Annual
Report
2023
RV
MARINE
POWERSPORTS
HOUSING
Selected Financial Data
Net sales
Gross profit
Warehouse & delivery expenses
Selling, general & administrative expenses
Operating income
Net income
Diluted net income per common share
(thousands except per share amounts)
2023
2022
2021
$3,468,045
$4,881,872
$4,078,092
782,233
143,921
299,418
260,200
142,897
6.50
1,059,938
163,026
327,513
496,170
328,196
13.49
801,194
139,606
253,547
351,712
224,915
9.63
Proforma adjusted EBITDA (1)
431,008
673,596
530,774
Total assets
Total debt
Shareholders’ equity
Net cash provided by operating activities
Cash dividends paid per common share
(1) Proforma adjusted EBITDA is a non-GAAP financial measure.
2,562,448
2,782,471
2,650,731
1,038,125
1,298,414
1,360,625
1,045,337
408,672
1.90
955,169
411,738
1.44
767,557
252,130
1.17
Investor Information
Net Sales ($ Millions)
Net Income ($ Millions)
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
$3,468
$143
Diluted Net Income per
Common Share
2019
2020
2021
2022
2023
$6.50
Working Capital ($ Millions) Stock Price At December 31st Operating Cash Flows
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
$471
Annual Report • 2023
($ Millions)
2019
2020
2021
2022
2023
$100.35
$409
Dear
Shareholder
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Against a dynamic macroeconomic
background our Company achieved record
gross margin and free cash flow — a
testament to the strength and efficiency
of our team and the flexibility of our
operations. In 2023, we continued to
prepare our Company for future profitable
growth, including the strategic acquisition
of Patrick Marine Transport, and optimizing
our balance sheet and capital structure to
welcome Sportech to the Patrick family in
early 2024. With our largest acquisition to
date in early 2024, we have enhanced our
Full Solutions Model to further exemplify
excellence from customer service to design
and delivery.
We focused on investing in our people and
our business, laying the groundwork to
accelerate our transformation ahead.
•
•
Solution-based Innovation: Our Advanced
Product Group unites two centers of
excellence, engineering and innovation,
to accelerate collaborative product
development with OEMs.
Strategic Diversification: The past few
years have shown the resilience of our
increasingly diversified portfolio, enabling
us to thrive in an ever-changing economic
environment and setting the stage
for further expansion in the Outdoor
Enthusiast markets.
•
Investing in Our People: Our team members
are our greatest asset, and we’ve taken our
investment in their growth and development
to a new level to ensure we continue to attract
and retain top talent.
• Diligent Financial Management: We have
maintained a disciplined capital allocation
strategy, bolstering our resilience and
clearing the path to future profitable growth.
As we move forward, we will continue to assess
the impact of economic shifts on consumer
behavior. We are confident in the bench strength
of our team and our agility which enables
us to seize strategic opportunities and drive
shareholder value.
Looking ahead, we aim to cement our role as
the supplier of choice to the Outdoor Enthusiast
markets. The great outdoors is not just a
destination; it is a place where passions are
discovered, bonds are built, and community
is created. Our commitment to empowering
enthusiasts remains steadfast.
Together, we will embrace the challenges
and harness the opportunities that lie ahead,
reinforcing our pledge to deliver value to you, our
shareholders, and to the communities we serve.
Andy L. Nemeth
Chief Executive Officer
2023
Highlights
FREE CASH FLOW
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CASH FLOW
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Annual Report • 2023
• Achieved record gross margin and generated
free cash flow (non-GAAP financial measure)
of $350 million.
• Generated $409 million in operating cash
flows, reinforcing our strong liquidity position
of $780 million and empowering us to take
strategic advantage of opportunities while
continuing to return cash to shareholders.
• Maintained a strong balance sheet that
included a $260 million repayment of debt
and a $158 million inventory reduction,
further strengthening our financial flexibility.
• Returned $61 million to shareholders in the
form of stock repurchases and dividends; our
Board increased our dividend to $0.55 per
share.
• Launched Patrick’s Advanced Product Group,
exemplifying our dedication to solution-
based innovation by uniting engineering
and innovation teams to accelerate product
development and enhance collaboration with
OEM partners.
• Patrick’s philanthropic efforts have delivered
transformative experiences to thousands
of people, from the achievement of home
ownership, to experiencing the healing power
of the outdoors.
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TO ACQUISITIONS, CAPEX, STOCK
REPURCHASES, AND DIVIDENDS
TO SHAREHOLDERS
RV
MARINE
HOUSING
Annual Report • 2023
End Market
Insights
Patrick Industries proactively and
successfully navigated a challenging
landscape across its core end markets
with resilience throughout 2023.
The Patrick team flexed its business
model and cost structure supporting
its RV OEM customers as they worked
with dealers to manage field inventory
levels and appropriately align production
with the retail environment. These
efforts leave the industry in a healthier
position and we remain poised to benefit
once retail demand improves and
normalization begins.
Our marine business performed as
intended, remaining positive as our RV
market turned down, but did face cyclical
pressures as the year progressed. Once
again, our team managed nimbly and
effectively, proactively making tough
decisions and flexing the business
to reflect end market dynamics. We
continue to focus on providing customers
service and value through our line of
highly engineered products and believe
field inventory is appropriate.
The demand for affordable housing
remains a long-term tailwind for Patrick.
As consumers grapple with higher
interest rates and inflation, we believe
manufactured and site-built housing
markets in the U.S. have significant
runway for future growth.
Advancing Sustainability
and Responsibility
In our commitment to sustainability, we have
focused on three core pillars: Empowering
People, Caring for Our Planet, and Living by
Our Policies. Our Empowerment initiatives
have cultivated a culture of safety, wellness,
and professional growth, leading to a notable
36% reduction in the Total Recordable Incident
Rate and 42% of our business units achieving
zero recordables as of September 2023.
Our holistic approach to Leadership and
Cultural development is making a meaningful
impact at all levels of our organization. Our
TACTical Leadership Training saw a 43%
increase in participation and a 31% rise in
completed training hours from 2022 to 2023.
Similarly, the BETTER Together Training has
strenghtened our culture of collaborative
growth and servant leadership, with marked
increases in both team members trained and
business units impacted.
Our commitment to the planet is reflected in
our efficient resource management and waste
reduction efforts, achieving a 60% total waste
recycling rate, a testament to our dedication to
environmental stewardship.
Living by our policies, we adhere to strict
ethical business practices, underlined by a
Code of Ethics for Directors, Officers, and
Employees, and Corporate Governance
Guidelines that ensure accountability,
transparency, and the protection of Company
assets. Our Board composition highlights our
commitment to diversity and expertise, with
33% representing gender or racial/ethnic
diversity. These efforts collectively underscore
our dedication to not just meeting but
exceeding standards, fostering a sustainable
future for our stakeholders and the planet.
Fortifying our
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Strategy and
Allocating
Capital
Patrick remains committed to strategic
investments and expansion initiatives. In 2023, we
invested $59 million in capital expenditures, with
a focus on automation, product development,
and IT enhancements. Looking ahead to 2024, we
anticipate allocating another $70 million to $80
million in capital investments to further enhance
our capabilities and fuel growth. Concurrently, we
continue to be actively engaged in M&A, keeping
a full pipeline that features high-quality targets
led by strong leadership teams in the Outdoor
Enthusiast space. Our interest in expanding into
aftermarket and adjacent market categories
persists, and with ample liquidity, we are
prepared to make value enhancing acquisitions
that align seamlessly with our strategic vision and
contribute to sustained success.
85+ BRANDS
Empowered by
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Annual Report • 2023
Intrinsic
Value
Patrick successfully navigated short-term challenges with a clear
focus on long-term value creation, financial stability, and strategic
growth. The market’s acknowledgement of our intrinsic value reflects
confidence in our strategic direction, financial resilience, and growth
potential. We are successfully raising Patrick’s profile by spotlighting
the achievements of our 85+ leading brands, Empowered by Patrick.
Our performance is a testament to the trust our investors place in our
vision and our team’s ability to execute that vision, driving sustainable
growth and profitability.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2023
or
☐ TRANSRR
ITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period froff m ……………… to ………………
Commission file number 000-03922
PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorpor
ation or organization)
Indiana
rr
107 W. Franklin St.
Elkhart,
Indiana
(Address of principal executive officff es)
35-1057796
(I.R.S. Employer Identificff ation No.)
46516
(Zip Code)
Registrant’s telephone number, including area code: (574) 294-7511
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, without par value
PATK
Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as definff ed in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to fileff
reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or forff
such reports), and (2) has
been subju ect to such filing requirements forff
such shorter period that the registrant was required to fileff
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to
such shorter period that the registrant was
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or forff
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
r ☐ Smaller reporting company ☐ Emerging growth company ☐
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated fileff
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forff
with any new or revised finff ancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
d a report on and attestation to its management’s assessment of the effeff ctiveness of its
Indicate by check mark whether the registrant has fileff
internal control over finff ancial reporting under Section 404(b) of the Sarbar nes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firff m that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers durd ing the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in RulRR e 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2023, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of
the common stock of the registrant held by non-affiff liates was $1.7 billion. As of Februarr
ry 16, 2024, there were 22,382,306 shares of the
registrant’s common stock outstanding.
complying
Portions of the registrant’s Proxy Statement forff
reference into Part III of this Form 10-K.
its Annual Meeting of Shareholders to be held on May 16, 2024 are incorpor
rr
ated by
DOCUMENTS INCORPORATRR ED BY REFERENCE
PATRICK INDUSTRIES, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2023
Table of Contents
PART I
ITEM 1.
BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRUU ESOLVED STAFF COMMENTS
ITEM 1C. CYBERSECURITY
ITEM 2.
PROPERTIES
ITEM 3.
LEGAL PROCEEDINGS
ITEM 4.
MINE SAFETY DISCLOSURES
PART II
ITEM 5.
MARKET FOR REGISTRANT
RR
ISSUER PURCHASES OF EQUITY SECURITIES
’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ITEM 6.
RESERVED
ITEM 7.
AA
MANAGE
OPERATIONS
MENT’S DISCUSSION AND ANALAA
YSIS OF FINANCIAL CONDITION AND RESULTS OF
ITEM 7A. QUANTAA ITATIVE ANDAA
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN ANDAA
DISCLOSURE
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDAA
FINANCIAL
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATRR E GOVERNANCE
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNEWW RSHIP OF CERTAIN BENEFICIAL OWNEWW RS AND MANAGE
STOCKHOLDER MATTERS
AA
MENT AND RELATED
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANRR
SACTIONS, ANDAA
DIRECTOR INDEPENDENCE
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16.
FORM 10-K SUMMARY
SIGNATURES
Index to Financial Statements and Financial Statement Scheduldd es
Report of Independent Registered Publu ic Accounting Firm, Deloitte & Touche LLP
FINANCIAL SECTION
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
2
4
4
13
25
25
26
26
26
26
26
28
28
36
36
36
36
37
37
38
38
38
38
38
38
39
39
41
42
F-1
F-2
F-4
F-5
F-6
F-7
F-8
F-9
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
ooki gng statements” wi hith respect to fifinanciiall c di
ondi ition, resullts
hThiis Annuall Report on Form 10-K cont iains certaiin “forff wa drd l-l ki
rowthh a dnd projojectiions,
of opera itions b, busiiness strat gegiies, opera itingg effiffi icien icies or ysyne grgiies, competi iitive posi iition, iinddustry gy grr
ggrow hth opportu ini ities forff
exiis iti gng pr doducts, pllans andd objbjectiives of managgement, markkets for thhe common sto kck of Patriickk
Inddustriies, Inc. ((thhe “Compa yny” or “Pat iri kck )”) andd o hther matters. Statements iin hthiis Form 10-K as w lelll as o hther statements
iwi hth hthe Secu iri ities a dnd Ex hchangge Commiis ision
cont iained id in thhe annuall report a dnd statements cont iained id in futff urt e filiilinff
((“SEC”)) a dnd
be byy
managgement of hthe Compa yny iin presenta itions, whihi hch are not hihistoriic lal facts, are man gagement’s current expectatiions andd
bebeliliefs regga drdiingg futff urt e a dnd an iticiipat ded ddevellopments andd thheiir iimpact on Patriickk, and id i hnherentlyly iin lvolve iri ksks a dnd
uncertaiin ities thhat c
louldd cause actu lal resullts to didiffer materiiallylly from hthose set forth ih in thhe forwardd-llo kioki gng statements.
publiiclyly didisse iminat ded press r leleases, a dnd statements
hwhiichh m yay bbe madde from tiime to itime iin hthe futff urt
ggs
bl
hThere are a numbber of facff
events to didiffer materiiallllyy froff m thhos de describib ded iin hthe forff wa drd l-l ki
ididen iftifiiefff d id in thhe “Riiskk Factors” sectiion of thihis Form 10-K as set forth ih in Part I, Item 1A, and id inclludde, wi hithout li
ooki gng statements. Manyy, bbut not
dond hthe controll of thhe Companyy,
tors, manyy of whihi hch ar be b yey
hwhiichh c
louldd cause actuat
i
lalll, of hthese facff
limitatiion:
ll res lults andd
tors are
r;
rr
dnd ma krkets;
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•
•
•
•
ev lels effectiiv lelyy, as wellll as iinventory ly l
hnol gyogy performance andd cybeyber-rellatedd riiskks;
hth ie impact of anyy economiic ddownturt ns on our priimaryy err
da d lecliin ie i dn diiscretiiona yry consumer spendidi gng;
ppriiciingg pressures ddue to competi iition;
costs a dnd av iaillabibia lilityy of raw mate iri lals a dnd comm diodi ities;
iinflflatiiona yry pressure on our didirect and id i dindirect costs, iits iimpact to our customers, and id its iimpact to hthe e dnd consumer;
hth ie imposi iition of rest irictiions andd taxes on iimports of raw materiialls andd components used id in our pr doducts;
iinformatiion tech
l
hthe availilabibia lili yty of commerciiall credidit;
hthe availilabibia lili yty of retailil andd wh lholes lale fiinff an ici gng for recreatiionall v hehiiclles, watercraft, a dnd re isiddentiiall a dnd manufacff
hhomes;
hthe availilabibia lili yty andd costs of llabboa
hthe abibia litylity to managge our iinventory ly l
hthe fiinff an ici lal co dindi ition of our customers;
retentiion a dnd concentratiion of materiiall customers;
hthe abibia litylity to ggenerate ca hsh flflow or bobt iain fiinff an ici gng to fu dnd ggrow hth;
future ggrow hth rate is in thhe Companyy's cor be busiinesses;
hthe seasonalili yty andd cyyclilic laliity iy in thhe iinddustriies to whihi hch our pr doducts are s loldd;
re laliizatiion a dnd iimpact of effififf
hthe successf lulff
iincreases iin iinterest rates a dnd ioill a dnd ggasoliline p irices;
iincreases/d/decreases iin hthe v lalue of fifinanciiall assets, whihi hch mayy affect didiscre itiona yry spendidi gng iin iinddustriies to whihi hch our
ppr doducts are s loldd;
hthe abibia litylity to retaiin kkeyy man gagement personnell;
dadverse weathher c di
our babilityility to remaiin iin compliliance wi hith our cr dediit gagreement covenants;
hth ie impact of anyy pandde imic or o hther
na itionall a dnd regigionall economiic, markket a dnd
•
•
•
•
•
You sh
hthe reports and dd documents hthat hthe Compa yny fifilles wiithh thhe SEC, iin lcl diudi gng hthiis Annuall Report on Form 10-K forff
endded Dd ecember 31, 2023.
houldd considider forwardd-llo kioki gng statements, thherefore i, i
iinteggratiion of acq iui isi itions andd o hther ggrow hth iini iitiatiives;
icien ycy iimprovements a dnd cost redduc itions;
ondi itions iimpactiingg ret iaill s lales;
ev lels of ret iaillers andd manufact
lpoliitiic lal co dindi itions.
ln ligighht of va irious iimportant factors, iin lcl diudi gng hthose set forth ih in
hth ye year
publiic hhe lal hth emerggencyy on thhe economyy, our endd markkets andd our opera itions, a dnd;
urt ers;
turedd
bl
ff
rr
l
hThese a dnd othher riiskks andd uncertaiin ities are didiscussedd more f lulff
lyly at Part I, Item 1A “Riiskk Factors.”
Anyy projejeo ctiions of fifinanciiall performance or statements concer ini gng expectatiions as to future ddevellopments hsh
construer d id in a yny manner as a gguarantee hthat su hch resullts or ddevellopments
anyy forff wa drd l-l ki
ooki gng statement willill bbe re laliiz ded or hthat actuat
forwardd-llo kioki gng statement. hThe Compa yny ddoes not
andd spe icififi
statements cont iained id in thihis Annuall Report on Form 10-K or to reflleff ct anyy chha gnge iin our expectatiions afteff
Annuall Report on Form 10-K or a yny hchangge is in events, co dindi itions or
as re
louldd not bbe
iwillll, iin fact, occur. hThere can bbe no assurance thhat
iwillll not bbe mate iri lallyly didifferent from thhat set forth ih in suchh
ooki gng statements,
ooki gng
r thhe ddate of hthiis
hwhiichh a yny statemen it i bs bas ded, except
lcallyly didiscllaiims anyy oblbligigatiion or u dndert kakiingg t do diisse iminate a yny
ll res lults
dundert kake to p blubliiclyly
dupdates or reviisiions to anyy forff wa drd l-l ki
dupdate or re ivise anyy forff wa drd l-l ki
icircumstances on
iquired bd by ly law.
3
ITEM 1.
BUSINESS
PART I
Unless the context othett
and its subsidiaries.
rwise requires, the terms “Company,yy ” “Patrick,” “we,” “our,r ” or “us” refee r to Patritt ck Industries, Inc.
Company Overview
p y
Patrick is a leading component solutions provider forff
urt ed housing ("MH")
and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets.
the recreational vehicle ("RV"), marine, manufact
ff
turing plants and
The Company operates through a nationwide network that includes, as of December 31, 2023, 179 manufacff
lities located in 23 states, with a small presence in Mexico, China and Canada. The
62 warehouse and distribution faci
ff
turing and Distribution, through a nationwide network of
Company operates within two reportabla e segments, Manufacff
ime and cost to the regional
rr
manufact
ing and Distribution segments accounted for 75% and 25%,
manufact
respectively, of the Company’s consolidated net sales for 2023. Financial inforff mation about
these operating segments is
included in Note 16 "Segment Inforff mation" of the Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K (the "Form 10-K") and incorporated herein by reference.
ing and distribution centers for its producd ts, thereby reducing in-transit delivery t
ff
ing foot
int of its customers. The Manufact
urt
urt
prt
urt
ff
ff
a
ff
The Company’s capital allocation strategy is to optimally manage and utilize its resources and leverage its platform of
operating brands to continue to grow, reinvest in its business, and returt n capital to shareholders. Through strategic
in infrastructurt e and capital
acquisitions, expansion both geographically and into new product
expenditures, Patrick seeks to ensure that its operating network contains capacity, technology and innovative thought
processes to support anticipated growth needs, effeff ctively respond to changes in market conditions, inventory a
nd sales
levels, and successfulff
ing, distribution and administrative func
lines and investment
ly integrate manufact
tions.
urt
ff
ff
rr
Over the last three years, we have executed on a number of new product initiatives and completed acquisitions for
approximately $804 million in total consideration that directly complement our core competencies and existing products,
expand our presence in our primary end markets, and position us to enter new end markets.
Patrick believes that returt ning capital to shareholders is an important part of its capital allocation strategy, and durd ing 2023
we returned $61 million to shareholders through our regular quarterly dividend and opportunistic share repurchases.
The Company was incorpor
ated in 1959 in Indiana. The Company's principal executive and administrative offices are located
at 107 West Franklin Street, Elkhart, Indiana 46516 and the telephone number is (574) 294-7511; Internet website address:
.
www.patrickind.com
p
rr
4
Majoa r Product Lines
j
Patrick manufacff
tures and distributes a variety of products within its reportabla e segments including:
turing
Manufacff
Laminated products for furff niture, shelving, walls and
countertops
Decorative vinyl, wrappe
vinyl printing
a
d vinyl, paper laminated panels and
Distribution
Pre-finished wall and ceiling panels
Drywrr
all and drywrr
all finff
ishing products
Solid surface, granite and quartz countertops
Interior and exterior lighting products
Fabra icated aluminum products
Wrapped vinyl, paper and hardwood profileff mouldings
Electrical systems components including instrument and dash
panels
Slide-out trim and fasff cia
Wiring, electrical and plumbing products
Transportation and logistics services
Electronics and audio systems components
Cement siding
rr
Cabia net products, doors, components and custom cabia netry
R
aw and processed lumber
Hardwood furniture
Fiberglass bath fixturt es and tile systems
Fiber reinforff ced polyester (“FRP”) products
Interior passage doors
Specialty bath and closet building products
Roofinff g products
Boat towers, tops, trailers, and fraff mes
Laminate and ceramic flooring
Shower doors
Fireplaces and surrounds
Appliances
Tile
Marine hardware and accessories
Other miscellaneous products
Softwoods lumber
Interior passage doors
Wiring and wire harnesses
CNC molds and composite parts
Aluminum and plastic fuel tanks
Slotwall panels and components
RV painting
Thermoformed shower surrounds
Fiberglass and plastic components including front and rear
caps and marine helms
Polymer-based and other flooring
Air handling products
Marine hardware and accessories
Treated, untreated and laminated plywood
RV and marine furff niture
Adhesives and sealants
Audio systems and accessories, including amplifieff
speakers, soundbars, and subwu
Marine non-slip foam flooring, padding, and accessories
Protective covers for boats, RVsRR , aircraft,ff and military arr
industrial equipment
Other miscellaneous products
oofers
nd
rs, tower
5
y
Primary Markets
Patrick manufacff
strategically located in proximity to the customers they serve. The Company’s net sales by market are as follows:
tures and distributes its products for four
nd markets. Our operating faci
lities generally are
primary err
ff
ff
RV
Marine
MH
Industrial
Total
Recreational VehVV icles
2023
2022
43 %
27 %
16 %
14 %
100 %
53 %
21 %
15 %
11 %
100 %
roducts are sold primarily to majoa r manufact
The Company’s RV pRR
turers
urt ers in adjacent industries. The principal types of recreational vehicles include (1)
("OEMs"), and to a lesser extent, manufact
towabla es: conventional travel trailers, fifff thff wheels, folff ding camping trailers, and trucr k campers; and (2) motorized: class A
(large motor homes), class B (van campers), and class C (small-to-mid size motor homes). The RV mRR
arket is primarily
dominated by Thor Industries, Inc. (“Thor”), Forest River, Inc. (“Forest River”) and Winnebago Industries, Inc.
towabla es andd 83% for motorized units for
("Winnebago") which combined held approximately 86% of retail market share forff
2023 as reported per Statistical Surveys, Inc. ("SSI").
urt ers of RVsRR , smaller original equipment manufacff
ff
ff
tyle. As more people see the benefitsff
We believe there has been subsu tantial growth over the past several years in the consumer’s affiff nity for the Outdoor Enthusiast
of enjon ying the outdoors with families and friends, there should be a positive impact
lifesff
arket. We also are optimistic about the near-term outlook for the RV market, which we
on long-term demand in the RV mR
eclines in OEM production in late 2022 and 2023 as a result of decreased
believe bottomed in 2023 afteff
evels are currently well below
retail demand and dealer inventory r
pace continues to be
historical norms and will need to be replenished when retail demand recovers. Our strategy in the RV sRR
io of products to OEMs through
centered around our goal of providing best-in-class customer service and a growing portfolff
our full solutions model, thereforff e helping our customers innovate and build quality units across the spectrum of feat
urt e and
price.
educd tions. Our analysis suggests that dealer inventory l
r a period of sharp dr
rr
rr
ff
roduction mix. In 2023, according to the Recreation Vehicle Industry Arr
We estimate that our mix of RV revenues related to towabla e units and motorized units is consistent with the overall RV
ssociation ("RVIA"), towable and
industry p
rr
motorized unit shipments represented appr
holesale shipments
with wholesale unit shipments decreasing 39% in the towable sector and decreasing 21% in the motorized sector in 2023
compared to the prior year.
oximately 85% and 15%, respectively, of total RV iRR ndustry wrr
a
Recreational vehicle purchases are generally consumer discretionary income purchases, and thereforff e, any situation which
causes concerns related to discretionary income may have a negative impact on the RV mRR
arket. The Company believes that
industry-rr wide retail sales and the related production levels of RVsRR will continue to be dependent on the overall strength of the
economy, consumer confidff ence levels, equity securities market trends, fluff ctuat
tions in dealer inventories, the level of
disposable income, and other demographic trends.
Demographic and ownership trends continue to point to favorable market growth for the long term in the RV mR
arket, as we
believe that there has been a shift toward outdoor, naturt e-based tourism activities in a post-COVID environment, with
younger and more diverse campers across diffeff
rent socio-economic groups. According to the 2023 Kampgrounds of America,
Inc. ("KOA") North American Camping and Outdoor Hospitality Report, based on surveys of North American leisure
travelers, 58.5 million households went camping in 2022, an increase froff m 57 million in 2021 and 42 million in 2019. Of
these camping households, 15.2 million went on at least one RV trip during 2022, compared to 14.8 million in 2021 and 11.3
million in 2019. At the same time, the proportion of campers in younger demographic groups has been steadily increasing
over the last several years, with "millennials" and "Gen Zers" representing 71% of campers in 2022, up from 53% in 2021
and 44% in 2019. Additionally, according to the 2023 KOA report, 28% of 2022 camper households reported household
income of over $100,000. While this percentage was down froff m 37% in 2021, these higher-income households still
represented a significantly greater proportion of campers than before the COVID-19 pandemic.
Detailed narrative inforff mation about
Discussion and Analysis of Financial Condition and Results of Operations” (the "MD&A") of this Form 10-K.
the Company’s sales to the RV iRR
rr
ndustry i
s included in Item 7. “Management’s
a
6
Marineii
rr
tyle and by economic conditions. The sharp i
tyle, similar to our RV end
We believe that the marine market refleff cts the active, outdoor leisure-based, family-oriented lifesff
market, and the Company has increased its focus and expanded its presence in this market through recent acquisitions,
particularly within the last three years. Consumer demand in the marine market is generally driven by the popularity of the
recreational and leisure lifesff
ts, which is our
primary marine market, experienced during the COVID-19 pandemic continued through 2021 and into 2022, although
y chain constraints limited wholesale unit shipments which resulted in higher order backlogs and historically low dealer
suppl
u
inventory l
evels, during the first half of 2022. While these supply chain constraints improved durd ing the second half of 2022,
OEM production declined slightly in 2023 as concerns relating to elevated interest rates, inflation and overall economic
uncertainties dampened retail demand and led marine dealers to reduce inventory l
evels. The Company's marine revenue mix
is slightly more concentrated toward higher dollar units, particularly the fiberglass and ski and wake segments, which began
to see more pronounced softness in market demand in the second half of 2023 compared to the broader marine market. We
expect to continue to feel the effects of our revenue mix through the firff st half of 2024. Despite short-term challenges, we
remain optimistic about the long-term outlook including within the high value, premium segment of the marine industry t
hat
we serve.
ncrease in demand forff
r
powerboa
rr
r
rr
turers Association (“NMMA”), per its 2022 U.S. Recreational Boating Statistical
According to the National Marine Manufacff
Abstract (the "Abstract"), U.S. retail expenditures on boats, engines, accessories, and related costs totaled appa
roximately
$59.3 billion in 2022, up approximately 4.4% from 2021. Based on data froff m the Abstract, we estimate that the average age
of pre-owned powerboa
oximately 23 years compared to an average usefulff
ts sold during 2022 was appr
f 30 years.
life off
a
r
re primarily focff used on the powerboa
The Company’s sales to the marine industry arr
t sector of the market which is comprised
of four main categories: fiberglass, aluminum fishing, pontoon and ski & wake. Based on current availabla e data per SSI
ioximatelyly 35% of retailil
r
through December 2023, within the powerboa
iunit s lales, allu iminum 25%, pontoon 34% andd skiki & w kake 6%. In addiddi ition, per SSI m,
t retail unit shipments
ioximatelyly 5% iin 2023 compared to 2022, while marine wholesale unit shipments, according to Company
decreased appr
estimates based on NMMA data, increased approximatelyy 2% in 2023 compared to 2022. Additional inforff mation about
the
Company’s sales to the marine industry i
t sector for 2023, fiberglass units account ded for appr
s included in the MD&A of this Form 10-K.
arine powerboa
a
a
rr
r
r
Manufacff
tured HouHH singii
hThe Compa yny’s prodducts for thihis markket are soldld priimarililyy to majajor manufact
to la lesser extent, manufacff
80% of MH ma krket retailil
urt ers of manufact
turers iin dadjajadd cen it i dndustriies. In hthe aggggr gegate, hthe top hthree manufact
iunit shihipments iin 2023 per SSI.
ff
ff
ff
urt
urt ers prodduc ded appr
ded hhomes, o hther OEMs, andd
ioximatelyly
r r
ioximatelyly 89,200
iunits iin 2023 afteff
hthiis ma krket iin hth le l gong term ddriiven byby pent-u dp du
iunits iin 2009 to
iunits iin 2022. hThe Compa yny bbelilieves thhere iis
emandd, mul ilti-familymily hhousiingg cap iaci yty d, demand fd forff
drd babilityility andd qualili yty d, dem gographihic tre dnds su hch as iincreas ded fifirst- itime hhom be b yuyers
leal estate iinvestment
lvol ivi gng ne deds of our OEM customers i, inclludidi gng energygy
ts. We contiinue to expa dnd our pr doduct offe iri gngs to meet hthe e
icient water hheaters, furnaces h, heatiingg, ventilila ition, andd aiir co dindi itio ini gng (("HVAC )") dduct syystems andd o hther pr doducts for
hWh loles lale u init shihipments hhave iincreas ded iin hthe M iH i dndustryy f
appr
ggrow hth poten itial fl forff
llower-cost rentall optiions i, increas ded affoff
andd u brban-to-subbur
trusrr
effififf
OEMs se kekiingg to exceed gd government sust iainabibia lili yty guiguiddelilines on manufact
bbar n r lelocatiions trendds, new hhome p iri ici gng, and id investments froff
heachiingg a 15-yyear hihighgh of 112,900
roff m a llow of appr
dm dev lelopers andd r
ioximatelyly 49,800
ded hhomes.
urt
u
a
rr
ff
Factors that may favorably impact production levels furff
nclude jobs growth, consumer confidff ence,
rence between interest rates on MH loans and mortgages
favorable changes in finff ancing regulations, a narrowing in the diffeff
on traditional residential "stick-built" housing, and any improvement in conditions in the asset-backed securities markets for
manufact
ther in this industry i
urt ed housing loans.
ff
rr
We believe that MH units offeff
mortgage interest rates have negatively impacted housing affordability.
r a cost-effective housing solution in a time when high home prices coupled with increased
Additional inforff mation about the Company’s sales to the MH industry i
rr
s included in the MD&A of this Form 10-K.
Industritt al Marketstt
We estimate that approximately 70% to 80% of our industrial net sales in 2023 were associated with the U.S. residential
housing market. We believe that there is a direct correlation between the demand forff
our products and new residential
tion and existing home remodeling activities. Patrick's sales to the industrial market generally lag new
housing construcrr
7
housing starts by four
unit construcrr
ff
tion and will vary based on diffeff
rences in regional economic prospects.
to six months as our industrial products are generally among the last components installed into new
ff
urt
Many of Patrick's core manufact
ing products are also utilized in the kitchen cabinet, high-rise, office and household
furniture, hospitality, and fixturt es and commercial furff nishings markets. These markets are generally categorized by a more
performance-than-price driven customer base and provide an opportunity for the Company to diversify its customer base.
Additionally, we believe that other residential and commercial segments have been less vulnerabla e to import competition, and
thereforff e, provide opportunities forff
t firff st half of
ily housing starts experienced significant softnff ess in the second half of 2023. Single-family housing starts
2023, multifamff
r declining significantly earlier in the year. Housing prices were resilient last
began to recover in the second half of 2023 afteff
interest rate cuts in 2024, combined with low
year in the faceff
inventory arr
our industrial market in 2024, particularly if
economic uncertainties recede.
nd high prices for existing homes for sale, may provide suppor
of a continued elevated mortgage rates. The potential forff
increased sales penetration and market share gains. Afteff
r a relatively flaff
t forff
u
Additional inforff mation about the Company’s sales to the industrial markets is included in the MD&A of this Form 10-K.
Strategic Acquisitions
q
g
The Company is focused on driving growth in its primary markets through the acquisition of companies with strong
management teams having a strategic fitff with Patrick’s core values, business model and customer presence, as well as
additional product lines, facff
ilities, or other assets to complement or expand its existing businesses. The Company may
explore strategic acquisition opportunities that are not directly tied to the four primary markets it serves in order to further
leverage its core competencies in manufact
ts end market exposure and presence, and expand
its footprt
int outside of its core Midwest markets.
ing and distribution, diversify i
urt
ff
ff
,
2023 the Company completed acquisitions for appr
During
three years has completed acquisitions for appr
the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K forff
completed by the Company in 2023, 2022 and 2021.
oximately $30 million of total consideration and over the last
oximately $804 million of total consideration. See Note 3 "Acquisitions" of
further discussion of acquisitions
a
a
ff
In January 2024, the Company announced that it completed its acquisition of Sportech, LLC, a leading designer and
urt er of high-value, complex component solutions sold to powersports OEMs, adjad cent market OEMs and the
manufact
afteff
rmarket. See Note 17 "Subsu equent Events" of the Notes to Consolidated Financial Statements included elsewhere in this
Form 10-K forff
further discussion.
p
Competition
The RV,R marine, MH and industrial markets are highly competitive, both among manufact
components. The barriers to entry for each industry arr
and safetff y requirements, and the initial capital investment required to establish manufact
urt ers of manufact
Company competes with manufact
range of products and services, competition exists primarily on price, product feat
delivery,rr
basis. However, in order forff
capital commitment and investment in personnel and facilities would be required.
urt ers and the suppliers of various
tandards, codes
ing operations. In addition, the
ff
urt ed homes with vertically integrated operations. Across the Company’s
urt es and innovation, timely and reliabla e
quality and customer service. Several competitors compete with Patrick in each product line on a regional and local
a competitor to compete with Patrick on a national basis, the Company believes that a subsu tantial
re generally low and include compliance with industry s
urt
ff
ff
rr
ff
ff
Capacity and Plant Expansions
p
p
y
lities. Capital expenditures forff
urt
certain producd ts in excess of capacity at certain facilities by shifting production to
Patrick has the abia lity to fulfilff l demand forff
2023 consisted of $59 million of investments primarily to provide more advanced
other faci
ff
manufact
ade production equipment. Management regularly monitors capacity at its
u
ff
facilities and reallocates existing resources where needed to maintain production efficiencies throughout all of its operations
t profitabla e growth, grow its customer base,
u
and capitalize on commercial and industrial synergies in key regions to suppor
and expand its geographical product reach outside its core Midwest market.
ing automation, replace and upgr
8
Brandingg
New product development is a key component of the Company’s efforts to grow its market share and revenue base, adapta
to
changing market conditions, and proactively address customer demand. The Company has expanded its product and service
offeff
rings with the integration of new and innovative product lines into its operations that bring additional value to customers
and create additional scale advantages.
The StuSS dio
o, is located in Elkhart, Indiana. The Studio presents the
The Company's Design/Innovation Center and Showroom, The Studi
customers to
latest design trends and products in the markets served by Patrick, and provides a creative environment forff
design products and enhance their brand. The 45,000 square foot facility includes a 25,000 square foot showroom devoted to
the display of products, capabilities and services offeff
red by each of Patrick’s business units, in addition to offices and
conferff ence rooms. The Company’s specialized team of designers, engineers and graphic artists works with RV, marine, MH
and industrial customers to meet their creative design and product needs, including creating new styles and utilizing new
colors, patterns, products, and materials forff
panels and mouldings, cabinet doors, furniture, lighting and other products. Other
o include product development, 3D CAD illustration, 3D printing, photography and marketing.
services provided at The Studi
t
t
Marineii
Studiodd
The Company's Marine Studio, located in Sarasota, Florida, is a comprehensive marine studio showroom, design and
engineering center, which provides engineering and integrated design solutions for our marine customers. The 14,000 square
foot facility includes a showroom that displays the Company's marine products as well as the marine design and engineering
capabilities and services offeff
red by our marine businesses.
Operatintt g Brandsdd
Through its operating brands, the Company provides customers with specific product knowledge, expertise and suppor
t that
ier of choice for its customers by elevating the customer
u
are tailored to their needs. The Company strives to be the suppl
purchasing experience with expert product line managers, and support staff and strategic partnerships for each operating
brand, which help drive effiff ciency and maximize value for its customers.
u
The Company’s research and development efforts are intended to maintain leadership positions in core products and provide
the Company with a competitive edge as it seeks additional business with new and existing customers. The Company also
works with technology development partners, including customers, to develop technological capabilities and new products
a
and appl
ications.
Marketing and Distributio
g
n
oximately 4,400 active customers. Its revenues froff m the RV market include
As of December 31, 2023, the Company had appr
turers of RVs that each account for over 10% of the Company's net sales, Forest River and Thor.
sales to two majoa r manufacff
Both Forest River and Thor have multiple businesses and brands that operate independently under the parent company and
these multiple businesses and brands generally purchase our producd ts independently from one another. The Company’s sales
to the various businesses of Forest River and Thor, on a combined basis, accounted for 29%, 38% and 42% of our
consolidated net sales, forff
the years ended December 31, 2023, 2022 and
2021 respectively.
a
,
The Company generally maintains supplies of various commodity products in its warehouses to ensure that it has product on
hand at all times for its distribution customers. The Company purchases a majority of its distribution segment products in
ioximatet ly 9%, 9%, and
railcar, container, or trucr kload quantities, whihi hch are war hehous ded priior to thheiir salle tot customers. Appr
8% of hthe Compa yny' ds diistribibutiion s gegment’s salles were froff m prodducts hshiipped dd diirec ltlyy froff m thhe su
iiers to Patriickk
u
customer
lcallyly, thhere iis a two to four-weekk periiod bd between Patrick receiving a
purchase order and the delivery of products to its warehouses or customers and, as a result, the Company has no material
backlog of orders. However, this can fluctuate depending on overall market factors and each specific end market we serve. In
periods of declining market conditions, customer order rates can decline, resulting in less efficient logistics planning and
fulfillmff
osts due to increased numbers of shipments with fewer products in each shipment.
is in 2023, 2022, a dnd 2021, respectiiv lelyy. yTy ipi
ent and thus increasing delivery crr
lppl
9
Raw Materials
Patrick has arrangements with certain suppl
rebate agreements among other terms.
u
iers that specify exclusivity in certain geographic areas, pricing structures and
iers. Our customers do not maintain long-term suppl
Raw materials are primarily commodity products, such as lauan, gypsum, particleboard and other softwood and hardwood
lumber products, aluminum, copper, plastic resin, fiberglass and overlays, among others which are availabla e fromff
many
suppl
y contracts, and therefore, the Company bears the risk of accurate
u
forecasting of customer orders. Our sales in the short-term could be negatively impacted in the event any unforff eseen negative
circumstances were to affeff ct our majoa r suppliers. In addition, demand changes in certain market sectors can result in
fluctuating costs of certain more commodity-oriented raw materials and other products that are utilized and distributed.
u
As a result of COVID-19 and other macroeconomic factors, the supply chain was previously impacted by increased
commodity prices, decreased product availabia lity, longer lead times and higher transportation costs, which resulted in
y chain constraints by
u
increased raw material pricing from several of our suppl
u
carrying increased levels of inventory arr
ies of materials. Beginning
in the second half of 2022 and throughout 2023, the Company reduced its inventory i
n alignment with lower OEM
production levels. We believe that, as of December 31, 2023, the Company’s inventory l
evels are appropriately balanced with
ased on anticipated customer needs. Additionally, the
expected OEM production, and we will continue to manage inventory brr
Company continually explores alternative sources of raw materials and components, both domestically and froff m outside the
all of its material purchases.
U.S. Alternate sources of suppl
u
nd partnering with suppl
iers. Patrick took steps to mitigate these suppl
iers to help secure adequate suppl
y are availabla e forff
u
u
rr
rr
y
Regulation and Environmental Quality
Q
g
eral, state, and local
The Company’s operations are subject to environmental laws and regulations administered by fedff
regulatory arr
uthorities including requirements relating to air, water, land and noise pollution. Additionally, these requirements
regulate the Company's use, storage, discharge and disposal of hazardous chemicals used or generated during specific
manufact
ing processes.
urt
ff
Select products are subject to various legally binding or voluntary s
tandards. For example, the composite wood subsu trate
materials that Patrick utilizes in the production process in the RV marketplt ace have been certifieff d as to compliance with
applicable emission standards developed by the Califorff nia Air Resources Board (“CARB”). All suppliers and manufact
urt ers
of composite wood materials are required to comply with the current CARB regulations.
ff
rr
ff
urt
The Company is certified to sell Forestry Stewardship Council (“FSC”) materials to its customers at certain of its
manufact
ing branches. The FSC certificff ation provides a link between responsible production and consumption of materials
from the world’s forff ests and assists the Company’s customers in making socially and environmentally responsible buying
decisions on the products they purchase. Upholstered products and mattresses provided by the Company forff RVs must
comply with Federal Motor Vehicle Safetff y Standards regulated by the National Highway Traffiff c Safetff y Administration
regarding flaff mmabia lity.
Select raw materials are subject to tariffs and other import dutd ies. For example, we have historically received benefitsff
from
duty-free imports on certain products from certain countries pursuant to the U.S. Generalized System of Preferff ences ("GSP")
program. Additionally, we are subju ect to government regulations relating to importation activities, including related to U.S.
Customs and Border Protection ("CBP") withhold release orders.
The Company also produces and provides products for manufact
construcr
tion regulations promulgated by the U.S. Department of Housing and Urbar n Development.
ff
urt ed homes that must comply with performance and
For additional inforff mation on the Company's efforts forff
sustainabia lity and environmental quality, please see our 2023
Responsibility & Sustainability Report under "ESG" on the "For Investors" section of our website. Inforff mation on our
website is not incorporated in this Annual Report on Form 10-K.
Seasonalityy
ff
urt
ing operations in the RV,R marine and MH industries historically have been seasonal and at their highest levels
Manufact
when the weather is moderate. Accordingly, the Company’s sales and profits had generally been the highest in the second
10
rr
rr
rends in the past several years have included the impact related to
quarter and lowest in the fourth quarter. Seasonal industry t
turer open houses for dealers in the August-September timeframe and marine open houses
the addition of major RV manufacff
imeframe, resulting in dealers delaying certain restocking purchases until new product lines are
in the December-February t
rends have been, and future trends may be, different than in
introduced at these shows. In addition, recent seasonal industry t
to volatile economic conditions, interest rates, access to finff ancing, cost of fuel, national and regional
prior years dued
and marine units and other products for which the
economic conditions and consumer confidff ence on retail sales of RVsRR
Company sells its components, as well as fluctuations in RV and marine dealer inventories, increased volatility in demand
from RV aRR
nd marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on
the timing of industry-rr wide wholesale shipments.
rr
Human Capital Management
p
g
Our people are the heart of our business, and we allocate substantial resources to foster the well-being, success and growth of
our team members in an inclusive and diverse environment which we believe is fundamental to our values and our service to
our customers. As of December 31, 2023, our team members totaled approximately 10,000, of which 83% are hourly team
members who serve our customers by producing and distributing products in our RV, marine, MH and industrial end markets,
and 17% who are salaried employees who manage the resources, capital allocations, business decisions, and customer
relationships of our end markets.
The majority of our team members work in our facilities to produce or distribute products for our customers. Our investment
in human capital resources focuses on this environment to ensure their well-being and success. Our primary commitment to
our team members in the production environment is to their safety, well-being and progress, and in this regard our human
lowing, in addition to our health care insurance and other employment benefitff s:
capital management programs focff us on the folff
•
•
•
•
•
•
Free assistance programs availabla e to all team members and their famff
which arise, which we believe are essential durd ing periods of uncertainty;
ilies to address mental health and other matters
Tuition reimbursement programs availabla e to all team members as they pursue educational opportunities;
Leadership programs availabla e to all employees that are designed to fosff
advance team members to the next stage of their careers;
ter leadership and communication skills to
Job safety analysis, which identifieff s risks unique to each production environment, training and empowering our team
members to mitigate risks and develop workplk ace best practices;
Occupau tional Safetff y and Health Administration ("OSHA") preparedness, which involves site specific training
development to educate and enable our team members to work safelff y and effeff ctively;
Industrial hygiene audits and testing, ensuring that our team members work in healthy environments with respect to air
quality and noise reduction;
• Machine guarding and work area audits, which identify mechanical and non-mechanical improvements in the safety and
well-being of the production environment;
•
•
•
•
Train-the-trainer programs, which fosff
capabilities to operate our facilities in the safest and most effecff
ter best-practice operational techniques forff
tive manner;
our team members to advance their
Site-specific training development, which tailors customized training and consulting to the unique needs of the
production environment;
Ergonomic assessments for all team members, which accommodate each individual to work in the most effeff ctive and
comforff
tabla e manner;
Community involvement initiatives, such as our participation in Military Makeover and Care Camps, which provides
our team members opportunities to give back to the communities in which we do business.
Our success is dependent on our ability to hire, retain, and engage highly qualifieff d team members who serve our customers.
In this regard, we aspire to be a merit-based organization that is inclusive and diverse, building a culture where our team
they belong. Our leadership development programs bring a diverse and energetic source of talent to lead the
members feel
future of our organization, and our recruir
ter an inclusive culture that we believe strengthens our
organization and our ability to serve our customers.
rts strive to fosff
tment effoff
ff
11
The organization is built on our six core founda
ff
tional values of being BETTER Together:
•
•
•
•
•
•
Balance - We work to build a healthy work environment that encourages excellence, happi
work and our home life.ff
a
ness, and peace in both our
Excellence - We strive to meet the highest possible standards of achievement in our work and our relationships.
Trust - We do what we say we will do every t
rr
ime - and communicate with all stakeholders if a commitment evolves.
Teamwork - We challenge, encourage, equip, empower, and inspire the individuals we work with.
Empowerment - We give our team the inforff mation, tools, and trust they need to grow as leaders and achieve results.
Respect - We treat our teammates and partners with the utmost honor and dignity.
For additional
inforff mation on the Company's human capia tal management, please see our 2023 Responsibility &
Sustainabia lity Report under "ESG" on the "For Investors" section of our website. Inforff mation on our website is not
incorporated in this Annual Report on Form 10-K.
Executive Offiff cers of the Companyp y
The folff
lowing tabla e sets forff
th our executive officers as of January 1, 2024:
Offiff cer
Andy L. Nemeth
Jeffrey M. Rodino
Kip B. Ellis
Matthew S. Filer
Joel D. Duthie
Stacey Amundson
Position
Chief Executive Officer
President
Executive Vice President-Operations and Chief Operating Officer
Interim Executive Vice President-Finance, Chief Financial Officer, and Treasurer
Executive Vice President-Chief Legal Officer and Secretary
rr
Executive Vice President-Human Resources and Chief Human Resources Offiff cer
Age
54
53
49
51
4
9
57
y
a
was appoi
Andy L. Nemeth
nted Chief Executive Offiff cer of the Company in January 2020. Mr. Nemeth previously served as
President of the Company froff m January 2016 to July 2021, Executive Vice President of Finance and Chief Financial Offiff cer
from May 2004 to December 2015, and Secretary-rr Treasurer from 2002 to 2015. Mr. Nemeth has over 32 years of
manufact
urt ed housing, recreational vehicle, marine and industrial experience in various financial and managerial capacities.
ff
y
a
was appoi
Jeffreyff M. Rodino
nted President of the Company in July 2021 and was Chief Sales Offiff cer of the Company from
September 2016 to July 2021. Mr. Rodino served as the Executive Vice President of Sales from December 2011 to July 2021.
Prior to that, he was the Chief Operating Officer of the Company from March 2013 to September 2016, and Vice President of
Sales forff
the Midwest from August 2009 to December 2011. Mr. Rodino has over 30 years of experience in serving the
recreational vehicle, manufacff
tured housing, marine and industrial markets.
p
a
was appoi
nted Executive Vice President of Operations and Chief Operating Officer of the Company in
Kip B. Ellis
September 2016. He was elected an offiff cer in September 2016. Mr. Ellis joined the Company as Vice President of Market
Development in April 2016. Prior to his role at Patrick, Mr. Ellis served as Vice President of Aftermarket Sales forff
the
Dometic Group from 2015 to 2016. Prior to his tenure at Dometic, Mr. Ellis served as Vice President of Global Sales and
Marketing froff m 2007 to 2015 at Atwood Mobile Producd ts. Mr. Ellis has over 27 years of experience serving the recreational
vehicle, marine, manufacff
tured housing, industrial and automotive markets.
a
Matthew S. Filer was appoi
nted Interim Executive Vice President-Finance, Chief Financial Offiff cer, and Treasurer in May
2023. He joined Patrick as Senior Vice President of Finance in November 2022. In 2007, he joined Caterpillar Inc. and served
ntment to Chief Financial Offiff cer beginning in 2019
in a series of progressive leadership roles which culminated in his appoi
for two separate multi-billion dollar divisions within Caterpillar’s Resource Industries segment. Prior to that, Mr. Filer served
in various controllership and CFO roles forff Progress Rail, Caterpillar's rail division, from 2008 to 2019.
a
a
n May 2021. Mr. Duthie
nted as Executive Vice President, Chief Legal Officff er and Secretary i
Joel D. Duthie was appoi
joined the Company as General Counsel in November 2020. Prior to joining Patrick, Mr. Duthie was a partner with Barnes &
Thornburg LLP, and practiced law at the firm from 2000 to 2002 and 2007 to 2020. As a corpor
ate lawyer, Mr. Duthie
focused on mergers and acquisitions, supply chain management and commercial contract counseling. Mr. Duthie served as
an assistant general counsel for a privately-held manufact
urt er of flow control products from 2002 to 2006.
r
ff
rr
12
y
a
was appoi
nted Executive Vice President, Human Resources and Chief Human Resources Offiff cer in May
Stacey Amundson
apacity with Kerry Foods with a
2022. Prior to joining Patrick in February 2rr
focus on providing human resources leadership in the transformation of its North America operations model. Prior to this
role, Ms. Amundson was with Spectrumr
Brands, Inc. froff m 2005 to 2018, holding a series of key human resources leadership
roles, including Senior Vice President, Human Resources and Chief Human Resources Offiff cer from 2010 to 2018. With over
26 years of experience in multiple industries, Ms. Amundson has led the human resource function with specialties in talent
management, executive compensation, mergers and acquisitions, integrations, shared services, and large-scale organizational
transforff mations.
022, Ms. Amundson served in a temporary crr
Websiite Access t Co Compa yny Reports
p y
p
We make availabla e freff e of charge through our website, www.patrickind.com
, our Annual Report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonabla y practicable
afteff
r such material is electronically filed with or furnished to the SEC. The charters of our Audit, Compensation, and
Corporate Governance and Nominations Committees, our Corporate Governance Guidelines and our Code of Ethics and
Business Conduct are also availabla e on the “Governance” portion of our website. Our website and the information contained
therein or incorpor
ated into this Annual Report on Form 10-K.
ated therein are not intended to be incorpor
p
r
r
ITEM 1A. RISK FACTORS
othett
r inforff mation set forth i
In addition to thett
arefulff
materially affeff ct our business, financial condition or results of operations. TheTT
we face. Addidd tional factors nrr
adverserr
ot presently known to us or that
eport, you should cl
n thitt s rii
tt
tt
ly affeff ct our business, cash flows, finff ancial condition or results of operations in future periods.
ly considerdd
s dkk
riskii
we currently deem to be immaterial alsoll may ma
the folff
lowing factors wrr
esdd cribed below are not the only rll
hich couldl
isks
aterially
Risks Related to our Business
Economic and business conditiii ons beyond Patrick's c'
luff ctuations in and negativtt ely i
products,tt
tt
eall d to f
ll
could l
ontrol, ill ncii
cyclicll alityll
ludingii
.
act opeo rating resultsll
ll mpii
and seasonality in the indii ustritt es it sells
The RV,R marine, MH and industrial markets in which we operate are subject to cycles of growth and contraction in consumer
to external factors such as general
demand, and volatility in production levels, shipments, sales and operating results, dued
economic conditions, consumer confidff ence, employment rates, finff ancing availabia lity, interest rates, inflaff
tion, fuel prices, and
other economic conditions affeff cting consumer demand and discretionary spending. Periods of economic recession and
downturt ns have adversely affected our business and operating results in the past, and have potential to adversely impact our
In
future results. Consequently, the results for any prior period may not be indicative of results for any future period.
addition, fluctuation in demand could adversely affect our management of inventory,rr which could lead to an inability to meet
customer needs or a charge for obsolete inventory.rr
ff
urt
ing operations in the RV,R marine and MH industries historically have been seasonal and at their highest levels
Manufact
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 t
rends in the past several years have included the impact related to
turer open houses for dealers in the August-September timeframe and marine open houses
the addition of major RV manufacff
imeframe, resulting in dealers delaying certain restocking purchases until new product lines are
in the December-February t
introduced at these shows. In addition, recent seasonal industry t
rends have been, and future trends may be, different than in
to the impact of COVID-19, volatile economic conditions, interest rates, access to finff ancing, cost of fuel,
prior years dued
national and regional economic conditions and consumer confidff ence on retail sales of RVsRR
and marine units and other
products for which the Company sells its components, as well as fluctuations in RV and marine dealer inventories, increased
volatility in demand froff m RV aRR
nd marine dealers, the timing of dealer orders, and from time to time, the impact of severe
weather conditions on the timing of industry-rr wide wholesale shipments.
rr
rr
rr
If the finff ancial conditidd on of our customers and supplpp iell rs deterioratestt
, os ur busineii
ss and opeo rating resultsll
could sll
uffeff r.
The markets we serve have been highly sensitive to changes in the economic environment. Weakening conditions in the
economy, or the lack of available financing in the credit market, could cause the finff ancial condition of our customers and
suppl
t our business through the loss of sales or the inabia lity to meet our
u
commitments. Many of our customers participate in highly competitive markets and their financial condition may deteriorate
iers to deteriorate, which could negatively affecff
13
as a result. In addition, a decline in the financial condition of our customers could hinder our ability to collect amounts owed
by customers.
Our salesll
on our opeo rating resultsll and finff ancial conditiodd
ially concentratedtt withii
are matertt
n.
two customers, the losll
s of eo
ithett
r of wo
hich could hll
ave a material adverserr
impacm t
Two customers in the RV mR
arket accounted for a combined 29% of our consolidated net sales in 2023. The loss of either of
these customers could have a material adverse impact on our operating results and finff ancial condition. We do not have long-
term agreements with our customers and cannot predict that we will maintain our current relationships with these customers
or that we will continue to suppl
y them at current levels.
u
Changes in c
results.
ii
onsumer prefee rences relating to ott
ur products could all
dverserr
ly impact our sales level
s all
ll
nd our opeo ratingii
Changes in consumer preferff ences, or our inability to anticipate changes in consumer preferff ences for RVsR , marine models or
manufact
our products and adversely affect our operating
results and finff ancial condition.
the products we make could reducd e demand forff
urt ed homes, or forff
ff
ial percentagea
A matertt
shipments ott
results and finff ancial conditdd iott n.
r reductions in industrytt
of the ComCC panm y’n s s’
alesll
growth could r
are concentratedtt
educe demdd
ll
in the RV indii ustry,r
and decldd
and forff
our products att
nd adverserr
inll es in the levell
l of Ro V unitii
ly impact our operating
In 2023 and 2022, the Company's net sales to the RV industry wrr
consolidated net sales. While the Company measures its RV mRR
the underlying health of the RV iR ndustry i
tied to general economic conditions and consumer confididff ence. Declilines iin RV iunit shihipmen lt lev lels or r deducd
dnd hhave a materiiall addvers
ggrow hth co luldd materiiallllyy r deducd e thhe Companyy’s revenue from thhe RV iinddustryy a
opera itingg res lults iin 2024 andd o hther future pe iri dods.
oximately 43% and 53%, respectively, of
arket sales against industry-rr wide wholesale shipment statistics,
historically have been closely
itions iin iinddustryyrr
ie impact o in its
s determined by retail demand. Retail sales of RVsRR
a
ere appr
rr
rr
ns in the credit mii
arkerr
t could limit the abiliii tyii of consumers,rr dealerll
and wholesale finaii ncing forff RVs, ms
arine products,tt and manufacff
s arr
nd wholesll ale cll
esultinll
ustomers to obtaitt n r
ii
g in r
ll
floor
educed demand for our
etaitt
tured homes, rs
l,ii
ii
Conditiodd
planll
products.tt
Restrictions on the availabia lity of consumer and wholesale finff ancing for RVsRR , marine products, and manufact
urt ed homes and
increases in the costs of such financing have in the past limited, and could again limit, the abia lity of consumers and wholesale
customers to purchase such products, which would result in reducd ed production by our customers, and therefore reduce
demand for our products.
ff
Loans used to finff ance the purchase of manufact
urt ed homes usually have shorter terms and higher interest rates, and are more
site-built homes. Historically, lenders required a higher down payment, higher credit
difficult to obtain, than mortgages forff
scores and other criteria for these loans. Current lending criteria are more stringent than historical criteria, and many potential
buyers of manufact
urt ed homes may not qualify.ff
ff
ff
ff
urt ed housing loans are also dependent on economic conditions, lending
The availabia lity, cost, and terms of these manufact
practices of financial institutions, government policies, and other factors, all of which are beyond our control. Reductions in
urt ed homes and increases in the costs of this financing have limited, and could
the availabia lity of financing forff manufact
continue to limit, the abia lity of consumers and wholesale customers to purchase manufact
urt ed homes, resulting in reducd ed
tured homes by our customers, and therefore reduced demand for our products. In addition, certain
production of manufacff
provisions of the Dodd-Frank Act, which regulate finff ancial transactions, could make certain types of loans more difficult to
obtain, including those historically used to finance the purchase of manufact
urt ed homes.
ff
ff
ff
The RV, marineii
resources than we do.
, Me H aMM nd industritt al industritt es are highlgg y cll
ompem titive and some of our compem titors may ha
ave greatertt
We operate in a highly competitive business environment and our sales could be negatively impacted by our inability to
maintain or increase prices, changes in regional demand or product mix, or the decision of our customers to purchase our
competitors’ products or to produce in-house products that we currently produce. We compete not only with other suppliers
14
iers of
to the RV,R marine, MH and industrial producers, but also with suppl
ted by pricing, purchasing, financing, advertising, operational,
cabinetry and countertops. Sales could also be affecff
promotional, or other decisions made by purchasers of our producd ts. Additionally, we cannot control the decisions made by
suppl
urt ed products and therefore, our ability to maintain our distribution arrangements
u
may be adversely impacted.
iers to traditional site-built homebuilders and suppl
iers of our distributed and manufact
u
u
ff
Some of our competitors have greater financial resources or lower levels of debt or finff ancial leverage and this may enable
them to commit larger amounts of capital in response to changing market conditions. Further, competitors may develop
innovative new products that could put the Company at a competitive disadvantage. If we are unabla e to compete successfulff
ly
turers and suppliers to the RV,RR marine and MH industries as well as to the industrial markets we serve,
against other manufacff
we could lose customers and sales could decline, or we may not be able to improve or maintain profitff margins on sales to
customers or be abla e to continue to compete successfulff
ly in our core markets.
Our opeo rating resultsll
transportation and othett
can be adverserr
by infln atll
r necessary suppu lies and services.
ly affeff ctedtt
iott n, changes in t
ii
hett
cost or availaii bilityii
of raw matertt
ials, es nergy,gg
u
We are currently experiencing inflationary pressures on our operating costs. The prices of key raw materials, consisting
primarily of lauan, gypsum, fibff erglass, particleboard, aluminum, softwff oods and hardwoods lumber, resin, and petroleum-
y and demand and other factors specific to these commodities as well as general
based products, are influenced by suppl
inflationary pressures, including those driven by supply chain and logistical disrupt
ions. Pricing and availabia lity of finished
goods, raw materials, energy, transportation and other necessary suppl
ies and services for use in the Company’s businesses
can be volatile due to numerous factors beyond its control, including general, domestic and international economic
costs, production levels, competition, consumer demand, import dutd ies and tariffs,
conditions, naturt al disasters, labor
currency exchange rates, international treaties, and changes in laws, regulations, and related interprr etations. Evolving trade
policies could continue to make sourcing products from foreign countries difficult and costly, as the Company sources a
significant amount of its products from outside of the United States.
u
a
rr
In addition, prices of certain raw materials have historically been volatile and continued to fluff ctuat
te in 2023. During periods
of volatile raw materials, energy and transportation costs, we have generally been able to pass both cost increases and
decreases to our customers in the form of price adjustments, however, there can be no assurance futff urt e cost increases or
decreases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases or decreases
will match raw materials, energy and transportation costs increases or decreases. Sustained price increases may lead to
declines in volume as competitors may not adjud st their prices or customers may decide not to pay the higher prices, which
could lead to sales declines and loss of market share. While we seek to project tradeoffs between price increases and volume,
our projections may not accurately predict the volume impact of price increases. As a result, fluctuations in raw materials,
energy and transportation costs could have a material adverse effect on the Company’s business, results of operations and
financial condition.
hain issues, is ncii
Supplpp y cll
a
capac
manufacff
turingii
impact on our busineii
tt nvii
or obsoletll e i
entory, wyy
ludingii
finaii ncial problemll
s of mo
anufacff
turers or supplu
ity that increase our costs or cause a delay ia n oii
ss and opeo rating resultsll
ur abilityii
re to estimate customtt
, as nd our faiff
luii
tt
iell rs, or a shortage
to fulfillff
er demand properly mll
orders, could hll
ials or
atertt
ave an adverserr
ay result in excess
of adequate mtt
hich could all
dverserr
ly affeff ct our gross margins.
ished parts. We are reliant on our extended supply chain and any disrupt
Generally, our raw materials, supplies and energy requirements are obtained froff m various sources. These purchases include
unforff med materials and rough and finff
ion in this
suppl
y chain could have an adverse impact on our ability to deliver products to our customers on a timely and cost-effeff ctive
u
basis. While alternative sources are availabla e, our business would be materially adversely affected if we are unabla e to finff d
alternative sources on a timely and cost-effeff ctive basis. A reduction or interruptu ion in supply; a significant increase in the
price of one or more materials; a faiff
lure
to appropriately cancel, reschedule, or adjud st our requirements based on our business and customer needs; could materially
our business, operating results, and financial condition and could materially damage customer relationships.
adversely affect
urt e our products, the price of these materials may increase, or these
If there are shortages of materials we need to manufact
materials may not be availabla e at all, and we may also encounter shortages if we do not accurately anticipate our needs. We
may not be able to secure enough materials at reasonabla e prices or of acceptabla e quality to build new products in a timely
r until other
manner in the quantities or configff urations needed. Accordingly, our revenue and gross margins could suffeff
lly
sources can be developed. Our operating results would also be adversely affected if, aff nticipating greater demand than actuat
develops, we commit to the purchase of more materials than we need, which is more likely to occur in a period of demand
lure to adequately authorize procurement of inventory brr
y our manufact
urt ers; or a faiff
ff
ff
r
ff
15
u
iers seek bankrupt
uncertainties such as we are currently experiencing. There can be no assurance that we will not encounter these problems in
cy relief or otherwise cannot continue their business as
r
the futff urt e. In addition, if any of our suppl
anticipated, the availabia lity or price of these requirements could be adversely affected. A global economic downturt n and
related market uncertainty could negatively impact the availabia lity of materials froff m one or more of these sources of these
materials, especially during times such as we have recently seen when there are suppl
and other
ier constraints based on labor
ources in a timely manner, which could harm our
actions due to the COVID-19 pandemic. We may not be able to diversify s
ability to deliver products to customers and seriously impact present and future sales. In addition, when facing component
suppl
rts in procuring materials in order to meet customer expectations which
u
in turn contribute to an increase in purchase commitments. Increases in our purchase commitments to shorten lead times
our products is less than our expectations. If we
harges if the demand forff
could also lead to excess and obsolete inventory crr
fail to anticipate customer demand properly, an oversupply of parts could result in excess or obsolete components that could
adversely affect our gross margins.
y-related challenges, we have increased our effoff
u
a
ff
If we cannot effee
profitaff
bilityii may sa uffeff r.
ctivtt ely mll
anage thett
challell nges and risks associatedtt withii
doingii
busineii
ss internatiott nally, oyy ur revenues and
u
l obligations and intellectuat
ies froff m suppliers located in Indonesia, China, Malaysia
We purchase a material portion of our raw materials and other suppl
and Canada. As a result, our ability to obtain raw materials and suppl
ies on favff orable terms and in a timely fashion are
u
subju ect to a variety of risks, including fluctuations in foreign currencies, changes in the economic strength of the foreign
countries in which we do business, difficulties in enforff cing contractuat
l property rights,
compliance burdens associated with a wide variety of international and U.S. import laws, and social, political, and economic
instability. Our business with our international suppliers could be adversely affected by restrictions on travel to and froff m any
to a health epidemic or outbrt eak, such as the COVID-19 pandemic, or other
of the countries in which we do business dued
event. Additional risks associated with our foreign business include restrictive trade policies, imposition of dutd ies, taxes, or
government royalties by foreign governments, and compliance with the Foreign Corruptu Practices Act and local anti-briberyrr
laws. Any measures, or proposals to implement such measures, could negatively impact our relations with our international
t on our
u
suppl
business and operating results. We maintain limited operations in Mexico, China and Canada but are nevertheless exposed to
risks of operating in those countries associated with: (i) the diffiff culties and costs of complying with a wide variety of
complex laws, treaties and regulations; (ii) unexpected changes in political or regulatory err
nvironments; (iii) earnings and cash
, exchange controls, or other restrictions;
flows that may be subju ect to tax withholding requirements or the imposition of tariffsff
(iv) political, economic, and social instability; (v) import and export restrictions and other trade barriers; (vi) responding to
disrupt
ions in existing trade agreements or increased trade tensions between countries or political or economic unions; (vii)
r
maintaining overseas subsidiaries and managing international operations; and (viii) fluctuations in foreign currency exchange
rates.
iers and the volume of shipments to the U.S. froff m these countries, which could have a materially adverse effecff
Our business is sii ubjeb ct to riskii
restritt ctiott ns could hll
flowll
s.w
s akk
ave a material adverserr
ssociatedtt withii
importingii
products,tt and thett
imposition of ao
effeff ct on our business, results of operations, fs
dditioii nal dutiett s, tariffi s off
inff ancial conditiodd
r tratt de
n, and cash
u
ears to be continued bipartisan suppor
There are risks inherent to importing our products. Virtually all of our imported products are subject to duties which may
impact the cost of such products. In addition, countries to which we ship our products may impose safegff uard quotas to limit
the quantity of products that may be imported. We rely on free trade agreements and other suppl
y chain initiatives in order to
from duty-free
maximize efficiencies relating to product importation. For example, we have historically received benefitsff
imports on certain products from certain countries pursuant to the Generalized System of Preferff ences ("GSP") program.
Although there appa
t of the GSP program, the provisions have not been renewed since
they expired on December 31, 2020. If the GSP program is not renewed or otherwise made retroactive, we would recognize
significant additional dutd ies and profitaff bia lity could be negatively impacted. The United States has imposed tariffs and export
controls on certain goods and products imported froff m China and certain other countries, such as plywood, which has resulted
in retaliatory tariffff s bff
imposed by the United States on a broader range of
imports, or furff
ther retaliatory trade measures taken by China or other countries in response, could result in an increase in
y chain costs that we may not be able to offsff et or that may otherwise adversely impact our results of operations.
u
suppl
Additionally, we are subju ect to government regulations relating to importation activities, including related to U.S. Customs
and Border Protection ("CBP") withhold release orders. The imposition of taxes, dutd ies and quotas, the withdrawal from or
material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order
on our business, results of operations and finff ancial condition. If additional tariffsff or trade
could have a material adverse effect
y China and other countries. Additional tariffsff
u
ff
16
restrictions are implemented by the U.S. or other countries, the cost of our products could increase which could adversely
affeff ct our business.
If we are unable t
ll o mtt
anage our inventory, oyy ur operating resultsll
could bll
e matertt
ially and adverserr
.dd
ly affeff ctedtt
rr
u
ommitments, based on our projections of future customer orders. We maintain an inventory t
y contracts with our customers and, thereforff e, we must bear the risk of certain
We generally do not have long-term suppl
o support these
inventory c
to macroeconomic
customers’ needs. During periods of sharp f
luff ctuat
r
ions, public health emergencies, or other influff ences, some of
factors, changes in end consumer demand, suppl
u
evels they maintain and the purchases of our products. While
our customers will make adjud stments to the inventory l
r down. If
responding to these changing dynamics in the end markets we serve, our inventory r
we are unabla e to adjust to our customers’ changing inventory nrr
eeds and purchases of our products, our business could be
adversely affected. Changes in demand, market conditions and/or product specifications could result in material obsolescence
and a lack of alternative markets for certain of our customer specific products and could negatively impact operating results.
rr
tions in demand, whether increasing or decreasing dued
y chain disrupt
rr
equirements will fluctuate up ou
r
rr
Increases in dii
adverserr
ly impact our operatingii
effiff ciencies.
emdd
and forff
our products ctt
ould make it more diffi
i
cult for us to ott
btaitt n aii
dditiii onal skilledll
labor, wr
hich maya
In certain geographic regions in which we have operating facilities, we have experienced shortages of qualifieff d employees,
which has negatively impacted our costs in the past. While we are taking certain steps to automate aspects of our producd tion
andd
and distribution, labor
a
create emplloyyee reten ition andd recr iuir
iwi hth
kknowlledgedge andd expe irience hhave hthe abibia litylity to hchangge em lpl yoyers more easilyily.
shortagges a dnd contiinuedd compe i itition for qualiflifiiefff dd emplloyyees may iy increase thhe cost of our llabbor
tment hch lallle gnges, espe ici lallyly dduriing ig impro ivi gng economiic itimes, as em lpl yoyees
a
If demand for employees continues to increase, we may not be able to increase production to timely satisfy demand, and may
initially incur higher labor and production costs, which could adversely impact our financial condition and operating results.
Fuel shortagea s or high pgg
rices for fueff
l could have an adverserr
impacm t on our operations.
nd marine industries typically require gasoline or diesel fueff
their operation, or the use
The products produced by the RV aRR
y of gasoline and
of a vehicle requiring gasoline or diesel fuel for their operation. There can be no assurance that the suppl
diesel fuel will continue uninterruptu ed or that the price or tax on fueff
l will not materially increase in the future. Shortages of
gasoline and diesel fuel, and subsu tantial increases in the price of fuel could have a material adverse effect on our business in
the futff urt e.
l forff
u
Interruptu iott ns or disruii
operations.
ptu iott ns in productiott n at one of our key facilitie
ii
s could have a matertt
ial adverserr
impact on our
turing and distribution facff
ilities across the continental United States. A significant interruption or
We operate manufacff
ion in operations at our locations resulting froff m severe weather conditions or natural disasters, including but not
r
disrupt
ion of the sourcing of
limited to hurricanes, tornadoes, blizzards, earthquakes or otherwise, could result in the disrupt
materials, manufact
ing of our products, or order fulfilff lment and, as a result, could have a material adverse impact on our
business, results of operations and finff ancial condition. If in the event of a naturt al disaster or other similar event, we may incur
damages and incur losses as a result and be required to deploy additional unexpected capital expenditures in order to ensure
faci
other initiatives in the short term
ff
relating to our capital allocation strategy.
lities are functioning properly. These unplanned capital expenditures may interruptu
urt
ff
rr
Our abilityii
to integre ate att
cquireii d businesses may adverserr
ly affeff ct operations.
ff
ing, distribution and other func
As part of our business and strategic plan, we look for strategic acquisitions to provide shareholder value. Any acquisition
tive integration of an existing business and certain of its administrative, financial, sales and marketing,
will require the effecff
tions to maximize synergies. Acquired businesses involve a number of risks that
urt
manufact
may affect our financial performance, including increased leverage, diversion of management resources, assumption of
liabia lities of the acquired businesses, financial reporting systems which do not integrate with the Company's existing finff ancial
reporting systems and possible corpor
ly integrate these acquisitions, we
may not realize the benefits identifieff d in our due diligence process, and our financial results may be negatively impacted.
Additionally, material unexpected liabia lities could arise from these acquisitions.
ts. If we are unabla e to successfulff
ate culture conflicff
rr
ff
17
We may ia
manufacff
ncii ur material charger
or distii ritt bui
turingii
.yy
tion facilityii
s or be adverserr
ly impacm ted by tb
hett
consolidll atdd iott n and/odd r closure of all oll
r part of ao
ture of our operating facilities with the objective to distribute and/or manufacff
ture
We periodically assess the cost strucr
urt
ing and/or
products in the most efficient manner. We may make capital investments to move, discontinue manufact
ing and/or distribution
distribution capabilities, or products and product lines, sell or close all or part of additional manufact
facilities in the future. These changes could result in material futff urt e charges or disrupt
ions in our operations, and we may not
achieve the expected benefits from these changes, which could result in an adverse impact on our operating results, cash
flows, and finff ancial condition.
urt
ff
r
ff
ll ncii ur charger
s forff
impaim rmii
ent of ao
alue of those assets or a decldd
ssets, is ncii
ee
inll e in eii
xpe
ludingii
ctedtt
goodwill and other long-lgg ivll ed assets, ds ue to potentt
tial declinll es
ivdd idual reporting unitsii of the
profitaff
bilityii
of the ComCC panm y on
r indii
We could i
in the faiff r vii
Company.n
Approximately 71% of our total assets as of December 31, 2023 were comprised of goodwill, intangible assets, operating
lease right-of-use assets and property, plant and equipment. Under generally accepted accounting principles, each of these
assets is subju ect to periodic review and testing to determine whether the asset is recoverabla e or realizable. The events or
changes that could require us to test these assets for impairment include changes in our estimated futff urt e cash floff ws, changes
in rates of growth in our industry orr
r in any of our businesses, and decreases in our stock price and market capitalization.
In the futff urt e, if sales demand or market conditions change from those projeo cted by management, asset write-downs may be
required. Material impairment charges, although not always affeff cting current cash floff w, could have a material effect on our
operating results and balance sheet.
The inaii
bilityii
to attrtt act and retain qualifll
ieff d exeee
cutive offo icff ers arr
nd key pe
ersorr nnel may adverserr
ly affeff ct our opeo rations.
While we include succession planning as part of our ongoing talent development and management process to help ensure the
continuity of our business model, the loss of any of our executive officers or other key personnel could reducd e our ability to
manage our business and strategic plan in the short-term and could cause our sales and operating results to decline. In
addition, our future success will depend on, among other facff
tors, our ability to attract and retain executive management, key
employees, and other qualified personnel.
We could bll
e impii
acted by pb
otentt
tial effee
cts ott
f uo
nion organr
izing activtt
ities.
ff
urt
union. Any disruptu ion in our
A small number of our North American employees are currently represented by a labor
relationship with such third-party associations could adversely affect our ability to attract and retain qualifieff d employees to
meet current or future manufact
ing demands at reasonabla e costs, if at all. Further unionization of any of our North
American facilities could result in higher costs and increased risk of work stoppages. We are also, directly or indirectly,
dependent upon business relationships with third parties having unionized work forces, including suppl
iers, customers and
logistics companies, and strikes or work stoppages organized by such unions could have a material adverse impact on our
business, financial conditions and operating results. Should a work stoppage occur, it could delay the manufact
urt e, sale and
distribution of our products and have a material adverse effecff
t on our business, prospects, operating results and finff ancial
condition.
u
a
ff
We are subjeb ct to governmrr
laws and regulatll
the aggra
egate,tt would hll
ental and enviroii nmental regulatll
iott ns or events beyoe nd our control could r
iott ns, as nd failure in our complm iall nce effoe
s thatt
esult i
effeff ct on our finff ancial conditiodd
ages, expexx nses or liabilitie
n and results of operations.
ll n dii
amdd
ii
ll
rts,tt
t indii
changes to s
uch
tt
ivdd idually,ll or in
ave a material adverserr
turing processes involve the use, handling, storage and contracting forff
Some of our manufacff
recycling or disposal of
hazardous or toxic substances or wastes. Accordingly, we are subject to various governmental and environmental laws and
regulations regarding these subsu tances, as well as environmental requirements relating to land, air, water and noise pollution.
The implementation of new laws and regulations or amendments to existing regulations could materially increase the cost of
the Company’s products. We cannot presently determine what, if any, legislation may be adopted by federal, state or local
governing bodies, or the effeff ct any such legislation may have on our customers or us. Failure to comply with present or futff urt e
regulations could result in finff es or potential civil or criminal liability, which could negatively impact our results of operations
or financial condition.
18
We are s bubjejebb ct to fefedderall, stattt e,tt
tt
ure to l
ppaid, expos
xx
iall biliii tiii es, as nd ffinaii ncial resultsll
llocall a dnd certaiin iinternatiiott nall taxtt
fof the ComCC panm yy.n
reggue
lla ition. ChChangges thhett
reto ca hn hav ie impii
acts on taxeaa s
hwhiichh we operate, new
iincome, personall a dnd re lal proper yty
hThese chha gnges m yay negga itiv lelyy affect our resullts of opera itions, fiinff an ici lal co dindi ition, andd cash fh fllofff ws or iincrease hthe
hWhilile we se kek to ensure hthe Compa yny remaiins com lpliiant
llegigi lslatiion or chha gnge is in e ixistiing lg l gegiislla ition m yay resullt iin hchangges to amounts owed fd forff
taxes.
Companyy's effect
iwi hth tax r geg lulatiions iin lall jl juriisdidictiions iin
iive tax rate.
ff
We are allso subjubject to thhe examiinatiion of our tax returt ns andd o hther tax matters byby hthe U.S. Internall Revenue Serviice, states iin
io increase, or ifif hthe ul iltimate
hwhiichh we c donducd
ddetermiinatiion of our taxes owed id is forff
ondi ition, opera itingg
results and cash floff ws could be adversely affected.
bt busiiness, andd o hther tax authhoriitiies. If our effeff ctiive tax rates were t
an amount iin excess of amounts pre iviouslyly accruer dd, our fifinanciiall c di
ll
xpe
We could e
ee
tt n pii
is i
ff
lalllelll ggee d dd defefddd ect
rience unusual or signigg fii cant litigtt atiott n, governmental invii
estigatiott ns, os
r adverserr
publicll
ity arising out of
rodducts,tt
serviices, ps
er
icei dved en iviroii nmental il impii
acts, os
.ee
r o hther iwiseii
rr
We spendd s bubstantiiall resources ensuriingg thhat we com lplyy wiith gh government lal safe yty regulgulatiions, consumer regulgulatiions andd
othher sta dnda drds, bbut we cannot ensure hthat em lpl yoyees or othhe ir i dindi ividdualls affififf liliatedd wi hith us
ivi lolate such lh laws or
ta dnda drds a dnd iinterpreta itions mayy chha gnge on hshort notiice a dnd iimpact our compliliance
regulgulatiions. In addiddi ition, regulgulatoryy s
iwi hth ggovernment lal standda drd ds does not necessa irilyly preven it i dindi ividduall or cllass actiio ln lawsuiits,
statust
. Moreover, compliliance
hwhere our pr doducd ts
hwhiichh can entailil
andd ser ivices complyly
ll or thhreaten ded
ta dnda drds, hwhethher r lelat ded to our pr doducts, ser ivices,
li ilitigga ition o gr government iinvestigigatiions of our compliliance
or bbusiiness commerciiall r lelatiionshihips, req iuires sigig inifificant expe dinditures of tiime andd o hther resources. Litigitigatiio
in is allso
iinhherentlyly uncertaiin, a dnd we co luldd expe irience isignignifificant dadverse res lults, whihi hch co luld hd have an addverse effect on our fifinanciiall
co dindi ition a dnd resullts of opera itions. In addiddi ition,
isignignifificant
reputatiional hl harm thhat c
isignignifificant cost andd riiskk. In certaiin icircumstances, courts mayy per
a
lppl
iwi hth fedderall a d/nd/or othher a
lould hd have a sigig inifificant addverse effeff ct on our bbusiiness, opera itingg res lults and fd fiinfff an ici lal co dindi itio .n
iic bablle llaw. Furthhermore,
iwi hth regulgulatoryy srr
ici ivill actiions even
di
dadverse p blubliicityity surro di
lalllegga ition m yay cause
ondi gng to actuat
isimplyly resp
undi gng an
iwillll not
imit
Publicll healthll
effeff ct on our business, results of operations, fs
emerger ncies, whethett
r domdd
inff ancial positiott n and cash flowll
s.
estic or internatiott nal, such as the COVCC
IDVV -19 pandemic, mc
ay have an adverserr
Pandemics, epidemics or disease outbrt eaks in the U.S. or globally may have a material adverse effect on our business,
employees, suppliers, customers, and the general economy. The fulff
l effect of these disruptu ions could be diffiff cult to predict,
and the estimated length of such disruptu ions may not be readily availabla e to the Company given such an event is affected by a
our operations, a health
number of fact
emergency could have, but is not limited to, the folff
ors, many of which are outside of our control. In addition to the effeff cts upon
lowing impact:
u
ff
•
•
•
•
Decreases in consumer confidff ence and disposable income and increases in unemployment could reducd e demand forff
our products by our customers in all of our end markets.
Tightening credit standards could negatively impact credit availabia lity to consumers which could have an adverse
effeff ct on all of our end markets.
Supply chain and shipping interruptu ions and constraints, volatility in demand for our products caused by sudden and
material changes in production levels by our customers or other restrictions affeff cting our business could adversely
impact our planning and forff ecasting, our revenues and our operations.
ion of essential
turing and supply elements such as raw materials or other finished product components, transportation,
tionary
Disruptu ions in our manufacff
manufacff
workforce, or other manufacff
pressures, and our inability to meet our end market customer needs and achieve cost targets.
turing and distribution capabilities could result in shortages of materials, inflaff
turing and supply arrangements caused by the loss or disrupt
r
• Material changes in the conditions in markets in which we manufact
urt e, sell or distribute our products, including
ctions in response to such an event, could adversely impact operations necessary for the
ff
governmental or regulatory arr
production, distribution, sale, and suppor
u
t of our products.
•
Failure of third parties on which we rely, including our customers, suppl
iers, distributors, commercial banks, and
other external business partners, to meet their obligations to the Company or to timely meet those obligations, or
ions in their abia lity to do so, which may be caused by their own finff ancial or operational diffiff culties,
material disrupt
may adversely impact our operations.
u
r
19
•
•
•
•
•
cy or insolvency, as a result of
rr
Certain of our customers may experience financial diffiff culties, including bankrupt
r material finff ancial difficulties, they may be unabla e to pay amounts dued
such an event. If any of our customers suffeff
to us fully, partially, or timely. Further, we may have to negotiate material discounts and/or extended finff ancing
terms with these customers in such a situation. If we are unabla e to collect our accounts receivabla e as they come dued ,
our financial condition, results of operations and cash floff ws may be materially and adversely affected.
If we are unabla e to maintain normal operations, or subsequently are unabla e to resume normal operations in a timely
fashion, our cash flows could be adversely affecff
ted, making it difficult to maintain adequate liquidity or meet debt
covenants. As a result, the Company may be required to pursue additional sources of financing to meet our financial
obligations and fund
our operations and obtaining such financing is not guaranteed and is largely dependent upon
ff
market conditions and other factors.
Disruptu ions to our operations related to a health emergency as a result of absenteeism by infected or ill members of
management or other employees, or absa
enteeism by members of management and other employees who elect not to
come to work due to the illness affeff cting others at our facilities, or due to quarantines.
tion and volatility in the U.S. and global capital markets,
A public health emergency could lead to severe disrupr
which could increase our cost of capital and adversely affecff
t our ability to access the capital markets in the futff urt e. In
addition, trading prices in the public equity markets, including prices of our common stock, could be highly volatile
as a result of such an event.
Sustained adverse impacts to the Company, certain suppl
iers, and customers may also affeff ct the Company’s futff urt e
valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve
associated with such assets, including goodwill, indefinite and finff
ite-lived intangible assets, property and equipment,
inventories, accounts receivable, tax assets, and other assets.
u
•
Increasing raw material and labor costs relating to a public health emergency may also affeff ct our profitaff bia lity.
The ultimate impact of public health emergencies, such as the COVID-19 pandemic, on our business, results of operations,
financial condition and cash floff ws is highly uncertain and cannot be accurately predicted and is dependent on futurt e
developments, including the durd ation of such an event and the length of its impact on the global economy, and the actions
taken by governmental bodies to contain it or mitigate its impact.
Risks Related to Indebtedness
Our level
ll
and take
tt
instrutt ments.tt
and tertt msrr
advantagea
of indebtedtt nedd ss could all
of new business oppor
o
dverserr
ly affeff ct our abilityii
to raise additioii nal capitaii
ff
l to f
tt
und
tunitiii es and prevent us froff m meetintt g our obligll atiott ns underdd
our opeo rations
our debdd t
As of December 31, 2023, we had $1.04 billion of total long-term debt, including current maturities and exclusive of deferff
red
financing costs and debt discount, outstanding under our 2021 Credit Facility, 4.75% Senior Notes, 7.50% Senior Notes and
1.75% Convertible Notes (all as definff ed in Note 7 "Debt" of the Notes to Consolidated Financial Statements included
elsewhere in this Form 10-K).
Our level of indebtedness could have adverse consequences on our future operations, including making it more difficff ult forff
us to meet our payments on outstanding debt, and we may not be able to find alternative finff ancing sources to replace our
working
indebtedness in such an event. Our level of indebtedness could: (i) reducd e the availabia lity of our cash floff w to fund
capital, capital expenditures, acquisitions and other general corpor
es, and limit our ability to obtain additional
r
es; (ii) limit our flexibility in planning for, or reacting to, and increase our vulnerabia lity to, changes
financing forff
in our business and the industry i
n which we operate; (iii) place us at a competitive disadvantage compared to our competitors
that have less debt or are less leveraged; and (iv) create concerns about our credit quality which could result in the loss of
u
suppl
ier contracts and/or customers.
these purpos
ate purpos
r
rr
r
ff
In addition, our debt could have important consequences to us, including:
•
•
increase our vulnerabia lity to general economic and industry crr
onditions;
require a substantial portion of our cash floff w froff m operations to be dedicated to the payment of principal and
interest on our indebtedness, thereforff e reducd ing our liquidity and our ability to use our cash floff w to funff
d our
operations, capital expenditures and future business opportunities;
20
•
•
•
•
expose us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings
lity (the “2021 Credit
pursuant to the credit agreement that established our revolving credit and term loan faci
Agreement”) are at variable rates of interest;
ff
ff
reducd e funds
due to the costs and expenses associated with such debt;
availabla e forff working capital, capital expenditures, acquisitions and other general corpor
r
ate purpos
rr
es,
limit our ability to obtain additional finff ancing for working capia tal, capital expenditures, debt service requirements,
acquisitions, and general corpor
ate or other purpos
es; and
r
rr
limit our ability to adjud st to changing marketplt ace conditions and placing us at a competitive disadvantage compared
to our competitors who may have less debt.
ff
If our cash floff ws and capital resources are insuffiff cient to fund
our debt service obligations, we may be forced to reduce or
delay capital expenditures, sell assets, seek additional capital, or restrucr
ture or refinance our indebtedness. These alternative
and may not permit us to meet our scheduled debt service obligations, which could cause us
measures may not be successfulff
to default on our debt obligations and impair our liquidity. In the event of a default under any of our indebtedness, the holders
of the defauff
and payable, together with accruer d and unpaid
interest, which in turn could result in cross-defaults under our other indebtedness The lenders under our 2021 Credit
ther loans, and such lenders
Agreement could also elect to terminate their commitments thereunder and cease making furff
could institute foreclosure proceedings against their collateral, and we could be forff ced into bankrupt
cy or liquidation. Our
ability to satisfy our debt obligations will depend on our future operating performance which may be affeff cted by factors
beyond our control.
lted debt could elect to declare all the funff
ds borrowed to be dued
r
Despite our current level of indebtedness, we may be abla e to incur subsu tantially more debt and enter into other transactions
ther exacerbate the risks to our financial condition described above. We may be able to incur significant
which could furff
additional indebtedness in the futff urt e. Although the 2021 Credit Agreement and other debt instrumr
ents contain restrictions on
the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to
a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be
subsu tantial. These restrictions also do not prevent us froff m incurring obligations, such as certain trade payables, that do not
constitutt e indebtedness as defined under our debt instruments. To the extent we incur additional indebtedness or other
obligations, the risks described in the risk fact
ors related to our indebtedness and others described herein may increase.
ff
The agra eements covering our indebtedtt nedd ss contaitt n v
remain in compliance withii
ii
ecome imme
thereunderdd
these covenants, ws
ue and payable.ll
diateltt y dll
could bll
ii
arious finaii ncial perfor
rmance and other covenants. If wII
e do ndd
e could be in breach of our debdd t agra eements and thett
amounts ott
utsttt antt
ot
dingii
The agreements governing our indebtedness contain finff ancial and non-financial covenants with which we must comply that
place restrictions on us. These restrictions will limit our ability and the abia lity of our subsu idiaries to, among other things:
•
•
•
•
incur additional indebtedness (including guarantee obligations);
incur liens;
engage in mergers, consolidations and certain other funff
damental changes;
dispose of assets;
• make advances, investments and loans;
•
•
•
•
•
engage in sale and leaseback transactions;
engage in certain transactions with affiff liates;
enter into contractuat
the ability to (A) (i) pay dividends or make
distributions, (ii) pay indebtedness, (iii) make loans or advances, or (iv) sell, lease or transfer property, in each case
to us, or (B) incur liens;
l arrangements that encumber or restrict
pay dividends, distributions and other payments in respect of capia tal stock or subor
retire capital stock, warrants or options or subor
dinated debt; and
u
u
dinated debt, and repurchase or
amend the terms of the documents governing, or make payments prior to the scheduled maturity date of, cff
other indebtedness, as applicable.
ertain
21
As a result of these restrictions, we will be limited as to how we conduct our business and we may not be able to raise
additional debt or equity financing to compete effeff ctively or to take advantage of new business opportunities. A potential
failure to comply with these finff ancial and other restrictive covenants in our debt instruments, which, among other things,
require us to maintain specifieff d finff ancial ratios could, if not cured or waived, have a material adverse effect on our ability to
fulfillff
our obligations under our indebtedness and on our business and prospects generally.
Our 2021 Credit Agreement contains covenants that require that we comply with a maximum level of a consolidated secured
net leverage ratio and a minimum level of a consolidated fixed charge coverage ratio (both covenants as described in Note 7
"Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K). There can be no assurance
that we will maintain compliance with the finff ancial and other covenants under our 2021 Credit Agreement and other
agreements governing our indebtedness. If we fail to comply with the covenants contained in our 2021 Credit Agreement, the
ity or it could result in our having to refinance the
lenders could cause our debt to become due and payable prior to maturt
lt under any of our indebtedness, the holders of the defauff
indebtedness under unfavff orable terms. In the event of a defauff
lted
debt could elect to declare all the funds
and payable, together with accruer d and unpaid interest, which in
turn could result in cross-defaults under our other indebtedness. If our debt were accelerated, our assets might not be
sufficient to repay our debt in full and there can be no assurance that we would be abla e to refinff ance any or all of this
indebtedness.
borrowed to be dued
ff
Due to i
tt ndii ustry cr
sources of capia taii
expanxx
d our busineii
ss.
onditioii ns and our operating resultsll
tt
l. If we are unable t
o l
ll
, ts hett
uitaii ble sll
ocll ate stt
re have been times in t
ources of capia taii
ii hett
l when neededdd , wdd
past when we have had limitedtt
o mtt
e may be unable t
access tott
r
aintii aitt n oii
ll
We depend on our cash balances, our cash floff ws from operations, our 2021 Credit Facility and other financing vehicles to
finance our operating requirements, capital expenditures and other needs. If a material economic recession occurred, such as
the recession that impacted the economy in 2007-2010, production of RVsRR , marine units and manufact
urt ed homes could
decline materially, resulting in reduced demand for our producd ts. A decline in our operating results could negatively impact
our liquidity. If our cash balances, cash floff ws from operations, and availabia lity under our 2021 Credit Facility are insuffiff cient
to finance our operations and alternative capital is not availabla e, we may not be able to expand our business and make
acquisitions, or we may need to curtail or limit our existing operations.
ff
We have letters of credit representing collateral forff
es that
have been issued under our 2021 Credit Agreement. The inabia lity to retain our current letters of credit, to obtain alternative
letter of credit sources, or to retain our 2021 Credit Agreement to support these programs could require us to post cash
collateral, reduce the amount of cash availabla e forff
our casualty insurance programs and for general operating purpos
our operations, or cause us to curtail or limit existing operations.
r
The conditioii nal conversion feature of to hett
triggegg red, may aa
dverserr
.
ly affeff ct our finff ancial conditidd on and opeo rating resultsll
1.75% Convertible Notes due 2028 that we issued in December 2021, if
ff
urt e of the 1.75% Convertible Senior Notes dued
In the event the conditional conversion feat
2028 (the "1.75% Convertible
Notes") is triggered, holders of the 1.75% Convertible Notes will be entitled to convert the 1.75% Convertible Notes at any
time during specified periods at their option. If one or more holders elect to convert their 1.75% Convertible Notes, we would
be required to settle our conversion obligation equal to the aggregate principal amount of such converted notes through the
payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their 1.75%
Convertible Notes, we could be required under appl
icable accounting rulr es to reclassify all or a portion of the outstanding
principal of the 1.75% Convertible Notes as a current rather than long-term liabia lity. See Notes 8 "Derivative Financial
Instruments" and 9 "Accruerr d Liabia lities" of the Notes to Consolidated Financial Statements included elsewhere in this Form
10-K forff
additional details.
a
The convertible note hedge and warrant transactiott ns may aa
common stock.kk
ffea
ct the value of the 1.75% Convertible Notes and our
In connection with the pricing of the 1.75% Convertible Notes, we entered into convertible note hedge transactions with
rties”). At the same time, we entered
certain of the initial purchasers and/or their respective affilff iates (the “option counterparr
into warrant transactions with the option counterpar
rties. The convertible note hedge transactions are expected generally to
reduce the potential dilution upon
conversion of the 1.75% Convertible Notes and/or offsff et any cash payments we are
required to make in excess of the principal amount of converted notes, as the case may be. However, the warrant transactions
u
22
could separately have a dilutive effect on our common stock to the extent that the market price per share of our common
stock exceeds the strike price of the warrants.
In addition, the option counterparr
rties or their respective affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other
securities of ours in secondary market transactions following the pricing of the 1.75% Convertible Notes and prior to the
maturity of the 1.75% Convertible Notes (and are likely to do so durd ing any observation period related to a conversion of
1.75% Convertible Notes). This activity could cause or avoid an increase or a decrease in the market price of our common
stock or the 1.75% Convertible Notes, which could affeff ct a holder's abia lity to convert the 1.75% Convertible Notes and, to
the extent the activity occurs durd ing any observation period related to a conversion of 1.75% Convertible Notes, it could
affeff ct the number of shares and value of the consideration that a holder will receive upon conversion of the 1.75%
Convertible Notes.
y
Risks Related to Information Security, Cybersecurity and Data Privacy
y, y
y
If our infii orff marr
affeff ct our business, repuee
tion tectt hnologyo
l t
ii o ptt
systemtt
f oo
tation and results ott
s faiff
peo rations.
erfor
rm adequateltt y,ll
our opeo rations could bll
e disdd ruptu edtt
and could adverserr
ly
ent, manufacff
We are increasingly dependent on digital technology, including information systems and related infrastructurt e, to process and
nd communicate with our employees and business partners. We rely
record financial and operating data, manage inventory arr
on our information technology systems to effectively manage our business data, inventory,rr
nd
turing, distribution, warranty administration, invoicing, collection of payments, and other business
fulfillmff
lures,
processes. Our systems are subject to damage or interruptu ion froff m power outages, telecommunications or internet faiff
l to
computer viruses and malicious attacks, security breaches and catastrophic events. If our systems are damaged or faiff
function properly or reliabla y, we may incur subsu tantial repair or replacement costs or experience data loss or theft aff
nd
impediments to our ability to manage our business, which could adversely affect our results of operations. Any such events
could result in legal claims or proceedings, liabia lity or penalties under privacy laws, disruptu ion in operations, and damage to
our reputation, which could adversely affect our business.
y chain, order entry arr
u
suppl
In addition, we may be required to make material technology investments to maintain and update our existing informff
technology systems. Implementing material system changes increases the risk of computer system disrupt
problems and interruptu ions associated with implementing technology initiatives could disruptu
effiff ciency.
ation
ion. The potential
or reduce our operational
r
er incident or data btt
A cybc
loss.
reach could result in infon rmatiott n thett
fte , dtt
atdd a ctt
orruptu iott n, operational disdd ruptu iott n, and/or//
finaii ncial
Our technologies, systems, networks, and those of our business partners have in the past been, and may in the future become,
the target of cyber-attacks or inforff mation security breaches that could result in the unauthorized release, gathering,
monitoring, misuse, loss, or destruction of proprietary and other information, or other disruptu ion of our business operations.
es of misappropriating assets or
A cyber-attack could include gaining unauthorized access to digital systems for purpos
r
sensitive information, corruptu ing data, or causing operational disruptu ion or destrucr
to ransom attacks or malware or
tion dued
result in denial of service on websites. We have programs in place to detect, contain and respond to data security incidents.
age systems change
However, because the techniques used to obtain unauthorized access, disabla e or degrade service, or sabot
frequently and may be difficult to detect for long periods of time, we may be unabla e to anticipate these techniques or
implement adequate preventive measures. Unauthorized parties may also attempt to gain access to our systems or faci
lities, or
those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members,
are, or applications we develop or procure from third
contractors, vendors, and temporary s
parties may contain defecff
ation
security. Any cyber-attack on our business could materially harm our business and operating results. The Company currently
carries insurance to cover exposure to this type of incident, but this coverage may not be sufficient to cover all potential
losses. As cyber threats continue to evolve, we may be required to expend material additional resources to continue to modify
or enhance our protective measures or to investigate and remediate any information security vulnerabia lities. If we or our
suppl
opriately respond to material data
u
security breaches, we could be exposed to costly government enforcement actions and private litigation and our business and
operating results could suffeff
iers experience additional material data security breaches or fail to detect and appr
urt e or other problems that could unexpectedly compromise informff
taff. In addition, hardware, softwff
ts in design or manufact
r.
a
a
rr
ff
ff
23
Other Risks
Certaitt n pii
change in contrott
rovisiii ons in oii
ur Articlesll
t our shareholdell
of Incorporatiott n and Amended and Restattt edtt By-lawll
to be in their bii
est intii ertt est.
considerdd
rs mightgg
l thatt
s mw
ay delay,a
defee r or prevent a
Our Articles of Incorpor
takeover practices and inadequate takeover bids. These provisions may delay, deferff
shareholders might consider to be in their best interest.
ation and Amended and Restated By-laws contain provisions that are intended to deter coercive
or prevent a change in control that our
r
Conditiodd
liabilityii
in the insii urance markets ctt
ns withii
coverage and could potentt
ould impact our abilityii
tially result in uninsii ured losses.
e
to negot
iatt
te favorable t
ertt msrr
ll
and conditioii ns for various
We generally negotiate our insurance contracts annually forff
property, casualty, workers compensation, general liabia lity,
health insurance, and directors and officers liabia lity coverage. Due to conditions within these insurance markets and other
factors beyond our control, future coverage limits, terms and conditions and the amount of the related premiums could have a
negative impact on our operating results. While we continually measure the risk/rkk eward of policy limits and coverage, the
lack of coverage in certain circumstances could result in potential uninsured losses.
Our business, results of operations and finff ancial conditidd on may ba
impact on thett
Ukraine and Russia, or any on
economy am nd capia taii
ther geopoliticll
l markerr
al tensions.
ts resultingii
ll
global
e matertt
ially and adverserr
from internatiott nal confln icll
ly affeff ctedtt
ts, ss uch as thett
egativtt e
by any nn
confliff ct between
t,
U.S. and global markets may experience volatility and disruptu ions resulting froff m geopolitical tensions or military conflicff
such as the military confliff ct between Ukraine and Russia. The length and impact of geopolitical tensions or military confliff ct
are highly unpredictabla e, and can lead to market disrupr
tions, including significant volatility in commodity prices, credit and
capital markets, as well as supply chain interruptu ions. In addition, geopolitical tensions, military actions and any resulting
sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in
capital markets, potentially making it more difficult for us to obtain additional capital. The Company continually monitors
ongoing geopolitical tensions and military confliff cts to evaluate any potential impacts they may have on our business,
operating results, and financial condition.
Risks Related to Ownership of our Common Stock
p
A variety of factortt
common stock.kk
s,rr many of which are beyoe nd our control, cll
ould infln uence fluff ctuations in the markerr
t price for our
The stock market, in general, experiences volatility that has often been unrelated to the underlying operating performance of
companies. If this volatility continues, the trading price of our common stock could decline materially, independent of our
actuat
te materially in response to a number of
factors, many of which are beyond our control, including the folff
l operating performance. The market price of our common stock could fluff ctuat
lowing:
•
•
•
•
•
•
•
•
•
•
variations in our customers' and our competitors’ operating results;
high concentration of shares held by institutional investors;
announcements by us or our competitors of material contracts, acquisitions, strategic partnerships, joint venturt es or
capital commitments;
announcements by us or our competitors of technological improvements or new products;
the gain or loss of material customers;
additions or departurt es of key personnel;
events affecff
ting other companies that the market deems comparabla e to us;
changes in investor perception of our business and/or management;
changes in global economic conditions or general market conditions in the industries in which we operate;
sales of our common stock held by certain equity investors or members of management;
24
•
•
issuance of our common stock or debt securities by the Company; and
the occurrence of other events that are described in these risk facff
tors.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity is critical to Patrick’s abia lity to drive its vision and operational initiatives. Patrick faces a range of
cybersecurity threats including attacks common to most industries, such as ransomware and denial-of-sff ervice, and attacks
from more advanced and persistent, highly organized adversaries. Our customers, suppliers, consultants and subcu ontractors
face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially
adversely affect our operations, performance and results of operations. These cybersecurity threats and related risks make it
ised of developments in the inforff mation security field, and we expend
imperative that we remain vigilant and appr
considerable resources on cybersecurity.
a
The Board of Directors oversees Management’s processes forff
identifyiff ng and mitigating risks, including cybersecurity risks,
and to support alignment of our risk exposure with our strategic objectives. Senior leadership, including our Vice President –
IT Operations and Chief Information Security Offiff cer (CISO), regularly briefs the Board of Directors on our cybersecurity
and inforff mation security posture and the Board of Directors is appr
ised of cybersecurity incidents deemed to have a moderate
a
or higher business impact, even if immaterial to us. In the event of an incident, we intend to follow our incident response
protocol, which outlines the steps to be followed froff m incident detection to mitigation, recovery and notificff ation, including
notifyiff ng functional areas (e.g., legal), as well as senior leadership and the Board of Directors, as appropriate.
ff
r
ate inforff mation security organization, led by our CISO, is responsible for our overall information security strategy,
Our corpor
ate inforff mation security
policy, security engineering, operations and cyber threat detection and response. The corpor
ise security structurt e with the ultimate goal of preventing cybersecurity incidents
organization manages the Company's enterprr
ible, while simultaneously increasing our system resilience in an effort to minimize the business impact
to the extent feas
should an incident occur. Central to this organization is our carefulff
ly selected combination of security tools that concentrate
on both perimeter and internal environments. These solutions are responsible for the protection, detection and response
capabilities used in the defense of Patrick’s data and enterprr
ise computing networks. Employees outside of our corporate
information security organization also have a role in our cybersecurity defenses, which we believe improves our
cybersecurity program.
r
rate information security organization has implemented a governance structurt e and process to assess, identify,ff
The corpor
rate-wide counterintelligence and insider threat detection
manage and report cybersecurity risks. We also have a corpor
program to proactively identify eff
xternal and internal threats, and mitigate those threats in a timely manner. In addition to
developing and implementing pre-existing third party fraff meworks, we have implemented our own practices and customized
controls tailored to the Patrick enterprr
oach enhances our defense in depth stance while
increasing our ability to identify,ff
a
contain and manage cybersecurity risks.
ise environment. We believe this appr
Third parties also play a role in our cybersecurity program initiatives. We engage third-party services to conduct evaluations
of our security controls, whether through penetration testing, independent audits or consulting on best practices to address
new challenges. These evaluations include testing both the design and operational effectiveness of security controls.
Assessing, identifying and managing cybersecurity related risks are integrated into our overall enterprise risk management
process. Cybersecurity related risks are included in the risk universe that the enterprise risk management function evaluates to
assess the top risks to the enterprise on an annual basis. To the extent the enterprr
ise risk management process identifieff s a
heightened cybersecurity related risk, "risk owners" are assigned to develop risk mitigation plans, which are then tracked to
completion. The process’s annual risk assessment is presented to the Board of Directors.
We rely heavily on our suppl
u
suppl
u
ier, subcu ontractor or third-party partner could materially adversely impact us.
y chain to deliver our producd ts and services to our customers, and a cybersecurity incident at a
in preventing or mitigating a
Notwithstanding the extensive approach we take to cybersecurity, we may not be successfulff
cybersecurity incident that could have a material adverse effecff
t on us, but we do ensure all proper cybersecurity protocol and
due diligence is applied across the organization. While Patrick maintains cybersecurity insurance, the costs related to
cybersecurity threats or disruptu ions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity
risks.
25
ITEM 2.
PROPERTIES
es for which they are currently
Patrick believes the facilities occupiu ed as of December 31, 2023 are adequate for the purpos
being used and are well-maintained. The Company may, as part of its strategic operating plan, further consolidate and/or
ilities and may not renew leases on property with near-term lease expirations. Use of our
close certain owned facff
manufact
lities may vary with seasonal, economic, and other business conditions. Our primary
ing and distribution faci
corporate office is located in Elkhart, Indiana.
urt
ff
ff
r
,
2023 the Company operated in 23 states in the U.S., Mexico, China and Canada. As of December 31,
ff
In
leased approximately 10.1 million square feet of manufacff
approximately 2.9 million square feet, as listed below.
turing, distribution and corporate faci
,
2023 the Company
lities and owned
Purpose / Nature
Manufact
ff
urt
ing
Distribution
Manufact
ff
urt
ing & Distribution (shared space)
Corporate & Other
Total
Leased
Owned
# of
Properties
145
48
1
14
208
Square
Footage
7,840,000
1,975,000
127,000
109,000
10,051,000
# of
Properties
34
14
1
1
50
Square
Footage
2,230,000
493,000
94,000
35,000
2,852,000
Pursuant to the terms of the Company’s 2021 Credit Agreement, most of our owned real property is subject to a security
interest.
ITEM 3.
LEGAL PROCEEDINGS
ourse of business. In management's opinion, currently pending legal
We are subject to claims and lawsuits in the ordinary crr
proceedings and claims against the Company will not, individually or in the aggregate, have a material adverse effect on its
financial condition, results of operations, or cash floff ws.
Se Ne ote 14 "Com imitments a dnd Contiinggenciies" of hthe Notes to Cons lolididat ded iFinanciiall Statement
Form 10-K forff
furthhe dr diiscu ission of lleggall matters iin rella ition to co
immitments a dnd contiinggenciies.
is inclluddedd ellsewhhere iin hthiis
ITEM 4. MINE SAFETY DISCLOSURES
a
Not appl
icable.
ITEM 5. MARKET FOR REGISTRANTRR
’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Market Information
The Company's common stock is listed on The NASDAQ Global Stock Market under the symbol PATK.
Holders of Common Stock
As of Februarr
on behalf of beneficial owners.
ry 16, 2024, there were 318 shareholders of record. A number of shares are held in broker and nominee names
Dividends
In December 2019, the Company's Board of Directors (the "Board") adopted a dividend policy under which it plans to declare
regular quarterly cash dividends. The Company paid cash dividends of $1.90 and $1.44 per share, or $42.1 million and $32.9
million in the aggregate, in 2023 and 2022, respectively. Any future determination to pay cash dividends will be made by the
Board in light of the Company’s earnings, finff ancial position, capital requirements, and restrictions under the Company’s
2021 Credit Agreement, and such other factors as the Board deems relevant.
26
Purchases of Equity Securities by the Issuer
(c)
Issuer Purchases of Equity Securities forff
the three months ended December 31,
2023
.
Total
Number of
Shares
Purchased (1)
81,474
$
10,187
91,674
183,335
Average
Price
Paid Per
Share (1)
72.24
74.50
98.56
Total Number of Shares
Purchased as
Part of Publu icly
Announced Plans
or Programs (2)
Maximum Dollar Value
of Shares that May
Yet Be Purchased
Under the Plans
or Programs (2)
81,474
$
9,317
—
90,791
78,254,795
77,569,000
77,569,000
Period
Oct. 2 - Oct. 29, 2023
Oct. 30 - Dec. 3, 2023
Dec. 4 - Dec. 31, 2023
Total
(1) Amount includes 92,544 shares of common stock purchased by the Company in aggregate in November and
December 2023 for the sole purpos
e of covering the exercise price related to the exercise of stock options and
satisfying minimum tax withholding obligations of employees upon the vesting of stock awards and the exercise of
stock options held by the employees.
rr
(2) See Note 11 "Stock Repurchase Programs" of the Notes to Consolidated Financial Statements included elsewhere in
this Form 10-K forff
additional inforff mation about
a
the Company's stock repurchase program.
27
Stoctt k PerPP for
rmance Graph
The folff
lowing graph compares the cumulative 5-year total returt n to shareholders of the Company’s common stock relative to
the cumulative total returns of the Russell 2000 index and a customized peer group of companies, which includes Brunswick
Corporation, Cavco Industries, Inc., LCI Industries, Malibu Boats, Inc., Polaris Inc., Thor Industries, Inc., Winnebago
ation. This graph assumes an initial investment of $100 (with reinvestment of all
Industries, Inc., and Wabaa
dividends) was made in our common stock, in the index and in the peer group on December 31, 2018 and its relative
performance is tracked through December 31, 2023.
sh National Corpor
r
Comparison of 5-Year Cumulative Total Return*
$400
$300
$200
$100
$0
8
1 / 1
2 / 3
1
9
1 / 1
2 / 3
1
0
1 / 2
2 / 3
1
1
1 / 2
2 / 3
1
2
1 / 2
2 / 3
1
3
1 / 2
2 / 3
1
PATK
Peer Groupu
Russell 2000
($)
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
Patrick Industries, Inc.
Peer Group
Russell 2000
$
$
$
100.00 $
100.00 $
100.00 $
177.93 $
148.13 $
123.72 $
236.31 $
175.17 $
146.44 $
282.90 $
221.39 $
166.50 $
217.68 $
171.50 $
130.60 $
369.19
225.72
150.31
*The stock price performance included in this grapha
is not necessarily indicative of futff urt e stock price performance.
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
RESERVED
OF OPERATRR IONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in
conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Report. In
addition, this MD&A contains certain statements relating to futff urt e results that are forff ward-looking statements as that term is
defined in the Private Securities Litigation Reforff m Act of 1995. See “Information Concerning Forward-Looking Statements”
on page 3 of this Report.
28
EXECUTIVE SUMMARY
Overview of Markets and Related Industry Perforff mance
Recreational VehVV icle ("RV"
") Industrytt
s our primary mrr
arket and comprised 43% of the Company’s consolidated net sales in
rr
ecreased 42% in 2023 compared to 2022. Following a dealer inventory r
2023 Net sales to the
The RV iRR ndustry i
RV industry drr
estocking in the first half of 2022,
OEMs dramatically reduced producd tion in the second half of 2022 and throughout 2023 as retail demand decreased and
dealer inventory nrr
eeds decreased, with the OEMs demonstrating operating discipline to maintain a balanced inventoryrr
channel forff
the long-term health and stabia lity of the industry.rr
rr
.
oximately 313,200 units
According to the RV Industry Arr
nit shipments totaled appr
in 2023, a decrease of 37% compared to approximately 493,300 units in 2022. RV industry r
etail unit sales totaled
approximately 377,500 units in 2023, a decrease of 15% compared to 2022 retail unit sales of approximately 446,300 units
according to Statistical Surveys, Inc. ("SSI").
ssociation (“RVIRR A”), wholesale industry urr
a
rr
Marineii
Industrytt
Net sales to the marine industry,rr which represented approximately 27% of the Company's consolidated net sales in 2023,
decreased 11% in 2023 compared to 2022. Our marine revenue is generally correlated to marine wholesale powerboa
t unit
shipments, which decreased 2% to approximately 192,300 units in 2023 compared to approximately 196,500 units in 2022,
according to Company estimates based on data published by the National Marine Manufact
urt ers Association ("NMMA").
2023 a decrease of 5% compared to
t shipments totaled appr
Estimated marine retail powerboa
oximately 178,100 units in
2022 retail powerboa
t shipments of approximately 188,100 units, according to SSI as economic uncertainty and higher
r
interest rates impacted demand.
a
r
r
ff
,
Manufacff
tured HouHH singii
("MH"
") Industrytt
Net sales to the MH industry,rr which represented 16% of the Company’s consolidated net sales in
2023 compared to 2022. MH sales are generally correlated to MH industry wrr
from thhe Manufact
21% compared to 2022 MH wholesale industry urr
by a decrease in housing affordability caused by elevated interest rates and higher raw material costs.
2023 decreased 19% in
ata
2023 a decrease of
nit shipments totaled 89,200 units in
nit shipments of 112,900 units. Demand forff MH units in 2023 was impacted
ded Housiingg Ins ititute, MH wh lholes lale ie ndustry urr
holesale unit shipments. Basedd o in i dndustry dy drr
urt
ff
,
,
Industritt al Market
high-rise,
The industrial market is comprised primarily of the solid surface countertop industry,rr
tures market, offiff ce and hd hous heh lold fd urff niture market and regional distributors. Net sales
hospitality, retail and commercial fixff
to this market represented 14% of our consolidated net sales in
2023 decreasing 14% in 2023 compared to 2022. Overall, our
revenues in these markets are focused on the residential housing, hospitality, high-rise housing and offiff ce, commercial
oximately 70% to 80% of our industrial business is
construcr
directly tied to the residential housing market, with the remaining industrial sales directly tied to the non-residential and
commercial markets.
ional furff niture markets. We estimate that appr
kitchen cabinet industry,rr
tion and institutt
a
,
Combined new housing starts decreased 9% in 2023 compared to 2022, with single famff
ily housing starts decreasing 6% and
multifamily residential starts decreasing 14% for the same period. Our industrial products are generally among the last
components installed in new unit construcr
r to six
months.
tion and as such our related sales typically trail new housing starts by fouff
29
CONSOLIDATED OPERATRR ING RESULTS
lowing tabla e sets forff
The folff
statements of income for the years ended December 31, 2023, 2022 and 2021.
th the percentage relationship to net sales of certain items on the Company’s consolidated
($ in thousands)
Net sales
Cost of goods sold
Gross profit
Warehouse and delivery expenses
Selling, general and administrative expenses
Amortization of intangible assets
Operating income
Interest expense, net
Income taxes
Net income
Year Ended December 31,
2023
2022
2021
$ 3,468,045 100.0 % $ 4,881,872 100.0 % $ 4,078,092 100.0 %
2,685,812
782,233
143,921
299,418
78,694
260,200
68,942
48,361
142,897
$
77.4
22.6
4.1
8.6
2.3
7.5
2.0
1.5
4.1
3,821,934
1,059,938
163,026
327,513
73,229
78.3
21.7
3.3
6.7
1.5
496,170
10.2
60,760
107,214
328,196
$
1.2
2.2
6.7
3,276,898
801,194
139,606
253,547
56,329
351,712
57,890
68,907
224,915
$
80.4
19.6
3.4
6.2
1.4
8.6
1.4
1.7
5.5
Year Ended December 31, 2023 Compared to 2022
Net Sales. Net sales in 2023 decreased appr
oximately $1.41 billion, or 29%, to $3.47 billion froff m $4.88 billion in 2022. The
decrease was attributable to a 42% decrease in net sales to our RV end market, a 11% decrease in net sales to our marine end
market, a 19% decrease in net sales to our MH end market, and a 14% decrease in net sales to our industrial end market.
a
In 2023 and 2d 022, net salles att iribbut bablle to acq iui isi itions complleted id in eachh of thhos ye years was $17.7 million and $d 121.8
million, respectiiv lelyy.
The Company’s RV cRR
marine powerboa
content per wholesale unit forff
r
ontent per wholesale unit forff
t content per wholesale unit forff
2023 decreased 9% to $4,800 from $5,257 in 2022. The Company's
2023 decreased 5% to $4,803 from $5,032 in 2022. The Company's MH
2023 increased 2% to $6,372 in 2023 from $6,243 in 2022.
Cost of Goods Sold. Cost of goods sold decreased $1.14 billion, or 30%, to $2.69 billion in 2023 from $3.82 billion in 2022.
As a percentage of net sales, cost of goods sold decreased 90 basis points durd ing 2023 to 77.4% from 78.3% in 2022.
Cost of goods sold as a percentage of net sales decreased forff
2023 compared to 2022 primarily as a result of (i) continued
cost reduction and automation initiatives we deployed throughout 2022 and 2023 that positively impacted overall costs, (ii)
improved labor effiff ciencies as a result of investment in human capital and improved retention rates, (iii) synergies and
differff ent cost profilff es from acquisitions completed in 2023 and 2022 and (iv) changes in certain commodity prices, partially
offsff et by reduced sales volumes resulting in less favff orable fixed cost absa orptrr
ion when compared to the prior year periods. For
ors contributed to a 50-basis point decrease in labor as a percentage of net sales and a 330-basis point
2023, these fact
decrease in materials cost as a percentage of net sales, partially offsff et by a 300-basis point increase in overhead as a
percentage of net sales due to lower sales volumes. In general, the Company's cost of goods sold percentage can be impacted
from period-to-period by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials
and commodity-based components that are utilized in production.
ff
Gross Profit. Gross profit decreased $277.7 million or 26%, to $782.2 million in 2023 from $1,059.9 million in 2022. As a
percentage of net sales, gross profitff
as a
percentage of net sales in 2023 compared to 2022 reflects the impact of the facff
under “Cost of Goods
Sold”.
increased to 22.6% in 2023 from 21.7% in 2022. The increase in gross profitff
tors discussed above
a
Economic or industry-rr wide factors affecting the profitff ability of our RV, marine, MH and industrial businesses include the
urt e our products, the competitive
y chain constraints and the labor used to manufact
costs of commodities and suppl
u
ff
30
environment and the impact of diffeff
fluctuate froff m quarter-to-quarter and year-to-year.
rent gross margin profiles of acquired companies, all of which can cause gross margins to
Warehouse and Delivery Expenses. Warehouse and delivery expenses decreased $19.1 million, or 12%, to $143.9 million
in 2023 from $163.0 million in 2022. As a percentage of net sales, warehouse and delivery err
xpenses were 4.1% in 2023 and
3.3% in 2022. The decrease in warehouse and delivery expenses is attributable to the decrease in sales, and the increase as a
percentage of net sales is primarily attributed to the fixff ed nature of certain expenses such as personnel wages, building
charges, fleet expense, insurance, and depreciation among others as well as a decrease in load efficiency.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses decreased $28.1 million, or 9%, to $299.4
million in 2023 from $327.5 million in 2022. As a percentage of net sales, SG&A expenses were 8.6% in 2023 and 6.7% in
2022.
The decrease in SG&A expenses in 2023 compared to 2022 is primarily due to lower variabla e expenses, such as
commissions, associated with the decrease in net sales. The increase in SG&A expenses as a percentage of net sales is
primarily a result of the fixed naturt e of certain other expenses such as wages, payroll taxes, stock compensation, and
insurance, as well as an increase in software and technology expenses. Additionally, certain 2022 and 2023 acquisitions
operate with comparatively higher SG&A as a percentage of sales when compared to the consolidated percentage.
Amortization of Intangible Assets. Amortization of intangible assets increased $5.5 million, or 8%, in 2023 compared to
2022. The increase in 2023 compared to 2022 reflects the impact of intangible assets of businesses acquired in 2023 and
2022.
Operating Income. Operating income decreased $236.0 million, or 48%, to $260.2 million in 2023 from $496.2 million in
2022. Operating income in 2023 and 2022 included $1.0 million and $19.4 million, respectively, froff m the businesses
acquired in each respective year. Operating income as a percentage of net sales decreased 270 basis points to 7.5% in 2023
from 10.2% in 2022. The decrease in operating income and operating margin is primarily attributable to lower net sales and
.
the items discussed above
a
Interest Expense, Net. Interest expense, net, increased $8.2 million, or 13%, to $68.9 million in 2023 from $60.8 million in
2022. The increase in interest expense is primarily attributable to the increase in interest rates on our debt subju ect to variable
2023 (the “1.00% Convertible Notes”) in
interest rates and the repayment of our 1.00% Convertible Senior Notes dued
Februar
2027") which has a comparatively
higher interest rate, partially offsff et by lower average debt levels compared to 2022.
ry 2023, with borrowings under our revolving credit facility (the "Revolver dued
Income Taxes. Income tax expense decreased $58.9 million, or 55%, to $48.4 million in 2023 from $107.2 million in 2022
as a result of the decrease in pre-tax income and an increase in the effective tax rate. For 2023, the effective tax rate was
25.3% compared to 24.6% in 2022. The increase in the effeff ctive tax rate in 2023 was mostly attributable to an increased
impact from stock compensation Section 162(m) permanent addback.
See our Form 10-K forff
enddedd Decembber 31, 2022 compar ded to 2021.
hth ye year e dndedd Decembber 31, 2022 for a didiscus ision of our cons lolididat ded opera itingg res lults for thhe yyear
Use of Financial Metrics
hwhiichh w be b leliieve ar
ie important
lcalcullatedd u isi gng our ma krket salles
hThese met irics
ata.
louldd not bbe considider ded lalternatiives to accountiingg p irinciiplle gs gener lallyly accepted id in thhe Uniitedd States of Ame irica (("U.S.
imila lrlyy ti litledd measures us ded byby othhers. Thhese metriics
Our MD& iA inclluddes fiinff an ici lal metriics, su hch as RV, mariine a dnd MH content per
measures of hthe Compa yny' bs busiiness performance. Content per
didi ividded bd byy Compa yny es itimates of if i dndustryy urr
hsh
GAAP )"). Our computatiions of content per
hsh
iunit,
iunit met irics ar ge gener lallyly
an an lalyysiis of our resullts as reportedd u dnder U.S. GAAP.
louldd not bbe considider ded iin iis lolatiion or as s bubs ititutes forff
hwhiichh are dde irived fd froff m thihi drd-par yty iinddustry dy drr
iunit m yay didiffer froff m si
init v lolume,
il
BUSINESS SEGMENTS
ing and distribution, are based on its method of internal reporting. The
The Company's reportabla e segments, manufact
Company regularly evaluates the performance of the manufact
ing and distribution segments and allocates resources to them
urt
based on a variety of indicators including net sales and operating income. The Company does not measure profitabia lity at the
end market (RV, marine, MH and industrial) level.
urt
ff
ff
31
• Manufacff
turing – This segment includes the following products: laminated products that are utilized to produce
furniture, shelving, walls, countertops and cabinet products; cabinet doors; fiberglass bath fixturt es and tile systems;
hardwood furniturt e; vinyl printing; RV and marine furff niture; audio systems and accessories, including amplifieff
rs,
tower speakers, soundbars, and subwu
ooferff s; decorative vinyl and paper laminated panels; solid surface, granite, and
quartz countertop fabff
rication; RV painting; fabra icated aluminum products; fibff erglass and plastic components;
fiberglass bath fixturt es and tile systems; softwoods lumber; custom cabinetry; polymer-based and other flooring;
electrical systems components including instrument and dash panels; wrapped vinyl, paper and hardwood profilff e
mouldings; interior passage doors; air handling products; slide-out trim and fasff cia; thermoformed shower surrounds;
specialty bath and closet building products; fibff erglass and plastic helm systems and components products; treated,
untreated and laminated plywood; wiring and wire harnesses; adhesives and sealants; boat towers, tops, trailers and
frames; marine hardware and accessories; protective covers for boats, RVsR , aircraft,ff
and military and industrial
equipment; aluminum and plastic fuel tanks; CNC molds and composite parts; slotwall panels and components; and
other products.
•
all
Distribution – This segment includes the distribution of pre-finished wall and ceiling panels; drywrr
finishing products; electronics and audio systems components; appliances; marine accessories and components;
wiring, electrical and plumbing products; fibff er reinforced polyester products; cement siding; raw and processed
lumber; interior passage doors; roofinff g products; laminate and ceramic flooring; tile; shower doors; furniture;
fireplaces and surrounds; interior and exterior lighting products; and other miscellaneous products in addition to
providing transportation and logistics services.
all and drywrr
Net sales pertaining to the manufact
discussions include intersegment sales. Gross profit includes the impact of intersegment operating activity.
ing and distribution segments as stated in the tabla e below and in the following
urt
ff
The table below presents inforff mation about
the net sales, gross profit, and operating income of the Company’s segments.
Reconciliations of the amounts below to consolidated totals are presented in Note 16 "Segment Information" of the Notes to
Consolidated Financial Statements included elsewhere in this Form 10-K.
a
($ in thousands)
Sales
Manufact
ff
urt
ing
Distribution
Gross Profit
Manufact
ff
urt
ing
Distribution
Operating Income
ing
ff
Manufact
urt
Distribution
Year Ended December 31, 2023 Compared to 2022
Manufacff
turingii
Year Ended December 31,
2023
2022
2021
$
$
$
$
$
$
2,653,257
889,408
577,284
195,506
321,096
90,095
$
$
$
$
$
$
3,681,412
1,287,597
818,960
254,886
531,547
136,889
$
$
$
$
$
$
3,002,107
1,154,654
598,942
211,241
379,885
106,241
Net Sales. Sales decreased $1.03 billion, or 28%, to $2.65 billion in 2023 from $3.68 billion in 2022. This segment accounted
for appr
oximately 75% of the Company’s consolidated net sales in 2023 compared to approximately 74% of the Company's
a
consolidated net sales in 2022. The sales decrease reflects decreased net sales across all of our end markets.
In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was appr
and $121.3 million, respectively.
a
oximately $3.6 million
Gross Profit. Gross profit decreased $241.7 million, or 30%, to $577.3 million in 2023 from $819.0 million in 2022. As a
percentage of net sales, gross profitff was 21.8% in 2023 compared to 22.2% in 2022.
32
Gross profit margin decreased in 2023 compared to 2022 due to increases in labor and manufact
ing overhead expense as a
percentage of net sales primarily due to reduced sales volumes, partially offsff et by an improvement in material costs as a
percentage of net sales.
urt
ff
Operating Income. Operating income decreased $210.4 million, or 40%, to $321.1 million in 2023 from $531.5 million in
ing segment attributable to acquisitions completed in 2023 and 2022 was
2022. Operating income forff
approximately $(0.6) million and $19.4 million, respectively. The decrease in operating income primarily reflects the
.
decrease in gross profitff mentioned above
the manufact
urt
a
ff
Distii ritt bui
tion
Net Sales. Sales decreased $398.2 million, or 31%, to $889.4 million in 2023 from $1,287.6 million in 2022. This segment
accounted for appa
roximately 25% of the Company’s consolidated net sales for 2023 compared to 26% of the Company's
consolidated net sales in 2022. The decrease in sales in 2023 is attributed to decreased net sales across all of our end markets.
oximately $14.1 million
In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was appr
and $0.5 million, respectively.
a
Gross Profit. Gross profit decreased $59.4 million, or 23%, to $195.5 million in 2023 from $254.9 million in 2022. As a
as a
percentage of net sales, gross profitff was 22.0% in 2023 compared to 19.8% in 2022. The increase in gross profitff
percentage of net sales for 2023 is primarily attributed to decreases in labor
as a percentage of net sales partly offsff et by
increases in material costs as a percentage of net sales.
a
Operating Income. Operating income in 2023 decreased $46.8 million, or 34%, to $90.1 million froff m $136.9 million in
2022. Operating income forff
the Distribution segment attributable to acquisitions completed in 2023 and 2022 was immaterial.
.
The decrease in operating income in 2023 primarily reflects the items discussed above
a
Unalloll cated CorCC por
rr
ate Ett
xpeEE
nses
As presented in Note 16 "Segment Inforff mation" of the Notes to Consolidated Financial Statements included elsewhere in this
ate expenses in 2023 decreased $26.7 million, or 27%, to $72.3 million froff m $99.0 million in
Form 10-K, unallocated corpor
2022. The decrease in 2023 was mostly attributed to decreases in incentive compensation, wages, profesff
and
amortization of inventory srr
tep-up adjud stments.
sional fees
ff
r
LIQUIDITY AND CAPITAL RESOURCES
Q
Our liquidity as of December 31, 2023 consisted of cash and cash equivalents of $11.4 million and $768.1 million of
availabia lity under our credit facility. The Company's primary sources of liquidity are cash floff ws from operations, which
includes selling its products and collecting receivabla es, available cash reserves and borrowing capacity availabla e under the
2021 Credit Facility as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements.
As of December 31, 2023, the Company's existing cash and cash equivalents, cash generated froff m operations, and availabla e
borrowings under its 2021 Credit Facility are expected to be sufficff
ient to meet anticipated cash needs forff working capital and
capital expenditures forff
at least the next 12 months, exclusive of any acquisitions, based on its current cash floff w budgets and
forecast of short-term and long-term liquidity needs.
Principal uses of cash are to suppor
t the Company's
capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company’s
common stock, among others.
t working capia tal demands, meet debt service requirements and suppor
u
u
rr
roff m period to period depending on manufact
Working capital requirements vary f
ing volumes primarily related to the RV,
marine, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that
operating cash floff w is inadequate and one or more of the Company's capital resources were to become unavailabla e, 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.
urt
ff
33
ry 2023, the Company utilized availabla e borrowing capacity under the Revolver dued
In Februarr
satisfy its repayment obligation at maturt
Financial Statements included elsewhere in this Form 10-K forff
Throughout the course of the year, the Company made payments on the Revolver dued
of December 2023.
2027 and cash on hand to
ity for the 1.00% Convertible Notes. See Note 7 "Debt" of the Notes to Consolidated
further discussion of the 1.00% Convertible Notes.
2027, with the balance repaid in full as
In January 2024, the Company utilized availabla e borrowing capaa
its acquisition of Sportech, as discussed in Note 17 "Subsu equent Events" of the Notes to Consolidated Financial Statements.
city under the Revolver dued
2027 and cash on hand to fund
ff
As of and forff
the reporting period ended December 31, 2023, the Company was in compliance with its financial covenants as
required under the terms of its 2021 Credit Agreement. The required maximum consolidated secured net leverage ratio and
the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement,
compared to the actuat
l amounts as of December 31, 2023 and forff
the fisff cal period then ended are as follows:
Consolidated secured net leverage ratio (12-month period)
Consolidated fixed charge coverage ratio (12-month period)
Required
2.75
1.50
l
Actuat
0.27
3.01
In addition, as of December 31, 2023, the Company's consolidated total net leverage ratio (12-month period) was 2.38. While
this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit
Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.
Cash Flows
Year Ended December 31, 2023 Compared to 2022
Operatintt g Activtt
ities
Cash flows froff m operating activities are one of the Company's primary sources of liquidity, representing the net income the
Company earned in the reported periods, adjusted forff
non-cash items and changes in operating assets and liabia lities.
Net cash provided by operating activities decreased $3.0 million, or 1%, to $408.7 million in 2023 from $411.7 million in
2022 primarily due to a decrease in net income of $185.3 million, subsu tantially offseff
t by an increase in depreciation and
amortization of $13.7 million and a $98.9 million source of cash from operating assets and liabia lities compared to a
$60.7 million use of cash froff m operating assets and liabia lities in the prior period.
Investing Activtt
ities
Net cash used in investing activities decreased $235.0 million, or 73%, to $86.5 million in 2023 from $321.5 million in 2022
capital
primarily due to a decrease in cash used in business acquisitions of $223.0 million and a decrease in cash used forff
expenditures of $20.9 million, partly offsff et by a $6.2 million decrease in cash received on disposals of property, plant, and
equipment.
Finaii ncing Activtt
ities
Net cash floff ws used in financing activities increased $143.3 million to $333.6 million in 2023 compared to $190.3 million in
2022. The increase in cash floff ws used in financing activities was primarily due to the $172.5 million repayment of the 1.00%
Convertible Notes and $25.6 million in net repayments on the Revolver dued
t by a $58.3 million
reduction in stock repurchases in 2023 compared to 2022.
2027, partially offseff
See our Form 10-K forff
2022 compared to 2021.
the year ended December 31, 2022 for a discussion of cash floff ws for the year ended December 31,
Off-Bff
alance Sheet Arrangements
None.
34
CRITICAL ACCOUNTING POLICIES
The preparation of finff ancial statements in conforff mity with accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions that affeff ct the reported amounts of assets and liabia lities, the disclosure of
contingent assets and liabia lities at the date of the finff ancial statements and the reported amounts of revenues and expenses
during the reporting period. The SEC has definff ed a company’s critical accounting policies as those that are most important to
the portrayal of its finff ancial condition and results of operations, and which require the Company to make its most difficult
and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although
management believes that its estimates and assumptions are reasonabla e, they are based upon information availabla e when they
rent assumptions or conditions. The Company
are made. Actual results may differff materially from these estimates under diffeff
has identifieff d the following critical accounting policies and estimates:
Goodwill and Other Intangible Assets. The Company’s acquisitions include purchased goodwill and other intangible assets.
Goodwill represents the excess of cost over the fair value of the net assets acquired. Other intangible assets acquired are
classified as customer relationships, non-compete agreements, patents and trademarks.
Goodwill and indefinite-lived intangible assets, representing acquired trademarks, are not amortized but are subject to an
annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair
value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the
carrying value of goodwill or trademarks may not be recoverabla e. These indicators include a sustained material decline in our
share price and market capitalization, a decline in expected future cash floff ws, or a material adverse change in the business
climate. A material adverse change in the business climate could result in a material loss of market share or the inability to
achieve previously projected revenue growth.
ff
urt
Impairment reviews of goodwill are performed at the reporting unit level. The Company’s reporting units are definff ed as one
level below our operating segments, Manufact
ing and Distribution, which are the same as our reportabla e segments. In
impairment, either a qualitative or quantitative assessment is performed. If the qualitative assessment
evaluating goodwill forff
r value of the reporting unit is less than its carrying value, the Company
indicates it is more likely than not that the faiff
performs a quantitative assessment. When estimating reporting unit faiff
r value with the quantitative assessment, the Company
uses a combination of market and income-based methodologies. The market approach includes a comparison of the multiple
of a reporting unit's carrying value to its earnings before interest, taxes, depreciation and amortization with the multiples of
similar businesses or guideline companies whose securities are actively traded in the public markets. When calculating the
present value of future cash floff ws under the income approach, the Company takes into consideration multiple variables,
including forecasted sales volumes and operating income, current industry arr
nd economic conditions, and historical results.
oach fair value estimate also includes estimates of long-term growth rates and discount rates that are
The income appr
commensurate with the risks and uncertainty inherent in the respective reporting units and internally-developed forff ecasts.
a
Impairment reviews of indefinite-lived intangible assets (trademarks) consist of a comparison of the faiff
r value of the
trademark to its carrying value. Fair value is measured using a relief-from-royalty approach, a form of discounted cash floff w
tudies and consideration of
method. Estimated royalty rates appl
operating margins. Discount rates are derived in a manner similar to what is done in testing goodwill for impairment.
ied to projeo cted revenues are based on comparabla e industry s
a
rr
Based on the results of the Company's analyses, the estimated fair value of each of the Company's reporting units and
trademarks was determined to exceed the carrying value for each of the years ended December 31, 2023, 2022 and 2021 and
so no impairments were recognized. Further, based on the results of the impairment analyses, none of the Company’s
reporting units or trademarks were at risk of failing the impairment assessments discussed above
that would have a material
effeff ct on the Company’s Consolidated Financial Statements forff
any period presented.
a
Business Combinations. From time to time, we may enter into business combinations. We recognize the identifiaff bla e assets
acquired and the liabia lities assumed at their fair values as of the date of acquisition. We measure goodwill as the excess of
consideration transferred, which we also measure at faiff
r values of the
identifiaff bla e assets acquired and liabia lities assumed. The acquisition method of accounting requires us to make significant
estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition,
including the faiff
r values of property, plant and equipment, identifiable intangible assets, contingent consideration and other
financial assets and liabia lities. Significant estimates and assumptions include subju ective and/or complex judgments regarding
items such as discount rates, customer attrition rates, royalty rates, and other factors, including estimated futff urt e cash floff ws
that we expect to generate from the acquired assets.
r value, over the net of the acquisition date faiff
35
a
The acquisition method of accounting also requires us to refinff e these estimates over a measurement period not to exceed one
facts and circumstances that existed as of the acquisition date that, if known,
year to reflect new information obtained about
would have affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional
amounts that we have recorded forff
r values of assets and liabia lities in connection with acquisitions, these adjud stments
could have a material impact on our financial condition and results of operations. No changes in the year ended December 31,
r value estimates of assets acquired and liabilities assumed in acquisitions were material. If the
2023 to provisional faiff
ted projeo ctions of the underlying business activity change compared with the assumptions
subsu equent actuat
and projeo ctions used to develop the acquisition date faiff
r value estimates, we could record future impairment charges. In
addition, we estimate the economic lives of certain acquired assets and these lives are used to calculate depreciation and
amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be
increased or decreased, or the acquired assets could be impaired.
l results and upda
the faiff
u
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Debt Obligations
As of December 31, 2023, our total debt obligations under our 2021 Credit Agreement were under Secured Overnight
Financing Rate Data ("SOFR")-based interest rates. A 100-basis point increase in the underlying SOFR rates would result in
oximately $1.3 million, assuming average borrowings during 2023, including the Term
additional annual interest cost of appr
Loan due 2027, subju ect to variable rates were equal to the amount of such borrowings outstanding as of December 31, 2023,
or $129.4 million, excluding deferred finff ancing costs related to the Term Loan dued
2027.
a
Commodity Volatility
The prices of key raw materials, consisting primarily of lauan, gypsum, fibff erglass, particleboard, aluminum, softwoods and
hardwoods lumber, resin, and petroleum-based products, are influenced by demand and other factors specific to these
commodities as well as general inflationary pressures, including those driven by supply chain and logistical disrupt
ions.
te in 2023. During periods of volatile
Prices of certain commodities have historically been volatile and continued to fluff ctuat
commodity prices, we have generally been able to pass both price increases and decreases to our customers in the form of
price adjustments. We are exposed to risks durd ing periods of commodity volatility because there can be no assurance futff urt e
cost increases or decreases, if any, can be partially or fully passed on to customers, or that the timing of such sales price
increases or decreases will match raw material cost increases or decreases. We do not believe that commodity price volatility
had a material effeff ct on results of operations for the periods presented.
rr
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The inforff mation required by this item is set forth in Item 15(a)(1) of Part IV of this Annual Report on Form 10-K.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Discii
losure Contrott
ls and ProPP cedures
The Company maintains “disclosure controls and procedurd es”, as such term is defined under Securities Exchange Act Rule
13a-15(e) or 15d-15(e), that are designed to ensure that inforff mation required to be disclosed in our Securities Exchange Act
of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such inforff mation is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appr
timely decisions regarding
required disclosures. In designing and evaluating the disclosure controls and procedurd es, the Company’s management
recognizes that any controls and procedurd es, no matter how well designed and operated, can provide only reasonabla e
assurance of achieving the desired control objectives and the Company’s management necessarily is required to appl
y its
judgment in evaluating the cost-benefitff
relationship of possible controls and procedurd es.
opriate to allow forff
a
a
36
Under the supeu rvision and with the participation of our senior management, including our Chief Executive Officer and Chief
Financial Officer, the Company conducted an evaluation of the effeff ctiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation,
our Chief Executive Offiff cer and Chief Financial Offiff cer concluded as of the Evaluation Date that our disclosure controls and
procedurd es were effeff ctive such that the information relating to the Company, including consolidated subsu idiaries, required to
be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms, and is accumulated and communicated to Company’s management, including
our Chief Executive Officer and Chief Financial Offiff cer, as appropriate to allow timely decisions regarding required
disclosure.
Managea ment’s Annual Report on IntII ertt nal ConCC trol Over Finaii ncial Reporting
We are responsible for establishing and maintaining adequate internal control over finff ancial reporting, as defined in RulRR e
13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonabla e assurance
regarding the fair and reliabla e preparation and presentation of our published finff ancial statements. We continually evaluate our
system of internal control over finff ancial reporting to determine if changes are appropriate based upon
changes in our
operations or the business environment in which we operate.
u
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effeff ctive can provide only reasonabla e assurance with respect to financial statement preparation and
presentation.
Under the supeu rvision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an assessment of the effeff ctiveness of our internal control over finff ancial reporting based on
the fraff mework in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). This assessment included a review of the documentation of controls, an assessment of
the design effect
iveness of controls, testing of the operating effeff ctiveness of controls, and a conclusion on this evaluation.
Based on our assessment, we have concluded that our internal control over finff ancial reporting was effeff ctive as of December
31, 2023.
ff
The Company’s independent registered public accounting firff m, Deloitte & Touche LLP, audited our internal control over
financial reporting as of December 31, 2023, as stated in their report in the section entitled “Report of Independent Registered
Publu ic Accounting Firm” included elsewhere in this Form 10-K, which expresses an unqualifieff d opinion on the effect
iveness
of the Company’s internal control over finff ancial reporting as of December 31, 2023.
ff
Changes in i
ii ntii ertt nal control over finaii ncial reporting
There have been no changes in our internal control over finff ancial reporting that occurred durd ing the fourth quarter ended
December 31, 2023 or subsu equent to the date the Company completed its evaluation, that have materially affeff cted, or are
reasonabla y likely to materially affeff ct, our internal control over finff ancial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
a
Not appl
icable.
37
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATRR E GOVERNANCE
PART III
Directors of the Companyp y
our 2024
The inforff mation required by this item with respect to directors is set forff
Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A (the “2024 Proxy Statement”) under
the captions “Election of Directors” and “Delinquent Section 16(a) Reports,” which inforff mation is hereby incorpor
ated herein
by reference.
th in our definitive Proxy Statement forff
r
Executive Offiff cers of the Registrant
g
The inforff mation required by this item is set forth under the caption “Executive Officers of the Company” in Part I of this
Annual Report on Form 10-K.
Audit Committee
Information on our Audit Committee is contained under the caption “Audit Committee” in the Company's 2024 Proxy
Statement and is incorporated herein by reference.
Code of Ethics and Business Conduct
icable to all employees. Our Code of Ethics and
We have adopted a Code of Ethics and Business Conduct Policy appl
Business Conduct Policy is availabla e on the Company’s web site at www.patrickind.com under “For Investors”. We intend to
post on our web site any subsu tantive amendments to, or waivers from, our Code of Ethics and Business Conduct Policy as
well as our Corporate Governance Guidelines. We will provide shareholders with a copy of these policies without charge
rate Secretary arr
upon written request directed to the Company’s Corpor
t the Company’s address.
a
Corporate Governance
p
Information on our corporate governance practices is contained under the caption “Corporate Governance Highlights” in the
Company's 2024 Proxy Statement and incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The inforff mation required by this item is set forth in our 2024 Proxy Statement under the caption “Executive Compensation,"
"Compensation Committee Interlocks and Director Participation," and "Compensation Committee Report," and is
incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The inforff mation required by this item is set forth in our 2024 Proxy Statement under the captions “Equity Compensation Plan
ated herein by
Information” and “Security Ownership of Certain Beneficff
reference.
ial Owners and Management,” and is incorpor
r
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The inforff mation required by this item is set forth in our 2024 Proxy Statement under the captions “Related Party
Transactions” and “Corpor
ate Governance Highlights”, and is incorporated herein by reference.
r
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The inforff mation required by this item is set forth in our 2024 Proxy Statement under the heading “Independent Publu ic
Accountants,” and is incorpor
ated herein by reference.
r
38
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
(1) The finff ancial statements listed in the accompanying Index to the Financial Statements on page F-1 of
the separate finff ancial section of this Report are incorporated herein by reference.
(3) The exhibits required to be filff ed as part of this Annual Report on Form 10-K are listed under (c) below.
(c)
Exhibits
Exhibit Number
3.1
3.2
3.3
4.1
4.2
4.3
4.4**
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8
10.9
Articles of Incorporation of Patrick Industries, Inc. (filff ed as Exhibit 3.1 to the Company’s
r
Form 10-K filff ed on March 30, 2010 and incorpor
ated herein by reference).
Exhibits
Amendment to the Articles of Incorporation of Patrick Industries, Inc. dated June 5, 2018 (filed
ated herein
as Exhibit 3.2 to the Company's Form 10-K fileff d on February 2rr
by reference).
8, 2019 and incorpor
r
Amended and Restated By-laws of Patrick Industries, Inc. (filff ed as Exhibit 3.1 to the
Company's Form 8-K filed on May 8, 2020 and incorpor
ated herein by reference).
r
Indenturt e (including Form of Note), dated as of September 17, 2019, among Patrick Industries,
Inc., the guarantors froff m time to time party thereto and U.S. Bank, National Association, as
Trusr
incorporated herein by reference).
tee (filed as Exhibit 4.1 to the Company's Form 8-K filed on September 18, 2019 and
Indenturt e (including Form of Note), dated as of April 20, 2021, among Patrick Industries, Inc.,
the guarantors froff m time to time party thereto and U.S. Bank, National Association, as Trusr
tee
(filed as Exhibit 4.1 to the Company's Form 8-K filed on April 26, 2021 and incorpor
herein by reference).
ated
r
Indenturt e (including Form of Note) with respect to the Company's 1.75% Convertible Senior
Notes dued
Bank National Association, as trusr
December 13, 2021 and incorporated herein by reference)
2028, dated as of December 13, 2021. between Patrick Industries, Inc. and U.S.
tee. (filff ed as Exhibit 4.1 to the Company's Form 8-K filed on
Description of the Company’s common stock.
Patrick Industries, Inc. 2009 Omnibus Incentive Plan (filed as Appendix A to the Company’s
revised Definff
incorporated herein by reference).
itive Proxy Statement on Scheduld e 14A filed on October 20, 2009 and
Form of Employment Agreement with Executive Officers (filed as Exhibit 10.2 to the
ated herein by reference).
Company’s Form 10-K fileff d on March 30, 2010 and incorpor
r
Form of Non-Qualifieff d Stock Option Agreement (filed as Exhibit 10.3 to the Company’s Form
10-K filff ed on Februar
ated herein by reference).
ry 24, 2023 and incorpor
r
Form of Offiff cer and Employee Time-Based Restricted Share Award (filed as Exhibit 10.4 to
ated herein by reference).
the Company’s Form 10-K fileff d on February 2rr
4, 2023 and incorpor
rr
Form of Offiff cer and Employee Time-Based Restricted Share Award and Performance
Contingent Restricted Share Award (filff ed as exhibit 10.5 to the Company's Form 10-K fileff d on
Februarr
ated herein by reference).
ry 24, 2023 and incorpor
rr
Form of Non-Employee Director Restricted Share Award (filff ed as Exhibit 10.6 to the
Company’s Form 10-K fileff d on February 2rr
4, 2023 and incorpor
ated herein by reference).
rr
Form of Stock Appreciation Rights Agreement (filed as Exhibit 10.7 to the Company’s Form
10-K filff ed on Februar
ated herein by reference).
ry 24, 2023 and incorpor
r
First amendment to Fourth Amended and Restated Credit Agreement dated August 11, 2022 by
and among the Company, the Guarantors, the lenders from time to time a party thereto and
Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Form 8-K
filff ed on August 15, 2022 and incorpor
ated herein by reference).
rr
Base Convertible Bond Hedge Transaction Confirff mation, dated as of December 7, 2021, by
and between Patrick Industries. Inc. and Bank of America, N.A. (filed as Exhibit 10.1 to the
Company's Form 8-K filed on December 13, 2021 and incorpor
ated herein by reference)
r
39
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21*
21**
23.1**
31.1**
31.2**
32**
97**
Base Convertible Bond Hedge Transaction Confirff mation, dated as of December 7, 2021, by
and between Patrick Industries. Inc. and Nomura Global Financial Products Inc. (filed as
Exhibit 10.2 to the Company's Form 8-K fileff d on December 13, 2021 and incorpor
by reference)
ated herein
r
Base Convertible Bond Hedge Transaction Confirff mation, dated as of December 7, 2021, by
and between Patrick Industries. Inc. and Wells Fargo Bank, National Association. (filed as
Exhibit 10.3 to the Company's Form 8-K fileff d on December 13, 2021 and incorpor
by reference)
ated herein
r
Base Issuer Warrant Transaction Confirff mation, dated as of December 7, 2021, by and between
Patrick Industries. Inc. and Bank of America, N.A. (filed as Exhibit 10.4 to the Company's
Form 8-K filff ed on December 13, 2021 and incorpor
rated herein by referff ence)
Base Issuer Warrant Transaction Confirff mation, dated as of December 7, 2021, by and between
Patrick Industries. Inc. and Nomura Global Financial Products Inc. (filed as Exhibit 10.5 to the
Company's Form 8-K filed on December 13, 2021 and incorpor
rated herein by referff ence)
Base Issuer Warrant Transaction Confirff mation, dated as of December 7, 2021, by and between
Patrick Industries. Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.6 to
ated herein by reference)
the Company's Form 8-K filed on December 13, 2021 and incorpor
r
Additional Convertible Bond Hedge Transaction Confirff mation, dated as of December 9, 2021,
by and between Patrick Industries, Inc. and Bank of America, N.A. (filed as Exhibit 10.7 to the
Company's Form 8-K filed on December 13, 2021 and incorpor
rated herein by referff ence)
Additional Convertible Bond Hedge Transaction Confirff mation, dated as of December 9, 2021,
by and between Patrick Industries, Inc. and Nomura Global Financial Products Inc. (filed as
Exhibit 10.8 to the Company's Form 8-K fileff d on December 13, 2021 and incorpor
by reference)
ated herein
r
Additional Convertible Bond Hedge Transaction Confirff mation, dated as of December 9, 2021,
by and between Patrick Industries, Inc. and Wells Fargo Bank, National Association. (filed as
Exhibit 10.9 to the Company's Form 8-K fileff d on December 13, 2021 and incorpor
ated herein
by reference)
r
Additional Issuer Warrant Transaction Confirff mation, dated as of December 9, 2021, by and
between Patrick Industries, Inc. and Bank of America, N.A. (filed as Exhibit 10.10 to the
rated herein by referff ence)
Company's Form 8-K filed on December 13, 2021 and incorpor
Additional Issuer Warrant Transaction Confirff mation, dated as of December 9, 2021, by and
between Patrick Industries, Inc. and Nomura Global Financial Products Inc. (filed as Exhibit
10.11 to the Company's Form 8-K filed on December 13, 2021 and incorpor
reference)
rated herein by
Additional Issuer Warrant Transaction Confirff mation, dated as of December 9, 2021, by and
between Patrick Industries, Inc. and Wells Fargo Bank, National Association. (filed as Exhibit
10.12 to the Company's Form 8-K filed on December 13, 2021 and incorpor
reference)
rated herein by
Employment Agreement with Executive Chairman of the Board of Directors. (filed as Exhibit
10.1 to the Company's Form 8-K filed on January 10, 2022 and incorpor
reference)
rated herein by
Subsu idiaries of the Registrant.
Consent of Deloitte & Touche LLP.
Certificff ation pursuant to Section 302 of the Sarbar nes-Oxley Act of 2002 by Chief Executive
Offiff cer.
Certificff ation pursuant to Section 302 of the Sarbar nes-Oxley Act of 2002 by Chief Financial
Offiff cer.
Certificff ation pursuant to 18 U.S.C. Section 1350.
Incentive Compensation Recovery Policy
40
XBRL Exhibits.
Interactive Data Files. The folff
lowing materials are filed electronically with this Annual Report on Form 10-K:
101.INS
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Schema Document
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Definff
ition Linkbase Document
101.LAB Inline XBRL Taxonomy Label Linkbase Document
101.PRE Inline XBRL Taxonomy Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document
Attached as Exhibits 101 to this report are the folff
10-K forff
the year ended December 31, 2023 formatted in XBRL (“eXtensible Business Reporting Language”): (i) the
Consolidated Balance Sheet; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive
Income; (iv) the Consolidated Statements of Shareholders’ Equity; and (v) the Consolidated Statements of Cash Flows, and
the related Notes to these financial statements in detail tagging format.
lowing financial statements froff m the Company’s Annual Report on Form
*Management contract or compensatory plan or arrangement.
**Filed herewith.
***Management contract or compensatory plan or arrangement and fileff d herewith.
All other financial statement schedules are omitted because they are not applicable or the required inforff mation is immaterial
or is shown in the Notes to Consolidated Financial Statements.
ITEM 16.
FORM 10-K SUMMARY
None.
41
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duld y authorized
SIGNATURES
Date: February 2rr
y
,
9, 2024
PATRICK INDUSTRIES, INC.
By:
/s/ Andy L. Nemeth
Andy L. Nemeth
Chief Executive Offiff cer
Pursuant to the Requirements of the Securities Exchange Act of 1934, this report has been signed below by the folff
persons on behalf of the registrant and in the capacities and on the dates indicated.
lowing
Signature
/s/ Andy L. Nemeth
Andy L. Nemeth
/s/ Matthew S. Filer
Matthew S. Filer
/s/ Joseph M. Cerulrr
Joseph M. Cerulli
li
/s/ Todd M. Cleveland
Todd M. Cleveland
/s/ John A. Forbes
John A. Forbes
/s/ Michael A. Kitson
Michael A. Kitson
/s/ Pamela R. Klyn
Pamela R. Klyn
/s/ Derrick B. Mayes
Derrick B. Mayes
/s/ Denis G. Suggs
Denis G. Suggs
/s/ M. Scott Welch
M. Scott Welch
Title
Chief Executive Offiff cer
(Principal Executive Officer)
Director
Interim Executive Vice President Finance,
Chief Financial Offiff cer and Treasurer
(Principal Financial and Accounting Officer)
Date
,
y
ry 29, 2024
Februarr
Februarr
,
ry 29, 2024
y
Director
Februarr
,
ry 29, 2024
y
Chairman of the Board
February 2rr
y
,
9, 2024
Director
Director
Director
Director
Director
Februarr
,
ry 29, 2024
y
Februarr
,
ry 29, 2024
y
Februarr
,
ry 29, 2024
y
Februarr
,
ry 29, 2024
y
Februarr
,
ry 29, 2024
y
Lead Independent Director
Februarr
,
ry 29, 2024
y
42
PATRICK INDUSTRIES, INC.
Index to the Financial Statements
Report of Independent Registered Publu ic Accounting Firm, Deloitte & Touche LLP (Firm ID No. 34)
Financial Statements:
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of Patrick Industries, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Patrick Industries, Inc. and subsidiaries (the "Company")
as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders'
equity, and cash floff ws, forff
each of the three years in the period ended December 31, 2023, and the related notes (collectively
referred to as the "finff ancial statements"). We also have audited the Company’s internal control over finff ancial reporting as of
December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the finff ancial statements referred to above
rly, in all material respects, the finff ancial position of the
present faiff
Company as of December 31, 2023 and 2022, and the results of its operations and its cash floff ws for each of the three years in
the period ended December 31, 2023, in conforff mity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the Company maintained, in all material respects, effeff ctive internal control over finff ancial
reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued
by COSO.
a
Basis forff Opinions
The Company’s management is responsible for these financial statements, for maintaining effeff ctive internal control over
its assessment of the effeff ctiveness of internal control over finff ancial reporting, included in the
financial reporting, and forff
accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on these finff ancial statements and an opinion on the Company’s internal control over finff ancial reporting based on
our audits. We are a public accounting firff m registered with the Publu ic Company Accounting Oversight Board (United States)
eral securities laws
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. fedff
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
whether the financial statements are free of material misstatement, whether
the audits to obtain reasonabla e assurance about
due to error or fraff ud, and whether effeff ctive internal control over finff ancial reporting was maintained in all material respects.
a
Our audits of the finff ancial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether dued
to error or fraff ud, and performing procedurd es to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our audit of internal control over finff ancial reporting included obtaining
an understanding of internal control over finff ancial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedurd es as we considered necessary in the circumstances. We believe that our audits provide a
reasonabla e basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over finff ancial reporting is a process designed to provide reasonabla e assurance regarding the
reliabia lity of financial reporting and the preparation of finff ancial statements for external purpos
es in accordance with generally
accepted accounting principles. A company’s internal control over finff ancial reporting includes those policies and procedurd es
that (1) pertain to the maintenance of records that, in reasonabla e detail, accurately and faiff
rly refleff ct the transactions and
dispositions of the assets of the company; (2) provide reasonabla e assurance that transactions are recorded as necessary to
permit preparation of finff ancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the finff ancial statements.
r
F-2
Because of its inherent limitations, internal control over finff ancial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to futff urt e periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedurd es may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising froff m the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subju ective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the finff ancial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Goodwill – FibFF erglr asll
s Reportingii Unit – Referff
to Notes 1 and 6 to t
tt hett Finaii ncial StaSS tementstt
Critical Audit MatMM ter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the faiff
r value of each reporting unit to its
carrying value. When calculating the present value of futff urt e cash floff ws under the income approach, the Company takes into
consideration forff ecasted sales volumes, operating income, and a discount rate. The Company uses a market approach as a
secondary valuation method to evaluate the income approach. The market approach includes a comparison of multiples of
earnings before interest, taxes, depreciation, and amortization (EBITDA) for the reporting unit to similar businesses or
guideline companies whose securities are actively traded in public markets. The estimated faiff
r value of the Company’s
reporting unit was determined to exceed the carrying value for the year end December 31, 2023, and so no impairment was
recognized.
the Fiberglass Reporting Unit as a critical audit matter because of the significant judgments made
We identifieff d goodwill forff
rence between its fair value and
by management to estimate the faiff
carrying value. This required a high degree of auditor judgment and an increased extent of effoff
rt, including the need to
involve our fair value specialists, when performing audit procedures to evaluate the reasonabla eness of management’s
estimates and assumptions related to selection of the discount rate and forff ecasts of future revenue and operating margin,
specifically due to the sensitivity of the Fiberglass Reporting Unit’s operations.
r value of the Fiberglass Reporting Unit and the diffeff
How thett Critical Audit MatMM ter WasWW Addrdd essed in thett Audit
Our audit procedurd es related to the discount rate and forff ecasts of sales and operating income used by management to estimate
the faiff
r value of certain reporting units included the following, among others:
• We tested the effeff ctiveness of controls over management’s goodwill impairment evaluation, including those over the
determination of the fair value of the Fiberglass Reporting Unit related to management’s selection of the discount
rates and forecasts of sales and operating income.
• We evaluated management’s ability to accurately forff ecast sales and operating income by comparing actuat
l results to
management’s historical forecasts.
• We evaluated the reasonabla eness of management’s sales and operating income assumptions included in the income
approach model, and the extent to which forff ecast projeo ction risk had been contemplated in the selection of the
discount rate by comparing the forecasts to historical sales and operating income.
• With the assistance of our fair value specialists, we evaluated the reasonabla eness of the valuation methodology and
discount rate by testing the source information underlying the determination of the discount rate, the mathematical
accuracy of the calculations and developing a range of independent estimates and comparing those to the discount
rate selected by management.
/s/ Deloitte & Touche LLP
Chicago, Illinois
Februar
ry 29, 2024
We have served as the Company's auditor since 2019.
F-3
Year Ended December 31,
2022
4,881,872
3,821,934
1,059,938
$
$
2023
3,468,045
2,685,812
782,233
143,921
299,418
78,694
522,033
260,200
68,942
191,258
48,361
142,897
6.64
6.50
21,519
22,025
$
$
$
163,026
327,513
73,229
563,768
496,170
60,760
435,410
107,214
328,196
14.82
13.49
22,140
24,471
$
$
$
2021
4,078,092
3,276,898
801,194
139,606
253,547
56,329
449,482
351,712
57,890
293,822
68,907
224,915
9.87
9.63
22,780
23,355
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands except per share data)
NET SALES
Cost of goods sold
GROSS PROFIT
Operating Expenses:
Warehouse and delivery
Selling, general and administrative
Amortization of intangible assets
Total operating expenses
OPERATRR ING INCOME
Interest expense, net
Income before income taxes
Income taxes
NET INCOME
BASIC EARNINGS PER COMMON SHARE
DILUTED EARNINGS PER COMMON SHARE
Weighted average shares outstanding - Basic
Weighted average shares outstanding - Diluted
See accompanying Notes to Consolidated Financial Statements.
$
$
$
$
F-4
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
in thousands)
NET INCOME
Other comprehensive income (loss), net of tax:
Change in unrealized gain on hedge derivatives
Foreign currency translation gain (loss)
Other
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
See accompanying Notes to Consolidated Financial Statements.
Year Ended December 31,
2022
2023
2021
$
142,897
$
328,196
$
224,915
—
(75)
(229)
(304)
142,593
$
757
(97)
873
1,533
329,729
$
4,131
142
(449)
3,824
228,739
$
F-5
PATRICK INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands except share data)
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivabla es, net
Inventories
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Operating lease right-of-use-assets
Goodwill
Intangible assets, net
Other non-current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current maturities of long-term debt
Current operating lease liabia lities
Accounts payable
Accruer d liabia lities
Total current liabilities
Long-term debt, less current maturities, net
Long-term operating lease liabia lities
Deferred tax liabia lities, net
Other long-term liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferff
red stock, no par value; authorized 1,000,000 shares; none issued or outstanding
Common stock, no par value; authorized 40,000,000 shares;
issued and outstanding 2023 - 22,160,608 shares;
issued and outstanding 2022 - 22,212,360 shares
Accumulated other comprehensive loss
Retained earnings
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
See accompanying Notes to Consolidated Financial Statements.
F-6
December 31,
2023
2022
$
$
$
11,409
163,838
510,133
49,251
734,631
353,625
177,717
637,393
651,153
7,929
2,562,448
7,500
48,761
140,524
111,711
308,496
1,018,356
132,444
46,724
11,091
1,517,111
22,847
172,890
667,841
46,326
909,904
350,572
163,674
629,263
720,230
8,828
2,782,471
7,500
44,235
142,910
172,595
367,240
1,276,149
122,471
48,392
13,050
1,827,302
—
—
203,258
(999)
843,078
1,045,337
2,562,448
$
197,003
(695)
758,861
955,169
2,782,471
$
$
$
$
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
CASH FLOWS FROM OPERATRR ING ACTIVITIES
Net income
Adjud stments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Amortization of convertible notes debt discount
Stock-based compensation expense
Deferred income taxes
(Gain) loss on sale of property, plant and equipment
Other
Change in operating assets and liabia lities, net of acquisitions of
businesses:
Trade and other receivabla es, net
Inventories
Prepaid expenses and other assets
Accounts payable, accrued liabia lities and other
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment
Proceeds froff m sale of property, equipment, facility and other
Business acquisitions, net of cash acquired
Purchase of intangible assets and other investing activities
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings
Term debt repayments
Borrowing on revolver
Repayments on revolver
Repayments of convertible notes
Proceeds froff m senior notes offeff
ring
Proceeds froff m convertible notes offeff
Purchase of convertible notes hedges
Proceeds froff m sale of warrants
Cash dividends paid to shareholders
Stock repurchases under buyback program
Taxes paid forff
Payment of deferff
Payment of contingent consideration froff m business acquisitions
Proceeds froff m exercise of common stock options
Other finff ancing activities
share-based payment arrangements
red finff ancing costs
ring
Net cash (used in) provided by finff ancing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.
$
F-7
Year Ended December 31,
2022
2021
2023
$
142,897
$
328,196
$
224,915
144,543
1,072
19,429
(591)
585
1,842
8,923
162,181
(3,931)
(68,278)
408,672
(58,987)
1,362
(25,859)
(3,061)
(86,545)
—
(7,500)
488,440
(568,728)
(172,500)
—
—
—
—
(42,140)
(18,808)
(12,132)
—
(1,460)
1,413
(150)
(333,565)
(11,438)
22,847
,,
11,409
$
130,757
1,851
21,751
(9,349)
(5,560)
4,785
26,056
(11,896)
20,123
(94,976)
411,738
(79,883)
7,620
(248,899)
(305)
(321,467)
—
(7,500)
839,436
(894,147)
—
—
—
—
—
(32,869)
(77,117)
(10,227)
(2,464)
(5,580)
195
—
(190,273)
(100,002)
122,849
,,
22,847
$
104,808
7,987
22,887
(3,943)
583
4,971
(14,350)
(232,465)
(13,114)
149,851
252,130
(64,804)
197
(508,127)
(2,000)
(574,734)
58,750
(6,875)
832,500
(972,500)
—
350,000
258,750
(57,443)
43,677
(27,024)
(48,940)
(17,814)
(15,745)
(1,600)
4,950
—
400,686
78,082
44,767
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N
PATRICK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
urt e and distribution of component
Patrick Industries, Inc. (“Patrick” or the “Company”) operations consist of the manufact
products and materials for use primarily by the recreational vehicle (“RV”), marine, manufact
urt ed housing (“MH”) and
industrial markets for customers throughout the United States and Canada. As of December 31, 2023, the Company
maintained 179 manufacff
ilities located in 23 states with a small presence in Mexico, China
and Canada. Patrick operates in two business segments: Manufacff
turing plants and 62 distribution facff
turing and Distribution.
ff
ff
Principles of Consolidation
The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). The consolidated financial statements include the accounts of Patrick and its wholly owned
subsu idiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conforff mity with U.S. GAAP requires management to make
estimates and assumptions that affeff ct the amounts reported in the consolidated financial statements and accompanying notes.
Estimates include the valuation of goodwill and indefinite-lived intangible assets, the valuation of long-lived assets, the
allowance forff
doubtful accounts, excess and obsolete inventories, assets acquired and liabia lities assumed in a business
combination, the valuation of estimated contingent consideration, deferred tax asset valuation allowances, and certain accruer d
liabia lities. Actuat
r froff m the amounts reported.
l results could diffeff
Revenue Recognition
ff
The Company is a major manufacturt er and distributor of component products and materials serving original equipment
manufact
urt ers and other customers in the RV,RR marine, MH, and industrial industries. Revenue is recognized when or as
control of the promised goods transferff s to the Company's customers in an amount that reflects the consideration the Company
those goods. The Company’s contracts typically consist of a single performance
expects to be entitled to in exchange forff
obligation to manufacff
ture and provide the promised goods. To the extent a contract is deemed to have multiple performance
obligations, the Company allocates the transaction price of the contract to each performance obligation using the standalone
selling price of each distinct good in the contract. The transaction price for contracts may include reductions to the transaction
price forff
estimated volume discounts and rebates and other customer incentives.
ff
urt
Manufact
ing segment revenue is recognized when control of the products transferff s to the customer which is the point when
the customer gains the abia lity to direct the use of and obtain substantially all the remaining benefitff s froff m the asset, which is
generally upon delivery orr
shipment of goods in certain circumstances. In limited circumstances, where the
products are customer specific with no alternative use to the Company, and the Company has a legally enforceable right to
payment forff
performance to date with a reasonabla e margin, revenue is recognized over the contract term based on the cost-to-
cost method. However, the finff ancial impact of these contracts is immaterial considering the short production cycles and
limited inventory drr
f goods, or upon
ays on hand.
u
Distribution segment revenue from product sales is recognized on a gross basis upon
f goods at which
point control transfers to the customer. The Company acts as a principal in such arrangements because it controls the
o the customer. The Company uses direct shipment arrangements with certain vendors and
promised goods before delivery t
t its warehouses. The Company
u
suppl
is the principal in the transaction and recognizes revenue for direct shipment arrangements on a gross basis. Our role as
principal in our distribution sales is generally characterized by (i) customers entering into contracts with the Company, not
the vendor; (ii) our obligation to pay the vendor irrespective of our ability to collect from the customer; (iii) our discretion in
iers to deliver products to its customers without having to physically hold the inventory arr
shipment or delivery orr
u
rr
F-9
determining the price of the good provided to the customer; (iv) our title to the goods before the customer receives or accept
the goods; and (v) our responsibility for the quality and condition of goods delivered to the customer.
Sales and other taxes collected concurrent with revenue-producing activities are excluded froff m net sales.
The Company records freff
related to these customer-billed freff
xpenses.
and delivery err
ight billed to customers in net sales. The corresponding costs incurred forff
ight costs are accounted for as costs to fulfillff
shipping and handling
the contract and are included in warehouse
The Company’s contracts across each of its businesses typically do not result in situations where there is a time period greater
than one year between performance under the contract and collection of the related consideration. The Company does not
account for a significff ant finff ancing component when the Company expects, at contract inception, that the period between the
Company's transfer of a promised good or service to a customer and the customer’s payment forff
that good or service will be
one year or less.
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period
of the incurred costs that the Company otherwise would have capitalized is one year or less. These costs, representing
primarily sales commissions, are included in selling, general and administrative expenses.
the transaction price being allocated to the remaining performance
The Company does not disclose information about
obligations at period end, as the Company does not have material contracts that have original expected durations of more than
one year.
a
Contract liabia lities, representing upfroff nt payments from customers received prior to satisfying performance obligations, were
immaterial in all periods presented and changes in contract liabilities were immaterial in all periods presented.
Costs and Expenses
Cost of goods sold includes material costs, direct and indirect labor
charges, inspection costs, internal transfer costs, receiving costs, and other costs.
a
, depreciation, overhead expenses, inbound freight
Warehouse and delivery err
distribution operations and delivery crr
xpenses include salaries and wages, building rent and insurance, and other overhead costs related to
osts related to the shipment of finished and distributed products to customers.
Stock Based Compensation
a
eciation rightght
a
(s (“SARS”)) awa drds as of thhe ggran dt dat be byy a
lppl
Compensation expense related to the fair value of restricted stock awards as of the grant date is calculated based on the
Company’s closing stock price on the date of grant. In addition, the Company estimates the fair value of all stock option and
stock appr
yiyi gng hthe Blla kck-S hch loles optiion-priiciingg m dodell. hThe use
of hthiis valluatiion m dod lel iin lvolves assump itions hthat are je judgmudgmentall a dnd hihighlghlyy sen isi itiv ie in thhe ddetermiinatiion of compensatiion
lvolatilityility of hthe Compa yny's common
expense, iin lcl diudi gng hthe expect ded optiion term, didi ividde dnd yiyi leldd,
stockk. Expect ded
lvolatilityility of hthe Compa yny’s common sto kck. Thhe expect ded
term of optiions andd SARS represents thhe pe iri dod of itime hthat hthe optiions andd SAR gS grant ded are expect ded to bbe outstandidi gng
babasedd o hn hiisto iri
ield curve in effect at the time
instruments of a similar term. New shares are issued upon exercise of options. Forfeitures of stock based
of grant forff
compensation are recognized as incurred.
lvolatiliilitiies t kak ie into considideratiion thhe hihistoriic lal
lcal Companyy tre dnds. Thhe iri ksk fre ie interest rat
ie i bs bas ded on hthe U.S. Tre sa ury yrr
iri ksk-fre ie interest rate a dnd
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares
outstanding. Diluted earnings per common share is computed by dividing net income availabla e forff
diluted shares (calculated
as net income plus the afteff
r-tax effect of interest on potentially dilutive convertible notes, as definff ed by Accounting
Standards Update ("ASU") 2020-06, as adopted in 2022) by the weighted-average number of common shares outstanding,
plus the weighted-average impact of potentially dilutive convertible notes as defined by ASU 2020-06, plus the dilutive effect
of stock options, SARS, and certain restricted stock awards (collectively, “Common Stock Equivalents”). The dilutive effecff
t
of Common Stock Equivalents is calculated under the treasury s
tock method using the average market price for the period.
rr
Common Stock Equivalents are not included in the computation of diluted earnings per common share if their effect would
F-10
be anti-dilutive. See Note 12 "Earnings Per Common Share" forff
common share.
the calculation of both basic and diluted earnings per
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be
cash equivalents.
Trade and Other Receivables
to the Company from its normal business activities. In assessing the
Trade receivabla es consist primarily of amounts dued
carrying value of its trade receivabla es, the Company estimates the recoverabia lity by making assumptions based on historical
and forff ward-looking factors, such as historical and anticipated customer performance, current overall and industry-rr
specific
economic conditions, historical write-off and collection experience, the level of past-dued
amounts, and specific risks
io. Other receivabla es consist of employee advances, insurance claims, amounts owed
identifieff d in the trade receivabla es portfolff
from vendors pertaining to importation costs, and other miscellaneous items.
($ in thousands)
Trade receivables
Other receivabla es
Allowance forff
Total
doubtful accounts
Inventories
As of December 31
2023
2022
$
$
136,796
31,046
(4,004)
163,838
$
$
144,301
30,787
(2,198)
172,890
Inventories are generally stated at the lower of cost (firff st-in, first-out method or, forff
method) and net realizable value. Based on the inventory arr
writes down the carrying value to net realizable value where appropriate. The Company reviews inventory orr
records provisions for excess and obsolete inventory brr
related management initiatives. The cost of manufact
overhead. The Company’s distribution inventories include the cost of materials purchased for resale and inbound freight.
certain inventories, average costing
ging and other considerations for realizable value, the Company
n-hand and
ased on current assessments of future demand, market conditions, and
urt ed inventories includes raw materials, inbound freight, labor and
ff
Prepaid Expenses and Other
($ in thousands)
Vendor rebates receivabla e
Prepaid expenses
Vendor and other deposits
Prepaid income taxes
Total
Property, Plant and Equipment
As of December 31
2023
2022
9,303
22,868
8,211
8,869
49,251
$
$
12,366
22,311
11,649
—
46,326
$
$
Property, plant and equipment (“PP&E”) is generally recorded at cost. Depreciation is computed primarily by the straight-line
method applied to individual items based on estimated useful lives, which is as follows for 2023:
Asset Class
Buildings and improvements
Leasehold improvements
Capia talized software
Machinery arr
nd equipment and transportation equipment
F-11
Estimated life (
ff
years)
10-30
10
3-5
3-7
Leasehold improvements are amortized over the lesser of their usefulff
lives or the related lease term. The recoverabia lity of
PP&E is evaluated whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverabla e, primarily based on estimated selling price, appraised value or projected future cash floff ws.
Goodwill and Intangible Assets
ite-lived intangible assets are not amortized but are subject to an annual impairment test based on their
Goodwill and indefinff
estimated faiff
r value. The Company reviews goodwill and indefinite-lived intangible assets for impairment in the fourth
quarter, or more freff quently, if events or changes in circumstances indicate the assets might be impaired. The impairment test
was performed on October 1, 2023.
a
In conducting its impairment testing, the Company estimates the fair value of our reporting units using both an income and
oach. The market approach includes a comparison of multiples of earnings before interest, taxes,
market based appr
the reporting units to similar businesses or guideline companies whose securities are
depreciation and amortization forff
oach calculates the present value of expected cash floff ws to determine the
actively traded in public markets. The income appr
estimated faiff
oach requires us to estimate future cash floff ws, the
timing of these cash floff ws, and a discount rate (based on a weighted average cost of capital), which represents the time value
of money and the inherent risk and uncertainty of the futff urt e cash floff ws. The assumptions we use to estimate future cash floff ws
are consistent with the assumptions that our reporting units use forff
es. When calculating the present
value of futff urt e cash floff ws under the income approach, we take into consideration multiple variables, including forecasted
sales volumes and operating income, current industry arr
r value of our reporting units. Additionally, the income appr
nd economic conditions, and historical results.
internal planning purpos
a
a
r
If we determine that the estimated faiff
r value of each reporting unit exceeds its carrying amount, goodwill of the reporting unit
th quarter 2023 goodwill impairment test concluded that the fair values of each of our reporting units
is not impaired. Our four
exceeded their carrying values. Our 2023 indefinite-lived intangibles test also concluded that the fair values of intangibles
exceeded their respective carrying values.
ff
Impairment of Long-Lived Assets
ff
u
several fact
When events or conditions warrant, the Company evaluates the recoverabia lity of long-lived assets other than goodwill and
indefinite-lived intangible assets and considers whether these assets are impaired. The Company assesses the recoverabia lity
ors, including management's intention with respect to the assets and their projeo cted
of these assets based upon
future undiscounted cash flows. If projected undiscounted cash floff ws are less than the carrying amount of the assets, the
Company adjusts the carrying amounts of such assets to their estimated faiff
r value. A significant adverse change in the
Company’s business climate in future periods could result in a significant loss of market share or the inabia lity to achieve
previously projected revenue growth and could lead to a required assessment of the recoverabia lity of the Company’s long-
lived assets, which may subsequently result in an impairment charge. Finite-lived intangible assets are amortized over their
usefulff
ther in Note 6 "Goodwill and Intangible Assets", and are also subju ect to an impairment test based
on estimated undiscounted cash floff ws when impairment indicators exist.
lives, as detailed furff
Fair Value and Financial Instruments
The Company accounts forff
r values are separated into three broad levels
(Levels 1, 2 and 3) based on the assessment of the availabia lity of observabla e market data and the significance of non-
observabla e data used to determine fair value. Each fair value measurement must be assigned to a level corresponding to the
lowest level input that is significant to the fair value measurement in its entirety. The three levels are as folff
certain assets and liabia lities at fair value. The faiff
lows:
•
•
•
Level 1 inputs, which are quoted prices (unadjusted) in active markets for identical assets or liabia lities that the
reporting entity has the abia lity to access at the measurement date.
Level 2 inputs, which are inputs other than quoted prices included within Level 1 that are observabla e forff
liability, either directly or indirectly. If the asset or liabia lity has a specified (contractuat
be observabla e forff
the asset or liabia lity. These unobservabla e inputs refleff ct the entity’s
Level 3 inputs, which are unobservabla e inputs forff
own assumptions about the assumptions that market participants would use in pricing the asset or liabia lity, and are
developed based on the best inforff mation availabla e in the circumstances (which might include the reporting entity’s
own data).
the asset or
l) term, a Level 2 input must
subsu tantially the full term of the asset or liabia lity.
F-12
($ in millions)
Cash equivalents(1)
7.50% senior notes due 2027(2)
4.75% senior notes due 2029(2)
1.00% convertible notes due 2023(2)
1.75% convertible notes due 2028(2)
Term loan due 2027(3)
2027(3)
Revolver dued
Contingent consideration(4)
As of December 31
2023
2022
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
$
$
$
$
$
$
$
6.1 $
— $
— $
— $
— $
— $
— $
— $
— $
303.7 $
320.2 $
— $
295.2 $
129.4 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
8.5
$
15.2 $
— $
— $
— $
— $
— $
— $
— $
— $
293.9 $
293.8 $
172.0 $
219.9 $
136.9 $
80.3 $
— $
—
—
—
—
—
—
—
9.2
(1) The carrying amounts of cash equivalents, representing government and other money market funds
maturities, are reported on the consolidated balance sheet as of December 31, 2023 as a component of "Cash and cash equivalents".
ff
traded in an active market with relatively short
(2) The amounts of these notes listed above
sheets as of December 31, 2023 and 2022 using the interest rate method.
are the fair values for disclosure purpos
a
rr
es only, and they are recorded in the Company's consolidated balance
(3) The carrying amounts of our term loan and revolving credit facility approximate fair value as of December 31, 2023 and 2022 based upon
conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions availabla e at those dates.
u
their terms and
(4) The estimated faiff
r value of the Company's contingent consideration is discussed furff
ther in Note 3 "Acquisitions".
Income Taxes
ax rates of the federal, state, and international jurisdictions in which the
Income tax expense is calculated based on statutt ory t
Company operates and income earned or appor
tioned to each of these respective jurisdictions, as well as any additional tax
planning availabla e to the Company in these jurisdictions. Certain income and expenses are not reported in tax returns and
financial statements in the same year. The tax effect of such temporary drr
rences is reported as deferff
red income taxes.
iffeff
a
rr
Deferred taxes are provided on an asset and liabia lity method whereby deferff
red taxes are recognized based on temporaryrr
differff ences between the reported amounts of assets and liabia lities and their tax basis. Deferred tax assets are reducd ed by a
valuation allowance when it is more likely than not that some portion or all of the deferff
red tax assets may not be realized.
The Company reports a liabia lity, if any, for unrecognized tax benefits resulting froff m uncertain tax positions taken or expected
to be taken in a tax returt n. The Company recognizes interest and penalties, if any, related to unrecognized tax benefitsff
in
income tax expense.
Recently Issued Accounting Pronouncements
g
y
Accounting Pronouncements Not Yet Adopted
In October 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-06, "Disclosure Improvements."
The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the codification.
Certain of the amendments represent clarifications to or technical corrections of the current requirements. The amendments in
this ASU are effeff ctive forff
r June 30, 2027. The Company is
currently evaluating the impacts of the provisions of ASU 2023-06.
public business entities for interim periods beginning afteff
rovements to Repor
tes
In November 2023, the FASB issued ASU 2023-07, "ImpII
reportabla e segment disclosure requirements by requiring disclosures of significant reportabla e segment expenses that are
regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a
segment's profitff or loss. This ASU also requires disclosure of the title and position of the individual identifieff d as the CODM
or loss in assessing segment
and an explanation of how the CODM uses the reported measures of a segment’s profitff
r December 15,
performance and deciding how to allocate resources. The ASU is effective forff
2023, and interim periods within fiscal years beginning afteff
ied
a
retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will
r December 15, 2024. Adoption of the ASU should be appl
annual periods beginning afteff
losures". This ASU upda
table SegSS megg
nt Discii
u
e
F-13
likely result in additional required disclosures when adopted. The Company is currently evaluating this guidance to determine
the impact on its disclosures; however, adoption will not impact our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, "ImpII
isclosures". This ASU establa ishes new
income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new
guidance, entities must consistently categorize and provide greater disaggregation of inforff mation in the rate reconciliation.
r
fiscal years beginning afteff
They must also further disaggregate income taxes paid. The new standard is effeff ctive forff
December 15, 2024, with retrospective appl
ication permitted. The Company is currently evaluating this guidance to
determine the impact on its disclosures; however, adoption will not impact our consolidated financial statements.
rovements to Income Tax Daa
a
2. REVENUE RECOGNITION
In the folff
lowing tabla e, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and
by reportabla e segment, consistent with how the Company believes the naturt e, amount, timing, and uncertainty of revenue and
cash floff ws are affected by economic factors:
($ in thousands)
Market type:
Recreational Vehicle
Marine
ff
Manufact
Industrial
Total
urt ed Housing
($ in thousands)
Market type:
Recreational Vehicle
Marine
Manufact
ff
Industrial
Total
g
urt ed Housin
($ in thousands)
Market type:
Recreational Vehicle
Marine
Manufact
ff
Industrial
Total
g
urt ed Housin
3. ACQUISITIONS
Q
General
Year Ended December 31, 2023
Manufacff
turing
Distribution
Total
$
$
1,018,003
868,681
258,551
441,548
2,586,783
$
$
485,339
55,080
309,659
31,184
881,262
$
$
1,503,342
923,761
568,210
472,732
3,468,045
Year Ended December 31, 2022
Manufacff
turing
Distribution
Total
$
$
1,777,541
976,699
3
44,983
504,543
3,603,766
$
$
815,478
60,803
359,618
42,207
1,278,106
$
$
2,593,019
1,037,502
704,601
546,750
4,881,872
Year Ended December 31, 2021
Manufacff
turing
Distribution
Total
$
$
1,617,852
633,848
2
61,856
416,910
2,930,466
$
$
786,590
31,417
283,207
46,412
1,147,626
$
$
2,404,442
665,265
545,063
463,322
4,078,092
Business combinations generally take place to strengthen Patrick's positions in existing markets and increase its market share
and per unit content, expand into additional markets, or gain key technology. Acquisitions are accounted for under the
acquisition method of accounting. For each acquisition, the excess of the purchase consideration over the fair value of the net
F-14
assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing
purchasing, manufacff
turing, sales, and systems resources with the organizational talent and expertise of the acquired
companies’ respective management teams to maximize effiff ciencies, market share growth and net income.
ecember 31, 2023, 2022 and 2021. The
The Company completed the acquisitions discussed below dduriingg thhe yyears e dnded Dd
acquisitions were funded through cash on hand, issuance of shares, or borrowings under the Company’s credit facff
ility in
existence at the time of acquisition. For each of the acquisitions discussed, we either acquired the assets and assumed the
liabilities of the business, or acquired 100% of the equity interests. Assets acquired and liabia lities assumed in the individual
r values as of the respective
acquisitions were recorded on the Company’s consolidated balance sheet at their estimated faiff
dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the faiff
r value of
acquired assets and liabia lities within a one-year measurement period. For those acquisitions where the purchase price
allocation is provisional, which includes certain acquisitions completed in 2023, the Company is still in the process of
finalizing the fair values of acquired intangible assets and fixff ed assets.
For the years ended December 31, 2023, 2022 and 2021, revenue of approximately $17.7 million, $121.8 million and $259.9
million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired
in each such respective year.
For the years ended December 31, 2023, 2022 and 2021, operating income of approximately $1.0 million, $19.4 million and
$25.0 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses
acquired in each such respective year. Acquisition-related costs associated with the businesses acquired in 2023, 2022 and
2021 were immaterial in each respective year.
Contingent Considerdd ation
In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is
required to pay additional cash consideration. The Company records a liabia lity for the fair value of the contingent
consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the
expected future cash floff ws and the probabia lity of future payments at the date of acquisition.
lowing tabla e provides a reconciliation of the beginning and ending aggregate faiff
r values of the contingent
The folff
consideration:
($ in thousands)
Beginning fair value - contingent consideration
Additions
Fair value adjustments
Settlements
g
g
Ending fair value - contingent consideration
g
g
Year Ended December 31
2023
2022
$
$
9,213
3,590
917
(5,210)
8,510
$
$
12,275
1,940
2,228
(7,230)
9,213
The folff
lowing tabla e shows the balance sheet location of the faiff
of contingent consideration payments the Company may be subju ect to:
r value of contingent consideration and the maximum amount
($ in thousands)
Accruer d liabia lities
Other long-term liabilities
Total faiff
gg
r value of contingent consideration
Maximum amount of contingent consideration
As of December 31
2023
2022
$
$
$
7,500
1,010
8,510
8,510
$
$
$
5,250
3,963
9,213
10,747
F-15
2023 Acquisitions
The Company completed three acquisitions in the year ended December 31, 2023, including the folff
announced acquisition (collectively, the "2023 Acquisitions"):
lowing previously
Company
Segment
BTI Transport
Distribution
Description
Provider of transportation and logistics services to marine original
equipment manufact
urt ers ("OEMs") and dealers, based in Elkhart,
Indiana, acquired in April 2023. The acquired business operates under
the Patrick Marine Transport brand.
ff
oximately
Inclusive of two acquisitions not discussed above
$26.3 million, plus contingent consideration over a two-year period based on futff urt e performance in connection with certain
acquisitions. The preliminary prr
urchase price allocations are subject to valuation activities being finalized, and thus certain
purchase accounting adjustments are subject to change within the measurement period as the Company finff alizes its estimates.
Changes to preliminary prr
urchase accounting estimates recorded in 2023 related to the 2023 Acquisitions were immaterial.
the 2023 Acquisitions was appr
, total cash consideration forff
a
a
2022 Acquisitions
The Company completed fivff e acquisitions in the year ended December 31, 2022, including the folff
announced acquisitions (collectively, the "2022 Acquisitions"):
lowing three previously
Company
Segment
Rockford Corporation
Manufacff
turing
Description
urt er of audio systems and components through
Designer and manufact
its brand Rockford Fosgate®, primarily serving the powersports and
automotive afteff
rmarkets, based in Tempe, Arizona, acquired in March
2022.
ff
Diamondback Towers, LLC
Manufacff
turing
Transhield
Manufacff
turing
turer of wakeboard/sdd ki
towers and accessories for marine
Manufacff
OEMs, based in Cocoa, Florida, acquired in May 2022.
urt er of customized and proprietary protection
Designer and manufact
solutions for the marine, military a
nd industrial markets, including
covers and shrinkabla e packaging, to protect equipment durd ing transport
and storage, based in Elkhart, Indiana, acquired in November 2022.
ff
rr
Inclusive of two acquisitions not discussed above
oximately
$248.1 million, plus contingent consideration over a one to two-year period based on futff urt e performance in connection with
certain acquisitions. Purchase price allocations and all valuation activities in connection with the 2022 Acquisitions have
urchase accounting estimates recorded in 2023 related to the 2022 Acquisitions were
been finalized. Changes to preliminary prr
immaterial and relate primarily to the valuation of intangible and fixed assets.
the 2022 Acquisitions was appr
, total cash consideration forff
a
a
F-16
2021 Acquisitions
The Company completed thirteen acquisitions in the year ended December 31, 2021, including the folff
previously announced acquisitions (collectively, the "2021 Acquisitions"):
lowing seven
Company
Segment
rr
Sea-Dog Corpor
Lect Plastics (collectively,
"Sea-Dog")
ation & Sea-
Distribution &
ing
ff
Manufact
urt
Hyperform, Inc.
Manufacff
turing
Alpha Systems, LLC
Manufact
ing
ff
& Distribution
urt
Coyote Manufact
Company
ff
urt
ing
Manufacff
turing
Tumacs Covers
Manufacff
turing
Wet Sounds, Inc. & Katalyst
Industries LLC (collectively
"Wet Sounds")
Manufacff
turing
Williamsburg Marine LLC &
Williamsburg Furniture, Inc.
(collectively "Williamsburg")
Manufacff
turing
ff
rr
ff
brand
Description
Distributor of a variety of marine and powersports hardware and
accessories to distributors, wholesalers, retailers, and manufact
urt ers and
provider of plastic injen ction molding, design, product development and
expert tooling to companies and government entities, based in Everett,
Washington, acquired in March 2021.
turer of high-quality, non-slip foam flooring, operating under
Manufacff
the SeaDek® brand name, forff
the marine OEM market and aftermarket
as well as serving the pool and spa, powersports and utility markets
the SwimDek
under
names, with
and EndeavorDek
manufacff
turing facilities in Rockledge, Florida and Cocoa, Florida,
acquired in April 2021.
turer and distributor of component producd ts and accessories for
Manufacff
urt ed housing and industrial end markets that
the RV,RR marine, manufact
includes adhesives, sealants, rubbe
r roofing, roto/blow molding and
injen ction molding products, floff oring, insulation, shutters, skylights, and
various other products and accessories, operating out of nine facilities
in Elkhart, Indiana, acquired in May 2021.
urt er of a variety of steel and
Designer, fabra icator, and manufact
aluminum products,
leaning
towers, T-tops,
including boat
posts, and other custom components primarily for the marine OEM
market, based in Nashville, Georgia, acquired in August 2021.
turer of custom designed boat covers, canvas fraff mes, and
Manufacff
tops, primarily serving large marine OEMs and dealers,
bimini
headquartered in Pittsburgh, Pennsylvania, with manufacff
turing
facilities in Indiana and Pennsylvania, and a distribution/service center
in Michigan, acquired in August 2021.
Designer, engineer, and fabra icator of innovative audio systems and
accessories,
tower speakers, soundbars, and
subwu
ooferff s sold directly to OEMs and consumers, and to dealers and
retailers, primarily within the marine market as well as to the home
audio and powersports markets and afteff
rmarkets, based in Rosenburg,
Texas, acquired in November 2021.
Manufacff
turer of seating for the RV and marine end markets sold
primarily to OEMs, based in Milford and Nappanee, Indiana, acquired
in November 2021.
including amplifieff
trailers,
rs,
ff
Inclusive of six acquisitions not discussed above
oximately
$509.1 million, plus contingent consideration over a one to three-year period based on futff urt e performance in connection with
certain acquisitions. Purchase price allocations and all valuation activities in connection with the 2021 Acquisitions have
been finalized.
the 2021 Acquisitions was appr
, total cash consideration forff
a
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1
-
F
We estimate the value of acquired property, plant, and equipment using a combination of the income, cost, and market
approaches, such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of
the acquired businesses.
We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation of the
income approach, calculating the present value of incremental after-tax cash floff ws attributable to the asset. Non-compete
agreements are valued using a discounted cash floff w appr
oach, which is a variation of the income approach, with and without
rties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty
the individual counterpar
method, which appl
ies an estimated royalty rate to forecasted future cash floff ws, discounted to present value.
a
a
The estimated useful life f
years. The weighted average estimated useful life f
indefinite usefulff
life.
orff
ff
ff
customer relationships is 10 years. The estimated usefulff
non-compete agreements is 5
ff
life f
patents is 13 years, ranging from 10 to 18 years. Trademarks have an
orff
orff
Pro ForFF marr
Infon rmatiott n (Un((
auditeii d)
lowing pro forff ma information assumes the 2023 Acquisitions and 2022 Acquisitions occurred as of the beginning of
The folff
the year immediately preceding each such acquisition. The pro forma inforff mation contains the actuat
l operating results of each
of the 2023 Acquisitions and 2022 Acquisitions, combined with the results prior to their respective acquisition dates, adjusted
to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such
acquisition.
The pro forma inforff mation includes finff ancing and interest expense charges based on the actuat
l incremental borrowings
incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such
acquisition.
In addition, the pro forma inforff mation includes incremental amortization expense related to intangible assets acquired of $0.4
million and $5.6 million forff
the years ended December 31, 2023 and 2022, respectively, in connection with the acquisitions
as if they occurred as of the beginning of the year immediately preceding each such acquisition.
($ in thousands except per share data)
Net sales
Net income
Basic earnings per common share
Diluted earnings per common share
Year Ended December 31
2023
$
$
3,483,940
143,693
$
$
6.68
6.53
2022
4,994,679
333,835
15.07
13.72
The pro forma inforff mation is presented for inforff mational purpos
operations that actuat
to be a projeo ction of futff urt e results.
es only and is not necessarily indicative of the results of
lly would have been achieved had the acquisitions been consummated as of that time, nor is it intended
r
4.
INVENTORIES
($ in thousands)
Raw materials
Work in process
Finished goods
Less: reserve forff
inventory err
xcess and obsolescence
Total manufact
ff
urt ed goods, net
Materials purchased for resale (distribution products)
Less: reserve forff
inventory err
xcess and obsolescence
Total materials purchased for resale (distribution products), net
As of December 31
2023
2022
$
269,786
$
16,596
107,675
(15,990)
378,067
140,147
(8,081)
132,066
348,670
22,630
141,516
(14,059)
498,757
175,061
(5,977)
169,084
667,841
Total inventories
$
510,133
$
F-19
5. PROPERTY, PLANT AND EQUIPMENT
Q
,
($ in thousands)
Land and improvements
Building and improvements
Machinery arr
nd equipment
Transportation equipment
Leasehold improvements
Property, plant and equipment, at cost
Less: accumulated depreciation and amortization
Property, plant and equipment, net
yy
As of December 31
2023
2022
$
19,502
$
85,941
485,020
21,900
33,736
646,099
(292,474)
19,242
82,280
442,881
11,866
29,252
585,521
(234,949)
$
353,625
$
350,572
Total depreciation expense forff
$57.5 million and $48.5 million, respectively.
property, plant and equipment forff
fiscal 2023, 2022, and 2021 was $65.8 million,
Accruer d capital expenditures were appr
31, 2023, 2022, and 2021.
a
oximately $2.1 million, $1.7 million and $2.6 million forff
the years ended December
6. GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 by segment are as follows:
($ in thousands)
Balance - January 1, 2022
Acquisitions
Adjud stment to prior year preliminary purchase price allocation
Balance - December 31, 2022
Acquisitions
Adjud stment to prior year preliminary purchase price allocation
Balance - December 31, 2023
Manufacff
turing
Distribution
Total
$
$
$
481,906
$
69,471
$
551,377
82,886
(6,430)
240
1,190
83,126
(5,240)
558,362
$
70,901
$
629,263
—
2,008
5,905
217
5,905
2,225
560,370
$
77,023
$
637,393
As of December 31, 2023 and 2022, accumulated impairment of goodwill in the Manufact
ff
urt
ing segment was $27.4 million.
Intangible assets, net consist of the following:
($ in thousands)
Customer relationships
Non-compete agreements
Patents
Trademarks
Gross intangible assets
Less: accumulated amortization
Intangible assets, net
gg
As of December 31
2023
2022
$
729,664
$
722,503
21,561
69,401
197,027
1,017,653
(366,500)
20,412
69,164
195,957
1,008,036
(287,806)
$
651,153
$
720,230
F-20
Changes in the carrying value of intangible assets for the years ended December 31, 2023 and 2022 by segment are as
follows:
Manufact
ff
urt
ing
Distribution
Total
($ in thousands)
Balance - January 1, 2022
Acquisitions
Amortization
Adjud stment to prior year preliminary purchase price allocation
Balance - December 31, 2022
Acquisitions
Amortization
Adjud stment to prior year preliminary purchase price allocation
$
534,827
$
105,629
$
145,204
(62,786)
5,402
622,647
3,061
(67,645)
(4,360)
260
(10,443)
2,137
97,583
11,000
(11,049)
(84)
Balance - December 31, 2023
$
553,703
$
97,450
$
640,456
145,464
(73,229)
7,539
720,230
14,061
(78,694)
(4,444)
651,153
Amortization expense forff
December 31, 2023 is estimated to be as folff
lows (in thousands):
the next fivff e fisff cal years ending December 31 related to finite-lived intangible assets as of
2024
2025
2026
2027
2028
7. DEBT
The folff
lowing tabla e presents a summary of total debt outstanding:
($ in thousands)
Long-term debt:
1.00% convertible notes due 2023
Term loan due 2027
Revolver dued
2027
7.50% senior notes due 2027
1.75% convertible notes due 2028
4.75% senior notes due 2029
Total long-term debt
Less: convertible notes debt discount, net
Less: term loan deferred finff ancing costs, net
Less: senior notes deferred finff ancing costs, net
Less: current maturities of long-term debt
$
$
$
$
$
77,403
73,316
67,455
61,001
47,877
As of December 31
2023
2022
$
— $
129,375
—
300,000
258,750
350,000
172,500
136,875
80,289
300,000
258,750
350,000
1,038,125
1,298,414
(4,917)
(548)
(6,804)
(7,500)
(5,989)
(701)
(8,075)
(7,500)
Total long-term debt, less current maturities, net
gg
$
1,018,356
$
1,276,149
2021 Credit Facility
On August 11, 2022, the Company entered into the first amendment of its Fourth Amended and Restated Credit Agreement
dated April 20, 2021 (as amended, the “2021 Credit Agreement”), under which the senior secured credit facff
ility was
increased to $925 million from $700 million and the maturt
ity date was extended to August 11, 2027 from April 20, 2026.
ility under the 2021 Credit Agreement is comprised of a $775 million revolving credit facility (the
The senior credit facff
F-21
2027") and the remaining balance of the $150 million term loan (the "Term Loan due 2027" and together with
"Revolver dued
the Revolver dued
red finff ancing
2027, the "2021 Credit Facility"). The Company recorded a $0.3 million write-off off
costs as a result of the amendment, which is included in "Selling, general and administrative" in the Company's consolidated
statements of income for the year ended December 31, 2022. Pursuant to the amendment, interest rates forff
borrowings under
the 2021 Credit Agreement transitioned to a Secured Overnight Financing Rate ("SOFR") based option froff m a London Inter-
Bank Offeff
red Rate ("LIBOR") based option.
f deferff
The Company determined that the amended terms of the 2021 Credit Agreement were not subsu tantially different from the
terms of the Company’s 2021 Credit Agreement prior to the amendment. Accordingly, debt modification accounting
treatment was appa
lied and the related impacts were immaterial.
Borrowings under the 2021 Credit Facility are secured by subsu tantially all personal property assets of the Company and any
domestic subsu idiary guarantors. Pursuant to the 2021 Credit Agreement:
•
•
•
The quarterly repayment scheduld e forff
2027 was revised, with quarterly installments in the
following amounts: (i) beginning June 30, 2021, through and including June 30, 2025, in the amount of $1,875,000,
and (ii) beginning September 30, 2025, and each quarter thereafteff
r, in the amount of $3,750,000, with the remaining
balance dued
the Term Loan dued
at maturity;
borrowings under the Revolver dued
2027 and the Term Loan due 2027 are the Prime Rate or
The interest rates forff
SOFR plus a margin, which ranges froff m 0.00% to 0.75% for Prime Rate loans and from 1.00% to 1.75% for SOFR
loans depending on the Company's consolidated total leverage ratio, as definff ed below. The Company is required to
ff
pay fees
on unused but committed portions of the Revolver dued
2027, which range from 0.15% to 0.225%; and
Covenants include requirements as to a maximum consolidated secured net leverage ratio (2.75:1.00, increasing to
3.25:1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixff ed
charge coverage ratio (1.50:1.00) that are tested on a quarterly basis, and other customary crr
ovenants.
The total face value of the Term Loan due 2027 is $150.0 million. Total availabla e borrowing capacity under the Revolver dued
2027 is $775.0 million. As of December 31, 2023, the Company had $129.4 million outstanding under the Term Loan due
2027. The interest rate forff
2027 under the SOFR-based option, and no outstanding borrowings for the Revolver dued
incremental borrowings as of December 31, 2023 was SOFR plus 1.75% (or 7.20%) forff
the SOFR-based option. The feeff
payabla e on committed but unused portions of the Revolver dued
2027 was 0.225% as of December 31, 2023.
1.75% Convertible Senior Notes due 2028
In December 2021, the Company issued $258.75 million aggregate principal amount of 1.75% Convertible Senior Notes dued
2028 (the “1.75% Convertible Notes”). The total debt discount of $56.1 million at issuance consisted of two components: (i)
the conversion option component, recorded to shareholders' equity, in the amount of $48.8 million, representing the
difference between the principal amount of the 1.75% Convertible Notes upon
issuance less the present value of the future
cash floff ws of the 1.75% Convertible Notes using a borrowing rate for a similar non-convertible debt instrument and (ii) debt
issuance costs of $7.3 million. The conversion option component of the 1.75% Convertible Notes was valued using Level 2
inputs under the fair value hierarchy. The unamortized portion of the total debt discount is being amortized to interest
expense over the life off
f the 1.75% Convertible Notes. The effective interest rate on the 1.75% Convertible Notes, which
includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 2.14% as of December 31,
2023.
u
a
oximately $249.7 million, afteff
r deducd ting the
The net proceeds froff m the issuance of the 1.75% Convertible Notes were appr
ing expenses payable by the Company, but before deducting the net
initial purchasers’ discounts and commissions and offerff
cost of the 1.75% Convertible Note Hedge Transactions and the 1.75% Convertible Note Warrant Transactions (each as
defined herein) described in Note 8 "Derivative Financial Instruments". The 1.75% Convertible Notes are senior unsecured
obligations of the Company and pay interest semi-annually in arrears on June 1 and December 1 of each year at an annual
rate of 1.75%. The 1.75% Convertible Notes will mature on December 1, 2028 unless earlier repurchased or converted in
accordance with their terms. Prior to June 1, 2028, the 1.75% Convertible Notes may be converted at the option of the holders
only upon the occurrence of specified events and durd ing certain periods, and thereafteff
r until the close of business on the
second scheduled trading day immediately preceding the maturity date. The Company will satisfy any conversion by paying
o the aggregate principal amount of the 1.75% Convertible Notes to be converted and by paying or delivering, as the
cash up tu
F-22
case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common
stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal
the 1.75% Convertible Notes is
amount of the 1.75% Convertible Notes being converted. The initial conversion rate forff
9.9887 shares of the Company's common stock per $1,000 principal amount of the 1.75% Convertible Notes (or 2,584,578
shares in the aggregate) and is equal to an initial conversion price of approximately $100.11 per share. If an event of default
on the 1.75% Convertible Notes occurs, the principal amount of the 1.75% Convertible Notes, plus accrued and unpaid
interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions.
The 1.75% Convertible Notes are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the
Company under the 2021 Credit Facility. 1.75% Convertible Notes holders may convert their Convertible Notes on or after
June 28, 2028 at any time at their option. Holders may convert 1.75% Convertible Notes prior to June 28, 2028, only under
the folff
lowing circumstances: (i) durd ing any calendar quarter, if the last reported sale price of the Company's common stock
for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last
trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each
r any five consecutive trading day period in which the
applicable trading day, (ii) durd ing the five business day period afteff
trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the
product of the last reported sale price of our common stock and the conversion rate on each such trading day and (iii) upon
the occurrence of certain specifieff d distributions or corporate events.
4.75% Senior Notes due 2029
In April 2021, the Company issued $350.0 million aggregate principal amount of 4.75% Senior Notes dued
2029 (the "4.75%
Senior Notes"). The 4.75% Senior Notes will mature on May 1, 2029. Interest on the 4.75% Senior Notes started accruing
April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November
1, 2021. The effective interest rate on the 4.75% Senior Notes, which includes debt issuance costs, is approximately 4.97%.
In connection with the issuance of the 4.75% Senior Notes, the Company incurred and capitalized as a reduction of the
principal amount of the 4.75% Senior Notes appr
oximately $5.1 million in deferred finff ancing costs which are being
amortized using the effeff ctive interest rate over the term of the 4.75% Senior Notes.
a
The 4.75% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s
subsu idiaries that guarantee the obligations of the Company under the 2021 Credit Facility. If the Company experiences
specific kinds of changes of control, the Company must offeff
r to repurchase all of the 4.75% Senior Notes (unless otherwise
redeemed) at a price equal to 101% of the aggregate principal amount thereof, plus accruerr d and unpaid interest. The
Company may redeem the 4.75% Senior Notes, in whole or in part, at any time (a) prior to May 1, 2024, at a price equal to
icable premium described in the associated indenturt e and accruerr d and
100% of the principal amount thereof, plus the appl
unpaid interest and (b) on or afteff
th in the indenturt e, plus accruerr d and
o an aggregate
unpaid interest. In addition, prior to May 1, 2024, the Company may redeem, in one or more transactions, up tu
of 40% of the original principal amount of the 4.75% Senior Notes at a redemption price equal to 104.75% of the principal
amount thereof, plus accruer d and unpaid interest, with the net cash proceeds of one or more equity offeff
r May 1, 2024 at specified redemption prices set forff
rings.
a
7.50% Senior Notes due 2027
In September 2019, the Company issued $300 million aggregate principal amount of 7.50% Senior Notes dued
2027 (the
“7.50% Senior Notes”). The 7.50% Senior Notes will mature on October 15, 2027. Interest on the 7.50% Senior Notes is
payabla e semi-annually in cash in arrears on April 15 and October 15 of each year. The effeff ctive interest rate on the 7.50%
Senior Notes, which includes debt issuance costs, is 7.82%. In connection with the issuance of the 7.50% Senior Notes, the
Company incurred and capitalized as a reducd tion of the principal amount of the 7.50% Senior Notes appa
roximately
$5.8 million in deferff
red finff ancing costs which is amortized using the effeff ctive interest rate over the term of the 7.50% Senior
Notes.
The 7.50% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s
subsu idiaries that guarantee the obligations of the Company under the 2021 Credit Facility. The Company may redeem the
7.50% Senior Notes, in whole or in part, at any time (a) prior to October 15, 2022, at a price equal to 100% of the principal
amount thereof, plus the appl
icable premium described in the associated indenturt e and accruer d and unpaid interest and (b) on
r October 15, 2022 at specified redemption prices set forth in the indenturt e, plus accruer d and unpaid interest. In
or afteff
addition, prior to October 15, 2022, the Company may redeem, in one or more transactions, up tu
o an aggregate of 40% of the
original principal amount of the 7.50% Senior Notes at a redemption price equal to 107.5% of the principal amount thereof,
a
F-23
plus accruerr d and unpaid interest, with the net cash proceeds of one or more equity offeff
specific kinds of changes of control, the Company must offeff
redeemed) at a price equal to 101% of the aggregate principal amount thereof, plus accruer d and unpaid interest.
rings. If the Company experiences
r to repurchase all of the 7.50% Senior Notes (unless otherwise
1.00% Convertible Senior Notes due 2023
In January 2018, the Company issued $172.5 million aggregate principal amount of 1.00% Convertible Senior Notes dued
ry 1, 2023, the Company utilized borrowing capacity under the Revolver
2023 (the “1.00% Convertible Notes”). On Februar
due 2027 to satisfy its repayment obligation at maturt
ity of the 1.00% Convertible Notes. All noteholders elected to receive
cash in repayment of the 1.00% Convertible Notes.
Debt Maturities
As of December 31, 2023, the aggregate maturt
follows (in thousands):
ities of total long-term debt for the next five fiscal years and thereafter are as
2024
2025
2026
2027
2028
r
Thereafteff
Total
$
7,500
13,125
15,000
393,750
258,750
350,000
$
1,038,125
Letters of credit totaling $6.9 million were outstanding as of December 31, 2023 that exist to meet credit requirements forff
Company’s insurance providers.
the
Cash paid for interest forff
million, respectively.
the years ended December 31, 2023, 2022 and 2021 was $66.3 million, $56.9 million and $45.0
8. DERIVATIVE FINANCIAL INSTRUMENTS
1.75% Convertible Note Hedge Transactions and Warrant Transactions
In December 2021, in connection with the 1.75% Convertible Notes offering, the Company entered into privately negotiated
convertible note hedge transactions (together, the “1.75% Convertible Note Hedge Transactions”) with each of Bank of
America, N.A., Wells Fargo Bank, National Association and Nomura Global Financial Products, Inc. (together, the “1.75%
Convertible Note Hedge Counterpar
rties”). Pursuant to the 1.75% Convertible Note Hedge Transactions, the Company
acquired options to purchase the same number of shares of the Company's common stock (or 2,584,578 shares) initially
underlying the 1.75% Convertible Notes at an initial strike price equal to the initial strike price of the 1.75% Convertible
Notes of appr
oximately $100.11 per share, subject to customary anti-dilution adjud stments. The options expire on December 1,
2028, subju ect to earlier exercise.
a
At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “1.75% Convertible
Note Warrant Transactions”) with each of the 1.75% Convertible Note Hedge Counterpar
rties, pursuant to which the
Company sold warrants to purchase the same number of shares of the Company's common stock (or 2,584,578 shares)
underlying the 1.75% Convertible Notes, at an initial strike price of approximately $123.22 per share, subject to customaryrr
anti-dilution adjud stments. The warrants have a finff al expiration date of July 25, 2029.
The Company paid $57.4 million associated with the cost of the 1.75% Convertible Note Hedge Transactions and received
proceeds of $43.7 million related to the 1.75% Convertible Note Warrant Transactions. The 1.75% Convertible Note Hedge
Transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the
1.75% Convertible Notes and/or offsff et any cash payments the Company is required to make in excess of the principal amount
of converted 1.75% Convertible Notes. However, the 1.75% Convertible Note Warrant Transactions could separately have a
F-24
dilutive effect
strike price of the warrants.
ff
on the Company's common stock to the extent that the market price per share of the common stock exceeds the
As these transactions meet certain accounting criteria,
Convertible Note Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.
the 1.75% Convertible Note Hedge Transactions and 1.75%
1.00% Convertible Note Hedge Transactions and Warrant Transactions
In January 2018, in connection with the 1.00% Convertible Note offeff
ring, the Company entered into privately negotiated
convertible note hedge transactions (the “1.00% Convertible Note Hedge Transactions”) and at the same time also entered
into separate, privately negotiated warrant transactions (the “1.00% Convertible Note Warrant Transactions”). The 1.00%
, 2023 and the 1.00% Convertible Note Warrant Transactions
Convertible Note Hedge Transactions expired as of February 1rr
ity of the 1.00% Convertible Notes.
expired as of September 20, 2023 in connection with the repayment at maturt
9. ACCRUED LIABILITIES
($ in thousands)
Employee compensation and benefitsff
Property taxes
Customer incentives
Accruer d interest
Accruer d warranty
Income tax payable
Other
Total accruerr d liabia lities
$
As of December 31
2023
2022
$
57,702
6,038
21,724
7,998
6,130
2,372
9,747
80,725
5,777
27,719
8,807
12,103
28,926
8,538
$
111,711
$
172,595
The table below summarizes the change in accruer d warranty liabia lities.
($ in thousands)
Beginning balance
Provision
Settlements made (in cash or in kind)
Acquisitions
gg
Ending balance
Year Ended December 31
2023
2022
2021
$
$
12,103
$
13,827
$
23,820
(29,793)
—
29,918
(32,998)
1,356
6,130
$
12,103
$
3,872
24,202
(17,725)
3,478
13,827
F-25
10. INCOME TAXES
The provision for income taxes consists of the folff
lowing:
($ in thousands)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferff
red
Income taxes
Year Ended December 31
2023
2022
2021
$
44,126
$
92,783
$
4,816
10
48,952
(3,578)
2,994
(7)
(591)
23,724
56
116,563
(7,348)
(2,027)
26
(9,349)
$
48,361
$
107,214
$
57,156
15,755
(61)
72,850
(1,854)
(2,089)
—
(3,943)
68,907
The Company has accounted for in its 2023, 2022, and 2021 income tax provision the impact of Global Intangible Low-
Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j)(( , and foreign-derived intangible
income deductions, although such provisions were either not applicable or resulted in a zero or immaterial impact to the
consolidated financial statements.
A reconciliation of the differences between the actuat
income tax rate of 21% is as follows:
l provision for income taxes and income taxes at the fedff
eral statutt oryrr
($ in thousands)
Rate applied to pretax income
State taxes, net of federal tax effeff ct
Research and development tax credits
Section 162(m) permanent addback
Year Ended December 31
2023
2022
2021
$
40,201
21.0 % $
91,436
21.0 % $
61,598
21.0 %
6,797
3.6 %
16,715
3.8 %
10,358
3.5 %
(2,889)
(1.5)%
(4,542)
(1.0)%
(1,990)
(0.7)%
6,315
3.3 %
7,421
1.7 %
5,825
2.0 %
Excess tax benefit on stock-based compensation
(3,513)
(1.8)%
(3,292)
(0.7)%
(6,035)
(2.1)%
Other
Income taxes
1,450
0.7 %
(524)
(0.1)%
(849)
(0.3)%
$
48,361
25.3 % $ 107,214
24.7 % $
68,907
23.4 %
F-26
The composition of the deferff
red tax assets and liabia lities is as folff
lows:
($ in thousands)
Deferred tax assets:
Trade receivabla es allowance
Inventory crr
apitalization
Inventory r
rr
eserves
Federal NOL carryforwards
State NOL carryforwards
Accruer d expenses
Deferred compensation
Operating lease liabia lities
Share-based compensation
Capia talized research & experimentation costs
red tax assets before valuation allowance
Total deferff
Less: valuation allowance
Deferred tax liabia lities:
Prepaid expenses
Operating lease right-of-use assets
Depreciation expense
Intangibles
Other
Total deferff
red tax liabia lities
Net deferff
red tax liabilities
As of December 31
2023
2022
$
$
1,339
3,696
8,322
417
745
20,819
750
45,371
7,045
23,751
112,255
(477)
(2,948)
(44,498)
(46,783)
(63,977)
(296)
1,325
4,454
8,318
736
572
27,865
625
41,739
7,921
14,037
107,592
(459)
107,133
(2,939)
(40,980)
(47,050)
(64,012)
(544)
$
$
(158,502) $
(155,525)
(46,724) $
(48,392)
Total deferff
red tax assets, net of valuation allowance
$
111,778
$
Cash paid by the Company for income taxes was $84.3 million, $117.1 million and $46.2 million in 2023, 2022 and 2021,
respectively.
As of December 31, 2023 and December 31, 2022, the Company had gross federal, state, and forff eign net operating losses, of
approximately $15.4 million and $17.6 million, respectively. These loss carryforwards generally expire between tax years
ending December 31, 2023 and December 31, 2041. The components of the valuation allowance relate to certain acquired
federal, state and foreign net operating loss carryforwards that the Company anticipates will not be utilized prior to their
expiration, either due to income limitations or limitations under Section 382 of the Internal Revenue Code of 1986. The tax
effeff cted values of these net operating losses are $1.2 million and $1.3 million as of December 31, 2023 and 2022,
respectively, exclusive of valuation allowances of $0.5 million and $0.5 million as of December 31, 2023 and 2022,
respectively.
The Company is subju ect to periodic audits by domestic tax authorities. For the majoa rity of tax jurisdictions, the U.S. federal
statutt e of limitations remains open forff
the years 2020 and later. Uncertain tax benefitsff were immaterial as of December 31,
2023 and 2022 and activity related to uncertain tax benefitsff was immaterial forff
all periods presented.
11. STOCK REPURCHASE PROGRAMRR
S
In December 2022, the Company's Board of Directors ("the Board") authorized an increase in the amount of the Company's
common stock that may be acquired over the next 24 months under the current stock repurchase program to $100 million,
including the $38.2 million remaining under the previous authorization. Approximately $77.6 million remains in the amount
F-27
of the Company's common stock that may be acquired under the current stock repurchase program as of December 31, 2023.
Under the stock repurchase plans, the Company made repurchases of common stock for 2023, 2022, and 2021 as follows:
Shares repurchased
Average price
Aggregate cost (in millions)
2023
2022
2021
276,784
1,325,564
$
$
67.95
18.8
$
$
58.08
77.0
$
$
612,325
79.93
48.9
The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been
refleff cted, using an average cost method, as a reducd tion of common stock, additional paid-in-capital and retained earnings in
the Company’s consolidated balance sheet.
12. EARNINGS PER COMMON SHARE
Earnings per common share is calculated as follows:
($ in thousands except per share data)
Numerator:
Earnings for basic per share calculation
Effeff ct of interest on potentially dilutive convertible notes, net of
tax
Earnings for dilutive per share calculation
Denominator:
Weighted average common shares outstanding - basic
Weighted average impact of potentially dilutive convertible
notes
Effeff ct of potentially dilutive securities
Weighted average common shares outstanding - diluted
Earnings per common share:
Basic earnings per common share
Diluted earnings per common share
Cash dividends paid per common share
Year Ended December 31
2023
2022
2021
142,897
$
328,196
$
224,915
162
1,927
—
143,059
$
330,123
$
224,915
21,519
166
340
22,025
22,140
2,059
272
24,471
6.64
6.50
1.90
$
$
$
14.82
13.49
1.44
$
$
$
22,780
—
575
23,355
9.87
9.63
1.17
$
$
$
$
$
The impact on diluted earnings per share from antidilutive securities excluded froff m the calculation was immaterial for all
periods presented.
13. LEASES
We lease certain facilities, trailers, forff kliftsff
and other assets. Leases with an initial term of 12 months or less are not recorded
on the balance sheet and expense related to these short-term leases was immaterial for the years ended December 31, 2023,
2022 and 2021. Variable lease expense, principally related to trucrr ks, forff kliftsff
lity rent escalators, was
immaterial for the years ended December 31, 2023, 2022 and 2021. Leases have remaining lease terms of 1 to 16 years.
Certain leases include options to renew forff
an additional term. Where there is reasonabla e certainty to utilize a renewal option,
we include the renewal option in the lease term used to calculate operating lease right-of-use assets and lease liabia lities.
, and index-related faci
ff
F-28
Lease expense, suppl
u
emental cash floff w inforff mation, and other information related to leases were as follows:
($ in thousands)
Operating lease cost
Cash paid forff
liabia lities:
amounts included in the measurement of lease
Operating cash floff ws for operating leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Balance sheet information related to leases was as folff
lows:
$
$
$
($ in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets
Liabilities
Operating lease liabia lities, current portion
Long-term operating lease liabia lities
Total lease liabilities
Weighted average remaining lease term, operating leases (in years)
Weighted average discount rate, operating leases
Year Ended December 31
2023
2022
2021
56,370
$
50,674
$
42,081
55,933
$
49,938
$
41,061
65,505
$
50,719
$
78,225
As of December 31
2023
2022
$
$
$
177,717
48,761
132,444
181,205
4.8
5.4 %
$
$
$
$
$
163,674
44,235
122,471
166,706
5.1
4.4 %
57,145
48,597
37,611
24,023
16,025
24,108
207,509
(26,304)
181,205
Maturities of operating lease liabia lities were as folff
lows as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
r
Thereafteff
Total lease payments
Less imputed interest
Total
The Company has additional operating leases that have not yet commenced as of December 31, 2023, and therefore,
approximately $2.9 million in operating lease right-of-use assets and corresponding operating lease liabia lities were not
included in our consolidated balance sheet as of December 31, 2023. These leases are expected to commence in the first
quarter of fiscal 2024 with lease terms of 5 years.
14. COMMITMENTS AND CONTINGENCIES
The Company is subju ect to proceedings, lawsuits, audits, and other claims arising in the normal course of business. All such
matters are subject to uncertainties and outcomes that are not predictabla e with assurance. Accruar
ls for these items, when
applicable, have been provided to the extent that losses are deemed probabla e and are reasonabla y estimabla e. These accruals are
adjud sted from time to time as developments warrant.
F-29
Although the ultimate outcome of these matters cannot be ascertained, on the basis of present inforff mation, amounts already
provided, availabia lity of insurance coverage and legal advice received, it is the opinion of management that the ultimate
resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s
consolidated balance sheet, results of operations, or cash floff ws.
In August 2019, a group of companies calling itself the Lusher Site Remediation Group (the “Group”) commenced litigation
against the Company in Lusher Site Remediation Group v. Sturt gis Iron & Metal Co., Inc., et al., Case Number 3:18-
cv-00506, pending in the U.S. District Court forff
the Northern District of Indiana, relating to a site owned by the Company
(the "Lusher Street Site"). The Group’s Second Amended Complaint, which was the first to assert claims against Patrick,
asserted claims under the federal Comprehensive Environmental Response, Compensation, and Liabia lity Act (“CERCLA”),
42 U.S.C. § 9601 et seq., an Indiana state environmental statute and Indiana common law. One defendant in the case, Sturt gis
Iron & Metal Co., Inc. (“Sturt gis”), subsu equently filed two cross claims against Patrick, asserting against the Company a claim
for (i) contribution under CERCLA and (ii) contractuat
l indemnity. The Company moved to dismiss the Group’s claims and
also moved to dismiss Sturt gis’s cross claims. On August 21, 2020, the court granted Patrick’s two motions to dismiss. The
Group subsu equently moved forff
reconsideration of the court’s decision.
On March 19, 2021, the Company received a General Notice of Potential Liabia lity from the U.S. Environmental Protection
Agency (the “EPA”), pursuant to Section 107(a) of CERCLA (the “Notice”). The Notice provides that the EPA has incurred
and will likely incur additional costs relative to conducting a Remedial Investigation/Feasibility Studyt
("RI/FS"), conducting
Remedial Design/Remedial Action ("RD/RA"), and other investigation, planning, response, oversight, and enforcement
activities related to the Lusher Street Site. Because the Company was the owner of and former operator within the Lusher
Street Site and as such may be a potentially responsible party pursuant to CERCLA, the Company received the Notice and an
indication that it may have a responsibility to contribute to the costs of RI/FS, RD/RA oRR
s
r additional mitigation effort
incurred or to be incurred by the EPA.
ff
On September 15, 2021, the Court granted the parties Joint Motion to Stay Proceedings Pending Negotiations with the EPA.
The proceedings remain subju ect to the Court-approved stay.
The Company sold certain parcels of real property that the EPA contends are connected to the Superfund Site (the "Divested
Properties") in January 2022 for a pretax gain on disposal of $5.5 million that is included in Selling, general and
administrative expenses in the Company's consolidated statements of income forff
year ended December 31, 2022. The
defend and hold the Company harmless for all liabia lity and exposure, both private and to all
purchaser agreed to indemnify,ff
EPA claims, concerning and relating to the Divested Properties. No further proceedings occurred in the year ended December
31, 2023. As to the real properties that were not among the Divested Properties but remain the subject of the litigation, the
Company does not currently believe that the litigation or the Supeu rfund Site matter are likely to have a material adverse
impact on its financial condition, results of operations, or cash floff ws. However, any litigation is inherently uncertain, the EPA
has yet to select a finff al remedy for the Supeu rfund Site, and any judgment or injunctive relief entered against us or any adverse
settlement could materially and adversely impact our business, results of operations, finff ancial condition, and prospects.
15. COMPENSATION PLANS
Stock-Based Compensation
The Company has various stock option and stock-based incentive plans and various agreements whereby stock options,
restricted stock awards, and SARS were made available to certain key employees, directors, and others based upon meeting
various individual, divisional or company-wide performance criteria and time-based criteria. All such awards qualify aff
nd are
accounted for as equity awards. Equity incentive plan awards, which are granted under the Company's 2009 Omnibus
Incentive Plan, are intended to retain and reward key employees for outstanding performance and efforts as they relate to the
Company’s short-term and long-term objectives and its strategic plan. As of December 31, 2023, approximately 1.3 million
common shares remain available for stock-based compensation grants.
Stock-based compensation expense was $19.4 million, $21.8 million and $22.9 million for the years ended December 31,
for stock-based compensation expense was $4.8 million, $5.4 million
2023, 2022 and 2021, respectively. Income tax benefitff
and $5.8 million forff
the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there was
approximately $18.2 million of total unrecognized compensation cost related to share-based compensation arrangements
granted under incentive plans. That cost is expected to be recognized over a weighted-average period of approximately 17.0
months.
F-30
Stock Options:
p
No stock options were granted durd ing the years ended December 31, 2023, 2022 and 2021. Outstanding stock options granted
in prior years vest ratably over either three or four
years and have nine-year contractuat
l terms.
ff
The folff
lowing tabla e summarizes the Company’s option activity:
(shares in thousands)
Years ended December 31
2023
2022
2021
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Shares
Outstanding beginning of year
362 $
43.76
368 $
—
(248)
114 $
—
44.88
41.33
(1)
(5)
362 $
43.72
41.33
41.33
43.76
1,015 $
(32)
(615)
368 $
43.88
41.33
41.11
43.72
Forfeited durd ing the year
Exercised durd ing the year
Outstanding end of year
Vested Options:
Vested during the year
Eligible end of year for exercise
Aggregate intrinsic value ($ in thousands):
Total options outstanding
Options exercisabla e
Options exercised
138 $
114 $
42.98
41.33
161 $
223 $
42.98
44.25
248 $
67 $
46.70
47.05
$
$
6,711
6,711
$ 10,888
$
$
$
6,204
3,716
91
$ 13,593
$
2,268
$ 26,348
Weighted average faiff
during the year
r value of options granted
N/A
N/A
N/A
The aggregate intrinsic value (excess of market value over the option exercise price) in the table above is before income
taxes, and assuming the Company’s closing stock price of $100.35, $60.60 and $80.69 per share as of December 31, 2023,
2022 and 2021, respectively, is the price that would have been received by the option holders had those option holders
exercised their options as of that date. As of December 31, 2023, the weighted average remaining contractuat
options
outstanding was 5.4 years and the weighted average remaining contractuat
l term forff
options exercisabla e was 5.4 years.
l term forff
The cash received froff m the exercise of stock options was $1.4 million, $0.2 million and $4.9 million in 2023, 2022 and 2021,
respectively. The income tax benefit related to the stock options exercised was $6.7 million in 2021, and immaterial in 2023
and 2022. The grant date fair value of stock options vested in 2023, 2022 and 2021 was $5.9 million, $6.9 million and
$11.6 million, respectively.
As of December 31, 2023, there was no unrecognized compensation expense related to the stock options.
F-31
)
Stock Appreciation Rights (SARS):
pp
g
(
No SARS were granted or forff
the Company’s SARS activity:
feited in the years ended December 31, 2023, 2022 and 2021. The folff
lowing tabla e summarizes
(shares in thousands)
Total SARS:
Outstanding beginning of year
Exercised durd ing the year
Outstanding end of year
Vested SARS:
Vested during the year
Eligible end of year for exercise
Aggregate intrinsic value ($ in thousands):
Total SARS outstanding
SARS exercisabla e
SARS exercised
Weighted average faiff
during the year
r value of SARS granted
Years ended December 31
2023
2022
2021
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Shares
224 $
64.33
224 $
64.33
—
—
—
—
224 $
64.33
224 $
64.33
485 $
(261)
224 $
56.96
50.63
64.33
— $
—
— $
—
224 $
64.33
224 $
64.33
85 $
224 $
63.86
64.33
$
$
$
8,078
8,078
—
N/A
$
$
$
383
383
—
N/A
$
$
$
3,669
3,669
9,045
N/A
The aggregate intrinsic value (excess of market value over the SARS exercise price) in the table above is before income
taxes, and assuming the Company’s closing stock price of $100.35, $60.60 and $80.69 per share as of December 31, 2023,
2022 and 2021, respectively, is the price that would have been received by the SARS holder had that SARS holder exercised
l terms. All SARS outstanding as
the SARS as of that date. SARS vest ratabla y over four
of December 31, 2023 were fully vested.
years and have nine-year contractuat
ff
As of December 31, 2023, there was no unrecognized compensation expense related to the SARS.
Restricted Stock:
The Company’s stock-based awards include restricted stock awards. As of December 31, 2023, there was approximately
$18.2 million of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over
a weighted-average remaining life off
oximately 17.0 months.
a
f appr
Restricted stock awards possess voting rights, are included in the calculation of actuat
l shares outstanding, and include both
performance- and time-based contingencies. The grant date fair value of the awards is expensed over the related service or
performance period. Time-based shares cliff vff
est at the conclusion of the required service period, which ranges froff m less than
one year to seven years. The performance contingent shares are earned based on the achievement of a cumulative finff ancial
performance target, which ranges froff m less than one year to a seven-year period and vest at the conclusion of the
measurement period.
F-32
The folff
lowing tabla e summarizes the activity for restricted stock:
(shares in thousands)
Unvested beginning of year
Granted durd ing the year
Vested during the year
Forfeited durd ing the year
Unvested end of year
yy
Year Ended December 31
2023
2022
2021
Weighted-
Average
Grant Date
Stock Price
Weighted-
Average
Grant Date
Stock Price
Weighted-
Average
Grant Date
Stock Price
Shares
Shares
Shares
758 $
331
(328)
(81)
680 $
64.38
64.56
56.64
67.81
68.47
929 $
254
(408)
(17)
758 $
55.06
64.62
43.23
66.30
64.38
790 $
371
(198)
(34)
929 $
50.39
67.27
60.05
50.37
55.06
Aggregate faiff
$17.6 million, and $11.9 million, respectively.
r values of restricted stock vested for the years ended December 31, 2023, 2022 and 2021 were $18.6 million,
16. SEGMENT INFORMATION
Financial results for the Company's reportabla e segments have been prepared using a management approach, which is
consistent with the basis and manner in which financial inforff mation is evaluated by the Company's Chief Operating Decision
Maker (CODM) in allocating resources and in assessing performance. The Company has two reportabla e segments,
Manufact
ing and Distribution, which are based on its method of internal reporting, which segregates its businesses based
on the way in which its CODM allocates resources, evaluates financial results, and determines compensation. The Company
does not measure profitabia lity at the end market (RV, marine, MH and industrial) level.
urt
ff
Manufacff
turing – This segment includes the following products: laminated products that are utilized to produce furff niture,
shelving, walls, countertops and cabinet products; cabinet doors; fiberglass bath fixturt es and tile systems; hardwood
furniture; vinyl printing; RV and marine furff niture; audio systems and accessories, including amplifieff
rs, tower speakers,
soundbars, and subwu
ooferff s; decorative vinyl and paper laminated panels; solid surface, granite, and quartz countertop
fabra ication; RV painting; fabra icated aluminum products; fibff erglass and plastic components; fiberglass bath fixturt es and tile
systems; softwoods lumber; custom cabinetry; polymer-based and other flooring; electrical systems components including
instrument and dash panels; wrapped vinyl, paper and hardwood profile mouldings; interior passage doors; air handling
products; slide-out trim and fasff cia; thermoformed shower surrounds; specialty bath and closet building products; fibff erglass
and plastic helm systems and components products; treated, untreated and laminated plywood; wiring and wire harnesses;
adhesives and sealants; boat towers, tops, trailers and fraff mes; marine hardware and accessories; protective covers for boats,
RVs, aircraft, and military and industrial equipment; aluminum and plastic fuel tanks; CNC molds and composite parts;
slotwall panels and components; and other products.
Distribution – The Company distributes pre-finished wall and ceiling panels; drywrr
ishing products;
electronics and audio systems components; appliances; marine accessories and components; wiring, electrical and plumbing
products; fibff er reinforced polyester products; cement siding; raw and processed lumber; interior passage doors; roofinff g
products; laminate and ceramic flooring; tile; shower doors; furniture; firff eplaces and surrounds; interior and exterior lighting
products; and other miscellaneous products in addition to providing transportation and logistics services.
all and drywrr
all finff
The accounting policies of the segments are the same as those described in Note 1 "Basis of Presentation and Significant
Accounting Policies" except that segment data includes intersegment sales. Assets are identifieff d to the segments except for
cash, prepaid expenses, land and buildings, and certain deferff
ate division. The
corporate division charges rent to the segments forff
estimated market rates. The
use of the land and buildings based upon
intersegment sales similar to third party transactions, which reflect current market prices. The
Company accounts forff
ate division. The Company evaluates
Company also records certain income from purchase incentive agreements at the corpor
the performance of its segments and allocates resources to them based on a variety of indicators including but not limited to
sales and operating income as presented in the tables below.
red assets, which are identifieff d with the corpor
u
r
r
F-33
The tables below present inforff mation that is provided to the CODM of the Company as of December 31, 2023 and 2022 and
for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Net outside sales
Intersegment sales
Total sales
Operating income
Total assets
Capia tal expenditures
Depreciation and amortization
Net outside sales
Intersegment sales
Total sales
Operating income
Total assets
Capia tal expenditures
Depreciation and amortization
Net outside sales
Intersegment sales
Total sales
Operating income
Capia tal expenditures
Depreciation and amortization
Year Ended December 31
2023
Manufacff
$
turing
2,586,783
66,474
2,653,257
321,096
2,071,500
50,771
126,431
$
Distribution
881,262
8,146
889,408
90,095
426,931
8,094
12,710
Year Ended December 31
2022
Manufacff
$
turing
3,603,766
77,646
3,681,412
531,547
2,302,745
67,635
114,782
Year Ended December 31
2021
Manufacff
$
turing
2,930,466
71,641
3,002,107
379,885
58,700
89,899
$
$
Distribution
1,278,106
9,491
1,287,597
136,889
407,861
3,801
11,422
Distribution
1,147,626
7,028
1,154,654
106,241
3,873
10,790
$
$
$
Total
3,468,045
74,620
3,542,665
411,191
2,498,431
58,865
139,141
Total
4,881,872
87,137
4,969,009
668,436
2,710,606
71,436
126,204
Total
4,078,092
78,669
4,156,761
486,126
62,573
100,689
F-34
A reconciliation of certain line items pertaining to the total reportable segments to the consolidated financial statements as of
December 31, 2023 and 2022 and forff
the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):
Net sales:
Total sales for reportabla e segments
Elimination of intersegment sales
Consolidated net sales
Operating income:
g
p
Operating income forff
Unallocated corporate expenses
Amortization
Consolidated operating income
reportabla e segments
Total assets:
Identifiaff bla e assets for reportabla e segments
Corporate assets unallocated to segments
Cash and cash equivalents
Consolidated total assets
p
Depreciation and amortization:
Depreciation and amortization forff
Corporate depreciation and amortization
Consolidated depreciation and amortization
reportabla e segments
p
Capia tal expenditures:
p
Capia tal expenditures forff
Corporate capital expenditures
Consolidated capital expenditures
reportabla e segments
Year Ended December 31
2022
2023
2021
3,542,665
(74,620)
3,468,045
411,191
(72,297)
(78,694)
260,200
$
$
$
$
4,969,009
(87,137)
4,881,872
668,436
(99,037)
(73,229)
496,170
$
$
$
$
4,156,761
(78,669)
4,078,092
486,126
(78,085)
(56,329)
351,712
As of December 31
2023
2,498,431
52,608
11,409
2,562,448
$
$
2022
2,710,606
49,018
22,847
2,782,471
Year Ended December 31
2022
2023
2021
139,141
5,402
144,543
58,865
3,183
62,048
$
$
$
$
126,204
4,553
130,757
71,436
8,447
79,883
$
$
$
$
100,689
4,119
104,808
62,573
2,231
64,804
$
$
$
$
$
$
$
$
$
$
ing segment for the years ended December 31, 2023, 2022
ff
Amortization expense related to intangible assets in the Manufact
and 2021 was $67.6 million, $62.8 million and $46.7 million, respectively. Intangible assets amortization expense in the
Distribution segment was $11.0 million, $10.4 million and $9.6 million in 2023, 2022 and 2021, respectively.
urt
Unallocated corporate expenses include corporate general and administrative expenses comprised of wages and other
compensation, insurance, taxes, suppl
tep-upu
ies, travel and entertainment, professional fees
adjud stments, and other.
, amortization of inventory s
u
rr
ff
F-35
Majoa r Customers
ing and Distribution
The Company had two majoa r customers that accounted for the following sales in our Manufact
segments for the years ended December 31, 2023, 2022 and 2021 and trade receivabla es balances as of December 31, 2023
and 2022 as shown in the tabla e below:
urt
ff
Customer 1
Net sales
Trade receivabla es
Customer 2
Net sales
Trade receivabla es
17. SUBSEQUENT
Q
EVENTS
Year Ended December 31
2023
2022
2021
15 %
8 %
14 %
5 %
21 %
4 %
17 %
6 %
24 %
18 %
ff
In January 2024, the Company announced that it completed its acquisition of Sportech, LLC, a leading designer and
urt er of high-value, complex component solutions sold to powersports OEMs, adjad cent market OEMs and the
manufact
rmarket. The aggregate purchase price for the acquisition (excluding working capital adjustments) was $315 million
afteff
2027 and cash on hand. As of the purchase date, we will record a
which was funded with borrowings under the Revolver dued
preliminary prr
the assets acquired and liabia lities assumed in connection with the acquisition. We
expect to allocate a significant portion of the purchase price to identifiaff bla e intangible assets and goodwill. Certain portions of
the goodwill balance will not be deductible for tax purpos
es. The Company will perform its valuation of net assets, based on
facts and circumstances that existed as of the transaction date, over a period not to exceed 12 months, and adjud stments will be
recorded in the periods in which they are determined.
urchase price allocation forff
rr
F-36
Exhibit 4.4
General
DESCRIPTION OF COMMON STOCK
We are currently authorized to issue 40,000,000 shares of common stock, without par value, and 1,000,000 shares of
preferff
red stock, without par value. Each share of our common stock has the same relative rights as, and is identical
in all respects to, each other share of our common stock. On February 1rr
6, 2024, there were 22,382,306 shares of our
common stock outstanding and no shares of preferred stock outstanding.
Issuance of Common Stock
Shares of common stock may be issued from time to time as our Board of Directors (the “Board”) shall determine
and on such terms and forff
such consideration as shall be fixed by the Board. The authorized number of shares of
common stock may, without a class or series vote, be increased or decreased from time to time by the affirmative
vote of the holders of a majority of the stock of the Company entitled to vote.
Dividends and Rights Upon Liquidation.
Afteff
r the requirements with respect to preferff ential dividends on any preferred stock outstanding, if any, are met, the
holders of our outstanding common stock are entitled to receive dividends out of assets legally availabla e at the time
and in the amounts as the Board may from time to time determine. Our common stock is not convertible or
exchangeable into other securities. Upon our liquidation, dissolution or winding up, the holders of our common
stock are entitled to receive the assets that are legally availabla e forff
distribution on a pro rata basis, after payment of
all of our debts and other liabia lities and subju ect to the prior rights of holders of any preferred stock then outstanding.
Voting Rights
The holders of the common stock are entitled to vote at all meetings of the shareholders and are entitled to cast one
vote forff
each share of common stock held by them respectively and standing in their respective names on the books
of the Company.
Preemptive Rights
Holders of our common stock do not have preemptive rights with respect to any shares that may be issued. Shares of
our common stock are not subju ect to redemption.
Relevant Provisions of the Indiana Business Corporation Law
The Indiana Business Corpor
rr
ation Law (the “IBCL”) limits some transactions between an Indiana company and any
person who acquires 10% or more of the company’s common stock (an “interested shareholder”). During the fivff e-
year period afteff
r the acquisition of 10% or more of a company’s common stock, an interested shareholder cannot
enter into a business combination with the company unless, before the interested shareholder acquired the common
stock, the board of directors of the company appr
a
oved the acquisition of common stock or approved the business
combination. Afteff
r the five-year period, an interested shareholder can enter into only the following three types of
business combinations with the company: (i) a business combination appr
a
oved by the board of directors of the
company beforff e the interested shareholder acquired the common stock; (ii) a business combination appr
a
oved by
holders of a majority of the common stock not owned by the interested shareholder; and (iii) a business combination
in which the shareholders receive a price for their common stock at least equal to a formula price based on the
highest price per common share paid by the interested shareholder.
In addition, under Indiana law, a person who acquires shares giving that person more than 20%, 33 1/3%, and 50%
of the outstanding voting securities of an Indiana corpor
ration is subject to the “Control Share Acquisitions Statutt e”
of the IBCL and may lose the right to vote the shares which take the acquiror over these respective levels of
ownership. Before an acquiror may vote the shares that take the acquiror over these ownership thresholds, the
acquiror must obtain the approval of a majoa rity of the shares of each class or series of shares entitled to vote
separately on the proposal, excluding shares held by offiff cers of the corpor
r
ation, by employees of the corpor
r
ation
who are directors of the corporation and by the acquiror. An Indiana corpor
rr
ation subject to the Control Share
Acquisitions Statutt e may elect not to be covered by the statutt e by so providing in its articles of incorpor
r
ation or by-
laws. We have adopted a provision in our Amended and Restated By-laws which states that the Control Share
Acquisitions Statutt e shall not apply to the issued and outstanding shares of our common stock.
Transferff Agent and Registrar
The transfer agent and registrar for our common stock is Computershare.
Listing
Our common stock is listed on The Nasdaq Stock Market under the symbol “PATK”.
PATRICK INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANTRR
Exhibit 21
Companyp y
Adorn Holdings, Inc.
All Counties Glass, Inc.
All State Glass, Inc.
Anything Boating, LLC
Arran Isle, Inc.
Bathroom & Closet, LLC
Bristolpipe, LLC
Dehco, Inc.
Dowco, Inc.
Dura Shower Enclosures Co., Ltd
Fresno Shower Door, Inc.
Front Range Stone, Inc.
ation
Geremarie Corpor
rr
G.G Schmitt & Sons, Inc.
Great Lakes Boat Top, LLC
Heywood Williams USA, LLC
Highland Lakes Acquisition, LLC
Hyperform, Inc. Seadek Marine Products
Inland Plywood Company
Katalyst Industries LLC
KLS Doors, LLC
Larry Methvin Installations, Inc.
LaSalle Bristol Corporation
LaSalle Bristol, LLC
LaSalle Bristol, LP
Madrona Stone, LLC
Marine Accessories Corporation
Marine Accessories Europe B.V.
Marine Accessories Europe Holdco, LLC
Monster Marine Products, Inc.
Patrick PS Holdco, LLC
Patrick Transportation, LLC
Rockford Corporation
ing, Inc.
SEI Manufact
urt
ff
Shanghai Daoke Trading Co, Ltd.
Shower Enclosures America, Inc.
Structurt al Composites, LLC
y, Ltd.
Sunrise Pipe and Suppl
Taco Metals, LLC
u
rr
The Tumacs Corpor
ation
Topline Counters, LLC
Transhield, Inc.
Transhield de Mexico S. de R.L. De C.V.
Transport Indiana, LLC
Transport Synergy, LLC
rr
TS Buyer Corp
Tumacs Holdings LLC
Tumacs LLC
Wet Sounds, Inc.
Xtreme Marine Corporation
p
State or Country of Incorporation
y
Delaware
Califorff nia
Califorff nia
Tennessee
Indiana
Nevada
Indiana
Indiana
Wisconsin
China
Califorff nia
Colorado
Illinois
Pennsylvania
Delaware
Indiana
Delaware
Florida
Michigan
Texas
Califorff nia
Califorff nia
Indiana
Delaware
Indiana
Washington
Arizona
The Netherlands
Delaware
Delaware
Indiana
Indiana
Arizona
Indiana
China
Califorff nia
Indiana
Canada
Florida
Pennsylvania
Washington
Indiana
Mexico
Indiana
Indiana
ndiana
I
Pennsylvania
Pennsylvania
Texas
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We consent to thhe iincorporatiio bn byy referff ence iin Regigistra ition Statement Nos. 333-156391 on Form S-3 a dnd
Regigistra ition Statement Nos. 333-165788, 333-198321, 333-236454 andd 333-238795 on Form S-8 of our
repor dt datedd F bebruaryy 2rr
“Compa yny”)) a dnd hthe effectiiveness of thhe Companyy'
hthiis Annuall Report on Form 10-K forff
9, 2024, rella itingg to thhe fifinanciiall statements of Pat iri kck Inddustriies, Inc. ((thhe
is internall controll over fiinff an ici lal repor itingg appe
hth ye year e dndedd Decembber 31, 2023.
ariing ig in
a
/s/ Deloitte & Touche LLP
Chicago, Illinois
,
ry 29, 2024
y
Februarr
I, Andy L. Nemeth, certify that:
CERTIFICATIONS
Exhibit 31.1
1
2
3
4
I have reviewed this annual report on Form 10-K of Patrick Industries, Inc. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact
a material facff
statements were made, not misleading with respect to the period covered by this report;
t necessary to make the statements made, in light of the circumstances under which such
ff
or omit to state
Based on my knowledge, the financial statements, and other financial inforff mation included in this report,
fairly present in all material respects the finff ancial condition, results of operations and cash floff ws of the
registrant as of, aff nd for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as definff ed in Exchange Act RulRR es 13a-15(e) and 15d-15(e)) and internal control
over finff ancial reporting (as definff ed in Exchange Act RulRR es 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedurd es, or caused such disclosure controls
and procedures to be designed under our supeu rvision, to ensure that material
information relating to the registrant, including its consolidated subsu idiaries, is made
known to us by others within those entities, particularly durd ing the period in which this
report is being prepared;
designed such internal control over finff ancial reporting, or caused such internal control
over finff ancial reporting to be designed under our supeu rvision, to provide reasonabla e
assurance regarding the reliabia lity of finff ancial reporting and the preparation of finff ancial
statements for external purpos
principles;
es in accordance with generally accepted accounting
r
evaluated the effeff ctiveness of the registrant’s disclosure controls and procedurd es and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedurd es, as of the end of the period covered by this report based on
such evaluation; and
disclosed in this report any change in the registrant’s internal control over finff ancial
reporting that occurred durd ing the registrant’s most recent fisff cal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affeff cted, or is
reasonabla y likely to materially affeff ct, the registrant’s internal control over finff ancial
reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over finff ancial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board
of Directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of
internal control over finff ancial reporting which are reasonabla y likely to adversely affect
the registrant’s abia lity to record, process, summarize and report finff ancial information;
and
any fraff ud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over finff ancial reporting.
Date:February 2rr
y
,
9, 2024
/s/ Andy L. Nemeth
Andy L. Nemeth
Chief Executive Offiff cer
I, Matthew S. Filer, certify t
ff
hat:
CERTIFICATIONS
Exhibit 31.2
1
2
3
4
I have reviewed this annual report on Form 10-K of Patrick Industries, Inc. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact
a material facff
statements were made, not misleading with respect to the period covered by this report;
t necessary to make the statements made, in light of the circumstances under which such
ff
or omit to state
Based on my knowledge, the financial statements, and other financial inforff mation included in this report,
fairly present in all material respects the finff ancial condition, results of operations and cash floff ws of the
registrant as of, aff nd for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as definff ed in Exchange Act RulRR es 13a-15(e) and 15d-15(e)) and internal control
over finff ancial reporting (as definff ed in Exchange Act RulRR es 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedurd es, or caused such disclosure controls
and procedures to be designed under our supeu rvision, to ensure that material
information relating to the registrant, including its consolidated subsu idiaries, is made
known to us by others within those entities, particularly durd ing the period in which this
report is being prepared;
designed such internal control over finff ancial reporting, or caused such internal control
over finff ancial reporting to be designed under our supeu rvision, to provide reasonabla e
assurance regarding the reliabia lity of finff ancial reporting and the preparation of finff ancial
statements for external purpos
principles;
evaluated the effeff ctiveness of the registrant’s disclosure controls and procedurd es and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedurd es, as of the end of the period covered by this report based on
such evaluation; and
es in accordance with generally accepted accounting
r
disclosed in this report any change in the registrant’s internal control over finff ancial
reporting that occurred durd ing the registrant’s most recent fisff cal quarter (the company’s
fourth fiscal quarter in the case of an annual report) that has materially affeff cted, or is
reasonabla y likely to materially affeff ct, the registrant’s internal control over finff ancial
reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over finff ancial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board
of Directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of
internal control over finff ancial reporting which are reasonabla y likely to adversely affect
the registrant’s abia lity to record, process, summarize and report finff ancial information;
and
any fraff ud, whether or not material, that involves management or other employees who
have a significant role in the company’s internal control over finff ancial reporting.
Date: February 2rr
y
,
9, 2024
/s/ Matthew S. Filer
Matthew S. Filer
Interim Executive Vice President - Finance,
Chief Financial Offiff cer and Treasurer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the Annual Report of Patrick Industries, Inc. (the “Company”) on Form 10-K forff
December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned Chief Executive Officff er and Chief Financial Officer of the Company hereby certify,ff
U.S.C. §1350, as adopted pursuant to §906 of the Sarbar nes-Oxley Act of 2002 that: 1) the Report fulff
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information
contained in the Report faiff
the Company as of and forff
rly presents, in all material respects, the finff ancial condition and results of operations of
the periods covered in the Report.
pursuant to 18
ly complies
the year ended
/s/ Andy L. Nemeth
y
Andy L. Nemeth
Chief Executive Officer
/s/ Matthew S. Filer
Matthew S. Filer
Interim Executive Vice President – Finance,
Chief Financial Offiff cer and Treasurer
Februar
ry 29, 2024
PATRICK INDUSTRIES INC.
INCENTIVE COMPENSATION RECOVERY PRR
OLICY (the "Policy")
Exhibit 97
1. Recovery of Excess Incentive Compensation. If Patrick Industries, Inc. (the “Companyp y”) is required to
the Company’s board of directors (the “Board”) shall, unless the Board’s
prepare a Restatement,
Compensation Committee determines it to be Impracticable, take reasonabla y prompt action to recover all
Recoverabla e Compensation froff m any Covered Person. The Company’s obligation to recover Recoverabla e
Compensation is not dependent on if or when the restated finff ancial statements are fileff d. Subju ect to
applicable law, the Board may seek to recover Recoverabla e Compensation by requiring a Covered Person
to repay such amount
ral policies to incentive
to the Company; by adding “holdback” or deferff
compensation; by adding post-vesting “holding” or “no transfer” policies to equity awards; by set-off of a
Covered Person’s other compensation; by reducing futff urt e compensation; or by such other means or
combination of means as the Board, in its sole discretion, determines to be appropriate. This Policy is in
et against any Covered Person that
addition to (and not in lieu of) aff
may be available under appl
r adoption of this
Policy). The Board may, in its sole discretion and in the exercise of its business judgment, determine
whether and to what extent additional action is appr
opriate to address the circumstances surrounding any
Restatement to minimize the likelihood of any recurrence and to impose such other discipline as it deems
appropriate.
icable law or otherwise (whether implemented prior to or afteff
ny right of repayment, forfeiff
ture or off-sff
a
a
2. Administration of Policy. The Board shall have fulff
l authority to administer, amend or terminate this
Policy. The Board shall, subju ect
to the provisions of this Policy, make such determinations and
opriate or
interpretations and take such actions in connection with this Policy as it deems necessary, appr
advisabla e. All determinations and interprr etations made by the Board shall be finff al, binding and conclusive.
The Board may delegate any of its powers under this Policy to the Compensation Committee of the Board
or any subcommittee or delegate thereof.
a
3. Acknowledgement by Executive Offiff cers. The Board shall provide notice to and seek written
acknowledgement of this Policy from each Executive Officer; provided that the failure to provide such
notice or obtain such acknowledgement shall have no impact on the applicability or enforceability of this
Policy.
4. No Indemnificff ation. Notwithstanding the terms of any of the Company’s organizational documents, any
the loss of any
corporate policy or any contract, no Covered Person shall be indemnifieff d against
Recoverabla e Compensation.
5. Disclosures. The Company shall make all disclosures and filings with respect to this Policy and maintain
all documents and records that are required by the applicable rules and forms of the U.S. Securities and
Exchange Commission (the “SEC”) (including, without limitation, Rule 10D-1 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act
icable Exchange listing
standard.
”)) and any appl
g
a
6. Definitions. In addition to terms otherwise defined in this Policy, the folff
lowing terms, when used in this
Policy, shall have the following meanings:
“Applicable Period” means the three (3) completed fisff cal years preceding the earlier to occur of: (i) the
date that the Board, a committee of the Board, or the offiff cer or offiff cers of the Company authorized to take
such action if Board action is not required, concludes, or reasonabla y should have concluded, that the
Company is required to prepare a Restatement; or (ii) the date a court, regulator, or other legally authorized
” also includes, in
body directs the Company to prepare a Restatement. The term “Applicable Period
addition to the three (3) fiscal year period described in the preceding sentence, any transition period (that
results froff m a change in the Company’s fisff cal year) within or immediately folff
lowing that completed three
ther,r a transition period between the last day of the Company’s previous
(3) fisff cal year period; provideddd , fdd urff
pp
fiscal year end and the firff st day of its new fisff cal year that comprises a period of nine (9) to twelve (12)
months would be deemed a completed fiscal year.
“Covered Person” means any person who receives Recoverabla e Compensation.
“Exchange” means any national securities exchange or national securities association upon
Company has a class of securities listed.
u
which the
“Executive Offiff cer” includes the Company’s president, principal financial officer, principal accounting
offiff cer (or if there is no such accounting officff er, the controller), any vice-president of the Company in
charge of a principal business unit, division, or function (such as sales, administration, or finance), any
other officer who performs a policy-making function, or any other person (including any executive officff er
of the Company’s subsidiaries or affiff liates) who performs similar policy-making functions for the
Company. At a minimum, the term “Executive Offiff cer” shall include all executive officers identifieff d in
SEC filff ings pursuant to Item 401(b) of Regulation S-K, 17 C.F.R. §229.401(b).
“Financial Reporting Measure” means a measure that is determined and presented in accordance with the
accounting principles used in preparing the Company’s finff ancial statements, and any measure that is
aring in earnings
derived wholly or in part (including “non-GAAP” finff ancial measures, such as those appe
releases) froff m such measures; provided, however, that any such measure need not be presented within the
Company’s finff ancial statements or included in a filing made with the SEC. Examples of Financial
Reporting Measures include measures based on: revenues, net income, operating income, financial ratios,
EBITDA, liquidity measures (such as freff e cash floff w), returt n measures (such as returt n on assets or return on
invested capia tal), profitabia lity of one or more segments, and cost per employee. Stock price and total
shareholder returt n (“TSR”) also are Financial Reporting Measures.
a
r exercising a normal dued
process review of all the relevant facff
ts and
“Impracticable” means, afteff
circumstances and taking all steps required by Exchange Act RulRR e 10D-1 and any applicable Exchange
listing standard, the Compensation Committee determines that recovery of the Recoverabla e Compensation
is impracticabla e because: (i) it has determined that the direct expense that the Company would pay to a
third party to assist in enforcing this Policy and recovering the otherwise Recoverabla e Compensation would
exceed the amount to be recovered; (ii) it has concluded that the recovery of the Recoverabla e Compensation
would violate home country law adopted prior to November 28, 2022; or (iii) it has determined that the
recovery of the Recoverabla e Compensation would cause a tax-qualifieff d retirement plan, under which
benefits are broadly availabla e to the Company’s employees, to faiff
l to meet the requirements of 26 U.S.C.
401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. The Company must: (x) in the case of clause (i)
of the preceding sentence, prior to making that determination, make a reasonabla e attempt to recover any
Recoverabla e Compensation, document
to recover, and provide that
documentation to the Exchange; and (y) in the case of clause (ii) of the preceding sentence, obtain an
opinion of home country counsel, acceptable to the Exchange, that recovery would result in such a
violation, and provide that opinion to the Exchange.
such reasonabla e attempt(s)
“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based
wholly or in part upon the attainment of a Financial Reporting Measure; however it does not include: (i)
base salaries; (ii) discretionary cash bonuses; (iii) awards (either cash or equity) that are based uponu
subju ective, strategic or operational standards; and (iv) equity awards that vest solely on the passage of time.
“Received” – Incentive-Based Compensation is deemed “Received” in any Company fiscal period during
which the Financial Reporting Measure specified in the Incentive- Based Compensation award is attained,
even if the payment or grant of the Incentive-Based Compensation occurs afteff
r the end of that period.
“Recoverable Compensation” means all Incentive-Based Compensation (calculated on a pre-tax basis)
Received after December 1, 2023 by a Covered Person: (i) after beginning service as an Executive Officer;
(ii) who served as an Executive Offiff cer at any time durd ing the performance period for that Incentive-Based
Compensation; (iii) while the Company had a class of securities listed on an Exchange; and (iv) during the
Applicable Period, that exceeded the amount of Incentive-Based Compensation that otherwise would have
been Received had the amount been determined based on the Financial Performing Measures, as refleff cted
in the Restatement. With respect to Incentive-Based Compensation based on stock price or TSR, when the
amount of erroneously awarded compensation is not subju ect to mathematical recalculation directly from the
information in an accounting restatement: (x) the amount must be based on a reasonabla e estimate of the
effeff ct of the Restatement on the stock price or TSR upon which the Incentive-Based Compensation
Received by the Covered Person originally was based; and (y) the Company must maintain documentation
of the determination of the reasonable estimate and provide such documentation to the Exchange.
“Restatement” means an accounting restatement of any of the Company’s finff ancial statements due to the
Company’s material noncompliance with any financial reporting requirement under U.S. securities laws,
including any required accounting restatement to correct an error in previously issued financial statements
that is material to the previously issued financial statements (ofteff n referff
red to as a “Big R” restatement), or
that would result in a material misstatement if the error were corrected in the current period or left
uncorrected in the current period (often referred to as a “little r” restatement). A Restatement does not
include situations in which finff ancial statement changes did not result from material non-compliance with
ication of a change in
financial reporting requirements, such as, but not limited to retrospective: (i) appl
accounting principles; (ii) revision to reportabla e segment information dued
ture of the
Company’s internal organization; (iii) reclassification due to a discontinued operation; (iv) application of a
change in reporting entity, such as froff m a reorganization of entities under common control; (v) adjustment
stock splits,
to provision amounts in connection with a prior business combination; and (vi) revision forff
stock dividends, reverse stock splits or other changes in capital strucr
to a change in the strucr
ture.
a
Adopted by the Board of Directors at its quarterly meeting on November 16, 2023
Executive
(cid:88)(cid:337)(cid:229)(cid:192)(cid:202)(cid:283)(cid:287)
Board Of
Directors
Andy L. Nemeth
Chief Executive Officer
Jeffrey M. Rodino
President, Recreational
Vehicles
Joseph M. Cerulli
Tontine Associates, LLC
Director since 2008
Todd M. Cleveland
Chairman of the Board
Director since 2008
John A. Forbes
Partner Outcomes LLC and
Full Sails LLC
Director since 2011
Kip B. Ellis
President,
Powersports,
Technology and
Housing
Andrew C. Roeder
Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
Michael A. Kitson
Former Fractional CFO
Ascent CFO Solutions
Director since 2013
Pamela R. Klyn
Executive Vice President
Corporate Relations and
Sustainability Whirlpool
Corporation Director since
2019
Derrick B. Mayes
Managing Partner
Bonaventure Equity, LLC
Director since 2019
Hugo E. Gonzalez
Executive Vice
President, Operations
and Chief Operating
Officer
Joel D. Duthie
Executive Vice President
Chief Legal Officer and
Secretary
Andy L. Nemeth
Chief Executive Officer
Director since 2006
Denis G. Suggs
CEO
LCP Transportation, LLC
Director since 2019
M. Scott Welch
President and CEO
Welch Packaging Group
Director since 2015
Stacey Amundson
Charles R. Roeder
Executive Vice
President, Chief Human
Resources Officer
Executive Vice
President, Sales
Corporate
Information
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Chicago, IL
Annual Report • 2023
Corporate Office
Transfer Agent & Registrar
Patrick Industries, Inc.
107 W. Franklin Street
Elkhart, IN 46516
(574) 294-7511
www.patrickind.com
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
Within the U.S., Canada and Puerto Rico:
(877) 581-5548
Outside the U.S., Canada and Puerto Rico:
(781) 575-2879
www.computershare.com/investor
Investor Relations
Stock Symbol
Stephen M. O’Hara II
(574) 294-7511
oharas@patrickind.com
NASDAQ: PATK
Company
(cid:111)(cid:283)(cid:257)(cid:339)(cid:245)(cid:202)
240+
Manufacturing &
Distribution
Centers in the U.S.
Iddaho
Decor
Inndiana Transport
Also in:
Canada
China
Mexico
Washington
Washington
Seea-Dog Line
SeeaLect Plastics
Toopline Counters
Oregon
Decor
Dehco
Nevada
LMI
Patrick is a leading component solutions provider serving the RV,
Marine, Powersports and Housing markets. Since 1959, Patrick has
empowered manufacturers and outdoor enthusiasts to achieve next-
level recreation experiences. Our customer-focused approach brings
together design, manufacturing, distribution, and transportation
in a full solutions model that defines us as a trusted partner and
supplier of choice. Patrick is home to more than 85 leading brands, all
united by a commitment to quality, customer service, and innovation.
Headquartered in Elkhart, IN, Patrick employs approximately 10,000
skilled team members throughout the United States. For more
information on Patrick, our brands, and products, please visit
www.patrickind.com
Indiana
Adorn
AIA
Alpha Systems
AMC/MSM
Betterway
BH Electronics
Cana Cabinetry
Carrerra Paint
Charleston
Collins & Company
Creative Wood Designs
Dehco
Dowco
Foremost
Frontline Manufacturing
Fusion Wood Products
Gravure Ink
Indiana Marine Products
Indiana Transport
Interior Composites Plus
KRA International
LaSalle Bristol*
CColorado
FFront Range Stone
LS Manufacturing
Maple City Woodworking
Medallion Plastics
Middlebury Hardwoods
Millennium Paint
Nickell Moulding
Parkland Plastics
Patrick Distribution*
Patrick Marine Transportation
Precision Painting
Premier Concepts
Premium Painting
Revel
SEI Manufacturing
Sigma Wire
Structural Composites of Indiana
Synergy RV Transport
The Studio
Transhield
Tumacs Covers
Williamsburg Furniture
Wire Design
Missouri
Beetterway
Dowco
Marine Electrical Products
Tennessee
BH Electronics
Fishmaster
Florida Marine Tanks
Great Lakes Boat Top
Marine Accessories Corporation
Metal Moulding
Monster Tower
Turboswing
Westland
Pennsylvania
Adorn
Tumacs Covers
North Carolina
Florida Marine Tanks
South Carolina
EM&C
GG Schmitt & Sons
TACO Marine
Mississip
Mississippi
AIA
Baymont
Alabama
Baymont
Custom Vinyls
Indiana Transport
Ubique Technologies
California
All Counties Glass
Fresno Shower Door
LMI
MMinnesota
a
Spportech
Arizona
Custon Vinyls
Rockford Fosgate
Wisconsin
Dowco
Illinois
Geremarie
Gravure Ink
MMichigan
i
Innnland Plywood
NNorth Ame
N th A
NNorth Ame
PPatrick Mar
TTummacs Co
PProg
erican Forest P
F
Products
erican Mouldin
ng
rine Transport
ansport
t
rrine Tr
n
on
ansport
tationi
t tii
i
overs
cs Coooovers
ve Grouu
gressiivve Gro
*up**up*
Georgia
Betterway
BH Electronics
Cana Cabinetry
Coyote Manufacturing
Marine Accessories Corporation
XTCrbn
e C
Florida
Design Concepts Marine Concepts
a
es g Co cepts
Diamondback Marine
GG Schmitt & Sons
Hyperform
Inland Plywood
In
Marine Accessories Corpor
Ma
Marine Design & Engineerin
Ma
Se
TA
eaDek
ACO Marine
ration
ng Center
Tex
Texas
Marine Accessories Corporation
ries
North American Forest Products
Forest Products
Transhield
Transhield
Wet Sounds
* Additional distribution centers across the U.S.: LaSalle Bristol: Alabama, California, Florida, Georgia, Idaho, Minnesota, North Carolina, Oregon,
Pennsylvania, Tennessee, Texas. Patrick Distribution: Alabama, California, Georgia, Oregon, Texas. The Progressive Group: Arizona, Colorado,
Florida, Georgia, Kansas, Utah.
Patrick Industries, Inc.
Corporate Office
107 W. Franklin Street
Elkhart, IN 46516
(800) 331-2151 / (574) 294-7511
www.patrickind.com
Learn more about
Patrick Industries, Inc.
Annual Report • 2023