(I.R.S. Employer Identification No.) 46515 (Address of principal executive offices) (ZIP Code) Accelerated filer [X] Non-accelerated filer [ ] Smaller reporting company [ ] PART I. FINANCIAL INFORMATION FINANCIAL STATEMENTS (Unaudited) Notes to Condensed Consolidated Financial Statements MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK CONTROLS AND PROCEDURES PART RISK FACTORS UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS As of (thousands) June 26, 2016 Dec. 31, 2015 ASSETS Current Assets Cash and cash equivalents Trade receivables, net Inventories Prepaid expenses and other Total current assets Property, plant and equipment, net Goodwill Other intangible assets, net Deferred financing costs, net (Note 3) Deferred tax assets, net (Note 2) Other non-current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Current maturities of long-term debt Accounts payable Accrued liabilities Total current liabilities Long-term debt, less current maturities, net (Note 3) Deferred compensation and other TOTAL LIABILITIES SHAREHOLDERS’ EQUITY Common stock Additional paid-in-capital Accumulated other comprehensive income Retained earnings TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY See accompanying Notes to Condensed Consolidated Financial Statements. PATRICK INDUSTRIES, INC. Second Quarter Ended Six Months Ended (thousands except per share data) June 26, 2016 June 28, 2015 June 26, 2016 June 28, 2015 NET SALES Cost of goods sold GROSS PROFIT Operating Expenses: Warehouse and delivery Selling, general and administrative Amortization of intangible assets (Gain) loss on sale of fixed assets Total operating expenses OPERATING INCOME Interest expense, net Income before income taxes Income taxes NET INCOME BASIC NET INCOME PER COMMON SHARE DILUTED NET INCOME PER COMMON SHARE Weighted average shares outstanding - Basic Weighted average shares outstanding - Diluted PATRICK INDUSTRIES, INC. Six Months Ended (thousands) June 26, 2016 June 28, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of intangible assets Stock-based compensation expense Deferred financing cost amortization Deferred income taxes (Gain) loss on sale of fixed assets Other non-cash items Change in operating assets and liabilities, net of effects of acquisitions: Trade receivables Inventories Prepaid expenses and other Accounts payable and accrued liabilities Payments on deferred compensation obligations Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures Proceeds from sale of property and equipment Business acquisitions Other investing activities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings Term debt repayments Borrowings on revolver Repayments on revolver Payment of deferred fnancing costs Stock repurchases under buyback program Realization of excess tax benefit on stock-based compensation Proceeds from exercise of stock options, including tax benefit Other financing activities Net cash provided by financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period See accompanying Notes to Condensed Consolidated Financial Statements. June 26, Dec. 31, (thousands) 2016 2015 Total long-term debt Less: Net deferred financing costs related to Term Loan Total long-term debt, net of deferred financing costs Less: current maturities of long-term debt Total long-term debt, less current maturities, net June 26, Dec. 31, (thousands) 2016 2015 Total deferred financing costs, net Less: Net deferred financing costs related to Term Loan Net deferred financing costs related to Revolver (thousands) June 26, 2016 Raw materials Work in process Finished goods Less: reserve for inventory obsolescence Total manufactured goods, net Materials purchased for resale (distribution products) Less: reserve for inventory obsolescence Total materials purchased for resale (distribution products), net Total inventories (thousands) Customer Relationships Non-Compete Agreements Trademarks Total Other Intangible Assets Goodwill Total Intangible Assets Parkland Plastics, Inc. The Progressive Group Cana Holdings, Inc. Mishawaka Sheet Metal, LLC (thousands) Manufacturing Distribution Total Balance - December 31, 2015 Acquisitions Other Balance - June 26, 2016 (thousands) June 26, 2016 Weighted Average Useful Life (in years) Dec. 31, 2015 Weighted Average Useful Life (in years) Customer relationships Non-compete agreements Trademarks Less: accumulated amortization Other intangible assets, net (thousands) Manufacturing Distribution Total Balance - December 31, 2015 Acquisitions Amortization Other Balance - June 26, 2016 (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired (thousands) Trade receivables Inventories Property, plant and equipment Prepaid expenses Accounts payable and accrued liabilities Intangible assets Goodwill Total net assets acquired Second Quarter Ended Six Months Ended June 26, June 28, June 26, June 28, (thousands except per share data) Revenue Net income Basic net income per common share Diluted net income per common share Second Quarter Ended Six Months Ended June 26, June 28, June 26, June 28, (thousands except per share data) 2016 2016 Net income for basic and diluted per share calculation Weighted average common shares outstanding - basic Effect of potentially dilutive securities Weighted average common shares outstanding - diluted Basic net income per common share Diluted net income per common share June 26, Dec. 31, (thousands) 2016 2015 Long-term debt: Revolver Term Loan Total long-term debt Less: current maturities of long-term debt Less: Net deferred financing costs related to Term Loan Total long-term debt, less current maturities, net The maturity date for the 2015 Credit Facility is April 28, 2020; Required Actual Consolidated total leverage ratio (12-month period) Consolidated fixed charge coverage ratio (12-month period) (thousands) Manufacturing Distribution Total Net outside sales Intersegment sales Total sales Operating income Second Quarter Ended June 28, 2015 (thousands) Manufacturing Distribution Total Net outside sales Intersegment sales Total sales Operating income Six Months Ended June 26, 2016 (thousands) Manufacturing Distribution Total Net outside sales Intersegment sales Total sales Operating income Six Months Ended June 28, 2015 (thousands) Manufacturing Distribution Total Net outside sales Intersegment sales Total sales Operating income Second Quarter Ended Six Months Ended June 26, June 28, June 26, June 28, (thousands) 2016 2016 Operating income for reportable segments Unallocated corporate expenses Amortization of intangible assets Consolidated operating income Shares Total Cost Average Price Year Repurchased (in thousands) Per Share 2013 2014 2015 2016 Total RV Industry tracking recent trends. As the RV lifestyle continues to attract new buyers to the market, the RVIA . Second Quarter Ended Six Months Ended June 26, June 28, June 26, June 28, 2016 2015 2016 2015 Net sales Cost of goods sold Gross profit Warehouse and delivery expenses Selling, general and administrative expenses Amortization of intangible assets Operating income Interest expense, net Income taxes Net income Income. 2015, as well as strong growth in shipments during the quarter of fifth wheels which have higher per unit content. 2015. Second Quarter Ended Six Months Ended June 26, June 28, June 26, June 28, (thousands) 2016 2015 2016 2015 Sales Manufacturing Distribution Gross Profit Manufacturing Distribution Operating Income Manufacturing Distribution Required Actual Consolidated total leverage ratio (12-month period) Consolidated fixed charge coverage ratio (12-month period) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (1) (3) March 28 - April 24, 2016 (2) April 25 - May 29, 2016 May 30 - June 26, 2016 Total Description By: /s/ Todd M. Cleveland Todd M. Cleveland Chief Executive Officer By: /s/ Joshua A. Boone Joshua A. BooneUNITEDJUNE 26,SEPTEMBER 25, 2016CommissionINDIANA35-1057796INDIANA 35-1057796 (State or other jurisdiction of incorporation or organization) WESTWEST FRANKLIN STREET,, P.O. Box 638,ELKHART,ELKHART, IN Large accelerated filer [ ] July 22,October 21, 2016, there were 15,325,43415,333,993 shares of the registrant’s common stock outstanding.TABLE OF CONTENTS Page No.No. ITEM 1. June 26, SecondSixNine Months Ended June 26,September 25, 2016 and June 28,September 27, 2015 SixJune 26,September 25, 2016 and June 28,September 27, 2015 20 ITEM 3. ITEM 4. II.II. OTHER INFORMATION ITEM 1A. ITEM 2. ITEM 6. EXHIBITS EXHIBITS SIGNATURES PART 1: FINANCIAL INFORMATION As of (thousands) Sep. 25, 2016 Dec. 31, 2015 ASSETS Current Assets Cash and cash equivalents $ 1,477 $ 87 Trade receivables, net 75,739 38,213 Inventories 116,115 89,478 Prepaid expenses and other 4,856 6,119 Total current assets 198,187 133,897 Property, plant and equipment, net 81,439 67,878 Goodwill 100,800 68,606 Other intangible assets, net 150,846 106,759 Deferred financing costs, net (Note 3) 1,830 1,885 Deferred tax assets, net (Note 2) 435 2,004 Other non-current assets 528 555 TOTAL ASSETS $ 534,065 $ 381,584 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Current maturities of long-term debt $ 15,766 $ 10,714 Accounts payable 58,133 28,744 Accrued liabilities 23,017 18,468 Total current liabilities 96,916 57,926 Long-term debt, less current maturities, net (Note 3) 264,479 193,142 Deferred compensation and other 1,867 1,919 TOTAL LIABILITIES 363,262 252,987 SHAREHOLDERS’ EQUITY Common stock 62,117 57,683 Additional paid-in-capital 9,504 8,308 Accumulated other comprehensive income 32 32 Retained earnings 99,150 62,574 TOTAL SHAREHOLDERS’ EQUITY 170,803 128,597 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 534,065 $ 381,584 $ 35 $ 87 91,293 38,213 102,081 89,478 4,579 6,119 197,988 133,897 78,437 67,878 84,044 68,606 129,914 106,759 1,686 1,885 3,907 2,004 543 555 $ 496,519 $ 381,584 $ 10,714 $ 10,714 53,071 28,744 23,363 18,468 87,148 57,926 250,438 193,142 1,870 1,919 339,456 252,987 60,450 57,683 9,456 8,308 32 32 87,125 62,574 157,063 128,597 $ 496,519 $ 381,584 $ 315,163 $ 233,481 $ 593,800 $ 456,869 259,879 193,088 493,164 381,082 55,284 40,393 100,636 75,787 9,285 6,826 16,984 13,485 14,764 11,219 28,997 22,738 3,225 1,982 5,993 3,641 3 (5 ) 41 (11 ) 27,277 20,022 52,015 39,853 28,007 20,371 48,621 35,934 1,632 898 3,281 1,702 26,375 19,473 45,340 34,232 9,672 7,400 16,604 13,009 $ 16,703 $ 12,073 $ 28,736 $ 21,223 $ 1.11 $ 0.79 $ 1.92 $ 1.39 $ 1.10 $ 0.78 $ 1.90 $ 1.37 15,008 15,312 14,978 15,319 15,176 15,513 15,155 15,498 Third Quarter Ended Nine Months Ended (thousands except per share data) Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 NET SALES $ 304,151 $ 214,805 $ 897,951 $ 671,674 Cost of goods sold 255,299 179,764 748,463 560,846 GROSS PROFIT 48,852 35,041 149,488 110,828 Operating Expenses: Warehouse and delivery 9,165 6,669 26,149 20,154 Selling, general and administrative 15,877 10,805 44,874 33,543 Amortization of intangible assets 3,687 2,354 9,680 5,995 Loss on sale of fixed assets 6 11 47 — Total operating expenses 28,735 19,839 80,750 59,692 OPERATING INCOME 20,117 15,202 68,738 51,136 Interest expense, net 1,917 1,153 5,198 2,855 Income before income taxes 18,200 14,049 63,540 48,281 Income taxes 6,175 5,089 22,779 18,098 NET INCOME $ 12,025 $ 8,960 $ 40,761 $ 30,183 BASIC NET INCOME PER COMMON SHARE $ 0.80 $ 0.58 $ 2.72 $ 1.97 DILUTED NET INCOME PER COMMON SHARE $ 0.79 $ 0.58 $ 2.68 $ 1.95 Weighted average shares outstanding - Basic 15,048 15,342 15,002 15,327 Weighted average shares outstanding - Diluted 15,235 15,532 15,182 15,507 Nine Months Ended (thousands) Sep. 25, 2016 Sep. 27, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 40,761 $ 30,183 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,994 5,796 Amortization of intangible assets 9,680 5,995 Stock-based compensation expense 4,798 3,426 Deferred financing cost amortization 453 345 Deferred income taxes (1,931 ) (2,679 ) Loss on sale of fixed assets 47 — Other non-cash items 296 248 Change in operating assets and liabilities, net of effects of acquisitions: Trade receivables (27,207 ) (17,648 ) Inventories (9,683 ) (3,695 ) Prepaid expenses and other 1,387 3,044 Accounts payable and accrued liabilities 23,376 580 Payments on deferred compensation obligations (238 ) (255 ) Net cash provided by operating activities 49,733 25,340 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (10,866 ) (4,731 ) Proceeds from sale of property and equipment 241 100 Business acquisitions (112,080 ) (139,168 ) Other investing activities (21 ) 651 Net cash used in investing activities (122,726 ) (143,148 ) CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings 29,002 75,000 Term debt repayments (5,358 ) (2,679 ) Borrowings on revolver 262,583 231,502 Repayments on revolver (209,856 ) (180,056 ) Payment of deferred financing costs (380 ) (1,887 ) Stock repurchases under buyback program (4,667 ) (5,650 ) Realization of excess tax benefit on stock-based compensation 1,256 1,080 Proceeds from exercise of stock options, including tax benefit 1,865 1,861 Other financing activities (62 ) (76 ) Net cash provided by financing activities 74,383 119,095 Increase in cash and cash equivalents 1,390 1,287 Cash and cash equivalents at beginning of year 87 123 Cash and cash equivalents at end of period $ 1,477 $ 1,410 $ 28,736 $ 21,223 5,121 3,819 5,993 3,641 3,133 2,194 291 215 (1,903 ) (534 ) 41 (11 ) 190 159 (46,016 ) (12,554 ) (979 ) (129 ) 1,683 3,410 21,151 6,104 (163 ) (174 ) 17,278 27,363 (6,070 ) (3,235 ) 201 17 (67,005 ) (60,513 ) (13 ) (13 ) (72,887 ) (63,744 ) - 75,000 (2,679 ) - 207,497 92,952 (147,588 ) (119,006 ) (26 ) (1,611 ) (4,667 ) (5,650 ) 1,208 1,215 1,863 16 (51 ) (52 ) 55,557 42,864 (52 ) 6,483 87 123 $ 35 $ 6,606 1. BASIS OF PRESENTATION PATRICK INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 1.Debt Financing / Debt Issuance Costs3. DEFERRED FINANCING / DEBT ISSUANCE COSTS (thousands) Sep. 25, 2016 Dec. 31, 2015 Total long-term debt $ 280,855 $ 204,484 Less: Net deferred financing costs related to Term Loan (610 ) (628 ) Total long-term debt, net of deferred financing costs 280,245 203,856 Less: current maturities of long-term debt (15,766 ) (10,714 ) Total long-term debt, less current maturities, net $ 264,479 $ 193,142 (thousands) Sep. 25, 2016 Dec. 31, 2015 Total deferred financing costs, net $ 2,440 $ 2,513 Less: Net deferred financing costs related to Term Loan (610 ) (628 ) Net deferred financing costs related to 2015 Revolver $ 1,830 $ 1,885 4. INVENTORIES (thousands) Sep. 25, 2016 Dec. 31, 2015 Raw materials $ 72,852 $ 52,601 Work in process 6,045 5,529 Finished goods 10,266 10,450 Less: reserve for inventory obsolescence (2,757 ) (1,897 ) Total manufactured goods, net 86,406 66,683 Materials purchased for resale (distribution products) 31,315 24,406 Less: reserve for inventory obsolescence (1,606 ) (1,611 ) Total materials purchased for resale (distribution products), net 29,709 22,795 Total inventories $ 116,115 $ 89,478 5. GOODWILL AND INTANGIBLE ASSETS BASIS OF PRESENTATION.(thousands) Customer Relationships Non-Compete Agreements Trademarks Total Other Intangible Assets Goodwill Total Intangible Assets Parkland Plastics, Inc. $ 7,500 $ 800 $ 2,500 $ 10,800 $ 5,325 $ 16,125 The Progressive Group 3,840 410 1,280 5,530 2,951 8,481 Cana Holdings, Inc. 4,592 510 1,531 6,633 3,572 10,205 Mishawaka Sheet Metal, LLC 4,399 489 1,466 6,354 3,421 9,775 L.S. Manufacturing, Inc. 3,982 443 1,327 5,752 3,096 8,848 BH Electronics, Inc. 13,063 1,451 4,354 18,868 13,660 32,528 (thousands) Manufacturing Distribution Total Balance - December 31, 2015 $ 62,285 $ 6,321 $ 68,606 Acquisitions 29,074 2,951 32,025 Other 169 — 169 Balance - September 25, 2016 $ 91,528 $ 9,272 $ 100,800 (thousands) Sep. 25, 2016 Weighted Average Useful Life
(in years)Dec. 31, 2015 Weighted Average Useful Life
(in years)Customer relationships $ 128,364 10.2 $ 91,164 10.4 Non-compete agreements 13,120 3.7 9,012 3.4 Trademarks 37,946 Indefinite 25,487 Indefinite 179,430 125,663 Less: accumulated amortization (28,584 ) (18,904 ) Other intangible assets, net $ 150,846 $ 106,759 (thousands) Manufacturing Distribution Total Balance - December 31, 2015 $ 95,359 $ 11,400 $ 106,759 Acquisitions 48,407 5,530 53,937 Amortization (7,639 ) (2,041 ) (9,680 ) Other (170 ) — (170 ) Balance - September 25, 2016 $ 135,957 $ 14,889 $ 150,846 In the opinion of Patrick Industries, Inc. (“Patrick” or the “Company”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 26, 2016 and December 31, 2015, and its results of operations and cash flows for the three and six months ended June 26, 2016 and June 28, 2015.Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The December 31, 2015 condensed consolidated statement of financial position data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the second quarter and six months ended June 26, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016.Certain amounts in the prior year’s condensed consolidated financial statements and notes have been reclassified to conform to the current year presentation. See Notes 2 and 3 for additional details.In preparation of Patrick’s condensed consolidated financial statements as of and for the second quarter and six months ended June 26, 2016, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q for potential recognition or disclosure in the consolidated financial statements. See Notes 9 and 15 for events that occurred subsequent to the balance sheet date.6. ACQUISITIONS (thousands) Trade receivables $ 2,915 Inventories 3,799 Property, plant and equipment 704 Accounts payable and accrued liabilities (4,946 ) Intangible assets 18,868 Goodwill 13,660 Total net assets acquired $ 35,000 (thousands) Trade receivables $ 621 Inventories 1,455 Property, plant and equipment 400 Prepaid expenses 1 Accounts payable and accrued liabilities (1,075 ) Intangible assets 5,752 Goodwill 3,096 Total net assets acquired $ 10,250 (thousands) Trade receivables $ 2,054 Inventories 1,610 Property, plant and equipment 1,575 Prepaid expenses 4 Accounts payable and accrued liabilities (1,091 ) Intangible assets 6,354 Goodwill 3,421 Total net assets acquired $ 13,927 (thousands) Trade receivables $ 646 Inventories 1,151 Property, plant and equipment 5,145 Prepaid expenses 29 Accounts payable and accrued liabilities (655 ) Intangible assets 6,633 Goodwill 3,572 Total net assets acquired $ 16,521 (thousands) Trade receivables $ 2,984 Inventories 5,280 Property, plant and equipment 2,986 Prepaid expenses 96 Accounts payable and accrued liabilities (2,100 ) Intangible assets 10,800 Goodwill 5,325 Total net assets acquired $ 25,371 (thousands) Trade receivables $ 1,099 Inventories 3,659 Property, plant and equipment 100 Prepaid expenses 61 Accounts payable and accrued liabilities (2,388 ) Intangible assets 5,530 Goodwill 2,951 Total net assets acquired $ 11,012 (thousands) Trade receivables $ 4,901 Inventories 1,829 Property, plant and equipment 3,907 Prepaid expenses 80 Accounts payable and accrued liabilities (1,349 ) Intangible assets 20,030 Goodwill 11,087 Total net assets acquired $ 40,485 (thousands) Trade receivables $ 1,407 Inventories 482 Property, plant and equipment 750 Prepaid expenses 5 Accounts payable and accrued liabilities (734 ) Intangible assets 9,535 Goodwill 8,596 Total net assets acquired $ 20,041 (thousands) Trade receivables $ 8,924 Inventories 19,189 Property, plant and equipment 5,959 Prepaid expenses 139 Accounts payable and accrued liabilities (8,209 ) Intangible assets 36,185 Goodwill 17,463 Total net assets acquired $ 79,650 Third Quarter Ended Nine Months Ended (thousands except per share data) Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 Revenue $ 306,611 $ 278,248 $ 957,177 $ 910,163 Net income 12,220 12,331 45,300 41,926 Basic net income per common share 0.81 0.80 3.02 2.74 Diluted net income per common share 0.80 0.80 2.98 2.71 2.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSRevenue RecognitionIn May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance which specifies how and when to recognize revenue as well as providing informative, relevant disclosures. In August 2015, the FASB deferred the effective date of this standard by one year, which would become effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating both the effect of adopting this new accounting guidance and determining the appropriate method of transition it will use to apply the new standard. It has not yet determined the impact, if any, that the implementation of this guidance will have on its condensed consolidated financial statements.Debt Issuance CostsIn April 2015, the FASB issued guidance that requires that debt issuance costs be presented in the statement of financial position as a reduction in the carrying amount of debt, consistent with the presentation of debt issuance discounts. The Company adopted this new guidance, on a retrospective basis, in the first quarter of 2016 as required. Total assets and total liabilities on the Company’s condensed consolidated statement of financial position as of December 31, 2015 were reduced by the reclassification of $0.6 million of deferred financing costs related to the Term Loan (as defined herein) to the long-term debt, less current maturities, net line on the condensed consolidated statement of financial position. See Note 3 for a description of the impact of the adoption of this guidance on the Company’s condensed consolidated statements of financial position for the periods presented.7. STOCK-BASED COMPENSATION Income TaxesIn November 2015, the FASB issued new accounting guidance that simplifies the presentation of deferred income taxes. Under the new guidance, deferred tax assets and liabilities are required to be classified, on a net basis, as noncurrent on the condensed consolidated statement of financial position. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 and early adoption is permitted.During the first quarter of 2016, the Company elected to adopt this guidance, thus reclassifying current deferred tax assets to noncurrent, net of deferred tax liabilities, on the condensed consolidated statements of financial position. The prior year reporting period was retrospectively adjusted. Current assets on the Company’s condensed consolidated statement of financial position as of December 31, 2015 were reduced by the reclassification of $5.8 million of current deferred tax assets to long-term assets. Total assets and total liabilities on the Company’s condensed consolidated statement of financial position as of December 31, 2015 were reduced by the reclassification of $3.8 million of long-term deferred tax liabilities to long-term deferred tax assets. The adoption of this guidance had no impact on the Company’s condensed consolidated statements of income.LeasesIn February 2016, the FASB issued new accounting guidance that will require that an entity recognize lease assets and lease liabilities on its balance sheet for leases in excess of one year that were previously classified as operating leases under U.S. GAAP. The guidance also requires companies to disclose in the footnotes to the financial statements information about the amount, timing, and uncertainty for the payments made for the lease agreements. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2018 on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting guidance and has not yet determined the impact that the implementation of this guidance will have on its condensed consolidated financial statements.Stock CompensationIn March 2016, the FASB issued new accounting guidance for share-based payments, which simplifies (i) the income tax consequences related to exercised or vested share-based payment awards; (ii) the classification of awards as assets or liabilities; and (iii) the classification in the condensed consolidated statements of cash flows. This guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 and early adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting guidance and has not yet determined the impact, if any, that the implementation of this guidance will have on its condensed consolidated financial statements.3.DEFERRED FINANCING/DEBT ISSUANCE COSTSThe condensed consolidated statements of financial position at June 26, 2016 and December 31, 2015 reflect the reclassification of assets related to deferred financing costs associated with the Term Loan outstanding under the Company’s 2015 Credit Facility (as defined herein) that were reclassified and presented net of long-term debt outstanding. The deferred financing costs related to the 2015 Revolver (as defined herein) were not reclassified to long-term debt and are reflected as a component of non-current assets on the condensed consolidated statements of financial position for the periods presented. The reclassification is the result of the Company’s adoption of new accounting guidance that requires debt issuance costs be presented in the statement of financial position as a reduction in the carrying amount of debt, consistent with the presentation of debt issuance discounts. In the first quarter of 2016, the Company adopted this guidance as required on a retrospective basis. See Note 2 “Debt Issuance Costs” for further details.At December 31, 2015, the total maximum borrowing limit under the Company’s 2015 Credit Facility was $300.0 million, of which $75.0 million or 25%, represented the total commitment under the Term Loan. Unamortized total deferred financing costs were $2.2 million and $2.5 million at June 26, 2016 and December 31, 2015, respectively. The following tables illustrate the effect of the change on certain line items within the condensed consolidated statements of financial position for the periods presented.8. NET INCOME PER COMMON SHARE Third Quarter Ended Nine Months Ended (thousands except per share data) Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 Net income for basic and diluted per share calculation $ 12,025 $ 8,960 $ 40,761 $ 30,183 Weighted average common shares outstanding - basic 15,048 15,342 15,002 15,327 Effect of potentially dilutive securities 187 190 180 180 Weighted average common shares outstanding - diluted 15,235 15,532 15,182 15,507 Basic net income per common share $ 0.80 $ 0.58 $ 2.72 $ 1.97 Diluted net income per common share $ 0.79 $ 0.58 $ 2.68 $ 1.95 $ 261,714 $ 204,484 (562 ) (628 ) 261,152 203,856 (10,714 ) (10,714 ) $ 250,438 $ 193,142 $ 2,248 $ 2,513 (562 ) (628 ) $ 1,686 $ 1,885 4.INVENTORIESInventories are stated at the lower of cost (First-In, First-Out (FIFO) Method) and net realizable value and consist of the following classes: Dec. 31, 2015 $ 60,890 $ 52,601 5,878 5,529 10,413 10,450 (2,592 ) (1,897 ) 74,589 66,683 29,353 24,406 (1,861 ) (1,611 ) 27,492 22,795 $ 102,081 $ 89,478 9. DEBT (thousands) Sep. 25, 2016 Dec. 31, 2015 Long-term debt: 2015 Revolver $ 190,246 $ 137,520 Term Loan 90,609 66,964 Total long-term debt 280,855 204,484 Less: current maturities of long-term debt (15,766 ) (10,714 ) Less: Net deferred financing costs related to Term Loan (610 ) (628 ) Total long-term debt, less current maturities, net $ 264,479 $ 193,142 5.2015 Credit FacilityGOODWILL AND INTANGIBLE ASSETSst Source Bank as an additional participant.The Company acquired intangible assets in various acquisitions in 2015 and through the first six months of 2016 that were determined to be business combinations. The goodwill recognized is expected to be deductible for income tax purposes. See Note 6 for further details. Goodwill and other intangible assets are allocated to the Company’s reporting units at the date they are initially recorded. Goodwill and indefinite-lived intangible assets are not amortized but are subject to an impairment test based on their estimated fair value performed annually in the fourth quarter (or under certain circumstances more frequently as warranted). Goodwill impairment testing is performed at the reporting unit level, one level below the business segment.Finite-lived intangible assets that meet certain criteria continue to be amortized over their useful lives and are also subject to an impairment test based on estimated undiscounted cash flows when impairment indicators exist. The Company assesses finite-lived intangible assets for impairment if events or changes in circumstances indicate that the carrying value may exceed the fair value.No impairment was recognized during the second quarter and six months ended June 26, 2016 and June 28, 2015 related to goodwill, indefinite-lived intangible assets or finite-lived intangible assets. There have been no material changes to the method of evaluating impairment related to goodwill, indefinite-lived intangible assets or finite-lived intangible assets during the first six months of 2016.The Company acquired the following intangible assets in various acquisitions in the first six months of 2016: $ 7,500 $ 800 $ 2,500 $ 10,800 $ 5,325 $ 16,125 3,840 410 1,280 5,530 2,951 8,481 4,592 510 1,531 6,633 3,572 10,205 4,399 489 1,466 6,354 3,421 9,775 GoodwillChanges in the carrying amount of goodwill for the six months ended June 26, 2016 by segment are as follows: $ 62,285 $ 6,321 $ 68,606 12,318 2,951 15,269 169 - 169 $ 74,772 $ 9,272 $ 84,044 Other Intangible AssetsOther intangible assets are comprised of customer relationships, non-compete agreements and trademarks. Customer relationships and non-compete agreements represent finite-lived intangible assets that have been recorded in the Manufacturing and Distribution segments along with related amortization expense. As of June 26, 2016, the other intangible assets balance of $129.9 million is comprised of $32.3 million of trademarks which have an indefinite life, and therefore, no amortization expense has been recorded, and $97.6 million pertaining to customer relationships and non-compete agreements which are being amortized over periods ranging from 2 to 19 years. For the finite-lived intangible assets attributable to the 2016 acquisitions of Parkland Plastics, Inc. (“Parkland”), The Progressive Group (“Progressive”), Cana Holdings, Inc. (“Cana”) and Mishawaka Sheet Metal, LLC (“MSM”), the useful life pertaining to non-compete agreements and to customer relationships for all four of these acquisitions was five years and 10 years, respectively.Amortization expense for the Company’s intangible assets in the aggregate was $6.0 million and $3.6 million for the six months ended June 26, 2016 and June 28, 2015, respectively.Other intangible assets, net consist of the following as of June 26, 2016 and December 31, 2015: $ 111,320 10.3 $ 91,164 10.4 11,227 3.6 9,012 3.4 32,264 25,487 154,811 125,663 (24,897 ) (18,904 ) $ 129,914 $ 106,759 Changes in the carrying value of other intangible assets for the six months ended June 26, 2016 by segment are as follows: $ 95,359 $ 11,400 $ 106,759 23,787 5,530 29,317 (4,733 ) (1,260 ) (5,993 ) (169 ) - (169 ) $ 114,244 $ 15,670 $ 129,914 6.ACQUISITIONSGeneralThe Company completed four acquisitions in the first six months of 2016 and three acquisitions in 2015, including two in the first six months of 2015. Each of the acquisitions was funded through borrowings under the Company’s credit facility in existence at the time of acquisition. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s condensed consolidated statements of financial position at their estimated fair values as of the respective dates of acquisition.For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which represents the value of leveraging the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, revenue impact, market share growth, and net income. Intangible asset values were estimated using income based valuation methodologies. See Note 5 for information regarding the amortization periods assigned to finite-lived intangible assets.For the second quarter ended June 26, 2016, revenue and operating income of approximately $16.2 million and $1.9 million, respectively, were included in the Company’s condensed consolidated statements of income relating to the four businesses acquired in 2016. The first six months of 2016 included revenue and operating income of approximately $20.0 million and $2.3 million, respectively. Acquisition-related costs associated with the businesses acquired in 2016 were immaterial.For the second quarter ended June 28, 2015, revenue and operating income of approximately $13.8 million and $2.2 million, respectively, were included in the Company’s condensed consolidated statements of income relating to the businesses acquired in 2015. The first six months of 2015 included revenue and operating income of approximately $20.3 million and $3.0 million, respectively. Acquisition-related costs associated with the business acquired in 2015 were immaterial.2016 AcquisitionsMSMIn June 2016, the Company acquired the business and certain assets of Elkhart, Indiana-based MSM, a fabricator of a wide variety of aluminum and steel products primarily serving the recreational vehicle (“RV”) and industrial markets, for a net purchase price of $13.9 million.The acquisition of MSM provides the opportunity for the Company to further expand its presence in the aluminum and steel products market and increase its product offering, market share and per unit content. The results of operations for MSM are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the second half of 2016. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 2,054 1,610 1,575 4 (1,091 ) 6,354 3,421 $ 13,927 CanaIn May 2016, the Company acquired the business and certain assets of Cana, a custom cabinetry manufacturer, primarily serving the manufactured housing (“MH”) industry and the residential, hospitality and institutional markets, for a net purchase price of $17.0 million.The acquisition of Cana, with operating facilities located in Elkhart, Indiana and Americus, Georgia, provides the opportunity for the Company to capitalize on its existing cabinetry manufacturing expertise and increase its product offerings, market share and per unit content. The results of operations for Cana are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the second half of 2016. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 1,134 1,151 5,145 37 (649 ) 6,633 3,572 $ 17,023 ParklandIn February 2016, the Company acquired the business and certain assets of Middlebury, Indiana-based Parkland, a fully integrated designer and manufacturer of innovative polymer-based products including wall panels, lay-in ceiling panels, coated and rolled floors, protective moulding, and adhesives and accessories, used in a wide range of applications primarily in the RV, architectural and industrial markets, for a net purchase price of $25.2 million.The acquisition of Parkland provides the opportunity for the Company to establish a presence in the polymer-based products market and increase its product offering, market share and per unit content. The results of operations for Parkland are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the second half of 2016. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 2,880 5,280 2,987 86 (2,180 ) 10,800 5,325 $ 25,178 ProgressiveIn March 2016, the Company acquired the business and certain assets of Progressive, a distributor and manufacturer's representative for major name brand electronics to small, mid-size and large retailers, distributors, and custom installers, primarily serving the auto and home electronics retail, custom integration, and commercial channels, for a net purchase price of $10.9 million.The acquisition of Progressive, with six distribution facilities located in Arizona, Colorado, Indiana, Michigan and Utah, provides the opportunity for the Company to expand its product offerings in its existing electronics platform and increase its market share and per unit content. The results of operations for Progressive are included in the Company’s condensed consolidated financial statements and the Distribution operating segment from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are expected to be finalized in the second half of 2016. The following summarizes the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 996 3,583 100 61 (2,344 ) 5,530 2,951 $ 10,877 2015 AcquisitionsBetter Way Partners, LLC d/b/a Better Way Products (“Better Way”)In February 2015, the Company acquired the business and certain assets of Better Way, a manufacturer of fiberglass front and rear caps, marine helms and related fiberglass components primarily used in the RV, marine and transit vehicle markets, for a net purchase price of $40.5 million.The acquisition of Better Way, with operating facilities located in New Paris, Bremen and Syracuse, Indiana, provided the opportunity for the Company to further expand its presence in the fiberglass components market and increase its product offerings, market share and per unit content. The results of operations for Better Way are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 4,901 1,829 3,907 80 (1,349 ) 20,030 11,087 $ 40,485 Structural Composites of Indiana, Inc. (“SCI”)In May 2015, the Company acquired the business and certain assets of Ligonier, Indiana-based SCI, a manufacturer of large, custom molded fiberglass front and rear caps and roofs, primarily used in the RV market, and specialty fiberglass components for the transportation, marine and other industrial markets, for a net purchase price of $20.0 million.The acquisition of SCI provided the opportunity for the Company to further expand its presence in the fiberglass components market and increase its product offerings, market share and per unit content. The results of operations for SCI are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 1,407 482 750 5 (734 ) 9,535 8,596 $ 20,041 North American Forest Products, Inc. and North American Moulding, LLC (collectively, “North American”)In September 2015, the Company acquired the business and certain assets of Edwardsburg, Michigan-based North American, a manufacturer primarily for the RV market, of profile wraps, custom mouldings, laminated panels and moulding products. North American is also a manufacturer and supplier of raw and processed softwoods products, including lumber, panels, trusses, bow trusses, and industrial packaging materials, primarily used in the RV and MH industries. The Company acquired North American for a net purchase price of $79.7 million.The acquisition of North American provided the opportunity for the Company to further expand its existing presence in the manufacture of laminated panels and moulding products and increase its product offerings, market share and per unit content, and provided a new opportunity in the softwoods lumber market. The results of operations for North American are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. The purchase price allocation and all required purchase accounting adjustments were finalized in the first quarter of 2016, with no material changes from previously reported estimated amounts. The following summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition: $ 8,924 19,189 5,959 139 (8,209 ) 36,185 17,463 $ 79,650 Pro Forma InformationThe following pro forma information for the second quarter and six months ended June 26, 2016 and June 28, 2015 assumes the Parkland, Progressive, Cana and MSM acquisitions (which were acquired in 2016) and the Better Way, SCI and North American acquisitions (which were acquired in 2015) occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of Parkland, Progressive, Cana, MSM, Better Way, SCI, and North American, combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.The pro forma information includes financing and interest expense charges based on the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of (i) $0.2 million and $0.7 million for the second quarter and six months ended June 26, 2016, respectively, and (ii) $1.4 million and $3.1 million for the second quarter and six months ended June 28, 2015, respectively. 2016 2015 2016 2015 $ 325,788 $ 302,355 $ 626,825 $ 610,401 16,849 14,595 30,244 27,332 1.12 0.95 2.02 1.78 1.11 0.94 2.00 1.76 The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.7.STOCK-BASED COMPENSATIONThe Company accounts for stock-based compensation in accordance with fair value recognition provisions. The Company recorded compensation expense of $1.6 million and $1.2 million for the second quarters ended June 26, 2016 and June 28, 2015, respectively, for its stock-based compensation plans on the condensed consolidated statements of income. For the first six months of 2016 and 2015, the Company recorded $3.1 million and $2.2 million, respectively.The Company estimates the fair value of (i) all stock grants as of the grant date using the closing price per share of the Company’s common stock on such date, and (ii) all stock option and stock appreciation rights awards as of the grant date by applying the Black-Scholes option pricing model.The Board of Directors (the “Board”) approved the following share grants in 2015 under the Company’s 2009 Omnibus Incentive Plan (the “Plan”): 127,629 shares on February 16, 2015, 300 shares on April 1, 2015, 12,064 shares on May 19, 2015, 447 shares on August 13, 2015, 2,250 shares on October 8, 2015, and 3,000 shares on October 12, 2015. In addition, on March 30, 2015, the Board granted 22,000 restricted stock units (“RSUs”).The Board approved the following share grants under the Plan in the first six months of 2016: 133,187 shares on February 23, 2016, 3,500 shares on March 2, 2016, 2,000 shares on April 11, 2016, and 9,294 shares on May 17, 2016. In addition, on February 23, 2016, the Board granted 22,000 RSUs.As of June 26, 2016, there was approximately $10.0 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 18.4 months.8.NETINCOME PER COMMON SHAREBasic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding, plus the dilutive effect of stock options, stock appreciation rights, and restricted stock units (collectively “Common Stock Equivalents”). The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the average market price for the period. Certain Common Stock Equivalents were not included in the computation of diluted net income per common share because the exercise prices of those Common Stock Equivalents were greater than the average market price of the common shares.Income per common share is calculated for the second quarter and six months periods as follows: 2015 2015 $ 16,703 $ 12,073 $ 28,736 $ 21,223 15,008 15,312 14,978 15,319 168 201 177 179 15,176 15,513 15,155 15,498 $ 1.11 $ 0.79 $ 1.92 $ 1.39 $ 1.10 $ 0.78 $ 1.90 $ 1.37 9.DEBTA summary of total debt outstanding at June 26, 2016 and December 31, 2015 is as follows: $ 197,428 $ 137,520 64,286 66,964 261,714 204,484 (10,714 ) (10,714 ) (562 ) (628 ) $ 250,438 $ 193,142 2015 Credit FacilityThe Company entered into an Amended and Restated Credit Agreement, dated as of April 28, 2015 (the “2015 Credit Agreement”), with Wells Fargo Bank, National Association, as Administrative Agent and a lender (“Wells Fargo”), and Fifth Third Bank (“Fifth Third”), Key Bank National Association (“Key Bank”), Bank of America, N.A. (“B of A”), and Lake City Bank as participants, to expand its senior secured credit facility to $250.0 million and extend its maturity to 2020 (the “2015 Credit Facility”). The 2015 Credit Facility initially was comprised of a $175.0 million revolving credit loan (the “2015 Revolver”) and a $75.0 million term loan (the “Term Loan”).On August 31, 2015, the Company entered into a first amendment to the 2015 Credit Agreement to expand the 2015 Credit Facility to $300.0 million from $250.0 million by expanding the 2015 Revolver to $225.0 million.On July 26, 2016, the Company entered into a second amendment to the 2015 Credit Agreement to expand the 2015 Credit Facility to $360.0 million from $300.0 million by expanding the 2015 Revolver to $269.4 million and the Term Loan to $90.6 million, and to add 1st Source Bank as an additional participant.The 2015 Credit Agreement is secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. The 2015 Credit Agreement includes certain definitions, terms and reporting requirements and includes the following additional provisions:●●●●●●● Required Actual Consolidated total leverage ratio (12-month period) 3.00 1.97 Consolidated fixed charge coverage ratio (12-month period) 1.50 3.12 At June 26, 2016, the Company had $64.3 million outstanding under the Term Loan under the LIBOR-based option, and borrowings outstanding under the 2015 Revolver of (i) $187.0 million under the LIBOR-based option and (ii) $10.4 million under the Prime Rate-based option. The interest rate for borrowings at June 26, 2016 was the Prime Rate plus 0.75% (or 4.25%), or LIBOR plus 1.75% (or 2.25%). At December 31, 2015, the Company had $67.0 million outstanding under the Term Loan under the LIBOR-based option, and borrowings outstanding under the 2015 Revolver of (i) $133.0 million under the LIBOR-based option and (ii) $4.5 million under the Prime Rate-based option. The interest rate for borrowings at December 31, 2015 was the Prime Rate plus 1.00% (or 4.50%), or LIBOR plus 2.00% (or 2.4375%). The fee payable on committed but unused portions of the 2015 Revolver was 0.25% for both of these periods. Pursuant to the 2015 Credit Agreement, the financial covenants include: (a) a maximum consolidated total leverage ratio, measured on a quarter-end basis, not to exceed 3.00:1.00 for the 12-month period ending on such quarter-end; and (b) a required minimum consolidated fixed charge coverage ratio, measured on a quarter-end basis, of at least 1.50:1.00 for the 12-month period ending on such quarter-end.The consolidated total leverage ratio is the ratio for any period of consolidated total indebtedness (as measured as of the second day following the end of the immediately preceding fiscal quarter) to consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total indebtedness for any period is the sum of: (i) total debt outstanding under the 2015 Revolver and the Term Loan; (ii) capital leases and letters of credit outstanding; and (iii) deferred payment obligations. The consolidated fixed charge coverage ratio for any period is the ratio of consolidated EBITDA less restricted payments, taxes paid and capital expenditures as defined under the 2015 Credit Agreement to consolidated fixed charges. Consolidated fixed charges for any period is the sum of interest expense and scheduled principal payments on outstanding indebtedness under the Term Loan.10. FAIR VALUE MEASUREMENTS 11. INCOME TAXES SEGMENT INFORMATION Third Quarter Ended Sep. 25, 2016 (thousands) Manufacturing Distribution Total Net outside sales $ 249,871 $ 54,280 $ 304,151 Intersegment sales 5,847 737 6,584 Total sales 255,718 55,017 310,735 Operating income 23,578 3,781 27,359 Third Quarter Ended Sep. 27, 2015 (thousands) Manufacturing Distribution Total Net outside sales $ 169,202 $ 45,603 $ 214,805 Intersegment sales 4,531 545 5,076 Total sales 173,733 46,148 219,881 Operating income 17,243 2,522 19,765 Nine Months Ended Sep. 25, 2016 (thousands) Manufacturing Distribution Total Net outside sales $ 731,885 $ 166,066 $ 897,951 Intersegment sales 17,316 2,265 19,581 Total sales 749,201 168,331 917,532 Operating income 80,990 11,295 92,285 Nine Months Ended Sep. 27, 2015 (thousands) Manufacturing Distribution Total Net outside sales $ 519,162 $ 152,512 $ 671,674 Intersegment sales 13,909 1,981 15,890 Total sales 533,071 154,493 687,564 Operating income 56,775 9,377 66,152 Third Quarter Ended Nine Months Ended (thousands) Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 Operating income for reportable segments $ 27,359 $ 19,765 $ 92,285 $ 66,152 Unallocated corporate expenses (3,555 ) (2,209 ) (13,867 ) (9,021 ) Amortization of intangible assets (3,687 ) (2,354 ) (9,680 ) (5,995 ) Consolidated operating income $ 20,117 $ 15,202 $ 68,738 $ 51,136 13. Shares Total Cost Average Price Year Repurchased (in thousands) Per Share 2013 610,995 $ 6,078 $ 9.95 2014 517,125 13,928 26.93 2015 618,557 22,637 36.60 2016 70,636 2,865 40.56 Total 1,817,313 $ 45,508 $ 25.04 14. RELATED PARTY TRANSACTIONS As of and for the June 26, 2016 reporting date, the Company was in compliance with both of these financial debt covenants as required under the terms of the 2015 Credit Agreement. The required maximum consolidated total leverage ratio and the minimum consolidated fixed charge coverage ratio compared to the actual amounts as of June 26, 2016 and for the fiscal period then ended are as follows: 3.00 1.92 1.50 2.98 Interest paid for the second quarter and first six months of 2016 was $1.6 million and $2.9 million, respectively. For the comparable 2015 periods, interest paid was $0.9 million and $1.7 million, respectively.10.FAIR VALUE MEASUREMENTSThe carrying amounts of cash and cash equivalents, trade receivables, and accounts payable approximated fair value as of June 26, 2016 and December 31, 2015 because of the relatively short maturities of these financial instruments. The carrying amount of debt approximated fair value as of June 26, 2016 and December 31, 2015 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt.11.INCOME TAXESThe Company recorded income taxes at an estimated effective rate of 36.7% and 36.6% in the second quarter and first six months of 2016, respectively. For both of the comparable 2015 periods, the estimated effective tax rate was 38.0%.The Company had various state net operating loss carry forwards (“NOLs”) of approximately $0.7 million at December 31, 2015, of which approximately $0.5 million were remaining to be utilized as of June 26, 2016. The Company estimates that it will utilize a majority of the remaining state NOLs by the end of 2016.In both the first six months of 2016 and 2015, the Company realized approximately $1.2 million of excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2015 and 2014. These tax benefits were recorded to shareholders’ equity upon realization in 2016 and 2015.The Company paid income taxes of $16.4 million and $16.5 million in the second quarter and first six months of 2016, respectively. For the comparable periods in 2015, the Company paid income taxes of $10.3 million and $12.0 million, respectively.12.SEGMENT INFORMATIONThe Company has determined that its reportable segments are those based on its method of internal reporting, which segregates its businesses by product category and production/distribution process.A description of the Company’s reportable segments is as follows:Manufacturing – The Company’s lamination operations utilize various materials, such as lauan, medium-density fiberboard (“MDF”), gypsum, and particleboard, which are bonded by adhesives or a heating process to a number of products, including vinyl, paper, foil, and high-pressure laminates. These products are utilized to produce furniture, shelving, walls, countertops, and cabinet products with a wide variety of finishes and textures. This segment also includes the following divisions: cabinet doors, fiberglass bath fixtures, hardwood furniture, vinyl printing, solid surface, granite, and quartz countertop fabrication, RV painting, fabricated aluminum products, simulated wood and stone products, fiberglass and plastic components, softwoods lumber, custom cabinetry, polymer-based flooring and other products. Patrick’s major manufactured products also include wrapped vinyl, paper and hardwood profile mouldings, interior passage doors, slide-out trim and fascia, and slotwall panels and components. The Manufacturing segment contributed approximately 81% and 77% of the Company’s net sales for the six months ended June 26, 2016 and June 28, 2015, respectively.Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics and audio systems components, wiring, electrical and plumbing products, fiber reinforced polyester products, cement siding, interior passage doors, roofing products, laminate and ceramic flooring, shower doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous products. The Distribution segment contributed approximately 19% and 23% of the Company’s net sales for the six months ended June 26, 2016 and June 28, 2015, respectively.The tables below present unaudited information about the sales and operating income of those segments.Second Quarter Ended June 26, 2016 $ 255,065 $ 60,098 $ 315,163 6,414 841 7,255 261,479 60,939 322,418 31,254 3,912 35,166 $ 179,613 $ 53,868 $ 233,481 4,875 635 5,510 184,488 54,503 238,991 21,211 3,562 24,773 $ 482,014 �� $ 111,786 $ 593,800 11,469 1,528 12,997 493,483 113,314 606,797 57,412 7,514 64,926 $ 349,960 $ 106,909 $ 456,869 9,378 1,436 10,814 359,338 108,345 467,683 39,532 6,855 46,387 The table below presents a reconciliation of segment operating income to consolidated operating income: 2015 2015 $ 35,166 $ 24,773 $ 64,926 $ 46,387 (3,934 ) (2,420 ) (10,312 ) (6,812 ) (3,225 ) (1,982 ) (5,993 ) (3,641 ) $ 28,007 $ 20,371 $ 48,621 $ 35,934 Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.13.STOCK REPURCHASE PROGRAMS2013 Repurchase PlanIn February 2013, the Board approved a stock repurchase program which was subsequently expanded in February 2014 and February 2015 (the “2013 Repurchase Plan”).Repurchases of the Company’s common stock made under the 2013 Repurchase Plan for the years ended December 2015, 2014 and 2013 and during the first quarter of 2016 are as follows: 610,995 $ 6,078 $ 9.95 517,125 13,928 26.93 618,557 22,637 36.60 70,636 2,865 40.56 1,817,313 $ 45,508 $ 25.04 2016 Repurchase PlanIn January 2016, the Company fully utilized the authorization under the 2013 Repurchase Plan and announced that the Board approved a new stock repurchase program that authorizes the repurchase of up to $50 million of the Company’s common stock over a 24-month period (the “2016 Repurchase Plan”). In the second quarter and first six months of 2016, the Company repurchased 40,102 shares at an average price of $44.93 for a total cost of $1.8 million under the 2016 Repurchase Plan.Together under both stock repurchase plans, the Company repurchased, in the aggregate, 110,738 shares of its common stock at an average price of $42.14 for a total cost of $4.7 million in the first six months of 2016. In the first six months of 2015, the Company repurchased 195,750 shares at an average price of $28.86 per share for a total cost of approximately $5.7 million.Common StockThe Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock, additional paid-in-capital, and retained earnings on the Company’s condensed consolidated statements of financial position.14.RELATED PARTY TRANSACTIONSIn the first six months of 2016, the Company entered into transactions with companies affiliated with two of its independent Board members. The Company purchased approximately $0.3 million of corrugated packaging materials from Welch Packaging Group, an independently owned company established by M. Scott Welch who serves as the President and CEO. In addition, the Company sold approximately $1.2 million of various fiberglass and plastic components and wood products to Utilimaster Corporation, a subsidiary of Spartan Motors, Inc. John A. Forbes serves as the President of Utilimaster. 15.SUBSEQUENT EVENTSAcquisitionsBH Electronics, Inc. (“BHE”)On July 29, 2016, the Company completed the acquisition of the business and certain assets of BHE, a major designer, engineer and manufacturer of custom thermoformed dash panel assemblies, center consoles and trim panels, complete electrical systems, and related components and parts, primarily for recreational boat manufacturers in the U.S., for a net purchase price of approximately $35 million. The acquisition of BHE provides the opportunity for the Company to expand its product offerings to the marine industry and increase its market share and per unit content.Vacuplast, LLC d/b/a L.S. Manufacturing, Inc. (“LS Mfg.”)On July 1, 2016, the Company completed the acquisition of the business and certain assets of LS Mfg., a manufacturer of a wide variety of thermoformed plastic parts and components, primarily serving the RV industry as well as certain industrial markets, for a net purchase price of approximately $11 million. The acquisition of LS Mfg. provides the opportunity for the Company to expand its product offerings in its existing thermoformed parts and components platform and increase its market share and per unit content.Both of these acquisitions were funded under the Company’s 2015 Credit Facility. The Company is in the process of allocating the purchase consideration to the fair value of the assets acquired for each of these acquisitions and expects to provide a summary of each in its Report on Form 10-Q for the third quarter ended September 25, 2016. The results of operations for both acquisitions will be included in the Company’s condensed consolidated financial statements from the respective dates of acquisition and in the Manufacturing segment.SecondSixNine Months Ended June 26,September 25, 2016 Compared to 2015SecondSixNine Months Ended June 26,September 25, 2016 Compared to 2015Summaryhalfnine months of 2016 reflected a continuation of steady growth in the recreational vehicle (“RV”) market, which includes growth in both towables and motorized units, and improving conditions in the industrial markets, as evidenced by year-to-date growth in new housing starts. In addition, the manufactured housing (“MH”) market continued to reflect solid improvement in thebased on the growth rate in estimated wholesale industry shipments surpassingof 2016 reflected shipment levels that of the prior year quarter. We are seeing resilience, in particularexceeded expected seasonal demand patterns in the RV market coupled with the expected changing production patterns resulting from the introduction of new RV units for the 2017 model year at the annual dealer shows held in September by the major original equipment manufacturers ("OEMs"). We expect that the positive sentiment exhibited by both RV dealers and overallmanufacturers during the September shows will be reflected in industry order levels consistent with recent seasonal trends as we move through the fourth quarter and into the first quarter of 2017. In addition, we are seeing balance related to dealer inventory levels when compared to original equipment manufacturer (“OEM”)OEM production levels. our strategic acquisitions, line extensions, and the introduction of new and innovative products, which resulted in our overall sales levels in the second quarter and first six months of 2016 increasing beyond the general industry results.products. We expect the three primary markets that we serve to experience continued growth in the remainder of 2016 with full year seasonal pattern tracking trends consistent with the prior year.76%75% of the Company’s sixnine months 2016 sales, continued to strengthen as evidenced by higher OEM production levels and wholesale unit shipments versus the prior year. According to the Recreational Vehicle Industry Association (“RVIA”), wholesale shipment levels reached 118,09198,000 units in the secondthird quarter of 2016, representing an increase of approximately 12%19% versus the prior year period.period, in addition to representing the largest quarter-over-quarter increase since the fourth quarter of 2012. In the first sixnine months of 2016, wholesale unit shipment levels reached 226,286324,286 units, an increase of approximately 12%14% over 2015. Recent acquisitions, new product offerings, and the ongoing strength of retail RV sales in both the towables and motorized sectors have led to a significant increase in our net sales in the first halfnine months of 2016.In2015,2016 and continuing through the industry began to seethird quarter of 2016. While the ongoing trend involving a shift in buying patterns towards a larger concentration of entry level, less expensive towablesmaller and more moderately priced towables and motorized units particularly in the travel trailer sector. While this trend is still evident today, it is beginningcontinues to have less of anmoderately impact quarter over quarter in terms of our overall dollar content per unit growth. We do, however, expect these mix shift trends to reversegrowth in the long termshort-term, we view this as consumers look to add more amenitiesa positive indicator of a broadening consumer base and upgrade their units over time. Further, we believe this mix shift is reflective of the continuing influx of younger and first-time consumers entering the market, as supported by recent dealer surveys, thus broadening the market’s foundation and extending thean opportunity for future long-term industry growth. Additionally, we believe our commitment to quality customer service and our large complement of innovative product lines at various price points position us to address our customers’ changing needs and buying patterns.BasedRecent acquisitions, new products, market share gains, and the ongoing strength of retail RV sales, as evidenced by an approximate 8% combined increase in industry-wide retail sales of towables and motorized units in the first eight months of 2016, based on the most recent available industry-wide survey data, have led to a significant increase in our net sales in both the third quarter and the first fivenine months of 2016, combined domestic and Canadian retail sales were up 7% year-over-year compared to wholesale production which was up approximately 10% over the same five-month period. We generally see wholesale shipments exceed retail sales in the first half of the calendar year as the retail selling season ramps up for the late first quarter and second quarter peak.2016. Despite the RV industry approaching prior peak levels of wholesale production, we continue to believe the future looks promising for the RV industry based on a number of factors including: positive industry demographic trends with younger buyers and an increasing number of baby boomers reaching retirement age, readily available financing, new and innovative products coming to market, increasing strength in the overall economic environment, and the value of the RV lifestyle related to spending quality time with families. The strong demographic indicators mentioned above point to a generally positive long-term outlook in the RV market, notwithstanding any major global events.12%13% of the Company’s sixnine months 2016 sales. As estimated by the Company, wholesale unit shipments in the MH industry increased by approximately 12%5% in the secondthird quarter of 2016 and 18%14% in the first sixnine months of 2016 from the comparable prior year periods. While we believe the MH industry has several hurdles to overcome related to the lack of financing alternatives, current credit standards and requirements, slow job growth, and limited access to the asset backed securities market, we are optimistic about the long-term potential in this industry as pent up demand continues to be created based on improving consumer credit, rising rents, and capacity constraints in multi-family housing.Similar to the RV industry, the MH industry is adapting to younger buyers focused on value and quality by concentrating on affordable, energy-efficient homes for both entry level participants and those looking to downsize from traditional stick built housing to allow flexibility and convenience. We believe there continues to be significant opportunity for growth in this market over the long-term based on pent up housing demand, multi-family housing capacity levels and increasing rental rates, improving consumer credit and financing conditions, and the value proposition of low cost affordable single family homes, among other factors. We expect to see continued year-over-year improvement with limited risk in the near term and believe that there is the potential for thislong-term market to grow at a much higher rate in the future,outlook remains positive, especially given historical trends when compared to residential housing starts. We believe we are well positioned to capitalize on the upside potential of the MH market, especially given the combination of our nationwide geographic footprint, available capacity in our current MH focused locations, and our current content per unit levels.sixnine months 2016 sales, and is comprised primarily of the kitchen cabinet industry, retail and commercial fixtures market, office and household furniture market and regionaladdition of new sales territories over the past two years,markets we serve, and a focus on opportunities in the commercial markets. In addition, our regional kitchen cabinet business grew during the third quarter primarily due to growth in residential construction and in the remodeling markets. We estimate approximately 45%50% of our industrial revenue base was directly tied to the residential housing market in the first halfnine months of 2016 where new housing starts increased approximately 7%4% compared to the prior year period (as reported by the U.S. Department of Commerce). The remaining 55%50% of our industrial business is directly tied to the commercial markets, mainly in the institutionalcommercial and commercial furnishings markets and in the retailinstitutional fixtures market. Our sales to the industrial market generally lag new residential housing starts by six to nine months.towardstowards: (1) market segments that are less directly tied to new single and multi-family home construction, including the marine, retail fixture, commercial, and hospitality, office and furniture markets.markets; (2) introducing new product lines via acquisition; and (3) new product development and penetration of adjacent markets and new geographic regions. In particular, in the first halfnine months of 2016, we saw an approximate 14%7% growth in our commercial and institutional furnishingsfixtures sales year over year. As a result, we have seen a shift in our product mix, which has had a positive impact on revenue from the industrial markets. In addition, we believe that projected continued low interest rates overall expectedand a stable economic improvement, and pent up demand are some of the drivers thatenvironment will continue to positively impact the housing industry for the next several years. Second Half 2016 Outlookcompared to the prior year. As we head into the third quarter of 2016 and the RV dealer show season in the September/October timeframe, we expect to seewith full year seasonal patterns generally consistent with prior years including sequential softening in the third quarter of 2016 compared to the second quarter of 2016 as dealers await the new product lines for the 2017 model year.has forecastedcurrently forecasts that RV unit shipment levels in 2016 will increase approximately 6% when compared to8% over prior year levels, and market conditions, retail sentiment and demand, and dealer inventory levels point towards slow and steady growth for the 2017 fiscal year. In addition, as of September 29, 2016, the National Association of Home Builders ("NAHB") is forecasting an approximate 5% year-over-year increase in new housing starts for the full year 2016 compared to 2015. In addition, consistentConsistent with the improvement in single-family residential housing starts, as projected by the National Association of Home Builders (the “NAHB”) for the full year 2016, we anticipate a further increase in production levels in the MH industry in 2016, reflecting improvement in the overall economy. Based on the industry’s current annualized run rates, the Company projects wholesale MH unit shipments for full year 2016 to increase by approximately 13%14% compared to 2015. As of June 30, 2016, the NAHB is forecasting an approximate 6% year-over-year increase in new housing starts for the full year 2016 compared to 2015.and increasing our per unit content, keeping costs aligned with revenue, maximizing operating efficiencies, talent management, and the execution of our organizational strategic agenda. Key focus areas for the remainder of 2016 include strategic revenue growth, driving improved manufacturing and operating efficiencies, reducing material costs due to improved strategic sourcing, and improving operating income, and net income, earnings per share, and earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and free cash flow.$10.0$15.0 million, to $12.0 million, and includesincluding the strategic capital expenditure program noted above, facility expansion costs outside of our core Midwest market, strategic replacement and upgrading of production equipment to improve efficiencies and increase capacity, and maintenance capital expenditures at certain of our facilities.SecondThird Quarter and SixNine MonthsEnded June 26,September 25, 2016Compared to 20152015 condensed consolidated statementsCondensed Consolidated Statements of income. 100.0 % 100.0 % 100.0 % 100.0 % 82.5 82.7 83.1 83.4 17.5 17.3 16.9 16.6 2.9 2.9 2.9 3.0 4.7 4.8 4.9 5.0 1.0 0.8 1.0 0.8 8.9 8.7 8.1 7.8 0.5 0.4 0.5 0.4 3.1 3.1 2.8 2.8 5.3 5.2 4.8 4.6 Third Quarter Ended Nine Months Ended Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of goods sold 83.9 83.7 83.4 83.5 Gross profit 16.1 16.3 16.6 16.5 Warehouse and delivery expenses 3.0 3.1 2.9 3.0 Selling, general and administrative expenses 5.2 5.0 5.0 5.0 Amortization of intangible assets 1.2 1.1 1.1 0.9 Operating income 6.6 7.1 7.7 7.6 Interest expense, net 0.6 0.5 0.6 0.4 Income taxes 2.0 2.4 2.5 2.7 Net income 4.0 4.2 4.5 4.5 secondthird quarter of 2016 increased $81.7$89.4 million or 35%42%, to $315.2$304.2 million from $233.5$214.8 million in the secondthird quarter of 2015. The increase was attributable to a 33%43% increase in the Company’s revenue from the RV industry, a 26% increase in revenue from the MH industry, and a 57%50% increase in revenue from the industrial markets.sixnine months of 2016 increased $136.9$226.3 million or 30%34%, to $593.8$898.0 million from $456.9$671.7 million in the prior year period. The increase was attributable to a 29%33% increase in the Company’s revenue from the RV industry, a 24%25% increase in revenuesrevenue from the MH industry, and a 44%46% increase in revenuesrevenue from the industrial markets.secondthird quarter and first sixnine months of 2016 is also attributable to: (i) increased RV, MH, and industrial market penetration; (ii) improved commercial and institutional fixtures sales in the industrial market; (iii) an increase in wholesale unit shipments in the RV and MH industries; and (iv) improved residential housing starts.secondthird quarter of 2016 and 2015 included $16.2$32.9 million and $13.8$26.1 million, respectively, related to the acquisitions completed in each of those periods. For the first sixnine months of 2016 and 2015, revenue attributable to acquisitions completed in each of those periods was $20.0$52.9 million and $20.3$46.4 million, respectively.secondthird quarter and first sixnine months of 2016, was the continued mix shift towards a larger concentration of entry level and lower priced units, particularly related to travel trailers in the towables sector of the industry, which negatively impacted our content per unit growth. In addition, there were some normal competitive pricing situations experienced in certain market sectors in 2016 as a result of model year changeovers.secondthird quarter of 2016 increased approximately 17%20% to $1,998$2,085 from $1,707$1,739 for the secondthird quarter of 2015. The MH content per unit (on a trailing twelve-month basis) for the secondthird quarter of 2016 increased approximately 3%5% to an estimated $1,844$1,911 from $1,790$1,820 for the third quarter of 2015. In the third quarter of 2016, we began to see improvement in the organic growth of our RV content per unit, reflecting the anniversary of the mix shift toward smaller, less expensive units that the RV industry started to experience in the second quarter of 2015.75%73% and 76%75% of the Company’s sales in the secondthird quarter and first sixnine months of 2016, respectively, saw wholesale unit shipments increase by approximately 12%19% and 14%, respectively, in both of those periods compared to 2015. The Company estimates that the MH industry, which represented 13%14% of the Company’s sales in the secondthird quarter and 12%13% in the first sixnine months of 2016, experienced a 12%an estimated 5% and 18%14% increase in wholesale unit shipments in those periods, respectively, compared to the prior year periods. The industrial market sector accounted for approximately 12%13% of the Company’s sales in both the secondthird quarter and 12% of sales in the first sixnine months of 2016. We estimate that approximately 45%50% of our industrial revenue base is linked to the residential housing market, which experienced an increase in new housing starts of approximately 1% in the second quarter of 2016 and 7%4% in the first sixnine months of 2016 compared to the prior year periodsperiod (as reported by the U.S. Department of Commerce).$66.8$75.5 million or 35%42%, to $259.9$255.3 million in the secondthird quarter of 2016 from $193.1$179.8 million in 2015.As a percentage of net sales, cost of goods sold decreasedincreased during the secondthird quarter of 2016 to 82.5%83.9% from 82.7%83.7% in 2015.For the first sixnine months of 2016, cost of goods sold increased $112.1$187.7 million million or 29%33%, to $493.2$748.5 million from $381.1$560.8 million in the prior year period. For the first sixnine months of 2016, cost of goods sold as a percentage of net sales decreased to 83.1%83.4% from 83.4%83.5% in the prior year period. during both the second quarter and first six months of 2016 by increased revenue relative to our overall fixed overhead costs, the impact of the timing of acquisitions completed during 2015 and 2016, and the addition of new higher margin product lines, and improved operating efficiencies.lines. In addition, demand changes in certain market sectors can result in fluctuating costs of certain more commodity-oriented raw materials and other products that we utilize and distribute from quarter-to-quarter. $14.9$13.9 million or 37%39%, to $55.3$48.9 million in secondthe third quarter of 2016 from $40.4$35.0 million in 2015. For the sixnine months periods, gross profit increased $24.8$38.7 million or 33%35%, to $100.6$149.5 million in 2016 from $75.8$110.8 million in 2015. As a percentage of net sales, gross profit increaseddecreased to 17.5%16.1% in the secondthird quarter of 2016 from 17.3%16.3% in the same period in 2015, and increased to 16.9%16.6% in the first sixnine months of 2016 from 16.6%16.5% in the prior year period. The improvement in gross profit dollars and as athe impact to the percentage of net sales in both the secondthird quarter and first sixnine months of 2016 compared to 2015 reflected the positive impact of the factors discussed above under “Cost of Goods Sold,Sold.” including the positive contribution to gross profit of acquisition-related revenue growth as noted above.WarehouseWarehouse and Delivery ExpensesExpenses. Warehouse and delivery expenses increased $2.5 million or 36%37%, to $9.3$9.2 million in secondthe third quarter of 2016 from $6.8$6.7 million in 2015. For the first sixnine months, warehouse and delivery expenses increased $3.5$6.0 million or 26%30%, to $17.0$26.2 million in 2016 from $13.5$20.2 million in 2015. As a percentage of net sales, warehouse and delivery expenses were unchanged at 2.9%3.0% and 3.1% in the secondthird quarter of 2016 and 2015.2015, respectively. For the comparable sixnine months periods, warehouse and delivery expenses were 2.9% and 3.0% of net sales for 2016 and 2015, respectively.sixnine months of 2016 reflected the impact of increased direct ship business in our Distribution segment, a reduction in fuel costs, the impact of acquisitions completed in 2015 and 2016 with lower delivery expenses as a percentage of net sales when compared to the consolidated percentage, and more efficient utilization per delivery truckload. We expect the current reduced level of fuel costs, if sustained throughout the remainder of 2016, to positively impact our warehouse and delivery expense.$3.6$5.1 million or 32%47%, to $14.8$15.9 million in secondthe third quarter of 2016 from $11.2$10.8 million in 2015. For the first sixnine months, SG&A expenses increased $6.328%34%, to $29.0$44.9 million in 2016 from $22.7$33.6 million in 2015. The net increase in SG&A expenses in the secondthird quarter and first sixnine months of 2016 compared to the prior year periods primarily reflected the impact of additional headcount and administrative expenses associated with recent acquisitions and increased stock-based and incentive compensation expense designed to attract and retain key employees. As a percentage of net sales, SG&A expenses were 4.7%5.2% in the secondthird quarter of 2016 compared to 4.8%5.0% in the secondthird quarter of 2015. For the comparable sixnine months periods, SG&A expenses were 4.9% and 5.0% of net sales for both 2016 and 2015, respectively.Assets. Assets.Amortization of intangible assets increased $1.2$1.3 million and $2.4$3.7 million in the secondthird quarter and first sixnine months of 2016, respectively, compared to the prior year periods, primarily reflecting the impact of the acquisitions completed in 2015 (Better Way, SCI and North American) and in the first sixnine months of 2016 (Parkland, Progressive, Cana, MSM, LS Mfg. and MSM)BHE). In the aggregate, in conjunction with the 2015 and 2016 acquisitions, the Company recognized an estimated $72.4$91.4 million in certain finite-lived intangible assets that are being amortized over periods ranging from two to 10 years.$7.6$4.9 million or 37%32%, to $28.0$20.1 million in secondthe third quarter of 2016 from $20.4$15.2 million in 2015. For the first sixnine months, operating income increased $12.7$17.6 million or 35%34%, to $48.6$68.7 million in 2016 from $35.9$51.1 million in 2015. As a percentage of net sales, operating income increaseddecreased to 8.9%6.6% in the secondthird quarter of 2016 from 8.7%7.1% in the same period in 2015. For the first sixnine months of 2016 and 2015, operating income was 8.1%7.7% and 7.8%7.6% of net sales, respectively. Operating income in the secondthird quarter of 2016 and 2015 included $1.9$3.5 million and $2.2$2.9 million, respectively, attributable to the acquisitions completed in each of those periods. For the first sixnine months of 2016 and 2015, operating income attributable to acquisitions completed in each of those periods was $2.3$5.8 million and $3.0$5.9 million, respectively. The change in operating income and operating margin is primarily attributable to the items discussed above.$1.6$1.9 million in secondthe third quarter of 2016 from $0.9$1.2 million in the prior year. For the first sixnine months, interest expense increased $1.6$2.3 million to $3.3$5.2 million in 2016 from $1.7$2.9 million in 2015. The change in interest expense reflects increased borrowings primarily to fund acquisitions and increased working capital needs in the secondthird quarter and first sixnine months of 2016.36.7%33.9% and 36.6%35.9% in the secondthird quarter and first sixnine months of 2016, respectively. For both of the comparable 2015 periods, the estimated effective tax rate was 38.0%.36.3% and 37.5%, respectively. The reduction in the effective rate for the 2016 periods primarily reflected the use of higher tax credits. As we continue to refine our state income tax estimates, which are impacted by shifts in apportionment factors among states as a result of recent acquisition activity and other factors, we could experience fluctuations in our combined effective income tax rate from period to period and for the remainder of 2016. both the first sixnine months of 2016 and 2015, the Company realized approximately $1.2$1.3 million and $1.1 million, respectively, of excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2015 and 2014.2014, respectively. These tax benefits were recorded to shareholders’ equity upon realization in 2016 and 2015.secondthird quarter of 2016 was $16.7$12.0 million or $1.10$0.79 per diluted share compared to $12.1$9.0 million or $0.78$0.58 per diluted share for 2015. For the first sixnine months, net income was $28.7$40.8 million or $1.90$2.68 per diluted share in 2016 compared to $21.2$30.2 million or $1.37$1.95 per diluted share for 2015. The changes in net income for both the secondthird quarter and first sixnine months of 2016 reflect the impact of the items previously discussed.The Company’s lamination operations utilize various materials, such as lauan, medium-density fiberboard (“MDF”), gypsum, and particleboard, which are bonded by adhesives or a heating process to a number ofThis segment includes the following divisions: laminated products including vinyl, paper, foil, and high-pressure laminates. These productsthat are utilized to produce furniture, shelving, walls, countertops, and cabinet products, with a wide variety of finishes and textures. This segment also includes the following divisions: cabinet doors, fiberglass bath fixtures, hardwood furniture, vinyl printing, solid surface, granite, and quartz countertop fabrication, RV painting, fabricated aluminum products, simulated wood and stone products, fiberglass and plastic components, softwoods lumber, custom cabinetry, polymer-basedpolymer-Distribution – The Company distributes pre-finished wall and ceiling panels, drywall and drywall finishing products, electronics and audio systems components, wiring, electrical and plumbing products, fiber reinforced polyester products, cement siding, interior passage doors, roofing products, laminate and ceramic flooring, shower doors, furniture, fireplaces and surrounds, interior and exterior lighting products, and other miscellaneous products.SecondThird Quarter and SixNine Months Ended June 26,September 25, 2016 Compared to 2015whileand gross profit includes the impact of intersegment operating activity. Third Quarter Ended Nine Months Ended (thousands) Sep. 25, 2016 Sep. 27, 2015 Sep. 25, 2016 Sep. 27, 2015 Sales Manufacturing $ 255,718 $ 173,733 $ 749,201 $ 533,071 Distribution 55,017 46,148 168,331 154,493 Gross Profit Manufacturing 39,137 27,962 123,739 88,158 Distribution 9,527 7,064 28,236 23,725 Operating Income Manufacturing 23,578 17,243 80,990 56,775 Distribution 3,781 2,522 11,295 9,377 $ 261,479 $ 184,488 $ 493,483 $ 359,338 60,939 54,503 113,314 108,345 45,797 31,937 84,602 60,196 10,097 8,471 18,709 16,661 31,254 21,211 57,412 39,532 3,912 3,562 7,514 6,855 ManufacturingSales.Sales. Sales increased $77.0$82.0 million or 42%47%, to $261.5$255.7 million in secondthe third quarter of 2016 from $184.5$173.7 million in 2015. In the first sixnine months of 2016, sales increased $134.2$216.1 million or 37%41%, to $493.5$749.2 million from $359.3$533.1 million in the first sixnine months of 2015. This segment accounted for approximately 81%82% of the Company’s consolidated net sales for both the secondthird quarter and first sixnine months of 2016, and 79% for the third quarter and 77% for both the second quarter and first sixnine months of 2015. In the secondthird quarter of 2016, the sales increase reflected a 42%51% increase in the Company’s revenue from the RV industry, a 47%44% increase in revenue from the MH industry, and a 37%30% increase in revenue from the industrial markets. On a year-to-date basis, the sales increase reflected a 38%42%, 40%42% and 30% increase in the Company’s revenue from the RV industry, MH industry and industrial markets, respectively.secondthird quarter of 2016 and 2015 included $10.7$27.7 million and $13.8$26.1 million, respectively, attributable to the acquisitions completed in each of those periods. For the first sixnine months of 2016 and 2015, revenue attributable to acquisitions completed in each of those periods was $13.1$40.9 million and $20.3$46.4 million, respectively. The sales improvement was also attributable to: (i) increased RV, MH and industrial market penetration; (ii) an increase in wholesale unit shipments in the RV and MH industries; and (iii) improved commercial and institutional fixtures business in the industrial markets. Partially offsetting this revenue growth, particularly in the RV industry, in both the secondthird quarter and first sixnine months of 2016, was the continued mix shift towards a larger concentration of entry level and lower priced units, particularly related to travel trailers in the towables sector of the industry, which negatively impacted our content per unit growth.$13.9$11.1 million to $45.8$39.1 million in secondthe third quarter of 2016 from $31.9$28.0 million in secondthe third quarter of 2015. As a percentage of sales, gross profit increaseddecreased to 17.5%15.3% in secondthird quarter 2016 from 17.3%16.1% in 2015. For the sixnine months periods, gross profit increased $24.4$35.5 million to $84.6$123.7 million in 2016 from $60.2$88.2 million in 2015. As a percentage of net sales, gross profit increased to 17.1%was flat at 16.5% in both the first sixnine months of 2016 from 16.8%and 2015. The decline in the same period in 2015. Grossgross profit as a percentage of sales for the secondthird quarter of 2016 primarily reflected the impact of RV wholesale shipments in excess of expected seasonal demand patterns, which when combined with the operational complexities related to the model year changeovers, generated certain internal capacity constraints and labor inefficiencies related to overtime and employee turnover, particularly in our Midwest facilities. In addition, gross profit as a percentage of sales for both the third quarter and the first sixnine months of 2016 improved primarily as a result of:benefited from: (i) the addition of new, higher margin product lines; (ii) the impact of acquisitions completed during 2015 and 2016; and (iii) higher revenue relative to overall fixed overhead costs; and (iv) improved operating efficiencies.costs.$10.0$6.4 million to $31.2$23.6 million in secondthe third quarter of 2016 from $21.2$17.2 million in the prior year. For the sixnine months periods, operating income increased $17.9$24.2 million to $57.4$81.0 million in 2016 from $39.5$56.8 million in 2015. The improvement in operating income primarily reflects the increasechanges in gross profit mentioned above. Operating income in the secondthird quarter of 2016 and 2015 included $1.6$3.4 million and $2.2$2.9 million, respectively, attributable to the acquisitions completed in each of those periods. For the first sixnine months of 2016 and 2015, operating income attributable to acquisitions completed in each of those periods was $1.9$5.3 million and $3.0$5.9 million, respectively.DistributionSales.Sales. Sales increased $6.4$8.9 million or 12%19%, to $60.9$55.0 million in the secondthird quarter of 2016 from $54.5$46.1 million in 2015. In the first sixnine months of 2016, sales increased $5.0$13.8 million or 5%9%, to $113.3$168.3 million from $108.3$154.5 million in the first sixnine months of 2015. This segment accounted for approximately 19%18% of the Company’s consolidated net sales for both the secondthird quarter and first sixnine months of 2016, and 21% for the third quarter and 23% for both the second quarter and first sixnine months of 2015. The sales increase in both the secondthird quarter and first sixnine months of 2016 largely reflected an increase in the Company’s revenue from the industrial markets that was partially offset, particularly in the six months of 2016, by a 4% decrease in the Company’s distribution revenue from the RV industry that primarily reflected the continued mix shift towards a larger concentration of entry level and lower priced units, particularly in the travel trailers sector of the towables market.markets.$5.5$5.2 million and $6.9$12.0 million to total sales in the Distribution segment in the secondthird quarter and first sixnine months of 2016, respectively. The acquisitions completed in 2015 were all related to the Manufacturing segment, and therefore there was no impact from these acquisitions on revenues in the Distribution segment.$1.6$2.4 million to $10.1$9.5 million in secondthe third quarter of 2016 from $8.5$7.1 million in secondthe third quarter of 2015. As a percentage of sales, gross profit increased to 16.6%17.3% in secondthe third quarter of 2016 from 15.5%15.3% in 2015. For the sixnine months periods, gross profit increased $2.0$4.5 million to $18.7$28.2 million in 2016 from $16.7$23.7 million in 2015. As a percentage of net sales, gross profit increased to 16.5%16.8% in the first sixnine months of 2016 from 15.4% in the same period in 2015. The increase in gross profit as a percentage of sales for both the secondthird quarter and first sixnine months of 2016 is primarily attributable to the strategic exit of certain negative or lower margin product lines within several of our distribution businesses.$0.3$1.3 million to $3.9$3.8 million in secondthe third quarter of 2016 from $3.6$2.5 million in the prior year. For the sixnine months periods, operating income increased $0.7$1.9 million to $7.5$11.3 million in 2016 from $6.8$9.4 million in 2015. The acquisition of Progressive contributed approximately $0.3$0.1 million and $0.4$0.5 million to total operating income in the Distribution segment in the secondthird quarter and first sixnine months of 2016, respectively. The acquisitions completed in 2015 were all related to the Manufacturing segment, and therefore there was no impact from these acquisitions on operating income in the Distribution segment. The change in operating income is primarily attributable to the items discussed above.secondthird quarter of 2016 increased $1.5$1.4 million to $3.9$3.6 million from $2.4$2.2 million in the comparable prior year period. In the first sixnine months of 2016, unallocated corporate expenses increased $3.5$4.9 million to $10.3$13.9 million from $6.8$9.0 million in the first sixnine months of 2015. Unallocated corporate expenses in both the third quarter of 2016 and the first sixnine months of 2016 included the impact of an increase in administrative wages, incentives and payroll taxes, and additional headcount associated with the 2015 and 2016 acquisitions.$17.3$49.7 million in the first sixnine months of 2016 compared to $27.4$25.3 million in 2015. Net income was $28.7$40.8 million in the first sixnine months of 2016 compared to $21.2$30.2 million in 2015. Net of acquisitions, trade receivables increased $46.0$27.2 million in the first sixnine months of 2016 and $12.6$17.6 million in the same period of 2015, reflecting increased sales levels and seasonal trends in each of those periods, including the post-acquisition sales increases of the acquisitions completed in 2016, 2015 and 2014, as well as the timing of certain customer payments. Due to the timing of the end of our fiscal quarters compared to the payment cycles of certain of our customers, cash flows from operating activities do not reflect the receipt of $29.8$17.7 million and $3.8$16.7 million in cash payments on trade receivables on the daywithin two days following the end of our fiscal quarters ended June 26,September 25, 2016 and June 28,September 27, 2015, respectively. $21.2$23.4 million net increase in accounts payable and accrued liabilities in the first sixnine months of 2016 and the $6.1$0.6 million net increase in the comparable 2015 period, primarily reflected the increased level of business activity, the timing and impact of acquisitions, and ongoing operating cash management.$16.4$6.7 million and $16.5$23.2 million in the secondthird quarter and first sixnine months of 2016, respectively. For the comparable periods in 2015, the Company paid income taxes of $10.3$6.3 million and $12.0$18.3 million, respectively. The Company had various state net operating loss carry forwards (“NOLs”) of approximately $0.7 million at December 31, 2015, of which approximately $0.5$0.4 million were remaining to be utilized as of June 26,September 25, 2016. The Company estimates that it will utilize a majority of the remaining state NOLs by the end of 2016. In 2016 and 2015, the Company made quarterly estimated tax payments consistent with its expected annual 2016 and 2015 federal and state income tax liability. both the first sixnine months of 2016 and 2015, the Company realized approximately $1.2$1.3 million and $1.1 million, respectively, of additional taxable deductions related to excess tax benefits on stock-based compensation, which had not been recorded as deferred tax assets at December 31, 2015 and 2014.2014, respectively. These tax benefits were recorded to shareholders’ equity upon realization in the first sixnine months of 2016 and 2015.$72.9$122.7 million in the first sixnine months of 2016 primarily to fund the Parkland, Progressive, Cana, MSM, LS Mfg. and MSMBHE acquisitions for $67.0$112.1 million in the aggregate, and for capital expenditures of $6.1 million.$10.9 million, of which $1.5 million was related to the strategic capital expenditure program the Company initiated in the third quarter of 2016. Investing activities used cash of $63.7$143.1 million in the first sixnine months of 2015 primarily to fund the Better Way, SCI and SCINorth American acquisitions for $60.5$139.2 million in the aggregate, and for capital expenditures of $3.2$4.7 million.Theplanexpenditures for full yearfiscal 2016 includes spending relatedof up to approximately $15.0 million, including the strategic capital expenditure program noted above, as well as facility expansion costs outside of our core Midwest market, strategic equipment replacement and upgradesupgrading of production equipment to improve efficiencies and increase capacity, and maintenance capital expenditures at certain of our facilities. Our current operating model forecasts capital expenditures for fiscal 2016 of approximately $10.0 million to $12.0 million.FinancingFinancing Activities$55.6$74.4 million in the first sixnine months of 2016 compared to $42.9$119.1 million in the comparable 2015 period. As of June 26,September 25, 2016, availability under the 2015 Revolver (as defined herein) was $26.3 million, including, net of cash on hand.Totalhand, was $76.3 million.$59.9$81.7 million in the aggregate in the first sixnine months of 2016. These borrowings were primarily used for fundingto fund the Parkland, Progressive, Cana, MSM, LS Mfg. and MSMBHE acquisitions, stock repurchases and capital expenditures, totaling $77.7$127.6 million in the aggregate. In addition, the Company paid down $2.7 million in principal on its Term Loan (as defined herein) in accordance with its scheduled debt service requirements with no comparable amount in 2015.repaymentsborrowings on the 2015 Revolver were $48.9$126.4 million in the aggregate in the first sixnine months of 2015. These borrowings were primarily used to fund the Better Way, SCI, and SCINorth American acquisitions, stock repurchases and capital expenditures, totaling $69.4$149.5 million in the aggregate.sixnine months of 2016 and 2015, the Company repurchased shares of its common stock for a total cost of $4.7 million and $5.7 million, respectively. See Note 13 to the condensed consolidated financial statementsCondensed Consolidated Financial Statements for additional details. In addition, cash flows from financing activities included $1.9 million of proceeds received from the exercise of stock options in 2016.both the first sixnine months of 2016 and 2015 also included $1.2$1.3 million and $1.1 million, respectively, related to the realization of excess tax benefits on stock-based compensation. See the related discussion above under “Cash Flows – Operating Activities” for additional details.At the beginning of the fiscal third quarter of 2016 through August 4, 2016, the Company paid down an additional $2.7 million in principal on its Term Loan and used borrowings of approximately $11 million and $35 million to fund the acquisitions of LS Mfg. and BHE, respectively.At June 26, 2016, the Company had $64.3 million outstanding under the Term Loan and $197.4 million outstanding under the 2015 Revolver.June 26,September 25, 2016 reporting date, the Company was in compliance with both of these financial debt covenants as required under the terms of the 2015 Credit Agreement. The required maximum consolidated total leverage ratio and the required minimum consolidated fixed charge coverage ratio compared to the actual amounts as of June 26,September 25, 2016 and for the fiscal period then ended are as follows: 3.00 1.92 1.50 2.98 Required Actual Consolidated total leverage ratio (12-month period) 3.00 1.97 Consolidated fixed charge coverage ratio (12-month period) 1.50 3.12 June 26,September 25, 2016; and (3) the composition of the calculation of both the consolidated total leverage ratio and the consolidated fixed charge coverage ratio is included in Note 9 to the Condensed Consolidated Financial Statements.June 26, 2016, prior to the expansion of the 2015 Revolver effective July 26,September 25, 2016, the availability under the 2015 Revolver, was $26.3 million, includingnet of cash on hand.hand, was $76.3 million. Borrowings under the 2015 Revolver and the Term Loan under the 2015 Credit Facility are subject to a maximum total borrowing limit of $360.0 million (effective as of July 26, 2016) and are subject to variable rates of interest. As of July 29, 2016 (funding date of BHE acquisition), the availability under the 2015 Revolver was $82.4 million, including cash on hand. For the first sixnine months of 2016 and for the fiscal year ended December 31, 2015, we were in compliance with all of our debt covenants under the terms of the credit agreement in effect at each reporting date.ITEM 3. June 26,September 25, 2016, our total debt obligations under our 2015 Credit Agreement were under either LIBOR-based or prime rate-based interest rates. A 100 basis point increase in the underlying LIBOR and prime rates would result in additional annual interest cost of approximately $2.6$2.8 million, assuming average borrowings, including the Term Loan, subject to variable rates of $261.7$280.9 million, which was the amount of such borrowings outstanding (excluding the reclassification of deferred financing costs related to the Term Loan) at June 26,September 25, 2016 subject to variable rates.halfnine months of 2016. During periods of rising commodity prices, we have generally been able to pass the increased costs to our customers in the form of surcharges and price increases. However, there can be no assurance future cost increases, if any, can be partially or fully passed on to customers, or that the timing of such sales price increases will match raw material cost increases. We do not believe that inflation had a material effect on results of operations for the periods presented.ITEM 4. secondthird quarter ended June 26,September 25, 2016 or subsequent to the date the Company completed its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 1A. RISKRISK FACTORSITEM 2. (a)None.(b)None.(c)Issuer Purchases of Equity Securities 22,173 $ 48.54 - $ 50,000,000 40,102 44.93 40,102 48,198,352 - - - 48,198,352 62,275 40,102 (1)ITEM 6. Includes commissions paid to repurchase shares as part of a publicly announced plan or program.(2)Exhibits Represents shares of common stock purchased by the Company for the sole purpose of satisfying the minimum tax withholding obligations of an employee upon the exercise of stock appreciation rights held by the employee.(3)In January 2016, the Company fully utilized the authorization under its previous repurchase plan originally announced in 2013, and announced that the Board approved a new stock repurchase program that authorizes the repurchase of up to $50 million of the Company’s common stock over a 24-month period (the “2016 Repurchase Plan”). In the second quarter and first six months of 2016, the Company repurchased 40,102 shares at an average price of $44.93 for a total cost of $1.8 million under the 2016 Repurchase Plan.ITEM 6.EXHIBITSExhibits 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.INS101.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
SIGNATURESSIGNATURES (Registrant) August 4, 2016November 3, 2016August 4, 2016November 3, 2016