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 ~~September 27, 2020~~March 28, 2021

☐ 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

PATRICK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Indiana			35-1057796
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


107 WEST FRANKLIN STREET, P.O. Box 638
ELKHART, IN	IN	46515
~~(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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	PATK	NASDAQ

As of ~~October~~April 23, ~~2020,~~2021, there were ~~23,363,124~~23,772,718 shares of the registrant’s common stock outstanding.

PATRICK INDUSTRIES, INC.

TABLE OF CONTENTS


			Page No.
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Income ~~Third~~ First Quarter ended March 28, 2021 and ~~Nine Months ended September 27,~~March 29, 2020 ~~and September 29, 2019~~			3

Condensed Consolidated Statements of Comprehensive Income ~~Third~~ First Quarter ended March 28, 2021 and ~~Nine Months ended September 27,~~March 29, 2020 ~~and September 29, 2019~~			4

Condensed Consolidated Statements of Financial Position September 27, 2020Balance Sheets March 28, 2021 and December 31, ~~2019~~2020			5

Condensed Consolidated Statements of Cash Flows ~~Nine Months~~ First Quarter ended ~~September 27,~~March 28, 2021 and March 29, 2020 ~~and September 29, 2019~~			6

Condensed Consolidated Statements of Shareholders' Equity ~~Third~~ First Quarter ended March 28, 2021 and ~~Nine Months ended September 27,~~March 29, 2020 ~~and September 29, 2019~~			7

Notes to Condensed Consolidated Financial Statements			98

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2320

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			3128

ITEM 4. CONTROLS AND PROCEDURES			3228

PART II. OTHER INFORMATION

ITEM ~~1. LEGAL PROCEEDINGS~~			33

~~ITEM~~ 1A. RISK FACTORS			3329

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			3429

ITEM 6. EXHIBITS			3630

SIGNATURES			3731

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		Third Quarter Ended				Nine Months Ended					First Quarter Ended
(thousands except per share data)	(thousands except per share data)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019		(thousands except per share data)	March 28, 2021		March 29, 2020
NET SALES	NET SALES	$	700,707	$	566,186	$	1,713,984	$	1,787,622	NET SALES	$	850,483	$	589,232
Cost of goods sold	Cost of goods sold	567,210		461,851		1,397,285		1,464,078		Cost of goods sold	688,951		479,751
GROSS PROFIT	GROSS PROFIT	133,497		104,335		316,699		323,544		GROSS PROFIT	161,532		109,481
Operating Expenses:	Operating Expenses:									Operating Expenses:
Warehouse and delivery	Warehouse and delivery	25,263		23,917		70,204		74,228		Warehouse and delivery	29,913		24,732
Selling, general and administrative	Selling, general and administrative	38,184		33,817		105,681		104,403		Selling, general and administrative	51,232		35,869
Amortization of intangible assets	Amortization of intangible assets	10,221		9,191		29,600		26,448		Amortization of intangible assets	11,906		9,601
Total operating expenses	Total operating expenses	73,668		66,925		205,485		205,079		Total operating expenses	93,051		70,202
OPERATING INCOME	OPERATING INCOME	59,829		37,410		111,214		118,465		OPERATING INCOME	68,481		39,279
Interest expense, net	Interest expense, net	10,507		8,603		31,820		26,222		Interest expense, net	11,179		10,492
Income before income taxes	Income before income taxes	49,322		28,807		79,394		92,243		Income before income taxes	57,302		28,787
Income taxes	Income taxes	11,986		7,490		20,157		22,661		Income taxes	9,789		7,600
NET INCOME	NET INCOME	$	37,336	$	21,317	$	59,237	$	69,582	NET INCOME	$	47,513	$	21,187

BASIC NET INCOME PER COMMON SHARE	BASIC NET INCOME PER COMMON SHARE	$	1.65	$	0.92	$	2.60	$	3.02	BASIC NET INCOME PER COMMON SHARE	$	2.09	$	0.92
DILUTED NET INCOME PER COMMON SHARE	DILUTED NET INCOME PER COMMON SHARE	$	1.62	$	0.92	$	2.57	$	2.99	DILUTED NET INCOME PER COMMON SHARE	$	2.04	$	0.91

Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	22,674		23,076		22,784		23,073		Weighted average shares outstanding – Basic	22,737		23,016
Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted	23,072		23,273		23,088		23,279		Weighted average shares outstanding – Diluted	23,286		23,267

See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.									See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


		Third Quarter Ended				Nine Months Ended					First Quarter Ended
(thousands)	(thousands)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019		(thousands)	March 28, 2021		March 29, 2020
NET INCOME	NET INCOME	$	37,336	$	21,317	$	59,237	$	69,582	NET INCOME	$	47,513	$	21,187
Other comprehensive (loss) income, net of tax:
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Unrealized gain (loss) of hedge derivatives	Unrealized gain (loss) of hedge derivatives	989		(240)		(1,553)		(3,225)		Unrealized gain (loss) of hedge derivatives	975		(3,006)
Other	Other	60		19		8		(48)		Other	(59)		(37)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	1,049		(221)		(1,545)		(3,273)		Total other comprehensive income (loss)	916		(3,043)
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	38,385	$	21,096	$	57,692	$	66,309	COMPREHENSIVE INCOME	$	48,429	$	18,144

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS OF FINANCIAL POSITION~~BALANCE SHEETS (Unaudited)


		As of					As of
(thousands)	(thousands)	September 27, 2020		December 31, 2019		(thousands)	March 28, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	62,347	$	139,390	Cash and cash equivalents	$	6,171	$	44,767
Trade and other receivables, net	Trade and other receivables, net	175,533		87,536		Trade and other receivables, net	211,974		132,505
Inventories	Inventories	281,374		253,870		Inventories	345,244		312,809
Prepaid expenses and other	Prepaid expenses and other	12,580		36,038		Prepaid expenses and other	28,446		37,982
Total current assets	Total current assets	531,834		516,834		Total current assets	591,835		528,063
Property, plant and equipment, net	Property, plant and equipment, net	197,415		180,849		Property, plant and equipment, net	256,213		251,493
Operating lease right-of-use assets	Operating lease right-of-use assets	105,410		93,546		Operating lease right-of-use assets	124,384		117,816
Goodwill	Goodwill	356,433		319,349		Goodwill	405,382		395,800
Intangible assets, net	Intangible assets, net	380,919		357,014		Intangible assets, net	451,269		456,276
Deferred financing costs, net	Deferred financing costs, net	2,544		2,978		Deferred financing costs, net	2,220		2,382
Other non-current assets	Other non-current assets	384		423		Other non-current assets	3,575		1,605
TOTAL ASSETS	TOTAL ASSETS	$	1,574,939	$	1,470,993	TOTAL ASSETS	$	1,834,878	$	1,753,435
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Current maturities of long-term debt	Current maturities of long-term debt	$	5,000	$	5,000	Current maturities of long-term debt	$	7,500	$	7,500
Current operating lease liabilities	Current operating lease liabilities	29,565		27,694		Current operating lease liabilities	32,513		30,901
Accounts payable	Accounts payable	117,088		96,208		Accounts payable	154,291		105,786
Accrued liabilities	Accrued liabilities	101,296		58,033		Accrued liabilities	105,545		83,202
Total current liabilities	Total current liabilities	252,949		186,935		Total current liabilities	299,849		227,389
Long-term debt, less current maturities, net	Long-term debt, less current maturities, net	673,852		670,354		Long-term debt, less current maturities, net	785,849		810,907
Long-term operating lease liabilities	Long-term operating lease liabilities	76,873		66,467		Long-term operating lease liabilities	93,327		88,175
Deferred tax liabilities, net	Deferred tax liabilities, net	26,100		27,284		Deferred tax liabilities, net	40,998		39,516
Other long-term liabilities	Other long-term liabilities	19,336		22,472		Other long-term liabilities	19,580		28,007
TOTAL LIABILITIES	TOTAL LIABILITIES	1,049,110		973,512		TOTAL LIABILITIES	1,239,603		1,193,994
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Common stock	Common stock	177,308		172,662		Common stock	174,920		180,892
Additional paid-in-capital	Additional paid-in-capital	24,440		25,014		Additional paid-in-capital	24,387		24,387
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(7,243)		(5,698)		Accumulated other comprehensive loss	(5,136)		(6,052)
Retained earnings	Retained earnings	331,324		305,503		Retained earnings	401,104		360,214
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	525,829		497,481		TOTAL SHAREHOLDERS’ EQUITY	595,275		559,441
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,574,939	$	1,470,993	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,834,878	$	1,753,435

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	First Quarter Ended
(thousands)	March 28, 2021		March 29, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	47,513	$	21,187
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,521		17,175
Stock-based compensation expense	4,298		4,311
Amortization of convertible notes debt discount	1,769		1,723
Other non-cash items	1,595		750
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade receivables	(76,350)		(66,453)
Inventories	(24,398)		(18,211)
Prepaid expenses and other assets	9,587		9,649
Accounts payable, accrued liabilities and other	63,757		43,033
Net cash provided by operating activities	50,292		13,164
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(14,239)		(7,580)
Proceeds from sale of property, plant and equipment	58		21
Business acquisitions, net of cash acquired	(28,864)		(24,281)
Other	(2,000)		0
Net cash used in investing activities	(45,045)		(31,840)
CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings on revolver	117,475		6,720
Repayments on revolver	(144,475)		(6,720)
Stock repurchases under buyback program	0		(15,550)
Cash dividends paid to shareholders	(6,573)		(5,837)
Taxes paid for share-based payment arrangements	(14,464)		(2,747)
Payment of deferred financing costs and other	0		(57)
Payment of contingent consideration from a business acquisition	0		(2,000)
Proceeds from exercise of common stock options	4,194		0
Net cash used in financing activities	(43,843)		(26,191)
Decrease in cash and cash equivalents	(38,596)		(44,867)
Cash and cash equivalents at beginning of year	44,767		139,390
Cash and cash equivalents at end of period	$	6,171	$	94,523

Supplemental Cash Flow Information:
Increase (decrease) in accrued capital expenditures	$	(2,816)	$	57

Nine Months Ended
(thousands) September 27, 2020 September 29, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 59,237 $ 69,582
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 52,955 46,449
Stock-based compensation expense 11,177 12,039
Amortization of convertible notes debt discount 5,302 5,123
Deferred income taxes (4,057) (794)
Other 3,521 235
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade receivables (78,701) (44,359)
Inventories (12,885) 9,084
Prepaid expenses and other assets 23,787 4,319
Accounts payable, accrued liabilities and other 52,422 20,355
Net cash provided by operating activities 112,758 122,033
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (22,159) (22,227)
Proceeds from sale of property, equipment and other investing activities 117 4,509
Business acquisitions, net of cash acquired (123,382) (22,350)
Net cash used in investing activities (145,424) (40,068)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings 0 7,500
Term debt repayments (2,500) (3,750)
Borrowings on revolver 8,198 648,460
Repayments on revolver (8,198) (905,792)
Stock repurchases under buyback program (20,286) (3,583)
Proceeds from issuance of senior notes 0 300,000
Cash dividends paid to shareholders (17,265) 0
Payments related to vesting of stock-based awards, net of shares tendered for taxes (2,910) (3,359)
Payment of deferred financing costs (58) (7,214)
Proceeds from exercise of stock options 642 6
Payment of contingent consideration from a business acquisition (2,000) (4,416)
Net cash (used in) provided by financing activities (44,377) 27,852
Increase (decrease) in cash and cash equivalents (77,043) 109,817
Cash and cash equivalents at beginning of year 139,390 6,895
Cash and cash equivalents at end of period $ 62,347 $ 116,712

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Third Quarter Ended September 27, 2020
(thousands) Common
Stock Additional
Paid-in-
Capital Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Balance June 28, 2020 $ 173,178 $ 24,534 $ (8,292) $ 303,848 $ 493,268
Net income — — — 37,336 37,336
Dividends declared — — — (5,865) (5,865)
Other comprehensive income, net of tax — — 1,049 — 1,049
Share repurchases under buyback program (647) (94) — (3,995) (4,736)
Shares used to pay taxes on stock grants (53) — — — (53)
  Stock-based compensation expense 4,830 — — — 4,830
Balance September 27, 2020 $ 177,308 $ 24,440 $ (7,243) $ 331,324 $ 525,829
Nine Months Ended September 27, 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 — — — 59,237 59,237
  Dividends declared — — — (17,666) (17,666)
  Other comprehensive loss, net of tax — — (1,545) — (1,545)
  Share repurchases under buyback program (3,962) (574) — (15,750) (20,286)
Issuance of shares upon exercise of common stock options 642 — — — 642
  Shares used to pay taxes on stock grants (3,211) — — — (3,211)
  Stock-based compensation expense 11,177 — — — 11,177
Balance September 27, 2020 $ 177,308 $ 24,440 $ (7,243) $ 331,324 $ 525,829
Third Quarter Ended September 29, 2019
(thousands) Common
Stock Additional
Paid-in-
Capital Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Balance June 30, 2019 $ 166,086 $ 25,124 $ (5,732) $ 273,139 $ 458,617
Net income — — — 21,317 21,317
Other comprehensive loss, net of tax — — (221) — (221)
Stock repurchases under buyback program (674) (104) — (2,805) (3,583)
Shares used to pay taxes on stock grants (59) — — — (59)
  Stock-based compensation expense 3,867 — — — 3,867
Balance September 29, 2019 $ 169,220 $ 25,020 $ (5,953) $ 291,651 $ 479,938

PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.)
Nine Months Ended September 29, 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 — — — 69,582 69,582
Other comprehensive loss, net of tax — — (3,273) — (3,273)
Stock repurchases under buyback program (674) (104) — (2,805) (3,583)
Shares used to pay taxes on stock grants (3,587) — — — (3,587)
Issuance of shares upon exercise of common stock options 6 — — — 6
Stock-based compensation expense 12,039 — — — 12,039
Balance September 29, 2019 $ 169,220 $ 25,020 $ (5,953) $ 291,651 $ 479,938


First Quarter Ended March 28, 2021
(thousands)	Common Stock		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance December 31, 2020	$	180,892	$	24,387	$	(6,052)	$	360,214	$	559,441
Net income	—		—		—		47,513		47,513
Dividends declared	—		—		—		(6,623)		(6,623)
Other comprehensive income, net of tax	—		—		916		—		916

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants	(14,464)		—		—		—		(14,464)
Issuance of shares upon exercise of common stock options	4,194		—		—		—		4,194
Stock-based compensation expense	4,298		—		—		—		4,298
Balance March 28, 2021	$	174,920	$	24,387	$	(5,136)	$	401,104	$	595,275

First Quarter Ended March 29, 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	—		—		—		21,187		21,187
Dividends declared	—		—		—		(5,978)		(5,978)
Other comprehensive loss, net of tax	—		—		(3,043)		—		(3,043)
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	(3,032)		—		—		—		(3,032)

Stock-based compensation expense	4,311		—		—		—		4,311
Balance March 29, 2020	$	170,626	$	24,534	$	(8,741)	$	308,957	$	495,376

See accompanying Notes to Condensed Consolidated Financial Statements

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 ~~September 27, 2020~~March 28, 2021 and December 31, ~~2019,~~2020, and its results of operations ~~for the third quarter~~ and ~~nine months ended September 27, 2020 and September 29, 2019 and its statements of~~ cash flows for the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 and ~~September~~March 29, ~~2019.~~

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 of accumulated other comprehensive income 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, ~~2019~~2020 condensed consolidated ~~statement of financial position~~balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the ~~third~~first quarter ~~and nine months~~ ended ~~September 27, 2020~~March 28, 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 ~~third~~first quarter of fiscal year 2021 ended on March 28, 2021 and the first quarter of fiscal year 2020 ended on ~~September 27, 2020 and the third quarter of fiscal year 2019 ended on September~~March 29, ~~2019.~~2020.

In preparation of Patrick’s condensed consolidated financial statements as of and for the ~~third quarter and nine~~three months ended ~~September 27, 2020,~~March 28, 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 evaluating~~The Company adopted ASU 2019-12 on January 1, 2021 and the ~~impact of this standard~~adoption did not have a material effect on ~~our~~its condensed consolidated financial statements.

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 are 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 ~~EPS~~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. We are 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:


		Third Quarter Ended September 27, 2020							First Quarter Ended March 28, 2021
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Market type:	Market type:							Market type:
Recreational Vehicle	Recreational Vehicle	$	290,326	$	130,845	$	421,171	Recreational Vehicle	$	329,612	$	171,814	$	501,426
Marine								Marine	132,338		4,471		136,809
Manufactured Housing	Manufactured Housing	45,845		61,908		107,753		Manufactured Housing	56,634		64,084		120,718
Industrial	Industrial	69,242		9,090		78,332		Industrial	82,172		9,358		91,530
Marine		88,861		4,590		93,451
Total	Total	$	494,274	$	206,433	$	700,707	Total	$	600,756	$	249,727	$	850,483

Nine Months Ended September 27, 2020
(thousands) Manufacturing Distribution Total
Market type:
Recreational Vehicle $ 656,739 $ 288,778 $ 945,517
Manufactured Housing 127,857 182,579 310,436
Industrial 202,368 25,113 227,481
Marine 219,150 11,400 230,550
Total $ 1,206,114 $ 507,870 $ 1,713,984

Third Quarter Ended September 29, 2019
(thousands) Manufacturing Distribution Total
Market type:
Recreational Vehicle $ 218,706 $ 91,313 $ 310,019
Manufactured Housing 44,159 64,959 109,118��
Industrial 64,541 7,566 72,107
Marine 72,306 2,636 74,942
Total $ 399,712 $ 166,474 $ 566,186
`


		Nine Months Ended September 29, 2019							First Quarter Ended March 29, 2020
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Market type:	Market type:							Market type:
Recreational Vehicle	Recreational Vehicle	$	694,261	$	299,115	$	993,376	Recreational Vehicle	$	226,785	$	93,435	$	320,220
Marine								Marine	75,429		2,622		78,051
Manufactured Housing	Manufactured Housing	131,101		193,975		325,076		Manufactured Housing	45,605		66,764		112,369
Industrial	Industrial	188,292		25,149		213,441		Industrial	71,447		7,145		78,592
Marine		246,017		9,712		255,729
Total	Total	$	1,259,671	$	527,951	$	1,787,622	Total	$	419,266	$	169,966	$	589,232

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.


4.			INVENTORIES

Inventories consist of the following:

(thousands) September 27, 2020 December 31, 2019
Raw materials $ 196,298 $ 162,238
Work in process 15,955 14,272
Finished goods 28,225 28,446
Less: reserve for inventory obsolescence (13,301) (10,123)
Total manufactured goods, net 227,177 194,833
Materials purchased for resale (distribution products) 56,676 60,918
Less: reserve for inventory obsolescence (2,479) (1,881)
Total materials purchased for resale (distribution products), net 54,197 59,037
Total inventories $ 281,374 $ 253,870


(thousands)	March 28, 2021		December 31, 2020
Raw materials	$	174,676	$	157,219
Work in process	23,641		19,282
Finished goods	34,257		37,632
Less: reserve for inventory obsolescence	(9,171)		(8,320)
Total manufactured goods, net	223,403		205,813
Materials purchased for resale (distribution products)	127,214		112,158
Less: reserve for inventory obsolescence	(5,373)		(5,162)
Total materials purchased for resale (distribution products), net	121,841		106,996
Total inventories	$	345,244	$	312,809


5.			GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 by segment are as follows:


(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2019		$	268,402	$	50,947	$	319,349
Balance - December 31, 2020								Balance - December 31, 2020	$	338,045	$	57,755	$	395,800
Acquisitions	Acquisitions	35,087		8,980		44,067		Acquisitions	3,894		0		3,894
Adjustments to preliminary purchase price allocations	Adjustments to preliminary purchase price allocations	(8,708)		1,725		(6,983)		Adjustments to preliminary purchase price allocations	5,688		0		5,688
Balance - September 27, 2020		$	294,781	$	61,652	$	356,433
Balance - March 28, 2021								Balance - March 28, 2021	$	347,627	$	57,755	$	405,382

Intangible assets, net consist of the following as of ~~September 27, 2020~~March 28, 2021 and December 31, ~~2019:~~2020:


(thousands)	(thousands)	September 27, 2020		December 31, 2019		(thousands)	March 28, 2021		December 31, 2020
Customer relationships	Customer relationships	$	394,687	$	357,513	Customer relationships	$	466,458	$	461,754
Non-compete agreements	Non-compete agreements	15,231		16,202		Non-compete agreements	16,282		15,949
Patents	Patents	16,555		16,495		Patents	23,078		23,025
Trademarks	Trademarks	101,426		88,524		Trademarks	115,605		113,796
		527,899		478,734			621,423		614,524
Less: accumulated amortization	Less: accumulated amortization	(146,980)		(121,720)		Less: accumulated amortization	(170,154)		(158,248)
Intangible assets, net	Intangible assets, net	$	380,919	$	357,014	Intangible assets, net	$	451,269	$	456,276

Changes in the carrying value of intangible assets for the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 by segment are as follows:

(thousands) Manufacturing Distribution Total
Balance - December 31, 2019 $ 282,123 $ 74,891 $ 357,014
Acquisitions and other 36,409 13,096 49,505
Amortization (24,313) (5,287) (29,600)
Impairment of intangible assets (1)
(119) (1,831) (1,950)
Adjustments to preliminary purchase price allocations 6,095 (145) 5,950
Balance - September 27, 2020 $ 300,195 $ 80,724 $ 380,919


(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2020	$	373,717	$	82,559	$	456,276
Acquisitions	11,988		0		11,988
Amortization	(9,874)		(2,032)		(11,906)
Adjustments to preliminary purchase price allocations	(5,089)		0		(5,089)
Balance - March 28, 2021	$	370,742	$	80,527	$	451,269

~~(1)~~ Certain immaterial operations permanently ceased activities during the nine months ended September 27, 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 nine months ended September 27, 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 nine months ended September 27, 2020 whether the impact of the COVID-19 pandemic on overall macroeconomic conditions and our results of operations for the third quarter and nine months ended September 27, 2020 indicated that at September 27, 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 September 27, 2020 in relation to the carrying amount of shareholders’ equity at September 27, 2020 and to fair values determined during our 2019 impairment tests; (iii) the results of our operations during the third quarter and nine months ended September 27, 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 concluded that no triggering events had occurred which would indicate the fair values of our goodwill and trademarks may be less than the carrying values at September 27, 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, the outcome of our 2020 impairment tests, which we will perform in the fourth quarter of 2020, could result in an impairment of our goodwill or our trademarks.


6.			ACQUISITIONS

General

The Company completed ~~6 acquisitions in the third quarter of 2020 and completed 9~~4 acquisitions in the first ~~nine months~~quarter of ~~2020~~2021 (the ~~"2020~~"2021 Acquisitions"). For the ~~third~~first quarter ~~and nine months~~ ended ~~September 27, 2020,~~March 28, 2021, net sales included in the Company's condensed consolidated ~~statements~~statement of income related to the ~~2020~~2021 Acquisitions were ~~$19.6~~$5.4 million and ~~$23.3 million, respectively. Operating~~operating income ~~related to the 2020 Acquisitions for the third quarter and nine months ended September 27, 2020~~ was ~~approximately $2.1 million and $2.2 million, respectively.~~immaterial. Acquisition-related costs ~~incurred~~associated with the businesses acquired in the first ~~nine months~~quarter of ~~2020~~2021 were immaterial. Assets acquired and liabilities assumed in the individual acquisitions were recorded 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 liabilities within the one year measurement period. The Company completed 23 acquisitions in the first ~~nine months~~quarter of ~~2019. For the third quarter and first nine months ended September 29, 2019, revenue~~2020. Net sales and operating income included in the Company's condensed consolidated ~~statements~~statement of income ~~were immaterial. Acquisition-related costs incurred~~related to the 2020 Acquisitions in the first ~~nine months of 2019~~quarter ended March 29, 2020 were immaterial.

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, revenue impact, market share growth and net income.

In connection with certain acquisitions, if certain financial targets for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company records a liability for the fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition. As of ~~September 27,~~March 28, 2021, the aggregate fair value of the estimated contingent consideration payments was $6.9 million, $3.3 million of which is included in the line item "Accrued liabilities" and $3.6 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 ~~$8.0~~$6.9 million, $6.1 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 ~~$14.8~~$14.5 million in the aggregate. In the first ~~nine months~~quarter of ~~2020,~~2021, the Company made 0 cash payments ~~of $2.0 million~~ related to contingent consideration ~~arrangements, recording a corresponding reduction to accrued~~ liabilities.

~~2020~~2021 Acquisitions

~~Acquisitions~~The Company completed ~~in the first nine months of 2020 include~~ the following previously announced ~~acquisitions:~~acquisition in the three months ended March 28, 2021:


Company	Segment	Description
Sea-Dog Corporation & Sea-Lect Plastics (collectively, "Sea-Dog")	Distribution & Manufacturing	Distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailer, and manufacturers Manufacturer that provides plastic injection molding, design, product development and expert tooling to companies and government entities

Inclusive of 3 immaterial acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $29.5 million. 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 first quarter ended March 28, 2021 related to the 2021 Acquisitions were immaterial.

2020 Acquisitions

The Company completed the following 7 previously announced acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"):


Company	Segment	Description
Maple City Woodworking Corporation	Manufacturing	Manufacturer of hardwood cabinet doors and fascia for the ~~recreational vehicle ("RV")~~RV market based in Goshen, Indiana
SEI Manufacturing, Inc.	Manufacturing	Manufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana
Inland Plywood Company	Manufacturing	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 RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida
Synergy RV Transport	Distribution	Transportation and logistics service provider primarily for original equipment manufacturers ("OEMs") and dealers in the RV market located in Goshen, Indiana
Front Range Stone	Manufacturing	Fabricator 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 Corporation	Manufacturing	Designer, 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, LLC	Manufacturing	Manufacturer 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 ~~$124~~$306.4 million, plus contingent consideration over a ~~maximum of a one-year~~one to three-year period based on future performance in connection with certain acquisitions. One acquisition in 2020 accounted for $129.7 million of cash consideration, $49.3 million of fixed assets, $49.1 million of intangible assets and $32.6 million of goodwill. The ~~preliminary~~measurement periods for Maple City Woodworking Corporation and SEI Manufacturing, Inc. have closed. Preliminary purchase price allocations on the remainder are ~~subject to~~substantially complete, pending valuation activities being finalized ~~and thus all~~on fixed assets in connection with certain acquisitions. 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 ~~third~~first quarter ~~and first nine months of 2020~~ended March 28, 2021 related to the 2020 Acquisitions were ~~immaterial. The 2020 Acquisitions are included in the Manufacturing segment except for Synergy RV Transport, which is included in the Distribution segment.~~

~~2019 Acquisitions~~

The Company completed 4 acquisitions in 2019 (the "2019 Acquisitions"), including the previously announced acquisitions of Topline Counters, LLC ("Topline Counters"), a Sumner, Washington-based designerimmaterial and ~~manufacturer of~~

kitchen and bathroom countertops for residential 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 million, plus contingent consideration over a one-year period based on future performance in connection with the acquisition of G.G. Schmitt. Valuation activities and purchase accounting adjustments have been finalized on all 2019 Acquisitions, except for the finalization of tangible assets for Topline Counters. Changes to preliminary purchase accounting estimates recorded in the third quarter and first nine months of 2020 relatedrelate primarily to the ~~2019 Acquisitions were immaterial. The 2019 Acquisitions are included in the Manufacturing segment.~~valuation of intangible assets.

The following table summarizes the fair values of the ~~consideration paid,~~ assets acquired and the liabilities assumed as of the date of acquisition for the ~~2020~~2021 Acquisitions and the ~~2019~~2020 Acquisitions:


(thousands)	2021 Acquisitions		2020 Acquisitions
Consideration
Cash, net of cash acquired	$	29,539	$	306,353
Working capital holdback and other, net(1)	543		(128)
Contingent consideration(2)	0		4,763
Total consideration	30,082		310,988

Assets Acquired
Trade receivables	$	3,739	$	15,302
Inventories	8,685		25,353
Prepaid expenses & other	258		725
Property, plant & equipment	4,118		66,525
Operating lease right-of-use assets	3,961		20,029
Identifiable intangible assets	11,935		130,981
Liabilities Assumed
Current portion of operating lease obligations	(1,068)		(2,721)
Accounts payable & accrued liabilities	(2,547)		(12,402)
Operating lease obligations	(2,893)		(17,308)
Deferred tax liabilities	0		(4,322)
Total fair value of net assets acquired	26,188		222,162
Goodwill(3)	3,894		88,826
	$	30,082	$	310,988

(1) Certain acquisitions contain working capital holdbacks which are typically settled in a 90-day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of March 28, 2021.

(thousands) 2020 Acquisitions 2019 Acquisitions
Consideration
Cash, net of cash acquired $ 124,013 $ 53,307
Contingent consideration(1)
1,813 1,160
Total consideration 125,826 54,467
Assets Acquired
Trade receivables $ 9,785 $ 9,692
Inventories 16,073 5,803
Prepaid expenses & other 502 20
Property, plant & equipment 15,633 6,567
Operating lease right-of-use assets 6,222 5,653
Identifiable intangible assets 49,445 23,715
Liabilities Assumed
Accounts payable & accrued liabilities (6,264) (6,514)
Operating lease obligations (6,222) (5,653)
Deferred tax liabilities, net (3,415) (1,922)
Total fair value of net assets acquired 81,759 37,361
Goodwill(2)
44,067 17,106
$ 125,826 $ 54,467

~~(1)~~(2) These amounts reflect the ~~preliminary estimated liability pertaining to the~~acquisition date fair value of contingent consideration based on future performance relating to certain acquisitions.

~~(2)~~(3) Goodwill is tax-deductible for the 2021 Acquisitions and the 2020 Acquisitions, except Front Range Stone (approximately ~~$14.1~~$10.1 million)~~, and for the 2019 Acquisitions, except GG Schmitt (approximately $5.4 million)~~. For acquisitions, the excess of purchase price consideration over the fair value of net assets acquired is recorded as goodwill, which generally represents the combined value of the Company's existing purchasing, manufacturing, sales, industry relationships, and systems resources with the organizational talent and expertise of the acquired companies' respective management teams to maximize efficiencies, revenue impact, market share growth, and net income.

We estimate the value of 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.

1513

The following table presents our estimates of identifiable ~~intangibles~~intangible assets for the ~~2020~~2021 Acquisitions and the ~~2019~~2020 Acquisitions:


			(thousands)
		Estimated Useful Life (in years)	2020 Acquisitions		2019 Acquisitions
(thousands, except year info)							(thousands, except year info)	Estimated Useful Life (in years)	2021 Acquisitions		2020 Acquisitions
Customer relationships	Customer relationships	10	$	37,723	$	18,112	Customer relationships	10	$	9,597	$	99,897
Non-compete agreements	Non-compete agreements	5	492		150		Non-compete agreements	5	393		1,150
Patents							Patents	10	0		6,470
Trademarks	Trademarks	Indefinite	11,230		5,453		Trademarks	Indefinite	1,945		23,464
			$	49,445	$	23,715			$	11,935	$	130,981

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 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 ~~third~~first quarter ended March 28, 2021 and ~~nine months ended September 27,~~March 29, 2020 ~~and September 29, 2019~~ assumes the ~~2020~~2021 Acquisitions and the ~~2019~~2020 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 ~~2020~~2021 Acquisitions and ~~2019~~2020 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 ~~$0.5~~$0.1 million and ~~$2.2~~$3.0 million for the ~~third~~first quarter ended March 28, 2021 and ~~nine months~~the first quarter ended ~~September 27,~~March 29, 2020, ~~respectively, and $1.4 million and~~ ~~$4.0 million~~ ~~for the third quarter and nine months ended September 29, 2019,~~ respectively.

Third Quarter Ended Nine Months Ended
(thousands except per share data) September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Revenue $ 719,953 $ 621,936 $ 1,798,914 $ 1,961,263
Net income 38,412 24,914 65,392 80,077
Basic net income per common share 1.69 1.08 2.87 3.47
Diluted net income per common share 1.66 1.07 2.83 3.44


	First Quarter Ended
(thousands except per share data)	March 28, 2021		March 29, 2020
Revenue	$	857,009	$	656,107
Net income	47,815		24,136
Basic net income per common share	2.10		1.05
Diluted net income per common share	2.05		1.04

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 ~~$4.9 million and $11.2~~approximately $4.3 million for each of the ~~third quarter~~first quarters ended March 28, 2021 and ~~nine months ended September 27,~~March 29, 2020, ~~respectively,~~ for its stock-based compensation plans in the condensed consolidated statements of income. Stock-based compensation expense for the nine months ended September 27, 2020 includes a reduction of expense due to certain forfeitures and adjustments in the amount of $2.3 million. For the third quarter and nine months ended September 29, 2019, the Company recorded stock-based compensation expense of $3.8 million and $12.0 million, respectively.

1614

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first ~~nine months~~quarter of ~~2020~~2021 totaling ~~275,740~~218,254 shares in the aggregate at an average fair value of ~~$53.78 per share~~$72.63 at grant date for a total fair value at grant date of ~~$14.8~~$15.9 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 ~~September 27, 2020,~~March 28, 2021, there was approximately ~~$25.5~~$33.9 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 ~~17.4~~22.8 months.


8.			NET INCOME PER COMMON SHARE

Net income per common share calculated for the ~~third~~first quarter of 2021 and ~~nine months of~~ 2020 ~~and 2019~~ is as follows:

Third Quarter Ended Nine Months Ended
(thousands except per share data) September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Net income for basic and diluted per share calculation $ 37,336 $ 21,317 $ 59,237 $ 69,582
Weighted average common shares outstanding - basic 22,674 23,076 22,784 23,073
Effect of potentially dilutive securities 398 197 304 206
Weighted average common shares outstanding - diluted 23,072 23,273 23,088 23,279
Basic net income per common share $ 1.65 $ 0.92 $ 2.60 $ 3.02
Diluted net income per common share $ 1.62 $ 0.92 $ 2.57 $ 2.99


	First Quarter Ended
(thousands except per share data)	March 28, 2021		March 29, 2020
Net income for basic and diluted per share calculation	$	47,513	$	21,187
Weighted average common shares outstanding - basic	22,737		23,016
Effect of potentially dilutive securities	549		251
Weighted average common shares outstanding - diluted	23,286		23,267
Basic net income per common share	$	2.09	$	0.92
Diluted net income per common share	$	2.04	$	0.91

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 ~~September 27, 2020~~March 28, 2021 and December 31, ~~2019~~2020 is as follows:

(thousands) September 27, 2020 December 31, 2019
Long-term debt:
1.0% convertible notes due 2023 $ 172,500 $ 172,500
Term loan due 2024 95,000 97,500
Revolver due 2024 135,000 135,000
7.5% senior notes due 2027 300,000 300,000
Total long-term debt 702,500 705,000
Less: convertible notes debt discount, net (17,958) (23,260)
Less: term loan deferred financing costs, net (463) (542)
Less: senior notes deferred financing costs, net (5,227) (5,844)
Less: current maturities of long-term debt (5,000) (5,000)
Total long-term debt, less current maturities, net $ 673,852 $ 670,354


(thousands)	March 28, 2021		December 31, 2020
Long-term debt:
1.0% convertible notes due 2023	$	172,500	$	172,500
Term loan due 2024	92,500		92,500
Revolver due 2024	248,000		275,000
7.5% senior notes due 2027	300,000		300,000
Total long-term debt	813,000		840,000
Less: convertible notes debt discount, net	(14,304)		(16,072)
Less: term loan deferred financing costs, net	(404)		(434)
Less: senior notes deferred financing costs, net	(4,943)		(5,087)
Less: current maturities of long-term debt	(7,500)		(7,500)
Total long-term debt, less current maturities, net	$	785,849	$	810,907

There were no material changes to any of our debt arrangements during the ~~third~~ quarter ~~and nine months~~ ended ~~September 27, 2020.~~March 28, 2021. See Note 17 for a description of changes to our debt arrangements subsequent to March 28, 2021.

Interest rates for borrowings under the revolver and term loan are the prime rate or LIBOR plus a margin. At ~~September 27, 2020,~~March 28, 2021, all of the Company's borrowings under the revolver and term loan were under the LIBOR-based option. The interest rate for incremental borrowings at ~~September 27, 2020~~March 28, 2021 was LIBOR plus 1.5% (or ~~1.69%~~1.63%) for the LIBOR-based option. The fee payable on committed but unused portions of the revolver was 0.20% at ~~September 27, 2020.~~

March 28, 2021.

Total cash interest paid ~~was $3.2 million and $6.9 million for the third quarter of 2020 and 2019, respectively, and $21.4 million and $19.7 million~~ for the first ~~nine months~~quarter of 2021 and 2020 was $3.3 million and ~~2019,~~$2.6 million, respectively.


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 ~~September 27, 2020,~~March 28, 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 position~~balance sheets (in thousands):

Fair value of derivative instruments
Derivatives accounted for as cash flow hedges Balance sheet location September 27, 2020 December 31, 2019
Interest rate swaps Other long-term liabilities $ 7,964 $ 5,868


	Fair value of derivative instruments
Derivatives accounted for as cash flow hedges	Balance sheet location	March 28, 2021		December 31, 2020
Interest rate swaps	Accrued liabilities	$	5,258	$	0
Interest rate swaps	Other 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 ~~which~~and 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.


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 ~~third quarter and nine~~three months ended ~~September 27,~~March 28, 2021 and March 29, 2020 ~~and September 29, 2019~~ was as follows:

Third Quarter Ended September 27, 2020
(thousands) Cash Flow Hedges Other Foreign Currency Items Total
Balance at June 28, 2020 $ (6,916) $ (1,270) $ (106) $ (8,292)
Other comprehensive income (net of tax of $340, $0 and $0) 989 0 60 1,049
Balance at September 27, 2020 $ (5,927) $ (1,270) $ (46) $ (7,243)


First Quarter Ended March 28, 2021
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at December 31, 2020	$	(4,889)	$	(1,263)	$	100	$	(6,052)
Other comprehensive loss before reclassifications, net of tax	(96)		0		(59)		(155)
Amounts reclassified from accumulated other comprehensive loss, net of tax	1,071		0		0		1,071
Net current period other comprehensive income (loss)	975		0		(59)		916
Balance at March 28, 2021	$	(3,914)	$	(1,263)	$	41	$	(5,136)

Nine Months Ended September 27, 2020
(thousands) Cash Flow Hedges Other Foreign Currency Items Total
Balance at December 31, 2019 $ (4,374) $ (1,270) $ (54) $ (5,698)
Other comprehensive income (loss) (net of tax benefit of $542, $0 and $0) (1,553) 0 8 (1,545)
Balance at September 27, 2020 $ (5,927) $ (1,270) $ (46) $ (7,243)

Third Quarter Ended September 29, 2019
(thousands) Cash Flow Hedges Other Foreign Currency Items Total
Balance at June 30, 2019 $ (4,958) $ (675) $ (99) $ (5,732)
Other comprehensive income (loss) (net of tax benefit of $83, $0 and $0) (240) 0 19 (221)
Balance at September 29, 2019 $ (5,198) $ (675) $ (80) $ (5,953)

Nine Months Ended September 29, 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 benefit of $1,098, $0 and $0) (3,225) 0 (48) (3,273)
Balance at September 29, 2019 $ (5,198) $ (675) $ (80) $ (5,953)

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


First Quarter Ended March 29, 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 before reclassifications, net of tax	(4,077)		0		(37)		(4,114)
Amounts reclassified from accumulated other comprehensive loss, net of tax	1,071		0		0		1,071
Net current period other comprehensive loss	(3,006)		0		(37)		(3,043)
Balance at March 29, 2020	$	(7,380)	$	(1,270)	$	(91)	$	(8,741)


12.			LEASES

Lease expense, supplemental cash flow information, and other information related to leases were as follows:
Third Quarter Ended
(thousands) September 27, 2020 September 29, 2019
Operating lease cost $ 8,525 $ 7,848
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 8,317 $ 6,946
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 17,091 $ 5,522


		Nine Months Ended					First Quarter Ended
(thousands)	(thousands)	September 27, 2020		September 29, 2019		(thousands)	March 28, 2021		March 29, 2020
Operating lease cost	Operating lease cost	$	25,093	$	23,536	Operating lease cost	$	9,585	$	8,176

Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	Operating cash flows for operating leases	$	24,680	$	20,545	Operating cash flows for operating leases	$	9,387	$	8,084

Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	34,993	$	14,767	Operating leases	$	15,185	$	12,428

Balance sheet information related to leases was as follows:


(thousands, except lease term and discount rate)	(thousands, except lease term and discount rate)	September 27, 2020		December 31, 2019		(thousands, except lease term and discount rate)	March 28, 2021		December 31, 2020
Assets	Assets					Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	105,410	$	93,546	Operating lease right-of-use assets	$	124,384	$	117,816
Liabilities	Liabilities					Liabilities
Operating lease liabilities, current portion	Operating lease liabilities, current portion	$	29,565	$	27,694	Operating lease liabilities, current portion	$	32,513	$	30,901
Long-term operating lease liabilities	Long-term operating lease liabilities	76,873		66,467		Long-term operating lease liabilities	93,327		88,175
Total lease liabilities	Total lease liabilities	$	106,438	$	94,161	Total lease liabilities	$	125,840	$	119,076

Weighted average remaining lease term, operating leases (in years) 4.2 4.2
Weighted average discount rate, operating leases 3.9 % 3.7 %


Weighted average remaining lease term, operating leases (in years)	5.1		5.3
Weighted average discount rate, operating leases	4.0	%	4.1	%

2017

Maturities of lease liabilities were as follows at ~~September 27, 2020:~~March 28, 2021:


(thousands)	(thousands)			(thousands)
2020 (excluding the nine months ended September 27, 2020)		$	8,561
2021		31,924
2021 (excluding the three months ended March 28, 2021)				2021 (excluding the three months ended March 28, 2021)	$	27,792
2022	2022	26,328		2022	33,939
2023	2023	20,593		2023	27,840
2024	2024	14,552		2024	20,307
2025				2025	12,054
Thereafter	Thereafter	14,283		Thereafter	18,862
Total lease payments	Total lease payments	116,241		Total lease payments	140,794
Less imputed interest	Less imputed interest	(9,803)		Less imputed interest	(14,954)
Total	Total	$	106,438	Total	$	125,840

~~Leases~~As of March 28, 2021, outstanding leases have remaining lease terms ofranging from one year to ~~ten~~18 years.


13.			FAIR VALUE MEASUREMENTS

The ~~carrying amounts~~following table presents fair values of ~~cash equivalents, representing government~~certain 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 $31.0 million and $132.6 millionliabilities at ~~September 27, 2020~~March 28, 2021 and December 31, ~~2019, respectively.~~2020:


	March 28, 2021					December 31, 2020
(in millions)	Level 1	Level 2		Level 3		Level 1	Level 2		Level 3

Senior Note(1)	0	$	351.6	0		0	$	329.0	0
Convertible Note(1)	0	188.3		0		0	180.0		0
Interest Rate Swaps(2)	0	5.3		0		0	6.6		0
Contingent consideration(3)	0	0		$	6.9	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 March 28, 2021 and December 31, 2020 using the interest rate method as described in Note 9.

(2) 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, and 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 $326.1 million and $320.3 million at September 27, 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 September 27, 2020~~ and ~~December 31, 2019 based upon terms and conditions available to the Company at those dates~~is 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 $166.9 million and $162.5 million as of September 27, 2020 and December 31, 2019, respectively.Note 6.


14.			INCOME TAXES

The effective tax rate in the ~~third~~first quarter of 2021 and 2020 was 17.1% and ~~2019 was 24.3% and 26.0%, respectively, and the effective tax rate for the comparable nine month periods was 25.4% and 24.6%~~26.4%, respectively. The effective tax rate for the ~~third~~first quarter of 2020 reflects the impact of certain federal and state income tax benefits and the first nine 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 nine 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~~The Company made 0 income ~~taxes, net of refunds, was $1.8 million and $1.6 million for the third quarter and nine months of 2020, respectively, and $7.4 million and $30.0 million~~tax payments in the ~~third quarter~~first quarters of 2021 and ~~nine months of 2019, respectively.~~2020.


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.


Third Quarter Ended September 27, 2020
First Quarter Ended March 28, 2021								First Quarter Ended March 28, 2021
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Net outside sales	Net outside sales	$	494,274	$	206,433	$	700,707	Net outside sales	$	600,756	$	249,727	$	850,483
Intersegment sales	Intersegment sales	12,004		1,640		13,644		Intersegment sales	13,808		1,403		15,211
Total sales	Total sales	506,278		208,073		714,351		Total sales	614,564		251,130		865,694
Operating income	Operating income	63,312		16,444		79,756		Operating income	78,429		21,175		99,604

Third Quarter Ended September 29, 2019
(thousands) Manufacturing Distribution Total
Net outside sales $ 399,712 $ 166,474 $ 566,186
Intersegment sales 8,102 1,078 9,180
Total sales 407,814 167,552 575,366
Operating income 42,353 9,041 51,394

Nine Months Ended September 27, 2020
(thousands) Manufacturing Distribution Total
Net outside sales $ 1,206,114 $ 507,870 $ 1,713,984
Intersegment sales 24,691 4,025 28,716
Total sales 1,230,805 511,895 1,742,700
Operating income 131,426 33,350 164,776

Nine Months Ended September 29, 2019
(thousands) Manufacturing Distribution Total
Net outside sales $ 1,259,671 $ 527,951 $ 1,787,622
Intersegment sales 24,153 3,361 27,514
Total sales 1,283,824 531,312 1,815,136
Operating income 135,577 28,132 163,709


First Quarter Ended March 29, 2020
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	419,266	$	169,966	$	589,232
Intersegment sales	7,573		1,300		8,873
Total sales	426,839		171,266		598,105
Operating income	45,704		9,968		55,672

The following table presents a reconciliation of segment operating income to consolidated operating income:

Third Quarter Ended Nine Months Ended
(thousands) September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Operating income for reportable segments $ 79,756 $ 51,394 $ 164,776 $ 163,709
Unallocated corporate expenses (9,706) (4,793) (23,962) (18,796)
Amortization (10,221) (9,191) (29,600) (26,448)
Consolidated operating income $ 59,829 $ 37,410 $ 111,214 $ 118,465


	First Quarter Ended
(thousands)	March 28, 2021		March 29, 2020
Operating income for reportable segments	$	99,604	$	55,672
Unallocated corporate expenses	(19,217)		(6,792)
Amortization	(11,906)		(9,601)
Consolidated operating income	$	68,481	$	39,279

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.


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 ~~$38.8~~$36.0 million remains ~~available~~ in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of ~~September 27, 2020.~~March 28, 2021. The Company did 0t repurchase any of its common stock in the first quarter of 2021. In the ~~third~~first quarter ofended March 29, 2020, the Company repurchased ~~88,950~~456,155 shares of its common stock at an average price of ~~$53.24 for~~$34.09 per share at an aggregate cost of ~~approximately $4.7~~$15.6 million.


17.			SUBSEQUENT EVENTS

In April 2021, we completed the acquisition of Hyperform Inc., a manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine OEM market and aftermarket. Hyperform also serves the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names (collectively, “SeaDek”). SeaDek operates out of 2 manufacturing facilities located in Rockledge, Florida and in Cocoa, Florida.

In April 2021, we completed the acquisition of Alpha Systems, LLC, a manufacturer and distributor of component products and accessories for the recreational vehicle, marine, manufactured housing and industrial end markets. Products include adhesives, sealants, rubber roofing, roto/blow molding, injection molding, flooring, insulation,

shutters, skylights, and various other products and accessories. Alpha Systems LLC operates out of 9 manufacturing and distribution facilities located in Elkhart, Indiana.

On April 20, 2021, we completed the issuance of $350 million aggregate principal amount of senior notes due 2029 in a private placement exempt from registration under the Securities Act of 1933. The notes, which were priced 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 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 maturity date for borrowings under the new senior secured credit facility was extended to April 2026. The new senior secured credit facility replaced the Company’s previously existing credit facility that was due to mature in September 2024. In addition to being used to repay a portion of existing borrowings, the net proceeds resulting from these transactions were used for general corporate purposes, including in connection with the acquisitions completed subsequent to the end of the first ~~nine months of 2020, the Company repurchased 545,105 shares of its common stock at an average price of $37.22 per share for an aggregate cost of approximately $20.3 million. During the third~~ quarter, and ~~first nine months of 2019,~~will support the ~~Company repurchased 98,201 shares at an average price of $36.50 per share for an aggregate cost of approximately $3.6 million.~~

Company's strategic objectives and other general business needs.

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 3127 of this Report. The Company undertakes no obligation to update these forward-looking statements.

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

Our four primary end markets each experienced sharp recoveries in the third quarter of 2020 following the production disruptions related to the COVID-19 pandemic in the second quarter of 2020. In aggregate, we achieved our highest quarterly sales in the Company's history in the third quarter of 2020, with revenue from the RV, marine and industrial end markets increasing in the third quarter of 2020 compared to the prior year. RV and marine original equipment manufacturers ("OEMs") experienced a strong increase in dealer demand in the third quarter of 2020, when compared to the prior year quarter, driven by increases in RV and marine retail sales against a background of low RV and marine dealer inventories. Our industrial end market benefited in the third quarter of 2020 from increases in housing starts and an increase in home improvement activity. Our MH end market recovered in the third quarter of 2020 from COVID-19 production disruptions in the second quarter of 2020, and OEM demand in this end market is strong despite short-term OEM labor and supply constraints experienced in the third quarter of 2020. In addition, our team members are currently working full production schedules, having adopted CDC, state, and local best practice safety protocols.

~~Third~~First Quarter ~~and Nine Months 2020~~2021 Financial Overview

Recreational Vehicle ("RV") Industry

The RV industry is our ~~largest~~primary market and comprised ~~60%~~59% and 55% of the Company’s sales in the ~~third~~first quarter ended ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019, respectively, and 55% and 56% for the comparative 2020 and 2019 nine month periods.~~respectively. Sales to the RV industry increased ~~36% in the third quarter of 2020 and decreased 5%~~57% in the first ~~nine months~~quarter of ~~2020,~~2021 compared to the prior year ~~periods.~~

quarter.

According to the Recreation Vehicle Industry Association ("RVIA"), wholesale shipments totaled ~~124,033 units~~ ~~in the third quarter of 2020, increasing 33% compared to 93,357~~approximately 148,500 units in the ~~third~~first quarter of ~~2019. Towable and motorized wholesale unit shipments increased 37% and 5%, respectively, for~~2021, an increase of 48% compared to approximately 100,400 units in the ~~third~~first quarter of ~~2020 compared to the prior year quarter. Wholesale unit shipments for the first nine months of 2020 decreased 3%, totaling~~ ~~300,100~~ ~~units compared to 309,938 units in the~~

prior year period. Towable and motorized wholesale unit shipments decreased 1% and 20%, respectively, for the first nine months of 2020 compared to the prior year period. Retail unit sales are estimated to have increased between 25%-30% and between 4%-6% during the third quarter and first nine months of 2020, respectively.2020. The increase in wholesale ~~and retail RV~~unit shipments in the ~~third~~first quarter of ~~2020 was~~2021 is attributed to an increase in RV dealer demand for RV units. This increase in dealer demand is correlated with consumer demand for RV units, which we believe is in part correlated with changes in consumer recreation patterns, which include an increased interest in outdoor recreation. According to 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 ~~RV industry against a background~~supply-demand dynamics of historically low dealer ~~inventory. The decrease~~inventory levels, combined with strong retail consumer demand, have resulted in ~~wholesale shipments~~positive momentum in our RV end market. We estimate RV retail unit sales increased 30-35% in the first ~~nine months~~quarter of ~~2020 is largely attributed~~2021 compared to ~~COVID-19 market disruptions. The increase in retail unit sales for~~ the first nine months of 2020 is largely due to the increase in consumer demand in the RV industry, partially offset by COVID-19 market disruptions. Based on our estimates, RV dealer inventories at the end of the third quarter of ~~2020 were at their lowest level since 2014.~~2020.

Marine Industry

Sales to the marine industry, which represented approximately ~~14%~~16% and 13% of the Company's consolidated net sales in the ~~third~~first quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, increased ~~25% in the third quarter of 2020~~75% compared to the prior year quarter. ~~Sales~~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

14% for the first quarter 2021 compared to the same period in 2020. At the same time, marine ~~industry, representing 14% of~~retail powerboat unit sales increased an estimated 30-35% in the first ~~nine months~~quarter of ~~2020 and 2019, decreased 10% in the 2020 period~~2021 compared to the ~~prior year period.~~

~~For the third~~first quarter of 2020, ~~overall~~benefiting from increased demand for powerboats, resulting in marine dealer inventory levels that we believe are at their lowest since 2014 as retail sales continue outpacing marine wholesale unit shipments in the powerboat sector, which is the Company's primary marine market, decreased an estimated 4%, with aluminum fishing sales decreasing an estimated 7%; pontoon sales decreasing an estimated 2%; fiberglass sales decreasing an estimated 4% and ski and wake sales decreasing an estimated 2%. The decrease in wholesale marine shipments in the thirdfirst quarter of 2020 was attributed to marine OEM capacity constraints that were the result of an rapid transition from production shutdowns related to the COVID-19 pandemic in the late first quarter and early second quarter of 2020 to production acceleration in response to a sharp increase in consumer demand in the third quarter of 2020. For the first nine months of 2020, overall marine wholesale unit shipments in the powerboat sector decreased an estimated 19%, with aluminum fishing sales decreasing an estimated 11%; pontoon sales decreasing an estimated 25%; fiberglass sales decreasing an estimated 22% and ski and wake sales decreasing an estimated 20%. The decrease in wholesale unit shipments during the first nine months of 2020 is primarily attributed to temporary OEM production shutdowns during the late first quarter and early second quarter of 2020 in addition to OEM capacity constraints in the third quarter of 2020, discussed above.

2021.

Manufactured Housing ("MH") Industry

Sales to the MH industry, which represented ~~15%~~14% and 19% of the Company’s sales in the ~~third~~first quarter of 2021 and 2020, ~~and 2019,~~ respectively, ~~decreased 1%~~increased 7% in the ~~third~~first quarter of ~~2020~~2021 compared to the ~~third~~first quarter of ~~2019. MH sales represented 18% of the Company's sales for the first nine months of 2020 and 2019 and decreased 5% in the first nine months of 2020 compared to the prior year period.~~2020. Based on industry data from the Manufactured Housing Institute, MH wholesale unit shipments ~~decreased by approximately~~ 2%increased 5% in the ~~third~~first quarter of ~~2020~~2021 compared to the prior year ~~quarter and decreased~~ 2% for the first nine months of 2020 compared to the prior year period. MH wholesale unit shipments were impacted by OEM labor and supply constraints in the third quarter of 2020 and temporary OEM plant shutdowns in the first nine months of 2020 related to the COVID-19 pandemic.

quarter.

Industrial Market

The industrial market is comprised primarily of the kitchen cabinet industry, hospitality market, retail and commercial fixtures market, office and household furniture market and regional distributors. Sales to this market represented 11% and 13% of our sales in the ~~third~~first quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, and increased 9%17% in the ~~third~~first quarter of ~~2020~~2021 compared to the prior year quarter. Sales to the industrial market represented 13% and 12% of our sales for the first nine months of 2020 and 2019, respectively, and increased 7% in the first nine months of 2020 compared to the prior year period. Overall, our revenues in these markets are focused on the residential housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that approximately 60% of our industrial business is directly tied to the residential housing market, with the remaining 40% directly tied to the non-residential and commercial markets.

~~Combined~~According to the U.S. Census Bureau, combined new housing starts increased ~~11%~~10% in the ~~third~~first quarter of ~~2020~~2021 compared to the prior year quarter, with single family housing starts increasing ~~17%~~20% and multifamily residential starts decreasing ~~1%. For~~7% for the ~~first nine months of 2020, combined new housing starts increased 5% compared to the prior year period, with single family housing starts increasing 6% and multifamily residential starts increasing 4%.~~same period. 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 ~~nine~~six months.

REVIEW OF CONSOLIDATED OPERATING RESULTS

~~Third~~First Quarter ~~and Nine Months~~ Ended ~~September 27, 2020~~March 28, 2021 Compared to ~~2019~~First Quarter Ended March 29, 2020

The following table sets forth the percentage relationship to net sales of certain items on the Company’s Condensed Consolidated Statements of Income.

Third Quarter Ended Nine Months Ended
September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 80.9 81.6 81.5 81.9
Gross profit 19.1 18.4 18.5 18.1
Warehouse and delivery 3.6 4.2 4.1 4.2
Selling, general and administrative 5.4 6.0 6.2 5.8
Amortization of intangible assets 1.5 1.6 1.7 1.5
Operating income 8.5 6.6 6.5 6.6
Interest expense, net 1.5 1.5 1.9 1.5
Income taxes 1.7 1.3 1.2 1.3
Net income 5.3 3.8 3.5 3.9


	First Quarter Ended
($ in thousands)	March 28, 2021				March 29, 2020				Change Amount		% Change
Net sales	$	850,483	100.0	%	$	589,232	100.0	%	$	261,251	44.3	%
Cost of goods sold	688,951		81.0		479,751		81.4		209,200		43.6	%
Gross profit	161,532		19.0		109,481		18.6		52,051		47.5	%
Warehouse and delivery expenses	29,913		3.5		24,732		4.2		5,181		20.9	%
Selling, general and administrative expenses	51,232		6.0		35,869		6.1		15,363		42.8	%
Amortization of intangible assets	11,906		1.4		9,601		1.6		2,305		24.0	%
Operating income	68,481		8.1		39,279		6.7		29,202		74.3	%
Interest expense, net	11,179		1.3		10,492		1.8		687		6.5	%
Income taxes	9,789		1.2		7,600		1.3		2,189		28.8	%
Net income	$	47,513	5.6		$	21,187	3.6		$	26,326	124.3	%

Net Sales. Net sales in the ~~third~~first quarter of 2021 increased $261.3 million, or 44%, to $850.5 million from $589.2 million in the first quarter of 2020. Net sales in the first quarter of 2020 ~~increased $134.5 million, or 24%, to $700.7 million from $566.2 million~~reflect COVID-19-related production shutdowns in our end markets in the ~~third quarter~~second half of ~~2019.~~March 2020. The consolidated net sales increase in the ~~third~~first quarter of ~~2020~~2021 was primarily attributed to sales increases ~~in three of our end~~to the RV and marine markets. The Company's RV

market sales increased ~~36%~~57%, marine market sales increased ~~25%~~75%, industrial market sales increased 9%16% and MH ~~market sales decreased 1% when compared to the prior year quarter.~~

Net sales in the first nine months of 2020 decreased $73.6 million, or 4%, to $1,714.0 million from $1,787.6 million in the first nine months of 2019. The consolidated net sales decrease in the first nine months of 2020 was attributed to sales decreases in three of our end markets. The Company's RV market sales decreased 5%, marine market sales decreased 10% and MH market sales decreased 5% while industrial market sales increased 7% when compared to the prior year ~~period.~~

During the nine months ended September 27, 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, which primarily affected our end marketsquarter. Net sales in the ~~second~~first quarter of ~~2020.~~

~~Revenue~~2021 attributable to acquisitions completed in ~~2020 was $19.6~~that quarter were approximately $5.4 million, and ~~$23.3 million for~~net sales in the ~~third~~first quarter ~~and first nine months~~ of 2020 ~~respectively. Revenue~~ attributable to acquisitions completed in ~~the first nine months of 2019 was immaterial for both the third~~that quarter ~~and first nine months of 2019.~~

were immaterial.

The Company’s RV content per wholesale unit (on a trailing twelve-month basis) for the ~~third~~first quarter of ~~2020 was relative1y flat at $3,140 versus $3,132~~2021 increased approximately 6% to $3,288 from $3,112 for the ~~third~~first quarter of ~~2019. Estimated marine~~2020. Marine powerboat content per wholesale ~~powerboat~~ unit (on a trailing twelve-month basis) for the ~~third~~first quarter of ~~2020~~2021 increased ~~16%~~approximately 44% to ~~$1,915~~an estimated $2,426 from $1,687 for the ~~third~~first quarter of 2020 from $1,651 for the third quarter of 2019. Beginning in the third quarter of 2020, we calculate marine content per unit based on estimated wholesale powerboat unit shipments, which we believe better represents the relationship between our sales and marine OEM production, rather than based on estimated retail powerboat unit sales. Estimated2020. MH content per wholesale unit (on a trailing twelve-month basis) for the ~~third~~first quarter of ~~2020~~2021 increased 4%approximately 1.5% to ~~$4,503~~$4,611 from ~~$4,327~~$4,543 for the ~~third~~first quarter of ~~2019.~~

2020.

Cost of Goods Sold. Cost of goods sold increased ~~$105.3~~$209.2 million, or ~~23%~~44%, to ~~$567.2~~$689.0 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$461.9~~$479.8 million in ~~2019, primarily reflecting the increase in net sales in the quarter.~~2020. As a percentage of net sales, cost of goods sold decreased 40 basis points during the third quarter of 2020 to 80.9% from 81.6% in 2019. This percentage decrease is largely attributed to an increase in sales relative to certain fixed components of cost of goods sold, synergies achieved and realized in the first quarter of ~~2020~~2021 to 81.0% from ~~acquisitions completed~~81.4% in ~~2018 and 2019 and a decrease in commodity cost inputs.~~

Cost of goods sold decreased $66.8 million, or 5%, to $1,397.3 million in the first nine months of 2020 from $1,464.1 million in 2019, primarily reflecting the decrease in net sales in the period. As a percentage of net sales, cost of goods sold decreased during the first nine months of 2020 to 81.5% from 81.9% in 2019.

2020.

Cost of goods sold as a percentage of net sales decreased ~~in the first nine months of 2020~~ primarily as a result of (i) continued cost ~~reductions~~reduction and automation initiatives we ~~initiated in the third quarter~~deployed throughout 2020, (ii) volume-driven efficiencies as a result of ~~2019, (ii)~~leveraging fixed overhead and (iii) synergies ~~achieved~~ and ~~realized in the first nine months of 2020~~different cost profiles from our ~~2018~~2020 acquisitions, partially offset by an increase in labor and ~~2019 acquisitions and (iii) decreases in~~certain commodity cost inputs. ~~These decreases in~~In general, the Company's cost of goods sold ~~were partially offset~~percentage can be impacted from quarter-to-quarter by ~~additional~~demand changes in certain market sectors that can result in fluctuating costs ~~incurred~~of certain raw materials and commodity-based components that are utilized in the production ~~and labor inefficiencies related to business disruption~~ of our ~~end markets as a result of the COVID-19 pandemic.~~products.

Gross Profit. Gross profit increased ~~$29.2~~$52.0 million, or ~~28%~~48%, to ~~$133.5~~$161.5 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$104.3~~$109.5 million in ~~2019.~~2020. As a percentage of net sales, gross profit increased 40 basis points to ~~19.1%~~19.0% in the ~~third~~first quarter of ~~2020~~2021 from ~~18.4%~~18.6% in the same period in 2019. Gross profit decreased $6.8 million, or 2%, to $316.7 million in the first nine months of 2020 from $323.5 million in 2019. As a percentage of net sales, gross profit increased to 18.5% in the first nine months of 2020 from 18.1% in the same period in 2019.

2020. The ~~changes~~increase in gross profit as a percentage of net sales in the ~~third~~first quarter ~~and first nine months~~ of ~~2020~~2021 compared to the same ~~periods~~period in ~~2019 reflect~~2020 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

Warehouse and Delivery Expenses. Warehouse and delivery expenses increased ~~$1.4~~$5.2 million, or 6%21%, to ~~$25.3~~$29.9 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$23.9~~$24.7 million in the ~~third~~first quarter of ~~2019, primarily reflecting the increase in net sales in the quarter.~~2020. As a percentage of net sales, warehouse and delivery expenses ~~were 3.6%~~improved 70 basis points to 3.5% in the ~~third~~first quarter of ~~2020~~2021 compared to 4.2% in the ~~third~~first quarter of ~~2019. Warehouse and delivery expenses decreased $4.0 million, or 5%,~~2020. This decrease as a percentage of sales is primarily attributable to ~~$70.2 million~~the lower proportion of MH sales in the first ~~nine months~~quarter of 2021 as compared to 2020, ~~from $74.2 million in the first nine months of 2019, primarily reflecting the decrease in net sales in the period. As a percentage of net sales,~~which have higher warehouse and delivery ~~expenses were 4.1% in the first nine months of 2020 compared to 4.2% in the same period in 2019.~~

~~The decrease in warehouse and delivery expenses~~costs as a percentage of net sales for the third quarter and first nine months of 2020 primarily reflects the fixed nature of certain of these expenses and operating efficiencies as net sales increased in the third quarter of 2020 compared to the prior year period.

sales.

Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased ~~$4.4~~$15.4 million, or ~~13%~~43%, to ~~$38.2~~$51.2 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$33.8~~$35.9 million in the prior year quarter. As a percentage of net sales, SG&A expenses were ~~5.4% in the third quarter of 2020 compared to~~ 6.0% in the ~~third~~first quarter of ~~2019.~~

~~SG&A expenses increased $1.3 million, or 1%,~~2021 compared to ~~$105.7 million~~6.1% in the first ~~nine months of 2020 from $104.4 million in the prior year period. As a percentage of net sales, SG&A expenses were 6.2% in the first nine months of 2020 compared to 5.8% in the prior year period.~~

~~The increase in SG&A expenses in the third~~ quarter of 2020 compared to 2019 is primarily due an increase in general and administrative expenses as the Company expanded resources to support end market demand. The decrease in SG&A expenses as a percentage of net sales in the third quarter of 2020 is primarily attributed to the increase in net sales compared to the prior year period.

2020.

The increase in SG&A expenses in the first ~~nine months~~quarter of 2021 compared to 2020 ~~as a percentage of revenue~~ is ~~attributed~~primarily due to (i) the ~~decline~~increase in net sales ~~from~~and (ii) increases in the ~~impact~~breadth and depth of ~~COVID-19, discussed above.~~

corporate resources to support the size and growth of the Company.

Amortization of Intangible Assets. Amortization of intangible assets increased ~~$1.0~~$2.3 million, or ~~11%~~24%, to ~~$10.2~~$11.9 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$9.2~~$9.6 million in the prior year ~~quarter and increased $3.2 million, or 12%, to $29.6 million in the first nine months of 2020 from $26.4 million in the prior year period.~~quarter. The increase in the ~~third~~first quarter ~~and first nine months~~ of ~~2020~~2021 compared to the prior year ~~periods~~quarter primarily reflects the impact of businesses acquired in ~~2019 and~~ 2020.

Operating Income. Operating income increased ~~$22.4~~$29.2 million, or ~~60%~~74%, to ~~$59.8~~$68.5 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$37.4~~$39.3 million in ~~2019.~~2020. As a percentage of net sales, operating income ~~was 8.5%~~increased 140 basis points to 8.1% in the ~~third~~first quarter of ~~2020~~2021 versus ~~6.6%~~6.7% in the same period in ~~2019. Operating income decreased $7.3 million, or 6%, to $111.2 million in the first nine months of~~

2020 from $118.5 million in 2019. As a percentage of net sales, operating income was 6.5% in the first nine months of 2020 versus 6.6% in the same period in 2019. Operating income related to the 2020 acquisitions for the third quarter and nine months ended September 27, 2020 was approximately $2.1 million and $2.2 million, respectively.2020. The change in operating income and operating ~~income percentage~~margin is primarily attributable to the items discussed above.

Interest Expense, Net. Interest expense increased ~~$1.9~~$0.7 million, or ~~22%~~7%, to ~~$10.5~~$11.2 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$8.6~~$10.5 million in the prior year. ~~For the first nine months of 2020, interest expense increased $5.6 million, or 21%, to $31.8 million from $26.2 million in the prior year period.~~

The increase in interest expense ~~in the third quarter and first nine months of 2020~~ reflects increased borrowings related to ~~2019 and~~ 2020 acquisitions, ~~and an increase~~partially offset by a decrease in variable interest rates on the unhedged portions of 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.~~

term loan and revolving credit facility.

Income Taxes. Income tax expense increased ~~$4.5~~$2.2 million, or ~~60%~~29%, to ~~$12.0~~$9.8 million ~~in the third quarter of 2020~~ from ~~$7.5 million in the prior year period. For the first nine months of 2020, income tax expense decreased $2.5 million, or 11%, to $20.2 million for the first nine months of 2020 from $22.7~~$7.6 million in the prior year period.

The ~~effective tax rate~~increase in the third quarter of 2020 and 2019 was 24.3% and 26.0%, respectively, and the effective tax rate for the comparable nine month periods was 25.4% and 24.6%, respectively. The effective tax rate in the third quarter of 2020 reflects the impact of certain federal and state income tax ~~benefits, and~~expense is due primarily to an increase in pretax income partially offset by a decrease in the effective tax rate in the first ~~nine months~~quarter of 2021 compared to the prior year quarter. The effective tax rate in the first quarter of 2021 and 2020 ~~reflects $2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief,~~was 17.1% and ~~Economic Security Act payroll tax credits. In addition, the~~26.4%, respectively. The effective tax rate for the first ~~nine months~~quarter of ~~2019~~2021 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, with no corresponding amount for the same period in 2020.

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. 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.

~~Third~~

First Quarter ~~and Nine Months~~ Ended ~~September 27, 2020~~March 28, 2021 Compared to ~~2019~~2020

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.

Third Quarter Ended Nine Months Ended
(thousands) September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Sales
Manufacturing $ 506,278 $ 407,814 $ 1,230,805 $ 1,283,824
Distribution 208,073 167,552 511,895 531,312
Gross Profit
Manufacturing 97,543 73,700 225,447 231,227
Distribution 36,293 27,965 88,627 87,738
Operating Income
Manufacturing 63,312 42,353 131,426 135,577
Distribution 16,444 9,041 33,350 28,132


	First Quarter Ended
(thousands)	March 28, 2021		March 29, 2020		Amount Change		% Change
Sales
Manufacturing	$	614,564	$	426,839	$	187,725	44%
Distribution	251,130		171,266		79,864		47%
Gross Profit
Manufacturing	120,926		78,947		41,979		53%
Distribution	44,150		29,196		14,954		51%
Operating Income
Manufacturing	78,429		45,704		32,725		72%
Distribution	21,175		9,968		11,207		112%

Manufacturing

Sales. Sales increased ~~$98.5~~$187.8 million, or ~~24%~~44%, to ~~$506.3~~$614.6 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$407.8~~$426.8 million in the prior year quarter. ~~For the first nine months of 2020, sales decreased $53.0 million, or 4%, to $1,230.8 million from $1,283.8 million in the prior year period.~~ This segment accounted for approximately 71% of the Company’s consolidated net sales for the ~~third~~first quarter of ~~2020~~2021 and ~~2019, and 70% of the Company's consolidated net sales for the first nine months of 2020 and 2019.~~2020. The sales increase in the ~~third~~first quarter of 2021 compared to 2020 was attributed to sales increases in all four of the Company' end markets: RV increased 45%, marine increased 75%, MH increased 24% and industrial increased 15%. Net sales in the first quarter of 2021 attributable to acquisitions completed in that quarter were approximately $4.8 million, and net sales in the first quarter of 2020 ~~largely reflected sales increases~~attributable to acquisitions completed in the RV, marine, and industrial markets compared to the prior year quarter. The sales decrease for the first nine months of 2020 was primarily attributed to sales decreases in our primary end markets as a result of business disruptions and lost production and shipping days due to the COVID-19 pandemic that ~~occurred primarily in the second~~ quarter ~~of 2020.~~

were immaterial.

Gross Profit. Gross profit increased ~~$23.8~~$42.0 million, or ~~32%~~53%, to ~~$97.5~~$120.9 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$73.7~~$78.9 million in the ~~third~~first quarter of ~~2019. For the first nine months of 2020, gross profit decreased $5.8 million, or 2%, to $225.4 million from $231.2 million in 2019.~~2020. As a percentage of sales, gross profit increased to ~~19.3% in the third quarter of 2020 from 18.1% in the third quarter of 2019 and increased to 18.3%~~19.7% in the first ~~nine months~~quarter of ~~2020~~2021 from ~~18.0%~~18.5% in the ~~prior year period.~~ first quarter of 2020.

Gross profit ~~as a percentage of net sales~~margin increased during the ~~third~~first quarter of 2020 primarily due to an increase in net sales relative to certain fixed components of costs of goods sold as well as a decrease in commodity cost inputs. Gross profit as a percentage of net sales increased in first nine months of 20202021 compared to the prior year ~~period~~quarter primarily due to a ~~decrease~~180 basis point improvement in ~~commodity cost inputs,~~manufacturing overhead and expenses as a percent of sales as certain of these costs are fixed in nature and a 60 basis point improvement in direct labor, partially offset by ~~operational and labor inefficiencies~~a 120 basis point increase in materials as a ~~result~~percent of ~~business disruptions from the COVID-19 pandemic incurred~~sales, for a net 120 basis point improvement in the ~~second~~first quarter of 2021 as compared to 2020.

Operating Income. Operating income increased ~~$20.9~~$32.7 million, or ~~49%~~72%, to ~~$63.3~~$78.4 million in the ~~third~~first quarter of 2020 from ~~$42.4~~$45.7 million in the prior year quarter. ~~For the first nine months of 2020, operating income decreased $4.2 million, or 3%, to $131.4 million from $135.6 million in the prior year.~~ The overall increase in operating income in the ~~third~~first quarter of ~~2020 and the overall decrease in operating income in the first nine months of 2020~~2021 primarily reflects the items discussed above.

Distribution

Sales. Sales increased ~~$40.6~~$79.8 million, or ~~24%~~47%, to ~~$208.1~~$251.1 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$167.5~~$171.3 million in the prior year quarter. ~~For the first nine months of 2020, sales decreased $19.4 million, or 4%, to $511.9 million from $531.3 million in the prior year period.~~ This segment accounted for approximately 29% of the Company’s consolidated net sales for the ~~third~~first quarter of ~~2020~~2021 and ~~2019, and 30% of consolidated net sales for the first nine months of 2020 and 2019.~~2020. The sales increase in the ~~third~~first quarter of 2021 compared to 2020 was ~~primarily~~ attributed to ~~sales increases~~an 84% increase in our RV market sales, a 71% increase in marine market sales and a 31% increase in industrial ~~markets. The~~market sales, partially offset by a 4% decrease in MH market sales. Net sales in the first ~~nine months~~quarter of 2021 attributable to acquisitions completed in that quarter were approximately $0.6 million, with no corresponding amount of net sales in the first quarter of 2020 ~~was primarily attributed~~attributable to ~~sales decreases~~acquisitions completed in ~~our primary end~~

~~markets as a result of business disruptions and lost production and shipping days due to the COVID-19 pandemic, primarily in the second quarter of 2020.~~

that quarter.

Gross Profit. Gross profit increased ~~$8.3~~$15.0 million, or ~~30%~~51%, to ~~$36.3~~$44.2 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$28.0~~$29.2 million in the ~~third~~first quarter of ~~2019. For the first nine months of 2020, gross profit increased $0.9 million, or 1%, to $88.6 million from $87.7 million in 2019.~~2020. As a percentage of sales, gross profit increased to ~~17.4%~~17.6% in the ~~third~~first quarter of 2021 from 17.0% in the first quarter of 2020. The increase in gross profit margin in the first quarter of 2021 compared to the first quarter of 2020 ~~from 16.7% in~~is primarily attributed to the ~~third quarter~~higher profitability of ~~2019 and increased to 17.3% in the first nine months of~~a 2020 ~~from 16.5% in the prior year period.~~

~~As a percentage of sales, gross profit increased during the third quarter of 2020~~acquisition compared to the ~~prior year quarter primarily due to realized synergies from certain 2018 and 2019 acquisitions. For~~rest of the first nine months of 2020, gross profit as a percentage of sales increased primarily due to realized synergies from certain 2018 and 2019 acquisitions, partially offset by additional costs and operational inefficiencies as a result of business disruptions from the COVID-19 pandemic primarily in the second quarter of 2020.

Distribution segment.

Operating Income. Operating income increased ~~$7.4~~$11.2 million, or ~~82%~~112%, to ~~$16.4~~$21.2 million in the ~~third~~first quarter of ~~2020~~2021 from ~~$9.0~~$10.0 million in the prior year quarter. ~~For the first nine months of 2020, operating income increased $5.2 million, or 19%, to $33.3 million from $28.1 million in the prior year.~~ The ~~overall increase~~improvement in operating income in the ~~third~~first quarter ~~and first nine months~~ of ~~2020~~2021 primarily reflects the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity at ~~September 27, 2020~~March 28, 2021 consisted of cash and cash equivalents of ~~$62.3~~$6.2 million ~~and $410.3~~as well as $296.8 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 $9.2~~increased $37.1 million to ~~$112.8~~$50.3 million in the first ~~nine months~~quarter of ~~2020~~2021 from ~~$122.0~~$13.2 million in the first ~~nine months~~quarter of ~~2019~~2020. The increase is primarily ~~due~~attributable to (i) a ~~decrease of~~$26.3 million increase in net income, ~~of $10.4~~(ii) a $5.3 million ~~due to disruptions in our end markets as a result of the COVID-19 pandemic; (ii) an~~ increase in the use of cash from working capital of $4.8 million and (iii) a decrease of deferred income tax liabilities of $3.3 million. These decreases in operating cash flows were partially offset by an increase of depreciation and amortization ~~of $6.5~~and (iii) $4.6 million ~~and other items of $2.8 million.~~less deployed into working capital as compared to the same quarter in the prior year.

Investing Activities

Net cash used in investing activities increased ~~$105.3~~$13.2 million to ~~$145.4~~$45.0 million in the first ~~nine months of 2020~~quarter 2021 from ~~$40.1~~$31.8 million in the first ~~nine months~~quarter of ~~2019~~2020 primarily due to an increase in cash used in business acquisitions of ~~$101.0~~$4.6 million and ~~a decrease~~an increase in ~~proceeds from sale of property, plant, and equipment~~capital expenditures and other investing activities of ~~$4.4~~$8.6 million.

Financing Activities

Net cash flows used by financing activities increased ~~$72.2~~$17.6 million to ~~$44.4 million in first nine months of 2020 from a source of cash of $27.8~~$43.8 million in the first ~~nine months~~quarter of 2019 primarily due to (i) the issuance of $300 million of senior notes in the first nine months of 2019 with no comparable amount in the first nine months of 2020; (ii) cash dividends paid to shareholders of $17.32021 from $26.2 million in the first ~~nine months~~quarter of 2020 primarily due to $27.0 million in net repayments on the Company's credit facility and an $11.7 million increase in tax payments for share-based payment arrangements. Partially offsetting these increases in use of cash were (i) a $15.6 million decrease in stock repurchases in the current quarter compared to the prior year quarter, (ii) $4.2 million in proceeds from the exercise of stock options with no corresponding amount in the prior year ~~period~~quarter and (iii) ~~an increase~~$2.1 million in ~~stock repurchases under our buyback program~~payments of ~~$16.7 million. These increases in cash used in financing activities were partially offset by (i) a decrease in repayments on our revolving credit facility~~contingent consideration and ~~term loan of $251.1 million; (ii) a decrease in payment of~~ deferred financing costs ~~of $7.2 million and (iii) a decrease~~ in the ~~payment of contingent consideration from a business acquisition and other financing activities of $3.5 million.~~prior year quarter with no corresponding amount in the current year quarter.

2925

Summary of Liquidity and Capital Resources

~~The~~At March 28, 2021, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its credit facility 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. See Note 17 of the Notes to Condensed Consolidated Financial Statements for a description of changes to our debt arrangements subsequent to March 28, 2021.

~~The~~At March 28, 2021, the Company's senior credit facility ~~consists~~consisted 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 iswas 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 senior credit facility ~~are~~were 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%.

On July 27, 2017, the Financial Conduct Authority, which regulates the London Interbank Offered Rate ("LIBOR"), announced that it intends to phase out LIBOR by the end of 2021. We expect that widespread use of LIBOR as a reference borrowing rate will transition to alternative interest rates in the near future. Since interest rates on loans made under our credit facility may be based on LIBOR based loans, the phasing out of LIBOR may adversely affect interest rates under our credit facility and result in higher borrowing costs. The Company is currently evaluating its options under our credit facility, but at this time we cannot reasonably estimate the impact to our financial statements from the phasing out of LIBOR.

At ~~September 27, 2020,~~March 28, 2021, the Company had ~~$410.3~~$296.8 million of unused borrowing availability under its senior credit facility. The ability to access unused borrowing capacity under the 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.

As of and for the ~~September 27, 2020~~March 28, 2021 reporting date, the Company was in compliance with its financial covenants as required under the terms of its credit agreement. The required maximum consolidated total leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the credit agreement, compared to the actual amounts as of ~~September 27, 2020~~March 28, 2021 and for the fiscal period then ended are as follows:

Required Actual
Maximum consolidated total leverage ratio (12-month period) 4.00 2.24
Minimum consolidated fixed charge coverage ratio (12-month period) 1.50 5.76


	Required	Actual
Consolidated total leverage ratio (12-month period)	4.00	2.30
Consolidated fixed charge coverage ratio (12-month period)	1.50	5.84

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH and marine industries as well as the 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.

was due to mature in September 2024. In addition to being used to repay a portion of existing borrowings, the net proceeds resulting from these transactions were used for general corporate purposes, including in connection with the acquisitions completed subsequent to the end of the first quarter, and will support the Company's strategic objectives and other general business needs.

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

~~Operations~~Manufacturing 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 had generally been the highest in the ~~third~~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 that required recognition or disclosure in the condensed consolidated financial statements.

See Note 17 of the Notes to Condensed Consolidated Financial Statements for further discussion of events occurring after March 28, 2021 until the filing date of this Form 10-Q.

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 Forms 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 ~~September 27, 2020,~~March 28, 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~~$1.4 million, assuming average borrowings, including our term loan, subject to variable rates of ~~$30.0~~$140.5 million, which was the amount of such borrowings outstanding at ~~September 27, 2020~~March 28, 2021 subject to variable rates. The ~~$30.0~~$140.5 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 ~~third quarter and~~ first ~~nine~~three 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 ~~that~~ 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 operations 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 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, ~~require~~drequired 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 ~~third~~first quarter ended ~~September 27, 2020~~March 28, 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 1. LEGAL PROCEEDINGS~~

In August 2019, a group of companies calling itself the Lusher Site Remediation Group (the “Group”) commenced litigation against the Company in Lusher Site Remediation Group v. Sturgis Iron & Metal Co., Inc., et al., Case Number 3:18-cv-00506, pending in the U.S. District Court for the Northern District of Indiana. The Group’s Second Amended Complaint, which was the first to assert claims against Patrick, asserted claims under the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., an Indiana state environmental statute and Indiana common law. One defendant in the case, Sturgis Iron & Metal Co., Inc. (“Sturgis”) subsequently filed two cross claims against Patrick, asserting against the Company a claim for (i) contribution under CERCLA and (ii) contractual indemnity. The Company moved to dismiss the Group’s claims and also moved to dismiss Sturgis’s cross claims. On August 21, 2020, the court granted Patrick’s two motions to dismiss. The Group subsequently moved for reconsideration of the court’s decision. That reconsideration motion is still pending. The Company does not currently believe that this matter is likely to have a material adverse impact on its financial condition, results of operations, or cash flows. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects.


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 ~~described~~previously 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 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 magnitude of the impact of the COVID-19 pandemic cannot be precisely estimated at this time, as each is 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 fully, partially, or timely. 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 we are unable to maintain normal operations, or subsequently are unable to resume normal operations in a timely fashion, our 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 our financial obligations and fund our 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.

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)
June 29 - July 26, 2020 857 $ 59.00 — $ 43,515,568
July 27 - August 30, 2020 5,000 58.84 5,000 43,221,354
August 31 - September 27, 2020 83,950 52.91 83,950 38,779,489
89,807 88,950


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)
January 1 - January 24, 2021	17,700	$	73.84	—	$	35,960,557
January 25 - February 28, 2021	63,302	71.92		—	35,960,557
March 1 - March 28, 2021	95,939	89.68		—	35,960,557
	176,941			—

(1) ~~Includes 857~~Amount includes 176,941 shares of common stock purchased by the Company in ~~July 2020~~January through March 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 options and 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			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
31.2			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
32			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer
101			Interactive Data Files. The following materials are filed electronically with this Quarterly Report on Form 10-Q:


			101.INS			XBRL Instance Document
			101.SCH			XBRL Taxonomy Schema Document
			101.CAL			XBRL Taxonomy Calculation Linkbase Document
			101.DEF			XBRL Taxonomy Definition Linkbase Document
			101.LAB			XBRL Taxonomy Label Linkbase Document
			101.PRE			XBRL Taxonomy Presentation Linkbase Document


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

3630

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: ~~November 5, 2020~~May 6, 2021	By:	/s/ Andy L. Nemeth
		Andy L. Nemeth
		President and Chief Executive Officer



Date: ~~November 5, 2020~~May 6, 2021	By:	/s/ ~~John A. Forbes~~Jacob R. Petkovich
		~~John A. Forbes~~ Jacob R. Petkovich
		~~Interim~~Executive Vice President-Finance and Chief Financial Officer



Date: May 6, 2021	By:	/s/ James E. Rose
		James E. Rose
		Principal Accounting Officer


	Nine Months Ended September 27, 2020
(thousands)	Manufacturing		Distribution		Total
Market type:
Recreational Vehicle	$	656,739	$	288,778	$	945,517
Manufactured Housing	127,857		182,579		310,436
Industrial	202,368		25,113		227,481
Marine	219,150		11,400		230,550
Total	$	1,206,114	$	507,870	$	1,713,984


	Third Quarter Ended September 29, 2019
(thousands)	Manufacturing		Distribution		Total
Market type:
Recreational Vehicle	$	218,706	$	91,313	$	310,019
Manufactured Housing	44,159		64,959		109,118��
Industrial	64,541		7,566		72,107
Marine	72,306		2,636		74,942
Total	$	399,712	$	166,474	$	566,186


	Required	Actual
Maximum consolidated total leverage ratio (12-month period)	4.00	2.24
Minimum consolidated fixed charge coverage ratio (12-month period)	1.50	5.76