Patrick Industries, Inc. Reports Third Quarter 2024 Financial Results
Third Quarter 2024 Highlights (compared to Third Quarter 2023 unless otherwise noted)
- Net sales increased 6% to
$919 million driven by a 13% increase in Housing revenue and our first quarter acquisition of Sportech, which together more than offset a 21% decline in Marine revenue. - Operating margin decreased 10 basis points to 8.1%. For the first nine months of 2024, adjusted operating margin improved 20 basis points to 7.8%.
- Net income increased 3% to
$41 million . Diluted earnings per share of$1.80 included the dilutive impact of our convertible notes and related warrants in the period, or an estimated$0.06 per share. For the first nine months of 2024, adjusted diluted earnings per share increased 13% to$5.75 . - Adjusted EBITDA increased 7% to
$121 million ; adjusted EBITDA margin increased 10 basis points to 13.2%. - Cash flow provided by operating activities was
$224 million for the first nine months of the year compared to$294 million in the same period last year. Free cash flow, on a trailing twelve-month basis, was$277 million . - Completed the acquisition of RecPro, which significantly increases our penetration into the RV aftermarket, while also providing synergy opportunity for our Marine and Powersports end markets to sell through a more advanced aftermarket distribution channel.
- Maintained solid balance sheet and liquidity position, ending the third quarter with a total net leverage ratio of 2.6x following the acquisition of RecPro and liquidity of
$458 million . - Subsequent to quarter end, the Company amended and extended the maturity of its credit facility, and also issued
$500 million aggregate principal amount of 6.375% Senior Notes due 2032. The Company plans to redeem its 7.500% Senior Notes due 2027 with a portion of the proceeds. - Patrick plans to host an investor day in
New York City onDecember 3, 2024 .
Net sales increased 6% to
Operating income of
Net income increased 3% to
"The Patrick team delivered another quarter of solid results with revenue and net income growth supported by the continued diversification of our business," said
Third Quarter 2024 Revenue by Market Sector
(compared to Third Quarter 2023 unless otherwise noted)
RV (43% of Revenue)
- Revenue of
$396 million decreased 1% while wholesale RV industry unit shipments increased 6%. - Content per wholesale RV unit (on a trailing twelve-month basis) decreased by 1% to
$4,887 . Compared to the second quarter of 2024, content per wholesale RV unit (on a trailing twelve-month basis) decreased 2%.
Marine (15% of Revenue)
- Revenue of
$136 million decreased 21% while estimated wholesale powerboat industry unit shipments decreased 23%. Our Marine end market revenue previously included Powersports revenue, which we began to report separately following the Sportech acquisition. End market revenue and content per unit reflect this change for the relevant periods. - Estimated content per wholesale powerboat unit (on a trailing twelve-month basis) decreased 6% to
$3,936 . Compared to the second quarter of 2024, estimated content per wholesale powerboat unit (on a trailing twelve-month basis) was flat.
Powersports (10% of Revenue)
- Revenue of
$87 million increased 204%, driven primarily by the acquisition of Sportech in the first quarter of 2024.
Housing (32% of Revenue, comprised of
- Revenue of
$300 million increased 13%; estimated wholesale MH industry unit shipments increased 17%; total housing starts decreased 3%. - Estimated content per wholesale MH unit (on a trailing twelve-month basis) increased 1% to
$6,518 . Compared to the second quarter of 2024, estimated content per wholesale MH unit increased 1%.
Balance Sheet, Cash Flow and Capital Allocation
For the first nine months of 2024, cash provided by operating activities was
We remained disciplined in allocating and deploying capital, returning approximately
Our total debt at the end of the third quarter was approximately
Subsequent to the end of the quarter, we reduced our cost of debt and increased our liquidity position by issuing
Business Outlook and Summary
"Our team remains confident in the strength of our brand portfolio, disciplined operating model, earnings power of the business, and the profitable runway of opportunity that exists in each of our primary end markets," continued
Conference Call Webcast
About
Patrick (NASDAQ: PATK) is a leading component solutions provider serving the RV, Marine, Powersports and Housing markets. Since 1959, Patrick has empowered manufacturers and outdoor enthusiasts to achieve next-level recreation experiences. Our customer-focused approach brings together design, manufacturing, distribution, and transportation in a full solutions model that defines us as a trusted partner. Patrick is home to more than 85 leading brands, all united by a commitment to quality, customer service, and innovation. Headquartered in
Cautionary Statement Regarding Forward-Looking Statements
This press release contains certain statements within the meaning of Private Securities Litigation Reform Act of 1995 that are forward-looking in nature. The forward-looking statements are based on current expectations and our actual results may differ materially from those projected in any forward-looking statement. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. Factors that could cause actual results to differ materially from those in forward-looking statements included in this press release include, without limitation: adverse economic and business conditions, including cyclicality and seasonality in the industries we sell our products; the financial condition of our customers or suppliers; the loss of a significant customer; changes in consumer preferences; declines in the level of unit shipments or reduction in growth in the markets we serve; the availability of retail and wholesale financing for RVs, watercraft and powersports products, and residential and manufactured homes; pricing pressures due to competition; costs and availability of raw materials, commodities and energy and transportation; supply chain issues, including financial problems of manufacturers or suppliers and shortages of adequate materials or manufacturing capacity; the challenges and risks associated with doing business internationally; challenges and risks associated with importing products, such as the imposition of duties, tariffs or trade restrictions; the ability to manage our working capital, including inventory and inventory obsolescence; the availability and costs of labor and production facilities and the impact of labor shortages; fuel shortages or high prices for fuel; any interruptions or disruptions in production at one of our key facilities; challenges with integrating acquired businesses; the impact of the consolidation and/or closure of all or part of a manufacturing or distribution facility; an impairment of assets, including goodwill and other long-lived assets; an inability to attract and retain qualified executive officers and key personnel; the effects of union organizing activities; the impact of governmental and environmental regulations, and our inability to comply with them; changes to federal, state, local or certain international tax regulations; unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise; public health emergencies or pandemics, such as the COVID-19 pandemic; our level of indebtedness; our inability to comply with the covenants contained in our senior secured credit facility; an inability to access capital when needed; the settlement or conversion of our notes; fluctuations in the market price for our common stock; an inability of our information technology systems to perform adequately; any disruptions in our business due to an IT failure, a cyber-incident or a data breach; any adverse results from our evaluation of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; certain provisions in our Articles of Incorporation and Amended and Restated By-laws that may delay, defer or prevent a change in control; adverse conditions in the insurance markets; and the impact on our business resulting from wars and military conflicts, such as war in
The Company does not undertake to publicly update or revise any forward-looking statements. Information about certain risks that could affect our business and cause actual results to differ from those express or implied in the forward-looking statements are contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
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Third Quarter Ended |
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Nine Months Ended |
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($ in thousands, except per share data) |
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$ 919,444 |
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$ 866,073 |
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$ 2,869,560 |
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$ 2,686,858 |
Cost of goods sold |
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706,930 |
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666,954 |
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2,220,897 |
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2,083,527 |
GROSS PROFIT |
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212,514 |
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199,119 |
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648,663 |
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603,331 |
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Operating Expenses: |
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Warehouse and delivery |
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37,865 |
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37,664 |
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114,053 |
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109,540 |
Selling, general and administrative |
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75,783 |
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70,873 |
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244,617 |
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231,814 |
Amortization of intangible assets |
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24,449 |
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19,507 |
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71,545 |
|
59,093 |
Total operating expenses |
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138,097 |
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128,044 |
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430,215 |
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400,447 |
OPERATING INCOME |
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74,417 |
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71,075 |
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218,448 |
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202,884 |
Interest expense, net |
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20,050 |
|
16,879 |
|
60,483 |
|
53,623 |
Income before income taxes |
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54,367 |
|
54,196 |
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157,965 |
|
149,261 |
Income taxes |
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13,501 |
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14,646 |
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34,122 |
|
37,181 |
NET INCOME |
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$ 40,866 |
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$ 39,550 |
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$ 123,843 |
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$ 112,080 |
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BASIC EARNINGS PER COMMON SHARE |
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$ 1.88 |
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$ 1.84 |
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$ 5.71 |
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$ 5.20 |
DILUTED EARNINGS PER COMMON SHARE |
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$ 1.80 |
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$ 1.81 |
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$ 5.55 |
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$ 5.09 |
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Weighted average shares outstanding - Basic |
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21,740 |
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21,511 |
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21,706 |
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21,541 |
Weighted average shares outstanding - Diluted |
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22,641 |
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21,884 |
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22,297 |
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22,063 |
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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
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As of |
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($ in thousands) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ 52,606 |
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$ 11,409 |
Trade and other receivables, net |
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255,369 |
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163,838 |
Inventories |
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545,445 |
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510,133 |
Prepaid expenses and other |
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59,539 |
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49,251 |
Total current assets |
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912,959 |
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734,631 |
Property, plant and equipment, net |
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369,342 |
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353,625 |
Operating lease right-of-use assets |
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205,110 |
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177,717 |
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1,628,358 |
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1,288,546 |
Other non-current assets |
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7,184 |
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7,929 |
TOTAL ASSETS |
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$ 3,122,953 |
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$ 2,562,448 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current Liabilities: |
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Current maturities of long-term debt |
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$ 11,250 |
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$ 7,500 |
Current operating lease liabilities |
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53,335 |
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48,761 |
Accounts payable |
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189,274 |
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140,524 |
Accrued liabilities |
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125,330 |
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111,711 |
Total current liabilities |
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379,189 |
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308,496 |
Long-term debt, less current maturities, net |
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1,377,727 |
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1,018,356 |
Long-term operating lease liabilities |
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156,083 |
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132,444 |
Deferred tax liabilities, net |
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68,012 |
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46,724 |
Other long-term liabilities |
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12,461 |
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11,091 |
TOTAL LIABILITIES |
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1,993,472 |
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1,517,111 |
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TOTAL SHAREHOLDERS' EQUITY |
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1,129,481 |
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1,045,337 |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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$ 3,122,953 |
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$ 2,562,448 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Nine Months Ended |
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($ in thousands) |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
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$ 123,843 |
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$ 112,080 |
Depreciation and amortization |
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124,002 |
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107,976 |
Stock-based compensation expense |
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14,367 |
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13,675 |
Other adjustments to reconcile net income to net cash provided by operating activities |
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2,335 |
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4,024 |
Change in operating assets and liabilities, net of acquisitions of businesses |
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(40,357) |
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56,075 |
Net cash provided by operating activities |
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224,190 |
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293,830 |
CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property, plant and equipment |
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(50,264) |
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(47,430) |
Business acquisitions and other investing activities |
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(435,137) |
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(28,033) |
Net cash used in investing activities |
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(485,401) |
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(75,463) |
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES |
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302,408 |
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(224,764) |
Net increase (decrease) in cash and cash equivalents |
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41,197 |
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(6,397) |
Cash and cash equivalents at beginning of year |
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11,409 |
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22,847 |
Cash and cash equivalents at end of period |
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$ 52,606 |
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$ 16,450 |
Earnings Per Common Share (Unaudited)
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The table below illustrates the calculation for earnings per common share:
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Third Quarter Ended |
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Nine Months Ended |
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($ in thousands, except per share data) |
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Numerator: |
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Earnings for basic earnings per common share calculation |
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$ 40,866 |
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$ 39,550 |
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$ 123,843 |
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$ 112,080 |
Effect of interest on potentially dilutive convertible notes, net of tax |
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— |
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— |
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— |
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162 |
Earnings for diluted earnings per common share calculation |
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$ 40,866 |
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$ 39,550 |
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$ 123,843 |
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$ 112,242 |
Denominator: |
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Weighted average common shares outstanding - basic |
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21,740 |
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21,511 |
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21,706 |
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21,541 |
Weighted average impact of potentially dilutive convertible notes |
|
554 |
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— |
|
340 |
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221 |
Weighted average impact of potentially dilutive warrants |
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117 |
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— |
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39 |
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— |
Weighted average impact of potentially dilutive securities |
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230 |
|
373 |
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212 |
|
301 |
Weighted average common shares outstanding - diluted |
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22,641 |
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21,884 |
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22,297 |
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22,063 |
Earnings per common share: |
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Basic earnings per common share |
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$ 1.88 |
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$ 1.84 |
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$ 5.71 |
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$ 5.20 |
Diluted earnings per common share |
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$ 1.80 |
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$ 1.81 |
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$ 5.55 |
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$ 5.09 |
Non-GAAP Reconciliation (Unaudited)
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with
The following table reconciles net income to EBITDA and adjusted EBITDA: |
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Third Quarter Ended |
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Nine Months Ended |
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($ in thousands) |
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Net income |
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$ 40,866 |
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$ 39,550 |
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$ 123,843 |
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$ 112,080 |
+ Depreciation & amortization |
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42,186 |
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36,484 |
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124,002 |
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107,976 |
+ Interest expense, net |
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20,050 |
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16,879 |
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60,483 |
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53,623 |
+ Income taxes |
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13,501 |
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14,646 |
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34,122 |
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37,181 |
EBITDA |
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116,603 |
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107,559 |
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342,450 |
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310,860 |
+ Stock-based compensation |
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4,625 |
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5,729 |
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14,367 |
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13,675 |
+ Acquisition related transaction costs |
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— |
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— |
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4,998 |
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— |
+ Acquisition related fair-value inventory step-up |
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— |
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— |
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822 |
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610 |
+ (Gain) Loss on sale of property, plant and equipment |
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(34) |
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142 |
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(402) |
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242 |
Adjusted EBITDA |
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$ 121,194 |
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$ 113,430 |
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$ 362,235 |
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$ 325,387 |
The following table reconciles cash flow from operations to free cash flow on a trailing twelve-month basis: |
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Trailing Twelve Months Ended |
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($ in thousands) |
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Cash flow from operating activities |
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$ 339,032 |
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$ 475,760 |
Less: purchases of property, plant and equipment |
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(61,821) |
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(63,876) |
Free cash flow |
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$ 277,211 |
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$ 411,884 |
The following table reconciles operating margin to adjusted operating margin: |
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Third Quarter Ended |
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Nine Months Ended |
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Operating margin |
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8.1 % |
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8.2 % |
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7.6 % |
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7.6 % |
Acquisition related fair-value inventory step-up |
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— % |
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— % |
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— % |
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— % |
Transaction costs |
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— % |
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— % |
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0.2 % |
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— % |
Adjusted operating margin |
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8.1 % |
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8.2 % |
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7.8 % |
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7.6 % |
The following table reconciles net income to adjusted net income and diluted earnings per common share to adjusted diluted earnings per common share: |
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Third Quarter Ended |
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Nine Months Ended |
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($ in thousands, except per share data) |
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Net income |
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$ 40,866 |
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$ 39,550 |
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$ 123,843 |
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$ 112,080 |
+ Acquisition related fair-value inventory step-up |
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— |
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— |
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822 |
|
610 |
+ Transaction costs |
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— |
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— |
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4,998 |
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— |
- Tax impact of adjustments |
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— |
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— |
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(1,488) |
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(154) |
Adjusted net income |
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$ 40,866 |
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$ 39,550 |
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$ 128,175 |
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$ 112,536 |
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Diluted earnings per common share (per above) |
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$ 1.80 |
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$ 1.81 |
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$ 5.55 |
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$ 5.09 |
Transaction costs, net of tax |
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— |
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— |
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0.17 |
|
— |
Acquisition related fair-value inventory step-up, net of tax |
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— |
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— |
|
0.03 |
|
0.01 |
Adjusted diluted earnings per common share |
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$ 1.80 |
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$ 1.81 |
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$ 5.75 |
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$ 5.10 |
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