Patrick Industries, Inc. Reports Second Quarter and Six Months 2019 Financial Results
ELKHART, Ind., July 25, 2019 /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 second quarter and six months ended June 30, 2019.
Second Quarter 2019 Financial Results
Net sales for the second quarter of 2019 increased $8.3 million, or 1%, to $613.2 million from $604.9 million in the same quarter of 2018. The increase in the second quarter was primarily attributable to acquisitions and market share gains, which was partially offset by quarter-over-quarter shipment declines in our primary markets. The Company's revenues from the RV industry, which represented 56% of second quarter 2019 sales, decreased 13% from the second quarter of 2018, compared to a 14% decrease in RV industry wholesale unit shipments, as estimated by the Company. Revenues from the marine industry, which represented 14% of second quarter 2019 sales, increased 39% over the second quarter of 2018, while estimated marine powerboat retail unit shipments decreased by approximately 6%. Revenues from the MH industry, representing 18% of second quarter 2019 sales, increased 56% compared to the prior year, with a 3% decrease in MH industry wholesale unit shipments, as estimated by the Company, compared to the second quarter of 2018. Revenues from the industrial market, which accounted for 12% of second quarter 2019 sales and is tied primarily to residential housing, commercial construction, hospitality, and institutional furniture markets, declined 3% compared to the prior year. New housing starts in the second quarter of 2019 were down slightly compared to the prior year.
For the second quarter of 2019, Patrick reported operating income of $45.2 million, a decrease of 15%, or $7.9 million, from $53.1 million reported in the second quarter of 2018. Net income in the second quarter of 2019 was $27.4 million compared to $34.9 million in the second quarter of 2018, and net income per diluted share was $1.18 and $1.42 for the second quarter of 2019 and 2018, respectively.
Todd Cleveland, Chairman and Chief Executive Officer, said, "Our second quarter performance reflects our team's ongoing efforts and discipline while we navigate continued aggressive dealer inventory rebalancing in the RV market sector and weather-related issues and conditions which hampered certain sectors of the marine and manufactured housing markets. Our consolidated net sales and profitability were negatively impacted in the second quarter of 2019 by the double digit decline in industry shipments, in the aggregate, in our four primary markets. Our profit margins were unfavorably impacted by certain 2018 distribution-related acquisitions that carry lower overall profit margins relative to our overall margin profile. In addition, in the short-term, we continued to carry a higher operating overhead cost structure relative to revenues in certain distribution operating units, and manufacturing overhead in certain manufacturing units, in order to be in position to respond quickly to anticipated increased demand levels as the RV dealer inventories reach equilibrium and negative weather-related conditions improve."
"The diversification of our market portfolio positively impacted our second quarter results and helped to partially offset RV market volatility," stated Andy Nemeth, President. "Fundamentally strong demographic and consumer trends continue to support and reinforce a solid long-term retail outlook and sentiment for all of our primary markets. We remain optimistic about RV industry shipments in anticipation of the upcoming RV dealer show season, based on the combination of sustained retail demand and lower inventory levels resulting from continued dealer inventory recalibration. Additionally, certain headwinds that negatively impacted our 2018 markets, including rising interest rates and commodity costs, have dissipated in 2019 and have the potential to be tailwinds in the long-term, positioning both our leisure lifestyle and housing and industrial markets for a strong return in the latter half of 2019 and into 2020."
Six Months 2019 Financial Results
Net sales for the six months of 2019 increased $64.7 million or 6%, to $1.22 billion from $1.16 billion in the same period of 2018. The increase in the first six months of 2019 was primarily attributable to acquisitions and organic growth, which was partially offset by shipment declines in our primary markets. The Company's revenues from the RV industry, which represented 56% of six months 2019 sales, decreased 12% from the first six months of 2018, compared to a 20% decrease in RV industry wholesale unit shipments, as estimated by the Company. Revenues from the marine industry, which represented 15% of six months 2019 sales, increased 64% over the first six months of 2018, while estimated marine powerboat retail unit shipments decreased by approximately 7%. Revenues from the MH industry, representing 18% of six months 2019 sales, increased 63% compared to the prior year with a decrease in MH industry wholesale unit shipments, as estimated by the Company, of approximately 8% from the first six months of 2018. Revenues from the industrial market, which accounted for 11% of six months 2019 sales, increased 1% compared to the prior year. New housing starts in the first six months of 2019 declined 4% compared to the prior year.
The Company's RV content per wholesale unit (on a trailing twelve-month basis) for the second quarter of 2019 increased approximately 19% to an estimated $3,137 from $2,639 for the second quarter of 2018. Marine powerboat content per retail unit (on a trailing twelve-month basis) for the second quarter of 2019 increased 93% to an estimated $1,655 from $856 for the second quarter of 2018. MH content per wholesale unit (on a trailing twelve-month basis) for the second quarter of 2019 increased approximately 54% to an estimated $3,884 from $2,520 for the second quarter of 2018.
For the first six months of 2019, Patrick reported operating income of $81.1 million, a decrease of 15%, or $13.7 million, from $94.8 million reported in the first six months of 2018. Net income in the first six months of 2019 was $48.3 million compared to $64.9 million in the first six months of 2018, and net income per diluted share was $2.07 and $2.62 for the first six months of 2019 and 2018, respectively.
"Our market mix, which is now 56% RV and 44% non-RV, provides us with an attractive diversified platform to continue to execute on our operating model and invest in organic and strategic growth initiatives," Mr. Nemeth further stated. "In addition, we plan to focus on leveraging our existing brands and expertise, customer relationships, innovation initiatives, and manufacturing capabilities to drive market share gains, and to realize operating efficiencies and execute on synergies across the organization. Our strong cash flows allow us to stay nimble and disciplined to our opportunistic capital allocation strategy and poised to continue to return value to our shareholders."
"For the remainder of 2019, we will continue to focus on flexing our business model with our industry business environments, positioning ourselves to capitalize on the anticipated market improvement, and maximizing opportunities to support our long-term strategic growth initiatives," Mr. Cleveland further stated. "The talent, commitment and dedication of our 8,000+ team members across our organization and our business model and operating platform, provide a solid foundation for us to effectively execute on our organizational strategic agenda."
Total assets increased $99.7 million to $1.3 billion at June 30, 2019, from $1.2 billion at December 31, 2018, primarily reflecting the first quarter 2019 recognition of operating lease right-of-use assets associated with the Company's adoption of the new lease accounting standard as of January 1, 2019 (totaling $82.5 million as of June 30, 2019), as well as seasonal working capital needs.
Conference Call Webcast
As previously announced, Patrick Industries will host an online webcast of its second quarter 2019 earnings conference call that can be accessed on the Company's website, www.patrickind.com, under "Investor Relations," on Thursday, July 25, 2019 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.
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 impact of any economic downturns especially in the residential housing market, a decline in discretionary consumer spending, pricing pressures due to competition, costs and availability of raw materials and commodities, the imposition of restrictions and taxes on imports of raw materials and components used in our products, information technology performance and security, the availability of commercial credit, the availability of retail and wholesale financing for residential and manufactured homes, the availability and costs of labor, inventory levels of retailers and manufacturers, the financial condition of our customers, retention and concentration of significant customers, the ability to generate cash flow or obtain financing to fund growth, future growth rates in the Company's core businesses, the seasonality and cyclicality in the industries to which our products are sold, 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 management personnel, adverse weather conditions impacting retail sales, our ability to remain in compliance with our credit agreement covenants, and general economic, market and political conditions. In addition, national and regional economic conditions may affect the retail sale of recreational vehicles and residential and manufactured housing. The Company does not undertake to update forward-looking statements, except as required by law. Further information regarding these and other risks, uncertainties and factors is 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.
PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Second Quarter Ended
Six Months Ended
---
(thousands except per share data) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
--- ---
NET SALES $
613,218 $
604,879 $
1,221,436 $
1,156,711
Cost of goods sold 500,557 490,087 1,002,227 944,165
GROSS PROFIT 112,661 114,792 219,209 212,546
Operating Expenses:
Warehouse and delivery 26,270 18,723 50,311 35,751
Selling, general and administrative 32,894 33,874 70,586 65,715
Amortization of intangible assets 8,268 9,140 17,257 16,267
Total operating expenses 67,432 61,737 138,154 117,733
OPERATING INCOME 45,229 53,055 81,055 94,813
Interest expense, net 8,636 6,264 17,619 10,642
Income before income taxes 36,593 46,791 63,436 84,171
Income taxes 9,177 11,931 15,171 19,243
NET INCOME $
27,416 $
34,860 $
48,265 $
64,928
BASIC NET INCOME PER COMMON SHARE $
1.19 $
1.44 $
2.09 $
2.65
DILUTED NET INCOME PER COMMON SHARE $
1.18 $
1.42 $
2.07 $
2.62
Weighted average shares outstanding - Basic 23,102 24,202 23,071 24,472
Weighted average shares outstanding - Diluted 23,316 24,515 23,282 24,812
PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
As of
(thousands) June 30, 2019 December 31, 2018
--- ---
ASSETS
Current Assets
Cash and cash equivalents $
23,572 $
6,895
Trade receivables, net 114,722 82,499
Inventories 252,646 272,898
Prepaid expenses and other 20,744 22,875
Total current assets 411,684 385,167
Property, plant and equipment, net 181,523 177,145
Operating lease right-of-use assets 82,472
Goodwill and intangible assets, net 651,417 664,716
Deferred financing costs, net 3,335 3,688
Other non-current assets 482 515
TOTAL ASSETS $
1,330,913 $
1,231,231
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $
10,000 $
8,750
Current operating lease liabilities 25,822
Accounts payable 118,147 89,803
Accrued liabilities 51,129 59,202
Total current liabilities 205,098 157,755
Long-term debt, less current maturities, net 569,844 621,751
Operating lease liabilities 57,018
Deferred tax liabilities, net 20,843 22,699
Other long-term liabilities 19,493 20,272
TOTAL LIABILITIES 872,296 822,477
SHAREHOLDERS' EQUITY
Common stock 166,086 161,436
Additional paid-in-capital 25,124 25,124
Accumulated other comprehensive loss (5,732) (2,680)
Retained earnings 273,139 224,874
TOTAL SHAREHOLDERS' EQUITY 458,617 408,754
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $
1,330,913 $
1,231,231
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SOURCE Patrick Industries, Inc.
