October '20

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28 • RV PRO • October 2020 rv-pro.com By Steve Bibler Even COVID-19 can't keep Patrick Industries down. While the Elkhart, Ind.-based supplier saw its sales decline by double digits in the second quarter ending June 28, CEO and President Andy Nemeth remained remarkably upbeat in his assessment of the company's outlook moving forward. "We are pleased with our operating and financial performance during the second quarter and the tremendous flexibility and adaptability of our team as we navigated significant uncertainty and production shutdowns in both our leisure lifestyle and housing and industrial markets," he said. "In particular, the RV industry experienced a five-week production shutdown, while various marine OEMs had production shutdowns ranging from one to five weeks. Our team took quick, disciplined and focused actions to reduce our fixed cost structure to align with our revenue stream starting at the end of the first quarter and during the second quarter. This helped position us to mitigate significant headwinds caused by COVID-19 during the second quarter, while strengthening and solidifying our operating platform to address ongoing uncertainty related to the pandemic. "In the latter half of the second quarter, rising demand in our RV, marine, and MH markets benefited from an increase in interest from new consumers in addition to those already in the retail pipeline," he added. "We expect this momentum to continue into the second half of 2020." In previous investor presentations, Nemeth has credited acquisitions with helping the company grow in all types of market conditions. And few companies were more committed to expanding their product portfolios within their core markets during the past decade than Patrick Industries, which made 42 strategic acquisitions of 57 companies from 2010 to 2018, including nine deals in 2018 and two in the second half of 2019. Most recently, in August, Patrick Industries acquired Michigan-based Inland Plywood Co., a supplier, laminator and distributor of plywood and other specialty products. Also in August, Patrick Industries acquired Synergy RV Transport, an Indiana-based transportation and logistics service provider that primarily serves OEMs and dealers in the RV market. Financial terms were not disclosed for either purchase. Patrick's most notable acquisition in the RV/MH sector in the past two years came in 2018, when it paid $54 million for Arran Isle and its subsidiaries, including LaSalle Bristol. LaSalle Bristol reported revenues of $230 million in the 12-month period ending in October 2018. Seeking Alpha, a crowd-sourced content service for Acquisitions Make Patrick Acquisitions Make Patrick Industries a Powerhouse Supplier Industries a Powerhouse Supplier From humble beginnings, Elkhart-based Patrick Industries has emerged as a powerhouse in the RV, marine and manufactured housing markets thanks in large part to 42 strategic acquisitions of 57 companies from 2010 to 2018. financial markets, stated at year-end 2019, "Patrick Industries has shown great ability in acquiring companies and successfully integrating them." As a result of its investment strategy, Patrick Industries ended the decade as the top-performing S&P 1500 stock with a return currently standing at 4,600 percent, according to research by the Bespoke Investment Group. Patrick's M&A expenditures reached a high point in 2017, with 92 percent of its capital allocation going for acquisition, compared to 47 percent through the first nine months of 2019, according to a Jan. 8, 2020, investor presentation. In tandem with its aggressive posture, rather than going international – as Lippert Components has done – Patrick Industries has sought to expand in RV/ MH adjacencies – companies that sell similar types of products to a different end market, such as the marine and industrial markets. For example, two of the company's 2019 acquisitions were outside the RV market: G.G. Schmitt & Sons, a supplier to the marine market, and Topline Counters, serving the single-family and multi-family residential markets. As recently as 2016, the RV market accounted for 72 percent of Patrick's sales, with the marine market accounting for a mere 3 percent. However, by 2019, the RV industry share had fallen to 55 percent, while marine industry share had risen to 14 percent. Although Patrick Industries' officials declined to be interviewed for this story, the company's thinking is well- documented via its annual presentations to investors and its investor conference calls following the release of each quarter's financial results. For example, in the Oct. 24, 2019, third-quarter conference call to investors, Chairman Todd Cleveland remarked, "We are very excited about our acquisition pipeline, which remains full, as we are constantly cultivating and exploring new opportunities in our primary markets."

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