Patrick Industries has reported its financial results for the third quarter, which were impacted by a sophisticated third-party malware cyberattack. Net sales for the third quarter of 2019 decreased $8.9 million, or 2 percent, to $566.2 million from $575.1 million in the same quarter of 2018. The decrease in the third quarter was primarily attributable to quarter-over-quarter declines in three of the four primary markets Patrick serves, which was partially offset by acquisitions and market share gains.
The cyberattack attack impacted the company’s administrative and production servers and resulted in a disruption of administrative and network operations for approximately two business days. In response to the attack, Patrick immediately took steps to ensure customer commitments were honored and to remediate the attack to minimize the disruption. Further, although Patrick has programs in place to detect, contain and respond to data security incidents, the company began an investigation of the attack, including engaging external forensic and other IT experts, and is in the process of implementing further security measures and processes designed to prevent unauthorized access to its information systems and mitigate cybersecurity related risks. Estimated after-tax costs incurred in the third quarter of 2019 related to the cyberattack were approximately $1.5 million, which included incremental consulting and professional fees, administrative, operating, and production inefficiencies, and equipment replacement and repair.
Patrick’s revenues from the RV industry, which represented 55 percent of third quarter 2019 sales, decreased 13 percent from the third quarter of 2018, compared to a 14 percent decrease in RV industry wholesale unit shipments, as estimated by the company.
For the third quarter of 2019, Patrick reported operating income of $37.4 million, a decrease of 16 percent, or $7.3 million, from $44.7 million reported in the third quarter of 2018. Net income in the third quarter of 2019 was $21.3 million compared to $27.9 million in the third quarter of 2018.
“Our financial results in the third quarter were negatively impacted by continued RV dealer inventory rebalancing as dealers position themselves for the upcoming 2020 model selling season,” said Todd Cleveland, chairman and CEO. “As we continue to navigate the volatility in all of our end markets, we have strategically aligned our cost structure while maintaining flexibility to respond to increased demand and changing market conditions. In the third quarter, we tactically reduced our fixed cost structure by approximately $10 million on an annualized basis and as a result expect to realize $2.5 million of cost savings in the fourth quarter of 2019. These cost savings, combined with our team’s focus of driving market share gains, operational improvement and synergy realization, will continue to position the Company to drive overall long-term growth in both our top and bottom line.”
Net sales for the first nine months of 2019 increased $55.8 million, or 3 percent, to $1.79 billion from $1.73 billion in the same period of 2018.
The increase in the first nine months of 2019 was primarily attributable to acquisitions and organic growth, which was partially offset by declines in the primary markets we serve. The company’s revenues from the RV industry, which represented 56 percent of nine months 2019 sales, decreased 12 percent from the first nine months of 2018, compared to a 20 percent decrease in RV industry wholesale unit shipments, as estimated by the company.
“As we look ahead to the remainder of 2019, and into 2020 and beyond, we believe that our operational and financial foundation, and customer first performance-oriented culture, when combined with the exceptional talent, passion, and energy of our team members, will continue to position us to execute on our strategic plan, drive shareholder value, and exceed our customers’ expectations,” said Cleveland.
