Patrick Industries Reports Second Quarter 2008 Results

ELKHART, Ind., Aug. 11 /PRNewswire-FirstCall/ — Patrick Industries,
Inc. (Nasdaq: PATK) today announced its operating results for the second
quarter and six-month period ended June 29, 2008. The 2008 and 2007 second
quarters and year to date periods include the financial performance of
American Hardwoods (acquired on January 29, 2007) and Adorn Holdings, Inc.
(acquired on May 18, 2007) for the full year in 2008 and since their
respective acquisition dates in 2007.

Second Quarter Results

Patrick, a leading manufacturer and distributor of building and
component products for the recreational vehicle (RV), manufactured housing
(MH) and industrial markets, reported net earnings of $1.8 million, or
$0.25 per diluted share, compared with a net loss of $1.3 million, or $0.23
per diluted share for the same quarter of 2007. The second quarter 2008
results include pre-tax restructuring and other expenses of approximately
$1.4 million, or $0.12 per diluted share after tax, attributable to the
acquisition and integration of Adorn and its related financing activities.
Additionally, as the Company recently reported, the 2008 second quarter
includes a pre-tax gain on sale of its idle California facility of
approximately $4.2 million, or $0.35 per diluted share after tax. Results
for the 2007 second quarter included pre-tax restructuring and other
acquisition and financing related costs of approximately $2.1 million, or
$0.24 per diluted share after tax.

The Company reported net sales of $109.8 million in the second quarter
of 2008 compared to net sales of $113.1 million in the same quarter of
2007. Patrick attributed the decrease in net sales during the quarter to
further weakening of market conditions from the prior year, partially
offset by a full quarter’s contribution from the Adorn acquisition, which
occurred during the 2007 second quarter. According to industry
associations, RV wholesale shipments were down approximately 22% in the
second quarter of 2008 and approximately 17% year-to-date through June,
while MH wholesale shipments were down approximately 11% in the second
quarter and approximately 7% year-to-date through June. “While working
through these difficult market conditions in the first half of the year, we
focused our efforts on fixed and variable cost reduction and the successful
implementation of lean principles throughout the entire organization as we
position the Company for uncertain economic conditions for the remainder of
the year. We also improved our balance sheet by paying down a significant
portion of our borrowings and raising equity in a private placement and a
rights offering,” said Todd Cleveland, President and Chief Operating
Officer. Cleveland further noted, “Moving into the second half of the year,
we plan to mitigate the slowness in the RV and MH industries through
continued focus on cost containment, continuous improvement, and lean
operating initiatives at all levels of the organization to maximize our
improved market position gained from the Adorn acquisition.”

In the 2008 second quarter, Patrick reported gross profit of
approximately $12.5 million, or 11.4 percent of net sales, compared to
$12.0 million, or 10.6 percent of net sales in the same period in 2007.
Gross profit includes the impact of approximately $0.3 million and $0.9
million of restructuring charges in the second quarter of 2008 and 2007,
respectively.

Patrick reported operating income of $4.6 million for the second
quarter of 2008, compared to an operating loss of $0.6 million in the
second quarter of 2007. In addition to the $0.3 million in restructuring
charges mentioned above, second quarter 2008 operating income includes the
impact of pre-tax charges of approximately $0.9 million, including $0.2
million in restructuring charges and stock compensation related to the
Adorn acquisition, $0.3 million related to vesting of certain retirement
obligations in conjunction with completion of the second quarter rights
offering, and $0.4 million in intangible asset amortization. Second quarter
2008 operating income also includes the impact of the $4.2 million pre-tax
gain on sale of its idle California facility. In addition to the $0.9
million in restructuring charges mentioned above, second quarter 2007
operating income includes the impact of pre-tax charges of approximately
$1.7 million including restructuring and other integration-related
activities in connection with the Adorn integration. These charges include
$0.2 million in restructuring charges, $0.8 million in charges related to
vesting of certain retirement obligations associated with the Adorn
acquisition, $0.1 million in stock compensation, $0.5 million in severance
and litigation settlement costs, and $0.1 million in acquisition related
amortization.

Six Month Results

For the first six months of 2008, Patrick reported a net loss of
approximately $12,000, or $0.00 per diluted share, compared to a net loss
of $1.9 million, or $0.37 per diluted share in the same period of 2007. The
2008 results include the net impact of pre-tax gains on sale of property
and equipment including the sale of the Company’s idle California facility
mentioned above of approximately $4.5 million, or $0.41 per diluted share,
offset by pre-tax costs associated with restructuring and other integration
activities and acquisition related amortization of approximately $2.8
million, or $0.26 per diluted share after tax. Results for the first half
of 2007 include the impact of approximately $3.1 million in pre-tax
expenses, or $0.36 per diluted share after tax, related to restructuring
and other integration related activities, litigation and settlement costs,
and pre-tax acquisition related amortization.

For the first six months of 2008, Patrick reported net sales of $220.8
million compared to net sales of $191.3 million in the same period of 2007.
The year over year increase in net sales is attributable to the full year
impact of the Adorn and American Hardwoods acquisitions, partially offset
by further weakening in 2008 versus 2007 in all three of the major market
sectors that the Company serves.

The MH and RV market sectors represent approximately 75 percent of
Patrick’s sales in the six-month period ended June 29, 2008. Industrial and
other sales, which include sales to the kitchen cabinet, office furniture,
store fixtures and other industries, represented approximately 25 percent
of the Company’s sales in the same period.

For the six months ended June 29, 2008 and June 30, 2007, Patrick
reported gross profit of approximately $24.2 million, or 11.0 percent of
net sales, compared to $20.8 million, or 10.9 percent of net sales,
respectively. Year to date gross profit includes the impact of
approximately $0.7 million and $0.9 million of restructuring charges
related to the acquisition of Adorn for the six-month periods ending June
29, 2008 and June 30, 2007, respectively.

Patrick reported operating income of $3.4 million in the 2008 year to
date period compared to an operating loss of $1.1 million in the same
period in 2007. In addition to the $0.7 million in restructuring charges
mentioned above, 2008 operating income includes the impact of pre-tax
charges of approximately $1.8 million, including $0.6 million in
restructuring charges and stock compensation related to the Adorn
acquisition, $0.3 million related to vesting of certain retirement
obligations in conjunction with completion of the second quarter rights
offering, and $0.9 million in intangible asset amortization. The
year-to-date period ended June 29, 2008 also includes the impact of $4.5
million in pre-tax gains on sale of property and equipment, primarily
related to the sale of the Company’s idle California facility. In addition
to the $0.9 million in restructuring charges mentioned above, the 2007 year
to date operating loss includes the impact of pre-tax charges of
approximately $2.0 million including $1.0 million in charges related to
vesting of certain retirement obligations associated with the Adorn
acquisition, $0.4 million in restructuring charges and stock compensation,
$0.5 million in severance and litigation settlement costs, and $0.1 million
in acquisition related amortization.

In June 2008, Patrick completed its previously announced rights
offering. The Company sold a total of 1,850,000 shares of its common stock
to Tontine Capital Partners, L.P. and Tontine Capital Overseas Master Fund,
L.P., and other existing shareholders through the exercise of rights at a
subscription price of $7.00 per share, for an aggregate purchase price of
$12.9 million. The Company used a portion of the net proceeds to prepay
approximately $7.1 million in principal plus $0.3 million in accrued
interest that remained outstanding on the Company’s Senior Subordinated
Promissory Notes owed to Tontine. The Company used the remaining $5.5
million in rights offering proceeds plus approximately $5.6 million in net
proceeds from the sale of the previously mentioned idle California facility
to pay down its term loan under the Company’s senior secured credit
facility in the third quarter of 2008. In total from December 31, 2007
through June 30, 2008, the Company has paid down more than $34 million in
senior subordinated debt and term debt under its senior secured credit
facility.

“When we first purchased Adorn LLC, we felt this was a transformational
event for both companies, and the first important step in Patrick
Industries, Inc. becoming the premier manufacturer and distributor of
building and component products to the RV and MH industries, and we are
pleased with our progress so far,” said Paul Hassler, Chief Executive
Officer. “Since the acquisition in May 2007, we have closed and
consolidated ten operations and two operating cells and reduced our
headcount by 640, including 70 salaried positions. We continue to see
significant synergies from the acquisition, and estimate our annualized
cost savings in 2008 to be more than $3 million. During the first half of
2008, we estimate we have already realized approximately $1.5 million in
combined annualized cost savings from the integration.”

In May 2008, Patrick announced the appointment of Paul E. Hassler as
Chairman of the Board of Directors. Hassler continues in his role as Chief
Executive Officer. In addition, the Company announced the promotion of Todd
M. Cleveland, previously Patrick’s Executive Vice President of Operations
and Sales and Chief Operating Officer, to the position of President and
Chief Operating Officer as well as his appointment to the Company’s board
of directors.

“With our leaner combined operations, stronger management team and
improving balance sheet, we have repositioned Patrick over the first six
months of 2008 to compete in the currently difficult RV and MH markets. We
are also in a better position to execute our long-term strategic plan based
on market penetration, enhanced capacity utilization, improving operating
efficiencies, product development and strategic and accretive acquisition
opportunities,” Hassler concluded.

About Patrick Industries

Patrick Industries, Inc. ( http://www.patrickind.com ) is a major manufacturer
of component products and distributor of building products serving the
manufactured housing, recreational vehicle, kitchen cabinet, home and
office furniture, fixture and commercial furnishings, marine, and other
industrial markets and operates coast-to-coast through locations in 14
states. Patrick’s major manufactured products include decorative vinyl and
paper panels, wrapped mouldings, cabinet doors, slotwall and slotwall
components, countertops, and aluminum extrusions. The Company also
distributes drywall and drywall finishing products, interior passage doors,
flooring, vinyl and cement siding, ceramic tile, high-pressure laminates,
and other miscellaneous products. In May 2007, Patrick acquired Adorn, LLC,
a manufacturer and supplier of interior components to the recreational
vehicle and manufactured housing industries.

Forward-Looking Information

This press release contains certain “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995 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 Company’s common stock and other matters. Statements in
this press release that are not historical facts are “forward-looking
statements” for the purpose of the safe harbor provided by Section 21E of
the Exchange Act and Section 27A of the Securities Act. Forward-looking
statements, including, without limitation, those relating to our future
business prospects, revenues and income, wherever they occur in this press
release, are necessarily estimates reflecting the best judgment of our
senior management at the time such statements were made, and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by forward-looking statements. The Company
does not undertake to update forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking
statements are made. You should consider forward-looking statements,
therefore, in light of various important factors, including those set forth
in this press release. There are a number of factors, many of which are
beyond the Company’s control, which could cause actual results and events
to differ materially from those described in the forward-looking
statements. These factors include pricing pressures due to competition,
costs and availability of raw materials, availability of retail and
wholesale financing for manufactured homes, availability and costs of
labor, inventory levels of retailers and manufacturers, levels of
repossessed manufactured homes, the financial condition of our customers,
interest rates, oil and gasoline prices, the outcome of litigation, volume
of orders related to hurricane damage and operating margins on such
business, and adverse weather conditions impacting retail sales. In
addition, national and regional economic conditions and consumer confidence
may affect the retail sale of recreational vehicles and manufactured homes.

UNAUDITED FINANCIAL HIGHLIGHTS

(dollars and weighted shares, THREE MONTHS SIX MONTHS
in 000’s except per share amounts) ENDED ENDED

INCOME STATEMENT 6/29/08 6/30/07 6/29/08 6/30/07

Net sales $109,788 $113,125 $220,799 $191,273
Cost of goods sold 96,990 100,213 195,904 169,547
Restructuring charges 273 938 719 938
Gross profit 12,525 11,974 24,176 20,788
Warehouse and delivery expenses 5,105 5,177 10,157 8,944
Selling, general, and
administrative expenses 6,421 7,086 14,081 12,667
Amortization expense 429 143 858 143
Restructuring charges 81 183 177 183
(Gain) on sale of property and
equipment (4,075) (7) (4,505) (12)
Operating income (loss) 4,564 (608) 3,408 (1,137)
Interest expense, net 1,614 1,525 3,426 2,096
Income (loss) before income
taxes (credits) 2,950 (2,133) (18) (3,233)
Income taxes (credits) 1,092 (847) (6) (1,293)
NET INCOME (LOSS) $1,858 ($1,286) ($12) ($1,940)

BASIC INCOME (LOSS) PER COMMON
SHARE $0.25 ($0.23) ($0.00) ($0.37)
DILUTED INCOME (LOSS) PER COMMON
SHARE $0.25 ($0.23) ($0.00) ($0.37)
Weighted average shares
outstanding, basic 7,453 5,489 6,893 5,229
Weighted average shares
outstanding, diluted 7,487 5,489 6,893 5,229

(dollars in 000’s)
JUN. 29, DEC. 31,
CONDENSED BALANCE SHEET 2008 2007

CURRENT ASSETS
Cash and cash equivalents $13,001 $151
Trade receivables, net 25,348 15,251
Inventories 41,985 43,566
Income taxes receivable 3,246 3,728
Prepaid expenses and other 2,377 4,621
Deferred tax assets 1,605 1,605
Total current assets 87,562 68,922

PROPERTY AND EQUIPMENT, NET 52,464 54,755
GOODWILL AND OTHER INTANGIBLE ASSETS 69,099 69,844
OTHER ASSETS 2,932 2,721

TOTAL ASSETS $212,057 $196,242

CURRENT LIABILITIES
Current maturities of long-term debt $6,828 $10,107
Accounts payable 29,976 14,349
Accrued expenses 7,447 7,568
Total current liabilities 44,251 32,024

LONG-TERM DEBT LESS CURRENT MATURITIES 53,956 71,501
DEFERRED COMPENSATION AND OTHER 4,391 4,180
DEFERRED TAX LIABILITIES 16,479 16,604

SHAREHOLDERS’ EQUITY 92,980 71,933

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $212,057 $196,242

Real Estate Central

Patrick Industries Reports Second Quarter 2008 Results

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