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What changed in PATRICK INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PATRICK INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+203 added−209 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-24)

Top changes in PATRICK INDUSTRIES INC's 2023 10-K

203 paragraphs added · 209 removed · 173 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+19 added−14 removed38 unchanged
Biggest changeIn addition, recent seasonal industry trends have been, and future trends may be, different than in prior years due to the impact of COVID-19, 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. 10 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.
Biggest changeIn 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.
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 specify exclusivity in certain geographic areas, pricing structures and rebate agreements among other terms.
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. 9 Raw Materials Patrick has arrangements with certain suppliers that specify exclusivity in certain geographic areas, pricing structures and rebate agreements among other terms.
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. 8 The Studio The Company's Design/Innovation Center and Showroom, The Studio, is located in Elkhart, Indiana.
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.
Seasonality Manufacturing operations in the RV, 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.
Seasonality Manufacturing operations in the RV, 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 10 quarter and lowest in the fourth quarter.
Nemeth previously served as President of the Company from January 2016 to July 2021, Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015, and Secretary-Treasurer from 2002 to 2015. Mr. Nemeth has over 31 years of manufactured housing, recreational vehicle, marine and industrial experience in various financial and managerial capacities. Jeffrey M.
Nemeth previously served as President of the Company from January 2016 to July 2021, Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015, and Secretary-Treasurer from 2002 to 2015. Mr. Nemeth has over 32 years of manufactured housing, recreational vehicle, marine and industrial experience in various financial and managerial capacities. Jeffrey M.
Prior to that, he was the Chief Operating Officer of the Company from March 2013 to September 2016, and Vice President of Sales for the Midwest from August 2009 to December 2011. Mr. Rodino has over 29 years of experience in serving the recreational vehicle, manufactured housing, marine and industrial markets. Kip B.
Prior to that, he was the Chief Operating Officer of the Company from March 2013 to September 2016, and Vice President of Sales for the Midwest from August 2009 to December 2011. Mr. Rodino has over 30 years of experience in serving the recreational vehicle, manufactured housing, marine and industrial markets. Kip B.
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 26 years of experience serving the recreational vehicle, marine, manufactured housing, industrial and automotive markets.
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 27 years of experience serving the recreational vehicle, marine, manufactured housing, industrial and automotive markets.
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 25 years of experience in multiple industries, 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.
For additional information on the Company's efforts for sustainability and environmental quality, please see our 2022 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.
For additional information on the Company's efforts for sustainability and environmental quality, please see our 2023 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.
For additional information on the Company's human capital management, please see our 2022 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.
For additional information on the Company's human capital management, please see our 2023 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.
Duthie was appointed as Executive Vice President, Chief Legal Officer and Secretary in May 2021. Mr. Duthie joined the Company as General Counsel in November 2020. Prior to joining Patrick, Mr. Duthie was a partner with Barnes & Thornburg LLP, and practiced law at the firm from 2000 to 2002 and 2007 to 2020. As a corporate lawyer, Mr.
Joel D. Duthie was appointed as Executive Vice President, Chief Legal Officer and Secretary in May 2021. Mr. Duthie joined the Company as General Counsel in November 2020. Prior to joining Patrick, Mr. Duthie was a partner with Barnes & Thornburg LLP, and practiced law at the firm from 2000 to 2002 and 2007 to 2020.
Company Overview Patrick i s a leading component solutions provider for the recreational vehicle ("RV"), marine, manufactured housing ("MH") and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets.
Company Overview Patrick is a leading component solutions provider for the recreational vehicle ("RV"), marine, manufactured housing ("MH") and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets.
Financial information about these operating segments is included in Note 17 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.
Financial information about these operating segments is included in Note 16 "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.
Marketing and Distribution As of December 31, 2022, 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.
Marketing and Distribution As of December 31, 2023, the Company had approximately 4,400 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.
Patrick believes that returning capital to shareholders is an important part of its capital allocation strategy, and during 2022 we returned $110 million to shareholders through our regular quarterly dividend and opportunistic share repurchases. The Company was incorporated in 1959 in Indiana.
Patrick believes that returning capital to shareholders is an important part of its capital allocation strategy, and during 2023 we returned $61 million to shareholders through our regular quarterly dividend and opportunistic share repurchases. The Company was incorporated in 1959 in Indiana.
The Company’s net sales by market are as follows: 2022 2021 RV 53 % 59 % Marine 21 % 16 % MH 15 % 14 % Industrial 11 % 11 % 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 Company’s net sales by market are as follows: 2023 2022 RV 43 % 53 % Marine 27 % 21 % MH 16 % 15 % Industrial 14 % 11 % 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.
Over the last three years, we have executed on a number of new product initiatives and completed acquisitions for approximately $1.09 billion in total consideration that directly complement our core competencies and existing products, expand our presence in our primary end markets, and position us to enter new end markets.
Over the last three years, we have executed on a number of new product initiatives and completed acquisitions for approximately $804 million in total consideration that directly complement our core competencies and existing products, expand our presence in our primary end markets, and position us to enter new end markets.
Demographic and ownership trends continue to point to favorable market growth for the long term in the RV market, as we believe that there has been a shift toward outdoor, nature-based tourism activities in a post-COVID environment, with younger and more diverse campers across different socio-economic groups.
Demographic and ownership trends continue to point to favorable market growth for the long term in the RV market, as we believe that there has been a shift toward outdoor, nature-based tourism activities in a post-COVID environment, with younger and more diverse campers across different socio-economic groups. According to the 2023 Kampgrounds of America, Inc.
The Company’s sales to the various businesses of Forest River and Thor, on a combined basis, accounted for 38%, 42% and 39% of our consolidated net sales, for the years ended December 31, 2022, 2021 and 2020 , respectively.
The Company’s sales to the various businesses of Forest River and Thor, on a combined basis, accounted for 29%, 38% and 42% of our consolidated net sales, for the years ended December 31, 2023, 2022 and 2021 , respectively.
In addition, per SSI, marine powerboat retail unit shipments decreased approximately 15% in 2022 compared to 2021, while marine wholesale unit shipments, according to Company estimates based on NMMA data, increased approximatel y 7% in 2022 compared to 2021. Additional information about the Company’s sales to the marine industry is included in the MD&A of this Form 10-K.
In addition, per SSI, marine powerboat retail unit shipments decreased approximately 5% in 2023 compared to 2022, while marine wholesale unit shipments, according to Company estimates based on NMMA data, increased approximatel y 2% in 2023 compared to 2022. Additional information about the Company’s sales to the marine industry is included in the MD&A of this Form 10-K.
At December 31, 2022, our team members totaled approximately 11,000, of which 83% are hourly team members who serve our customers by producing and distributing products in our RV, marine, MH and industrial end markets, and 17% who are salaried employees who manage the resources, capital allocations, business decisions, and customer relationships of our end markets.
As of December 31, 2023, our team members totaled approximately 10,000, of which 83% are hourly team members who serve our customers by producing and distributing products in our RV, marine, MH and industrial end markets, and 17% who are salaried employees who manage the resources, capital allocations, business decisions, and customer relationships of our end markets.
Duthie Executive Vice President-Chief Legal Officer and Secretary 48 Stacey Amundson Executive Vice President-Human Resources and Chief Human Resources Officer 56 Andy L. Nemeth was appointed Chief Executive Officer of the Company in January 2020. Mr.
Duthie Executive Vice President-Chief Legal Officer and Secretary 49 Stacey Amundson Executive Vice President-Human Resources and Chief Human Resources Officer 57 Andy L. Nemeth was appointed Chief Executive Officer of the Company in January 2020. Mr.
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 the unique pressures and uncertainties during the COVID-19 pandemic; • 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; • 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; • 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; • Patrick Connect, our social media platform to share ongoing events, communicate leadership messages, share success stories, and provide a platform of mutual communication; and • 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 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; • 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.
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 2022.
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 75% and 25%, respectively, of the Company’s consolidated net sales for 2023.
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 Amundson was appointed Executive Vice President, Human Resources and Chief Human Resources Officer in May 2022. Prior to joining Patrick in February 2022, Ms.
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. 12 Stacey Amundson was appointed Executive Vice President, Human Resources and Chief Human Resources Officer in May 2022.
Manufactured Housing The Company’s manufactured housing products 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 produced approximately 75% of MH market retail unit shipments in 2022 per SSI.
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 produced approximately 80% of MH market retail unit shipments in 2023 per SSI.
Patrick took steps to mitigate these supply chain constraints by carrying increased levels of inventory and partnering with suppliers to help secure adequate supplies of materials. In the second half of 2022, the Company began to reduce its inventory in alignment with lower production levels.
Patrick took steps to mitigate these supply chain constraints by carrying increased levels of inventory and partnering with suppliers to help secure adequate supplies of materials. Beginning in the second half of 2022 and throughout 2023, the Company reduced its inventory in alignment with lower OEM production levels.
The Company operates through a nationwide network that includes, as of December 31, 2022, 185 manufacturing plants and 67 warehouse and distribution facilities located in 23 states, with a small presence in Mexico, China and Canada.
The Company operates through a nationwide network that includes, as of December 31, 2023, 179 manufacturing plants and 62 warehouse and distribution facilities located in 23 states, with a small presence in Mexico, China and Canada.
The organization is built on our six core foundational values of being BETTER Together: • B alance - We work to build a healthy work environment that encourages excellence, happiness, and peace in both our work and our home life. • E xcellence - We strive to meet the highest possible standards of achievement in our work and our relationships. • T rust - We do what we say we will do every time - and communicate with all stakeholders if a commitment evolves. 11 • T eamwork - We challenge, encourage, equip, empower, and inspire the individuals we work with. • E mpowerment - We give our team the information, tools, and trust they need to grow as leaders and achieve results. • R espect - We treat our teammates and partners with the utmost honor and dignity.
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. 11 The organization is built on our six core foundational values of being BETTER Together: • B alance - We work to build a healthy work environment that encourages excellence, happiness, and peace in both our work and our home life. • E xcellence - We strive to meet the highest possible standards of achievement in our work and our relationships. • T rust - We do what we say we will do every time - and communicate with all stakeholders if a commitment evolves. • T eamwork - We challenge, encourage, equip, empower, and inspire the individuals we work with. • E mpowerment - We give our team the information, tools, and trust they need to grow as leaders and achieve results. • R espect - We treat our teammates and partners with the utmost honor and dignity.
Amundson served in a temporary capacity with Kerry Foods with a focus on providing HR leadership in the transformation of its North America operations model. Prior to this role, Ms.
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.
Based on current available data per SSI through December 2022, within the powerboat sector for 2022, fiberglass units a ccounted for approximately 38% of retail unit sales, aluminum 24%, pontoon 32% and ski & wake 6%.
Based on current available data per SSI through December 2023, within the powerboat sector for 2023, fiberglass units a ccounted for approximately 35% of retail unit sales, aluminum 25%, pontoon 34% and ski & wake 6%.
Approximate ly 9% , 8 %, and 12% of the Company's distribution segment’s sales were from products shipped directly from the suppliers to Patrick customers in 2022, 2021, and 2020, respectively.
Approximat ely 9%, 9%, and 8% of the Company's distribution segment’s sales were from products shipped directly from the suppliers to Patrick customers in 2023, 2022, and 2021, respectively.
Executive Officers of the Company The following table sets forth our executive officers as of January 1, 2023: Officer Position Age Andy L. Nemeth Chief Executive Officer 53 Jeffrey M. Rodino President 52 Kip B. Ellis Executive Vice President-Operations and Chief Operating Officer 48 Jacob R. Petkovich Executive Vice President-Finance, Chief Financial Officer, and Treasurer 49 Joel D.
Executive Officers of the Company The following table sets forth our executive officers as of January 1, 2024: Officer Position Age Andy L. Nemeth Chief Executive Officer 54 Jeffrey M. Rodino President 53 Kip B. Ellis Executive Vice President-Operations and Chief Operating Officer 49 Matthew S. Filer Interim Executive Vice President-Finance, Chief Financial Officer, and Treasurer 51 Joel D.
The Company makes available free of charge through the website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed with the SEC as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. 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 Other miscellaneous products RV painting Thermoformed shower surrounds Fiberglass and plastic components including front and rear caps and marine helms Polymer-based and other flooring Air handling products Marine hardware and accessories Treated, untreated and laminated plywood RV and marine 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 Other miscellaneous products 5 Primary Markets Patrick manufactures and distributes its products for four primary end markets.
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 . 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 Other miscellaneous products RV painting Thermoformed shower surrounds Fiberglass and plastic components including front and rear caps and marine helms Polymer-based and other flooring Air handling products Marine hardware and accessories Treated, untreated and laminated plywood RV and marine 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 Other miscellaneous products 5 Primary Markets Patrick manufactures and distributes its products for four primary end markets.
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. Patrick has no material licenses, franchises, or concessions and does not conduct material research and development activities.
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.
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.
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. 8 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.
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. 9 As a result of COVID-19 and other macroeconomic factors, the supply chain was previously impacted by increased commodity prices, decreased product availability, longer lead times and higher transportation costs, which resulted in increased raw material pricing from several of our suppliers.
As a result of COVID-19 and other macroeconomic factors, the supply chain was previously impacted by increased commodity prices, decreased product availability, longer lead times and higher transportation costs, which resulted in increased raw material pricing from several of our suppliers.
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. 7 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.
Patrick's sales to the industrial market generally lag new 7 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.
Amundson has led the human resource function with specialties in talent management, executive compensation, mergers and acquisitions, integrations, shared services, and large-scale organizational transformations. 12 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.
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.
We believe the Company's inventory levels remained elevated as of December 31, 2022 compared to historical norms, and we intend to 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.
We believe that, as of December 31, 2023, 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.
Capital expenditures for 2022 consisted of $80 million of investments primarily to provide more advanced manufacturing automation, replace and upgrade production equipment, and increase capacity to meet consumer needs and trends.
Capital expenditures for 2023 consisted of $59 million of investments primarily to provide more advanced manufacturing automation, replace and upgrade production equipment.
In 2022, according to the RVIA, towable and motorized unit shipments represented approximately 88% and 12%, respectively, of total RV industry wholesale shipments with w holesale unit shipments decreasing 20% in the towable sector and increasing 4% in the motorized sector in 2022 compared to the prior year.
In 2023, according to the Recreation Vehicle Industry Association ("RVIA"), towable and motorized unit shipments represented approximately 85% and 15%, respectively, of total RV industry wholesale shipments with wholesale unit shipments decreasing 39% in the towable sector and decreasing 21% in the motorized sector in 2023 compared to the prior year.
During 2022 , the Company completed acquisitions for approximately $250 million of total consideration and over the last three years has completed acquisitions for approximately $1.09 billion of total consideration. See Note 4 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of acquisitions completed by the Company in 2022, 2021 and 2020.
See Note 3 "Acquisitions" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of acquisitions completed by the Company in 2023, 2022 and 2021.
Although wholesale unit shipments have increased in the MH industry from a low of approximately 49,800 units in 2009 to approximately 112,900 units in 2022, they are still trending below historical levels.
Wholesale unit shipments have increased in the MH industry from a low of approximately 49,800 units in 2009 to approximately 89,200 units in 2023 after reaching a 15-year high of 112,900 units in 2022.
We believe that there is a direct correlation between the demand for our products and new residential housing construction and existing home remodeling activities.
Industrial Markets We estimate that approximately 70% to 80% of our industrial net sales in 2023 were associated with the U.S. residential housing market. We believe that there is a direct correlation between the demand for our products and new residential housing construction and existing home remodeling activities.
Despite supply chain disruptions, the MH industry expanded capacity during 2022 to meet current and future customer demand. We believe that MH units offer a cost-effective housing solution in a time when high home prices coupled with increased mortgage interest rates have negatively impacted housing affordability.
We believe that MH units offer a cost-effective housing solution in a time when high home prices coupled with increased mortgage interest rates have negatively impacted housing affordability. Additional information about the Company’s sales to the MH industry is included in the MD&A of this Form 10-K.
("Winnebago") which combined held approximately 87% of retail market share for towables an d 86% for motorized units for 2022 as reported per Statistical Surveys, Inc. ("SSI").
("Winnebago") which combined held approximately 86% of retail market share for towables an d 83% for motorized units for 2023 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.
Based on data from the Abstract, we estimate that the average age of pre-owned powerboats sold during 2021 was approximately 25 years compared to an average useful life of 30 years, while the estimated average age of pre-owned powerboats sold during 2020 was approximately 22 years.
Recreational Boating Statistical Abstract (the "Abstract"), U.S. retail expenditures on boats, engines, accessories, and related costs totaled approximately $59.3 billion in 2022, up approximately 4.4% from 2021. Based on data from the Abstract, we estimate that the average age of pre-owned powerboats sold during 2022 was approximately 23 years compared to an average useful life of 30 years.
Our sales in the short-term could be negatively impacted in the event any unforeseen negative circumstances were to affect our major suppliers.
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.
Consumer demand in the marine market is generally driven by the popularity of the recreational and leisure lifestyle and by economic conditions. As was the case with the RV industry, the marine industry experienced an increase in demand in 2021, primarily driven by new entrants into the market resulting from the post-COVID interest in outdoor leisure lifestyle activities.
Consumer demand in the marine market is generally driven by the popularity of the recreational and leisure lifestyle and by economic conditions.
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.
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. After a relatively flat first half of 2023, multifamily housing starts experienced significant softness in the second half of 2023.
Jacob R. Petkovich was appointed as Executive Vice President of Finance, Chief Financial Officer, and Treasurer of the Company in November 2020. Prior to joining Patrick, Mr.
Matthew S. Filer was appointed Interim Executive Vice President-Finance, Chief Financial Officer, and Treasurer in May 2023. He joined Patrick as Senior Vice President of Finance in November 2022.
Additional information about the Company’s sales to the industrial markets is included in the MD&A of this Form 10-K.
The potential for interest rate cuts in 2024, combined with low inventory and high prices for existing homes for sale, may provide support for our industrial market in 2024, particularly if economic uncertainties recede. Additional information about the Company’s sales to the industrial markets is included in the MD&A of this Form 10-K.
While retail demand remained strong throughout 2022, supply chain constraints relating to certain inputs, particularly engines, limited wholesale unit shipments which resulted in higher order backlogs and historically low dealer inventory levels, as measured by weeks of sales on hand, during the first half of 2022.
The sharp increase in demand for powerboats, which is our primary marine market, experienced during the COVID-19 pandemic continued through 2021 and into 2022, although supply chain constraints limited wholesale unit shipments which resulted in higher order backlogs and historically low dealer inventory levels, during the first half of 2022.
According to the 2022 KOA North American Camping Report, based on surveys of North American leisure travelers, 53% of campers in 2021 were "millennials" and "Gen Zers", up from 48% in 2020 and 34% in 2019.
("KOA") North American Camping and Outdoor Hospitality Report, based on surveys of North American leisure travelers, 58.5 million households went camping in 2022, an increase from 57 million in 2021 and 42 million in 2019.
Removed
The Company's principal executive and administrative offices are located at 107 West Franklin Street, Elkhart, Indiana 46515 and the telephone number is (574) 294-7511; Internet website address: www.patrickind.com . The information on Patrick's website is not incorporated by reference into this Form 10-K.
Added
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.
Removed
In 2021, strong demand in the RV market due to demographic trends and the post-COVID increased interest in the travel and leisure lifestyle resulted in RV wholesale industry unit shipments of approximately 600,200, an increase of 39% compared to the prior year and a record high for the industry, according to the Recreational Vehicle Industry Association (the “RVIA”), while RV retail unit sales increased by 9% according to SSI.
Added
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 in late 2022 and 2023 as a result of decreased retail demand and dealer inventory reductions.
Removed
While wholesale unit growth and dealer inventory restocking continued in the first half of 2022, RV OEMs dramatically reduced production in the second half of the year as retail demand decreased and the OEMs focused on maintaining a balanced dealer inventory channel for the long-term health and stability of the industry.
Added
Our analysis suggests that dealer inventory levels are currently well below historical norms and will need to be replenished when retail demand recovers.
Removed
RV wholesale shipments were down 18% in 2022 compared to 2021 as a result of the reduced production levels, while RV retail unit shipments decreased 22% compared to 2021 in part due to rising interest rates and macroeconomic conditions.
Added
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.
Removed
Additionally, according to KOA, 37% of 2021 camper households reported household income of over $100,000, up from 29% in 2020, demonstrating leisure lifestyle participants who may be more resilient to negative macroeconomic conditions. Furthermore, 56% of non-camping leisure travelers polled expressed having an interest in camping in the future.
Added
Of these camping households, 15.2 million went on at least one RV trip during 2022, compared to 14.8 million in 2021 and 11.3 million in 2019.
Removed
According to the 2022 KOA North American Camping Report, KOA projects that a record 61.3 million households went camping in 2022, illustrating both current and potential long-term interest in the leisure lifestyle space. Detailed narrative information about the Company’s sales to the RV industry is included in Item 7.
Added
At the same time, the proportion of campers in younger demographic groups has been steadily increasing over the last several years, with "millennials" and "Gen Zers" representing 71% of campers in 2022, up from 53% in 2021 and 44% in 2019. Additionally, according to the 2023 KOA report, 28% of 2022 camper households reported household income of over $100,000.
Removed
As supply chain constraints improved during the second half of 2022, dealer inventory levels began to increase, although at the end of 2022 they remained well below levels historically seen in the industry. According to the National Marine Manufacturers Association ("NMMA"), per its 2021 U.S.
Added
While this percentage was down from 37% in 2021, these higher-income households still represented a significantly greater proportion of campers than before the COVID-19 pandemic. Detailed narrative information about the Company’s sales to the RV industry is included in Item 7.
Removed
Recreational Boating Statistical Abstract (the "Abstract"), U.S. retail expenditures on boats, engines, accessories, and related costs totaled approximately $56.7 billion in 2021, up approximately 13% from 2020.
Added
While these supply chain constraints improved during the second half of 2022, OEM production declined slightly in 2023 as concerns relating to elevated interest rates, inflation and overall economic uncertainties dampened retail demand and led marine dealers to reduce inventory levels.
Removed
Additional 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 70% to 80% of our industrial net sales in 2022 were associated with the U.S. residential housing market.
Added
The Company's marine revenue mix is slightly more concentrated toward higher dollar units, particularly the fiberglass and ski and wake segments, which began to see more pronounced softness in market demand in the second half of 2023 compared to the broader marine market.
Removed
Over the past three years, the residential housing market in particular has benefited from a low interest rate environment and limited housing inventory across the country.
Added
We expect to continue to feel the effects of our revenue mix through the first half of 2024. Despite short-term challenges, we remain optimistic about the long-term outlook including within the high value, premium segment of the marine industry that we serve. According to the National Marine Manufacturers Association (“NMMA”), per its 2022 U.S.
Removed
While the demand for single family homes may be negatively impacted by the interest rate increases throughout 2022 and into 2023, the demand for multi-family units to provide rental options in a limited-inventory environment remains relatively strong, which we believe may provide support for our industrial market.
Added
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.
Removed
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.
Added
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.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+4 added−10 removed116 unchanged
Biggest changeOur 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. 20 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; • expose us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings under our 2021 Credit Agreement (as defined herein) 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.
Biggest changeIn 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; 20 • 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 “2021 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.
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. 19 • 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. • Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of such an event.
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. 19 • Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of such an event.
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 a public health emergency may also affect our profitability.
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 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; 24 • 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; • 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.
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; • changes in global economic conditions or general market conditions in the industries in which we operate; • sales of our common stock held by certain equity investors or members of management; 24 • issuance of our common stock or debt securities by the Company; and • the occurrence of other events that are described in these risk factors.
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 1.00% Convertible Notes or 1.75% Convertible Notes and prior to the maturity of the 1.00% Convertible Notes or 1.75% Convertible Notes (and are likely to do so during any observation period related to a conversion of 1.00% Convertible Notes or 1.75% Convertible Notes).
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).
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. 14 The RV, marine, MH and industrial industries are highly competitive and some of our competitors may have greater resources than we do.
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, MH and industrial industries are highly competitive and some of our competitors may have greater resources than we do.
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.
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 15 uncertainties such as we are currently experiencing. There can be no assurance that we will not encounter these problems in the future.
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. 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.
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. 18 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.
This activity could cause or avoid an increase or a decrease in the market price of our common stock or the 1.00% Convertible Notes or 1.75% Convertible Notes, which could affect a holder's ability to convert the 1.00% Convertible Notes or 1.75% Convertible Notes and, to the extent the activity occurs during any observation period related to a conversion of 1.00% Convertible Notes or 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 1.00% Convertible Notes or 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.
Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade 16 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 otherwise adversely impact our results of operations.
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.
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, 17 manufacturing, distribution and other functions to maximize synergies.
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.
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 23 result in denial of service on websites. We have programs in place to detect, contain and respond to data security incidents.
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.
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 15 adversely affect our business, operating results, and financial condition and could materially damage customer relationships.
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.
We compete not only with other suppliers to the RV, marine, 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.
We compete not only with other suppliers 14 to the RV, marine, 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.
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 18 regulations regarding these substances, as well as environmental requirements relating to land, air, water and noise pollution.
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 loss of either of these customers could have a material adverse impact on our operating results and financial condition. We do not have long- 13 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.
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.
The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the 1.00% Convertible Notes or 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.
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.
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. If we are unable to manage our inventory, our operating results could be materially and adversely affected.
If additional tariffs or trade 16 restrictions are implemented by the U.S. or other countries, the cost of our products could increase which could adversely affect our business. If we are unable to manage our inventory, our operating results could be materially and adversely affected.
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.
Many of our customers participate in highly competitive markets and their financial condition may deteriorate 13 as a result. In addition, a decline in the financial condition of our customers could hinder our ability to collect amounts owed by customers.
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.
However, the warrant transactions 22 could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants.
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 2023 and other future periods.
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 2024 and other future periods.
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. In addition, prices of certain raw materials have historically been volatile and continued to fluctuate in 2022.
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. In addition, prices of certain raw materials have historically been volatile and continued to fluctuate in 2023.
In addition, even if holders do not elect to convert their 1.00% Convertible Notes or 1.75% Convertible Notes, we could be required under 22 applicable accounting rules to reclassify all or a portion of the outstanding principal of the 1.00% Convertible Notes or 1.75% Convertible Notes as a current rather than long-term liability.
In addition, even if holders do not elect to convert their 1.75% Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 1.75% Convertible Notes as a current rather than long-term liability.
Our 2021 Credit Agreement contains covenants that require that we comply with a maximum level of a consolidated secured net leverage ratio and a minimum level of a consolidated fixed charge coverage ratio (both covenants as described in Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K).
Our 2021 Credit Agreement contains covenants that require that we comply with a maximum level of a consolidated secured net leverage ratio and a minimum level of a consolidated fixed charge coverage ratio (both covenants as described in Note 7 "Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K).
While alternative sources are available, our business would be material adversely affected if we are unable to find alternative sources 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.
Approximately 67% of our total assets as of December 31, 2022 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.
Approximately 71% of our total assets as of December 31, 2023 were comprised of goodwill, intangible assets, operating lease right-of-use assets and property, plant and equipment. Under generally accepted accounting principles, each of these assets is subject to periodic review and testing to determine whether the asset is recoverable or realizable.
In the event the conditional conversion feature of the 1.00% Convertible Senior Notes due 2023 (the "1.00% Convertible Notes") or 1.75% Convertible Senior Notes due 2028 (the "1.75% Convertible Notes") is triggered, holders of 1.00% Convertible Notes or 1.75% Convertible Notes will be entitled to convert the 1.00% Convertible Notes or 1.75% Convertible Notes at any time during specified periods at their option.
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.
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.
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.
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 38% of our consolidated net sales in 2022.
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 2023.
In 2022 and 2021, the Company's net sales to the RV industry were approximately 53% and 59%, 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.
In 2023 and 2022, the Company's net sales to the RV industry were approximately 43% and 53%, 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.
The conditional conversion feature of the 1.00% Convertible Notes due 2023 that we issued in January 2018 or 1.75% Convertible Notes due 2028 that we issued in December 2021, if triggered, may adversely affect our financial condition and operating results.
The conditional conversion feature of the 1.75% Convertible Notes due 2028 that we issued in December 2021, if triggered, may adversely affect our financial condition and operating results.
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; 21 • 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.
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. 21 As a result of these restrictions, we will be limited as to how we conduct our business and we may not be able to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities.
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 GSP program. The GSP program expired on December 31, 2020.
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.
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.
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.
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 to distribute and/or manufacture products in the most efficient manner.
Additionally, material unexpected liabilities could arise from these acquisitions. 17 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.
Additionally, we are subject to government regulations relating to importation activities, including related to CBP withhold release orders.
Additionally, we are subject to government regulations relating to importation activities, including related to U.S. Customs and Border Protection ("CBP") withhold release orders.
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.
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.
The convertible note hedge and warrant transactions may affect the value of the 1.00% Convertible Notes or 1.75% Convertible Notes and our common stock. In connection with the pricing of the 1.00% Convertible Notes and 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”).
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.
As of December 31, 2022, we had $1.30 billion of total long-term debt, including current maturities and exclusive of deferred financing costs and debt discount, outstanding under our 2021 Credit Facility, 4.75% Senior Notes, 7.50% Senior Notes, 1.75% Convertible Notes and 1.00% Convertible Notes (all as defined herein).
As of December 31, 2023, we had $1.04 billion of total long-term debt, including current maturities and exclusive of deferred financing costs and debt discount, outstanding under our 2021 Credit Facility, 4.75% Senior Notes, 7.50% Senior Notes and 1.75% Convertible Notes (all as defined in Note 7 "Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K).
The convertible note hedge transactions associated with the 1.00% Convertible Notes expired as of February 1, 2023. Risks Related to Information Security, Cybersecurity and Data Privacy If our information technology systems fail to perform adequately, our operations could be disrupted and could adversely affect our business, reputation and results of operations.
Risks Related to Information Security, Cybersecurity and Data Privacy If our information technology systems fail to perform adequately, our operations could be disrupted and could adversely affect our business, reputation and results of operations.
If the GSP program is not renewed or otherwise made retroactive, we could experience 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 and certain other countries, such as plywood, which has resulted in retaliatory tariffs by China and other countries.
The United States has imposed tariffs and export controls on certain goods and products imported from China and certain other countries, such as plywood, which has resulted in retaliatory tariffs by China and other countries.
If we are unable to adjust to our customers’ changing inventory positions, 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.
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.
If we or our suppliers experience additional material data security breaches or fail to detect and appropriately respond to material data security breaches, we could be exposed to costly government enforcement actions and private litigation and our business and operating results could suffer.
If we or our suppliers experience additional material data security breaches or fail to detect and appropriately respond to material data security breaches, we could be exposed to costly government enforcement actions and private litigation and our business and operating results could suffer. 23 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.
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.
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.
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.
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.
See Notes 8 and 9 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional details. Our 1.00% Convertible Notes were repaid in full on February 1, 2023, thereby eliminating the risks described above as they relate to the 1.00% Convertible Notes.
See Notes 8 "Derivative Financial Instruments" and 9 "Accrued Liabilities" 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.
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.
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.
Removed
The manufactured housing industry has experienced a material long-term decline in shipments, which has led to reduced demand for our products. The MH industry, which accounted for 15% and 14% of the Company's consolidated net sales for 2022 and 2021, respectively, has experienced a material decline in production of new homes compared to the last peak production level in 1998.
Added
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.
Removed
The downturn was caused, in part, by limited availability and high cost of financing for manufactured homes and was exacerbated by economic and political conditions during the 2008 financial crisis.
Added
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.
Removed
Although industry-wide wholesale production of manufactured homes has improved somewhat in recent years, annual production remains well below historical averages and a worsening of conditions in the MH market could have a material adverse impact on our operating results.
Added
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.
Removed
Some of our customers have adjusted the amount of inventory that they carry during the COVID-19 pandemic and it is uncertain whether these levels of inventory will continue in the future.
Added
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.
Removed
As a result of COVID-19 and other macroeconomic factors, in 2020 and 2021, Patrick took steps to mitigate supply chain constraints by carrying increased levels of inventory and partnering with suppliers to help secure adequate supplies of materials and as a result, the Company currently has elevated inventory levels compared to historical norms.
Removed
Shortages of gasoline and diesel fuel, and substantial increases in the price of fuel, have had a material adverse effect on our business and the RV and marine industries as a whole in the past and could have a material adverse effect on our business in the future.
Removed
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.
Removed
If one or more holders elect to convert their 1.00% Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
Removed
At the same time, we entered into warrant transactions with the option counterparties.
Removed
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest changeITEM 2. PROPERTIES Patrick believes the facilities occupied as of December 31, 2023 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.
Leased Owned Purpose / Nature # of Properties Square Footage # of Properties Square Footage Manufacturing 153 7,962,000 32 2,232,000 Distribution 53 2,002,000 14 493,000 Manufacturing & Distribution (shared space) 1 127,000 1 94,000 Corporate & Other 13 112,000 1 35,000 Total 220 10,203,000 48 2,854,000 Pursuant to the terms of the Company’s 2021 Credit Agreement, most of our owned real property is subject to a security interest.
Leased Owned Purpose / Nature # of Properties Square Footage # of Properties Square Footage Manufacturing 145 7,840,000 34 2,230,000 Distribution 48 1,975,000 14 493,000 Manufacturing & Distribution (shared space) 1 127,000 1 94,000 Corporate & Other 14 109,000 1 35,000 Total 208 10,051,000 50 2,852,000 Pursuant to the terms of the Company’s 2021 Credit Agreement, most of our owned real property is subject to a security interest.
ITEM 2. PROPERTIES In 2022 , the Company operated in 23 states in the U.S., Mexico, China and Canada. At December 31, 2022 , the Company leased approximately 10.2 million square feet of manufacturing, distribution and corporate facilities and owned approximately 2.9 million square feet, as listed below.
As of December 31, 2023 , the Company leased approximately 10.1 million square feet of manufacturing, distribution and corporate facilities and owned approximately 2.9 million square feet, as listed below.
Removed
The Company`s leased properties have lease expiration dates ranging from 2023 to 2032, with the exception of one property with a lease term expiring in 2039. Patrick believes the facilities occupied as of December 31, 2022 are adequate for the purposes for which they are currently being used and are well-maintained.
Added
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 2023 , the Company operated in 23 states in the U.S., Mexico, China and Canada.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 15 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. 25 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeSee Note 14 "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

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod 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) Sep. 26 - Oct. 23, 2022 53,479 $ 43.01 53,479 $ 60,550,399 Oct. 24 - Nov. 27, 2022 146,067 53.85 146,067 52,684,914 Nov. 28 - Dec. 31, 2022 320,518 56.97 317,376 96,376,543 Total 520,064 516,922 (1) Amount includes 3,142 shares of common stock purchased by the Company in aggregate in December 2022 for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards held by the employees.
Biggest changePeriod 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) Oct. 2 - Oct. 29, 2023 81,474 $ 72.24 81,474 $ 78,254,795 Oct. 30 - Dec. 3, 2023 10,187 74.50 9,317 77,569,000 Dec. 4 - Dec. 31, 2023 91,674 98.56 — 77,569,000 Total 183,335 90,791 (1) Amount includes 92,544 shares of common stock purchased by the Company in aggregate in November and December 2023 for the sole purpose of covering the exercise price related to the exercise of stock options and satisfying minimum tax withholding obligations of employees upon the vesting of stock awards and the exercise of stock options held by the employees.
(2) See Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional information about the Company's stock repurchase program. 26 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.
(2) See Note 11 "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. 27 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, 2017 and its relative performance is tracked through December 31, 2022.
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, 2018 and its relative performance is tracked through December 31, 2023.
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 SM under the symbol PATK. Holders of Common Stock As of February 10, 2023, there were 296 shareholders of record.
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 16, 2024, there were 318 shareholders of record.
The Company paid cash dividends of $1.44 and $1.17 per share, or $32.9 million and $27.0 million in the aggregate, in 2022 and 2021, respectively.
The Company paid cash dividends of $1.90 and $1.44 per share, or $42.1 million and $32.9 million in the aggregate, in 2023 and 2022, respectively.
Any future determination to pay cash dividends will be made by the Board in light of the Company’s earnings, financial position, capital requirements, and restrictions under the Company’s 2021 Credit Agreement, and such other factors as the Board deems relevant.
Any future determination to pay cash dividends will be made by the Board in light of the Company’s earnings, financial position, capital requirements, and restrictions under the Company’s 2021 Credit Agreement, and such other factors as the Board deems relevant. 26 Purchases of Equity Securities by the Issuer (c) Issuer Purchases of Equity Securities for the three months ended December 31, 2023 .
($) 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Patrick Industries, Inc. 100.00 42.63 75.86 100.75 120.61 92.81 Peer Group 100.00 58.97 92.03 105.44 136.56 106.83 Russell 2000 100.00 87.82 108.66 128.61 146.23 114.70 *The stock price performance included in this graph is not necessarily indicative of future stock price performance. 27
($) 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Patrick Industries, Inc. $ 100.00 $ 177.93 $ 236.31 $ 282.90 $ 217.68 $ 369.19 Peer Group $ 100.00 $ 148.13 $ 175.17 $ 221.39 $ 171.50 $ 225.72 Russell 2000 $ 100.00 $ 123.72 $ 146.44 $ 166.50 $ 130.60 $ 150.31 *The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Removed
Purchases of Equity Securities by the Issuer (c) Issuer Purchases of Equity Securities for the three months ended December 31, 2022 .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+6 added−10 removed27 unchanged
Biggest changeThe change in cash flows from financing activities was primarily due to: (i) a $34.1 million increase in stock repurchases and cash dividends paid to shareholders in 2022 and (ii) $62.2 million in net revolver and term loan repayments in 2022 compared with $520.6 million of net borrowings in 2021 consisting of $350.0 million of borrowings from the Company's issuance of its 4.75% Senior Notes and $258.8 million of borrowings from the Company's issuance of its 1.75% Convertible Notes, less $88.1 million of net revolver and term loan repayments .
Biggest changeThe increase in cash flows used in financing activities was primarily due to the $172.5 million repayment of the 1.00% Convertible Notes and $25.6 million in net repayments on the Revolver due 2027, partially offset by a $58.3 million reduction in stock repurchases in 2023 compared to 2022.
Economic or industry-wide factors affecting the profitability of our RV, marine, MH and industrial businesses 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.
Economic or industry-wide factors affecting the profitability of our RV, marine, MH and industrial businesses include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the competitive 30 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.
No changes in the year ended December 31, 2022 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.
No changes in the year ended December 31, 2023 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.
Cash Flows Year Ended December 31, 2022 Compared to 2021 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 non-cash items and changes in operating assets and liabilities.
Cash Flows Year Ended December 31, 2023 Compared to 2022 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 non-cash items and changes in operating assets and liabilities.
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, 2022, 2021 and 2020 and so no impairments were recognized.
Based on the results of the Company's analyses, the estimated fair value of each of the Company's reporting units and trademarks was determined to exceed the carrying value for each of the years ended December 31, 2023, 2022 and 2021 and so no impairments were recognized.
The Company does not measure profitability at the end market (RV, marine, 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; slotwall panels and components; and other products. • Distribution – This segment includes the distribution of 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; and other miscellaneous products in addition to providing transportation and logistics services. 31 Net sales pertaining to the manufacturing and distribution segments as stated in the table below and in the following discussions include intersegment sales.
The Company does not measure profitability at the end market (RV, marine, MH and industrial) level. 31 • 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; slotwall panels and components; and other products. • Distribution – This segment includes the distribution of 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; and other miscellaneous products in addition to providing transportation and logistics services.
As of and for the reporting period ended December 31, 2022, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement.
As of and for the reporting period ended December 31, 2023, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement.
As a percentage of net sales, gross profit increased to 21.7% in 2022 from 19.6% in 2021. The increase in gross profit as a percentage of net sales in 2022 compared to 2021 reflects the impact of the factors discussed above under “Cost of Goods Sold”.
As a percentage of net sales, gross profit increased to 22.6% in 2023 from 21.7% in 2022. The increase in gross profit as a percentage of net sales in 2023 compared to 2022 reflects the impact of the factors discussed above under “Cost of Goods Sold”.
Industrial Market The industrial market is comprised primarily of the solid surface countertop industry, kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors. Net sales to this market represented 11% of our consolidated net sales in 2022 , increasing 18% in 2022 compared to 2021.
Industrial Market The industrial market is comprised primarily of the solid surface countertop industry, kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors. Net sales to this market represented 14% of our consolidated net sales in 2023 , decreasing 14% in 2023 compared to 2022.
These metrics should not be considered alternatives to U.S. GAAP. Our computations of content per unit may differ from similarly titled measures used by others. These metrics should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.
These metrics should not be considered alternatives to accounting principles generally accepted in the United States of America ("U.S. GAAP"). Our computations of content per unit may differ from similarly titled measures used by others. These metrics should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.
The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of December 31, 2022 and for the fiscal period then ended are as follows: Required Actual Consolidated secured net leverage ratio (12-month period) 2.75 0.29 Consolidated fixed charge coverage ratio (12-month period) 1.50 5.42 In addition, as of December 31, 2022, the Company's consolidated total net leverage ratio (12-month period) was 1.89.
The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of December 31, 2023 and for the fiscal period then ended are as follows: Required Actual Consolidated secured net leverage ratio (12-month period) 2.75 0.27 Consolidated fixed charge coverage ratio (12-month period) 1.50 3.01 In addition, as of December 31, 2023, the Company's consolidated total net leverage ratio (12-month period) was 2.38.
In general, the Company's cost of goods sold percentage can be impacted from quarter-to-quarter 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. Gross Profit. Gross profit increased $258.7 million or 32%, to $1,059.9 million in 2022 from $801.2 million in 2021.
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. Gross Profit. Gross profit decreased $277.7 million or 26%, to $782.2 million in 2023 from $1,059.9 million in 2022.
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.
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.
As a percentage of net sales, cost of goods sold decreased 210 basis points during 2022 to 78.3% from 80.4% in 2021.
As a percentage of net sales, cost of goods sold decreased 90 basis points during 2023 to 77.4% from 78.3% in 2022.
Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which increased 7% to approximately 196,500 units in 2022 compared to approximately 183,200 units in 2021, according to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA").
Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which decreased 2% to approximately 192,300 units in 2023 compared to approximately 196,500 units in 2022, according to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA").
See our Form 10-K for the year ended December 31, 2021 for a discussion of cash flows for the year ended December 31, 2021 compared to 2020. 33 Summary of Liquidity and Capital Resources At December 31, 2022, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2021 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.
As of December 31, 2023, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2021 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.
The increase in the effective tax rate in 2022 was mostly attributable to decreased benefits from stock-based compensation. See our Form 10-K for the year ended December 31, 2021 for a discussion of our consolidated operating results for the year ended December 31, 2021 compared to 2020.
The increase in the effective tax rate in 2023 was mostly attributable to an increased impact from stock compensation Section 162(m) permanent addback. See our Form 10-K for the year ended December 31, 2022 for a discussion of our consolidated operating results for the year ended December 31, 2022 compared to 2021.
Operating income increased $151.6 million, or 40%, to $531.5 million in 2022 from $379.9 million in 2021. Operating income for the manufacturing segment attributable to acquisitions completed in 2022 and 2021 was approximately $19.4 million and $14.5 million, respectively. The increase in operating income primarily reflects the increase in gross profit mentioned above. Distribution Net Sales.
Operating Income. Operating income decreased $210.4 million, or 40%, to $321.1 million in 2023 from $531.5 million in 2022. Operating income for the manufacturing segment attributable to acquisitions completed in 2023 and 2022 was approximately $(0.6) million and $19.4 million, respectively. The decrease in operating income primarily reflects the decrease in gross profit mentioned above. Distribution Net Sales.
In 2022 and 2021 , net sales attributable to acquisitions completed in each of those years was $121.8 million and $259.9 million , respectively. The Company’s RV content per wholesale unit for 2022 increased 31% to $5,257 from $4,006 in 2021. The Company's marine powerboat content per wholesale unit for 2022 increased 45% to $5,281 from $3,632 in 2021.
In 2023 and 2022 , net sales attributable to acquisitions completed in each of those years was $17.7 million and $121.8 million , respectively. The Company’s RV content per wholesale unit for 2023 decreased 9% to $4,800 from $5,257 in 2022. The Company's marine powerboat content per wholesale unit for 2023 decreased 5% to $4,803 from $5,032 in 2022.
Cost of goods sold as a percentage of net sales decreased for 2022 compared to 2021 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2021 and 2022 that positively impacted overall costs, (ii) improved labor efficiencies as a result of investment in human capital and improved retention rates, (iii) synergies and different cost profiles from acquisitions completed in 2022 and 2021, and (iv) volume-driven efficiencies as a result of leveraging fixed overhead.
Cost of goods sold as a percentage of net sales decreased for 2023 compared to 2022 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2022 and 2023 that positively impacted overall costs, (ii) improved labor efficiencies as a result of investment in human capital and improved retention rates, (iii) synergies and different cost profiles from acquisitions completed in 2023 and 2022 and (iv) changes in certain commodity prices, partially offset by reduced sales volumes resulting in less favorable fixed cost absorption when compared to the prior year periods.
LIQUIDITY AND CAPITAL RESOURCES 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 2021 Credit Facility (as defined below).
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 2021 Credit Facility as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements.
Operating income for the Distribution segment attributable to acquisitions completed in 2022 was immaterial. Operating income for the Distribution segment in 2021 attributable to acquisitions completed in 2021 was approximately $10.4 million. The overall improvement in operating income in 2022 primarily reflects the items discussed above.
Operating income for the Distribution segment attributable to acquisitions completed in 2023 and 2022 was immaterial. The decrease in operating income in 2023 primarily reflects the items discussed above.
According to the Recreation Vehicle Industry Association (“RVIA”), wholesale industry unit shipments totaled approximately 493,300 units in 2022, a decrease of 18% compared to approximately 600,200 units in 2021. RV industry retail unit sales totaled approximately 446,300 units in 2022 , a decrease of 22% compared to 2021 retail unit sales of approximately 568,900 units according to Statistical Surveys, Inc.
According to the RV Industry Association (“RVIA”), wholesale industry unit shipments totaled approximately 313,200 units in 2023, a decrease of 37% compared to approximately 493,300 units in 2022. RV industry retail unit sales totaled approximately 377,500 units in 2023, a decrease of 15% compared to 2022 retail unit sales of approximately 446,300 units according to Statistical Surveys, Inc. ("SSI").
Year Ended December 31, (thousands) 2022 2021 2020 Net sales $ 4,881,872 100.0 % $ 4,078,092 100.0 % $ 2,486,597 100.0 % Cost of goods sold 3,821,934 78.3 3,276,898 80.4 2,027,580 81.5 Gross profit 1,059,938 21.7 801,194 19.6 459,017 18.5 Warehouse and delivery expenses 163,026 3.3 139,606 3.4 98,400 4.0 Selling, general and administrative expenses 327,513 6.7 253,547 6.2 146,376 5.9 Amortization of intangible assets 73,229 1.5 56,329 1.4 40,868 1.6 Operating income 496,170 10.2 351,712 8.6 173,373 7.0 Interest expense, net 60,760 1.2 57,890 1.4 43,001 1.7 Income taxes 107,214 2.3 68,907 1.7 33,311 1.4 Net income $ 328,196 6.7 $ 224,915 5.5 $ 97,061 3.9 29 Year Ended December 31, 2022 Compared to 2021 Net Sales.
Year Ended December 31, ($ in thousands) 2023 2022 2021 Net sales $ 3,468,045 100.0 % $ 4,881,872 100.0 % $ 4,078,092 100.0 % Cost of goods sold 2,685,812 77.4 3,821,934 78.3 3,276,898 80.4 Gross profit 782,233 22.6 1,059,938 21.7 801,194 19.6 Warehouse and delivery expenses 143,921 4.1 163,026 3.3 139,606 3.4 Selling, general and administrative expenses 299,418 8.6 327,513 6.7 253,547 6.2 Amortization of intangible assets 78,694 2.3 73,229 1.5 56,329 1.4 Operating income 260,200 7.5 496,170 10.2 351,712 8.6 Interest expense, net 68,942 2.0 60,760 1.2 57,890 1.4 Income taxes 48,361 1.5 107,214 2.2 68,907 1.7 Net income $ 142,897 4.1 $ 328,196 6.7 $ 224,915 5.5 Year Ended December 31, 2023 Compared to 2022 Net Sales.
Income tax expense increased $38.3 million, or 56%, to $107.2 million in 2022 from $68.9 million in 2021 as a result of the increase in pre-tax income and an increase in the effective tax rate. For 2022, the effective tax rate was 24.6% compared to 23.5% in 2021.
Income Taxes. Income tax expense decreased $58.9 million, or 55%, to $48.4 million in 2023 from $107.2 million in 2022 as a result of the decrease in pre-tax income and an increase in the effective tax rate. For 2023, the effective tax rate was 25.3% compared to 24.6% in 2022.
Year Ended December 31, (thousands) 2022 2021 2020 Sales Manufacturing $ 3,681,412 $ 3,002,107 $ 1,765,818 Distribution 1,287,597 1,154,654 762,472 Gross Profit Manufacturing 818,960 598,942 324,938 Distribution 254,886 211,241 133,291 Operating Income Manufacturing 531,547 379,885 190,518 Distribution 136,889 106,241 54,376 Year Ended December 31, 2022 Compared to 2021 Manufacturing Net Sales.
Year Ended December 31, ($ in thousands) 2023 2022 2021 Sales Manufacturing $ 2,653,257 $ 3,681,412 $ 3,002,107 Distribution $ 889,408 $ 1,287,597 $ 1,154,654 Gross Profit Manufacturing $ 577,284 $ 818,960 $ 598,942 Distribution $ 195,506 $ 254,886 $ 211,241 Operating Income Manufacturing $ 321,096 $ 531,547 $ 379,885 Distribution $ 90,095 $ 136,889 $ 106,241 Year Ended December 31, 2023 Compared to 2022 Manufacturing Net Sales.
Operating income in 2022 and 2021 included $19.4 million and $25.0 million, respectively, from the businesses 30 acquired in each respective year. Operating income as a percentage of net sales increased 160 basis points to 10.2% in 2022 from 8.6% in 2021.
Operating Income. Operating income decreased $236.0 million, or 48%, to $260.2 million in 2023 from $496.2 million in 2022. Operating income in 2023 and 2022 included $1.0 million and $19.4 million, respectively, from the businesses acquired in each respective year. Operating income as a percentage of net sales decreased 270 basis points to 7.5% in 2023 from 10.2% in 2022.
The increase in operating income and operating margin is primarily attributable to the items discussed above as well as the operating margin profiles of businesses acquired in 2022 and 2021. Interest Expense, Net. Interest expense, net, increased $2.9 million, or 5%, to $60.8 million in 2022 from $57.9 million in 2021.
The decrease in operating income and operating margin is primarily attributable to lower net sales and the items discussed above. Interest Expense, Net. Interest expense, net, increased $8.2 million, or 13%, to $68.9 million in 2023 from $60.8 million in 2022.
Following a strong post-COVID increase in retail demand through 2021 and dealer inventory restocking occurring through the first half of 2022, OEMs dramatically reduced production in the second half of 2022 as retail demand decreased and the OEMs focused on maintaining a balanced dealer inventory channel for the long-term health and stability of the industry.
Following a dealer inventory restocking in the first half of 2022, OEMs dramatically reduced production in the second half of 2022 and throughout 2023 as retail demand decreased and dealer inventory needs decreased, with the OEMs demonstrating operating discipline to maintain a balanced inventory channel for the long-term health and stability of the industry.
("SSI"). 28 Marine Industry Net sales to the marine industry, which represented approximately 21% of the Company's consolidated net sales in 2022 , increased 56% in 2022 compared to 2021.
Marine Industry Net sales to the marine industry, which represented approximately 27% of the Company's consolidated net sales in 2023, decreased 11% in 2023 compared to 2022.
The increase was attributable to an 8% increase in net sales to our RV end market, a 56% increase in net sales to our marine end market, a 29% increase in net sales to our MH end market, and a 18% increase in net sales to our industrial end market.
The decrease was attributable to a 42% decrease in net sales to our RV end market, a 11% decrease in net sales to our marine end market, a 19% decrease in net sales to our MH end market, and a 14% decrease in net sales to our industrial end market.
Sales increased $679.3 million, or 23%, to $3.68 billion in 2022 from $3.00 billion in 2021. This segment accounted for approximately 74% of the Company’s consolidated net sales in 2022 compared to approximately 72% of the Company's consolidated net sales in 2021. The sales increase reflected increased net sales across all of our end markets.
Sales decreased $1.03 billion, or 28%, to $2.65 billion in 2023 from $3.68 billion in 2022. This segment accounted for approximately 75% of the Company’s consolidated net sales in 2023 compared to approximately 74% of the Company's consolidated net sales in 2022. The sales decrease reflects decreased net sales across all of our end markets.
The Company's MH content per wholesale unit for 2022 increased 21% to $6,243 in 2022 from $5,153 in 2021. Cost of Goods Sold. Cost of goods sold increased $545.0 million, or 17%, to $3.82 billion in 2022 from $3.28 billion in 2021.
The Company's MH content per wholesale unit for 2023 increased 2% to $6,372 in 2023 from $6,243 in 2022. Cost of Goods Sold. Cost of goods sold decreased $1.14 billion, or 30%, to $2.69 billion in 2023 from $3.82 billion in 2022.
In 2022 and 2021, net sales attributable to acquisitions completed in each of those periods was approximately $121.3 million and $202.2 million, respectively. Gross Profit. Gross profit increased $220.1 million, or 37%, to $819.0 million in 2022 from $598.9 million in 2021. As a percentage of net sales, gross profit was 22.2% in 2022 compared to 20.0% in 2021.
In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $14.1 million and $0.5 million, respectively. Gross Profit. Gross profit decreased $59.4 million, or 23%, to $195.5 million in 2023 from $254.9 million in 2022. As a percentage of net sales, gross profit was 22.0% in 2023 compared to 19.8% in 2022.
EXECUTIVE SUMMARY Overview of Markets and Related Industry Performance Recreational Vehicle ("RV") Industry The RV industry is our primary market and comprised 53% of the Company’s consolidated net sales in 2022 . Net sales to the RV industry increased 8% in 2022 compared to 2021.
See “Information Concerning Forward-Looking Statements” on page 3 of this Report. 28 EXECUTIVE SUMMARY Overview of Markets and Related Industry Performance Recreational Vehicle ("RV") Industry The RV industry is our primary market and comprised 43% of the Company’s consolidated net sales in 2023 . Net sales to the RV industry decreased 42% in 2023 compared to 2022.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $23.4 million, or 17%, to $163.0 million in 2022 from $139.6 million in 2021. As a percentage of net sales, warehouse and delivery expenses were 3.3% in 2022 and 3.4% in 2021. The increase in warehouse and delivery expenses is attributable to the increase in sales.
Warehouse and Delivery Expenses. Warehouse and delivery expenses decreased $19.1 million, or 12%, to $143.9 million in 2023 from $163.0 million in 2022. As a percentage of net sales, warehouse and delivery expenses were 4.1% in 2023 and 3.3% in 2022.
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 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
Reconciliations of the amounts below to consolidated totals are presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
Financing Activities Net cash flows used in financing activities was $190.3 million in 2022 compared to net cash provided by financing activities of $400.7 million in 2021.
Financing Activities Net cash flows used in financing activities increased $143.3 million to $333.6 million in 2023 compared to $190.3 million in 2022.
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.
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. 33 In February 2023, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to satisfy its repayment obligation at maturity for the 1.00% Convertible Notes.
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, 2022, 2021 and 2020.
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. 29 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, 2023, 2022 and 2021.
Marine wholesale unit shipments were limited in part by supply chain constraints, particularly for engines and related components. Manufactured Housing ("MH") Industry Net sales to the MH industry, which represented 15% of the Company’s consolidated net sales in 2022 , increased 29% in 2022 compared to 2021. MH sales are generally correlated to MH industry wholesale unit shipments.
Manufactured Housing ("MH") Industry Net sales to the MH industry, which represented 16% of the Company’s consolidated net sales in 2023 , decreased 19% in 2023 compared to 2022. MH sales are generally correlated to MH industry wholesale unit shipments.
For 2022, these four factors contributed to a 210-basis point decrease in labor as a percentage of net sales and a 10-basis point decrease in overhead as a percentage of net sales, partially offset by a 10-basis point increase in material costs as a percentage of net sales in part due to supply chain constraints and elevated raw material costs in the first half of 2022.
For 2023, these factors contributed to a 50-basis point decrease in labor as a percentage of net sales and a 330-basis point decrease in materials cost as a percentage of net sales, partially offset by a 300-basis point increase in overhead as a percentage of net sales due to lower sales volumes.
In February 2023, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to satisfy its repayment obligation at maturity for the 1.00% Convertible Notes due 2023. See Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of the 1.00% Convertible Notes due 2023.
See Note 7 "Debt" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for further discussion of the 1.00% Convertible Notes. Throughout the course of the year, the Company made payments on the Revolver due 2027, with the balance repaid in full as of December 2023.
Unallocated Corporate Expenses As presented in Note 17 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2022 increased $20.9 million, or 27%, to $99.0 million from $78.1 million in 2021. The increase in 2022 was mostly attributed to an increase in professional fees, administrative wages, and incentive compensation.
Unallocated Corporate Expenses As presented in Note 16 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2023 decreased $26.7 million, or 27%, to $72.3 million from $99.0 million in 2022.
Net cash provided by operating activities increased $159.6 million, or 63%, to $411.7 million in 2022 from $252.1 million in 2021 primarily due to: (i) an increase in net income of $103.3 million; (ii) a decrease in cash used for inventory procurement of $220.6 million; (iii) a source of cash from trade and other receivables of $26.1 million compared to a use of cash of $14.4 million in 2021; and (iv) an increase in depreciation and amortization of $26.0 million.
Net cash provided by operating activities decreased $3.0 million, or 1%, to $408.7 million in 2023 from $411.7 million in 2022 primarily due to a decrease in net income of $185.3 million, substantially offset by an increase in depreciation and amortization of $13.7 million and a $98.9 million source of cash from operating assets and liabilities compared to a $60.7 million use of cash from operating assets and liabilities in the prior period.
Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 112,900 units in 2022 , an increase of 7% compared to 2021 MH wholesale industry unit shipments of 105,800 units.
Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 89,200 units in 2023 , a decrease of 21% compared to 2022 MH wholesale industry unit shipments of 112,900 units. Demand for MH units in 2023 was impacted by a decrease in housing affordability caused by elevated interest rates and higher raw material costs.
The increase in gross profit as a percentage of net sales for 2022 is primarily attributed to the higher margin profiles of certain 2021 acquisitions as well as the benefit of leveraging certain fixed costs on increased net sales. Operating Income. Operating income in 2022 increased $30.7 million, or 29%, to $136.9 million from $106.2 million in 2021.
The increase in gross profit as a percentage of net sales for 2023 is primarily attributed to decreases in labor as a percentage of net sales partly offset by increases in material costs as a percentage of net sales. Operating Income. Operating income in 2023 decreased $46.8 million, or 34%, to $90.1 million from $136.9 million in 2022.
Net sales in 2022 increased approximately $803.8 million, or 20%, to $4.88 billion from $4.08 billion in 2021.
Net sales in 2023 decreased approximately $1.41 billion, or 29%, to $3.47 billion from $4.88 billion in 2022.
Sales increased $132.9 million, or 12%, to $1.29 billion in 2022 from $1.15 billion in 2021. This segment accounted for approximately 26% of the Company’s consolidated net sales for 2022 compared to 28% of the Company's consolidated net sales in 2021.
Sales decreased $398.2 million, or 31%, to $889.4 million in 2023 from $1,287.6 million in 2022. This segment accounted for approximately 25% of the Company’s consolidated net sales for 2023 compared to 26% of the Company's consolidated net sales in 2022. The decrease in sales in 2023 is attributed to decreased net sales across all of our end markets.
Gross profit margin increased in 2022 compared to 2021 due to (i) an improvement in direct labor, material costs, and manufacturing overhead expense as a percentage of net sales primarily as a result of automation and efficiency initiatives implemented during 2022 and 2021 and (ii) synergies and different cost profiles from acquisitions completed in 2022 and 2021. Operating Income.
As a percentage of net sales, gross profit was 21.8% in 2023 compared to 22.2% in 2022. 32 Gross profit margin decreased in 2023 compared to 2022 due to increases in labor and manufacturing overhead expense as a percentage of net sales primarily due to reduced sales volumes, partially offset by an improvement in material costs as a percentage of net sales.
Investing Activities N et cash used in i nvesting activities de creased $253.2 million, or 44%, to $321.5 million in 2022 from $574.7 million in 2021 primarily due to a decrease in cash used in business acquisitions of $259.2 million, partially offset by an increase in cash used for capital expenditures of $15.1 million .
Investing Activities Net cash used in investing activities decreased $235.0 million, or 73%, to $86.5 million in 2023 from $321.5 million in 2022 primarily due to a decrease in cash used in business acquisitions of $223.0 million and a decrease in cash used for capital expenditures of $20.9 million, partly offset by a $6.2 million decrease in cash received on disposals of property, plant, and equipment.
Combined new housing starts decreased 3% in 2022 compared to 2021, with single family housing starts decreasing 11% and multifamily residential starts increasing 15% for the same period. 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.
Combined new housing starts decreased 9% in 2023 compared to 2022, with single family housing starts decreasing 6% and multifamily residential starts decreasing 14% for the same period.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased $74.0 million, or 29%, to $327.5 million in 2022 from $253.5 million in 2021. As a percentage of net sales, SG&A expenses were 6.7% in 2022 and 6.2% in 2021.
SG&A expenses decreased $28.1 million, or 9%, to $299.4 million in 2023 from $327.5 million in 2022. As a percentage of net sales, SG&A expenses were 8.6% in 2023 and 6.7% in 2022. The decrease in SG&A expenses in 2023 compared to 2022 is primarily due to lower variable expenses, such as commissions, associated with the decrease in net sales.
The increase in 2022 compared to 2021 reflects the impact of intangible assets of businesses acquired in 2022 and 2021. Operating Income. Operating income increased $144.5 million, or 41%, to $496.2 million in 2022 from $351.7 million in 2021.
Additionally, certain 2022 and 2023 acquisitions operate with comparatively higher SG&A as a percentage of sales when compared to the consolidated percentage. Amortization of Intangible Assets. Amortization of intangible assets increased $5.5 million, or 8%, in 2023 compared to 2022. The increase in 2023 compared to 2022 reflects the impact of intangible assets of businesses acquired in 2023 and 2022.
The increase in sales in 2022 is attributed to an increase in net sales in our RV, marine and MH markets, partially offset by a decrease in net sales in our industrial market. In 2022 and 2021, net sales attributable to acquisitions completed in each of those periods was approximately $0.5 million and $57.7 million, respectively. 32 Gross Profit.
In 2023 and 2022, net sales attributable to acquisitions completed in each of those periods was approximately $3.6 million and $121.3 million, respectively. Gross Profit. Gross profit decreased $241.7 million, or 30%, to $577.3 million in 2023 from $819.0 million in 2022.
Approximately 65% of our marine net sales increase was attributable to acquisitions made in 2022 and 2021, with the remaining growth attributable to pricing, industry product mix and market share gains. Estimated marine retail powerboat shipments totaled approximately 188,100 units in 2022 , a decrease of 15% compared to 2021 retail powerboat shipments of approximately 220,200 units, according to SSI.
Estimated marine retail powerboat shipments totaled approximately 178,100 units in 2023 , a decrease of 5% compared to 2022 retail powerboat shipments of approximately 188,100 units, according to SSI as economic uncertainty and higher interest rates impacted demand.
The increase in interest expense is primarily attributable to the issuance of our 1.75% Convertible Senior Notes due 2028 (the "1.75% Convertible Notes") issued in December 2021, partially offset by a decrease in total borrowings. Income Taxes.
The increase in interest expense is primarily attributable to the increase in interest rates on our debt subject to variable interest rates and the repayment of our 1.00% Convertible Senior Notes due 2023 (the “1.00% Convertible Notes”) in February 2023, with borrowings under our revolving credit facility (the "Revolver due 2027") which has a comparatively higher interest rate, partially offset by lower average debt levels compared to 2022.
Removed
The increase in SG&A expenses in 2022 compared to 2021 is primarily due to (i) higher variable expenses associated with the increase in net sales, and (ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital, technology and other initiatives to support the size and growth of the Company.
Added
The decrease in warehouse and delivery expenses is attributable to the decrease in sales, and the increase as a percentage of net sales is primarily attributed to the fixed nature of certain expenses such as personnel wages, building charges, fleet expense, insurance, and depreciation among others as well as a decrease in load efficiency. Selling, General and Administrative ("SG&A") Expenses.
Removed
The increase in SG&A expenses as a percentage of net sales is primarily a result of the aforementioned investment in human capital and incentive compensation. Amortization of Intangible Assets. Amortization of intangible assets increased $16.9 million, or 30%, in 2022 compared to 2021.
Added
The increase in SG&A expenses as a percentage of net sales is primarily a result of the fixed nature of certain other expenses such as wages, payroll taxes, stock compensation, and insurance, as well as an increase in software and technology expenses.
Removed
Gross profit increased $43.7 million, or 21%, to $254.9 million in 2022 from $211.2 million in 2021. As a percentage of net sales, gross profit was 19.8% in 2022 compared to 18.3% in 2021.
Added
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.
Removed
Partially offsetting these sources of cash was a use of cash for accounts payable, accrued liabilities and other of $95.0 million compared to a source of cash of $149.9 million in the prior year period.
Added
The decrease in 2023 was mostly attributed to decreases in incentive compensation, wages, professional fees and amortization of inventory step-up adjustments. LIQUIDITY AND CAPITAL RESOURCES Our liquidity as of December 31, 2023 consisted of cash and cash equivalents of $11.4 million and $768.1 million of availability under our credit facility.
Removed
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.
Added
In January 2024, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to fund its acquisition of Sportech, as discussed in Note 17 "Subsequent Events" of the Notes to Consolidated Financial Statements.
Removed
The senior credit facility under the 2021 Credit Agreement is 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").
Added
See our Form 10-K for the year ended December 31, 2022 for a discussion of cash flows for the year ended December 31, 2022 compared to 2021.
Removed
The quarterly repayment schedule for the Term Loan due 2027 was revised, with quarterly installments in the following amounts: (i) beginning June 30, 2021, through and including June 30, 2025, in the amount of $1,875,000, and (ii) beginning September 30, 2025, and each quarter thereafter, in the amount of $3,750,000, with the remaining balance due at maturity.
Removed
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.
Removed
Pursuant to the amendment, interest rates for borrowings under the 2021 Credit Agreement transitioned to a SOFR-based option from a LIBOR-based option. The ability to access unused borrowing capacity under the 2021 Credit Agreement as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the 2021 Credit Agreement.
Removed
See Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for aggregate maturities of total long-term debt for the next five fiscal years and thereafter.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed4 unchanged
Biggest changeA 100-basis point increase in the underlying SOFR rates would result in additional annual interest cost of approximately $2.2 million, assuming average borrowings, including the Term Loan due 2027, subject to variable rates of $217.2 million, which was the amount of such borrowings outstanding at December 31, 2022, excluding deferred financing costs related to the Term Loan due 2027.
Biggest changeA 100-basis point increase in the underlying SOFR rates would result in additional annual interest cost of approximately $1.3 million, assuming average borrowings during 2023, including the Term Loan due 2027, subject to variable rates were equal to the amount of such borrowings outstanding as of December 31, 2023, or $129.4 million, excluding deferred financing costs related to the Term Loan due 2027.
Prices of certain commodities have historically been volatile and continued to fluctuate in 2022. 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.
Prices of certain commodities have historically been volatile and continued to fluctuate in 2023. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Debt Obligations At December 31, 2022, our total debt obligations under our 2021 Credit Agreement were under SOFR-based interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Debt Obligations As of December 31, 2023, our total debt obligations under our 2021 Credit Agreement were under Secured Overnight Financing Rate Data ("SOFR")-based interest rates.

Other PATK 10-K year-over-year comparisons