Soon after issuing a mostly favorable financial report – net sales increased 3% for both the fourth quarter and full year of 2019 – that seemed to be well received by Wall Street, Patrick Industries Inc. officials said the company is already experiencing growth for the first two months of 2020 as the industry-wide inventory balancing seems to have leveled off.

In its earnings statement yesterday (Feb. 13), Patrick, a major supplier to the RV, marine and other industries, reported that net sales for the fourth quarter of 2019 increased $18.3 million, or 3%, to $549.5 million from $531.2 million in the same quarter of 2018.

Meanwhile, sales for the full year increased 3% to $2.34 billion from $2.26 billion in 2018. RV industry revenues represented 55% of 2019 sales, a 10% decrease from 2018, compared to a 16% decrease in RV industry wholesale unit shipments. RV content per wholesale unit for 2019 increased 7% to $3,170 from $2,965 for 2018.

In a conference call to investment analysts, Andy Nemeth, president of Elkhart, Ind.-based Patrick Industries, provided a recap of 2019 that centered around a mostly pleasing performance despite market volatility and other familiar industry headwinds. He also looked ahead to 2020, which was highlighted by a jump in OEM orders through the first two months.

Nemeth also said the “inventory rebalancing” that took place throughout 2019 — RV dealers, generally speaking, reduced their wholesale orders from OEMs in proportion with retail demand and unit availability — has reached a point where Patrick expects wholesale production “to remain resilient” in 2020.

“As we look towards 2020,” he said, “we believe that momentum is building in both our leisure lifestyle and housing and industrial markets. Retail demand and demographic trends remain positive for all of our primary markets supported by macroeconomic and secular tailwinds. We have strategically and opportunistically diversified our business model that is based on building upon our strengths and expertise and staying close to what we know and what we do best.”

Going into greater detail, Nemeth explained that the gap between retail shipments and wholesale production for 2019 is estimated to be more than 50,000 units, with retail having outpaced wholesale. He also estimated there have been more than 100,000 units of inventory taken out since the destocking began in the second quarter of 2018.

This data implies that by the end of 2019 more than 10 weeks of production was taken out of “inventory weeks on hand” since 2014, Nemeth suggested. During that same timeframe, he pointed out, retail unit shipments are up more than 40%.

Nemeth mentioned Patrick is anticipating the industry will enjoy a positive first quarter in 2020 wholesale shipments, as strong retail demand — marked by record attendance and strong buying levels — is evident at consumer shows.

“Additionally, we have seen the decontenting of units slow and a potential reversing of those trends with upcontenting of certain brands looking to differentiate their units taking place as well as buyers looking to upgrade. This will ultimately add to our content per unit,” he said.

“Based on current first quarter run rates to date, and significant declines in shipments in the first quarter of 2019, which were partially impacted by negative weather, we are anticipating year-over-year growth in shipments in the first quarter of 2020,” he added.

Nemeth also touched on a number of other issues in greater detail during the call with investors, an edited transcript of which follows:

• On whether OEM orders are on the upswing:

“We do some pretty detailed tracking as it relates to production rates with our customers and, based on our data and what we’re anticipating right now, January was up double digits and February is up single digits. So, for the first two months, we’re going to be up high single digits to low double digits. So, production rates have improved. There is some weather impact from a year ago but, again, we would tell you that we’re seeing a mid- to high single-digit production rate increase right now, and we are seeing that in both January and February.”

• On whether retail demand remains in a positive state:

We think retail is in a good spot. Other than trending down flat to mid-single digits, we would tell you that retail feels pretty good right now. We’re hearing good news on the shows. We’re hearing traffic is up. We’re hearing as well that sales are up and unit sales are up. So, everything is positive at this point from our perspective on the retail side.

• On whether per-unit-content will grow this year?

‘We think the decontenting has definitely stabilized. And, in fact, we’re seeing certain customers upcontent at this point, and really looking to differentiate their units from the contenting that has been taken out. So, we’ve actually kind of seen a little bit of a shift; the start of that looks like it’s starting to happen. Our estimates continue to be with 2% to 3% organic growth. So, we feel like those are valid and achievable targets.”

• On whether the coronavirus is impacting its supply chain:

“It’s a mixed bag. At this point, though, the coronavirus lined up with Chinese New Year, and we always buy a little bit ahead during this time period. So, we’re good from an inventory perspective through the first quarter. We’ve heard that return to work rates are coming back at 70% to 75% at this point in time. It also depends on the automation of the facilities as well. We’ve got a mix of facilities that are more labor intensive. So, we don’t expect anything at this point. We’re planning ahead and making sure that we’re working on supply. We’ll continue to evaluate, but we’re good through the first quarter.

• On which markets represent the most likely acquisition opportunities:

“I would say our leisure lifestyle market — RV and marine — is where we have opportunities. And then the industrial market is very exciting for us. We’ve got new presence in the Pacific Northwest they we’re extremely excited about. We’re excited about the western regions of the country today on the industrial market. So again, very excited about both those two.