RV Industry Rebound Boosts Patrick Earnings
Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowElkhart-based Patrick Industries Inc. (Nasdaq: PATK) is reporting second quarter net income of $7.3 million, compared to $5.5 million during the same period the previous year. The manufacturer says it benefited from a surge in sales in its recreational vehicle components unit. October 30, 2014
News Release
ELKHART, Ind. – Patrick Industries, Inc. (NASDAQ: PATK), a major manufacturer and distributor of building and component products for the recreational vehicle (“RV”), manufactured housing (“MH”) and industrial markets, today reported its financial results for the third quarter and nine months ended September 28, 2014.
Third Quarter 2014 Financial Results
Net sales for the third quarter of 2014 increased $41.5 million or 28.3%, to $188.1 million from $146.6 million in the same quarter of 2013. The increase was primarily attributable to a 34% increase in the Company's revenue from the RV industry, which represented 73% of the Company's third quarter 2014 sales. According to industry sources, wholesale unit shipments in the RV industry increased approximately 8% in the third quarter of 2014 compared to the third quarter of 2013. For the third quarter of 2014, the Company's revenue from the MH industry increased 12% from the prior year period, while revenue from the industrial market increased 19%. The Company estimates that wholesale unit shipments in the MH industry, which represented 16% of third quarter 2014 sales, rose approximately 8% from the third quarter of 2013. The industrial market sector, which is primarily tied to the residential housing and commercial and retail fixtures markets, accounted for 11% of the Company's third quarter 2014 sales, and reflected an approximate 15% increase in new housing starts in the third quarter of 2014 compared to the prior year.
The Company estimates its organic growth in the third quarter of 2014 at approximately 7%, or $10.2 million of its total revenue increase. The remaining $31.3 million of the revenue increase in the third quarter of 2014 reflects the contribution of the acquisitions completed in 2013 and 2014. As previously announced, the Company acquired the business and certain assets of PolyDyn3, LLC in September 2014, and of Precision Painting, Inc., Carrera Custom Painting, Inc., Millennium Paint, Inc., and TDM Transport, Inc. (collectively, “Precision”) and Foremost Fabricators, LLC in June 2014.
The Company's RV content per unit (on a trailing twelve-month basis) for the third quarter of 2014 increased approximately 17% to $1,488 from $1,271 for the comparable period in 2013. The estimated MH content per unit (on a trailing twelve-month basis) for the third quarter of 2014 increased to $1,619 from $1,599 for the comparable period in 2013.
Patrick reported operating income of $12.5 million in the third quarter of 2014, an increase of $3.5 million or 39.2%, from the $9.0 million reported in the third quarter of 2013. Third quarter 2014 net income was $7.3 million or $0.68 per diluted share compared to net income of $5.5 million or $0.51 per diluted share in the third quarter of 2013.
Todd Cleveland, President and Chief Executive Officer, said, “We are pleased with our third quarter revenue growth which continues to be supported by our acquisition initiatives, our focus on bringing value added products to our customer base, and growth in all three of the end markets we serve. Our gross margin improved in the third quarter compared to the prior year period primarily reflecting contributions from increased volumes and acquisitions, as well as our disciplined cost control and management of certain low margin business. We have added capacity where appropriate in advance of projected demand, ensuring that we are positioned to fulfill our customers' orders on a timely basis, and continue to leverage our fixed costs over our sales base. In addition, we saw positive sentiment exhibited by both dealers and OEMs during the RV manufacturer open houses in September, which we expect will be reflected in industry order levels consistent with past seasonal trends as we move later into the fourth quarter of 2014 and into the first quarter of 2015.”
Nine Months 2014 Financial Results
Net sales for the first nine months of 2014 increased $97.8 million or 21.8%, to $546.1 million from $448.3 million in the same period in 2013. For the first nine months of 2014, the Company's revenue from the RV industry, which represented 75% of its nine months 2014 sales, increased by 24%. According to industry sources, RV industry wholesale unit shipments increased approximately 9% in the first nine months of 2014 compared to the prior year. Company revenue from the MH industry, which represented 14% of the Company's nine months 2014 sales, rose 10% compared to the prior year as MH wholesale unit shipments, as estimated by the Company, increased by approximately 6%. The Company's revenue from the industrial market increased 22% compared to the prior year and benefited primarily from improved residential cabinet, and office, medical and institutional furnishings sales. The industrial market, which accounted for 11% of the Company's nine months 2014 sales, saw new housing starts increase by approximately 9% for the first nine months of 2014 compared to the prior year. The Company estimates that approximately 56% of its industrial market sales are tied to the residential housing sector and its sales to the industrial market generally lag new housing starts by approximately six to nine months.
The Company estimates its organic growth in the first nine months of 2014 at approximately 10%, or $43.1 million of its total revenue increase. The remaining $54.7 million of the revenue increase in the first nine months of 2014 reflects the contribution of the 2013 and 2014 acquisitions.
For the first nine months of 2014, Patrick reported operating income of $39.8 million, an increase of $7.5 million or 23.1%, from the $32.3 million reported in the first nine months of 2013. Nine months 2014 net income was $23.4 million or $2.18 per diluted share compared to net income of $19.0 million or $1.76 per diluted share in the first nine months of 2013.
In February 2014, the Company's Board of Directors authorized an increase in the amount of the Company's stock that may be acquired through the existing stock repurchase program over the following 12 months to $20.0 million, including approximately $3.9 million available under the previous authorization. In the third quarter of 2014, the Company repurchased 78,183 shares at an average price of $41.50 per share for a total cost of approximately $3.2 million. In the first nine months of 2014, the Company repurchased 172,729 shares at an average price of $40.11 per share for a total cost of approximately $6.9 million. Since the inception of the stock repurchase program in February 2013 through October 24, 2014, the Company has repurchased in the aggregate 704,137 shares at an average price of $25.47 per share for a total cost of approximately $17.9 million.
Patrick's total assets increased $89.6 million to $263.8 million at September 28, 2014 from $174.2 million at December 31, 2013, primarily reflecting overall growth and the addition of acquisition-related assets. Total debt outstanding at September 28, 2014 increased $52.3 million to $107.3 million from $55.0 million at December 31, 2013, reflecting the funding of acquisitions, stock repurchases, and capital expenditures, net of debt reduction.
“Our strong cash flows, revenue, operating income and net income for the first nine months of 2014 have allowed us to continue to strengthen our balance sheet and, consistent with our capital allocation strategy, reinvest in our business through acquisitions, stock repurchases, and capital expenditures, while maintaining a leverage position that allows us the flexibility to execute on key strategic initiatives,” stated Mr. Cleveland.