Patrick Industries Reports Higher Profit
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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 $9.2 million, compared to $7.6 million during the same period the previous year. Chief Executive Officer Todd Cleveland says performance is consistent with expectations and reflects industry sentiment. July 29, 2014
News Release
ELKHART, Ind. — Patrick Industries, Inc. PATK -4.69% , 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 second quarter and six months ended June 29, 2014.
Second Quarter 2014 Financial Results Net sales for the second quarter of 2014 increased $28.3 million or 17.7%, to $187.9 million from $159.6 million in the same quarter of 2013. The increase was primarily attributable to a 19% increase in the Company's revenue from the RV industry, which represented 75% of the Company's second quarter 2014 sales. Sales to the MH industry increased 5%, while sales to the industrial markets increased 23%. According to industry sources, wholesale unit shipments to the RV industry increased approximately 7% in the second quarter of 2014 compared to the second quarter of 2013. Additionally, the Company estimates that wholesale unit shipments to the MH industry, which represented 14% of second quarter 2014 sales, rose approximately 3% from the second 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 second quarter 2014 sales, and reflected an approximate 12% increase in new housing starts in the second quarter of 2014 compared to the prior year.
Excluding the revenue contributions of acquisitions completed in 2013 and 2014, the Company estimates its organic growth in the second quarter of 2014 at approximately 10%, or $14.9 million of its total revenue increase. The Company estimates that this organic growth was comprised of growth resulting from market share gains of approximately 3% and growth tied to overall industry improvement of approximately 7%. The remaining $13.4 million of the revenue increase in the second quarter of 2014 reflects the incremental contribution of the 2013 and 2014 acquisitions (including related market share and industry growth), resulting in incremental growth of approximately 8%. As previously announced, in June 2014, the Company acquired the business and certain assets of Precision Painting, Inc., Carrera Custom Painting, Inc., Millennium Paint, Inc., and TDM Transport, Inc. (collectively, “Precision”), and Foremost Fabricators, LLC (“Foremost”).
The Company's RV content per unit (on a trailing twelve-month basis) for the second quarter of 2014 increased approximately 16% to $1,410 from $1,217 for the second quarter of 2013. The estimated MH content per unit (on a trailing twelve-month basis) for the second quarter of 2014 increased to $1,598 from $1,585 for the second quarter of 2013.
Patrick reported operating income of $15.5 million in the second quarter of 2014, an increase of $2.6 million or 20.2% from the $12.9 million reported in the second quarter of 2013. Second quarter 2014 net income was $9.2 million or $0.86 per diluted share compared to net income of $7.6 million or $0.70 per diluted share in the second quarter of 2013. Second quarter 2013 net income included an after-tax gain on sale of fixed assets of $0.3 million or $0.02 per diluted share, related to the sale of an operating facility.
Todd Cleveland, President and Chief Executive Officer, said, “We are pleased with our continued RV content growth, and excited about the organic and strategic opportunities that currently exist to grow our revenue base and increase our market share, all of which we believe will provide us with the opportunity to bring additional value to our customer base and drive shareholder value. The revenue growth and strong operating income performance we experienced in the second quarter of 2014 is consistent with our expectations and is reflective of the general positive industry sentiment across all three of the primary markets that we serve. In addition, the newest members of the Patrick family, Precision and Foremost, are an excellent fit with our existing RV businesses, and we continue to focus on our goal of bringing the highest quality product offerings and service to our customers.”
Six Months 2014 Financial Results Net sales for the first six months of 2014 increased $56.3 million or 18.7%, to $358.0 million from $301.7 million in the same period in 2013. For the first six months of 2014, the Company's revenue from the RV industry, which represented 75% of its six months 2014 sales, increased by 20%. According to industry sources, RV industry wholesale unit shipments increased approximately 10% in the first six months of 2014 compared to the prior year. Additionally, revenues from the MH industry, which represented 14% of the Company's six months 2014 sales, rose 8% compared to the prior year as wholesale unit shipments, as estimated by the Company, increased by approximately 4%. Revenues from the industrial market increased 23% and benefited primarily from improved residential cabinet, and office and institutional furniture sales. The industrial market, which accounted for 11% of the Company's six months 2014 sales, saw new housing starts increase by approximately 6% for the first six months of 2014 compared to the prior year. The Company estimates that approximately 56% of its industrial market sales are linked to the residential housing sector and its sales to the industrial markets generally lag new housing starts by approximately six to nine months.
Excluding the revenue contributions of the 2013 and 2014 acquisitions, the Company estimates its organic growth in the first six months of 2014 at approximately 11%, or $32.4 million of its total revenue increase. The Company estimates that this organic growth was comprised of growth resulting from market share gains of approximately 2% and growth tied to overall industry improvement of approximately 9%. The remaining $23.9 million of the revenue increase in the first six months of 2014 reflects the incremental contribution of the 2013 and 2014 acquisitions (including related market share and industry growth), resulting in incremental growth of approximately 8%.
For the first six months of 2014, Patrick reported operating income of $27.3 million, an increase of $4.0 million or 16.9%, from the $23.3 million reported in the first six months of 2013. Six months 2014 net income was $16.1 million or $1.50 per diluted share compared to net income of $13.6 million or $1.25 per diluted share in the first six months of 2013. Six months 2013 net income included the after-tax gain on sale of fixed assets of $0.3 million or $0.02 per diluted share discussed above.
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 next 12 months to $20.0 million, including approximately $3.9 million available under the previous authorization. In the second quarter and first six months of 2014, the Company repurchased 94,546 shares at an average price of $38.96 per share for a total cost of approximately $3.7 million. Since the inception of the stock repurchase program in February 2013, the Company has repurchased in the aggregate 501,876 shares at an average price of $19.45 per share for a total cost of approximately $9.8 million.
Patrick's total assets increased $80.7 million to $254.9 million at June 29, 2014 from $174.2 million at December 31, 2013, primarily reflecting overall growth and the impact of acquisitions. Cash on hand was $3.3 million at June 29, 2014, and total debt outstanding at June 2