Patrick Industries, Inc. Reports Third Quarter 2020 Financial Results
Patrick Industries, Inc. (“Patrick” or the “Company”) a major manufacturer and distributor of component and building products for the recreational vehicle (“RV”), marine, manufactured housing (“MH”), and industrial markets, today reported financial results for the third quarter ended September 27, 2020.
Net sales in the third quarter of 2020 increased $134.5 million, or 24%, to $700.7 million from $566.2 million in the third quarter of 2019. The consolidated net sales increase in the third quarter of 2020 was attributed to sales increases in our RV, marine and industrial markets.
Operating income increased $22.4 million, or 60%, to $59.8 million in the third quarter of 2020 from $37.4 million in 2019. As a percentage of net sales, operating income was 8.5% in the third quarter of 2020 versus 6.6% in the same period in 2019.
Net income increased $16.0 million, or 75%, to $37.3 million in the third quarter of 2020 compared to $21.3 million in the third quarter of 2019. Net income per diluted share increased $0.70, or 76%, to $1.62 for the third quarter of 2020 compared to $0.92 for the third quarter of 2019.
Net sales in the first nine months of 2020 decreased $73.6 million, or 4%, to $1,714.0 million from $1,787.6 million in the first nine months of 2019. Operating income decreased $7.3 million, or 6%, to $111.2 million in the first nine months of 2020 from $118.5 million in 2019. As a percentage of net sales, operating income was 6.5% in the first nine months of 2020 versus 6.6% in the same period in 2019. Net income for the first nine months of 2020 was $59.2 million compared to net income of $69.6 million for the first nine months of 2019, and net income per diluted share for the first nine months of 2020 was $2.57 compared to $2.99 for the first nine months of 2019. Year-to-date operating results include the impact of industry and statewide shutdowns implemented in response to COVID-19 late in the first quarter of 2020 and through early May 2020.
“Our leisure lifestyle markets continued to rebound in the third quarter with a continuation of positive secular trends and tailwinds in on-the-road domestic travel and outdoor activities,” said Andy Nemeth, President and Chief Executive Officer. “Strong demand in our RV, marine and industrial markets resulted in improved profitability as we leveraged our fixed cost structure, despite direct labor inefficiencies due to the significant snap back in production levels which have exceeded pre-pandemic levels. The strategic acquisitions we completed in the third quarter of Inland Plywood, Synergy RV Transport and Front Range Stone capitalize on recent momentum, support customer growth and expand our product offerings in our end markets.”
Third Quarter 2020 Revenue by Market Sector
(all metrics compared to Third Quarter 2019 unless otherwise noted)
RV (60% Revenue)
– Revenue of $421.2 million increased 36% while wholesale RV unit shipments increased 33%
– Content per wholesale RV unit (on a trailing twelve-month basis) was relatively flat at approximately $3,140
Marine (14% Revenue)
– Revenue of $93.4 million increased 25% while estimated wholesale powerboat shipments decreased 4%
– Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) increased 16% to $1,915
MH (15% Revenue)
– Revenue of $107.8 million decreased 1% while estimated wholesale MH unit shipments decreased 2%
– Estimated content per wholesale MH unit (on a trailing twelve-month basis) increased 4% to $4,503
Industrial (11% Revenue)
– Revenue of $78.3 million increased 9% while housing starts increased 11%
“Outdoor recreation has and continues to see, a significant increase in popularity as a result of the COVID-19 environment,” said Mr. Nemeth. “Our leisure lifestyle markets–RV and marine–provide ideal outlets for multiple generations of friends and family to spend quality time together in both the COVID-19 and post COVID-19 environment. Our industrial market has benefited from an increase in housing starts and home improvement activity, and our MH market, while affected by short-term labor constraints, has recovered from COVID-19 disruptions with increasing backlogs.”
COVID-19 Business Impact
As previously disclosed, the Company suspended operations at certain of its facilities from late March 2020 through early May 2020 as a result of production shutdowns by certain OEM customers in response to the COVID-19 pandemic. The Company successfully implemented CDC, state and local safety best practices at its facilities as we began to increase production levels in early May, and we continue to provide a healthy and safe environment for our team members as they work to safely accommodate increased demand in our end markets.
Balance Sheet, Cash Flow and Capital Allocation
Operating cash flow for the third quarter of 2020 was $73.4 million, an increase of 160%, from $28.2 million in the third quarter of 2019. Operating cash flows of $112.8 million for the nine months ended September 27, 2020 decreased 8% compared to the prior year, primarily reflecting the impact to net income related to COVID-19 business disruptions that largely affected second quarter 2020 operating results. The Company invested $99.2 million in business acquisitions in the third quarter of 2020 to expand its product offerings and geographic presence in the RV, marine and industrial end markets, with year-to-date investments in business acquisitions totaling $124.0 million. Capital expenditures in the third quarter of 2020 totaled $10.9 million, an increase of 168%, compared to $4.0 million in the third quarter of 2019. The increase in capital spending is facilitating strategic capacity expansion in certain of our facilities in response to, and in anticipation of, increased demand in our end markets that began in the latter half of the second quarter of 2020, and is currently expected to continue into and through 2021. The Company currently expects capital expenditures to total approximately $35 million for full year 2020.
In alignment with our dividend policy and capital allocation strategy, the Company returned $5.7 million to shareholders in the third quarter of 2020 in the form of dividends, with year-to-date dividends totaling $17.3 million, and resumed share repurchases with 88,950 shares repurchased in the amount of $4.7 million during the third quarter of 2020 and 545,105 shares repurchased year-to-date in the amount of $20.3 million.
The Company’s net debt at the end of the quarter was approximately $640 million, resulting in a net leverage ratio of 2.2x (as calculated in accordance with our credit agreement). Available liquidity, comprised of borrowing availability under the Company’s credit facility and $62.3 million of cash on hand, was approximately $473 million, with no major debt maturities until 2023.
“Momentum in our RV and marine sectors is expected to remain strong, and our housing and industrial markets are experiencing tailwinds with low interest rates, an increase in home improvement activity, and urban to suburban and rural relocation trends,” said Mr. Nemeth. “We have strategically and aggressively pulled forward certain capital expenditure initiatives to ensure that we are in the best position possible with continued available capacity to support and grow with our customers for the 2021 model season and beyond. Our strong cash flows and liquidity allow us to invest in our businesses, continue to deploy strategic capital, and capitalize on growth opportunities as they arise in support of expansion necessary to serve our primary end markets over the long-term.”
For the full third quarter results, click here.
About Patrick Industries, Inc.
Patrick Industries, Inc. is a major manufacturer and distributor of component products and building products serving the recreational vehicle, marine, manufactured housing, residential housing, high-rise, hospitality, kitchen cabinet, office and household furniture, fixtures and commercial furnishings, and other industrial markets and operates coast-to-coast in various locations throughout the United States and in Canada, China and the Netherlands. Patrick’s major manufactured products include decorative vinyl and paper laminated panels, countertops, fabricated aluminum products, wrapped profile mouldings, slide-out trim and fascia, cabinet doors and components, hardwood furniture, fiberglass bath fixtures and tile systems, thermoformed shower surrounds, specialty bath and closet building products, fiberglass and plastic helm systems and component products, wiring and wire harnesses, boat covers, towers, tops and frames, electrical systems components including instrument and dash panels, softwoods lumber, interior passage doors, air handling products, RV painting, slotwall panels and components, aluminum fuel tanks, and CNC molds and composite parts and other products. The Company also distributes drywall and drywall finishing products, electronics and audio systems components, wiring, electrical and plumbing products, appliances, cement siding, raw and processed lumber, FRP products, interior passage doors, roofing products, tile, laminate and ceramic flooring, shower doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous products, in addition to providing transportation and logistics services.
Julie Ann Kotowski – Investor Relations – firstname.lastname@example.org – (574) 294-7511
Source: Patrick Industries, Inc.