Patrick Industries Inc. announced the acquisition of the business and certain assets of Goshen, Ind,-based John H. McDonald Co. Inc., dba Westside Furniture, a wholesale supplier of La-Z-Boy recliners and the Serta Trump Home mattress line, among other furniture products, to the recreational vehicle industry. Westside marks the Patrick’s third business acquisition this year.
“We are very excited to welcome the highly respected Westside Furniture business to the Patrick family and look to continue the legacy that Michael, Rose Ann and John Morgan have created. We look forward to working with John to carry on the standards that have been set by Michael and Rose Ann, who now can focus on enjoying their retirement years,” said Todd Cleveland, president and CEO of Elkhart-based Patrick, in a press release. “Westside will help us continue to bring new and innovative product lines to our customers and John’s creative and value driven approach will be a great fit with our organization. Consistent with the acquisitions we have completed in the past, we will continue to allow the entrepreneurial spirit of Westside to thrive while supporting the business with the financial and operational foundation that will enable it to align with our company mission of bringing the highest quality products, service and value to our customers.”
John Morgan, a principal owner and manager of Westside, said, “My family and I have been actively engaged in the wholesale furniture business for the RV industry for the last seven years and we are excited to partner with an organization such as Patrick whose industry expertise and ‘Customer First’ approach are a natural fit with the core values, competencies and relationships that Westside has built over the last six decades in the local retail furniture business. As my parents begin the next chapter in their lives, they are confident that the company is in good hands and I am very much looking forward to the new opportunities that the Patrick team will bring to this business.”
The purchase of Westside was funded under Patrick’s existing credit facility. Patrick will continue to operate the wholesale furniture business on a stand-alone basis under the Westside Furniture brand name in its existing 53,000 square foot leased facility. Patrick expects the acquisition to be accretive to 2013 earnings per share.
Elkhart, Ind.-based Patrick Industries Inc., a major manufacturer and distributor of building and component products for the recreational vehicle, manufactured housing and industrial markets, today (Oct. 27) reported higher sales and earnings for its third quarter, ended Sept. 25, bolstered by recent acquisitions.
Net sales for the quarter were $77.4 million compared to $72.8 million in the same quarter of 2010, an increase of $4.6 million or 6.4%. The increase was primarily attributable to the contributions of three business acquisitions completed since August 2010, higher raw material commodity prices and improved retail fixture sales in the industrial market. Softer than expected conditions in the MH industry partially offset the sales increase in the quarter. According to industry associations, wholesale unit shipments in the RV industry, which represented 59% of the company’s sales in the quarter, decreased approximately 3% in the third quarter of 2011 compared to the prior year period. Patrick estimates that wholesale unit shipments in the MH industry, which represented 26% of the company’s third quarter sales, were down approximately 5% from the third quarter of 2010. The industrial market sector, which is primarily tied to the residential housing market and accounted for 15% of the company’s third quarter 2011 sales, saw a 6% increase in new housing starts in the quarter compared to the prior year.
As previously announced, Patrick acquired Syracuse, Ind.-based A.I.A. Countertops LLC in September 2011. AIA, a fabricator of countertops, backsplashes, tables, signs and other products for the RV and commercial markets, was the company’s second acquisition of the year following the acquisition of the manufacturing and distribution business of Praxis Group in June 2011. Together, AIA and Praxis accounted for approximately $1.3 million of the sales increase in the third quarter of 2011. In addition, the acquisition of Blazon International Group (“Blazon”) during the third quarter of 2010 contributed only a partial quarter’s results in the prior year period compared to a full quarter in 2011.
For the third quarter of 2011, Patrick reported net income of $4.5 million or $0.44 per diluted share, compared to a net loss of $0.6 million or $0.07 per diluted share in the third quarter of 2010. Third quarter 2011 and 2010 net income each included the positive impact of a non-cash credit of $0.1 million or $0.01 per diluted share related to mark-to-market accounting for common stock warrants.
The impact of the acquisition of new product lines during 2010, in particular the acquisition of the distribution business of Blazon, positively contributed to gross profit and net income during the third quarter of 2011. Continued improved profitability at two of the company’s Midwest manufacturing divisions, one of which had underperformed in 2010 compared to historical levels, also contributed to the increase in net income. Both divisions benefited from margin improvements that were in line with the Company’s expectations and ongoing organizational and process changes that enhanced labor efficiencies, reduced scrap and returns, and increased material yields.
“While we have been negatively impacted by continuing soft market conditions in the MH industry, we have increased our market share in both the RV and industrial market sectors through new product introductions and line extensions to further drive sales levels,” said Todd Cleveland, president and CEO. “In addition, we believe the impact of the acquisitions of Praxis and AIA in 2011 will provide positive contributions to our operating profitability and allow us to gain additional penetration in the RV and industrial market sectors.”
Net sales for the first nine months of 2011 were $229.5 million, an increase of $9.3 million or 4.3%. Similar to the third quarter, the year-to-date increase was primarily attributable to the contributions of the three acquisitions described above, higher raw material commodity prices, and improved retail fixture business. The sales increase was partially offset by continued softness in the MH and residential housing markets. According to industry associations, wholesale unit shipments in the RV industry, which represented 62% of the company’s year-to-date sales, increased approximately 3% in the first nine months of 2011 compared to the prior year period. Patrick estimates that wholesale unit shipments in the MH industry, which represented 23% of the company’s nine months sales, were down approximately 10% from 2010. The industrial market sector, which accounted for 15% of the Company’s nine months sales, saw new housing starts decrease by approximately 2% for the first nine months of 2011 compared to the prior year.
For the first nine months of 2011, Patrick reported net income of $7.0 million or $0.68 per diluted share, compared to net income of $2.2 million or $0.22 per diluted share in the prior year period. Net income for the first nine months of 2011 benefited from the impact of improved profitability at two of the company’s Midwest manufacturing divisions and the product line acquisitions as discussed above.
Nine months 2011 net income included non-cash charges related to the refinancing of Patrick’s previous credit facility, including $0.6 million or $0.06 per diluted share for the write-off of the remaining unamortized loss on interest rate swaps that were terminated and paid off during the first quarter and the write-off of $0.6 million or $0.06 per diluted share of financing costs. The costs were partially offset by a net gain on the sale of fixed assets and on the acquisition of a business of $0.3 million or $0.03 per diluted share, and a non-cash credit of approximately $0.1 million or $0.01 per diluted share related to stock warrant accounting. Net income for the first nine months of 2010 included a net gain on the sale of fixed assets of $2.8 million or $0.28 per diluted share, and a non-cash credit of approximately $0.2 million or $0.02 per diluted share related to stock warrant accounting.
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