Patrick Industries, Inc. Reports Fourth Quarter and Full Yea

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|Feb 14|magazine134 min read

ELKHART, Ind., Feb. 13, 2020 /PRNewswire/ -- Patrick Industries, Inc. (NASDAQ: PATK), a major manufacturer and distributor of component and building products for the recreational vehicle ("RV"), marine, manufactured housing ("MH"), and industrial markets, today reported its financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Financial Results
Net sales for the fourth quarter of 2019 increased $18.3 million, or 3%, to $549.5 million from $531.2 million in the same quarter of 2018. The increase in the fourth quarter was primarily attributable to industry growth in our housing and industrial markets, acquisitions, and market share gains, and was partially offset by wholesale unit shipment declines in the RV and marine markets.

  • RV industry revenues represented 54% of fourth quarter 2019 sales and decreased 4% from the fourth quarter of 2018, compared to an 8% decrease in RV industry wholesale unit shipments;
  • Marine industry revenues represented 13% of fourth quarter 2019 sales and declined 13% from the fourth quarter of 2018, while marine powerboat industry wholesale unit shipments decreased between 18% and 20%, as estimated by the Company;
  • MH industry revenues represented 20% of fourth quarter 2019 sales and increased 50% compared to the prior year, with a 9% increase in MH industry wholesale unit shipments; and
  • Industrial market revenues, which accounted for 13% of fourth quarter 2019 sales (and are tied primarily to residential housing, commercial construction, high-rise, hospitality, and institutional furniture markets), increased 6% compared to the prior year, while new housing starts in the fourth quarter of 2019 increased 20% compared to 2018.

For the fourth quarter of 2019, Patrick reported operating income of $36.0 million, a decrease of 7%, or $2.9 million, from $38.9 million reported in the fourth quarter of 2018. Net income in the fourth quarter of 2019 was $20.0 million compared to $27.0 million in the fourth quarter of 2018, and net income per diluted share was $0.86 and $1.15 for the fourth quarter of 2019 and 2018, respectively.  Fourth quarter 2018 net income included tax benefits associated with share-based compensation of $4.5 million, or $0.19 per diluted share, with no comparable amount for the fourth quarter of 2019.

Andy Nemeth, President and Chief Executive Officer, said, "We are pleased with our fourth quarter and full year performance, especially in light of the volatility experienced in all of our primary markets. Our team's efforts reflect tremendous focus on executing on strategic initiatives across all of our end markets, driving operational efficiencies and cost reductions to optimize and position our cost structure for 2020, leveraging synergies from new acquisitions and across our business units, and delivering market share gains. While our leisure lifestyle markets, comprised of RV and marine, continued to feel the impact of reductions in wholesale unit production levels to better align with retail demand, our housing and industrial markets exhibited positive momentum as we finished 2019."

2019 Financial Results
Net sales for 2019 increased $74.0 million, or 3%, to $2.34 billion from $2.26 billion in 2018. The increase in 2019 was primarily attributable to acquisitions and market share gains, which were partially offset by industry declines in three of the four primary markets served.

  • RV industry revenues represented 55% of 2019 sales and decreased 10% from 2018, compared to a 16% decrease in RV industry wholesale unit shipments. Our RV content per wholesale unit for 2019 increased 7% to $3,170 from $2,965 for 2018;
  • Marine industry revenues represented 14% of 2019 sales and increased 20% over 2018, while marine powerboat industry wholesale unit shipments decreased an estimated 12% to 14%, primarily within the aluminum fishing sector. Our Marine powerboat content per unit for 2019 increased 26% to an estimated $1,581 from $1,256 for 2018;
  • MH industry revenues represented 19% of 2019 sales and increased 59% compared to the prior year, with a 2% decrease in MH industry wholesale unit shipments. Our MH content per wholesale unit for 2019 increased 62% to $4,616 from $2,849 for 2018; and
  • Industrial market revenues, which accounted for 12% of 2019 sales, increased 2% compared to the prior year, while new housing starts in 2019 increased 3% compared to 2018.

For 2019, Patrick reported operating income of $154.4 million, a decrease of 13%, or $24.0 million, from $178.4 million reported in 2018. Net income in 2019 was $89.6 million compared to $119.8 million in 2018, and net income per diluted share was $3.85 and $4.93 for 2019 and 2018, respectively. For 2018, net income included tax benefits associated with share-based compensation of $6.7 million, or $0.28 per diluted share. For 2019, there were $0.8 million, or $0.04 per diluted share, of tax benefits associated with share-based compensation.

Total assets increased $239.8 million to $1.47 billion at December 31, 2019, from $1.23 billion at December 31, 2018, primarily reflecting net cash proceeds from the Company's senior notes offering, after the pay down of existing debt, and the first quarter 2019 recognition of operating lease right-of-use assets related to the Company's adoption of the new lease accounting standard as of January 1, 2019 (totaling $93.5 million as of December 31, 2019).

For the full year 2019, the Company repurchased 102,932 shares at an average price of $37.06 per share for a total cost of $3.8 million.

"As we enter fiscal 2020 and beyond, we believe we are well-positioned to drive our business and strategic plan and execute off of our operational and financial platform," Mr. Nemeth commented. "The capital capacity and flexibility provided by both the senior note offering and the amendment and maturity extension of our credit facility that we completed in the third quarter of 2019 position us with the dry powder to continue to execute on our long-term strategic growth initiatives and disciplined capital allocation strategy, which in the fourth quarter also included the payment of a $0.25 per share cash dividend to our shareholders. In addition, consistent with past practices, we intend to put our strong cash flows and financing platform to work and continue to invest in our overall business model and brands through acquisitions, share repurchases, strategic capital expenditures, and geographic and product line expansions to support our organizational strategic agenda." Mr. Nemeth further stated, "We look forward to continuing to deliver shareholder value with our ongoing focus on reinvesting in our businesses and communities, and engaging and developing the talent of our leaders and dedicated team members."

Todd Cleveland, Executive Chairman of the Board, said, "We are excited about the Company's strategic and organic opportunities to continue to serve our customers at the highest level and bring new, innovative products to the marketplace in each of the core markets we serve. We want to thank our customers, team members, shareholders, suppliers, banking and financing partners, and business partners for their continued and loyal support."

Conference Call Webcast
As previously announced, Patrick Industries will host an online webcast of its fourth quarter 2019 earnings conference call that can be accessed on the Company's website, www.patrickind.com, under "Investor Relations," on Thursday, February 13, 2020 at 10:00 a.m. Eastern time.

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.

Use of Financial Metrics
In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides financial metrics, such as RV, marine and MH content per unit, 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 content per unit may differ from similarly titled measures used by others. You should not consider these metrics in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.

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: adverse economic and business conditions, including cyclicality and seasonality in the industries we sell our products; the deterioration of the financial condition of our customers or suppliers; 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; the imposition of restrictions and taxes on imports of raw materials and components used in our products; information technology performance and security; 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; inventory levels of retailers and manufacturers; 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; and adverse weather conditions impacting retail sales.

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.  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, 2018, and in the Company's Form 10-Qs 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)


















Fourth Quarter Ended


Twelve Months Ended

(thousands except per share data)

Dec. 31,
2019


Dec. 31,
2018


Dec. 31,
2019


Dec. 31,
2018









NET SALES

$

549,460



$

531,211



$

2,337,082



$

2,263,061


Cost of goods sold

450,133



434,546



1,914,211



1,847,195


           GROSS PROFIT

99,327



96,665



422,871



415,866










 Operating Expenses:








     Warehouse and delivery

23,827



19,456



98,055



74,996


     Selling, general and administrative

30,063



29,243



134,466



128,242


     Amortization of intangible assets

9,460



9,073



35,908



34,213


           Total operating expenses

63,350



57,772



268,429



237,451










OPERATING INCOME

35,977



38,893



154,442



178,415


     Interest expense, net

10,394



8,456



36,616



26,436


 Income before income taxes

25,583



30,437



117,826



151,979


     Income taxes

5,599



3,467



28,260



32,147


NET INCOME

$

19,984



$

26,970



$

89,566



$

119,832










BASIC NET INCOME PER COMMON SHARE

$

0.87



$

1.17



$

3.88



$

4.99


DILUTED NET INCOME PER COMMON SHARE

$

0.86



$

1.15



$

3.85



$

4.93










Weighted average shares outstanding - Basic

23,017



23,150



23,058



23,995


Weighted average shares outstanding - Diluted

23,281



23,422



23,280



24,317


 

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)










As of

(thousands)

Dec. 31, 2019


Dec. 31, 2018

ASSETS




Current Assets




     Cash and cash equivalents

$

139,390



$

6,895


     Trade receivables, net

87,536



82,499


     Inventories

253,870



272,898


     Prepaid expenses and other

36,038



22,875


           Total current assets

516,834



385,167


 Property, plant and equipment, net

180,849



177,145


 Operating lease right-of-use assets

93,546




 Goodwill and intangible assets, net

676,363



664,716


 Deferred financing costs, net

2,978



3,688


 Other non-current assets

423



515


          TOTAL ASSETS

$

1,470,993



$

1,231,231






LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities




     Current maturities of long-term debt

$

5,000



$

8,750


     Current operating lease liabilities

27,694




     Accounts payable

96,208



89,803


     Accrued liabilities

58,033



59,202


         Total current liabilities

186,935



157,755


 Long-term debt, less current maturities, net

670,354



621,751


 Long-term operating lease liabilities

66,467




 Deferred tax liabilities, net

27,284



22,699


 Other long-term liabilities

22,472



20,272


          TOTAL LIABILITIES

973,512



822,477






 SHAREHOLDERS' EQUITY




 Common stock

172,662



161,436


 Additional paid-in-capital

25,014



25,124


 Accumulated other comprehensive loss

(5,698)



(2,680)


 Retained earnings

305,503



224,874


          TOTAL SHAREHOLDERS' EQUITY

497,481



408,754


          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,470,993



$

1,231,231


 

PATRICK INDUSTRIES, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 









(thousands)

Year Ended December 31,


2019


2018

CASH FLOWS FROM OPERATING ACTIVITIES




Net income

$

89,566



$

119,832


Depreciation and amortization

62,795



55,052


Stock-based compensation expense

15,436



13,981


Amortization of convertible notes debt discount

7,021



5,885


Other adjustments to reconcile net income to net cash provided by operating
   activities

3,932



(2,082)


  Change in operating assets and liabilities, net of acquisitions of businesses

13,660



7,345


Net cash provided by operating activities

192,410



200,013


CASH FLOWS FROM INVESTING ACTIVITIES




Capital expenditures

(27,661)



(34,486)


Other investing activities

(51,551)



(336,884)


Net cash used by investing activities

(79,212)



(371,370)






NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

19,297



175,485


Increase in cash and cash equivalents

132,495



4,128


Cash and cash equivalents at beginning of year

6,895



2,767


Cash and cash equivalents at end of year

$

139,390



$

6,895


 

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SOURCE Patrick Industries, Inc.