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~~26, 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 ~~23, 2020,~~22, 2021, there were ~~23,363,124~~23,656,016 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 Quarter and Nine Months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019~~27, 2020			3

Condensed Consolidated Statements of Comprehensive Income Third Quarter and Nine Months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019~~27, 2020			4

Condensed Consolidated ~~Statements of Financial Position~~ Balance Sheets September ~~27, 2020~~26, 2021 and December 31, ~~2019~~2020			5

Condensed Consolidated Statements of Cash Flows Nine Months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019~~27, 2020			6

Condensed Consolidated Statements of Shareholders' Equity Third Quarter and Nine Months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019~~27, 2020			7

Notes to Condensed Consolidated Financial Statements			9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2326

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			3135

ITEM 4. CONTROLS AND PROCEDURES			3235

PART II. OTHER INFORMATION

ITEM ~~1. LEGAL PROCEEDINGS~~			33

~~ITEM~~ 1A. RISK FACTORS			3336

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			3436

ITEM 6. EXHIBITS			3637

SIGNATURES			3738

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		Third Quarter Ended				Nine Months Ended					Third Quarter Ended				Nine Months 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)	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
NET SALES	NET SALES	$	700,707	$	566,186	$	1,713,984	$	1,787,622	NET SALES	$	1,060,177	$	700,707	$	2,930,613	$	1,713,984
Cost of goods sold	Cost of goods sold	567,210		461,851		1,397,285		1,464,078		Cost of goods sold	852,016		567,210		2,356,443		1,397,285
GROSS PROFIT	GROSS PROFIT	133,497		104,335		316,699		323,544		GROSS PROFIT	208,161		133,497		574,170		316,699
Operating Expenses:	Operating Expenses:									Operating Expenses:
Warehouse and delivery	Warehouse and delivery	25,263		23,917		70,204		74,228		Warehouse and delivery	35,885		25,263		100,613		70,204
Selling, general and administrative	Selling, general and administrative	38,184		33,817		105,681		104,403		Selling, general and administrative	64,245		38,184		175,842		105,681
Amortization of intangible assets	Amortization of intangible assets	10,221		9,191		29,600		26,448		Amortization of intangible assets	14,758		10,221		40,695		29,600
Total operating expenses	Total operating expenses	73,668		66,925		205,485		205,079		Total operating expenses	114,888		73,668		317,150		205,485
OPERATING INCOME	OPERATING INCOME	59,829		37,410		111,214		118,465		OPERATING INCOME	93,273		59,829		257,020		111,214
Interest expense, net	Interest expense, net	10,507		8,603		31,820		26,222		Interest expense, net	15,436		10,507		41,195		31,820
Income before income taxes	Income before income taxes	49,322		28,807		79,394		92,243		Income before income taxes	77,837		49,322		215,825		79,394
Income taxes	Income taxes	11,986		7,490		20,157		22,661		Income taxes	20,440		11,986		51,930		20,157
NET INCOME	NET INCOME	$	37,336	$	21,317	$	59,237	$	69,582	NET INCOME	$	57,397	$	37,336	$	163,895	$	59,237

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	$	2.52	$	1.65	$	7.18	$	2.60
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	$	2.45	$	1.62	$	7.01	$	2.57

Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	22,674		23,076		22,784		23,073		Weighted average shares outstanding – Basic	22,789		22,674		22,826		22,784
Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted	23,072		23,273		23,088		23,279		Weighted average shares outstanding – Diluted	23,403		23,072		23,375		23,088

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					Third Quarter Ended				Nine Months Ended
(thousands)	(thousands)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019		(thousands)	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
NET INCOME	NET INCOME	$	37,336	$	21,317	$	59,237	$	69,582	NET INCOME	$	57,397	$	37,336	$	163,895	$	59,237
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	1,031		989		3,024		(1,553)
Other	Other	60		19		8		(48)		Other	74		60		4		8
Total other comprehensive income (loss)	Total other comprehensive income (loss)	1,049		(221)		(1,545)		(3,273)		Total other comprehensive income (loss)	1,105		1,049		3,028		(1,545)
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	38,385	$	21,096	$	57,692	$	66,309	COMPREHENSIVE INCOME	$	58,502	$	38,385	$	166,923	$	57,692

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)	September 26, 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	$	44,882	$	44,767
Trade and other receivables, net	Trade and other receivables, net	175,533		87,536		Trade and other receivables, net	292,932		132,505
Inventories	Inventories	281,374		253,870		Inventories	485,766		312,809
Prepaid expenses and other	Prepaid expenses and other	12,580		36,038		Prepaid expenses and other	39,205		37,982
Total current assets	Total current assets	531,834		516,834		Total current assets	862,785		528,063
Property, plant and equipment, net	Property, plant and equipment, net	197,415		180,849		Property, plant and equipment, net	309,170		251,493
Operating lease right-of-use assets	Operating lease right-of-use assets	105,410		93,546		Operating lease right-of-use assets	142,719		117,816
Goodwill	Goodwill	356,433		319,349		Goodwill	478,955		395,800
Intangible assets, net	Intangible assets, net	380,919		357,014		Intangible assets, net	558,040		456,276
Deferred financing costs, net		2,544		2,978
Other non-current assets	Other non-current assets	384		423		Other non-current assets	6,789		3,987
TOTAL ASSETS	TOTAL ASSETS	$	1,574,939	$	1,470,993	TOTAL ASSETS	$	2,358,458	$	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	36,955		30,901
Accounts payable	Accounts payable	117,088		96,208		Accounts payable	219,153		105,786
Accrued liabilities	Accrued liabilities	101,296		58,033		Accrued liabilities	145,865		83,202
Total current liabilities	Total current liabilities	252,949		186,935		Total current liabilities	409,473		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	1,077,664		810,907
Long-term operating lease liabilities	Long-term operating lease liabilities	76,873		66,467		Long-term operating lease liabilities	107,753		88,175
Deferred tax liabilities, net	Deferred tax liabilities, net	26,100		27,284		Deferred tax liabilities, net	49,344		39,516
Other long-term liabilities	Other long-term liabilities	19,336		22,472		Other long-term liabilities	22,176		28,007
TOTAL LIABILITIES	TOTAL LIABILITIES	1,049,110		973,512		TOTAL LIABILITIES	1,666,410		1,193,994
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Common stock	Common stock	177,308		172,662		Common stock	195,402		180,892
Additional paid-in-capital	Additional paid-in-capital	24,440		25,014		Additional paid-in-capital	23,981		24,387
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(7,243)		(5,698)		Accumulated other comprehensive loss	(3,024)		(6,052)
Retained earnings	Retained earnings	331,324		305,503		Retained earnings	475,689		360,214
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	525,829		497,481		TOTAL SHAREHOLDERS’ EQUITY	692,048		559,441
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,574,939	$	1,470,993	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,358,458	$	1,753,435

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended
(thousands)	September 26, 2021		September 27, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	163,895	$	59,237
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	76,298		52,955
Stock-based compensation expense	17,307		11,177
Amortization of convertible notes debt discount	5,528		5,302
Deferred income taxes	6,540		(4,057)
Other non-cash items	1,644		3,521
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade and other receivables, net	(142,550)		(78,701)
Inventories	(127,464)		(12,885)
Prepaid expenses and other assets	(593)		23,787
Accounts payable, accrued liabilities and other	146,812		52,422
Net cash provided by operating activities	147,417		112,758
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(44,155)		(22,159)
Proceeds from sale of property, plant and equipment	140		117
Business acquisitions, net of cash acquired	(297,701)		(123,382)
Other	(2,000)		—
Net cash used in investing activities	(343,716)		(145,424)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings	58,750		—
Term debt repayments	(3,125)		(2,500)
Borrowings on revolver	425,930		8,198
Repayments on revolver	(565,475)		(8,198)
Proceeds from senior notes offering	350,000		—
Stock repurchases under buyback program	(31,945)		(20,286)
Cash dividends paid to shareholders	(19,487)		(17,265)
Taxes paid for share-based payment arrangements	(14,898)		(2,910)
Payment of deferred financing costs and other	(6,638)		(58)
Payment of contingent consideration from a business acquisition	(1,600)		(2,000)
Proceeds from exercise of common stock options	4,902		642
Net cash provided by (used in) financing activities	196,414		(44,377)
Increase (decrease) in cash and cash equivalents	115		(77,043)
Cash and cash equivalents at beginning of year	44,767		139,390
Cash and cash equivalents at end of period	$	44,882	$	62,347

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
Third Quarter Ended September 26, 2021												Third Quarter Ended September 26, 2021
(thousands)	(thousands)	Common Stock		Additional Paid-in- Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total		(thousands)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total
Balance June 28, 2020		$	173,178	$	24,534	$	(8,292)	$	303,848	$	493,268
Balance June 27, 2021												Balance June 27, 2021	$	191,131	$	24,387	$	(4,129)	$	(21,550)	$	453,432	$	643,271
Net income	Net income	—		—		—		37,336		37,336		Net income	—		—		—		—		57,397		57,397
Dividends declared	Dividends declared	—		—		—		(5,865)		(5,865)		Dividends declared	—		—		—		—		(6,613)		(6,613)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		1,049		—		1,049		Other comprehensive income, net of tax	—		—		1,105		—		—		1,105
Share repurchases under buyback program	Share repurchases under buyback program	(647)		(94)		—		(3,995)		(4,736)		Share repurchases under buyback program	(999)		(135)		—		—		(9,261)		(10,395)
Shares used to pay taxes on stock grants		(53)		—		—		—		(53)
Retirement of treasury stock												Retirement of treasury stock	(2,013)		(271)		—		21,550		(19,266)		—
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants												Repurchases of shares for tax payments related to the vesting and exercise of share-based grants	(13)		—		—		—		—		(13)
Issuance of shares upon exercise of common stock options												Issuance of shares upon exercise of common stock options	325		—		—		—		—		325
Stock-based compensation expense	Stock-based compensation expense	4,830		—		—		—		4,830		Stock-based compensation expense	6,971		—		—		—		—		6,971
Balance September 27, 2020		$	177,308	$	24,440	$	(7,243)	$	331,324	$	525,829
Balance September 26, 2021												Balance September 26, 2021	$	195,402	$	23,981	$	(3,024)	$	—	$	475,689	$	692,048

Nine Months Ended September 27, 2020
Nine Months Ended September 26, 2021												Nine Months Ended September 26, 2021
(thousands)	(thousands)	Common Stock		Additional Paid-in- Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total		(thousands)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		Retained Earnings		Total
Balance December 31, 2019		$	172,662	$	25,014	$	(5,698)	$	305,503	$	497,481
Balance December 31, 2020												Balance December 31, 2020	$	180,892	$	24,387	$	(6,052)	$	—	$	360,214	$	559,441
Net income	Net income	—		—		—		59,237		59,237		Net income	—		—		—		—		163,895		163,895
Dividends declared	Dividends declared	—		—		—		(17,666)		(17,666)		Dividends declared	—		—		—		—		(19,893)		(19,893)
Other comprehensive loss, net of tax		—		—		(1,545)		—		(1,545)
Other comprehensive income, net of tax												Other comprehensive income, net of tax	—		—		3,028		—		—		3,028
Share repurchases under buyback program	Share repurchases under buyback program	(3,962)		(574)		—		(15,750)		(20,286)		Share repurchases under buyback program	(999)		(135)		—		(21,550)		(9,261)		(31,945)
Retirement of Treasury Stock												Retirement of Treasury Stock	(2,013)		(271)		—		21,550		(19,266)		—
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants												Repurchases of shares for tax payments related to the vesting and exercise of share-based grants	(14,898)		—		—		—		—		(14,898)
Issuance of shares in connection with a business combination												Issuance of shares in connection with a business combination	10,211		—		—		—		—		10,211
Issuance of shares upon exercise of common stock options	Issuance of shares upon exercise of common stock options	642		—		—		—		642		Issuance of shares upon exercise of common stock options	4,902		—		—		—		—		4,902
Shares used to pay taxes on stock grants		(3,211)		—		—		—		(3,211)
Stock-based compensation expense	Stock-based compensation expense	11,177		—		—		—		11,177		Stock-based compensation expense	17,307		—		—		—		—		17,307
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

Balance September 26, 2021												Balance September 26, 2021	$	195,402	$	23,981	$	(3,024)	$	—	$	475,689	$	692,048

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
PATRICK INDUSTRIES, INC.

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


Third Quarter Ended September 27, 2020
(thousands)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Treasury Stock		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
Stock repurchases under buyback program	(647)		(94)		—				(3,995)		(4,736)
Repurchases of shares for tax payments related to the vesting and exercise of share-based 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		Treasury Stock		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)
Stock repurchases under buyback program	(3,962)		(574)		—		—		(15,750)		(20,286)
Issuance of shares upon exercise of common stock options	642		—		—		—		—		642
Repurchases of shares for tax payments related to the vesting and exercise of share-based 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

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~~26, 2021 and December 31, ~~2019,~~2020, its results of operations for the third quarter and nine months ended September 26, 2021 and September 27, 2020, and ~~September 29, 2019 and~~ its ~~statements of~~ cash flows for the nine months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019.~~

27, 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 other non-current assets in the condensed consolidated balance sheets and accumulated other comprehensive loss in Note 11. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The December 31, ~~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 quarter and nine months ended September ~~27, 2020~~26, 2021 are not necessarily indicative of the results ~~to be expected~~that we will realize or expect 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 quarter of fiscal year ~~2020~~2021 ended on September ~~27, 2020~~26, 2021 and the third quarter of fiscal year ~~2019~~2020 ended on September ~~29, 2019.~~27, 2020.

In preparation of Patrick’s condensed consolidated financial statements as of and for the third quarter and nine months ended September ~~27, 2020,~~26, 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 18 for further 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~~The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements.

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

In August 2020, the FASB issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity", a new standard that simplifies certain accounting treatments for convertible debt instruments. The guidance eliminates certain requirements that require separate accounting for embedded conversion features and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the diluted ~~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~~The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements.At this point in time, we anticipate the primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our convertible notes referenced 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							Third Quarter Ended September 26, 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	$	434,029	$	199,208	$	633,237
Marine								Marine	164,535		8,491		173,026
Manufactured Housing	Manufactured Housing	45,845		61,908		107,753		Manufactured Housing	65,785		68,840		134,625
Industrial	Industrial	69,242		9,090		78,332		Industrial	107,886		11,403		119,289
Marine		88,861		4,590		93,451
Total	Total	$	494,274	$	206,433	$	700,707	Total	$	772,235	$	287,942	$	1,060,177

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


	Nine Months Ended September 26, 2021
(thousands)	Manufacturing		Distribution		Total
Market type:
Recreational Vehicle	$	1,161,254	$	568,840	$	1,730,094
Marine	453,223		23,105		476,328
Manufactured Housing	190,786		203,648		394,434
Industrial	296,769		32,988		329,757
Total	$	2,102,032	$	828,581	$	2,930,613

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
`


	Third Quarter Ended September 27, 2020
(thousands)	Manufacturing		Distribution		Total
Market type:
Recreational Vehicle	$	290,326	$	130,845	$	421,171
Marine	88,861		4,590		93,451
Manufactured Housing	45,845		61,908		107,753
Industrial	69,242		9,090		78,332
Total	$	494,274	$	206,433	$	700,707


		Nine Months Ended September 29, 2019							Nine Months Ended September 27, 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	$	656,739	$	288,778	$	945,517
Marine								Marine	219,150		11,400		230,550
Manufactured Housing	Manufactured Housing	131,101		193,975		325,076		Manufactured Housing	127,857		182,579		310,436
Industrial	Industrial	188,292		25,149		213,441		Industrial	202,368		25,113		227,481
Marine		246,017		9,712		255,729
Total	Total	$	1,259,671	$	527,951	$	1,787,622	Total	$	1,206,114	$	507,870	$	1,713,984

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)	September 26, 2021		December 31, 2020
Raw materials	$	261,775	$	157,219
Work in process	30,221		19,282
Finished goods	66,189		37,632
Less: reserve for inventory obsolescence	(13,604)		(8,320)
Total manufactured goods, net	344,581		205,813
Materials purchased for resale (distribution products)	147,502		112,158
Less: reserve for inventory obsolescence	(6,317)		(5,162)
Total materials purchased for resale (distribution products), net	141,185		106,996
Total inventories	$	485,766	$	312,809


5.			GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended September ~~27, 2020~~26, 2021 by segment are as follows:
(thousands) Manufacturing Distribution Total
Balance - December 31, 2019 $ 268,402 $ 50,947 $ 319,349
Acquisitions 35,087 8,980 44,067
Adjustments to preliminary purchase price allocations (8,708) 1,725 (6,983)
Balance - September 27, 2020 $ 294,781 $ 61,652 $ 356,433


(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2020	$	338,045	$	57,755	$	395,800
Acquisitions	64,312		11,458		75,770
Adjustments to preliminary purchase price allocations	7,366		19		7,385
Balance - September 26, 2021	$	409,723	$	69,232	$	478,955

Intangible assets, net consist of the following as of September ~~27, 2020~~26, 2021 and December 31, ~~2019:~~2020:


(thousands)	(thousands)	September 27, 2020		December 31, 2019		(thousands)	September 26, 2021		December 31, 2020
Customer relationships	Customer relationships	$	394,687	$	357,513	Customer relationships	$	549,314	$	461,754
Non-compete agreements	Non-compete agreements	15,231		16,202		Non-compete agreements	19,144		15,949
Patents	Patents	16,555		16,495		Patents	36,528		23,025
Trademarks		101,426		88,524
Trademarks (non-amortizing, indefinite lived)						Trademarks (non-amortizing, indefinite lived)	151,997		113,796
		527,899		478,734			756,983		614,524
Less: accumulated amortization	Less: accumulated amortization	(146,980)		(121,720)		Less: accumulated amortization	(198,943)		(158,248)
Intangible assets, net	Intangible assets, net	$	380,919	$	357,014	Intangible assets, net	$	558,040	$	456,276

Changes in the carrying value of intangible assets for the nine months ended September ~~27, 2020~~26, 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

~~(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.


(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2020	$	373,717	$	82,559	$	456,276
Acquisitions	114,833		32,715		147,548
Amortization	(33,543)		(7,152)		(40,695)
Adjustments to preliminary purchase price allocations	(5,089)		—		(5,089)
Balance - September 26, 2021	$	449,918	$	108,122	$	558,040

1312


6.			ACQUISITIONS

General

The Company completed 63 acquisitions in the third quarter of ~~2020~~2021 and completed 910 acquisitions in the ~~first~~ nine months ~~of 2020~~ended September 26, 2021 (the ~~"2020~~"2021 Acquisitions"). For the third quarter and nine months ended September ~~27, 2020,~~26, 2021, net sales included in the Company's condensed consolidated statements of income related to the ~~2020~~2021 Acquisitions were ~~$19.6~~$84.0 million and ~~$23.3~~$146.1 million, ~~respectively. Operating~~respectively, and operating income ~~related~~was $6.6 million and $12.6 million, respectively, for each of these periods. One of the 2021 Acquisitions accounted for $53.5 million in net sales and $2.6 million in operating income for the third quarter of 2021 and $85.6 million in net sales and $4.5 million in operating income for the nine months ended September 26, 2021. Acquisition-related costs associated with the businesses acquired in the third quarter of 2021 and first nine months of 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 a one year measurement period. The Company completed 6 acquisitions in the third quarter of 2020 ~~Acquisitions for~~and 9 acquisitions in the nine months ended September 27, 2020. Net sales included in the Company's condensed consolidated statements of income in the third quarter and nine months ended September 27, 2020 ~~was approximately $2.1 million and $2.2 million, respectively. Acquisition-related costs incurred~~related to acquisitions completed in the first nine months of 2020 were ~~immaterial. The Company completed 2 acquisitions in the first nine months of 2019. For the third quarter~~$19.6 million and ~~first nine months ended September 29, 2019, revenue~~$23.3 million, respectively, and operating income ~~included in~~was $2.1 million and $2.2 million, respectively, for the ~~Company's condensed consolidated statements of income were immaterial. Acquisition-related costs incurred in the first nine months of 2019 were immaterial.~~same periods.

For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income.

In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company records a liability for the estimated 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,~~26, 2021, the aggregate fair value of the estimated contingent consideration payments was $9.8 million, $3.7 million of which is included in "Accrued liabilities" and $6.1 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~~$19.6 million in the aggregate. In the ~~first~~third quarter and nine months ~~of 2020,~~ended September 26, 2021, the Company made $1.5 million and $2.5 million in cash payments, ~~of $2.0 million~~respectively, related to contingent consideration ~~arrangements, recording~~liabilities. In connection with cash payments on contingent consideration, the Company recorded a ~~corresponding reduction~~$0.9 million charge in selling general and administrative expense in the condensed consolidated statement of income for the nine months ended September 26, 2021, representing changes from the amounts initially expected to ~~accrued liabilities.~~be paid to what was ultimately paid.

~~2020~~2021 Acquisitions

~~Acquisitions~~The Company completed 10 acquisitions in the ~~first~~ nine months ~~of 2020 include~~ended September 26, 2021, including the following 5 previously announced acquisitions:

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, retailers, and manufacturers that provides plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington

Hyperform, Inc.

Manufacturing

Manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida

Alpha Systems, LLC

Manufacturing & Distribution

Manufacturer and distributor of component products and accessories for the recreational vehicle ("RV"), marine, manufactured housing and industrial end markets that includes adhesives, sealants, rubber roofing, roto/blow molding, injection molding, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of 9 facilities in Elkhart, Indiana.

Coyote Manufacturing Company

Manufacturing

Designer, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia.

Tumacs Covers

Manufacturing & Distribution

Manufacturer of custom designed boat covers, canvas frames, and bimini tops, primary serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan.

Inclusive of 5 acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $298.4 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2021 Acquisitions accounted for $149.3 million in cash and $10.2 million in common stock as consideration, $25.8 million in inventory, $28.4 million in fixed assets, $85.0 million in intangible assets, $18.1 million in accounts payable and accrued liabilities, $11.5 million in operating lease right-of-use assets and liabilities, and $33.6 million in goodwill. The preliminary purchase price allocations are subject to valuation activities being finalized, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2021 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

2020 Acquisitions

The Company completed 11 acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"), including the following 7 previously announced 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~~$306.3 million, plus contingent consideration over a ~~maximum of a one-year~~one to three-year period based on future ~~performance~~results in connection with certain acquisitions. ~~The preliminary purchase price allocations are subject to valuation activities being finalized,~~One of the 2020 Acquisitions accounted for $129.7 million in cash consideration, $2.9 million in inventory, $49.3 million in fixed assets, $49.1 million in intangible assets, $2.6 million in accounts payable and ~~thus all required purchase~~accrued liabilities, $4.9 million in operating lease right-of-use assets and liabilities, and $32.6 million in goodwill. Purchase accounting adjustments are ~~subject to change within the measurement period as the Company finalizes its estimates.~~complete on all 2020 Acquisitions. Changes to preliminary purchase accounting estimates recorded in the third quarter and ~~first~~ nine months ~~of 2020~~ended September 26, 2021 related to the 2020 Acquisitions were ~~immaterial. The 2020 Acquisitions are included in~~immaterial and relate primarily to 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~~valuation of ~~Topline Counters, LLC ("Topline Counters"), a Sumner, Washington-based designer~~intangible and ~~manufacturer of~~fixed assets.

1415

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 related to the 2019 Acquisitions were immaterial. The 2019 Acquisitions are included in the Manufacturing segment.

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	$	298,384	$	306,319
Working capital holdback and other, net(1)	1,189		(37)
Common stock issuance(2)	10,211		—
Contingent consideration(3)	4,540		4,763
Total consideration	$	314,324	$	311,045

Assets Acquired
Trade receivables	$	18,582	$	15,320
Inventories	46,099		25,395
Prepaid expenses & other	975		725
Property, plant & equipment	53,570		65,083
Operating lease right-of-use assets	16,438		20,029
Identifiable intangible assets	147,495		130,981
Liabilities Assumed
Current portion of operating lease obligations	(3,984)		(2,721)
Accounts payable & accrued liabilities	(26,171)		(12,405)
Operating lease obligations	(12,454)		(17,308)
Deferred tax liabilities	(1,996)		(4,576)
Total fair value of net assets acquired	238,554		220,523
Goodwill(4)	75,770		90,522
	$	314,324	$	311,045

(1) Certain acquisitions contain working capital holdbacks which are typically settled after a 90-day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of September 26, 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
(2) In connection with one acquisition, the Company issued 113,961 shares of common stock at a closing price of $89.60 as of the acquisition date.

~~(1)~~(3) These amounts reflect the ~~preliminary estimated liability pertaining to the~~acquisition date fair value of contingent consideration based on future ~~performance~~results relating to certain acquisitions.

~~(2)~~(4) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $6.2 million), and the 2020 Acquisitions, except Front Range Stone (approximately ~~$14.1~~$11.0 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.

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

(thousands)
Estimated Useful Life (in years) 2020 Acquisitions 2019 Acquisitions
Customer relationships 10 $ 37,723 $ 18,112
Non-compete agreements 5 492 150
Trademarks Indefinite 11,230 5,453
$ 49,445 $ 23,715

We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation on the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete agreements are valued using a discounted cash flow approach, which is a variation of an income approach, with and without the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.

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


(thousands, except year info)	Estimated Useful Life (in years)	2021 Acquisitions		2020 Acquisitions
Customer relationships	10	$	92,453	$	99,897
Non-compete agreements	5	3,255		1,150
Patents	10 - 18	13,450		6,470
Trademarks	Indefinite	38,337		23,464
		$	147,495	$	130,981

Pro Forma Information

The following pro forma information for the third quarter and nine months ended September 27, 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~~$0.2 million and ~~$2.2~~$4.0 million for the third quarter and nine months ended September 26, 2021, respectively and $5.2 million and $16.3 million for the third quarter and nine months ended September 27, 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


	Third Quarter Ended				Nine Months Ended
(thousands, except per share data)	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
Revenue	$	1,067,111	$	802,753	$	3,040,971	$	2,049,211
Net income	58,190		43,183		172,574		66,967
Basic net income per common share	2.55		1.90		7.56		2.94
Diluted net income per common share	2.49		1.87		7.38		2.90

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~~approximately $7.0 million and ~~$11.2~~$17.3 million ~~for~~ the third quarter and nine months ended September ~~27, 2020,~~26, 2021, 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~~$4.9 million and ~~adjustments~~$11.2 million was recorded in ~~the amount of $2.3 million. For~~ the third quarter and nine months ended September ~~29, 2019,~~27, 2020, which includes a $2.3 million reduction of expense in the ~~Company recorded stock-based compensation expense of $3.8 million~~nine month period due to certain forfeitures and ~~$12.0 million, respectively.~~

adjustments.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first nine months of ~~2020~~2021 totaling ~~275,740~~296,073 shares in the aggregate at an average fair value of ~~$53.78 per share~~$73.31 at grant date for a total fair value at grant date of ~~$14.8~~$21.7 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,~~26, 2021, there was approximately ~~$25.5~~$31.5 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~~18.5 months.


8.			NET INCOME PER COMMON SHARE

Net income per common share calculated for the third quarter and nine months of ~~2020~~2021 and ~~2019~~2020 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


	Third Quarter Ended				Nine Months Ended
(thousands except per share data)	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
Net income for basic and diluted per share calculation	$	57,397	$	37,336	$	163,895	$	59,237
Weighted average common shares outstanding - basic	22,789		22,674		22,826		22,784
Effect of potentially dilutive securities	614		398		549		304
Weighted average common shares outstanding - diluted	23,403		23,072		23,375		23,088
Basic net income per common share	$	2.52	$	1.65	$	7.18	$	2.60
Diluted net income per common share	$	2.45	$	1.62	$	7.01	$	2.57

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.~~method for all periods presented.


9.			DEBT

A summary of total debt outstanding at September ~~27, 2020~~26, 2021 and December 31, ~~2019~~2020 is as follows:


(thousands)	(thousands)	September 27, 2020		December 31, 2019		(thousands)	September 26, 2021		December 31, 2020
Long-term debt:	Long-term debt:					Long-term debt:
1.0% convertible notes due 2023	1.0% convertible notes due 2023	$	172,500	$	172,500	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
Term loan due 2026						Term loan due 2026	148,125		92,500
Revolver due 2026						Revolver due 2026	135,455		275,000
7.50% senior notes due 2027						7.50% senior notes due 2027	300,000		300,000
4.75% senior notes due 2029						4.75% senior notes due 2029	350,000		—
Total long-term debt	Total long-term debt	702,500		705,000		Total long-term debt	1,106,080		840,000
Less: convertible notes debt discount, net	Less: convertible notes debt discount, net	(17,958)		(23,260)		Less: convertible notes debt discount, net	(10,545)		(16,072)
Less: term loan deferred financing costs, net	Less: term loan deferred financing costs, net	(463)		(542)		Less: term loan deferred financing costs, net	(660)		(434)
Less: senior notes deferred financing costs, net	Less: senior notes deferred financing costs, net	(5,227)		(5,844)		Less: senior notes deferred financing costs, net	(9,711)		(5,087)
Less: current maturities of long-term debt	Less: current maturities of long-term debt	(5,000)		(5,000)		Less: current maturities of long-term debt	(7,500)		(7,500)
Total long-term debt, less current maturities, net	Total long-term debt, less current maturities, net	$	673,852	$	670,354	Total long-term debt, less current maturities, net	$	1,077,664	$	810,907

4.75% Senior Notes due 2029

On April 20, 2021, the Company issued $350.0 million aggregate principal amount of 4.75% Senior Notes due 2029 (the "4.75% Senior Notes"). The 4.75% Senior Notes were not registered under the Securities Act of 1933, as amended (the "Securities Act") and were offered under rule 144A under the Securities Act. The 4.75% Senior Notes will mature on May 1, 2029. Interest on the 4.75% Senior Notes started accruing April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November 1, 2021. The effective interest rate on the 4.75% Senior Notes, which includes debt issuance costs, is approximately 4.98%. In connection with the issuance of the 4.75% Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75% Senior Notes

approximately $5.3 million in deferred financing costs which are being amortized using the effective interest rate over the term of the 4.75% Senior Notes.

The 4.75% Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2021 Credit Facility (as defined herein). The Company may redeem the 4.75% Senior Notes at any time according to the following timeframes with the respective restrictions and prices:

Timeframe

Redemption Restrictions

Redemption Prices

Prior to May 1, 2024

Up to 40% of the notes

104.750%

After May 1, 2024

In whole, or in part

102.375%

After May 1, 2025

In whole, or in part

101.188%

After May 1, 2026

In whole, or in part

100.000%

2021 Credit Facility

Simultaneously with the issuance of the 4.75% Senior Notes, the Company entered into the Fourth Amended and Restated Credit Agreement (the "2021 Credit Agreement"). The 2021 Credit Agreement amended and extended the Company's 2019 Credit Agreement (as defined herein) and consists of a senior secured revolver (the "2021 Revolver") and a senior secured term loan (the "2021 Term Loan" and together with the 2021 Revolver, the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Agreement is April 20, 2026. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2021 Credit Facility by up to $250.0 million for acquisitions.

~~There~~The Company determined that the terms of the 2021 Credit Agreement were ~~no material changes~~not substantially different from the terms of the Company’s 2019 Credit Agreement. Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial.

Borrowings under the 2021 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Pursuant to ~~any of our debt arrangements during~~ the ~~third quarter and nine months ended September 27, 2020.~~2021 Credit Agreement:

•The 2021 Term Loan is due in consecutive quarterly installments in the following amounts: (i) beginning June 30, 2021, through and including March 31, 2024, $1,875,000 and (ii) beginning June 30, 2024, and each quarter thereafter, $3,750,000, with the remaining balance due at maturity;

~~Interest~~•The interest rates for borrowings under the ~~revolver~~2021 Revolver and ~~term loan~~the 2021 Term Loan are the ~~prime rate~~Prime Rate or LIBOR plus a ~~margin. At September 27, 2020, all~~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, as defined below. The Company is required to pay fees on unused but committed portions of the 2021 Revolver, which range from 0.15% to 0.225%; and

•Covenants include requirements as to a maximum consolidated secured net leverage ratio (2.75:1.00, increasing to 3.25:1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixed charge coverage ratio (1.50:1.00) that are tested on a quarterly basis, a minimum liquidity requirement applicable during the six-month period preceding the maturity of the Company's ~~borrowings~~1.00% Convertible Notes due 2023, and other customary covenants.

The total face value of the 2021 Term Loan is $150.0 million. Total available borrowing capacity under the ~~revolver~~2021 Revolver is $550.0 million. At September 26, 2021, the Company had $148.1 million outstanding under the 2021 Term Loan under the LIBOR-based option, and ~~term loan were~~borrowings outstanding under the 2021 Revolver of $135.5 million under the LIBOR-based option. The interest rate for incremental borrowings at September ~~27, 2020~~26, 2021 was LIBOR plus ~~1.5%~~1.50% (or ~~1.69%~~1.63%) for the LIBOR-based option. The fee payable on committed but unused portions of the ~~revolver~~2021 Revolver was 0.20% at September ~~27, 2020.~~26, 2021.

Total cash interest paid ~~was $3.2 million and $6.9 million~~ for the third quarter of 2021 and 2020 was $3.7 million and ~~2019,~~$3.2 million, respectively, and $21.2 million and $21.4 million ~~and $19.7 million~~ for the ~~first~~comparative nine ~~months~~month periods, respectively.

2019 Credit Facility

See Note 8 of the Notes to Consolidated Financial Statements section of the Fiscal 2020 Form 10-K regarding the Company's previous credit agreement (the "2019 Credit Agreement") which established a $550 million revolving credit loan (the "2019 Revolver") and a $100 million term loan (the "2019 Term Loan" and, together with 2019 ~~respectively.~~Revolver, the "2019 Credit Facility"). The 2019 Credit Agreement was amended by the 2021 Credit Agreement on April 20, 2021 as discussed above.


10.			DERIVATIVE FINANCIAL INSTRUMENTS

The Company's credit facility exposes the Company to risks associated with the variability in interest expense associated with fluctuations in LIBOR. To partially mitigate this risk, the Company ~~has historically~~ entered into interest rate swaps. As of September ~~27, 2020,~~26, 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	September 26, 2021		December 31, 2020
Interest rate swaps	Accrued liabilities	$	2,506	$	—
Interest rate swaps	Other long-term liabilities	$	—	$	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 months ended September ~~27, 2020~~26, 2021 and September ~~29, 2019~~27, 2020 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)


Third Quarter Ended September 26, 2021
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at June 27, 2021	$	(2,896)	$	(1,263)	$	30	$	(4,129)
Other comprehensive income (loss) before reclassifications, net of tax	(19)		—		74		55
Amounts reclassified from accumulated other comprehensive loss, net of tax	1,050		—		—		1,050
Other comprehensive income	1,031		—		74		1,105
Balance at September 26, 2021	$	(1,865)	$	(1,263)	$	104	$	(3,024)

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)


Nine Months Ended September 26, 2021
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at December 31, 2020	$	(4,889)	$	(1,263)	$	100	$	(6,052)
Other comprehensive income (loss) before reclassifications, net of tax	(70)		—		4		(66)
Amounts reclassified from accumulated other comprehensive loss, net of tax	3,094		—		—		3,094
Other comprehensive income	3,024		—		4		3,028
Balance at September 26, 2021	$	(1,865)	$	(1,263)	$	104	$	(3,024)

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)


Third Quarter Ended September 27, 2020
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at June 28, 2020	$	(6,916)	$	(1,270)	$	(106)	$	(8,292)
Other comprehensive income (loss) before reclassifications, net of tax	(38)		—		60		22
Amounts reclassified from accumulated other comprehensive loss, net of tax	1,027		—		—		1,027
Other comprehensive income	989		—		60		1,049
Balance at September 27, 2020	$	(5,927)	$	(1,270)	$	(46)	$	(7,243)

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.~~


Nine Months Ended September 27, 2020
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at December 31, 2019	$	(4,374)	$	(1,270)	$	(54)	$	(5,698)
Other comprehensive income (loss) before reclassifications, net of tax	(3,940)		—		8		(3,932)
Amounts reclassified from accumulated other comprehensive loss, net of tax	2,387		—		—		2,387
Other comprehensive income (loss)	(1,553)		—		8		(1,545)
Balance at September 27, 2020	$	(5,927)	$	(1,270)	$	(46)	$	(7,243)


12.			LEASES

Lease expense, supplemental cash flow information, and other information related to leases were as follows:


		Third Quarter Ended					Third Quarter Ended
(thousands)	(thousands)	September 27, 2020		September 29, 2019		(thousands)	September 26, 2021		September 27, 2020
Operating lease cost	Operating lease cost	$	8,525	$	7,848	Operating lease cost	$	10,760	$	8,525

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	$	8,317	$	6,946	Operating cash flows for operating leases	$	10,440	$	8,317

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	$	17,091	$	5,522	Operating leases	$	12,573	$	17,091

Nine Months Ended
(thousands) September 27, 2020 September 29, 2019
Operating lease cost $ 25,093 $ 23,536
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 24,680 $ 20,545
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 34,993 $ 14,767


	Nine Months Ended
(thousands)	September 26, 2021		September 27, 2020
Operating lease cost	$	30,697	$	25,093

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	29,945	$	24,680

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	52,564	$	34,993

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)	September 26, 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	$	142,719	$	117,816
Liabilities	Liabilities					Liabilities
Operating lease liabilities, current portion	Operating lease liabilities, current portion	$	29,565	$	27,694	Operating lease liabilities, current portion	$	36,955	$	30,901
Long-term operating lease liabilities	Long-term operating lease liabilities	76,873		66,467		Long-term operating lease liabilities	107,753		88,175
Total lease liabilities	Total lease liabilities	$	106,438	$	94,161	Total lease liabilities	$	144,708	$	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	3.9	%	4.1	%

Maturities of lease liabilities were as follows at September ~~27, 2020:~~26, 2021:


(thousands)	(thousands)			(thousands)
2020 (excluding the nine months ended September 27, 2020)		$	8,561
2021		31,924
2021 (excluding the nine months ended September 26, 2021)				2021 (excluding the nine months ended September 26, 2021)	$	10,617
2022	2022	26,328		2022	41,015
2023	2023	20,593		2023	35,238
2024	2024	14,552		2024	27,629
2025				2025	18,787
Thereafter	Thereafter	14,283		Thereafter	27,681
Total lease payments	Total lease payments	116,241		Total lease payments	160,967
Less imputed interest	Less imputed interest	(9,803)		Less imputed interest	(16,259)
Total	Total	$	106,438	Total	$	144,708

~~Leases~~As of September 26, 2021, outstanding leases have remaining lease terms ~~of one~~ranging from 1 year to ~~ten~~18 years. The Company has additional operating leases that have not yet commenced as of September 26, 2021 and, therefore, were not included as operating lease right-of-use assets and corresponding operating lease liabilities on our balance sheet at September 26, 2021. These operating leases will commence between the fourth quarter of fiscal 2021 and the second quarter of fiscal 2022 with lease terms of 5 years to 10 years. The estimated fair value of these operating lease right-of-use assets and corresponding operating lease liabilities to be recorded on our balance sheet upon lease commencement is approximately $5.8 million.


13.			FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities at September 26, 2021 and December 31, 2020:


	September 26, 2021						December 31, 2020
(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash equivalents(1)	$	41.0	$	—	$	—	$	—	$	—	$	—
7.50% senior notes due 2027(2)	—		326.3		—		—		329.0		—
4.75% senior notes due 2029(2)	—		359.7		—		—		—		—
Convertible note(2)	—		193.0		—		—		180.0		—
Term loan due 2026(3)	—		148.1		—		—		92.5		—
Revolver due 2026(3)	—		135.5		—		—		275.0		—
Interest rate swaps(4)	—		2.5		—		—		6.6		—
Contingent consideration(5)	—		—		9.8		—		—		6.9

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated ~~statements~~balance sheet as of ~~financial position~~September 26, 2021 as a component of "Cash and cash equivalents". The ~~carrying amount of~~Company held no cash equivalents ~~valued using Level 1 inputs and approximating fair value because~~as of ~~their relatively short maturities, was approximately $31.0 million and $132.6 million at September 27, 2020 and~~ December 31, ~~2019, respectively.~~2020.

(2) The ~~estimated~~amounts of these notes listed above are the current fair ~~value of our senior notes, calculated~~values for disclosure purposes only, valued using Level 2 inputs, ~~was approximately $326.1 million~~ and ~~$320.3 million at~~they are recorded in the Company's condensed consolidated balance sheets as of September ~~27, 2020~~26, 2021 and December 31, ~~2019, respectively.~~2020 using the interest rate method as described in Note 9.

(3) The carrying amounts of our term loan and ~~our~~ revolver, valued using Level 2 inputs, ~~approximated~~approximate fair value as of September ~~27, 2020~~26, 2021 and December 31, ~~2019~~2020 based upon their terms and conditions ~~available to the Company at those dates~~ in comparison to the terms and conditions ~~of its outstanding debt.~~available at those dates.

(4) The interest rate swaps are classified as Level 2 in the fair value hierarchy and discussed further in Note 10.

(5) The estimated fair value of ~~our convertible notes, calculated~~the Company's contingent consideration is valued using Level 23 inputs ~~was approximately $166.9 million~~ and ~~$162.5 million as of September 27, 2020 and December 31, 2019, respectively.~~is discussed further in Note 6.


14.			INCOME TAXES

The effective tax rate in the third quarter of 2021 and 2020 was 26.3% and ~~2019 was~~ 24.3% ~~and 26.0%~~, respectively, and the effective tax rate for the comparable nine month periods was ~~25.4%~~24.1% and ~~24.6%~~25.4%, respectively. The effective tax rate for ~~the third 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 ~~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~~$5.7 million.

Cash paid for income taxes, net of refunds, was $19.7 million and $43.9 million, respectively, in the third quarter and first nine months of 2021 and $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~~ in the third quarter and nine months of ~~2019, respectively.~~

2020.

2123


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 26, 2021
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	772,235	$	287,942	$	1,060,177
Intersegment sales	20,064		1,880		21,944
Total sales	792,299		289,822		1,082,121
Operating income	91,370		31,187		122,557


Third Quarter Ended September 27, 2020
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	494,274	$	206,433	$	700,707
Intersegment sales	12,004		1,640		13,644
Total sales	506,278		208,073		714,351
Operating income	63,312		16,444		79,756

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 26, 2021
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	2,102,032	$	828,581	$	2,930,613
Intersegment sales	49,914		4,800		54,714
Total sales	2,151,946		833,381		2,985,327
Operating income	269,227		83,563		352,790


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

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


	Third Quarter Ended				Nine Months Ended
(thousands)	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
Operating income for reportable segments	$	122,557	$	79,756	$	352,790	$	164,776
Unallocated corporate expenses	(14,526)		(9,706)		(55,075)		(23,962)
Amortization	(14,758)		(10,221)		(40,695)		(29,600)
Consolidated operating income	$	93,273	$	59,829	$	257,020	$	111,214

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

The following table presents an allocation of total assets to the reportable segments of the Company and a reconciliation to consolidated total assets:


(thousands)	September 26, 2021		December 31, 2020
Manufacturing assets	$	1,838,583	$	1,337,920
Distribution assets	453,839		343,170
Assets for reportable segments	2,292,422		1,681,090
Corporate assets unallocated to segments	21,154		27,578
Cash and cash equivalents	44,882		44,767
Consolidated total assets	$	2,358,458	$	1,753,435


16.			STOCK REPURCHASE PROGRAMS

In March 2020, the Board approved a new stock repurchase program for up to $50 million of its common stock, including amounts remaining under previous authorizations. In August 2021, the Company's Board authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program to $50 million, including the $14.4 million remaining under the previous authorization. Approximately ~~$38.8~~$39.6 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.~~26, 2021. The Company repurchased 128,929 shares of its common stock at an average price of $80.62 for an aggregate cost of $10.4 million in the third quarter ended September 26, 2021 and repurchased 388,929 shares of its common stock at an average price of $82.14 for an aggregate cost of $31.9 million in the nine months ended September 26, 2021. Prior to 2021, the Company retired shares as repurchased. Beginning in 2021, the Company elected not to retire shares as repurchased and the shares repurchased in the first six months of 2021 were instead held as "Treasury Stock." However, the Company retired these shares during the third quarter ended September 26, 2021 and has elected to retire shares immediately upon repurchase going forward. In the third quarter ofended September 27, 2020, the Company repurchased 88,950 shares of its common stock at an average price of $53.24 per share for an aggregate cost of ~~approximately~~ $4.7 million. In the first nine months ofended September 27, 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~~


17.			COMMITMENTS AND CONTINGENCIES

The Company is subject to proceedings, lawsuits, audits, and other claims arising in the ~~third quarter~~normal course of business. All such matters are subject to uncertainties and ~~first nine months~~outcomes that are not predictable with assurance. Accruals for these items, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are adjusted from time to time as developments warrant.

Although the ultimate outcome of ~~2019,~~these matters cannot be ascertained, on the ~~Company repurchased 98,201 shares at an average price~~basis of ~~$36.50 per share~~present information, amounts already provided, availability of insurance coverage and legal advice received, it is the opinion of management that the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Certain of our customers in the RV end market recently have initiated recalls involving certain products which are sold by our Distribution segment. We are currently evaluating the extent to which this matter will impact our consolidated financial statements. At this time, we are unable to reasonably estimate any such impact.


18.			SUBSEQUENT EVENTS

In November 2021, we completed the acquisition of Wet Sounds, Inc., a manufacturer of premium audio products and accessories for ~~an aggregate cost of approximately $3.6 million.~~the marine OEM market and aftermarket as well as other adjacent OEM markets and aftermarkets. Products include speakers, subwoofers, amplifiers, soundbars, and media units. Wet Sounds, Inc. is headquartered in Rosenberg, Texas.

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~~Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on page 3134 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 Quarter and Nine Months ~~2020~~2021 Financial Overview

Recreational Vehicle ("RV") Industry

The RV industry is our largest market and comprised 60% ~~and 55%~~ of the Company’s sales in the third quarter ended September 26, 2021 and September 27, 2020, ~~and September 29, 2019,~~ respectively, and ~~55%~~59% and ~~56%~~55% for the comparative ~~2020~~2021 and ~~2019~~2020 nine month periods. Sales to the RV industry increased ~~36%~~50% in the third quarter of ~~2020~~2021 and ~~decreased 5%~~increased 83% in the first nine months of ~~2020,~~2021, compared to the prior year periods.

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 152,400 units in the third quarter of ~~2019. Towable and motorized wholesale unit shipments increased 37% and 5%, respectively, for~~2021, an increase of 23% compared to approximately 124,100 units in the third quarter of ~~2020 compared to the prior year quarter. Wholesale~~2020. RVIA indicated that wholesale unit shipments for the first nine months of ~~2020 decreased 3%, totaling~~ ~~300,100~~2021 totaled approximately 452,600 units, an increase of 51% compared to ~~309,938~~approximately 300,200 units in the

prior ~~year period. Towable and motorized~~year. The increase in 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~~in the third quarter and first nine months of ~~2020, respectively. The~~2021 is attributed to a continued increase in RV dealer demand for RV units. In addition, the increase in the first nine months of 2021 reflects the comparison to the sharp decrease in wholesale unit shipments in the second quarter of 2020, which was a result of COVID-19-related production shutdowns at original equipment manufacturers' plants. This increase in dealer demand is correlated with consumer demand for RV units, which we believe reflects changes in consumer recreation patterns, which include an increased interest in outdoor recreation. According to our estimates, RV dealer inventories are trending at historical lows relative to what we understand to be historical customary inventory levels of RV dealers. We believe that the supply-demand dynamics of historically low dealer inventory levels, combined with strong retail consumer demand, have resulted in positive momentum in our RV end market. We estimate RV retail unit sales decreased 15-20% in the third quarter of 2021 in comparison to the third quarter of 2020 as a result of supply-chain constraints and low dealer inventory levels as well as particularly strong retail ~~RV shipments~~sales in the third quarter of 2020 ~~was attributed to an increase in consumer demand in~~as leisure lifestyle activities recovered following the COVID-19-related slowdown. We estimate RV ~~industry against a background of low dealer inventory. The decrease in wholesale shipments in the first nine months of 2020 is largely attributed to COVID-19 market disruptions. The increase in~~ retail unit sales increased 15% for the first nine months of ~~2020 is largely due~~2021 compared 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.prior year period.

Marine Industry

Sales to the marine industry, which represented approximately ~~14%~~16% and ~~13%~~14% of the Company's consolidated net sales in the third quarter of 2021 and 2020, respectively, increased 85% compared to the prior year quarter. For the first nine months of 2021 and 2020, sales to the marine industry represented 16% and 14% of consolidated net sales, respectively, increasing 107% in 2021 compared to the prior year period.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments which, according to National Marine Manufacturers Association ("NMMA"), increased an estimated 15% for the third quarter 2021 and increased an estimated 16% for the first nine months of 2021 compared to the prior year periods. Marine retail powerboat unit sales decreased 31% in the third quarter of 2021 and decreased 6% for the first nine months of 2021 compared to the prior year periods as a result of supply-chain constraints and low dealer inventory levels as well as particularly strong retail sales in the third quarter of 2020 ~~and 2019, respectively, increased 25% in~~as leisure lifestyle activities recovered following the ~~third quarter of 2020 compared to the prior year quarter. Sales to the~~COVID-19-related slowdown. We estimate that, despite these decreases, marine ~~industry, representing 14% of~~retail sales ~~in the first nine months of 2020 and 2019, decreased 10% in the 2020 period compared to the prior year period.~~

~~For the third quarter of 2020, overall~~exceeded 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 inboth the third ~~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~~2021, resulting in marine ~~wholesale unit shipments~~dealer inventory levels that we believe are at their lowest 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.

at least a decade.

Manufactured Housing ("MH") Industry

Sales to the MH industry, which represented ~~15%~~13% and ~~19%~~15% of the Company’s sales in the third quarter of 2021 and 2020, ~~and 2019,~~ respectively, ~~decreased 1%~~increased 25% in the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. MH sales represented 14% and 18% of the Company's sales for the first nine months of 2021 and 2020, respectively, and ~~2019 and decreased 5%~~increased 27% in the first nine months of ~~2020~~2021 compared to the ~~prior~~prior year period. Based on industry data from the Manufactured Housing Institute, MH wholesale unit shipments ~~decreased by approximately~~ 2%increased 9% in the third quarter of ~~2020 compared to the prior year quarter~~2021 and ~~decreased~~ 2% increased 14% for the first nine months of ~~2020~~2021 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.

periods.

Industrial Market

The industrial market is comprised primarily of the kitchen cabinet and countertop industry, hospitality market, retail and commercial fixtures market, office and household furniture market and regional distributors. Sales to this market represented 11% ~~and 13%~~ of our sales in the third quarter of 2021 and 2020, and ~~2019, respectively, and~~ increased 9%52% in the third quarter of ~~2020~~2021 compared to the prior year quarter. Sales to the industrial market represented ~~13%~~11% and ~~12%~~13% of our sales for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively, and increased 7%45% in the first nine months of ~~2020~~2021 compared to the prior year period. Overall, our revenues in these markets are focused on the residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that approximately ~~60%~~70% of our industrial business is directly tied to the residential housing market, with the remaining ~~40%~~30% directly tied to the non-residential and commercial markets.

~~Combined~~According to the U.S. Census Bureau, combined new housing starts increased ~~11%~~9% in the third quarter of ~~2020~~2021 compared to the prior year quarter, with single family housing starts increasing ~~17%~~5% and multifamily ~~residential~~housing starts ~~decreasing 1%. For~~increasing 19% for the same period. The U.S. Census Bureau also indicated that for the first nine months of ~~2020,~~2021, combined new housing starts increased ~~5% compared to the prior year period,~~20%, with single family housing starts increasing 6%20% and multifamily ~~residential~~housing starts increasing ~~4%.~~18% compared to 2020. Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to ~~nine~~six months.

REVIEW OF CONSOLIDATED OPERATING RESULTS

Third Quarter and Nine Months Ended September ~~27, 2020~~26, 2021 Compared to ~~2019~~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					Third Quarter Ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
($ in thousands)										($ in thousands)	September 26, 2021				September 27, 2020				Amount Change		% Change
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	$	1,060,177	100.0	%	$	700,707	100.0	%	$	359,470	51	%
Cost of goods sold	Cost of goods sold	80.9		81.6		81.5		81.9		Cost of goods sold	852,016		80.4	%	567,210		80.9	%	284,806		50	%
Gross profit	Gross profit	19.1		18.4		18.5		18.1		Gross profit	208,161		19.6	%	133,497		19.1	%	74,664		56	%
Warehouse and delivery		3.6		4.2		4.1		4.2
Selling, general and administrative		5.4		6.0		6.2		5.8
Warehouse and delivery expenses										Warehouse and delivery expenses	35,885		3.4	%	25,263		3.6	%	10,622		42	%
Selling, general and administrative expenses										Selling, general and administrative expenses	64,245		6.1	%	38,184		5.4	%	26,061		68	%
Amortization of intangible assets	Amortization of intangible assets	1.5		1.6		1.7		1.5		Amortization of intangible assets	14,758		1.4	%	10,221		1.5	%	4,537		44	%
Operating income	Operating income	8.5		6.6		6.5		6.6		Operating income	93,273		8.8	%	59,829		8.5	%	33,444		56	%
Interest expense, net	Interest expense, net	1.5		1.5		1.9		1.5		Interest expense, net	15,436		1.5	%	10,507		1.5	%	4,929		47	%
Income taxes	Income taxes	1.7		1.3		1.2		1.3		Income taxes	20,440		1.9	%	11,986		1.7	%	8,454		71	%
Net income	Net income	5.3		3.8		3.5		3.9		Net income	$	57,397	5.4	%	$	37,336	5.3	%	$	20,061	54	%


	Nine Months Ended
($ in thousands)	September 26, 2021				September 27, 2020				Amount Change		% Change
Net sales	$	2,930,613	100.0	%	$	1,713,984	100.0	%	$	1,216,629	71	%
Cost of goods sold	2,356,443		80.4	%	1,397,285		81.5	%	959,158		69	%
Gross profit	574,170		19.6	%	316,699		18.5	%	257,471		81	%
Warehouse and delivery expenses	100,613		3.4	%	70,204		4.1	%	30,409		43	%
Selling, general and administrative expenses	175,842		6.0	%	105,681		6.2	%	70,161		66	%
Amortization of intangible assets	40,695		1.4	%	29,600		1.7	%	11,095		37	%
Operating income	257,020		8.8	%	111,214		6.5	%	145,806		131	%
Interest expense, net	41,195		1.4	%	31,820		1.9	%	9,375		29	%
Income taxes	51,930		1.8	%	20,157		1.2	%	31,773		158	%
Net income	$	163,895	5.6	%	$	59,237	3.5	%	$	104,658	177	%

Net Sales. Net sales in the third quarter of ~~2020~~2021 increased ~~$134.5~~$359.5 million, or ~~24%~~51%, to ~~$700.7~~$1,060.2 million from ~~$566.2~~$700.7 million in the third quarter of ~~2019.~~2020. The ~~consolidated~~ net sales increase in the third quarter of ~~2020 was attributed to sales increases in three of~~2021 reflects strong demand for our products across all end markets. The Company's RV market sales increased ~~36%~~50%, marine market sales increased 85%, MH market sales increased 25%, and industrial market sales increased ~~9% and MH market sales decreased 1%~~52% when compared to the prior year quarter.

Net sales in the first nine months of ~~2020 decreased $73.6~~2021 increased $1,216.6 million, or 4%71%, to ~~$1,714.0~~$2,930.6 million from ~~$1,787.6~~$1,714.0 million in the first nine months of ~~2019.~~2020. The ~~consolidated~~ net sales ~~decrease~~increase in the first nine months of 2021 reflects sales increases in all of our end markets, while sales in the first nine months of 2020 ~~was attributed to sales decreases in three~~also reflect the impact of ~~our end markets.~~COVID-19-related production shutdowns during the second quarter of 2020. The Company's RV market sales ~~decreased 5%~~increased 83%, marine market sales ~~decreased 10% and~~increased 107%, MH market sales ~~decreased 5% while~~increased 27% and industrial market sales increased 7%45% in the first nine months of 2021 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 markets in the second quarter of 2020.

~~Revenue attributable to acquisitions completed in 2020 was $19.6 million and $23.3 million for the third quarter and first nine months of 2020, respectively.~~ Revenue attributable to acquisitions completed in the first nine months of ~~2019~~2021 was ~~immaterial~~$84.0 million in the third quarter of 2021 and $146.1 million for ~~both~~ the ~~third quarter and~~ first nine months of ~~2019.~~2021. Revenue attributable to acquisitions completed in the first nine months of 2020 was $19.6 million in the third quarter of 2020 and $23.3 million for the first nine months of 2020.

The Company’s RV content per wholesale unit (on a trailing twelve-month basis) for the third quarter of ~~2020 was relative1y flat at $3,140 versus $3,132~~2021 increased approximately 19% to $3,735 from $3,139 for the third quarter of ~~2019. Estimated marine~~2020. Marine powerboat content per wholesale ~~powerboat~~ unit (on a trailing twelve-month basis) for the third quarter of ~~2020~~2021 increased ~~16%~~approximately 66% to ~~$1,915~~an estimated $3,166 from $1,909 for the third 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 quarter of ~~2020~~2021 increased 4%approximately 10% to ~~$4,503~~$4,961 from ~~$4,327~~$4,497 for the third quarter of ~~2019.~~

2020.

Cost of Goods Sold. Cost of goods sold increased ~~$105.3~~$284.8 million, or ~~23%~~50%, to ~~$567.2~~$852.0 million in the third ~~quarter~~quarter of ~~2020~~2021 from ~~$461.9~~$567.2 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 50 basis points during the third quarter of ~~2020~~2021 to 80.4% from 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 from acquisitions completed in 2018 and 2019 and a decrease in commodity cost inputs.

2020.

Cost of goods sold ~~decreased $66.8 million, or 5%, to $1,397.3 million~~ in the first nine months ~~of 2020~~increased $959.1 million, or 69%, to $2,356.4 million from ~~$1,464.1~~$1,397.3 million in ~~2019, primarily reflecting the decrease in net sales in the period.~~2020. As a percentage of net sales, cost of goods sold decreased 110 basis points during the first nine months of ~~2020~~2021 to 80.4% from 81.5% ~~from 81.9%~~ in ~~2019.~~

2020.

Cost of goods sold as a percentage of net sales decreased in the third quarter and first nine months of ~~2020~~2021 primarily as a result of (i) continued cost ~~reductions~~reduction and automation initiatives we ~~initiated~~deployed throughout 2020 and into 2021, (ii) volume-driven efficiencies as a result of leveraging fixed overhead, (iii) a recovery from the production inefficiencies experienced while operating in ~~the third quarter of 2019, (ii)~~a COVID-19 environment, and (iv) synergies ~~achieved~~ and ~~realized in the first nine months of 2020~~different cost profiles from our ~~2018~~2021 and ~~2019~~2020 acquisitions, partially offset by an increase in labor, supply-chain constraints, and ~~(iii) decreases~~an increase 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~~$74.7 million, or ~~28%~~56%, to ~~$133.5~~$208.2 million in the third quarter of ~~2020~~2021 from ~~$104.3~~$133.5 million in ~~2019.~~2020. As a percentage of net sales, gross profit increased 50 basis points to ~~19.1%~~19.6% in the third quarter of ~~2020~~2021 from ~~18.4%~~19.1% in the same period in ~~2019.~~ 2020.

Gross profit ~~decreased $6.8~~increased $257.5 million, or 2%81%, to ~~$316.7~~$574.2 million in the first nine months of ~~2020~~2021 from ~~$323.5~~$316.7 million in ~~2019.~~2020. As a percentage of net sales, gross profit increased 110 basis points to ~~18.5%~~19.6% in the first nine months of ~~2020~~2021 from ~~18.1%~~18.5% in the same period in ~~2019.~~

2020.

The ~~changes~~increase in gross profit as a percentage of net sales in the third quarter and ~~first~~ nine months ~~of 2020~~ended September 26, 2021 compared to the same periods 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~~$10.6 million, or 6%42%, to $35.9 million in the third quarter of 2021 from $25.3 million in the third quarter of ~~2020 from $23.9 million in the third 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~~decreased 20 basis points to 3.4% in the third quarter of 2021 compared to 3.6% in the third quarter of ~~2020 compared to 4.2% in the third quarter of 2019.~~ 2020.

Warehouse and delivery expenses ~~decreased $4.0~~increased $30.4 million, or 5%43%, to $100.6 million in the first nine months of 2021 from $70.2 million in the first nine months of ~~2020 from $74.2 million in the first nine months of 2019, primarily reflecting the decrease in net sales in the period.~~2020. As a percentage of net sales, warehouse and delivery expenses ~~were 4.1%~~decreased 70 basis points to 3.4% in the first nine months of ~~2020~~2021 compared to ~~4.2%~~4.1% in the ~~same period in 2019.~~

prior year period.

The ~~decrease~~increases in warehouse and delivery expenses are attributable to the significant increases in sales. However, the decreases as a percentage of ~~net~~ sales ~~for~~are primarily attributable to leveraging certain fixed warehousing costs and the lower proportion of MH sales in the third quarter and first nine months of 2021 as compared to 2020, ~~primarily reflects~~which have higher warehouse and delivery costs as a percentage of net sales. In addition, the ~~fixed nature of certain of these expenses and operating efficiencies as net sales increased in the third quarter~~first nine months of 2020 ~~compared to the prior year period.~~

reflect operating inefficiencies associated with COVID-19.

Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased ~~$4.4~~$26.0 million, or ~~13%~~68%, to ~~$38.2~~$64.2 million in the third quarter of ~~2020~~2021 from ~~$33.8~~$38.2 million in the prior year quarter. As a percentage of net sales, SG&A expenses were 6.1% in the third quarter of 2021 compared to 5.4% in the third quarter of ~~2020 compared to 6.0% in the third quarter of 2019.~~

2020.

SG&A expenses increased ~~$1.3~~$70.1 million, or 1%66%, to $175.8 million in the first nine months of 2021 from $105.7 million in the first nine months of ~~2020 from $104.4 million in the prior year period.~~2020. As a percentage of net sales, SG&A expenses were 6.0% in the first nine months of 2021 compared to 6.2% in the first nine months of ~~2020 compared to 5.8% in the prior year period.~~

2020.

The ~~increase~~increases in SG&A expenses in the third quarter and first nine months of 2021 compared to 2020 are primarily due to (i) the increase in net sales; (ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital and other initiatives to support the size and growth of the Company and (iii) the comparison to the prior year, which includes SG&A cost reduction measures implemented in the second 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 inthat continued into the third quarter of ~~2020~~2020. As a percentage of sales, SG&A expenses increased 70 basis points for the third quarter of 2021 compared to the third quarter of 2020. This increase is primarily ~~attributed~~a result of the aforementioned investment in human capital in order to further support the ~~increase in net~~size and growth of the Company. As a percentage of sales, SG&A expenses decreased 20 basis points for the first nine months of 2021 when compared to the prior year ~~period.~~

~~The increase in~~period, primarily reflecting the fixed nature of certain SG&A ~~expenses in the first nine months of 2020 as a percentage of revenue is attributed to the decline in net sales from the impact of~~costs and operating inefficiencies associated with COVID-19 ~~discussed above.~~

during 2020.

Amortization of Intangible Assets. Amortization of intangible assets increased ~~$1.0~~$4.6 million, or ~~11%~~44%, to ~~$10.2~~$14.8 million in the third quarter of ~~2020~~2021 from ~~$9.2~~$10.2 million in the prior year ~~quarter and~~quarter. Amortization of intangible assets increased ~~$3.2~~$11.1 million, or ~~12%~~37%, to $40.7 million in the first nine months of 2021 from $29.6 million in the first nine months of ~~2020 from $26.4 million in the prior year period.~~2020. The ~~increase~~increases in the third quarter and first nine months of ~~2020~~2021 compared to the prior year periods primarily ~~reflects~~reflect the impact of businesses acquired in ~~2019~~2020 and ~~2020.~~

2021.

Operating Income. Operating income increased ~~$22.4~~$33.5 million, or ~~60%~~56%, to ~~$59.8~~$93.3 million in the third quarter of ~~2020~~2021 from ~~$37.4~~$59.8 million in ~~2019.~~2020. As a percentage of net sales, operating income ~~was 8.5%~~increased 30 basis points to 8.8% in the third quarter of ~~2020~~2021 versus ~~6.6%~~8.5% in the same period in ~~2019.~~2020. Operating income ~~decreased $7.3~~increased $145.8 million, or 6%131%, to ~~$111.2~~$257.0 million in the first nine months of

~~2020~~ 2021 from ~~$118.5~~$111.2 million in ~~2019.~~2020. As a percentage of net sales, operating income ~~was 6.5%~~

increased 230 basis points to 8.8% in the first nine months of ~~2020~~2021 versus ~~6.6%~~6.5% 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~~$4.9 million, or ~~22%~~47%, to ~~$10.5~~$15.4 million in the third quarter of ~~2020~~2021 from ~~$8.6~~$10.5 million in the prior year. ~~For~~Interest expense increased $9.4 million, or 29%, to $41.2 million in the first nine months of ~~2020, interest expense increased $5.6 million, or 21%, to~~2021 from $31.8 ~~million from $26.2~~ million in the prior ~~year period.~~

year.

The increase in interest expense ~~in the third quarter and first nine months of 2020~~ reflects (i) increased borrowings related to ~~2019~~2020 and ~~2020~~2021 acquisitions and ~~an increase~~(ii) the Company's issuance of its 4.75% Senior Notes due 2029 (the "4.75% Senior Notes") in April 2021 (as described in Note 9 in the ~~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.~~

Notes to Condensed Consolidated Financial Statements).

Income Taxes. Income tax expense increased ~~$4.5 million, or 60%, to $12.0~~$8.4 million in the third quarter of ~~2020~~2021 to $20.4 million from ~~$7.5~~$12.0 million in the prior year period. ~~For~~Income tax expense increased $31.7 million in the first nine months of ~~2020, income tax expense decreased $2.5~~2021, to $51.9 million ~~or 11%, to~~from $20.2 ~~million for the first nine months of 2020 from $22.7~~ million in the prior year period.

The increase in income tax expense is due primarily to an increase in pretax income. The effective tax rate in the third quarter of 2021 and 2020 was 26.3% 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 the effective tax rate~~rates in the first nine months of 2021 and 2020 ~~reflects $2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief,~~were 24.1% and ~~Economic Security Act payroll tax credits. In addition, the effective tax~~25.4%, respectively. The 2021 rate ~~for the first nine months of 2019~~ includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense ~~upon realization~~ in the amount of ~~$0.9 million.~~

$5.7 million, while the 2020 rate reflects the impact of $2.2 million in permanent tax differences due to certain Coronavirus Aid Relief and Economic Security Act payroll tax credits.

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 Quarter and Nine Months Ended September ~~27, 2020~~26, 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
(thousands)	September 26, 2021		September 27, 2020		Amount Change		% Change
Sales
Manufacturing	$	792,299	$	506,278	$	286,021	56%
Distribution	289,822		208,073		81,749		39%
Gross Profit
Manufacturing	149,139		97,543		51,596		53%
Distribution	57,349		36,293		21,056		58%
Operating Income
Manufacturing	91,370		63,312		28,058		44%
Distribution	31,187		16,444		14,743		90%

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


	Nine Months Ended
(thousands)	September 26, 2021		September 27, 2020		Amount Change		% Change
Sales
Manufacturing	$	2,151,946	$	1,230,805	$	921,141	75%
Distribution	833,381		511,895		321,486		63%
Gross Profit
Manufacturing	420,625		225,447		195,178		87%
Distribution	158,047		88,627		69,420		78%
Operating Income
Manufacturing	269,227		131,426		137,801		105%
Distribution	83,563		33,350		50,213		151%

Manufacturing

Sales. Sales increased ~~$98.5~~$286.0 million, or ~~24%~~56%, to ~~$506.3~~$792.3 million in the third quarter of ~~2020~~2021 from ~~$407.8~~$506.3 million in the prior year quarter. For the first nine months of ~~2020,~~2021, sales ~~decreased $53.0~~increased $921.1 million, or 4%75%, to ~~$1,230.8~~$2,151.9 million from ~~$1,283.8~~$1,230.8 million in the prior year period. This segment accounted for approximately 73% and 71% of the Company’s ~~consolidated net~~ sales for the third quarter of 2021 and 2020, respectively, and ~~2019,~~72% and ~~70% of the Company's consolidated net sales~~71% for the first nine months of 2021 and 2020, ~~and 2019.~~respectively. The sales increase in the third quarter of 2021 compared to 2020 ~~largely reflected~~was attributed to sales increases in all four of the Company's end markets, where sales to the RV end market increased 49%, marine increased 85%, MH increased 43% and industrial ~~markets compared to the prior year quarter.~~increased 56%. The sales ~~decrease~~increase for the first nine months of ~~2020~~2021 compared to the prior year period was ~~primarily~~also attributed to sales ~~decreases~~increases in ~~our primary~~all four end markets, ~~as a result of business disruptions~~where RV end market sales increased 77%, marine increased 107%, MH increased 49% and ~~lost production and shipping days due to the COVID-19 pandemic that occurred primarily~~industrial increased 47%. Net sales in the ~~second~~third quarter and first nine months of ~~2020.~~2021 attributable to acquisitions completed in the first nine months of 2021 were approximately $63.4 million and

$110.1 million, respectively, and net sales in the third quarter and first nine months of 2020 attributable to acquisitions completed in the first nine months of 2020 were $13.2 million and $17.0 million, respectively.

Gross Profit. Gross profit increased ~~$23.8~~$51.6 million, or ~~32%~~53%, to $149.1 million in the third quarter of 2021 from $97.5 million in the third quarter of ~~2020 from $73.7 million in the third quarter of 2019.~~2020. For the first nine months of ~~2020,~~2021, gross profit ~~decreased $5.8~~increased $195.2 million, or 2%87%, to $420.6 million from $225.4 million ~~from $231.2 million~~ in ~~2019.~~the prior year period. As a percentage of sales, gross profit ~~increased~~decreased to 18.8% in the third quarter of 2021 from 19.3% in the third quarter of 2020 ~~from 18.1% in the third quarter of 2019~~ and increased to ~~18.3%~~19.5% in the first nine months of ~~2020~~2021 from ~~18.0%~~18.3% in the prior year period.

Gross profit ~~as a percentage~~margin decreased during the third quarter of ~~net sales increased during the~~2021 compared to third quarter of 2020 primarily due to ana 250 basis point increase in ~~net sales relative to certain fixed components of costs of goods sold as well~~manufacturing material expense as a ~~decrease~~percentage of sales due to the impacts of supply chain constraints and increased material costs, partially offset by an improvement of 90 basis points in ~~commodity cost inputs.~~ manufacturing labor and 120 basis points in manufacturing overhead as a percentage of sales.

Gross profit margin increased during the first nine months of 2021 compared to the same period in 2020 primarily due to (i) a 250 basis point improvement in manufacturing overhead expense as a percentage of net sales, ~~increased~~and (ii) an 80 basis point improvement in ~~first nine months~~direct labor as a percentage of ~~2020 compared to the prior year period primarily due to a decrease in commodity cost inputs,~~net sales, partially offset by ~~operational and labor inefficiencies~~a 200 basis point increase in material costs as a ~~result~~percentage of ~~business disruptions from the COVID-19 pandemic incurred in the second quarter of 2020.~~

sales.

Operating Income. Operating income increased ~~$20.9~~$28.1 million, or ~~49%~~44%, to ~~$63.3~~$91.4 million in the third quarter of ~~2020~~2021 from ~~$42.4~~$63.3 million in the prior year quarter. For the first nine months of ~~2020,~~2021, operating income ~~decreased $4.2~~increased $137.8 million, or 3%105%, to ~~$131.4~~$269.2 million from ~~$135.6~~$131.4 million in the prior year. The overall increase in operating income in the third quarter of 2020 and the overall decrease in operating income in the first nine months of 2020 primarily reflects the items discussed above.

~~Distribution~~

~~Sales.~~ ~~Sales increased $40.6 million, or 24%, to $208.1 million in the third quarter of 2020 from $167.5 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 quarter of 2020 and 2019, and 30% of consolidated net sales for the first nine months of 2020 and 2019. The sales increase in the third quarter of 2020 was primarily attributed to sales increases in our RV, marine, and industrial markets. The decrease in sales in 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, primarily in the second quarter of 2020.~~

~~Gross Profit.~~ Gross profit increased $8.3 million, or 30%, to $36.3 million in the third quarter of 2020 from $28.0 million in the third 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. As a percentage of sales, gross profit increased to 17.4% in the third quarter of 2020 from 16.7% in the third quarter of 2019 and increased to 17.3% in the first nine months of 2020 from 16.5% in the prior year period.

As a percentage of sales, gross profit increased during the third quarter of 2020 compared to the prior year quarter primarily due to realized synergies from certain 2018 and 2019 acquisitions. For 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.

~~Operating Income.~~ Operating income increased $7.4 million, or 82%, to $16.4 million in the third quarter of 2020 from $9.0 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 in operating income in the third quarter and first nine months of ~~2020~~2021 primarily reflects the items discussed above.

Distribution

Sales. Sales increased $81.7 million, or 39%, to $289.8 million in the third quarter of 2021 from $208.1 million in the prior year quarter. For the first nine months of 2021, sales increased $321.5 million, or 63%, to $833.4 million from $511.9 million in the prior year period. This segment accounted for approximately 27% and 29% of the Company’s sales for the third quarter of 2021 and 2020, respectively, and 28% and 29% of sales for the first nine months of 2021 and 2020, respectively. The sales increase in the third quarter of 2021 compared to the third quarter of 2020 was attributed to a 52% increase in our RV market sales, an 85% increase in marine market sales, an 11% increase in MH market sales, and a 25% increase in industrial market sales. The sales increase in the first nine months of 2021 compared to the same period in 2020 was attributed to a 97% increase in RV market sales, a 103% increase in marine market sales, a 12% increase in MH market sales and a 31% increase in industrial market sales. Net sales in the third quarter and first nine months of 2021 attributable to acquisitions completed in the first nine months of 2021 were approximately $20.6 million and $36.0 million, respectively, and net sales in the third quarter and first nine months of 2020 attributable to acquisitions completed in the first nine months of 2020 was approximately $6.5 million.

Gross Profit. Gross profit increased $21.0 million, or 58%, to $57.3 million in the third quarter of 2021 from $36.3 million in the third quarter of 2020. For the first nine months of 2021, gross profit increased $69.4 million, or 78%, to $158.0 million from $88.6 million the prior year period. As a percentage of sales, gross profit increased to 19.8% in the third quarter of 2021 from 17.4% in the third quarter of 2020, and increased to 19.0% for the first nine months of 2021 from 17.3% for the prior year period. The increase in gross profit margin in the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020 is primarily attributed to the higher margin profiles of certain 2020 and 2021 acquisitions and leveraging of certain fixed costs.

Operating Income. Operating income increased $14.8 million, or 90%, to $31.2 million in the third quarter of 2021 from $16.4 million in the prior year quarter. For the first nine months of 2021, operating income increased $50.2 million or 151%, to $83.6 million from $33.4 million the prior year period. The improvement in operating income in the third quarter and first nine months of 2021 primarily reflects the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity at September ~~27, 2020~~26, 2021 consisted of cash and cash equivalents of ~~$62.3~~$44.9 million ~~and $410.3~~as well as $409.3 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 $34.6 million to $147.4 million in the first nine months of 2021 from $112.8 million in the first nine months of ~~2020 from $122.0 million in the first nine months of 2019~~2020. The increase is primarily ~~due~~attributable to (i) a ~~decrease of~~$104.7 million increase in net income ~~of $10.4~~and (ii) a $23.3 million ~~due to disruptions in our end markets as a result of the COVID-19 pandemic; (ii) an~~ increase in ~~the use~~depreciation and amortization. These increases in sources 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~~operations were ~~partially~~ offset by an increase in use of ~~depreciation~~cash for net working capital of $108.4 million, associated primarily with investments in inventory to support customer needs and ~~amortization~~growth of ~~$6.5 million and other items of $2.8 million.~~accounts receivable in line with net sales.

Investing Activities

Net cash used in investing activities increased ~~$105.3~~$198.3 million to $343.7 million in the first nine months of 2021 from $145.4 million in the first nine months of 2020 ~~from $40.1 million in the first nine months of 2019~~ primarily due to an increase in cash used in business acquisitions of ~~$101.0~~$174.3 million and a ~~decrease~~$22.0 million increase in ~~proceeds from sale of property, plant, and equipment and other investing activities of $4.4 million.~~capital expenditures.

Financing Activities

Net cash ~~flows used~~provided by financing activities increased ~~$72.2~~$240.8 million to ~~$44.4 million in first nine months of 2020 from a source of cash of $27.8~~$196.4 million in the first nine months of ~~2019 primarily due to (i) the issuance~~2021 from a $44.4 million use of ~~$300 million of senior notes~~cash in the first nine months of ~~2019 with no comparable amount in~~2020. The increase is primarily due to (i) proceeds of $350.0 million from the ~~first nine months~~Company's issuance of ~~2020;~~its 4.75% Senior Notes and (ii) ~~cash dividends paid to shareholders of $17.3~~an additional $58.8 million in ~~the first nine months~~term loan borrowings. These sources of ~~2020 with no corresponding amount in the prior year period and (iii) an increase in stock repurchases under our buyback program of $16.7 million. These increases in~~ cash ~~used in financing activities~~ were partially offset by (i) ~~a decrease~~an additional $139.6 million in net revolver repayments, ~~on our revolving credit facility and term loan of $251.1 million;~~ (ii) a ~~decrease~~$12.0 million increase in taxes paid for share-based payment ~~of deferred financing costs of $7.2 million~~arrangements and (iii) a ~~decrease~~$13.8 million increase in ~~the payment of contingent consideration from a business acquisition~~stock repurchases and ~~other financing activities of $3.5 million.~~

dividends to shareholders.

Summary of Liquidity and Capital Resources

~~The~~At September 26, 2021, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its ~~credit facility~~2021 Credit Facility (as defined herein) are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.

The Company's credit facility consists of a $550 million senior secured revolver and a $100 million senior secured term loan. The maturity date for borrowings under the credit agreement that established the credit facility is September 17, 2024. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the credit facility by up to $250 million. Borrowings under the credit facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Pursuant to the credit agreement:

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

•~~The interest rates for borrowings under the revolver and the term loan are the Prime Rate or LIBOR~~

~~plus a margin, which ranges from 0.00% to 0.75% for Prime Rate loans and from 1.00% to 1.75% for LIBOR~~

~~loans depending on the Company’s consolidated total leverage ratio. The Company is required to pay fees on unused but committed portions of the revolver, which range from 0.15% to 0.225%.~~

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, the Company had $410.3 million of unused borrowing availability under its credit facility. The~~ ability to access unused borrowing capacity under the ~~credit facility~~2021 Credit Facility as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the credit ~~agreement.~~agreement that established the 2021 Credit Facility (the "2021 Credit Agreement").

As of and for the September ~~27, 2020~~26, 2021 reporting date, the Company was in compliance with its financial covenants as required under the terms of its ~~credit agreement.~~2021 Credit Agreement. The required maximum consolidated ~~total~~secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the ~~credit agreement,~~2021 Credit Agreement, compared to the actual amounts as of September ~~27, 2020~~26, 2021 and for the fiscal period then ended are as follows:


	Required	Actual
Consolidated secured net leverage ratio (12-month period)	2.75	0.48
Consolidated fixed charge coverage ratio (12-month period)	1.50	6.84

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
In addition, as of September 26, 2021, the Company's consolidated total net leverage ratio (12-month period) was 2.20. While this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH, marine and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

On April 20, 2021, we completed the issuance of $350 million aggregate principal amount of our 4.75% Senior Notes in a private placement exempt from registration under the Securities Act of 1933, as amended. The 4.75% Senior Notes, which were issued at par, carry an interest rate of 4.75%. Following the completion of the offering, the Company amended and restated the credit agreement governing its then-existing $650 million senior secured credit facility to establish a new $700 million senior secured credit facility consisting of a $550 million revolving credit facility and a $150 million term loan facility (the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Facility was extended to April 2026. The 2021 Credit Facility replaced the Company’s previously existing credit facility that was due to mature in September 2024.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

OTHER

Seasonality

~~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 18 of the Notes to Condensed Consolidated Financial Statements for further discussion of events occurring after September 26, 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,~~26, 2021, our total debt obligations under our credit agreement were under LIBOR-based interest rates. A 100-basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately ~~$0.3~~$0.8 million, assuming average borrowings, including our term loan, subject to variable rates of ~~$30.0~~$83.6 million, which was the amount of such borrowings outstanding at September ~~27, 2020~~26, 2021 subject to variable rates. The ~~$30.0~~$83.6 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 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 quarter ended September ~~27, 2020~~26, 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	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
June 28 - July 25	—	$	—	—	$	14,410,258
July 26 - August 29	45,000	82.37		45,000	46,293,551
August 30 - September 26	83,929	79.69		83,929	39,605,258
	128,929			128,929

(1) ~~Includes 857~~ shares of common stock purchased by the Company in July 2020 for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards 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.

3536


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)

3637

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~~4, 2021	By:	/s/ Andy L. Nemeth
		Andy L. Nemeth
		~~President and~~ Chief Executive Officer



Date: November ~~5, 2020~~4, 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: November 4, 2021	By:	/s/ James E. Rose
		James E. Rose
		Principal Accounting Officer


(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


	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


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