Business Context and Reporting Period
Company: Patrick Industries, Inc. (PATK)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal Year Ended December 31, 2025
Business Overview: Patrick is a leading component solutions provider for the recreational vehicle (RV), marine, powersports, manufactured housing (MH), and industrial markets. The company operates through two reportable segments: Manufacturing (74% of net sales) and Distribution (26% of net sales). As of December 31, 2025, the company operated approximately 191 manufacturing plants and 50 warehouse/distribution facilities across 25 U.S. states, with a small presence in Mexico, China, and Canada.
Key Financial Metrics
| Metric ($ in millions) | 2025 | 2024 | Change |
|---|---|---|---|
| Net Sales | $3,950.8 | $3,715.7 | +6.3% |
| Gross Profit | $912.9 | $835.9 | +9.2% |
| Gross Margin | 23.1% | 22.5% | +60 bps |
| Operating Income | $276.0 | $258.0 | +7.0% |
| Operating Margin | 7.0% | 6.9% | +10 bps |
| Net Income | $135.1 | $138.4 | -2.4% |
| Diluted EPS | $3.90 | $4.11 | -5.1% |
| Operating Cash Flow | $329.4 | $326.8 | +0.8% |
| Total Debt (Long-term + Current) | $1,300.9 | $1,332.2 | -2.3% |
| Cash and Cash Equivalents | $26.4 | $33.6 | -21.4% |
Liquidity: As of December 31, 2025, the company had $26.4 million in cash and cash equivalents and $791.5 million in availability under its 2024 Credit Facility. The company returned $87 million to shareholders in 2025 through dividends and share repurchases.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased by $235.1 million (6%) driven by growth in the RV (+9%), Marine (+6%), Powersports (+9%), and Industrial (+4%) markets. This was partially offset by a slight decline in the Manufactured Housing market (-1%).
- Profitability: Gross margin expanded by 60 basis points to 23.1% due to cost reduction and automation initiatives, which reduced labor and overhead costs as a percentage of sales. However, Net Income decreased by 2% primarily due to a $24.4 million legal settlement expense recorded in "Other expenses" and a slight increase in the effective tax rate (23.7% vs 22.5%).
- Acquisitions: The company completed five acquisitions in 2025 for aggregate cash consideration of approximately $117 million. These contributed $44.0 million to net sales and $1.3 million to operating income in 2025.
- Segment Performance: The Manufacturing segment saw operating income rise 5% to $358.0 million. The Distribution segment saw operating income decline 2% to $103.0 million, despite a 12% increase in gross profit, due to higher operating expenses.
Guidance, Outlook, Risks, and Unusual Items
Unusual Items: The company recognized a $24.4 million legal settlement expense in 2025 related to a motor-vehicle accident resulting in two fatalities. This is classified under "Other expenses."
Outlook and Commentary:
- RV Market: Dealer inventory levels are normalizing and currently below historical norms, suggesting a need for replenishment when retail demand recovers. Wholesale unit shipments increased 3% in 2025.
- Marine Market: The powerboat market remained below 2024 levels with retail unit shipments decreasing 8%. The company remains optimistic about the long-term outlook for the premium segment.
- Manufactured Housing: Wholesale unit shipments decreased 1% to 102,700 units. Growth potential is seen in affordable housing demand.
- Capital Allocation: The company continues to focus on strategic acquisitions, infrastructure investment, and returning capital to shareholders.
Key Risks:
- Customer Concentration: Two major customers (Forest River and Thor) accounted for a combined 28% of consolidated net sales in 2025.
- Convertible Notes: The conditional conversion feature for the 1.75% Convertible Senior Notes due 2028 was triggered as of December 31, 2025. Holders may convert notes from January 1, 2026, to March 31, 2026, which could impact liquidity if settled in cash.
- Debt Covenants: The company is in compliance with its 2024 Credit Agreement covenants (Leverage Ratio: 0.34 vs 2.75 max; Interest Coverage: 6.63 vs 3.00 min).
- Executive Turnover: Andrew C. Roeder, CFO, announced his resignation effective February 20, 2026. Matthew S. Filer has been appointed to succeed him.
Investor Verification Checklist
- Legal Settlement Impact: Verify the finality of the $24.4 million legal settlement and assess any potential for future related liabilities.
- Convertible Note Conversion: Monitor the conversion activity of the 1.75% Convertible Notes during the Q1 2026 window and its impact on cash liquidity and share dilution.
- Customer Concentration: Review the stability of relationships with Forest River and Thor, which represent 28% of total sales.
- Inventory Levels: Assess the company's inventory management strategy given the normalization of dealer inventory levels in the RV and Marine sectors.
- CFO Transition: Confirm the smooth transition of financial leadership from Andrew C. Roeder to Matthew S. Filer.