Patrick Industries, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter results. Patrick manufactures and distributes components for recreational vehicle (RV), marine, manufactured housing (MH), and industrial markets through Manufacturing and Distribution segments.
Business context and results
Demand rebounded strongly after COVID-related customer shutdowns affected 2020. The company completed seven acquisitions during 2021 and reported 174 manufacturing plants and 64 distribution facilities at year-end. RV accounted for 59% of sales, marine 16%, MH 14%, and industrial 11%. Two RV customers together represented 42% of consolidated sales.
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Net sales | $4,078.1 million | $2,486.6 million | +64% |
| Gross profit / margin | $801.2 million / 19.6% | $459.0 million / 18.5% | Margin +1.1 pts |
| Operating income / margin | $351.7 million / 8.6% | $173.4 million / 7.0% | Income +103% |
| Net income | $224.9 million | $97.1 million | +132% |
| Diluted EPS | $9.63 | $4.20 | +129% |
| Operating cash flow | $252.1 million | $160.2 million | +57% |
| Capital expenditures | $64.8 million | $32.1 million | +$32.7 million |
Fourth-quarter 2021 sales were $1,147.5 million versus $772.6 million in fourth-quarter 2020; net income was $61.0 million versus $37.8 million. Quarterly diluted EPS was $2.62 versus $1.64.
Sales rose in every end market: RV +73%, marine +96%, MH +26%, and industrial +43%. Acquisitions completed in 2021 contributed approximately $259.9 million of revenue and $25.0 million of operating income for the year. Manufacturing represented 72% of consolidated sales and Distribution 28%.
Cash, debt, and liquidity
- Cash and equivalents were $122.8 million at year-end, up from $44.8 million. Inventories increased to $614.4 million from $312.8 million, reflecting deliberate stock-building amid strong demand and supply constraints.
- Investing activities used $574.7 million, including $508.1 million for acquisitions and $64.8 million for capital expenditures. Financing activities provided $400.7 million.
- Total debt was $1,360.6 million at face value, versus $840.0 million in 2020; debt less cash was approximately $1,237.8 million. Debt included $350 million of 4.75% notes due 2029 and $258.8 million of 1.75% convertible notes due 2028 issued in 2021.
- The secured credit facility comprises a $550 million revolver and a $150 million term loan, maturing in April 2026. The revolver had $135 million drawn at year-end; availability is subject to credit agreement terms and letters of credit.
- Management stated existing cash, operating cash flow, and available credit were expected to cover working capital and capital expenditures for at least 12 months, excluding acquisitions. The company reported compliance with covenants; actual secured net leverage was 0.29 versus a 2.75 maximum, and fixed-charge coverage was 5.83 versus a 1.50 minimum.
Material changes, outlook, and risks
- Gross margin improved with automation and cost-reduction initiatives, higher volumes and fixed-cost absorption, recovery from COVID-related inefficiencies, and acquisition mix. These benefits were partly offset by higher labor, commodity, and supply-chain costs. SG&A rose to 6.2% of sales from 5.9%, primarily reflecting corporate investment and incentive compensation.
- Patrick invested approximately $509.8 million in cash consideration for 2021 acquisitions; total acquisition consideration was approximately $524.5 million, including stock and contingent consideration. The company also spent $48.9 million on share repurchases and paid $27.0 million in dividends.
- No specific financial guidance was provided. Management cited continued demand across markets and expected the residential housing market to remain supportive in 2022, while emphasizing uncertainty and market cyclicality.
- Key risks include dependence on discretionary and cyclical end markets, especially RVs; customer concentration and lack of long-term customer agreements; inflation and availability of materials, labor, and transportation; supply disruptions and inventory forecasting; financing availability and interest rates; and integration and valuation risks from acquisitions. COVID-related labor and supply disruptions continued to affect customers and suppliers.
- In 2021, the company accrued an estimate for its expected share of certain customer RV product-recall costs; management did not expect a material financial-statement effect, but the filing does not state the estimated amount. An EPA/CERCLA matter concerning the Lusher Street Site remained unresolved; the company said the remaining properties were not then expected to have a material adverse effect. Certain parcels were sold in January 2022 with purchaser indemnification for related liabilities.
- Management reported no goodwill or indefinite-lived intangible-asset impairment in 2021. The auditor issued unqualified opinions on the financial statements and internal controls; its critical audit matter was valuation of acquired intangible assets in a significant acquisition.
Important facts for investors to verify
- Whether strong RV and marine demand and elevated customer production levels continue, and how retail demand compares with wholesale shipments.
- Inventory levels, cash conversion, and the ability to pass through continued commodity, freight, and labor cost increases without reducing volumes or margins.
- Acquisition integration, realized synergies, remaining purchase-price allocation estimates, and contingent consideration exposure.
- Debt repayment and refinancing needs, especially the $180 million of scheduled 2023 maturities, covenant headroom, and actual revolver availability.
- The final cost and resolution of the product recall and environmental matter; the filing does not provide a clear recall-cost estimate.