What changed in this filing

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Item 1. Financial Statements

2020-05-07 compared with 2019-11-07 · 188 added, 363 removed, 210 unchanged (72% of the section changed)

1 unchanged sentence

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

First Quarter Ended

(thousands except per share data)

March 29, 2020

March 31, 2019

Cost of goods sold

Operating Expenses:

Warehouse and delivery

Selling, general and administrative

Amortization of intangible assets

Total operating expenses

OPERATING INCOME

Interest expense, net

Income before income taxes

BASIC NET INCOME PER COMMON SHARE

DILUTED NET INCOME PER COMMON SHARE

Weighted average shares outstanding – Basic

Weighted average shares outstanding – Diluted

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

First Quarter Ended

March 29, 2020

March 31, 2019

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain of hedge derivatives

Total other comprehensive loss

COMPREHENSIVE INCOME

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

September 29, 2019

March 29, 2020

December 31, 2019

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PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Third Quarter Ended

Nine Months Ended

(thousands except per share data)

September 29, 2019

September 30, 2018

September 29, 2019

September 30, 2018

Cost of goods sold

Operating Expenses:

Warehouse and delivery

Selling, general and administrative

Amortization of intangible assets

Total operating expenses

OPERATING INCOME

Interest expense, net

Income before income taxes

BASIC NET INCOME PER COMMON SHARE

DILUTED NET INCOME PER COMMON SHARE

Weighted average shares outstanding – Basic

Weighted average shares outstanding – Diluted

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Third Quarter Ended

Nine Months Ended

September 29, 2019

September 30, 2018

September 29, 2019

September 30, 2018

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain of hedge derivatives

Foreign currency translation gain (loss)

Total other comprehensive (loss) gain

COMPREHENSIVE INCOME

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Third Quarter Ended September 29, 2019

Comprehensive

Income (Loss)

Balance June 30, 2019

Other comprehensive loss, net of tax

Share repurchases under buyback program

Shares used to pay taxes on stock grants

Stock-based compensation expense

Balance September 29, 2019

Nine Months Ended September 29, 2019

Comprehensive

Income (Loss)

Balance December 31, 2018

Other comprehensive loss, net of tax

Share repurchases under buyback program

Shares used to pay taxes on stock grants

Issuance of shares upon exercise of common stock options

Stock-based compensation expense

Balance September 29, 2019

Third Quarter Ended September 30, 2018

Additional Paid-in- Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Balance July 1, 2018

Other comprehensive income, net of tax

Stock repurchases under buyback program

Issuance of shares upon exercise of common stock options

Shares used to pay taxes on stock grants

Stock-based compensation expense

Equity component of convertible notes issuance

Balance September 30, 2018

PATRICK INDUSTRIES, INC.

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

Nine Months Ended September 30, 2018

Additional Paid-in- Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Balance December 31, 2017

Other comprehensive loss, net of tax

Stock repurchases under buyback program

Issuance of shares upon exercise of common stock options

Shares used to pay taxes on stock grants

Stock-based compensation expense

Purchase of convertible notes hedges

Proceeds from sale of warrants

Equity component of convertible notes issuance

Balance September 30, 2018

See accompanying Notes to Condensed Consolidated Financial Statements

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

September 29, 2019

September 30, 2018

Three Months Ended

March 29, 2020

March 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Amortization of convertible notes debt discount

Deferred income taxes

Change in operating assets and liabilities, net of acquisitions of businesses:

9 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Term debt borrowings

Term debt repayments

2 unchanged sentences

Stock repurchases under buyback program

Proceeds from issuance of senior notes

Proceeds from convertible notes offering

Purchase of convertible notes hedges

Proceeds from sale of warrants

Cash dividends paid to shareholders

Payments related to vesting of stock-based awards, net of shares tendered for taxes

Payment of deferred financing costs

Payment of deferred financing costs and other

Payment of contingent consideration from a business acquisition

Other financing activities

Net cash provided by financing activities

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

3 unchanged sentences

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

First Quarter Ended March 29, 2020

Comprehensive

Balance December 31, 2019

Dividends declared

Other comprehensive loss, net of tax

Share repurchases under buyback program

Shares used to pay taxes on stock grants

Stock-based compensation expense

Balance March 29, 2020

First Quarter Ended March 31, 2019

Comprehensive

Balance December 31, 2018

Other comprehensive loss, net of tax

Shares used to pay taxes on stock grants

Issuance of shares upon exercise of common stock options

Stock-based compensation expense

Balance March 31, 2019

See accompanying Notes to Condensed Consolidated Financial Statements

PATRICK INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of September 29, 2019 and December 31, 2018 , and its results of operations for the three and nine months ended September 29, 2019 and September 30, 2018 and cash flows for the nine months ended September 29, 2019 and September 30, 2018.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of March 29, 2020 and December 31, 2019 , and its results of operations and cash flows for the three months ended March 29, 2020 and March 31, 2019 .

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.

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Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation.

For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 2 to Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 .

For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

The December 31, 2019 condensed consolidated statement of financial position data was derived from audited financial statements, but does not include all disclosures required by U.S.

Operating results for the third quarter and nine months ended September 29, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019 .

Operating results for the first quarter ended March 29, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020 .

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks.

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The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year.

The third quarter of fiscal year 2019 ended on September 29, 2019 and the third quarter of fiscal year 2018 ended on September 30, 2018.

In preparation of Patrick’s condensed consolidated financial statements as of and for the three and nine months ended September 29, 2019 , management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.

The first quarter of fiscal year 2020 ended on March 29, 2020 and the first quarter of fiscal year 2019 ended on March 31, 2019.

In preparation of Patrick’s condensed consolidated financial statements as of and for the three months ended March 29, 2020 , management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.

See Note 17 for more information.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, " Leases (Topic 842) ", which requires in part that an entity recognize lease assets and lease liabilities on its statement of financial position for leases that were previously classified as operating leases under U.S.

In July 2018, the FASB issued ASU 2018-11, " Leases (Topic 842):

Targeted Improvements ", which offered practical expedient alternatives to the modified retrospective adoption of Accounting Standards Codification (“ASC”) 842.

The Company adopted ASC 842 effective January 1, 2019, and recorded approximately $ 80 million in lease right-of-use assets and corresponding lease liabilities, with no material impact on the condensed consolidated statement of shareholders' equity, income, comprehensive income or cash flows.

See Note 12 for further information.

Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, " Intangibles-Goodwill and Other (Topic 350):

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04, " Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ".

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It eliminates the second step that requires the impairment to be measured between the implied value of a reporting unit's goodwill and its carrying value.

The standard is effective for annual and any interim impairment tests for periods beginning after December 15, 2019 and early adoption is permitted.

The Company is currently evaluating the effect of adopting this new accounting standard, which will depend on the outcomes of future goodwill impairment tests.

The Company adopted ASU 2017-04 on January 1, 2020 and the adoption did not have a material impact on the condensed consolidated financial statements.

Credit Losses

3 unchanged sentences

For trade and other receivables, held to maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

Additionally, entities will be required to disclose more information with respect to credit quality indicators, including information used to track credit quality by year of origination for most financing receivables.

The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and will be applied as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period for which the guidance is effective.

The Company does not expect that the adoption of the ASU will have a material effect on its condensed consolidated financial statements.

Additionally, entities will be

required to disclose more information with respect to credit quality indicators, including information used to track credit quality by year of origination for most financing receivables.

The Company adopted ASU 2016-13 on January 1, 2020 and the adoption did not have a material impact on the condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, " Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ", a new standard to simplify the accounting for income taxes.

The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries.

The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

We are currently evaluating the impact of this standard in our consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848) ", a new standard providing final guidance to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR.

Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met.

An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination.

Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.

The guidance is effective upon issuance and generally can be applied through December 31, 2022.

We are currently evaluating the impact of this standard in our consolidated financial statements.

REVENUE RECOGNITION

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

Third Quarter Ended September 29, 2019

Manufacturing

Total Reportable Segments

Recreational Vehicle

Manufactured Housing

Nine Months Ended September 29, 2019

Manufacturing

Total Reportable Segments

Recreational Vehicle

Manufactured Housing

Third Quarter Ended September 30, 2018

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

First Quarter Ended March 29, 2020

Manufacturing

2 unchanged sentences

Manufactured Housing

Nine Months Ended September 30, 2018

First Quarter Ended March 31, 2019

Manufacturing

2 unchanged sentences

Manufactured Housing

The following table provides information about contract balances:

September 29, 2019

December 31, 2018

Receivables, which are included in trade and other receivables, net

Contract Liabilities

Significant changes in the contract liabilities balance during the nine months ended September 29, 2019 are as follows:

Contract Liabilities

Revenue recognized that was included in the contract liability balance at the beginning of the period

Increases due to cash received, excluding amounts recognized as revenue during the period

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

Inventories consist of the following:

September 29, 2019

March 29, 2020

December 31, 2019

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GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended September 29, 2019 by segment are as follows:

Changes in the carrying amount of goodwill for the three months ended March 29, 2020 by segment are as follows:

Manufacturing

1 unchanged sentence

Adjustments to preliminary purchase price allocations

Balance - September 29, 2019

Intangible assets, net consist of the following as of September 29, 2019 and December 31, 2018 :

September 29,

Balance - March 29, 2020

Intangible assets, net consist of the following as of March 29, 2020 and December 31, 2019 :

Weighted Average Useful Life

4 unchanged sentences

Intangible assets, net

Changes in the carrying value of intangible assets for the nine months ended September 29, 2019 by segment are as follows:

Changes in the carrying value of intangible assets for the three months ended March 29, 2020 by segment are as follows:

Manufacturing

1 unchanged sentence

Adjustments to preliminary purchase price allocations

Balance - September 29, 2019

In addition to the acquisitions completed in 2018 as discussed below, the Company completed two acquisitions in the first nine months of 2019.

For the third quarter and first nine months ended September 29, 2019, revenue and operating income included in the Company's condensed consolidated statements of income related to the 2019 acquisitions were immaterial.

For the third quarter ended September 30, 2018, revenue and operating income of approximately $ 82.4 million and $ 8.8 million , respectively, were included in the Company’s condensed consolidated statements of income relating to the businesses acquired in the first nine months of 2018 .

The first nine months of 2018 included revenue and operating income of approximately $ 160.0 million and $ 17.3 million , respectively, related to these acquisitions.

Acquisition-related costs in the aggregate associated with the businesses acquired in the first nine months of 2019 and 2018 were immaterial.

Contingent Consideration

In connection with certain acquisitions, if certain financial targets for the acquired businesses are achieved, the Company will be required to pay additional cash consideration.

The Company has recorded a liability for the fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments.

As required, the liabilities for the contingent consideration associated with each of these acquisitions will be remeasured quarterly at fair value.

As of September 29, 2019 , the aggregate fair value of the estimated contingent consideration payments was $ 12.0 million, $ 4.5 million of which is included in the line item "Accrued liabilities" and $ 7.5 million is included in “Other long-term liabilities” on the condensed consolidated statement of financial position.

Balance - March 29, 2020

Valuation of Goodwill and Indefinite-Lived Intangibles

We test goodwill and indefinite-lived intangible assets (trademarks) for impairment on an annual basis (as of September 30, 2019 for our most recent annual tests) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.

Our 2019 tests indicated that there was no impairment, as fair value exceeded carrying values, and we concluded that none of our reporting units or trademarks were at risk of failing the impairment test.

Despite the excess fair value identified in our 2019 impairment tests, we assessed during the quarter ended March 29, 2020 whether the impact of the COVID-19 pandemic on overall macroeconomic conditions and the global equity markets, which negatively affected the Company’s market capitalization, indicated that at March 29, 2020 it was more likely than not that our goodwill and trademarks were impaired.

We evaluated amongst other factors (1) the results of our 2019 impairment tests;

(2) our market capitalization at March 29, 2020 in relation to the carrying amount of shareholders’ equity at March 29, 2020 and to fair values determined during our 2019 impairment tests;

(3) the results of our operations during the quarter ended March 29, 2020 in relation to our projections;

and (4) our analysis of the impact on the fair values determined during our 2019 impairment tests using more recent projections and discount rates that account for various risks and uncertainties, including the duration and extent of impact to our business, related to the COVID-19 pandemic.

Based on the results of our assessment, we determined it was more likely than not that our goodwill and trademarks were not impaired as of March 29, 2020.

However, we are unable to predict how long the COVID-19-related conditions will persist, what additional measures may be introduced by governments or private parties, or what effect any such additional measures may have on demand for our products or those of our customers in each of our end markets.

As such, we may be required to perform quantitative impairment tests in future periods preceding our annual impairment test date, and the outcome of such tests could result in an impairment of our goodwill or our trademarks.

The Company completed three acquisitions in the first quarter of 2020 (the "2020 Acquisitions").

For the first quarter ended March 29, 2020, net sales and operating income included in the Company's condensed consolidated statements of income related to the 2020 acquisitions were immaterial.

Acquisition-related costs associated with the businesses acquired in the first quarter of 2020 were immaterial.

The Company made no acquisitions in the first quarter of 2019.

As of March 29, 2020 , the aggregate fair value of the estimated contingent consideration payments was $ 7.8 million, $ 5.9 million of which is included in the line item "Accrued liabilities" and $ 1.9 million is included in “Other long-term liabilities” on the condensed consolidated statement of financial position.

At December 31, 2019, the aggregate fair value of the estimated contingent consideration payments was $ 9.6 million , $ 2.0 million of which was included in the line item "Accrued liabilities" and $ 7.6 million was included in "Other long-term liabilities".

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The contingent consideration arrangements are subject to a maximum payment amount of up to $ 12.3 million in the aggregate.

In the first quarter of 2019, the Company made cash payments of approximately $ 4.4 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

In the first quarter of 2020, the Company made cash payments of $ 2.0 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2020 Acquisitions

The Company completed two acquisitions in the third quarter and first nine months ended September 29, 2019, including the previously announced acquisition of G.G.

Acquisitions completed in the first quarter of 2020 include the previously announced acquisitions of Maple City Woodworking Corporation, a Goshen, Indiana-based manufacturer of hardwood cabinet doors and fascia for the recreational vehicle market, and SEI Manufacturing, Inc., a Cromwell, Indiana-based manufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market.

The total initial consideration for the 2020 Acquisitions was $ 24.9 million .

The preliminary purchase price allocations are subject to valuation activities being finalized, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates.

The 2020 Acquisitions are included in the Manufacturing segment.

2019 Acquisitions

The Company completed three acquisitions in 2019 ( the "2019 Acquisitions"), including the previously announced acquisitions of Topline Counters, LLC, a Sumner, Washington-based designer and manufacturer of kitchen and bathroom countertops for residential and commercial markets, and G.G.

Schmitt & Sons, Inc.

Schmitt"), a Sarasota, Florida-based designer and manufacturer of customized hardware and structural components for the marine industry.

The total initial consideration for these acquisitions was $ 21.1 million, plus subsequent contingent consideration payments over a one -year period based on future performance in connection with the acquisition of G.G.

The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

The results of operations for these acquisitions are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from their respective dates of acquisition.

2018 Acquisitions

Metal Moulding Corporation ( “ MMC” )

In February 2018, the Company completed the acquisition of the business and certain assets of Madison, Tennessee-based MMC, a manufacturer of custom metal fabricated products, primarily for the marine market, including hinges, arm rests, brackets, panels and trim, as well as plastic products including boxes, inlay tables, steps, and related components, for a net initial purchase price of $ 19.9 million , plus contingent consideration payments over a one -year period based on future performance.

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

Aluminum Metals Company, LLC (“AMC” )

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

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

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

In March 2018, the Company completed the acquisition of the business and certain assets of Angola, Indiana-based IMP, a manufacturer of fully-assembled helm assemblies, including electrical wiring harnesses, dash panels, instrumentation and gauges, and other products primarily for the marine market, for a net initial purchase price of $ 18.6 million , plus subsequent contingent consideration payments over a three -year period based on future performance.

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

Collins & Company, Inc.

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

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

Changes from previously reported estimated amounts as of December 31, 2018 include a decrease to intangible assets of $ 3.6 million and a $ 3.6 million offsetting increase to goodwill.

There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

In April 2018, the Company completed the acquisition of Dehco, a distributor and manufacturer of flooring, kitchen and bath products, adhesives and sealants, electronics, appliances and accessories, LP tanks, and other related building materials, primarily for the RV market as well as the manufactured housing (“MH”), marine and other industrial markets, for a net purchase price of $ 52.8 million .

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

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

Changes from previously reported estimated amounts as of December 31, 2018 include a decrease to intangible assets of $ 0.3 million and a $ 0.3 million offsetting increase to goodwill.

In May 2018, the Company completed the acquisition of Dowco, a designer and manufacturer of custom designed boat covers and bimini tops, full boat enclosures, mounting hardware, and other accessories and components for the marine market, for a net purchase price of $ 56.3 million , net of cash acquired.

Dowco has operating facilities in Wisconsin, Missouri, Indiana, and Minnesota.

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

Changes from previously reported estimated amounts as of December 31, 2018 include a $ 2.7 million increase to property, plant and equipment and a $ 3.3 million increase to goodwill, offset by a $ 5.9 million decrease to intangible assets and a $ 0.1 million increase in accounts payable and accrued liabilities.

Marine Accessories Corporation (“MAC”)

In June 2018, the Company acquired 100 % of the membership interests of Maryville, Tennessee-based MAC, a manufacturer, distributor and aftermarket supplier of custom tower and canvas products and other related accessories to OEMs, dealers, retailers and distributors within the marine market, as well as direct to consumers, for a net purchase price of $ 57.0 million, net of cash acquired.

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

Changes from previously reported estimated amounts as of December 31, 2018 include a $ 6.5 million decrease to intangible assets and a $ 1.0 million decrease to property, plant and equipment, offset by a decrease in deferred taxes and other liabilities of $ 1.1 million and an increase to goodwill of $ 6.4 million .

Engineered Metals and Composites, Inc.

In September 2018, the Company completed the acquisition of the business and certain assets of West Columbia, South Carolina-based EMC, a designer and manufacturer of custom marine towers, frames, and other fabricated component products for OEMs in the marine industry, for a net initial purchase price of $ 25.3 million , plus contingent consideration over a three -month period based on future performance.

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

After adjusting for a $ 0.1 million increase to the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $ 0.1 million , changes from previously reported estimated amounts as of December 31, 2018 include an increase to intangible assets of $ 1.6 million , an increase to inventory of $ 0.1 million , a decrease to property, plant and equipment of $ 0.8 million , a decrease to goodwill of $ 0.6 million and an increase to accounts payable of $ 0.2 million .

LaSalle Bristol (“LaSalle”)

In November 2018, the Company completed the acquisition of LaSalle, a distributor and manufacturer of plumbing, flooring, tile, lighting, air handling and building products for the MH, RV, and industrial markets, for a net purchase price of $ 51.1 million , net of cash acquired.

LaSalle is headquartered in Elkhart, Indiana and operates a total of 15 manufacturing and distribution centers located in North America.

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

After adjusting for a $ 1.1 million increase in the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $ 1.1 million , changes from previously reported estimated amounts as of December 31, 2018 are related primarily to a $ 6.7 million decrease to inventory, offset partly by a $ 0.8 million increase to accounts receivable, a $ 0.3 million increase to prepaid expenses and a $ 6.7 million increase to goodwill.

There was no material impact to the condensed consolidated statement of income related to these changes.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of the acquisition for the 2019 and 2018 acquisitions:

The total initial consideration for the 2019 Acquisitions was $ 53.7 million , plus contingent consideration over a one -year period based on future performance in connection with the acquisition of G.G.

Changes to preliminary purchase accounting estimates recorded in the first quarter of 2020 related to the 2019 Acquisitions were immaterial.

The 2019 Acquisitions are included in the Manufacturing segment.

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

Trade receivables

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(1) Total net assets acquired for the 2019 Acquisitions reflect the preliminary estimated liability of $ 2.6 million pertaining to the fair value of contingent consideration based on future performance relating to the acquisition of G.G.

(2) Total net assets acquired for MMC reflect the preliminary estimated liability of $ 1.4 million pertaining to the fair value of the contingent consideration based on future performance.

(3) Total net assets acquired for IMP reflect the preliminary estimated liability of $ 7.9 million pertaining to the fair value of the contingent consideration based on future performance.

(4) Total net assets acquired for EMC reflect the preliminary estimated liability of $ 2.5 million pertaining to the fair value of the contingent consideration based on future performance.

Pro Forma Information

The following pro forma information for the third quarter and first nine months ended September 29, 2019 and September 30, 2018 assumes the 2019 and 2018 acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The pro forma information contains the actual operating results of the 2019 and 2018 acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The following pro forma information for the first quarter ended March 29, 2020 and March 31, 2019 assumes the 2020 Acquisitions and the 2019 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The pro forma information contains the actual operating results of the 2020 Acquisitions and 2019 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction.

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.2 million and $ 0.5 million for the third quarter and nine months ended September 29, 2019, respectively, and $ 0.7 million and $ 5.7 million for the third quarter and nine months ended September 30, 2018 , respectively.

Third Quarter Ended

Nine Months Ended

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.2 million and $ 0.6 million for the first quarter ended March 29, 2020 and the first quarter ended March 31, 2019, respectively.

First Quarter Ended

(thousands except per share data)

September 29, 2019

September 30, 2018

September 29, 2019

September 30, 2018

March 29, 2020

March 31, 2019

Basic net income per common share

2 unchanged sentences

STOCK-BASED COMPENSATION

The Company recorded expense of $ 3.8 million and $ 3.5 million for the third quarter ended September 29, 2019 and September 30, 2018 , respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

For the first nine months of 2019 and 2018, the Company recorded $ 12.0 million and $ 10.9 million in stock-based compensation expense, respectively.

The Board approved various share grants under the Company’s 2009 Omnibus Incentive Plan in the first nine months of 2019 totaling 376,186 shares in the aggregate.

As of September 29, 2019 , there was approximately $ 23.8 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

The Company recorded expense of $ 4.3 million and $ 3.9 million for the first quarter ended March 29, 2020 and March 31, 2019 , respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first quarter of 2020 totaling 258,800 shares in the aggregate at an average fair value of $ 54.60 at grant date for a total fair value at grant date of $ 14.1 million.

As of March 29, 2020 , there was approximately $ 29.6 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 19.9 months.

NET INCOME PER COMMON SHARE

Net income per common share calculated for the third quarter and nine months of 2019 and 2018 is as follows:

Third Quarter Ended

Nine Months Ended

Net income per common share calculated for the first quarter of 2020 and 2019 is as follows:

First Quarter Ended

(thousands except per share data)

September 29, 2019

September 30, 2018

September 29, 2019

September 30, 2018

March 29, 2020

March 31, 2019

Net income for basic and diluted per share calculation

4 unchanged sentences

Diluted net income per common share

A summary of total debt outstanding at September 29, 2019 and December 31, 2018 is as follows:

September 29, 2019

A summary of total debt outstanding at March 29, 2020 and December 31, 2019 is as follows:

March 29, 2020

December 31, 2019

Long-term debt:

Convertible Notes

Revolver due 2024

Term loan due 2024

7.5% senior notes due 2027

1.0% convertible notes due 2023

Total long-term debt

4 unchanged sentences

Total long-term debt, less current maturities, net

On September 17, 2019, the Company issued $ 300 million aggregate principal amount of 7.50 % Senior Notes due 2027 (the “Senior Notes”).

The Senior Notes were not registered under the Securities Act of 1933, as amended (the "Securities Act") and were offered under Rule 144A under the Securities Act.

The Senior Notes will mature on October 15, 2027.

Interest on the Senior Notes will accrue from September 17, 2019 and is payable semi-annually in cash in arrears on April 15 and October 15 of each year, beginning on April 15, 2020.

The effective interest rate on the Senior Notes, which includes debt issuance costs, was 7.83 % .

In connection with the issuance of the Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the Senior Notes approximately $ 6.0 million in deferred financing costs which will be amortized using the effective interest rate over the term of the Senior Notes.

The Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2019 Credit Facility (as defined herein).

The Company may redeem the Senior Notes, in whole or in part, at any time (a) prior to October 15, 2022, at a price equal to 100 % of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after October 15, 2022 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest.

In addition, prior to October 15, 2022, the Company may redeem, in one or more transactions, up to an aggregate of 40 % of the original principal amount of the Senior Notes at a redemption price equal to 107.5 % of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings.

If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the Senior Notes (unless otherwise redeemed) at a price equal to 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest.

2019 Credit Facility

Simultaneously with the issuance of the Senior Notes, the Company entered into the Third Amended and Restated Credit Agreement (the “2019 Credit Agreement”).

The 2019 Credit Agreement amended and extended the Company’s 2018 Credit Agreement (as defined herein) and consists of a $ 550 million senior secured revolver (the “2019 Revolver”) and a $ 100 million senior secured term loan (the “2019 Term Loan” and together with the 2019 Revolver, the “2019 Credit Facility”).

The maturity date for borrowings under the 2019 Credit Agreement is September 17, 2024.

Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2019 Credit Facility by up to $ 250 million .

Borrowings under the 2019 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors.

Pursuant to the 2019 Credit Agreement:

The 2019 Term Loan is due in consecutive quarterly installments in the following amounts:

(i) beginning September 30, 2019, through and including June 30, 2021, $ 1,250,000 and (ii) beginning September 30, 2021, and each quarter thereafter, $ 2,500,000 , with the remaining balance due at maturity;

The interest rates for borrowings under the 2019 Revolver and the 2019 Term Loan are the Prime Rate or LIBOR plus a margin, which ranges from 0.00 % to 0.75 % for Prime Rate loans and from 1.00 % to 1.75 % for LIBOR loans depending on the Company’s consolidated total leverage ratio, as defined below.

The Company is required to pay fees on unused but committed portions of the 2019 Revolver, which range from 0.15 % to 0.225 % ;

Covenants include requirements as to a maximum consolidated total net leverage ratio ( 4.00 :1.00, increasing to 4.50 :1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixed charge coverage ratio ( 1.50 :1.00) that are tested on a quarterly basis, a minimum liquidity requirement applicable during the six-month period preceding the maturity of the Convertible Notes (as defined herein), and other customary covenants.

At September 29, 2019 , the Company had $ 100.0 million outstanding under the 2019 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2019 Revolver of $ 135.0 million under the LIBOR-based option.

The interest rate for incremental borrowings at September 29, 2019 was LIBOR plus 1.5 % (or 3.54 % ) for the LIBOR-based option.

The fee payable on committed but unused portions of the 2019 Revolver was 0.20 % at September 29, 2019 .

Total cash interest paid for the third quarter of 2019 and 2018 was $ 6.9 million and $ 6.6 million , respectively, and $ 19.7 million and $ 12.2 million for the comparative nine month periods, respectively.

2018 Credit Facility

See Note 9 of the Notes to Consolidated Financial Statements section of the Fiscal 2018 Form 10-K regarding the Company's previous credit agreement (the "2018 Credit Agreement") which established an $ 800 million revolving credit loan (the “2018 Revolver”) and a $ 100 million term loan (the “2018 Term Loan” and, together with the 2018 Revolver, the “2018 Credit Facility”).

The 2018 Credit Agreement was amended by the 2019 Credit Agreement on September 17, 2019 as discussed above.

The Company recorded a $ 0.7 million loss on extinguishment of debt in the third quarter of 2019 in connection with the replacement of the 2018 Credit Facility with the 2019 Credit Facility.

Convertible Senior Notes

In January 2018, the Company issued $ 172.5 million aggregate principal amount of 1.00 % Convertible Senior Notes due 2023 (the “Convertible Notes”).

See Note 9 of the Notes to Consolidated Financial Statements section of the Fiscal 2018 Form 10-K for further information.

The effective interest rate on the Convertible Notes, which includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 5.25 % as of September 29, 2019 and December 31, 2018.

The unamortized portion of the debt discount and debt issuance costs as of September 29, 2019 and December 31, 2018 was $ 25.0 million and $ 30.1 million , respectively.

There were no material changes to any of our debt arrangements during the quarter ended March 29, 2020.

Interest rates for borrowings under the revolver and term loan are the prime rate or LIBOR plus a margin.

At March 29, 2020 , all of the Company's borrowings under the revolver and term loan were under the LIBOR-based option.

The interest rate for incremental borrowings at March 29, 2020 was LIBOR plus 1.5 % (or 3.13 % ) for the LIBOR-based option.

The fee payable on committed but unused portions of the revolver was 0.20 % at March 29, 2020 .

Total cash interest paid for the first quarter of 2020 and 2019 was $ 2.6 million and $ 6.5 million , respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

Convertible Note Hedge Transactions and Warrant Transactions

In January 2018, in connection with the Convertible Notes offering, the Company entered into privately negotiated convertible note hedge transactions (together, the “Convertible Note Hedge Transactions”) with each of Bank of America, N.A.

and Wells Fargo Bank, National Association (together, the “Hedge Counterparties”), pursuant to which the Company acquired options to purchase the same number of shares of its common stock initially underlying the Convertible Notes.

See Note 10 of the Notes to Consolidated Financial Statements section of the Fiscal 2018 Form 10-K for information regarding the Convertible Note Hedge Transactions.

At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “Warrant Transactions”) with each of the Hedge Counterparties, pursuant to which the Company sold warrants to purchase the same number of shares of its common stock initially underlying the Convertible Notes.

See Note 10 of the Notes to Consolidated Financial Statements section of the Fiscal 2018 Form 10-K for further information regarding the Warrant Transactions.

There have been no material changes to the terms of the Convertible Note Hedge Transactions or the Warrant Transactions during the nine month period ended September 29, 2019.

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

Interest Rate Swaps

The 2019 Credit Facility exposes the Company to risk associated with the variability in interest expense associated with fluctuations in LIBOR.

To partially mitigate this risk, the Company entered into interest rate swaps on a portion of its 2018 Credit Facility, now amended by the 2019 Credit Facility.

As of September 29, 2019 , the Company had a combined notional principal amount of $ 200.0 million of interest rate swap agreements, all of which are designated as cash flow hedges.

These swap agreements effectively convert the interest expense associated with a portion of the 2019 Term Loan and a portion of the 2019 Revolver from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

Fair Value of Derivative Contracts

The following table summarizes the fair value of derivative contracts included in the condensed statement of financial position (in thousands):

The Company's credit facility exposes the Company to risks associated with the variability in interest expense associated with fluctuations in LIBOR.

To partially mitigate this risk, the Company entered into interest rate swaps.

As of March 29, 2020 , the Company had a combined notional principal amount of $ 200.0 million of interest rate swap agreements, all of which are designated as cash flow hedges.

These swap agreements effectively convert the interest expense associated with a portion of the Company's variable rate debt from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

The following table summarizes the fair value of derivative contracts included in the condensed statements of financial position (in thousands):

Fair value of derivative instruments

1 unchanged sentence

Balance sheet location

September 29, 2019

March 29, 2020

December 31, 2019

3 unchanged sentences

See Note 11 for information regarding accumulated other comprehensive loss on interest rate swaps.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) includes unrealized gains and losses on derivatives that qualify as hedges of cash flows, unrecognized pension-related costs and cumulative foreign currency translation adjustments.

The activity in accumulated other comprehensive loss during the three and nine months ended September 29, 2019 and September 30, 2018 was as follows:

Third Quarter Ended September 29, 2019

Cash Flow Hedges

Defined Benefit Pension

Foreign Currency Items

Balance at June 30, 2019

Other comprehensive income (loss) (net of tax of $83, $0 and $0)

Balance at September 29, 2019

Nine Months Ended September 29, 2019

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss includes unrealized gains and losses on derivatives that qualify as hedges of cash flows, cumulative foreign currency translation and other adjustments.

The activity in accumulated other comprehensive loss during the three months ended March 29, 2020 and March 31, 2019 was as follows:

First Quarter Ended March 29, 2020

Cash Flow Hedges

Defined Benefit Pension

Foreign Currency Items

1 unchanged sentence

Other comprehensive loss (net of tax of $1,040, $0 and $0)

Balance at September 29, 2019

Third Quarter Ended September 30, 2018

Cash Flow Hedges

Defined Benefit Pension

Foreign Currency Items

Balance at July 1, 2018

Other comprehensive income (loss) (net of tax of $28, $0 and $0)

Balance at September 30, 2018

Nine Months Ended September 30, 2018

Balance at March 29, 2020

First Quarter Ended March 31, 2019

Cash Flow Hedges

Defined Benefit Pension

Foreign Currency Items

1 unchanged sentence

Other comprehensive income (loss) (net of tax of $356, $0 and $0)

Balance at September 30, 2018

Balance at March 31, 2019

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

As discussed in Note 2, the Company adopted the provisions of ASC 842 on January 1, 2019 using the modified retrospective approach as of the effective date of ASC 842 (the effective date method).

Under the effective date method, financial results in periods reported prior to 2019 are unchanged.

As a result of the adoption of ASC 842, operating leases for certain warehouses, buildings, forklifts, trucks, trailers and other equipment are now recognized as right-of-use assets and corresponding short-term and long-term lease liabilities.

The Company utilized a package of available practical expedients in the adoption of ASC 842, which, among them, does not require the reassessment of operating versus capital lease classification.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense related to these short term leases is immaterial.

Lease and non-lease components in the fixed base rent of facility and equipment leases are included as a single component and accounted for as a lease.

Pursuant to ASC 842, the Company elected to use the remaining non-cancellable lease term as of January 1, 2019 in determining the lease term at the date of adoption and the corresponding incremental borrowing rate for such leases.

Variable lease expense, principally related to trucks, forklifts, and index-related facility rent escalators, was immaterial for the third quarter and nine months ended September 29, 2019.

Leases have remaining lease terms of one year to eleven years .

Certain leases include options to renew for an additional term.

Where there is reasonable certainty to utilize a renewal option, we include the renewal option in the lease term used to calculate operating lease right-of-use assets and lease liabilities.

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

Third Quarter Ended

Nine Months Ended

September 29, 2019

First Quarter Ended

March 29, 2020

March 31, 2019

Operating lease cost

5 unchanged sentences

(thousands, except lease term and discount rate)

September 29, 2019

March 29, 2020

December 31, 2019

Operating lease right-of-use assets

4 unchanged sentences

Weighted average discount rate, operating leases

Maturities of lease liabilities were as follows at September 29, 2019:

2019 (excluding the nine months ended September 29, 2019)

Maturities of lease liabilities were as follows at March 29, 2020:

2020 (excluding the three months ended March 29, 2020)

Total lease payments

Less imputed interest

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

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

Leases have remaining lease terms of one year to ten years .

FAIR VALUE MEASUREMENTS

The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market, are reported on the condensed consolidated statements of financial position as a component of "Cash and cash equivalents".

The carrying amount of cash equivalents at September 29, 2019 approximated fair value which was approximately $ 108.0 million, valued using level 1 inputs, with no corresponding amount at December 31, 2018 .

The carrying amount of the Senior Notes at September 29, 2019 approximated fair value given their recent issuance and based upon terms and conditions available to the Company, with no corresponding amount at December 31, 2018.

The 2019 Term Loan and the 2019 Revolver, valued using level 2 inputs, approximated fair value as of September 29, 2019 and the 2018 Term Loan and the 2018 Revolver, valued using level 2 inputs, approximated fair value ss of December 31, 2018 , respectively, based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt.

The estimated fair value of the Convertible Notes, calculated using Level 2 inputs, was approximately $ 152.1 million and $ 130.3 million as of September 29, 2019 and December 31, 2018, respectively.

The estimated fair value of the Company's interest rate swaps is valued using Level 2 inputs and discussed in further detail in Note 10.

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

The effective tax rate in the third quarter of 2019 and 2018 was 26.0 % and 25.3 % , respectively, and the effective tax rate for the comparable nine month periods was 24.6 % and 23.6 % , respectively.

The effective tax rate for the periods presented includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $ 0.9 million and $ 2.2 million for the nine months ended September 29, 2019 and September 30, 2018, respectively, with no corresponding amounts in the corresponding quarterly periods.

The Company made income tax payments of $ 7.4 million and $ 5.6 million in the third quarter of 2019 and 2018 , respectively, and $ 30.0 million and $ 21.0 million in the first nine months of 2019 and 2018, respectively.

The carrying amount of cash equivalents, valued using level 1 inputs and approximating fair value because of their relatively short maturities, was approximately $ 83.9 million and $ 132.6 million at March 29, 2020 and December 31, 2019, respectively.

The estimated fair value of our senior notes, calculated using level 2 inputs, was approximately $ 309.5 million and $ 320.3 million at March 29, 2020 and December 31, 2019, respectively.

The carrying amounts of our term loan and our revolver, valued using level 2 inputs, approximated fair value as of March 29, 2020 and December 31, 2019 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt.

The estimated fair value of our convertible notes, calculated using level 2 inputs, was approximately $ 134.6 million and $ 162.5 million as of March 29, 2020 and December 31, 2019, respectively.

The effective tax rate in the first quarter of 2020 and 2019 was 26.4 % and 22.3 % , respectively.

The effective tax rate for the first quarter of 2019 includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $ 0.8 million .

The Company made no income tax payments in the first quarter of 2020 and $ 1.5 million in income tax payments in the first quarter of 2019 .

SEGMENT INFORMATION

The Company has two reportable segments, Manufacturing and Distribution, which are those based on its method of internal reporting, which segregates its businesses based on the manner in which its Chief Operating Decision Maker allocates resources, evaluates financial results, and determines compensation.

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

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

Third Quarter Ended September 29, 2019

Manufacturing

Net outside sales

Intersegment sales

Operating income

Third Quarter Ended September 30, 2018

Manufacturing

Net outside sales

Intersegment sales

Operating income

Nine Months Ended September 29, 2019

First Quarter Ended March 29, 2020

Manufacturing

2 unchanged sentences

Operating income

Nine Months Ended September 30, 2018

First Quarter Ended March 31, 2019

Manufacturing

3 unchanged sentences

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

Third Quarter Ended

Nine Months Ended

September 29, 2019

September 30, 2018

September 29, 2019

September 30, 2018

First Quarter Ended

March 29, 2020

March 31, 2019

Operating income for reportable segments

3 unchanged sentences

STOCK REPURCHASE PROGRAMS

In 2018, the Board approved a new stock repurchase program for up to $ 50 million of its common stock as well as two additions totaling $ 87.9 million to this program.

Approximately $ 26.7 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program.

In the third quarter and first nine months ended September 29, 2019, the Company repurchased 98,201 shares of its common stock at an average price of $ 36.50 per share at an aggregate cost of $ 3.6 million.

In the third quarter of 2018, the Company repurchased 347,235 shares of its common stock at an average price of $ 60.32 per share at an aggregate cost of $ 20.9 million .

In the first nine months of 2018, the Company repurchased 1,282,930 shares of its common stock at an average price of $ 58.48 per share at an aggregate cost of $ 75.0 million .

RELATED PARTY TRANSACTIONS

In the first nine months of 2019 , the Company entered into transactions with companies affiliated with two of its independent Board members.

The Company purchased approximately $ 0.8 million of corrugated packaging materials from Welch Packaging Group, an independently owned company established by M.

Scott Welch who serves as its President and CEO.

The Company also sold approximately $ 0.4 million of RV component products to DNA Enterprises, Inc.

("DNA") in the first six months of 2019.

After June 30, 2019, sales to DNA no longer qualified as related party transactions, as Walter E.

Wells, whose son is affiliated with DNA, retired from Patrick's Board on May 15, 2019.

In March 2020, the Board approved a new stock repurchase program for up to $ 50 million of its common stock, including amounts remaining under previous authorizations.

Approximately $ 43.5 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of March 29, 2020.

In the first quarter ended March 29, 2020, the Company repurchased 456,155 shares of its common stock at an average price of $ 34.09 per share at an aggregate cost of $ 15.6 million.

The Company did not repurchase any of its common stock in the first quarter of 2019.

SUBSEQUENT EVENTS

The COVID-19 pandemic caused a disruption to our business beginning in late March 2020 and continuing throughout April and into May 2020, as many of the Company's customers reduced production levels and purchases of our products.

In response, the Company temporarily suspended operations at certain facilities in late March and through the month of April 2020 and furloughed affected team members with benefits, in addition to taking various cost containment and financial management measures.

In April 2020, the Company implemented certain actions to reduce its fixed cost structure, primarily in the form of labor cost reductions.

We continue to analyze our cost structure and may implement additional measures as necessary due to the ongoing economic conditions resulting from the COVID-19 pandemic and related impact on demand levels within our market sectors.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements