Third Quarter 2023 Highlights (compared to
Third Quarter 2022 unless otherwise noted)
- Net sales of $866 million
decreased 22% as a result of lower wholesale unit shipments in our
end markets and lower pricing passed on to our customers to reflect
changes in certain commodity costs, partially offset by market
share gains.
- Diversification strategy, acquisitions, successful labor
management and cost control, continuous improvement and automation
initiatives resulted in operating margin resilience despite the
sales decline, with operating margin declining 10 basis points to
8.2% during the quarter.
- Adjusted EBITDA of $113
million decreased 14%; adjusted EBITDA margin increased 130
basis points to 13.1%.
- Inventory reduction of $150
million from year-end 2022 and $216
million from the end of the third quarter of 2022; cash
provided by operations for the first nine months of 2023 was
$294 million versus $230 million for the same period last year.
- On a trailing twelve-month basis, free cash flow through the
third quarter of 2023 was $412
million, an increase of 64% compared to $250 million through the third quarter of
2022.
- Strong cash flow and solid balance sheet and liquidity position
us favorably and help enable us to continue to opportunistically
deploy capital and flex our operations, to reflect current market
conditions.
ELKHART, Ind., Oct. 26, 2023 /PRNewswire/ -- Patrick Industries,
Inc. (NASDAQ: PATK) ("Patrick" or the "Company"), a leading
component solutions provider for the Outdoor Enthusiast and Housing
markets, today reported financial results for the third quarter
ended October 1, 2023.
Net sales were $866 million, a
decrease of $246 million, or 22% from
$1.11 billion in the third quarter of
2022. The decline in sales was primarily driven by a decrease in
unit shipments across our end markets and lower pricing passed on
to our customers to reflect changes in certain commodity costs,
partially offset by market share gains.
Operating income of $71 million in
the third quarter of 2023 decreased $22
million from $93 million in
the third quarter of 2022. Operating margin of 8.2% decreased 10
basis points compared to 8.3% in the same period a year ago,
primarily due to the impact of lower net sales, absorption on
certain fixed distribution expenses, and an increase in non-cash
amortization due to acquisitions.
Net income decreased 33% to $40
million from $59 million in
the third quarter of 2022. Diluted earnings per share of
$1.81 decreased 26% compared to
$2.43 for the third quarter of
2022.
"Our operating results for the third quarter of 2023 are a
reflection of our team's thoughtful discipline to manage our
business and drive resilient operating margins in a very dynamic
environment, despite the continued reduction in shipments across
our end markets," said Andy Nemeth,
Chief Executive Officer. "We have reduced our overall cost
structure and reduced our inventory by $150
million from year-end 2022. Our team's focus on labor
management, automation, and continuous improvement has helped
enable us to dynamically adjust our business to current market
demand and industry trends, while remaining opportunistically
nimble and poised, ready to pivot when opportunity presents itself
or upon an uptick in our markets."
Jeff Rodino, President, said, "We
continue to strategically deploy capital and reinvest in the
business with the goal of achieving our long-term growth
objectives and operational excellence. This focus is also reflected
in our repayment of $112 million of
long-term debt during the quarter, demonstrating our commitment to
maintaining our solid financial foundation and bolstering our
ability to seize upon both organic and strategic opportunities. Our
acquisition pipeline remains full of potential targets to continue
to enhance our outdoor enthusiast platform."
Third Quarter 2023 Revenue by Market
Sector
(compared to Third Quarter 2022 unless
otherwise noted)
RV (46% of Revenue)
- Revenue of $400 million decreased
24% while wholesale RV industry unit shipments declined 20%.
- Content per wholesale RV unit (on a trailing twelve-month
basis) decreased 2% to $4,957.
Marine (24% of Revenue)
- Revenue of $205 million decreased
24% while estimated wholesale powerboat industry unit shipments
decreased 23%.
- Estimated content per wholesale powerboat unit (on a trailing
twelve-month basis) increased 3% to $5,009.
Housing (30% of Revenue, comprised of Manufactured
Housing ("MH") and Industrial)
- Revenue of $261 million decreased
18%; estimated wholesale MH industry unit shipments decreased 22%;
total housing starts decreased 6%, with single-family housing
starts increasing 7% and multifamily housing starts decreasing
28%.
- Estimated MH content per wholesale MH unit (on a trailing
twelve-month basis) increased 8% to $6,498.
Balance Sheet, Cash Flow and Capital Allocation
Cash provided by operations of $294
million in the first nine months of 2023 increased by
$64 million from $230 million in the first nine months of 2022 due
to an improvement of $227 million in working capital
monetization, partially offset by a $176
million reduction in net income. Capital expenditures
totaled $11 million in the third
quarter of 2023, reflecting continued investments in alignment with
our automation and technology initiatives. On a trailing
twelve-month basis, free cash flow through the third quarter of
2023 was $412 million, an increase of
64% compared to $250 million through
the third quarter of 2022. Our long-term debt decreased
approximately $112 million during the
third quarter of 2023, principally due to net repayments on our
revolving credit facility.
We remained disciplined in allocating and deploying capital,
returning approximately $10 million
to shareholders in the third quarter of 2023 through dividends.
Our total debt at the end of the third quarter was approximately
$1.13 billion, resulting in a total
net leverage ratio of 2.5x (as calculated in accordance with our
credit agreement). Available net liquidity, comprised of borrowing
availability under our credit facility and cash on hand, was
approximately $700 million.
Business Outlook and Summary
"We remain confident in our ability to navigate the current
macroeconomic environment while continuing to reinvest in our
business thanks to our solid balance sheet and liquidity position
and our team's dedication to operational excellence and customer
service at the highest level," continued Mr. Nemeth. "We believe RV
OEM production is calibrated with retail unit shipments as a result
of disciplined business management by dealers and OEMs alike
resulting in lower dealer inventory relative to historical levels,
and a healthier mix of product by model year. As we anticipate a
potential recovery in RV production next year, we expect improving
industry wholesale shipments to offset the financial impact of
continued restricted production from marine OEMs and inventory
discipline from dealers. More importantly, long-term demand for the
outdoor enthusiast lifestyle is supported by positive demographic
trends and consumers' affinity for outdoor living and innovative
lifestyle product enhancements. Affordable housing continues to be
in short supply and we remain optimistic about the long-term
opportunity this presents as home buyers adjust to higher interest
rates. We like our position in the markets we serve and are
confident that our diverse portfolio and flexible operating model
will help continue to enable us to deliver value to our
stakeholders."
Conference Call Webcast
Patrick Industries will host an online webcast of its third
quarter 2023 earnings conference call that can be accessed on the
Company's website, www.patrickind.com, under "For Investors," on
Thursday, October 26, 2023 at 10:00
a.m. Eastern Time. In addition, a supplemental earnings
presentation can be accessed on the Company's website,
www.patrickind.com under "For Investors."
About Patrick Industries, Inc.
Patrick Industries (NASDAQ: PATK) is a leading component
solutions provider for the RV, Marine and Housing markets. Founded
in 1959, Patrick is based in Elkhart,
Indiana, employing approximately 10,000 team members
throughout the United States.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains certain statements related to future
results, our intentions, beliefs and expectations or predictions
for the future, which are forward-looking statements as that term
is defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially
from either historical or anticipated results depending on a
variety of factors. Potential factors that could impact results
include: the effects of external macroeconomic factors, including
adverse developments in world financial markets, disruptions
related to tariffs and other trade issues, and global supply chain
interruptions; adverse economic and business conditions, including
inflationary pressures, cyclicality and seasonality in the
industries we sell our products; the effects of interest rate
changes and other monetary and market fluctuations; the
deterioration of the financial condition of our customers or
suppliers; the ability to adjust our production schedules up or
down quickly in response to rapid changes in demand; the loss of a
significant customer; changes in consumer preferences; pricing
pressures due to competition; conditions in the credit market
limiting the ability of consumers and wholesale customers to obtain
retail and wholesale financing for RVs, manufactured homes, and
marine products; public health emergencies or pandemics, such as
the COVID-19 pandemic; the imposition of, or changes in,
restrictions and taxes on imports of raw materials and components
used in our products; information technology performance and
security to include our ability to deter cyberattacks or other
information security incidents; any increased cost or limited
availability of certain raw materials; the impact of governmental
and environmental regulations, and our inability to comply with
them; our level of indebtedness; the ability to remain in
compliance with our credit agreement covenants; the availability
and costs of labor and production facilities and the impact of
labor shortages; inventory levels of retailers and manufacturers;
the ability to manage working capital, including inventory and
inventory obsolescence; the ability to generate cash flow or obtain
financing to fund growth; future growth rates in the Company's core
businesses; realization and impact of efficiency improvements and
cost reductions; the successful integration of acquisitions and
other growth initiatives; increases in interest rates and oil and
gasoline prices; the ability to retain key executive and management
personnel; the impact on our business resulting from wars and
military conflicts such as war in Ukraine and evolving conflict in Israel, Gaza
and Syria, and throughout the
Middle East; natural disasters or
other unforeseen events, and adverse weather conditions.
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.
Information about certain risks that could affect our business and
cause actual results to differ from those expressed or implied in
the forward-looking statements are contained in the section
entitled "Risk Factors" in the Company's Annual Report on Form 10-K
for the year ended December 31, 2022,
and in the Company's Forms 10-Q for subsequent quarterly periods,
which are filed with the Securities and Exchange Commission ("SEC")
and are available on the SEC's website at www.sec.gov. Each
forward-looking statement speaks only as of the date of this press
release, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances
occurring after the date on which it is made.
PATRICK INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
Ended
|
|
Nine Months
Ended
|
($ in thousands except
per share data)
|
|
October 1,
2023
|
|
September 25,
2022
|
|
October 1,
2023
|
|
September 25,
2022
|
NET
SALES
|
|
$
866,073
|
|
$ 1,112,089
|
|
$
2,686,858
|
|
$ 3,929,957
|
Cost of goods
sold
|
|
666,954
|
|
875,638
|
|
2,083,527
|
|
3,071,057
|
GROSS
PROFIT
|
|
199,119
|
|
236,451
|
|
603,331
|
|
858,900
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
Warehouse and
delivery
|
|
37,664
|
|
39,997
|
|
109,540
|
|
125,213
|
Selling, general and
administrative
|
|
70,873
|
|
84,924
|
|
231,814
|
|
250,969
|
Amortization of intangible
assets
|
|
19,507
|
|
18,769
|
|
59,093
|
|
54,175
|
Total operating expenses
|
|
128,044
|
|
143,690
|
|
400,447
|
|
430,357
|
OPERATING
INCOME
|
|
71,075
|
|
92,761
|
|
202,884
|
|
428,543
|
Interest expense,
net
|
|
16,879
|
|
15,302
|
|
53,623
|
|
44,990
|
Income before
income taxes
|
|
54,196
|
|
77,459
|
|
149,261
|
|
383,553
|
Income taxes
|
|
14,646
|
|
18,640
|
|
37,181
|
|
95,537
|
NET
INCOME
|
|
$
39,550
|
|
$
58,819
|
|
$
112,080
|
|
$
288,016
|
BASIC EARNINGS PER
COMMON
SHARE
|
|
$
1.84
|
|
$
2.66
|
|
$
5.20
|
|
$
12.93
|
DILUTED EARNINGS PER
COMMON
SHARE
|
|
$
1.81
|
|
$
2.43
|
|
$
5.09
|
|
$
11.78
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding -
Basic
|
|
21,511
|
|
22,087
|
|
21,541
|
|
22,274
|
Weighted average shares
outstanding -
Diluted
|
|
21,884
|
|
24,413
|
|
22,063
|
|
24,573
|
PATRICK INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
|
|
As of
|
($ in
thousands)
|
|
October 1,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
16,450
|
|
$
22,847
|
Trade receivables,
net
|
|
240,850
|
|
172,890
|
Inventories
|
|
517,657
|
|
667,841
|
Prepaid expenses and
other
|
|
36,296
|
|
46,326
|
Total current assets
|
|
811,253
|
|
909,904
|
Property, plant
and equipment, net
|
|
358,266
|
|
350,572
|
Operating lease
right-of-use assets
|
|
170,128
|
|
163,674
|
Goodwill and
intangible assets, net
|
|
1,308,156
|
|
1,349,493
|
Other non-current
assets
|
|
8,140
|
|
8,828
|
TOTAL ASSETS
|
|
$
2,655,943
|
|
$
2,782,471
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Current maturities of
long-term debt
|
|
$
7,500
|
|
$
7,500
|
Current operating lease
liabilities
|
|
47,262
|
|
44,235
|
Accounts payable
|
|
148,239
|
|
142,910
|
Accrued
liabilities
|
|
132,813
|
|
172,595
|
Total current liabilities
|
|
335,814
|
|
367,240
|
Long-term debt,
less current maturities, net
|
|
1,104,618
|
|
1,276,149
|
Long-term
operating lease liabilities
|
|
126,231
|
|
122,471
|
Deferred tax
liabilities, net
|
|
47,390
|
|
48,392
|
Other long-term
liabilities
|
|
10,587
|
|
13,050
|
TOTAL LIABILITIES
|
|
1,624,640
|
|
1,827,302
|
|
|
|
|
|
TOTAL SHAREHOLDERS' EQUITY
|
|
1,031,303
|
|
955,169
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
$
2,655,943
|
|
$
2,782,471
|
PATRICK INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
Nine Months
Ended
|
($ in
thousands)
|
|
|
|
|
|
|
October 1,
2023
|
|
September 25,
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
Net income
|
|
$
112,080
|
|
$
288,016
|
Depreciation and
amortization
|
|
107,976
|
|
96,256
|
Stock-based
compensation expense
|
|
13,675
|
|
15,596
|
Amortization of
convertible notes debt discount
|
|
823
|
|
1,399
|
Other adjustments to
reconcile net income to net cash
provided by operating activities
|
|
3,201
|
|
(664)
|
Change in operating
assets and liabilities, net of acquisitions
of businesses
|
|
56,075
|
|
(170,795)
|
Net cash provided
by operating activities
|
|
293,830
|
|
229,808
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
(47,430)
|
|
(63,437)
|
Business
acquisitions and other investing activities
|
|
(28,033)
|
|
(145,447)
|
Net cash used in
investing activities
|
|
(75,463)
|
|
(208,884)
|
NET CASH FLOWS USED
IN FINANCING ACTIVITIES
|
|
(224,764)
|
|
(90,504)
|
Decrease in cash and
cash equivalents
|
|
(6,397)
|
|
(69,580)
|
Cash and cash
equivalents at beginning of year
|
|
22,847
|
|
122,849
|
Cash and cash
equivalents at end of period
|
|
$
16,450
|
|
$
53,269
|
PATRICK INDUSTRIES, INC.
Earnings
Per Common Share
The table below illustrates the calculation for diluted share
count which shows the dilutive impact of the adoption of ASU
2020-06 on our 1.00% Convertible Senior Notes due 2023, which were
paid off in full at maturity in February
2023:
|
|
Third Quarter
Ended
|
|
Nine Months
Ended
|
($ in thousands except
per share data)
|
|
October 1,
2023
|
|
September 25,
2022
|
|
October 1,
2023
|
|
September 25,
2022
|
Numerator:
|
|
|
|
|
|
|
|
|
Earnings for basic
earnings per
common share calculation
|
|
$
39,550
|
|
$
58,819
|
|
$
112,080
|
|
$
288,016
|
Effect of interest on
potentially
dilutive convertible notes, net of tax
|
|
—
|
|
478
|
|
162
|
|
1,417
|
Earnings for diluted
earnings per
common share calculation
|
|
$
39,550
|
|
$
59,297
|
|
$
112,242
|
|
$
289,433
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common
shares
outstanding - basic
|
|
21,511
|
|
22,087
|
|
21,541
|
|
22,274
|
Weighted average
impact of
potentially dilutive convertible
notes
|
|
—
|
|
2,064
|
|
221
|
|
2,053
|
Weighted average
impact of
potentially dilutive securities
|
|
373
|
|
262
|
|
301
|
|
246
|
Weighted average common
shares
outstanding - diluted
|
|
21,884
|
|
24,413
|
|
22,063
|
|
24,573
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
|
$
1.84
|
|
$
2.66
|
|
$
5.20
|
|
$
12.93
|
Diluted earnings per
common
share
|
|
$
1.81
|
|
$
2.43
|
|
$
5.09
|
|
$
11.78
|
PATRICK INDUSTRIES, INC.
Non-GAAP
Reconciliation (Unaudited)
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with
U.S. GAAP, the Company also provides financial metrics, such as net
leverage ratio, content per unit, net debt, free cash flow,
earnings before interest, taxes, depreciation and amortization
("EBITDA"), adjusted EBITDA, and available liquidity, which we
believe are important measures of the Company's business
performance. These metrics should not be considered alternatives to
U.S. GAAP. Our computations of net leverage ratio, content per
unit, net debt, free cash flow, EBITDA, adjusted EBITDA, and
available liquidity may differ from similarly titled measures used
by others. We calculate net debt by subtracting cash and cash
equivalents from the gross value of debt outstanding. We calculate
EBITDA by adding back depreciation and amortization, net interest
expense, and income tax expense to net income. We calculate
adjusted EBITDA by taking EBITDA and adding back stock-based
compensation and loss on sale of property, plant and equipment and
subtracting out gain on sale of property, plant and equipment. We
calculate free cash flow by subtracting cash paid for purchases of
property, plant and equipment from cash flow from operations. RV
wholesale unit shipments are provided by the RV Industry
Association. Marine wholesale unit shipments are Company estimates
based on data provided by the National Marine Manufacturers
Association. MH wholesale unit shipments are provided by the
Manufactured Housing Institute. Housing starts are provided by the
U.S. Census Bureau. You should not consider these metrics in
isolation or as substitutes for an analysis of our results as
reported under U.S. GAAP.
The following table reconciles net income to EBITDA and adjusted
EBITDA:
|
|
Third Quarter
Ended
|
|
Nine Months
Ended
|
($ in
thousands)
|
|
October 1,
2023
|
|
September 25,
2022
|
|
October 1,
2023
|
|
September 25,
2022
|
Net
income
|
|
$
39,550
|
|
$
58,819
|
|
$
112,080
|
|
$
288,016
|
+ Depreciation &
amortization
|
|
36,484
|
|
33,281
|
|
107,976
|
|
96,256
|
+ Interest expense,
net
|
|
16,879
|
|
15,302
|
|
53,623
|
|
44,990
|
+ Income
taxes
|
|
14,646
|
|
18,640
|
|
37,181
|
|
95,537
|
EBITDA
|
|
107,559
|
|
126,042
|
|
310,860
|
|
524,799
|
+ Stock-based
compensation
|
|
5,729
|
|
5,352
|
|
13,675
|
|
15,596
|
+ Loss (Gain) on sale
of property, plant
and equipment
|
|
142
|
|
(165)
|
|
242
|
|
(5,713)
|
Adjusted
EBITDA
|
|
$
113,430
|
|
$
131,229
|
|
$
324,777
|
|
$
534,682
|
The following table reconciles cash flow from operations to free
cash flow on a trailing twelve-month basis:
|
|
Trailing Twelve Months
Ended
|
($ in
thousands)
|
|
October 1,
2023
|
|
September 25,
2022
|
Cash flow from
operations
|
|
$
475,760
|
|
$
334,521
|
Less: purchases of
property, plant and equipment
|
|
(63,876)
|
|
(84,086)
|
Free cash
flow
|
|
$
411,884
|
|
$
250,435
|
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SOURCE Patrick Industries, Inc.