UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~APRIL 1, 2018~~MARCH 31, 2019

( ) 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	46515
(Address of principal executive offices)	(ZIP Code)

(574) 294-7511

(Registrant’s telephone number, including area code)

(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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes [X] 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 [X]	Accelerated filer [ ]	Non-accelerated filer [ ] ~~(Do not check if a smaller reporting company)~~	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 [X]

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	The NASDAQ Global Stock Market

As of April ~~27, 2018,~~26, 2019, there were ~~24,775,903~~23,849,644 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 Financial Position ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017~~2018	3

Condensed Consolidated Statements of Income First Quarter Ended March 31, 2019 and April 1, 2018 ~~and March 26, 2017~~	4

Condensed Consolidated Statements of Comprehensive Income First Quarter Ended March 31, 2019 and April 1, 2018	5

Condensed Consolidated Statements of Shareholders' Equity First Quarter Ended March 31, 2019 and April 1, 2018	6

Condensed Consolidated Statements of Cash Flows ~~Three Months~~First Quarter Ended March 31, 2019 and April 1, 2018 ~~and March 26, 2017~~	57

Notes to Condensed Consolidated Financial Statements	68

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2126

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3336

ITEM 4. CONTROLS AND PROCEDURES	3337

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS	3538

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3538

ITEM 6. EXHIBITS	3639

SIGNATURES	3740

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)


	As of				As of
(thousands)	Apr. 1, 2018		Dec. 31, 2017		March 31, 2019			December 31, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	71	$	2,767	$	8,454		$	6,895
Trade receivables, net	138,685		77,784		137,318			82,499
Inventories	205,902		175,270		264,994			272,898
Prepaid expenses and other	16,039		18,132		17,757			22,875
Total current assets	360,697		273,953		428,523			385,167
Property, plant and equipment, net	129,022		118,486		180,331			177,145
Operating lease right-of-use assets					79,868			—
Goodwill	223,518		208,044		292,113			281,734
Intangible assets, net	313,458		263,467		370,233			382,982
Deferred financing costs, net	2,356		2,184		3,617			3,688
Other non-current assets	494		510		499			515
TOTAL ASSETS	$	1,029,545	$	866,644	$	1,355,184		$	1,231,231
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current maturities of long-term debt	$	15,766	$	15,766	$	10,000		$	8,750
Current operating lease liabilities					25,874			—
Accounts payable	114,380		84,109		124,640			89,803
Accrued liabilities	49,294		36,550		57,292			59,202
Total current liabilities	179,440		136,425		217,806			157,755
Long-term debt, less current maturities, net	413,146		338,111		613,599			621,751
Long-term operating lease liabilities					54,309			—
Deferred tax liabilities, net	15,050		13,640		23,624			22,699
Other long-term liabilities	16,131		7,783		16,757			20,272
TOTAL LIABILITIES	623,767		495,959		926,095			822,477
SHAREHOLDERS’ EQUITY
Common stock	162,625		163,196		161,949			161,436
Additional paid-in-capital	25,785		8,243		25,124			25,124
Accumulated other comprehensive income	94		66
Accumulated other comprehensive loss					(3,707		)	(2,680		)
Retained earnings	217,274		199,180		245,723			224,874
TOTAL SHAREHOLDERS’ EQUITY	405,778		370,685		429,089			408,754
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,029,545	$	866,644	$	1,355,184		$	1,231,231

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	First Quarter Ended					First Quarter Ended
(thousands except per share data)	Apr. 1, 2018		Mar. 26, 2017			March 31, 2019		April 1, 2018
NET SALES	$	551,832	$	345,427		$	608,218	$	551,832
Cost of goods sold	454,078		287,878			501,670		454,078
GROSS PROFIT	97,754		57,549			106,548		97,754
Operating Expenses:
Warehouse and delivery	17,028		10,343			24,041		17,028
Selling, general and administrative	31,841		19,106			37,692		31,841
Amortization of intangible assets	7,127		4,185			8,989		7,127
Total operating expenses	55,996		33,634			70,722		55,996
OPERATING INCOME	41,758		23,915			35,826		41,758
Interest expense, net	4,378		2,014			8,983		4,378
Income before income taxes	37,380		21,901			26,843		37,380
Income taxes	7,312		4,434			5,994		7,312
NET INCOME	$	30,068	$	17,467		$	20,849	$	30,068

BASIC NET INCOME PER COMMON SHARE ~~(1)~~	$	1.22	$	0.76		$	0.90	$	1.22
DILUTED NET INCOME PER COMMON SHARE ~~(1)~~	$	1.20	$	0.75		$	0.90	$	1.20

Weighted average shares outstanding - Basic ~~(1)~~	24,740		22,857			23,039		24,740
Weighted average shares outstanding - Diluted ~~(1)~~	25,110		23,324			23,248		25,110

(1) Net income per common share and weighted average shares outstanding, on both a basic and diluted basis, for the first quarter ended March 26, 2017, have been retroactively adjusted to reflect the impact of the three-for-two stock split paid on December 8, 2017.
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)



	First Quarter Ended
(thousands)	March 31, 2019			April 1, 2018
NET INCOME	$	20,849		$	30,068
Other comprehensive (loss) income, net of tax:
Change in unrealized loss of hedge derivatives	(1,054		)	—
Foreign currency translation gain	27			28
Total other comprehensive (loss) income	(1,027		)	28
COMPREHENSIVE INCOME	$	19,822		30,096

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)



(thousands)	Common Stock			Additional Paid-in- Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings				Total
First Quarter Ended April 1, 2018
Balance December 31, 2017	$	163,196		$	8,243		$	66		$	199,180			$	370,685
Net income	—			—			—			30,068				30,068
Other comprehensive income, net of tax	—			—			28			—				28
Stock repurchases under buyback program	(1,424		)	(72		)	—			(11,974		)	��	(13,470		)
Shares used to pay taxes on stock grants	(2,843		)	—			—			—				(2,843		)
Stock-based compensation expense	3,696			—			—			—				3,696
Purchase of convertible notes hedges	—			(31,481		)	—			—				(31,481		)
Proceeds from sale of warrants	—			18,147			—			—				18,147
Equity component of convertible note issuance	—			30,948			—			—				30,948
Balance April 1, 2018	$	162,625		$	25,785		$	94		$	217,274			$	405,778

First Quarter Ended March 31, 2019
Balance December 31, 2018	$	161,436		$	25,124		$	(2,680	)	$	224,874			$	408,754
Net income	—			—			—			20,849				20,849
Other comprehensive loss, net of tax	—			—			(1,027		)	—				(1,027		)
Shares used to pay taxes on stock grants	(3,437		)	—			—			—				(3,437		)
Issuance of shares upon exercise of common stock options	3			—			—			—				3
Stock-based compensation expense	3,947			—			—			—				3,947
Balance March 31, 2019	$	161,949		$	25,124		$	(3,707	)	$	245,723			$	429,089

See accompanying Notes to Condensed Consolidated Financial Statements

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended						Three Months Ended
(thousands)	Apr. 1, 2018			Mar. 26, 2017			March 31, 2019			April 1, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	30,068		$	17,467		$	20,849		$	30,068
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,325			7,417			15,543			11,325
Stock-based compensation expense	3,696			2,439			3,947			3,696
Non-cash interest expense	1,246			—
Amortization of convertible notes debt discount							1,671			1,246
Deferred income taxes	1,410			904			1,281			1,410
Other non-cash items	(1,304		)	59
Other							(233		)	(1,304		)
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade receivables	(48,443		)	(53,114		)	(54,188		)	(48,443		)
Inventories	(8,557		)	(5,400		)	1,224			(8,557		)
Prepaid expenses and other assets	2,136			3,305			5,216			2,136
Accounts payable, accrued liabilities and other	34,231			16,026			32,574			34,231
Net cash provided by (used in) operating activities	25,808			(10,897		)
Net cash provided by operating activities							27,884			25,808
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(7,641		)	(3,484		)	(10,005		)	(7,641		)
Business acquisitions	(95,861		)	(10,104		)
Other investing activities	(6		)	(2		)
Proceeds from sale of property, equipment and other investing activities							1,372			(6		)
Business acquisitions, net of cash acquired							(1,222		)	(95,861		)
Net cash used in investing activities	(103,508		)	(13,590		)	(9,855		)	(103,508		)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt repayments	(3,941		)	—			(1,250		)	(3,941		)
Borrowings on revolver	331,058			65,717			213,523			331,058
Repayments on revolver	(389,855		)	(126,371		)	(220,855		)	(389,855		)
Stock repurchases under buyback program	(13,470		)	—			—			(13,470		)
Proceeds from convertible note offering	172,500			—
Purchase of convertible note hedges	(31,481		)	—
Proceeds from convertible notes offering							—			172,500
Purchase of convertible notes hedges							—			(31,481		)
Proceeds from sale of warrants	18,147			—			—			18,147
Payments related to vesting of stock-based awards, net of shares tendered for taxes	(2,586		)	(3,025		)	(3,222		)	(2,586		)
Proceeds from public offering of common stock, net of expenses	—			93,612
Payment of deferred financing/debt issuance costs	(5,367		)	(980		)
Payment of deferred financing costs							(253		)	(5,367		)
Payment of contingent consideration from a business acquisition							(4,416		)	—
Other financing activities	(1		)	4			3			(1		)
Net cash provided by financing activities	75,004			28,957
Net cash (used in) provided by financing activities							(16,470		)	75,004
Increase (decrease) in cash and cash equivalents	(2,696		)	4,470			1,559			(2,696		)
Cash and cash equivalents at beginning of year	2,767			6,449			6,895			2,767
Cash and cash equivalents at end of period	$	71		$	10,919		$	8,454		$	71

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



1.	BASIS OF PRESENTATION

In the opinion of Patrick Industries, Inc. (“Patrick” or, the “Company”, "we", "our"), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position as of ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, and its results of operations and cash flows for the three months ended March 31, 2019 and April 1, ~~2018 and March 26, 2017.~~2018.

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 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. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. The December 31, ~~2017~~2018 condensed consolidated statement of financial position data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the first quarter ended ~~April 1, 2018~~March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2018.~~2019.

The number of shares and per share amounts for the first quarter ended March 26, 2017 have been retroactively adjusted to reflect the three-for-two stock split of the Company's common stock, which was effected in the form of a common stock dividend paid on December 8, 2017.

In preparation of Patrick’s condensed consolidated financial statements as of and for the first quarter ended ~~April 1, 2018,~~March 31, 2019, management evaluated all material subsequent events or 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 Notes 14 and 16 for events that occurred subsequent to the balance sheet date.~~



2.	RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~Revenue Recognition~~

Leases

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2014-09, Revenue from Contracts with Customers (commonly referred to as “Topic 606”)~~2016-02, "Leases (Topic 842)", which requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations and significant judgments in measurement and recognition of revenue. Topic 606 became effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted Topic 606 effective January 1, 2018 under the modified retrospective method, under which the cumulative effect of initially applying the guidance is recognized as an adjustment to opening retained earnings at the date of initial application. As permitted under the transition rules, the Company applied Topic 606 to only those contracts that did not meet the definition of a completed contract at January 1, 2018, which represented contracts for which all of the revenues had not been recognized in accordance with the Company’s revenue recognition policy under previous guidance as of the date of initial application of Topic 606.

The Company determined that the adoption of the new revenue standard did not have a material impact on its revenues, results of operations or financial position. The Company expects that its performance obligations under Topic 606 will generally be consistent with its deliverables or units of accounting under the Company’s previous revenue recognition policy. In addition, based on the assessment regarding timing of transfer of control, the Company determined that the timing of revenue

recognition under Topic 606 will continue to be at a point-in-time upon transfer of control, which is consistent with its revenue recognition policy under previous guidance and occurs at the time of passage of title and risk of loss to the customer.

The Company elected certain practical expedients and has made certain policy elections as permitted under Topic 606. The adoption of Topic 606 resulted in additional disclosures, including with respect to the disaggregation of revenue by market, additional information with respect to the Company’s performance obligations and the significant judgments required by the Company to comply with Topic 606. In addition, under the modified retrospective method, the Company is required to disclose for the first year subsequent to adoption any significant revenue recognition differences under Topic 606 from what would have been recorded by the Company had historical revenue recognition guidance continued to be in effect for 2018. The Company is also required to disclose the amount of each account impacted as a result of the adoption of Topic 606 and what that amount would have been under previous revenue recognition guidance during 2018. See Note 3 for additional details and for the required disclosures.

~~Leases~~

~~In February 2016, the FASB issued a new accounting standard that will require~~ that an entity recognize lease assets and lease liabilities on its ~~balance sheet~~statement of financial position for leases ~~in excess of one year~~ that were previously classified as operating leases under U.S. GAAP. The standard also requires companies to disclose in the footnotes to the financial statements information about the amount and timing ~~and uncertainty for the payments made for the~~of lease ~~agreements.~~payments. The standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2018 on a ~~retroactive basis. Early~~modified retrospective basis and early adoption iswas permitted.

In ~~2017,~~July 2018, the ~~Company established an implementation team~~FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements", which offered practical expedient alternatives to ~~develop a plan~~the modified retrospective adoption of Accounting Standards Codification (“ASC”) 842. Specifically, the practical expedients allow companies to ~~assess changes to processes and systems necessary to adopt the new standard. Adopting this new accounting standard is expected to have a material impact on the reporting~~recognize right of use lease assets and lease liabilities onat the ~~condensed consolidated statements~~date of ~~financial position~~adoption only, rather than retrospectively for all periods presented, as well as practical expedients related to the presentation of lease ~~arrangements~~components.

The Company adopted ASC 842 effective January 1, 2019, and ~~is not expected to have a~~recorded approximately $80 million in lease right-of-use assets and corresponding lease liabilities, with no material impact on the condensed consolidated ~~statements~~statement of ~~financial position as a whole or on the~~shareholders' equity, results of operations or cash flows. See Note 12 for further information.

~~Stock Compensation~~

In May 2017, the FASB issued a new accounting standard that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting related to changes to such awards. The updated guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The Company adopted this new standard as of January 1, 2018 as required, and since it does not have a history of modifying share-based payment awards, has determined that the updated requirements did not have an impact on its condensed consolidated financial statements.

~~Cash Flow Statement Classifications~~

In August 2016, the FASB issued a new accounting standard related to the classification of certain cash receipts and cash payments in the statement of cash flows. This standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2017. The standard may be applied on a retrospective basis and early adoption is permitted. The Company adopted the new standard as of January 1, 2018 as required and has determined that its implementation did not have a material impact on its condensed consolidated statements of cash flows for the periods presented.

Goodwill Impairment

In January 2017, the FASB issued ~~a new accounting standard that~~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 standard is effective for annual and any interim impairment tests for periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting standard and has not yet determined the impact that its implementation will have on its condensed consolidated financial statements.

Credit Losses

~~Definition of a Business~~

In ~~January 2017,~~June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments”, which amends certain provisions of 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 will be required to use a new ~~accounting standard~~forward-looking “expected loss” model that ~~clarifies~~generally will result in the ~~definition~~earlier recognition of ~~a business~~allowances for losses. Additionally, entities will have to disclose more information with ~~the objective~~respect to credit quality indicators, including information used to track credit quality by year of ~~adding guidance to assist companies with evaluating whether transactions should be accounted~~origination for ~~as acquisitions (or disposals) of assets or businesses.~~most financing receivables. The ~~standard~~ASU is effective for ~~financial statements issued for annual and interim periods~~fiscal years beginning after December 15, ~~2017~~2019, including interim periods within those fiscal years and ~~may~~will be applied onas a ~~retrospective basis with early adoption permitted.~~cumulative effect adjustment to retained earnings as of the beginning of the first reporting period for which the guidance is effective. The Company ~~adopted this new standard as~~does not expect that the adoption of ~~January 1, 2018 as required and determined that its implementation did not~~the ASU will have a material ~~impact~~effect on ~~the Company's~~its condensed consolidated financial statements.



3.	REVENUE RECOGNITION

Effective January 1, 2018, the Company adopted FASB ASU 2014-09, "Revenue from Contracts with Customers" (commonly referred to as “Topic 606”), which requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive. The Company adopted Topic 606 ~~effective January 1, 2018,~~ using the modified retrospective method and applied it to those contracts which were not completed as of the adoption date. The adoption of ~~Topic 606~~the new revenue standard did not have a material impact on the Company’s condensed consolidated financial position, results of operations, ~~equity~~ or ~~cash flows~~revenues as of the adoption ~~date or for the first quarter ended April 1, 2018.~~date.

Revenue Recognition

Revenues are recognized when or as control of the promised goods or services transfers to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The transaction price for contracts may include forms of variable consideration, including reductions to the transaction price for volume discounts and rebates. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using the standalone selling price of each distinct good or service in the contract.

Disaggregation of Revenue

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable operating segments:


	First Quarter Ended April 1, 2018						First Quarter Ended March 31, 2019
(thousands)	Manufacturing		Distribution		Total Reportable Operating Segments		Manufacturing		Distribution		Total Reportable Operating Segments
Market type:
Recreational Vehicle	$	293,225	$	85,066	$	378,291	$	234,878	$	107,558	$	342,436
Manufactured Housing	39,315		22,941		62,256		42,203		63,816		106,019
Industrial	58,676		7,019		65,695		60,928		8,049		68,977
Marine	44,696		894		45,590		87,675		3,111		90,786
Total	$	435,912	$	115,920	$	551,832	$	425,684	$	182,534	$	608,218



	First Quarter Ended April 1, 2018
(thousands)	Manufacturing		Distribution		Total Reportable Operating Segments
Market type:
Recreational Vehicle	$	293,225	$	85,066	$	378,291
Manufactured Housing	39,315		22,941		62,256
Industrial	58,677		7,018		65,695
Marine	44,696		894		45,590
Total	$	435,913	$	115,919	$	551,832

Description of Products and Services

The Company is a major manufacturer of component products and a distributor of building products and materials serving original equipment manufacturers (“OEMs”). The following is a description of the principal activities, by reportable segments, from which the Company generates its revenue. See Note 1315 for more detailed information about the Company's reportable operating segments.

Manufacturing

The Company’s Manufacturing segment revenue is primarily derived from the sale of laminated products that are utilized to produce furniture, shelving, walls, countertops, and cabinet products, cabinet doors, fiberglass bath fixtures and tile systems, hardwood furniture, vinyl printing, decorative vinyl and paper laminated panels, solid surface, granite, and quartz countertop fabrication, ~~recreational vehicle~~RV painting, fabricated aluminum products, fiberglass and plastic components, softwoods lumber, custom cabinetry, polymer-based flooring, electrical systems components (including instrument and dash panels), wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, air handling products, slide-out trim and fascia, thermoformed shower surrounds, specialty bath and closet building products, fiberglass and plastic helm systems and components products, wiring and wire harnesses, boat covers, towers, tops and frames, aluminum fuel tanks, CNC molds and composite parts, slotwall panels and components and other products.

Manufacturing segment revenue is recognized when control of the ~~products~~product transfers to the customer which is the point when the customer gains the ability to direct the use of and obtain substantially all of the remaining benefits from the asset, which is generally upon delivery of goods. In limited circumstances, where the products are customer specific with no alternative use to the Company and the Company has a legally enforceable

right to payment for performance to date with a reasonable margin, revenue is recognized over the contract term based on the cost-to-cost method. The Company uses this measure of progress because it best depicts the transfer of value to the customer and correlates with the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods to the customer. However, revenue recognized based on the cost-to-cost method does not constitute a material amount of total Manufacturing segment revenue and consolidated net sales.

Distribution

The Company’s Distribution segment revenue is primarily derived from the resale of pre-finished wall and ceiling panels, drywall and drywall finishing products, ~~appliances,~~ electronics and audio systems components, appliances, wiring, electrical and plumbing products, fiber reinforced polyester products, cement siding, raw and processed lumber, interior passage doors, roofing products, laminate and ceramic flooring, tile, shower doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous ~~products.~~ products, in addition to providing transportation and logistics services.

The Company acts as a principal in such arrangements because it controls the promised goods before delivery to the customer. Distribution segment revenue from product sales is recognized on a gross basis upon delivery of goods at which point control transfers to the customer. The Distribution segment also generates revenue by providing marketing services for other manufacturers in exchange for agreed upon commissions. The commission revenue is recognized in the amount of expected commissions to be collected from the manufacturer upon delivery of goods to the customer. The overall commission business is not material to the Company’s consolidated net sales.

Significant Judgments and Practical Expedients Applied

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are not recognized as separate performance obligations to which a portion of revenue would otherwise be allocated.

The Company records freight billed to customers in net sales. The corresponding costs incurred for shipping and handling related to these customer billed freight costs are recorded as costs to fulfill the contract and are included in warehouse and delivery expenses.

The Company’s contracts across each of its businesses typically do not result in situations where there is a time period greater than one year between performance under the contract and collection of the related consideration. The Company elected the practical expedient under Topic 606 related to significant financing components, where the Company expects, at contract inception, that the period between the entity’s transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less.

The Company also applies the practical expedient in Topic 606 related to costs to obtain a contract and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the incurred costs that the Company otherwise would have capitalized is one year or less. These costs are included in selling, general and administrative expenses.

Contract Balances

The Company typically invoices the customer after shipment of the promised goods, at which time it has an unconditional right to payment. In limited circumstances, the Company may receive upfront payments from customers prior to satisfaction of a performance obligation in both the manufacturing and distribution businesses, in which case a contract liability is recorded. ~~Contract liabilities are not material to the consolidated financial statements.~~ The following table provides information about contract balances:



(thousands)	April 1, 2018		At Adoption		March 31, 2019		December 31, 2018
Receivables, which are included in trade receivables, net	$	133,663	$	75,926	$	135,202	$	74,196
Contract liabilities	1,340		1,310		$	2,847	$	2,642

Significant changes in the contract liabilities balance during the ~~first quarter~~three months ended ~~April 1, 2018~~March 31, 2019 are as follows:



(thousands)	Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	(910	)
Increases due to cash received, excluding amounts recognized as revenue during the period	$	1,115



		~~Contract Liabilities~~
~~(thousands)~~
~~Revenue recognized that was included in the contract liability balance at the beginning of the period~~		~~$(664)~~
~~Increases due to cash received, excluding amounts recognized as revenue during the period~~		~~694~~
~~Transferred to receivables from contract assets recognized at the beginning of the period~~		—
~~Increases as a result of cumulative catch-up adjustment arising from changes in the estimate of the stage of completion, excluding amounts transferred to receivables during the period~~		—

Transaction Price Allocated to the Remaining Performance Obligation

The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.The Company does not have material contracts that have original expected durations of more than one year.



4.	INVENTORIES

Inventories are stated at the lower of cost (First-In, First-Out (FIFO) Method) and net realizable value and consist of the following classes:



(thousands)	March 31, 2019			December 31, 2018
Raw materials	$	166,369		$	164,408
Work in process	13,882			12,829
Finished goods	25,003			28,341
Less: reserve for inventory obsolescence	(7,341		)	(5,354		)
Total manufactured goods, net	197,913			200,224
Materials purchased for resale (distribution products)	68,876			74,914
Less: reserve for inventory obsolescence	(1,795		)	(2,240		)
Total materials purchased for resale (distribution products), net	67,081			72,674
Total inventories	$	264,994		$	272,898

(thousands) Apr. 1, 2018 Dec. 31, 2017
Raw materials $ 113,756
$ 96,846
Work in process 13,210
10,720
Finished goods 33,650
22,936
Less: reserve for inventory obsolescence (3,781 ) (3,087 )
Total manufactured goods, net 156,835
127,415
Materials purchased for resale (distribution products) 51,079
49,392
Less: reserve for inventory obsolescence (2,012 ) (1,537 )
Total materials purchased for resale (distribution products), net 49,067
47,855
Total inventories $ 205,902
$ 175,270



5.	GOODWILL AND INTANGIBLE ASSETS

The Company acquired goodwill and intangible assets in various acquisitions in ~~2017 and in the first quarter of~~ 2018 that were determined to be business combinations. ~~The goodwill recognized is expected~~No new intangible assets were acquired through business combination in the first quarter of 2019, but purchase accounting adjustments to ~~be deductible for income tax purposes for each of the 2018 and 2017 acquisitions with the exception of the acquisition of Leisure Product Enterprises, LLC.~~previously reported estimated amounts were made in such quarter. See Note 6 for further details. Goodwill and intangible assets are allocated to the Company’s reporting units aton the date they are initially recorded. Goodwill and indefinite-lived intangible assets are not amortized but are subject to an impairment test based on their estimated fair value performed annually ~~in the fourth quarter~~ (or under certain circumstances more frequently as warranted). Goodwill impairment testing is performed at the reporting unit level, one level below the business segment.

Finite-lived intangible assets that meet certain criteria continue to be amortized over their useful lives and are also subject to an impairment test based on estimated undiscounted cash flows when impairment indicators exist. The Company assesses finite-lived intangible assets for impairment if events or changes in circumstances indicate that the carrying value may exceed the fair value.

No impairment was recognized during the ~~first quarter~~three months ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017~~ related to goodwill, indefinite-lived intangible assets or finite-lived intangible assets.

Goodwill

Changes in the carrying amount of goodwill for the ~~quarter~~three months ended ~~April 1, 2018~~March 31, 2019 by segment are as follows:



(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2018	$	235,345	$	46,389	$	281,734
Adjustments to prior year preliminary purchase price allocations	339		10,040		10,379
Balance - March 31, 2019	$	235,684	$	56,429	$	292,113

(thousands) Manufacturing Distribution Total
Balance - December 31, 2017 $ 179,471
$ 28,573
$ 208,044
Acquisitions 9,842
6,475
16,317
Adjustment to prior year preliminary purchase price allocation (843 ) —
(843 )
Balance - April 1, 2018 $ 188,470
$ 35,048
$ 223,518

Intangible Assets

Intangible assets are comprised of customer relationships, non-compete agreements, trademarks and ~~trademarks.~~patents. Customer relationships and non-compete agreements represent finite-lived intangible assets that have been recorded in the Manufacturing and Distribution segments along with related amortization expense. As of ~~April 1, 2018,~~March 31, 2019, the remaining intangible assets balance of ~~$313.5~~$370.2 million is comprised of ~~$69.6~~$85.2 million of trademarks which have an indefinite life, and therefore, no amortization expense has been recorded for trademarks, and ~~$243.9~~$285.0 million pertaining to customer relationships, ~~and~~ non-compete agreements and patents which are being amortized over periods ranging from three to 19 years.

For the finite-lived intangible assets attributable to the 2018 acquisitions, the useful life pertaining to non-compete agreements was three years for Aluminum Metals Company, LLC and five years for Metal Moulding Corporation, Indiana Marine Products, and Collins & Company, Inc.. The useful life pertaining to customer relationships for all of the 2018 acquisitions was 10 years.

Amortization expense for the Company’s intangible assets in the aggregate was ~~$7.1~~$9.0 million and ~~$4.2~~$7.1 million for the ~~first quarter~~three months ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017,~~ respectively.

Intangible assets, net consist of the following as of ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


(thousands)	Apr. 1, 2018			Weighted Average Useful Life (in years)	Dec. 31, 2017			Weighted Average Useful Life (in years)	March 31, 2019			Weighted Average Useful Life (in years)	December 31, 2018			Weighted Average Useful Life (in years)
Customer relationships	$	284,387		10.1	$	239,053		10.2	$	361,308		10.1	$	366,228		10.1
Non-compete agreements	18,234			4.6	15,564			4.2	17,499			5.0	19,159			4.9
Patents									1,048			9.0	1,048			8.9
Trademarks	69,562			Indefinite	60,448			Indefinite	85,178			Indefinite	82,358			Indefinite
	372,183				315,065				465,033				468,793
Less: accumulated amortization	(58,725		)		(51,598		)		(94,800		)		(85,811		)
Intangible assets, net	$	313,458			$	263,467			$	370,233			$	382,982

Changes in the carrying value of intangible assets for the three months ended ~~April 1, 2018~~March 31, 2019 by segment are as follows:



(thousands)	Manufacturing			Distribution			Total
Balance - December 31, 2018	$	304,485		$	78,497		$	382,982
Amortization	(7,715		)	(1,274		)	(8,989		)
Adjustments to prior year preliminary purchase price allocations	(3,451		)	(309		)	(3,760		)
Balance - March 31, 2019	$	293,319		$	76,914		$	370,233

(thousands)
Manufacturing
Distribution
Total
Balance - December 31, 2017
$ 220,540

$ 42,927

$ 263,467
Acquisitions
33,973

22,000

55,973
Amortization
(5,665 )
(1,462 )
(7,127 )
Adjustment to prior year preliminary purchase price allocation
1,145

—

1,145
Balance - April 1, 2018
$ 249,993

$ 63,465

$ 313,458



6.	ACQUISITIONS

General

The Company did not complete any acquisitions the first quarter of 2019 and completed nine acquisitions in 2018, including four acquisitions in the first quarter of ~~2018 and seven acquisitions involving 13 companies in 2017, including one acquisition in the first quarter of 2017.~~2018. Each of the 2018 acquisitions was funded through borrowings under the Company’s ~~Credit Facility (as defined herein).~~credit facility in effect at the time of acquisition. Assets acquired and liabilities assumed in the individual acquisitions

were recorded on the Company’s condensed consolidated statements of financial position at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within the one year measurement period. For those acquisitions where the purchase price allocation has been noted as being provisional, the Company generally is still in the process of finalizing the fair values of acquired goodwill, intangible assets, fixed assets, and, if applicable, related deferred tax assets and liabilities. Historically, the impact of finalizing provisional purchase price allocations has not been significant. In general, the acquisitions described below provided the opportunity for the Company to either establish a new presence in a particular market and/or expand its product offerings in an existing market and increase its market share and per unit content.

For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which represents the combined value of ~~leveraging~~ the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, revenue impact, market share growth and net income. The goodwill recognized is expected to be deductible for income tax purposes for each of the 2018 ~~acquisitions. The goodwill recognized~~acquisitions with the exception of the acquisition of Marine Accessories Corporation which is expected to be partially deductible for income tax purposes, ~~for each~~and the acquisition of ~~the 2017 acquisitions with the exception of Leisure Product Enterprises, LLC for~~LaSalle Bristol which ~~goodwill~~ is ~~expected to be partially~~not deductible for income tax purposes. Intangible asset values were estimated using income based valuation methodologies. See Note 5 for information regarding the amortization periods assigned to finite-lived intangible assets.

For the first quarter ended April 1, 2018, revenue and operating income of approximately $12.6 million and $1.3 million, respectively, ~~were~~was included in the Company’s condensed consolidated statements of income relating to the four ~~companies~~businesses acquired in the first ~~quarter~~three months of 2018. Acquisition-related costs in the aggregate associated with the businesses acquired in the first ~~quarter~~three months of 2018 were immaterial.

~~For~~Contingent Consideration

In connection with certain 2018 and 2017 acquisitions, if certain financial targets for the ~~first quarter ended March 26, 2017, revenue~~acquired businesses are achieved, the Company will be required to pay additional cash consideration. The Company has recorded a liability for the fair value of ~~approximately $0.3~~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. As required, the liabilities for the contingent consideration associated with each of these acquisitions will be measured quarterly at fair value and the Company could record adjustments in future periods.

The aggregate fair value of the estimated contingent consideration payments was $9.4 million, ~~was~~$4.9 million of which is included in the ~~Company’s~~line item "Accrued liabilities" and $4.5 million is included in “Other long-term liabilities” on the condensed consolidated ~~statements~~statement of ~~income relating~~financial position as of March 31, 2019. 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 $13.7 million in the ~~business acquired in~~aggregate. In the first quarter of ~~2017. Operating income and acquisition-related costs associated with such business were immaterial.~~2019, the Company made cash payments of approximately $4.4 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2018 Acquisitions

Metal Moulding Corporation (“MMC”)

In February 2018, the Company completed the acquisition of the business and certain assets of Madison, Tennessee-based MMC, a manufacturer of custom metal fabricated products, primarily for the marine market, including hinges, arm rests, brackets, panels and trim, as well as plastic products including boxes, inlay tables, steps, and related components, for a net initial purchase price of $19.9 million, plus subsequent contingent consideration over a one-year period based on future performance. ~~The Company recorded a preliminary fair value estimate of the contingent consideration of $1.4 million, which is included in the line item~~ “~~Other long-term liabilities~~” on the condensed consolidated statement of financial position as of April 1, 2018. As required, the liability for this contingent consideration will be measured quarterly at fair value and the Company could record adjustments in future periods.

The results of operations for MMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

Aluminum Metals Company, LLC (“AMC”)

In February 2018, the Company completed the acquisition of the business and certain assets of Elkhart, Indiana-based AMC, a manufacturer ~~and distributor~~ of aluminum products including coil, fabricated sheets and extrusions, in addition to roofing products, primarily for the recreational vehicle ~~("RV"~~(“RV”), industrial, and marine markets, for a net purchase price of ~~$17.7~~$17.8 million.

The results of operations for AMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

IMP Holdings, LLC d/b/a Indiana Marine Products (“IMP”)

In March 2018, the Company completed the acquisition of the business and certain assets of Angola, Indiana-based IMP, a manufacturer ~~and distributor~~ of fully-assembled helm assemblies, including electrical wiring harnesses, dash panels, instrumentation and gauges, and other products primarily for the marine market, for a net initial purchase price of ~~$18.2~~$18.6 million, plus subsequent contingent consideration payments over a three-year period based on future performance. The Company recorded a ~~preliminary~~ fair value estimate of the contingent consideration of $7.9 million ~~which is included in~~at the ~~line item~~ “~~Other long-term liabilities~~” ~~on the condensed consolidated statement~~time of financial position as of April 1, 2018. As required, the liability for this contingent consideration will be measured quarterly at fair value and the Company could record adjustments in future periods.acquisition.

The results of operations for IMP are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The ~~preliminary~~ purchase price allocation ~~is subject to final review~~ and ~~approval, and thus~~ all required purchase accounting adjustments ~~are subject to change within~~were finalized in the ~~measurement period~~first quarter of 2019. Net changes from previously reported estimated amounts as ~~the Company finalizes its fair value estimates.~~of December 31, 2018 were immaterial.

Collins & Company, Inc. (“Collins”)

In March 2018, the Company completed the acquisition of the business and certain assets of Bristol, Indiana-based Collins, a distributor of appliances, trim products, fuel systems, flooring, tile, and other related building materials primarily to the RV market as well as the housing and industrial markets, for a net purchase price of $40.0 million.

The results of operations for Collins are included in the Company’s condensed consolidated financial statements and the Distribution operating segment from the date of acquisition. The ~~preliminary~~ purchase price allocation ~~is subject to final review~~ and ~~approval, and thus~~ all required purchase accounting adjustments ~~are subject~~were finalized in the first quarter of 2019. Changes from previously reported estimated amounts as of December 31, 2018 include a decrease to ~~change within~~intangible assets of $3.6 million and a $3.6 million offsetting increase to goodwill. There was no material impact to the ~~measurement period as~~condensed consolidated statement of income related to these changes in the first quarter of 2019.

Dehco, Inc. (“Dehco”)

In April 2018, the Company ~~finalizes its fair value estimates.~~

~~2017 Acquisitions~~

~~Medallion Plastics, Inc. (“Medallion”)~~

~~In March 2017,~~completed the ~~Company acquired the business and certain assets~~acquisition of ~~Elkhart, Indiana-based Medallion,~~Dehco, a ~~designer, engineer~~distributor and manufacturer of ~~custom thermoformed~~flooring, kitchen and bath products, adhesives and ~~components which include dash~~sealants, electronics, appliances and ~~trim panels~~accessories, LP tanks, and ~~fender skirts~~other related building materials, primarily for the RV market ~~and complete interior packages, bumper covers, hoods, and trims for~~as well as the ~~automotive, specialty transportation~~manufactured housing (“MH”), marine and other industrial markets, for a net purchase price of ~~$9.9~~$52.8 million.

Dehco has operating facilities in Indiana, Oregon, Pennsylvania and Alabama.

The results of operations for ~~Medallion~~Dehco are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating ~~segment from the date of acquisition.~~

~~Leisure Product Enterprises, LLC (“LPE”)~~

In April 2017, the Company acquired 100% of the membership interests of LPE for a net purchase price of $73.6 million. LPE is comprised of three complementary manufacturing companies primarily serving the marine and industrial markets: Marine Electrical Products, located in Lebanon, Missouri, supplies marine OEMs with fully-assembled boat dash and helm assemblies, including electrical wire harnesses as well as custom parts and assemblies for the industrial, commercial, and off-road vehicle markets; Florida Marine Tanks, located in Henderson, North Carolina, supplies aluminum fuel and holding tanks for marine and industrial customers; and Marine Concepts/Design Concepts, with facilities located in Sarasota, Florida and Cape Coral, Florida, designs, engineers and manufactures CNC plugs, open and closed composite molds, and CNC molds for fiberglass boat manufacturers.

~~The results of operations for LPE are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment~~segments from the date of acquisition. The purchase price allocation and all required purchase accounting adjustments were finalized in the first quarter of ~~2018, and resulted in changes~~2019. Changes from previously reported estimated amounts as of December 31, ~~2017 that~~2018 include a ~~$0.6 million~~ decrease to ~~goodwill~~intangible assets of $0.3 million and a ~~$0.9~~$0.3 million offsetting increase to ~~intangible assets.~~goodwill. There was no material impact to the condensed consolidated statement of income related to these changes in the first quarter of ~~2018.~~2019.

~~Indiana Technologies,~~Dowco, Inc. ~~d/b/a Wire Design~~ (“~~Wire Design”~~Dowco”)

In ~~July 2017,~~May 2018, the Company ~~acquired~~completed the ~~business~~acquisition of Dowco, a designer and ~~certain assets of Elkhart, Indiana-based Wire Design, a~~ manufacturer of ~~wire harnesses~~custom designed boat covers and bimini tops, full boat enclosures, mounting hardware, and other accessories and components for the ~~RV,~~ marine ~~and industrial markets,~~market, for a net purchase price of ~~$10.8 million.~~

$56.3 million, net of cash acquired. Dowco has operating facilities in Wisconsin, Missouri, Indiana, and Minnesota.

The results of operations for Wire Design are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The purchase price allocation and all required purchase accounting adjustments were finalized in the first quarter of 2018, and resulted in changes from previously reported estimated amounts as of December 31, 2017 that include a $0.2 million decrease to goodwill with a corresponding $0.2 million increase to intangible assets. There was no material impact to the condensed consolidated statement of income related to these changes in the first quarter of 2018.

~~Baymont, Inc. (“Baymont”)~~

In September 2017, the Company acquired the business and certain assets of Baymont, a manufacturer and supplier of fiberglass showers, tubs, and tile systems for the manufactured housing ("MH") and industrial markets, for a net initial purchase price of $3.3 million plus contingent consideration based on future performance. The Company recorded a preliminary fair value estimate of the contingent consideration of $5.1 million at the date of acquisition, which was included in the line item “~~Other long-term liabilities~~” on the condensed consolidated statement of financial position as of December 31, 2017. As required, the liability for this contingent consideration will be measured quarterly at fair value and the Company could record adjustments in future periods. In the first quarter of 2018, the fair value estimate of the contingent consideration was adjusted by $1.1 million to $4.0 million. Baymont has operating facilities located in Golden, Mississippi and Belmont, Mississippi.

~~The results of operations for Baymont~~Dowco are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates. ~~In the first quarter of 2018, changes~~Changes from previously reported estimated amounts as of December 31, ~~2017 include a $1.1 million decrease to goodwill which corresponded to the adjustment noted above to the fair value estimate of the contingent liability.~~2018 were immaterial.

~~Indiana Transport, Inc.~~Marine Accessories Corporation (“~~Indiana Transport”~~MAC”)

In ~~November 2017,~~June 2018, the Company acquired 100% of the ~~business~~membership interests of Maryville, Tennessee-based MAC, a manufacturer, distributor and ~~certain assets~~aftermarket supplier of ~~Elkhart, Indiana-based Indiana Transport, a transportation~~custom tower and ~~logistics service provider primarily~~canvas products and other related accessories to OEMs, dealers, retailers and ~~dealers in~~distributors within the RVmarine market, as well as direct to consumers, for a net purchase price of ~~$59.3 million.~~$57.0 million, net of cash acquired.

The results of operations for ~~Indiana Transport~~MAC are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating ~~segment~~segments from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates. Changes from previously reported estimated amounts as of December 31, 2018 were immaterial.

~~LMI,~~Engineered Metals and Composites, Inc. ~~and Related Companies (collectively, “LMI”~~(“EMC”)

In ~~November 2017,~~September 2018, the Company ~~acquired LMI,~~completed the acquisition of West Columbia, South Carolina-based EMC, a designer ~~fabricator,~~ and ~~installer~~manufacturer of ~~specialty glass, mirror, bath~~custom marine towers, frames, and ~~closet building~~other fabricated component products ~~to residential housing and commercial high-rise builders, general contractors, retailers, and RV manufacturers~~for OEMs in the ~~U.S.,~~marine industry, for a net initial purchase price of ~~$80.5~~$24.9 million, plus subsequent contingent consideration over a three-month period based on future performance. The Company recorded a preliminary fair value estimate of the contingent consideration of $2.5 million. ~~LMI is headquartered in Ontario, California and operates six manufacturing and distribution centers in California and Nevada and an additional manufacturing facility in China.~~

The results of operations for ~~LMI~~EMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates. ~~In the first quarter of 2018, changes~~Changes from previously reported estimated amounts as of December 31, ~~2017~~2018 include a ~~$1.0~~decrease to the estimated purchase price of $0.3 million based on a final working capital adjustment resulting from an increase to ~~goodwill.~~accounts payable in the same amount. There was no material impact to the condensed consolidated statement of income related to these changes in the first quarter of 2019.

~~Nickell Moulding Company, Inc.~~LaSalle Bristol (“~~Nickell”~~LaSalle”)

In ~~December 2017,~~November, 2018, the Company ~~acquired~~completed the ~~business~~acquisition of LaSalle, a distributor and ~~certain assets of Elkhart, Indiana-based Nickell, a~~ manufacturer of ~~hardwood~~plumbing, flooring, tile, lighting, air handling and ~~wrapped mouldings and trim, custom wood frames, and door components~~building products for the MH, RV, ~~retail~~ and ~~hospitality, MH, and other~~industrial markets, for a net purchase price of ~~$12.3 million.~~

$51.5 million, net of cash acquired. LaSalle is headquartered in Elkhart, Indiana and operates a total of 15 manufacturing and distribution centers located in North America.

The results of operations for ~~Nickell~~LaSalle are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating ~~segment~~segments from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

After adjusting for a $1.5 million increase in the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $1.4 million and other adjustments of $0.1 million, changes from previously reported estimated amounts as of December 31, 2018 include a $6.7 million decrease to inventory and a $6.8 million increase to goodwill. There was no material impact to the condensed consolidated statement of income related to these changes in the first quarter of 2019.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of the ~~acquisition.~~acquisition for the 2018 acquisitions. The purchase price allocation in each acquisition is final except as noted in the discussions above:



(thousands)	Trade receivables		Inventories		Property, plant and equipment		Prepaid expenses & other		Intangible assets		Goodwill		Less: Total liabilities		Less: Deferred tax liability, net		Total net assets acquired
2018
MMC ⁽¹⁾	$	1,463	$	2,324	$	2,085	$	—	$	8,540	$	7,668	$	827	$	—	$	21,253
AMC	3,942		5,623		2,321		39		6,550		1,755		2,463		—		17,767
IMP ⁽²⁾	1,943		4,286		1,463		13		12,920		8,803		2,930		—		26,498
Collins	2,830		9,903		1,188		5		18,430		10,237		2,586		—		40,007
Dehco	4,771		16,923		13,755		208		13,950		6,580		3,392		—		52,795
Dowco	4,053		4,498		5,910		1,240		34,379		10,444		4,178		—		56,346
MAC	3,054		6,815		8,000		284		32,733		19,264		4,290		8,839		57,021
EMC ⁽³⁾	634		1,576		2,500		—		15,750		8,074		1,115		—		27,419
LaSalle	8,888		39,318		8,500		6,548		5,885		10,497		28,128		41		51,467
Other	473		329		300		13		1,667		899		184				3,497
2018 Totals	$	32,051	$	91,595	$	46,022	$	8,350	$	150,804	$	84,221	$	50,093	$	8,880	$	354,070

(thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses & other Intangible assets Goodwill Less: Accounts payable and accrued liabilities Less: Deferred tax liability Total net assets acquired
2018

MMC (1)
$ 1,469
$ 2,255
$ 3,000
$ —
$ 10,626
$ 4,774
$ 812
$ —
$ 21,312
AMC 3,948
5,625
4,000
39
5,350
1,250
2,463
—
17,749
IMP (2)
1,965
4,127
1,100
12
17,997
3,818
2,960
—
26,059
Collins 2,786
10,091
1,125
5
22,000
6,475
2,466
—
40,016
2018 Totals $ 10,168
$ 22,098
$ 9,225
$ 56
$ 55,973
$ 16,317
$ 8,701
$ —
$ 105,136

2017

Medallion $ 2,233
$ 2,605
$ 1,713
$ 118
$ 3,100
$ 1,342
$ 1,200
$ —
$ 9,911
LPE 5,848
5,162
9,225
337
33,275
39,945
6,358
13,791
73,643
Wire Design 615
437
555
21
5,590
4,052
491
—
10,779
Baymont (3)
—
1,169
1,750
—
2,241
2,146
50
—
7,256
Indiana Transport 6,385
—
3,550
1,309
31,390
19,272
2,558
—
59,348
LMI 11,210
9,156
4,000
994
36,110
27,511
8,494
—
80,487
Nickell 1,944
1,159
933
—
6,179
3,243
1,152
—
12,306
Other —
250
2,508
—
—
828
124
—
3,462
2017 Totals $ 28,235
$ 19,938
$ 24,234
$ 2,779
$ 117,885
$ 98,339
$ 20,427
$ 13,791
$ 257,192

(1) Total net assets acquired for MMC ~~include~~reflect the preliminary estimated liability of $1.4 million pertaining to the fair value of the contingent consideration based on future performance. The actual net cash paid for the MMC acquisition of $19.9 million is included in“Cash Flows from Investing Activities - Business Acquisitions” on the ~~condensed~~ consolidated statement of cash flows for the ~~three months~~year ended ~~April 1,~~December 31, 2018.

(2) Total net assets acquired for IMP ~~include~~reflect the preliminary estimated liability of $7.9 million pertaining to the fair value of the contingent consideration based on future performance. The actual net cash paid for the IMP acquisition of ~~$18.2~~$18.6 million is included in “Cash Flows from Investing Activities - Business Acquisitions” on the ~~condensed~~ consolidated statement of cash flows for the ~~three months~~year ended ~~April 1,~~December 31, 2018.

(3) Total net assets acquired for ~~Baymont include~~EMC reflect the preliminary estimated liability of ~~$4.0~~$2.5 million pertaining to the fair value of the contingent consideration based on future performance. The actual net cash paid for the ~~Baymont~~EMC acquisition of ~~$3.3~~$24.9 million is included $25.2 million in “Cash Flows from Investing Activities - Business Acquisitions” on the ~~condensed~~ consolidated statement of cash flows for the year ended December 31, ~~2017.~~

2018 as well as a decrease of $0.3 million in “Cash Flows from Investing Activities - Business Acquisitions” on the condensed consolidated statement of cash flows for the first quarter ended March 31, 2019.

Pro Forma Information

The following pro forma information for the first ~~quarters~~quarter ended April 1, 2018 ~~and March 26, 2017~~ assumes the MMC, AMC, IMP, Collins, Dehco, Dowco, MAC, EMC and ~~Collins~~LaSalle acquisitions (which were ~~acquired~~completed in 2018) ~~and the Medallion, LPE, Wire Design, Baymont, Indiana Transport, LMI, and Nickell acquisitions (which were acquired in 2017)~~ occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of the ~~2017 and~~ 2018 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 the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of ~~$0.7~~$2.9 million for the first quarter ended April 1, ~~2018 and $3.6 million for the first quarter ended March 26, 2017.~~2018.



	First Quarter Ended
(thousands except per share data)	April 1, 2018
Revenue	$	690,482
Net income	34,375
Basic net income per common share	1.39
Diluted net income per common share	1.37

First Quarter Ended
(thousands except per share data)
Apr. 1, 2018
Mar. 26, 2017
Revenue
$ 581,163

$ 451,315
Net income
31,765

23,104
Basic net income per common share
1.28

1.01
Diluted net income per common share
1.27

0.99

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.



7.	STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with fair value recognition provisions. The Company recorded compensation expense of ~~$3.7~~$3.9 million and ~~$2.4~~$3.7 million for the first ~~quarters~~quarter ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017,~~ respectively, for its stock-based compensation plans on the condensed consolidated statements of income.

The Company estimates the fair value of (i) all stock grants as of the grant date using the closing price per share of the Company’s common stock on such date, and (ii) all stock option and stock appreciation rights awards as of the grant date by applying the Black-Scholes option pricing model.

For full year ~~2017,~~2018, the Board of Directors (the “Board”) approved various share grants under the Company’s 2009 Omnibus Incentive Plan (the “Plan”) totaling ~~233,654~~181,808 shares in the aggregate, of which grants of ~~149,705~~164,988 shares were approved in the first ~~three months~~quarter of ~~2017. On January 17, 2017, the Board approved the issuance of 340,110 stock options and the issuance of 340,128 stock appreciation rights.~~2018.

The Board approved various share grants under the Plan in the first ~~three months~~quarter of ~~2018~~2019 totaling ~~164,988~~356,017 shares in the aggregate.

As of ~~April 1, 2018,~~March 31, 2019, there was approximately ~~$30.3~~$31.3 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 ~~26.4~~23.5 months.



8.	NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding, plus the dilutive effect of stock options, stock appreciation rights, and restricted stock units (collectively “Common Stock Equivalents”). The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the average market price for the period. Certain Common Stock Equivalents were not included in the computation of diluted net income per common share because the exercise prices of those Common Stock Equivalents were greater than the average market price of the common shares.

Income per common share is calculated for the first quarter ~~periods~~of 2019 and 2018 is as follows:



	First Quarter Ended
(thousands except per share data)	March 31, 2019		April 1, 2018
Net income for basic and diluted per share calculation	$	20,849	$	30,068
Weighted average common shares outstanding - basic	23,039		24,740
Effect of potentially dilutive securities	209		370
Weighted average common shares outstanding - diluted	23,248		25,110
Basic net income per common share	$	0.90	$	1.22
Diluted net income per common share	$	0.90	$	1.20

First Quarter Ended
(thousands except per share data) Apr. 1, 2018 Mar. 26, 2017
Net income for basic and diluted per share calculation $ 30,068
$ 17,467
Weighted average common shares outstanding - basic 24,740
22,857
Effect of potentially dilutive securities 370
467
Weighted average common shares outstanding - diluted 25,110
23,324
Basic net income per common share $ 1.22
$ 0.76
Diluted net income per common share $ 1.20
$ 0.75

~~On March 14, 2017, the Company completed a public offering of 2,025,000 shares of its common stock at a price of $48.67 per share for gross proceeds of $98.6 million.~~



9.	DEBT

A summary of total debt outstanding at ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is as follows:



(thousands)	March 31, 2019			December 31, 2018
Long-term debt:
Revolver	$	385,000		$	392,332
Term Loan	95,000			96,250
Convertible Notes	172,500			172,500
Total long-term debt	652,500			661,082
Less: Convertible Notes debt discount	(28,454		)	(30,125		)
Less: current maturities of long-term debt	(10,000		)	(8,750		)
Less: net deferred financing costs related to Term Loan	(447		)	(456		)
Total long-term debt, less current maturities, net	$	613,599		$	621,751

(thousands)
Apr. 1, 2018
Dec. 31, 2017
Long-term debt:

Revolver
$ 228,600

$ 287,397
Term Loan
63,019

66,960
Convertible Notes
172,500

—
Total long-term debt
464,119

354,357
Less: debt discount
(34,724 )
—
Less: current maturities of long-term debt
(15,766 )
(15,766 )
Less: net deferred financing costs related to Term Loan
(483 )
(480 )
Total long-term debt, less current maturities, net
$ 413,146

$ 338,111

2018 Credit Facility

The ~~Company's~~Company entered into a Second Amended and Restated Credit Agreement, dated as of ~~April 28, 2015, with~~June 5, 2018, (the “2018 Credit Agreement”) by and among the Company, the Lenders party thereto, and Wells Fargo, ~~Bank, National Association,~~ as Administrative ~~Agent~~Agent. The 2018 Credit Agreement amended and restated the Company’s 2015 Credit Agreement.

The 2018 Credit Agreement established a ~~lender (“Wells Fargo”), and the lenders party thereto, as amended (the “Credit Agreement”), provides for a $417.3~~credit facility comprised of an $800 million revolving credit loan (the ~~“Revolver”~~“2018 Revolver”) and ~~up to an $82.7~~a $100 million term loan (the ~~“Term~~“2018 Term Loan” and, together with the 2018 Revolver, the ~~“Credit~~“2018 Credit Facility”).

~~The~~ Borrowings under the 2018 Credit Agreement ~~has a maturity date of~~mature on March 17, 2022. ~~The Revolver amount reflects an amendment to the Credit Agreement on January 29, 2018, which increased the Revolver to $417.3 million.~~

The 2018 Credit Agreement is secured by substantially all personal property assets of the Company and ~~its~~any domestic subsidiary guarantors. The 2018 Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:

The 2018 Term Loan will be repaid in consecutive quarterly ~~repayment~~ installments ~~are $3.9 million,~~on the last business day of each of March, June, September and December in the following amounts: (i) beginning June 30, 2018, through and including March 31, 2019, $1,250,000, (ii) beginning June 30, 2019, through and including March 31, 2021, $2,500,000, and (iii) beginning June 30, 2021, and each quarter thereafter, $3,750,000, with the remaining balance due at maturity;

The interest rates for borrowings under the 2018 Revolver and the 2018 Term Loan are the Base Rate plus the Applicable Margin or LIBOR plus the Applicable Margin, with a fee payable by the Company on unused but committed portions of the Revolver;

The 2018 Revolver includes a ~~sub-limit up to~~ $10.0 million limit for same day advances (“Swing Line”) which shall bear interest based upon the Base Rate plus the Applicable Margin;

Up to $10.0 million of the 2018 Revolver is available as a sub facility for the issuance of standby letters of credit, which are subject to certain expiration dates;

The financial covenants include requirements as to a consolidated total leverage ratio and a consolidated fixed charge coverage ratio, and other covenants include limitations and restrictions concerning permitted acquisitions, investments, sales of assets, liens on assets, dividends and other payments; and

Customary prepayment provisions, representations, warranties and covenants, and events of default.

At ~~April 1, 2018,~~March 31, 2019, the Company had ~~$63.0~~$95.0 million outstanding under the 2018 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2018 Revolver ~~of: (i) $215.0~~of $385.0 million under the LIBOR-based ~~option and (ii) $13.6 million under the Base Rate-based~~ option. The interest rate for incremental borrowings at ~~April 1, 2018~~March 31, 2019 was the Prime Rate plus ~~0.75%~~1.00% (or ~~5.50%~~6.50%), for the Base Rate-based option, or LIBOR plus ~~1.75%~~2.00% (or ~~3.6875%~~4.50%). for the LIBOR-based option. At December 31, ~~2017,~~2018, the Company had ~~$67.0~~$96.3 million outstanding under the 2018 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2018 Revolver of: (i) ~~$281.0~~$388.0 million under the LIBOR-based option and (ii) ~~$6.4~~$4.3 million under the Base Rate-based option. The interest rate for incremental borrowings at December 31, ~~2017~~2018 was the Prime Rate plus ~~0.50%~~1.00% (or ~~5.00%~~6.50%), for the Base Rate-based option, or LIBOR plus ~~1.50%~~2.00% (or ~~3.1250%~~4.56%). for the LIBOR-based option. The fee payable on committed but unused portions of the 2018 Revolver was ~~0.225%~~0.25% at ~~April 1, 2018~~March 31, 2019 and ~~0.20%~~ December 31, ~~2017.~~2018.

Pursuant to the 2018 Credit Agreement, the financial covenants include: (a) a required maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.00:1.00 for the 12-month period ending on such quarter-end; and (b) a required minimum consolidated fixed charge coverage ratio, measured on a quarter-end basis, of at least 1.50:1.00 for the 12-month period ending on such quarter-end.

The consolidated total leverage ratio is the ratio for any period of consolidated total indebtedness (as measured as of the second day following the end of the immediately preceding fiscal quarter) to consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total indebtedness for any period is the sum of: (i) total debt outstanding under the 2018 Revolver, the 2018 Term Loan and the Convertible Notes (as defined herein); (ii) capital leases and letters of credit outstanding; and (iii) deferred payment obligations. The consolidated fixed charge coverage ratio for any period is the ratio of consolidated EBITDA less restricted payments, taxes paid and capital expenditures as defined under the 2018 Credit Agreement to consolidated fixed charges. Consolidated fixed charges for any period is the sum of cash interest expense related to the 2018 Term Loan, 2018 Revolver and the Convertibles Notes, and scheduled principal payments on outstanding indebtedness under the 2018 Term Loan.

As of and for the ~~April 1, 2018~~March 31, 2019 reporting date, the Company was in compliance with both of these financial debt covenants as required under the terms of the 2018 Credit Agreement. The required maximum consolidated total leverage ratio and the required minimum consolidated fixed charge coverage ratio compared to the actual amounts as of ~~April 1, 2018~~March 31, 2019 and for the fiscal period then ended are as follows:

Required

Actual
Consolidated total leverage ratio (12-month period)
3.00

1.96
Consolidated fixed charge coverage ratio (12-month period)
1.50

3.90

Total cash interest paid for the first quarter of 2019 and 2018 was $6.5 million and ~~2017 was~~ $2.9 million, ~~and $1.7~~respectively.

Interest Rate Swaps

In the third quarter of2018, the Company entered into $200.0 million ~~respectively.~~notional amount of variable to fixed interest rate swaps to partially hedge risks associated with the variable LIBOR component of the 2018 Credit Facility. These interest rate swaps fix the LIBOR component of interest expense on $200.0 million of the debt outstanding under the 2018 Credit Facility at an average interest rate of 2.91%, with an all-in average rate of 4.91% with the current applicable margin, discussed above. See Note 10 for further details.

Convertible Senior Notes

In January 2018, the Company issued $172.5 million aggregate principal amount of 1.00% Convertible Senior Notes due 2023 (the “Convertible Notes”). The total debt discount ~~at closing~~ of $36.0 million ~~represented (1)~~at issuance consisted of two components: (i) the conversion option component, recorded to shareholders' equity, in the amount of $31.9 million, representing the difference between the principal amount of the Convertible Notes upon issuance less the present value of the future cash flows of the Convertible Notes ~~or $31.9 million plus (2) the~~and (ii) debt ~~discount portion of the~~ issuance costs of $4.1 million. The unamortized portion of the total debt discount is being amortized to interest expense over the life of the Convertible Notes beginning in the first quarter of 2018. The effective interest rate on the Convertible Notes, which includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 5.25% as of March 31, 2019 and December 31, 2018. The unamortized portion of the debt discount and debt issuance costs as of ~~April 1, 2018~~March 31, 2019 was ~~$34.7~~$28.5 million.

The net proceeds from the issuance of the Convertible Notes were approximately $167.5 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the Convertible Note Hedge Transactions and the Warrant Transactions (each as defined herein) described in Note 10. The Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually in arrears on February 1 and August 1 of each year at an annual rate of 1.00% beginning August 1, 2018. The Convertible Notes will mature on February 1, 2023 unless earlier repurchased or converted in accordance with their terms. The Convertible Notes are convertible by the noteholders, in certain circumstances and subject to certain conditions, into cash, shares of common

stock of the Company, or a combination thereof, at the Company’s election. The initial conversion rate for the Convertible Notes is 11.3785 shares of the Company's common stock per $1,000 principal amount of the Convertible Notes ~~which~~(or 1,962,790 shares in the aggregate) and is equal to an initial conversion price of approximately $87.89 per share. If an event of default on the Convertible Notes occurs, the principal amount of the Convertible Notes, plus accrued and unpaid interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions. ~~The net proceeds were used~~

Convertible Notes holders can convert their Convertibles Notes on or after August 1, 2022 at any time at their option. Holders may convert Convertible Notes prior to ~~pay~~August 1, 2022, only under the ~~net cost~~following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018, if the last reported sale price of the ~~Convertible Hedge Transactions~~Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the ~~Warrant Transactions~~conversion rate on each such trading day and ~~to reduce borrowings under~~(iii) upon the ~~Revolver.~~ occurrence of certain specified distributions or corporate events.



10.	DERIVATIVE FINANCIAL INSTRUMENTS

Convertible Note Hedge Transactions and Warrant Transactions

In January 2018, in connection with the Convertible Notes offering, the Company entered into privately negotiated convertible note hedge transactions (together, the “Convertible Note Hedge Transactions”) with ~~certain~~each of Bank of America, N.A. and Wells Fargo Bank, National Association (together, the “Hedge Counterparties”). Pursuant to the Convertible Note Hedge Transactions, the Company acquired options to purchase the same number of shares of the Company's common stock (or 1,962,790 shares) initially underlying the Convertibles Notes at an initial ~~purchasers~~strike price equal to the initial strike price of the Convertible Notes ~~(the “Convertible Note Hedge Transactions”). Concurrently,~~of approximately $87.89 per share, subject to customary anti-dilution adjustments. The options expire on February 1, 2023, subject to earlier exercise.

At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “Warrant Transactions”) with each of the ~~counterparties~~Hedge Counterparties, pursuant to which the ~~Convertible Note Hedge Transactions relating~~Company sold warrants to purchase the same number of shares of the Company’s common stock (or 1,962,790 shares) underlying the Convertible ~~Note Hedge Transactions,~~Notes, at an initial strike price of approximately $113.93 per share, subject to customary anti-dilution ~~adjustments (the “Warrant Transactions”).~~ adjustments. The warrants have a final expiration date of September 20, 2023.

The Company paid $31.5 million associated with the cost of the Convertible Note Hedge Transactions and received proceeds of $18.1 million related to the Warrant Transactions. The Convertible Note Hedge Transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes. However, the Warrant Transactions, could separately have a dilutive effect on the Company's common stock to the extent that the market price per share of the common stock exceeds the strike price of the warrants.

As these transactions meet certain accounting criteria, the Convertible Note Hedges Transactions and Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

Interest Rate Swaps

The ~~initial strike price~~2018 Credit Facility exposes the Company to risk associated with the variability in interest expense associated with fluctuations in LIBOR. To partially mitigate this risk, the Company entered into interest rate swaps on a portion of its 2018 Credit Facility. As of March 31, 2019, the Company had a combined notional principal amount of $200.0 million of variable to fixed interest rate swap agreements, all of which were designated as cash flow hedges. These swap agreements effectively convert the interest expense associated with a portion of the ~~Warrant Transactions~~2018 Term Loan and a portion of the 2018 Revolver from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

Fair Value of Derivative Contracts

The following table summarizes the fair value of derivative contracts included in the accompanying condensed consolidated balance sheet (in thousands):



	Fair value of derivative liabilities
Derivatives accounted for as cash flow hedges	Balance sheet location	March 31, 2019		December 31, 2018
Interest rate swap agreements	Other long-term liabilities	$	4,062	$	2,652

The interest rate swaps are comprised of over-the-counter derivatives, which are valued using models that primarily rely on observable inputs such as yield curves, and are classified as Level 2 in the fair value hierarchy.

AOCI Recognition

The following table presents the amount of gains and losses that have been recognized in accumulated other comprehensive ("AOCI") from changes in the unrealized gain on the interest rate swaps, net of tax (in thousands):



Unrealized Loss Recognized in AOCI
First Quarter Ended
March 31, 2019		April 1, 2018
$	3,027	$	—



11.	ACCUMULATED OTHER COMPREHENSIVE LOSS

The Company incurs activity in AOCI for unrealized gains and losses on derivatives that qualify as hedges of cash flows, unrecognized pension costs and cumulative foreign currency translation adjustments. The activity in AOCI is ~~$113.9250 per share, subject to certain adjustments.~~as follows:



(thousands)	Cash Flow Hedges			Defined Benefit Pension			Foreign Currency Items			Total
Balance at December 31, 2018	$	(1,973	)	$	(675	)	$	(32	)	$	(2,680	)
Other comprehensive income (loss) (net of tax of $356, $0 and $0)	(1,054		)	—			27			(1,027		)
Balance at March 31, 2019	$	(3,027	)	$	(675	)	$	(5	)	$	(3,707	)



(thousands)	Defined Benefit Pension		Foreign Currency Items		Total
Balance at December 31, 2017	$	66	$	—	$	66
Other comprehensive income (net of tax of $0 and $0)	—		28		28
Balance at April 1, 2018	$	66	$	28	$	94



~~11.~~12.	LEASES

The Company adopted the provisions of ASC 842 in January of 2019 using the modified retrospective approach as of the effective date of ASC 842 (the effective date method). Under the effective date method, financial results in periods reported prior to 2019 are unchanged.

As a result of the adoption of ASC 842, operating leases for certain warehouses, buildings, forklifts, trucks, trailers and other equipment are now recognized as right-of-use assets and corresponding short-term and long-term lease liabilities. The Company utilized a package of available practical expedients in the adoption of ASC 842, which, among them, does not require the reassessment of operating versus capital lease classification.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense related to these short term leases is included in total operating lease cost and not separately disclosed due to immateriality. Lease and non-lease components in the fixed base rent of facility and equipment leases are included as a single component and accounted for as a lease. Pursuant to ASC 842, the Company elected to use the remaining non-cancellable lease term as of January 1, 2019 in determining the lease term at the date of adoption and the corresponding incremental borrowing rate for such leases. Variable lease expense, principally related to trucks, forklifts, and index-related facility rent escalators, was immaterial for the quarter ended March 31, 2019 and is expected to be immaterial for 2019. Leases have remaining lease terms of one year to ten years. Certain leases include options to renew for an additional term. Where there is reasonable certainty to utilize a renewal option, we would include the renewal option in the lease term used to calculate operating lease right-of-use assets and liabilities.

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



(thousands)	First Quarter Ended
	March 31, 2019
Operating lease cost	$	7,787

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	6,724

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	577

Balance sheet information related to leases was as follows:



(thousands, except lease term and discount rate)	March 31, 2019
Assets
Operating lease right-of-use assets	$	79,868
Liabilities
Operating lease liabilities, current portion	$	25,874
Long-term operating lease liabilities	54,309
Total lease liabilities	$	80,183



Weighted average remaining lease term, operating leases (in years)	3.86
Weighted average discount rate, operating leases	4.01	%

Maturities of lease liabilities were as follows at March 31, 2019:



(thousands)
2019 (excluding the three months ended March 31, 2019)	$	21,884
2020	24,314
2021	17,542
2022	10,910
2023	6,864
Thereafter	5,211
Total lease payments	86,725
Less imputed interest	(6,542		)
Total	$	80,183

As of March 31, 2019, we have additional operating leases, primarily for facilities and equipment, that have not yet commenced of $1.5 million in future cash payments under the non-cancellable terms of the leases. These operating leases will commence in fiscal year 2019 with lease terms of 4 years to 7 years.

Disclosures related to periods prior to the adoption of ASC 842:

Maturities of lease liabilities were as follows at December 31, 2018:



(thousands)
2019	$	29,345
2020	23,344
2021	16,165
2022	9,602
2023	5,357
Thereafter	4,883
Total	$	88,696

Operating lease expense for the first quarter of 2018 was approximately $6 million.



13.	FAIR VALUE MEASUREMENTS

The carrying amounts of cash and cash equivalents, trade receivables, and accounts payable approximated fair value as of ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017~~2018 because of the relatively short maturities of these financial instruments. The carrying ~~amount~~amounts of ~~debt~~the 2018 Term Loan and the 2018 Revolver approximated fair value as of ~~April 1, 2018~~March 31, 2019 and December 31, ~~2017~~2018, respectively, based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt.

The estimated fair value of the Convertible Notes, calculated using Level 2 inputs, was approximately $154.8 million as of March 31, 2019. As discussed in Note 10, the Convertible Note Hedges Transactions and Warrant Transactions are recorded in shareholders’ equity, are not accounted for as derivatives and are presented at carrying value, which does not approximate fair value at March 31, 2019. The estimated fair value of the Company's interest rate swaps are valued using Level 2 inputs and discussed in further detail in Note 10. The estimated fair value of the Company's contingent consideration is valued using Level 3 inputs and is discussed further in Note 6.



~~12.~~14.	INCOME TAXES

The effective tax rate in the first quarter of 2019 and 2018 was 22.3% and ~~2017 was~~ 19.6% ~~and 20.2%~~, respectively. The effective tax rate for the periods presented includes the impact of the recognition of excess tax benefits on share-based compensation ~~of $2.1 million and $3.7 million~~ that was recorded as a reduction to income tax expense upon realization in the amount of $0.8 million and$2.1 million in the first quarter of 2019 and 2018, ~~and 2017,~~ respectively.

The Company paid income taxes of ~~approximately $52,000 and $0.3~~$1.5 million in the first quarter of ~~2018~~2019 and ~~2017, respectively.~~an immaterial amount in the first quarter of 2018. Due to the timing of tax payments, the Company paid an additional ~~$3.7~~$10.2 million in ~~income taxes~~April 2019 (the beginning of the 2019 second fiscal quarter) and $3.7 million in April 2018 (the beginning of the 2018 ~~second fiscal quarter) and $6.2 million in April 2017 (the beginning of the 2017~~ second fiscal quarter).



~~13.~~15.	SEGMENT INFORMATION

The Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.

A description of the Company’s reportable segments is as follows:

Manufacturing – ~~This~~Products in this segment ~~includes the following divisions:~~include: laminated products that are utilized to produce

furniture, shelving, walls, countertops, and cabinet products, cabinet doors, fiberglass bath fixtures and tile systems,

hardwood furniture, vinyl printing, decorative vinyl and paper laminated panels, solid surface, granite, and quartz countertop fabrication, RV painting, fabricated

aluminum products, fiberglass and plastic components, softwoods lumber, custom cabinetry, polymer-based

flooring, electrical systems components ~~including~~(including instrument and dash ~~panels, and other products. Patrick’s major~~

~~manufactured products also include~~panels), wrapped vinyl, paper and hardwood

profile mouldings, interior passage doors,

air handling products, slide-out trim and fascia, thermoformed shower surrounds, specialty bath and closet building products, fiberglass

and plastic helm systems and components products, wiring and wire harnesses, boat covers, towers, tops and frames, aluminum fuel tanks, CNC molds

and composite parts, ~~and~~ slotwall panels and ~~components.~~components and other products. The Manufacturing segment contributed approximately ~~79%~~70% and ~~82%~~79% of the Company’s net sales for the first ~~quarter~~three months ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017,~~ respectively.

Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing

products, electronics and audio systems components, appliances, wiring, electrical and plumbing products, ~~appliances,~~ fiber reinforced

polyester products, cement siding, raw and processed lumber, interior passage doors, roofing products, laminate and ceramic flooring, tile, shower

doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous products, in addition to providing transportation and logistics services. The Distribution segment contributed approximately ~~21%~~30% and ~~18%~~21% of the Company’s net sales for the ~~first quarter~~three months ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017,~~ respectively.

The tables below present unaudited information about the sales and operating income of those segments.



First Quarter Ended March 31, 2019
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	425,684	$	182,534	$	608,218
Intersegment sales	7,720		1,165		8,885
Total sales	433,404		183,699		617,103
Operating income	44,437		8,291		52,728



First Quarter Ended April 1, 2018
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	435,913	$	115,919	$	551,832
Intersegment sales	9,369		669		10,038
Total sales	445,282		116,588		561,870
Operating income	52,923		7,290		60,213

First Quarter Ended March 26, 2017
(thousands) Manufacturing Distribution Total
Net outside sales $ 284,506
$ 60,921
$ 345,427
Intersegment sales 6,984
600
7,584
Total sales 291,490
61,521
353,011
Operating income 31,069
3,710
34,779

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


	First Quarter Ended						First Quarter Ended
(thousands)	Apr. 1, 2018			Mar. 26, 2017			March 31, 2019			April 1, 2018
Operating income for reportable segments	$	60,213		$	34,779		$	52,728		$	60,213
Unallocated corporate expenses	(11,328		)	(6,679		)	(7,913		)	(11,328		)
Amortization	(7,127		)	(4,185		)	(8,989		)	(7,127		)
Consolidated operating income	$	41,758		$	23,915		$	35,826		$	41,758

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



~~14.~~16.	STOCK REPURCHASE PROGRAMS

In ~~January~~ 2018, the Board approved a new stock repurchase program ~~that authorizes the repurchase of~~for up to $50 million of its common stock as well as two additions totaling $87.9 million to this program. Approximately $30.3 million remains in the amount of the Company's common stock ~~over a 24-month period (the “2018 Repurchase Plan”) to replace~~that may be acquired under the current stock repurchase ~~plan~~program. The Company did not repurchase any of its common stock in the ~~Board previously approved in January 2016 that had expired in January 2018.~~first quarter of 2019. In the first quarter of 2018, the Company repurchased 221,095 ~~shares under the 2018 Repurchase Plan~~of its common stock at an average price of $60.93 per share ~~for a total~~at an aggregate cost of $13.5 million. ~~Year-to-date through April 27, 2018, the Company repurchased 720,695 shares at an average price of $57.56 per share for a total cost of $41.5 million.~~

Common Stock

The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock, additional paid-in-capital, and retained earnings on the Company’s condensed consolidated statements of financial position.



~~15.~~17.	RELATED PARTY TRANSACTIONS

In the first ~~quarter~~three months of ~~2018,~~2019, the Company entered into transactions with companies affiliated with two of its independent Board members. The Company purchased approximately ~~$0.3~~$0.2 million of corrugated packaging materials from Welch Packaging Group, an independently owned company established by M. Scott Welch who serves as its President and CEO. The Company also sold approximately $0.2 million of RV component products to DNA Enterprises, Inc. ("DNA"). Walter E. Wells' son serves as the President of DNA.



~~16.~~	~~SUBSEQUENT EVENT~~

~~Dehco, Inc. (~~“~~Dehco”)~~

In April 2018, during the Company’s second fiscal quarter, the Company completed the acquisition of Dehco, a distributor and manufacturer of parts and accessories primarily for the RV market as well as the MH, marine and other industrial markets, for a net purchase price of approximately $53 million. Dehco’s primary products include flooring, kitchen and bath products, adhesives and sealants, electronics, appliances and accessories, LP tanks, and other related building materials. Dehco has operating facilities in Indiana, Oregon, Pennsylvania and Alabama.

The Dehco acquisition was funded under the Company’s Credit Facility. The Company is in the process of allocating the purchase consideration to the fair value of the assets acquired and expects to provide a summary in its Report on Form 10-Q for the second quarter ended July 1, 2018. The results of operations for Dehco will be included in the Company’s condensed consolidated financial statements from the date of acquisition and in the Manufacturing and the Distribution operating segments.

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

OVERVIEW

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-Looking Statements” on ~~pages 32 and 33~~page 35 of this Report. The Company undertakes no obligation to update these forward-looking statements.

The MD&A is divided into seven major sections:

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

REVIEW OF CONSOLIDATEDOPERATINGRESULTS

First Quarter Ended March 31, 2019 Compared to April 1, 2018 ~~Compared to 2017~~

REVIEW BY BUSINESS SEGMENT

First Quarter Ended March 31, 2019 Compared to April 1, 2018 ~~Compared to 2017~~

Unallocated Corporate Expenses

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Capital Resources

Summary of Liquidity and Capital Resources

CRITICAL ACCOUNTING POLICIES

OTHER

Seasonality

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

Summary

The first quarter of ~~2018~~2019 reflected a continuation of ~~steady~~planned end market diversification and the execution of our organic and strategic growth ~~supported by positive demographic drivers~~initiatives as the gap continued to widen in the first quarter of 2019 between wholesale production and retail shipments in the recreational vehicle ~~(“RV”~~("RV") ~~market, which includes growth~~market. As RV dealers continued to manage inventory to return to more normalized levels, RV original equipment manufacturers ("OEMs") continued to adjust production levels, and we expect OEM production to align with retail demand once normalized inventory levels are established among the dealers. We believe that overall dealer sentiment at recent RV shows thus far in ~~both towables~~2019 has been positive and ~~motorized units,~~retail traffic and ~~strong~~sales are off to a solid start to the year.

The Company has been able to continue to increase its content per unit in all markets despite the additional headwinds related to inclement weather in many parts of the country, uncertainty regarding the near-term direction of interest rates, uncertainty around tariffs, and commodity cost volatility. Industry fundamentals and demographics within each of our end markets remain strong. In addition, we carried a higher operating cost structure compared to revenues through the first quarter of 2019 in anticipation of expected improving retail demand in all four of our primary markets as we enter the traditionally stronger spring and summer selling seasons.

Our diversified market penetration in the marine ~~market. In addition, the positive sentiment exhibited by both RV dealers~~ and ~~manufacturers during the early spring industry retail~~our residential and ~~trade shows supports our belief~~commercial industrial markets, which we have been strategically targeting, has helped to offset wholesale shipment declines in the ~~sustainable long-term potential in this market and our anticipation of industry order levels consistent with recent seasonal trends as we move into the second~~first quarter of ~~2018~~2019 in our two largest market sectors, RV and ~~into~~manufactured housing ("MH"). At the ~~remainder of 2018. In~~same time, we achieved organic revenue growth in the ~~marine market, retail trends and demand patterns are strong as evidenced by a solid~~ first quarter ~~dealer show season with increased year over year traffic at almost all~~ of ~~the shows reporting. The manufactured housing (~~“~~MH”) market continued~~2019 and realized savings related to ~~reflect solid improvement for the quarter based on the growth rate in estimated wholesale industry shipments. Additionally,~~synergistic opportunities resulting from acquisitions we ~~see a continuation of improving conditions~~have made in the ~~industrial markets, as evidenced by growth in new housing starts and increases in commercial construction and institutional furniture spending.~~last two years.

We anticipate that attractive demographics, strong retail trends, particularly in the outdoor leisure and recreational lifestyle markets, namely RV and marine, improving consumer credit, equity market strength, and consumer confidence will all have a significant role in the ongoing growth we project for the remainder of 2018 in the primary markets we serve.

RV Industry

The RV industry ~~which~~ is our primary market and comprised ~~69%~~56% of the Company’s sales in the first quarter of ~~2018, continued~~2019. Sales from the RV industry decreased 9% in the first quarter of 2019 compared to ~~strengthen as evidenced by higher original equipment manufacturers (“OEM”) production levels and wholesale unit shipments versus~~ the prior ~~year.~~ year quarter.

According to the Recreation Vehicle Industry Association (“RVIA”), wholesale ~~shipment levels reached~~shipments totaled 99,976 units in the first quarter of 2019, a decline of 27% compared to 137,086 units in the first quarter of ~~2018, representing an increase~~2018. Both towable units and motorized units, which accounted for 87% and 13%, respectively, of ~~approximately 13% versus~~first quarter 2019 wholesale units, were down 27% compared to the prior year ~~period.~~quarter.

~~Leading~~We continue to believe that the ~~industry growth was~~future retail demand trajectory remains positive based on new and younger buyers and the ~~towables market, which includes~~emergence of incremental repeat buyers in the channel, increased participation by millennials, the continued shift to smaller travel trailers, ~~fifth wheels, camping trailers~~ and ~~park models. According to~~overall economic conditions. In addition, used RV inventory levels remain generally low with rising prices, supporting the ~~RVIA, towables represented 87% of industry~~demand for new RVs in the long-term.

The RVIA’s latest published expectations for 2019 project wholesale unit shipments to range from approximately 445,000 units to 476,000 units, representing low-to-high-single digit percentage declines from 2018. We currently anticipate that RV dealer inventories will continue to normalize as we progress through the second quarter of 2019 and will support a return to wholesale shipment levels aligned more closely with retail demand in the first quarter of 2018. In line with recent trends, travel trailer unit shipments led the way in towable market growth, increasing 17% in the first quarter of 2018 and comprising approximately 77% of all towables shipped year-to-date. Fifth wheels, which represented 21% of the towable market, increased 9% in the first quarter of 2018 versus the prior year period. The motorized sector of the industry, which represented 13% of all RV wholesale unit shipments in the first quarter of 2018, grew 7% compared to 2017. Wholesale unit shipments of Class B and C units, which are smaller, less expensive motorhomes, were up 5% in the first quarter of 2018 and comprised approximately 63% of the total motorized market. Wholesale unit shipments of Class A units, which are larger, more expensive models, increased 10% in the first quarter of

~~2018 compared to 2017. Demand for more affordable towables and motorhomes continues to grow significantly, reflecting in part industry demographic trends, with younger buyers entering the market.~~

Based on the most recent available industry-wide survey data from Statistical Surveys, Inc. (“SSI”), in the first quarter of 2018, combined domestic and Canadian RV retail unit sales were up 8% year-over-year. We generally see wholesale shipments exceed retail sales in the firstlatter half of the ~~calendar year as~~second quarter and into the ~~retail selling season ramps up for the second and~~ third quarter ~~peaks.~~of 2019.

As it relates to the correlation between retail inventories and overall production levels, industry reports and dealer surveys continue to indicate RV dealer inventory levels are in line with anticipated retail demand as OEMs and dealers are adding capacity where necessary to meet growing demand. We have continued to capture market share through our strategic acquisitions, line extensions, and the introduction of new and innovative products ~~which resulted in our overall sales levels in the first quarter~~and have a favorable view of ~~2018 increasing beyond the general industry results.~~

~~With first quarter 2018 wholesale unit shipments in the RV industry surpassing all prior shipment peaks, we continue to believe the future looks promising~~growth for the RV industry based on a number of factors including:

Attractive industry demographic trends with new and younger buyers entering the market and baby boomers reaching retirement age;

Readily available financing and improving consumer credit;

New and innovative products coming to market;

Consumer confidence;

Increased strength in the overall economic environment, including lower unemployment rates, improving trends in wages and improving consumer confidence ~~levels,~~levels; and ~~equity market conditions; and~~

The value of the travel and leisure lifestyle related to spending quality time with families.

On a macroeconomic level, as consumer confidence has generally trended higher over the last eight years, there has been a consistent trend of year-over-year increases in RV shipments for the same time period.

Marine Industry

AsSales to the marine industry, ~~embodies~~which represented approximately 15% of the ~~similar active, outdoor leisure-based, family-oriented lifestyle~~Company's consolidated net sales in the first quarter of 2019, increased 99% compared to the first quarter of 2018.

We anticipate that ~~characterizes~~ the ~~RV industry,~~marine market is poised to continue its recovery with the ~~Company increased its focus~~potential for a long runway of slow and ~~expanded its presence~~steady growth as OEMs in this market ~~through recent acquisitions~~continue to offer more value-added content and increased comfort and convenience on boats, consistent with the marine leisure lifestyle experience. Our marine portfolio companies are comprised of a high quality brand platform that is generating significant organic ~~growth.~~growth opportunities. The Company's combination of design, engineering, manufacturing and fabrication capabilities, along with its growing geographic footprint and comprehensive product offerings to its customers in the marine market, provides continuing opportunities for fully integrated solutions and additional content for the marine OEMs.

~~Sales to this~~All indicators currently point toward another solid year in the marine industry ~~represented approximately 8%~~with a growth rate in powerboat retail unit shipments for fiscal 2019 of low-to-mid-single digits based on long-term fundamental demand, aging boats in service, and the ~~Company's consolidated net sales in~~related replacement cycle, and positive consumer economic metrics.

For the first quarter of ~~2018, up approximately 225% over the first quarter of 2017. The Company’s sales to the~~2019, overall marine ~~industry primarily focus on~~retail unit shipments in the powerboat sector, ~~of the market~~ which is ~~comprised of four main categories:~~the Company's primary marine market, decreased approximately 7%, with aluminum and pontoon sales decreasing 14% and 3%, respectively, fiberglass ~~aluminum, pontoon~~decreasing 4%, and ski ~~& wake.~~and wake sales increasing 13%. Retail sales and wholesale unit shipments in this market are seasonal and are traditionally strongest in the second and third quarters.

~~Consumer demand~~ This market continues to make a steady recovery, with single-digit annual average growth rates since 2010. Moreover, according to industry sources, the average age of boats in service is approximately 24 to 25 years compared to a 30-year estimated useful life, and approximately one million boats are expected to be retired over the ~~marine market is generally driven by the popularity~~next four years. The increased age of the recreational and leisure lifestyle and by economic conditions. Based on currently available data per SSI, within the powerboat sector, fiberglass units accounted for approximately 40% of retail units, aluminum was 37%, pontoon was 19% and ski & wake was 4% for the first quarter of 2018. The Company's sales to the Marine industry are primarily focused on the powerboat sectorboats in both the freshwater and saltwater markets. Although powerboat retail sales, as currently reported by SSI, were down slightly in the first quarter of 2018 versus 2017, the first quarter seasonality trend is consistent with the first quarter of 2017 and all indicators point toward another solid year in the marine industry based onservice, low channel inventories, and continued positive demographics ~~trends.~~all point to anticipated growth in the marine market.

MH Industry

~~The~~Sales to the MH industry, which represented ~~approximately 11%~~17% of the Company’s sales in the first quarter of ~~2018.~~2019, increased 70% compared to the prior year. Based on industry data from the Manufactured Housing Institute and the Company's estimate for the month of March, MH wholesale unit shipments ~~increased~~decreased by approximately 9%10% in the first quarter of ~~2018. We currently expect steady growth in this market for~~2019. Similar to the ~~remainder~~fourth quarter of 2018, ~~with growth rates~~manufactured housing continues to be negatively impacted by wet weather conditions in certain regions of the country where moving inventory and ~~seasonality consistent with recent years~~setting foundations and ~~believe we are~~houses have been difficult. Nevertheless, demographic trends within the MH market indicate strong expected demand patterns related to first time home buyers and those looking to downsize.

The Company believes it is well-positioned to capitalize on pent up demand and the significant upside potential of the MH market in the long-term, especially given the increasing attractiveness of the single-family manufactured housing option and the combination of ~~our~~its nationwide geographic footprint, available capacity in ~~our~~ current MH concentrated locations, and ~~our~~ current content per unit levels.

~~In addition, we believe there is pent up demand being created and significant upside potential for this market in the long-term based on current economic trends including:~~

~~Multi-family housing capacity;~~

~~New home pricing; and~~

~~Improving credit and financing conditions.~~

Factors that may favorably impact production levels further in this industry include improving quality credit standards in the residential housing market, ~~job~~new jobs growth, consumer confidence, favorable changes in financing regulations, ~~higher~~a narrowing spread in interest rates on MH loans and mortgages on traditional residential "stick-built" housing, ~~loans,~~ and ~~improved~~any improvement in conditions in the asset-backed securities markets for manufactured housing loans.

Industrial Market

The industrial market ~~which accounted for 12% of our sales in the first quarter of 2018,~~ is comprised primarily of the kitchen cabinet industry, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors. ~~This~~Sales to this market represented 12% of our consolidated sales in the first quarter of 2019 and increased 5% in the first quarter of 2019 compared to the prior year period.

Overall, our revenues in these markets are focused on the residential housing, hospitality, high-rise, commercial construction and institutional furniture markets. Single and multifamily residential housing starts declined 5% and 19%, respectively, for the first quarter of 2019, with combined new housing starts down 10% in the quarter. Interest rate

increases and tariffs in the past year have created some headwinds, but potential demand remains strong given the lack of affordable housing capacity and inventories. We believe these factors present opportunities for continued pent up demand along with improving consumer credit, strong jobs and wage growth, and demographic trends related to new buyers and those looking to downsize, and are aligned well with our core housing and industrial market model.

The industrial market is primarily impacted by macroeconomic conditions and more specifically, conditions in the residential housing market. The Company’s industrial sales increased 64% in the first quarter of 2018 compared to 2017, reflecting the expansion into new commercial markets, the introduction of new product lines related to acquisitions and new product development, and the penetration of adjacent markets and new geographic regions. Additionally, the Company has targeted certain sales efforts towards market segments that are less directly tied to new single and multi-family home construction, including the retail fixture, and office, medical, and institutional furnishings markets.

We estimate that approximately 48% of our industrial revenue base was directly tied to the residential housing market in the first quarter of 2018 where new housing starts increased approximately 8% compared to the prior year period (as reported in a U.S. Department of Commerce release dated April 17, 2018), with single and multi-family residential housing starts, in total, up 7% and 11%, respectively. The remaining 52%60% of our industrial business is directly tied to the residential housing market, with the remaining 40% directly tied to the non-residential and commercial ~~markets, mainly in the retail fixture, institutional and commercial furnishings~~ markets. The Company believes there is a direct correlation between the demand for its products in the residential housing market and new residential housing construction and remodeling activities. Sales to the industrial market generally lag new residential housing starts by six to nine months. ~~In addition, the Company's sales~~

Fiscal Year 2019 Outlook

The 16 acquisitions we completed in ~~the first quarter of~~total in 2017 and 2018 ~~benefited from~~continue to present organic growth opportunities and synergies to further increase market share gains, ~~particularly in~~expand geographically, establish best practices across all of our brands, and service our customers at the ~~commercial and hospitality markets.~~

~~The Company believes that projected continued low interest rates, overall expected economic improvement, and pent up demand are some of the drivers that will~~highest level. We continue to ~~positively impact the housing industry for the next several years.~~

~~Outlook~~

~~In general, the primary markets that we serve experienced steady growth in the first quarter~~expect a return to a more normalized pattern of 2018 compared to the prior year, and we expect to see continued growth throughout the remainder of 2018 with full year seasonal patterns tracking trends consistent with the prior year. While the ongoing trend involving a shift in buying patterns towards smaller and more moderately priced towables and motorized units in the RV market continues to moderately impact the Company's overall dollar content per unit growth in the short-term, the Company views this shift as a positive indicator of a broadening consumer base and an opportunity for long-term industry growth. As the RV lifestyle continues to attract new buyers to the market, the RVIA has forecasted that RV wholesale unit ~~shipment levels~~production in ~~2018 will increase approximately 7% when compared to~~alignment with retail demand for fiscal year 2019.

Based on its most recent forecast, the ~~full year 2017 supported by strong retail sales and favorable demographic patterns. In addition, we are currently forecasting low double-digit growth rates~~RVIA expects the percentage decline in MHRV wholesale unit shipments for fiscal 2019 to range from low-single digits to high-single digits compared to full year 2018 reflecting the ~~improvement~~continued recalibration of dealer inventory levels. On the retail side, the Company expects RV retail unit shipments to be in ~~single-family residential housing starts. As it relates~~the range of flat to a low-single digit percentage decline in 2019 with potential upside based on subsiding headwinds related to interest rates, tariffs, commodity prices, consumer confidence, and equity market volatility.

In the marine market, we ~~currently estimate 2018~~anticipate that the retail unit growth rate in the powerboat sector of ~~approximately 3% to 5%. The National Association~~this market will be in the range of ~~Home Builders (per its~~low-to-mid single digits in 2019 based on the increasing age of boats in service, balanced channel inventories, and continued positive demographics.

~~housing and interest rate forecast as of April 6, 2018) is~~On the MH side, we are currently forecasting ~~an approximate 5% year-over-year increase~~low-to-mid single digit growth rates in wholesale unit shipments for 2019, and a low single-digit growth rate in new housing starts ~~in 2018 compared~~overall, and expect to ~~2017.~~

~~We will~~ continue to ~~review~~increase our ~~operations on~~content and market share in both of these market sectors beyond the general industry expectations as a ~~regular basis, balance appropriate risks~~result of increasing market penetration, strategic geographic expansions, and ~~opportunities, and maximize efficiencies to support the Company's long-term strategic growth goals.~~ cross selling opportunities.

Our team remains focused on strategic acquisitions in our existing, similar or complementary businesses, expanding operations in targeted regional territories, capturing market share and increasing our per unit content, keeping costs aligned with revenue, maximizing operating efficiencies, focusing on strategic capital expenditures to achieve cost reductions, labor efficiencies and increased capacity, talent management, engagement and retention, and the execution of our organizational strategic agenda.

In conjunction with our organizational strategic agenda, we ~~will~~plan to continue to make targeted capital investments to support new business and leverage our operating platform, and we will continue to work to strengthen and broaden customer relationships and meet customer demands with the highest quality service and the goal of continually exceeding our customers’ expectations.platform. The current capital plan for full year ~~2018~~2019 includes expenditures of ~~up to~~ approximately ~~$25~~$30 million related primarily to strategic investments in geographic expansions, the strategic replacement and upgrading of production equipment to improve efficiencies and increase capacity, ~~facility expansion costs outside of our core Midwest markets,~~new process and product development, and other strategic capital and maintenance improvements. ~~We will continue to assess our capital expenditure needs given market demands and make adjustments where necessary to address capacity constraints within the Company's operations.~~

REVIEW OF CONSOLIDATED OPERATING RESULTS

First Quarter Ended March 31, 2019Compared to First Quarter Ended April 1, 2018~~Compared to 2017~~

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


	First Quarter Ended				First Quarter Ended
	Apr. 1, 2018		Mar. 26, 2017		March 31, 2019		April 1, 2018
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	82.3		83.3		82.5		82.3
Gross profit	17.7		16.7		17.5		17.7
Warehouse and delivery expenses	3.1		3.0		4.0		3.1
Selling, general and administrative expenses	5.8		5.5		6.2		5.8
Amortization of intangible assets	1.3		1.2		1.5		1.3
Operating income	7.6		6.9		5.9		7.6
Interest expense, net	0.8		0.6		1.5		0.8
Income taxes	1.3		1.3		1.0		1.3
Net income	5.4		5.1		3.4		5.4

Net Sales. Net sales in the first quarter of ~~2018~~2019 increased ~~$206.4~~$56.4 million, or ~~60%~~10%, to ~~$551.8~~$608.2 million from ~~$345.4~~$551.8 million in the first quarter of ~~2017.~~2018. The Company's net sales increased in ~~all~~three of its ~~four~~ primary markets ~~as evidenced by~~in the first quarter of 2019 with increases of ~~53% in RV, 225%~~99% in marine, ~~43%~~70% in MH, and ~~64%~~5% in ~~industrial. Approximately one-half~~industrial, partly offset by a decline of ~~the~~9% in RV market sales.

The consolidated net sales increase in the first quarter of 2019 primarily reflected ~~the~~ revenue ~~contribution of four~~from nine acquisitions completed in fiscal year 2018, with no acquisitions completed in the first quarter of ~~2018 and~~2019. In addition to the ~~incremental revenue~~ contributions of the 2018 acquisitions, ~~completed~~increases in 2017. In the first quarter of 2018 and 2017, revenue attributable to acquisitions completed in each of those periods was $12.6 million and $0.3 million, respectively. The other half of the consolidated net sales ~~increase in 2018 was attributable to: (i)~~reflected increased penetration ~~including~~through geographic and ~~products~~product expansion efforts in the ~~primary markets; (ii) an increase in wholesale unit shipments in the RV~~marine and MH ~~industries and in retail shipments in the marine industry; and (iii) improved residential housing starts.~~

markets. In the first quarter of 2018, we acquired Metal Moulding Corporation, Aluminum Metals Company, LLC, IMP Holdings, LLC d/b/a/ Indiana Marine Products, and Collins & Company, Inc. InThe revenue attributable to these four acquisitions in the first quarter of ~~2017, we acquired Medallion Plastics, Inc.~~2018 was $12.6 million.

The Company’s RV content per unit (on a trailing twelve-month basis) for the first quarter of ~~2018~~2019 increased approximately ~~17%~~30% to ~~$2,414~~$3,131 from ~~$2,063~~$2,414 for the first quarter of ~~2017.~~2018. The marine content per retail unit (on a trailing twelve-month basis) for the first quarter of 2019 increased approximately 118% to an estimated $1,490 from $683 for the first quarter of 2018. MH content per unit (on a trailing twelve-month basis) for the first quarter of ~~2018~~2019 increased approximately ~~18%~~42% to ~~$2,382~~an estimated $3,389 from ~~$2,015~~$2,382 for the first quarter of ~~2017.~~2018.

The RV industry, which represented 69% of the Company’s sales in the first quarter of 2018, experienced wholesale unit shipments increase by approximately 13% compared to 2017. The MH industry, which represented 11% of the Company’s sales in the first quarter of 2018, experienced a 9% increase in wholesale unit shipments compared to the first quarter of 2017. Revenues from the marine industry represented 8% of the Company's sales in first quarter of 2018 and powerboat retail sales were down slightly in the first quarter of 2018 versus 2017. The industrial market sector accounted for approximately 12% of the Company’s sales in the first quarter of 2018. We estimate that approximately 48% of our industrial revenue base was directly tied to the residential housing market in the first quarter of 2018, which experienced an increase in new housing starts of approximately 8% compared to the prior year period (as reported by the U.S. Department of Commerce).

Cost of Goods Sold. Cost of goods sold increased ~~$166.2~~$47.6 million, or ~~58%~~10%, to ~~$454.1~~$501.7 million in the first quarter of ~~2018~~2019 from ~~$287.9~~$454.1 million in ~~2017.~~2018. As a percentage of net sales, cost of goods sold ~~decreased~~increased during the first quarter of ~~2018~~2019 to 82.5% from 82.3% ~~from 83.3%~~ in ~~2017.~~2018.

Cost of goods sold as a percentage of net sales was ~~positively~~ impacted during the first quarter of ~~2018~~2019 by: (i) ~~increased~~decreased RV revenue relative to overall fixed overhead costs; (ii) the ~~impact~~lower distribution margin sales profile of ~~acquisitions completed during 2017 and~~LaSalle Bristol ("LaSalle"), which was acquired in the fourth quarter of 2018 and (iii) inventory sold in the ~~addition~~first quarter of ~~new~~2019 which reflected higher ~~margin product lines; and (iii)~~input costs incurred in the ~~ongoing deployment~~latter part of ~~strategic capital investments and labor initiatives~~2018 relative to ~~automate certain processes, improve efficiencies, expand capacity, and alleviate certain labor inefficiencies. Partially offsetting~~ the ~~decline~~current commodities market. Part of the increase in the cost of goods sold ~~as a~~ percentage ~~of net sales~~ was ~~the impact of higher labor~~offset by leveraging fixed costs ~~related to tight labor markets, particularly~~ in the ~~Midwest.~~marine and industrial sectors and by the Company's acquisitions over the last 18 to 24 months that have a lower cost of goods sold percentage profile. In ~~addition, our~~general, the Company's cost of goods sold percentage can be impacted from quarter-to-quarter by demand changes in certain market sectors that can result in fluctuating costs of certain ~~more commodity-oriented~~ raw materials and ~~other products~~commodity-based components that ~~we utilize~~are utilized and ~~distribute.~~distributed. The timing of the Company's pass through of input cost increases and decreases to its customers may not coincide with the period in which such costs are incurred in inventory.

Gross Profit. Gross profit increased ~~$40.3~~$8.7 million, or ~~70%~~9%, to ~~$97.8~~$106.5 million in the first quarter of ~~2018~~2019 from ~~$57.5~~$97.8 million in ~~2017.~~2018. As a percentage of net sales, gross profit ~~increased~~decreased to ~~17.7%~~17.5% in the first quarter of ~~2018~~2019 from ~~16.7%~~17.7% in the same period in ~~2017.~~2018. The improvement in gross profit dollars and the impact to the percentage of net sales in the first quarter of ~~2018~~2019 compared to ~~2017~~2018 reflected the impact of the factors discussed above under “Cost of Goods Sold”.

Economic or industry-wide factors affecting the profitability of our RV, MH, marine and industrial businesses include the costs of commodities and the labor used to manufacture our products as well as the competitive environment that can cause gross margins to fluctuate from quarter-to-quarter and year-to-year. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs would impact our profit margins negatively if we were unable to raise the selling prices to our customers for our products by corresponding amounts. Historically, we have generally been able to pass along cost increases to customers.

Warehouse and Delivery Expenses. Warehouse and delivery expenses increased ~~$6.7~~$7.0 million, or ~~65%~~41%, to ~~$17.0~~$24.0 million in the first quarter of ~~2018~~2019 from ~~$10.3~~$17.0 million in ~~2017.~~2018. As a percentage of net sales, warehouse and delivery expenses ~~increased~~were 4.0% in the first quarter of 2019 compared to 3.1% in the first quarter of 2018. The expense increase in the first quarter of 2019 compared to the prior year period was primarily attributable to increased sales volumes and to the impact of certain acquisitions completed in 2018 ~~from 3.0%~~that had higher warehouse and delivery expenses as a percentage of net sales when compared to the consolidated percentage. In addition, the Company's shipments to the OEMs in ~~2017.~~the first quarter of 2019 were generally in lower volume, and as a result transportation costs relative to sales levels of products delivered increased as a percentage of net sales.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased ~~$12.7~~$5.9 million, or ~~67%~~18%, to ~~$31.8~~$37.7 million in the first quarter of ~~2018~~2019 from ~~$19.1~~$31.8 million in ~~2017.~~2018. As a percentage of net sales, SG&A expenses were 6.2% in the first quarter of 2019 compared to 5.8% in the first quarter of ~~2018 compared to 5.5% in the first quarter of 2017.~~2018.

The increase in SG&A expenses as a percentage of net sales in the first quarter of ~~2018~~2019 compared to the prior year period primarily reflected: (i) the impact of additional headcount and administrative expenses associated with recent acquisitions; (ii) the additional investment in and costs related to an expansion of certain leadership roles to support our continued strategic growth plans in ~~2018~~2019 and ~~beyond;~~beyond and (iii) ~~increased stock-based and incentive compensation expense designed to attract and retain key employees; and (iv)~~ the impact of certain acquisitions completed in ~~2017 and~~ 2018 that had higher SG&A expenses as a percentage of net sales when compared to the consolidated percentage.

Amortization of Intangible Assets. Amortization of intangible assets increased ~~$2.9~~$1.9 million in the first quarter of ~~2018~~2019 compared to the prior year quarter, primarily reflecting the impact of ~~acquisitions completed~~businesses acquired in ~~2017 and in the first three months of~~

2018. In the aggregate, in conjunction with the ~~2017 and~~ 2018 acquisitions, the Company recognized an estimated ~~$141.8~~$121.9 million in certain finite-lived intangible assets that are being amortized over periods ranging from three to 10 years.

OperatingIncome. Operating income ~~increased $17.9~~decreased $6.0 million, or ~~75%~~14%, to ~~$41.8~~$35.8 million in the first quarter of ~~2018~~2019 from ~~$23.9~~$41.8 million in ~~2017.~~2018. As a percentage of net sales, operating income was ~~7.6%~~5.9% in the first quarter of ~~2018~~2019 versus ~~6.9%~~7.6% in the same period in ~~2017.~~2018. Operating income in the first quarter of 2018 included $1.3 million attributable to the acquisitions completed in that period. ~~Operating income associated with the business acquired in the first quarter of 2017 was immaterial.~~ The change in operating income and operating margin is primarily attributable to the items discussed above.

Interest Expense, Net. Interest expense increased ~~$2.4~~$4.6 million to ~~$4.4~~$9.0 million in the first quarter of ~~2018~~2019 from ~~$2.0~~$4.4 million in the prior year. The increase in interest expense ~~primarily reflects~~reflects: (i) increased borrowings ~~primarily~~related to ~~fund~~2018 acquisitions and ~~increased working capital needs~~(ii) increases in the average interest rate on the variable rate portion of the Company's debt, which reflects increases in LIBOR in the first quarter of ~~2018.~~2019 compared to the prior year.

Income Taxes. For the first quarter of ~~2018,~~2019, the effective tax rate was ~~19.6%~~22.3% compared to ~~20.2%~~19.6% in the comparable ~~2017~~2018 period. The effective tax rate for the periods presented includes the impact of the recognition of excess tax benefits on share-based compensation ~~of $2.1 million and $3.7 million~~ that were recorded as a reduction to income tax expense upon ~~realization~~realization. Amounts recorded include $0.8 million in the first quarter of ~~2018~~2019 and ~~2017, respectively. Exclusive~~$2.1 million in the first quarter of 2018. Excluding the impact relating to the share-based payment awards in the first ~~three months~~quarter of ~~2018~~2019 and any additional impact in the remainder of ~~2018,~~2019, and excluding the impact of one-time tax items, we anticipate our full year ~~2018~~2019 effective tax rate to be ~~approximately~~between 25% and 26%.

The Company's combined effective income tax rate from period to period and for the full year ~~2018~~2019 could further fluctuate due to: (i) refinements in federal and state income tax estimates, which are impacted by the availability of tax credits; (ii)

permanent differences impacting the effective tax rate; (iii) shifts in apportionment factors among states as a result of recent acquisition activity and other ~~factors;~~factors and (iv) the timing of the recognition of excess tax benefits related to the vesting of share-based payments awards as previously discussed.

Net Income. Net income for the first quarter of ~~2018~~2019 was $20.8 million, or $0.90 per diluted share, compared to $30.1 million, or $1.20 per diluted share ~~compared to $17.5 million or $0.75 per diluted share~~ for ~~2017.~~2018. The changes in net income for the first quarter of ~~2018~~2019 reflect the impact of the items previously discussed.

In addition, net income includes the impact of the recognition of excess tax benefits on share-based compensation of $2.1 million and $3.7 million, in the first quarter of 2018 and 2017, respectively, that was discussed above under “Income Taxes”.

Net income per share on a basic and diluted basis in the first quarter of 2018 also reflects the impact of the increase in weighted average shares outstanding as a result of the common stock offering completed in March 2017.

REVIEW BY BUSINESS SEGMENT

The Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.

The Company’s reportable business segments are as follows:

Manufacturing – This segment includes the ~~following divisions:~~following: laminated products that are utilized to produce furniture, shelving, walls, countertops, and cabinet products, cabinet doors, fiberglass bath fixtures and tile systems, hardwood furniture, vinyl printing, decorative vinyl and paper laminated panels, solid surface, granite, and quartz countertop fabrication, RV painting, fabricated aluminum products, fiberglass and plastic components, softwoods lumber, custom cabinetry, polymer-based flooring, electrical systems components including instrument and dash panels, ~~and other products. Patrick’s major manufactured products also include~~ wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, air handling products, slide-out trim and fascia, thermoformed shower surrounds, specialty bath and closet building products, fiberglass and plastic helm systems and components products, wiring and wire harnesses, boat covers, towers, tops and frames, aluminum fuel tanks, CNC molds and composite parts, ~~and~~ slotwall panels and ~~components.~~components and other products.

Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics and audio systems components, appliances, wiring, electrical and plumbing products, ~~appliances,~~ fiber reinforced polyester

products, cement siding, raw and processed lumber, interior passage doors, roofing products, laminate and ceramic flooring, tile, shower doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous products, in addition to providing transportation and logistics services.

First Quarter Ended March 31, 2019 Compared to First Quarter Ended April 1, 2018 ~~Compared to 2017~~

General

In the discussion that follows, sales attributable to the Company’s operating 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 operating segments. A reconciliation of consolidated operating income is presented in Note 1315 to the Notes to Condensed Consolidated Financial Statements.


	First Quarter Ended				First Quarter Ended
(thousands)	Apr. 1, 2018		Mar. 26, 2017		March 31, 2019		April 1, 2018
Sales
Manufacturing	$	445,282	$	291,490	$	433,404	$	445,282
Distribution	116,588		61,521		183,699		116,588

Gross Profit
Manufacturing	81,587		48,059		76,827		81,587
Distribution	17,874		10,483		28,973		17,875

Operating Income
Manufacturing	52,923		31,069		44,437		52,923
Distribution	7,290		3,710		8,291		7,290

Manufacturing

Sales. Sales ~~increased $153.8~~decreased $11.9 million, or ~~53%~~3%, to ~~$445.3~~$433.4 million in the first quarter of ~~2018~~2019 from ~~$291.5~~$445.3 million in ~~2017.~~2018. This segment accounted for approximately ~~79%~~70% of the Company’s consolidated net sales for the first quarter of ~~2018~~2019 and ~~82% for the first quarter of 2017. The sales increase in the first quarter of 2018 largely reflected an increase in revenue from all four of the Company's primary markets.~~

~~Revenue in the first quarter of 2018 included $10.3 million related to the three manufacturing acquisitions completed in~~79% the first quarter of 2018. The sales ~~improvement~~decrease in the first quarter of ~~2018 is also attributable to: (i) increased RV, MH, marine and industrial market penetration including geographic and product expansion efforts; (ii) an increase~~2019 largely reflected a decrease in wholesale unit shipments in the RV and MH industries and in retail shipments in the marine ~~industry; and (iii) improved residential housing starts.~~industry. Revenue in the first quarter of ~~2017~~2018 included ~~$0.3~~$10.3 million ~~attributable~~related to acquisitions completed in the ~~business acquired in that period.~~first three months of 2018.

Gross Profit. Gross profit ~~increased $33.5~~decreased $4.8 million, or ~~70%~~6%, to $76.8 in the first quarter of 2019 from $81.6 million in the first quarter of ~~2018 from $48.1 million in the first quarter of 2017.~~2018. As a percentage of sales, gross profit ~~increased~~decreased to ~~18.3%~~17.7% in the first quarter of ~~2018~~2019 from ~~16.5%~~18.3% in ~~2017.~~2018.

Gross profit ~~was positively impacted~~decreased during the first quarter of ~~2018 by:~~2019 primarily due to: (i) ~~increased~~decreased revenue relative to overall fixed overhead ~~costs;~~costs and (ii) the impact of acquisitions completed during 2017 and 2018 and the addition of new higher margin product lines; and (iii) the ongoing deployment of strategic capital investments and labor initiatives to automate certain processes, improve efficiencies, expand capacity, and alleviate certain labor inefficiencies. The impact of higher labor

~~costs related to tight labor markets, particularly~~inventory sold in the ~~Midwest, partially offset~~first quarter of 2019 which reflected higher input costs incurred in the ~~improvement in gross profit as a percentage~~latter part of ~~net sales resulting from~~2018 relative to the ~~factors discussed above.~~current commodities market.

Operating Income. Operating income ~~increased $21.8 million~~decreased 16% to ~~$52.9~~$44.4 million in the first quarter of ~~2018~~2019 from ~~$31.1~~$52.9 million in the prior year. ~~The improvement~~In addition to the gross profit decline discussed above, operating expenses increased $3.7 million in ~~operating income primarily reflects~~ the first quarter of 2019, mostly attributed to an increase in ~~gross profit mentioned above.~~SG&A expense due to an increase in head count. Operating income in the first quarter of 2018 included $1.2 million attributable to ~~the~~ three manufacturing acquisitions completed in the first quarter of 2018. ~~Operating income in the first quarter of 2017 associated with the business acquired in that period was immaterial.~~

Distribution

Sales. Sales increased ~~$55.1~~$67.1 million, or ~~90%~~58%, to ~~$116.6~~$183.7 million in the first quarter of ~~2018~~2019 from ~~$61.5~~$116.6 million in ~~2017.~~2018. This segment accounted for approximately 30% and 21%, respectively, of the Company’s consolidated net sales for the first quarter of ~~2018~~2019 and ~~18% for the first quarter of 2017.~~2018. The sales increase in the first quarter of ~~2018~~2019 compared to the prior period quarter was largely ~~reflected an increase in~~attributed to the revenue ~~from all four~~contribution of the ~~Company's primary markets.~~

distribution business acquired during the fourth quarter of 2018. Revenue in the first quarter of 2018 included $2.3 million related to the one distribution acquisition completed in the first quarter of 2018. ~~The acquisition completed~~

Gross Profit. Gross profit increased $11.1 million to $29.0 million in the first quarter of ~~2017 was related to the Manufacturing segment, and therefore there was no impact~~2019 from ~~this acquisition on revenues in the Distribution segment.~~

~~Gross Profit.~~ ~~Gross profit increased $7.4 million to~~ $17.9 million in the first quarter of ~~2018 from $10.5 million in the first quarter of 2017.~~2018. As a percentage of sales, gross profit ~~decreased~~increased to 15.8% in the first quarter of 2019 from 15.3% in the first quarter of 2018, ~~from 17.0% in 2017,~~ primarily reflecting ~~an increase in~~ the ~~percentage~~impact of ~~direct shipment sales from the Company's vendors to its customers,~~acquisitions completed during 2018 which ~~generally carry lower gross margins than distribution products sold and delivered by the Company.~~had higher margin product lines.

Operating Income. Operating income increased ~~$3.6~~$1.0 million to ~~$7.3~~$8.3 million in the first quarter of ~~2018~~2019 from ~~$3.7~~$7.3 million in the prior year. Operating income in the first quarter of 2018 included $0.1 million related to the one distribution acquisition completed in the first quarter of 2018. The acquisition completed in the first quarter of 2017 was related to the Manufacturing segment, and therefore there was no impact from this acquisition on operating income in the Distribution segment.that quarter. The overall net improvement in operating income in the first quarter of ~~2018~~2019 primarily reflects the items discussed above.

Unallocated Corporate Expenses

Unallocated corporate expenses in the first quarter of ~~2018 increased $4.6~~2019 decreased $3.4 million to ~~$11.3~~$7.9 million from ~~$6.7~~$11.3 million in the ~~comparable~~ prior year period. ~~Unallocated~~The decrease in unallocated corporate expenses in the first quarter of 2019 compared to the first quarter of 2018 ~~and 2017 included the impact of an increase~~was largely attributable to a decrease in ~~administrative wages, incentives and payroll taxes, and additional headcount associated with 2018 and 2017 acquisitions.~~

accrued incentive compensation.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Operating Activities

Cash flows from ~~operations represent~~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. Our primary sources of liquidity have been cash flows from operating activities, borrowings under our Credit Facility (as defined herein), and proceeds from other financing activities. Principal uses of cash are to support working capital demands, meet debt service requirements and support capital allocation strategy, which includes acquisitions, capital expenditures, and repurchases of the Company’s common stock, among others.

Net cash provided by operating activities ~~was~~increased $2.1 million to $27.9 million in the first quarter of 2019 from $25.8 million in the first ~~three months~~quarter of 2018 ~~compared~~primarily due to: (i) an increase in depreciation and amortization of $4.2 million; (ii) an increase in non-cash interest expense from the amortization of convertible notes debt discount of $0.4 million; (iii) an increase in stock-based compensation expense of $0.3 million; (iv) a decrease in use of cash from other operating cash flows of $1.1 million, and (vi) a decrease in the use of cash from changes in operating assets and liabilities, net of acquisitions of businesses, of $5.5 million, partially offset by a decrease in net income of $9.2 million.

Investing Activities

Net cash used in investing activities decreased $93.7 million to ~~cash outflows of $10.9 million in 2017. Net income was $30.1~~$9.8 million in the first ~~three months~~quarter of ~~2018 compared to $17.5 million in 2017.~~

Net of acquisitions, trade receivables increased $48.4 million in the first three months of 2018 and $53.1 million in the same period of 2017, reflecting increased sales levels and normal seasonal trends in each of those periods, including the post-acquisition sales increases of the acquisitions completed in 2018, 2017 and 2016 as well as the timing of certain

~~customer payments. Due to the timing of the end of our fiscal quarters compared to the payment cycles of certain of our customers, cash flows~~2019 from operating activities do not reflect the receipt of approximately $22.8 million and $23.5 million in cash payments on trade receivables within two days following the end of our fiscal quarters ended April 1, 2018 and March 26, 2017, respectively.

Inventories, net of acquisitions, increased $8.6 million and $5.4 million in the first three months of 2018 and 2017, respectively, primarily reflecting the post-acquisition sales and inventory increases associated with recent acquisitions. The Company continually works with its key suppliers to match lead-time and minimum order requirements, although it may see fluctuations in inventory levels from quarter to quarter as a result of taking advantage of strategic buying opportunities.

The $34.2 million net increase in accounts payable, accrued liabilities and other in the first three months of 2018 and the $16.0 million net increase in the comparable 2017 period, primarily reflected the increased level of business activity, the timing and impact of acquisitions, and ongoing operating cash management.

The Company paid income taxes of $52,000 in the first three months of 2018. For the comparable period in 2017, the Company paid income taxes of $0.3 million. Due to the timing of tax payments, the Company paid an additional $3.7 million in income taxes in April 2018 (the beginning of the 2018 second fiscal quarter) and $6.2 million in April 2017 (the beginning of the 2017 second fiscal quarter).

~~Investing Activities~~

~~Investing activities used cash of~~ $103.5 million in the first ~~three months~~quarter of 2018 primarily ~~to fund~~due to: (i) a decrease in cash used in business acquisitions of $94.6 million and (ii) an increase in proceeds from the ~~four acquisitions acquired~~sale of property, equipment and other investing activities of $1.4 million, partially offset by an increase in ~~that period for $95.9 million in the aggregate, and for~~ capital expenditures of ~~$7.6~~$2.4 million. Investing activities used cash of $13.6 million in the first three months of 2017 primarily to fund the business acquired in that period for $10.1 million and for capital expenditures of $3.5 million. In addition, in April 2018 (the second fiscal quarter of 2018), the Company used cash of $53 million for the acquisition of Dehco, Inc. See Note 16 to the Condensed Consolidated Financial Statements for additional details.

~~Our~~The Company's current operating model forecasts capital expenditures for fiscal ~~2018~~2019 of ~~up to $25~~approximately $30 million related primarily to ~~facility expansion costs outside of our core Midwest market,~~strategic investments in geographic expansions, the strategic replacement and upgrading of production equipment to improve efficiencies and increase capacity, new process and product development, and other strategic capital and maintenance improvements.

Financing Activities

Cash flows from financing activities are one of the Company's primary sources of liquidity through borrowings, effective June 5, 2018 under a credit facility (the "2018 Credit Facility") consisting of a revolving credit loan (the "2018 Revolver") and a term loan (the "2018 Term Loan").

Net cash flows ~~provided~~used by financing activities ~~were~~increased $91.5 million to $16.5 million in the first quarter of 2019 from a source of cash of $75.0 million in the first ~~three months~~quarter of 2018 ~~compared to $29.0 million in the comparable 2017 period.~~

~~In January 2018, the Company issued~~primarily due to: (i) gross proceeds of $172.5 million ~~aggregate principal amount~~from the first quarter 2018 issuance of ~~its 1.00%~~1% Convertible Senior Notes due 2023 (the "Convertible Notes")~~, raising $167.5 million~~ with no comparable amount in ~~net proceeds, after deducting~~ the ~~initial purchasers’ discounts and commissions and offering expenses payable by~~first quarter of 2019; (ii) a source of cash in the ~~Company. In connection with the offering, the Company entered into convertible note hedge transactions and warrant transactions, receiving proceeds~~first quarter of 2018 of $18.1 million ~~related to the warrant transactions. The Company used the net proceeds~~ from the ~~offering and~~related sale of warrants with no comparable amount in the ~~warrant transactions to pay $31.5 million associated with the cost~~first quarter of ~~the convertible note hedge transactions and to reduce borrowings under the Revolver. See Notes 9 and 10 to the Condensed Consolidated Financial Statements for additional details.~~

~~Net repayments on the 2015 Revolver were $58.8 million and $60.7~~2019; (iii) a use of cash of $4.4 million in the ~~aggregate,~~first quarter of 2019 from payment of contingent consideration from a business acquisition with no comparable amount in the first ~~three months~~quarter of 2018; and (iv) an increase in cash used for the vesting of stock-based awards, net of shares tendered for taxes of $0.6 million. Partially offsetting these items were: (i) a decrease in use of cash from net repayments under the 2018 Credit Facility of $54.2 million; (ii) a use of cash in the first quarter of 2018 ~~and 2017, respectively. Stock~~of $31.5 million from the purchase of Convertible Notes hedges with no comparable amount in the first quarter of 2019; (iii) a use of cash from stock repurchases ~~were~~under stock buyback program of $13.5 million in the first ~~three months~~quarter of 2018 with no comparable amount in ~~2017. In April 2018 (the Company's second fiscal quarter), stock repurchases were $28.0~~the first quarter of 2019, and (iv) a decrease in the use of cash for deferred financing payments of $5.1 million.

See ~~Note~~Notes 9, 10, 14 and 16 of the Notes to ~~the~~ Condensed Consolidated Financial Statements for ~~additional details.~~

~~In March 2017, the Company completed a public offering of 2,025,000 shares of its common stock. The net proceeds from the offering of $93.3 million were used to pay down a portion of~~further information on the Company's ~~outstanding indebtedness. In accordance with its scheduled debt service requirements, the Company paid down $3.9 million in principal on its Term Loan in the first three months of 2018,~~indebtedness, derivative financial instruments, income taxes, and ~~$3.9 million on March 28, 2017 (beginning of the 2017 fiscal second quarter).~~

~~Capital Resources~~

~~Credit Facility~~

The Company's Amended and Restated Credit Agreement, dated as of April 28, 2015, with Wells Fargo Bank, National Association, as Administrative Agent and a lender (“Wells Fargo”), and the lenders party thereto, as amended (the “Credit Agreement”), provides for a $417.3 million revolving credit loan (the “Revolver”) and up to an $82.7 million term loan (the “Term Loan” and, together with the Revolver, the “Credit Facility”). The Credit Agreement has a maturity date of March 17, 2022. The Revolver amount reflects an amendment to the Credit Agreement on January 29, 2018, which increased the Revolver to $417.3 million. The Credit Agreement is secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors.

~~At April 1, 2018, the Company had $63.0 million outstanding under the Term Loan and $228.6 million under the Revolver.~~

Pursuant to the Credit Agreement, the financial covenants include: (a) a required maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.00:1.00 for the 12-month period ending on such quarter-end; and (b) a required minimum consolidated fixed charge coverage ratio, measured on a quarter-end basis, of at least 1.50:1.00 for the 12-month period ending on such quarter-end.

As of and for the April 1, 2018 reporting date, the Company was in compliance with both of these financial debt covenants as required under the terms of the Credit Agreement. The required maximum consolidated total leverage ratio and the required minimum consolidated fixed charge coverage ratio compared to the actual amounts as of April 1, 2018 and for the fiscal period then ended are as follows:

Required
Actual
Consolidated total leverage ratio (12-month period) 3.00
1.96
Consolidated fixed charge coverage ratio (12-month period) 1.50
3.90

Additional information regarding (1) certain definitions, terms and reporting requirements included in the Credit Agreement; (2) the interest rates for borrowings at April 1, 2018; and (3) the calculation of both the consolidated total leverage ratio and the consolidated fixed charge coverage ratio is included in Note 9 to the Condensed Consolidated Financial Statements.

~~Convertible Senior Notes~~

In January 2018, the Company issued the Convertible Notes. The total debt discount at closing of $36.0 million represented (1) the difference between the principal amount of the Convertible Notes upon issuance less the present value of the future cash flows of the Convertible Notes or $31.9 million plus (2) the debt discount portion of the issuance costs of $4.1 million. The unamortized portion of the total debt discount is being amortized to interest expense over the life of the Convertible Notes beginning in the first quarter of 2018. The unamortized portion of the debt discount as of April 1, 2018 was $34.7 million.

The net proceeds from the issuance of the Convertible Notes were approximately $167.5 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the convertible note hedge and warrant transactions described in Note 10 to the Condensed Consolidated Financial Statements. The Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually on February 1 and August 1 of each year at an annual rate of 1.00%. The Convertible Notes will mature on February 1, 2023 unless earlier repurchased or converted in accordance with their terms.

~~Additional information regarding (1) the timing of interest payments and the annual rate; and (2) the conversion features and conditions of the convertibility of the notes into cash, shares of common~~ stock ~~of the Company, or a combination thereof, is included in Note 9 to the Condensed Consolidated Financial Statements.~~

repurchases, respectively.

Summary of Liquidity and Capital Resources

The Company's primary sources of liquidity are cash flow from operations, which includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the Credit Facility. Principal uses of

cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, and repurchases of the Company’s common stock, among others.

Borrowings under the Revolver and the Term Loan under the Credit Facility, which are subject to variable rates of interest, were subject to a maximum total borrowing limit of $450.0 million (effective January 1, 2018 to January 28, 2018), and of $500.0 million (effective January 29, 2018). For the first three months of 2018 and for the fiscal year ended December 31, 2017, we were in compliance with all of our debt covenants under the terms of the Credit Agreement. As of April 1, 2018, the unused availability under the Revolver, net of cash on hand, was $186.5 million.

The Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2018 Credit Facility ~~will~~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 ~~our~~ short-term and long-term liquidity needs.

The ability to access unused borrowing capacity under the 2018 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 that established the 2018 Credit Agreement. In the first quarter of 2019, the Company was in compliance with its financial debt covenants as required under the terms of the 2018 Credit Agreement. See Note 9 of the Notes to Condensed Consolidated Financial Statements for additional information.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH and marine ~~and MH~~ industries as well as the industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to

become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

Borrowings under the 2018 Revolver and the 2018 Term Loan, which are subject to variable rates of interest, were subject to a maximum total borrowing limit of $900.0 million (effective June 5, 2018). See Note 10 of the Notes to Condensed Consolidated Financial Statements for information on interest rate swaps used to partially hedge variable interest rates under the 2018 Revolver and 2018 Term Loan. The unused availability under the 2018 Credit Facility as of March 31, 2019 was $419.6 million.

CRITICAL ACCOUNTING POLICIES

In the first quarter of ~~2018,~~2019, we adopted Accounting Standards Update ~~(“ASU”) No. 2014-09, Revenue from Contracts with Customers (commonly referred~~2016-02, "Leases (Topic 842)". See Note 12 to ~~as “Topic 606”). As discussed in~~the Notes ~~2 and 3~~ to ~~the~~ Condensed Consolidated Financial Statements ~~the adoption of the new revenue standard did not have a material impact on the Company's revenues, results of operations or financial position nor its revenue recognition accounting policy.~~for further information. There have been no other material changes to our significant accounting policies which are summarized in the MD&A and Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~ 2018.

OTHER

Seasonality

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 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 ~~September/October~~August/September timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. This has resulted in seasonal softening in the RV industry beginning in the third quarter and extending through October, resulting in a seasonal trend pattern in which the Company achieves its strongest sales and profit levels in the first half of the year. 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, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.

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 the 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 except as required by law. Factors that may affect the Company’s operations and prospects are contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and in the Company's Form 10-Qs 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 ~~April 1, 2018,~~March 31, 2019, our total debt obligations under our 2018 Credit Agreement were under ~~either~~ LIBOR-based ~~or Base rate-based~~ interest rates. A 100 basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately ~~$2.9~~$2.8 million, assuming average borrowings, including the 2018 Term Loan, subject to variable rates of ~~$291.6~~$280.0 million, which was the amount of such borrowings outstanding ~~(excluding~~at March 31, 2019 subject to variable rates. The $280.0 million excludes the reclassification of deferred financing costs related to the 2018 Term ~~Loan)~~Loan and $200.0 million of borrowings outstanding under the 2018 Credit Facility that are hedged at ~~April 1, 2018 subject to variable rates.~~a fixed interest rate through interest rate swaps.

Inflation

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 first three months of ~~2018.~~2019. During periods of rising commodity prices, we have generally been able to pass the increased costs to our customers in the form of surcharges and price increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases. We do not believe that inflation 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, required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and

communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the first quarter ended ~~April 1, 2018~~March 31, 2019 or subsequent to the date the Company completed its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

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



ITEM 1A.	RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.



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 (2)

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (3)

Jan. 1 - Jan. 28, 2018 —
$ —
—
$ 50,000,000
Jan. 29 - March 4, 2018 191,252
61.06
150,000
40,907,966
March 5 - April 1, 2018 71,551
61.57
71,095
36,529,505
262,803

221,095



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share ⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
January 1 - January 27, 2019	54,817	$	36.46	—	$	30,306,041
January 28 - March 3, 2019	25,246	47.64		—	30,306,041
March 4 - March 31, 2019	—	—		—	30,306,041
	80,063			—

(1)~~Includes 41,252 shares and 456~~Represents shares of common stock purchased by the Company for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards held by the ~~employees in~~employees.

(2) See Note 16 to the ~~January 29~~Notes to ~~March 4, 2018 and~~Condensed Consolidated Financial Statements for additional information about the ~~March 5 to April 1, 2018 periods, respectively.~~

~~(2)Includes commissions paid to repurchase shares as part of a publicly announced plan or program.~~

~~(3)~~ ~~In January 2018, the Board approved a new~~Company's stock repurchase ~~program that authorizes the repurchase of up to $50~~program.

million of the Company's common stock over a 24-month period (the “2018 Repurchase Plan”) to replace the repurchase plan the Board previously approved in January 2016 that had expired in January 2018. In the first quarter of 2018, the Company repurchased 221,095 shares under the 2018 Repurchase Plan at an average price of $60.93 per share for a total cost of $13.5 million. Year-to-date through April 27, 2018, the Company has repurchased 720,695 shares at an average price of $57.56 per share for a total cost of $41.5 million.



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

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: May ~~10, 2018~~9, 2019	By:	/s/ Todd M. Cleveland
		Todd M. Cleveland
		Chief Executive Officer




Date: May ~~10, 2018~~9, 2019	By:	/s/ Joshua A. Boone
		Joshua A. Boone
		Vice President-Finance and Chief Financial Officer

3740



First Quarter Ended March 26, 2017
(thousands)	Manufacturing		Distribution		Total
Net outside sales	$	284,506	$	60,921	$	345,427
Intersegment sales	6,984		600		7,584
Total sales	291,490		61,521		353,011
Operating income	31,069		3,710		34,779



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (3)
Jan. 1 - Jan. 28, 2018	—	$	—	—	$	50,000,000
Jan. 29 - March 4, 2018	191,252	61.06		150,000	40,907,966
March 5 - April 1, 2018	71,551	61.57		71,095	36,529,505
	262,803			221,095

Consolidated total leverage ratio (12-month period)

Consolidated fixed charge coverage ratio (12-month period)