Q1 2021 Patrick Industries Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Patrick Industries incorporated first quarter 2021 earnings Conference call.
My name is Diego and I'll be your operator for today's call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
And I will now turn the call over to MS. Julie Ann Kotowski from Investor Relations.
But the kotowski you may begin.
Good morning, everyone and welcome to Patrick Industries first quarter 2021 conference call I'm joined on the call today by Andy Nemeth, President and CEO and Jake pack of H C of O.
Certain statements made in today's conference call regarding Patrick industries, and its operations, maybe considered forward looking statements under the Securities law.
There are a number of factors many of which are beyond the company's control, which could cause the actual results and events to differ materially from those described in the forward looking statements.
These factors are identified in our press releases, our form 10-K for the year ended 2020 and in our other filings with the Securities and Exchange Commission.
We undertake no obligation to update these statements to reflect circumstances or events that occur after the day. The forward looking statements for me.
I would now like to turn the call over to Andy Nemeth.
Thank you Julie and good morning, ladies and gentlemen, and thank you for joining us on the call today.
We kicked off our first quarter of 2021 with the continuation of the strong trends in tailwind supporting our markets as expected in fact momentum accelerated both year over year and sequentially in our leisure lifestyle markets, which represent 75 per cent of our first quarter revenues as the strength of both retail and wholesale shipments in the recreational vehicle and boating market.
It's materially improved year over year demand for outdoor recreation remains solid and interest in popularity in alignment with our view of their tremendous attractiveness and potential in both of the COVID-19 and post COVID-19 environment.
Energy remains strong capitalizing on interest in outdoor recreation activities that provide adventure and the exploration of the great American outdoors, the ability for families to experience. This adventure together and the inherent social distancing through the freedom of being outside.
And our housing and industrial markets, which collectively represent approximately 25% of first quarter revenues housing repair and remodel and home improvement conditions also remained robust with demand for housing continuing to outweigh supply. The success of the evolving work from home model and the continued urban migration and extra debt from certain concentrated regions to less.
Dance and more attractive climate associated regions.
These trends in leisure lifestyle, and housing and industrial and consumer preferences and activities all provide a strong tailwind for Patrick in our primary end markets further solidifying and already promising long term outlook.
From an operations perspective, the size scale and flexibility of our well positioned operating and financial platform allowed us to execute strategically and tactically during the quarter and leverage our fixed cost structure to drive increased profitability.
Our fourth quarter decision to the carry heavier inventories in anticipation of a strong start to the year proved positive as those inventories were quickly used up in Q1.
Our tremendously talented team members and business unit leaders leveraged our internal sourcing synergies purchasing power and supply chain partnerships and relationships proactively overcoming material pricing and supply chain challenges of constraints to support our customers where others couldn't.
We further deploy capital within our infrastructure to proactively drive our business model off of as well as automating and expanding capacity, which will continue to allow us the opportunity to consistently deliver our differentiated products and services to our customers.
We continued our investments in innovation automation capacity and our facilities in anticipation of resilient demand and channel restocking for the foreseeable future to again match up and flex with our customers' growth expectations and demands.
We completed the acquisition of Seadog in the first quarter and also focused efforts on investments in our human capital initiatives we.
We are actively investing in the tools needed talent and energy of our people who work for our customers, both internal and external to more proactively provide them with access to the solutions and products that will help further drive our performance in the end markets.
The spirit of our team members in combination with their dedication and can do attitude is let us forward as we partner with our customers some of the development and delivery of products promoting and enabling excitement growth and enthusiasm toward our end markets.
On the COVID-19 front, the passion and compassion of our team members has been inspiring our trends continue to improve and our protocols remain in place inactive.
We will continue to prioritize the health safety and wellbeing of our team members and alignment with our core values and culture.
Our ESG and related initiatives continue to be a high priority for us as well as we continue on our journey to drive focus goals envision on sustainability across our platform and the way we use resources through innovative programs to reduce waste and reuse materials. Additionally.
Additionally, we are dedicated the solid corporate governance, and accountability to our stakeholders and human capital management initiatives to provide a safe inclusive and tolerant environment in which everyone is encouraged empowered and supported in the pursuit of their professional and personal development goals.
With that as a general update and backdrop, our first quarter operating performance was very strong in alignment with high double digit revenue growth in our RV Marine and industrial end markets and high single digit revenue growth in our MH market.
Our teams worked tirelessly to match up with OEM and build our production levels as we once again leveraged our fixed cost structure to drive improved gross profit operating income net income and diluted earnings per share during the quarter.
Our first quarter revenues of $850 million increased 44% of 261 million compared to the first quarter of 2020, and we earned $2.04 per diluted share 124% increase over the prior year's first quarter.
Subsequent to quarter end, we completed the acquisition of seed that the industry, leading marine supplier of non slip phone flooring and also closed on new financing with the issuance of $350 million of senior unsecured notes in conjunction with the expanded capacity and extension of our credit facility, which Jake will further detail.
We will continue to proactively position of our capital structure for both strategic and defensive purposes for marine and flexible and nimble in any environment and support our growth needs and capital allocation strategy in alignment with our overall strategic plan.
Now turning to a deeper dive in our end markets Justice calibration of inventories and Destocking has occurred in our leisure lifestyle markets in the past. The same holds true currently on the restocking front as RV and marine dealer inventories, whether new or used continue to trend at or near historical lows as the measure started by weeks on hand, and RV and Marine REIT.
<unk> sales continued to be powered by healthy and growing demographic trends.
New buyers motivated by the outdoor recreation boom continue to enter the space and by doing so also introduce the boating camping lifestyle of their friends and family likely promoting the chain reaction.
Housing demand is well supported by similar demographic trends low interest rates government stimulus as a result of COVID-19 and the shift in migration trends from urban areas. The suburban are expected to further bolster our MH and industrial market businesses in single and multifamily housing home improvement and repair and remodel.
Our RV revenues were up $181 million or 57% in the first quarter and represented 59% of our consolidated sales are.
RV wholesale unit shipments were up 48% totaling more than 148000 units for the quarter.
We currently estimate retail unit shipments also increased between 30 and 35% in that same period or resulted in between approximately of 115000 and of 125000 units sold.
The units are continuing to immediately of retail sell through at the dealer level and backlogs at the Oems continue to increase further delaying the dealer inventory replenishment cycle and as we head into the peak retail buying season in Q2, and Q3 are estimates indicate the dealer inventories are down approximately 30% to 35% on T. T M retail use.
Net shipments that are up 20% over the same period.
Household owning arby's has continued to grow over the years worth of approximately $11 2 million U S households, currently owning an RV with an additional projected nine plus million households, intending to own an RV in the next five years. According to the most recent 2020 RV owner of demographic profile.
Additionally, 68% of current owners plan to purchase another RV in the next five years. According to the same survey.
Camping and boating opportunities continue to grow bolstered by continued public and private investment in the outdoor infrastructure.
Outdoor recreation is a natural form of social distancing and the opportunities to explore everywhere with national parks and the incredible National American footprint.
The RV market continues to additionally benefit from upgrades by existing users along with recent work and study from anywhere trends.
The continued strong traffic of the dealers widespread awareness of the RV lifestyle, and OEM and dealer commitments the offering of strong value proposition will all provide greater opportunities in capacity for Americans to experience camping opportunities outdoors.
On the marine side of our business momentum is just as strong and continues based on similar trends of the parallel RV wholesale retail and dealer demand and inventory levels with the marine inventory levels, even leaner than RV and the longer potential runway for extended the restocking.
Our marine revenues of 137 million, representing 16% of our sales were up $59 million or 75 per cent for the quarter, an estimated of marine wholesale unit shipments that increased approximately 12% to 15% in the same period.
Marine retail shipments are estimated to have increased approximately 30 to 35 per cent in the quarter translating into between 45050 thousand units sold.
New buyers continue to enter the marine space and expand the ongoing network effect and demographic trends are driven primarily by a sweet spot of the 35 to 45 year olds at their peak wealth and family formation.
Secular trends also advanced in outdoor recreation and in particular in interest in boating activities from across the spectrum of boat types, whether its fiberglass pontoon and ski and wake or fishing.
Marinas are at peak capacity and heavy boat usage patterns, and the resulting demand for new marine products, including aftermarket products, where our presence continues to grow have created historically low channel inventories.
Our estimates indicate the dealer inventories are down more than 45% to 50% on TTM retail shipments that are up approximately 15% to 20% over the same period.
We expect the very positive demand trajectory for marine wholesale unit shipments and favorable supply and demand conditions throughout the remainder of 2021.
In summary of the leisure lifestyle markets are well positioned to support long term growth and are expected to continue to benefit from tailwind, including historically low inventories low interest rates and extremely compelling outdoor recreation value proposition strong demographic trends and expansion of the customer base among others. We.
We believe that the leisure lifestyle markets are poised for continued strength throughout the remainder of 2021 and well into 2022.
Now turning to the housing and industrial side of our business New single family housing starts increased 20% in the quarter and while multifamily housing starts decreased during the quarter March showed a significant revival and was up 33% as conditions are improving from COVID-19 related constraints.
Demand for new housing starts continue to outpace supply and combined with the activity in home improvement projects and related do it yourself activities. The housing sector indicates a positive demand trajectory for the remainder of 2021.
Tightness in the housing market and relative affordability of manufactured housing for that too strong positive data points for our housing and industrial markets urban the suburban and rural migration demographic trends representing household formation.
And the continued increase of both builder and the M. H OEM backlogs indicate supply demand trends that we believe will lead to continued growth in our industrial and MH of end markets for the remainder of 2021.
Our manufactured housing sales of $121 million represented 14% of our total revenues in the quarter, increasing 8% over the first quarter of 2020 on an estimated decrease in MH wholesale unit shipments of 2%.
Oems continue to work through capacity constraints with increasing backlogs as capacity opens up in backlogs translate into MH wholesale unit shipments for the remainder of 2021. We believe there is a positive trajectory for MH production and the resulting demand for our supply to this market in the remainder of 2021.
Revenues in our industrial market sector were 92 million or 11% of our overall sales mix in the first quarter, increasing 16% compared to the prior year.
New housing starts increased 10% in the first quarter.
Continued growth in new residential construction, the R&R market and Big box home improvement are supported by similar tailwind as in our other markets and of showing no signs of slowing down.
Yeah.
In summary, we are continuing to deploy our resources in tandem with our customers' growth trajectory to foster further opportunities to partner and gained share in alignment with the secular movement in all four of our primary markets inventory.
Inventory depth attaching the consumer market interest our capabilities of actively managing our supply chain and our disciplined capital allocation and financing strategies have positioned our business for continued growth for the remainder of 2021.
We are investing in software automation and specialized equipment needs, which will enable our team members to have better balance and serve our customers at the highest level.
And now I'll turn the call over to Jay who will provide additional comments on our financial performance.
Thanks, Andy and good morning, everyone.
Our consolidated net sales for the first quarter increased 44% to $850 million driven by increases in all for primary end markets, our leisure lifestyle and markets continue to benefit from the popularity of RV and marine outdoor activities, while our industrial and MH markets benefited from consumer investment in homes of remodeling and the growing price differential between stick built.
And manufactured housing.
Revenue from our leisure lifestyle markets, which are comprised of RV and marine increased 60% with RV and marine revenues of 57% and 75% respectively. RV content per unit increased 6% to approximately $3288 per unit and the estimated marine content per unit increased approximately 44% for 2000 and 426.
Dollars per unit.
Revenues from our housing and industrial markets increased 11% of the quarter with MH revenues up 8% versus the prior year and industrial revenue was up 16% compared to the prior year.
H content per unit increased 3% to $4691 per unit.
Gross margin of the first quarter was 19% increase from 40 basis points compared to the prior year.
The gross margin improvement was primarily driven by benefits of leveraging our fixed cost against the strong increase in revenue, but was partially offset by labor inefficiencies in the overtime necessary to maintain quality standards and consistent delivery of our products to end markets.
Operating expenses were 10, 9% of sales compared to 11, 9% in 2020 due to our leveraging fixed operating expenses of sales increase.
Warehouse and delivery expenses decreased 70 basis points due at a lower mix of MH sales in the quarter.
SG&A expenses were 6% of sales in the quarter of 10 basis point decrease compared to the prior year again, primarily reflecting the benefit of leveraging our fixed cost against increased sales.
Operating income of $68 million increased 74 per cent in the first quarter net operating margin of eight 1% increase of 140 basis points, primarily due to factors previously described.
Our diluted earnings per share in the first quarter was $2 <unk> up from 91 from the prior year net income and diluted EPS for the quarter reflect an income tax benefit of $5 $7 million or 24 cents, respectively weighted to the vesting and exercise of share based payment of awards.
Our overall the effective tax rate decreased to $17 one per cent for the first quarter of 2021 compared to $26 four per cent in the prior year, mostly due to tax benefits related to share based compensation.
We expect our overall effective tax rate to be 24% in 2021.
Looking at cash flows we generated approximately $50 million of operating cash flows for the first quarter of 2021, an increase of 281 per cent compared to the prior year quarter.
The increase was primarily attributed to the strong increase in net income during the quarter offset slightly by the continued investment in inventory as we work to align with strong OEM customer demand and the goal of supply and production lines in a just in time manner as Andy discussed we are focused on securing inventory levels through the leveraging of our extensive supply chain.
Continue to make strategic purchases to strive to attain a strong supply for our customers.
Strategically we further invested $30 million in acquisitions in the first quarter of 2021, including the previously announced the acquisition of Seadog.
After the close of the first quarter. We also completed the acquisition of Hyperform operating under the industry, leading see debt brand further increasing our penetration into the marine market and related aftermarket.
The acquisitions represent investments in best in class popular marine categories in the aftermarket solutions positioning our platform to deliver a deeper value added highly engineered spectrum of products to marine manufacturers, they fulfill increased marine production levels.
In addition in alignment with our disciplined capital allocation strategy and dividend policy, we invested $14 million in capital expenditures for the quarter to support capacity expansion and automation to support growing end market demand.
We returned nearly $7 million of shareholders in the form of quarterly dividends.
We had approximately $303 million of total liquidity at the end of the first quarter, including $6 million of cash on hand, the remaining unused capacity of our revolving credit facility of $297 million.
We have no major debt maturities until 2023 or.
Our operating cash flow position us to capitalize on strategic growth opportunities return capital to our shareholders and maintain our disciplined capital allocation strategy with attention to our long term leverage profile.
The leverage position at the end of the quarter was two three times net debt to EBITDA.
And then the previously mentioned subsequent to the end of the first quarter and in alignment with our strategic growth plan and financing strategy. We completed the issuance of $350 million of for 75% Senior notes due 2029 increased the capacity of our senior secured credit facility of the $700 million and extended the maturity of the credit facility to April of 2012.
The six.
Strong trends in our markets are sound and flexible capital structure, our disciplined leverage position and cash flows of positioned us extremely well for growth in our markets. We expect the leisure lifestyle channel replenishment well into 2022 as marine and RV dealers work for the first obtained inventory for immediate retail sell through with the goal of leisure lifestyle retailers to eventually build inventory levels to an appropriate level of.
Two are in hand, and we expect solid and resilient of MH and industrial markets growth during the same period.
For 2021, RBI, a currently estimation of approximate 24% increase in wholesale unit shipments to 533000 units with an upside range of 544000 units and our current estimates point towards the higher end of that range.
Based on current conditions and trends, we are presently estimating RV retail to be up low to mid single digits for the full year.
We currently anticipate bring wholesale to be of 25% to 30% over the 2020 shipment rates on retail that is estimated to be up low to mid single digits.
Based on these estimates from the continued strong retail demand expectations, we believe channel inventories in both of the RV and Marine markets remained well below recent historic levels and will not be calibrated to a new normal until 2022 and possibly into 2023.
And the manufactured housing and industrial markets. We currently expect MH wholesale unit shipments to increase low to mid single digit from 'twenty to 'twenty. One of new housing starts to continue the strong trajectory of high single digit the double digit growth in 2021.
We have continued to invest in our capabilities to strive to ensure that we can meet increasing OEM demand as the markets grow at a rapid pace geographic diversification and scale will enable us to supported capture the growth of our addressable end markets.
Our strong cash flow and liquidity support investments in our end market platforms, we estimate of approximately $45 million to $50 million of Capex for the full year 2021, which reflects increased investment in automation projects to offset the expected continued tight labor market, which will enable us to continue to support growth of all of our end markets.
That completes my remarks Andy.
Andy.
Thanks, Jake as discussed our teams have been actively working with our customers. During this incredibly dynamic period to support their needs and our proactive inventory management and investment in our infrastructure has afforded us the opportunity to move with our customers and partner and their growth across all end markets. This quarter.
We will continue to position ourselves in alignment with our customers' demand and remain flexible and nimble in our end markets as we execute our disciplined capital allocation and growth strategy.
As always the health and safety of our over 800 team members will continue to remain Paramount and our efforts in priorities and they are inspiring dedication and outstanding performance. During this quarter have energized and strengthened our commitment to strive for the highest level of internal and external customer service.
Additionally, we remain committed to serving our communities stakeholders and partners and driving overall shareholder value.
Our focus on human capital management initiatives has resulted in energy ideas and solutions for our customers and team members the importance of our people and their talent is both tangible and inspiring as our incredible market share of such a vital purpose of balance of enjoyment in the wellbeing and recreation of families and individuals as they pursue and explore the outdoors.
And invest in their homes the dedication of our people is visible and evident as our team members give shape and meaning to the solutions and products, we deliver to our customers.
Our financial versatility breadth and depth of our resources strong liquidity and balance sheet strength of afford us the opportunity to pursue strategic acquisitions and key capital investments to expand the portfolio of brands, we offer our customers to further drive capacity efficiency interbrand synergies and continuous improvement initiatives.
As we look ahead to the remainder of 2021, we believe the scale and capacity of our infrastructure position us to match up with the cadence of growth in leisure lifestyle and housing and industrial markets. Our team members core values and humble culture represent the center of who we are and our relationships with our suppliers board of directors and shareholders can.
<unk> to crystallize our efforts in creating long term shareholder value and it always driving towards our goal of striving to serve our customers at the highest level.
By investing in and protecting our talented and dedicated team members dealing ethically and responsibly with our business partners and supporting our local communities. We believe our contributions will continue to enhance our overall brand and thriving end markets. This is the end of our prepared remarks, we are now ready to take questions.
Thank you.
And at this time of will conduct a question and answer session.
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Our first question comes from Brett Andress with Keybanc capital markets. Please state your question.
Hey, good morning, guys.
So one of them.
Yeah.
Thinking about the updated wholesale outlook for Rovs, we've we've seen monthly shipment numbers kind of ramp from the 40000 into the fifties and now I think the mid fifties here in March and so.
So.
How are you thinking about April and May here with the information you have I mean do you think the industry kind of shoots up into the 60000 plus or are there just too.
Too many constraints.
The industry back in the near term.
Brett This is Andy I think that there is there is opportunity for that type of number I think there are some constraints over the next couple of months as we look at kind of the supply chain that being said the manufacturers have done a fantastic job of of adapting and flexing towards our two of the supply environment and so you know we've really worked hard our teams have worked hard.
To make sure that we're matching up with the production needs and so as we look at it I think there's some constraints just debt.
In various places, but certainly nothing that's gating.
From our perspective to continue to see strong production levels at the OE level. So our view is that the.
The the Oems are very very good at flexing and the supply chain as well as very very good of flexing and we would expect of a consistent cadence really three of the next couple of months. So it'll be very positive and continue to support the the flow through to the retail channel.
Got it Okay, and then I'm just curious what youre seeing with India and the transport you know maybe first just the financial profile.
Of that business in this environment.
But also any insights you have seen from that business as it relates to retail here in April of.
How quickly.
The delivered units are getting sold it just it just still seems like a very heavy pre sale market.
Certainly you know both on the we've got to transport companies today, and there they've done a phenomenal job and they're performing extremely extremely well we continue to grab share I'd also say that they're very very efficient at managing their driver pool.
As it relates to inventories that we're carrying at each of those particular operations. There at lows right now and so unit served are moving just as fast as they come on the lots and going right through the the dealers and then the channel checks that the dealers are indicating that the units are flowing just as fast to the retail consumer. So it's it's moving very very quickly and very efficiently through those opera.
<unk> and we're seeing again, no real signs today of any headwinds out there.
Alright, thank you.
Thanks.
Our next question comes from Daniel Moore with CJS Securities. Please state your question.
Perfect, Thanks, Andy and Jake.
Given the just you know what we've seen in terms of rising raw material costs. Obviously, you don't have a ton of steel, but others are going up just.
What are your expectations for margins in Q2 relative to what we saw in Q1.
Sure Dan This is Andy we've definitely seen commodity costs really across the platform go up we're definitely in an inflationary environment. Our teams have worked very hard to mitigate the impact of those.
Commodity costs as it relates to be you know our customers and so our expectation would be is that we won't see any material degradation as we work with our customers both on the upside and on the downside when materials are flowing upwards or downwards, and so we really partner with our customers through that process have continued to do so and we'll do everything that we can.
To mitigate the impact on them.
But we're working very hard but that being said we are definitely seeing commodity costs continue to rise.
And I've seen it in Q1 in this environment.
Helpful. And then SG&A is coupon of the kind of reasonable run rate to think about anything unusually good or bad in there.
Nothing unusual either way no anomalies.
The high variable cost component and so I would expect of SG&A to stay pretty consistent.
Perfect. One last one you mentioned the growing or maybe it was Jake mentioned the growing price differential between stick built in MH can you just give us your thoughts on what's driving that is it a more efficient operating model for MH is of the ability to pass on rising raw material prices of its a little better just you know maybe.
Maybe any thoughts on that would be helpful.
Sure Dan it's all of the above but also there's a there's the embedded kind.
Kind of infrastructure of the stick built the that's probably a little more mature than where theyre, putting in some of the of the manufactured housing. So what you end up with the supply and demand paradigm is driving a lot of buyers still to the the stick built just because there's a little more inventory.
We've talked about in previous calls and you can see that there's a little bit of capacity constraints on the MH side. So that drives people who are looking for homes into the more of the stick built or the the lot of ability to do that there's a lot more builders out there that can help satisfy that demand and then when you get with the supply demand of them driven.
Driven by the migration patterns you see it from just the the household formation and everything else, it's pushing a little more pricing on that side as well. So let's say input costs are certainly impacting everybody out there and the supply chain availability for all the folks whether the building MH units or a stick built or are still seeing that inflationary pressure.
Sure as well, so it's creating a delta, but I would tell you there's a while there's strong demand I think across both categories. There's just a little more availability out there on the stick built side and that's driving a lot of people that way, whether you know rather than waiting maybe for MH house.
Okay Super helpful. I'll jump back with any follow ups. Thank you.
Thanks, Dan.
Our next question comes from Scott number with C L King and associates. Please state your question.
Hey, good morning, guys.
Good morning.
Jay did you give what the organic sales growth was whether it's.
Patrick Spisak on top of what the industry zone.
No I did not but I'm happy to provide that so we're up 44% just at the top line up six.
Per cent is we're up 6% net of industry on the organic side.
About 28% is up on industry growth in the rest of out of the balance of that is coming from some acquisitions. We made the beginning in second quarter of last year.
Okay.
That's perfect and then all of the supply chain side I know that you have been doing it for.
Great job of dealing with this but are there any specific areas, whether its fiberglass or.
Anything else.
That's giving you guys any headaches right now we need to be worth.
Nothing significant Scott I mean, it's really kind of in a number of areas is what I would say.
From week to week things can change pretty quickly, but our teams have really done a great job of staying on top of things working with each other.
Working with our like brands to make sure that we mix and match to be able to keep of constant.
Supply chain going on internally to our customers so I.
I expect it to continue but again I expect us to continue to manage that very actively and continue to work the match up with production needs, but it's really you know in a number of different areas. You know we're seeing it. So I think it's kind of like I said I think it's going to be continued to be of a challenge, but it's something that I believe our teams are doing a fantastic job of working through the <unk>.
Keep in mind, Scott, we as Andy mentioned in his initial comments, we started the year and of great spot the key to give us the both the stock that we need and the velocity to drive us through periods of this kind of supply chain tightness and we spoke a lot about of the fourth quarter that proactive inventory build and the and it's really really helped us out as we as we come in.
To a point, where some folks are starting to falter, a little bit and we're coming from a running start into the first quarter of that's helped us carry us through and put us the position to take share as well.
Okay very helpful. Thanks, Andy.
And then last question on labor.
Specifically in the Elkhart area, how is that going in.
The labor any inflation on that front that we need to think about.
Sure. Scott. This is Andy labor continues to be very very tight in the area.
Again, I think the teams have done a great job.
Of working through kind of some labor headwinds as it relates to efficiencies, we're working a lot of overtime certainly.
Our teams have done a great job of managing that we're definitely focused on maintaining a balanced with our team members and making sure that they've got some balance, especially in this environment as we look forward.
But overall I think that it's going to continue to be tight and some of the things certainly on the automation front that we're working on we're very excited about to be able to continue to offset some of the the labor constraints that we're seeing out there and so again, it's a tight market for sure, but we're doing a good job of managing through it.
Got it that's all I have thank you.
Thanks.
And just sort of minded to ask a question at this time press star one on your telephone keypad.
Sort of remove yourself from the queue Press star followed by the number two on your telephone keypad.
Okay.
Our next question comes from Steve O'hara with Sidoti. Please state your question.
Yeah, Hi, good morning, Thanks for taking the question.
Sure.
On the.
About <unk>.
The.
Like you know obviously ramped up.
From January into February I'm, sorry January to March and then.
I mean, so it's not like you're getting the.
Some of the 50 to.
The 55000 units.
<unk> is the right way to think about.
<unk> on a monthly basis is that kind of does that makes sense on the RV side.
I think that's that's definitely makes sense, Steve I think you know again, there is just a little bit of constraint here or there as it relates to <unk>.
Some of the materials that are out there, but overall again the manufacturers have proven that they can they can manage through that and operate at that type of cadence. So I think that's definitely an opportunity to achieve out there.
Okay and then.
And then just on the maybe the margin performance.
Solid in the quarter.
Let's see it was an easy comp, but it doesn't look like it.
For the year change, but how do you think about kind of of a.
Normalized operating margin and you know kind of.
So should we be thinking of three five.
You know of 30 to 50 a day.
<unk> points over.
The kind of last year or is there a better kind of.
Starting number to think about.
Maybe a normalized number for 2020.
Yeah, Steve I appreciate the question of something we certainly put a lot of thought into and you can see the margin expansion that we've been able to drive both of the gross margin of the operating profit lines here as we come through first quarter, a good leverage ability of our of our fixed cost and as Andy has mentioned today and in the past we have a pretty significant variable cost components of what we do.
And that has helped drive that.
Some of the input costs, we talked a little bit of about labor today, we talked a little bit about raw materials of day and our ability to manage those so I would tell you as we think through the the remainder of 2021, we're thinking.
Words at that 30 to 50, and maybe moving that upwards to thinking about 80 to 100 basis points of margin expansion versus last year for the full year.
Okay great.
Great.
And maybe just on the on the.
Most of the market no debt.
Inventories are extremely low there as well.
Do you have a sense for.
That industries ability to flex.
Flex up to the same.
Extents of the RV industry has performed is there any further constraints there or are there.
Excuse that they faced in the RV industry in terms of their ability to kind of meet that.
Man for.
Let's say you know cytori shortfall.
Steve This is Andy Theres Theres similar constraints, if you will as it relates to the material supply. That's there today, but they're also very very resilient on the OE level at the OE level on the marine side and would expect them to continue to flex as well and we're continuing to partner with those customers and our customers to make sure that we're doing everything that we can't imagine up in similar fashion.
As we are in the RV industry. So.
I don't see any reason why they can't I think you know again, it's just going to be a little bit choppy here on the material side for a couple of months and so I don't expect that to go away in the near term, but everybody's managing through it as best I can right now and doing a great job of managing through it. So I don't see anything of any reason why they wouldn't be able to.
Okay, alright, thanks, I'll jump back in queue.
Yeah.
Thank you.
And we have no further questions at this time I will now turn the call back over to MS. Julie Ann Kotowski for further remarks.
Thanks, Diego, we appreciate everyone for being on the call today and look forward to talking to you again at our second quarter 2021 conference call. A replay of today's call will be archived on Patrick website Www dot after guy in the dot.
Dot com under Investor Relations.
I'll now turn the call back over to the operator.
Thank you.
Ladies and gentlemen. This concludes today's teleconference. Thank you for participating and you may now disconnect.