What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 195 added, 106 removed, 292 unchanged (51% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

First Quarter Ended

Second Quarter Ended

Six Months Ended

(thousands except per share data)

March 29, 2020

March 31, 2019

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Cost of goods sold

14 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

First Quarter Ended

March 29, 2020

March 31, 2019

Second Quarter Ended

Six Months Ended

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain of hedge derivatives

Total other comprehensive loss

Unrealized gain (loss) of hedge derivatives

Total other comprehensive income (loss)

COMPREHENSIVE INCOME

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

March 29, 2020

June 28, 2020

December 31, 2019

30 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

March 29, 2020

March 31, 2019

Six Months Ended

June 28, 2020

June 30, 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:

15 unchanged sentences

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

Payment of deferred financing costs and other

Payment of deferred financing costs

Proceeds from exercise of stock options

Payment of contingent consideration from a business acquisition

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

First Quarter Ended March 29, 2020

Second Quarter Ended June 28, 2020

Comprehensive

Balance March 29, 2020

Dividends declared

Other comprehensive income, net of tax

Issuance of shares upon exercise of common stock options

Shares used to pay taxes on stock grants

Stock-based compensation expense

Balance June 28, 2020

Six Months Ended June 28, 2020

Comprehensive

Balance December 31, 2019

2 unchanged sentences

Share 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

Balance June 28, 2020

Second Quarter Ended June 30, 2019

Comprehensive

Balance March 31, 2019

First Quarter Ended March 31, 2019

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 June 30, 2019

PATRICK INDUSTRIES, INC.

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

Six Months Ended June 30, 2019

Comprehensive

4 unchanged sentences

Stock-based compensation expense

Balance March 31, 2019

Balance June 30, 2019

See accompanying Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

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 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”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of June 28, 2020 and December 31, 2019 , and its results of operations and cash flows for the second quarter and six months ended June 28, 2020 and June 30, 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.

6 unchanged sentences

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

Operating results for the second quarter and six months ended June 28, 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.

1 unchanged sentence

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

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.

The second quarter of fiscal year 2020 ended on June 28, 2020 and the second quarter of fiscal year 2019 ended on June 30, 2019.

In preparation of Patrick’s condensed consolidated financial statements as of and for the second quarter and six months ended June 28, 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.

9 unchanged sentences

In June 2016, the FASB issued ASU 2016-13, “ Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments ”, which amends certain provisions of ASC 326, “Financial Instruments-Credit Loss”.

Measurement of Credit Losses on Financial Instruments ”, which amends certain provisions of Accounting Standards Codification ("ASC") 326, “Financial Instruments-Credit Loss”.

The ASU changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held to maturity debt securities, loans and other instruments, entities 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.

For trade and other receivables, held to maturity debt securities, loans and other instruments, entities are required to use a

new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

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

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

4 unchanged sentences

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.

We are currently evaluating the impact of this standard on 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.

In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848) ", a new standard providing final guidance to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR.

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

2 unchanged sentences

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.

We are currently evaluating the impact of this standard on 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 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

Second Quarter Ended June 28, 2020

Manufacturing

2 unchanged sentences

Manufactured Housing

First Quarter Ended March 31, 2019

Six Months Ended June 28, 2020

Manufacturing

2 unchanged sentences

Manufactured Housing

Second Quarter Ended June 30, 2019

Manufacturing

Total Reportable Segments

Recreational Vehicle

Manufactured Housing

Six Months Ended June 30, 2019

Manufacturing

Total Reportable Segments

Recreational Vehicle

Manufactured Housing

Contract Liabilities

1 unchanged sentence

Inventories consist of the following:

March 29, 2020

June 28, 2020

December 31, 2019

9 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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

Changes in the carrying amount of goodwill for the six months ended June 28, 2020 by segment are as follows:

Manufacturing

1 unchanged sentence

Adjustments to preliminary purchase price allocations

Balance - March 29, 2020

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

Balance - June 28, 2020

Intangible assets, net consist of the following as of June 28, 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 three months ended March 29, 2020 by segment are as follows:

Changes in the carrying value of intangible assets for the six months ended June 28, 2020 by segment are as follows:

Manufacturing

Balance - December 31, 2019

Impairment of intangible assets (1)

Adjustments to preliminary purchase price allocations

Balance - March 29, 2020

Balance - June 28, 2020

(1) Certain immaterial operations permanently ceased activities during the second quarter of 2020.

As a result, we recorded a $ 2.0 million pre-tax impairment of customer relationships and trademarks of these operations after determining the net carrying value of the assets was no longer recoverable.

The impairment was calculated using our internal projections of discounted cash flows, which rely on Level 3 inputs in the fair value hierarchy based on the unobservable nature of the underlying data.

The impairment was recorded in selling, general and administrative in our condensed consolidated statements of income for the second quarter and six months ended June 28, 2020.

Valuation of Goodwill and Indefinite-Lived Intangibles

1 unchanged sentence

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.

Despite the excess fair value identified in our 2019 impairment tests, we assessed during the quarter and six months ended June 28, 2020 whether the impact of the COVID-19 pandemic on overall macroeconomic conditions and our operating income for the second quarter and six months ended June 28, 2020 indicated that at June 28, 2020 it was more likely than not that our goodwill and trademarks were impaired.

We evaluated among other factors (i) the results of our 2019 impairment tests;

(ii) our market capitalization at June 28, 2020 in relation to the carrying amount of shareholders’ equity at June 28, 2020 and to fair values determined during our 2019 impairment tests;

(iii) the results of our operations during the second quarter and six months ended June 28, 2020 in relation to our projections;

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

Based on the results of our assessment, and other than immaterial impairments discussed above, we determined it was more likely than not that our goodwill and trademarks were not impaired as of June 28, 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.

The Company did not make any acquisitions in the second quarter of 2020 and completed three acquisitions in the first six months of 2020 (the "2020 Acquisitions").

For the second quarter and six months ended June 28, 2020, net sales included in the Company's condensed consolidated statements of income related to the 2020 acquisitions were $ 3.3 million and $ 3.8 million , respectively.

Acquisition-related costs incurred in the first six months of 2020 were immaterial.

The Company made no acquisitions in the first six months of 2019.

As of June 28, 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".

1 unchanged sentence

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

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

2020 Acquisitions

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 .

Acquisitions completed in the first six months 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 cash consideration for the 2020 Acquisitions was $ 25.0 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.

4 unchanged sentences

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

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.

The total cash consideration for the 2019 Acquisitions was $ 53.1 million , plus contingent consideration over a one -year period based on future performance in connection with the acquisition of G.G.

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

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

The 2019 Acquisitions are included in the Manufacturing segment.

9 unchanged sentences

Pro Forma Information

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 following pro forma information for the second quarter and six months ended June 28, 2020 and June 30, 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 $ 0.6 million for the first quarter ended March 29, 2020 and the first quarter ended March 31, 2019, respectively.

First Quarter 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 for the six months ended June 28, 2020 and $ 0.6 million and $ 1.2 million for the second quarter and six months ended June 30, 2019, respectively.

Second Quarter Ended

Six Months Ended

(thousands except per share data)

March 29, 2020

March 31, 2019

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Basic net income per common share

2 unchanged sentences

STOCK-BASED COMPENSATION

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.

The Company recorded expense of $ 2.0 million and $ 6.3 million for the second quarter and six months ended June 28, 2020, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense for the second quarter and six months ended June 28, 2020 includes a reduction of expense due to certain forfeitures and adjustments in the amount of $ 2.4 million.

For the second quarter and six months ended June 30, 2019, the Company recorded stock-based compensation expense of $ 4.3 million and $ 8.2 million , respectively.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first six months of 2020 totaling 275,740 shares in the aggregate at an average fair value of $ 53.78 at grant date for a total fair value at grant date of $ 14.8 million .

In addition, in the second quarter of 2020, the Board approved stock option grants representing 465,000 shares in the aggregate at an exercise price of $ 41.33 per share.

The total cost to be expensed over the three-year vesting period will be $ 6.6 million , or $ 14.25 per share, with an underlying volatility of 42 % under the Black Scholes option pricing model.

As of June 28, 2020, there was approximately $ 30.3 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

That cost is expected to be recognized over a weighted-average period of 19.9 months.

NET INCOME PER COMMON SHARE

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

First Quarter Ended

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

Second Quarter Ended

Six Months Ended

(thousands except per share data)

March 29, 2020

March 31, 2019

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 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 March 29, 2020 and December 31, 2019 is as follows:

March 29, 2020

A summary of total debt outstanding at June 28, 2020 and December 31, 2019 is as follows:

June 28, 2020

December 31, 2019

10 unchanged sentences

Total long-term debt, less current maturities, net

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

There were no material changes to any of our debt arrangements during the second quarter and six months ended June 28, 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.

At June 28, 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 June 28, 2020 was LIBOR plus 1.5 % (or 1.69 % ) for the LIBOR-based option.

The fee payable on committed but unused portions of the revolver was 0.20 % at June 28, 2020 .

Total cash interest paid was $ 15.6 million and $ 6.3 million for the second quarter of 2020 and 2019, respectively, and $ 18.2 million and $ 12.8 million for the first six months of 2020 and 2019, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

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

To partially mitigate this risk, the Company 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.

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

As of June 28, 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):

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

Fair value of derivative instruments

1 unchanged sentence

Balance sheet location

March 29, 2020

June 28, 2020

December 31, 2019

5 unchanged sentences

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

The activity in accumulated other comprehensive loss during the second quarter and six months ended June 28, 2020 and June 30, 2019 was as follows:

Second Quarter Ended June 28, 2020

Cash Flow Hedges

Foreign Currency Items

Balance at March 29, 2020

Other comprehensive income (loss) (net of tax (benefit) of ($158), $0 and $0)

Balance at June 28, 2020

Six Months Ended June 28, 2020

Cash Flow Hedges

Foreign Currency Items

Balance at December 31, 2019

Other comprehensive loss (net of tax of $882, $0 and $0)

Balance at June 28, 2020

Second Quarter Ended June 30, 2019

Cash Flow Hedges

Foreign Currency Items

Balance at March 31, 2019

First Quarter Ended March 31, 2019

Other comprehensive loss (net of tax of $659, $0 and $0)

Balance at June 30, 2019

Six Months Ended June 30, 2019

Cash Flow Hedges

1 unchanged sentence

Balance at December 31, 2018

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

Balance at March 31, 2019

Other comprehensive loss (net of tax of $1,015, $0 and $0)

Balance at June 30, 2019

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

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

First Quarter Ended

March 29, 2020

March 31, 2019

Second Quarter Ended

June 28, 2020

June 30, 2019

Operating lease cost

3 unchanged sentences

Operating leases

Six Months Ended

June 28, 2020

June 30, 2019

Operating lease cost

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Balance sheet information related to leases was as follows:

(thousands, except lease term and discount rate)

March 29, 2020

June 28, 2020

December 31, 2019

5 unchanged sentences

Weighted average discount rate, operating leases

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

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

Maturities of lease liabilities were as follows at June 28, 2020:

2020 (excluding the six months ended June 28, 2020)

Total lease payments

3 unchanged sentences

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, 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 .

The carrying amount of cash equivalents, valued using Level 1 inputs and approximating fair value because of their relatively short maturities, was approximately $ 90.0 million and $ 132.6 million at June 28, 2020 and December 31, 2019, respectively.

The estimated fair value of our senior notes, calculated using Level 2 inputs, was approximately $ 306.2 million and $ 320.3 million at June 28, 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 June 28, 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 $ 166.6 million and $ 162.5 million as of June 28, 2020 and December 31, 2019, respectively.

The effective tax rate in the second quarter of 2020 and 2019 was 44.4 % and 25.1 % , respectively, and the effective tax rate for the comparable six month periods was 27.2 % and 23.9 % , respectively.

The effective tax rate for the second quarter and six months of 2020 reflects the impact of $ 2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief, and Economic Security Act payroll tax credits.

In addition, the effective tax rate for the first six months of 2019 includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $ 0.9 million.

Cash paid for income taxes for the second quarter and six months of 2020 was immaterial.

The Company paid income taxes of $ 21.1 million and $ 22.6 million in the second quarter and six months of 2019, respectively.

SEGMENT INFORMATION

1 unchanged sentence

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

First Quarter Ended March 29, 2020

Second Quarter Ended June 28, 2020

Manufacturing

2 unchanged sentences

Operating income

First Quarter Ended March 31, 2019

Second Quarter Ended June 30, 2019

Manufacturing

2 unchanged sentences

Operating income

Six Months Ended June 28, 2020

Manufacturing

Net outside sales

Intersegment sales

Operating income

Six Months Ended June 30, 2019

Manufacturing

Net outside sales

Intersegment sales

Operating income

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

First Quarter Ended

March 29, 2020

March 31, 2019

Second Quarter Ended

Six Months Ended

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Operating income for reportable segments

4 unchanged sentences

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.

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 June 28, 2020.

No stock repurchases were made in the second quarter of 2020.

In the first six months 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 second quarter and first six months of 2019.

SUBSEQUENT EVENT

In August 2020, the Company announced the completion of the acquisition of Inland Plywood Company (“Inland”), a supplier, laminator and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the recreational vehicle and industrial markets for a net initial purchase price of $ 46.0 million.

Inland is headquartered in Pontiac, Michigan with an additional facility located in Cocoa, Florida.

The acquisition of Inland includes the acquisition of working capital, machinery and equipment, and real estate.

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