Fourth Quarter and Full Year 2023 Highlights (compared
to Fourth Quarter 2022 unless otherwise noted)
- Fourth quarter net sales of $781
million decreased 18% as a result of lower OEM wholesale
unit shipments in our end markets and lower pricing passed on to
our customers to reflect changes in certain commodity costs.
- Fourth quarter and full year 2023 diluted earnings per share
(EPS) was $1.41 and $6.50, respectively. Fourth quarter and full year
2023 EPS included approximately $0.08
and $0.21, respectively, of one-time,
non-recurring expenses related to tornado damage, severance, and
facility consolidations, net of a favorable fair-value measurement
adjustment.
- Operating margin for the fourth quarter improved 20 basis
points to 7.3%, reflecting the continued benefits of our
diversification strategy, successful labor management and cost
control, and continuous improvement and automation
initiatives.
- Achieved full year 2023 operating margin of 7.5%.
- Fourth quarter adjusted EBITDA of $100
million decreased 8%, while fourth quarter adjusted EBITDA
margin increased 140 basis points to 12.8%; full year 2023 adjusted
EBITDA of $425 million decreased 34%,
while full year 2023 adjusted EBITDA margin decreased 100 basis
points to 12.2%.
- Inventory reduction of $158
million from year-end 2022.
- Cash provided by operations for full year 2023 was $409 million versus $412
million for 2022; free cash flow for 2023 was $350 million, an increase of 5% compared to
$332 million for 2022.
- Repaid $260 million of debt
during the year, resulting in total net leverage of 2.4x and total
available liquidity of $780 million
at year-end 2023. Returned $61
million to shareholders in 2023 in the form of stock
repurchases and dividends.
- Completed the acquisition of Sportech, LLC in January 2024, representing our largest
acquisition to date.
ELKHART,
Ind., Feb. 8, 2024 /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 fourth
quarter and year ended December 31,
2023.
Fourth quarter net sales decreased 18%, to $781 million from $952
million in the fourth quarter of 2022. The decline in
revenue was primarily due to the impact on our business from lower
OEM wholesale unit shipments across our end markets during the
period and lower pricing passed on to our customers to reflect
changes in certain commodity costs.
Operating income of $57 million
decreased $11 million, or 15%, from
$68 million in the fourth quarter of
2022. The decline was the result of lower sales, partially offset
by cost reduction efforts. Operating margin of 7.3% increased 20
basis points compared to 7.1% in the same period a year ago due to
our team's execution of cost savings initiatives, successful labor
management, automation, continuous improvement and investments to
strategically diversify our business through margin accretive
acquisitions. These were partially offset by the higher fixed cost
profile of our marine businesses.
Net income was $31 million, a
decrease of 23%, compared to $40
million in the same period of 2022. Diluted earnings per
share was $1.41, a decrease of 16%
compared to $1.68. Fourth quarter
2023 diluted earnings per share included approximately $0.08 of one-time, non-recurring expenses related
to tornado damage to two of our facilities in Nashville, Tennessee in December, severance,
and facility consolidations, net of a favorable fair-value
measurement adjustment. Adjusted EBITDA was $100 million in the quarter, a decline of 8%,
while adjusted EBITDA margin increased 140 basis points to 12.8%
versus the prior year period.
"I am extremely proud of our team's achievements throughout 2023
as they relentlessly focused on driving and delivering strong
results in the face of challenging market conditions, with an
unwavering commitment to our goal to be the supplier of choice to
OEMs in the Outdoor Enthusiast and Housing markets," said
Andy Nemeth, Chief Executive
Officer. "Our team performed impressively, despite RV wholesale
unit shipments hitting 10-year lows in 2023 and emerging marine
headwinds that resulted in an almost 30% decline in marine
wholesale shipment run rates in the second half of 2023 compared
with the first half of the year. We executed on delivering strong
free cash flows through disciplined cost control and prudent
working capital management, while continuing to strengthen our
financial foundation by repaying $260
million of debt in 2023, and reducing our inventory by
$158 million. Our strong liquidity
has enabled us to remain nimble and act decisively to take
advantage of strategic opportunities, including investments like
our recent acquisition of Sportech in January 2024. Our strategic diversification
initiatives have enhanced our profitability despite cyclical
pressures and we expect to see improved performance when demand
recovers."
Jeff Rodino, President – RV,
said, "We have continued to invest in our platform to ensure we
remain focused on our goal of delivering the highest quality and
service while actively listening to the voice of the customer. The
recent creation of our Advanced Products Evolution Group, our
continued investments in automation, AI, robotic learning, IT, and
software solutions, represent our commitment to continuously
improve our customer focused model, as well as our financial and
structural processes, further enabling us to drive long-term
benefits that support future growth."
Fourth Quarter 2023 Revenue by Market
Sector
(compared to Fourth Quarter 2022 unless otherwise
noted)
RV (45% of Revenue)
- Revenue of $353 million decreased
14% while wholesale RV industry unit shipments decreased 3%
- Full year content per wholesale RV unit decreased 9% to
$4,800
Marine (22% of Revenue)
- Revenue of $174 million decreased
32% while estimated wholesale powerboat industry unit shipments
decreased 24%
- Full year estimated content per wholesale powerboat unit
decreased 5% to $4,803
Housing (33% of Revenue, comprised of Manufactured
Housing ("MH") and Industrial)
- Revenue of $254 million decreased
11%; wholesale MH industry unit shipments decreased 2%; total
housing starts increased 2%, with single-family housing starts
increasing 22% and multifamily housing starts decreasing 27%
- Full year MH content per wholesale MH unit increased 2% to
$6,372
Full Year 2023 Results
Net sales of $3.5 billion
decreased 29% from a record $4.9
billion in 2022, reflecting the impact of a 37% decline in
RV wholesale unit shipments during the year, a 7% decline in
estimated marine wholesale unit shipments, a 21% decline in MH
wholesale unit shipments, and a 9% decline in new housing starts as
inflation and interest rates weighed on demand.
Operating income of $260 million
decreased 48%, compared to $496
million in 2022. Operating margin of 7.5% declined 270 basis
points from 10.2% in the prior year. Net income of $143 million decreased 56% compared to
$328 million in 2022. Diluted
earnings per share of $6.50 decreased
52% compared to $13.49 in the prior
year. Diluted earnings per share in 2023 included approximately
$0.21 of one-time, non-recurring
expenses related to tornado damage to our facilities in
Nashville, Tennessee in December,
severance, and facility consolidations, net of a favorable
fair-value measurement adjustment. Adjusted EBITDA for full year
2023 was $425 million, decreasing 34%
from 2022.
Balance Sheet, Cash Flow and Capital Allocation
Cash provided by operations for the full year 2023 was
$409 million versus $412 million in 2022, as our monetization of
working capital largely offset the year-over-year decrease in net
income. Purchases of property, plant and equipment for full year
2023 totaled $59 million, reflecting
continued investments in automation and technology initiatives in
support of scalable growth. For the full year 2023, business
acquisitions totaled $26 million,
primarily related to the acquisition of Patrick Marine Transport in
the second quarter. Free cash flow in 2023 was $350 million, an increase of 5% compared to
$332 million in 2022.
In alignment with our capital allocation strategy, we returned
$19 million to shareholders in the fourth quarter of 2023,
consisting of $7 million in opportunistic repurchases of
approximately 90,800 shares and $12 million in dividends. For
the full year, we repurchased approximately 276,800 shares for a
total of $19 million and returned $42
million in dividends to our shareholders.
We repaid long-term debt of approximately $260 million in 2023. Our total debt at the end
of the quarter was approximately $1.0
billion, resulting in a total net leverage ratio of 2.4x (as
calculated in accordance with our credit agreement). Available
liquidity, comprised of borrowing availability under our credit
facility and cash on hand, was approximately $780 million. In January
2024, we completed the $315
million acquisition of Sportech, primarily funded by
borrowings under our credit facility.
Business Outlook and Summary
"In the face of a challenging environment, our team members
demonstrated our BETTER Together values, prioritizing improving our
customer service, meeting our customers' needs and managing in
alignment with their dynamic production schedules while also
focusing on our financial strength through initiatives including
debt reduction, prudent working capital and cost management, and
realized operational efficiencies," continued Mr. Nemeth. "We are
confident in the long-term growth potential of our business and
remain optimistic that we will begin to see improvement in our end
markets this year, starting with the RV market. Our recent
acquisition of Sportech, with a focus on the attractive utility and
premium off-road vehicle segment of the Powersports market,
provides us with another solid platform for future organic and
strategic growth. Sportech enables us to further accelerate our
momentum within the attractive Outdoor Enthusiast space, and we
continue to see the potential to expand our total addressable
market, furthering our strategic diversification. Looking ahead to
2024 with our strong capital structure and liquidity position,
nimble business model, and focus on delivering the highest level of
customer service, we remain ready to flex our business both for
challenges and opportunities and drive profitable long-term
growth."
Quarterly Cash Dividend
On February 5, 2024, the Company's
Board of Directors declared a quarterly cash dividend of
$0.55 per share of common stock. The
dividend is payable on March 4, 2024,
to shareholders of record at the close of business on February 20, 2024.
Conference Call Webcast
As previously announced, Patrick Industries will host an online
webcast of its fourth quarter 2023 earnings conference call that
can be accessed on the Company's website, www.patrickind.com, under
"For Investors," on Thursday, February 8,
2024 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, Powersports 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, including 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. In
addition, future dividends are subject to Board approval. 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
December 31
|
|
Year Ended December
31
|
($ in thousands, except
per share data)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
NET
SALES
|
$
781,187
|
|
$
951,915
|
|
$ 3,468,045
|
|
$ 4,881,872
|
Cost of goods
sold
|
602,285
|
|
750,877
|
|
2,685,812
|
|
3,821,934
|
GROSS
PROFIT
|
178,902
|
|
201,038
|
|
782,233
|
|
1,059,938
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
Warehouse and
delivery
|
34,381
|
|
37,813
|
|
143,921
|
|
163,026
|
Selling, general and
administrative
|
67,604
|
|
76,544
|
|
299,418
|
|
327,513
|
Amortization of
intangible assets
|
19,601
|
|
19,054
|
|
78,694
|
|
73,229
|
Total operating expenses
|
121,586
|
|
133,411
|
|
522,033
|
|
563,768
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
57,316
|
|
67,627
|
|
260,200
|
|
496,170
|
Interest expense,
net
|
15,319
|
|
15,770
|
|
68,942
|
|
60,760
|
Income before income
taxes
|
41,997
|
|
51,857
|
|
191,258
|
|
435,410
|
Income
taxes
|
11,180
|
|
11,677
|
|
48,361
|
|
107,214
|
NET
INCOME
|
$
30,817
|
|
$
40,180
|
|
$
142,897
|
|
$
328,196
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER
COMMON SHARE
|
$
1.44
|
|
$
1.85
|
|
$
6.64
|
|
$
14.82
|
DILUTED EARNINGS PER
COMMON SHARE
|
$
1.41
|
|
$
1.68
|
|
$
6.50
|
|
$
13.49
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - Basic
|
21,451
|
|
21,771
|
|
21,519
|
|
22,140
|
Weighted average shares
outstanding - Diluted
|
21,914
|
|
24,191
|
|
22,025
|
|
24,471
|
PATRICK INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
As of December
31
|
($ in
thousands)
|
2023
|
|
2022
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
11,409
|
|
$
22,847
|
Trade receivables,
net
|
163,838
|
|
172,890
|
Inventories
|
510,133
|
|
667,841
|
Prepaid expenses and
other
|
49,251
|
|
46,326
|
Total current
assets
|
734,631
|
|
909,904
|
Property, plant
and equipment, net
|
353,625
|
|
350,572
|
Operating lease
right-of-use assets
|
177,717
|
|
163,674
|
Goodwill and
intangible assets, net
|
1,288,546
|
|
1,349,493
|
Other non-current
assets
|
7,929
|
|
8,828
|
TOTAL
ASSETS
|
$
2,562,448
|
|
$ 2,782,471
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Current maturities of
long-term debt
|
$
7,500
|
|
$
7,500
|
Current operating lease
liabilities
|
48,761
|
|
44,235
|
Accounts payable
|
140,524
|
|
142,910
|
Accrued
liabilities
|
111,711
|
|
172,595
|
Total current
liabilities
|
308,496
|
|
367,240
|
Long-term debt,
less current maturities, net
|
1,018,356
|
|
1,276,149
|
Long-term
operating lease liabilities
|
132,444
|
|
122,471
|
Deferred tax
liabilities, net
|
46,724
|
|
48,392
|
Other long-term
liabilities
|
11,091
|
|
13,050
|
TOTAL
LIABILITIES
|
1,517,111
|
|
1,827,302
|
|
|
|
|
TOTAL SHAREHOLDERS'
EQUITY
|
$
1,045,337
|
|
$
955,169
|
|
|
|
|
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY
|
$
2,562,448
|
|
$ 2,782,471
|
PATRICK INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Year Ended December
31
|
($ in
thousands)
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
Net income
|
$
142,897
|
|
$
328,196
|
Depreciation and
amortization
|
144,543
|
|
130,757
|
Amortization of
convertible notes debt discount
|
1,072
|
|
1,851
|
Stock-based
compensation expense
|
19,429
|
|
21,751
|
Other adjustments to
reconcile net income to net cash provided by operating
activities
|
1,836
|
|
(10,124)
|
Change in operating
assets and liabilities, net of acquisitions of
businesses
|
98,895
|
|
(60,693)
|
Net cash provided
by operating activities
|
408,672
|
|
411,738
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
Capital
expenditures
|
(58,987)
|
|
(79,883)
|
Business
acquisitions and other investing activities
|
(27,558)
|
|
(241,584)
|
Net cash used in
investing activities
|
(86,545)
|
|
(321,467)
|
NET CASH FLOWS USED
IN FINANCING ACTIVITIES
|
(333,565)
|
|
(190,273)
|
Decrease in cash and
cash equivalents
|
(11,438)
|
|
(100,002)
|
Cash and cash
equivalents at beginning of year
|
22,847
|
|
122,849
|
Cash and cash
equivalents at end of year
|
$
11,409
|
|
$
22,847
|
PATRICK INDUSTRIES, INC.
Earnings
Per Common Share (Unaudited)
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 notes due 2023 as mentioned
above:
|
|
Fourth Quarter Ended
December 31
|
|
Year Ended December
31
|
($ in thousands, except
per share data)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Numerator:
|
|
|
|
|
|
|
|
|
Earnings for basic per
share calculation
|
|
$
30,817
|
|
$
40,180
|
|
$
142,897
|
|
$
328,196
|
Effect of interest on
potentially dilutive convertible notes, net of tax
|
|
—
|
|
510
|
|
162
|
|
1,927
|
Earnings for dilutive
per share calculation
|
|
$
30,817
|
|
$
40,690
|
|
$
143,059
|
|
$
330,123
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding - basic
|
|
21,451
|
|
21,771
|
|
21,519
|
|
22,140
|
Weighted average
impact of potentially dilutive convertible notes
|
|
—
|
|
2,078
|
|
166
|
|
2,059
|
Weighted average
impact of potentially dilutive securities
|
|
463
|
|
342
|
|
340
|
|
272
|
Weighted average common
shares outstanding - diluted
|
|
21,914
|
|
24,191
|
|
22,025
|
|
24,471
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
|
$
1.44
|
|
$
1.85
|
|
$
6.64
|
|
$
14.82
|
Diluted earnings per
common share
|
|
$
1.41
|
|
$
1.68
|
|
$
6.50
|
|
$
13.49
|
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:
|
|
Fourth Quarter Ended
December 31
|
|
Year Ended December
31
|
($ in
thousands)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
income
|
|
$
30,817
|
|
$
40,180
|
|
$
142,897
|
|
$
328,196
|
+ Depreciation &
amortization
|
|
36,567
|
|
34,501
|
|
144,543
|
|
130,757
|
+ Interest expense,
net
|
|
15,319
|
|
15,770
|
|
68,942
|
|
60,760
|
+ Income
taxes
|
|
11,180
|
|
11,677
|
|
48,361
|
|
107,214
|
EBITDA
|
|
93,883
|
|
102,128
|
|
404,743
|
|
626,927
|
+ Stock based
compensation
|
|
5,754
|
|
6,155
|
|
19,429
|
|
21,751
|
+ (Gain) loss on sale
of property, plant and equipment
|
|
343
|
|
153
|
|
585
|
|
(5,560)
|
Adjusted
EBITDA
|
|
$
99,980
|
|
$
108,436
|
|
$
424,757
|
|
$
643,118
|
The following table reconciles full year cash flow from
operations to free cash flow:
|
|
Year Ended December
31
|
($ in
thousands)
|
|
2023
|
|
2022
|
Cash flow from
operations
|
|
$
408,672
|
|
$
411,738
|
Less: purchases of
property, plant and equipment
|
|
(58,987)
|
|
(79,883)
|
Free cash
flow
|
|
$
349,685
|
|
$
331,855
|
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SOURCE Patrick Industries, Inc.