Patrick Industries Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 06:39

Quarterly Report for Quarter Ending March 29, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the results of operations, financial condition and cash flows of Patrick Industries, Inc. This MD&A should be read in conjunction with the Company's Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See "Information Concerning Forward-Looking Statements" on page 28 of this Report. The Company undertakes no obligation to update these forward-looking statements.
OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE
Three Months Ended March 29, 2026 Financial Overview
Recreational Vehicle ("RV") Industry
The RV industry is the Company's primary market, and the Company's RV products are sold primarily to major manufacturers of RVs, smaller original equipment manufacturers ("OEMs"), and to a lesser extent, manufacturers in adjacent industries. The principal types of recreational vehicles include (1) towables: conventional travel trailers, fifth wheels, folding camping trailers, and truck campers; and (2) motorized: class A (large motor homes), class B (van campers), and class C (small-to-mid size motor homes).
For the three months ended March 29, 2026 and March 30, 2025, net sales to the RV industry were 45% and 48% of the Company's net sales, respectively. Net sales to the RV industry decreased 7% for the three months ended March 29, 2026 compared to the prior year period.
According to the RV Industry Association ("RVIA"), RV wholesale unit shipments for the three months ended March 29, 2026 totaled approximately 86,100 units, a decrease of 12% compared to approximately 97,800 units for the three months ended March 30, 2025. We estimate that RV industry retail unit sales decreased 13% for the three months ended March 29, 2026 compared to the prior year period. Wholesale unit shipments exceeded retail unit sales during the period, reflecting lower retail demand and a modest increase in dealer inventory levels.
Marine Industry
The Company's sales to the marine industry are primarily focused on the powerboat sector of the market which is comprised of four main categories: fiberglass, aluminum fishing, pontoon and ski & wake.
For the three months ended March 29, 2026 and March 30, 2025, net sales to the marine industry were 17% and 15% of the Company's net sales, respectively. Net sales to the marine industry increased 14% for the three months ended March 29, 2026 compared to the prior year period.
Our marine revenue is generally correlated to marine industry wholesale powerboat unit shipments. According to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments decreased 7% for the three months ended March 29, 2026 compared to the three months ended March 30, 2025. We estimate that marine industry retail powerboat unit sales decreased 7% for the three months ended March 29, 2026 compared to the prior year period. Wholesale unit shipments exceeded retail unit sales during the period, reflecting lower retail demand and a modest increase in dealer inventory levels.
Powersports Industry
Powersports is a category of motorsports which includes vehicles such as motorcycles, all-terrain vehicles ("ATVs"), side-by-sides, snowmobiles, scooters, golf carts and other personal transportation vehicles, and other related categories. Our powersports business is primarily focused on the utility and premium segments of the side-by-side market, which have been outperforming the more discretionary recreational segment. We also participate in the motorcycle and golf cart segments of the market. OEMs and dealers are actively managing field inventory levels to align dealer inventories with retail demand.
For the three months ended March 29, 2026 and March 30, 2025, net sales to the powersports industry were 10% and 8% of the Company's net sales, respectively. Net sales to the powersports industry increased 28% for the three months ended March 29, 2026 compared to the prior year period.
Manufactured Housing ("MH") Industry
The Company's products for this market are sold primarily to major manufacturers of manufactured homes, other OEMs, and to a lesser extent, manufacturers in adjacent industries. Factors that may favorably impact demand in this industry include jobs growth, consumer confidence, favorable changes in financing regulations, a narrowing in the difference
between interest rates on MH loans and mortgages on traditional residential "site-built" housing, and any improvement in conditions in the asset-backed securities markets for manufactured housing loans.
For the three months ended March 29, 2026 and March 30, 2025, net sales to the MH industry were 16% and 17% of the Company's net sales, respectively. Net sales to the MH industry decreased 11% for the three months ended March 29, 2026 compared to the prior year period.
According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments decreased 11% for the three months ended March 29, 2026 compared to the prior year period.
Industrial Market
The industrial market is comprised primarily of U.S. residential housing market and non-housing market categories and includes kitchen cabinet, countertop, hospitality, retail and commercial fixtures, and office and household furniture markets and regional distributors.
For the three months ended March 29, 2026 and March 30, 2025, net sales to the industrial market were 12% of the Company's net sales in both periods. Net sales to the industrial market increased 1% for the three months ended March 29, 2026 compared to the prior year period.
According to the Company estimates based on U.S. Census Bureau data, combined new housing starts increased 1% for the three months ended March 29, 2026 compared to the prior year period, reflecting an increase in multifamily housing starts of 19%, partially offset by a decrease in single-family housing starts of 6%.
RESULTS OF OPERATIONS
Three Months Ended March 29, 2026 Compared to the Three Months Ended March 30, 2025
The following table sets forth the percentage relationship to net sales of certain items on the Company's Condensed Consolidated Statements of Income.
Three Months Ended
Amount Change % Change
($ in thousands) March 29, 2026 March 30, 2025
Net sales $ 997,172 100.0 % $ 1,003,420 100.0 % $ (6,248) (1) %
Cost of goods sold 770,312 77.2 % 774,829 77.2 % (4,517) (1) %
Gross profit 226,860 22.8 % 228,591 22.8 % (1,731) (1) %
Warehouse and delivery expenses 45,032 4.5 % 44,582 4.4 % 450 1 %
Selling, general and administrative expenses 93,096 9.3 % 93,931 9.4 % (835) (1) %
Amortization of intangible assets 24,010 2.4 % 24,509 2.4 % (499) (2) %
Operating income 64,722 6.5 % 65,569 6.5 % (847) (1) %
Interest expense, net 18,388 1.8 % 19,112 1.9 % (724) (4) %
Income taxes 6,854 0.7 % 8,219 0.8 % (1,365) (17) %
Net income $ 39,480 4.0 % $ 38,238 3.8 % $ 1,242 3 %
Net Sales. Net sales decreased $6.2 million, or 1%, to $997.2 million for the three months ended March 29, 2026 compared to $1.00 billion for the three months ended March 30, 2025. The decrease was driven by lower sales to the RV and MH markets, partially offset by increased sales to the powersports, marine and industrial markets. Sales to the RV market decreased $32.4 million, or 7%, compared to the prior year period, primarily due to a decrease in estimated wholesale unit shipments of approximately 12%. Sales to the MH market decreased $18.7 million, or 11%, compared to the prior year period, primarily due to a decrease in estimated MH industry wholesale unit shipments of approximately 11%. Sales to the powersports market increased $22.7 million, or 28%, compared to the prior year period, primarily reflecting higher attachment rates on premium utility vehicles compared to the prior year period. Sales to the marine market increased $20.8 million, or 14%, primarily attributable to incremental sales from acquisitions completed in the prior year. Sales to the industrial market increased $1.3 million, or 1%, compared to the prior year period, which is attributable to market share gains and product mix shifts by certain customers.
Revenue in the three months ended March 29, 2026 attributable to acquisitions completed during such period was immaterial. Revenue in the three months ended March 30, 2025 attributable to acquisitions completed during such period was $4.3 million.
Cost of Goods Sold. Cost of goods sold decreased $4.5 million, or 1%, to $770.3 million for the three months ended March 29, 2026 compared to $774.8 million for the three months ended March 30, 2025. As a percentage of net sales, cost of goods sold remained flat at 77.2% for both periods.
Gross Profit. Gross profit decreased $1.7 million, or 1%, to $226.9 million for the three months ended March 29, 2026 compared to $228.6 million for the three months ended March 30, 2025. As a percentage of net sales, gross profit remained flat at 22.8% for both periods.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.5 million, or 1%, to $45.0 million for the three months ended March 29, 2026 compared to $44.6 million for the three months ended March 30, 2025. As a percentage of net sales, warehouse and delivery expenses increased 10 basis points to 4.5% for the three months ended March 29, 2026 compared to 4.4% for the three months ended March 30, 2025.
The increase in warehouse and delivery expenses and increase as a percentage of net sales for the three months ended March 29, 2026 compared to the same period in 2025 is primarily related to higher freight costs.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses decreased $0.8 million, or 1%, to $93.1 million for the three months ended March 29, 2026 compared to $93.9 million for the three months ended March 30, 2025. The decrease in SG&A expenses for the three months ended March 29, 2026 compared to the prior year period is primarily related to a decreased loss on sale of assets and decreased wages and insurance expense, partially offset by increased professional fees and incentive compensation.
As a percentage of net sales, SG&A expenses decreased 10 basis points to 9.3% for the three months ended March 29, 2026 compared to 9.4% for the three months ended March 30, 2025 reflecting the expense changes above.
Amortization of Intangible Assets. Amortization of intangible assets decreased $0.5 million, or 2%, to $24.0 million for the three months ended March 29, 2026 compared to $24.5 million for the three months ended March 30, 2025. The decrease in amortization expense for the three months ended March 29, 2026 compared to the comparable prior year period primarily reflects certain intangible assets that were fully amortized in the prior year.
Operating Income. Operating income decreased $0.8 million, or 1%, to $64.7 million for the three months ended March 29, 2026 compared to $65.6 million for the three months ended March 30, 2025. As a percentage of net sales, operating income remained flat at 6.5% for both periods. The decrease in operating income is primarily attributable to the items discussed above.
Interest Expense, Net. Interest expense decreased $0.7 million, or 4%, to $18.4 million for the three months ended March 29, 2026 compared to $19.1 million for the three months ended March 30, 2025. The decrease primarily reflects a lower average interest rate on our outstanding debt compared to the prior year period.
Income Taxes. Income tax expense decreased $1.4 million for the three months ended March 29, 2026, to $6.9 million, compared to $8.2 million for the three months ended March 30, 2025. The effective tax rate was 14.8% and 17.7% for the three months ended March 29, 2026 and March 30, 2025, respectively.
The decrease in income tax expense for the three months ended March 29, 2026 compared to the three months ended March 30, 2025 primarily reflects higher excess tax benefits related to share-based compensation and lower income before income taxes.
SEGMENT REPORTING
The Company's reportable segments, Manufacturing and Distribution, are based on its method of internal reporting. The Company regularly evaluates the performance of the Manufacturing and Distribution segments and allocates resources to them based on a variety of indicators including sales, gross profit and operating income. The Company does not measure profitability at the customer end market (RV, marine, powersports, MH and industrial) level.
Three Months Ended March 29, 2026 Compared to the Three Months Ended March 30, 2025
General
In the discussion that follows, sales attributable to the Company's reportable segments include inter-segment sales and gross profit includes the impact of inter-segment operating activity.
The table below presents information about the sales, gross profit and operating income of the Company's reportable segments. A reconciliation of consolidated net sales and operating income is presented in Note 11 "Segment Information" of the Notes to Condensed Consolidated Financial Statements.
Three Months Ended Amount Change % Change
($ in thousands) March 29, 2026 March 30, 2025
Sales
Manufacturing $ 780,018 $ 754,487 $ 25,531 3%
Distribution $ 222,553 $ 254,086 $ (31,533) (12)%
Gross Profit
Manufacturing $ 170,856 $ 169,391 $ 1,465 1%
Distribution $ 56,108 $ 61,701 $ (5,593) (9)%
Operating Income
Manufacturing $ 94,841 $ 98,121 $ (3,280) (3)%
Distribution $ 20,278 $ 25,000 $ (4,722) (19)%
Manufacturing
Sales. Manufacturing segment sales increased $25.5 million, or 3%, to $780.0 million for the three months ended March 29, 2026 compared to $754.5 million for the three months ended March 30, 2025. The manufacturing segment accounted for approximately 78% and 75% of the Company's sales for the three months ended March 29, 2026 and March 30, 2025, respectively.
Manufacturing segment sales increased due to higher sales to the powersports, marine and industrial markets, partially offset by decreased sales to the RV and MH markets. Sales to the powersports market increased $21.3 million, or 28%, compared to the prior year period, primarily reflecting higher attachment rates on premium utility vehicles compared to the prior year period. Sales to the marine market increased $21.1 million, or 15%, compared to the prior year period, primarily reflecting the impact of acquisitions completed in the prior year. Sales to the industrial market increased $2.1 million, or 2%, compared to the prior year period. Sales to the RV market decreased $14.2 million, or 4%, compared to the prior year period, primarily due to a decrease in estimated RV industry wholesale unit shipments of approximately
12%. Sales to the MH market decreased $5.0 million, or 7%, compared to the prior year period, primarily due to a decrease in estimated MH industry wholesale unit shipments of approximately 11%.
Manufacturing segment sales in the three months ended March 29, 2026 attributable to acquisitions completed during such period were immaterial. Manufacturing segment sales in the three months ended March 30, 2025 attributable to acquisitions completed during such period were $4.3 million.
Gross Profit. Manufacturing segment gross profit increased $1.5 million, or 1%, to $170.9 million for the three months ended March 29, 2026 compared to $169.4 million for the three months ended March 30, 2025. As a percentage of sales, gross profit decreased 60 basis points to 21.9% for the three months ended March 29, 2026 compared to 22.5% for the three months ended March 30, 2025. The decrease in gross profit as a percentage of sales for the three months ended March 29, 2026 compared to the prior year period is attributable to increased labor and manufacturing overhead costs as a percentage of sales, partially offset by decreased material costs as a percentage of sales.
Operating Income. Operating income decreased $3.3 million, or 3%, to $94.8 million for the three months ended March 29, 2026 compared to $98.1 million for the three months ended March 30, 2025. As a percentage of sales, operating income decreased 80 basis points to 12.2% for the three months ended March 29, 2026 compared to 13.0% for the three months ended March 30, 2025. The decrease in operating income and operating income as a percentage of sales is primarily related to the items discussed above combined with an increase in operating expenses and operating expenses as a percentage of sales.
Distribution
Sales. Distribution segment sales decreased $31.5 million, or 12%, to $222.6 million for the three months ended March 29, 2026 compared to $254.1 million for the three months ended March 30, 2025. The distribution segment accounted for approximately 22% and 25% of the Company's sales for the three months ended March 29, 2026 and March 30, 2025, respectively.
Distribution segment sales decreased due to lower sales to the RV, MH, industrial, and marine markets, partially offset by increased sales to the powersports market. Sales to the RV market decreased $18.2 million, or 14%, compared to the prior year period, primarily attributable to a decrease in estimated RV industry wholesale unit shipments of approximately 12%. Sales to the MH market decreased $13.7 million, or 14%, compared to the prior year period, primarily due to a decrease in estimated MH industry wholesale unit shipments of approximately 11%. Sales to the industrial market decreased $0.8 million, or 8%, compared to the prior year period. Sales to the marine market decreased $0.2 million, or 2%, compared to the prior year period. Sales to the powersports market increased $1.4 million, or 37%, compared to the prior year period.
Gross Profit. Distribution segment gross profit decreased $5.6 million, or 9%, to $56.1 million for the three months ended March 29, 2026 compared to $61.7 million for the three months ended March 30, 2025. As a percentage of sales, gross profit increased 90 basis points to 25.2% for the three months ended March 29, 2026 compared to 24.3% in the prior year period. The increase in gross profit as a percentage of sales for the three months ended March 29, 2026 compared to the prior year period is attributable to decreased labor costs as a percentage of sales.
Operating Income. Operating income decreased $4.7 million, or 19%, to $20.3 million for the three months ended March 29, 2026 compared to $25.0 million for the three months ended March 30, 2025. As a percentage of sales, operating income decreased 70 basis points to 9.1% for the three months ended March 29, 2026 compared to 9.8% in the same period in 2025. The decrease in operating income is primarily related to the items discussed above, partially offset by a decrease in operating expenses compared to the prior year period. The decrease in operating income as a percentage of sales is primarily related to higher operating expenses as a percentage of sales compared to the prior year period, partially offset by the increase in gross profit as a percentage of sales discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from operations, available cash reserves and borrowing capacity available under the revolving credit and term loan facility (the "2024 Credit Facility"), as discussed in Note 8
"Debt" of the Notes to Condensed Consolidated Financial Statements. Our liquidity as of March 29, 2026 consisted of cash and cash equivalents of $37.5 million and $696.4 million of availability under the 2024 Credit Facility, net of $8.6 million of outstanding letters of credit.
As of March 29, 2026, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under the 2024 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on the Company's current cash flow budgets and forecast of short-term and long-term liquidity needs.
Principal uses of cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company's common stock, among others.
Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, marine, powersports, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.
As of and for the reporting period ended March 29, 2026, the Company was in compliance with its financial covenants as required under the terms of the credit agreement that established the 2024 Credit Facility (the "2024 Credit Agreement"). The required maximum consolidated secured net leverage ratio and the required minimum consolidated interest coverage ratio, as such ratios are defined in the 2024 Credit Agreement, compared to the actual amounts as of March 29, 2026 and for the fiscal period then ended are as follows:
Required Actual
Consolidated secured net leverage ratio (12-month period) 2.75 0.52
Consolidated interest coverage ratio (12-month period) 3.00 6.57
In addition, as of March 29, 2026, the Company's consolidated total net leverage ratio (12-month period) was 2.82. While this ratio is not a covenant under the 2024 Credit Agreement, it is used in determining the applicable borrowing margin under the 2024 Credit Agreement.
Cash Flows
Operating Activities: Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for certain non-cash items and changes in operating assets and liabilities.
Net cash used in operating activities was $14.0 million for the three months ended March 29, 2026 compared to net cash provided by operating activities of $40.1 million for the three months ended March 30, 2025. The change in operating cash flows is primarily attributable to a $106.9 million use of cash from operating assets and liabilities, net of business acquisitions, compared to a $41.6 million use of cash in the prior year period, partially offset by a $1.2 million increase in net income compared to the three months ended March 30, 2025
Investing Activities: Net cash used in investing activities decreased $40.2 million to $25.9 million for the three months ended March 29, 2026 compared to $66.1 million for the three months ended March 30, 2025 due to a decrease in cash used in business acquisitions, which were $7.2 million for the three months ended March 29, 2026 compared to $47.6 million for the three months ended March 30, 2025.
Financing Activities: Net cash provided by financing activities decreased $28.0 million, or 35%, to $51.0 million for the three months ended March 29, 2026 compared to $79.0 million for the three months ended March 30, 2025, primarily due to a decrease in net borrowings under our revolving credit facility of $95.0 million compared to $110.0 million for the three months ended March 30, 2025 and increased stock repurchases of $14.7 million compared to $8.5 million in the prior year period.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Note 1, "Basis of Presentation and Significant Accounting Policies" to the accompanying Condensed Consolidated Financial Statements.
CRITICAL ACCOUNTING POLICIES
There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 19, 2026.
OTHER
Seasonality
Manufacturing operations in the RV, marine, powersports and MH industries historically have been seasonal and at their highest levels when the weather is moderate. Accordingly, the Company's sales and profits had generally been the highest in the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August-September timeframe and marine open houses in the December-February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. In addition, recent seasonal industry trends have been, and future trends may be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national and regional economic conditions and consumer confidence on retail sales of RVs, powersports and marine units and other products for which the Company sells its components, as well as fluctuations in RV, powersports and marine dealer inventories, increased volatility in demand from RV, powersports and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick Industries, Inc. and other matters from time to time and desires to take advantage of the "safe harbor" which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing "Management's Discussion and Analysis of Financial Condition and Results of Operations", as well as other statements contained in this quarterly report and statements contained in future filings with the Securities and Exchange Commission ("SEC"), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from those set forth in such forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements. Information about certain risks that could affect our business and cause actual results to differ from those expressed or implied in the forward-looking statements are contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and in the Company's Forms 10-Q for subsequent quarterly periods, which are filed with the SEC and are available on the SEC's website at www.sec.gov.
Patrick Industries Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 12:39 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]