UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 28, 202027, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ……………… to ………………
 
Commission file number 000-03922
 
patk-20210627_g1.jpg
PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Indiana35-1057796
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
                              
107 WEST FRANKLIN STREET, P.O. Box 638
ELKHART,IN46515
                  (Address(Address of principal executive offices)          (ZIP(ZIP Code)
 (574) 294-7511
(Registrant’s telephone number, including area code)
         (Former(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.                             
Large accelerated filer☒Accelerated filer
 ☐
Non-accelerated filer
 ☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
 Common Stock, no par value PATKNASDAQ
As of July 24, 2020,23, 2021, there were 23,448,72523,670,838 shares of the registrant’s common stock outstanding. 




PATRICK INDUSTRIES, INC.

 TABLE OF CONTENTS 

Page No.
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Statements of Income
    Second Quarter and Six Months ended June 28, 202027, 2021 and June 30, 201928, 2020
3
Condensed Consolidated Statements of Comprehensive Income
   Second Quarter and Six Months ended June 28, 202027, 2021 and June 30, 201928, 2020
4
Condensed Consolidated Statements of Financial PositionBalance Sheets
    June 28, 202027, 2021 and December 31, 20192020
5
Condensed Consolidated Statements of Cash Flows
    Six Months ended June 28, 202027, 2021 and June 30, 201928, 2020
6
Condensed Consolidated Statements of Shareholders' Equity
    Second Quarter and Six Months ended June 28, 202027, 2021 and June 30, 201928, 2020
7
Notes to Condensed Consolidated Financial Statements
9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2125
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
2934
ITEM 4. CONTROLS AND PROCEDURES
3034
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
3135
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
3235
ITEM 6. EXHIBITS
3336
SIGNATURES
3437


2



PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Second Quarter EndedSix Months Ended
(thousands except per share data)June 27, 2021June 28, 2020June 27, 2021June 28, 2020
NET SALES$1,019,953 $424,045 $1,870,436 $1,013,277 
Cost of goods sold815,476 350,324 1,504,427 830,075 
GROSS PROFIT204,477 73,721 366,009 183,202 
Operating Expenses:
  Warehouse and delivery34,815 20,209 64,728 44,941 
  Selling, general and administrative60,365 31,628 111,597 67,497 
  Amortization of intangible assets14,031 9,778 25,937 19,379 
    Total operating expenses109,211 61,615 202,262 131,817 
OPERATING INCOME95,266 12,106 163,747 51,385 
Interest expense, net14,580 10,821 25,759 21,313 
Income before income taxes80,686 1,285 137,988 30,072 
Income taxes21,701 571 31,490 8,171 
NET INCOME$58,985 $714 $106,498 $21,901 
BASIC NET INCOME PER COMMON SHARE$2.57 $0.03 $4.66 $0.96 
DILUTED NET INCOME PER COMMON SHARE$2.52 $0.03 $4.56 $0.95 
Weighted average shares outstanding – Basic22,948 22,667 22,844 22,840 
Weighted average shares outstanding – Diluted23,435 22,932 23,360 23,098 
See accompanying Notes to Condensed Consolidated Financial Statements.




3


Second Quarter Ended Six Months Ended
(thousands except per share data)
June 28, 2020
June 30, 2019 June 28, 2020 June 30, 2019
NET SALES
$424,045

$613,218
 $1,013,277
 $1,221,436
Cost of goods sold
350,324

500,557
 830,075
 1,002,227
GROSS PROFIT
73,721

112,661
 183,202
 219,209
Operating Expenses:
 
     
  Warehouse and delivery
20,209

26,270
 44,941
 50,311
  Selling, general and administrative
31,628

32,894
 67,497
 70,586
  Amortization of intangible assets
9,778

8,268
 19,379
 17,257
    Total operating expenses
61,615

67,432
 131,817
 138,154
OPERATING INCOME
12,106

45,229
 51,385
 81,055
Interest expense, net
10,821

8,636
 21,313
 17,619
Income before income taxes
1,285

36,593
 30,072
 63,436
Income taxes
571

9,177
 8,171
 15,171
NET INCOME
$714

$27,416
 $21,901
 $48,265





     
BASIC NET INCOME PER COMMON SHARE
$0.03

$1.19
 $0.96
 $2.09
DILUTED NET INCOME PER COMMON SHARE
$0.03

$1.18
 $0.95
 $2.07





     
Weighted average shares outstanding – Basic
22,667

23,102
 22,840
 23,071
Weighted average shares outstanding – Diluted
22,932

23,316
 23,098
 23,282
         
See accompanying Notes to Condensed Consolidated Financial Statements.






PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Second Quarter EndedSix Months Ended
(thousands)June 27, 2021June 28, 2020June 27, 2021June 28, 2020
NET INCOME$58,985 $714 $106,498 $21,901 
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) of hedge derivatives1,018 464 1,993 (2,542)
Other(11)(15)(70)(52)
Total other comprehensive income (loss)1,007 449 1,923 (2,594)
COMPREHENSIVE INCOME$59,992 $1,163 $108,421 $19,307 
  Second Quarter Ended Six Months Ended
(thousands) June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
NET INCOME $714
 $27,416
 $21,901
 $48,265
Other comprehensive (loss) income, net of tax:        
Unrealized gain (loss) of hedge derivatives 464
 (1,931) (2,542) (2,985)
Other (15) (94) (52) (67)
Total other comprehensive income (loss) 449
 (2,025) (2,594) (3,052)
COMPREHENSIVE INCOME $1,163
 $25,391
 $19,307
 $45,213

See accompanying Notes to Condensed Consolidated Financial Statements.


4


PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONBALANCE SHEETS (Unaudited)
As of
(thousands)June 27, 2021December 31, 2020
ASSETS
Current Assets
    Cash and cash equivalents$58,402 $44,767 
    Trade and other receivables, net264,296 132,505 
    Inventories406,235 312,809 
    Prepaid expenses and other34,691 37,982 
        Total current assets763,624 528,063 
Property, plant and equipment, net298,022 251,493 
Operating lease right-of-use assets139,576 117,816 
Goodwill453,537 395,800 
Intangible assets, net563,288 456,276 
Other non-current assets6,660 3,987 
        TOTAL ASSETS$2,224,707 $1,753,435 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
    Current maturities of long-term debt$7,500 $7,500 
    Current operating lease liabilities35,951 30,901 
    Accounts payable164,646 105,786 
    Accrued liabilities120,695 83,202 
        Total current liabilities328,792 227,389 
Long-term debt, less current maturities, net1,076,950 810,907 
Long-term operating lease liabilities105,318 88,175 
Deferred tax liabilities, net48,734 39,516 
Other long-term liabilities21,642 28,007 
        TOTAL LIABILITIES1,581,436 1,193,994 
SHAREHOLDERS’ EQUITY
Common stock191,131 180,892 
Additional paid-in-capital24,387 24,387 
Accumulated other comprehensive loss(4,129)(6,052)
Treasury stock(21,550)0 
Retained earnings453,432 360,214 
        TOTAL SHAREHOLDERS’ EQUITY643,271 559,441 
        TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY2,224,707 1,753,435 
 
As of
(thousands)
June 28, 2020
December 31, 2019
ASSETS
 
 
Current Assets
 
 
    Cash and cash equivalents
$111,062

$139,390
    Trade and other receivables, net
143,614

87,536
    Inventories
261,691

253,870
    Prepaid expenses and other
21,086

36,038
        Total current assets
537,453

516,834
Property, plant and equipment, net
184,797

180,849
Operating lease right-of-use assets 96,065
 93,546
Goodwill
326,478

319,349
Intangible assets, net
344,905

357,014
Deferred financing costs, net
2,706

2,978
Other non-current assets
392

423
        TOTAL ASSETS $1,492,796

$1,470,993
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
Current Liabilities
 
 
    Current maturities of long-term debt
$5,000

$5,000
    Current operating lease liabilities 28,567
 27,694
    Accounts payable
115,838

96,208
    Accrued liabilities
69,132

58,033
        Total current liabilities
218,537

186,935
Long-term debt, less current maturities, net
673,138

670,354
Long-term operating lease liabilities 68,318
 66,467
Deferred tax liabilities, net
19,056

27,284
Other long-term liabilities
20,479

22,472
        TOTAL LIABILITIES
999,528

973,512
SHAREHOLDERS’ EQUITY
 
 
Common stock
173,178

172,662
Additional paid-in-capital
24,534

25,014
Accumulated other comprehensive loss
(8,292)
(5,698)
Retained earnings
303,848

305,503
        TOTAL SHAREHOLDERS’ EQUITY
493,268

497,481
        TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$1,492,796

$1,470,993

See accompanying Notes to Condensed Consolidated Financial Statements.


5


PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
(thousands)June 27, 2021June 28, 2020
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$106,498 $21,901 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization48,715 34,689 
Stock-based compensation expense10,336 6,347 
Amortization of convertible notes debt discount3,643 3,505 
Deferred income taxes8,534 (7,346)
Other non-cash items1,892 3,016 
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade and other receivables, net(116,625)(55,520)
Inventories(54,646)(7,183)
Prepaid expenses and other assets3,998 14,908 
Accounts payable, accrued liabilities and other66,400 25,055 
Net cash provided by operating activities78,745 39,372 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(26,345)(11,305)
Proceeds from sale of property, plant and equipment112 126 
Business acquisitions, net of cash acquired(252,660)(23,838)
Other(2,000)0 
Net cash used in investing activities(280,893)(35,017)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings58,750 0 
Term debt repayments(1,250)(1,250)
Borrowings on revolver425,475 8,022 
Repayments on revolver(565,475)(8,022)
Proceeds from senior notes offering350,000 0 
Stock repurchases under buyback program(21,550)(15,550)
Cash dividends paid to shareholders(13,061)(11,607)
Taxes paid for share-based payment arrangements(14,885)(2,860)
Payment of deferred financing costs and other(5,798)(58)
Payment of contingent consideration from a business acquisition(1,000)(2,000)
Proceeds from exercise of common stock options4,577 642 
Net cash provided by (used in) financing activities215,783 (32,683)
Increase (decrease) in cash and cash equivalents13,635 (28,328)
Cash and cash equivalents at beginning of year44,767 139,390 
Cash and cash equivalents at end of period$58,402 $111,062 
  Six Months Ended
(thousands) June 28, 2020 June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income $21,901
 $48,265
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 34,689
 30,247
Stock-based compensation expense 6,347
 8,172
Amortization of convertible notes debt discount 3,505
 3,382
Deferred income taxes (7,346) 231
Other 3,016
 (810)
Change in operating assets and liabilities, net of acquisitions of businesses:    
Trade receivables (55,520) (31,514)
Inventories (7,183) 13,699
Prepaid expenses and other assets 14,908
 2,368
Accounts payable, accrued liabilities and other 25,055
 19,774
Net cash provided by operating activities
39,372

93,814
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
Capital expenditures
(11,305)
(18,177)
Proceeds from sale of property, equipment and other investing activities
126

4,357
Business acquisitions, net of cash acquired
(23,838)
(1,246)
Net cash used in investing activities
(35,017) (15,066)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
Term debt repayments
(1,250)
(3,750)
Borrowings on revolver
8,022

389,294
Repayments on revolver
(8,022)
(439,627)
Stock repurchases under buyback program
(15,550)
—
Cash dividends paid to shareholders (11,607) —
Payments related to vesting of stock-based awards, net of shares tendered for taxes
(2,860) (3,303)
Payment of deferred financing costs
(58) (276)
Proceeds from exercise of stock options 642
 7
Payment of contingent consideration from a business acquisition (2,000) (4,416)
Net cash used in financing activities
(32,683) (62,071)
Increase (decrease) in cash and cash equivalents
(28,328) 16,677
Cash and cash equivalents at beginning of year
139,390
 6,895
Cash and cash equivalents at end of period
$111,062
 $23,572

See accompanying Notes to Condensed Consolidated Financial Statements.


6


PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Second Quarter Ended June 27, 2021
(thousands)Common
Stock		Additional Paid-in-CapitalAccumulated Other
Comprehensive Loss		Treasury StockRetained
Earnings		Total
Balance March 28, 2021$174,920 $24,387 $(5,136)$0 $401,104 $595,275 
Net income— — — — 58,985 58,985 
Dividends declared— — — — (6,657)(6,657)
Other comprehensive income, net of tax— — 1,007 — — 1,007 
Share repurchases under buyback program— — — (21,550)— (21,550)
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(421)— — — — (421)
Issuance of shares in connection with a business combination10,211 — — — — 10,211 
Issuance of shares upon exercise of common stock options383 — — — — 383 
Stock-based compensation expense6,038 — — — — 6,038 
Balance June 27, 2021$191,131 $24,387 $(4,129)$(21,550)$453,432 $643,271 
Six Months Ended June 27, 2021
(thousands)Common
Stock		Additional Paid-in-CapitalAccumulated Other
Comprehensive Loss		Treasury StockRetained
Earnings		Total
Balance December 31, 2020$180,892 $24,387 $(6,052)$0 $360,214 $559,441 
Net income— — — — 106,498 106,498 
Dividends declared— — — — (13,280)(13,280)
Other comprehensive loss, net of tax— — 1,923 — — 1,923 
Share repurchases under buyback program— — — (21,550)— (21,550)
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(14,885)— — — — (14,885)
Issuance of shares in connection with a business combination10,211 — — — — 10,211 
Issuance of shares upon exercise of common stock options4,577 — — — — 4,577 
Stock-based compensation expense10,336 — — — — 10,336 
Balance June 27, 2021$191,131 $24,387 $(4,129)$(21,550)$453,432 $643,271 
7


Second Quarter Ended June 28, 2020
(thousands) 
Common
Stock
 
Additional
Paid-in-
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 Total
Balance March 29, 2020 $170,626
 $24,534
 $(8,741) $308,957
 $495,376
Net income —
 —
 —
 714
 714
Dividends declared —
 —
 —
 (5,823) (5,823)
Other comprehensive income, net of tax —
 —
 449
 —
 449
Issuance of shares upon exercise of common stock options 642
 —
 —
 —
 642
Shares used to pay taxes on stock grants (126) —
 —
 —
 (126)
  Stock-based compensation expense 2,036
 —
 —
 —
 2,036
Balance June 28, 2020 $173,178
 $24,534
 $(8,292) $303,848
 $493,268
           
Six Months Ended June 28, 2020
(thousands) 
Common
Stock
 
Additional
Paid-in-
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 Total
Balance December 31, 2019 $172,662
 $25,014
 $(5,698) $305,503
 $497,481
  Net income —
 —
 —
 21,901
 21,901
  Dividends declared —
 —
 —
 (11,801) (11,801)
  Other comprehensive loss, net of tax —
 —
 (2,594) —
 (2,594)
  Share repurchases under buyback program (3,315)—
(480)—
—
—
(11,755) (15,550)
Issuance of shares upon exercise of common stock options 642
 —
 —
 —
 642
  Shares used to pay taxes on stock grants (3,158) —
 —
 —
 (3,158)
  Stock-based compensation expense 6,347
 —
 —
 —
 6,347
Balance June 28, 2020 $173,178
 $24,534
 $(8,292) $303,848
 $493,268
           
Second Quarter Ended June 30, 2019

(thousands) 
Common
Stock
 
Additional
Paid-in-
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 Total
Balance March 31, 2019 $161,949
 $25,124
 $(3,707) $245,723
 $429,089
Net income —
 —
 —
 27,416
 27,416
Other comprehensive loss, net of tax —
 —
 (2,025) —
 (2,025)
Shares used to pay taxes on stock grants (91) —
 —
 —
 (91)
Issuance of shares upon exercise of common stock options 3
 —
 —
 —
 3
  Stock-based compensation expense 4,225
 —
 —
 —
 4,225
Balance June 30, 2019 $166,086
 $25,124
 $(5,732) $273,139
 $458,617
           
PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.)

PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.)

Six Months Ended June 30, 2019
(thousands) 
Common
Stock
 
Additional
Paid-in-
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 Total
Balance December 31, 2018 $161,436
 $25,124
 $(2,680) $224,874
 $408,754
Net income —
 —
 —
 48,265
 48,265
Other comprehensive loss, net of tax —
 —
 (3,052) —
 (3,052)
Shares used to pay taxes on stock grants (3,528) —
 —
 —
 (3,528)
Issuance of shares upon exercise of common stock options 6
 —
 —
 —
 6
  Stock-based compensation expense 8,172
 —
 —
 —
 8,172
Balance June 30, 2019 $166,086
 $25,124
 $(5,732) $273,139
 $458,617

Second Quarter Ended June 28, 2020
(thousands)Common
Stock		Additional Paid-in-CapitalAccumulated Other
Comprehensive Loss		Treasury StockRetained
Earnings		Total
Balance March 29, 2020$170,626 $24,534 $(8,741)$0 $308,957 $495,376 
Net income— — — — 714 714 
Dividends declared— — — — (5,823)(5,823)
Other comprehensive income, net of tax— — 449 — — 449 
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(126)— — — — (126)
Issuance of shares upon exercise of common stock options642 — — — — 642 
Stock-based compensation expense2,036 — — — — 2,036 
Balance June 28, 2020$173,178 $24,534 $(8,292)$0 $303,848 $493,268 
Six Months Ended June 28, 2020
(thousands)Common
Stock		Additional Paid-in-CapitalAccumulated Other
Comprehensive Loss		Treasury StockRetained
Earnings		Total
Balance December 31, 2019$172,662 $25,014 $(5,698)$0 $305,503 $497,481 
Net income— — — — 21,901 21,901 
Dividends declared— — — — (11,801)(11,801)
Other comprehensive loss, net of tax— — (2,594)— — (2,594)
Share repurchases under buyback program(3,315)(480)— — (11,755)(15,550)
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(3,158)— — — — (3,158)
Issuance of shares upon exercise of common stock options642 — — — — 642 
Stock-based compensation expense6,347 — — — — 6,347 
Balance June 28, 2020$173,178 $24,534 $(8,292)$0 $303,848 $493,268 
See accompanying Notes to Condensed Consolidated Financial Statements




8



PATRICK INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
1.BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc. (“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of June 28, 202027, 2021 and December 31, 2019, and2020, its results of operations and cash flows for the second quarter and six months ended June 27, 2021 and June 28, 2020, and its statements of cash flows for the six months ended June 30, 2019.
27, 2021 and June 28, 2020.
Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation.presentation of other non-current assets in the condensed consolidated balance sheets and accumulated other comprehensive loss in Note 11. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020. The December 31, 20192020 condensed consolidated statement of financial positionbalance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the second quarter and six months ended June 28, 202027, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020.

2021.
The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Sunday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The second quarter of fiscal year 20202021 ended on June 28, 202027, 2021 and the second quarter of fiscal year 20192020 ended on June 30, 2019.28, 2020.
In preparation of Patrick’s condensed consolidated financial statements as of and for the second quarter and six months ended June 28, 2020,27, 2021, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements. See Note 17 for more information.

2.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Goodwill Impairment

Income Taxes
In January 2017,December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". This ASU simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. The standard requires that the impairment loss be measured as the excess of the reporting unit's carrying amount over its fair value. It eliminates the second step that requires the impairment to be measured between the implied value of a reporting unit's goodwill and its carrying value. The Company adopted ASU 2017-04 on January 1, 2020 and the adoption did not have a material impact on the condensed consolidated financial statements.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments”, which amends certain provisions of Accounting Standards Codification ("ASC") 326, “Financial Instruments-Credit Loss”. The ASU changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held to maturity debt securities, loans and other instruments, entities are required to use a


new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. Additionally, entities are required to disclose more information with respect to credit quality indicators, including information used to track credit quality by year of origination for most financing receivables. The Company adopted ASU 2016-13 on January 1, 2020 and the adoption did not have a material impact on the condensed consolidated financial statements.

Income Taxes

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently evaluatingThe Company adopted ASU 2019-12 on January 1, 2021 and the impact of this standardadoption did not have a material effect on ourits condensed consolidated financial statements.
9


Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", a new standard providing final guidance to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. We areThe Company is currently evaluating the impact of this standard on our condensed consolidated financial statements.

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

In August 2020, the FASB issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity", a new standard that simplifies certain accounting treatments for convertible debt instruments. The guidance eliminates certain requirements that require separate accounting for embedded conversion features and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the diluted net income per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares, with certain exceptions. Furthermore, the guidance requires new disclosures about events that occur during the reporting period that cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements. At this point in time, we anticipate the primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our convertible notes discussed in Note 9.
 3.REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors:
Second Quarter Ended June 27, 2021
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$397,613 $197,818 $595,431 
Marine156,350 10,143 166,493 
Manufactured Housing68,367 70,724 139,091 
Industrial106,711 12,227 118,938 
Total$729,041 $290,912 $1,019,953 

10


 Second Quarter Ended June 28, 2020Six Months Ended June 27, 2021
(thousands) Manufacturing Distribution Total Reportable Segments(thousands)ManufacturingDistributionTotal
Market type:      Market type:
Recreational Vehicle $139,628
 $64,498
 $204,126
Recreational Vehicle$727,225 $369,632 $1,096,857 
MarineMarine288,688 14,614 303,302 
Manufactured Housing 36,407
 53,907
 90,314
Manufactured Housing125,001 134,808 259,809 
Industrial 61,679
 8,878
 70,557
Industrial188,883 21,585 210,468 
Marine 54,860
 4,188
 59,048
Total $292,574
 $131,471
 $424,045
Total$1,329,797 $540,639 $1,870,436 



  Six Months Ended June 28, 2020
(thousands) Manufacturing Distribution Total Reportable Segments
Market type:      
Recreational Vehicle $366,413
 $157,933
 $524,346
Manufactured Housing 82,012
 120,671
 202,683
Industrial 133,126
 16,023
 149,149
Marine 130,289
 6,810
 137,099
Total $711,840
 $301,437
 $1,013,277

  Second Quarter Ended June 30, 2019
(thousands) Manufacturing Distribution Total Reportable Segments
Market type:      
Recreational Vehicle $240,677
 $100,244
 $340,921
Manufactured Housing 44,739
 65,200
 109,939
Industrial 62,823
 9,534
 72,357
Marine 86,036
 3,965
 90,001
Total $434,275
 $178,943
 $613,218
`

Second Quarter Ended June 28, 2020
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$139,628 $64,498 $204,126 
Marine54,860 4,188 59,048 
Manufactured Housing36,407 53,907 90,314 
Industrial61,679 8,878 70,557 
Total$292,574 $131,471 $424,045 
  Six Months Ended June 30, 2019
(thousands) Manufacturing Distribution Total Reportable Segments
Market type:      
Recreational Vehicle $475,555
 $207,802
 $683,357
Manufactured Housing 86,942
 129,016
 215,958
Industrial 123,751
 17,583
 141,334
Marine 173,711
 7,076
 180,787
Total $859,959
 $361,477
 $1,221,436

Six Months Ended June 28, 2020
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$366,413 $157,933 $524,346 
Marine130,289 6,810 137,099 
Manufactured Housing82,012 120,671 202,683 
Industrial133,126 16,023 149,149 
Total$711,840 $301,437 $1,013,277 
Contract Liabilities
Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial as of the beginning and end of all periods presented and changes in contract liabilities were immaterial during all periods presented.


11


4.INVENTORIES
Inventories consist of the following:
(thousands) June 28, 2020 December 31, 2019
Raw materials $174,758
 $162,238
Work in process 14,143
 14,272
Finished goods 27,617
 28,446
Less: reserve for inventory obsolescence (12,054) (10,123)
  Total manufactured goods, net 204,464
 194,833
Materials purchased for resale (distribution products) 59,523
 60,918
Less: reserve for inventory obsolescence (2,296) (1,881)
  Total materials purchased for resale (distribution products), net 57,227
 59,037
Total inventories $261,691
 $253,870

(thousands)June 27, 2021December 31, 2020
Raw materials$218,116 $157,219 
Work in process26,466 19,282 
Finished goods57,827 37,632 
Less: reserve for inventory obsolescence(10,315)(8,320)
  Total manufactured goods, net292,094 205,813 
Materials purchased for resale (distribution products)119,765 112,158 
Less: reserve for inventory obsolescence(5,624)(5,162)
  Total materials purchased for resale (distribution products), net114,141 106,996 
Total inventories$406,235 $312,809 

5.GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the six months ended June 28, 202027, 2021 by segment are as follows:
(thousands) Manufacturing Distribution Total
Balance - December 31, 2019 $268,402
 $50,947
 $319,349
Acquisitions 6,008
 —
 6,008
Adjustments to preliminary purchase price allocations (603) 1,724
 1,121
Balance - June 28, 2020 $273,807
 $52,671
 $326,478

(thousands)ManufacturingDistributionTotal
Balance - December 31, 2020$338,045 $57,755 $395,800 
Acquisitions40,548 10,059 50,607 
Adjustments to preliminary purchase price allocations7,111 19 7,130 
Balance - June 27, 2021$385,704 $67,833 $453,537 
Intangible assets, net consist of the following as of June 28, 202027, 2021 and December 31, 2019:2020:
(thousands)June 27, 2021December 31, 2020
Customer relationships$545,554 $461,754 
Non-compete agreements18,714 15,949 
Patents33,428 23,025 
Trademarks (non-amortizing, indefinite-lived)149,777 113,796 
747,473 614,524 
Less: accumulated amortization(184,185)(158,248)
Intangible assets, net$563,288 $456,276 
(thousands)
June 28,
2020
Weighted Average Useful Life
(in years)
December 31,
2019
Weighted Average Useful Life
(in years)
Customer relationships
$360,962

10.1
$357,513

10.1
Non-compete agreements
15,149

5.0
16,202

5.0
Patents
16,495

14.6
16,495

14.6
Trademarks 89,058
 Indefinite 88,524
 Indefinite
 
481,664

 
478,734

 
Less: accumulated amortization
(136,759)


(121,720)
 
Intangible assets, net
$344,905

 
$357,014

 

Changes in the carrying value of intangible assets for the six months ended June 28, 202027, 2021 by segment are as follows:
(thousands)ManufacturingDistributionTotal
Balance - December 31, 2020$373,717 $82,559 $456,276 
Acquisitions105,338 32,700 138,038 
Amortization(21,424)(4,513)(25,937)
Adjustments to preliminary purchase price allocations(5,089)0 (5,089)
Balance - June 27, 2021$452,542 $110,746 $563,288 
(thousands)
Manufacturing
Distribution
Total
Balance - December 31, 2019
$282,123
 $74,891

$357,014
Acquisitions
9,220
 —

9,220
Amortization
(15,838) (3,541)
(19,379)
Impairment of intangible assets (1)
 (119) (1,831) (1,950)
Adjustments to preliminary purchase price allocations


138
 (138)
—
Balance - June 28, 2020
$275,524
 $69,381

$344,905
12



(1) Certain immaterial operations permanently ceased activities during the second quarter of 2020. As a result, we recorded a $2.0 million pre-tax impairment of customer relationships and trademarks of these operations after determining the net carrying value of the assets was no longer recoverable. The impairment was calculated using our internal projections of discounted cash flows, which rely on Level 3 inputs in the fair value hierarchy based on the unobservable nature of the underlying data. The impairment was recorded in selling, general and administrative in our condensed consolidated statements of income for the second quarter and six months ended June 28, 2020.
Valuation of Goodwill and Indefinite-Lived Intangibles

We test goodwill and indefinite-lived intangible assets (trademarks) for impairment on an annual basis (as of September 30, 2019 for our most recent annual tests) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Our 2019 tests indicated that there was no impairment, as fair value exceeded carrying values, and we concluded that none of our reporting units or trademarks were at risk of failing the impairment test.

Despite the excess fair value identified in our 2019 impairment tests, we assessed during the quarter and six months ended June 28, 2020 whether the impact of the COVID-19 pandemic on overall macroeconomic conditions and our operating income for the second quarter and six months ended June 28, 2020 indicated that at June 28, 2020 it was more likely than not that our goodwill and trademarks were impaired. We evaluated among other factors (i) the results of our 2019 impairment tests; (ii) our market capitalization at June 28, 2020 in relation to the carrying amount of shareholders’ equity at June 28, 2020 and to fair values determined during our 2019 impairment tests; (iii) the results of our operations during the second quarter and six months ended June 28, 2020 in relation to our projections; and (iv) our analysis of the impact on the fair values determined during our 2019 impairment tests using more recent projections and discount rates that account for various risks and uncertainties, including the duration and extent of impact to our business, related to the COVID-19 pandemic.

Based on the results of our assessment, and other than immaterial impairments discussed above, we determined it was more likely than not that our goodwill and trademarks were not impaired as of June 28, 2020. However, we are unable to predict how long the COVID-19-related conditions will persist, what additional measures may be introduced by governments or private parties, or what effect any such additional measures may have on demand for our products or those of our customers in each of our end markets. As such, we may be required to perform quantitative impairment tests in future periods preceding our annual impairment test date, and the outcome of such tests could result in an impairment of our goodwill or our trademarks.

6.ACQUISITIONS
General 
The Company did not make anycompleted 3 acquisitions in the second quarter of 20202021 and completed 37 acquisitions in the first six months of 2020ended June 27, 2021 (the "2020"2021 Acquisitions"). For the second quarter and six months ended June 28, 2020,27, 2021, net sales included in the Company's condensed consolidated statements of income related to the 20202021 Acquisitions were $56.7 million and $62.1 million, respectively, and operating income was $6.0 million for each of these periods. One of the 2021 Acquisitions accounted for $32.2 million in net sales and $1.9 million in operating income for the second quarter and six months ended June 27, 2021. Acquisition-related costs associated with the businesses acquired in the second quarter and first six months of 2021 were immaterial. Assets acquired and liabilities assumed in the individual acquisitions were $3.3 millionrecorded on the Company’s condensed consolidated balance sheet at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and $3.8 million, respectively. Acquisition-related costs incurredliabilities within a one year measurement period. No acquisitions were completed in the second quarter of 2020 and 3 acquisitions were completed in the six months ended June 28, 2020. Net sales included in the Company's condensed consolidated statements of income in the second quarter and six months ended June 28, 2020 related to acquisitions completed in the first six months of 2020 were immaterial.$3.3 million and $3.8 million, respectively, and operating income was immaterial for the same periods.
For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income.
In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company made norecords a liability for the estimated fair value of the contingent consideration related to each of these acquisitions inas part of the first six monthsinitial purchase price based on the present value of 2019.

the expected future cash flows and the probability of future payments at the date of acquisition. As of June 28,27, 2021, the aggregate fair value of the estimated contingent consideration payments was $9.8 million, $4.2 million of which is included in "Accrued liabilities" and $5.6 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet. At December 31, 2020, the aggregate fair value of the estimated contingent consideration payments was $7.8$6.9 million, $5.9 million of which is included in the line item "Accrued liabilities" and $1.9 million is included in “Other long-term liabilities” on the condensed consolidated statement of financial position. At December 31, 2019, the aggregate fair value of the estimated contingent consideration payments was $9.6 million, $2.0$1.6 million of which was included in the line item "Accrued liabilities" and $7.6$5.3 million was included in "Other long-term liabilities". The liabilities for contingent consideration expire at various dates through December 2023. The contingent consideration arrangements are subject to a maximum payment amount of up to $12.3$19.5 million in the aggregate. In the firstsecond quarter and six months of 2020,ended June 27, 2021, the Company made $1.0 million in cash payments of $2.0 million related to contingent consideration arrangements, recordingliabilities and recorded a $0.9 million non-cash charge and a corresponding reductionincrease to accrued liabilities. The non-cash charge is included in selling general and administrative expense in the condensed consolidated statement of income, representing changes in the expected amount of consideration to be paid.
13

2020
2021 Acquisitions
AcquisitionsThe Company completed 7 acquisitions in the first six months of 2020 includeended June 27, 2021, including the following 3 previously announced acquisitions:
CompanySegmentDescription
Sea-Dog Corporation & Sea-Lect Plastics
(collectively, "Sea-Dog")		Distribution & ManufacturingDistributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailer, and manufacturers, and manufacturer that provides plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington
Hyperform, Inc.ManufacturingManufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida
Alpha Systems, LLCManufacturing & DistributionManufacturer and distributor of component products and accessories for the recreational vehicle ("RV"), marine, manufactured housing and industrial end markets, such as adhesives, sealants, rubber roofing, roto/blow molding, injection molding, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of 9 facilities in Elkhart, Indiana
Inclusive of 4 immaterial acquisitions of Maple City Woodworking Corporation, a Goshen, Indiana-based manufacturer of hardwood cabinet doors and fascia for the recreational vehicle market, and SEI Manufacturing, Inc., a Cromwell, Indiana-based manufacturer of towers, T-Tops,


hardtops, rails, gates and other aluminum exterior products for the marine market. Thenot discussed above, total cash consideration for the 20202021 Acquisitions was $25.0approximately $253.3 million. The preliminary purchase price allocations are subject to valuation activities being finalized,One of the 2021 Acquisitions accounted for $147.1 million in cash and thus all required purchase accounting adjustments are subject to change within the measurement period$10.2 million in common stock as the Company finalizes its estimates. The 2020 Acquisitions are includedconsideration, $26.8 million in the Manufacturing segment.
2019 Acquisitions
The Company completed 3 acquisitionsfixed assets, $90.4 million in 2019 ( the "2019 Acquisitions"), including the previously announced acquisitions of Topline Counters, LLC, a Sumner, Washington-based designerintangible assets, $18.2 million in accounts payable and manufacturer of kitchenaccrued liabilities, $11.5 million in operating lease right-of-use assets and bathroom countertops for residentialliabilities, and commercial markets, and G.G. Schmitt & Sons, Inc. ("G.G. Schmitt"), a Sarasota, Florida-based designer and manufacturer of customized hardware and structural components for the marine industry. The total cash consideration for the 2019 Acquisitions was $53.1$28.9 million plus contingent consideration over a one-year period based on future performance in connection with the acquisition of G.G. Schmitt.goodwill. The preliminary purchase price allocations are subject to valuation activities being finalized, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in the second quarter and first six months of 2020ended June 27, 2021 related to the 20192021 Acquisitions were immaterial.
14


2020 Acquisitions
The 2019 Acquisitions are includedCompany completed 11 acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"), including the following 7 previously announced acquisitions:
CompanySegmentDescription
Maple City Woodworking CorporationManufacturingManufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana
SEI Manufacturing, Inc.ManufacturingManufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana
Inland Plywood CompanyManufacturingSupplier, laminator, and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida
Synergy RV TransportDistributionTransportation and logistics service provider primarily for OEMs and dealers in the RV market located in Goshen, Indiana
Front Range StoneManufacturingFabricator and installer of natural stone, quartz, solid surface, and laminate countertops, primarily serving big box home improvement retailers, home builders and commercial contractors in the industrial market based in Englewood, Colorado
Geremarie CorporationManufacturingDesigner, manufacturer, and fabricator of a full suite of high-precision aluminum components serving the marine industry, in addition to the medical, aerospace, defense, commercial and industrial markets located in Lake Zurich, Illinois
Taco Metals, LLCManufacturingManufacturer of boating products including rub rail systems, canvas and tower components, sport fishing and outrigger systems, helm chairs and pedestals, and specialty hardware for OEMs in the recreational boating industry and the related aftermarket headquartered in Miami, Florida, with manufacturing facilities in Tennessee and Florida, and distribution centers in Tennessee, Florida, South Carolina, and Massachusetts
Inclusive of 4 immaterial acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $306.3 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2020 Acquisitions accounted for $129.7 million in cash consideration, $49.3 million in fixed assets, $49.1 million in intangible assets and $32.6 million in goodwill. Purchase accounting adjustments are complete for Maple City Woodworking Corporation and SEI Manufacturing, segment.Inc. Preliminary purchase price allocations, predominantly related to property, plant, and equipment and identifiable intangible assets, are still in the process of final valuation procedures on the remainder of the 2020 Acquisitions. All purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in the second quarter and six months ended June 27, 2021 related to the 2020 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.
15


The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 20202021 Acquisitions and the 20192020 Acquisitions:
(thousands)Trade receivablesInventoriesProperty, plant and equipmentPrepaid expenses & otherIntangible assetsGoodwillLess: Total liabilitiesLess: Deferred tax liability, netTotal net assets acquired
          
2020$962
$1,883
$7,913
$17
$9,220
$6,008
$1,005
$—
$24,998
          
2019 (1)
$9,711
$6,012
$5,380
$104
$17,765
$25,205
$6,512
$1,922
$55,743

(thousands)2021 Acquisitions2020 Acquisitions
Consideration
Cash, net of cash acquired$253,336 $306,335 
Working capital holdback and other, net(1)
2,860 (53)
Common stock issuance(2)
10,211 0 
Contingent consideration(3)
3,000 4,763 
Total consideration$269,407 $311,045 
Assets Acquired
Trade receivables$15,824 $15,320 
Inventories39,386 25,395 
Prepaid expenses & other1,025 725 
Property, plant & equipment46,986 65,083 
Operating lease right-of-use assets16,026 20,029 
Identifiable intangible assets137,985 130,981 
Liabilities Assumed
Current portion of operating lease obligations(3,650)(2,721)
Accounts payable & accrued liabilities(22,406)(12,405)
Operating lease obligations(12,376)(17,308)
Deferred tax liabilities0 (4,322)
Total fair value of net assets acquired218,800 220,777 
Goodwill(4)
50,607 90,268 
$269,407 $311,045 
(1) Total net assets acquired forCertain acquisitions contain working capital holdbacks which are typically settled after a 90-day period following the 2019 Acquisitionsclose of the acquisition. This value represents the remaining amounts due to (from) sellers as of June 27, 2021.
(2) In connection with one acquisition, the company issued 113,961 shares of common stock at a closing price of $89.60 as of the acquisition date.
(3) These amounts reflect the preliminary estimated liability of $2.6 million pertaining to theacquisition date fair value of contingent consideration based on future performanceresults relating to certain acquisitions.
(4) Goodwill is tax-deductible for the acquisition2021 Acquisitions and the 2020 Acquisitions, except Front Range Stone (approximately $10.8 million).

We estimate the value of G.G. Schmitt.acquired property, plant, and equipment using a combination of the income, cost, and market approaches, such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the acquired businesses.
The following table presents our estimates of identifiable intangible assets for the 2021 Acquisitions and the 2020 Acquisitions:
(thousands, except year info)Estimated Useful Life (in years)2021 Acquisitions2020 Acquisitions
Customer relationships10$88,693 $99,897 
Non-compete agreements52,825 1,150 
Patents1010,350 6,470 
TrademarksIndefinite36,117 23,464 
$137,985 $130,981 
16


We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation on the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete agreements are valued using a discounted cash flow approach, which is a variation of an income approach, with and without the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.  
Pro Forma Information
The following pro forma information for the second quarter and six months ended June 28, 2020 and June 30, 2019 assumes the 20202021 Acquisitions and the 20192020 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of the 20202021 Acquisitions and 20192020 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $0.2 million for the six months ended June 28, 2020 and $0.6 million and $1.2$3.1 million for the second quarter and six months ended June 30, 2019,27, 2021, respectively and $5.2 million and $10.5 million for the second quarter and six months ended June 28, 2020, respectively.
  Second Quarter Ended Six Months Ended
(thousands except per share data) June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
Revenue $424,045
 $636,454
 $1,018,631
 $1,267,907
Net income 714
 28,949
 22,480
 51,140
Basic net income per common share 0.03
 1.25
 0.98
 2.22
Diluted net income per common share 0.03
 1.24
 0.97
 2.20




 Second Quarter EndedSix Months Ended
(thousands, except per share data)June 27, 2021June 28, 2020June 27, 2021June 28, 2020
Revenue$1,038,874 $515,104 $1,953,675 $1,215,622 
Net income60,187 (791)111,524 23,428 
Basic net income per common share2.62 (0.03)4.88 1.03 
Diluted net income per common share2.57 (0.03)4.77 1.01 
The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of the periods indicated above.

7.STOCK-BASED COMPENSATION
The Company recorded expense of $2.0approximately $6.0 million and $6.3$10.3 million for the second quarter and six months ended June 28, 2020,27, 2021, respectively, for its stock-based compensation plans in the condensed consolidated statements of income. Stock-basedStock based compensation expense forof $2.0 million and $6.3 million was recorded in the second quarter and six months ended June 28, 2020, which includes a $2.4 million reduction of expense in both periods due to certain forfeitures and adjustments in the amount of $2.4 million. For the second quarter and six months ended June 30, 2019, the Company recorded stock-based compensation expense of $4.3 million and $8.2 million, respectively.

adjustments.
The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first six months of 20202021 totaling 275,740230,073 shares in the aggregate at an average fair value of $53.78$73.53 at grant date for a total fair value at grant date of $14.8$16.9 million. In addition, in the second quarter of 2020, the Board approved stock option grants representing 465,000 shares in the aggregate at an exercise price of $41.33 per share. The total cost to be expensed over the three-year vesting period will be $6.6 million, or $14.25 per share, with an underlying volatility of 42% under the Black Scholes option pricing model.
As of June 28, 2020,27, 2021, there was approximately $30.3$31.7 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans. That cost is expected to be recognized over a weighted-average period of 19.920.1 months.
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8.NET INCOME PER COMMON SHARE
Net income per common share calculated for the second quarter and six months of 20202021 and 20192020 is as follows:
 Second Quarter EndedSix Months Ended
(thousands except per share data)June 27, 2021June 28, 2020June 27, 2021June 28, 2020
Net income for basic and diluted per share calculation$58,985 $714 $106,498 $21,901 
Weighted average common shares outstanding - basic22,948 22,667 22,844 22,840 
Effect of potentially dilutive securities487 265 516 258 
Weighted average common shares outstanding - diluted23,435 22,932 23,360 23,098 
Basic net income per common share$2.57 $0.03 $4.66 $0.96 
Diluted net income per common share$2.52 $0.03 $4.56 $0.95 
  Second Quarter Ended Six Months Ended
(thousands except per share data) June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
Net income for basic and diluted per share calculation $714
 $27,416
 $21,901
 $48,265
Weighted average common shares outstanding - basic 22,667
 23,102
 22,840
 23,071
Effect of potentially dilutive securities 265
 214
 258
 211
Weighted average common shares outstanding - diluted 22,932
 23,316
 23,098
 23,282
Basic net income per common share $0.03
 $1.19
 $0.96
 $2.09
Diluted net income per common share $0.03
 $1.18
 $0.95
 $2.07
An immaterial amount of securities was not included in the computation of diluted income per share as they are considered anti-dilutive under the treasury stock method.




9.DEBT
A summary of total debt outstanding at June 28, 202027, 2021 and December 31, 20192020 is as follows:
(thousands)June 27, 2021December 31, 2020
Long-term debt:
1.00% convertible notes due 2023$172,500 $172,500 
Term loan due 2026150,000 92,500 
Revolver due 2026135,000 275,000 
7.50% senior notes due 2027300,000 300,000 
4.75% senior notes due 2029350,000 0 
Total long-term debt1,107,500 840,000 
Less: convertible notes debt discount, net(12,429)(16,072)
Less: term loan deferred financing costs, net(624)(434)
Less: senior notes deferred financing costs, net(9,997)(5,087)
Less: current maturities of long-term debt(7,500)(7,500)
Total long-term debt, less current maturities, net$1,076,950 $810,907 
(thousands)
June 28, 2020
December 31, 2019
Long-term debt:
 
 
Revolver due 2024
$135,000

$135,000
Term loan due 2024
96,250

97,500
7.5% senior notes due 2027 300,000
 300,000
1.0% convertible notes due 2023
172,500

172,500
Total long-term debt
703,750

705,000
Less: convertible notes debt discount, net
(19,755)
(23,260)
Less: senior notes deferred financing costs, net (5,365) (5,844)
Less: current maturities of long-term debt
(5,000)
(5,000)
Less: term loan deferred financing costs, net
(492)
(542)
Total long-term debt, less current maturities, net
$673,138

$670,354


4.75% Senior Notes due 2029
ThereOn April 20, 2021, the Company issued $350 million aggregate principal amount of 4.75% Senior Notes due 2029 (the "4.75% Senior Notes"). The 4.75% Senior Notes were no material changesnot registered under the Securities Act of 1933, as amended (the "Securities Act") and were offered under rule 144A under the Securities Act. The 4.75% Senior Notes will mature on May 1, 2029. Interest on the 4.75% Senior Notes will accrue from April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November 1, 2021. The effective interest rate on the 4.75% Senior Notes, which includes debt issuance costs, is approximately 4.98%. In connection with the issuance of the 4.75% Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75% Senior Notes
18


approximately $5.3 million in deferred financing costs which will be amortized using the effective interest rate over the term of the 4.75% Senior Notes.
The 4.75% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2021 Credit Facility (as defined herein). The Company may redeem the 4.75% Senior Notes at any time according to the following timeframes with the respective restrictions and prices:
TimeframeRedemption RestrictionsRedemption Prices
Prior to May 1, 2024 Up to 40% of the notes104.750%
After May 1, 2024In whole, or in part102.375%
After May 1, 2025In whole, or in part101.188%
After May 1, 2026In whole, or in part100.000%
2021 Credit Facility
Simultaneously with the issuance of the 4.75% Senior Notes, the Company entered into the Fourth Amended and Restated Credit Agreement (the "2021 Credit Agreement"). The 2021 Credit Agreement amended and extended the Company's 2019 Credit Agreement (as defined herein) and consists of a senior secured revolver (the "2021 Revolver") and a senior secured term loan (the "2021 Term Loan" and together with the 2021 Revolver, the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Agreement is April 20, 2026. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2021 Credit Facility by up to $250 million for acquisitions.

The Company determined that the terms of the 2021 Credit Agreement were not substantially different from the terms of the Company’s 2019 Credit Agreement. Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial.
Borrowings under the 2021 Credit Facility are secured by substantially all personal property assets of the Company and any of our debt arrangements duringdomestic subsidiary guarantors. Pursuant to the second2021 Credit Agreement:
•The 2021 Term Loan is due in consecutive quarterly installments in the following amounts: (i) beginning June 30, 2021, through and including March 31, 2024, $1,875,000 and (ii) beginning June 30, 2024, and each quarter and six months ended June 28, 2020.thereafter, $3,750,000, with the remaining balance due at maturity;

Interest•The interest rates for borrowings under the revolver2021 Revolver and term loanthe 2021 Term Loan are the prime ratePrime Rate or LIBOR plus a margin. At June 28, 2020, allmargin, which ranges from 0.00% to 0.75% for Prime Rate loans and from 1.00% to 1.75% for LIBOR loans depending on the Company's consolidated total leverage ratio, as defined below. The Company is required to pay fees on unused but committed portions of the 2021 Revolver, which range from 0.15% to 0.225%; and
•Covenants include requirements as to a maximum consolidated secured net leverage ratio (2.75:1.00, increasing to 3.25:1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixed charge coverage ratio (1.50:1.00) that are tested on a quarterly basis, a minimum liquidity requirement applicable during the six-month period preceding the maturity of the Company's borrowings1.00% Convertible Notes due 2023, and other customary covenants.
The total face value of the 2021 Term Loan is $150.0 million. Total available borrowing capacity under the revolver2021 Revolver is $550.0 million. At June 27, 2021, the Company had $150.0 million outstanding under the 2021 Term Loan under the LIBOR-based option, and term loan wereborrowings outstanding under the 2021 Revolver of $135.0 million under the LIBOR-based option. The interest rate for incremental borrowings at June 28, 202027, 2021 was LIBOR plus 1.5%1.50% (or 1.69%1.63%) for the LIBOR-based option. The fee payable on committed but unused portions of the revolver2021 Revolver was 0.20% at June 28, 2020.27, 2021.
19


Total cash interest paid was $15.6 million and $6.3 million for the second quarter of 2021 and 2020 was $14.1 million and 2019,$15.6 million, respectively, and $17.4 million and $18.2 million and $12.8 million for the firstcomparative six monthsmonth periods, respectively.
2019 Credit Facility
See Note 8 of the Notes to Consolidated Financial Statements section of the Fiscal 2020 Form 10-K regarding the Company's previous credit agreement (the "2019 Credit Agreement") which established a $550 million revolving credit loan (the "2019 Revolver") and a $100 million term loan (the "2019 Term Loan" and, together with 2019 respectively.Revolver, the "2019 Credit Facility"). The 2019 Credit Agreement was amended by the 2021 Credit Agreement on April 20, 2021 as discussed above.

10.DERIVATIVE FINANCIAL INSTRUMENTS


The Company's credit facility exposes the Company to risks associated with the variability in interest expense associated with fluctuations in LIBOR. To partially mitigate this risk, the Company has historically entered into interest rate swaps. As of June 28, 2020,27, 2021, the Company had a combined notional principal amount of $200.0$200 million of interest rate swap agreements, all of which are designated as cash flow hedges. These swap agreements effectively convert the interest expense associated with a portion of the Company's variable rate debt from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

The following table summarizes the fair value of derivative contracts included in the condensed consolidated statements of financial positionbalance sheets (in thousands):
  Fair value of derivative instruments
Derivatives accounted for as cash flow hedges Balance sheet locationJune 28, 2020 December 31, 2019
Interest rate swaps Other long-term liabilities$9,292
 $5,868


Fair value of derivative instruments
Derivatives accounted for as cash flow hedgesBalance sheet locationJune 27, 2021December 31, 2020
Interest rate swapsAccrued liabilities$3,890 $0 
Interest rate swapsOther long-term liabilities$0 $6,567 
The interest rate swaps are comprised of over-the-counter derivatives, which are valued using models that primarily rely on observable inputs such as yield curves whichand are classified as Level 2 in the fair value hierarchy.

See Note 11 for information regarding accumulated other comprehensive loss on interest rate swaps.
swaps, which qualify as cash flow hedges.

20


11.ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss includes unrealized gains and losses on derivatives that qualify as hedges of cash flows,flow hedges, cumulative foreign currency translation and other adjustments. The activity in accumulated other comprehensive loss during the second quarter and sixthree months ended June 28, 202027, 2021 and June 30, 201928, 2020 was as follows:
Second Quarter Ended June 27, 2021
(thousands)Cash Flow HedgesOtherForeign Currency TranslationTotal
Balance at March 28, 2021$(3,914)$(1,263)$41 $(5,136)
Other comprehensive loss before reclassifications, net of tax45 0 (11)34 
Amounts reclassified from accumulated other comprehensive loss, net of tax973 0 0 973 
Net current period other comprehensive income (loss)1,018 0 (11)1,007 
Balance at June 28, 2021$(2,896)$(1,263)$30 $(4,129)
Second Quarter Ended June 28, 2020
(thousands)Cash Flow Hedges Other Foreign Currency Items Total
Balance at March 29, 2020$(7,380) $(1,270) $(91) $(8,741)
Other comprehensive income (loss) (net of tax (benefit) of ($158), $0 and $0)464
 —
 (15) 449
Balance at June 28, 2020$(6,916) $(1,270) $(106) $(8,292)
Six Months Ended June 27, 2021
(thousands)Cash Flow HedgesOtherForeign Currency TranslationTotal
Balance at December 31, 2020$(4,889)$(1,263)$100 $(6,052)
Other comprehensive loss before reclassifications, net of tax(51)0 (70)(121)
Amounts reclassified from accumulated other comprehensive loss, net of tax2,044 0 0 2,044 
Net current period other comprehensive loss1,993 0 (70)1,923 
Balance at June 27, 2021$(2,896)$(1,263)$30 $(4,129)

Second Quarter Ended June 28, 2020
(thousands)Cash Flow HedgesOtherForeign Currency TranslationTotal
Balance at March 29, 2020$(7,380)$(1,270)$(91)$(8,741)
Other comprehensive loss before reclassifications, net of tax174 0 (15)159 
Amounts reclassified from accumulated other comprehensive loss, net of tax290 0 0 290 
Net current period other comprehensive loss464 0 (15)449 
Balance at June 28, 2020$(6,916)$(1,270)$(106)$(8,292)
Six Months Ended June 28, 2020
(thousands)Cash Flow HedgesOtherForeign Currency TranslationTotal
Balance at December 31, 2019$(4,374)$(1,270)$(54)$(5,698)
Other comprehensive loss before reclassifications, net of tax(3,903)0 (52)(3,955)
Amounts reclassified from accumulated other comprehensive loss, net of tax1,361 0 0 1,361 
Net current period other comprehensive loss(2,542)0 (52)(2,594)
Balance at June 28, 2020$(6,916)$(1,270)$(106)$(8,292)
Six Months Ended June 28, 2020
(thousands)Cash Flow Hedges Other Foreign Currency Items Total
Balance at December 31, 2019$(4,374) $(1,270) $(54) $(5,698)
Other comprehensive loss (net of tax of $882, $0 and $0)(2,542) —
 (52) (2,594)
Balance at June 28, 2020$(6,916) $(1,270) $(106) $(8,292)

Second Quarter Ended June 30, 2019

(thousands)Cash Flow Hedges Other Foreign Currency Items Total
Balance at March 31, 2019$(3,027) $(675) $(5) $(3,707)
Other comprehensive loss (net of tax of $659, $0 and $0)(1,931) —
 (94) (2,025)
Balance at June 30, 2019$(4,958) $(675) $(99) $(5,732)


Six Months Ended June 30, 2019

(thousands)Cash Flow Hedges Other Foreign Currency Items Total
Balance at December 31, 2018$(1,973) $(675) $(32) $(2,680)
Other comprehensive loss (net of tax of $1,015, $0 and $0)(2,985) —
 (67) (3,052)
Balance at June 30, 2019$(4,958) $(675) $(99) $(5,732)


Reclassification adjustments out of accumulated other comprehensive loss were immaterial for all periods presented.





21


12.LEASES

Lease expense, supplemental cash flow information, and other information related to leases were as follows:
Second Quarter Ended
(thousands)June 27, 2021June 28, 2020
Operating lease cost$10,353 $8,399 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$10,117 $8,279 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$24,806 $5,474 
 Second Quarter Ended
(thousands)June 28, 2020 June 30, 2019
Operating lease cost$8,399
 $7,901
    
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows for operating leases$8,279
 $6,875
    
Right-of-use assets obtained in exchange for lease obligations:   
Operating leases$5,474
 $8,668

 Six Months Ended
(thousands)June 28, 2020 June 30, 2019
Operating lease cost$16,568
 $15,688
    
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows for operating leases$16,362
 $13,599
    
Right-of-use assets obtained in exchange for lease obligations:   
Operating leases$17,902
 $9,245

Six Months Ended
(thousands)June 27, 2021June 28, 2020
Operating lease cost$19,938 $16,568 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$19,504 $16,362 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$39,991 $17,902 
Balance sheet information related to leases was as follows:
(thousands, except lease term and discount rate)June 27, 2021December 31, 2020
Assets
Operating lease right-of-use assets$139,576 $117,816 
Liabilities
Operating lease liabilities, current portion$35,951 $30,901 
Long-term operating lease liabilities105,318 88,175 
Total lease liabilities$141,269 $119,076 
(thousands, except lease term and discount rate)June 28, 2020 December 31, 2019
Assets   
Operating lease right-of-use assets$96,065
 $93,546
Liabilities   
Operating lease liabilities, current portion$28,567
 $27,694
Long-term operating lease liabilities68,318
 66,467
Total lease liabilities$96,885
 $94,161
Weighted average remaining lease term, operating leases (in years)5.15.3
Weighted average discount rate, operating leases3.9 %4.1 %
22

Weighted average remaining lease term, operating leases (in years)4.1
 4.2
Weighted average discount rate, operating leases3.7% 3.7%














Maturities of lease liabilities were as follows at June 28, 2020:27, 2021:
(thousands)
2021 (excluding the six months ended June 27, 2021)$20,559 
202238,969 
202333,089 
202425,151 
202516,420 
Thereafter23,153 
Total lease payments157,341 
Less imputed interest(16,072)
Total$141,269 
(thousands) 
2020 (excluding the six months ended June 28, 2020)$16,235
202128,873
202222,920
202317,072
202411,341
Thereafter7,955
Total lease payments104,396
Less imputed interest(7,511)
Total$96,885


LeasesAs of June 27, 2021, outstanding leases have remaining lease terms ofranging from one year to ten18 years.

13.FAIR VALUE MEASUREMENTS
The carrying amountsfollowing table presents fair values of cash equivalents, representing governmentcertain assets and other money market funds traded in an active market, are reported on the condensed consolidated statements of financial position as a component of "Cash and cash equivalents". The carrying amount of cash equivalents, valued using Level 1 inputs and approximating fair value because of their relatively short maturities, was approximately $90.0 million and $132.6 millionliabilities at June 28, 202027, 2021 and December 31, 2019, respectively.2020:
June 27, 2021December 31, 2020
(in millions)Level 1Level 2Level 3Level 1Level 2Level 3
7.50% senior notes due 2027(1)
0 $325.0 0 0 $329.0 0 
4.75% senior notes due 2029(1)
0 347.5 0 0 0 0 
Convertible note(1)
0 189.8 0 0 180.0 0 
Interest rate swaps(2)
0 3.9 0 0 6.6 0 
Contingent consideration(3)
0 0 $9.8 0 0 $6.9 
(1) The amounts of these notes listed above are the current fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of June 27, 2021 and December 31, 2020 using the interest rate method as described in Note 9.
(2) The interest rate swaps are classified as Level 2 in the fair value hierarchy and discussed further in Note 10.
(3) The estimated fair value of our senior notes, calculated using Level 2 inputs, was approximately $306.2 million and $320.3 million at June 28, 2020 and December 31, 2019, respectively. The carrying amounts of our term loan and our revolver,the Company's contingent consideration is valued using Level 23 inputs approximated fair value as of June 28, 2020 and December 31, 2019 based upon terms and conditions available to the Company at those datesis discussed further in comparison to the terms and conditions of its outstanding debt. The estimated fair value of our convertible notes, calculated using Level 2 inputs, was approximately $166.6 million and $162.5 million as of June 28, 2020 and December 31, 2019, respectively.Note 6.
14.INCOME TAXES

The effective tax rate in the second quarter of 2021 and 2020 was 26.9% and 2019 was 44.4% and 25.1%, respectively, and the effective tax rate for the comparable six month periods was 27.2%22.8% and 23.9%27.2%, respectively. The effective tax rate for the second quarter and six months of 2020 reflects the impact of $2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief, and Economic Security Act payroll tax credits. In addition, the effective tax rate for the first six months of 20192021 includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $0.9$5.7 million.
 
Cash paid for income taxes for the second quarter and six months of 2020 was immaterial. The Company paid income taxes of $21.1 million and $22.6 million in the second quarter and first six months of 2019,2021 was $24.0 million and $24.1 million, respectively.
The Company made an immaterial amount of income tax payments in the second quarter and first six months of 2020.

23


15.SEGMENT INFORMATION
The Company has 2 reportable segments, Manufacturing and Distribution, which are based on its method of internal reporting, which segregates its businesses based on the manner in which its chief operating decision maker allocates resources, evaluates financial results, and determines compensation.
The tables below present information about the sales and operating income of those segments. 
Second Quarter Ended June 27, 2021   
(thousands)ManufacturingDistributionTotal
Net outside sales$729,041 $290,912 $1,019,953 
Intersegment sales16,042 1,517 17,559 
Total sales745,083 292,429 1,037,512 
Operating income99,428 31,201 130,629 
Second Quarter Ended June 28, 2020   
(thousands)ManufacturingDistributionTotal
Net outside sales$292,574 $131,471 $424,045 
Intersegment sales5,114 1,085 6,199 
Total sales297,688 132,556 430,244 
Operating income22,410 6,938 29,348 

Second Quarter Ended June 30, 2019      
(thousands) Manufacturing Distribution Total
Net outside sales $434,275
 $178,943
 $613,218
Intersegment sales 8,331
 1,118
 9,449
Total sales 442,606
 180,061
 622,667
Operating income 48,787
 10,800
 59,587

Six Months Ended June 27, 2021   
(thousands)ManufacturingDistributionTotal
Net outside sales$1,329,797 $540,639 $1,870,436 
Intersegment sales29,850 2,920 32,770 
Total sales1,359,647 543,559 1,903,206 
Operating income177,857 52,376 230,233 
Six Months Ended June 28, 2020   
(thousands)ManufacturingDistributionTotal
Net outside sales$711,840 $301,437 $1,013,277 
Intersegment sales12,687 2,385 15,072 
Total sales724,527 303,822 1,028,349 
Operating income68,114 16,906 85,020 

Six Months Ended June 30, 2019      
(thousands) Manufacturing Distribution Total
Net outside sales $859,959
 $361,477
 $1,221,436
Intersegment sales 16,051
 2,283
 18,334
Total sales 876,010
 363,760
 1,239,770
Operating income 93,224
 19,091
 112,315















The following table presents a reconciliation of segment operating income to consolidated operating income:
  Second Quarter Ended Six Months Ended
(thousands) June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
Operating income for reportable segments $29,348
 $59,587
 $85,020
 $112,315
Unallocated corporate expenses (7,464) (6,090) (14,256) (14,003)
Amortization (9,778) (8,268) (19,379) (17,257)
Consolidated operating income $12,106
 $45,229
 $51,385
 $81,055

 Second Quarter EndedSix Months Ended
(thousands)June 27, 2021June 28, 2020June 27, 2021June 28, 2020
Operating income for reportable segments$130,629 $29,348 $230,233 $85,020 
Unallocated corporate expenses(21,332)(7,464)(40,549)(14,256)
Amortization(14,031)(9,778)(25,937)(19,379)
Consolidated operating income$95,266 $12,106 $163,747 $51,385 
Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.
24


The following table presents an allocation of total assets to the reportable segments of the Company and a reconciliation to consolidated total assets:
(thousands)June 27, 2021December 31, 2020
Manufacturing assets$1,723,928 $1,337,920 
Distribution assets419,551 343,170 
Assets for reportable segments2,143,479 1,681,090 
Corporate assets unallocated to segments22,826 27,578 
Cash and cash equivalents58,402 44,767 
Consolidated total assets$2,224,707 $1,753,435 
16.
STOCK REPURCHASE PROGRAMS
In March 2020, the Board approved a new stock repurchase program for up to $50 million of its common stock, including amounts remaining under previous authorizations. Approximately $43.5$14.4 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of June 28, 2020. NaN27, 2021. The Company repurchased 260,000 shares of its common stock repurchases were madeat an average price of $82.89 at an aggregate cost of $21.6 million in the second quarter of 2020.and six months ended June 27, 2021. In the firstsecond quarter and six months ended June 28, 2020, the Company repurchased 456,155 shares of its common stock at an average price of $34.09 per share at an aggregate cost of $15.6 million. The Company did not repurchase any of its common stock in the second quarter and first six months of 2019.

17.SUBSEQUENT EVENT

In August 2020,Previously, the Company announcedwould retire the completionshares upon repurchase. However, beginning in 2021, the Company has now elected to hold these shares in treasury stock. Accordingly, beginning in 2021, the Company has begun presenting stock repurchases within "Treasury Stock" on the condensed consolidated balance sheet and condensed consolidated statement of shareholders' equity. Prior periods have not been adjusted to reflect the acquisitioncurrent presentation of Inland Plywood Company (“Inland”), a supplier, laminator and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the recreational vehicle and industrial markets for a net initial purchase price of $46.0 million. Inland is headquartered in Pontiac, Michigan with an additional facility located in Cocoa, Florida. The acquisition of Inland includes the acquisition of working capital, machinery and equipment, and real estate.stock repurchases.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on page 2934 of this Report. The Company undertakes no obligation to update these forward-looking statements.
OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

The second quarter of 2020 exhibited distinct trends in each month of April, May and June, which are historically among our strongest sales months, as we responded to COVID-19 market volatility. Beginning in late March and early April of 2020, we temporarily curtailed production in certain of our facilities in alignment with reductions in OEM customer production levels, which resulted in a significant decline in revenue during April from each of our end markets. Cost reduction measures implemented at the end of the first quarter of 2020, in order to more closely align our direct and indirect labor costs with the decreased level of business activities, helped to mitigate the financial impact of the revenue


decline in April. These cost reduction measures also positively impacted the rest of the second quarter of 2020. In early May 2020 our facilities started to incrementally increase production levels as demand began to recover in our end markets, and the majority of our direct labor force, many of whom had been furloughed with benefits in April, returned to work in our RV, marine, MH and industrial facilities. While the first half of May 2020 was impacted by the temporary shutdowns in operations, the second half of May 2020 experienced a strong increase in end market demand compared to the first half of the month. This momentum continued in June 2020, where our revenues from the RV and industrial markets increased from the prior year, while revenues from the marine and MH markets recovered more gradually but still exhibited a positive trajectory.

While current trends in our end markets are encouraging, we believe the combination of our strong financial position, our available liquidity, the flexibility of our highly variable cost operating model, and the diversification of our end markets and the geographic regions in which we operate will help us to manage through any future volatility in our business caused by the pandemic, while allowing us to take advantage of opportunities that may arise in our markets.

The safety and well-being of our team members continue to be a key priority during the COVID-19 pandemic. We have successfully implemented extensive safety measures to adapt to this new environment. Those measures have included modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, and other industry best practices needed to continue to maintain a healthy and safe environment for our employees during the pandemic.

Second Quarter and Six Months 20202021 Financial Overview

Recreational Vehicle ("RV") Industry 
The RV industry is our largest market and comprised 48%58% and 56%48% of the Company’s sales in the second quarter ended June 27, 2021 and June 28, 2020, and June 30, 2019, respectively, and 52%59% and 56%52% for the comparative 20202021 and 20192020 six month periods. Sales to the RV industry decreased 40%increased 192% in the second quarter of 20202021 and 23%increased 109% in the first six months respectively,of 2021, compared to the prior year periods.

According to the Recreation Vehicle Industry Association ("RVIA"), wholesale shipments totaled 75,663approximately 151,800 units in the second quarter of 2020, decreasing 35%2021, an increase of 101% compared to 116,605approximately 75,700 units in the second quarter of 2019.2020. Wholesale unit shipments for the first six months of 2020 decreased 19% for the first six months2021 totaled approximately 300,300 units, an increase of 2020, totaling 176,067 units71% compared to 216,581approximately 176,100 units in the prior year period. Retailyear. The increase in wholesale unit sales are estimated to have decreased 17% and 13% during shipments in
25


the second quarter and first six months of 2020, respectively. Decreases2021 is attributed to an increase in wholesale and retail RV shipmentsdealer demand for RV units. In addition, the increase in the second quarter and first six months of 2021 reflects the comparison to the sharp decrease in wholesale unit shipments in the second quarter of 2020, are largely attributedwhich was a result of COVID-19-related production shutdowns at original equipment manufacturers' plants. This increase in dealer demand is correlated with consumer demand for RV units, which we believe reflects changes in consumer recreation patterns, which include an increased interest in outdoor recreation. According to COVID-19 market disruptions. Based on our estimates, RV dealer inventories are trending at historical lows relative to what we understand to be typical inventory levels of RV dealers. We believe that the supply-demand dynamics of historically low dealer inventory levels, combined with strong retail consumer demand, have resulted in positive momentum in our RV end ofmarket. We estimate RV retail unit sales increased 30-35% in the second quarter of 2020 were at their lowest level since 2014 due2021 and increased 37-40% for the first six months of 2021 compared to a combination of reduced wholesale shipments by the OEMs during the quarter and a recovery in retail sales in the latter part of May and throughout June 2020.prior year periods.
Marine Industry
Sales to the marine industry, which represented approximately 16% and 14% of the Company's consolidated net sales in the second quarter of 2021 and 2020, and 2019, decreased 34% in the second quarter of 2020respectively, increased 182% compared to the prior year quarter. For the first six months of 20202021 and 2019,2020, sales to the marine industry represented 13%16% and 15%13% of consolidated net sales, respectively, declining 24%increasing 121% in 20202021 compared to the prior year.
Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, and according to National Marine Manufacturers Association ("NMMA") marine wholesale powerboat unit shipments increased an estimated 26% for the second quarter 2021 and increased an estimated 16% for the first six months of 2021 compared to the prior year period.

Forperiods. Marine retail powerboat unit sales were nearly unchanged in the second quarter of 2020, overall marine retail unit shipments in the powerboat sector, which is the Company's primary marine market, decreased an estimated 7%, with aluminum fishing sales decreasing an estimated 11%; pontoon sales decreasing an estimated 3%; fiberglass sales decreasing an estimated 10%;2021 and ski and wake sales increasing an estimated 1%. Wholesale unit shipments declined an estimated 39% during the quarter, reflecting the impact of COVID-19 OEM production shutdowns. Forincreased 8% for the first six months of 2020, overall2021 compared to the prior year periods. We estimate that marine retail sales substantially exceeded marine wholesale unit shipments in both the powerboat sector decreased an estimated 7%, with aluminum fishing sales decreasing an estimated 10%; pontoon sales decreasing an estimated 4%; fiberglass sales decreasing an estimated 9%;second quarter and ski and wake sales virtually flat. Wholesale unit shipments declined an estimated 27% during the first six months of 2020, due mostly to temporary OEM production shutdowns.



2021, resulting in marine dealer inventory levels that we believe are at their lowest in at least a decade.
Manufactured Housing ("MH") Industry
Sales to the MH industry, which represented 21%14% and 18%21% of the Company’s sales in the second quarter of 2021 and 2020, and 2019, respectively, decreased 18%increased 54% in the second quarter of 20202021 compared to the second quarter of 2019.2020. MH sales represented 14% and 20% of the Company's sales for the first six months of 2021 and 2020, representing 20%respectively, and 18% of the Company's sales for the 2020 and 2019 periods, decreased 6%increased 28% in the first six months of 20202021 compared to the prior year period. Based on industry data from the Manufactured Housing Institute, MH wholesale unit shipments decreased by approximately 14%increased 31% in the second quarter of 2020 compared to the prior year quarter2021 and decreased 1%increased 16% for the first six months of 20202021 compared to the prior year period. MH wholesale unit shipments were impacted due to temporary OEM plant shutdowns in the second quarter and first six months of 2020 as well as COVID-19 related construction delays during these periods.

Industrial Market
The industrial market is comprised primarily of the kitchen cabinet and countertop industry, hospitality market, retail and commercial fixtures market, office and household furniture market and regional distributors. Sales to this market represented 17%12% and 12%17% of our sales in the second quarter of 20202021 and 2019,2020, respectively, and decreased 2%increased 69% in the second quarter of 20202021 compared to the prior year quarter. Sales to the industrial market represented 15%11% and 11%15% of our sales for the first six months of 20202021 and 2019,2020, respectively, and increased 6%41% in the first six months of 20202021 compared to the prior year period. Overall, our revenues in these markets are focused on the residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that approximately 60%70% of our industrial business is directly tied to the residential housing market, with the remaining 40%30% directly tied to the non-residential and commercial markets.
CombinedAccording to the U.S. Census Bureau, combined new housing starts decreased 17%increased 43% in the second quarter of 20202021 compared to the prior year quarter, with single family housing starts decreasing 13%increasing 42% and multifamily residential starts decreasing 27%.increasing 48% for the same period. For the first six months of 2020,2021, combined new housing starts increased 1% compared to the prior year period,25%, with single family housing starts decreasing 1%increasing 31% and multifamily residentialhousing starts increasing 5%.14% compared to 2020. Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.
26


REVIEW OF CONSOLIDATED OPERATING RESULTS
SecondQuarter and Six Months EndedJune 28, 202027, 2021 Compared to 20192020 
The following table sets forth the percentage relationship to net sales of certain items on the Company’s Condensed Consolidated Statements of Income.
 Second Quarter Ended
($ in thousands)June 27, 2021June 28, 2020Change Amount% Change
Net sales$1,019,953 100.0 %$424,045 100.0 %$595,908 141 %
Cost of goods sold815,476 80.0 %350,324 82.6 %465,152 133 %
Gross profit204,477 20.0 %73,721 17.4 %130,756 177 %
Warehouse and delivery expenses34,815 3.4 %20,209 4.8 %14,606 72 %
Selling, general and administrative expenses60,365 5.9 %31,628 7.5 %28,737 91 %
Amortization of intangible assets14,031 1.4 %9,778 2.3 %4,253 43 %
Operating income95,266 9.3 %12,106 2.9 %83,160 687 %
Interest expense, net14,580 1.4 %10,821 2.6 %3,759 35 %
Income taxes21,701 2.1 %571 0.1 %21,130 3,701 %
Net income$58,985 5.8 %$714 0.2 %$58,271 8,161 %
 
Second Quarter Ended Six Months Ended
 
June 28, 2020


June 30, 2019

 
June 28, 2020

 
June 30, 2019

Net sales
100.0%
100.0% 100.0% 100.0%
Cost of goods sold
82.6

81.6
 81.9
 82.1
Gross profit 17.4
 18.4
 18.1
 17.9
Warehouse and delivery
4.8

4.3
 4.4
 4.1
Selling, general and administrative
7.4

5.4
 6.7
 5.8
Amortization of intangible assets
2.3

1.3
 1.9
 1.4
Operating income
2.9

7.4
 5.1
 6.6
Interest expense, net
2.6

1.4
 2.1
 1.4
Income taxes
0.1

1.5
 0.8
 1.2
Net income
0.2

4.5
 2.2
 4.0

 Six Months Ended
($ in thousands)June 27, 2021June 28, 2020Change Amount% Change
Net sales$1,870,436 100.0 %$1,013,277 100.0 %$857,159 85 %
Cost of goods sold1,504,427 80.4 %830,075 81.9 %674,352 81 %
Gross profit366,009 19.6 %183,202 18.1 %182,807 100 %
Warehouse and delivery expenses64,728 3.5 %44,941 4.4 %19,787 44 %
Selling, general and administrative expenses111,597 6.0 %67,497 6.7 %44,100 65 %
Amortization of intangible assets25,937 1.4 %19,379 1.9 %6,558 34 %
Operating income202,262 10.8 %51,385 5.1 %150,877 294 %
Interest expense, net25,759 1.4 %21,313 2.1 %4,446 21 %
Income taxes31,490 1.7 %8,171 0.8 %23,319 285 %
Net income$106,498 5.7 %$21,901 2.2 %$84,597 386 %
Net Sales. Net sales in the second quarter of 2020 decreased $189.22021 increased $596.0 million, or 31%141%, to $424.0$1,020.0 million from $613.2$424.0 million in the second quarter of 2019.2020. The consolidated net sales decreaseincrease in the second quarter of 2021 reflects strong demand for our products across all end markets as well as the comparison to the second quarter of 2020, was attributedwhich reflects the impact to net sales decreases in all four of our end markets.COVID-19-related production shutdowns. The Company's RV market sales decreased 40%increased 192%, marine market sales decreased 34%increased 182%, industrial market sales decreased 2%increased 69% and MH market sales decreased 18%increased 54% when compared to the prior year quarter.



Net sales in the first six months of 2020 decreased $208.12021 increased $857.1 million, or 17%85%, to $1,013.3$1,870.4 million from $1,221.4$1,013.3 million in the first six months of 2019.2020. The consolidated net sales decreaseincrease in the first six months of 2021 reflects sales increases in all of our end markets, while sales in the first six months of 2020 also reflect the impact of COVID-19 as discussed above. The Company's RV market sales increased 109%, marine market sales increased 121%, MH market sales increased 28% and industrial market sales increased 41% when compared to the prior year period.
27


Revenue attributable to acquisitions completed in the first six months of 2021 was $56.7 million in the second quarter of 2021 and $62.1 million for the first six months of 2021. Revenue attributable to acquisitions completed in the first six months of 2020 was attributed to sales decreases in three of our end markets. The Company's RV market sales decreased 23%, marine market sales decreased 24% and MH market sales decreased 6% while industrial market sales increased 6% when compared to the prior year period.

During the second quarter and six months ended June 28, 2020, all four of our end markets were impacted by business disruptions and associated lost production and shipping days due to the COVID-19 pandemic.

Revenue attributable to acquisitions completed$3.3 million in the second quarter of 2020 and $3.8 million for the first six months of 2020 was $3.3 million and $3.8 million, respectively.2020.

The Company’s RV content per wholesale unit (on a trailing twelve-month basis) for the second quarter of 2020 decreased2021 increased approximately 2%15% to $3,086$3,543 from $3,135$3,086 for the second quarter of 2019.2020. Marine powerboat content per retailwholesale unit (on a trailing twelve-month basis) for the second quarter of 2020 decreased approximately 13%2021 increased approximately 60% to an estimated $1,439$2,841 from $1,659$1,775 for the second quarter of 2019.2020. MH content per wholesale unit (on a trailing twelve-month basis) for the second quarter of 20202021 increased approximately 16%7% to an estimated$4,799 from $4,501 from $3,889 for the second quarter of 2019.

2020.
Cost of Goods Sold. Cost of goods sold decreased $150.3increased $465.2 million, or 30%133%, to $350.3$815.5 million in the second quarter of 20202021 from $500.6$350.3 million in 2019, primarily reflecting the decrease in net sales in the quarter. As a percentage of net sales, cost of goods sold increased during the second quarter of 2020 to 82.6% from 81.6% in 2019. This percentage increase is largely attributed to additional costs incurred and production inefficiencies related to business disruption of our end markets as a result of the COVID-19 pandemic.

Cost of goods sold decreased $172.1 million, or 17%, to $830.1 million in the first six months of 2020 from $1,002.2 million in 2019, primarily reflecting the decrease in net sales in the period.2020. As a percentage of net sales, cost of goods sold decreased 260 basis points during the second quarter of 2021 to 80.0% from 82.6% in 2020.
Cost of goods sold in the first six months increased $674.3 million, or 81%, to $1,504.4 million from $830.1 million in 2020. As a percentage of net sales, cost of goods sold decreased 150 basis points during the first six months of 20202021 to 80.4% from 81.9% from 82.1% in 2019.

2020.
Cost of goods sold as a percentage of net sales decreased in the second quarter and first six months of 20202021 primarily as a result of (i) continued cost reductionsreduction and automation initiatives we initiateddeployed throughout 2020 and into 2021, (ii) volume-driven efficiencies as a result of leveraging fixed overhead, (iii) a recovery from the production inefficiencies experienced while operating in the third quarter of 2019, (ii)a COVID-19 environment, and (iv) synergies achieved and realized in the first six months of 2020different cost profiles from our 20182021 and 20192020 acquisitions, partially offset by an increase in labor and (iii) decreases incertain commodity cost inputs. These decreases inIn general, the Company's cost of goods sold were partially offsetpercentage can be impacted from quarter-to-quarter by additionaldemand changes in certain market sectors that can result in fluctuating costs incurredof certain raw materials and commodity-based components that are utilized in the production inefficiencies related to business disruption of our end markets as a result of the COVID-19 pandemic.products.
Gross Profit. Gross profit decreased $39.0increased $130.8 million, or 35%177%, to $73.7$204.5 million in the second quarter of 20202021 from $112.7$73.7 million in 2019. As a percentage of net sales, gross profit decreased to 17.4% in the second quarter of 2020 from 18.4% in the same period in 2019. Gross profit decreased $36.0 million, or 16%, to $183.2 million in the first six months of 2020 from $219.2 million in 2019.2020. As a percentage of net sales, gross profit increased 260 basis points to 18.1%20.0% in the second quarter of 2021 from 17.4% in the same period in 2020.
Gross profit increased $182.8 million, or 100%, to $366.0 million in the first six months of 20202021 from 17.9%$183.2 million in 2020. As a percentage of net sales, gross profit increased 150 basis points to 19.6% in the second quarter of 2021 from 18.1% in the same period in 2019.

2020.
The changesincrease in gross profit as a percentage of net sales in the second quarter and first six months of 2020ended June 27, 2021 compared to the same periods in 2019 reflect2020 reflects the impact of the factors discussed above under “Cost of Goods Sold”.
Warehouse and Delivery Expenses. Warehouse and delivery expenses decreased $6.1increased $14.6 million, or 23%72%, to $34.8 million in the second quarter of 2021 from $20.2 million in the second quarter of 2020 from $26.3 million in the second quarter of 2019.2020. As a percentage of net sales, warehouse and delivery expenses wereimproved 140 basis points to 3.4% in the second quarter of 2021 compared to 4.8% in the second quarter of 2020 compared to 4.3% in the second quarter of 2019. 2020.
Warehouse and delivery expenses decreased $5.4increased $19.8 million, or 11%44%, to $64.7 million in the first six months of 2021 from $44.9 million in the first six months of 2020 from $50.3 million in the first six months of 2019.2020. As a percentage of net sales, warehouse and delivery expenses were 4.4%improved 110 basis points to 3.5% in the first six months of 20202021 compared to 4.1%4.4% in the same period in 2019.

prior year period.
The increaseincreases in warehouse and delivery expenses are attributable to the significant increases in sales. However, the decreases as a percentage of sales are primarily attributable to leveraging certain fixed warehousing costs and the lower proportion of MH sales in the second quarter and first six months of 2021 as compared to 2020, which have higher warehouse and delivery costs as a percentage of net sales forsales. In addition, the second quarter and first six months of 2020 primarily reflects the fixed nature of certain of these expenses andreflect operating inefficiencies as net sales declined.
associated with COVID-19 disruptions.

28


Selling, General and Administrative ("SG&A") Expenses. SG&A expenses decreased $1.3increased $28.8 million, or 4%91%, to $31.6$60.4 million in the second quarter of 20202021 from $32.9$31.6 million in the prior year quarter. As a percentage of net sales, SG&A expenses were 7.4%5.9% in the second quarter of 20202021 compared to 5.4%7.5% in the second quarter of 2019.2020.

SG&A expenses decreased $3.1increased $44.1 million, or 4%63%, to $111.6 million in the first six months of 2021 from $67.5 million in the first six months of 2020 from $70.6 million in the prior year period.2020. As a percentage of net sales, SG&A expenses were 5.9% in the first six months of 2021 compared to 6.7% in the first six months of 2020 compared to 5.8% in the prior year period.

2020.
The decreaseincrease in SG&A expenses in the second quarter and six months of 20202021 compared to 20192020 is primarily due to (i) the realizationincrease in net sales; (ii) increases in the breadth and depth of corporate resources to support the size and growth of the Company and (iii) the comparison to the prior year, which includes SG&A cost reduction measures implemented in the third quarter of 2019 and the first quarter of 2020 as well as reductions in certain SG&A spending associated with the decrease in net sales in the second quarter of 2020. As a percentage of sales, SG&A expenses decreased 160 basis points for the second quarter of 2021 compared to the second quarter of 2020 and decreased 70 basis points for the first six months of 2020. The increase in2021 when compared to the prior year period. These improvements are attributable to the fixed nature of certain SG&A expenses as a percentage of net sales in the second quarter and first six months of 2020 compared to prior year periods is attributed to the decline in net sales from the impact of COVID-19, discussed above.

costs.
Amortization of Intangible Assets. Amortization of intangible assets increased $1.5$4.2 million, or 18%44%, to $9.8$14.0 million in the second quarter of 20202021 from $8.3$9.8 million in the prior year quarter andquarter. Amortization of intangible assets increased $2.1$6.5 million, or 12%34%, to $25.9 million in the first six months of 2021 from $19.4 million in the first six months of 2020 from $17.3 million in the prior year period.2020. The increaseincreases in the second quarter and first six months of 20202021 compared to the prior year periods primarily reflects the impact of businesses acquired in 20192020 and 2020.2021.

Operating Income. Operating income decreased $33.1increased $83.2 million, or 73%687%, to $12.1$95.3 million in the second quarter of 20202021 from $45.2$12.1 million in 2019.2020. As a percentage of net sales, operating income was 2.9%increased 640 basis points to 9.3% in the second quarter of 20202021 versus 7.4%2.9% in the same period in 2019.2020. Operating income decreased $29.7increased $150.9 million, or 37%294%, to $51.4$202.3 million in the first six months of 20202021 from $81.1$51.4 million in 2019.2020. As a percentage of net sales, operating income was 5.1%increased 570 basis points to 10.8% in the first six months of 20202021 versus 6.6%5.1% in the same period in 2019.2020. The change in operating income and operating income percentagemargin is primarily attributable to the items discussed above.

Interest Expense, Net. Interest expense increased $2.2$3.8 million, or 25%35%, to $10.8$14.6 million in the second quarter of 20202021 from $8.6$10.8 million in the prior year. ForInterest expense increased $4.5 million, or 21%, to $25.8 million in the first six months of 2020,2021 from $21.3 million in the prior year.
The increase in interest expense reflects (i) increased $3.7borrowings related to 2020 and 2021 acquisitions and (ii) the Company's issuance of its 4.75% Senior Notes due 2029 (the "4.75% Senior Notes") in April 2021 (as described in Note 9 in the Notes to Condensed Consolidated Financial Statements), partially offset by a decrease in variable interest rates on the unhedged portions of the Company's term loan and revolving credit facility.
Income Taxes. Income tax expense increased $21.1 million or 21%,in the second quarter of 2021 to $21.3$21.7 million from $17.6$0.6 million in the prior year period. Income tax expense increased $23.3 million in the first six months of 2021, to $31.5 million from $8.2 million in the prior year period.

The increase in interestincome tax expense in the second quarter and first six months of 2020 reflects increased borrowings relatedis due primarily to 2019 and 2020 acquisitions and an increase in the Company's overall average interest rate resulting from the issuance of $300 million aggregate principal amount of 7.5% senior notes in the third quarter of 2019.
Income Taxes. Income tax expense decreased $8.6 million, or 94%, to $0.6 million in the second quarter of 2020 from $9.2 million in the prior year period. For the first six months of 2020, income tax expense decreased $7.0 million, or 46%, to $8.2 million for the first six months of 2020 from $15.2 million in the prior year period. The decrease in both the second quarter and first six months of 2020 is attributed to the decrease in taxable income for both periods.

pretax income. The effective tax rate in the second quarter of 2021 and 2020 was 26.9% and 2019 was 44.4% and 25.1%, respectively, and the effective tax rate for the comparable six month periods was 27.2% and 23.9%, respectively. The effective taxhigher 2020 rate for the second quarter and six months of 2020primarily reflects the impact of $2.2 million ofin permanent tax differences due to certain Coronavirus Aid Relief and Economic Security Act payroll tax credits. In addition, theThe effective tax rate forrates in the first six months of 20192021 and 2020 were 22.8% and 27.2%, respectively. The 2021 rate includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $0.9 million.

$5.7 million, while the 2020 rate reflects the impact of the permanent tax differences mentioned above.
Use of Financial Metrics
Our MD&A includes financial metrics, such as RV, marine and MH content per unit, which we believe are important measures of the Company's business performance. Content per unit metrics are generally calculated using our market sales divided by third-party measures of industry volume. These metrics should not be considered alternatives to U.S.
29


GAAP. Our computations of content per unit may differ from similarly titled measures used by others. These metrics should not be considered in isolation or as substitutes for an analysis of our results as reported under U.S. GAAP.



REVIEW BY BUSINESS SEGMENT
The Company's reportable segments, Manufacturing and Distribution, are based on its method of internal reporting. The Company regularly evaluates the performance of the Manufacturing and Distribution segments and allocates resources to them based on a variety of indicators including sales and operating income. The Company does not measure profitability at the customer market (RV, marine, MH and industrial) level.

SecondQuarter and Six Months EndedJune 28, 202027, 2021 Compared to 20192020
General
 
In the discussion that follows, sales attributable to the Company’s reportable segments include intersegment sales and gross profit includes the impact of intersegment operating activity.
The table below presents information about the sales, gross profit and operating income of the Company’s reportable segments. A reconciliation of consolidated operating income is presented in Note 15 of the Notes to Condensed Consolidated Financial Statements.
 Second Quarter Ended
(thousands)June 27, 2021June 28, 2020Amount Change% Change
Sales  
Manufacturing$745,083 $297,688 $447,395 150%
Distribution292,429 132,556 159,873 121%
Gross Profit
Manufacturing150,560 48,957 101,603 208%
Distribution56,548 23,192 33,356 142%
Operating Income
Manufacturing99,428 22,410 77,018 344%
Distribution31,201 6,938 24,263 346%
 Six Months Ended
(thousands)June 27, 2021June 28, 2020Amount Change% Change
Sales  
Manufacturing$1,359,647 $724,527 $635,120 88%
Distribution543,559 303,822 239,737 79%
Gross Profit
Manufacturing271,486 127,904 143,582 113%
Distribution100,698 52,388 48,310 92%
Operating Income
Manufacturing177,857 68,114 109,743 161%
Distribution52,376 16,906 35,470 207%
30


  Second Quarter Ended Six Months Ended
(thousands) June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019
Sales  
  
    
Manufacturing $297,688
 $442,606
 $724,527
 $876,010
Distribution 132,556
 180,061
 303,822
 363,760
Gross Profit        
Manufacturing 48,957
 80,700
 127,904
 157,527
Distribution 23,192
 30,800
 52,388
 59,773
Operating Income        
Manufacturing 22,410
 48,787
 68,114
 93,224
Distribution 6,938
 10,800
 16,906
 19,091

Manufacturing
Sales. Sales decreased $144.9increased $447.4 million, or 33%150%, to $297.7$745.1 million in the second quarter of 20202021 from $442.6$297.7 million in the prior year quarter. For the first six months of 2020,2021, sales decreased $151.5increased $635.1 million, or 17%88%, to $724.5$1,359.6 million from $876.0$724.5 million in the prior year period. This segment accounted for approximately 69%72% and 71%69% of the Company’s consolidated net sales for the second quarter of 20202021 and 2019,2020, respectively, and 71% and 70% of the Company's consolidated net sales for the first six months of 2021 and 2020, and 2019.respectively. The sales decreaseincrease in the second quarter of 2021 compared to 2020 was attributed to sales increases in all four of the Company's end markets, where sales to each of the RV and marine end markets increased 185%, MH increased 88% and industrial increased 73%. The sales increase for the first six months of 2021 compared to the prior year period was also attributed to sales increases in all four end markets, where RV end market sales increased 98%, marine increased 122%, MH increased 52% and industrial increased 42%. Net sales in the second quarter and first six months of 2021 attributable to acquisitions completed in the first six months of 2021 were approximately $41.9 million and $46.7 million, respectively, and net sales in the second quarter and first six months of 2020 was primarily attributedattributable to sales decreasesacquisitions completed in our primary end markets as a resultthe first six months of business disruptions2020 were $3.3 million and lost production and shipping days due to the COVID-19 pandemic.$3.8 million, respectively.

Gross Profit. Gross profit decreased $31.7increased $101.6 million, or 39%208%, to $150.6 million in the second quarter of 2021 from $49.0 million in the second quarter of 2020 from $80.7 million in the second quarter of 2019.2020. For the first six months of 2020,2021, gross profit decreased $29.6increased $143.6 million, or 19%113%, to $271.5 million from $127.9 million from $157.5 million in 2019.the prior year period. As a percentage of sales, gross profit decreasedincreased to 16.5%20.2% in the second quarter of 2021 from 16.4% in the second quarter of 2020 from 18.2% in the second quarter of 2019 and decreasedincreased to 17.7%20.0% in the first six months of 20202021 from 18.0%17.7% in the prior year period.
Gross profit margin increased during the second quarter of 2021 compared to second quarter of 2020 primarily due to (i) a 550 basis point improvement in manufacturing overhead expense as a percentage of sales, as certain of these costs are fixed in nature and (ii) a 60 basis point improvement in direct labor as a percentage of sales. These two improvements as a percentage of net sales decreasedwere partially offset by a 220 basis point increase in materials as a percentage of sales.
Gross profit margin increased during the second quarter and first six months of 20202021 compared to the prior year periodssame period in 2020 primarily due to additional costs and operational inefficiencies(i) a 350 basis point improvement in manufacturing overhead expense as a resultpercentage of business disruptions from the COVID-19 pandemic.

sales, as certain of these costs are fixed in nature and (ii) a 70 basis point improvement in direct labor as a percentage of sales. These two improvements as a percentage of net sales were partially offset by a 180 basis point increase in materials as a percentage of sales.
Operating Income. Operating income decreased $26.4increased $77.0 million, or 54%344%, to $22.4$99.4 million in the second quarter of 20202021 from $48.8$22.4 million in the prior year quarter. For the first six months of 2020,2021, operating income decreased $25.1increased $109.8 million, or 27%161%, to $177.9 million from $68.1 million from $93.2 million in the prior year.year period. The overall decreaseincrease in operating income in the second quarter and first six months of 20202021 primarily reflects the items discussed above.


Distribution
Sales. Sales decreased $47.5increased $159.8 million, or 26%121%, to $132.6$292.4 million in the second quarter of 20202021 from $180.1$132.6 million in the prior year quarter. For the first six months of 2020,2021, sales decreased $60.0increased $239.8 million, or 16%79%, to $303.8$543.6 million from $363.8$303.8 million in the prior year period. This segment accounted for approximately 31%28% and 29%31% of the Company’s consolidated net sales for the second quarter of 20202021 and 2019,2020, respectively, and 29% and 30% of consolidated net sales for the first six months of 20202021 and 2019.2020. The sales decreaseincrease in the second quarter of 2021 compared to the second quarter of 2020 was attributed to a 207% increase in our RV market sales, a 142% increase in marine market sales, a 38% increase in industrial market sales, and a 31% increase in MH market sales. The sales increase in the first six months of 2021 compared to the same period in 2020 was attributed to a 134% increase in RV market sales, a 115% increase in marine market sales, a 12% increase in MH market sales and a 35% increase in industrial market sales. Net sales in the second quarter and first six months of 2021 attributable to acquisitions completed in the first six months of 2021 were approximately $14.8 million and $15.4 million, respectively, with no corresponding amount of net sales in the second quarter or first six months of 2020 was primarily attributedattributable to sales decreasesacquisitions completed in our primary end markets as a resultthe first six months of business disruptions and lost production and shipping days due to the COVID-19 pandemic.2020.

Gross Profit. Gross profit decreased $7.6increased $33.4 million, or 25%142%, to $56.6 million in the second quarter of 2021 from $23.2 million in the second quarter of 2020 from $30.8 million in the second quarter of 2019.2020. For the first six months of 2020,2021, gross profit decreased $7.4increased $48.3 million, or 12%92%, to $100.7 million from $52.4 million from $59.8 million in 2019.the prior year period. As a percentage of sales, gross profit increased to 19.3% in the
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second quarter of 2021 from 17.5% in the second quarter of 2020, and to 18.5% from 17.1%17.2% for the comparable six month periods. The increase in gross profit margin in the second quarter of 2019 and increased to 17.2% in the first six months of 2020 from 16.4% in the prior year period.

As a percentage of sales, gross profit increased during2021 compared to the second quarter and first six months of 2020 comparedis primarily attributed to the prior year periods primarily due to realized synergies from certain 2018 and 2019 acquisitions, partially offset by additional costs and operational inefficiencies ashigher margin profile of a result of business disruptions from the COVID-19 pandemic.

2020 acquisition.
Operating Income. Operating income decreased $3.9increased $24.3 million, or 36%346%, to $6.9$31.2 million in the second quarter of 20202021 from $10.8$6.9 million in the prior year quarter. For the first six months of 2020,2021, operating income decreased $2.2increased $35.5 million or 11%207%, to $52.4 million from $16.9 million from $19.1 million in the prior year.year period. The overall decreaseimprovement in operating income in the second quarter and first six months of 20202021 primarily reflects the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES
As the impact of the COVID-19 pandemic on the economy, our markets and our operations evolves, we will continue to assess our liquidity needs. After a postponement of non-essential capital expenditures in the second quarter of 2020, the Company expects to return to its historical levels of capital expenditures in the second half of 2020 reflecting the anticipated recovery of our end markets.

Our liquidity at June 28, 202027, 2021 consisted of cash and cash equivalents of $111.1$58.4 million and $410.2as well as $409.8 million of unused borrowing availability under our credit facility.

Cash Flows
Operating Activities
Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.
Net cash provided by operating activities decreased $54.4increased $39.0 million to $78.4 million in the first six months of 2021 from $39.4 million in the first six months of 2020 from $93.8 million in the first six months of 20192020. The increase is primarily dueattributable to (i) a decrease ofan $86.9 million increase in net income, of $26.4(ii) a $14.0 million due to disruptions in our end markets as a result of the COVID-19 pandemic; (ii) an increase in the usedepreciation and amortization, and (iii) $15.9 million increase in deferred income taxes. These increases in sources of cash from trade receivables of $24.0 million, primarily due to the timing of customer cash payments at the end of our fiscal second quarter; (iii) an increase in the use of cash from inventories of $20.8 million, due mostly to purchases of inventory in June 2020 as a result of an increase in demand in our end markets; and (iv) a decrease of deferred income tax liabilities of $7.6 million. These decreases in operating cash flowsoperations were partially offset by an increase in use of cash flows from prepaid expenses and other assetsfor net working capital of $12.5$78.1 million, andassociated primarily with investments in inventory to support customer needs, growth of accounts payable of $5.2 millionreceivable in line with net sales, and an increaseacceleration of depreciation and amortization of $4.4 million.payments for certain inventory-related payables to maintain or enhance vendor prioritization in a dynamic supply chain environment.
Investing Activities  
Net cash used in investing activities increased $19.9$245.9 million to $280.9 million in the first six months of 2021 from $35.0 million in the first six months of 2020 from $15.1 million in the first six months of 2019 primarily due to an increase in cash used in business acquisitions of $22.6$228.8 million


and a decrease in proceeds from sale of property, plant, and equipment and other investing activities of $4.2$15.1 million partially offset by a decreaseincrease in capital expenditures of $6.9 million.expenditures.
Financing Activities 
Net cash flows usedprovided by financing activities decreased $29.4increased $248.5 million to $32.7 million in first six months of 2020 from $62.1$215.8 million in the first six months of 20192021 from a $32.7 million use of cash in the first six months of 2020. The increase is primarily due to a net decrease(i) proceeds of $350.0 million from the Company's issuance of its 4.75% Senior Notes, (ii) an additional $58.8 million in repayments on our revolving credit facility and term loan borrowings and (iii) $3.9 million in additional proceeds from the exercise of $52.8 million and other financing activitiesstock options. These sources of $3.8 million,cash were partially offset by (i) an additional $140.0 million in net revolver repayments, (ii) a $12.0 million increase in taxes paid for share-based payment arrangements, (iii) a $7.5 million increase in stock repurchases under our buyback program of $15.6 million with no corresponding amount in the prior year period and cash dividends paid to shareholders and (iv) $5.7 million increase in payments of $11.6 million with no corresponding amount in the prior year period.deferred financing costs.
Summary of Liquidity and Capital Resources
TheAt June 27, 2021, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its credit facility2021 Credit Facility (as defined herein) are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.
The Company's credit facility consists of a $550 million senior secured revolver and a $100 million senior secured term loan. The maturity date for borrowings under the credit agreement that established the credit facility is September 17, 2024. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the credit facility by up to $250 million. Borrowings under the credit facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Pursuant to the credit agreement:

The term loan is due in consecutive quarterly installments in the following amounts: (i) through and including June 30, 2021, $1,250,000 and (ii) beginning September 30, 2021, and each quarter thereafter, $2,500,000, with the remaining balance due at maturity;

The interest rates for borrowings under the revolver and the term loan are the Prime Rate or LIBOR
plus a margin, which ranges from 0.00% to 0.75% for Prime Rate loans and from 1.00% to 1.75% for LIBOR
loans depending on the Company’s consolidated total leverage ratio. The Company is required to pay fees on unused but committed portions of the revolver, which range from 0.15% to 0.225%.

At June 28, 2020, the Company had $410.2 million of unused borrowing availability under its credit facility. The ability to access unused borrowing capacity under the credit facility2021 Credit Facility as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the credit agreement.agreement that established the 2021 Credit Facility (the "2021 Credit Agreement").
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As of and for the June 28, 202027, 2021 reporting date, the Company was in compliance with its financial covenants as required under the terms of its credit agreement.2021 Credit Agreement. The required maximum consolidated totalsecured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the credit agreement,2021 Credit Agreement, compared to the actual amounts as of June 28, 202027, 2021 and for the fiscal period then ended are as follows:  
 RequiredActual
Consolidated secured net leverage ratio (12-month period)2.75 0.43 
Consolidated fixed charge coverage ratio (12-month period)1.50 6.92 
 
Required

Actual
Maximum consolidated total leverage ratio (12-month period)
4.00

2.31
Minimum consolidated fixed charge coverage ratio (12-month period)
1.50

5.65

In addition, as of June 27, 2021, the Company's consolidated total net leverage ratio (12-month period) was 2.26. While this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.
Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH, marine and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.






On April 20, 2021, we completed the issuance of $350 million aggregate principal amount of our 4.75% Senior Notes in a private placement exempt from registration under the Securities Act of 1933, as amended. The 4.75% Senior Notes, which were issued at par, carry an interest rate of 4.75%. Following the completion of the offering, the Company amended and restated the credit agreement governing its then-existing $650 million senior secured credit facility to establish a new $700 million senior secured credit facility consisting of a $550 million revolving credit facility and a $150 million term loan facility (the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Facility was extended to April 2026. The 2021 Credit Facility replaced the Company’s previously existing credit facility that was due to mature in September 2024.
CRITICAL ACCOUNTING POLICIES
There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. 
OTHER
Seasonality
OperationsManufacturing operations in the RV, marine and MH industries historically have been seasonal and at their highest levels when the weather is moderate. Accordingly, the Company’s sales and profits hadhave generally been the highest in the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August/September timeframe as well as marine open houses in the January/February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. In addition, current and future seasonal industry trends may be different than in prior years due to the impact of national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, timing of dealer orders, fluctuations in dealer inventories, the impact of the COVID-19 pandemic on consumer buying patterns, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.
Subsequent Events
We evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q, and there were none that required recognition or disclosure in the condensed consolidated financial statements.
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INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick Industries, Inc. and other matters from time to time and desires to take advantage of the “safe harbor” which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as other statements contained in this quarterly report and statements contained in future filings with the Securities and Exchange Commission (“SEC”), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. 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. 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 expressed 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 December 31, 2019,2020, and in the Company's Form 10-QsForms 10-Q for subsequent quarterly periods, which are filed with the SEC and are available on the SEC’s website at www.sec.gov.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Debt Obligations under Credit Agreement
At June 28, 2020,27, 2021, our total debt obligations under our credit agreement were under LIBOR-based interest rates. A 100-basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately $0.3$0.9 million, assuming average borrowings, including our term loan, subject to variable rates of $31.3$85.0 million, which was the amount of such borrowings outstanding at June 28, 202027, 2021 subject to variable rates. The $31.3$85.0 million excludes deferred financing costs related to the term loan and $200.0 million of borrowings outstanding under the revolver and term loan that are hedged at a fixed interest rate through interest rate swaps.
Commodity Price Volatility
The prices of key raw materials, consisting primarily of lauan, gypsum, particleboard, aluminum, softwoods lumber, and petroleum-based products, are influenced by demand and other factors specific to these commodities, such as the price of oil, rather than being directly affected by inflationary pressures. Prices of certain commodities have historically been


volatile and continued to fluctuate in the second quarter and first six months of 2020.2021. During periods of volatile commodity prices, we have generally been able to pass both price increases and decreases to our customers in the form of price adjustments. We are exposed to risks during periods of commodity volatility because there can be no assurance future cost increases or decreases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases or decreases will match raw material cost increases or decreases. We do not believe that commodity price volatility had a material effect on results of operationsour net income for the periods presented.
ITEM 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding
34


required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and the Company’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the second quarter ended June 28, 202027, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.      


PART II: OTHER INFORMATION
Items 1, 3, 4 and 5 of Part II are not applicable and have been omitted.

ITEM 1A.RISK FACTORS
“Item 1A. Risk Factors” of our Form 10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 10-K for the year ended December 31, 2019. Except as presented below, thereThere have been no material changes from the risk factors describedpreviously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

The global spread of the COVID-19 virus and measures implemented to combat it have had, and are expected in the future to continue to have, a material adverse effect on our business.

The global spread of the novel coronavirus (COVID-19) in recent months has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption in financial markets. The impact of this pandemic has created significant uncertainty in the global economy and has had, and is expected to continue to have, a material adverse effect on our business, employees, suppliers, and customers. The duration and the magnitude of the impact of the COVID-19 pandemic cannot be precisely estimated at this time, as they are affected by a number of factors, many of which are outside of our control. As a result of the COVID-19 pandemic and potential future pandemic outbreaks, we face significant risks including, but not limited to:

Decreases in consumer confidence and disposable income and increases in unemployment could reduce demand for our products by our customers in all of our end markets.
Tightening credit standards could negatively impact credit availability to consumers which could have an adverse effect on all of our end markets.
Supply chain and shipping interruptions and constraints, volatility in demand for our products caused by sudden and significant changes in production levels by our customers or other restrictions affecting our business could adversely impact our planning and forecasting, our revenues and our operations.
Disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, transportation, workforce, or other manufacturing and distribution capabilities could result in our inability to meet our end market customer needs and achieve cost targets.
Significant changes in the conditions in markets in which we manufacture, sell or distribute our products, including additional or expanded quarantines or "stay at home" orders, governmental or regulatory actions, closures or other restrictions that further limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our suppliers or customers from sufficiently staffing operations, could adversely impact operations necessary for the production, distribution, sale, and support of our products.
Failure of third parties on which we rely, including our customers, suppliers, distributors, commercial banks, and other external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, may adversely impact our operations.
Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of the impact of COVID-19. If any of our customers suffer significant financial difficulties, they may be unable to pay amounts due to us timely or at all. Further, we may have to negotiate significant discounts and/or extended financing terms with these customers in such a situation. If we are unable to collect our accounts receivable as they come due, there may be a material adverse effect on our financial condition, results of operations and cash flows.
If the Company is unable to maintain normal operations, or subsequently is unable to resume normal operations in a timely fashion, its cash flows could be adversely affected, making it difficult to maintain adequate liquidity or meet debt covenants. As a result, the Company may be required to pursue additional sources of financing to meet


its financial obligations and fund its operations and obtaining such financing is not guaranteed and is largely dependent upon market conditions and other factors.
Disruptions to our operations related to COVID-19 as a result of absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others at our facilities, or due to quarantines.
The COVID-19 pandemic has led to and could continue to lead to severe disruption and volatility in the United States and global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices in the public equity markets, including prices of our common stock, have been highly volatile as a result of the COVID-19 pandemic.
Sustained adverse impacts to the Company, certain suppliers, and customers may also affect the Company’s future valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, tax assets, and other assets.

The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is highly uncertain and cannot be accurately predicted and is dependent on future developments, including the duration of the pandemic and the length of its impact on the global economy, as well as any new information that may emerge concerning the COVID-19 pandemic and the actions taken to contain it or mitigate its impact. The continued impact on our business as a result of the COVID-19 pandemic could materially adversely affect our business, results of operations, financial condition, cash flows, prospects and the trading prices of our securities in the near-term and beyond 2020.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None. 
(c) Issuer Purchases of Equity Securities

Period 
Total Number of Shares Purchased (1)
 
Average Price
Paid Per Share (1) 
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
 
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
March 30 - April 26, 2020 —
 $—
 —
 43,515,568
April 27 - May 31, 2020 2,383
 43.43
 —
 43,515,568
June 1 - June 28, 2020 143
 62.37
 —
 43,515,568
  2,526
   —
  
Period
Total Number of Shares Purchased (1)
Average Price
Paid Per Share(1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
March 29 - April 25, 202198 $78.93 — $35,960,557 
April 26 - May 30, 202189,546 89.62 85,388 28,338,024 
May 31 - June 27, 2021174,909 79.77 174,612 14,410,258 
264,553 260,000 
(1) RepresentsAmount includes 4,553 shares of common stock purchased by the Company in April through June 2021 for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards and the exercise of stock appreciation rights held by the employees.
(2) See Note 16 of the Notes to Condensed Consolidated Financial Statements for additional information about the Company's stock repurchase program.


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ITEM 6.EXHIBITS
 
Exhibits (1)Description
31.1
31.2
32
101Interactive Data Files. The following materials are filed electronically with this Quarterly Report on Form 10-Q:
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Schema Document
101.CALXBRL Taxonomy Calculation Linkbase Document
101.DEFXBRL Taxonomy Definition Linkbase Document
101.LABXBRL Taxonomy Label Linkbase Document
101.PREXBRL Taxonomy Presentation Linkbase Document

104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
PATRICK INDUSTRIES, INC.
(Registrant)
Date: August 6, 20205, 2021By:/s/ Andy L. Nemeth
Andy L. Nemeth

President and Chief Executive Officer
 
 
Date: August 6, 20205, 2021By:/s/ John A. ForbesJacob R. Petkovich
John A. Forbes

Jacob R. Petkovich
InterimExecutive Vice President-Finance and Chief Financial Officer


Date: August 5, 2021By:/s/ James E. Rose
James E. Rose
Principal Accounting Officer
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