Patrick Industries, Inc. (2)
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RV Supplier Patrick Industries Surprises with Top Spot Debut

Aug. 8, 2017
Headquartered in the RV Capital of the World, Patrick Industries used an aggressive acquisition strategy and made the most of the RV industry's darkest days to develop into a power.

Some years, our annual list of the 50 Best U.S. Manufacturers can be almost unbelievably predictable. Some years, it can be almost unbelievably unpredictable.

And some years, like this year, it can be both.

After all, almost two-thirds of the public manufacturers that appeared on the list last year are back, tucked somewhere on the table printed below, and 12 of the previous top 17 are right back in the upper third again this year. These companies are strong and steady, like metronomes. At the same time, the company that tops this edition of the U.S. 50 is an incredible surprise. It, too, is strong, steady and relatively metronomic, but when its financial numbers were plugged into our proprietary formula, it also exploded like some sort of supernova.

Meet Patrick Industries, Inc.

Headquartered in Elkhart, Ind., Patrick Industries is, not surprisingly, involved in the recreational vehicle industry. If you've stepped foot in an RV, you've probably touched or at least looked at their pre-finished ceiling and wall panels, countertops, paneling, moldings, trim and doors. They also manufacture plumbing, electrical and wiring, among other products. (And that product set also gives Patrick Industries a big spot in the manufactured housing market, in addition to household and office furniture, commercial furnishings, and marine parts.) If you've never heard of them, you've certainly seen them. And if you've never heard of them, you will.

The company has expanded bo
th its offerings and its acquisitions in recent years, affording it "the opportunity to … further expand our presence as a key component supplier," CEO Todd Cleveland said in a recent earnings call. Last year, it recorded $1,221.89 million in revenue, with a profit margin of 4.55%, right in line with each of its last two years. Its revenue growth, meanwhile, increased 32.77%, its third straight year well over 20% in that area.

Will Patrick Industries become a U.S. 50 regular -- perhaps in the manner of Drew Industries, which made its own surprising debut last year at No. 11 before jumping to No. 2 overall this year -- or did everything just sort of click for one incredible year? Most definitely the latter, if you listen to Cleveland.

"We are focused on continuing to drive strong growth on both the top and bottom line," he said. "Make strategic acquisitions in our existing businesses and similar markets, reinvest in our business through capital expenditures and workforce planning, and maximize efficiencies to support our long-term strategic growth initiatives."

Around a decade ago, during the height of the recession, the company struggled as both the manufactured housing and RV markets cratered to their lowest shipment numbers in decades. While the market recovered, the company grew through acquisitions -- 27 from 2010 through 2016, according to Micro Cap Club, at an aggregate purchase price of $330 million -- granting autonomy to acquired management teams.

During that wave of acquisitions, Patrick Industries also implemented a share repurchase program, buying back almost 2 million shares, which peaked at $83.75 in February after bottoming out under $6 just five years ago. They also completed a three-for-two stock split in 2015 that somehow did not visibly affect the share price.

Like so many corners of manufacturing, the RV industry has yet to reach its pre-recession levels. But Patrick Industries planned and implemented, acquired and expanded, all under the watch of a CEO, Cleveland, who at 49 is younger than the company he runs. It might not be a U.S. 50 metronome just yet, but the company is also certainly not a supernova, burning out after a spectacular show.

The Next 49

Plenty of familiar names popped up in the U.S. 50 after Patrick Industries. RV manufacturer Thor Industries climbed for the fifth straight year, this time all the way to No. 3, while check printer Deluxe Corp. at No. 4 made its sixth straight appearance overall and fifth straight in the top 10. Likewise, building materials leader Sherwin-Williams climbed for the fifth straight year to No. 5, while four-time leader Apple at No. 6 notched its lowest spot in almost a decade but still made the list for the 11th straight year.

Petroleum additive holding company Newmarket Corp. (37) and 2015 leader Polaris (38) both appeared among the top 50 for the ninth straight year, while Hormel Foods Corp. (18) and Hershey Co. (27) each ran their streak to seven years. In addition to Deluxe, maintenance equipment leader Toro Co. (11), Monster Beverage Corp. (17) and Rockwell Automation Inc. (44) all showed up for the sixth straight year, and analytical instruments maker Mettler-Toledo International Inc. (15) joined Thor and Sherwin-Williams at five straight.

Some other familiar names returned to the list, including food maker Lancaster Colony Corp. (7 after last appearing in 2014), auto supplier Gentex Corp. (25 after last appearing in 2015), furniture maker Herman Miller Inc. (30 after last appearing in 2015) and IBM Corp. (33 after last appearing in 2015, though it had also notched seven straight appearances prior to that). Hasbro Inc. (43), NVIDIA Corp. (45) and Raytheon Co. (48) all returned after gaps of at least five years.

Like Patrick Industries, nine other manufacturers made their U.S. 50 debut this year, including some recognizable to the general public: Cintas Corp. (10), Northrop Grumman Corp. (35), Huntington Ingalls Industries Inc. (39) and Dr Pepper Snapple Group Inc. (40).

And again like Patrick Industries, there were some significant jumps this year: Transportation manufacturing company Greenbrier Cos. Inc. jumped 25 spots to No. 20, electronics maker Acuity Brands Inc. was up 23 spots to No. 21, auto supplier Lear Corp. improved 17 spots to No. 19, and Lockheed Martin Corp. bumped up 15 spots to No. 16.

For the record, the IndustryWeek 50 Best U.S. Manufacturers is based on a formula applied to the IW U.S. 500 -- our exclusive ranking of America's largest public manufacturers based on revenue. The calculations measure three years of six metrics -- revenue growth, profit margin, return on assets, return on equity, sales turnover and inventory turnover -- with recent years weighted more heavily.

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