PATRICK INDUSTRIES INC - Quarter Report: 2025 March (Form 10-Q)

Stock repurchases under buyback program() Cash dividends paid to shareholders()()Taxes paid for share-based payment arrangements()()Payment of contingent consideration from business acquisitions()() ))() )()() $

See accompanying Notes to Condensed Consolidated Financial Statements.

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PATRICK INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1.

For further information, refer to Patrick’s Audited Consolidated Financial Statements and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

Summary of Significant Accounting Policies

A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

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% %

Customer 2

% %

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NOTE 2.

$ $ Marine Powersports Manufactured Housing Industrial Total$ $ $

First Quarter Ended March 31, 2024

($ in thousands)

Manufacturing

Distribution

Total

Market type:

Recreational Vehicle

Marine

Powersports

Manufactured Housing

Industrial

Total

NOTE 3.

$ Work in process Finished goods Less: reserve for inventory excess and obsolescence()() Total manufactured goods, net Materials purchased for resale (distribution products) Less: reserve for inventory excess and obsolescence()() Total materials purchased for resale (distribution products), net Total inventories$ $

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NOTE 4.

$ $ Acquisitions Adjustments to preliminary purchase price allocations

Balance at March 30, 2025

$ $ $ $ Non-compete agreements Patents Trademarks Intangible assets, gross Less: accumulated amortizationCustomer relationships()()Non-compete agreements()()Patents()()Intangible assets, net$ $ $ $ Additions Amortization()()()Adjustments to preliminary purchase price allocations

Balance at March 30, 2025

$ $ $

NOTE 5.

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acquisitions in the first three months of 2025 (the "2025 Acquisitions"). Acquisition-related costs associated with the 2025 Acquisitions were immaterial. For the first quarter ended March 30, 2025, net sales included in the Company's condensed consolidated statements of income related to the 2025 Acquisitions were $ million and operating losses were $ million. Assets acquired and liabilities assumed in the acquisitions were recorded on the Company's condensed 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.

The Company completed acquisitions in the first three months of 2024. Acquisition-related costs associated with the acquisitions completed in the first three months of 2024 were approximately $ million. For the first quarter ended March 31, 2024, net sales included in the Company's condensed consolidated statements of income related to the acquisitions completed in such quarter were $ million, and operating income was $ million.

In connection with certain acquisitions, the Company is required to pay additional cash consideration 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.

$ Additions Fair value adjustments() Settlements()()Fair value at end of period$ $

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:

($ in thousands)

March 30, 2025

December 31, 2024

Accrued liabilities

Other long-term liabilities

Total fair value of contingent consideration

Maximum amount of contingent consideration

2025 Acquisitions

The Company completed acquisitions in the first three months ended March 30, 2025. Total cash consideration for the 2025 Acquisitions were approximately $ million, plus working capital holdbacks and contingent consideration over a less than period based on future performance. As the Company finalizes the fair value of the acquired assets and assumed liabilities, additional purchase price adjustments may be recorded during the measurement period.

2024 Acquisitions

acquisitions in the year ended December 31, 2024, including the following previously announced acquisitions (collectively, the “2024 Acquisitions”):

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Inclusive of acquisitions not discussed above, total cash consideration for the 2024 Acquisitions was approximately $ million, plus contingent consideration over a period based on future performance. Purchase price allocations and all valuation activities in connection with the 2024 Acquisitions have been finalized for four of the 2024 Acquisitions. Changes to preliminary purchase accounting estimates recorded in the three months ended March 30, 2025 related to the 2024 Acquisitions were immaterial.

$ $ $ Working capital holdback and other, net

Contingent consideration (1)

Total consideration$ $ $ $ Assets Acquired:Trade receivables$ $ $ $ Inventories Prepaid expenses & other Property, plant & equipment Operating lease right-of-use assets Identifiable intangible assets:Customer relationships Non-compete agreements Patents and developed technology Trademarks Liabilities Assumed:Current portion of operating lease obligations ()()()Accounts payable & accrued liabilities()()()()Operating lease obligations ()()()Deferred tax liabilities () ()Total fair value of net assets acquired

Goodwill (2)

(1)The prior year period reflects the impact of the three-for-two stock split paid in December 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details.

An immaterial amount of securities were not included in the computation of diluted earnings per common share as they are considered anti-dilutive for the periods presented.

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NOTE 8.

$ Revolver due 2029

% convertible notes due 2028

% senior notes due 2029

% senior notes due 2032

Total debt Less: convertible notes deferred financing costs, net()()Less: term loan deferred financing costs, net()()Less: senior notes deferred financing costs, net()()Less: current maturities of long-term debt()()Total long-term debt, less current maturities, net$ $

As of March 30, 2025, the Company maintained a senior secured credit facility comprised of a $ million revolving credit facility (the "Revolver due 2029") and a $ million term loan (the "Term Loan due 2029") and together with the Revolver due 2029, (the "2024 Credit Facility").

The interest rate for incremental borrowings under the Revolver due 2029 as of March 30, 2025 was the Secured Overnight Financing Rate (“SOFR”) plus % (or %) for the SOFR-based option. The fee payable on committed but unused portions of the Revolver due 2029 was % as of March 30, 2025.

Total cash interest paid for the first quarter of 2025 and 2024 was $ million and $ million, respectively.

Conditional Conversion Feature of the % Convertible Senior Notes due 2028

As of March 30, 2025, the conditional conversion feature of the % Convertible Senior Notes due 2028 (the “% Convertible Notes”) related to the price of our common stock equaling or exceeding % of the conversion price was triggered. As a result, the % Convertible Notes are convertible, in whole or in part, at the option of the holders from April 1, 2025 to June 30, 2025. Whether the % 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 % Convertible Notes were also convertible from January 1, 2025 to March 31, 2025 based on satisfying this condition in the prior calendar quarter. The % Convertible Notes converted during the period from January 1, 2025 to March 31, 2025 were immaterial. 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.

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NOTE 9.

% convertible notes due 2028 (1)$ $ $ $ $ $

% senior notes due 2029 (1)

$ $ $ $ $ $

% senior notes due 2032 (1)

$ $ $ $ $ $

Term loan due 2029 (1) (2)

$ $ $ $ $ $

Revolver due 2029 (1) (2)

$ $ $ $ $ $

Contingent consideration (3)

$ $ $ $ $ $

(1)The amounts of these notes listed above are the fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of March 30, 2025 and December 31, 2024 at carrying value.

(2)The carrying amounts of our term loan and revolving credit facility approximate fair value as of March 30, 2025 and December 31, 2024 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 5 "Acquisitions".

NOTE 10.

% and %, respectively. The first quarter of 2025 and 2024 tax rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $ million and $ million, respectively.

Cash paid for income taxes, net of refunds, was $ million and $ million in the first quarter of 2025 and 2024, respectively.

NOTE 11.

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.

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$ $ Cost of goods sold Gross profit$ $ $ Operating expenses Operating income$ $ $ Reconciliation of reportable segment operating income to consolidated income before income tax:Selling, general and administrative Amortization of intangible assets Interest expense, net Elimination of inter-segment profits

NOTE 13.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations, financial condition and cash flows of Patrick Industries, Inc. This MD&A should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on page 28 of this Report. The Company undertakes no obligation to update these forward-looking statements.

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

First Quarter 2025 Financial Overview

Recreational Vehicle ("RV") Industry

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 industry is our primary market and comprised 48% and 45% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively. Net sales to the RV industry in the first quarter of 2025 increased 14% compared to the prior year period.

According to the RV Industry Association ("RVIA"), RV wholesale unit shipments in the first quarter of 2025 totaled approximately 97,800 units, an increase of 14% from approximately 85,900 units in the first quarter of 2024. While we estimate RV industry retail unit sales in the first quarter of 2025 decreased by approximately 7% compared to the first quarter of 2024, we estimate that wholesale unit shipments exceeded industry retail unit sales in the first quarter of 2025 as RV OEMs increased production volumes in anticipation of higher retail demand later in the year.

Marine Industry

The Company’s sales to the marine industry are primarily focused on the powerboat sector of the market which is comprised of four main categories: fiberglass, aluminum fishing, pontoon and ski & wake.

Net sales to the marine industry comprised approximately 15% and 17% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively. Net sales to the marine industry decreased 4% compared to the prior year period.

Our marine revenue is generally correlated to marine industry wholesale powerboat unit shipments. According to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments decreased 10% in the first quarter of 2025, compared to the prior year period.

We estimate that marine industry retail powerboat unit sales decreased 5% in the first quarter of 2025 compared to the prior year period, primarily due to the current macroeconomic environment faced by the end consumer, such as economic uncertainty and elevated interest rates.

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Powersports Industry

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. 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.

Net sales to the powersports industry comprised 8% and 9% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively. Net sales to the powersports industry in the first quarter of 2025 decreased 2% compared to the prior year period.

Manufactured Housing ("MH") Industry

The Company’s products for this market are sold primarily to major manufacturers of manufactured homes, other OEMs, and to a lesser extent, manufacturers in adjacent industries. Factors that may favorably impact demand in this industry include jobs growth, consumer confidence, favorable changes in financing regulations, a narrowing in the difference between interest rates on MH loans and mortgages on traditional residential "stick-built" housing, and any improvement in conditions in the asset-backed securities markets for manufactured housing loans.

Net sales to the MH industry comprised 17% and 16% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively. Net sales to the MH industry in the first quarter ended March 30, 2025 increased 11% compared to the prior year period. According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments increased 6% in the first quarter of 2025 compared to the prior year period, primarily driven by OEMs increasing production in first quarter of 2025 in anticipation of an increase 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 12% and 13% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively. Net sales to the industrial market in the first quarter ended March 30, 2025 increased 2% compared to the prior year period. Overall, our revenues in these markets are focused on residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that, in general, approximately 75% to 85% of our industrial business is directly tied to the residential housing market, with the remaining 15% to 25% tied to the non-residential and commercial markets.

According to the U.S. Census Bureau, combined new housing starts decreased 2% in the first quarter of 2025 compared to the prior year quarter, reflecting a decrease in single-family housing starts of 6%, partially offset by an increase in multifamily housing starts of 11%. 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.

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RESULTS OF OPERATIONS

First Quarter Ended March 30, 2025 Compared to First Quarter Ended March 31, 2024

The following table sets forth the percentage relationship to net sales of certain items on the Company’s Condensed Consolidated Statements of Income.


	First Quarter Ended								Amount Change		% Change
($ in thousands)	March 30, 2025				March 31, 2024
Net sales	$	1,003,420	100.0	%	$	933,492	100.0	%	$	69,928	7	%
Cost of goods sold	774,829		77.2	%	728,637		78.1	%	46,192		6	%
Gross profit	228,591		22.8	%	204,855		21.9	%	23,736		12	%
Warehouse and delivery expenses	44,582		4.4	%	37,449		4.0	%	7,133		19	%
Selling, general and administrative expenses	93,931		9.4	%	85,246		9.1	%	8,685		10	%
Amortization of intangible assets	24,509		2.4	%	22,818		2.4	%	1,691		7	%
Operating income	65,569		6.5	%	59,342		6.4	%	6,227		10	%
Interest expense, net	19,112		1.9	%	20,090		2.2	%	(978)		(5)	%
Income taxes	8,219		0.8	%	4,159		0.4	%	4,060		98	%
Net income	$	38,238	3.8	%	$	35,093	3.8	%	$	3,145	9	%

Net Sales. Net sales in the first quarter of 2025 increased $69.9 million, or 7%, to $1.00 billion compared to $933.5 million in the first quarter of 2024. Net sales in the first quarter of 2025 increased due to increased sales to the RV, MH and industrial markets, partially offset by decreased sales to the marine and powersports markets. Sales to the RV market increased $57.9 million, or 14%, compared to the prior year quarter, primarily due to an increase in estimated wholesale shipments of approximately 14%. Sales to the MH market increased $17.1 million, or 11%, compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%. Sales to the industrial market increased $2.9 million, or 2%, compared to the prior year quarter, which is attributable to product mix shifts by certain customers. Sales to the marine market decreased $6.3 million, or 4%, primarily attributable to a decrease in estimated powerboat wholesale units of 10% compared to the prior year quarter. Sales to the powersports market decreased $1.7 million, or 2%, compared to the prior year quarter.

Revenue in the first quarter of 2025 attributable to acquisitions completed in the first quarter of 2025 was $4.3 million. Revenue in the first quarter of 2024 attributable to acquisitions completed in the first three months of 2024 was $58.1 million.

Goods Sold. Cost of goods sold increased $46.2 million, or 6%, to $774.8 million in the first quarter of 2025 compared to $728.6 million in the first quarter of 2024. As a percentage of net sales, cost of goods sold decreased 90 basis points in the first quarter of 2025 to 77.2% compared to 78.1% in the first quarter of 2024. The decrease in cost of goods sold as a percentage of net sales in the first quarter of 2025 primarily reflected a 60 basis point decrease in labor as a percentage of net sales, 20 basis point decrease in material as a percentage of net sales and 10 basis point decrease in overhead as a percentage of net sales.

Gross Profit. Gross profit increased $23.7 million, or 12%, to $228.6 million in the first quarter of 2025 compared to $204.9 million in the prior year period. As a percentage of net sales, gross profit increased 90 basis points to 22.8% in the first quarter of 2025 compared to 21.9% in the prior year period.

The increase in gross profit as a percentage of net sales in the first quarter of 2025 compared to the same period in 2024 reflects the impact of the factors discussed above under "Cost of Goods Sold".

Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $7.1 million, or 19%, to $44.6 million in the first quarter of 2025 compared to $37.4 million in the first quarter of 2024. As a percentage of net sales, warehouse and delivery expenses increased 40 basis points to 4.4% in first quarter of 2025 compared to 4.0% the first quarter of 2024.

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The increase in warehouse and delivery expenses in the first quarter of 2025 compared to the same period in 2024 is primarily attributable to the increase in sales. The increase in warehouse and delivery expenses as a percentage of net sales in the first quarter of 2025 compared to the same period in 2024 is primarily related to higher freight costs.

Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased $8.7 million, or 10%, to $93.9 million in the first quarter of 2025 compared to $85.2 million in the prior year quarter. The increase in SG&A expenses in the first quarter of 2025 compared to the prior year quarter is primarily related to increased wages, technology expenses, loss on sale of fixed assets, and insurance expenses, partially offset by decreased professional fees. In the first quarter of 2025, SG&A expenses as a percentage of net sales increased 30 basis points to 9.4% compared to 9.1% in the first quarter of 2024.

Amortization of Intangible Assets. Amortization of intangible assets increased $1.7 million, or 7%, to $24.5 million in the first quarter of 2025 compared to $22.8 million in the prior year quarter, primarily reflecting the impact of the acquisitions completed in 2024.

Operating Income. Operating income increased $6.3 million, or 10%, to $65.6 million in the first quarter of 2025 compared to $59.3 million in the first quarter of 2024. As a percentage of net sales, operating income increased 10 basis points to 6.5% in the first quarter of 2025 compared to 6.4% in the same period in 2024. The increase in operating income is primarily attributable to increased net sales and the items discussed above. The increase to operating income as a percentage of net sales is primarily attributable to the items discussed above.

Interest Expense, Net. Interest expense decreased $1.0 million, or 5%, to $19.1 million in the first quarter of 2025 compared to $20.1 million in the prior year quarter. The decrease primarily reflects a lower average interest rate on our outstanding debt compared to the prior year quarter.

Income Taxes. Income tax expense increased $4.0 million in the first quarter of 2025 to $8.2 million compared to $4.2 million in the prior year quarter.

The effective tax rate was 17.7% in the first quarter of 2025 and 10.6% in the first quarter of 2024. The increase in income tax expense in the first quarter of 2025 compared to the same period in 2024 is primarily related to decreased excess tax benefits on share-based compensation and an increase in income before taxes.

SEGMENT REPORTING

The Company's reportable segments, Manufacturing and Distribution, are based on its method of internal reporting. The Company regularly evaluates the performance of the Manufacturing and Distribution segments and allocates resources to them based on a variety of indicators including sales and operating income. The Company does not measure profitability at the customer end market (RV, marine, powersports, MH and industrial) level.

First Quarter Ended March 30, 2025 Compared to 2024

General

In the discussion that follows, sales attributable to the Company’s reportable segments include inter-segment sales and gross profit includes the impact of inter-segment operating activity.

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The table below presents information about the sales, gross profit and operating income of the Company’s reportable segments. A reconciliation of consolidated net sales and operating income is presented in Note 11 "Segment Information" of the Notes to Condensed Consolidated Financial Statements.


	First Quarter Ended				Amount Change		% Change
($ in thousands)	March 30, 2025		March 31, 2024
Sales
Manufacturing	$	754,487	$	714,510	$	39,977	6%
Distribution	$	254,086	$	238,502	$	15,584	7%
Gross Profit
Manufacturing	$	169,391	$	156,664	$	12,727	8%
Distribution	$	61,701	$	50,057	$	11,644	23%
Operating Income
Manufacturing	$	98,121	$	87,450	$	10,671	12%
Distribution	$	25,000	$	23,720	$	1,280	5%

Manufacturing

Sales. Manufacturing segment sales increased $40.0 million, or 6%, to $754.5 million in the first quarter of 2025 compared to $714.5 million in the prior year quarter. The manufacturing segment accounted for approximately 75% of the Company’s sales for both the first quarter of 2025 and 2024.

Manufacturing segment sales in the first quarter of 2025 compared to the prior year quarter increased due to increased sales to the RV, MH, and industrial markets, partially offset by decreased sales to the marine and powersports markets. Sales to the RV market increased 19%, primarily attributable to an increase in estimated wholesale units of 14% compared to the prior year quarter. Sales to the MH market increased 10% compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%. Sales to the industrial market increased 1% compared to the prior year quarter. Sales to the marine market decreased 5%, primarily attributable to a decrease in estimated powerboat wholesale unit shipments of 10% compared to the prior year quarter. Sales to the powersports market decreased 3% compared to the prior year quarter.

Manufacturing segment sales in the first quarter of 2025 attributable to acquisitions completed in the first quarter of 2025 were $4.3 million. Manufacturing segment sales in the first quarter of 2024 attributable to acquisitions completed in the first quarter of 2024 were $ million.

Gross Profit. Manufacturing segment gross profit increased $12.7 million, or 8%, to $169.4 million in the first quarter of 2025 compared to $156.7 million in the first quarter of 2024. As a percentage of sales, gross profit increased 60 basis points to 22.5% in the first quarter of 2025 compared to 21.9% in the prior year quarter. The increase in gross profit as a percentage of sales in the first quarter of 2025 compared to the same quarter in 2024 is attributable to decreased labor and manufacturing costs as a percentage of sales, partially offset by increased material costs as a percentage of sales.

Operating Income. Operating income increased $10.7 million, or 12%, to $98.1 million in the first quarter of 2025 compared to $87.5 million in the prior year quarter. The overall increase in operating income in the first quarter of 2025 primarily reflects the items discussed above.

Distribution

Sales. Distribution segment sales increased $15.6 million, or 7%, to $254.1 million in the first quarter of 2025 compared to $238.5 million in the prior year quarter. This segment accounted for approximately 25% of the Company’s sales for both the first quarter of 2025 and 2024.

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Distribution segment sales in the first quarter of 2025 compared to the first quarter of 2024 increased due to increased sales to each of our markets. Sales to the MH market increased 12% compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%. Sales to the RV market increased 3% compared to the prior year quarter. Sales to the industrial market increased 17% compared to the prior year quarter. Sales to the marine market increased 4% compared to the prior year quarter, primarily attributable to product mix shifts by certain customers. Sales to the powersports market increased 37% compared to the prior year quarter, primarily attributable to product mix shifts by certain customers.

Gross Profit. Distribution segment gross profit increased $11.6 million, or 23%, to $61.7 million in the first quarter of 2025 compared to $50.1 million in the first quarter of 2024. As a percentage of sales, gross profit increased 330 basis points to 24.3% in the first quarter of 2025 compared to 21.0% in the prior year quarter. The increase in gross profit as a percentage of sales in the first quarter of 2025 compared to the same quarter in 2024 is attributable to decreased labor and material costs as a percentage of sales.

Operating Income. Operating income increased $1.3 million, or 5%, to $25.0 million in the first quarter of 2025 compared to $23.7 million in the prior year quarter. The increase in operating income in the first quarter of 2025 primary reflects the impact of the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are cash flows from operation, available cash reserves and borrowing capacity available under the revolving credit and term loan facility (the “2024 Credit Facility”), as discussed in Note 8 "Debt" of the Notes to Condensed Consolidated Financial Statements. Our liquidity as of March 30, 2025 consisted of cash and cash equivalents of $86.6 million and $658.0 million of availability under the 2024 Credit Facility, net of $7.0 million of outstanding letters of credit.

As of March 30, 2025, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under the 2024 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on the Company's current cash flow budgets and forecast of short-term and long-term liquidity needs.

Principal uses of cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company’s common stock, among others.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, marine, powersports, MH and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

In the first three months of 2025, the Company utilized available borrowing capacity under the Revolver due 2029 and cash on hand to fund two acquisitions, as discussed in Note 5 "Acquisitions" of the Notes to Condensed Consolidated Financial Statements.

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As of and for the reporting period ended March 30, 2025, the Company was in compliance with its financial covenants as required under the terms of the credit agreement that established the 2024 Credit Facility (the “2024 Credit Agreement”). The required maximum consolidated secured net leverage ratio and the required minimum consolidated interest coverage ratio, as such ratios are defined in the 2024 Credit Agreement, compared to the actual amounts as of March 30, 2025 and for the fiscal period then ended are as follows:


	Required	Actual
Consolidated secured net leverage ratio (12-month period)	2.75	0.43
Consolidated interest coverage ratio (12-month period)	3.00	6.70

In addition, as of March 30, 2025, the Company's consolidated total net leverage ratio (12-month period) was 2.74. While this ratio is not a covenant under the 2024 Credit Agreement, it is used in determining the applicable borrowing margin under the 2024 Credit Agreement.

Cash Flows

Operating Activities: Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for certain non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities increased $4.9 million, or 14%, to $40.1 million in the first three months of 2025 compared to $35.2 million in the first three months of 2024. The increase in operating cash flows is primarily attributable to a $5.0 million decrease in operating assets and liabilities, net of business acquisitions, as a use of cash, increased net income, depreciation and amortization, and losses on sale of property plant and equipment of $3.1 million, $2.3 million and $2.0 million, respectively, partially offset by decreased deferred income taxes of $5.7 million compared to the first three months of 2024.

Investing Activities: Net cash used in investing activities decreased $304.6 million to $66.1 million in the first three months of 2025 compared to $370.7 million in the first three months of 2024 due to a decrease in cash used in business acquisitions, which were $47.6 million in the three months of 2025 compared to $329.6 million in the first three months of 2024, primarily due to the acquisition of Sportech in January 2024.

Financing Activities: Net cash provided by financing activities was $79.0 million in the first three months of 2025 compared to $341.7 million in the first three months of 2024, primarily due to a decrease in net borrowings under our revolving credit facility of $265 million, to $110.0 million in the first three months of 2025 from $375.0 million in the first three months of 2024.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 1, “Basis of Presentation and Significant Accounting Policies” to the accompanying Condensed Consolidated Financial Statements in Item 1.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

OTHER

Seasonality

Manufacturing operations in the RV, marine, powersports and MH industries historically have been seasonal and at their highest levels when the weather is moderate. Accordingly, the Company’s sales and profits had generally been the highest in the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August-September

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timeframe and marine open houses in the December-February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. In addition, recent seasonal industry trends have been, and future trends may be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national and regional economic conditions and consumer confidence on retail sales of RVs, powersports and marine units and other products for which the Company sells its components, as well as fluctuations in RV, powersports and marine dealer inventories, increased volatility in demand from RV, powersports and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick Industries, Inc. and other matters from time to time and desires to take advantage of the “safe harbor” which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as other statements contained in this quarterly report and statements contained in future filings with the Securities and Exchange Commission (“SEC”), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from those set forth in such forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements. Information about certain risks that could affect our business and cause actual results to differ from those expressed or implied in the forward-looking statements are contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and in the Company's Forms 10-Q for subsequent quarterly periods, which are filed with the SEC and are available on the SEC’s website at www.sec.gov.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Debt Obligations

As of March 30, 2025, our total debt obligations under our 2024 Credit Agreement were under Secured Overnight Financing Rate ("SOFR")-based interest rates. A 100-basis point increase in the underlying SOFR rates would result in additional annual interest cost of approximately $3.33 million, assuming average borrowings during 2025, including the Revolver due 2029 and Term Loan due 2029, subject to variable rates were equal to the amount of such borrowings outstanding at March 30, 2025, 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 2025. 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.

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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 described in Note 9 "Derivative Financial Instruments" included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 20, 2025.

ITEM 4. 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 the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the first quarter ended March 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Items 3 and 4 of Part II are not applicable and have been omitted.

ITEM 1. 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 13 "Commitments and Contingencies" to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Recent Sales of Unregistered Securities. None.

(b) Use of Proceeds. None.

The following table summarizes our purchases of common stock in the three months ended March 30, 2025.


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)
January 1 - January 26, 2025	—	$	—	—	$	200,000,000
January 27 - March 2, 2025	86,300	$	96.46	—	$	200,000,000
March 3 - March 30, 2025	102,862	$	85.34	99,763	$	191,500,000
	189,162			99,763

(1)Amount includes 89,399 shares of common stock purchased by the Company in the period for the purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards and the exercise of stock options and stock appreciation rights held by the employees.

(2)See Note 12 "Stock Repurchase Programs" of the Notes to Condensed Consolidated Financial Statements for additional information about the Company's stock repurchase program.

ITEM 5. OTHER INFORMATION

During the three months ended March 30, 2025, none of our directors or executive officers or any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement" (as defined in Item 408(c) of Regulation S-K).

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ITEM 6. EXHIBITS


Exhibits (1)			Description
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 Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer
101			Interactive Data Files. The following materials are filed electronically with this Quarterly Report on Form 10-Q:


			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 (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements 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.



Date: May 8, 2025	By:	/s/ Andrew C. Roeder
		Andrew C. Roeder
		Executive Vice President - Finance, Chief Financial Officer, and Treasurer



Date: May 8, 2025	By:	/s/ Matthew S. Filer
		Matthew S. Filer
		Senior Vice President - Finance and Chief Accounting Officer

PATRICK INDUSTRIES INC - Quarter Report: 2025 March (Form 10-Q)

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