In September of 2010, Elkhart, Ind.-based Patrick Industries was a 50-year-old company with a stellar reputation for manufacturing and distributing a long list of building products and materials to multiple industries including manufactured housing.
The company had enjoyed slow, steady growth. Like nearly every other industry and sector, the Great Recession took a toll. Patrick Industries survived, and it was staring in the face of a grand resurgence in RV and recreational boating, as well as a doubling of the manufactured housing industry.
Trading on the NASDAQ 10 years ago, investors picked up PATK shares for 94 cents apiece. Those same shares today are valued in the neighborhood of $64, growth of more than 4,600%. In the ’10s, Patrick Industries took its place in the eyes of Wall Street among the better-known decade darlings like Amazon, Tesla, Netflix, and Dominoes.
An investor who put $4,000 into Patrick Industries 10 years ago would have made $270,000 on that investment alone. During that time the company grew to more than 8,000 employees, acquired more than 40 businesses, and reached annual sales of $2.3 billion.
Still, there have been few headlines of Patrick Industries’ remarkable success, partially because investors and those who cover the Street focus on “large caps”, companies that start at $10 billion or better. A decade ago, PATK was a “small cap” at $22.3 million. By 2020 that valuation hit $1.2 billion. As the Elkhart company was powering through 4,600% growth the entirety of the S&P 500 increased 200% in the market surge.
It certainly was a decade to remember.
Elkhart Executives Maintain Growth Focus
The Elkhart executives, Todd Cleveland and Andy Nemeth, who led Patrick Industries through the phenomenal decade of growth have preferred and likely benefited from the low-profile success.
In remarks during an earnings announcement and investor call at the close of the decade, Nemeth spoke of the quarter and the strong annual results with nary a word about the successes of previous years.
“We are pleased with our fourth quarter and full-year performance, especially in light of the volatility experienced in all of our primary markets,” Nemeth stated. “Our team’s efforts reflect tremendous focus on executing on strategic initiatives across all of our end markets, driving operational efficiencies and cost reductions to optimize and position our cost structure for 2020, leveraging synergies from new acquisitions and across our business units, and delivering market share gains. While our leisure lifestyle markets, comprised of RV and marine, continued to feel the impact of reductions in wholesale unit production levels to better align with retail demand, our housing and industrial markets exhibited positive momentum as we finished 2019.”
True, RV demand began to level as manufactured housing output increased nine out of the 10 years. Within Patrick Industries’ business mix, manufactured housing contributes on a recent annual average about 17 percent to corporate revenue.
How Patrick Industries Handled the COVID-19 Shutdowns
It certainly looked as though the only thing that could slow down the Elkhart company’s growth would be a global pandemic. When COVID-19 precautions began rolling out in mid-March, production slowed and stock tumbled to $19.43 per share in mid-March. It took a matter of weeks to double its value and has been trading above $60 again since mid-July.
“We are pleased with our operating and financial performance during the second quarter and the tremendous flexibility and adaptability of our team as we navigated significant uncertainty and production shutdowns in both our leisure lifestyle and housing and industrial markets,” Nemeth said. “In particular, the RV industry experienced a five-week production shutdown, while various marine OEMs had production shutdowns ranging from one to five weeks. Our team took quick, disciplined, and focused actions to reduce our fixed cost structure to align with our revenue stream starting at the end of the first quarter and during the second quarter.”
Patrick Industries was able to avoid potential harm from COVID-19 measures and worked toward solidifying its operations to address ongoing uncertainty related to the pandemic, Nemeth said.
Again, rising demand in all major markets buoyed the company from its short-lived pandemic dip. In the latter half of the second quarter, buyers looked at recreational vehicles and boating as safe alternatives to flying. And the manufactured housing market rose to near-2019 levels, largely with consumers either looking to downsize or move from apartments to single-family living.
“We expect this momentum to continue into the second half of 2020,” Nemeth said in a recent investor call. “Additionally, we believe that the continued resilience and subsequent surge in retail demand in these markets have further reduced dealer inventories from what we believe were already at a low point heading into the 2020 selling season.”
Select List of Patrick Industries Brand Names
- Adorn hardwood doors
- AIA Countertops
- Aluminum Metals
- Baymont basins, enclosures, tilework
- Cana Cabinetry
- Collins & Company
- Creative Wood Designs
- Decor lamination and overlay
- Dehco building materials
- Frontline Manufacturing
- Gustafson Lighting
- LaSalle Bristol building products
- LMI glass products
- Middlebury Hardwood Products
- Nickell Moulding Company
- North American Forest Products
- North American Moulding
- Patrick Distribution
- Praxis Group surfaces and furniture
- Premier Concepts premium countertops
- Quest Audio
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