2024
Annual Report
Annual Report • 2024
Selected Financial Data
As of or for the Year Ended December 31,
($ in thousands except per share amounts)
2024
2023
2022
Net sales
$3,715,683
$3,468,045
$4,881,872
Gross profit
835,890
782,233
1,059,938
Warehouse & delivery expenses
155,821
143,921
163,026
Selling, general & administrative expenses
325,754
299,418
327,513
Operating income
258,040
260,200
496,170
Net income
138,401
142,897
328,196
Diluted net income per common share (1)
4.11
4.33
8.99
Total assets
3,020,954
2,562,448
2,782,471
Total debt
1,332,188
1,038,125
1,298,414
Shareholders’ equity
1,128,366
1,045,337
955,169
Net cash provided by operating activities
326,841
408,672
411,738
Cash dividends paid per common share (1)
1.50
1.27
0.96
Investor Information
Working Capital ($ millions)
Stock Price At December 31st
Operating Cash Flows
($ millions)
Net Income ($ millions)
Diluted Net Income per
Common Share
Net Sales ($ millions)
2023
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2024
2024
2024
2024
2024
2024
$3,716
$138
$4.11
$495
$83.08
$327
(2) Non-cash current assets less accounts payable and accrued liabilities
(2)
(1) Prior year periods reflect the December 2024 3-for-2 stock split
Dear
Shareholder
•
Financial Strength: We remain focused on
generating profitable growth while maintaining
the disciplined financial position necessary to
remain steadfast in dynamic markets. In the third
quarter, we strengthened our balance sheet
by refinancing a portion of our debt, improving
terms, increasing liquidity, and extending
maturities while reducing our interest costs.
•
We are Enthusiasts: The heart of Patrick’s
success is driven by the passion and
entrepreneurial spirit of the people and
brands who make up our team. Our people are
enthusiasts who enjoy the outdoor lifestyle:
RV’ing, camping, boating, fishing, riding and
other pursuits that help refresh and energize the
mind, body and spirit.
Patrick’s future success lies in our ability to remain
nimble and scalable to be able to pivot quickly
and effectively, adjusting to our end markets and
the evolving needs of our valued customers. We
believe a strong team and solid financial foundation
are necessary components to achieve our growth
objectives, while maintaining our flexibility.
We will continue to focus on prudent capital
allocation centered on three key priorities: accretive
acquisitions, reinvesting in our business, and
returning value to our shareholders.
Our team remains steadfast and ready to meet
the future, serving our shareholders, our team, our
customers and the end markets and communities
we serve.
Andy L. Nemeth
Chairman and
Chief Executive Officer
Fiscal 2024 represented the continuation of our strategic investments in the future of Patrick
and in our people. Our team, guided by our BETTER Together values and culture, performed
admirably at all levels in the face of dynamic uncertainty and volatility in our end markets and
our business. I am very proud of our team’s strength, resilience and ability to turn challenges
into opportunities for future long-term value and growth.
Our team’s focus, drive, and determination in
pursuit of our goal of serving our customers and
markets at the highest level were a reflection
of their entrepreneurial spirit and proof of
their tenacity and strength. Acquisitions
continue to be a key part of our growth plan,
strategically diversifying our business within
our core end markets: RV, Marine, Powersports
and Housing. We completed two significant
acquisitions in 2024, defining Powersports as
a new end market through our purchase of
Sportech in January, and formalizing our direct-
to-consumer foundation and strategy with the
addition of RecPro in September. Within our
Outdoor Enthusiast markets, which comprise
RV, Marine, and Powersports, original equipment
manufacturers (OEMs) remained disciplined
in their production levels, working closely with
dealers to carefully manage channel inventories.
These efforts, while challenging in the near-
term, help to ensure the long-term health of
these markets. Separately, our Housing business
outperformed expectations, further showcasing
the value of our strategic diversification efforts.
Through continued investment in our business
and our people, Patrick remains well positioned
for future growth.
•
New Product Development reflects our
dedication to innovation and our full solutions
model: Through the launch of our Advanced
Product Group and our sales restructuring
and focus, we have reinvigorated our
customer engagement and commitment to
long-term partnership on next generation
product development.
•
Higher-Margin Businesses Diversify Patrick:
We completed two key acquisitions last
year. Sportech, our largest to date, solidified
our Powersports platform, and RecPro
significantly enhanced our aftermarket
presence and ability to serve and leverage the
direct-to-consumer market.
Annual Report • 2024
2024
Highlights
$327M
OPERATING
CASH FLOW
$3.7B
SALES
$138M
NET INCOME
$251M
FREE CASH FLOW
$804M
LIQUIDITY
$542M
STRATEGIC
CAPITAL
ALLOCATIONS
•
Allocated capital of $412 million toward
acquisitions including Sportech, solidifying
our Powersports platform, and RecPro,
significantly enhancing our aftermarket
presence and direct-to-consumer foundation
and capabilities.
•
Returned $55 million to shareholders,
including $50 million in dividends and $5
million of share repurchases; we increased
our quarterly dividend by 9% to $0.40 per
share.
•
Generated Free Cash Flow (a non-GAAP
financial measure) of $251 million.
•
Executed a three-for-two stock split, which
was paid on December 13, 2024.
•
On December 3, 2024, Patrick held its
inaugural investor day at the Nasdaq
MarketSite in New York, highlighting our
long-term vision, growth objectives, market
share opportunity, and the strength of
organizational talent.
•
We believe in the importance of giving
back to the communities we live and work
in. Patrick’s philanthropic endeavors focus
on giving to those in need and empowering
our communities to engage with the great
outdoors.
TO ACQUISITIONS, CAPEX, STOCK
REPURCHASES, AND DIVIDENDS
TO SHAREHOLDERS
Annual Report • 2024
End Market
Insights
In 2024, RV OEMs, in partnership with dealers, focused on meeting consumer demand for lower-
priced units by producing a heavier concentration of small travel trailers and single-axle units. While
this created a content per wholesale unit headwind for our businesses, experience has shown the
recovery in demand typically begins with entry-level products. In the fourth quarter, the RV market
recorded its first improvement in retail registrations in 40 months.
In response to slowing demand from end consumers, Marine OEMs acted proactively and shipped
fewer units than dealers sold in 2024, effectively reducing overall dealer inventory. We believe this
has left marine dealers with leaner, fresher inventory levels to kick-off the 2025 selling season. As a
result of this production discipline, we adjusted our business accordingly to align with the market
and are prepared to pivot when OEM production levels increase.
In 2024, we solidified our Powersports platform with the acquisition of Sportech in January.
Sportech supplies component solutions, allowing Powersports OEMs and dealers to improve
customer utility and comfort through innovative and value-enhancing products. In the second half
of the year, Powersports OEMs proactively trimmed production schedules to help limit the impact of
slowing demand on dealers’ floor plan costs.
Patrick’s Housing businesses primarily focus on the affordable housing side of the market, where
demand has been strong, but conversion has been limited by interest rates and other factors. In
2024, the manufactured housing industry tapped strong demand for affordable housing, which
helped drive a 10% increase in Patrick’s Housing end market revenue. We expect the demand for
affordable housing to continue to exceed supply.
RV
MARINE
POWERSPORTS
HOUSING
Patrick remains committed to deploying capital where it has the opportunity to generate the
greatest impact and long-term growth. In 2024, we invested $76 million toward purchases
of property, plant, and equipment, demonstrating our commitment to maintaining the
strength of our core business through technology, automation and product development
initiatives. For 2025, we plan to reinvest $75 million to $85 million in capital expenditures,
with more than half earmarked for strategic initiatives, enhancing our potential to drive
profitable growth and earnings in the future. We continue to augment organic growth by
actively engaging in both strategic and incremental acquisitions, furthering the resilience
and diversification of our model. Acquisitions remain a primary component of our strategic
growth strategy. We will continue to evaluate and invest in candidates with value-enhancing
qualities that align with Patrick’s culture, entrepreneurial spirit, and Outdoor Enthusiast
focus to drive our business forward.
Fueling our Strategic
Diversification Initiatives and
the Deployment of Capital
Annual Report • 2024
Intrinsic Value
Our inaugural investor day held in December
2024 represented the continuation of our
strategy to drive intrinsic value through our
intentional, authentic approach to telling our
story to investors and other stakeholders.
We believe our profitable long-term growth
algorithm, strong balance sheet and solid cash
flow generation will continue to bolster our ability
to provide lasting value for shareholders and
all stakeholders. Patrick’s 85+ brands remain
invigorated and empowered to execute the
Company’s vision of long-term profitable growth.
85+ BRANDS
COMMITTED TO THE
HIGHEST STANDARDS
OF QUALITY, CUSTOMER
SERVICE, AND
INNOVATION.
Empowered by
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, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-03922
PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana
35-1057796
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
107 W. Franklin St.
Elkhart, Indiana
46516
(Address of principal executive offices)
(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 defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file 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 for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for 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
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
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.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm 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 during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 28, 2024, 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-affiliates was $2.3 billion. As of February 14, 2025, there were 33,644,702 shares of the
registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on May 15, 2025 are incorporated by
reference into Part III of this Form 10-K.
PATRICK INDUSTRIES, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 2024
Table of Contents
Part I
4
Item 1.
Business
4
Item 1A.
Risk Factors
14
Item 1B.
Unresolved Staff Comments
26
Item 1C.
Cybersecurity
26
Item 2.
Properties
27
Item 3.
Legal Proceedings
27
Item 4.
Mine Safety Disclosures
27
Part II
27
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
27
Item 6.
Reserved
29
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
37
Item 8.
Financial Statements and Supplementary Data
37
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
37
Item 9A.
Controls and Procedures
38
Item 9B.
Other Information
39
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
39
Part III
40
Item 10.
Directors, Executive Officers and Corporate Governance
40
Item 11.
Executive Compensation
40
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
40
Item 13.
Certain Relationships and Related Transactions, and Director Independence
41
Item 14.
Principal Accounting Fees and Services
41
Part IV
42
Item 15.
Exhibits and Financial Statement Schedules
42
Item 16.
Form 10–K Summary
44
Signatures
45
Financial Section
Index to Financial Statements and Financial Statement Schedules
F-1
Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP
F-2
Consolidated Statements of Income
F-5
Consolidated Statements of Comprehensive Income
F-6
Consolidated Balance Sheets
F-7
Consolidated Statements of Cash Flows
F-8
Consolidated Statements of Shareholders’ Equity
F-9
Notes to Consolidated Financial Statements
F-10
2
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain “forward-looking statements” with respect to financial condition, results
of operations, business strategies, operating efficiencies or synergies, competitive position, industry growth and projections,
growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick
Industries, Inc. (the “Company” or “Patrick”) and other matters. Statements in this Form 10-K as well as other statements
contained in the annual report and statements contained in future filings with the Securities and Exchange Commission
(“SEC”) and publicly disseminated press releases, and statements which may be made from time to time in the future by
management of the Company in presentations, which are not historical facts, are management’s current expectations and
beliefs regarding future and anticipated developments and their impact on Patrick, and inherently involve risks and
uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements.
There are a number of factors, many of which are beyond the control of the Company, which could cause actual results and
events to differ materially from those described in the forward-looking statements. Many, but not all, of these factors are
identified in the “Risk Factors” section of this Form 10-K as set forth in Part I, Item 1A, and include, without limitation:
•
the impact of any economic downturns on our primary end markets;
•
a decline in discretionary consumer spending;
•
pricing pressures due to competition;
•
costs and availability of raw materials and commodities;
•
inflationary pressure on our direct and indirect costs, its impact to our customers, and its impact to the end consumer;
•
the imposition of restrictions and taxes and/or tariffs on imports of raw materials and components used in our products;
•
information technology performance and cyber-related risks;
•
the availability of commercial credit;
•
the availability of retail and wholesale financing for recreational vehicles, watercraft, and residential and manufactured
homes;
•
the availability and costs of labor;
•
the ability to manage our inventory levels effectively, as well as inventory levels of retailers and manufacturers;
•
the financial condition of our customers;
•
retention and concentration of material customers;
•
the ability to generate cash flow or obtain financing to fund growth;
•
future growth rates in the Company's core businesses;
•
the seasonality and cyclicality in the industries to which our products are sold;
•
realization and impact of efficiency improvements and cost reductions;
•
the successful integration of acquisitions and other growth initiatives;
•
increases in interest rates and oil and gasoline prices;
•
increases/decreases in the value of financial assets, which may affect discretionary spending in industries to which our
products are sold;
•
the ability to retain key management personnel;
•
adverse weather conditions impacting retail sales;
•
our ability to remain in compliance with our credit agreement covenants;
•
the impact of any pandemic or other public health emergency on the economy, our end markets and our operations, and;
•
national and regional economic, market and political conditions.
You should consider forward-looking statements, therefore, in light of various important factors, including those set forth in
the reports and documents that the Company files with the SEC, including this Annual Report on Form 10-K for the year
ended December 31, 2024.
These and other risks and uncertainties are discussed more fully at Part I, Item 1A “Risk Factors.”
Any projections of financial performance or statements concerning expectations as to future developments should not be
construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that
any forward-looking statement will be realized or that actual results will not be materially different from that set forth in such
forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements,
and specifically disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking
statements contained in this Annual Report on Form 10-K or to reflect any change in our expectations after the date of this
Annual Report on Form 10-K or any changes in events, conditions or circumstances on which any statement is based, except
as required by law.
3
PART I
ITEM 1.
BUSINESS
Unless the context otherwise requires, the terms “Company,” “Patrick,” “we,” “our,” or “us” refer to Patrick Industries, Inc.
and its subsidiaries.
Company Overview
Patrick is a leading component solutions provider for the recreational vehicle ("RV"), marine, powersports, manufactured
housing ("MH") and various industrial markets – including single and multi-family housing, hospitality, institutional and
commercial markets.
The Company operates through a nationwide network that includes, as of December 31, 2024, approximately 179
manufacturing plants and 47 warehouse and distribution facilities located in 25 states, with a small presence in Mexico, China
and Canada. The Company operates within two reportable segments, Manufacturing and Distribution, through a nationwide
network of manufacturing and distribution centers for its products, thereby reducing in-transit delivery time and cost to the
regional manufacturing footprint of its customers. The Manufacturing and Distribution segments accounted for 74% and
26%, respectively, of the Company’s consolidated net sales for the year ended December, 31, 2024. Financial information
about these operating segments is included in Note 17 "Segment Information" 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.
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 return capital to shareholders. Through strategic
acquisitions, expansion both geographically and into new product lines and investment in infrastructure and capital
expenditures, Patrick seeks to ensure that its operating network contains capacity, technology and innovative thought
processes to support anticipated growth needs, effectively respond to changes in market conditions, inventory and sales
levels, and successfully integrate manufacturing, distribution and administrative functions.
Over the last three years, we have executed on a number of new product initiatives and completed acquisitions for
approximately $696 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 opportunistically enter into adjacent end markets or
product categories.
Patrick believes that returning capital to shareholders is an important part of its capital allocation strategy, and during 2024
we returned $55 million to shareholders through our regular quarterly dividend and opportunistic share repurchases.
The Company was incorporated 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. Information on our website is not incorporated in this Annual Report on Form 10-K.
4
Major Product Lines
Patrick manufactures and distributes a variety of products within its reportable segments including:
Manufacturing
Distribution
Laminated products for furniture, shelving, walls and
countertops
Pre-finished wall and ceiling panels
Decorative vinyl, wrapped vinyl, paper laminated panels and
vinyl printing
Drywall and drywall finishing products
Solid surface, granite and quartz countertops
Interior and exterior lighting products
Fabricated aluminum products
Wiring, electrical and plumbing products
Wrapped vinyl, paper and hardwood profile mouldings
Transportation and logistics services
Electrical systems components including instrument and dash
panels
Electronics and audio systems components
Slide-out trim and fascia
Cement siding
Cabinet products, doors, components and custom cabinetry
Raw and processed lumber
Hardwood furniture
Fiber reinforced polyester (“FRP”) products
Fiberglass bath fixtures and tile systems
Interior passage doors
Specialty bath and closet building products
Roofing products
Boat towers, tops, trailers, and frames
Laminate and ceramic flooring
Softwoods lumber
Shower doors
Interior passage doors
Fireplaces and surrounds
Wiring and wire harnesses
Appliances
CNC molds and composite parts
Tile
Aluminum and plastic fuel tanks
Marine hardware and accessories
Slotwall panels and components
RV awnings, windows, fiberglass siding and roofing
RV painting
Marine windshields
Thermoformed shower surrounds
Other miscellaneous products
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 furniture
Adhesives and sealants
Audio systems and accessories, including amplifiers, tower
speakers, soundbars, and subwoofers
Marine non-slip foam flooring, padding, and accessories
Protective covers for boats, RVs, aircraft, and military and
industrial equipment
Windshield and wiper systems
Roofs/canopies
Integrated door systems
Fender flares and rear panels
Other miscellaneous products
5
Primary Markets
Patrick manufactures and distributes its products for five primary end markets. Our operating facilities generally are
strategically located in proximity to the customers they serve. Previously, our sales to the powersports end market were
included in the Company’s marine end market sales. Effective with the first quarter of 2024, powersports net sales are being
reported separately after the January 2024 acquisition of Sportech, LLC (“Sportech”), as disclosed in Note 2 "Revenue
Recognition" of the Notes to Consolidated Financial Statements. The Company’s net sales by end market are as follows:
2024
2023
RV
44 %
43 %
Marine
15 %
23 %
Powersports
10 %
4 %
MH
18 %
16 %
Industrial
13 %
14 %
Total
100 %
100 %
Recreational Vehicles
The Company’s RV products are sold primarily to major manufacturers of RVs, smaller original equipment manufacturers
("OEMs"), and to a lesser extent, manufacturers in adjacent industries. The principal types of recreational vehicles include (1)
towables: conventional travel trailers, fifth wheels, folding camping trailers, and truck campers; and (2) motorized: class A
(large motor homes), class B (van campers), and class C (small-to-mid size motor homes). The RV market is primarily
dominated by Thor Industries, Inc. (“Thor”), Forest River, Inc. (“Forest River”) and Winnebago Industries, Inc.
("Winnebago") which combined held approximately 86% of retail market share for towables and 83% for motorized units for
2024 as reported per Statistical Surveys, Inc. ("SSI").
We believe there has been substantial growth over the past several years in the consumer’s affinity for the Outdoor Enthusiast
lifestyle. As more people see the benefits of enjoying the outdoors with families and friends, there should be a positive impact
on long-term demand in the RV market. We also are optimistic about the near-term outlook for the RV market, which we
believe bottomed in 2023 after a period of sharp declines in OEM production. Following a dealer inventory restocking in the
first half of 2024, OEMs reduced production slightly in the second half of 2024 as retail demand decreased, with dealers
managing inventory levels and the OEMs demonstrating operating discipline to maintain a balanced inventory channel for the
long-term health and stability of the industry. Our analysis suggests that dealer inventory levels are currently well below
historical norms and will need to be replenished when retail demand recovers. Our strategy in the RV space continues to be
centered around our goal of providing best-in-class customer service and a growing portfolio of products to OEMs through
our full solutions model, therefore helping our customers innovate and build quality units across the spectrum of feature and
price.
We estimate that our mix of RV revenues related to towable units and motorized units is consistent with the overall RV
industry production mix. In 2024, according to the Recreation Vehicle Industry Association ("RVIA"), towable and
motorized unit shipments represented approximately 90% and 10%, respectively, of total RV industry wholesale shipments
with wholesale unit shipments increasing 12% in the towable sector and decreasing 24% in the motorized sector in 2024
compared to the prior year.
Recreational vehicle purchases are generally consumer discretionary income purchases, and therefore, any situation which
causes concerns related to discretionary income may have a negative impact on the RV market. The Company believes that
industry-wide retail sales and the related production levels of RVs will continue to be dependent on the overall strength of the
economy, consumer confidence levels, equity securities market trends, fluctuations 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 market, as we
believe that the shift toward outdoor, nature-based tourism activities has continued, despite the loss of many first time
campers who had contributed to a significant increase in camping participation during the COVID-19 pandemic. Based on
data from the 2024 Kampgrounds of America, Inc. ("KOA") North American Camping and Outdoor Hospitality Report,
utilizing surveys of North American leisure travelers, camping remains popular, with annual camping households of 54
million in 2023 which, while a decrease from 58 million in 2022, is well above pre-pandemic levels of 39 million in 2018 and
42 million in 2019. Younger campers (Millennials and GenZers) still represent an important camper demographic group
despite a decrease in participation rates since the peak of the pandemic, with 48% of annual campers and 49% of new
campers from these groups. Additionally, according to the 2024 KOA report, 25% of 2023 camper households reported
6
household income of over $100,000. While this percentage was down from 28% in 2022, these higher-income households
still represented a significantly greater proportion of campers than before the COVID-19 pandemic. Following a similar
pattern as overall camping participation, 13.2 million households reported taking at least one RV trip in 2023, which was
lower than in 2022 but well above pre-pandemic levels of 9.4 million in 2018 and 11.3 million in 2019.
Detailed narrative information about the Company’s sales to the RV industry is included in Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” (the "MD&A") of this Form 10-K.
Marine
We believe that the marine market reflects the active, outdoor enthusiast-based, family-oriented lifestyle, similar to our RV
and powersports end markets, and the Company has increased its focus and expanded its presence in this market through
recent acquisitions. Consumer demand in the marine market is generally driven by the popularity of the recreational and
leisure lifestyle and by economic conditions. The powerboat sector, which is our primary marine market, has experienced a
down cycle since mid-2023, resulting in continued softness particularly in our higher-engineered ski/wake and pontoon
categories, where we maintain a significant market presence. After a slight decrease in 2023, OEM production declined
further in 2024 as concerns relating to elevated interest rates, inflation and overall economic uncertainties dampened retail
demand and led marine dealers to reduce inventory levels. The Company's marine revenue mix is slightly more concentrated
toward higher dollar units, particularly the pontoon and ski and wake segments, which have seen more pronounced softness
in market demand beginning in the second half of 2023 and throughout 2024 compared to the broader marine market. We
expect to continue to feel the effects of our revenue mix through the first half of 2025. Despite short-term challenges, we
remain optimistic about the long-term outlook including within the high value, premium segment of the marine industry that
we serve.
According to the National Marine Manufacturers Association (“NMMA”), per its 2023 U.S. Recreational Boating Statistical
Abstract (the "Abstract"), total U.S. retail expenditures on boats, engines, accessories, and related costs fell 2.6% to $57.7
billion in 2023 compared to 2022. Based on data from the Abstract, we estimate that the average age of pre-owned
powerboats sold during 2023 was approximately 23 years compared to an average useful life of 30 years.
The Company’s sales to the marine industry are primarily focused on the powerboat sector of the market which is comprised
of four main categories: fiberglass, aluminum fishing, pontoon and ski & wake. Based on current available data per SSI
through December 2024, within the powerboat sector for 2024, fiberglass units accounted for approximately 34% of retail
unit sales, aluminum 29%, pontoon 32% and ski & wake 5%. In addition, per SSI, marine powerboat retail unit shipments
decreased approximately 8% in 2024 compared to 2023, while marine wholesale unit shipments, according to Company
estimates based on NMMA data, decreased approximately 25% in 2024 compared to 2023.
Detailed narrative information about the Company’s sales to the marine industry is included in the MD&A of this Form 10-K.
Powersports
Through acquisitions completed in recent years, the Company entered the powersports end market. Powersports is a category
of motorsports which includes vehicles such as motorcycles, all-terrain vehicles ("ATVs"), side-by-sides, snowmobiles,
scooters, golf carts and other personal transportation vehicles, and other related categories. Previously, our sales to the
powersports end market were included in the Company’s marine end market sales. Effective with the first quarter of 2024,
powersports net sales are being reported separately after the January 2024 acquisition of Sportech, as disclosed in Note 2
"Revenue Recognition" of the Notes to Consolidated Financial Statements.
Our powersports business is primarily focused on the utility and premium segments of the side-by-side market, which have
been outperforming the more discretionary recreational segment. We also participate in the motorcycle and golf cart
segments of the market. OEMs and dealers are actively managing field inventory levels to align with retail demand and in an
effort to update units held in dealer inventories. We believe that our portfolio of brands and products is well-positioned to
benefit from future market growth. As OEMs and dealers continue to manage their businesses to better align with current
retail demand, we are focused on supporting OEMs by developing new products and solutions that deliver value to
consumers.
Detailed narrative information about the Company’s sales to the powersports industry is included in the MD&A of this Form
10-K.
7
Manufactured Housing
The Company’s products for this market are sold primarily to major manufacturers of manufactured homes, other OEMs, and
to a lesser extent, manufacturers in adjacent industries. In the aggregate, the top three manufacturers, Clayton Homes, Inc.,
Skyline Champion Corporation and Cavco Industries, Inc., combined to produce approximately 84% of MH market retail unit
shipments in 2024 per SSI.
Wholesale unit shipments have increased in the MH industry to approximately 103,300 units in 2024 compared to
approximately 89,200 units in 2023. The Company believes there is growth potential for this market in the long term driven
by pent-up demand, multi-family housing capacity, demand for lower-cost rental options, increased affordability and quality,
demographic trends such as increased first-time home buyers and urban-to-suburban relocations trends, new home pricing,
and investments from developers and real estate investment trusts. We continue to expand our product offerings to meet the
evolving needs of our OEM customers, including energy efficient water heaters, furnaces, heating, ventilation, and air
conditioning ("HVAC") duct systems and other products for OEMs seeking to exceed government sustainability guidelines
on manufactured homes.
Factors that may favorably impact demand further in this industry include jobs growth, consumer confidence, favorable
changes in financing regulations, a narrowing in the difference between interest rates on MH loans and mortgages on
traditional residential "stick-built" housing, and any improvement in conditions in the asset-backed securities markets for
manufactured housing loans.
We believe that MH units offer a cost-effective housing solution in a time when high home prices coupled with elevated
mortgage interest rates have negatively impacted housing affordability.
Detailed narrative information about the Company’s sales to the MH industry is included in the MD&A of this Form 10-K.
Industrial Markets
We estimate that approximately 75% to 85% of our industrial net sales in 2024 were associated with the U.S. residential
housing market. We believe that there is a direct correlation between the demand for our products and new residential
housing construction and existing home remodeling activities. Patrick's sales to the industrial market generally lag new
housing starts by four to six months as our industrial products are generally among the last components installed into new
unit construction and will vary based on differences in regional economic prospects.
Many of Patrick's core manufacturing products are also utilized in the kitchen cabinet, high-rise, office and household
furniture, hospitality, and fixtures and commercial furnishings 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 vulnerable to import competition, and
therefore, provide opportunities for increased sales penetration and market share gains. In 2024, new housing starts were
down from 2023 by approximately 4%, with single family housing starts increasing approximately 6% and multifamily
housing starts decreasing 25%. Despite some interest rate relief in 2024, housing affordability continued to be an issue as
housing prices and mortgage rates remained elevated compared to prior years. Low inventory and high prices for existing
homes for sale may provide support for our industrial market in 2025.
Detailed narrative information about the Company’s sales to the industrial markets is included in the MD&A of this Form 10-
K.
Strategic Acquisitions
The Company is focused on driving growth in its primary markets through the acquisition of companies with strong
management teams having a strategic fit with Patrick’s core values, business model and customer presence, as well as
additional product lines, facilities, or other assets to complement or expand its existing businesses. The Company may
explore strategic acquisition opportunities that are not directly linked to the five primary markets it serves in order to further
leverage its core competencies in manufacturing and distribution, diversify its end market exposure and presence, and expand
its footprint outside of its core Midwest markets.
During 2024, the Company completed acquisitions for approximately $418 million of total consideration and over the last
three years has completed acquisitions for approximately $696 million of total consideration. See Note 3 "Acquisitions" of
8
the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of acquisitions
completed by the Company in 2024, 2023 and 2022.
Competition
The RV, marine, powersports, MH and industrial markets are highly competitive, both among manufacturers and the
suppliers of various components. The barriers to entry for each industry are generally low and include compliance with
industry standards, codes and safety requirements, and the initial capital investment required to establish manufacturing
operations. In addition, the Company competes with manufacturers of manufactured homes with vertically integrated
operations. Across the Company’s range of products and services, competition exists primarily on price, product features and
innovation, timely and reliable delivery, quality and customer service. Several competitors compete with Patrick in each
product line on a regional and local basis. However, in order for a competitor to compete with Patrick on a national basis, the
Company believes that a substantial capital commitment and investment in personnel and facilities would be required.
Capacity and Plant Expansions
Patrick has the ability to fulfill demand for certain products in excess of capacity at certain facilities by shifting production to
other facilities. Purchases of property, plant, and equipment for 2024 consisted of $76 million of investments which were
primarily used to provide more advanced manufacturing automation and replace and upgrade production equipment.
Management regularly monitors capacity at its facilities and reallocates existing resources where needed to maintain
production efficiencies throughout all of its operations and capitalize on commercial and industrial synergies in key regions
to support profitable growth, grow its customer base, and expand its geographical product reach outside its core Midwest
market.
Branding
New product development is a key component of the Company’s efforts to grow its market share and revenue base, adapt to
changing market conditions, and proactively address customer demand. The Company has expanded its product and service
offerings with the integration of new and innovative product lines into its operations that bring additional value to customers
and create additional scale advantages.
The Studio
The Company's Design/Innovation Center and Showroom, The Studio, is located in Elkhart, Indiana. The Studio presents the
latest design trends and products in the markets served by Patrick and provides a creative environment for customers to
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 offered by each of Patrick’s business units, in addition to offices and
conference rooms. The Company’s specialized team of designers, engineers and graphic artists works with RV, marine,
powersports, MH and industrial customers to meet their creative design and product needs, including creating new styles and
utilizing new colors, patterns, products, and materials for panels and mouldings, cabinet doors, furniture, lighting and other
products. Other services provided at The Studio include product development, 3D CAD illustration, 3D printing, photography
and marketing.
Marine Studio
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 offered by our marine businesses.
Operating Brands
Through its operating brands, the Company provides customers with specific product knowledge, expertise and support that
are tailored to their needs. The Company strives to be the supplier of choice for its customers by elevating the customer
purchasing experience with expert product line managers, and support staff and strategic partnerships for each operating
brand, which help drive efficiency and maximize value for its customers.
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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
and applications.
Marketing and Distribution
As of December 31, 2024, the Company had approximately 4,500 active customers. Its revenues from the RV market include
sales to two major manufacturers of RVs that each account for over 10% of the Company's net sales, Forest River and Thor.
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 products independently from one another. The Company’s sales
to the various businesses of Forest River and Thor, on a combined basis, accounted for 29%, 29% and 38% of our
consolidated net sales, for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company generally maintains supplies of various commodity products in its warehouses to ensure that it has product on
hand for its distribution customers. The Company purchases a majority of its distribution segment products in railcar,
container, or truckload quantities, which are warehoused prior to their sale to customers. Approximately 9% of the
Company's distribution segment’s sales were from products shipped directly from the suppliers to Patrick customers in each
of 2024, 2023 and 2022. Typically, there is a two to four-week period 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 timing can fluctuate depending on overall market factors and end market we serve. In periods of declining
market conditions, customer order rates can decline, resulting in less efficient logistics planning and fulfillment and thus
increasing delivery costs due to increased numbers of shipments with fewer products in each shipment.
Raw Materials
Patrick has arrangements with certain suppliers that provide for exclusivity in certain geographic areas, pricing structures and
rebate agreements among other terms.
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 available from many
suppliers. Our customers do not maintain long-term supply contracts, and therefore, the Company bears the risk of accurate
forecasting of customer orders. Our sales in the short-term could be negatively impacted in the event any unforeseen negative
circumstances were to affect our major 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.
We believe that, as of December 31, 2024, the Company’s inventory levels are appropriately balanced with expected OEM
production, and we will continue to manage inventory based on anticipated customer needs. Additionally, the Company
continually explores alternative sources of raw materials and components, both domestically and from outside the U.S.
Alternate sources of supply are available for all of its material purchases.
Regulation and Environmental Quality
The Company’s operations are subject to environmental laws and regulations administered by federal, state, and local
regulatory authorities 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
manufacturing processes.
Select products are subject to various legally binding or voluntary standards. For example, the composite wood substrate
materials that Patrick utilizes in the production process in the RV marketplace have been certified as to compliance with
applicable emission standards developed by the California Air Resources Board (“CARB”). All suppliers and manufacturers
of composite wood materials are required to comply with the current CARB regulations.
The Company is certified to sell Forestry Stewardship Council (“FSC”) materials to its customers at certain of its
manufacturing branches. The FSC certification provides a link between responsible production and consumption of materials
from the world’s forests 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 for RVs must
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comply with Federal Motor Vehicle Safety Standards regulated by the National Highway Traffic Safety Administration
regarding flammability.
Select raw materials are subject to tariffs and other import duties, although we have historically received benefits from duty-
free imports on certain products from certain countries pursuant to the U.S. Generalized System of Preferences ("GSP")
program. The current U.S. administration’s trade policies may result in additional tariffs being imposed on certain products
we import. Additionally, we are subject 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 manufactured homes that must comply with performance and
construction regulations promulgated by the U.S. Department of Housing and Urban Development.
For additional information on the Company's efforts for sustainability and environmental quality, please see our 2024
Responsibility & Sustainability Report under "ESG" on the "For Investors" section of our website. Information on our
website is not incorporated in this Annual Report on Form 10-K.
Seasonality
Manufacturing operations in the RV, marine, powersports and MH industries historically have been seasonal and at their
highest levels when the weather is moderate. Accordingly, the Company’s sales and profits had generally been the highest in
the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the
impact related to the addition of major RV manufacturer open houses for dealers in the August-September timeframe and
marine open houses in the December-February timeframe, resulting in dealers delaying certain restocking purchases until
new product lines are introduced at these shows. In addition, recent seasonal industry trends have been, and future trends may
be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national
and regional economic conditions and consumer confidence on retail sales of RVs, powersports and marine units and other
products for which the Company sells its components, as well as fluctuations in RV, powersports and marine dealer
inventories, increased volatility in demand from RV, powersports and marine dealers, the timing of dealer orders, and from
time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.
Human Capital Management
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, 2024, our team members totaled approximately 10,000, of which 80% are hourly team
members who serve our customers by producing and distributing products in our RV, powersports, marine, MH and
industrial end markets, and 20% 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
capital management programs focus on the following, in addition to our health care insurance and other employment benefits:
•
Free assistance programs available to all team members and their families to address mental health and other matters
which arise, which we believe are essential during periods of uncertainty;
•
Tuition reimbursement programs available to all team members as they pursue educational opportunities;
•
Leadership programs available to all employees that are designed to foster leadership and communication skills to
advance team members to the next stage of their careers;
•
Job safety analysis, which identifies risks unique to each production environment, training and empowering our team
members to mitigate risks and develop workplace best practices;
•
Occupational Safety and Health Administration ("OSHA") preparedness, which involves site specific training
development to educate and enable our team members to work safely and effectively;
•
Industrial hygiene audits and testing, ensuring that our team members work in healthy environments with respect to air
quality and noise reduction;
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•
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 foster best-practice operational techniques for our team members to advance their
capabilities to operate our facilities in the safest and most effective manner;
•
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 effective and
comfortable 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 qualified 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
members feel they belong. Our leadership development programs bring a diverse and energetic source of talent to lead the
future of our organization, and our recruitment efforts strive to foster an inclusive culture that we believe strengthens our
organization and our ability to serve our customers.
The organization is built on our six core foundational values of being BETTER Together:
•
Balance - We work to build a healthy work environment that encourages excellence, happiness, and peace in both our
work and our home life.
•
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 time - 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 information, 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 information on the Company's human capital management, please see our 2024 Responsibility &
Sustainability Report under "ESG" on the "For Investors" section of our website. Information on our website is not
incorporated in this Annual Report on Form 10-K.
Executive Officers of the Company
The following table sets forth our executive officers as of January 1, 2025:
Officer
Position
Age
Andy L. Nemeth
Chairman and Chief Executive Officer
55
Jeffrey M. Rodino
President - RV
54
Kip B. Ellis
President - Powersports, Technology & Housing
50
Richard N. Reyenger
President – Marine
76
Andrew C. Roeder
Executive Vice President - Finance, Chief Financial Officer, and Treasurer
48
Matthew S. Filer
Senior Vice President - Finance and Chief Accounting Officer
52
Joel D. Duthie
Executive Vice President - Chief Legal Officer and Secretary
50
Stacey L. Amundson
Executive Vice President - Human Resources and Chief Human Resources Officer
58
Charles R. Roeder
Executive Vice President - Sales and Chief Sales Officer
43
Hugo E. Gonzalez
Executive Vice President - Operations and Chief Operating Officer
44
Andy L. Nemeth, who was appointed as Chairman of the Board in May 2024, has been the Chief Executive Officer of the
Company since January 2020 and served as President of the Company from January 2016 to July 2021. Mr. Nemeth was
Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015, and Secretary-Treasurer
from 2002 to 2015. Prior to that, Mr. Nemeth was Vice President of Finance and Chief Financial Officer from 2003 to 2004.
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Mr. Nemeth has over 33 years of RV, marine, powersports, manufactured housing and industrial experience in various
financial and managerial capacities. Director since 2006.
Jeffrey M. Rodino was named President – RV in January 2024 after serving as President of the Company from July 2021 to
January 2024. Prior to serving as Patrick’s President, Mr. Rodino was Chief Sales Officer 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 and as the
Chief Operating Officer of the Company from March 2013 to September 2016. Prior to that, he was Vice President of Sales
for the Midwest from August 2009 to December 2011. Mr. Rodino has over 31 years of experience in serving the RV,
marine, manufactured housing and industrial markets.
Kip B. Ellis was named President – Powersports, Technology and Housing in January 2024 after serving as Executive Vice
President of Operations and Chief Operating Officer of the Company since September 2016. Mr. Ellis joined the Company as
Vice President of Market Development in April 2016 and was elected an executive officer in September 2016. Prior to his
role at Patrick, Mr. Ellis served as Vice President of Aftermarket Sales for the Dometic Group from 2015 to 2016. Prior to his
tenure at Dometic, Mr. Ellis served as Vice President of Global Sales and Marketing from 2007 to 2015 at Atwood Mobile
Products. Mr. Ellis has over 28 years of experience serving the RV, marine, manufactured housing, powersports, industrial
and automotive markets.
Richard N. Reyenger was named President – Marine in January 2024 after serving as the Company’s Senior Vice President
of Marine since 2020. Mr. Reyenger joined the Company as a Business Unit Director upon Patrick’s acquisition of Marine
Accessories Corporation in 2018 where he served as Chief Executive Officer. Prior to joining Marine Accessories, Mr.
Reyenger served as Vice President of the Astro, Fisher, and Procraft brands at Marine Group, a division of Whitewater
Marine Group, and President of Mako Marine International. Mr. Reyenger has over 30 years of experience in the marine
industry, including serving as Senior Vice President at Boston Whaler.
Andrew C. Roeder was appointed Executive Vice President – Finance, Chief Financial Officer and Treasurer of the
Company in March 2024. Prior to joining Patrick, Mr. Roeder served as Chief Financial Officer of Polaris Marine from 2018
to 2024. Prior to his role at Polaris, Inc. he was the Chief Financial Officer of Bennington Marine from 2016 to 2018, and the
Director of Financial Planning & Analysis for Bennington from 2014 to 2015. Mr. Roeder has over 10 years of experience
serving the marine markets in various leadership capacities.
Matthew S. Filer joined the Company as Senior Vice President of Finance in November 2022 and was elected Chief
Accounting Officer in May 2024. Mr. Filer served as Interim Executive Vice President - Finance, Chief Financial Officer and
Treasurer from May 2023 to March 2024. Prior to his role at Patrick, Mr. Filer was with Caterpillar Inc. from 2007 to 2021,
serving in a series of progressive global leadership roles which culminated in his appointment as Chief Financial Officer for
divisions within Caterpillar’s Resource Industries segment. With over 27 years of experience with prior organizations that
include Honeywell and Raytheon, Mr. Filer has extensive industry knowledge across multiple manufacturing industries such
as rail, mining, industrial and defense.
Joel D. Duthie joined the Company as General Counsel in November 2020 and was appointed Executive Vice President,
Chief Legal Officer and Secretary in May 2021. 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 corporate 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 manufacturer of flow control products from 2002 to 2006.
Stacey L. Amundson was appointed Executive Vice President and Chief Human Resources Officer in May 2022. Prior to
joining Patrick in February 2022, Ms. Amundson served in a temporary capacity with Kerry Foods with a focus on providing
human resources leadership in the transformation of its North America operations model. Prior to this role, Ms. Amundson
was with Spectrum Brands, Inc. from 2005 to 2018, holding a series of key human resources leadership roles, including
Senior Vice President, Human Resources and Chief Human Resources Officer 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, M&A, integrations, shared services, and large-scale organizational transformations.
Charles R. Roeder was appointed Executive Vice President - Sales in January 2024 and elected Chief Sales Officer in May
2024. Prior to that, Mr. Roeder served as Senior Vice President of RV Operations since 2020. Mr. Roeder was Group Vice
President of Operations for the Company’s Metals group in 2019. He joined the Company as a Business Unit Director in
2017 upon Patrick’s acquisition of Indiana Transport, which he co-founded 2009. Mr. Roeder has 18 years of experience in
the RV industry.
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Hugo E. Gonzalez was appointed Executive Vice President - Operations in January 2024 and elected as Chief Operating
Officer in May 2024. Prior to that, Mr. Gonzalez served as Senior Vice President of RV Operations for the Company from
July 2021 to January 2024, Group Vice President of Operations from February 2020 to June 2021, and Business Unit
Director from February 2017 to January 2020. He joined the Company in 2006 and served in a series of progressive
leadership roles. Mr. Gonzalez has over 18 years of experience serving the RV, manufactured housing, industrial, and marine
markets.
Website Access to Company Reports
We make available free 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 reasonably practicable
after 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 available on the “Governance” portion of our website. Our website and the information contained
therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the following factors which could
materially affect our business, financial condition or results of operations. The risks described below are not the only risks
we face. Additional factors not presently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, cash flows, financial condition or results of operations in future periods.
Risks Related to our Business
Economic and business conditions beyond Patrick's control, including cyclicality and seasonality in the industries it sells
products, could lead to fluctuations in and negatively impact operating results.
The RV, marine, powersports, MH and industrial markets in which we operate are subject to cycles of growth and contraction
in consumer demand, and volatility in production levels, shipments, sales and operating results, due to external factors such
as general economic conditions, consumer confidence, employment rates, financing availability, interest rates, inflation, fuel
prices, and other economic conditions affecting consumer demand and discretionary spending. Periods of economic recession
and downturns have adversely affected our business and operating results in the past, and have potential to adversely impact
our future results. Consequently, the results for any prior period may not be indicative of results for any future period. In
addition, fluctuation in demand could adversely affect our management of inventory, which could lead to an inability to meet
customer needs or a charge for obsolete inventory.
Manufacturing operations in the RV, powersports, marine and MH industries historically have been seasonal and at their
highest levels when the weather is moderate. Accordingly, the Company’s sales and profits had generally been the highest in
the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the
impact related to the addition of major RV manufacturer open houses for dealers in the August-September timeframe and
marine open houses in the December-February timeframe, resulting in dealers delaying certain restocking purchases until
new product lines are introduced at these shows. In addition, recent seasonal industry trends have been, and future trends may
be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national
and regional economic conditions and consumer confidence on retail sales of RVs 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 from RV and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather
conditions on the timing of industry-wide wholesale shipments.
If the financial condition of our customers and suppliers deteriorates, our business and operating results could suffer.
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 financial condition of our customers and
suppliers to deteriorate, which could negatively affect our business through the loss of sales or the inability to meet our
commitments. Many of our customers participate in highly competitive markets and their financial condition may deteriorate
as a result. In addition, a decline in the financial condition of our customers could hinder our ability to collect amounts owed
by customers.
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Our sales are materially concentrated with two customers, the loss of either of which could have a material adverse impact
on our operating results and financial condition.
Two customers in the RV market accounted for a combined 29% of our consolidated net sales in 2024. The loss of either of
these customers could have a material adverse impact on our operating results and financial 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 supply them at current levels.
Changes in consumer preferences relating to our products could adversely impact our sales levels and our operating
results.
Changes in consumer preferences, or our inability to anticipate changes in consumer preferences for RVs, marine models,
powersports products or manufactured homes, or for the products we make could reduce demand for our products and
adversely affect our operating results and financial condition.
A material percentage of the Company’s sales are concentrated in the RV industry, and declines in the level of RV unit
shipments or reductions in industry growth could reduce demand for our products and adversely impact our operating
results and financial condition.
In 2024 and 2023, the Company's net sales to the RV industry were approximately 44% and 43%, respectively, of
consolidated net sales. While the Company measures its RV market sales against industry-wide wholesale shipment statistics,
the underlying health of the RV industry is determined by retail demand. Retail sales of RVs historically have been closely
tied to general economic conditions and consumer confidence. Declines in RV unit shipment levels or reductions in industry
growth could materially reduce the Company’s revenue from the RV industry and have a material adverse impact on its
operating results in 2025 and other future periods.
Conditions in the credit market could limit the ability of consumers, dealers and wholesale customers to obtain retail, floor
plan and wholesale financing for RVs, marine products, powersports products, and manufactured homes, resulting in
reduced demand for our products.
Restrictions on the availability of consumer and wholesale financing for RVs, marine products, powersports products, and
manufactured homes and increases in the costs of such financing have in the past limited, and could again limit, the ability of
consumers and wholesale customers to purchase such products, which would result in reduced production by our customers,
and therefore reduce demand for our products.
Loans used to finance the purchase of manufactured homes usually have shorter terms and higher interest rates, and are more
difficult to obtain, than mortgages for site-built homes. Historically, lenders required a higher down payment, higher credit
scores and other criteria for these loans. Current lending criteria are more stringent than historical criteria, and many potential
buyers of manufactured homes may not qualify.
The availability, cost, and terms of these manufactured housing loans are also dependent on economic conditions, lending
practices of financial institutions, government policies, and other factors, all of which are beyond our control. Reductions in
the availability of financing for manufactured homes and increases in the costs of this financing have limited, and could
continue to limit, the ability of consumers and wholesale customers to purchase manufactured homes, resulting in reduced
production of manufactured homes by our customers, and therefore reduced demand for our products. In addition, certain
provisions of the Dodd-Frank Act, which regulate financial transactions, could make certain types of loans more difficult to
obtain, including those historically used to finance the purchase of manufactured homes.
The RV, marine, powersports, MH and industrial industries are highly competitive and some of our competitors may have
greater resources than we do.
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
to the RV, marine, powersports, MH and industrial producers, but also with suppliers to traditional site-built homebuilders
and suppliers of cabinetry and countertops. Sales could also be affected by pricing, purchasing, financing, advertising,
operational, promotional, or other decisions made by purchasers of our products. Additionally, we cannot control the
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decisions made by suppliers of our distributed and manufactured products and therefore, our ability to maintain our
distribution arrangements may be adversely impacted.
Some of our competitors have greater financial resources or lower levels of debt or financial 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 unable to compete successfully
against other manufacturers and suppliers to the RV, marine, powersports and MH industries as well as to the industrial
markets we serve, we could lose customers and sales could decline, or we may not be able to improve or maintain profit
margins on sales to customers or be able to continue to compete successfully in our core markets.
Our operating results can be adversely affected by inflation, changes in the cost or availability of raw materials, energy,
transportation and other necessary supplies and services.
We are currently experiencing inflationary pressures on our operating costs. The prices of key raw materials, consisting
primarily of lauan, gypsum, fiberglass, particleboard, aluminum, softwoods and hardwoods lumber, resin, and petroleum-
based products, are influenced by supply and demand and other factors specific to these commodities as well as general
inflationary pressures, including those driven by supply chain and logistical disruptions. Pricing and availability of finished
goods, raw materials, energy, transportation and other necessary supplies 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
conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs,
currency exchange rates, international treaties, and changes in laws, regulations, and related interpretations. 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 including from China, Mexico and Canada which may be
subject to additional tariffs imposed by the current U.S. administration.
In addition, prices of certain raw materials have historically been volatile and continued to fluctuate in 2024. 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 future 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 adjust 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.
Supply chain issues, including financial problems of manufacturers or suppliers, or a shortage of adequate materials or
manufacturing capacity that increase our costs or cause a delay in our ability to fulfill orders, could have an adverse
impact on our business and operating results, and our failure to estimate customer demand properly may result in excess
or obsolete inventory, which could adversely affect our gross margins.
Generally, our raw materials, supplies and energy requirements are obtained from various sources. These purchases include
unformed materials and rough and finished parts. We are reliant on our extended supply chain and any disruption in this
supply chain could have an adverse impact on our ability to deliver products to our customers on a timely and cost-effective
basis. While alternative sources are available, our business would be materially adversely affected if we are unable to find
alternative sources on a timely and cost-effective basis. A reduction or interruption in supply; a significant increase in the
price of one or more materials; a failure to adequately authorize procurement of inventory by our manufacturers; or a failure
to appropriately cancel, reschedule, or adjust our requirements based on our business and customer needs; could materially
adversely affect our business, operating results, and financial condition and could materially damage customer relationships.
If there are shortages of materials we need to manufacture our products, the price of these materials may increase, or these
materials may not be available 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 reasonable prices or of acceptable quality to build new products in a timely
manner in the quantities or configurations needed. Accordingly, our revenue and gross margins could suffer until other
sources can be developed. Our operating results would also be adversely affected if, anticipating greater demand than actually
develops, we commit to the purchase of more materials than we need, which is more likely to occur in a period of demand
uncertainties such as we are currently experiencing. There can be no assurance that we will not encounter these problems in
the future. In addition, if any of our suppliers seek bankruptcy relief or otherwise cannot continue their business as
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anticipated, the availability or price of these requirements could be adversely affected. A global economic downturn and
related market uncertainty could negatively impact the availability of materials from one or more of these sources of these
materials, especially during times such as we have recently seen when there are supplier constraints based on labor and other
actions due to pandemic. We may not be able to diversify sources in a timely manner, which could harm our ability to deliver
products to customers and seriously impact present and future sales. In addition, when facing component supply-related
challenges, we have increased our efforts in procuring materials in order to meet customer expectations which in turn
contribute to an increase in purchase commitments. Increases in our purchase commitments to shorten lead times could also
lead to excess and obsolete inventory charges if the demand for our products is less than our expectations. If we fail to
anticipate customer demand properly, an oversupply of parts could result in excess or obsolete components that could
adversely affect our gross margins.
If we cannot effectively manage the challenges and risks associated with doing business internationally, our revenues and
profitability may suffer.
We purchase a material portion of our raw materials and other supplies from suppliers located in Indonesia, China, Malaysia,
Mexico and Canada. As a result, our ability to obtain raw materials and supplies on favorable terms and in a timely fashion
are subject 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 enforcing contractual obligations and intellectual 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 from any
of the countries in which we do business due to a health epidemic, pandemic outbreak, or other event. Additional risks
associated with our foreign business include restrictive trade policies, imposition of duties, taxes, or government royalties by
foreign governments, imposition of tariffs by the United States on products we import from certain countries, and compliance
with the Foreign Corrupt Practices Act and local anti-bribery laws. Any measures, or proposals to implement such measures,
could negatively impact our relations with our international suppliers and the volume of shipments to the U.S. from these
countries, which could have a materially adverse effect on our 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
difficulties and costs of complying with a wide variety of complex laws, treaties and regulations; (ii) unexpected changes in
political or regulatory environments; (iii) earnings and cash flows that may be subject to tax withholding requirements or the
imposition of tariffs, exchange controls, or other restrictions; (iv) political, economic, and social instability; (v) import and
export restrictions and other trade barriers; (vi) responding to disruptions in existing trade agreements or increased trade
tensions between countries or political or economic unions; (vii) maintaining overseas subsidiaries and managing
international operations; and (viii) fluctuations in foreign currency exchange rates.
Our business is subject to risks associated with importing products, and the imposition of additional duties, tariffs or trade
restrictions could have a material adverse effect on our business, results of operations, financial condition, and cash
flows.
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 safeguard quotas to limit
the quantity of products that may be imported. We rely on free trade agreements and other supply chain initiatives in order to
maximize efficiencies relating to product importation. For example, we have historically received benefits from duty-free
imports on certain products from certain countries pursuant to the Generalized System of Preferences ("GSP") program.
Although there appears to be continued bipartisan support 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 duties, and profitability could be negatively impacted. The United States has imposed tariffs and export
controls on certain goods and products imported from China, Mexico, Canada and certain other countries, such as plywood,
which has resulted in retaliatory tariffs by China and other countries and additional tariffs may be imposed by the current
U.S. administration on products imported from China, Mexico and Canada. Additional tariffs imposed by the United States
on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could result
in an increase in supply chain costs that we may not be able to offset or that may otherwise adversely impact our results of
operations. Additionally, we are subject to government regulations relating to importation activities, including related to U.S.
Customs and Border Protection ("CBP") withhold release orders. The imposition of taxes, duties 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 could have a material adverse effect on our business, results of operations and financial condition. If additional
tariffs or trade restrictions are implemented by the U.S. or other countries, the cost of our products could increase which
could adversely affect our business.
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If we are unable to manage our inventory, our operating results could be materially and adversely affected.
We generally do not have long-term supply contracts with our customers and, therefore, we must bear the risk of certain
inventory commitments, based on our projections of future customer orders. We maintain an inventory to support these
customers’ needs. During periods of sharp fluctuations in demand, whether increasing or decreasing due to macroeconomic
factors, changes in end consumer demand, supply chain disruptions, public health emergencies, or other influences, some of
our customers will make adjustments to the inventory levels they maintain and the purchases of our products. While
responding to these changing dynamics in the end markets we serve, our inventory requirements will fluctuate up or down. If
we are unable to adjust to our customers’ changing inventory needs 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.
Increases in demand for our products could make it more difficult for us to obtain additional skilled labor, which may
adversely impact our operating efficiencies.
In certain geographic regions in which we have operating facilities, we have experienced shortages of qualified employees,
which has negatively impacted our costs in the past. While we are taking certain steps to automate aspects of our production
and distribution, labor shortages and continued competition for qualified employees may increase the cost of our labor and
create employee retention and recruitment challenges, especially during improving economic times, as employees with
knowledge and experience have the ability to change employers more easily.
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 shortages or high prices for fuel could have an adverse impact on our operations.
The products produced by the RV, powersports and marine industries typically require gasoline or diesel fuel for their
operation, or the use of a vehicle requiring gasoline or diesel fuel for their operation. There can be no assurance that the
supply of gasoline and diesel fuel will continue uninterrupted or that the price or tax on fuel will not materially increase in the
future. Shortages of gasoline and diesel fuel, and substantial increases in the price of fuel could have a material adverse effect
on our business in the future.
Interruptions or disruptions in production at one of our key facilities could have a material adverse impact on our
operations.
We operate manufacturing and distribution facilities across the continental United States. A significant interruption or
disruption in operations at our locations resulting from severe weather conditions or natural disasters, including but not
limited to hurricanes, tornadoes, blizzards, earthquakes or otherwise, could result in the disruption of the sourcing of
materials, manufacturing of our products, or order fulfillment and, as a result, could have a material adverse impact on our
business, results of operations and financial condition. If in the event of a natural 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
facilities are functioning properly. These unplanned capital expenditures may interrupt other initiatives in the short term
relating to our capital allocation strategy.
Our ability to integrate acquired businesses may adversely affect operations.
As part of our business and strategic plan, we look for strategic acquisitions to provide shareholder value. Any acquisition
will require the effective integration of an existing business and certain of its administrative, financial, sales and marketing,
manufacturing, distribution and other functions to maximize synergies. Acquired businesses involve a number of risks that
may affect our financial performance, including increased leverage, diversion of management resources, assumption of
liabilities of the acquired businesses, financial reporting systems which do not integrate with the Company's existing financial
reporting systems and possible corporate culture conflicts. If we are unable to successfully integrate these acquisitions, we
may not realize the benefits identified in our due diligence process, and our financial results may be negatively impacted.
Additionally, material unexpected liabilities could arise from these acquisitions.
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We may incur material charges or be adversely impacted by the consolidation and/or closure of all or part of a
manufacturing or distribution facility.
We periodically assess the cost structure of our operating facilities with the objective to distribute and/or manufacture
products in the most efficient manner. We may make capital investments to move, discontinue manufacturing and/or
distribution capabilities, or products and product lines, sell or close all or part of additional manufacturing and/or distribution
facilities in the future. These changes could result in material future charges or disruptions 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 financial condition.
We could incur charges for impairment of assets, including goodwill and other long-lived assets, due to potential declines
in the fair value of those assets or a decline in expected profitability of the Company or individual reporting units of the
Company.
Approximately 72% of our total assets as of December 31, 2024, 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 subject to periodic review and testing to determine whether the asset is recoverable or realizable. The events or
changes that could require us to test these assets for impairment include changes in our estimated future cash flows, changes
in rates of growth in our industry or in any of our businesses and decreases in our stock price and market capitalization.
In the future, if sales demand or market conditions change from those projected by management, asset write-downs may be
required. Material impairment charges, although not always affecting current cash flow, could have a material effect on our
operating results and balance sheet.
The inability to attract and retain qualified executive officers and key personnel may adversely affect our operations.
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 reduce 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 factors, our ability to attract and retain executive management, key
employees, and other qualified personnel.
We could be impacted by potential effects of union organizing activities.
A small number of our North American employees are currently represented by a labor union. Any disruption in our
relationship with such third-party associations could adversely affect our ability to attract and retain qualified employees to
meet current or future manufacturing demands at reasonable 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 suppliers, 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 manufacture, sale and
distribution of our products and have a material adverse effect on our business, prospects, operating results and financial
condition.
We are subject to governmental and environmental regulations, and failure in our compliance efforts, changes to such
laws and regulations or events beyond our control could result in damages, expenses or liabilities that individually, or in
the aggregate, would have a material adverse effect on our financial condition and results of operations.
Some of our manufacturing processes involve the use, handling, storage and contracting for recycling or disposal of
hazardous or toxic substances or wastes. Accordingly, we are subject to various governmental and environmental laws and
regulations regarding these substances, 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 effect any such legislation may have on our customers or us. Failure to comply with present or future
regulations could result in fines or potential civil or criminal liability, which could negatively impact our results of operations
or financial condition.
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We are subject to federal, state, local and certain international tax regulation. Changes thereto can have impacts on taxes
paid, exposure to liabilities, and financial results of the Company.
While we seek to ensure the Company remains compliant with tax regulations in all jurisdictions in which we operate, new
legislation or changes in existing legislation may result in changes to amounts owed for income, personal and real property
taxes. These changes may negatively affect our results of operations, financial condition, and cash flows or increase the
Company's effective tax rate.
We are also subject to the examination of our tax returns and other tax matters by the U.S. Internal Revenue Service, states in
which we conduct business, and other tax authorities. If our effective tax rates were to increase, or if the ultimate
determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition, operating
results and cash flows could be adversely affected.
We could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of
alleged defects in products, services, perceived environmental impacts, or otherwise.
We spend substantial resources ensuring that we comply with governmental safety regulations, consumer regulations and
other standards, but we cannot ensure that employees or other individuals affiliated with us will not violate such laws or
regulations. In addition, regulatory standards and interpretations may change on short notice and impact our compliance
status. Moreover, compliance with governmental standards does not necessarily prevent individual or class action lawsuits,
which can entail significant cost and risk. In certain circumstances, courts may permit civil actions even where our products
and services comply with federal and/or other applicable law. Furthermore, simply responding to actual or threatened
litigation or government investigations of our compliance with regulatory standards, whether related to our products, services,
or business commercial relationships, requires significant expenditures of time and other resources. Litigation is also
inherently uncertain, and we could experience significant adverse results, which could have an adverse effect on our financial
condition and results of operations. In addition, adverse publicity surrounding an allegation may cause significant
reputational harm that could have a significant adverse effect on our business, operating results and financial condition.
Public health emergencies, whether domestic or international, may have an adverse effect on our business, results of
operations, financial position and cash flows.
Pandemics, epidemics or disease outbreaks in the U.S. or globally may have a material adverse effect on our business,
employees, suppliers, customers, and the general economy. The full effect of these disruptions could be difficult to predict,
and the estimated length of such disruptions may not be readily available to the Company given such an event is affected by a
number of factors, many of which are outside of our control. In addition to the effects upon our operations, a health
emergency could have, but is not limited to, the following impact:
•
Decreases in consumer confidence and disposable income and increases in unemployment could reduce demand for
our products by our customers in all of our end markets.
•
Tightening credit standards could negatively impact credit availability to consumers which could have an adverse
effect on all of our end markets.
•
Supply chain and shipping interruptions and constraints, volatility in demand for our products caused by sudden and
material changes in production levels by our customers or other restrictions affecting our business could adversely
impact our planning and forecasting, our revenues and our operations.
•
Disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential
manufacturing and supply elements such as raw materials or other finished product components, transportation,
workforce, or other manufacturing and distribution capabilities could result in shortages of materials, inflationary
pressures, and our inability to meet our end market customer needs and achieve cost targets.
•
Material changes in the conditions in markets in which we manufacture, sell or distribute our products, including
governmental or regulatory actions in response to such an event, could adversely impact operations necessary for the
production, distribution, sale, and support of our products.
•
Failure of third parties on which we rely, including our customers, suppliers, distributors, commercial banks, and
other external business partners, to meet their obligations to the Company or to timely meet those obligations, or
material disruptions in their ability to do so, which may be caused by their own financial or operational difficulties,
may adversely impact our operations.
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•
Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of
such an event. If any of our customers suffer material financial difficulties, they may be unable to pay amounts due
to us fully, partially, or timely. Further, we may have to negotiate material discounts and/or extended financing
terms with these customers in such a situation. If we are unable to collect our accounts receivable as they come due,
our financial condition, results of operations and cash flows may be materially and adversely affected.
•
If we are unable to maintain normal operations, or subsequently are unable to resume normal operations in a timely
fashion, our cash flows could be adversely affected, 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
market conditions and other factors.
•
Disruptions to our operations related to a health emergency as a result of absenteeism by infected or ill members of
management or other employees, or absenteeism by members of management and other employees who elect not to
come to work due to the illness affecting others at our facilities, or due to quarantines.
•
A public health emergency could lead to severe disruption and volatility in the U.S. and global capital markets,
which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. 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 suppliers, and customers may also affect the Company’s future
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 finite-lived intangible assets, property and equipment,
inventories, accounts receivable, tax assets, and other assets.
•
Increasing raw material and labor costs relating to a public health emergency may also affect our profitability.
The ultimate impact of public health emergencies on our business, results of operations, financial condition and cash flows is
highly uncertain and cannot be accurately predicted and is dependent on future developments, including the duration 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 and terms of indebtedness could adversely affect our ability to raise additional capital to fund our operations
and take advantage of new business opportunities and prevent us from meeting our obligations under our debt
instruments.
As of December 31, 2024, we had $1.33 billion of total long-term debt, including current maturities and exclusive of deferred
financing costs and debt discount, outstanding under our 2024 Credit Facility, 4.75% Senior Notes, 6.375% Senior Notes and
1.75% Convertible Notes (all as defined 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 difficult for
us to meet our payments on outstanding debt, and we may not be able to find alternative financing sources to replace our
indebtedness in such an event. Our level of indebtedness could: (i) reduce the availability of our cash flow to fund working
capital, capital expenditures, acquisitions and other general corporate purposes, and limit our ability to obtain additional
financing for these purposes; (ii) limit our flexibility in planning for, or reacting to, and increase our vulnerability to, changes
in our business and the industry in 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
supplier contracts and/or customers.
In addition, our debt could have important consequences to us, including:
•
increase our vulnerability to general economic and industry conditions;
•
require a substantial portion of our cash flow from operations to be dedicated to the payment of principal and
interest on our indebtedness, therefore reducing our liquidity and our ability to use our cash flow to fund our
operations, capital expenditures and future business opportunities;
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•
expose us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings
pursuant to the credit agreement that established our revolving credit and term loan facility (the “2024 Credit
Agreement”) are at variable rates of interest;
•
reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes,
due to the costs and expenses associated with such debt;
•
limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements,
acquisitions, and general corporate or other purposes; and
•
limit our ability to adjust to changing marketplace conditions and placing us at a competitive disadvantage compared
to our competitors who may have less debt.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or
delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our scheduled debt service obligations, which could cause us
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 defaulted debt could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid
interest, which in turn could result in cross-defaults under our other indebtedness The lenders under our 2024 Credit
Agreement could also elect to terminate their commitments thereunder and cease making further loans, and such lenders
could institute foreclosure proceedings against their collateral, and we could be forced into bankruptcy or liquidation. Our
ability to satisfy our debt obligations will depend on our future operating performance which may be affected by factors
beyond our control.
Despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions
which could further exacerbate the risks to our financial condition described above. We may be able to incur significant
additional indebtedness in the future. Although the 2024 Credit Agreement and other debt instruments 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
substantial. These restrictions also do not prevent us from incurring obligations, such as certain trade payables, that do not
constitute indebtedness as defined under our debt instruments. To the extent we incur additional indebtedness or other
obligations, the risks described in the risk factors related to our indebtedness and others described herein may increase.
The agreements governing our indebtedness contain various financial performance and other covenants. If we do not
remain in compliance with these covenants, we could be in breach of our debt agreements and the amounts outstanding
thereunder could become immediately due and payable.
The agreements governing our indebtedness contain financial and non-financial covenants with which we must comply that
place restrictions on us. These restrictions will limit our ability and the ability of our subsidiaries to, among other things:
•
incur additional indebtedness (including guarantee obligations);
•
incur liens;
•
engage in mergers, consolidations and certain other fundamental changes;
•
dispose of assets;
•
make advances, investments and loans;
•
engage in sale and leaseback transactions;
•
engage in certain transactions with affiliates;
•
enter into contractual arrangements that encumber or restrict 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;
•
pay dividends, distributions and other payments in respect of capital stock or subordinated debt, and repurchase or
retire capital stock, warrants or options or subordinated debt; and
•
amend the terms of the documents governing, or make payments prior to the scheduled maturity date of, certain
other indebtedness, as applicable.
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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 effectively or to take advantage of new business opportunities. A potential
failure to comply with these financial and other restrictive covenants in our debt instruments, which, among other things,
require us to maintain specified financial ratios could, if not cured or waived, have a material adverse effect on our ability to
fulfill our obligations under our indebtedness and on our business and prospects generally.
Our 2024 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 interest 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 financial and other covenants under our 2024 Credit Agreement and other
agreements governing our indebtedness. If we fail to comply with the covenants contained in our 2024 Credit Agreement, the
lenders could cause our debt to become due and payable prior to maturity or it could result in our having to refinance the
indebtedness under unfavorable terms. In the event of a default under any of our indebtedness, the holders of the defaulted
debt could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest, which in
turn could result in cross-defaults under our other indebtedness. An event of default could also result in events of default
under other debt agreements that contain cross-acceleration or cross-default provisions, which could permit counterparties
thereunder to exercise remedies. 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 able to refinance any or all of this indebtedness.
Due to industry conditions and our operating results, there have been times in the past when we have had limited access to
sources of capital. If we are unable to locate suitable sources of capital when needed, we may be unable to maintain or
expand our business.
We depend on our cash balances, our cash flows from operations, our 2024 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 RVs, powersports, marine units and manufactured
homes could decline materially, resulting in reduced demand for our products. A decline in our operating results could
negatively impact our liquidity. If our cash balances, cash flows from operations, and availability under our 2024 Credit
Facility are insufficient to finance our operations and alternative capital is not available, we may not be able to expand our
business and make acquisitions, or we may need to curtail or limit our existing operations.
We have letters of credit representing collateral for our casualty insurance programs and for general operating purposes that
have been issued under our 2024 Credit Agreement. The inability to retain our current letters of credit, to obtain alternative
letter of credit sources, or to retain our 2024 Credit Agreement to support these programs could require us to post cash
collateral, reduce the amount of cash available for our operations, or cause us to curtail or limit existing operations.
The conditional conversion feature of the 1.75% Convertible Notes due 2028 may adversely affect our financial condition
and operating results.
In the event the conditional conversion feature of the 1.75% Convertible Senior Notes due 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. This conditional conversion feature is triggered for a given calendar quarter if
the last reported price of our common stock is more than or equal to 130% of the conversion price for at least 20 trading days
(whether or not consecutive) in the period of 30 consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter. Because this condition was satisfied during the calendar quarter ended December 31,
2024, the conditional conversion feature was triggered as of December 31, 2024 and the 1.75% Convertible Notes are
convertible, in whole or in part, at the option of the holders from January 1, 2025 to March 31, 2025. Whether the 1.75%
Convertible Notes will be convertible in subsequent periods will depend on the continued satisfaction of this condition or
another conversion condition in the future. 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. See Notes 7 "Debt" and 9 "Derivative Financial Instruments" of
the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional details.
The convertible note hedge and warrant transactions may affect the value of the 1.75% Convertible Notes and our
common stock.
In connection with the pricing of the 1.75% Convertible Notes, we entered into convertible note hedge transactions with
certain of the initial purchasers and/or their respective affiliates (the “option counterparties”). At the same time, we entered
into warrant transactions with the option counterparties. The convertible note hedge and warrant transactions are expected
23
generally to reduce the potential dilution upon conversion of the 1.75% Convertible Notes and/or offset 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 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 counterparties 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 during 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 affect a holder's ability to convert the 1.75% Convertible Notes and, to
the extent the activity occurs during any observation period related to a conversion of 1.75% Convertible Notes, it could
affect the number of shares and value of the consideration that a holder will receive upon conversion of the 1.75%
Convertible Notes.
Risks Related to Information Security, Cybersecurity and Data Privacy
If our information technology systems fail to perform adequately, our operations could be disrupted which could adversely
affect our business, reputation and results of operations.
We are increasingly dependent on digital technology, including information systems and related infrastructure, to process and
record financial and operating data, manage inventory and communicate with our employees and business partners. We rely
on our information technology systems to effectively manage our business data, inventory, supply chain, order entry and
fulfillment, manufacturing, distribution, warranty administration, invoicing, collection of payments, and other business
processes. Our systems are subject to damage or interruption from power outages, telecommunications or internet failures,
computer viruses and malicious attacks, security breaches and catastrophic events. If our systems are damaged or fail to
function properly or reliably, we may incur substantial repair or replacement costs or experience data loss or theft and
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, liability or penalties under privacy laws, disruption in operations, and damage to
our reputation, which could adversely affect our business.
In addition, we may be required to make material technology investments to maintain and update our existing information
technology systems. Implementing material system changes increases the risk of computer system disruption. The potential
problems and interruptions associated with implementing technology initiatives could disrupt or reduce our operational
efficiency.
A cyber incident or data breach could result in information theft, data corruption, operational disruption, and/or financial
loss.
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 information security breaches that could result in the unauthorized release, gathering,
monitoring, misuse, loss, or destruction of proprietary and other information, or other disruption of our business operations.
A cyber-attack could include gaining unauthorized access to digital systems for purposes of misappropriating assets or
sensitive information, corrupting data, or causing operational disruption or destruction due to ransom attacks or malware or
result in denial of service on websites. We have programs in place to detect, contain and respond to data security incidents.
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change
frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or
implement adequate preventive measures. Unauthorized parties may also attempt to gain access to our systems or facilities, or
those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members,
contractors, vendors, and temporary staff. In addition, hardware, software, or applications we develop or procure from third
parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information
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 vulnerabilities. If we or our
suppliers experience additional material data security breaches or fail to detect and appropriately respond to material data
24
security breaches, we could be exposed to costly government enforcement actions and private litigation and our business and
operating results could suffer.
Other Risks
Certain provisions in our Articles of Incorporation and Amended and Restated By-laws may delay, defer or prevent a
change in control that our shareholders might consider to be in their best interest.
Our Articles of Incorporation and Amended and Restated By-laws contain provisions that are intended to deter coercive
takeover practices and inadequate takeover bids. These provisions may delay, defer or prevent a change in control that our
shareholders might consider to be in their best interest.
Conditions within the insurance markets could impact our ability to negotiate favorable terms and conditions for various
liability coverage and could potentially result in uninsured losses.
We generally negotiate our insurance contracts annually for property, casualty, workers compensation, general liability,
health insurance, and directors and officers liability 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/reward of policy limits and coverage, the
lack of coverage in certain circumstances could result in potential uninsured losses.
Our business, results of operations and financial condition may be materially and adversely affected by any negative
impact on the global economy and capital markets resulting from international conflicts, such as the conflict between
Ukraine and Russia and conflict in the Middle East, or any other geopolitical tensions.
U.S. and global markets may experience volatility and disruptions resulting from geopolitical tensions or military conflict,
such as the military conflict between Ukraine and Russia and conflict in the Middle East. The length and impact of
geopolitical tensions or military conflict are highly unpredictable, and can lead to market disruptions, including significant
volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. 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 conflicts to evaluate any potential
impacts they may have on our business, operating results, and financial condition.
Risks Related to Ownership of our Common Stock
A variety of factors, many of which are beyond our control, could influence fluctuations in the market price for our
common stock.
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
actual operating performance. The market price of our common stock could fluctuate materially in response to a number of
factors, many of which are beyond our control, including the following:
•
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 ventures or
capital commitments;
•
announcements by us or our competitors of technological improvements or new products;
•
the gain or loss of material customers;
•
additions or departures of key personnel;
•
events affecting other companies that the market deems comparable to us;
•
changes in investor perception of our business and/or management;
25
•
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;
•
issuance of our common stock or debt securities by the Company; and
•
the occurrence of other events that are described in these risk factors.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity is critical to Patrick’s ability 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-service, and attacks
from more advanced and persistent, highly organized adversaries. Our customers, suppliers, consultants and subcontractors
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
imperative that we remain vigilant and apprised of developments in the information security field, and we expend
considerable resources on cybersecurity.
The Board of Directors oversees management’s processes for identifying 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 Officer (CISO), regularly briefs the Board of Directors on our cybersecurity
and information security posture and the Board of Directors is apprised of cybersecurity incidents deemed to have a moderate
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 from incident detection to mitigation, recovery and notification, including
notifying functional areas (e.g., legal), as well as senior leadership and the Board of Directors, as appropriate.
Our corporate information security organization, led by our CISO, is responsible for our overall information security strategy,
policy, security engineering, operations and cyber threat detection and response. The corporate information security
organization manages the Company's enterprise security structure with the ultimate goal of preventing cybersecurity incidents
to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact
should an incident occur. Central to this organization is our carefully 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 enterprise 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.
The corporate information security organization has implemented a governance structure and process to assess, identify,
manage and report cybersecurity risks. We also have a corporate-wide counterintelligence and insider threat detection
program to proactively identify external and internal threats and mitigate those threats in a timely manner. In addition to
developing and implementing pre-existing third party frameworks, we have implemented our own practices and customized
controls tailored to the Patrick enterprise environment. We believe this approach enhances our defense in depth stance while
increasing our ability to identify, contain and manage cybersecurity risks.
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 enterprise risk management process identifies 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 supply chain to deliver our products and services to our customers, and a cybersecurity incident at a
supplier, subcontractor or third-party partner could materially adversely impact us.
26
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a
cybersecurity incident that could have a material adverse effect 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 disruptions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity
risks.
ITEM 2.
PROPERTIES
Patrick believes the facilities occupied as of December 31, 2024, are adequate for the purposes for which they are currently
being used and are well-maintained. The Company may, as part of its strategic operating plan, further consolidate and/or
close certain owned facilities and may not renew leases on property with near-term lease expirations. Use of our
manufacturing and distribution facilities may vary with seasonal, economic, and other business conditions. Our primary
corporate office is located in Elkhart, Indiana.
In 2024, the Company operated in 25 states in the U.S., Mexico, China and Canada. As of December 31, 2024, the Company
leased approximately 10.6 million square feet of manufacturing, distribution and corporate facilities and owned
approximately 2.6 million square feet, as listed below.
Leased
Owned
Purpose / Nature:
# of
Properties
Square
Footage
# of
Properties
Square
Footage
Manufacturing
145
8,373,000
34
2,097,000
Distribution
41
1,607,000
6
358,000
Manufacturing & Distribution (shared space)
3
536,000
1
94,000
Corporate & Other
24
117,000
1
35,000
Total
213
10,633,000
42
2,584,000
Pursuant to the terms of the Company’s 2024 Credit Agreement, most of our owned real property is subject to a security
interest.
ITEM 3.
LEGAL PROCEEDINGS
We are subject to claims and lawsuits in the ordinary course of business. In management's opinion, currently pending legal
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 flows.
See Note 15 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements included elsewhere in this
Form 10-K for further discussion of legal matters in relation to commitments and contingencies.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
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 February 14, 2025, there were approximately 280 shareholders of record. A number of shares are held in broker and
nominee names on behalf of beneficial owners.
27
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 $1.50 and $1.27 per share, or $50.2 million and $42.1
million in the aggregate, in 2024 and 2023, respectively. Any future determination to pay cash dividends will be made by the
Board in light of the Company’s earnings, financial position, capital requirements, and restrictions under the Company’s
2024 Credit Agreement, and such other factors as the Board deems relevant.
Purchases of Equity Securities by the Issuer
Issuer Purchases of Equity Securities for the three months ended December 31, 2024.
Period
Total Number
of Shares
Purchased (1)
Average
Price
Paid Per
Share (1)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (2)
Maximum Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs (2)
September 30 - October 27, 2024
549
$
96.14
—
$
77,569,000
October 28 - December 1, 2024
61,098
77.68
60,000
200,000,000
December 2 - December 31, 2024
1,365
55.39
—
200,000,000
Total
63,012
60,000
(1)
Amount includes 3,012 shares of common stock purchased by the Company in aggregate in October, November and December 2024 for the sole
purpose of satisfying minimum tax withholding obligations of employees upon the vesting of stock awards held by the employees.
(2)
See Note 12 "Stock Repurchase Programs" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional
information about the Company's stock repurchase program.
28
Stock Performance Graph
The following graph compares the cumulative 5-year total return 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
Industries, Inc., and Wabash National Corporation. This graph assumes an initial investment of $100 (with reinvestment of all
dividends) was made in our common stock, in the index and in the peer group on December 31, 2019, and its relative
performance is tracked through December 31, 2024.
Comparison of 5-Year Cumulative Total Return*
PATK
Peer Group
Russell 2000
12/31/19
12/31/20
12/31/21
12/30/22
12/31/23
12/31/24
$50
$100
$150
$200
$250
$300
($)
12/31/2019
12/31/2020
12/31/2021
12/30/2022
12/31/2023
12/31/2024
Patrick Industries, Inc.
$
100.00 $
132.78 $
158.95 $
122.26 $
207.39 $
262.33
Peer Group
$
100.00 $
115.84 $
145.14 $
112.44 $
146.32 $
114.29
Russell 2000
$
100.00 $
118.36 $
134.57 $
105.56 $
121.49 $
133.66
*The stock price performance included in this graph is not necessarily indicative of future stock price performance.
ITEM 6.
RESERVED
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 future results that are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements”
on page 3 of this Report and Part I, Item 1A. "Risk Factors" for a discussion of risks and uncertainties. Patrick’s results of
operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 along with components of
change compared to the prior year that have been omitted under this item can be found in Part II, Item 7. "Management’s
Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the year ended
December 31, 2023 filed with the SEC on February 29, 2024.
29
EXECUTIVE SUMMARY
Overview of Markets and Related Industry Performance
Recreational Vehicle ("RV") Industry
The RV industry is our primary market and comprised 44% and 43% of the Company’s consolidated net sales for the years
ended December 31, 2024 and 2023, respectively. Net sales to the RV industry increased 8% for the year ended
December 31, 2024 compared to 2023. Following a dealer inventory restocking in the first half of 2024, OEMs reduced
production slightly in the second half of 2024 as retail demand decreased, with dealers managing inventory levels and the
OEMs demonstrating operating discipline to maintain a balanced inventory channel for the long-term health and stability of
the industry.
According to the RV Industry Association (“RVIA”), RV industry wholesale unit shipments totaled approximately 333,700
units in 2024, an increase of 7% from approximately 313,200 units in 2023. According to Statistical Surveys, Inc. ("SSI"),
RV industry retail unit sales totaled approximately 352,700 units in 2024, a decrease of 7% from approximately 380,700 units
in 2023.
Marine Industry
Net sales to the marine industry comprised approximately 15% and 23% of the Company's consolidated net sales for the
years ended December 31, 2024 and 2023, respectively. Net sales to the marine industry in the year ended December 31,
2024 decreased 27% compared to 2023. The decrease in net sales to the marine industry was in line with the decrease in
wholesale powerboat unit shipments.
Our marine revenue is generally correlated to marine wholesale powerboat unit shipments. According to Company estimates
based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments
totaled approximately 143,900 units in 2024, a decrease of 25% compared to 192,300 units in 2023. According to SSI, we
estimate marine retail powerboat shipments totaled approximately 165,000 units in 2024, a decrease of 8% from
approximately 179,500 units in 2023.
Powersports Industry
Through acquisitions completed in recent years, the Company entered the powersports end market. Previously, our sales to
the powersports end market were included in the Company’s marine end market sales. Effective with the first quarter of
2024, powersports net sales are being reported separately after the January 2024 acquisition of Sportech, LLC (“Sportech”),
as disclosed in Note 2 "Revenue Recognition" of the Notes to Consolidated Financial Statements included herein.
Net sales to the powersports industry comprised approximately 10% and 4% of the Company's consolidated net sales for the
years ended December 31, 2024 and 2023, respectively. Net sales to the powersports industry increased 189% during the year
ended December 31, 2024 compared to 2023. The increase in net sales for this period is primarily attributable to the
Company's acquisition of Sportech in January 2024.
Manufactured Housing ("MH") Industry
Net sales to the MH industry comprised approximately 18% and 16% of the Company's consolidated net sales for the years
ended December 31, 2024 and 2023, respectively. Net sales to the MH industry increased 20% during the year ended
December 31, 2024 compared to 2023. MH sales are generally correlated to MH industry wholesale unit shipments.
According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale
unit shipments totaled approximately 103,300 units in 2024, an increase of 16% compared to 89,200 units in 2023, primarily
driven by OEMs increasing production from significantly reduced levels in 2023 in anticipation of a recovery in demand.
Industrial Market
The industrial market is comprised primarily of kitchen cabinet, countertop, hospitality, retail and commercial fixtures, and
office and household furniture markets and regional distributors. Net sales to the industrial market comprised approximately
13% and 14% of the Company's consolidated net sales for the years ended December 31, 2024 and 2023, respectively. Net
sales to the industrial market decreased 1% during the year ended December 31, 2024 compared to 2023. Overall, our
revenues in these markets are focused on residential and multifamily housing, hospitality, high-rise housing and office,
30
commercial construction and institutional furniture markets. We estimate that approximately 75% to 85% of our industrial
business is directly tied to the residential housing market, with the remaining industrial sales tied to the non-residential and
commercial markets.
During the year ended December 31, 2024, combined new housing starts decreased 4% compared to 2023, reflecting a
decrease in multifamily housing starts of 25%, partially offset by an increase in single-family housing starts of 6%. Our
industrial products are generally among the last components installed in new unit construction and as such our related sales
typically trail new housing starts by four to six months.
CONSOLIDATED OPERATING RESULTS
The following table sets forth the percentage relationship to net sales of certain items on the Company’s consolidated
statements of income for the years ended December 31, 2024 and 2023.
Year Ended December 31,
$
Change
%
Change
($ in thousands)
2024
2023
Net sales
$ 3,715,683 100.0 %
$ 3,468,045 100.0 %
$
247,638
7 %
Cost of goods sold
2,879,793
77.5
2,685,812
77.4
193,981
7
Gross profit
835,890
22.5
782,233
22.6
53,657
7
Warehouse and delivery expenses
155,821
4.2
143,921
4.1
11,900
8
Selling, general and administrative expenses
325,754
8.8
299,418
8.6
26,336
9
Amortization of intangible assets
96,275
2.6
78,694
2.3
17,581
22
Operating income
258,040
6.9
260,200
7.5
(2,160)
(1)
Interest expense, net
79,470
2.1
68,942
2.0
10,528
15
Income taxes
40,169
1.1
48,361
1.5
(8,192)
(17)
Net income
$
138,401
3.7
$
142,897
4.1
$
(4,496)
(3)
Year Ended December 31, 2024 Compared to 2023
Net Sales. Net sales in 2024 increased approximately $247.6 million, or 7%, to $3.72 billion compared to $3.47 billion in
2023. Net sales in 2024 increased due to increased sales to the powersports, RV and MH markets, partially offset by
decreased sales to the marine and industrial markets. The Company's sales to the powersports market increased $230.3
million, or 189%, in 2024 compared to 2023, primarily attributable to the Company’s acquisition of Sportech in the first
quarter of 2024. Sales to the RV market increased $121.9 million, or 8%, to $1.63 billion in 2024 compared to $1.50 billion
in 2023, due to industry volume growth and the Company’s acquisition of ICON Direct LLC which does business as RecPro
(“RecPro”) in the third quarter of 2024. Sales to the MH market increased $113.9 million, or 20%, to $682.1 million in 2024
compared to $568.2 million in 2023, primarily due to an increase in estimated MH industry wholesale unit shipments of
approximately 16%. Sales to the marine market decreased $211.9 million, or 27%, to $570.7 million in 2024 compared to
$782.6 million in 2023 primarily attributable to a decrease in estimated powerboat wholesale unit shipments of 25%
compared to 2023. Sales to the industrial market decreased $6.5 million, or 1%, compared to 2023.
In 2024 and 2023, net sales attributable to acquisitions completed in each of those years was $295.7 million and $17.7
million, respectively.
Cost of Goods Sold. Cost of goods sold increased $194.0 million, or 7%, to $2.88 billion in 2024 compared to $2.69 billion
in 2023. As a percentage of net sales, cost of goods sold increased 10-basis points during 2024 to 77.5% compared to 77.4%
in 2023.
Cost of goods sold as a percentage of net sales increased in 2024 compared to 2023 primarily as a result of a 50-basis point
increase in overhead as a percentage of net sales due to higher research and development costs, partially offset by a 40-basis
point decrease in labor as a percentage of net sales. 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.
31
Gross Profit. Gross profit increased $53.7 million or 7%, to $835.9 million in 2024 compared to $782.2 million in 2023. As
a percentage of net sales, gross profit decreased to 22.5% in 2024 compared to 22.6% in 2023. The decrease in gross profit as
a percentage of net sales in 2024 compared to 2023 reflects the impact of the factors discussed above under “Cost of Goods
Sold”.
Economic or industry-wide factors affecting the profitability of our sales to the RV, marine, powersports, MH and industrial
markets include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the
competitive environment and the impact of different gross margin profiles of acquired companies, all of which can cause
gross margins to fluctuate from quarter-to-quarter and year-to-year.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $11.9 million, or 8%, to $155.8 million in
2024 compared to $143.9 million in 2023. As a percentage of net sales, warehouse and delivery expenses increased 10 basis
points to 4.2% in 2024 compared to 4.1% in 2023.
The increase in warehouse and delivery expenses in 2024 compared to 2023 is primarily attributable to the increase in sales,
and the increase as a percentage of net sales is primarily related to an increase in certain expenses that are fixed in nature,
including fleet and insurance expenses.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased $26.3 million, or 9%, to $325.8
million in 2024 compared to $299.4 million in 2023. As a percentage of net sales, SG&A expenses were 8.8% in 2024 and
8.6% in 2023.
The increase in SG&A expenses in 2024 compared to 2023 is primarily due to increased wages, $5.0 million of transaction
costs associated with the acquisition of Sportech, increased technology expenses and the $2.5 million write-off of deferred
financing costs due to early payment debt, partially offset by decreased incentive compensation and insurance expenses.
The increase in SG&A expenses as a percentage of net sales in 2024 compared to 2023 is primarily attributable to the
Sportech acquisition-related costs, increased technology expenses and deferred financing costs write-off mentioned above,
partially offset by decreased incentive compensation, wages and insurance expenses. Additionally, certain 2023 and 2024
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 $17.6 million, or 22%, in 2024 compared to
2023. The increase in 2024 compared to 2023 primarily reflect the impact of the Sportech acquisition as well as other
acquisitions completed in 2024 and 2023.
Operating Income. Operating income decreased $2.2 million, or 1%, to $258.0 million in 2024 compared to $260.2 million
in 2023. Operating income in 2024 and 2023 included $47.2 million and $1.0 million, respectively, from the businesses
acquired in each respective year. Operating income as a percentage of net sales decreased 60 basis points to 6.9% in 2024
compared to 7.5% in 2023. The decrease in operating income as a percentage of net sales is primarily attributable to the items
discussed above.
Interest Expense, Net. Interest expense, net, increased $10.5 million, or 15%, to $79.5 million in 2024 compared to $68.9
million in 2023. The increase primarily reflects interest associated with the issuance of our 6.375% Senior Notes due 2032
(the “6.375% Senior Notes”) in October 2024, higher debt levels and higher interest rates on our term loan and revolver
balances.
Income Taxes. Income tax expense decreased $8.2 million, or 17%, to $40.2 million in 2024 compared to $48.4 million in
2023 as a result of the decrease in pre-tax income and a decrease in the effective tax rate. For 2024, the effective tax rate was
22.5% compared to 25.3% in 2023. The decrease in the effective tax rate in 2024 is primarily related to increased excess tax
benefits on share-based compensation.
BUSINESS SEGMENTS
The Company's reportable segments, manufacturing and distribution, are based on its method of internal reporting. The
Company regularly evaluates the performance of the manufacturing and distribution segments and allocates resources to them
based on a variety of indicators including net sales and operating income. The Company does not measure profitability at the
32
end market (RV, marine, powersports, MH and industrial) level. See Notes 17 "Segment Information" of the Notes to
Consolidated Financial Statements included elsewhere in this Form 10-K for additional details.
Net sales pertaining to the manufacturing and distribution segments as stated in the table below and in the following
discussions include intersegment sales. Gross profit includes the impact of intersegment operating activity.
The table below presents information 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 17 "Segment Information" of the Notes to
Consolidated Financial Statements included elsewhere in this Form 10-K.
Year Ended December 31,
$
Change
%
Change
($ in thousands)
2024
2023
Sales
Manufacturing
$
2,756,547
$
2,653,257 $
103,290
4%
Distribution
$
980,127
$
889,408 $
90,719
10%
Gross Profit
Manufacturing
$
612,552
$
577,284 $
35,268
6%
Distribution
$
224,855
$
195,506 $
29,349
15%
Operating Income
Manufacturing
$
340,961
$
321,096 $
19,865
6%
Distribution
$
104,715
$
90,095 $
14,620
16%
Year Ended December 31, 2024 Compared to 2023
Manufacturing
Sales. Manufacturing sales increased $103.2 million, or 4%, to $2.76 billion in 2024 compared to $2.65 billion in 2023. The
manufacturing segment accounted for approximately 74% of the Company’s consolidated net sales in 2024 compared to
approximately 75% of the Company's consolidated net sales in 2023.
Manufacturing segment sales in 2024 compared to 2023 increased due to increased sales to the powersports, MH and RV
markets, partially offset by decreased sales to the marine and industrial markets. Sales to the powersports market increased
210% in 2024 compared to 2023, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.
Sales to the MH market increased 16% compared to 2023, primarily due to an increase in estimated MH industry wholesale
unit shipments of approximately 16%. Sales to the RV market increased 10% compared to 2023, due to industry volume
growth. Sales to the marine market decreased 29% compared to 2023, primarily attributable to a decrease in estimated
powerboat wholesale unit shipments of 25%. Sales to the industrial market decreased 2% compared to 2023.
For 2024 and 2023, manufacturing segment sales attributable to acquisitions completed in each of those years were $275.4
million and $3.6 million, respectively.
Gross Profit. Manufacturing segment gross profit increased $35.3 million, or 6%, to $612.6 million in 2024 compared to
$577.3 million in 2023. As a percentage of sales, gross profit increased 40 basis points to 22.2% in 2024 compared to 21.8%
in 2023. The increase in gross profit as a percentage of sales in 2024 compared to 2023 is attributable to decreases in material
and labor costs as a percentage of sales, partially offset by increased overhead costs as a percentage of sales.
Operating Income. Manufacturing segment operating income increased $19.9 million, or 6%, to $341.0 million in 2024
compared to $321.1 million in 2023. Manufacturing segment operating income in 2024 attributable to acquisitions completed
in such year was approximately $46.5 million and manufacturing segment operating loss in 2023 attributable to acquisitions
completed in such year was $(0.6) million. The increase in operating income in 2024 primarily reflects the items discussed
above.
33
Distribution
Sales. Distribution sales increased $90.7 million, or 10%, to $980.1 million in 2024 compared to $889.4 million in 2023. The
distribution segment accounted for approximately 26% of the Company’s consolidated net sales for 2024 compared to 25%
of the Company's consolidated net sales in 2023.
Distribution segment sales in 2024 compared to 2023 increased due to increased sales to all five of our end markets. Sales to
the MH market increased 23% compared to 2023, primarily due to an increase in estimated MH industry wholesale unit
shipments of approximately 16%. Sales to the powersports market increased 6% compared to 2023, primarily attributable to
product mix shifts by certain customers. Sales to the RV market increased 4% compared to 2023, primarily attributable to the
Company’s acquisition of RecPro in the third quarter of 2024. Sales to the marine market increased 3% compared to 2023.
Sales to the industrial market increased 2% compared to 2023, primarily reflecting product mix shifts by certain customers.
For 2024 and 2023, distribution segment sales attributable to acquisitions completed in each of those years were $20.3
million and $14.1 million, respectively.
Gross Profit. Distribution segment gross profit increased $29.4 million, or 15%, to $224.9 million in 2024 compared to
$195.5 million in 2023. As a percentage of sales, gross profit increased 90 basis points 22.9% in 2024 compared to 22.0% in
2023. The increase in gross profit as a percentage of net sales for 2024 is primarily attributed to decreases in material and
labor costs as a percentage of net sales.
Operating Income. Distribution segment operating income increased $14.6 million, or 16%, to $104.7 million in 2024
compared to $90.1 million in 2023. For 2024 and 2023 distribution segment operating income attributable to acquisitions
completed in each of those years was immaterial. The increase in operating income in 2024 primarily reflects the items
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements are primarily to support working capital demands, meet debt service requirements and support the
Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the
Company’s common stock, among others. The Company's primary sources of liquidity are cash flows from operations, which
includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the
revolving credit and term loan facility (the “2024 Credit Facility”) as discussed in Note 7 "Debt" of the Notes to Consolidated
Financial Statements.
During 2024, we expanded our access to capital and reduced our cost of debt by issuing $500 million in aggregate principal
amount of 6.375% Senior Notes. The proceeds from the issuance, together with borrowings under the 2024 Credit Facility,
were utilized to redeem all $300 million aggregate principal amount of the Company’s 7.50% Senior Notes due 2027 (the
“7.50% Senior Notes”), to repay all borrowings under its existing senior secured credit facility and to pay related fees and
expenses, as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements.
As of December 31, 2024, our liquidity consisted of cash and cash equivalents of $33.6 million and $770.0 million of
availability under our 2024 Credit Facility. As of December 31, 2024, the Company's existing cash and cash equivalents, cash
generated from operations, and available borrowings under its 2024 Credit Facility are expected to be sufficient to meet
anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any
acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.
Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV,
marine, powersports, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In
the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become
unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its
liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and
capital market conditions, and other relevant circumstances.
34
As of and for the reporting period ended December 31, 2024, the Company was in compliance with its financial covenants
under the Company’s Fifth Amended and Restated Credit Agreement (the "2024 Credit Agreement"). The required maximum
consolidated secured net leverage ratio and the required minimum consolidated interest coverage ratio, as such ratios are
defined in the 2024 Credit Agreement, compared to the actual amounts as of December 31, 2024 and for the fiscal period
then ended are as follows:
Required
Actual
Consolidated secured net leverage ratio (12-month period)
2.75
0.40
Consolidated interest coverage ratio (12-month period)
3.00
6.05
In addition, as of December 31, 2024, the Company's consolidated total net leverage ratio (12-month period) was 2.71. While
this ratio is not a covenant under the 2024 Credit Agreement, it is used in determining the applicable borrowing margin under
the 2024 Credit Agreement.
Cash Flows
Year Ended December 31, 2024 Compared to 2023
Operating Activities: Cash flows from operating activities are one of the Company's primary sources of liquidity,
representing the net income the Company earned in the reported periods, adjusted for certain non-cash items and changes in
operating assets and liabilities.
Net cash provided by operating activities decreased $81.9 million, or 20%, to $326.8 million in 2024 compared to $408.7
million in 2023. The decrease in operating cash flows is primarily attributable to a decrease in operating assets and liabilities,
net of business acquisitions, as a source of cash of $93.3 million, from $98.9 million in 2023 compared to $5.6 million in
2024, a decrease in net income of $4.5 million and an increase in deferred income taxes of $5.9 million, partially offset by
increased depreciation and amortization expense of $22.0 million and loss on extinguishment of debt of $2.5 million.
Investing Activities
Net cash used in investing activities increased $426.3 million, to $512.8 million in 2024 compared to $86.5 million in 2023
primarily due to an increase in cash used in business acquisitions, which were $411.7 million in 2024, primarily due to the
acquisitions of Sportech and RecPro, compared to $25.9 million in 2023, an increase in cash used for capital expenditures of
$16.7 million and an increase in other investing activities of $24.7 million.
Financing Activities
Net cash flows provided by financing activities was $208.2 million in 2024 compared to net cash flows used in financing
activities of $333.6 million in 2023. The change in cash flow from financing activities was primarily due to net borrowings of
$100 million under the Revolver due 2029 and proceeds from the issuance of $500 million aggregate principal amount of
6.375% Senior Notes in 2024 and compared to cash used in 2023 to redeem the $172.5 million 1.00% Convertible Senior
Notes due 2023, partially offset by the redemption of the $300 million 7.50% Senior Notes in 2024.
Off-Balance Sheet Arrangements
None.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The SEC has defined a company’s critical accounting policies as those that are most important to
the portrayal of its financial 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 reasonable, they are based upon information available when they
are made. Actual results may differ materially from these estimates under different assumptions or conditions. The Company
has identified the following critical accounting policies and estimates:
35
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 recoverable. These indicators include a sustained material decline in our
share price and market capitalization, a decline in expected future cash flows, 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.
Impairment reviews of goodwill are performed at the reporting unit level. The Company’s reporting units are defined as one
level below our operating segments, Manufacturing and Distribution, which are the same as our reportable segments. In
evaluating goodwill for impairment, either a qualitative or quantitative assessment is performed. The Company performed a
quantitative assessment for all reporting units in 2024. When estimating reporting unit fair value with a 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 flows under the income approach, the Company takes into
consideration multiple variables, including forecasted sales volumes and operating income, current industry and economic
conditions, and historical results. The income approach fair value estimate also includes estimates of long-term growth rates
and discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and
internally-developed forecasts.
Impairment reviews of indefinite-lived intangible assets (trademarks) consist of a comparison of the fair value of the
trademark to its carrying value. Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow
method. Estimated royalty rates applied to projected revenues are based on comparable industry studies and consideration of
operating margins. Discount rates are derived in a manner similar to what is done in testing goodwill for impairment.
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, 2024, 2023 and 2022 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
effect on the Company’s Consolidated Financial Statements for any period presented.
Business Combinations. From time to time, we may enter into business combinations. We recognize the identifiable assets
acquired and the liabilities 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 fair value, over the net of the acquisition date fair values of the
identifiable assets acquired and liabilities 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 fair values of property, plant and equipment, identifiable intangible assets, contingent consideration and other
financial assets and liabilities. Significant estimates and assumptions include subjective and/or complex judgments regarding
items such as discount rates, customer attrition rates, royalty rates, and other factors, including estimated future cash flows
that we expect to generate from the acquired assets.
The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one
year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
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 for the fair values of assets and liabilities in connection with acquisitions, these adjustments
could have a material impact on our financial condition and results of operations. No changes in the year ended December 31,
2024 to provisional fair value estimates of assets acquired and liabilities assumed in acquisitions were material. If the
subsequent actual results and updated projections of the underlying business activity change compared with the assumptions
and projections used to develop the acquisition date fair 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.
36
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Debt Obligations
As of December 31, 2024, our total debt obligations under our 2024 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
additional annual interest cost of approximately $2.2 million, assuming average borrowings during 2024, including the
Revolver due 2029 and Term Loan due 2029, subject to variable rates were equal to the amount of such borrowings
outstanding as of December 31, 2024, or $223.4 million, excluding deferred financing costs related to the Revolver due 2029
and Term Loan due 2029.
Commodity Volatility
The prices of key raw materials, consisting primarily of lauan, gypsum, fiberglass, 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 disruptions.
Prices of certain commodities have historically been volatile and continued to fluctuate in 2024. During periods of volatile
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 during periods of commodity volatility because there can be no assurance future
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 effect on results of operations for the periods presented.
Equity Price Risk
The fair value of the 1.75% Convertible Notes is subject to market risk and other factors due to the conditional conversion
feature. The fair value of the 1.75% Convertible Notes will generally increase as our common stock price increases and will
generally decrease as our common stock price decreases. The 1.75% Convertible Notes are carried at amortized cost and their
fair value is presented for disclosure purposes only.
The Company will satisfy any conversion by paying cash up to the aggregate principal amount of the 1.75% Convertible
Notes to be converted and by paying or delivering, as the 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 amount of the 1.75% Convertible Notes being converted.
In connection with the pricing of the 1.75% Convertible Notes, we entered into convertible note hedge transactions with
certain of the initial purchasers and/or their respective affiliates (the “option counterparties”). At the same time, we entered
into warrant transactions with the option counterparties. The convertible note hedge transactions are expected generally to
reduce the potential dilution upon conversion of the 1.75% Convertible Notes and/or offset 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
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. See Note 9 "Derivative Financial Instruments" of the Notes to Consolidated
Financial Statements included elsewhere in this Form 10-K for further discussion.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information 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.
37
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule
13a-15(e) or 15d-15(e), that are designed to ensure that information 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 information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding
required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives and the Company’s management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief
Financial Officer, the Company conducted an evaluation of the effectiveness 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 Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and
procedures were effective such that the information relating to the Company, including consolidated subsidiaries, 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 Officer, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule
13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance
regarding the fair and reliable preparation and presentation of our published financial statements. We continually evaluate our
system of internal control over financial reporting to determine if changes are appropriate based upon changes in our
operations or the business environment in which we operate.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on
the framework 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 effectiveness of controls, testing of the operating effectiveness of controls, and a conclusion on this evaluation. As
permitted under SEC guidance, management’s assessment of and conclusion regarding the design and effectiveness of
internal control over financial reporting excluded the internal control over financial reporting of the operations of businesses
acquired in 2024, which are described in Note 3 "Acquisitions" of the Notes to Consolidated Financial Statements included
elsewhere in this Form 10-K. Businesses acquired in 2024 represented approximately 8% of consolidated net sales for the
year ended December 31, 2024 and approximately 3% of consolidated total assets as of December 31, 2024. Based on our
assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2024.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, audited our internal control over
financial reporting as of December 31, 2024, as stated in their report in the section entitled “Report of Independent Registered
Public Accounting Firm” included elsewhere in this Form 10-K, which expresses an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2024.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting that occurred during the fourth quarter ended
December 31, 2024 or subsequent to the date the Company completed its evaluation, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
38
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
39
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors of the Company
The information required by this item with respect to directors is set forth in our definitive Proxy Statement for our 2025
Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A (the “2025 Proxy Statement”) under
the captions “Election of Directors” and “Delinquent Section 16(a) Reports,” which information is hereby incorporated herein
by reference.
Executive Officers of the Registrant
The information 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 2025 Proxy
Statement and is incorporated herein by reference.
Code of Ethics and Business Conduct
We have adopted a Code of Ethics and Business Conduct Policy applicable to all employees. Our Code of Ethics and
Business Conduct Policy is available on the Company’s web site at www.patrickind.com under “For Investors”. We intend to
post on our web site any substantive 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
upon written request directed to the Company’s Corporate Secretary at the Company’s address.
Corporate Governance
Information on our corporate governance practices is contained under the caption “Corporate Governance Highlights” in the
Company's 2025 Proxy Statement and incorporated herein by reference.
Insider Trading Policies and Procedures
We have adopted an Insider Trading Policy governing the purchase, sale and other disposition of our securities by directors,
officers, and employees that is designed to promote compliance with insider trading laws, rules and regulations, and
applicable listing standards, as well as procedures designed to further the foregoing purposes. In addition, it is our intent to
comply with applicable laws and regulations relating to the Company trading in its own securities.
A copy of our Insider Trading Policy is filed with this Annual Report on Form 10-K as Exhibit 19.1
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is set forth in our 2025 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 information required by this item is set forth in our 2025 Proxy Statement under the captions “Equity Compensation Plan
Information” and “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by
reference.
40
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is set forth in our 2025 Proxy Statement under the captions “Related Party
Transactions” and “Corporate Governance Highlights”, and is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is set forth in our 2025 Proxy Statement under the heading “Independent Public
Accountants,” and is incorporated herein by reference.
41
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
(1) The financial statements listed in the accompanying Index to the Financial Statements on page F-1 of
the separate financial section of this Report are incorporated herein by reference.
(3) The exhibits required to be filed as part of this Annual Report on Form 10-K are listed under (c) below.
(c)
Exhibits
Exhibit Number
Exhibits
3.1
Articles of Incorporation of Patrick Industries, Inc. (filed as Exhibit 3.1 to the Company’s
Form 10-K filed on March 30, 2010 and incorporated herein by reference).
3.2
Amendment to the Articles of Incorporation of Patrick Industries, Inc. dated June 5, 2018 (filed
as Exhibit 3.2 to the Company's Form 10-K filed on February 28, 2019 and incorporated herein
by reference).
3.3
Amended and Restated By-laws of Patrick Industries, Inc. (filed as Exhibit 3.1 to the
Company's Form 8-K filed on May 8, 2020 and incorporated herein by reference).
4.1
Indenture (including Form of Note), dated as of September 17, 2019, among Patrick Industries,
Inc., the guarantors from time to time party thereto and U.S. Bank, National Association, as
Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on September 18, 2019 and
incorporated herein by reference).
4.2
Indenture (including Form of Note), dated as of April 20, 2021, among Patrick Industries, Inc.,
the guarantors from time to time party thereto and U.S. Bank, National Association, as Trustee
(filed as Exhibit 4.1 to the Company's Form 8-K filed on April 26, 2021 and incorporated
herein by reference).
4.3
Indenture (including Form of Note) with respect to the Company's 1.75% Convertible Senior
Notes due 2028, dated as of December 13, 2021. between Patrick Industries, Inc. and U.S.
Bank National Association, as trustee. (filed as Exhibit 4.1 to the Company's Form 8-K filed on
December 13, 2021 and incorporated herein by reference)
4.4
Indenture, dated as of October 22, 2024, among Patrick Industries, Inc., the guarantors from
time to time party thereto and U.S. Bank Trust Company, National Association, as Trustee
(filed as Exhibit 4.1 to the Company's Form 8-K filed on October 28, 2024 and incorporated
herein by reference).
4.5
Supplemental Indenture, dated as of October 24, 2024, to the indenture dated as of October 22,
2024, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S.
Bank Trust Company, National Association, as Trustee (filed as Exhibit 4.2 to the Company's
Form 8-K filed on October 28, 2024 and incorporated herein by reference).
4.6
Indenture, dated as of October 24, 2024, to the indenture dated as of April 20, 2021, among
Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank Trust
Company, National Association, as Trustee (filed as Exhibit 4.3 to the Company's Form 8-K
filed on October 28, 2024 and incorporated herein by reference).
4.7
Indenture, dated as of October 24, 2024, to the indenture dated as of December 13, 2021,
among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank
Trust Company, National Association, as Trustee (filed as Exhibit 4.4 to the Company's Form
8-K filed on October 28, 2024 and incorporated herein by reference).
4.8**
Description of the Company’s common stock.
10.1
Patrick Industries, Inc. 2009 Omnibus Incentive Plan (filed as Appendix A to the Company’s
revised Definitive Proxy Statement on Schedule 14A filed on October 20, 2009 and
incorporated herein by reference).
10.2*
Form of Employment Agreement with Executive Officers (filed as Exhibit 10.2 to the
Company’s Form 10-K filed on March 30, 2010 and incorporated herein by reference).
10.3*
Form of Non-Qualified Stock Option Agreement (filed as Exhibit 10.3 to the Company’s Form
10-K filed on February 24, 2023 and incorporated herein by reference).
42
10.4*
Form of Officer and Employee Time-Based Restricted Share Award (filed as Exhibit 10.4 to
the Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference).
10.5*
Form of Officer and Employee Time-Based Restricted Share Award and Performance
Contingent Restricted Share Award (filed as exhibit 10.5 to the Company's Form 10-K filed on
February 24, 2023 and incorporated herein by reference).
10.6*
Form of Non-Employee Director Restricted Share Award (filed as Exhibit 10.6 to the
Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference).
10.7*
Form of Stock Appreciation Rights Agreement (filed as Exhibit 10.7 to the Company’s Form
10-K filed on February 24, 2023 and incorporated herein by reference).
10.8
Fifth Amended and Restated Credit Agreement dated October 24, 2024 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 filed on October 28,
2024 and incorporated herein by reference).
10.9
Base Convertible Bond Hedge Transaction Confirmation, 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 incorporated herein by reference)
10.10
Base Convertible Bond Hedge Transaction Confirmation, 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 filed on December 13, 2021 and incorporated herein
by reference)
10.11
Base Convertible Bond Hedge Transaction Confirmation, 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 filed on December 13, 2021 and incorporated herein
by reference)
10.12
Base Issuer Warrant Transaction Confirmation, 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 filed on December 13, 2021 and incorporated herein by reference)
10.13
Base Issuer Warrant Transaction Confirmation, 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 incorporated herein by reference)
10.14
Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between
Patrick Industries. Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.6 to
the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)
10.15
Additional Convertible Bond Hedge Transaction Confirmation, 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 incorporated herein by reference)
10.16
Additional Convertible Bond Hedge Transaction Confirmation, 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 filed on December 13, 2021 and incorporated herein
by reference)
10.17
Additional Convertible Bond Hedge Transaction Confirmation, 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 filed on December 13, 2021 and incorporated herein
by reference)
10.18
Additional Issuer Warrant Transaction Confirmation, 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
Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)
10.19
Additional Issuer Warrant Transaction Confirmation, 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 incorporated herein by
reference)
43
10.20
Additional Issuer Warrant Transaction Confirmation, 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 incorporated herein by
reference)
10.21*
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 incorporated herein by
reference)
10.22*
Employment Agreement, dated March 5, 2024, by and between Patrick Industries, Inc. and
Andrew C. Roeder (filed as Exhibit 10.1 to the Company's Form 8-K filed on March 5, 2024
and incorporated herein by reference)
19.1**
Insider Trading Policy
21**
Subsidiaries of the Registrant.
23.1**
Consent of Deloitte & Touche LLP.
31.1**
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive
Officer.
31.2**
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial
Officer.
32**
Certification pursuant to 18 U.S.C. Section 1350.
97**
Incentive Compensation Recovery Policy
XBRL Exhibits.
Interactive Data Files. The following 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 Definition 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 following financial statements from the Company’s Annual Report on Form
10-K for the year ended December 31, 2024 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.
*Management contract or compensatory plan or arrangement.
**Filed herewith.
All other financial statement schedules are omitted because they are not applicable or the required information is immaterial
or is shown in the Notes to Consolidated Financial Statements.
ITEM 16.
FORM 10-K SUMMARY
None.
44
SIGNATURES
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 duly authorized
PATRICK INDUSTRIES, INC.
Date: February 20, 2025
By: /s/ Andy L. Nemeth
Andy L. Nemeth
Chief Executive Officer
Pursuant to the Requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Andy L. Nemeth
Chairman of the Board
February 20, 2025
Andy L. Nemeth
Chief Executive Officer
(Principal Executive Officer)
/s/ Andrew C. Roeder
Executive Vice President - Finance,
February 20, 2025
Andrew C. Roeder
Chief Financial Officer, and Treasurer
(Principal Financial Officer)
/s/ Matthew S. Filer
Senior Vice President - Finance,
February 20, 2025
Matthew S. Filer
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Joseph M. Cerulli
Director
February 20, 2025
Joseph M. Cerulli
/s/ Todd M. Cleveland
Director
February 20, 2025
Todd M. Cleveland
/s/ John A. Forbes
Lead Independent Director
February 20, 2025
John A. Forbes
/s/ Michael A. Kitson
Director
February 20, 2025
Michael A. Kitson
/s/ Pamela R. Klyn
Director
February 20, 2025
Pamela R. Klyn
/s/ Derrick B. Mayes
Director
February 20, 2025
Derrick B. Mayes
/s/ Denis G. Suggs
Director
February 20, 2025
Denis G. Suggs
/s/ M. Scott Welch
Director
February 20, 2025
M. Scott Welch
45
PATRICK INDUSTRIES, INC.
Index to the Financial Statements
Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP (Firm ID No. 34)
F-2
Financial Statements:
Consolidated Statements of Income
F-5
Consolidated Statements of Comprehensive Income
F-6
Consolidated Balance Sheets
F-7
Consolidated Statements of Cash Flows
F-8
Consolidated Statements of Shareholders' Equity
F-9
Notes to Consolidated Financial Statements
F-10
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, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders'
equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively
referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of
December 31, 2024, 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 financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued
by COSO.
As described in the accompanying Management's Annual Report on Internal Control Over Financial Reporting, management
excluded from its assessment the internal control over financial reporting at the operations of businesses acquired in 2024,
which are described in Note 3, whose financial statements constitute less than 8% of consolidated net sales for the year ended
December 31, 2024 and approximately 3% of consolidated total assets as of December 31, 2024. Accordingly, our audit did
not include the internal control over financial reporting at these businesses.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
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
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures 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 financial reporting included obtaining
an understanding of internal control over financial 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 procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial 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
F-2
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 financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future 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 procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from 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, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial 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.
Acquisitions - Sportech - Customer Relationships and Trademark Intangible Assets - Refer to Note 3 to the financial
statements
Critical Audit Matter Description
The Company completed the acquisition of Sportech for approximately $319 million in January 2024. The Company
accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including a
customer relationships intangible asset and a trademark intangible asset of $152 million and $21 million, respectively.
Management estimated the fair value of the customer relationships intangible asset using the multi-period excess earnings
method and the fair value of the trademark intangible asset using the relief-from-royalty method, both such methods being
specific discounted cash flow methods. The fair value determination of these intangible assets required management to make
significant estimates and assumptions related to future cash flows, specifically revenue growth and profit margins, and the
selection of the discount rates and, specifically for the trademark intangible asset, the selection of the royalty rate.
We identified these intangible assets for Sportech as a critical audit matter because of the significant estimates and
assumptions management made to fair value these assets. This required a high degree of auditor judgment and an increased
extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the
reasonableness of management’s valuation methodologies, forecasts of future cash flows, specifically revenue growth and
profit margins, and the selection of the discount rates and, for the trademark intangible asset, the royalty rate.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation methodologies, the forecasts of future cash flows, specifically revenue growth
and profit margins, and the selection of the discount rates and trademark intangible asset royalty rate included the following,
among others:
•
We tested the effectiveness of controls over the valuation of the customer relationships and trademark intangible
assets, including management’s controls over the valuation methodologies, forecasts of future cash flows,
specifically revenue growth and profit margins, and selection of the discount rates and trademark intangible asset
royalty rate.
•
We assessed the reasonableness of management’s forecast of future cash flows, specifically revenue growth and
profit margins, by comparing the projections to historical results and certain peer companies.
•
With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation
methodologies, discount rates, and trademark intangible asset royalty rate by:
◦
Assessing whether the selected valuation methodologies align with generally accepted valuation
methodologies.
◦
Testing the source information underlying the determination of the discount rates and trademark intangible
asset royalty rate.
F-3
◦
Testing the mathematical accuracy of the calculations.
◦
Developing ranges of independent estimates and comparing those to the rates selected by management.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 2025
We have served as the Company's auditor since 2019.
F-4
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
($ in thousands, except per share data)
2024
2023
2022
NET SALES
$
3,715,683
$
3,468,045
$
4,881,872
Cost of goods sold
2,879,793
2,685,812
3,821,934
GROSS PROFIT
835,890
782,233
1,059,938
Operating Expenses:
Warehouse and delivery
155,821
143,921
163,026
Selling, general and administrative
325,754
299,418
327,513
Amortization of intangible assets
96,275
78,694
73,229
Total operating expenses
577,850
522,033
563,768
OPERATING INCOME
258,040
260,200
496,170
Interest expense, net
79,470
68,942
60,760
Income before income taxes
178,570
191,258
435,410
Income taxes
40,169
48,361
107,214
NET INCOME
$
138,401
$
142,897
$
328,196
BASIC EARNINGS PER COMMON SHARE (1)
$
4.25
$
4.43
$
9.88
DILUTED EARNINGS PER COMMON SHARE (1)
$
4.11
$
4.33
$
8.99
Weighted average shares outstanding - Basic (1)
32,568
32,278
33,210
Weighted average shares outstanding - Diluted (1)
33,699
33,038
36,707
(1)
Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant
Accounting Policies" for further details.
See accompanying Notes to Consolidated Financial Statements.
F-5
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
($ in thousands)
2024
2023
2022
NET INCOME
$
138,401
$
142,897
$
328,196
Other comprehensive income (loss), net of tax:
Change in unrealized gain on hedge derivatives
—
—
757
Foreign currency translation loss
(40)
(75)
(97)
Other
113
(229)
873
Total other comprehensive income (loss)
73
(304)
1,533
COMPREHENSIVE INCOME
$
138,474
$
142,593
$
329,729
See accompanying Notes to Consolidated Financial Statements.
F-6
PATRICK INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
($ in thousands)
2024
2023
ASSETS
Current Assets:
Cash and cash equivalents
$
33,561
$
11,409
Trade and other receivables, net
178,206
163,838
Inventories
551,617
510,133
Prepaid expenses and other
59,233
49,251
Total current assets
822,617
734,631
Property, plant and equipment, net
384,903
353,625
Operating lease right-of-use-assets
200,697
177,717
Goodwill
797,236
637,393
Intangible assets, net
802,889
651,153
Other non-current assets
12,612
7,929
TOTAL ASSETS
$
3,020,954
$
2,562,448
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt
$
6,250
$
7,500
Current operating lease liabilities
53,697
48,761
Accounts payable
187,915
140,524
Accrued liabilities
105,753
111,711
Total current liabilities
353,615
308,496
Long-term debt, less current maturities, net
1,311,684
1,018,356
Long-term operating lease liabilities
151,026
132,444
Deferred tax liabilities, net
61,346
46,724
Other long-term liabilities
14,917
11,091
TOTAL LIABILITIES
1,892,588
1,517,111
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; authorized 1,000,000 shares; none issued or outstanding
—
—
Common stock, no par value, 40,000,000 shares authorized, 33,567,048 and
33,240,912 issued and outstanding as of December 31, 2024 and 2023, respectively (1)
202,353
203,258
Accumulated other comprehensive loss
(926)
(999)
Retained earnings
926,939
843,078
TOTAL SHAREHOLDERS’ EQUITY
1,128,366
1,045,337
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
3,020,954
$
2,562,448
(1)
The prior year period reflects the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant
Accounting Policies" for further details.
See accompanying Notes to Consolidated Financial Statements.
F-7
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
($ in thousands)
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
138,401
$
142,897
$
328,196
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
166,545
144,543
130,757
Amortization of deferred debt financing costs
3,270
3,239
3,892
Stock-based compensation expense
16,775
19,429
21,751
Deferred income taxes
(6,481)
(591)
(9,349)
(Gain) loss on sale of property, plant and equipment
(237)
585
(5,560)
Loss on extinguishment of debt
2,549
—
—
Other
376
(325)
2,744
Change in operating assets and liabilities, net of business
acquisitions:
Trade and other receivables, net
10,847
8,923
26,056
Inventories
(1,863)
162,181
(11,896)
Prepaid expenses and other assets
(7,609)
(3,931)
20,123
Accounts payable, accrued liabilities and other
4,268
(68,278)
(94,976)
Net cash provided by operating activities
326,841
408,672
411,738
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment
(75,682)
(58,987)
(79,883)
Proceeds from sale of property, plant, and equipment
2,411
1,362
7,620
Business acquisitions, net of cash acquired
(411,747)
(25,859)
(248,899)
Purchase of intangible assets and other investing activities
(27,831)
(3,061)
(305)
Net cash used in investing activities
(512,849)
(86,545)
(321,467)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings
125,000
—
—
Term debt repayments
(130,938)
(7,500)
(7,500)
Borrowing on revolver
1,320,385
488,440
839,436
Repayments on revolver
(1,220,385)
(568,728)
(894,147)
Repayment of convertible notes
—
(172,500)
—
Proceeds from senior notes offering
500,000
—
—
Repayment of senior notes
(300,000)
—
—
Cash dividends paid to shareholders
(50,187)
(42,140)
(32,869)
Stock repurchases under buyback program
(4,661)
(18,808)
(77,117)
Taxes paid for share-based payment arrangements
(17,334)
(12,132)
(10,227)
Payment of deferred financing costs
(9,212)
—
(2,464)
Payment of contingent consideration from business acquisitions
(4,652)
(1,460)
(5,580)
Proceeds from exercise of common stock options
21
1,413
195
Other financing activities
123
(150)
—
Net cash provided by (used in) financing activities
208,160
(333,565)
(190,273)
Net increase (decrease) in cash and cash equivalents
22,152
(11,438)
(100,002)
Cash and cash equivalents at beginning of year
11,409
22,847
122,849
Cash and cash equivalents at end of year
$
33,561
$
11,409
$
22,847
See accompanying Notes to Consolidated Financial Statements.
F-8
PATRICK INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands)
Common
Stock
Additional
Paid-in-
Capital
Accumulated Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Balance at January 1, 2022
$
196,383
$
59,668
$
(2,228) $
513,734
$
767,557
Impact of adoption of ASU 2020-06
—
(59,668)
—
15,975
(43,693)
Net income
—
—
—
328,196
328,196
Dividends declared
—
—
—
(33,160)
(33,160)
Other comprehensive income, net of tax
—
—
1,533
—
1,533
Share repurchases under buyback program
(11,099)
—
—
(65,884)
(76,983)
Issuance of shares upon exercise of common stock options
195
—
—
—
195
Repurchase of shares for tax payments related to the vesting and exercise of
share-based grants
(10,227)
—
—
—
(10,227)
Stock-based compensation expense
21,751
—
—
—
21,751
Balance at December 31, 2022
$
197,003
$
—
$
(695)
$
758,861
$
955,169
Net income
—
—
—
142,897
142,897
Dividends declared
—
—
—
(42,327)
(42,327)
Other comprehensive loss, net of tax
—
—
(304)
—
(304)
Share repurchases under buyback program
(2,455)
—
—
(16,353)
(18,808)
Issuance of shares upon exercise of common stock options
1,413
—
—
—
1,413
Repurchase of shares for tax payments related to the vesting and exercise of
share-based grants
(12,132)
—
—
—
(12,132)
Stock-based compensation expense
19,429
—
—
—
19,429
Balance at December 31, 2023
$
203,258
$
—
$
(999)
$
843,078
$
1,045,337
Net income
—
—
—
138,401
138,401
Dividends declared
—
—
—
(50,246)
(50,246)
Other comprehensive income, net of tax
—
—
73
—
73
Stock repurchases under buyback program
(367)
—
—
(4,294)
(4,661)
Issuance of shares upon exercise of common stock options
21
—
—
—
21
Repurchase of shares for tax payments related to the vesting and exercise of
share-based grants
(17,334)
—
—
—
(17,334)
Stock-based compensation expense
16,775
—
—
—
16,775
Balance at December 31, 2024
$
202,353
$
—
$
(926)
$
926,939
$
1,128,366
See accompanying Notes to Consolidated Financial Statements.
F-9
PATRICK INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Patrick Industries, Inc. (“Patrick” or the “Company”) operations consist of the manufacture and distribution of component
products and materials for use primarily by the recreational vehicle (“RV”), marine, powersports, manufactured housing
(“MH”) and industrial markets for customers throughout the United States and Canada. As of December 31, 2024, the
Company maintained approximately 179 manufacturing plants and 47 distribution facilities located in 25 states with a small
presence in Mexico, China and Canada. Patrick operates in two business segments: Manufacturing and Distribution.
Reclassified Amounts
Certain amounts have been reclassified in prior years' financial statements to conform with current year presentation. These
reclassifications are immaterial to the overall financial statements.
Previously, our sales to the powersports end market were included in the Company’s marine end market sales. Effective with
the first quarter of 2024, powersports net sales are being reported separately after the January 2024 acquisition of Sportech,
LLC, as disclosed in Note 2 "Revenue Recognition".
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
subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect 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 for credit losses, excess and obsolete inventories, assets acquired and liabilities assumed in a business
combination, the valuation of estimated contingent consideration, deferred tax asset valuation allowances, and certain accrued
liabilities. Actual results could differ from the amounts reported.
Revenue Recognition
The Company is a major manufacturer and distributor of component products and materials serving original equipment
manufacturers and other customers in the RV, marine, powersports, MH, and industrial industries. Revenue is recognized
when or as control of the promised goods transfers to the Company's customers in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods. The Company’s contracts typically consist of a single
performance obligation to manufacture 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 for estimated volume discounts and rebates and other customer incentives. There are no material instances in
any period presented where variable consideration was constrained and not recorded at the initial time of sale.
Manufacturing segment revenue is recognized when control of the products transfers to the customer which is the point when
the customer gains the ability to direct the use of and obtain substantially all the remaining benefits from the asset, which is
generally upon delivery of goods, or upon 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 for performance to date with a reasonable margin, revenue is recognized over the contract term based on the cost-to-
F-10
cost method. However, the financial impact of these contracts is immaterial considering the short production cycles and
limited inventory days on hand.
Distribution segment revenue from product sales is recognized on a gross basis upon shipment or delivery of goods at which
point control transfers to the customer. The Company acts as a principal in such arrangements because it controls the
promised goods before delivery to the customer. The Company uses direct shipment arrangements with certain vendors and
suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses. The Company
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
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 from net sales.
The Company records freight billed to customers in net sales. The corresponding costs incurred for shipping and handling
related to these customer-billed freight costs are accounted for as costs to fulfill the contract and are included in warehouse
and delivery expenses.
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 significant financing 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 for 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 Company does not disclose information about the transaction price being allocated to the remaining performance
obligations at period end, as the Company does not have material contracts that have original expected durations of more than
one year.
Contract liabilities, representing upfront 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.
Contract assets, representing the Company’s rights to consideration for work completed but not billed (generally in
conjunction with contracts for which revenue is recognized over time), were immaterial in all periods presented.
Costs and Expenses
Cost of goods sold includes material costs, direct and indirect labor, depreciation, overhead expenses, inbound freight
charges, inspection costs, internal transfer costs, receiving costs, and other costs.
Warehouse and delivery expenses include salaries and wages, building rent and insurance, and other overhead costs related to
distribution operations and delivery costs related to the shipment of finished and distributed products to customers.
Stock Based Compensation
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 appreciation rights (“SARS”) awards as of the grant date by applying the Black-Scholes option-pricing model. The use
of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation
expense, including the expected option term, dividend yield, risk-free interest rate and volatility of the Company's common
stock. Expected volatilities take into consideration the historical volatility of the Company’s common stock. The expected
term of options and SARS represents the period of time that the options and SARS granted are expected to be outstanding
based on historical Company trends. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time
F-11
of grant for instruments of a similar term. New shares are issued upon exercise of options. Forfeitures of stock based
compensation are recognized as incurred.
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 available for diluted shares (calculated
as net income plus the after-tax effect of interest on potentially dilutive convertible notes, where applicable) by the weighted-
average number of common shares outstanding, plus the weighted-average impact of potentially dilutive convertible notes,
plus the dilutive effect of stock options, SARS, and certain restricted stock awards (collectively, “Common Stock
Equivalents”). The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the
average market price for the period. Common Stock Equivalents are not included in the computation of diluted earnings per
common share if their effect would be anti-dilutive.
On November 18, 2024, the Board of Directors declared a three-for-two stock split of the Company's common stock, to be
effected in the form of a stock dividend. Shareholders of record as of the close of business on November 29, 2024 received
one additional share for every two shares held which was paid on December 13, 2024. The Company's stock began trading on
a post-split basis on December 16, 2024. Cash paid in lieu of fractional shares was immaterial. All share and per share
information has been updated on a retrospective basis for all periods presented. See Note 13 "Earnings Per Common Share"
for the calculation of both basic and diluted earnings per common share.
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. The Company held no cash equivalents as of December 31, 2024 and 2023, respectively.
Trade and Other Receivables
Trade receivables consist primarily of amounts due to the Company from its normal business activities. In assessing the
carrying value of its trade receivables, the Company estimates the recoverability by making assumptions based on historical
and forward-looking factors, such as historical and anticipated customer performance, current overall and industry-specific
economic conditions, historical write-off and collection experience, the level of past-due amounts, and specific risks
identified in the trade receivables portfolio. Other receivables consist of employee advances, insurance claims, amounts owed
from vendors pertaining to importation costs, and other miscellaneous items.
As of December 31,
($ in thousands)
2024
2023
Trade receivables
$
149,146
$
136,796
Other receivables
32,768
31,046
Allowance for credit losses
(3,708)
(4,004)
Total
$
178,206
$
163,838
Inventories
Inventories are generally stated at the lower of cost (first-in, first-out method or, for certain inventories, average costing
method) and net realizable value. Based on the inventory aging and other considerations for realizable value, the Company
writes down the carrying value to net realizable value where appropriate. The Company reviews inventory on-hand and
records provisions for excess and obsolete inventory based on current assessments of future demand, market conditions, and
related management initiatives. The cost of manufactured inventories includes raw materials, inbound freight, labor and
overhead. The Company’s distribution inventories include the cost of materials purchased for resale and inbound freight.
F-12
Prepaid Expenses and Other
As of December 31,
($ in thousands)
2024
2023
Vendor rebates receivable
$
9,877
$
9,303
Prepaid expenses
31,543
22,868
Vendor and other deposits
14,503
8,211
Prepaid income taxes
3,310
8,869
Total
$
59,233
$
49,251
Property, Plant and Equipment
The costs of major improvements that materially extend the useful life of property are capitalized. Expenditures for repairs
and maintenance are charged to expense as incurred. Depreciation is determined based on a straight-line method over the
assets' estimated useful lives. Leasehold improvements are amortized over the lesser of their useful lives or the related lease
term.
Goodwill and Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized but are subject to an annual impairment test based on their
estimated fair value. The Company reviews goodwill and indefinite-lived intangible assets for impairment in the fourth
quarter, or more frequently, if events or changes in circumstances indicate the assets might be impaired. The impairment test
was performed on September 30, 2024.
In conducting its impairment testing, the Company estimates the fair value of our reporting units using both an income and
market based approach and the fair value of our indefinite-lived intangible assets using an income based approach. The
market approach includes a comparison of multiples of earnings before interest, taxes, depreciation and amortization for the
reporting units to similar businesses or guideline companies whose securities are actively traded in public markets. The
income approach calculates the present value of expected cash flows to determine the estimated fair value of our reporting
units or indefinite-lived intangible assets. Additionally, the income approach requires us to estimate future cash flows, the
timing of these cash flows, 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 future cash flows. Estimated royalty rates applied to projected revenues
are based on comparable industry studies and consideration of operating margins. The assumptions we use to estimate future
cash flows are consistent with the assumptions that our reporting units use for internal planning purposes. When calculating
the present value of future cash flows under the income approach, we take into consideration multiple variables, including
forecasted sales volumes and operating income, current industry and economic conditions, and historical results.
If we determine that the estimated fair value of each reporting unit or indefinite-lived intangible asset exceeds its carrying
amount, the reporting unit's goodwill or indefinite-lived intangible asset is not impaired. Our fourth quarter 2024 goodwill
impairment test concluded that the fair values of each of our reporting units exceeded their carrying values. Our 2024
indefinite-lived intangibles test also concluded that the fair values of these intangibles exceeded their respective carrying
values.
Long-Lived Assets
When events or conditions warrant, the Company evaluates the recoverability of long-lived assets other than goodwill and
indefinite-lived intangible assets, which includes property, plant and equipment, finite-lived intangible assets, and lease right-
of-use assets, and considers whether these assets are impaired. The Company assesses the recoverability of these assets based
upon several factors, including management's intention with respect to the assets and their projected future undiscounted cash
flows. If projected undiscounted cash flows are less than the carrying amount of the assets, the Company adjusts the carrying
amounts of such assets to their estimated fair 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 inability to achieve previously projected revenue growth and
could lead to a required assessment of the recoverability of the Company’s long-lived assets, which may subsequently result
in an impairment charge.
F-13
Finite-lived intangible assets are amortized on a straight-line basis over their useful lives, as detailed further in Note 6
"Goodwill and Intangible Assets".
Income Taxes
Income tax expense is calculated based on statutory tax rates of the federal, state, and international jurisdictions in which the
Company operates and income earned or apportioned to each of these respective jurisdictions, as well as any additional tax
planning available 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 differences is reported as deferred income taxes.
Deferred taxes are provided on an asset and liability method whereby deferred taxes are recognized based on temporary
differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a
valuation allowance when it is more likely than not that some portion or all of the deferred tax assets may not be realized.
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken or expected
to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in
income tax expense.
Leases
The Company determines whether an arrangement is a lease at inception. For leases where the Company is the lessee, a lease
liability and a right-of-use asset are recognized for all leases, with the exception of short-term leases with terms of twelve
months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease, and is
measured as the present value of the lease payments. As the rate implicit in the lease is usually not known at lease
commencement, the Company uses its incremental borrowing rate to discount the lease obligation. The Company uses its best
judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay
to borrow on a collateralized basis over a similar term to the lease payments in a similar currency. The right-of-use asset
represents the lessee’s right to use a specified asset for the lease term, and is measured at the lease liability amount, adjusted
for lease prepayment, lease incentives received and the Company’s initial direct costs. Additionally, the Company has lease
agreements containing lease and non-lease components which are accounted for as a single lease component. See Note 14
"Leases" for additional information.
Recently Issued Accounting Pronouncements
Adoption of New Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures". This ASU updates reportable
segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly
provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit
or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an
explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance
and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and
interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied
retrospectively to all prior periods presented in the financial statements. The Company adopted the ASU during the year
ended December 31, 2024 and applied the requirements for the fiscal year ended December 31, 2024 on a retrospective basis
to all periods presented. The Company will begin to apply the disclosure requirements in interim periods beginning in 2025.
The adoption of this guidance did not have a significant impact on Patrick’s consolidated financial statements. See Note 17
"Segment Reporting" for further detail.
Accounting Standards Not Yet Adopted
In November 2024, the FASB" issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in this
update require public business entities to disclose, on an annual and interim basis, disaggregated information about certain
income statement expense line items in the notes to the financial statements. Public business entities are required to apply the
guidance prospectively or retrospectively. This ASU is effective for fiscal years beginning after December 15, 2026 and
interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is
F-14
currently evaluating the effects that the adoption of ASU 2024-03 will have on the Company's consolidated financial
statements.
In November 2024, the FASB issued ASU 2024-04, "Debt - Debt with Conversion and Other Options (Subtopic 470-20):
Induced Conversions of Convertible Debt Instruments". The amendments in this update are intended to clarify disclosure
requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced
conversions rather than as debt extinguishments. This ASU is effective for annual periods beginning after December 15,
2025, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating
the effects that the adoption of ASU 2024-04 will have on the Company's consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures".
This ASU establishes 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
information in the rate reconciliation. They must also further disaggregate income taxes paid. The new standard is effective
for fiscal years beginning after December 15, 2024, with retrospective application permitted. The Company is currently
evaluating this guidance to determine the impact on its disclosures; however, adoption will not impact our consolidated
financial statements.
2.
REVENUE RECOGNITION
In the following table, revenue from contracts with customers, is disaggregated by market type and by reportable segment,
consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected
by economic factors:
Year Ended December 31, 2024
($ in thousands)
Manufacturing
Distribution
Total
Market type:
Recreational Vehicle
$
1,121,128
$
504,083
$
1,625,211
Marine
530,828
39,896
570,724
Powersports
338,904
13,329
352,233
Manufactured Housing
300,689
381,401
682,090
Industrial
449,685
35,740
485,425
Total
$
2,741,234
$
974,449
$
3,715,683
Year Ended December 31, 2023
($ in thousands)
Manufacturing
Distribution
Total
Market type:
Recreational Vehicle
$
1,018,003
$
485,339
$
1,503,342
Marine
743,826
38,749
782,575
Powersports
109,362
12,592
121,954
Manufactured Housing
258,551
309,659
568,210
Industrial
457,041
34,923
491,964
Total
$
2,586,783
$
881,262
$
3,468,045
F-15
Year Ended December 31, 2022
($ in thousands)
Manufacturing
Distribution
Total
Market type:
Recreational Vehicle
$
1,777,584
$
815,478
$
2,593,062
Marine
868,996
44,515
913,511
Powersports
89,977
13,024
103,001
Manufactured Housing
344,983
359,618
704,601
Industrial
522,226
45,471
567,697
Total
$
3,603,766
$
1,278,106
$
4,881,872
3.
ACQUISITIONS
General
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 meeting the definition of a
business combination 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 assets acquired is recorded as goodwill, which generally represents the
combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational
talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth
and net income.
The Company completed the acquisitions representing business combinations discussed below during the years ended
December 31, 2024, 2023 and 2022. The acquisitions were funded through cash on hand or borrowings under the Company’s
credit facility 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 liabilities assumed in the
individual acquisitions were recorded on the Company’s consolidated balance sheet at their estimated fair values as of the
respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair
value of acquired assets and liabilities within a one-year measurement period. For those acquisitions where the purchase price
allocation is provisional, which includes certain acquisitions completed in 2024, the Company is still in the process of
finalizing the fair values of acquired intangible assets and fixed assets.
For the years ended December 31, 2024, 2023 and 2022, revenue of approximately $295.7 million, $17.7 million and $121.8
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, 2024, 2023 and 2022, operating income of approximately $47.2 million, $1.0 million and
$19.4 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 2024 were $5.0 million. Acquisition-related costs
associated with the businesses acquired in 2023 and 2022 were immaterial in each respective year.
Contingent Consideration
In connection with certain acquisitions, the Company is required to pay additional cash consideration to the sellers if certain
financial results of the acquired businesses are achieved. The Company records a liability for the estimated fair value of the
contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of
the expected future cash flows and the probability of future payments at the date of acquisition.
The following table provides a reconciliation of the beginning and ending aggregate fair values of the contingent
consideration:
F-16
Year Ended December 31,
($ in thousands)
2024
2023
Balance at January 1
$
8,510
$
9,213
Additions
2,030
3,590
Fair value adjustments
(1,900)
917
Settlements
(5,032)
(5,210)
Balance at December 31
$
3,608
$
8,510
The following table shows the balance sheet location of the fair value of contingent consideration and the maximum amount
of contingent consideration payments the Company may be subject to:
As of December 31,
($ in thousands)
2024
2023
Accrued liabilities
$
1,665
$
7,500
Other long-term liabilities
1,943
1,010
Total fair value of contingent consideration
$
3,608
$
8,510
Maximum amount of contingent consideration
$
8,618
$
8,510
2024 Acquisitions
The Company completed seven acquisitions in the year ended December 31, 2024, including the following previously
announced acquisitions (collectively, the "2024 Acquisitions"):
Company
Segment
Description
Sportech, LLC ("Sportech")
Manufacturing
Leading designer and manufacturer of high-value, complex component
solutions sold to powersports original equipment manufacturers
("OEMs"), adjacent market OEMs and the aftermarket, including
integrated door systems, roofs, canopies, bumpers, windshields, fender
flares and cowls, based in Elk River, Minnesota, acquired in January
2024.
ICON Direct LLC doing
business as RecPro
("RecPro")
Distribution
Leading e-commerce business and aftermarket platform specializing in
creating and marketing component products, systems, and solutions for
the RV and marine end markets, based in Bristol, Indiana, acquired in
September 2024
Inclusive of five acquisitions not discussed above, total cash consideration for the 2024 Acquisitions was approximately
$411.7 million, plus working capital holdbacks and contingent consideration over a three-year period based on future
performance in connection with certain acquisitions. The preliminary purchase 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 finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in 2024 related
to the 2024 Acquisitions were immaterial.
2023 Acquisitions
The Company completed three acquisitions in the year ended December 31, 2023, including the following previously
announced acquisition (collectively, the "2023 Acquisitions"):
Company
Segment
Description
BTI Transport
Distribution
Provider of transportation and logistics services to marine original
equipment manufacturers ("OEMs") and dealers, based in Elkhart,
Indiana, acquired in April 2023. The acquired business operates under
the Patrick Marine Transport brand.
F-17
Inclusive of two acquisitions not discussed above, total cash consideration for the 2023 Acquisitions was approximately
$26.3 million, plus contingent consideration over a two-year period based on future performance in connection with certain
acquisitions. Purchase price allocations and all valuation activities in connection with the 2023 Acquisitions have been
finalized. Changes to preliminary purchase accounting estimates recorded in 2024 related to the 2023 Acquisitions were
immaterial and relate primarily to the valuation of intangible and fixed assets.
2022 Acquisitions
The Company completed five acquisitions in the year ended December 31, 2022, including the following three previously
announced acquisitions (collectively, the "2022 Acquisitions"):
Company
Segment
Description
Rockford Corporation
Manufacturing
Designer and manufacturer of audio systems and components through its
brand Rockford Fosgate®, primarily serving the powersports and
automotive aftermarkets, based in Tempe, Arizona, acquired in March
2022.
Diamondback Towers, LLC
Manufacturing
Manufacturer of wakeboard/ski towers and accessories for marine
OEMs, based in Cocoa, Florida, acquired in May 2022.
Transhield
Manufacturing
Designer and manufacturer of customized and proprietary protection
solutions for the marine, military and industrial markets, including
covers and shrinkable packaging, to protect equipment during transport
and storage, based in Elkhart, Indiana, acquired in November 2022.
Inclusive of two acquisitions not discussed above, total cash consideration for the 2022 Acquisitions was approximately
$248.1 million, plus contingent consideration over a one to two-year period based on future performance in connection with
certain acquisitions. Purchase price allocations and all valuation activities in connection with the 2022 Acquisitions have
been finalized.
Pro Forma Information (Unaudited)
The following pro forma information assumes the 2024 Acquisitions and 2023 Acquisitions occurred as of the beginning of
the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of each
of the 2024 Acquisitions and 2023 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 information includes financing and interest expense charges based on the actual 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 information includes incremental amortization expense, net of tax related to intangible assets
acquired of $3.7 million and $14.9 million for the years ended December 31, 2024 and 2023, respectively, in connection with
the acquisitions as if they occurred as of the beginning of the year immediately preceding each such acquisition.
Year Ended December 31,
($ in thousands, except per share data)
2024
2023
Net sales
$
3,801,996
$
3,841,655
Net income
$
145,102
$
152,117
Basic earnings per common share (1)
$
4.46
$
4.71
Diluted earnings per common share (1)
$
4.31
$
4.60
(1)
The prior year period reflects the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant
Accounting Policies" for further details.
The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of
operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended
to be a projection of future results.
F-18
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2024, 2023, and 2022 Acquisitions:
2024 Acquisitions
2023
Acquisitions
2022 Acquisitions
($ in thousands)
Sportech
All Others
Total
Acquisition A
Acquisition B
All Others
Total
Consideration:
Cash, net of cash acquired
$
319,073
$
92,631
$
411,704
$
26,294
$
132,557
$
94,705
$
20,824
$
248,086
Working capital holdback and other, net
—
4,201
4,201
—
—
—
—
—
Contingent consideration (1)
—
2,030
2,030
1,600
—
—
1,840
1,840
Total consideration
$
319,073
$
98,862
$
417,935
$
27,894
$
132,557
$
94,705
$
22,664
$
249,926
Assets Acquired:
Trade receivables
$
21,588
$
2,258
$
23,846
$
1,293
$
20,640
$
4,880
$
905
$
26,425
Inventories
20,611
19,010
39,621
4,430
32,744
8,732
2,352
43,828
Prepaid expenses & other
1,766
4,139
5,905
105
1,325
164
127
1,616
Property, plant & equipment
18,766
7,083
25,849
8,165
4,681
8,086
1,464
14,231
Operating lease right-of-use assets
15,096
1,283
16,379
1,044
2,917
1,435
599
4,951
Identifiable intangible assets:
Customer relationships
152,000
17,560
169,560
10,075
58,000
30,970
7,055
96,025
Non-compete agreements
2,000
2,375
4,375
270
500
—
310
810
Patents
17,500
600
18,100
—
7,500
9,500
—
17,000
Trademarks
20,500
8,000
28,500
—
17,000
8,080
1,310
26,390
Liabilities Assumed:
Current portion of operating lease
obligations
(1,437)
(585)
(2,022)
(262)
(512)
(289)
(273)
(1,074)
Accounts payable & accrued liabilities
(32,398)
(4,068)
(36,466)
(514)
(24,521)
(3,336)
(1,279)
(29,136)
Operating lease obligations
(13,658)
(699)
(14,357)
(781)
(2,405)
(1,146)
(326)
(3,877)
Deferred tax liabilities
(21,288)
—
(21,288)
—
(19,930)
(12,684)
—
(32,614)
Total fair value of net assets acquired
201,046
56,956
258,002
23,825
97,939
54,392
12,244
164,575
Goodwill (2)
118,027
41,906
159,933
5,814
34,618
40,313
10,420
85,351
Bargain purchase gain
—
—
—
(1,745)
—
—
—
—
$
319,073
$
98,862
$
417,935
$
27,894
$
132,557
$
94,705
$
22,664
$
249,926
(1)
These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions.
(2)
Goodwill is tax-deductible for the 2024 Acquisitions, except for Sportech which is only partially tax-deductible, for the 2023 Acquisitions, and for the 2022 Acquisitions, except Acquisition A and
Acquisition B (totaling approximately $74.9 million).
F-19
We estimate the value of acquired property, plant, and equipment using a combination of the income, cost, and market
approaches, such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of
the acquired businesses.
We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation of the
income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete
agreements are valued using a discounted cash flow approach, which is a variation of the income approach, with and without
the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty
method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.
The estimated useful life for customer relationships is 10 years. The estimated useful life for non-compete agreements is 5
years. The weighted average estimated useful life for patents is 13 years, ranging from 10 to 18 years. Trademarks have an
indefinite useful life.
4.
INVENTORIES
As of December 31,
($ in thousands)
2024
2023
Raw materials
$
292,730
$
269,786
Work in process
18,157
16,596
Finished goods
103,318
107,675
Less: reserve for inventory excess and obsolescence
(16,456)
(15,990)
Total manufactured goods, net
397,749
378,067
Materials purchased for resale (distribution products)
161,492
140,147
Less: reserve for inventory excess and obsolescence
(7,624)
(8,081)
Total materials purchased for resale (distribution products), net
153,868
132,066
Total inventories
$
551,617
$
510,133
5.
PROPERTY, PLANT AND EQUIPMENT
Estimated Useful
Lives (years)
As of December 31,
($ in thousands)
2024
2023
Land and improvements
$
26,512
$
19,502
Building and improvements
30
85,629
85,941
Machinery and equipment
3-7
545,791
470,689
Capitalized software
3
20,159
14,331
Transportation equipment
5
24,788
21,900
Leasehold improvements (1)
41,378
33,736
Property, plant and equipment, gross
744,257
646,099
Less: accumulated depreciation
(359,354)
(292,474)
Property, plant and equipment, net
$
384,903
$
353,625
(1)
Leasehold improvements are amortized over the shorter of the useful life of those leasehold improvements and the remaining life of the lease term.
Total depreciation expense for property, plant and equipment for the years ended December 31, 2024, 2023, and 2022 was
$70.2 million, $65.8 million and $57.5 million, respectively.
Accrued capital expenditures were approximately $7.3 million, $2.1 million and $1.7 million for the years ended December
31, 2024, 2023, and 2022, respectively.
F-20
6.
GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023 by segment are as follows:
($ in thousands)
Manufacturing
Distribution
Total
Balance at January 1, 2023
$
558,362
$
70,901
$
629,263
Acquisitions
—
5,905
5,905
Adjustment to prior year preliminary purchase price allocation
2,008
217
2,225
Balance at December 31, 2023
$
560,370
$
77,023
$
637,393
Acquisitions
119,859
40,074
159,933
Adjustment to prior year preliminary purchase price allocation
17
(107)
(90)
Balance at December 31, 2024
$
680,246
$
116,990
$
797,236
As of December 31, 2024 and 2023, accumulated impairment of goodwill in the Manufacturing segment was $27.4 million.
Intangible assets, net consist of the following:
As of December 31,
($ in thousands)
2024
2023
Customer relationships
$
924,720
$
729,664
Non-compete agreements
25,776
21,561
Patents
89,641
69,401
Trademarks
225,527
197,027
Intangible assets, gross
1,265,664
1,017,653
Less: accumulated amortization:
Customer relationships
(419,358)
(332,220)
Non-compete agreements
(20,065)
(18,322)
Patents
(23,352)
(15,958)
Intangible assets, net
$
802,889
$
651,153
Changes in the carrying value of intangible assets for the years ended December 31, 2024 and 2023 by segment are as
follows:
($ in thousands)
Manufacturing
Distribution
Total
Balance at January 1, 2023
$
622,647
$
97,583
$
720,230
Additions (1)
3,061
11,000
14,061
Amortization
(67,645)
(11,049)
(78,694)
Adjustment to prior year preliminary purchase price allocation
(4,360)
(84)
(4,444)
Balance at December 31, 2023
$
553,703
$
97,450
$
651,153
Additions (1)
199,966
48,400
248,366
Amortization
(82,538)
(13,737)
(96,275)
Adjustment to prior year preliminary purchase price allocation
—
(355)
(355)
Balance at December 31, 2024
$
671,131
$
131,758
$
802,889
F-21
(1)
Includes intangible assets acquired that did not meet the definition of a business combination of $27.8 million and $3.4 million for the years ended
December 31, 2024 and 2023, respectively.
Estimated amortization expense for the years ending December 31, 2025 through 2029 is presented below:
($ in thousands)
2025
$
90,696
2026
$
84,924
2027
$
78,292
2028
$
65,787
2029
$
61,712
7.
DEBT
The following table presents a summary of total debt outstanding:
As of December 31,
($ in thousands)
2024
2023
Long-term debt:
Term loan due 2027
$
—
$
129,375
Term loan due 2029
123,438
—
Revolver due 2029
100,000
—
7.50% senior notes due 2027
—
300,000
1.75% convertible notes due 2028
258,750
258,750
4.75% senior notes due 2029
350,000
350,000
6.375% senior notes due 2032
500,000
—
Total debt
1,332,188
1,038,125
Less: convertible notes debt discount, net
(3,915)
(4,917)
Less: term loan deferred financing costs, net
(543)
(548)
Less: senior notes deferred financing costs, net
(9,796)
(6,804)
Less: current maturities of long-term debt
(6,250)
(7,500)
Total long-term debt, less current maturities, net
$
1,311,684
$
1,018,356
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 facility was
increased to $925 million from $700 million and the maturity date was extended to August 11, 2027 from April 20, 2026.
Following this amendment, the senior credit facility under the 2021 Credit Agreement was comprised of a $775 million
revolving credit facility (the "Revolver due 2027") and the remaining balance of the $150 million term loan (the "Term Loan
due 2027" and together with the Revolver due 2027, the "2021 Credit Facility"). The Company recorded a $0.3 million write-
off of deferred financing 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 for borrowings under the 2021 Credit Agreement transitioned to a Secured Overnight Financing Rate ("SOFR") based
option from a London Inter-Bank Offered Rate ("LIBOR") based option. During 2024, the Company entered into the Fifth
Amended and Restated Credit Agreement (the “2024 Credit Agreement”), and used borrowings under the 2024 Credit
Facility (as defined below), together with a portion of the proceeds from the issuance of the 6.375% Senior Notes (as defined
below), to repay all borrowings under its existing 2021 Credit Facility.
F-22
2024 Credit Facility
On October 24, 2024, the Company entered into the 2024 Credit Agreement, under which the Company's credit facility was
increased to $1.0 billion from $925.0 million and the maturity date was extended to October 24, 2029 from August 11, 2027.
The credit facility under the 2024 Credit Agreement (the "2024 Credit Facility") is comprised of an $875.0 million revolving
credit facility (the "Revolver due 2029") and a $125.0 million term loan (the "Term Loan due 2029"). Pursuant to the terms of
the 2024 Credit Agreement, the interest rate for borrowings under the Revolver due 2029 and the Term Loan due 2029 is
either the Prime Rate or SOFR plus a margin, which ranges from 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. The interest rate for incremental
borrowings as of December 31, 2024 was SOFR plus 1.75% (or 6.11%) for the SOFR-based option. The Company is
required to pay fees on committed but unused portions of the Revolver due 2029, which range from 0.15% to 0.225%. The
fee payable on committed but unused portions of the Revolver due 2029 was 0.225% as of December 31, 2024. The Term
Loan due 2029 requires quarterly installments of $1,562,500 the last business day of each March, June, September and
December, commencing December 31, 2024.
Borrowings under the 2024 Credit Facility are secured by substantially all personal property assets of the Company and any
domestic subsidiary guarantors.
Under the terms of the 2024 Credit Agreement, the covenant requiring the Company to have a minimum consolidated fixed
charge coverage ratio of 1.5 to 1.0 was replaced with a covenant requiring the Company to have a consolidated interest
coverage ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the 2024 Credit
Agreement) of not less than 3.0 to 1.0 tested on a quarterly basis. In addition, the 2024 Credit Agreement continues to have a
covenant requiring the Company to have a maximum consolidated secured net leverage ratio of 2.75 to 1.00 (increasing to
3.25 to 1.00 in certain circumstances).
The Company determined that the amended terms of the 2024 Credit Agreement were not substantially different from the
terms of the Company’s 2021 Credit Agreement prior to the amendment. Accordingly, debt modification accounting
treatment was applied and the related impacts were immaterial. The amount of deferred financing costs write-off as a result of
the amendment of the 2021 Credit Facility was immaterial in the Company's consolidated statements of income for the year
ended December 31, 2024.
6.375% Senior Notes due 2032
On October 22, 2024, the Company issued $500.0 million aggregate principal amount of 6.375% Senior Notes due 2032 (the
“6.375% Senior Notes”) in a transaction pursuant to Rule 144A under the Securities Act. The proceeds from the issuance,
together with borrowings under the 2024 Credit Facility, were utilized to redeem all of the Company's $300.0 million
aggregate principal amount of 7.50% Senior Notes due 2027 (the “7.50% Senior Notes”) on November 7, 2024, to repay all
borrowings under the 2021 Credit Facility and to pay fees and expenses in connection with the foregoing. The 6.375% Senior
Notes will mature on November 1, 2032. Interest on the 6.375% Senior Notes is payable semi-annually in cash in arrears on
May 1 and November 1 of each year, beginning on May 1, 2025. The effective interest rate on the 6.375% Senior Notes,
which includes debt issuance costs, is approximately 6.60%. In connection with the issuance of the 6.375% Senior Notes, the
Company incurred and capitalized as a reduction of the principal amount of the 6.375% Senior Notes approximately
$6.9 million in deferred financing costs which are being amortized using the effective interest rate over the term of the
6.375% Senior Notes.
The 6.375% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s
subsidiaries that guarantee the obligations of the Company under the 2024 Credit Facility. If the Company experiences
specific kinds of changes of control, the Company must offer to repurchase all of the 6.375% Senior Notes (unless otherwise
redeemed) at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest. The
Company may redeem the 6.375% Senior Notes, in whole or in part, at any time (a) prior to November 1, 2027, at a price
equal to 100% of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued
and unpaid interest and (b) on or after November 1, 2027 at specified redemption prices set forth in the indenture, plus
accrued and unpaid interest. In addition, prior to November 1, 2027, the Company may redeem, in one or more transactions,
up to an aggregate of 40% of the original principal amount of the 6.375% Senior Notes at a redemption price equal to
106.375% of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity
offerings.
F-23
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 due
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 flows 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 of 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,
2024.
The net proceeds from the issuance of the 1.75% Convertible Notes were approximately $249.7 million, after deducting the
initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net
cost of the 1.75% Convertible Note Hedge Transactions and the 1.75% Convertible Note Warrant Transactions (each as
defined herein) described in Note 9 "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 during certain periods, and thereafter until the close of business on the
second scheduled trading day immediately preceding the maturity date. The Company will satisfy any conversion by paying
cash up to the aggregate principal amount of the 1.75% Convertible Notes to be converted and by paying or delivering, as the
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
amount of the 1.75% Convertible Notes being converted. The initial conversion rate for the 1.75% Convertible Notes is
14.9831 shares of the Company's common stock per $1,000 principal amount of the 1.75% Convertible Notes (or 3,876,867
shares in the aggregate) and is equal to an initial conversion price of approximately $66.74 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 2024 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 following circumstances: (i) during 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
applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the
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 specified distributions or corporate events.
As of December 31, 2024, the conditional conversion feature of the 1.75% Convertible Notes related to the price of our
common stock equaling or exceeding 130% of the conversion price was triggered. As a result, the 1.75% Convertible Notes
are convertible, in whole or in part, at the option of the holders from January 1, 2025 to March 31, 2025. Whether the 1.75%
Convertible Notes will be convertible in subsequent periods will depend on the continued satisfaction of this condition or
another conversion condition in the future. The 1.75% Convertible Notes were also convertible from October 1, 2024 to
December 31, 2024 based on satisfying this condition in the prior calendar quarter. No 1.75% Convertible Notes were
converted during the period from October 1, 2024 to December 31, 2024. The Company has the intent and ability to utilize
available borrowing capacity under the Revolver due 2029 to satisfy any cash conversion obligations that it may have, should
holders choose to exercise their conversion rights during the period noted above.
4.75% Senior Notes due 2029
In April 2021, the Company issued $350.0 million aggregate principal amount of 4.75% Senior Notes due 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
F-24
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 approximately $5.1 million in deferred financing costs which are being
amortized using the effective interest rate over the term of the 4.75% Senior Notes.
The 4.75% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s
subsidiaries that guarantee the obligations of the Company under the 2024 Credit Facility. If the Company experiences
specific kinds of changes of control, the Company must offer 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 accrued 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
100% of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and
unpaid interest and (b) on or after May 1, 2024 at specified redemption prices set forth in the indenture, plus accrued and
unpaid interest. In addition, prior to May 1, 2024, the Company may redeem, in one or more transactions, up to an aggregate
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 accrued and unpaid interest, with the net cash proceeds of one or more equity offerings.
7.50% Senior Notes due 2027
In September 2019, the Company issued $300.0 million aggregate principal amount of 7.50% Senior Notes due 2027 (the
“7.50% Senior Notes”). As noted above, the Company utilized proceeds from the issuance the 6.375% Senior Notes to
redeem at par all of its outstanding $300 million aggregate principal amount of its 7.50% Senior Notes. The Company
recorded a $2.5 million write-off of deferred financing costs as a result of the redemption of the 7.50% Senior Notes which is
included in "Selling, general and administrative" in the Company's consolidated statement of income for the year ended
December 31, 2024.
Debt Maturities
As of December 31, 2024, the aggregate maturities of total long-term debt for the next five fiscal years and thereafter are as
follows (in thousands):
2025
$
6,250
2026
6,250
2027
6,250
2028
265,000
2029
548,438
Thereafter
500,000
Total
$
1,332,188
Letters of credit totaling $5.0 million and $6.9 million were outstanding as of December 31, 2024 and 2023, respectively, that
exist to meet credit requirements for the Company’s insurance providers.
Cash paid for interest for the years ended December 31, 2024, 2023 and 2022 was $75.9 million, $66.3 million and $56.9
million, respectively.
8.
FAIR VALUE AND FINANCIAL INSTRUMENTS
The Company accounts for certain assets and liabilities at fair value. The fair values are separated into three broad levels
(Levels 1, 2 and 3) based on the assessment of the availability of observable market data and the significance of non-
observable data used to determine fair value. Each fair value measurement must be assigned to a level corresponding to the
lowest level input that is significant to the fair value measurement in its entirety. The three levels are as follows:
•
Level 1 inputs, which are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
reporting entity has the ability to access at the measurement date.
F-25
•
Level 2 inputs, which are inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must
be observable for substantially the full term of the asset or liability.
•
Level 3 inputs, which are unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s
own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are
developed based on the best information available in the circumstances (which might include the reporting entity’s
own data).
The following table presents fair values of certain assets and liabilities as of for the years ended December 31, 2024 and
December 31, 2023:
As of December 31,
2024
2023
($ in millions)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
7.50% senior notes due 2027 (1)
$
— $
— $
—
$
— $
303.7 $
—
1.75% convertible notes due 2028 (1)
$
— $
351.3 $
—
$
— $
295.2 $
—
4.75% senior notes due 2029 (1)
$
— $
330.3 $
—
$
— $
320.2 $
—
6.375% senior notes due 2032 (1)
$
— $
485.0 $
—
$
— $
— $
—
Term loan due 2029 (1) (2)
$
— $
123.4 $
—
$
— $
— $
—
Term loan due 2027 (1) (2)
$
— $
— $
—
$
— $
129.4 $
—
Revolver due 2029(1) (2)
$
— $
100.0 $
—
$
— $
— $
—
Contingent consideration (3)
$
— $
— $
3.6
$
— $
— $
8.5
(1)
The amounts of these notes listed above are the fair values for disclosure purposes only, and they are recorded in the Company's consolidated balance
sheets as of December 31, 2024 and 2023 at carrying value.
(2)
The carrying amounts of our term loan and revolving credit facility approximate fair value as of December 31, 2024 and 2023 based upon their terms
and conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates.
(3)
The estimated fair value of the Company's contingent consideration is discussed further in Note 3 "Acquisitions".
9.
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 Counterparties”). 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 3,876,867 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 approximately $66.74 per share, subject to customary anti-dilution adjustments. The options expire on December 1,
2028, subject to earlier exercise.
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 Counterparties, pursuant to which the
Company sold warrants giving the counterparties the right to purchase the same number of shares of the Company's common
stock (or 3,876,867 shares) underlying the 1.75% Convertible Notes, at an initial strike price of approximately $85.30 per
share, subject to customary anti-dilution adjustments. The warrants have a final 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 $43.7 million related to the 1.75% Convertible Note Warrant Transactions. Together, the 1.75% Convertible
Note Hedge Transactions and the 1.75% Convertible Note Warrant Transactions are expected generally to reduce potential
dilution to the Company’s common stock upon any conversion of the 1.75% Convertible Notes and/or offset any cash
payments the Company is required to make in excess of the principal amount of converted 1.75% Convertible Notes
compared to the potential dilution from the 1.75% Convertible Notes without such transactions. The 1.75% Convertible Note
Warrant Transactions may have a dilutive effect on the Company's common stock to the extent that the market price per share
F-26
of the common stock exceeds the strike price of the warrants. See Note 13 "Earnings Per Common Share" for additional
information on the dilutive impact of the 1.75% Convertible Note Warrant Transactions.
As these transactions meet certain accounting criteria, the 1.75% Convertible Note Hedge Transactions and 1.75%
Convertible Note Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.
10. ACCRUED LIABILITIES
As of December 31,
($ in thousands)
2024
2023
Employee compensation and benefits
$
50,098
$
57,702
Property taxes
5,643
6,038
Customer incentives
19,185
21,724
Accrued interest
8,884
7,998
Accrued warranty
5,838
6,130
Income tax payable
6,302
2,372
Other
9,803
9,747
Total accrued liabilities
$
105,753
$
111,711
The table below summarizes the change in accrued warranty liabilities.
Year Ended December 31,
($ in thousands)
2024
2023
2022
Beginning balance
$
6,130
$
12,103
$
13,827
Provision
32,091
23,820
29,918
Settlements made during the year (in cash or in kind)
(32,424)
(29,793)
(32,998)
Acquisitions
41
—
1,356
Ending balance
$
5,838
$
6,130
$
12,103
11. INCOME TAXES
The provision for income taxes consists of the following:
Year Ended December 31,
($ in thousands)
2024
2023
2022
Current income tax expense:
U.S. federal
$
35,288
$
44,126
$
92,783
U.S. state and local
11,324
4,816
23,724
Foreign
38
10
56
Total current
46,650
48,952
116,563
Deferred income tax (benefit) expense, net:
U.S federal
(5,509)
(3,578)
(7,348)
U.S. state and local
(971)
2,994
(2,027)
Foreign
(1)
(7)
26
Total deferred
(6,481)
(591)
(9,349)
Total income tax provision
$
40,169
$
48,361
$
107,214
The Company has accounted for in its 2024, 2023, and 2022 income tax provision the impact of Global Intangible Low-
Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j) of the Internal Revenue Code of
F-27
1986, 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 actual provision for income taxes and income taxes at the federal statutory
income tax rate of 21% is as follows:
Year Ended December 31,
($ in thousands)
2024
2023
2022
Rate applied to pretax income
$
37,500
21.0 %
$
40,201
21.0 % $
91,436
21.0 %
State taxes, net of federal tax effect
7,975
4.5 %
6,797
3.6 %
16,715
3.8 %
Research and development tax credits
(3,750)
(2.1) %
(2,889)
(1.5) %
(4,542)
(1.0) %
Section 162(m) permanent addback
4,603
2.6 %
6,315
3.3 %
7,421
1.7 %
Excess tax benefit on stock-based compensation
(6,469)
(3.6) %
(3,513)
(1.8) %
(3,292)
(0.7) %
Other
310
0.1 %
1,450
0.7 %
(524)
(0.1) %
Income taxes
$
40,169
22.5 %
$
48,361
25.3 % $ 107,214
24.7 %
The composition of the deferred tax assets and liabilities is as follows:
As of December 31,
($ in thousands)
2024
2023
Deferred tax assets:
Trade receivables allowance
$
1,215
$
1,339
Inventory capitalization
4,329
3,696
Inventory reserves
8,503
8,322
Federal NOL carryforwards
386
417
State NOL carryforwards
453
745
Accrued expenses
18,831
20,819
Deferred compensation
805
750
Operating lease liabilities
50,784
45,371
Share-based compensation
6,498
7,045
Capitalized research & experimentation costs
30,140
23,751
Other
278
—
Total deferred tax assets before valuation allowance
122,222
112,255
Less: valuation allowance
(480)
(477)
Total deferred tax assets, net of valuation allowance
$
121,742
$
111,778
Deferred tax liabilities:
Prepaid expenses
$
(5,569) $
(2,948)
Operating lease right-of-use assets
(49,785)
(44,498)
Depreciation expense
(45,026)
(46,783)
Intangibles
(82,708)
(63,977)
Other
—
(296)
Total deferred tax liabilities
(183,088)
(158,502)
Net deferred tax liabilities
$
(61,346) $
(46,724)
Cash paid by the Company for income taxes was $38.1 million, $84.3 million and $117.1 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2024 and December 31, 2023, the Company had gross federal, state, and foreign net operating losses, of
approximately $12.8 million and $15.4 million, respectively. These loss carryforwards generally expire between tax years
F-28
ending December 31, 2024 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
effected values of these net operating losses are $0.8 million and $1.2 million at December 31, 2024 and 2023, respectively,
exclusive of valuation allowances of $0.5 million and $0.5 million at December 31, 2024 and 2023, respectively.
The Company is subject to periodic audits by domestic tax authorities. For the majority of tax jurisdictions, the U.S. federal
statute of limitations remains open for the years 2021 and later. Uncertain tax benefits were immaterial as of December 31,
2024 and 2023 and activity related to uncertain tax benefits was immaterial for all periods presented.
12. STOCK REPURCHASE PROGRAMS
In November 2024, 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 $200 million,
including the $72.9 million remaining under the previous authorization. As of December 31, 2024, Patrick has $200 million
remaining in the amount of the Company's common stock that may be acquired under the current stock repurchase program.
Under the stock repurchase plans, the Company made repurchases of common stock for 2024, 2023, and 2022 as follows:
Year Ended December 31,
($ in millions, except average price data)
2024
2023
2022
Shares repurchased (1)
60,000
415,176
1,988,346
Average price (1)
$
77.68
$
45.30
$
38.72
Aggregate cost
$
4.7
$
18.8
$
77.0
(1)
Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant
Accounting Policies" for further details.
The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been
reflected, using an average cost method, as a reduction of common stock and retained earnings in the Company’s
consolidated balance sheets.
13. EARNINGS PER COMMON SHARE
Earnings per common share is calculated as follows:
Year Ended December 31,
($ and shares in thousands, except per share data)
2024
2023
2022
Numerator:
Earnings for basic earnings per common share calculation
$
138,401
$
142,897
$
328,196
Effect of interest on potentially dilutive convertible notes, net of tax
—
162
1,927
Earnings for diluted earnings per common share calculation
$
138,401
$
143,059
$
330,123
Denominator: (1)
Weighted average common shares outstanding - basic
32,568
32,278
33,210
Weighted average impact of potentially dilutive convertible notes
644
248
3,089
Weighted average impact of potentially dilutive warrants
137
—
—
Weighted average impact of potentially dilutive securities
350
512
408
Weighted average common shares outstanding - diluted
33,699
33,038
36,707
Earnings per common share: (1)
Basic earnings per common share
$
4.25
$
4.43
$
9.88
Diluted earnings per common share
$
4.11
$
4.33
$
8.99
(1)
Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant
Accounting Policies" for further details.
F-29
The impact on diluted earnings per share from antidilutive securities excluded from the calculation was immaterial for all
periods presented.
14. LEASES
The Company has operating leases for certain facilities, trailers, forklifts 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, 2024, 2023 and 2022. Variable lease payments, principally related to trucks, forklifts, and index-
related facility rent escalators, was immaterial for the years ended December 31, 2024, 2023 and 2022. The leases have
remaining lease terms of 1 to 15 years. Certain leases include options to renew for an additional term. Where there is
reasonable 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 liabilities.
Lease expense, supplemental cash flow information, and other information related to leases were as follows:
Year Ended December 31,
($ in thousands)
2024
2023
2022
Operating lease cost
$
64,391
$
56,370
$
50,674
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows used for operating leases
$
63,958
$
55,933
$
49,938
Right-of-use assets obtained in exchange for new lease
obligations:
Operating leases
$
77,558
$
65,505
$
50,719
Other information related to leases was as follows:
As of December 31,
2024
2023
Weighted average remaining lease term, operating leases (in years)
5.2
4.8
Weighted average discount rate, operating leases
5.8 %
5.4 %
Maturities of operating lease liabilities were as follows as of December 31, 2024 (in thousands):
2025
$
63,870
2026
52,568
2027
37,810
2028
27,333
2029
18,504
Thereafter
40,253
Total lease payments
240,338
Less imputed interest
(35,615)
Total
$
204,723
The Company had no operating leases that were entered into and have not yet commenced as of December 31, 2024.
15. COMMITMENTS AND CONTINGENCIES
The Company is subject 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 predictable with assurance. Accruals for these items, when
F-30
applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are
adjusted from time to time as developments warrant.
Although the ultimate outcome of these matters cannot be ascertained, on the basis of present information, amounts already
provided, availability 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 flows.
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. Sturgis Iron & Metal Co., Inc., et al., Case Number 3:18-
cv-00506, pending in the U.S. District Court for 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 Liability Act (“CERCLA”),
42 U.S.C. § 9601 et seq., an Indiana state environmental statute and Indiana common law. One defendant in the case, Sturgis
Iron & Metal Co., Inc. (“Sturgis”), subsequently filed two cross claims against Patrick, asserting against the Company a claim
for (i) contribution under CERCLA and (ii) contractual indemnity. The Company moved to dismiss the Group’s claims and
also moved to dismiss Sturgis’s cross claims. On August 21, 2020, the court granted Patrick’s two motions to dismiss. The
Group subsequently moved for reconsideration of the court’s decision. On July 3, 2023, the Court granted the Company’s
Joint Motion to Dismiss without prejudice, dismissing all remaining claims against the Company for non-consent decree
costs and entered an order on June 3, 2024, denying the plaintiff’s motion to bar contribution claims, thereby ending the case
against the Company.
On March 19, 2021, the Company received a General Notice of Potential Liability 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 Study ("RI/FS"), conducting
Remedial Design/Remedial Action ("RD/RA"), and other investigation, planning, response, oversight, and enforcement
activities related to the Lusher Street Site (the "Superfund 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 or
additional mitigation efforts incurred or to be incurred by the EPA.
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 statement of income for year ended December 31, 2022. The
purchaser agreed to indemnify, defend and hold the Company harmless for all liability and exposure, both private and to all
EPA claims, concerning and relating to the Divested Properties. No further proceedings occurred in the years ended
December 31, 2024 and 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 Superfund Site matter are likely to have a
material adverse impact on its financial condition, results of operations, or cash flows. However, any litigation is inherently
uncertain, the EPA has yet to select a final remedy for the Superfund Site, and any judgment or injunctive relief entered
against us or any adverse settlement could materially and adversely impact our business, results of operations, financial
condition, and prospects.
16. 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 are 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 and 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, 2024, approximately 2.0 million
common shares remain available for stock-based compensation grants.
Stock-based compensation expense was $16.8 million, $19.4 million and $21.8 million for the years ended December 31,
2024, 2023 and 2022, respectively. Income tax benefit for stock-based compensation expense was $4.3 million, $4.8 million
F-31
and $5.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was
approximately $20.9 million of total unrecognized compensation cost related to share-based compensation arrangements
granted under incentive plans. That cost is expected to be recognized over a weighted-average period of approximately 16.5
months.
Stock Options:
No stock options were granted during the years ended December 31, 2024, 2023 and 2022. Outstanding stock options granted
in prior years vest ratably over either three or four years and have nine-year contractual terms.
The following table summarizes the Company’s option activity:
Years ended December 31,
2024
2023
2022
($ and shares in thousands, except per share data)
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Outstanding beginning of year
171 $
27.55
543 $
29.17
552 $
29.15
Forfeited during the year
—
—
—
—
(1)
27.55
Exercised during the year
(143)
27.55
(372)
29.92
(8)
27.55
Outstanding end of year
28 $
27.55
171 $
27.55
543 $
29.17
Vested Options:
Vested during the year
— $
—
207 $
28.65
242 $
28.65
Eligible end of year for exercise
28 $
27.55
171 $
27.55
334 $
29.50
Aggregate intrinsic value:
Total options outstanding
$
1,562
$
6,711
$
6,204
Options exercisable
$
1,562
$
6,711
$
3,716
Options exercised
$
8,357
$ 10,888
$
91
Weighted average fair value of options granted
during the year
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 $83.08, $66.90 and $40.40 per share as of December 31, 2024,
2023 and 2022, 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, 2024, the weighted average remaining contractual term for options
outstanding was 4.4 years and the weighted average remaining contractual term for options exercisable was 4.4 years.
The cash received from the exercise of stock options was immaterial for 2024, $1.4 million for 2023 and $0.2 million for
2022. The income tax benefit related to the stock options exercised was immaterial for all periods presented. The grant date
fair value of stock options vested in 2023 and 2022 was $5.9 million and $6.9 million, respectively; no stock options vested
in 2024.
As of December 31, 2024, there was no unrecognized compensation expense related to the stock options.
F-32
Stock Appreciation Rights (SARS):
No SARS were granted or forfeited in the years ended December 31, 2024, 2023 and 2022. The following table summarizes
the Company’s SARS activity:
Years ended December 31,
2024
2023
2022
($ and shares in thousands, except per share data)
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Total SARS:
Outstanding beginning of year
336 $
42.89
336 $
42.89
336 $
42.89
Exercised during the year
(336)
42.89
—
—
—
—
Outstanding end of year
— $
—
336 $
42.89
336 $
42.89
Vested SARS:
Vested during the year
— $
—
— $
—
— $
—
Eligible end of year for exercise
— $
—
336 $
42.89
336 $
42.89
Aggregate intrinsic value:
Total SARS outstanding
$
—
$
8,078
$
383
SARS exercisable
$
—
$
8,078
$
383
SARS exercised
$ 10,802
$
—
$
—
Weighted average fair value of SARS granted
during the year
N/A
N/A
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 $83.08, $66.90 and $40.40 per share as of December 31, 2024,
2023 and 2022, respectively, is the price that would have been received by the SARS holder had that SARS holder exercised
the SARS as of that date. SARS vest ratably over four years and have nine-year contractual terms. There were no SARS
outstanding as of December 31, 2024 because all SARS outstanding as of December 31, 2023 were exercised during 2024.
As of December 31, 2024, 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, 2024, there was approximately
$20.9 million of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over
a weighted-average remaining life of approximately 16.5 months.
Restricted stock awards possess voting rights, are included in the calculation of actual 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 vest at the conclusion of the required service period, which ranges from less than
one year to seven years. The performance contingent shares are earned based on the achievement of a cumulative financial
performance target, which ranges from less than one year to a seven-year period and vest at the conclusion of the
measurement period.
F-33
A summary of restricted stock activity, including grants, vesting and forfeitures, is provided below:
Year Ended December 31,
2024
2023
2022
(shares in thousands)
Shares
Weighted-
Average
Grant Date
Stock Price
Shares
Weighted-
Average
Grant Date
Stock Price
Shares
Weighted-
Average
Grant Date
Stock Price
Unvested beginning of year
1,020 $
45.65
1,138 $
42.92
1,394 $
36.71
Granted during the year
413
64.38
497
43.04
381
43.08
Vested during the year
(423)
48.26
(492)
37.76
(612)
28.82
Forfeited during the year
(21)
49.53
(123)
45.21
(25)
44.20
Unvested end of year
989 $
51.94
1,020 $
45.65
1,138 $
42.92
Aggregate fair values of restricted stock vested for the years ended December 31, 2024, 2023 and 2022 were $20.4 million,
$18.6 million, and $17.6 million, respectively.
17. SEGMENT INFORMATION
The Company has two reportable segments, Manufacturing and Distribution, which are defined based on the way in which
internally reported information is regularly reviewed and evaluated by the Company’s chief operating decision maker (the
"CODM"), who is our Chairman and Chief Executive Officer, to allocate resources, evaluate financial results and make
decisions. The Company does not measure profitability at the end market (RV, marine, powersports, MH and industrial)
level.
Manufacturing – This segment includes the following products: laminated products that are utilized to produce furniture,
shelving, walls, countertops and cabinet products; cabinet doors; fiberglass bath fixtures and tile systems; hardwood
furniture; vinyl printing; RV and marine furniture; audio systems and accessories, including amplifiers, tower speakers,
soundbars, and subwoofers; decorative vinyl and paper laminated panels; solid surface, granite, and quartz countertop
fabrication; RV painting; fabricated aluminum products; fiberglass and plastic components; fiberglass bath fixtures 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 fascia; thermoformed shower surrounds; specialty bath and closet building products; fiberglass
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,
RVs, aircraft, and military and industrial equipment; aluminum and plastic fuel tanks; CNC molds and composite parts; roofs/
canopies; wiper systems; integrated door systems; windshield systems; slotwall panels and components; fender flares and rear
panels; and other products.
Distribution – The Company distributes pre-finished wall and ceiling panels; drywall and drywall finishing products;
electronics and audio systems components; appliances; marine accessories and components; wiring, electrical and plumbing
products; fiber reinforced polyester products; cement siding; raw and processed lumber; interior passage doors; roofing
products; laminate and ceramic flooring; tile; shower doors; furniture; fireplaces and surrounds; interior and exterior lighting
products; RV awnings, windows, fiberglass siding and roofing; marine windshields; and other miscellaneous products in
addition to providing transportation and logistics services.
The CODM evaluates the performance of the Company's segments and allocates resources to them based on a variety of
indicators including but not limited to net sales, gross profit and operating income. On at least a quarterly basis, the CODM
considers actual to budget variances as well as actual to prior year actual performance for both profit measures when making
decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit
and segment operating income to assess the performance of each segment by comparing the results of each segment with one
another.
The accounting policies of the segments are the same as those described in Note 1 "Basis of Presentation and Significant
Accounting Policies". Segment net sales data includes inter-segment sales. The Company accounts for inter-segment sales
similar to third party transactions, which reflect current market prices. Certain income from purchase incentive agreements is
F-34
not allocated to the segments and instead recorded at the corporate level. Assets are identified to the segments except for
cash, prepaid expenses, land and buildings, and certain deferred assets, which are identified with corporate. Corporate
charges rent to the segments for use of the land and buildings based upon estimated market rates.
The following tables summarize key financial information by segment:
Year Ended December 31, 2024
($ in thousands)
Manufacturing
Distribution
Total
Total net sales
$
2,756,547 $
980,127 $
3,736,674
Cost of goods sold
2,143,995
755,272
2,899,267
Gross profit
$
612,552 $
224,855 $
837,407
Operating expenses
271,591
120,140
391,731
Operating income
$
340,961 $
104,715 $
445,676
Reconciliation of reportable segment operating income to
consolidated income before income tax:
Selling, general and administrative
92,902
Amortization of intangible assets
96,235
Interest expense, net
79,470
Elimination of inter-segment profits
1,501
Other
(3,002)
Consolidated income before income taxes
$
178,570
Total assets
$
2,402,533 $
524,827 $
2,927,360
Capital expenditures
$
62,342 $
10,808 $
73,150
Depreciation and amortization
$
143,844 $
15,728 $
159,572
F-35
Year Ended December 31, 2023
($ in thousands)
Manufacturing
Distribution
Total
Total net sales
$
2,653,257 $
889,408 $
3,542,665
Cost of goods sold
2,075,973
693,902
2,769,875
Gross Profit
$
577,284 $
195,506 $
772,790
Operating expenses
256,188
105,411
361,599
Operating income
$
321,096 $
90,095 $
411,191
Reconciliation of reportable segment operating income to
consolidated income before income tax:
Selling, general and administrative
82,674
Amortization of intangible assets
78,616
Interest expense, net
68,942
Elimination of inter-segment profits
(10,299)
Consolidated income before income taxes
$
191,258
Total assets
$
2,071,500 $
426,931 $
2,498,431
Capital expenditures
$
50,771 $
8,094 $
58,865
Depreciation and amortization
$
126,431 $
12,710 $
139,141
Year Ended December 31, 2022
($ in thousands)
Manufacturing
Distribution
Total
Total net sales
$
3,681,412 $
1,287,597 $
4,969,009
Cost of goods sold
2,862,452
1,032,711
3,895,163
Gross Profit
$
818,960 $
254,886 $
1,073,846
Operating expenses
287,413
117,997
405,410
Operating income
$
531,547 $
136,889 $
668,436
Reconciliation of reportable segment operating income to
consolidated income before income tax:
Selling, general and administrative
85,181
Amortization of intangible assets
73,177
Interest expense, net
60,760
Elimination of inter-segment profits
13,908
Consolidated income before income taxes
$
435,410
Total assets
$
2,302,745 $
407,861 $
2,710,606
Capital expenditures
$
67,635 $
3,801 $
71,436
Depreciation and amortization
$
114,782 $
11,422 $
126,204
F-36
A reconciliation of certain line items pertaining to the total reportable segments to the consolidated financial statements as of
December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands):
Net sales:
Total sales for reportable segments
$
3,736,674
$
3,542,665
$
4,969,009
Elimination of intersegment sales(1)
(20,991)
(74,620)
(87,137)
Consolidated net sales
$
3,715,683
$
3,468,045
$
4,881,872
Depreciation and amortization:
Depreciation and amortization for reportable segments
$
159,572
$
139,141
$
126,204
Corporate depreciation and amortization
6,973
5,402
4,553
Consolidated depreciation and amortization
$
166,545
$
144,543
$
130,757
Capital expenditures:
Capital expenditures for reportable segments
$
73,150
$
58,865
$
71,436
Corporate capital expenditures
2,532
3,183
8,447
Consolidated capital expenditures
$
75,682
$
62,048
$
79,883
Year Ended December 31,
($ in thousands)
2024
2023
2022
($ in thousands)
As of December 31,
Total assets:
2024
2023
Identifiable assets for reportable segments
$
2,927,360
$
2,498,431
Corporate assets unallocated to segments
60,033
52,608
Cash and cash equivalents
33,561
11,409
Consolidated total assets
$
3,020,954
$
2,562,448
(1) Eliminations for the year ended December 31, 2024 include only the elimination of inter-segment transactions.
The Company's revenue from external customers and long-lived assets are substantially all attributed to the U.S.
Major Customers
The Company had two major customers that accounted for the following consolidated net sales for the years ended
December 31, 2024, 2023 and 2022 and trade receivables as of December 31, 2024 and 2023 as shown in the table below:
Year Ended December 31,
2024
2023
2022
Customer 1
Net sales
15 %
15 %
21 %
Trade receivables
6 %
8 %
Customer 2
Net sales
14 %
14 %
17 %
Trade receivables
8 %
5 %
F-37
Exhibit 4.8
DESCRIPTION OF COMMON STOCK
General
We are currently authorized to issue 40,000,000 shares of common stock, without par value, and 1,000,000 shares of
preferred 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 14, 2025, there were 33,644,702 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 for 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.
After the requirements with respect to preferential 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 available 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 available for distribution on a pro rata basis, after payment of
all of our debts and other liabilities and subject 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 for 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 subject to redemption.
Relevant Provisions of the Indiana Business Corporation Law
The Indiana Business Corporation 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 five-
year period after 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 approved the acquisition of common stock or approved the business
combination. After 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 approved by the board of directors of the
company before the interested shareholder acquired the common stock; (ii) a business combination approved 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 corporation is subject to the “Control Share Acquisitions Statute”
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 majority of the shares of each class or series of shares entitled to vote
separately on the proposal, excluding shares held by officers of the corporation, by employees of the corporation
who are directors of the corporation and by the acquiror. An Indiana corporation subject to the Control Share
Acquisitions Statute may elect not to be covered by the statute by so providing in its articles of incorporation or by-
laws. We have adopted a provision in our Amended and Restated By-laws which states that the Control Share
Acquisitions Statute shall not apply to the issued and outstanding shares of our common stock.
Transfer 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”.
Exhibit 19.1
PATRICK INDUSTRIES, INC.
INSIDER TRADING POLICY
The Board of Directors of Patrick Industries, Inc. (the “Company”) has adopted this Insider Trading Policy
(this “Policy”) to inform employees and others about the prohibition against insider trading. Every person subject to
this Policy has the individual responsibility to comply with this Policy. This Policy shall be delivered to each newly
elected member of the Board of Directors upon commencement of the member’s initial term and to employees
subject to this Policy upon commencement of their employment with the Company. The Company’s Board of
Directors shall be responsible for the review of and revisions to this Policy as may be required from time to time but
no less frequently than annually.
I.
The Policy.
Material non-public information must not be disclosed (through written, oral or electronic means) to
anyone, except the persons within the Company or third-party agents of the Company (such as financial advisors or
outside legal counsel) until such information has been publicly released by the Company. This Policy prohibits any
unauthorized communication of material non-public information even when there is no intent or expectation that
anyone will profit or otherwise benefit from such information.
In addition, no director, officer or employee or any other person designated by this Policy or designated by
the Company as being subject to this Policy (each an “Insider”) who has material non-public information relating to
the Company, may buy or sell securities (stock or debt) of the Company, directly or indirectly, or engage in any
other transaction in the securities of the Company, except as expressly provided herein. This Policy also applies to
material non-public information relating to any other company, including a customer or supplier, obtained in the
course of employment.
II.
Material Non-Public Information.
It is not possible to define all categories of material information. However, information should be regarded
as “material” if there is a reasonable likelihood that it would be considered important to an investor in determining
whether to buy, hold, or sell Company securities. Any information that could be expected to affect the Company's
stock price, whether it is positive or negative, should be considered material. Common examples, though not
inclusive, of information that might be regarded as material, include: financial information such as revenues,
expenses, margins, and earnings, information about a material transaction or the material acquisition or disposition
of a business, existence of an event-specific blackout period, forecasts, budgets and business plans, changes in
dividends, stock splits, stock offerings, material litigation, changes in senior management, directors or auditors, or
the gain or loss of a substantial client.
Information is “non-public” if it is not available to the general public. In order for information to be
considered public, it must be widely disseminated in a manner making it generally available to investors. Even after
a public announcement of material information, a reasonable period of time must elapse in order for the market to
react to the information. Generally, one should allow one full trading day following the publication of information as
a reasonable waiting period before such information is deemed to be public.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 1
The circulation of rumors, even if accurate and reported in the media, does not constitute effective public
dissemination. Information is considered to be available to the public only when it has been released broadly to the
marketplace such as by a press release or a filing with the Securities Exchange Commission (“SEC”). There should
be no Company-wide internal communication announcing any material non-public information prior to the
information being released to the public. If a person subject to this policy is uncertain as to whether or not
information has been publicly disclosed, please contact the Company’s compliance official.
III.
Application of Policy.
This Policy applies to any transaction that would be a violation of federal insider trading rules. The following
list includes, but is not limited to, certain individuals and transactions subject to the limitations or prohibitions set
forth in this Policy:
•
all transactions in the Company's securities, including, but not limited to, common stock, options for common
stock and any other securities the Company may issue from time to time, such as preferred stock, warrants,
convertible debentures and non-convertible notes.
•
all officers of the Company, all members of the Company's Board of Directors, and all employees of the
Company and its subsidiaries. The Company may also determine that other persons, such as consultants,
contractors to, and third-party agents of the Company and its subsidiaries, who receive or have access to
material non-public information regarding the Company, should also be subject to this Policy.
•
any person who receives material non-public information from any Insider.
•
all transactions in the securities of any publicly traded customer or supplier of the Company while a person
subject to this Policy is in the possession of such customer’s or supplier’s material non-public information that
was obtained through that person’s relationship with the Company.
•
entities controlled by the Insider, partnerships in which the Insider is a general partner; trusts of which the
Insider is a trustee; and estates of which the Insider is an executor.
•
family members who reside with Insiders, anyone else who lives in an Insider’s household, and any family
members who do not live in the Insider’s household but whose transactions in the Company’s securities are
directed by the Insider or are subject to the Insider’s influence or control (such as parents or children who
consult with the Insider before trading in Company securities). Each Insider is responsible for the transactions
of these other persons and therefore should make them aware of the need to confer with the Insider before they
trade in the Company’s securities.
IV.
Blackout Periods.
A.
Quarterly Blackout Periods. The Company’s announcement of its quarterly financial results almost
always has the potential to have a material effect on the market for the Company’s securities. The Company
has determined that all directors and executive officers and certain Company employees with access to
material information are subject to quarterly “blackout periods” which restrict the dates in which Company
securities may be bought or sold. Persons subject to quarterly blackout periods are not allowed to trade in
the Company’s securities during the period that begins fourteen (14) calendar days prior to the close of
trading on the stock market on the last Trading Day of the Company’s quarterly reporting period and ends
after the first full Trading Day following the Company’s issuance of its quarterly earnings release. As used
in this Policy, the term “Trading Day” shall mean a day on which national stock exchanges and NASDAQ
are open for trading, and the Trading Day begins at the time trading begins on such day. Blackout periods
may be extended by notice to persons who are subject to the blackout.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 2
B.
Event-Specific Blackouts. Additional blackout periods may be imposed from time to time due to
extenuating circumstances and must be adhered to by all persons subject to the blackout (see list below).
During the blackout period, any person subject to the blackout is not allowed to trade in the Company’s
securities. The Company will issue material information by means of a press release, SEC filing on Form 8-
K or other means designed to achieve widespread dissemination. The failure of the compliance official to
designate a person as being subject to an event-specific blackout will not relieve that person of the
obligation not to trade while aware of material non-public information.
The compliance official will post periodic reminders (via email or other approved methods of internal
communication) of the dates that a quarterly blackout or event-specific blackout period begins and ends.
C.
Section 16 Individuals. The Company has identified and maintains a listing of its directors and officers
who are subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of
1934, as amended and the rules and regulations promulgated thereunder (“Section 16 Individuals"). These
persons have been notified by the Company as to their obligations under Section 16. This list of persons
will be amended from time to time as appropriate to reflect the election of new officers or directors, any
change in function of current officers and the resignation or departure of current officers or directors.
V.
Pre-Clearance Procedures.
Section 16 Individuals and certain other employees designated by the Chief Executive Officer or the Chief
Financial Officer who have been notified that they have been so identified (“Restricted Persons”) must refrain from
trading in or entering into any other transaction with respect to the Company's securities, even during the trading
window, without first complying with the Company's "pre-clearance" process.
If a Restricted Person desires to purchase, sell or make a bona fide gift of Company securities, he or she
must notify and obtain clearance from the Chief Financial Officer or the compliance official at least two (2) business
days in advance of the transaction. Notification (but not pre-clearance) is also required for routine stock option
exercises.
Our compliance official is under no obligation to approve a transaction submitted for pre-clearance and
may determine not to permit the transaction. The Company may issue interim earnings guidance or other potentially
material information by means of a press release, SEC filing on Form 8-K or other means designed to achieve
widespread dissemination of the information. An Insider should anticipate that transactions are unlikely to be pre-
cleared while the Company is in the process of assembling the information to be released and until the information
has been released and fully absorbed by the market.
Pre-clearance of a transaction is valid only for a 48-hour period.
The Company may from time to time identify other persons who, together with the Restricted Persons, are
subject to the pre-clearance process as outlined in this Policy.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 3
VI.
Confidentiality of Non-Public Information.
Non-public information relating to the Company is the property of the Company and the unauthorized
disclosure of such information is forbidden. In the event any officer, director or employee of the Company receives
any inquiry from outside the Company, such as from a stock analyst, for information (particularly financial results
and/or earnings projections) that may be material non-public information, the inquiry should be referred to the
Company's compliance official, who is responsible for coordinating and overseeing the release of such information
to the investing public, analysts and others in compliance with applicable laws and regulations.
VII.
Waiting Period.
If a person subject to this Policy were in possession of material non-public information, then in addition,
even after a public announcement of material information, a reasonable period of time must elapse in order for the
market to react to the information. For this purpose, information would be considered fully absorbed by the
marketplace after the expiration of one full Trading Day after the information is released. Examples: If the
Company were to make an announcement on a Monday (before market open), the person subject to this Policy may
not trade in the Company’s securities until Tuesday, assuming uninterrupted Trading Days. If an announcement
were made on a Friday (after market close), the following Tuesday would be the first eligible Trading Day.
VIII.
No Tipping.
Not only is a person subject to this Policy liable for trading on material non-public information, but such
person may also be liable for communicating or tipping material non-public information to any third party.
Furthermore, tippees can be liable for trading while aware of material non-public information. In order to ensure
protection of “confidential” information, non-public inside information cannot be communicated to other persons in
any manner, even inadvertently. Company personnel must avoid “tipping”, intentionally or unintentionally, at all
times. Such tipping can be construed as the communication of material, non-public information about the Company,
which may give a trading advantage to a third party. For example:
• Do not discuss material non-public information in elevators, hallways, restaurants, airplanes, taxicabs,
internet e-mail, chat rooms or social media, or any place where a person can be overheard or observed by
a third party.
• Be cautious when using speaker phones, cell phones, or appearing on virtual conference calls, as
conversations through such medium are often easily overheard.
• Do not read documents containing non-public information in public places or discard them where they can
be retrieved by others.
• Do not leave confidential papers or information where visitors or others can see them (e.g. desk, open
work area, or break room.)
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 4
IX.
Internet Chat Rooms, Message Boards, Web Sites & Social Media.
Posting or participation in the posting of any message, response or information on websites, internet
chat rooms, message boards or social media, which make mention of the Company in general or its securities,
regardless of the content or nature of the posting, is strictly prohibited. Remember, anyone scrutinizing an Insider’s
transactions will be doing so after the fact, with the benefit of hindsight. As a practical matter, before engaging in
any transaction, persons subject to this Policy should carefully consider how enforcement authorities and others
might view the transaction.
X.
Transactions Subject to This Policy.
This Policy applies to any sale, purchase, or gift of securities, which includes trading of stock or other
securities. It also applies to sales of stock in connection with stock option exercises.
A.
Stock Option Exercises. Except for the notification requirement previously discussed, this Policy does not
apply to the exercise of an employee stock option as long as the exercise is just a purchase of stock with no
associated sale (this includes a “cashless exercise” where the employee pays the exercise price in shares of
the Company’s stock and/or the Company withholds shares subject to the option to satisfy the employee’s
tax withholding requirements).
Note: This Policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of
an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price
and/or the related taxes of an option.
Example: When exercising an option, a person is buying stock directly from the Company at a specified
price. However, if one exercises an option and sells stock on the open market in order to use the proceeds
from the stock sale to pay for the option exercise price or related taxes, such person is both buying stock
from the Company and selling stock on the open market. For example, if a person exercises an option to
purchase 10 shares with an exercise price of $10.00, such individual is buying the 10 shares from the
Company for a total of $100 (10 shares x $10). Assume the Company stock is trading on the open market
for $20.00. If, when such option is exercised, the person also sells five (5) shares to obtain the $100 (5
shares x $20), such individual is also engaging in the sale of stock. This Policy does not apply to the
exercise of the option to obtain the 10 shares (other than the notification requirement), but it does apply to
the sale of the five (5) shares on the open market.
B.
Rule 10b5-1 Plans. Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability
under Section 10(b) of the Exchange Act and Rule 10b-5. In order to be eligible to rely on this defense, a
person must enter into a binding contract, give an instruction or adopt a written plan to effect transactions in
Company securities that meets the conditions specified in the Rule 10b5-1(c) (a “Rule 10b5-1 Plan”). If
the Rule 10b5-1 Plan meets the requirements of Rule 10b5-1(c) and has been approved by the compliance
official, transactions executed pursuant to the Rule 10b5-1 Plan are not subject to the requirements of this
Policy. In general, a Rule 10b5-1 Plan must be entered into during a trading window (i.e., not during a
blackout period) when the person entering into the Rule 10b5-1 Plan is not aware of material nonpublic
information. Once the Rule 10b5-1 Plan is adopted, the person must not exercise any influence over the
number of securities to be traded, the price at which they are to be traded or the date of the trade. The Rule
10b5-1 Plan must either specify the amount, pricing and timing of transactions in advance or delegate
discretion on these matters to an independent third party.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 5
Any Rule 10b5-1 Plan must be submitted to the Company’s compliance official for approval five (5) days
prior to the entry into the Rule 10b5-1 Plan. For the avoidance of doubt, a lack of response from the
compliance official shall never be deemed to be an approval of a Rule 10b5-1 Plan; only a response
approving such proposed Rule 10b5-1 Plan shall constitute approval.
C.
Post-Termination Transactions. This Policy continues to apply to transactions in Company securities
even after a Restricted Person terminates employment or service on the Board of Directors. A Restricted
Person who is in possession of material non-public information when his or her employment or service on
the Board of Directors terminates may not trade in Company securities until that information has become
public or is no longer material.
XI.
Compliance Assistance
The Company has designated its Senior Director of Philanthropy & Stakeholder Engagement, Julie Ann
Kotowski, (574) 294-751l, ext. 7515 or kotowskj@patrickind.com as its “compliance official.” Any person who has
a question about this Policy or its application to any proposed transaction may obtain additional guidance from the
Company’s compliance official. The Company may change this designation at any time without notification.
XII.
Potential Criminal and Civil Liability and/or Disciplinary Action
A.
Individual Responsibility. Persons subject to this Policy have ethical and legal obligations to maintain the
confidentiality of information about the Company and to not engage in transactions in Company securities
while in possession of material non-public information. Persons subject to this Policy must not engage in
illegal trading and must avoid the appearance of improper trading. Each individual is responsible for
making sure that he, she or they complies with this Policy, and that any family member, household member
or entity whose transactions are subject to this Policy also complies with this Policy. In all cases, the
responsibility for determining whether an individual is in possession of material non-public information
rests with that individual, and any action on the part of the Company, the Company’s compliance official or
any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal
advice or insulate an individual from liability under applicable securities laws. Each individual subject to
this Policy could be subject to severe legal penalties and disciplinary action by the Company for any
conduct prohibited by this Policy or applicable securities laws.
B.
Liability for Insider Trading. Pursuant to federal and state securities laws, Insiders may be subject to
criminal and civil fines and penalties as well as imprisonment for engaging in transactions in the
Company's securities at a time when they have knowledge of material non-public information regarding the
Company.
C.
Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly
referred to as a “tippee”) to whom they have disclosed material non-public information regarding the
Company or to whom they have made recommendations or expressed opinions on the basis of such
information as to trading in the Company’s securities. The SEC has imposed large penalties even when the
disclosing person did not profit from the trading. The SEC, the stock exchanges and the Financial Industry
Regulatory Authority use sophisticated electronic surveillance techniques to uncover insider trading.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 6
D.
Possible Employee Disciplinary Actions. Employees of the Company who violate this Policy may also be
subject to disciplinary action by the Company, which may include termination of employment, whether or
not such failure to comply results in a violation of law or whether or not it was intended.
Patrick Industries, Inc. - Insider Trading Policy
February 2025
Page 7
Exhibit 21
PATRICK INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANT
Adorn Holdings, Inc.
Delaware
All Counties Glass, Inc.
California
All State Glass, Inc.
California
Anything Boating, LLC
Tennessee
Arran Isle, Inc.
Indiana
Bathroom & Closet, LLC
Nevada
Bristol Pipe, LLC
Indiana
Dehco, Inc.
Indiana
Dowco, Inc.
Wisconsin
Dura Shower Enclosures Co., Ltd
China
Fresno Shower Door, Inc.
California
Front Range Stone, Inc.
Colorado
Geremarie Corporation
Illinois
G.G Schmitt & Sons, Inc.
Pennsylvania
Great Lakes Boat Top, LLC
Delaware
Heywood Williams USA, LLC
Indiana
Highland Lakes Acquisition, LLC
Delaware
Hyperform, Inc. Seadek Marine Products
Florida
ICON Direct LLC
Michigan
Inland Plywood Company
Michigan
Johnson's Building Supply LLC
Michigan
Katalyst Industries LLC
Texas
KLS Doors, LLC
California
Larry Methvin Installations, Inc.
California
LaSalle Bristol Corporation
Indiana
LaSalle Bristol, LLC
Delaware
LaSalle Bristol, LP
Indiana
Marine Accessories Corporation
Arizona
Marine Accessories Europe B.V.
The Netherlands
Marine Accessories Europe Holdco, LLC
Delaware
Monster Marine Products, Inc.
Delaware
Off-Road Acquisition Co, LLC
Delaware
Off-Road Blue Investments, LLC
Delaware
Off-Road Intermediate Holdings, LLC
Delaware
Patrick Marine Transportation, LLC
Indiana
Patrick PS Holdco, LLC
Indiana
Patrick Transportation, LLC
Indiana
Rockford Corporation
Arizona
SEI Manufacturing, Inc.
Indiana
Shanghai Daoke Trading Co, Ltd.
China
Shower Enclosures America, Inc.
California
Sportech, LLC
Minnesota
Structural Composites, LLC
Indiana
Sunrise Pipe and Supply, Ltd.
Canada
Taco Metals, LLC
Florida
The Tumacs Corporation
Pennsylvania
Topline Counters, LLC
Washington
Transhield, Inc.
Indiana
Transhield de Mexico S. de R.L. De C.V.
Mexico
Transport Indiana, LLC
Indiana
Transport Synergy, LLC
Indiana
Company
State or Country of Incorporation
TS Buyer Corp
Indiana
Tumacs Holdings LLC
Pennsylvania
Tumacs LLC
Pennsylvania
Wet Sounds, Inc.
Texas
Xtreme Marine Corporation
Delaware
Company
State or Country of Incorporation
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-156391 on Form S-3 and
Registration Statement Nos. 333-165788, 333-198321, 333-236454 and 333-238795 on Form S-8 of our
report dated February 20, 2025, relating to the financial statements of Patrick Industries, Inc. (the
“Company”) and the effectiveness of the Company's internal control over financial reporting appearing in
this Annual Report on Form 10-K for the year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 2025
Exhibit 31.1
CERTIFICATIONS
I, Andy L. Nemeth, certify that:
1
I have reviewed this annual report on Form 10-K of Patrick Industries, Inc. (the “registrant”);
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board
of Directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information;
and
b)
any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
Date:February 20, 2025
/s/ Andy L. Nemeth
Andy L. Nemeth
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Andrew C. Roeder, certify that:
1
I have reviewed this annual report on Form 10-K of Patrick Industries, Inc. (the “registrant”);
2
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the company’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board
of Directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information;
and
b)
any fraud, whether or not material, that involves management or other employees who
have a significant role in the company’s internal control over financial reporting.
Date: February 20, 2025
/s/ Andrew C. Roeder
Andrew C. Roeder
Executive Vice President - Finance,
Chief Financial Officer, and Treasurer
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Patrick Industries, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 that: 1) the Report fully complies
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 fairly presents, in all material respects, the financial condition and results of operations of
the Company as of and for the periods covered in the Report.
/s/ Andy L. Nemeth
Andy L. Nemeth
Chief Executive Officer
/s/ Andrew C. Roeder
Andrew C. Roeder
Executive Vice President - Finance,
Chief Financial Officer, and Treasurer
February 20, 2025
Exhibit 97
PATRICK INDUSTRIES INC.
INCENTIVE COMPENSATION RECOVERY POLICY (the "Policy")
1.
Recovery of Excess Incentive Compensation. If Patrick Industries, Inc. (the “Company”) is required to
prepare a Restatement, the Company’s board of directors (the “Board”) shall, unless the Board’s
Compensation Committee determines it to be Impracticable, take reasonably prompt action to recover all
Recoverable Compensation from any Covered Person. The Company’s obligation to recover Recoverable
Compensation is not dependent on if or when the restated financial statements are filed. Subject to
applicable law, the Board may seek to recover Recoverable Compensation by requiring a Covered Person
to repay such amount to the Company; by adding “holdback” or deferral policies to incentive
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 future 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
addition to (and not in lieu of) any right of repayment, forfeiture or off-set against any Covered Person that
may be available under applicable law or otherwise (whether implemented prior to or after 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 appropriate to address the circumstances surrounding any
Restatement to minimize the likelihood of any recurrence and to impose such other discipline as it deems
appropriate.
2.
Administration of Policy. The Board shall have full authority to administer, amend or terminate this
Policy. The Board shall, subject to the provisions of this Policy, make such determinations and
interpretations and take such actions in connection with this Policy as it deems necessary, appropriate or
advisable. All determinations and interpretations made by the Board shall be final, 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.
3.
Acknowledgement by Executive Officers. 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 Indemnification. Notwithstanding the terms of any of the Company’s organizational documents, any
corporate policy or any contract, no Covered Person shall be indemnified against the loss of any
Recoverable 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”)) and any applicable Exchange listing
standard.
6.
Definitions. In addition to terms otherwise defined in this Policy, the following terms, when used in this
Policy, shall have the following meanings:
“Applicable Period” means the three (3) completed fiscal years preceding the earlier to occur of: (i) the
date that the Board, a committee of the Board, or the officer or officers of the Company authorized to take
such action if Board action is not required, concludes, or reasonably should have concluded, that the
Company is required to prepare a Restatement; or (ii) the date a court, regulator, or other legally authorized
body directs the Company to prepare a Restatement. The term “Applicable Period” also includes, in
addition to the three (3) fiscal year period described in the preceding sentence, any transition period (that
results from a change in the Company’s fiscal year) within or immediately following that completed three
(3) fiscal year period; provided, further, a transition period between the last day of the Company’s previous
fiscal year end and the first day of its new fiscal 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 Recoverable Compensation.
“Exchange” means any national securities exchange or national securities association upon which the
Company has a class of securities listed.
“Executive Officer” includes the Company’s president, principal financial officer, principal accounting
officer (or if there is no such accounting officer, 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 officer
of the Company’s subsidiaries or affiliates) who performs similar policy-making functions for the
Company. At a minimum, the term “Executive Officer” shall include all executive officers identified in
SEC filings 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 financial statements, and any measure that is
derived wholly or in part (including “non-GAAP” financial measures, such as those appearing in earnings
releases) from such measures; provided, however, that any such measure need not be presented within the
Company’s financial 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 free cash flow), return measures (such as return on assets or return on
invested capital), profitability of one or more segments, and cost per employee. Stock price and total
shareholder return (“TSR”) also are Financial Reporting Measures.
“Impracticable” means, after exercising a normal due process review of all the relevant facts and
circumstances and taking all steps required by Exchange Act Rule 10D-1 and any applicable Exchange
listing standard, the Compensation Committee determines that recovery of the Recoverable Compensation
is impracticable 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 Recoverable Compensation would
exceed the amount to be recovered; (ii) it has concluded that the recovery of the Recoverable Compensation
would violate home country law adopted prior to November 28, 2022; or (iii) it has determined that the
recovery of the Recoverable Compensation would cause a tax-qualified retirement plan, under which
benefits are broadly available to the Company’s employees, to fail 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 reasonable attempt to recover any
Recoverable Compensation, document such reasonable attempt(s) 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.
“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 upon
subjective, 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 after 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 Officer at any time during 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 reflected
in the Restatement. With respect to Incentive-Based Compensation based on stock price or TSR, when the
amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the
information in an accounting restatement: (x) the amount must be based on a reasonable estimate of the
effect 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 financial 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 (often referred 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 financial statement changes did not result from material non-compliance with
financial reporting requirements, such as, but not limited to retrospective: (i) application of a change in
accounting principles; (ii) revision to reportable segment information due to a change in the structure of the
Company’s internal organization; (iii) reclassification due to a discontinued operation; (iv) application of a
change in reporting entity, such as from a reorganization of entities under common control; (v) adjustment
to provision amounts in connection with a prior business combination; and (vi) revision for stock splits,
stock dividends, reverse stock splits or other changes in capital structure.
Adopted by the Board of Directors at its quarterly meeting on November 16, 2023
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Annual Report • 2024
Executive
Officers
Board Of
Directors
Chairman and
Chief Executive Officer
Andy L. Nemeth
Tontine Associates, LLC
Director since 2008
Joseph M. Cerulli
President—RV
Jeffrey M. Rodino
CEO
JumpShot, Inc.
Director since 2019
Derrick B. Mayes
Former CEO of the Company
Director since 2008
Todd M. Cleveland
President—Powersports,
Technology, and Housing
Kip B. Ellis
Executive Vice President—Finance,
Chief Financial Officer & Treasurer
Andrew C. Roeder
Partner
Full Sails LLC
Director since 2011
John A. Forbes
CEO
LCP Transportation, LLC
Director since 2019
Denis G. Suggs
Executive Vice President—
Operations & Chief Operating
Officer
Hugo E. Gonzalez
Former CEO and CFO
Nautic Global Group
Director since 2013
Michael A. Kitson
Executive Vice President, Chief Legal
Officer & Secretary
Joel D. Duthie
President
Whirlpool Foundation
Director since 2019
Pamela R. Klyn
President and CEO
Welch Packaging Group
Director since 2015
M. Scott Welch
Chairman and
Chief Executive Officer
Director since 2006
Andy L. Nemeth
Patrick Industries, Inc.
107 W. Franklin Street
Elkhart, IN 46516
(574) 294-7511
www.patrickind.com
Stephen M. O’Hara II
(574) 294-7511
oharas@patrickind.com
NASDAQ: PATK
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
Corporate Office
Investor Relations
Corporate
Information
Deloitte & Touche LLP
Chicago, IL
Independent Registered
Public Accounting Firm
Stock Symbol
Transfer Agent & Registrar
Executive Vice President, Chief
Human Resources Officer
Stacey L. Amundson
Executive Vice President—Sales
& Chief Sales Officer
Charles R. Roeder
Senior Vice President—Finance
& Chief Accounting Officer
Matthew S. Filer
President—Marine
Richard N. Reyenger
Company
Profile
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.
225+
Manufacturing &
Distribution
Centers in the U.S.
Also in:
Canada
China
Mexico
Washington
Sea-Dog Line
SeaLect Plastics
Topline Counters
Nevada
LMI
Oregon
Decor
Dehco
Indiana Transport
Synergy RV Transport
Idaho
Decor
Indiana Transport
Texas
Custom Vinyls
Transhield
Westland Industries
Wet Sounds
North Carolina
Florida Marine Tanks
Colorado
Front Range Stone
Arizona
Custon Vinyls
Rockford Fosgate
Minnesota
Sportech
California
All Counties Glass
Custom Vinyls
Fresno Shower Door
LMI
Michigan
Inland Plywood
Medallion Instrumentation
Systems
North American Forest Products
North American Moulding
Patrick Marine Transport
Progressive Group*
Tumacs Covers
Illinois
Geremarie
Gravure Ink
M-Tech
Missouri
Betterway
Dowco
Marine Electrical Products
Tennessee
BH Electronics
Fishmaster
Florida Marine Tanks
Great Lakes Boat Top
Marine Accessories Corporation
Metal Moulding
Monster Tower
TACO Marine
Turboswing
Westland
Xtreme Tower Products
Pennsylvania
Adorn
Tumacs Covers
Mississippi
AIA
Baymont
Prestige Paint
Georgia
Betterway
BH Electronics
Cana Cabinetry
Coyote Manufacturing
XTCrbn
Florida
Castaway Customs
Diamondback Marine
GG Schmitt & Sons
Great Lakes Boat Top
Inland Plywood
Marine Accessories Corporation
Marine Concepts/Design Concepts
Marine Design & Engineering Center
SeaDek
TACO Marine
South Carolina
EM&C
TACO Marine
Alabama
Baymont
Cana Cabinetry
Custom Vinyls
Indiana Transport
Ubique Technologies
Indiana
Adorn
AIA
Alpha Systems
AMC/MSM
Betterway
BH Electronics
Cana Cabinetry
Carrera Custom Painting
Collins & Company
Dehco
Dowco
Elkhart Composites
Foremost
Frontline Manufacturing
Fusion Wood Products
Gravure Ink
Indiana Marine Products
Indiana Transport
Interior Composites Plus
KRA International
LaSalle Bristol*
LS Manufacturing
Maple City Woodworking
Medallion Plastics
Middlebury Hardwoods
Mike’s Custom Painting
Millennium Paint
Nickell Moulding
Parkland Plastics
Patrick Distribution*
Patrick Marine Transportation
Precision Painting
Premier Concepts
Premium Paint
QAV
RecPro
Revel
SEI Manufacturing
Sigma Wire
Structural Composites of Indiana
Synergy RV Transport
The Studio
Transhield
Tumacs Covers
Williamsburg Furniture
Williamsburg Marine
Wire Design
* Additional distribution centers across the U.S.: LaSalle Bristol: Alabama, Arizona, California, Florida, Georgia, Idaho, Minnesota, North Carolina, Oregon, Pennsylvania, Tennessee, Texas. Patrick
Distribution: Alabama, California, Georgia, Oregon, Pennsylvania, Texas. The Progressive Group: Arizona, Colorado, Florida, Georgia, Maryland, Michigan, Kansas, Utah, Washington.
Annual Report • 2024
Patrick Industries, Inc.
Corporate Office
107 W. Franklin Street
Elkhart, IN 46516
(800) 331-2151 / (574) 294-7511
www.patrickind.com