangible assets

  11,387 

Goodwill

  6,744 

Total net purchase price

 $20,063 

Better Way

In February 2015, the Company acquired the business and certain assets of Better Way, a manufacturer of fiberglass front and rear caps, marine helms and related fiberglass components primarily used in the RV, marine, and transit vehicle markets, for a net purchase price of approximately $39.6$40.4 million.

 

 

 

The acquisition of Better Way, with operating facilities located in New Paris, Bremen and Syracuse, Indiana, provides the opportunity for the Company to further expand its presence in the fiberglass components market and increase its product offerings, market share and per unit content. The results of operations for Better Way are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the secondthird quarter of 2015. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

 

(thousands)

    

Trade receivables

 $4,440 

Inventories

  1,963 

Property, plant and equipment

  3,500 

Prepaid expenses

  59 

Accounts payable and accrued liabilities

  (1,781)

Intangible assets

  15,921 

Goodwill

  15,477 

Total net purchase price

 $39,579 

2014 Acquisitions

Precision Painting Group

In June 2014, the Company acquired the business and certain assets of four related companies based in Bremen, Indiana and Elkhart, Indiana: Precision Painting, Inc., Carrera Custom Painting, Inc., Millennium Paint, Inc., and TDM Transport, Inc. (collectively referred to as “Precision Painting Group” or “Precision”), for a net purchase price of $16.0 million. The Precision Painting Group is comprised of three full service exterior full body painting operations that offer exterior painting and interior refurbishing for both OEMs and existing RV and fleet owners, and a transportation operation that services their in-house customers.

This acquisition provided the opportunity for the Company to establish a presence in the RV exterior full body painting market and increase its product offerings, market share and per unit content. The results of operations for Precision are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

(thousands)

    

Trade receivables

 $1,425 

Inventories

  208 

Property, plant and equipment

  7,032 

Prepaid expenses

  10 

Accounts payable and accrued liabilities

  (997)

Intangible assets

  4,492 

Goodwill

  3,843 

Total net purchase price

 $16,013 

Foremost

In June 2014, the Company acquired the business and certain assets of Goshen, Indiana-based Foremost, a fabricator and distributor of fabricated aluminum products, fiber reinforced polyester (“FRP”) sheet and coil, and custom laminated products primarily used in the RV market, for a net purchase price of $45.4 million.


This acquisition provided the opportunity for the Company to establish a presence in the laminated and fabricated roll formed aluminum products market and increase its product offerings, market share and per unit content. The results of operations for Foremost are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating segments from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

(thousands)

    

Trade receivables

 $4,868 

Inventories

  11,415 

Property, plant and equipment

  3,934 

Prepaid expenses

  129 

Accounts payable and accrued liabilities

  (4,302)

Intangible assets

  20,905 

Goodwill

  8,407 

Total net purchase price

 $45,356 

PolyDyn3

In September 2014, the Company acquired the business and certain assets of Elkhart, Indiana-based PolyDyn3, a custom fabricator of simulated wood and stone products such as headboards, fireplaces, ceiling medallions, columns and trims, for the RV market, for a net purchase price of $1.3 million.

This acquisition provided the opportunity for the Company to bring in-house new production capabilities and product lines that were previously represented through one of the Company’s Distribution segment business units, and increase its product offerings, market share and per unit content. The results of operations for PolyDyn3 are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

(thousands)

    

Trade receivables

 $86 

Inventories

  194 

Property, plant and equipment

  683 

Prepaid expenses

  125 

Accounts payable and accrued liabilities

  (124)

Intangible assets

  230 

Goodwill

  57 

Total net purchase price

 $1,251 

Charleston

In November 2014, the Company acquired the business and certain assets of Bremen, Indiana-based Charleston, a manufacturer of fiberglass and plastic components primarily used in the RV, marine, and vehicle aftermarket industries, for a net purchase price of $9.5 million.

This acquisition provided the opportunity for the Company to further expand its presence in the fiberglass components market and increase its product offerings, market share and per unit content. The results of operations for Charleston are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

(thousands)

    

Trade receivables

 $1,931 

Inventories

  1,033 

Property, plant and equipment

  3,056 

Prepaid expenses

  7 

Accounts payable and accrued liabilities

  (2,042)

Intangible assets

  2,783 

Goodwill

  2,706 

Total net purchase price

 $9,474 


(thousands)

    

Trade receivables

 $4,901 

Inventories

  1,829 

Property, plant and equipment

  3,907 

Prepaid expenses

  80 

Accounts payable and accrued liabilities

  (1,349)

Intangible assets

  19,905 

Goodwill

  11,177 

Total net purchase price

 $40,450 

 

Pro Forma Information 

The following pro forma information for the first quarterssecond quarter and six months ended June 28, 2015 and June 29, 2014 assumes the Better Way acquisitionand SCI acquisitions (which waswere acquired in February 2015) and the Precision, Foremost acquisitionand Charleston acquisitions (which waswere acquired in June 2014) occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of Better Way, SCI, Precision, Foremost and Foremost,Charleston, combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition. There were no actual operating results in the second quarter and six months of 2014 related to the acquisition of Foremost since Foremost was acquired on the last business day of the second quarter ended June 29, 2014. Pro forma information related to the acquisition of PolyDyn3 in 2014 is not included in the table below, as its financial results were not considered significant to the Company’s operating results for the periods presented.

 

The pro forma information includes financing and interest expense charges based on the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition. In addition, the pro forma information includes amortization expense, of (i) $0.2 million and $0.4 million forin the first quarter ended March 30, 2015 and March 29, 2014, respectively,aggregate, related to intangible assets acquired in connection with each transaction of (i) $0.2 million and $0.7 million for the Better Way acquisition,second quarter and six months ended June 28, 2015, respectively, and (ii) $0.5$0.7 million related to intangible assets acquired in the Foremost acquisitionand $1.4 million for the firstsecond quarter and six months ended March 30, 2014. Pro forma information related to the other businesses acquired in 2015 andJune 29, 2014, is not included in the table below, as their financial results were not considered significant to the Company’s operating results for the periods presented.respectively.

 

 

Second Quarter Ended

  

Six Months Ended

 
 

First Quarter Ended

  

June 28, 

  

June 29,

  

June 28,

  

June 29,

 
(thousands except per share data) 

March 29,

2015

  

March 30,

2014

  2015  2014  2015  2014 

Revenue

 $229,296  $200,663  $236,255  $237,112  $470,213  $453,955 

Net income

  9,650   7,862   12,376   11,357   22,814   20,136 

Net income per share – basic

  0.94   0.73   0.81   0.70   1.49   1.25 

Net income per share – diluted

  0.94   0.73   0.80   0.70   1.47   1.25 

 

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.

 

6.STOCK-BASEDSTOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with fair value recognition provisions. The Company recorded compensation expense of $1.0$1.2 million and $0.7$0.9 million for the firstsecond quarters ended March 29,June 28, 2015 and March 30,June 29, 2014, respectively, for its stock-based compensation plans on the condensed consolidated statements of income. For the comparable six months periods, the Company recorded $2.2 million and $1.6 million, respectively.

 

The Company estimates the fair value of (i) all stock grants as of the grant date using the closing price per share of the Company’s common stock on such date, and (ii) all stock option and stock appreciation rights awards as of the grant date by applying the Black-Scholes option pricing model. The Board of Directors (the “Board”) approved the following share grants in 2014: 34,0002014 under the Company’s 2009 Omnibus Incentive Plan (the “Plan”): 51,000 shares on February 12, 2014, 65,66898,502 shares on February 18, 2014, 10,56015,840 shares on May 22, 2014, and 296444 shares on September 30, 2014. In addition, on February 18, 2014, the Board approved the issuance of a total of 44,00166,002 restricted stock units (“RSUs”) under the Company’s 2009 Omnibus Incentive Plan (the “Plan”), of which 14,66722,000 of those RSUs were granted on that same date.


 

The Board approved the following share grantgrants under the Plan in the first quartersix months of 2015: 85,086127,629 shares on February 16, 2015, 300 shares on April 1, 2015, and 12,064 shares on May 19, 2015. In addition, on March 30, 2015, the beginning of the Company’s fiscal second quarter, the Board approved a share grant of 200 shares and granted an additional 14,66722,001 RSUs under the Plan as discussed above.

 

As of March 29,June 28, 2015, there was approximately $8.9$8.2 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans. That cost is expected to be recognized over a weighted-average period of 23.621.0 months.

 


7.NET INCOMEINCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding, plus the dilutive effect of stock options, stock appreciation rights, and restricted stock units (collectively “Common Stock Equivalents”). The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the average market price for the period. Certain Common Stock Equivalents were not included in the computation of diluted net income per common share because the exercise prices of those Common Stock Equivalents were greater than the average marketaveragemarket price of the common shares.

 

Net incomeThe number of shares and per share amounts have been retroactively adjusted to reflect the three-for-two stock split of the Company's common stock, which was effected in the form of a common stock dividend paid on May 29, 2015.

Income per common share is calculated for the firstsecond quarter and six months periods as follows:

 

 

Second Quarter Ended

  

Six Months Ended

 
 

June 28,

  

June 29,

  

June 28,

  

June 29,

 
(thousands except per share data) 

March 29,

2015

  

March 30,

2014

  

2015

  2014  

2015

  2014 

Net income for basic and diluted per share calculation

 $9,150  $6,896  $12,073  $9,231  $21,223  $16,127 

Weighted average common shares outstanding - basic

  10,218   10,702   15,312   16,061   15,319   16,057 

Effect of potentially dilutive securities

  100   113   201   81   179   75 

Weighted average common shares outstanding - diluted

  10,318   10,815   15,513   16,142   15,498   16,132 

Basic net income per common share

 $0.90  $0.64  $0.79  $0.57  $1.39  $1.00 

Diluted net income per common share

 $0.89  $0.64  $0.78  $0.57  $1.37  $1.00 


 

8.       8.      DEBT

A summary of total debt outstanding at June 28, 2015 and December 31, 2014 is as follows:

  

June 28,

  

Dec. 31,

 

(thousands)

 

2015

  

2014

 

Long-term debt:

        

Revolver

 $75,000  $101,054 

Term loan

  75,000   - 

Total long-term debt

  150,000   101,054 

Less: current maturities of long-term debt

  10,714   - 

Total long-term debt, less current maturities

 $139,286  $101,054 

2012Credit Facility

On

Prior to April 28, 2015, the Company’s debt financing was supported by its credit agreement, dated October 24, 2012, as amended (the “2012 Credit Agreement”), among the Company, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as the agent and lender (“Wells Fargo”), and Fifth Third Bank (“Fifth Third”) and Key Bank National Association (“Key Bank”), as participant, to establishparticipants.  The 2012 Credit Agreement consisted of a five-year $80.0$185.0 million revolving secured senior credit facility (the “Credit“2012 Credit Facility”).

On June 26, 2014 and November 7, 2014, the Company entered into amendments to the Credit Agreement to increase the maximum borrowing limit under the revolving line of credit (the “Revolver”) to $125.0 million and $165.0 million, respectively, and to add Key Bank National Association (“Key Bank”) as a participant. On February 13, 2015, the Credit Agreement was further amended to expand the  The 2012 Credit Facility, which was scheduled to $185.0 million.

The Credit Agreement is secured by a pledge of substantially all of the assets of the Company pursuant to a Security Agreement, datedmature on October 24, 2012, between the Company and Wells Fargo, as agent. The Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:

The maturity date for the Credit Facility is October 24, 2017;

The interest rates for borrowings under the Revolver are the Base Rate plus the Applicable Margin or the London Interbank Offer Rate (“LIBOR”) plus the Applicable Margin, with a fee payable by the Company on unused but committed portions of the Revolver;

The Revolver includes a sub-limit up to $5.0 million for same day advances (“Swing Line”) which shall bear interest based upon the Base Rate plus the Applicable Margin;

Up to $20.0 million of the Revolver will be available as a sub facility for the issuance of standby letters of credit, which are subject to certain expiration dates;

The financial covenants include requirements as to a consolidated total leverage ratio and a consolidated interest coverage ratio, and other covenants include limitations on permitted acquisitions, capital expenditures, indebtedness, restricted payments and fundamental changes (see further details below); and

Customary prepayment provisions which require the prepayment of outstanding amounts under the Revolver based on predefined conditions.

At March 29, 2015, the Company had $149.8 million outstanding under its Revolver which consisted of $140.5 million of borrowings under the LIBOR-based option and $9.3 million of borrowings under the Base Rate-based option. At December 31, 2014, the Company had $101.1 million outstanding under its Revolver, which consisted of $97.0 million of borrowings under the LIBOR-based option and $4.1 million of borrowings under the Base Rate-based option. The interest rate for borrowings under the Revolver at both March 29, 2015 and December 31, 20142017, was the Prime Rate plus 0.50% (or 3.75%), or LIBOR plus 1.50% (or 1.6875%). These same interest rates were applicable during the first quarters ended March 29, 2015 and March 30, 2014. The fee payable on committed but unused portions of the Revolver was 0.20% for both of these periods.


Pursuant to the Credit Agreement, the financial covenants include (a) a maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.50:1.00 for the 12 month period ending on such quarter-end; (b) a required minimum consolidated interest coverage ratio under the Revolver, measured on a quarter-end basis, of at least 2.25:1.00 for the 12 month period ending on such quarter-end; and (c) a limitation on annual capital expenditures of $10.0 million for 2014 and for subsequent fiscal years, exclusive of acquisitions. If the consolidated total leverage ratio is in excess of 3.00:1.00 and less than 3.50:1.00, the Company is considered to be in compliance with this financial covenant provided it maintains an asset coverage ratio of at least 1.00 to 1.00 as of the close of each period.

The consolidated total leverage ratio is the ratio for any period of (i) consolidated total indebtedness to (ii) earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total indebtedness for any period is the sum of (i) total debt outstanding under the Revolver, (ii) capital leases and letters of credit outstanding, and (iii) deferred payment obligations. The asset coverage ratio for any period is the ratio of (i) eligible amounts of the Company’s trade payables, inventory and fixed assets, minus certain reserves as defined under the Credit Agreement to (ii) the sum of outstanding obligations under the Credit Facility.

The consolidated interest coverage ratio for any period is the ratio of (i) EBITDA minus depreciation to (ii) the sum of consolidated interest expense plus restricted payments madereplaced by the Company.

As of and for the fiscal three-month period ended March 29, 2015 the Company was in compliance with all three of these financial covenants at each reporting date. The required maximum total leverage ratio, minimum interest coverage ratio, and the annual capital expenditures limitation amounts compared to the actual amounts as of and for the fiscal three-month period ended March 29, 2015 are as follows:

(thousands except ratios)

 

Required

  

Actual

 

Consolidated leverage ratio (12-month period)

  3.00   1.80 

Consolidated interest coverage ratio (12-month period)

  2.25   3.32 

Annual capital expenditures limitation (actual year-to-date)

 $10,000  $1,866 

Interest paid for the first quarter ended March 29, 2015 and March 30, 2014 (in thousands) was $789 and $531, respectively.Credit Facility discussed below.

 

2015 Credit Facility

The Company entered into an Amended and Restated Credit Agreement, dated as of April 28, 2015 (the “2015 Credit Agreement”,) by and among the Company, the lenders party thereto, and Wells Fargo, as Administrative Agent. The 2015 Credit Agreement amends and restates the Company’s existing Credit Agreement, which was scheduled to expire in October 2017, and extends the maturity to April 2020. The 2015Credit Agreement provides for a $175.0 million revolving credit facility and a $75.0 million term loan. See Note 13 for additional details.

9.     FAIR VALUE MEASUREMENTS

The carrying amounts of cash and cash equivalents, trade receivables, and accounts payable approximated fair value as of March 29, 2015 and December 31, 2014 because of the relatively short maturities of these financial instruments. The carrying amount of long-term debt approximated fair value as of March 29, 2015 and December 31, 2014 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding long-term debt.


10.    INCOME TAXES

The Company recorded income taxes at an estimated full year effective rate of 38.0% in the first quarter of 2015 and 38.5% in the first quarter of 2014.

The Company had various state net operating loss carry forwards (“NOLs”) of approximately $1.6 million at December 31, 2014, of which approximately $1.3 million were remaining to be utilized as of March 29, 2015. The Company estimates that it will utilize a majority of the remaining state NOLs by the end of 2015.

In the first three months of 2015 and 2014, the Company realized approximately $1.2 million and $1.0 million, respectively, of excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2014 and 2013. These tax benefits were recorded to shareholders’ equity upon realization in 2015 and 2014.

The Company paid income taxes of $1.7 million in the first quarter of 2015 and $8,976 in the first quarter of 2014.

11.    SEGMENT INFORMATION

The Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.

A description of the Company’s reportable segments is as follows:

Manufacturing – The Company’s lamination operations utilize various materials, such as lauan, medium density fiberboard (“MDF”), gypsum, and particleboard, which are bonded by adhesives or a heating process to a number of products, including vinyl, paper, foil, and high-pressure laminates. These products are utilized to produce furniture, shelving, wall, counter, and cabinet products with a wide variety of finishes and textures. This segment also includes a cabinet door division, a fiberglass bath fixtures division, a hardwood furniture division, a vinyl printing division, a solid surface, granite, and quartz countertop fabrication division, an exterior graphics division, an RV painting division, a fabricated aluminum products division, a simulated wood and stone products division, and a fiberglass and plastic components division. Patrick’s major manufactured products also include wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, and slotwall panels and components. The Manufacturing segment contributed approximately 76% of the Company’s net sales in both the first quarter of 2015 and the first quarter of 2014.

Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics, wiring, electrical and plumbing products, FRP 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. The Distribution segment contributed approximately 24% of the Company’s net sales in both the first quarter of 2015 and the first quarter of 2014.


The tables below present unaudited information about the sales and operating income of those segments.

First Quarter Ended March 29, 2015

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $170,347  $53,041  $223,388 

Intersegment sales

  4,503   801   5,304 

Total sales

  174,850   53,842   228,692 

Operating income

  18,321   3,293   21,614 

First Quarter Ended March 30, 2014

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $128,686  $41,464  $170,150 

Intersegment sales

  5,062   601   5,663 

Total sales

  133,748   42,065   175,813 

Operating income

  13,144   2,297   15,441 

The table below presents a reconciliation of segment operating income to consolidated operating income:

  

First Quarter Ended

 

(thousands)

  

March 29,

2015

   

March 30,

2014

 

Operating income for reportable segments

 $21,614  $15,441 

Unallocated corporate expenses

  (4,392)  (2,893)

Amortization of intangible assets

  (1,659)  (787)

Consolidated operating income

 $15,563  $11,761 

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.

12.    STOCK REPURCHASE PROGRAM

On February 17, 2015, the Company’s Board authorized an increase in the amount of the Company’s common stock that may be acquired under its existing stock buyback program over the following 12 months to $20.0 million.

In the first quarter of 2015, the Company repurchased 130,500 shares at an average price of $43.29 per share for a total cost of approximately $5.7 million. Since the inception of the stock repurchase program in February 2013 through March 29, 2015, the Company has repurchased in the aggregate 882,580 shares at an average price of $29.07 per share for a total cost of approximately $25.7 million.

Common Stock

The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock, additional paid-in-capital, and retained earnings on the Company’s condensed consolidated statements of financial position.

13.   SUBSEQUENT EVENTS

Termination ofShareholder Rights Agreement

On April 16, 2015, the Company accelerated the expiration date of the Rights Agreement, dated March 21, 2006, between Patrick Industries, Inc. and National City Bank, as Rights Agent (as so amended, the “Rights Agreement”) so that the Rights Agreement terminated at the close of business on April 16, 2015 and, therefore, the Rights issued under the Rights Agreement expired at that time.


Common Stock Split

On April 27, 2015, the Company’s Board declared a three-for-two stock split, to be effected in the form of a stock dividend, payable in the form of one share of common stock for every two shares of the Company’s common stock held. The split is effective for shareholders of record as of May 15, 2015 and will be payable on May 29, 2015.

2015 Credit Facility

On April 28, 2015, the Company entered into the 2015 Credit Agreement with Wells Fargo, as Administrative Agent and a lender, and Fifth Third, Key Bank, Bank of America, N.A., and Lake City Bank as participants, to expand its senior secured credit facility to $250.0 million and extend its maturity to 2020 (the “2015 Credit Facility) Facility”). The 2015 Credit Facility is comprised of a $175.0 million revolving credit loan (the “2015 Revolver”) and a $75.0 million term loan (the “Term Loan”).The 2015 Credit Agreement amends and restates the Company’s existing2012 Credit Agreement, which was scheduled to expire in October 2017.Agreement.

 

The 2015 Credit Agreement is secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. The 2015 Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:

 

The maturity date for the 2015 Credit Facility is April 28, 2020;

 

The Company has the option to increase the 2015 Revolver by an amount up to $50.0 million, subject to certain conditions.

 

The Term Loan will be repaid in installments of approximately $2.7 million per quarter starting on June 30, 2015, with the remaining balance due at maturity;

 

The interest rates for borrowings under the 2015 Revolver and the Term Loan are the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin, with a fee payable by the Company on unused but committed portions of the 2015 Revolver;

 

The 2015 Revolver includes a sub-limit up to $10.0 million for same day advances (“Swing Line”) which shall bear interest based upon the Base Rate plus the Applicable Margin;

 

Up to $10.0 million of the 2015 Revolver will be available as a sub facility for the issuance of standby letters of credit, which are subject to certain expiration dates;

 

The financial covenants include requirements as to a consolidated total leverage ratio and a consolidated fixed charge coverage ratio, and other covenants include limitations and restrictions concerning permitted acquisitions, investments, sales of assets, liens on assets, dividends and other payments; and

 

Customary prepayment provisions, representations, warranties and covenants, and events of default.

At June 28, 2015, the Company had (i) $75.0 million outstanding under the Term Loan, which consisted of $72.3 million of borrowings under the LIBOR-based option and $2.7 million of borrowings under the Based Rate-based option, and (ii) $75.0 million outstanding under its 2015 Revolver under the LIBOR-based option. At December 31, 2014, the Company had $101.1 million outstanding under the then current revolver, which consisted of $97.0 million of borrowings under the LIBOR-based option and $4.1 million of borrowings under the Base Rate-based option. The interest rate for borrowings at both June 28, 2015 and December 31, 2014 was the Prime Rate plus 0.50% (or 3.75%), or LIBOR plus 1.50% (or 1.6875%). The fee payable on committed but unused portions of the Revolver was 0.20% for both of these periods.


Pursuant to the 2015 Credit Agreement, the financial covenants include (a) a maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.00:1.00 for the 12 month period ending on such quarter-end; and (b) a required minimum consolidated fixed charge coverage ratio, measured on a quarter-end basis, of at least 1.50:1.00 for the 12 month period ending on such quarter-end.

The consolidated total leverage ratio is the ratio for any period of (i) consolidated total indebtedness to (ii) consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total indebtedness for any period is the sum of (i) total debt outstanding under the 2015 Revolver and the Term Loan, (ii) capital leases and letters of credit outstanding, and (iii) deferred payment obligations. The consolidated fixed charge coverage ratio for any period is the ratio of (i) consolidated EBITDA less restricted payments, taxes paid and capital expenditures as defined under the 2015 Credit Agreement to (ii) consolidated fixed charges. Consolidated fixed charges for any period is the sum of (i) interest expense and (ii) principal payments on outstanding indebtedness under the Term Loan.

As of and for the June 28, 2015 reporting date, the Company was in compliance with both of these financial covenants. The required maximum consolidated total leverage ratio and the minimum consolidated fixed charge coverage ratio compared to the actual amounts as of and for the fiscal six-month period ended June 28, 2015 are as follows: 

 

 

Required

  

Actual

 

Consolidated total leverage ratio (12-month period)

  3.00   1.64 

Consolidated fixed charge coverage ratio (12-month period)

  1.50   3.57 

Interest paid for the second quarter and first six months of 2015 was $0.9 million and $1.7 million, respectively. For the comparable 2014 periods, interest paid was $0.5 million and $1.0 million, respectively.

9.     FAIR VALUE MEASUREMENTS

The carrying amounts of cash and cash equivalents, trade receivables, and accounts payable approximated fair value as of June 28, 2015 and December 31, 2014 because of the relatively short maturities of these financial instruments. The carrying amount of debt approximated fair value as of June 28, 2015 and December 31, 2014 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt.

10.   INCOME TAXES

The Company recorded income taxes at an estimated full year effective rate of 38.0% in the second quarter and first six months of 2015. For the comparable 2014 periods, the estimated full year effective tax rate was 38.5%.

The Company had various state net operating loss carry forwards (“NOLs”) of approximately $1.6 million at December 31, 2014, of which approximately $1.1 million were remaining to be utilized as of June 28, 2015. The Company estimates that it will utilize a significant majority of the remaining state NOLs by the end of 2015.

In the first six months of 2015 and 2014, the Company realized approximately $1.2million and $1.1 million, respectively, of excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2014 and 2013, respectively. These tax benefits were recorded to shareholders’ equity upon realization in 2015 and 2014.

The Company paid income taxes of $10.3 million and $12.0 million in the second quarter and first six months of 2015, respectively. For both the comparable periods in 2014, the Company paid income taxes of $10.4 million.


11.SEGMENT INFORMATION

The Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.

A description of the Company’s reportable segments is as follows:

Manufacturing – The Company’s lamination operations utilize various materials, such as lauan, medium-density fiberboard (“MDF”), gypsum, and particleboard, which are bonded by adhesives or a heating process to a number of products, including vinyl, paper, foil, and high-pressure laminates. These products are utilized to produce furniture, shelving, wall, counter, and cabinet products with a wide variety of finishes and textures. This segment also includes a cabinet door division, a fiberglass bath fixtures division, a hardwood furniture division, a vinyl printing division, a solid surface, granite, and quartz countertop fabrication division, an exterior graphics division, an RV painting division, a fabricated aluminum products division, a simulated wood and stone products division, and a fiberglass and plastic components division. Patrick’s major manufactured products also include wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, and slotwall panels and components. The Manufacturing segment contributed approximately 77% and 76% of the Company’s net sales for the six months ended June 28, 2015 and June 29, 2014, respectively.

Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics, wiring, electrical and plumbing products, fiber reinforced polyester 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. The Distribution segment contributed approximately 23% and 24% of the Company’s net sales for the six months ended June 28, 2015 and June 29, 2014, respectively.

The tables below present unaudited information about the sales and operating income of those segments.


Second Quarter Ended June 28, 2015

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $179,613  $53,868  $233,481 

Intersegment sales

  4,875   635   5,510 

Total sales

  184,488   54,503   238,991 

Operating income

  21,211   3,562   24,773 

Second Quarter Ended June 29, 2014

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $142,948  $44,907  $187,855 

Intersegment sales

  5,253   634   5,887 

Total sales

  148,201   45,541   193,742 

Operating income

  16,271   2,552   18,823 

Six Months Ended June 28, 2015

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $349,960  $106,909  $456,869 

Intersegment sales

  9,378   1,436   10,814 

Total sales

  359,338   108,345   467,683 

Operating income

  39,532   6,855   46,387 

Six Months Ended June 29, 2014

(thousands)

 

Manufacturing

  

Distribution

  

Total

 

Net outside sales

 $271,634  $86,371  $358,005 

Intersegment sales

  10,315   1,235   11,550 

Total sales

  281,949   87,606   369,555 

Operating income

  29,415   4,849   34,264 

The table below presents a reconciliation of segment operating income to consolidated operating income:

  

Second Quarter Ended

  

Six Months Ended

 
  

June 28,

  

June 29,

  

June 28, 

  

June 29,

 

(thousands)

 

2015

  2014  

2015

  2014 

Operating income for reportable segments

 $24,773  $18,823  $46,387  $34,264 

Unallocated corporate expenses

  (2,420)  (2,465)  (6,812)  (5,358)

Amortization of intangible assets

  (1,982)  (841)  (3,641)  (1,628)

Consolidated operating income

 $20,371  $15,517  $35,934  $27,278 

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.

12.STOCK REPURCHASE PROGRAM

On February 17, 2015, the Company’s Board authorized an increase in the amount of the Company’s common stock that may be acquired under its existing stock buyback program over the following 12 months to $20.0 million.

In the first six months of 2015, the Company repurchased 195,750 shares at an average price of $28.86 per share for a total cost of approximately $5.7 million. There were no stock repurchases in the second quarter of 2015. Since the inception of the stock repurchase program in February 2013 through June 28, 2015, the Company has repurchased in the aggregate 1,323,870 shares at an average price of $19.38 per share for a total cost of approximately $25.7 million.


Common Stock

The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock, additional paid-in-capital, and retained earnings on the Company’s condensed consolidated statements of financial position.

13.OTHEREVENTS

Termination ofShareholder Rights Agreement

On April 16, 2015, the Company accelerated the expiration date of the Rights Agreement, dated March 21, 2006, between Patrick Industries, Inc. and National City Bank, as Rights Agent (as so amended, the “Rights Agreement”) so that the Rights Agreement terminated at the close of business on April 16, 2015 and, therefore, the Rights issued under the Rights Agreement expired at that time.

Common Stock Split

On April 27, 2015, the Company’s Board declared a three-for-two stock split, to be effected in the form of a stock dividend, payable in the form of one share of common stock for every two shares of the Company’s common stock held. The split was effective for shareholders of record as of May 15, 2015 and was paid on May 29, 2015.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

OVERVIEW

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on pagepages 28 and 29 of this Report. The Company undertakes no obligation to update these forward-looking statements.

 

The MD&A is divided into seven major sections:

 

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

 

REVIEW OF CONSOLIDATEDOPERATINGRESULTS

FirstSecond Quarter and Six Months Ended March 29,June 28, 2015 Compared to 2014

 

REVIEW BY BUSINESS SEGMENT

FirstSecond Quarter and Six Months Ended March 29,June 28, 2015 Compared to 2014

Unallocated Corporate Expenses


 

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Capital Resources

Summary of Liquidity and Capital Resources

 

CRITICAL ACCOUNTING POLICIES

 

OTHER

Seasonality

Inflation

 

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

 


 

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

Summary

The second quarter and first quartersix months of 2015 reflected a continuation of steady growth in the recreational vehicle (“RV”) market, which includes growth in both towable and motorized units, and improving conditions in the industrial markets, as evidenced by year over year growth in new housing starts. In addition, the manufactured housing (“MH”) industry also saw a year-over-year shipment improvement in the second quarter and first quartersix months of 2015 and experienced seasonally typical sales activity.

We are seeing resilience, in particularbelieve overall original equipment manufacturer (“OEM”) and dealer sentiment in the RV market, with whatindustry remains positive as we believelook forward to be upside potentialthe 2016 model changes in the immediate future based on current indicators including positiveanticipation of consistent retail traffic on dealer retail lots, retail sales and wholesale shipment statistics trending similar to recent years, and overall balance related to dealer inventory levels when compared to original equipment manufacturer (“OEM”) production levels. Additionally, the MH industry appears to be gaining modest strength, as expected, and both our MH and industrial businesses continue to outperform the markets. Overall, we have continued to capture market share through our strategic acquisitions, product line extensions,addition of new business, and the introduction of new product initiatives. We expect the three primary markets that we serve to experience steady growth in the remainder of 2015 with full year seasonal patterns tracking trends consistent with the prior year.and innovative products.

 

RV Industry

The RV industry, which is our primary market and comprised 78%77% of the Company’s first quartersix months 2015 sales, continued to strengthen as evidenced by higher OEM production levels and wholesale unit shipments versus the prior year. According to the Recreational Vehicle Industry Association (“RVIA”), wholesale shipment levels reached 97,074105,579 units in the firstsecond quarter of 2015, representing an increase of approximately8%approximately3% versus the prior year period, and resulted in year-over-year shipment increases in all but one quarter since the fourth quarter of 2009. The RV industry experienced strong monthly increases in wholesaleIn the first six months of 2015, shipment levels inreached 202,653 units, an increase of approximately 6% over 2014.

In the firstsecond quarter of 2015, comparedwe started to the prior year quarter, continuing the strength in order rates experienced in the latter half of the fourth quarter of 2014 that also exceeded expected seasonal patterns. We believe that this changing seasonal pattern reflected the OEMs’ goal to mitigate potential weather and transportation delays in the first quarter of 2015 in anticipation of expected retail demand following the strong dealer show season in the third and fourth quarters of 2014, while also better balancing their production schedules in order to maintain efficiencies. Overall OEM and dealer sentimentsee a shift in the RV industry remains positivetowards a larger concentration of entry level and lower priced units, which has nominally impacted content per unit growth. As a result of this mix shift, we may continue to see some content volatility in the short-term. However, this mix shift primarily affects certain of our more commodity-based product lines, which generally carry lower gross margins. Further, we believe this mix shift is reflective of younger and first-time consumers entering the market, as supported by recent dealer surveys, thus broadening the market’s foundation and extending the opportunity for longer-term industry growth potential. Additionally, we head into the heightbelieve our commitment to quality customer service and our large complement of the selling season in anticipation of strong retail traffic on dealer lotsinnovative product lines at various price points position us to address our customers’ changing needs and expected continued year over year growth.buying patterns.

  

IndustryAs it relates to the correlation between retail inventories and overall production levels, industry reports and dealer surveys continue to indicate that RV dealer inventory levels continue to beare in line with retail demand. We expect to see quarterly revenue growth fordemand with consistent retail traffic on dealer lots through the remainder of 2015 compared to 2014 exclusivefirst half of the revenue contribution of the acquisitions we completed in 2014 and in the first quarter of 2015.

We believe that, based on the factors mentioned above, as well as favorable demographic trends,year. Despite the RV industry hasapproaching prior wholesale production peaks, we continue to believe the future looks promising for the RV industry based on a number of factors including: positive long-term outlook asindustry demographic trends with younger buyers and an increasing number of baby boomers reaching retirement age, readily available financing, new and innovative products coming to market, an improving overall economic conditions continueenvironment, and the value of the RV lifestyle related to improve.spending quality time with families. On a macroeconomic level, as consumer confidence has improvedgenerally trended higher over the last five years, there havehas been a related consistent trended year-over-year increasesincrease in RV shipments for the same time period. StrongThe strong demographic indicators mentioned above point to a generally positive long-term outlook not only with the increasing number of baby boomers reaching retirement age, but also with increasing RV demand in the 35-54 demographic age group. We anticipate that RV industry growth will continue into the remainder of 2015 when compared to the prior year,market, barring any global, political or other factors that negatively impact consumer confidence for an extended period of time.

 

 

 

MH Industry

The MH industry represented approximately 12%13% of the Company’s first quartersix months 2015 sales. TheAs estimated by the Company, estimates that wholesale unit shipments in the MH industry increased approximately 11%4% in the second quarter of 2015 and 8% in the first quartersix months of 2015 compared tofrom the comparable prior year quarter, representing the strongest quarterly improvement in wholesale unit shipment levels since the third quarter of 2013. While we do not anticipate significantperiods. We continue to believe there is meaningful growth potential in the MH market based on current wholesale shipment level trends and pent up demand created by the buildup in the near term,multi-family housing and apartment capacity. However, we believe there is opportunity for moderate year-over-year growth, with limited downside risk, based on volumes returning to their historical relationship with new housing starts and assuming the availability of credit and recalibration of quality credit standards. On average over the last 40 years, approximately three-fourths of total residential housing starts have been single-family housing starts, while wholesale unit shipment levels in the MH industry have averaged approximately 10% of the level of single-family housing starts over the last 10 years.

Factors that may favorably impact production levels further in this industry include quality credit standards in the residential housing market, favorable changes in financing laws, higher interest rates on traditional residential housing loans, and improved conditions in the asset-backed securities markets for manufactured housing loans. Although there is still overhanghas several hurdles to overcome related to the factors that negatively impacted demand in the MH industry in recent years, including the lack of financing alternatives, current credit standards and credit availability,requirements, slow job growth, and access to the asset backed securities market. We expect to see continued year over year improvement with limited risk in certain area, excess residential housing inventories, wethe near term and believe that there is also longer termthe potential for this industry asmarket to grow at a much higher rate in the future, especially given historical trends when compared to residential housing demand recovers. Additionally, manufactured housing provides a cost effective alternative for those individualsstarts. Also, while we do not currently anticipate significant growth in this market in the second half of 2015, we do believe we are well positioned to capitalize on the upside potential of the MH market and families seeking to establish or re-establish home ownership, or whose credit ratings have been impacted byare optimistic about the economicfuture of this industry, especially given the combination of our nationwide geographic footprint, available capacity in our current MH concentrated locations, and job environment over the past several years. We also believe manufactured housing to be an attractive option for those who have migrated to temporary and multi-family housing alternatives.our current content per unit levels.

 

Industrial Market

The industrial market, which accounted for 10% of our first quartersix months 2015 sales and is comprised primarily of the kitchen cabinet industry, retail and commercial fixture market, office and household furniture market and regional distributors, is primarily impacted by macroeconomic conditions and more specifically, conditions in the residential housing market. The Company’s industrial sales have increased over the last several years, reflecting both acquisition and organic growth, the addition of new sales territories, and a focus on opportunities in the commercial markets. We estimate approximately 51%50% of our industrial revenue base was directly tied to the residential housing market in the first quartersix months of 2015 with the remaining 49%50% in the retail and commercial markets, mainly in the retail fixtures and office and institutional furnishings markets. New housing starts in the second quarter and first quartersix months of 2015 increased approximately 4% when16% and 11%, respectively, compared to the first quarter of 2014prior year periods (as reported by the U.S. Department of Commerce) and we saw our industrial sales increase approximately 23% as a result of both acquisition and organic growth.. In addition, a portion of our sales improvement in the industrial markets in the first quartersix months of 2015 was the result of the unusually harsh weather we experienced in 2014,benefited primarily from continued market share gains, particularly in the Midwest, which delayed manyoffice and institutional furniture markets as well as improved sales to the retail projects during that timeframe.and commercial fixtures markets. Our sales to the industrial market generally lag new residential housing starts by six to nine months.

 

In order to offset some of the impacts of the weakness in the residential housing market in recent years, we have focused on diversification efforts, strategic acquisitions, and increased penetration into the commercial and multi-family housing markets with the addition of new sales territories and personnel. Additionally, we have targeted certain sales efforts towards market segments that are less directly tied to new single and multi-family home construction, including the marine, retail fixture, and office, furniture, and countertop markets. As a result, we have seen a shift in our product mix, which has had a positive impact on revenues from the industrial markets. In addition, we believe that projected continued low interest rates, overall expected economic improvement, and pent up demand are some of the drivers that will continue to positively impact the housing industry for the next several years.   


 

Second Half2015 Outlook

In general,

We expect the three primary markets that we serve experienced steadyto continue to experience quarter-over-quarter growth infor the firstremainder of 2015 compared to 2014. As we head into the third quarter of 2015 whichand the RV dealer show season in the September timeframe, we expect to continue throughoutsee seasonal patterns relatively consistent with prior years including sequential softening in the remainderthird quarter of 2015. The2015 as dealers await the new product lines for 2016.

As the RV lifestyle continues to attract new buyers to the market, the RVIA currently forecasts that RV unit shipment levels for fiscal full yearin 2015 will increase approximately 6%7% when compared to the full year 2014. In addition, we anticipate a further increase in production levels in the MH industry in 2015, reflecting improvement in the overall economy and consistent with the improvement in single-family residential housing starts as projected by the National Association of Home Builders (the “NAHB”) for the full year 2015. Based on the industry’s current annualized run rates, the Company projects wholesale MH unit shipments for full year 2015 to increase by approximately 10% compared to 2014. New housing starts in 2015 are estimated to improve by approximately 10%7% year-over-year (as forecasted by the NAHB as of March 31,June 30, 2015) consistent with improving overall economic conditions.

 

We believe we are well-positioned to increase revenues in each of the primary markets we serve as the overall economy continues to improve. While our visibility related to longer-term industry conditions is limited to approximately six months, we expect to continue to see quarterly year-over-year revenue growth for the remainder of fiscal year 2015, exclusive of the revenue contribution of the acquisitions we completed in 2014 and in the first quarter of 2015.


 

We willcontinue to review our operations on a regular basis, balance appropriate risks and opportunities, and maximize efficiencies to support the Company’s long-term strategic growth goals. Our team remains focused on strategic acquisitions in our existing businesses and similar markets, capturing market share and increasing our per unit content, keeping costs aligned with revenue, maximizing operating efficiencies, talent management, and the execution of our organizational strategic agenda. Key focus areas for the remainder of 2015 include strategic revenue growth, improved operating income and net income, earnings per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and free cash flow. Additional focus areas include:

Sales into additional commercial/institutional markets to diversify revenue base;

Further improvement of operating efficiencies in all manufacturing operations and corporate functions;

Acquisition of businesses/product lines that meet established criteria;

Balance aggressive management of inventory quantities and pricing with the need to meet expected customer demand growth, as well as the addition of select key commodity suppliers; and

Ongoing development of existing product lines and the addition of new product lines.

     

In conjunction with our organizational strategic agenda, we will continue to make targeted capital investments to support new business and leverage our operating platform. In the first quartersix months of 2015, capital expenditures were approximately $1.9$3.2 million versus $0.9$2.4 million in the first quartersix months of 2014. The current capital plan for full year 2015 includes expenditures approximating $8.0 million, and includes the ongoing replacement of our Enterprise Resource Planning (“ERP”) system at our operating divisions that have not yet been converted, thestrategic replacement and upgrading of production equipment to ensure that our facilities have the capacity, capabilities and technology to facilitate our growth plans, the ongoing replacement of our Enterprise Resource Planning (“ERP”) system at our operating divisions that have not yet been converted, which is progressing in accordance with plans, and other strategic capital and maintenance improvements.


 

REVIEW OF CONSOLIDATED OPERATING RESULTS

 

FirstSecond Quarterand Six MonthsEndedMarch 29,June 28, 2015Compared to 2014

 

The following table sets forth the percentage relationship to net sales of certain items on the Company’s condensed consolidated statements of income.

 

 

First Quarter Ended

  

Second Quarter Ended

  

Six Months Ended

 
 

March 29,

  

March 30,

  

June 28,

  

June 29,

  

June 28,

  

June 29,

 
 

2015

  

2014

  

2015

  

2014

  

2015

  

2014

 

Net sales

  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%

Cost of goods sold

  84.2   84.0   82.7   83.1   83.4   83.5 

Gross profit

  15.8   16.0   17.3   16.9   16.6   16.5 

Warehouse and delivery expenses

  3.0   3.6   2.9   3.5   3.0   3.6 

Selling, general and administrative expenses

  5.1   5.0   4.8   4.7   5.0   4.8 

Amortization of intangible assets

  0.7   0.5   0.8   0.4   0.8   0.5 

Gain on sale of fixed assets

  -   - 

Operating income

  7.0   6.9   8.8   8.3   7.8   7.6 

Interest expense, net

  0.4   0.3   0.4   0.3   0.4   0.3 

Income taxes

  2.5   2.5   3.2   3.1   2.8   2.8 

Net income

  4.1   4.1   5.2   4.9   4.6   4.5 

 

Net Sales. Net sales in the firstsecond quarter of 2015 increased $53.3$45.6 million or 31.3%24.3%, to $223.4$233.5 million from $170.1$187.9 million in the firstsecond quarter of 2014. The increase was primarily attributable to a 35%26% increase in the Company’s revenue from the RV industry, an 18% increase in revenuerevenues from the MH industry, and a 23%20% increase in revenuerevenues from the industrial markets.

 

The Company estimates organic growthNet sales in the first quartersix months of 2015 at approximately 9%increased $98.9 million or 27.6%, or $15.5to $456.9 million offrom $358.0 million in the total revenue increase.prior year period. The remaining $37.8 million of the revenueincrease was primarily attributable to a 30% increase in the Company’s revenue from the RV industry, an 18% increase in revenues from the MH industry, and a 21% increase in revenues from the industrial markets.

The sales improvement in both the second quarter and first quartersix months of 2015 reflects the contribution of Better Way Partners, LLC d/b/a Better Way Products (“Better Way”) which was acquired in February 2015, as well the contribution of thelargely reflected thecontributions from six acquisitions completed in 2014: Precision Painting, Inc., Carrera Custom Painting, Inc., Millennium Paint, Inc.,2014 and TDM Transport, Inc. (collectively, “Precision”)2015 in June 2014; Foremost Fabricators, LLC (“Foremost”) in June 2014; PolyDyn3 LLC (“PolyDyn3”) in September 2014; and Charleston Corporation (“Charleston”) in November 2014.

The organic sales increase in the first quarter of 2015 is primarily attributableaddition to: (i) increased RV, MH, and Industrial market penetration, (ii) improved retail fixtures and office and institutional furnishings and retail and commercial fixtures sales in the industrial market, and (iii) an increase in wholesale unit shipments in the RV and MH industries. Our sales to the industrial market sector, which is primarily tied to the residential housing and commercial and retail fixture markets, generally lag new residential housing starts by approximately six to nine months. Partially offsetting this revenue growth, particularly in the RV industry, in both the second quarter and first six months of 2015, were the mix shift towards a larger concentration of entry level and lower priced units, which nominally impacted content per unit growth, and price declines in certain more commodity-oriented raw materials passed on to customers that we utilize in our manufacturing processes.


 

The Company’s RV content per unit (on a trailing twelve-month basis) for the firstsecond quarter of 2015 increased approximately 19%21% to $1,629$1,707 from $1,364$1,410 for the firstsecond quarter of 2014. The MH content per unit (on a trailing twelve-month basis) increased approximately 8%13% to an estimated $1,723$1,797 from $1,599$1,592 for the comparable 2014 period.

 

The RV industry, which represented 78%75% and 77% of the Company’s sales in the second quarter and first quartersix months of 2015, respectively, saw wholesale unit shipments increase by approximately8%approximately 3% and 6%, respectively, in that periodthose periods compared to 2014. The Company estimates that the MH industry, which represented 12%14% and 13% of the Company’s sales in the second quarter and first quartersix months of 2015, respectively, experienced an 11%estimated 4% and 8% increase in wholesale unit shipments in the first quarter of 2015,those periods, respectively, compared to the prior year period.periods. The industrial market sector accounted for approximately 11% and 10% of the Company’s sales in the second quarter and first quarter of 2015.six months 2015, respectively. We estimate that approximately 51%50% of our industrial revenue base in the first quarter of 2015 was directly tiedis linked to the residential housing market, which experienced an increase in new housing starts of approximately 4%16% in the second quarter of 2015 and 11% in the first quartersix months of 2015 compared to the prior year periods (as reported by the U.S. Department of Commerce). We expect to continue to see quarterly year-over-year revenue growth in the remainder of fiscal year 2015, exclusive of the revenue contributions of the acquisitions completed in 2014 and in the first quarter of 2015.

 

Cost of Goods Sold.Cost of goods sold increased $45.0$37.1 million or 31.5%23.7%, to $188.0$193.1 million in firstsecond quarter 2015 from $143.0$156.0 million in 2014.As a percentage of net sales, cost of goods sold increaseddecreased during the firstsecond quarter of 2015 to 84.2%82.7% from 84.0%83.1% in 2014.2014.For the first six months of 2015, cost of goods sold increased $82.1 million or 27.4%, to $381.1 million from $299.0 million in the prior year period. For the first six months of 2015, cost of goods sold as a percentage of net sales decreased to 83.4% from 83.5% in the prior year period.


 

Cost of goods sold as a percentage of net sales was negatively impactedpositively impact during the second quarter and first quartersix months of 2015 primarily by: (i) acquisitions completed in the prior year with gross margins lower than historical consolidated gross margins,increased revenues relative to our overall fixed overhead costs, (ii) the timingimpact of the integrationtiming of acquisitions completed during 2014 and 2015, (iii) price declines in the first quarter of 2015,certain more commodity-oriented raw materials, and (iii) additional direct ship distribution business in the third and fourth quarters of 2014 which generally carries lower gross margins than our other distribution business.(iv) ongoing process changes that primarily improved material yields. In addition, changingincreased demand in certain market sectors can result in fluctuating costs of certain commodities ofmore commodity-oriented raw materials and other products that we utilize and distribute from quarter-to-quarter.

 

Gross Profit.Gross profit increased $8.3$8.6 million or 30.4%26.9%, to $35.4$40.4 million in firstsecond quarter 2015 from $27.1$31.8 million in firstsecond quarter 2014. For the six months periods, gross profit increased $16.8 million or 28.5%, to $75.8 million in 2015 from $59.0 million in 2014. As a percentage of net sales, gross profit decreasedincreased to 15.8%17.3% in firstsecond quarter 2015 from 16.0%16.9% in the same period in 2014.2014, and increased to 16.6% in the first six months of 2015 from 16.5% in the prior year period. The improvement in gross profit dollars and as a percentage of net sales in the second quarter and first quartersix months of 2015 compared to 2014 reflected the positive impact of increased revenues both from organic sources and from acquisitions, while the decrease infactors discussed above under “Cost of Goods Sold,” including the positive contribution to gross profit of acquisition-related revenue growth as a percentage of net sales is attributable to the factors describednoted above.

 

Economic or industry-wide factors affecting the profitability of our RV, MH, and industrial businesses include the costs of commodities used to manufacture our products and the competitive environment that can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

 

Exclusive of any commodity pricing fluctuations, competitive pricing dynamics, or other circumstances outside of our control, we expectanticipate full year gross margins in 2015 to be generally consistent withwill improve from those in 2014 with the potential to increase as a result of operating leverage from continued expected sales growth, partially offset by lower gross margins on certain acquisitions completed in 2014 when compared to historical consolidated gross margins.


 

Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.6$0.2 million or 8.9%2.5%, to $6.7$6.8 million in firstsecond quarter 2015 from $6.1$6.6 million in firstsecond quarter 2014. For the six months, warehouse and delivery expenses increased $0.7 million or 5.6%, to $13.5 million in 2015 from $12.8 million in 2014. As a percentage of net sales, warehouse and delivery expenses were 2.9% in second quarter 2015 compared to 3.5% in second quarter 2014. For the comparable six months periods, warehouse and delivery expenses were 3.0% and 3.6% in the first quarter of net sales for 2015 and 2014, respectively.

The decrease in warehouse and delivery expenses as a percentage of net sales in the second quarter of 2015 and first six months of 2015 primarily reflected the impact of market share gains related to increased direct ship business in our Distribution segment, a reduction in fuel costs, the impact of acquisitions completed in 2014 and 2015 with lower delivery expenses as a percentage of net sales when compared to the consolidated percentage, and more efficient utilization per delivery truckload.

 

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased $3.0$2.4 million or 35.5%28.0%, to $11.5$11.2 million in firstsecond quarter 2015 from $8.5$8.8 million in firstsecond quarter 2014. For the six months, SG&A expenses increased $5.4 million or 31.7%, to $22.7 million in 2015 from $17.3 million in 2014. The net increase in SG&A expenses in the second quarter and first quartersix months of 2015 compared to the prior year periodperiods primarily reflected the impact of additional headcount and administrative expenses associated with recent acquisitions and increased stock-based and incentive compensation expense designed to attract and retain key employees. As a percentage of net sales, SG&A expenses were 5.1%4.8% in second quarter 2015 compared to 4.7% in second quarter 2014. For the comparable six months periods, SG&A expenses were 5.0% and 5.0% in the first quarter4.8% of net sales for 2015 and 2014, respectively.

 

Amortization of Intangible AssetsAssets..Amortization of intangible assets increased $0.9$1.1 million and $2.0 million in the second quarter and first quartersix months of 2015, respectively, compared to the prior year period,periods, primarily reflecting the impact of businesses acquiredthe acquisitions completed in June2014 (Precision and Foremost), in September 2014 (PolyDyn3), in November 2014 (Charleston) and in February 2015 (Better Way).the first half of 2015. In the aggregate, in conjunction with the 2014 and 2015 acquisitions, the CompanyrecognizedCompany recognized an estimated $37.6$49.8 million in certain finite-lived intangible assets that are being amortized over periods ranging from two to 10 years.

 

Operating Income.Operating income increased $3.8$4.9 million or 32.3%31.3%, to $15.6$20.4 million in firstsecond quarter 2015 from $11.8$15.5 million in the prior year. For the six months, operating income increased $8.6 million or 31.7%, to $35.9 million from $27.3 million in 2014. The change in operating income is primarily attributable to the items discussed above.

 

Interest expense, net.Interest expense increased $0.3$0.4 million to $0.8$0.9 million in the firstsecond quarter of 2015 from $0.5 million in the prior year quarter reflectingyear. For the six months, interest expense increased $0.6 million to $1.7 million from $1.1 million in 2014. The change in interest expense reflects increased borrowings primarily to fund acquisitions and increased working capital needs in the second quarter and first quartersix months of 2015.

 

Income Taxes.The Company recorded income taxes at an estimated effective tax rate of 38.0% in the second quarter and first quartersix months of 2015 and 38.5% in the first quarter of 2014.comparable 2014 periods. As we continue to refine our federal and state income tax estimates, which are impacted by permanent differences impacting the effective tax rate and shifts in apportionment factors among states as a result of recent acquisition activity and other factors, we could experience further fluctuations in our combined effective income tax rate from period to period and for the remainder of 2015.

 


In the first quartersix months of 2015 and 2014, the Company realized excess tax benefits of approximately $1.2 million$1.2million and $1.0$1.1 million, respectively, related to stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2014 and 2013, respectively. These tax benefits were recorded to shareholders’ equity upon realization in the first quartersix months of 2015 and 2014 at the then estimated combined federal and state statutory tax rate.

 

Net Income. Net income for firstsecond quarter 2015 increased 32.7%was $12.1 million or $0.78 per diluted share compared to $9.2 million from $6.9 million in the prior year period. Net incomeor $0.57 per diluted share for 2014. For the comparable periods increased 39.1% to $0.89first six months, net income was $21.2 million or $1.37 per diluted share in 2015 from $0.64compared to $16.1 million or $1.00 per diluted share for 2014. The changes in 2014.net income for both the second quarter and first six months of 2015 reflect the impact of the items previously discussed.


 

REVIEW BY BUSINESS SEGMENT

The Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.

 

The Company’s reportable business segments are as follows:

 

Manufacturing – The Company’s lamination operations utilize various materials, such as lauan, medium-density fiberboard (“MDF”), gypsum, and particleboard, which are bonded by adhesives or a heating process to a number of products, including vinyl, paper, foil, and high-pressure laminates. These products are utilized to produce furniture, shelving, wall, counter, and cabinet products with a wide variety of finishes and textures. This segment also includes a cabinet door division, a fiberglass bath fixtures division, a hardwood furniture division, a vinyl printing division, a solid surface, granite, and quartz countertop fabrication division, an exterior graphics division, an RV painting division, a fabricated aluminum products division, a simulated wood and stone products division, and a fiberglass and plastic components division. Patrick’s major manufactured products also include wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, and slotwall panels and components.

 

Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics, wiring, electrical and plumbing products, fiber reinforced polyester 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.

 

FirstSecond Quarter and Six MonthsEndedMarch 29,June 28, 2015 Compared to 2014

General

Sales pertaining to the Manufacturing and Distribution segments as stated in the following discussions include intersegment sales. Gross profit includes the impact of intersegment operating activity.


 

The table below presents information about the sales, gross profit and operating income of the Company’s operating segments. A reconciliation to consolidated operating income is presented in Note 11 to the Condensed Consolidated Financial Statements.

 

 

First Quarter Ended

  

Second Quarter Ended

  

Six Months Ended

 
 

March 29,

  

March 30,

  

June 28,

  

June 29,

  

June 28,

  

June 29,

 

(thousands)

 

2015

  

2014

  

2015

  

2014

  

2015

  

2014

 

Sales

                        

Manufacturing

 $174,850  $133,748  $184,488  $148,201  $359,338  $281,949 

Distribution

  53,842   42,065   54,503   45,541   108,345   87,606 
                        

Gross Profit

                        

Manufacturing

  28,259   20,817   31,937   24,924   60,196   45,741 

Distribution

  8,190   6,844   8,471   7,116   16,661   13,960 
                        

Operating Income

                        

Manufacturing

  18,321   13,144   21,211   16,271   39,532   29,415 

Distribution

  3,293   2,297   3,562   2,552   6,855   4,849 

 

Manufacturing

Sales.Sales increased $41.1$36.3 million or 30.7%24.5%, to $174.8$184.5 million in firstsecond quarter 2015 from $133.7$148.2 million in 2014. In the first six months of 2015, sales increased $77.4 million or 27.4%, to $359.3 million from $281.9 million in the first six months of 2014. This segment accounted for approximately 76%77% of the Company’s consolidated net sales infor both the second quarter and first quartersix months of 2015, and 76% for both the second quarter and first quartersix months of 2014. In the firstsecond quarter of 2015, the sales increase reflected a 35%28% increase in the Company’s revenue from the RV industry, a 26%17% increase from the MH industry, and a 22%20% increase in revenue from the industrial markets. On a year-to-date basis, the sales increase reflected a 32%, 21% and 21% increase in the Company’s revenue from the RV industry, MH industry, and industrial markets, respectively.

 


Approximately $28.1 million of the revenue

The sales improvement in the second quarter and first quartersix months of 2015 was primarily attributable to the contribution of acquisitions completed in 2014 and 2015. The remaining sales increase of $13.0 million in the first quarter of 2015 is primarily attributableand to: (i) increased RV, MH and Industrialindustrial market penetration,penetration; (ii) an increase in wholesale unit shipments in the RV and MH industries of 8%3% and an estimated 11%,4% in the second quarter of 2015, respectively, and 6% and 8% in the first quartersix months of 2015, respectively; and (iii) improved retail and commercial fixtures and office and institutional furnishings salesfurniture business in the industrial market. We expect to continue to see quarterly year-over-yearmarkets. Partially offsetting this revenue growth, forparticularly in the remainderRV industry, in both the second quarter and first six months of 2015, exclusivewere the mix shift towards a larger concentration of the revenue contributions of the acquisitions completedentry level and lower priced units, which nominally impacted content per unit growth, and price declines in 2014 andcertain more commodity-oriented raw materials passed on to customers that we utilize in 2015.our manufacturing processes.

 

Gross Profit.Gross profit increased $7.5$7.0 million to $28.3$31.9 million in firstsecond quarter 2015 from $20.8$24.9 million in firstsecond quarter 2014. As a percentage of sales, gross profit increased to 16.2%17.3% in firstsecond quarter 2015 from 15.6%16.8% in 2014. Gross profit increased $14.5 million to $60.2 million in the first six months of 2015 from $45.7 million in the prior year period. As a percentage of sales, gross profit increased to 16.8% in the first six months of 2015 from 16.2% in 2014. Gross profit for the second quarter and first quartersix months of 2015 improved primarily as a result ofof: (i) higher revenues relative to overall fixed overhead costscosts; (ii) the impact of acquisitions completed during 2014 and 2015; (iii) price declines in certain commodities of raw materials, and (iv) ongoing organizational and process changes that enhanced labor efficiencies andprimarily increased material yields.

 

Operating Income.Operating income increased $5.2$4.9 million to $18.3$21.2 million in firstsecond quarter 2015 from $13.1$16.3 million in the prior year. For the first six months of 2015, operating income increased by $10.1 million to $39.5 million from $29.4 million in 2014. The improvement in operating income primarily reflects the increase in gross profit mentioned above.

 

Distribution

Sales.Sales.Sales increased $11.7$9.0 million or 28.0%19.7%, to $53.8$54.5 million in the second quarter of 2015 from $45.5 million in 2014. In the first six months of 2015, sales increased $20.7 million or 23.7%, to $108.3 million from $87.6 million in the first quartersix months of 2015 from $42.1 million in 2014. This segment accounted for approximately 24%23% of the Company’s consolidated net sales infor both the second quarter and first quartersix months of 2015, and approximately 24% for both the second quarter and first quartersix months of 2014. In the firstsecond quarter of 2015, the sales increase primarily reflected a 33%20% increase in the Company’s revenue from both the RV and MH industry and a 10% increase in revenue from the industrial markets. On a year-to-date basis, the sales increase reflected a 26%, 15% and 24% increase in the Company’s revenue from the RV, industry, a 10% increase in revenue from the MH industry, and a 42% increase in revenue from the industrial markets.markets, respectively.

 

Approximately $9.7 million of the revenueThe sales improvement in the second quarter and first quartersix months of 2015 was primarily attributable to the contribution of one of our acquisitions completed in 2014.2014, and increased market penetration and revenues due to additional direct ship distribution business added in the latter half of 2014 in the MH market. Sales were also positively impacted during the second quarter and first quartersix months of 2015 by a 4% and an estimated 11%8% increase, respectively, in wholesale unit shipments in the MH industry, and increased direct ship distribution business added in the third and fourth quarters of 2014. We expect to continue to see quarterly year-over-year revenue growth for the remainder of 2015, exclusive of the revenue contributions of the acquisitions completed in 2014.industry.


 

Gross Profit.Gross profit increased $1.4 million to $8.2$8.5 million in firstsecond quarter 2015 from $6.8$7.1 million in 2014. As a percentage of sales, gross profit was 15.2%15.5% in firstsecond quarter 2015 compared to 16.3%15.6% in 2014.

For the first six months of 2015, gross profit increased $2.7 million to $16.7 million in 2015 compared to $14.0 million in 2014. As a percentage of sales, gross profit was 15.4% in the first six months of 2015 compared to 15.9% in 2014. The decrease in gross profit as a percentage of sales for the first quartersix months of 2015 is primarily attributable to the impact of one of our acquisitions completed in 2014 and an increase in sales of lower margin products primarily attributable toresulting from the increased direct ship distribution business added in the third and fourth quarterslatter half of 2014 at certain of the Company’s distribution facilities.

 

Operating Income.Operating income in firstsecond quarter 2015 increased $1.0 million to $3.3$3.6 million from $2.3$2.6 million in 2014. For the first six months of 2015, operating income increased $2.0 million to $6.9 million from $4.9 million in the first six months of 2014. The improvement in operating income primarily reflects the increase in gross profit discussed above that was partially offset by an increase in warehouse and delivery expenses and in SG&A expenses in the first quarter of 2015 compared to the prior year period.mentioned above.


 

Unallocated Corporate Expenses

Unallocated corporate expenses in the firstsecond quarter of 2015 increased $1.5milliondecreased $0.1 million to $4.4$2.4 million from $2.9$2.5 million in the comparable prior year period. In the first six months of 2015, unallocated corporate expenses decreased $1.4 million to $6.8 million from $5.4 million in the first six months of 2014. Unallocated corporate expenses in both the second quarter and first quartersix months of 2015 also included the impact of an increase in administrative wages, incentives and payroll taxes, and additional headcount associated with the 2014 and 2015 acquisitions.

 

LIQUIDITYAND CAPITAL RESOURCES

Cash Flows

 

Operating Activities

Cash flows from operations represent the net income earned in the reported periods adjusted for non-cash items and changes in operating assets and liabilities. Our primary sources of liquidity have been cash flows from operating activities and borrowings under our 2015 Credit Facility (as defined herein).Facility. Our principal uses of cash in 2015 are to support working capital demands, meet debt service requirements and support our capital allocation strategy, which includes acquisitions, capital expenditures, and repurchases ofrepurchase the Company’s common stock, among others.

 

Net cash used inprovided by operating activities was $2.8$27.4 million in the first quartersix months of 2015 compared to cash provided of $7.5$16.7 million in the first quartersix months of 2014. Net income was $9.2$21.2 million in the first quartersix months of 2015 compared to $6.9$16.1 million in the 2014 period. Net of acquisitions, trade receivables increased $31.7$12.6 million in the first quartersix months of 2015 and $20.2$17.8 million in first quarterthe same period of 2014 reflecting increased sales levels and seasonal trends in each of those periods including the post-acquisition sales increases of the acquisitions completed in 2015, 2014 and 2013.

 

Net of acquisitions, inventories increased $1.3$0.1 million and $3.2 million, respectively, in the first quartersix months of 2015 and $4.3 million in the comparable 2014 period, primarily reflecting higher sales volumes and related higher inventory levels associated with acquisitions completed in 2015, 2014 and 2013. We continue to work together with key suppliers to match lead-time and minimum order requirements, although we may see fluctuations in inventory levels from quarter to quarter as a result of taking advantage of strategic buying opportunities.

 

The $12.1$6.1 million net increase in accounts payable and accrued liabilities in the first quartersix months of 2015 compared toand the $17.7$14.7 million net increase in the comparable 2014 period primarily reflected the increased level of business activity and ongoing operating cash management, and the impact of acquisitions.

 

The Company paid income taxes of $1.7$12.0 million and $10.4 million in the first quartersix months of 2015 and $8,976 in the first quarter of 2014.2014, respectively.

 

In the first quartersix months of 2015 and 2014, the Company realized approximately $1.2 million and $1.0$1.1 million, respectively, of excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2014 and 2013.2013, respectively. These tax benefits were recorded to shareholders’ equity upon realization in the first quartersix months of 2015 and 2014 at the then estimated combined federal and state statutory tax rate, and are reflected in cash flows from financing activities.

 


Investing Activities

Investing activities used cash of $41.4$63.7 million in the first quartersix months of 2015 primarily to fund the acquisitionacquisitions of Better Way and SCI for $39.6$60.5 million in the aggregate, and for capital expenditures of $1.9$3.2 million. Investing activities used cash of $0.9$57.4 million in the first quartersix months of 2014 primarily to fund the acquisitions of Precision and Foremost for $55.0 million in the aggregate, and for capital expenditures.expenditures of $2.4 million.


 

The capital plan for full year 2015 includes spending related to the ongoing replacement of our current ERP system, equipment replacement and upgrades to ensure that our facilities have the capacity, capabilities and technology to facilitate our growth plans, the ongoing replacement of our current ERP system which is progressing as planned, and other strategic capital and maintenance improvements. Our current operating model forecasts capital expenditures for fiscal 2015 of approximately $8.0 million.

 

Financing Activities

Net cash flows provided by financing activities were $44.2$42.9 million in the first quartersix months of 2015 compared to cash outflows of $6.6$44.0 million in the comparable 2014 period. As of March 29,June 28, 2015, availability under the revolving line of credit under the Credit Facility was approximately $34.0$105.4 million excluding(including cash on hand.hand of $6.6 million).

 

The net increase in borrowings of $48.7$48.9 million under the Company’s revolving line of credit in the first quartersix months of 2015 (including a $6.5 million increase in cash on hand) primarily reflected the funding of the Better Way acquisition,and SCI acquisitions, stock repurchases and capital expenditures, totaling $69.4 million in the aggregate, $47.1partially offset by debt repayments. For the first six months of 2014, net long-term debt payments were approximately $46.7 million.

 

In the first quartersix months of 2015, the Company used cash to repurchase 130,500repurchased 195,750 shares of common stock for a total cost of approximately $5.7 million. There were no stock repurchases made duringIn the first quartersix months of 2014.2014, the Company used cash to repurchase 141,819 shares of common stock, for a total cost of $3.7 million.

 

Cash flows related to financing activities in the first quartersix months of 2015 and 2014 also included $1.2 million and $1.0$1.1 million, respectively, related to the realization of excess tax benefits on stock-based compensation. See the related discussion above under “Cash Flows – Operating Activities” for additional details.

 

Capital Resources

2012Credit Facility

 

Credit Facility

OnPrior to April 28, 2015, the Company’s debt financing was supported by its credit agreement, dated October 24, 2012, as amended (the “2012 Credit Agreement”), among the Company, entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as the agent and lender (“Wells Fargo”), and Fifth Third Bank (“Fifth Third”) and Key Bank National Association (“Key Bank”), as participant, to establishparticipants.  The 2012 Credit Agreement consisted of a five-year $80.0$185.0 million revolving secured senior credit facility (the “Credit“2012 Credit Facility”).

On June 26, 2014 and November 7, 2014, the Company entered into amendments to the Credit Agreement to increase the maximum borrowing limit under the revolving line of credit (the “Revolver”) to $125.0 million and $165.0 million, respectively, and to add Key Bank National Association (“Key Bank”) as a participant. On February 13, 2015, the Credit Agreement was further amended to expand the  The 2012 Credit Facility, which was scheduled to $185.0 million.

The Credit Agreement is secured by a pledge of substantially all of the assets of the Company pursuant to a Security Agreement, datedmature on October 24, 2012, between the Company and Wells Fargo, as agent. The Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:

The maturity date for the Credit Facility is October 24, 2017;

The interest rates for borrowings under the Revolver are the Base Rate plus the Applicable Margin or the London Interbank Offer Rate (“LIBOR”) plus the Applicable Margin, with a fee payable by the Company on unused but committed portions of the Revolver;

The Revolver includes a sub-limit up to $5.0 million for same day advances (“Swing Line”) which shall bear interest based upon the Base Rate plus the Applicable Margin;

Up to $20.0 million of the Revolver will be available as a sub facility for the issuance of standby letters of credit, which are subject to certain expiration dates;

The financial covenants include requirements as to a consolidated total leverage ratio and a consolidated interest coverage ratio, and other covenants include limitations on permitted acquisitions, capital expenditures, indebtedness, restricted payments and fundamental changes (see further details below); and

Customary prepayment provisions which require the prepayment of outstanding amounts under the Revolver based on predefined conditions.


At March 29, 2015, the Company had $149.8 million outstanding under its Revolver which consisted of $140.5 million of borrowings under the LIBOR-based option and $9.3 million of borrowings under the Base Rate-based option. At December 31, 2014, the Company had $101.1 million outstanding under its Revolver, which consisted of $97.0 million of borrowings under the LIBOR-based option and $4.1 million of borrowings under the Base Rate-based option. The interest rate for borrowings under the Revolver at both March 29, 2015 and December 31, 20142017, was the Prime Rate plus 0.50% (or 3.75%), or LIBOR plus 1.50% (or 1.6875%). These same interest rates were applicable during the first quarters ended March 29, 2015 and March 30, 2014. The fee payable on committed but unused portions of the Revolver was 0.20% for both of these periods.

Pursuant to the Credit Agreement, the financial covenants include (a) a maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.50:1.00 for the 12 month period ending on such quarter-end; (b) a required minimum consolidated interest coverage ratio under the Revolver, measured on a quarter-end basis, of at least 2.25:1.00 for the 12 month period ending on such quarter-end; and (c) a limitation on annual capital expenditures of $10.0 million for 2014 and for subsequent fiscal years, exclusive of acquisitions. If the consolidated total leverage ratio is in excess of 3.00:1.00 and less than 3.50:1.00, the Company is considered to be in compliance with this financial covenant provided it maintains an asset coverage ratio of at least 1.00 to 1.00 as of the close of each period.

The consolidated total leverage ratio is the ratio for any period of (i) consolidated total indebtedness to (ii) EBITDA. Consolidated total indebtedness for any period is the sum of (i) total debt outstanding under the Revolver, (ii) capital leases and letters of credit outstanding, and (iii) deferred payment obligations. The asset coverage ratio for any period is the ratio of (i) eligible amounts of the Company’s trade payables, inventory and fixed assets, minus certain reserves as defined under the Credit Agreement to (ii) the sum of outstanding obligations under the Credit Facility.

The consolidated interest coverage ratio for any period is the ratio of (i) EBITDA minus depreciation to (ii) the sum of consolidated interest expense plus restricted payments madereplaced by the Company.2015 Credit Facility discussed below.

 

As of and for the fiscal three-month period ended March 29, 2015, the Company was in compliance with all three of these financial covenants at each reporting date. The required maximum total leverage ratio, minimum interest coverage ratio, and the annual capital expenditures limitation amounts compared to the actual amounts as of and for the fiscal three-month period ended March 29, 2015 are as follows:

(thousands except ratios)

 

Required

  

Actual

 

Consolidated leverage ratio (12-month period)

  3.00   1.80 

Consolidated interest coverage ratio (12-month period)

  2.25   3.32 

Annual capital expenditures limitation (actual year-to-date)

 $10,000  $1,866 

2015 Credit Facility

The Company entered into an Amended and Restated Credit Agreement, dated as of April 28, 2015 (the “2015 Credit Agreement”), with Wells Fargo, as Administrative Agent and a lender, and Fifth Third, Key Bank, Bank of America, N.A., and Lake City Bank as participants, to expand its senior secured credit facility to $250.0 million and extend its maturity to 2020 (the “2015 Credit Facility) Facility”). The 2015 Credit Facility is comprised of a $175.0 million revolving credit loan (the “2015 Revolver”) and a $75.0 million term loan (the “Term Loan”).The 2015 Credit Agreement amends and restates the Company’s 2012 Credit Agreement, which was scheduled to expire in October 2017.Agreement.


 

The 2015 Credit Agreement is secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. The 2015 Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:

 

 

The maturity date for the 2015 Credit Facility is April 28, 2020;

 

The Company has the option to increase the 2015 Revolver by an amount up to $50.0 million, subject to certain conditions.

 

The Term Loan will be repaid in installments of approximately $2.7 million per quarter starting on June 30, 2015, with the remaining balance due at maturity;

 

The interest rates for borrowings under the 2015 Revolver and the Term Loan are the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin, with a fee payable by the Company on unused but committed portions of the 2015 Revolver;

 

The 2015 Revolver includes a sub-limit up to $10.0 million for same day advances (“Swing Line”) which shall bear interest based upon the Base Rate plus the Applicable Margin;

 

Up to $10.0 million of the 2015 Revolver will be available as a sub facility for the issuance of standby letters of credit, which are subject to certain expiration dates;

 

The financial covenants include requirements as to a consolidated total leverage ratio and a consolidated fixed charge coverage ratio, and other covenants include limitations and restrictions concerning permitted acquisitions, investments, sales of assets, liens on assets, dividends and other payments; and

 

Customary prepayment provisions, representations, warranties and covenants, and events of default.

 


At June 28, 2015, the Company had (i) $75.0 million outstanding under the Term Loan, which consisted of $72.3 million of borrowings under the LIBOR-based option and $2.7 million of borrowings under the Based Rate-based option, and (ii) $75.0 million outstanding under its 2015 Revolver under the LIBOR-based option. At December 31, 2014, the Company had $101.1 million outstanding under the then current revolver, which consisted of $97.0 million of borrowings under the LIBOR-based option and $4.1 million of borrowings under the Base Rate-based option. The interest rate for borrowings at both June 28, 2015 and December 31, 2014 was the Prime Rate plus 0.50% (or 3.75%), or LIBOR plus 1.50% (or 1.6875%). The fee payable on committed but unused portions of the Revolver was 0.20% for both of these periods.

Pursuant to the 2015 Credit Agreement, the financial covenants include (a) a maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.00:1.00 for the 12 month period ending on such quarter-end; and (b) a required minimum consolidated fixed charge coverage ratio, measured on a quarter-end basis, of at least 1.50:1.00 for the 12 month period ending on such quarter-end.

The consolidated total leverage ratio is the ratio for any period of (i) consolidated total indebtedness to (ii) consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total indebtedness for any period is the sum of (i) total debt outstanding under the 2015 Revolver and the Term Loan, (ii) capital leases and letters of credit outstanding, and (iii) deferred payment obligations. The consolidated fixed charge coverage ratio for any period is the ratio of (i) consolidated EBITDA less restricted payments, taxes paid and capital expenditures as defined under the 2015 Credit Agreement to (ii) consolidated fixed charges. Consolidated fixed charges for any period is the sum of (i) interest expense and (ii) principal payments on outstanding indebtedness under the Term Loan.

As of and for the June 28, 2015 reporting date, the Company was in compliance with both of these financial covenants. The required maximum consolidated total leverage ratio and the minimum consolidated fixed charge coverage ratio compared to the actual amounts as of and for the fiscal six-month period ended June 28, 2015 are as follows: 

 

 

Required

  

Actual

 

Consolidated total leverage ratio (12-month period)

  3.00   1.64 

Consolidated fixed charge coverage ratio (12-month period)

  1.50   3.57 

 

Summary of Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operations, which includes selling our products and collecting receivables, available cash reserves and borrowing capacity available under the Credit Facility (and, effective April 28, 2015, theour 2015 Credit Facility).Facility. Our principal uses of cash are to support working capital demands, meet debt service requirements and support our capital allocation strategy, which includes acquisitions, capital expenditures, and repurchases of the Company’s common stock, among others.

 

Borrowings under the revolving line of credit2015 Revolver and the Term Loan under the 2015 Credit Facility are subject to a maximum total borrowing limit of $185.0$250.0 million (as(effective as of February 13, 2015 through April 27,28, 2015) and are subject to variable rates of interest. The unused availability under the Credit Facility as of March 29,June 28, 2015 was $34.0$105.4 million, excludingincluding cash on hand, and the additional capacity from the 2015 Credit Facility as described above.hand. For the first quartersix months of 2015 and for the fiscal year ended December 31, 2014, we were in compliance with all of our debt covenants at each reporting date as required under the terms of the Credit Agreement.credit agreement in effect at each reporting date.

 

We believe that our existing cash and cash equivalents, cash generated from operations, and available borrowings under our Credit Facility (from January 1, 2015 through April 27, 2015) and under the 2015 Credit Facility (effective as of April 28, 2015) will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs.


 

Our ability to access unused borrowing capacity under the 2015 Credit Facility as a source of liquidity is dependent on our maintaining compliance with the financial covenants as specified under the terms of the 2015 Credit Agreement. In 2015, our management team is focused on increasing market share, maintaining margins, keeping costs aligned with revenue, further improving operating efficiencies, managing inventory levels and pricing, acquiring businesses and product lines that meet established criteria, and the ongoing implementation of our new ERP system at our operating divisions that have not yet been converted, all of which may impact our sources and uses of cash from period to period and impact our liquidity levels. In addition, future liquidity and capital resources may be impacted as we continue to make targeted capital investments to support new business and leverage our operating platform and to repurchase common stock in conjunction with the Company’s previously announced stock buyback program.

 

Our working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV and MH industries, the timing of deliveries, and the payment cycles of our customers. In the event that our operating cash flow is inadequate and one or more of our capital resources were to become unavailable, we would seek to revise our operating strategies accordingly.We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions, and other relevant circumstances.

 


CRITICAL ACCOUNTING POLICIES

There have been no material changes to our significant accounting policies which are summarized in the MD&A and Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

OTHER

 

Seasonality

Manufacturing operations in the RV and MH industries historically have been seasonal and are generally had been at the highest levels when the climate is moderate. Accordingly, the Company’s sales and profits had generally been the highest in the second and third quarters. Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers to the September/OctoberSeptember timeframe, whereby dealers are delaying purchases until new product lines are introduced at these shows. This has resulted in seasonal softening in the RV industry beginning in the mid-thirdthird quarter and extending through October, and when combined with our increased concentration in the RV industry, led to a seasonal trend pattern in which the Company achieves its strongest sales and profit levels in the first half of the year. In addition, current and future seasonal industry trends may be different than in prior years due to the impact of severe weather conditions on the timing of industry-wide shipments from time to time.

 

Inflation

The prices of key raw materials, consisting primarily of lauan, gypsum, particleboard, and aluminum and components used by the Company that are made from these raw materials, are influenced by demand and other factors specific to these commodities, such as the price of oil, rather than being directly affected by inflationary pressures. Prices of certain commodities have historically been volatile and have continued to fluctuate in 2014 and 2015. During periods of rising commodity prices, we have generally been able to pass the increased costs to our customers in the form of surcharges and price increases. We do not believe that inflation had a material effect on results of operations for the periods presented.

 

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick Industries, Inc. and other matters from time to time and desires to take advantage of the “safe harbor” which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ


materially from those in the forward-looking statements. The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as other statements contained in the quarterly report and statements contained in future filings with the Securities and Exchange Commission (“SEC”), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements except as required by law. Factors that may affect the Company’s operations and prospects are contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and in the Company's Form 10-Qs for subsequent quarterly periods, which are filed with the SEC and are available on the SEC’s website at www.sec.gov.


 

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risk primarily in relation to our cash and short-term investments. The interest rate we may earn on the cash we invest in short-term investments is subject to market fluctuations. We utilize a mix of investment maturities based on our anticipated cash needs and evaluation of existing interest rates and market conditions. While we attempt to minimize market risk and maximize return, changes in market conditions may significantly affect the income we earn on our cash and cash equivalents and short-term investments.

 

At March 29,June 28, 2015, our total debt obligations under the 2015 Credit Agreement were under the LIBOR-based and prime rate-based interest rates. A 100 basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately $1.5 million, assuming average related revolving debt subject to variable rates of $149.8$150.0 million, which was the total amount of related borrowings at March 29,June 28, 2015 subject to variable rates.

 

ITEM 4.   CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

The Company maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and the Company’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


 

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the firstsecond quarter ended March 29,June 28, 2015 or subsequent to the date the Company completed its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.      

 


 

PART II: OTHER INFORMATION

 

Items 1, 3, 4 and 5 of Part II are not applicable and have been omitted.

 

 

ITEM 1A.     RISK FACTORS

 

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

 

ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

 

(a)

None.

 

(b)

None.

 

(c)

Issuer Purchases of Equity Securities

 

Period

 

Total

Number of

Shares

Purchased

  

Average

Price Paid

Per Share (1)

  

Total Number of Shares

Purchased as

Part of Publicly Announced

Plans or

Programs (3)

  

Maximum Dollar Value of Shares that May Yet Be Purchased Under

the Plans or Programs (1) (3)

 

Jan. 1 - Jan. 25, 2015

  130,500  $43.29   30,500  $4,807,630 

Jan. 26 - Mar. 1, 2015 (2)

  4,155   44.20   -   20,000,000 

Mar. 2 - Mar. 29, 2015 (2)

  1,135   57.46   -   20,000,000 

Total

  135,790       30,500     

(1)

Includes commissions paid to repurchase shares as part of a publicly announced plan or program.

(2)

On January 28, 2015, February 16, 2015, and March 12, 2015, the Company purchased 2,436 shares, 1,719 shares, and 1,135 shares, respectively, of common stock at a purchase price of $42.25, $46.96 and $57.46 per share, respectively, for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards held by the employees.

(3)

On February 17, 2015, the Board authorized an increase in the amount of the Company’s stock that may be acquired under the existing stock buyback program over the following 12 months to $20.0 million. In the first quarter of 2015, the Company repurchased 130,500 shares, including 100,000 shares purchased from a major stockholder in a privately negotiated transaction, at an average price of $43.29 per share for a total cost of approximately $5.7 million. Since the inception of the stock repurchase program in February 2013 through March 29, 2015, the Company has repurchased in the aggregate 882,580 shares at an average price of $29.07In February 2015, the Board authorized an increase in the amount of the Company’s stock that may be acquired under the existing stock buyback program over the following 12 months to $20.0 million. In the first six months of 2015, the Company repurchased 195,750 shares, including 150,000 shares purchased from a major stockholder in a privately negotiated transaction, at an average price of $28.86 per share for a total cost of approximately $5.7 million. There were no stock repurchases in the second quarter of 2015. Since the inception of the stock repurchase program in February 2013 through June 28, 2015, the Company has repurchased in the aggregate 1,323,870 shares at an average price of $19.38 per share for a total cost of approximately $25.7 million.

 

In the period from March 30,June 29, 2015 through AprilJuly 24, 2015, there were no additional repurchases made of the Company’s common stock. As of AprilJuly 24, 2015, there was $20.0 million available to be repurchased under the authorized stock repurchase program.


 

ITEM 6.       EXHIBITS

 

Exhibits    ExhibitsDescription
   

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

31.2 

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

32 

32

Certification pursuant to 18 U.S.C. Section 1350906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer

101 

101

Interactive Data Files. The following materials are filed electronically with this Quarterly Report on Form 10-Q:

101.INS

101.INS     

XBRL Instance Document

101.SCH

XBRL Taxonomy101.SCH   

XBRLTaxonomy Schema Document

101.CAL

101.CAL    

XBRL Taxonomy Calculation Linkbase Document

101.DEF

101.DEF    

XBRL Taxonomy Definition Linkbase Document

101.LAB

101.LAB   

XBRL Taxonomy Label Linkbase Document

101.PRE

101.PRE    

XBRL Taxonomy Presentation Linkbase Document

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

PATRICK INDUSTRIES, INC.

 (Registrant)

Date:May 7, 2015

By:

/s/ Todd M. Cleveland               

 

(Registrant)

 Todd M. Cleveland

 Chief Executive Officer

 

 

 

 

 

 

 

 

Date:May 7August6, 2015

By:

/s/ Todd M. Cleveland

Todd M. Cleveland

Chief Executive Officer

Date:August6, 2015

By:

/s/ Andy L. Nemeth

 

 

 

Andy L. Nemeth

 

 

 

Executive Vice President-Finance

and Chief Financial Officer

 

        

        

 

32

 31