UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~June~~March 27, ~~2021~~2022

☐ 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	PATK	NASDAQ

As of ~~July 23, 2021,~~April 22, 2022, there were ~~23,670,838~~23,004,770 shares of the registrant’s common stock outstanding.

PATRICK INDUSTRIES, INC.

TABLE OF CONTENTS


			Page No.
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Income ~~Second~~First Quarter ended March 27, 2022 and ~~Six Months ended June 27,~~March 28, 2021 ~~and June 28, 2020~~			3

Condensed Consolidated Statements of Comprehensive Income ~~Second~~First Quarter ended March 27, 2022 and ~~Six Months ended June 27,~~March 28, 2021 ~~and June 28, 2020~~			4

Condensed Consolidated Balance Sheets ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020~~2021			5

Condensed Consolidated Statements of Cash Flows ~~Six Months~~First Quarter ended ~~June~~March 27, ~~2021~~2022 and ~~June~~March 28, ~~2020~~2021			6

Condensed Consolidated Statements of Shareholders' Equity ~~Second~~First Quarter ended March 27, 2022 and ~~Six Months ended June 27,~~March 28, 2021 ~~and June 28, 2020~~			7

Notes to Condensed Consolidated Financial Statements			98

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2519

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			3426

ITEM 4. CONTROLS AND PROCEDURES			3427

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS			3528

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			3528

ITEM 6. EXHIBITS			3629

SIGNATURES			3730

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


		Second Quarter Ended				Six Months Ended					First Quarter Ended
(thousands except per share data)	(thousands except per share data)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(thousands except per share data)	March 27, 2022		March 28, 2021
NET SALES	NET SALES	$	1,019,953	$	424,045	$	1,870,436	$	1,013,277	NET SALES	$	1,342,175	$	850,483
Cost of goods sold	Cost of goods sold	815,476		350,324		1,504,427		830,075		Cost of goods sold	1,046,830		688,951
GROSS PROFIT	GROSS PROFIT	204,477		73,721		366,009		183,202		GROSS PROFIT	295,345		161,532
Operating Expenses:	Operating Expenses:									Operating Expenses:
Warehouse and delivery	Warehouse and delivery	34,815		20,209		64,728		44,941		Warehouse and delivery	41,169		29,913
Selling, general and administrative	Selling, general and administrative	60,365		31,628		111,597		67,497		Selling, general and administrative	75,560		51,232
Amortization of intangible assets	Amortization of intangible assets	14,031		9,778		25,937		19,379		Amortization of intangible assets	16,861		11,906
Total operating expenses	Total operating expenses	109,211		61,615		202,262		131,817		Total operating expenses	133,590		93,051
OPERATING INCOME	OPERATING INCOME	95,266		12,106		163,747		51,385		OPERATING INCOME	161,755		68,481
Interest expense, net	Interest expense, net	14,580		10,821		25,759		21,313		Interest expense, net	14,886		11,179
Income before income taxes	Income before income taxes	80,686		1,285		137,988		30,072		Income before income taxes	146,869		57,302
Income taxes	Income taxes	21,701		571		31,490		8,171		Income taxes	34,196		9,789
NET INCOME	NET INCOME	$	58,985	$	714	$	106,498	$	21,901	NET INCOME	$	112,673	$	47,513

BASIC NET INCOME PER COMMON SHARE	BASIC NET INCOME PER COMMON SHARE	$	2.57	$	0.03	$	4.66	$	0.96	BASIC NET INCOME PER COMMON SHARE	$	5.00	$	2.09
DILUTED NET INCOME PER COMMON SHARE	DILUTED NET INCOME PER COMMON SHARE	$	2.52	$	0.03	$	4.56	$	0.95	DILUTED NET INCOME PER COMMON SHARE	$	4.54	$	2.04

Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	22,948		22,667		22,844		22,840		Weighted average shares outstanding – Basic	22,517		22,737
Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted	23,435		22,932		23,360		23,098		Weighted average shares outstanding – Diluted	24,882		23,286

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

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Second Quarter Ended Six Months Ended
(thousands) June 27, 2021 June 28, 2020 June 27, 2021 June 28, 2020
NET INCOME $ 58,985 $ 714 $ 106,498 $ 21,901
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) of hedge derivatives 1,018 464 1,993 (2,542)
Other (11) (15) (70) (52)
Total other comprehensive income (loss) 1,007 449 1,923 (2,594)
COMPREHENSIVE INCOME $ 59,992 $ 1,163 $ 108,421 $ 19,307


	First Quarter Ended
(thousands)	March 27, 2022		March 28, 2021
NET INCOME	$	112,673	$	47,513
Other comprehensive income, net of tax:
Unrealized gain of hedge derivatives	757		975
Other	29		(59)
Total other comprehensive income	786		916
COMPREHENSIVE INCOME	$	113,459	$	48,429

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


		As of					As of
(thousands)	(thousands)	June 27, 2021		December 31, 2020		(thousands)	March 27, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	58,402	$	44,767	Cash and cash equivalents	$	63,846	$	122,849
Trade and other receivables, net	Trade and other receivables, net	264,296		132,505		Trade and other receivables, net	354,489		172,392
Inventories	Inventories	406,235		312,809		Inventories	698,712		614,356
Prepaid expenses and other	Prepaid expenses and other	34,691		37,982		Prepaid expenses and other	57,358		64,478
Total current assets	Total current assets	763,624		528,063		Total current assets	1,174,405		974,075
Property, plant and equipment, net	Property, plant and equipment, net	298,022		251,493		Property, plant and equipment, net	328,003		319,493
Operating lease right-of-use assets	Operating lease right-of-use assets	139,576		117,816		Operating lease right-of-use assets	170,875		158,183
Goodwill	Goodwill	453,537		395,800		Goodwill	600,119		551,377
Intangible assets, net	Intangible assets, net	563,288		456,276		Intangible assets, net	690,610		640,456
Other non-current assets	Other non-current assets	6,660		3,987		Other non-current assets	7,368		7,147
TOTAL ASSETS	TOTAL ASSETS	$	2,224,707	$	1,753,435	TOTAL ASSETS	$	2,971,380	$	2,650,731
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities	Current Liabilities					Current Liabilities
Current maturities of long-term debt	Current maturities of long-term debt	$	7,500	$	7,500	Current maturities of long-term debt	$	7,500	$	7,500
Current operating lease liabilities	Current operating lease liabilities	35,951		30,901		Current operating lease liabilities	42,841		40,301
Accounts payable	Accounts payable	164,646		105,786		Accounts payable	240,694		203,537
Accrued liabilities	Accrued liabilities	120,695		83,202		Accrued liabilities	205,280		181,439
Total current liabilities	Total current liabilities	328,792		227,389		Total current liabilities	496,315		432,777
Long-term debt, less current maturities, net	Long-term debt, less current maturities, net	1,076,950		810,907		Long-term debt, less current maturities, net	1,489,811		1,278,989
Long-term operating lease liabilities	Long-term operating lease liabilities	105,318		88,175		Long-term operating lease liabilities	130,550		120,161
Deferred tax liabilities, net	Deferred tax liabilities, net	48,734		39,516		Deferred tax liabilities, net	40,515		36,453
Other long-term liabilities	Other long-term liabilities	21,642		28,007		Other long-term liabilities	14,217		14,794
TOTAL LIABILITIES	TOTAL LIABILITIES	1,581,436		1,193,994		TOTAL LIABILITIES	2,171,408		1,883,174
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Common stock	Common stock	191,131		180,892		Common stock	188,433		196,383
Additional paid-in-capital	Additional paid-in-capital	24,387		24,387		Additional paid-in-capital	—		59,668
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(4,129)		(6,052)		Accumulated other comprehensive loss	(1,442)		(2,228)
Treasury stock		(21,550)		0
Retained earnings	Retained earnings	453,432		360,214		Retained earnings	612,981		513,734
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	643,271		559,441		TOTAL SHAREHOLDERS’ EQUITY	799,972		767,557
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	2,224,707		1,753,435		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,971,380	$	2,650,731

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Six Months Ended					First Quarter Ended
(thousands)	(thousands)	June 27, 2021		June 28, 2020		(thousands)	March 27, 2022		March 28, 2021
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	106,498	$	21,901	Net income	$	112,673	$	47,513
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	48,715		34,689		Depreciation and amortization	30,201		22,521
Stock-based compensation expense	Stock-based compensation expense	10,336		6,347		Stock-based compensation expense	5,111		4,298
Amortization of convertible notes debt discount	Amortization of convertible notes debt discount	3,643		3,505		Amortization of convertible notes debt discount	449		1,769
Deferred income taxes		8,534		(7,346)

(Gain) loss on sale of property, plant and equipment						(Gain) loss on sale of property, plant and equipment	(5,501)		45
Other non-cash items	Other non-cash items	1,892		3,016		Other non-cash items	1,697		1,550
Change in operating assets and liabilities, net of acquisitions of businesses:	Change in operating assets and liabilities, net of acquisitions of businesses:					Change in operating assets and liabilities, net of acquisitions of businesses:
Trade and other receivables, net	Trade and other receivables, net	(116,625)		(55,520)		Trade and other receivables, net	(160,883)		(76,350)
Inventories	Inventories	(54,646)		(7,183)		Inventories	(51,769)		(24,398)
Prepaid expenses and other assets	Prepaid expenses and other assets	3,998		14,908		Prepaid expenses and other assets	7,198		9,587
Accounts payable, accrued liabilities and other	Accounts payable, accrued liabilities and other	66,400		25,055		Accounts payable, accrued liabilities and other	37,785		63,757
Net cash provided by operating activities		78,745		39,372
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(23,039)		50,292
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(26,345)		(11,305)		Capital expenditures	(18,668)		(14,239)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	112		126		Proceeds from sale of property, plant and equipment	7,146		58
Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired	(252,660)		(23,838)		Business acquisitions, net of cash acquired	(131,597)		(28,864)
Other	Other	(2,000)		0		Other	—		(2,000)
Net cash used in investing activities	Net cash used in investing activities	(280,893)		(35,017)		Net cash used in investing activities	(143,119)		(45,045)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings		58,750		0
Term debt repayments		(1,250)		(1,250)

Borrowings on revolver	Borrowings on revolver	425,475		8,022		Borrowings on revolver	303,712		117,475
Repayments on revolver	Repayments on revolver	(565,475)		(8,022)		Repayments on revolver	(149,712)		(144,475)
Proceeds from senior notes offering		350,000		0

Stock repurchases under buyback program	Stock repurchases under buyback program	(21,550)		(15,550)		Stock repurchases under buyback program	(24,778)		—
Cash dividends paid to shareholders	Cash dividends paid to shareholders	(13,061)		(11,607)		Cash dividends paid to shareholders	(8,288)		(6,573)
Taxes paid for share-based payment arrangements	Taxes paid for share-based payment arrangements	(14,885)		(2,860)		Taxes paid for share-based payment arrangements	(9,999)		(14,464)
Payment of deferred financing costs and other		(5,798)		(58)

Payment of contingent consideration from a business acquisition	Payment of contingent consideration from a business acquisition	(1,000)		(2,000)		Payment of contingent consideration from a business acquisition	(3,780)		—
Proceeds from exercise of common stock options	Proceeds from exercise of common stock options	4,577		642		Proceeds from exercise of common stock options	—		4,194
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	215,783		(32,683)		Net cash provided by (used in) financing activities	107,155		(43,843)
Increase (decrease) in cash and cash equivalents		13,635		(28,328)
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	(59,003)		(38,596)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	44,767		139,390		Cash and cash equivalents at beginning of year	122,849		44,767
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	58,402	$	111,062	Cash and cash equivalents at end of period	$	63,846	$	6,171

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

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


First Quarter Ended March 27, 2022
(thousands)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance December 31, 2021	$	196,383	$	59,668	$	(2,228)	$	513,734	$	767,557
Impact of adoption of ASU 2020-06	—		(59,668)		—		15,975		(43,693)
Net income	—		—		—		112,673		112,673
Dividends declared	—		—		—		(7,684)		(7,684)
Other comprehensive income, net of tax	—		—		786		—		786
Stock repurchases under buyback program	(3,062)		—		—		(21,717)		(24,779)
Repurchase of shares for tax payments related to the vesting and exercising of share-based grants	(9,999)		—		—		—		(9,999)
Stock-based compensation expense	5,111		—		—		—		5,111
Balance March 27, 2022	$	188,433	$	—	$	(1,442)	$	612,981	$	799,972

First Quarter Ended March 28, 2021
(thousands)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance December 31, 2020	$	180,892	$	24,387	$	(6,052)	$	360,214	$	559,441
Net income	—		—		—		47,513		47,513
Dividends declared	—		—		—		(6,623)		(6,623)
Other comprehensive income, net of tax	—		—		916		—		916
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants	(14,464)		—		—		—		(14,464)
Issuance of shares upon exercise of common stock options	4,194		—		—		—		4,194
Stock-based compensation expense	4,298		—		—		—		4,298
Balance March 28, 2021	$	174,920	$	24,387	$	(5,136)	$	401,104	$	595,275

~~PATRICK INDUSTRIES, INC.~~

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

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

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

PATRICK INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.			BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc. (“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020,~~2021, and its results of operations ~~for the second quarter~~ and ~~six months ended June 27, 2021 and June 28, 2020, and its statements of~~ cash flows for the ~~six~~three months ended ~~June~~March 27, ~~2021~~2022 and ~~June~~March 28, ~~2020.~~2021.

Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation of other ~~non-current assets~~non-cash items in the condensed consolidated ~~balance sheets and accumulated other comprehensive loss in Note 11.~~statements of cash flows. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The December 31, ~~2020~~2021 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the ~~second quarter and six~~three months ended ~~June~~March 27, ~~2021~~2022 are not necessarily indicative of the results ~~to be expected~~that we will realize or expect for the full year ending December 31, ~~2021.~~2022.

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Sunday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The ~~second~~first quarter of fiscal year 2022 ended on March 27, 2022 and the first quarter of fiscal year 2021 ended on ~~June 27, 2021 and the second quarter of fiscal year 2020 ended on June~~March 28, ~~2020.~~2021.

In preparation of Patrick’s condensed consolidated financial statements as of and for the ~~second quarter and six~~three months ended ~~June~~March 27, ~~2021,~~2022, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.


2.			RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

In ~~December 2019,~~August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2019-12,~~2020-06, "~~Income Taxes (Topic 740): Simplifying the~~ Accounting for ~~Income Taxes~~Convertible Instruments and Contracts in an Entity's Own Equity", a new standard ~~to simplify the~~that simplifies certain accounting treatments for ~~income taxes.~~convertible debt instruments. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects ofrequirements that require separate accounting for ~~franchise taxes~~embedded conversion features and ~~enacted changes in tax laws or rates, and clarifies~~simplifies the ~~accounting~~settlement assessment that entities are required to perform to determine whether a contract qualifies for ~~transactions that result in a step-up~~equity classification. In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the ~~tax basis~~diluted net income per share calculation and include the effect of ~~goodwill.~~potential share settlement for instruments that may be settled in cash or shares, with certain exceptions. Furthermore, the guidance requires new disclosures about events that occur during the reporting period that cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The ~~standard~~guidance is effective for fiscal years beginning after December 15, ~~2020,~~2021, with early adoption permitted. ~~The Company~~We adopted ASU ~~2019-12~~2020-06 on January 1, ~~2021 and the adoption did not have~~2022 using a ~~material effect~~modified retrospective transition approach. The primary impact on ~~its~~our condensed consolidated financial ~~statements.~~statements as a result of the adoption of ASU 2020-06 was a reduction in non-cash interest expense for our 1.00% Convertible Notes due 2023, an increase in diluted shares outstanding used to calculate diluted net income per share and a resulting reduction in diluted net income per share for the first quarter of

2022 attributable to the application of the if-converted method for such convertible notes. In addition, the adoption resulted in the recognition of a $56.0 million increase to the carrying value of convertible notes payable, a $12.4 million decrease in "Deferred tax liabilities, net", and a $59.7 million decrease in "Additional paid-in-capital", resulting in a cumulative adjustment to the opening balance of retained earnings as an increase of $16.0 million. Additionally, in line with the adoption, our diluted share count increased by approximately 2.0 million shares, a 9.0% increase. Diluted net income per share increased $0.3 million in relation to the effect of interest on potentially dilutive convertible notes, as shown in Note 8. The adoption resulted in an overall decrease of $0.39 to diluted net income per share for the first quarter of 2022. There was no impact on the Company's condensed consolidated statement of cash flows upon adoption of ASU 2020-06.

Reference Rate Reform

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

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

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


3.			REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors:


		Second Quarter Ended June 27, 2021							First Quarter Ended March 27, 2022
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Market type:	Market type:							Market type:
Recreational Vehicle	Recreational Vehicle	$	397,613	$	197,818	$	595,431	Recreational Vehicle	$	570,022	$	250,582	$	820,604
Marine	Marine	156,350		10,143		166,493		Marine	207,501		13,473		220,974
Manufactured Housing	Manufactured Housing	68,367		70,724		139,091		Manufactured Housing	84,986		88,578		173,564
Industrial	Industrial	106,711		12,227		118,938		Industrial	117,100		9,933		127,033
Total	Total	$	729,041	$	290,912	$	1,019,953	Total	$	979,609	$	362,566	$	1,342,175

Six Months Ended June 27, 2021
(thousands) Manufacturing Distribution Total
Market type:
Recreational Vehicle $ 727,225 $ 369,632 $ 1,096,857
Marine 288,688 14,614 303,302
Manufactured Housing 125,001 134,808 259,809
Industrial 188,883 21,585 210,468
Total $ 1,329,797 $ 540,639 $ 1,870,436

Second Quarter Ended June 28, 2020
(thousands) Manufacturing Distribution Total
Market type:
Recreational Vehicle $ 139,628 $ 64,498 $ 204,126
Marine 54,860 4,188 59,048
Manufactured Housing 36,407 53,907 90,314
Industrial 61,679 8,878 70,557
Total $ 292,574 $ 131,471 $ 424,045


		Six Months Ended June 28, 2020							First Quarter Ended March 28, 2021
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Market type:	Market type:							Market type:
Recreational Vehicle	Recreational Vehicle	$	366,413	$	157,933	$	524,346	Recreational Vehicle	$	329,612	$	171,814	$	501,426
Marine	Marine	130,289		6,810		137,099		Marine	132,338		4,471		136,809
Manufactured Housing	Manufactured Housing	82,012		120,671		202,683		Manufactured Housing	56,634		64,084		120,718
Industrial	Industrial	133,126		16,023		149,149		Industrial	82,172		9,358		91,530
Total	Total	$	711,840	$	301,437	$	1,013,277	Total	$	600,756	$	249,727	$	850,483

Contract Liabilities

Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial as of the beginning and end of all periods presented and changes in contract liabilities were immaterial during all periods presented.

119


4.			INVENTORIES

Inventories consist of the following:


(thousands)	(thousands)	June 27, 2021		December 31, 2020		(thousands)	March 27, 2022		December 31, 2021
Raw materials	Raw materials	$	218,116	$	157,219	Raw materials	$	365,387	$	315,269
Work in process	Work in process	26,466		19,282		Work in process	30,073		30,801
Finished goods	Finished goods	57,827		37,632		Finished goods	129,442		101,763
Less: reserve for inventory obsolescence	Less: reserve for inventory obsolescence	(10,315)		(8,320)		Less: reserve for inventory obsolescence	(16,865)		(9,573)
Total manufactured goods, net	Total manufactured goods, net	292,094		205,813		Total manufactured goods, net	508,037		438,260
Materials purchased for resale (distribution products)	Materials purchased for resale (distribution products)	119,765		112,158		Materials purchased for resale (distribution products)	197,272		181,921
Less: reserve for inventory obsolescence	Less: reserve for inventory obsolescence	(5,624)		(5,162)		Less: reserve for inventory obsolescence	(6,597)		(5,825)
Total materials purchased for resale (distribution products), net	Total materials purchased for resale (distribution products), net	114,141		106,996		Total materials purchased for resale (distribution products), net	190,675		176,096
Total inventories	Total inventories	$	406,235	$	312,809	Total inventories	$	698,712	$	614,356


5.			GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the ~~six~~three months ended ~~June~~March 27, ~~2021~~2022 by segment are as follows:
(thousands) Manufacturing Distribution Total
Balance - December 31, 2020 $ 338,045 $ 57,755 $ 395,800
Acquisitions 40,548 10,059 50,607
Adjustments to preliminary purchase price allocations 7,111 19 7,130
Balance - June 27, 2021 $ 385,704 $ 67,833 $ 453,537


(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2021	$	481,906	$	69,471	$	551,377
Acquisitions	45,666		—		45,666
Adjustments to preliminary purchase price allocations	2,966		110		3,076
Balance - March 27, 2022	$	530,538	$	69,581	$	600,119

Intangible assets, net consist of the following as of ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020:~~2021:


(thousands)	(thousands)	June 27, 2021		December 31, 2020		(thousands)	March 27, 2022		December 31, 2021
Customer relationships	Customer relationships	$	545,554	$	461,754	Customer relationships	$	656,777	$	617,814
Non-compete agreements	Non-compete agreements	18,714		15,949		Non-compete agreements	22,851		21,284
Patents	Patents	33,428		23,025		Patents	60,988		50,038
Trademarks (non-amortizing, indefinite-lived)		149,777		113,796
Trademarks						Trademarks	181,432		165,897
		747,473		614,524			922,048		855,033
Less: accumulated amortization	Less: accumulated amortization	(184,185)		(158,248)		Less: accumulated amortization	(231,438)		(214,577)
Intangible assets, net	Intangible assets, net	$	563,288	$	456,276	Intangible assets, net	$	690,610	$	640,456

Changes in the carrying value of intangible assets for the ~~six~~three months ended ~~June~~March 27, ~~2021~~2022 by segment are as follows:


(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2020		$	373,717	$	82,559	$	456,276
Balance - December 31, 2021								Balance - December 31, 2021	$	534,827	$	105,629	$	640,456
Acquisitions	Acquisitions	105,338		32,700		138,038		Acquisitions	70,000		—		70,000
Amortization	Amortization	(21,424)		(4,513)		(25,937)		Amortization	(14,314)		(2,547)		(16,861)
Adjustments to preliminary purchase price allocations	Adjustments to preliminary purchase price allocations	(5,089)		0		(5,089)		Adjustments to preliminary purchase price allocations	(2,655)		(330)		(2,985)
Balance - June 27, 2021		$	452,542	$	110,746	$	563,288
Balance - March 27, 2022								Balance - March 27, 2022	$	587,858	$	102,752	$	690,610

1210


6.			ACQUISITIONS

General

The Company completed ~~3 acquisitions~~1 acquisition in the ~~second~~first quarter of ~~2021 and completed 7 acquisitions in the six months ended June 27, 2021~~2022 (the ~~"2021 Acquisitions"~~"2022 Acquisition"). For the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 27, ~~2021,~~2022, net sales included in the Company's condensed consolidated statements of income related to the ~~2021 Acquisitions~~2022 Acquisition were ~~$56.7~~$8.4 million, ~~and $62.1 million, respectively,~~ and operating income was $6.0 million for each of these periods. One of the 2021 Acquisitions accounted for $32.2 million in net sales and $1.9 million in operating income for the second quarter and six months ended June 27, 2021.$1.4 million. Acquisition-related costs associated with the ~~businesses acquired in the second quarter and first six months of 2021~~2022 Acquisition were immaterial. Assets acquired and liabilities assumed in the ~~individual acquisitions~~acquisition were recorded on the Company’s condensed consolidated balance sheet at their estimated fair values as of the respective ~~dates~~date of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one year measurement period. NoThe Company completed 4 acquisitions ~~were completed~~ in the ~~second~~first quarter of ~~2020 and 3 acquisitions were completed in the six months ended June 28, 2020.~~2021. Net sales included in the Company's condensed consolidated statements of income in the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 28, ~~2020~~2021 related to acquisitions completed in the first ~~six~~three months of ~~2020~~2021 were ~~$3.3~~$5.4 million, and ~~$3.8 million, respectively, and~~ operating income relating to acquisitions was immaterial for the same ~~periods.~~period.

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

In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company records a liability for the estimated fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition. As of ~~June~~March 27, ~~2021,~~2022, the aggregate fair value of the estimated contingent consideration payments was ~~$9.8 million, $4.2~~$8.1 million, of which $3.7 million is included in "Accrued liabilities" and ~~$5.6~~$4.4 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet. At December 31, ~~2020,~~2021, the ~~aggregate~~ fair value of the estimated contingent consideration payments was ~~$6.9 million, $1.6~~$12.3 million, of which $7.0 million was included in the line item "Accrued liabilities" and $5.3 million was included in "Other long-term liabilities". The liabilities for contingent consideration expire at various dates through December 2023. The contingent consideration arrangements are subject to a maximum payment amount of up to $~~19.5~~14.0 million in the ~~aggregate.~~aggregate as of March 27, 2022. In the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 27, ~~2021,~~2022, the Company ~~made $1.0~~recorded $1.1 million in ~~cash payments related~~non-cash increases to contingent consideration liabilities, ~~and recorded a $0.9 million non-cash charge and a corresponding increase to accrued liabilities. The non-cash charge~~which is ~~included in~~reflected as charges within selling, general and administrative expense in the condensed consolidated statement of income, representing changes in the ~~expected~~ amount of consideration expected to be paid. These charges relate to changes in projected performance of certain acquisitions compared to the projected performance originally used in calculating the projected fair values of the contingent consideration of such acquisitions. In the first quarter ended March 27, 2022, the Company made cash payments of approximately $5.4 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2022 Acquisition

The Company completed the following previously announced acquisition in the three months ended March 27, 2022:

Company

Segment

Description

Rockford Corporation

Manufacturing

Designs and produces audio systems and components through its brand Rockford Fosgate®, primarily serving the powersports and automotive aftermarkets, based in Tempe, Arizona, acquired in March 2022

Total cash consideration for the 2022 Acquisition was approximately $130.1 million. The preliminary purchase price allocations are subject to valuation activities being finalized, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates.

1311

2021 Acquisitions

The Company completed the following 7 previously announced acquisitions in the ~~six months~~year ended ~~June 27,~~December 31, 2021 ~~including~~(together with 6 acquisitions not described below, the ~~following 3 previously announced acquisitions:~~"2021 Acquisitions"):

Company

Segment

Description

Sea-Dog Corporation & Sea-Lect Plastics
~~(collectively,~~ (collectively, "Sea-Dog")

Distribution & Manufacturing

Distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, ~~retailer,~~retailers, and manufacturers and ~~manufacturer that provides~~provider of plastic injection molding, design, product development and ~~expert~~ tooling to companies and government entities, based in Everett, Washington, acquired in March 2021.

Hyperform, Inc.

Manufacturing

Manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida, acquired in April 2021.

Alpha Systems, LLC

Manufacturing & Distribution

Manufacturer and distributor of component products and accessories for the ~~recreational vehicle ("RV"),~~RV, marine, manufactured housing and industrial end markets ~~such as~~including adhesives, sealants, rubber roofing, roto/blow molding and injection molding products, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of 9 facilities in Elkhart, Indiana, acquired in May 2021.

Coyote Manufacturing Company

Manufacturing

Designer, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia, acquired in August 2021.

Tumacs Covers

Manufacturing

Manufacturer of custom designed boat covers, canvas frames, and bimini tops, primarily serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan, acquired in August 2021.

Wet Sounds, Inc. & Katalyst Industries LLC (collectively "Wet Sounds")

Manufacturing

Designer, engineer, and fabricator of innovative audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers sold directly to OEMs and consumers, and to dealers and retailers, primarily within the marine market as well as to the home audio and powersports markets and aftermarkets, based in Rosenburg, Texas, acquired in November 2021.

Williamsburg Marine LLC & Williamsburg Furniture, Inc. (collectively "Williamsburg")

Manufacturing

Manufacturer of seating for the RV and marine end markets sold primarily to OEMs, based in Milford and Nappanee, Indiana, acquired in November 2021.

~~Inclusive of 4 immaterial acquisitions not discussed above, total~~Total cash consideration for the 2021 Acquisitions was approximately ~~$253.3 million. One of the 2021 Acquisitions accounted for $147.1~~$510.2 million, plus contingent consideration over a one to three-year period based on future performance in cash and $10.2 million in common stock as consideration, $26.8 million in fixed assets, $90.4 million in intangible assets, $18.2 million in accounts payable and accrued liabilities, $11.5 million in operating lease right-of-use assets and liabilities, and $28.9 million in goodwill.connection with certain acquisitions. The preliminary purchase price allocations are subject to valuation activities being finalized, primarily related to the valuation of property, plant, and equipment and intangible assets, and thus ~~all required~~certain purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 27, ~~2021~~2022 related to the 2021 Acquisitions, ~~were immaterial.~~

~~2020 Acquisitions~~

~~The Company completed 11 acquisitions~~individually and in the ~~year ended December 31, 2020 (the "2020 Acquisitions"), including the following 7 previously announced acquisitions:~~

~~Company~~

~~Segment~~

~~Description~~

~~Maple City Woodworking Corporation~~

~~Manufacturing~~

~~Manufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana~~

~~SEI Manufacturing, Inc.~~

~~Manufacturing~~

~~Manufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana~~

~~Inland Plywood Company~~

~~Manufacturing~~

Supplier, laminator, and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida

~~Synergy RV Transport~~

~~Distribution~~

~~Transportation and logistics service provider primarily for OEMs and dealers in the RV market located in Goshen, Indiana~~

~~Front Range Stone~~

~~Manufacturing~~

Fabricator and installer of natural stone, quartz, solid surface, and laminate countertops, primarily serving big box home improvement retailers, home builders and commercial contractors in the industrial market based in Englewood, Colorado

~~Geremarie Corporation~~

~~Manufacturing~~

Designer, manufacturer, and fabricator of a full suite of high-precision aluminum components serving the marine industry, in addition to the medical, aerospace, defense, commercial and industrial markets located in Lake Zurich, Illinois

~~Taco Metals, LLC~~

~~Manufacturing~~

Manufacturer of boating products including rub rail systems, canvas and tower components, sport fishing and outrigger systems, helm chairs and pedestals, and specialty hardware for OEMs in the recreational boating industry and the related aftermarket headquartered in Miami, Florida, with manufacturing facilities in Tennessee and Florida, and distribution centers in Tennessee, Florida, South Carolina, and Massachusetts

~~Inclusive of 4 immaterial acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $306.3 million, plus contingent consideration over a~~ ~~one~~ to three-year period based on future results in connection with certain acquisitions. One of the 2020 Acquisitions accounted for $129.7 million in cash consideration, $49.3 million in fixed assets, $49.1 million in intangible assets and $32.6 million in goodwill. Purchase accounting adjustments are complete for Maple City Woodworking Corporation and SEI Manufacturing, Inc. Preliminary purchase price allocations, predominantly related to property, plant, and equipment and identifiable intangible assets, are still in the process of final valuation procedures on the remainder of the 2020 Acquisitions. All purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. ~~Changes to preliminary purchase accounting estimates recorded in the second quarter and six months ended June 27, 2021 related to the 2020 Acquisitions~~aggregate, were immaterial and relate primarily to the valuation of intangible and fixed assets.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the ~~2021 Acquisitions~~2022 Acquisition and the ~~2020~~2021 Acquisitions:
(thousands) 2021 Acquisitions 2020 Acquisitions
Consideration
Cash, net of cash acquired $ 253,336 $ 306,335
Working capital holdback and other, net(1)
2,860 (53)
Common stock issuance(2)
10,211 0
Contingent consideration(3)
3,000 4,763
Total consideration $ 269,407 $ 311,045
Assets Acquired
Trade receivables $ 15,824 $ 15,320
Inventories 39,386 25,395
Prepaid expenses & other 1,025 725
Property, plant & equipment 46,986 65,083
Operating lease right-of-use assets 16,026 20,029
Identifiable intangible assets 137,985 130,981
Liabilities Assumed
Current portion of operating lease obligations (3,650) (2,721)
Accounts payable & accrued liabilities (22,406) (12,405)
Operating lease obligations (12,376) (17,308)
Deferred tax liabilities 0 (4,322)
Total fair value of net assets acquired 218,800 220,777
Goodwill(4)
50,607 90,268
$ 269,407 $ 311,045


(thousands)			2022 Acquisition		2021 Acquisitions
Consideration
	Cash, net of cash acquired(1)		$	130,058	$	510,229
	Working capital holdback and other, net(2)		2,500		(1,190)
	Common stock issuance(3)		—		10,211
	Contingent consideration(4)		—		4,730
		Total consideration	132,558		523,980

Assets Acquired
	Trade receivables		$	20,526	$	26,224
	Inventories		32,744		69,343
	Prepaid expenses & other		478		13,740
	Property, plant & equipment		5,270		55,567
	Operating lease right-of-use assets		2,917		25,530
	Identifiable intangible assets		70,000		242,460

Liabilities Assumed
	Current portion of operating lease obligations		(512)		(5,518)
	Accounts payable & accrued liabilities		(25,452)		(32,326)
	Operating lease obligations		(2,924)		(20,012)
	Deferred tax liabilities		(16,155)		(1,996)
		Total fair value of net assets acquired	86,892		373,012
		Goodwill(5)	45,666		150,968
			$	132,558	$	523,980

(1) Amounts include cash used to pay off outstanding debt obligations at the time of acquisition.

(2) Certain acquisitions contain working capital holdbacks which are typically settled after a 90-day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of ~~June~~March 27, ~~2021.~~2022.

~~(2)~~(3) In connection with one ~~acquisition,~~of the ~~company~~2021 Acquisitions, the Company issued 113,961 shares of common stock at a closing price of $89.60 as of the acquisition date.

~~(3)~~(4) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions.

~~(4)~~(5) Goodwill is not tax-deductible for the 2022 Acquisition and is tax-deductible for the 2021 Acquisitions, ~~and the 2020 Acquisitions,~~ except ~~Front Range Stone~~Tumacs Covers (approximately ~~$10.8~~$6.2 million).

We estimate the value of acquired property, plant, and equipment using a combination of the income, cost, and market approaches, such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the acquired businesses.

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

(thousands, except year info) Estimated Useful Life (in years) 2021 Acquisitions 2020 Acquisitions
Customer relationships 10 $ 88,693 $ 99,897
Non-compete agreements 5 2,825 1,150
Patents 10 10,350 6,470
Trademarks Indefinite 36,117 23,464
$ 137,985 $ 130,981

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

The following table presents our estimates of identifiable intangible assets for the 2022 Acquisition and the 2021 Acquisitions:


(thousands, except year data)	Estimated Useful Life (in years)	2022 Acquisition		2021 Acquisitions
Customer relationships	10	$	42,000	$	157,916
Non-compete agreements	5	2,100		4,862
Patents	10 - 18	10,500		27,310
Trademarks	Indefinite	15,400		52,372
		$	70,000	$	242,460

Pro Forma Information

The following pro forma information for the ~~second~~first quarter ended March 27, 2022 and ~~six months ended June~~March 28, ~~2020~~2021 assumes the ~~2021 Acquisitions~~2022 Acquisition and the ~~2020~~2021 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of the ~~2021 Acquisitions~~2022 Acquisition and ~~2020~~2021 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of ~~$0.6~~$0.8 million and ~~$3.1~~$5.9 million for the ~~second~~first quarter ended March 27, 2022 and ~~six months ended June 27,~~March 28, 2021, ~~respectively and $5.2 million and $10.5 million for the second quarter and six months ended June 28, 2020,~~ respectively.


		Second Quarter Ended				Six Months Ended					First Quarter Ended
(thousands, except per share data)	(thousands, except per share data)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(thousands, except per share data)	March 27, 2022		March 28, 2021
Revenue	Revenue	$	1,038,874	$	515,104	$	1,953,675	$	1,215,622	Revenue	$	1,369,234	$	989,281
Net income	Net income	60,187		(791)		111,524		23,428		Net income	114,665		58,986
Basic net income per common share	Basic net income per common share	2.62		(0.03)		4.88		1.03		Basic net income per common share	5.09		2.59
Diluted net income per common share	Diluted net income per common share	2.57		(0.03)		4.77		1.01		Diluted net income per common share	4.62		2.53

The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of the periods indicated above.


7.			STOCK-BASED COMPENSATION

The Company recorded stock-based compensation expense of approximately ~~$6.0~~$5.1 million and ~~$10.3~~$4.3 million in the ~~second~~first quarter ended March 27, 2022 and ~~six months ended June 27,~~March 28, 2021, respectively, for its stock-based compensation plans in the condensed consolidated statements of income. Stock based compensation expense of $2.0 million and $6.3 million was recorded in the second quarter and six months ended June 28, 2020, which includes a $2.4 million reduction of expense in both periods due to certain forfeitures and adjustments.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first ~~six months of 2021~~quarter ended March 27, 2022 totaling ~~230,073~~220,450 shares in the aggregate at an average fair value of ~~$73.53~~$64.74 at grant date for a total fair value at grant date of ~~$16.9~~$14.4 million.

As of ~~June~~March 27, ~~2021,~~2022, there was approximately ~~$31.7~~$35.3 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 ~~20.1~~21.1 months.

1714


8.			NET INCOME PER COMMON SHARE

Net income per common share calculated for the ~~second~~first quarter of 2022 and ~~six months of~~ 2021 ~~and 2020~~ is as follows:


		Second Quarter Ended				Six Months Ended					First Quarter Ended
(thousands except per share data)	(thousands except per share data)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(thousands except per share data)	March 27, 2022		March 28, 2021
Net income for basic and diluted per share calculation		$	58,985	$	714	$	106,498	$	21,901
Numerator:										Numerator:
Net income for basic per share calculation										Net income for basic per share calculation	$	112,673	$	47,513
Effect of interest on potentially dilutive convertible notes, net of tax										Effect of interest on potentially dilutive convertible notes, net of tax	317		—
Net income for dilutive per share calculation										Net income for dilutive per share calculation	$	112,990	$	47,513
Denominator:										Denominator:
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	22,948		22,667		22,844		22,840		Weighted average common shares outstanding - basic	22,517		22,737
Effect of potentially dilutive securities		487		265		516		258
Weighted average impact of potentially dilutive convertible notes										Weighted average impact of potentially dilutive convertible notes	2,046		—
Weighted average impact of potentially dilutive securities										Weighted average impact of potentially dilutive securities	319		549
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	23,435		22,932		23,360		23,098		Weighted average common shares outstanding - diluted	24,882		23,286
Net income per common share:										Net income per common share:
Basic net income per common share	Basic net income per common share	$	2.57	$	0.03	$	4.66	$	0.96	Basic net income per common share	$	5.00	$	2.09
Diluted net income per common share	Diluted net income per common share	$	2.52	$	0.03	$	4.56	$	0.95	Diluted net income per common share	$	4.54	$	2.04

An immaterial amount of securities was not included in the computation of diluted income per share as they are considered anti-dilutive under the treasury stock ~~method.~~

method for all periods presented.


9.			DEBT

A summary of total debt outstanding at ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


(thousands)	(thousands)	June 27, 2021		December 31, 2020		(thousands)	March 27, 2022		December 31, 2021
Long-term debt:	Long-term debt:					Long-term debt:
1.00% convertible notes due 2023	1.00% convertible notes due 2023	$	172,500	$	172,500	1.00% convertible notes due 2023	$	172,500	$	172,500
Term loan due 2026	Term loan due 2026	150,000		92,500		Term loan due 2026	144,375		144,375
Revolver due 2026	Revolver due 2026	135,000		275,000		Revolver due 2026	289,000		135,000
7.50% senior notes due 2027	7.50% senior notes due 2027	300,000		300,000		7.50% senior notes due 2027	300,000		300,000
1.75% convertible notes due 2028						1.75% convertible notes due 2028	258,750		258,750
4.75% senior notes due 2029	4.75% senior notes due 2029	350,000		0		4.75% senior notes due 2029	350,000		350,000
Total long-term debt	Total long-term debt	1,107,500		840,000		Total long-term debt	1,514,625		1,360,625
Less: convertible notes debt discount, net	Less: convertible notes debt discount, net	(12,429)		(16,072)		Less: convertible notes debt discount, net	(7,750)		(64,245)
Less: term loan deferred financing costs, net	Less: term loan deferred financing costs, net	(624)		(434)		Less: term loan deferred financing costs, net	(588)		(624)
Less: senior notes deferred financing costs, net	Less: senior notes deferred financing costs, net	(9,997)		(5,087)		Less: senior notes deferred financing costs, net	(8,976)		(9,267)
Less: current maturities of long-term debt	Less: current maturities of long-term debt	(7,500)		(7,500)		Less: current maturities of long-term debt	(7,500)		(7,500)
Total long-term debt, less current maturities, net	Total long-term debt, less current maturities, net	$	1,076,950	$	810,907	Total long-term debt, less current maturities, net	$	1,489,811	$	1,278,989

~~4.75% Senior Notes due 2029~~

~~On April 20, 2021,~~There were no material changes to any of our debt arrangements during the ~~Company issued $350 million aggregate principal amount~~quarter ended March 27, 2022. The decrease in the convertible notes debt discount reflects the impact of ~~4.75% Senior Notes due 2029 (the "4.75% Senior Notes"). The 4.75% Senior Notes were not registered under~~ the ~~Securities Act~~adoption of ~~1933, as amended (the "Securities Act") and were offered under rule 144A under the Securities Act. The 4.75% Senior Notes will mature on May 1, 2029. Interest~~ASU 2020-06 on the 4.75% Senior Notes will accrue from April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November 1, 2021. The effective interest rate on the 4.75% Senior Notes, which includes debt issuance costs, is approximately 4.98%. In connection with the issuancecarrying value of the ~~4.75% Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75% Senior Notes~~convertible notes.

1815

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

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

~~Timeframe~~

~~Redemption Restrictions~~

~~Redemption Prices~~

~~Prior to May 1, 2024~~

~~Up to 40% of the notes~~

~~104.750%~~

~~After May 1, 2024~~

~~In whole, or in part~~

~~102.375%~~

~~After May 1, 2025~~

~~In whole, or in part~~

~~101.188%~~

~~After May 1, 2026~~

~~In whole, or in part~~

~~100.000%~~

~~2021 Credit Facility~~

Simultaneously with the issuance of the 4.75% Senior Notes, the Company entered into the Fourth Amended and Restated Credit Agreement (the "2021 Credit Agreement"). The 2021 Credit Agreement amended and extended the Company's 2019 Credit Agreement (as defined herein) and consists of a senior secured revolver (the "2021 Revolver") and a senior secured term loan (the "2021 Term Loan" and together with the 2021 Revolver, the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Agreement is April 20, 2026. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2021 Credit Facility by up to $250 million for acquisitions.

The Company determined that the terms of the 2021 Credit Agreement were not substantially different from the terms of the Company’s 2019 Credit Agreement. Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial.

~~Borrowings under the 2021 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Pursuant to the 2021 Credit Agreement:~~

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

•The interest rates for borrowings under the 2021 Revolver and the 2021 Term Loan are the Prime Rate or LIBOR plus a margin, which ranges from 0.00% to 0.75% for Prime Rate loans and from 1.00% to 1.75% for LIBOR loans depending on the Company's consolidated total leverage ratio, as defined below. The Company is required to pay fees on unused but committed portions of the 2021 Revolver, which range from 0.15% to 0.225%; and

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

The total face value of the 2021 Term Loan is $150.0 million. Total available borrowing capacity under the 2021 Revolver is $550.0 million. At June 27, 2021, the Company had $150.0 million outstanding under the 2021 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2021 Revolver of $135.0 million under the LIBOR-based option. The interest rate for incremental borrowings at ~~June~~March 27, ~~2021~~2022 was LIBOR plus 1.50% (or ~~1.63%~~1.75%) for the LIBOR-based option. The fee payable on committed but unused portions of the ~~2021~~ Revolver due 2026 was 0.20% at ~~June~~March 27, ~~2021.~~

2022.

Total cash interest paid for the ~~second~~first quarter of 2022 and 2021 ~~and 2020~~ was ~~$14.1~~$3.2 million and ~~$15.6~~$3.3 million, ~~respectively, and $17.4 million and $18.2 million for the comparative six month periods,~~ respectively.

~~2019 Credit Facility~~

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


10.			DERIVATIVE FINANCIAL INSTRUMENTS

The Company's credit facility exposes the Company to risks associated with the variability in interest expense associated with fluctuations in LIBOR. To partially mitigate this risk, the Company previously entered into interest rate ~~swaps. As~~swaps, which matured in March 2022, and therefore have 0 further associated liability as of ~~June~~March 27, 2021, the Company had a combined notional principal amount of $200 million of interest rate swap agreements, all of which are designated as cash flow hedges. These swap agreements effectively convert the interest expense associated with a portion of the Company's variable rate debt from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

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

Fair value of derivative instruments
Derivatives accounted for as cash flow hedges Balance sheet location June 27, 2021 December 31, 2020
Interest rate swaps Accrued liabilities $ 3,890 $ 0
Interest rate swaps Other long-term liabilities $ 0 $ 6,567

Fair value of derivative instruments

Derivatives accounted for as cash flow hedges

Balance sheet location

March 27, 2022

December 31, 2021

Interest rate swaps

Accrued liabilities

—

1,017

The interest rate swaps ~~are~~were 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.

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


11.			~~ACCUMULATED OTHER COMPREHENSIVE LOSS~~

Accumulated other comprehensive loss includes unrealized gains and losses on derivatives that qualify as cash flow hedges, cumulative foreign currency translation and other adjustments. The activity in accumulated other comprehensive loss during the three months ended June 27, 2021 and June 28, 2020 was as follows:

Second Quarter Ended June 27, 2021
(thousands) Cash Flow Hedges Other Foreign Currency Translation Total
Balance at March 28, 2021 $ (3,914) $ (1,263) $ 41 $ (5,136)
Other comprehensive loss before reclassifications, net of tax 45 0 (11) 34
Amounts reclassified from accumulated other comprehensive loss, net of tax 973 0 0 973
Net current period other comprehensive income (loss) 1,018 0 (11) 1,007
Balance at June 28, 2021 $ (2,896) $ (1,263) $ 30 $ (4,129)

Six Months Ended June 27, 2021
(thousands) Cash Flow Hedges Other Foreign Currency Translation Total
Balance at December 31, 2020 $ (4,889) $ (1,263) $ 100 $ (6,052)
Other comprehensive loss before reclassifications, net of tax (51) 0 (70) (121)
Amounts reclassified from accumulated other comprehensive loss, net of tax 2,044 0 0 2,044
Net current period other comprehensive loss 1,993 0 (70) 1,923
Balance at June 27, 2021 $ (2,896) $ (1,263) $ 30 $ (4,129)

Second Quarter Ended June 28, 2020
(thousands) Cash Flow Hedges Other Foreign Currency Translation Total
Balance at March 29, 2020 $ (7,380) $ (1,270) $ (91) $ (8,741)
Other comprehensive loss before reclassifications, net of tax 174 0 (15) 159
Amounts reclassified from accumulated other comprehensive loss, net of tax 290 0 0 290
Net current period other comprehensive loss 464 0 (15) 449
Balance at June 28, 2020 $ (6,916) $ (1,270) $ (106) $ (8,292)

Six Months Ended June 28, 2020
(thousands) Cash Flow Hedges Other Foreign Currency Translation Total
Balance at December 31, 2019 $ (4,374) $ (1,270) $ (54) $ (5,698)
Other comprehensive loss before reclassifications, net of tax (3,903) 0 (52) (3,955)
Amounts reclassified from accumulated other comprehensive loss, net of tax 1,361 0 0 1,361
Net current period other comprehensive loss (2,542) 0 (52) (2,594)
Balance at June 28, 2020 $ (6,916) $ (1,270) $ (106) $ (8,292)


~~12.~~			LEASES

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


		Six Months Ended					First Quarter Ended
(thousands)	(thousands)	June 27, 2021		June 28, 2020		(thousands)	March 27, 2022		March 28, 2021
Operating lease cost	Operating lease cost	$	19,938	$	16,568	Operating lease cost	$	12,164	$	9,585

Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	Operating cash flows for operating leases	$	19,504	$	16,362	Operating cash flows for operating leases	$	11,927	$	9,387

Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	39,991	$	17,902	Operating leases	$	23,725	$	15,185

Balance sheet information related to leases was as follows:


(thousands, except lease term and discount rate)	(thousands, except lease term and discount rate)	June 27, 2021		December 31, 2020		(thousands, except lease term and discount rate)	March 27, 2022		December 31, 2021
Assets	Assets					Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	139,576	$	117,816	Operating lease right-of-use assets	$	170,875	$	158,183
Liabilities	Liabilities					Liabilities
Operating lease liabilities, current portion	Operating lease liabilities, current portion	$	35,951	$	30,901	Operating lease liabilities, current portion	$	42,841	$	40,301
Long-term operating lease liabilities	Long-term operating lease liabilities	105,318		88,175		Long-term operating lease liabilities	130,550		120,161
Total lease liabilities	Total lease liabilities	$	141,269	$	119,076	Total lease liabilities	$	173,391	$	160,462

Weighted average remaining lease term, operating leases (in years) 5.1 5.3
Weighted average discount rate, operating leases 3.9 % 4.1 %


Weighted average remaining lease term, operating leases (in years)	5.1
Weighted average discount rate, operating leases	3.8	%

2216

Maturities of lease liabilities were as follows at ~~June~~March 27, ~~2021:~~2022:


(thousands)	(thousands)			(thousands)
2021 (excluding the six months ended June 27, 2021)		$	20,559
2022		38,969
2022 (excluding the three months ended March 27, 2022)				2022 (excluding the three months ended March 27, 2022)	$	36,617
2023	2023	33,089		2023	44,562
2024	2024	25,151		2024	36,461
2025	2025	16,420		2025	26,795
2026				2026	17,545
Thereafter	Thereafter	23,153		Thereafter	31,411
Total lease payments	Total lease payments	157,341		Total lease payments	193,391
Less imputed interest	Less imputed interest	(16,072)		Less imputed interest	(20,000)
Total	Total	$	141,269	Total	$	173,391

As of ~~June~~March 27, ~~2021,~~2022, outstanding leases have remaining lease terms ranging from ~~one~~1 year to 1817 years.


~~13.~~12.			FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities at ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 27, 2021					December 31, 2020						March 27, 2022						December 31, 2021
(in millions)	(in millions)	Level 1	Level 2		Level 3		Level 1	Level 2		Level 3		(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Cash equivalents(1)												Cash equivalents(1)	$	0.4	$	—	$	—	$	118.4	$	—	$	—
7.50% senior notes due 2027~~(1)~~(2)	7.50% senior notes due 2027~~(1)~~(2)	0	$	325.0	0		0	$	329.0	0		7.50% senior notes due 2027~~(1)~~(2)	—		309.3		—		—		319.5		—
4.75% senior notes due 2029~~(1)~~(2)	4.75% senior notes due 2029~~(1)~~(2)	0	347.5		0		0	0		0		4.75% senior notes due 2029~~(1)~~(2)	—		307.0		—		—		350.6		—
Convertible note(1)		0	189.8		0		0	180.0		0
Interest rate swaps(2)		0	3.9		0		0	6.6		0
Contingent consideration(3)		0	0		$	9.8	0	0		$	6.9
1.75% convertible notes due 2028(2)												1.75% convertible notes due 2028(2)	—		237.2		—		—		269.8		—
1.00% convertible notes due 2023(2)												1.00% convertible notes due 2023(2)	—		170.8		—		—		194.1		—
Term loan due 2026(3)												Term loan due 2026(3)	—		144.4		—		—		144.4		—
Revolver due 2026(3)												Revolver due 2026(3)	—		289.0		—		—		135.0		—
Interest rate swaps(4)												Interest rate swaps(4)	—		—		—		—		1.0		—
Contingent consideration(5)												Contingent consideration(5)	—		—		8.1		—		—		12.3

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of March 27, 2022 as a component of "Cash and cash equivalents".

(2) The amounts of these notes listed above are the current fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of ~~June~~March 27, ~~2021~~2022 and December 31, ~~2020~~2021 using the interest rate ~~method~~method.

(3) The carrying amounts of our term loan and revolver approximate fair value as ~~described~~of March 27, 2022 and December 31, 2021 based upon their terms and conditions in ~~Note 9.~~comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates.

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

~~(3)~~(5) The estimated fair value of the Company's contingent consideration ~~is valued using Level 3 inputs and~~ is discussed further in Note 6.


~~14.~~13.			INCOME TAXES

The effective tax rate in the ~~second~~first quarter of 2022 and 2021 was 23.3% and ~~2020 was 26.9% and 44.4%, respectively, and the effective tax rate for the comparable six month periods was 22.8% and 27.2%~~17.1%, respectively. The ~~effective tax rate for the second quarter of 2020 reflects the impact of $2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief,~~2022 and ~~Economic Security Act payroll tax credits. In addition, the first six months of~~ 2021 ~~includes~~rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense ~~upon realization~~ in the amount of $4.0 million and $5.7 ~~million.~~million, respectively.

Cash paid for income taxes, net of refunds, in the ~~second~~first quarter ~~and first six months~~ of ~~2021~~2022 was ~~$24.0 million and $24.1 million, respectively. The Company made an immaterial amount of~~$18.4 million. No income tax payments were made in the ~~second~~first quarter ~~and first six months~~ of ~~2020.~~2021.

2317


~~15.~~14.			SEGMENT INFORMATION

The Company has 2 reportable segments, Manufacturing and Distribution, which are based on its method of internal reporting, which segregates its businesses based on the manner in which its chief operating decision maker allocates resources, evaluates financial results, and determines compensation.

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


Second Quarter Ended June 27, 2021
First Quarter Ended March 27, 2022								First Quarter Ended March 27, 2022
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Net outside sales	Net outside sales	$	729,041	$	290,912	$	1,019,953	Net outside sales	$	979,609	$	362,566	$	1,342,175
Intersegment sales	Intersegment sales	16,042		1,517		17,559		Intersegment sales	18,976		3,168		22,144
Total sales	Total sales	745,083		292,429		1,037,512		Total sales	998,585		365,734		1,364,319
Operating income	Operating income	99,428		31,201		130,629		Operating income	170,544		45,966		216,510


Second Quarter Ended June 28, 2020
First Quarter Ended March 28, 2021								First Quarter Ended March 28, 2021
(thousands)	(thousands)	Manufacturing		Distribution		Total		(thousands)	Manufacturing		Distribution		Total
Net outside sales	Net outside sales	$	292,574	$	131,471	$	424,045	Net outside sales	$	600,756	$	249,727	$	850,483
Intersegment sales	Intersegment sales	5,114		1,085		6,199		Intersegment sales	13,808		1,403		15,211
Total sales	Total sales	297,688		132,556		430,244		Total sales	614,564		251,130		865,694
Operating income	Operating income	22,410		6,938		29,348		Operating income	78,429		21,175		99,604

Six Months Ended June 27, 2021
(thousands) Manufacturing Distribution Total
Net outside sales $ 1,329,797 $ 540,639 $ 1,870,436
Intersegment sales 29,850 2,920 32,770
Total sales 1,359,647 543,559 1,903,206
Operating income 177,857 52,376 230,233

Six Months Ended June 28, 2020
(thousands) Manufacturing Distribution Total
Net outside sales $ 711,840 $ 301,437 $ 1,013,277
Intersegment sales 12,687 2,385 15,072
Total sales 724,527 303,822 1,028,349
Operating income 68,114 16,906 85,020

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


		Second Quarter Ended				Six Months Ended					First Quarter Ended
(thousands)	(thousands)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(thousands)	March 27, 2022		March 28, 2021
Operating income for reportable segments	Operating income for reportable segments	$	130,629	$	29,348	$	230,233	$	85,020	Operating income for reportable segments	$	216,510	$	99,604
Unallocated corporate expenses	Unallocated corporate expenses	(21,332)		(7,464)		(40,549)		(14,256)		Unallocated corporate expenses	(37,894)		(19,217)
Amortization	Amortization	(14,031)		(9,778)		(25,937)		(19,379)		Amortization	(16,861)		(11,906)
Consolidated operating income	Consolidated operating income	$	95,266	$	12,106	$	163,747	$	51,385	Consolidated operating income	$	161,755	$	68,481

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages and other compensation, insurance, taxes, supplies, travel and entertainment, professional fees, amortization of inventory step-up adjustments, and other.

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


(thousands)	(thousands)	June 27, 2021		December 31, 2020		(thousands)	March 27, 2022		December 31, 2021
Manufacturing assets	Manufacturing assets	$	1,723,928	$	1,337,920	Manufacturing assets	$	2,359,183	$	2,031,465
Distribution assets	Distribution assets	419,551		343,170		Distribution assets	517,143		464,575
Assets for reportable segments	Assets for reportable segments	2,143,479		1,681,090		Assets for reportable segments	2,876,326		2,496,040
Corporate assets unallocated to segments	Corporate assets unallocated to segments	22,826		27,578		Corporate assets unallocated to segments	31,208		31,842
Cash and cash equivalents	Cash and cash equivalents	58,402		44,767		Cash and cash equivalents	63,846		122,849
Consolidated total assets	Consolidated total assets	$	2,224,707	$	1,753,435	Consolidated total assets	$	2,971,380	$	2,650,731


~~16.~~15.			STOCK REPURCHASE PROGRAMS

In ~~March 2020,~~January 2022, the Company's Board ~~approved a new~~authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program ~~for up~~ to ~~$50~~$100 million, ~~of its common stock,~~ including ~~amounts~~the $11.0 million remaining under the previous ~~authorizations.~~authorization. Approximately ~~$14.4~~$86.8 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of ~~June~~March 27, ~~2021.~~2022. The Company repurchased ~~260,000~~365,627 shares of its common stock at an average price of ~~$82.89 at~~$67.77 for an aggregate cost of ~~$21.6~~$24.8 million in the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 27, ~~2021. In the second quarter and six months ended June 28, 2020, the~~2022. The Company ~~repurchased 456,155 shares~~did 0t repurchase any of its common stock ~~at an average price~~in the first quarter ended March 28, 2021.


16.			COMMITMENTS AND CONTINGENCIES

The Company is subject to proceedings, lawsuits, audits, and other claims arising in the normal course of ~~$34.09 per share at an aggregate~~business. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. Accruals for these items, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are adjusted from time to time as developments warrant.

Although the ultimate outcome of these matters cannot be ascertained, on the basis of present information, amounts already provided, availability of insurance coverage and legal advice received, it is the opinion of management that the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The Company disclosed litigation concerning the Lusher Site Remediation Group in the Company's 2021 Form 10-K. The Company has also been named as a potentially responsible party for the related Lusher Street Groundwater Contamination Superfund Site (the "Superfund Site") by the U.S. Environmental Protection Agency (the "EPA"). The Company sold certain parcels of real property that the EPA contends are connected to the Superfund Site (the "Divested Properties") in January 2022 for a pretax gain on disposal of $5.5 million that is included in Selling, general and administrative expenses in the Company's Condensed Consolidated Statements of Income for the first quarter of 2022. The purchaser agreed to indemnify, defend and hold the Company harmless for all liability and exposure, both private and to all EPA claims, concerning and relating to the Divested Properties. No further proceedings have occurred in the first quarter of 2022. As to the real properties that were not among the Divested Properties but remain the subject of the litigation, the Company does not currently believe that the litigation or the Superfund Site matter are likely to have a material adverse impact on its financial condition, results of operations, or cash flows. However, any litigation is inherently uncertain, the EPA has yet to select a final remedy for the Superfund Site, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects.

Certain of our customers in the RV end market initiated recalls in 2021 involving certain products that were produced by a third party and sold by our Distribution segment. Although we do not believe we are legally responsible for costs related to the product recall, based on discussions with our customers and other developments subsequent to when these recalls were initiated, we believe it is probable that the Company will bear a portion of the total cost of ~~$15.6 million. Previously,~~ the ~~Company would retire~~recalls. In the ~~shares upon repurchase. However, beginning~~fourth quarter of 2021, we recorded an estimate of the Company's cost related to this matter. We do not expect this matter to have a material effect on our financial position, results of operations, or cash flows, and there have been no further proceedings in ~~2021,~~ the Company has now elected to hold these shares in treasury stock. Accordingly, beginning in 2021, the Company has begun presenting stock repurchases within "Treasury Stock" on the condensed consolidated balance sheet and condensed consolidated statementfirst quarter of ~~shareholders' equity. Prior periods have not been adjusted to reflect the current presentation of stock repurchases.~~2022.

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

OVERVIEW

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes thereto included in Item 1 of this Report. In addition, this MD&A contains certain statements relating to future results which are forward-looking statements as that term is defined in the ~~Private~~Private Securities Litigation Reform Act of 1995. See “Information

Concerning Forward-Looking Statements” on page 34 of this Report. The Company undertakes no obligation to update these forward-looking statements.

OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

~~Second~~First Quarter ~~and Six Months 2021~~2022 Financial Overview

Recreational Vehicle ("RV") Industry

The RV industry is our ~~largest~~primary market and comprised ~~58%~~61% and ~~48%~~59% of the Company’s sales in the ~~second~~first quarter ended ~~June~~March 27, 2022 and March 28, 2021, ~~and June 28, 2020, respectively, and 59% and 52% for the comparative 2021 and 2020 six month periods.~~respectively. Sales to the RV industry increased ~~192% in the second quarter of 2021 and increased 109%~~64% in the first ~~six months~~quarter of ~~2021,~~2022, compared to the prior year ~~periods.~~period.

According to the Recreation Vehicle Industry Association ("RVIA"), wholesale shipments totaled approximately ~~151,800~~171,500 units in the ~~second~~first quarter of ~~2021,~~2022, an increase of ~~101%~~15% compared to approximately ~~75,700~~148,500 units in the ~~second~~first quarter of ~~2020. Wholesale unit shipments for the first six months of 2021 totaled approximately 300,300 units, an increase of 71% compared to approximately 176,100 units in the prior year.~~2021. The increase in wholesale unit shipments in

the ~~second~~first quarter ~~and first six months~~ of ~~2021~~2022 is attributed to ~~an increase in~~continued RV dealer demand for RV units. In addition, the increase in the second quarter and first six months of 2021 reflects the comparison to the sharp decrease in wholesale unit shipments in the second quarter of 2020, which was a result of COVID-19-related production shutdowns at original equipment manufacturers' plants. This increase in dealer demand is correlated with continued consumer demand for RV units, ~~which we believe reflects changes in consumer recreation patterns, which include an increased interest in outdoor recreation. According~~as dealers replenish inventories to our estimates, RV dealer inventories are trending at historical lows relative to what we understand to be typical inventory levels of RV dealers. We believe that the supply-demand dynamics of historically low dealer inventory levels, combined with strong retailmatch consumer demand ~~have resulted in positive~~and prepare for expected continued momentum in ~~our~~the RV ~~end market.~~industry. We estimate RV retail unit sales ~~increased 30-35%~~decreased 10-15% in the ~~second~~first quarter of 2022 in comparison to the first quarter of 2021 ~~and increased 37-40% for the~~(which was a record quarter in relation to historical first ~~six months of 2021 compared to the prior year periods.~~quarter trends).

Marine Industry

Sales to the marine industry, which represented approximately 16% ~~and 14%~~ of the Company's consolidated net sales in both the ~~second~~first quarters of 2022 and 2021, increased 62% in the first quarter of ~~2021 and 2020, respectively, increased 182%~~2022 compared to the prior year quarter. ~~For the first six months of 2021 and 2020, sales to the marine industry represented 16% and 13% of consolidated net sales, respectively, increasing 121% in 2021 compared to the prior year.~~

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments ~~and~~which, according to National Marine Manufacturers Association ("NMMA") ~~marine wholesale powerboat unit shipments increased an estimated 26%~~ ~~for the second quarter 2021 and increased an estimated 16%~~, remained relatively constant for the first ~~six months~~quarter of ~~2021~~2022 compared to the prior year ~~periods.~~period. Marine retail powerboat unit sales ~~were nearly unchanged~~decreased an estimated 9% in the ~~second~~first quarter of ~~2021 and increased 8% for the first six months of 2021~~2022 compared to the prior year ~~periods. We~~period, primarily as a result of a lack of retail units available for purchase due to low inventory levels. Estimated wholesale shipments slightly outpaced retail shipments in the first quarter of 2022, and we estimate that ~~marine retail sales substantially exceeded marine wholesale unit shipments in both the second quarter and six months of 2021, resulting in~~ marine dealer inventory levels ~~that we believe are at their lowest in at least a decade.~~continue to remain low.

Manufactured Housing ("MH") Industry

Sales to the MH industry, which represented ~~14%~~13% and ~~21%~~14% of the Company’s sales in the ~~second~~first quarter of ~~2021~~2022 and ~~2020,~~2021, respectively, increased ~~54%~~44% in the ~~second~~first quarter of ~~2021~~2022 compared to the ~~second~~first quarter of ~~2020. MH sales represented 14% and 20% of the Company's sales for the first six months of~~ 2021 ~~and 2020, respectively, and increased 28% in the first six months of 2021 compared to the prior year period.~~. Based on industry data from the Manufactured Housing Institute, MH wholesale unit shipments increased ~~31%~~11% in the ~~second~~first quarter of ~~2021 and increased 16%~~2022 ~~for the first six months of 2021~~ compared to the prior year ~~periods.~~period.

Industrial Market

The industrial market is comprised primarily of the kitchen cabinet and countertop industry, hospitality market, retail and commercial fixtures market, office and household furniture market and regional distributors. Sales to this market represented ~~12%~~10% and ~~17%~~11% of our sales in the ~~second~~first quarter of ~~2021~~2022 and ~~2020,~~2021, respectively, and increased ~~69%~~39% in the ~~second~~first quarter of ~~2021~~2022 compared to the prior year quarter. Sales to the industrial market represented 11% and 15% of our sales for the first six months of 2021 and 2020, respectively, and increased 41% in the first six months of 2021 compared to the prior year period. Overall, our revenues in these markets are focused on the residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that approximately ~~70%~~65% of our industrial business is directly tied to the residential housing market, with the remaining ~~30%~~35% directly tied to the non-residential and commercial markets.

According to the U.S. Census Bureau, combined ~~new~~new housing starts increased ~~43%~~10% in the ~~second~~first quarter of ~~2021~~2022 compared to the prior year quarter, with single family housing starts increasing ~~42%~~ ~~and multifamily residential starts increasing 48% for the same period. For the first six months of 2021, combined new housing starts increased 25%, with single family housing starts increasing 31%~~4% and multifamily housing starts increasing ~~14% compared to 2020.~~30% for the same period. Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.

2620

REVIEW OF CONSOLIDATED OPERATING RESULTS

~~Second~~First Quarter ~~and Six Months~~ Ended ~~June~~March 27, ~~2021~~2022 Compared to ~~2020~~2021

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

Second Quarter Ended
($ in thousands) June 27, 2021 June 28, 2020 Change Amount % Change
Net sales $ 1,019,953 100.0 % $ 424,045 100.0 % $ 595,908 141 %
Cost of goods sold 815,476 80.0 % 350,324 82.6 % 465,152 133 %
Gross profit 204,477 20.0 % 73,721 17.4 % 130,756 177 %
Warehouse and delivery expenses 34,815 3.4 % 20,209 4.8 % 14,606 72 %
Selling, general and administrative expenses 60,365 5.9 % 31,628 7.5 % 28,737 91 %
Amortization of intangible assets 14,031 1.4 % 9,778 2.3 % 4,253 43 %
Operating income 95,266 9.3 % 12,106 2.9 % 83,160 687 %
Interest expense, net 14,580 1.4 % 10,821 2.6 % 3,759 35 %
Income taxes 21,701 2.1 % 571 0.1 % 21,130 3,701 %
Net income $ 58,985 5.8 % $ 714 0.2 % $ 58,271 8,161 %


		Six Months Ended													First Quarter Ended
($ in thousands)	($ in thousands)	June 27, 2021				June 28, 2020				Change Amount		% Change		($ in thousands)	March 27, 2022				March 28, 2021				Amount Change		% Change
Net sales	Net sales	$	1,870,436	100.0	%	$	1,013,277	100.0	%	$	857,159	85	%	Net sales	$	1,342,175	100.0	%	$	850,483	100.0	%	$	491,692	58	%
Cost of goods sold	Cost of goods sold	1,504,427		80.4	%	830,075		81.9	%	674,352		81	%	Cost of goods sold	1,046,830		78.0	%	688,951		81.0	%	357,879		52	%
Gross profit	Gross profit	366,009		19.6	%	183,202		18.1	%	182,807		100	%	Gross profit	295,345		22.0	%	161,532		19.0	%	133,813		83	%
Warehouse and delivery expenses	Warehouse and delivery expenses	64,728		3.5	%	44,941		4.4	%	19,787		44	%	Warehouse and delivery expenses	41,169		3.1	%	29,913		3.5	%	11,256		38	%
Selling, general and administrative expenses	Selling, general and administrative expenses	111,597		6.0	%	67,497		6.7	%	44,100		65	%	Selling, general and administrative expenses	75,560		5.6	%	51,232		6.0	%	24,328		47	%
Amortization of intangible assets	Amortization of intangible assets	25,937		1.4	%	19,379		1.9	%	6,558		34	%	Amortization of intangible assets	16,861		1.3	%	11,906		1.4	%	4,955		42	%
Operating income	Operating income	202,262		10.8	%	51,385		5.1	%	150,877		294	%	Operating income	161,755		12.1	%	68,481		8.1	%	93,274		136	%
Interest expense, net	Interest expense, net	25,759		1.4	%	21,313		2.1	%	4,446		21	%	Interest expense, net	14,886		1.1	%	11,179		1.3	%	3,707		33	%
Income taxes	Income taxes	31,490		1.7	%	8,171		0.8	%	23,319		285	%	Income taxes	34,196		2.5	%	9,789		1.2	%	24,407		249	%
Net income	Net income	$	106,498	5.7	%	$	21,901	2.2	%	$	84,597	386	%	Net income	$	112,673	8.4	%	$	47,513	5.6	%	$	65,160	137	%

Net Sales. Net sales in the ~~second~~first quarter of ~~2021~~2022 increased ~~$596.0~~$491.7 million, or ~~141%~~58%, to ~~$1,020.0~~$1,342.2 million from ~~$424.0~~$850.5 million in the ~~second~~first quarter of ~~2020.~~2021. The net sales increase in the ~~second~~first quarter of ~~2021~~2022 reflects strong demand for our products across all end markets as well as the ~~comparison to the second quarter~~contribution of ~~2020, which reflects the impact to net sales of COVID-19-related production shutdowns.~~acquisitions completed in 2021. The Company's RV market sales increased ~~192%~~64%, marine market sales increased ~~182%~~62%, MH market sales increased 44% and industrial market sales increased ~~69% and MH market sales increased 54%~~39% when compared to the prior year quarter.

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

Revenue attributable to acquisitions completed in the first ~~six~~three months of ~~2021~~2022 was ~~$56.7~~$8.4 million in the ~~second~~first quarter of ~~2021 and $62.1 million for the first six months of 2021.~~2022. Revenue attributable to acquisitions completed in the first ~~six~~three months of ~~2020~~2021 was ~~$3.3~~$5.4 million in the ~~second~~first quarter of ~~2020 and $3.8 million for the first six months of 2020.~~2021.

The Company’s RV content per wholesale unit (on a trailing twelve-month basis) for the ~~second~~first quarter of ~~2021~~2022 increased approximately 33%~~15%~~ to ~~$3,543 from $3,086~~ $4,370 from $3,288 for the ~~second~~first quarter of ~~2020.~~2021. Marine powerboat content per wholesale unit (on a trailing twelve-month basis) for the ~~second~~first quarter of ~~2021~~2022 increased ~~approximately 60%~~approximately 73% to an estimated ~~$2,841~~$4,113 from ~~$1,775~~$2,371 for the ~~second~~first quarter of ~~2020.~~2021. MH content per wholesale unit (on a trailing twelve-month ~~basis)~~basis) for the first quarter of 2022 increased approximately 19% to $5,501 from $4,611 for the ~~second~~first quarter of ~~2021 increased approximately~~ ~~7% to $4,799 from $4,501~~2021 ~~for the second quarter of 2020.~~.

Cost of Goods Sold. Cost of goods sold increased ~~$465.2~~$357.8 million, or ~~133%~~52%, to ~~$815.5~~$1,046.8 million in the ~~second quarter~~first quarter of ~~2021~~2022 from ~~$350.3~~$689.0 million in ~~2020.~~2021. As a percentage of net sales, cost of goods sold decreased ~~260 basis points during the second quarter of 2021 to 80.0% from 82.6% in 2020.~~

~~Cost of goods sold in the first six months increased $674.3 million, or 81%, to $1,504.4 million from $830.1 million in 2020. As a percentage of net sales, cost of goods sold decreased 150~~300 basis points during the first ~~six months~~quarter of ~~2021~~2022 to ~~80.4%~~78.0% from ~~81.9%~~81.0% in ~~2020.~~2021.

Cost of goods sold as a percentage of net sales decreased in the ~~second~~first quarter ~~and first six months of 2021~~2022 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout ~~2020~~2021 and into ~~2021,~~2022 that have begun to have a positive impact on costs, (ii) volume-driven efficiencies as a result of leveraging fixed overhead, (iii) improved labor efficiencies as a ~~recovery from the production inefficiencies experienced while operating~~result of investment in ~~a COVID-19 environment,~~human capital and improved retention rates, and (iv) synergies and different cost profiles from ~~our~~acquisitions completed in 2021 and ~~2020 acquisitions,~~2022. These four factors contributed to a 350 basis point decrease in labor as a percentage of net sales and 120 basis point decrease in overhead as a percentage of net sales, partially offset by a 170 basis point increase in material costs as a percentage of net sales as a result of supply-chain constraints, and an increase in ~~labor and~~ certain commodity cost inputs. In 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 raw materials and commodity-based components that are utilized in ~~the production of our products.~~production.

Gross Profit. Gross profit increased ~~$130.8~~$133.8 million, or ~~177%~~83%, to ~~$204.5~~$295.3 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$73.7~~$161.5 million in ~~2020.~~2021. As a percentage of net sales, gross profit increased ~~260~~300 basis points to ~~20.0%~~22.0% in the ~~second~~first quarter of ~~2021~~2022 from ~~17.4%~~19.0% in the same period in ~~2020.~~2021.

Gross profit increased $182.8 million, or 100%, to $366.0 million in the first six months of 2021 from $183.2 million in 2020. As a percentage of net sales, gross profit increased 150 basis points to 19.6% in the second quarter of 2021 from 18.1% in the same period in 2020.

The increase in gross profit as a percentage of net sales in the ~~second~~first quarter ~~and six months~~ ended ~~June~~March 27, ~~2021~~2022 compared to the same ~~periods~~period in ~~2020~~2021 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

Warehouse and Delivery Expenses. Warehouse and delivery expenses increased ~~$14.6~~$11.3 million, or ~~72%~~38%, to ~~$34.8~~$41.2 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$20.2~~$29.9 million in the ~~second~~first quarter of ~~2020.~~2021. As a percentage of net sales, warehouse and delivery expenses ~~improved 140~~decreased 40 basis points to ~~3.4%~~3.1% in the ~~second~~first quarter of ~~2021~~2022 compared to ~~4.8%~~3.5% in the ~~second~~first quarter of ~~2020.~~2021.

~~Warehouse~~The increase in warehouse and delivery expenses ~~increased $19.8 million, or 44%,~~is attributable to ~~$64.7 million~~the increase in sales. However, the ~~first six months of 2021 from $44.9 million in the first six months of 2020. As~~decrease as a percentage of net sales ~~warehouse and delivery expenses improved 110 basis points to 3.5% in the first six months of 2021 compared to 4.4% in the prior year period.~~

~~The increases in warehouse and delivery expenses are attributable to the significant increases in sales. However, the decreases as a percentage of sales are~~is primarily attributable to leveraging certain fixed warehousing costs and the lower proportion of MH sales in the ~~second~~first quarter ~~and first six months~~ of ~~2021~~2022 as compared to ~~2020,~~2021, which have higher warehouse and delivery costs as a percentage of net sales. ~~In addition, the second quarter and first six months of 2020 reflect operating inefficiencies associated with COVID-19 disruptions.~~

Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased ~~$28.8~~$24.4 million, or ~~91%~~47%, to ~~$60.4~~$75.6 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$31.6~~$51.2 million in the prior year quarter. As a percentage of net sales, SG&A expenses were ~~5.9% in the second quarter of 2021 compared to 7.5% in the second quarter of 2020.~~

~~SG&A expenses increased $44.1 million, or 63%, to $111.6 million~~5.6% in the first ~~six months~~quarter of ~~2021 from $67.5 million~~2022 compared to 6.0% in the first ~~six months~~quarter of ~~2020. As a percentage of net sales, SG&A expenses were 5.9% in the first six months of 2021 compared to 6.7% in the first six months of 2020.~~2021.

The increase in SG&A expenses in the ~~second~~first quarter ~~and six months~~ of ~~2021~~2022 compared to ~~2020~~2021 is primarily due to (i) the increase in net ~~sales;~~sales, and (ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital and other initiatives to support the size and growth of the ~~Company and (iii) the comparison to the prior year, which includes SG&A cost reduction measures in the second quarter of 2020.~~Company. As a percentage of sales, SG&A expenses decreased ~~160 basis points for the second quarter of 2021 compared to the second quarter of 2020 and decreased 70~~40 basis points for the first ~~six months~~quarter of ~~2021 when~~2022 compared to the ~~prior year period. These improvements are attributable to~~first quarter of 2021. This decrease is primarily a result of the fixed nature of certain SG&A ~~costs.~~expenses.

Amortization of Intangible Assets. Amortization of intangible assets increased ~~$4.2~~$5.0 million, or ~~44%~~42%, to ~~$14.0~~$16.9 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$9.8~~$11.9 million in the prior year quarter. ~~Amortization of intangible assets increased $6.5 million, or 34%, to $25.9 million~~The increase in the first ~~six months~~quarter of ~~2021 from $19.4 million in the first six months of 2020. The increases in the second quarter and first six months of 2021~~2022 compared to the prior year ~~periods~~period primarily reflects the impact of businesses acquired in ~~2020~~2021 and ~~2021.~~2022.

Operating Income. Operating income increased ~~$83.2~~$93.3 million, or ~~687%~~136%, to ~~$95.3~~$161.8 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$12.1~~$68.5 million in ~~2020.~~2021. As a percentage of net sales, operating income increased ~~640~~400 basis points to ~~9.3%~~12.1% in the ~~second~~first quarter of ~~2021~~2022 versus ~~2.9%~~8.1% in the same period in 2020. Operating income increased $150.9 million, or 294%, to $202.3 million in the first six months of 2021 from $51.4 million in 2020. As a percentage of net sales, operating income increased 570 basis points to 10.8% in the first six months of 2021 versus 5.1% in the same period in 2020.2021. The change in operating income and operating margin is primarily attributable to the items discussed above.

Interest Expense, Net. Interest expense increased ~~$3.8~~$3.7 million, or ~~35%~~33%, to ~~$14.6~~$14.9 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$10.8~~$11.2 million in the prior ~~year. Interest expense increased $4.5 million, or 21%, to $25.8 million in the first six months of 2021 from $21.3 million in the prior year.~~year period.

The increase in interest expense reflects (i) increased borrowings related to ~~2020 and~~ 2021 acquisitions and (ii) the Company's issuance of its 4.75% Senior Notes ~~due 2029 (the "4.75% Senior Notes")~~ in April 2021 ~~(as described~~and 1.75% Convertible Notes in Note 9 in the Notes to Condensed Consolidated Financial Statements), partially offset by a decrease in variable interest rates on the unhedged portions of the Company's term loan and revolving credit facility.December 2021.

Income Taxes. Income tax expense increased ~~$21.1 million in the second quarter of 2021 to $21.7 million from $0.6 million in the prior year period. Income tax expense increased $23.3~~$24.4 million in the first ~~six months~~quarter of ~~2021,~~2022 to ~~$31.5~~$34.2 million from ~~$8.2~~$9.8 million in the prior year period.

The increase in income tax expense is due primarily to an increase in pretax ~~income.~~income as well as an increase in the effective tax rate. The effective tax rate in the ~~second~~first quarter of 2022 and 2021 was 23.3% and ~~2020 was 26.9% and 44.4%~~17.1%, respectively. The ~~higher 2020 rate primarily reflects the impact of $2.2 million in permanent tax differences due to certain Coronavirus Aid Relief~~2022 and ~~Economic Security Act payroll tax credits. The effective tax~~2021 rates ~~in the first six months of 2021 and 2020 were 22.8% and 27.2%, respectively. The 2021 rate includes~~include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $4.0 million and $5.7 million, ~~while the 2020 rate reflects the impact of the permanent tax differences mentioned above.~~respectively.

Use of Financial Metrics

Our MD&A includes financial metrics, such as RV, marine and MH content per unit, which we believe are important measures of the Company's business performance. Content per unit metrics are generally calculated using our market sales divided by third-party measures of industry volume. These metrics should not be considered alternatives to U.S.

2922

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

REVIEW BY BUSINESS SEGMENT

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

~~Second~~First Quarter Ended ~~June~~March 27, ~~2021~~2022 Compared to ~~2020~~2021

General

In the discussion that follows, sales attributable to the Company’s reportable segments include intersegment sales and gross profit includes the impact of intersegment operating activity.

The table below presents information about the sales, gross profit and operating income of the Company’s reportable segments. A reconciliation of consolidated operating income is presented in Note 1514 of the Notes to Condensed Consolidated Financial Statements.

Second Quarter Ended
(thousands) June 27, 2021 June 28, 2020 Amount Change % Change
Sales
Manufacturing $ 745,083 $ 297,688 $ 447,395 150%
Distribution 292,429 132,556 159,873 121%
Gross Profit
Manufacturing 150,560 48,957 101,603 208%
Distribution 56,548 23,192 33,356 142%
Operating Income
Manufacturing 99,428 22,410 77,018 344%
Distribution 31,201 6,938 24,263 346%

Six Months Ended
(thousands) June 27, 2021 June 28, 2020 Amount Change % Change
Sales
Manufacturing $ 1,359,647 $ 724,527 $ 635,120 88%
Distribution 543,559 303,822 239,737 79%
Gross Profit
Manufacturing 271,486 127,904 143,582 113%
Distribution 100,698 52,388 48,310 92%
Operating Income
Manufacturing 177,857 68,114 109,743 161%
Distribution 52,376 16,906 35,470 207%


	First Quarter Ended
(thousands)	March 27, 2022		March 28, 2021		Amount Change		% Change
Sales
Manufacturing	$	998,585	$	614,564	$	384,021	62%
Distribution	365,734		251,130		114,604		46%
Gross Profit
Manufacturing	236,286		120,926		115,360		95%
Distribution	75,768		44,150		31,618		72%
Operating Income
Manufacturing	170,544		78,429		92,115		117%
Distribution	45,966		21,175		24,791		117%

Manufacturing

Sales. Sales increased ~~$447.4~~$384.0 million, or ~~150%~~62%, to ~~$745.1~~$998.6 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$297.7~~$614.6 million in the prior year quarter. ~~For the first six months of 2021, sales increased $635.1 million, or 88%, to $1,359.6 million from $724.5 million in the prior year period.~~ This segment accounted for approximately ~~72%~~73% and ~~69%~~71% of the Company’s sales for the ~~second~~first quarter of ~~2021~~2022 and ~~2020, respectively, and 71% and 70% for the first six months of~~ 2021, ~~and 2020,~~ respectively. The sales increase in the ~~second~~first quarter of ~~2021~~2022 compared to ~~2020~~2021 was attributed to sales increases in all four of the Company's end markets, where sales to ~~each of~~ the ~~RV and marine end markets~~ ~~increased 185~~%, MH increased 88% and industrial increased 73%. The sales increase for the first six months of 2021 compared to the prior year period was also attributed to sales increases in all four end markets, where RV end market ~~sales~~ increased ~~98%~~73%, marine increased ~~122~~57%%, MH increased ~~52%~~50% and industrial increased ~~42%~~43%. Net sales in the ~~second~~first quarter of 2022 and ~~first six months of~~ 2021 attributable to acquisitions completed in the first ~~six~~three months of 2022 and 2021 ~~were~~was approximately ~~$41.9~~$8.4 million and ~~$46.7 million, respectively, and net sales in the second quarter and first six months of 2020 attributable to acquisitions completed in the first six months of 2020 were $3.3 million and $3.8~~$4.8 million, respectively.

Gross Profit. Gross profit increased ~~$101.6~~$115.4 million, or ~~208%~~95%, to ~~$150.6~~$236.3 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$49.0~~$120.9 million in the ~~second~~first quarter of ~~2020. For the first six months of 2021, gross profit increased $143.6 million, or 113%, to $271.5 million from $127.9 million in the prior year period.~~2021. As a percentage of sales, gross profit increased to ~~20.2% in the second quarter of 2021 from 16.4% in the second quarter of 2020 and increased to 20.0%~~23.7% in the first ~~six months~~quarter of ~~2021~~2022 from ~~17.7%~~19.7% in the ~~prior year period.~~

~~Gross profit margin increased during the second~~first quarter of 2021 compared to second quarter of 2020 primarily due to (i) a 550 basis point improvement in manufacturing overhead expense as a percentage of sales, as certain of these costs are fixed in nature and (ii) a 60 basis point improvement in direct labor as a percentage of sales. These two improvements as a percentage of net sales were partially offset by a 220 basis point increase in materials as a percentage of sales.2021.

Gross profit margin increased during the first ~~six months~~quarter of ~~2021~~2022 compared to ~~the same period in 2020~~first quarter of 2021 primarily due to ~~(i)~~ a ~~350~~220 basis point ~~improvement~~decrease in manufacturing labor as a percentage of sales and a 230 basis point decrease in manufacturing overhead as a percentage of sales, partially offset by a 50 basis point increase in manufacturing material expense as a percentage of sales as ~~certain~~a result of ~~these costs are fixed in nature~~supply-chain constraints and (ii) a 70 basis point improvement in direct labor as a percentage of sales. These two improvements as a percentage of net sales were partially offset by a 180 basis point increase in materials as a percentage of sales.increased material costs.

Operating Income. Operating income increased ~~$77.0~~$92.1 million, or ~~344%~~117%, to ~~$99.4~~$170.5 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$22.4~~$78.4 million in the prior year quarter. ~~For the first six months of 2021, operating income increased $109.8 million, or 161%, to $177.9 million from $68.1 million the prior year period.~~ The overall increase in operating income in the ~~second~~first quarter ~~and first six months~~ of ~~2021~~2022 primarily reflects the items discussed above.

Distribution

Sales. Sales increased ~~$159.8~~$114.6 million, or ~~121%~~46%, to ~~$292.4~~$365.7 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$132.6~~$251.1 million in the prior year quarter. ~~For the first six months of 2021, sales increased $239.8 million, or 79%, to $543.6 million from $303.8 million in the prior year period.~~ This segment accounted for approximately ~~28%~~27% and ~~31%~~29% of the Company’s sales for the ~~second~~first quarter of 2022 and 2021, ~~and 2020, respectively, and 29% and 30% of sales for the first six months of 2021 and 2020.~~respectively. The sales increase in the ~~second~~first quarter of ~~2021~~2022 compared to the ~~second~~first quarter of ~~2020~~2021 was attributed to a ~~207%~~46% increase in our RV market sales, a ~~142%~~201% increase in marine market sales, a 38~~% increase in industrial market sales, and a~~ 31% increase in MH market sales. The sales increase in the first six months of 2021 compared to the same period in 2020 was attributed to a 134% increase in RV market sales, a 115% increase in marine market sales, a 12%38% increase in MH market sales, and a ~~35%~~6% increase in industrial market sales. Net sales in the ~~second~~first quarter ~~and first six months~~ of 2021 attributable to acquisitions completed in the first ~~six~~three months of 2021 ~~were~~was approximately $14.8 million and $15.4 million, respectively, with no corresponding amount of net sales in the second quarter or first six months of 2020 attributable to acquisitions completed in the first six months of 2020.$0.6 million.

Gross Profit. Gross profit increased ~~$33.4~~$31.6 million, or ~~142%~~72%, to ~~$56.6~~$75.8 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$23.2~~$44.2 million in the ~~second~~first quarter of ~~2020. For the first six months of 2021, gross profit increased $48.3 million, or 92%, to $100.7 million from $52.4 million the prior year period.~~2021. As a percentage of sales, gross profit increased to ~~19.3%~~20.7% in the first quarter of 2022 from 17.6% in the first quarter of 2021.

~~second~~Gross profit margin increased during the first quarter of 2022 compared to first quarter of 2021 ~~from 17.5%~~primarily due to a 610 basis point decrease in ~~the second quarter~~distribution labor as a percentage of ~~2020, and to 18.5% from 17.2% for the comparable six month periods. The~~sales partially offset by a 300 basis point increase in ~~gross profit margin in the second quarter~~distribution material expense as a percentage of sales as a result of supply-chain constraints and ~~first six months of 2021 compared to the second quarter and first six months of 2020 is primarily attributed to the higher margin profile of a 2020 acquisition.~~increased material costs.

Operating Income. Operating income increased ~~$24.3~~$24.8 million, or ~~346%~~117%, to ~~$31.2~~$46.0 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$6.9~~$21.2 million in the prior year quarter. ~~For the first six months of 2021, operating income increased $35.5 million or 207%, to $52.4 million from $16.9 million the prior year period.~~ The improvement in operating income in the ~~second~~first quarter ~~and first six months~~ of ~~2021~~2022 primarily reflects the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity at ~~June~~March 27, ~~2021~~2022 consisted of cash and cash equivalents of ~~$58.4~~$63.8 million ~~as well as $409.8~~and $255.6 million of availability under our credit facility.

Cash Flows

Operating Activities

Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.

Net cash used in operating activities was $23.0 million in the first quarter of 2022 compared to net cash provided by operating activities ~~increased $39.0 million to $78.4~~of $50.3 million in the first ~~six months~~quarter of ~~2021 from $39.4 million in the first six months of 2020.~~2021. The ~~increase~~change is primarily attributable to (i) an $86.9 million increase in net income, (ii) a $14.0 million increase in depreciation and amortization, and (iii) $15.9 million increase in deferred income taxes. These increases in sources of cash from operations were offset by an increase in use of cash for net working capital of ~~$78.1~~$140.3 million, associated primarily with investments in inventory to support customer needs and growth of accounts receivable in line with net ~~sales,~~sales. This use of cash was partially offset by a source of cash from (i) a $65.2 million increase in net income and ~~an acceleration of payments for certain inventory-related payables to maintain or enhance vendor prioritization~~(ii) a $7.7 million increase in ~~a dynamic supply chain environment.~~depreciation and amortization.

Investing Activities

Net cash used in investing activities increased ~~$245.9~~$98.1 million to ~~$280.9~~$143.1 million in the first ~~six months~~quarter of ~~2021~~2022 from ~~$35.0~~$45.0 million in the first ~~six months~~quarter of ~~2020~~2021 primarily due to an increase in cash used in business acquisitions of ~~$228.8 million and a $15.1 million increase in capital expenditures.~~$102.7 million.

Financing Activities

Net cash provided by financing activities ~~increased $248.5 million to $215.8~~was $107.2 million in the first ~~six months~~quarter of ~~2021 from~~2022 compared to a ~~$32.7~~$43.8 million use of cash in the first ~~six months~~quarter of ~~2020. The increase~~2021. This change is primarily due to (i) ~~proceeds of $350.0 million from the Company's issuance of its 4.75% Senior Notes, (ii) an additional $58.8~~$154.0 million in ~~term loan~~net revolver borrowings ~~and (iii) $3.9 million~~ in ~~additional proceeds from~~ the ~~exercise~~first quarter of ~~stock options. These sources of cash were partially offset by (i) an additional $140.0~~2022 compared to $27.0 million in net revolver repayments in the first quarter of 2021 and (ii) a ~~$12.0~~$4.5 million ~~increase~~decrease in taxes paid for share-based payment arrangements, ~~(iii)~~partially offset by a ~~$7.5~~$26.5 million increase in stock repurchases and dividends to ~~shareholders and (iv) $5.7 million increase in payments of deferred financing costs.~~shareholders.

Summary of Liquidity and Capital Resources

At ~~June~~March 27, ~~2021,~~2022, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its ~~2021 Credit Facility (as defined herein)~~current credit facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.

The ability to access unused borrowing capacity under the ~~2021 Credit Facility~~Company's current 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 ~~2021 Credit Facility~~credit facility (the "2021 Credit Agreement").

As of and for the ~~June~~reporting period ended March 27, ~~2021 reporting date,~~2022, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement. The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of ~~June~~March 27, ~~2021~~2022 and for the fiscal period then ended are as follows:

Required Actual
Consolidated secured net leverage ratio (12-month period) 2.75 0.43
Consolidated fixed charge coverage ratio (12-month period) 1.50 6.92


	Required	Actual
Consolidated secured net leverage ratio (12-month period)	2.75	0.54
Consolidated fixed charge coverage ratio (12-month period)	1.50	6.73

In addition, as of ~~June~~March 27, ~~2021,~~2022, the Company's consolidated total net leverage ratio (12-month period) was ~~2.26.~~2.24. While this ratio was a covenant under the Company’s ~~previous~~ credit agreement ~~and~~in existence prior to the 2021 Credit Agreement, it is not a covenant under the 2021 Credit ~~Agreement,~~Agreement. However, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.

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

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

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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 ~~have~~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 August/September timeframe as well as marine open houses in the January/February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. In addition, current and future seasonal industry trends may be different than in prior years due to the impact of national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, timing of dealer orders, fluctuations in dealer inventories, the impact of the COVID-19 pandemic on consumer buying patterns, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.

Russia-Ukraine War

In February 2022, Russia invaded Ukraine. As military activity proceeds and sanctions, export controls and other measures are imposed against Russia, Belarus and specific areas of Ukraine, the war is increasingly affecting the global economy and financial markets, as well as exacerbating ongoing economic challenges, including rising inflation and global supply-chain disruption. We will continue to monitor the impacts of the Russia-Ukraine war on macroeconomic conditions and continually assess the effect these matters may have on consumer demand, our suppliers’ ability to deliver products, cybersecurity risks and our liquidity and access to capital. See “Risk Factors — Risks Related to Our Business” below.

Subsequent Events

We evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q ~~and there were none~~ that required recognition or disclosure in the condensed consolidated financial statements.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock of Patrick Industries, Inc. and other matters from time to time and desires to take advantage of the “safe harbor” which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as other statements contained in this quarterly report and statements contained in future filings with the Securities and Exchange Commission (“SEC”), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements. Information about certain risks that could affect our business and cause actual results to differ from those expressed or implied in the forward-looking statements are contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and in the Company's Forms 10-Q for subsequent quarterly periods, which are filed with the SEC and are available on the SEC’s website at www.sec.gov.


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Debt Obligations under Credit Agreement

At ~~June~~March 27, ~~2021,~~2022, our total debt obligations under our credit agreement were under LIBOR-based interest rates. A 100-basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately ~~$0.9~~$4.3 million, assuming average borrowings, including our term loan, subject to variable rates of ~~$85.0~~$433.4 million, which was the amount of such borrowings outstanding at ~~June~~March 27, ~~2021~~2022 subject to variable rates. The ~~$85.0~~$433.4 million excludes deferred financing costs related to the term ~~loan and $200.0 million of borrowings outstanding under the revolver and term loan that are hedged at a fixed interest rate through interest rate swaps.~~loan.

Commodity Volatility

The prices of key raw materials, consisting primarily of lauan, gypsum, particleboard, aluminum, softwoods lumber, and petroleum-based products, are influenced by demand and other factors specific to these commodities, such as the price of oil, rather than being directly affected by inflationary pressures. Prices of certain commodities have historically been volatile and continued to fluctuate in the first ~~six months~~quarter of ~~2021.~~2022. During periods of volatile commodity prices, we have generally been able to pass both price increases and decreases to our customers in the form of price adjustments. We are exposed to risks during periods of commodity volatility because there can be no assurance future cost increases or

decreases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases or decreases will match raw material cost increases or decreases. We do not believe that commodity price volatility had a material effect on ~~our net income~~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 ~~second~~first quarter ended ~~June~~March 27, ~~2021~~2022 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

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business. In addition, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional capital.

There have been no other material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.


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

(a) None.

(b) None.

Period
Total Number of Shares Purchased (1)
Average Price
Paid Per Share(1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
March 29 - April 25, 2021 98 $ 78.93 — $ 35,960,557
April 26 - May 30, 2021 89,546 89.62 85,388 28,338,024
May 31 - June 27, 2021 174,909 79.77 174,612 14,410,258
264,553 260,000


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 23, 2022	166,236	$	69.77	166,236	$	11,011,609
January 24 - February 27, 2022	219,097	65.98		65,190	95,544,224
February 28 - March 27, 2022	134,201	65.01		134,201	86,821,264
	519,534			365,627

(1) Amount includes ~~4,553~~153,907 shares of common stock purchased by the Company in ~~April through June 2021~~aggregate in February 2022 for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards ~~and the exercise of stock appreciation rights~~ held by the employees.

(2) See Note 1615 of the Notes to Condensed Consolidated Financial Statements for additional information about the Company's stock repurchase program.

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ITEM 6.			EXHIBITS


Exhibits (1)			Description
31.1			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
31.2			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
32			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer
101			Interactive Data Files. The following materials are filed electronically with this Quarterly Report on Form 10-Q:


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


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

3629

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PATRICK INDUSTRIES, INC.
	(Registrant)

Date: ~~August~~May 5, ~~2021~~2022	By:	/s/ Andy L. Nemeth
		Andy L. Nemeth
		Chief Executive Officer



Date: ~~August~~May 5, ~~2021~~2022	By:	/s/ Jacob R. Petkovich
		Jacob R. Petkovich
		Executive Vice ~~President-Finance and~~President Finance, Chief Financial Officer and Treasurer



Date: ~~August~~May 5, ~~2021~~2022	By:	/s/ James E. Rose
		James E. Rose
		Vice President Finance and Principal Accounting Officer

3730


	Six Months Ended June 27, 2021
(thousands)	Manufacturing		Distribution		Total
Market type:
Recreational Vehicle	$	727,225	$	369,632	$	1,096,857
Marine	288,688		14,614		303,302
Manufactured Housing	125,001		134,808		259,809
Industrial	188,883		21,585		210,468
Total	$	1,329,797	$	540,639	$	1,870,436


(thousands)	2021 Acquisitions		2020 Acquisitions
Consideration
Cash, net of cash acquired	$	253,336	$	306,335
Working capital holdback and other, net(1)	2,860		(53)
Common stock issuance(2)	10,211		0
Contingent consideration(3)	3,000		4,763
Total consideration	$	269,407	$	311,045

Assets Acquired
Trade receivables	$	15,824	$	15,320
Inventories	39,386		25,395
Prepaid expenses & other	1,025		725
Property, plant & equipment	46,986		65,083
Operating lease right-of-use assets	16,026		20,029
Identifiable intangible assets	137,985		130,981
Liabilities Assumed
Current portion of operating lease obligations	(3,650)		(2,721)
Accounts payable & accrued liabilities	(22,406)		(12,405)
Operating lease obligations	(12,376)		(17,308)
Deferred tax liabilities	0		(4,322)
Total fair value of net assets acquired	218,800		220,777
Goodwill(4)	50,607		90,268
	$	269,407	$	311,045


(thousands, except year info)	Estimated Useful Life (in years)	2021 Acquisitions		2020 Acquisitions
Customer relationships	10	$	88,693	$	99,897
Non-compete agreements	5	2,825		1,150
Patents	10	10,350		6,470
Trademarks	Indefinite	36,117		23,464
		$	137,985	$	130,981


Second Quarter Ended June 27, 2021
(thousands)	Cash Flow Hedges		Other		Foreign Currency Translation		Total
Balance at March 28, 2021	$	(3,914)	$	(1,263)	$	41	$	(5,136)
Other comprehensive loss before reclassifications, net of tax	45		0		(11)		34
Amounts reclassified from accumulated other comprehensive loss, net of tax	973		0		0		973
Net current period other comprehensive income (loss)	1,018		0		(11)		1,007
Balance at June 28, 2021	$	(2,896)	$	(1,263)	$	30	$	(4,129)


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
March 29 - April 25, 2021	98	$	78.93	—	$	35,960,557
April 26 - May 30, 2021	89,546	89.62		85,388	28,338,024
May 31 - June 27, 2021	174,909	79.77		174,612	14,410,258
	264,553			260,000