What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-26 compared with 2020-02-27 · 447 added, 370 removed, 786 unchanged (51% of the section changed)

13 unchanged sentences

This assessment included a review of the documentation of controls, an assessment of the design effectiveness of controls, testing of the operating effectiveness of controls, and a conclusion on this evaluation.

As permitted under SEC guidance, management’s assessment of and conclusion regarding the design and effectiveness of internal control over financial reporting excluded the internal control over financial reporting of the operations of businesses acquired in 2019 , which are described in Note 4 of the Notes to Consolidated Financial Statements.

As permitted under SEC guidance, management’s

assessment of and conclusion regarding the design and effectiveness of internal control over financial reporting excluded the internal control over financial reporting of the operations of businesses acquired in 2020, which are described in Note 4 of the Notes to Consolidated Financial Statements.

Businesses acquired in 2020 represented less than 3% of consolidated net sales for the year ended December 31, 2020 and approximately 19% of consolidated total assets as of December 31, 2020.

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Directors of the Company

The information required by this item with respect to directors is set forth in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 14, 2020 , under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” which information is hereby incorporated herein by reference.

The information required by this item with respect to directors is set forth in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 13, 2021, under the captions “Election of Directors” and “Delinquent Section 16(a) Reports,” which information is hereby incorporated herein by reference.

Executive Officers of the Registrant

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We have adopted a Code of Ethics and Business Conduct Policy applicable to all employees.

Additionally, we have adopted a Code of Ethics Applicable to Senior Executives including, but not limited to, the Chief Executive Officer and Chief Financial Officer of the Company.

Our Code of Ethics and Business Conduct, and our Code of Ethics Applicable to Senior Executives are available on the Company’s web site at www.patrickind.com under “Investor Relations”.

We intend to post on our web site any substantive amendments to, or waivers from, our Code of Ethics and Business Conduct Policy and our Code of Ethics Applicable to Senior Executives as well as our Corporate Governance Guidelines.

Our Code of Ethics and Business Conduct Policy is available on the Company’s web site at www.patrickind.com under “Investor Relations”.

We intend to post on our web site any substantive amendments to, or waivers from, our Code of Ethics and Business Conduct Policy as well as our Corporate Governance Guidelines.

We will provide shareholders with a copy of these policies without charge upon written request directed to the Company’s Corporate Secretary at the Company’s address.

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EXECUTIVE COMPENSATION

The information required by this item is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 14, 2020 , under the captions “Executive Compensation – Compensation of Executive Officers and Directors,” “Compensation Committee Interlocks and Director Participation,” and “Compensation Committee Report,” and is incorporated herein by reference.

The information required by this item is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 13, 2021, under the caption “Executive Compensation," "Compensation Committee Interlocks and Director Participation," and "Compensation Committee Report," and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is set forth in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 14, 2020 , under the captions “Related Party Transactions” and “Independent Directors,” and is incorporated herein by reference.

The information required by this item is set forth in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 13, 2021, under the captions “Related Party Transactions” and “Corporate Governance and Related Matters,” and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) The financial statements listed in the accompanying Index to the Financial Statements on page F-1 of the separate financial section of this Report are incorporated herein by reference.

(a) (1) The financial statements listed in the accompanying Index to the Financial Statements on page F-1 of the separate financial section of this Report are incorporated herein by reference.

(3) The exhibits required to be filed as part of this Annual Report on Form 10-K are listed under (c) below.

Exhibit Number

Exhibit Number Exhibits

3.1 Articles of Incorporation of Patrick Industries, Inc.

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3.2 Amendment to the Articles of Incorporation of Patrick Industries, Inc.

dated June 5, 2018 (filed as exhibit 3.2 to the Company's Form 10-K filed on February 28, 2019 and incorporated herein by reference).

dated June 5, 2018 (filed as E xhibit 3.2 to the Company's Form 10-K filed on February 28, 2019 and incorporated herein by reference).

3.3 Amended and Restated By-laws of Patrick Industries, Inc.

(filed as Exhibit 3.1 to the Company's Form 8-K filed on November 20, 2019 and incorporated herein by reference).

(filed as Exhibit 3.1 to the Company's Form 8-K filed on May 8, 2020 and incorporated herein by reference).

4.1 Indenture (including Form of Note) with respect to the Company's 1.00% Convertible Senior Notes due 2023, dated as of January 22, 2018, between Patrick Industries, Inc.

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10.8* Form of Performance Share Unit Award (filed as Exhibit 10.1 to the Company’s Form 10-Q filed on May 8, 2014 and incorporated herein by reference).

Third Amended and Restated Credit Agreement dated September 17, 2019 by and among theCompany, the Guarantors, the lenders from time to time a party thereto and Wells Fargo Bank,National Association (filed as Exhibit 10.1 to the Company's Form 8-K filed on September 18,2019 and incorporated herein by reference).

10.9 Third Amended and Restated Credit Agreement dated September 17, 2019 by and among the Company, the Guarantors, the lenders from time to time a party thereto and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Form 8-K filed on September 18, 2019 and incorporated herein by reference).

10.10 Base Convertible Bond Hedge Transaction Confirmation, dated as of January 17, 2018, by and between Patrick Industries, Inc.

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and Well Fargo Bank, National Association (filed as Exhibit 10.9 to the Company's Form 8-K filed on January 22, 2018 and incorporated herein by reference).

Statement of Computation of Operating Ratios.

Subsidiaries of the Registrant.

16.1 Letter of Crowe LLP to the Securities and Exchange Commission dated June 7, 2019 (filed as Exhibit 16.1 to the Company's Form 8-K filed on June 7, 2019 and incorporated herein by reference).

21** Subsidiaries of the Registrant.

23.1** Consent of Deloitte & Touche LLP.

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The following materials are filed electronically with this Annual Report on Form 10-K:

XBRL Instance Document

XBRL Taxonomy Schema Document

XBRL Taxonomy Calculation Linkbase Document

XBRL Taxonomy Definition Linkbase Document

XBRL Taxonomy Label Linkbase Document

XBRL Taxonomy Presentation Linkbase Document

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Schema Document

101.CAL XBRL Taxonomy Calculation Linkbase Document

101.DEF XBRL Taxonomy Definition Linkbase Document

101.LAB XBRL Taxonomy Label Linkbase Document

101.PRE XBRL Taxonomy Presentation Linkbase Document

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 formatted in XBRL (“eXtensible Business Reporting Language”):

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Pursuant to the Requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

President and Chief Executive Officer

February 27, 2020

(Principal Executive Officer)

/s/ Joshua A.

Vice President Finance, Chief Financial Officer and

February 27, 2020

Secretary-Treasurer

(Principal Financial and Accounting Officer)

Signature Title Date

Nemeth President and Chief Executive Officer February 26, 2021

Nemeth (Principal Executive Officer)

Petkovich Executive Vice President Finance, February 26, 2021

Petkovich Chief Financial Officer and Treasurer

(Principal Financial Officer)

Rose Principal Accounting Officer February 26, 2021

Rose (Principal Accounting Officer)

/s/ Joseph M.

February 27, 2020

Executive Chairman of the Board

February 27, 2020

Cerulli Director February 26, 2021

Cleveland Executive Chairman of the Board February 26, 2021

Forbes Director February 26, 2021

/s/ Michael A.

February 27, 2020

Kitson Director February 26, 2021

/s/ Pamela R.

February 27, 2020

Klyn Director February 26, 2021

/s/ Derrick B.

February 27, 2020

Lead Director

February 27, 2020

Mayes Director February 26, 2021

Suggs Director February 26, 2021

Scott Welch Lead Director February 26, 2021

PATRICK INDUSTRIES, INC.

Index to the Financial Statements

Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP

Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP F-2

Report of Independent Registered Public Accounting Firm, Crowe LLP

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statement of financial position of Patrick Industries, Inc.

and subsidiaries (the "Company") as of December 31, 2019, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for the year ended December 31, 2019, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated statements of financial position of Patrick Industries, Inc.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

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Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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Elkhart, Indiana

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Patrick Industries, Inc.

(the "Company") as of December 31, 2018, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity of Patrick Industries, Inc.

(the “Company”) for the year ended December 31, 2018, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements referred to above present fairly, in all material respects, the Company’s results of operations and cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Crowe LLP

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CONSOLIDATED STATEMENTS OF INCOME

(thousands except per share data)

Year Ended December 31,

(thousands except per share data) Year Ended December 31,

2020 2019 2018

NET SALES $ 2,486,597 $ 2,337,082 $ 2,263,061

Cost of goods sold 2,027,580 1,914,211 1,847,195

GROSS PROFIT 459,017 422,871 415,866

Operating Expenses:

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Income before income taxes 130,372 117,826 151,979

Income taxes 33,311 28,260 32,147

NET INCOME $ 97,061 $ 89,566 $ 119,832

BASIC NET INCOME PER COMMON SHARE $ 4.27 $ 3.88 $ 4.99

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

(thousands) Year Ended December 31,

2020 2019 2018

NET INCOME $ 97,061 $ 89,566 $ 119,832

Other comprehensive (loss) income, net of tax:

Change in unrealized loss of hedge derivatives ( 515 ) ( 2,401 ) ( 1,973 )

Foreign currency translation loss

Total other comprehensive (loss) income

Foreign currency translation gain (loss) 154 ( 22 ) ( 32 )

Other 7 ( 595 ) ( 741 )

Total other comprehensive loss ( 354 ) ( 3,018 ) ( 2,746 )

COMPREHENSIVE INCOME $ 96,707 $ 86,548 $ 117,086

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Cash and cash equivalents $ 44,767 $ 139,390

Trade receivables, net

Trade and other receivables, net 132,505 87,536

Inventories 312,809 253,870

Prepaid expenses and other 37,982 36,038

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Operating lease right-of-use-assets 117,816 93,546

Goodwill 395,800 319,349

Intangible assets, net 456,276 357,014

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Other non-current assets 1,605 423

TOTAL ASSETS $ 1,753,435 $ 1,470,993

LIABILITIES AND SHAREHOLDERS’ EQUITY

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issued 2019 - 23,753,551 shares

180,892 172,662

Additional paid-in-capital 24,387 25,014

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

(thousands) Year Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 97,061 $ 89,566 $ 119,832

Adjustments to reconcile net income to net cash provided by operating activities:

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Deferred income taxes 8,091 5,593 759

Other 3,991 ( 1,661 ) ( 2,841 )

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

Trade receivables

Trade and other receivables, net ( 29,190 ) 5,768 26,680

Inventories ( 34,554 ) 19,682 92

Prepaid expenses and other assets ( 2,414 ) ( 12,869 ) 1,654

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Capital expenditures

( 32,100 ) ( 27,661 ) ( 34,486 )

Proceeds from sale of property, equipment, facility and other

211 4,402 6,463

Business acquisitions, net of cash acquired

( 305,995 ) ( 55,953 ) ( 343,347 )

Net cash used in investing activities ( 337,884 ) ( 79,212 ) ( 371,370 )

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Borrowing on revolver

239,277 653,129 1,211,464

Repayments on revolver ( 99,277 ) ( 910,461 ) ( 1,106,528 )

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Purchase of convertible notes hedges

— — ( 31,481 )

Proceeds from sale of warrants — — 18,147

Cash dividends paid to shareholders

( 23,630 ) ( 5,798 ) —

Stock repurchases under buyback program ( 23,106 ) ( 3,815 ) ( 107,567 )

Proceeds from public offering of common stock, net of expenses

Payments related to vesting of stock-based awards, net of shares tendered for taxes ( 3,741 ) ( 3,380 ) ( 2,698 )

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(thousands except share data)

(thousands except share data) Common

Stock Additional

Capital Accumulated Other

Comprehensive

Income (Loss)

Income (Loss) Retained

Earnings Total

Balance January 1, 2018 $ 163,196 $ 8,243 $ 66 $ 199,180 $ 370,685

Other comprehensive income, net of tax

Issuance of 2,025,000 shares in public offering, net of expenses

— — — 119,832 119,832

Other comprehensive loss, net of tax

— — ( 2,746 ) — ( 2,746 )

Stock repurchases under buyback program

( 12,783 ) ( 646 ) — ( 94,138 ) ( 107,567 )

Issuance of shares upon exercise of common stock options

Shares used to pay taxes on stock grants

( 2,961 ) — — — ( 2,961 )

Stock-based compensation expense

13,981 — — — 13,981

Purchase of convertible notes hedges

— ( 31,481 ) — — ( 31,481 )

Proceeds from sale of warrants

— 18,147 — — 18,147

Equity component of convertible note issuance

— 30,861 — — 30,861

Balance December 31, 2018 $ 161,436 $ 25,124 $ ( 2,680 ) $ 224,874 $ 408,754

— — — 89,566 89,566

Dividends declared — — — ( 5,938 ) ( 5,938 )

Other comprehensive loss, net of tax

— — ( 3,018 ) — ( 3,018 )

Stock repurchases under buyback program

( 706 ) ( 110 ) — ( 2,999 ) ( 3,815 )

Issuance of shares upon exercise of common stock options

Shares used to pay taxes on stock grants

( 3,511 ) — — — ( 3,511 )

Stock-based compensation expense

Purchase of convertible notes hedges

Proceeds from sale of warrants

Equity component of convertible note issuance

15,436 — — — 15,436

Balance December 31, 2019 $ 172,662 $ 25,014 $ ( 5,698 ) $ 305,503 $ 497,481

— — — 97,061 97,061

Dividends declared

— — — ( 24,202 ) ( 24,202 )

Other comprehensive loss, net of tax

— — ( 354 ) — ( 354 )

Stock repurchases under buyback program

( 4,331 ) ( 627 ) — ( 18,148 ) ( 23,106 )

Issuance of shares upon exercise of common stock options

643 — — — 643

Shares used to pay taxes on stock grants

( 4,042 ) — — — ( 4,042 )

Stock-based compensation expense

15,960 — — — 15,960

Balance December 31, 2020 $ 180,892 $ 24,387 $ ( 6,052 ) $ 360,214 $ 559,441

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The consolidated financial statements include the accounts of Patrick and its wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform with current year presentation and such reclassifications are immaterial.

All intercompany accounts and transactions have been eliminated in consolidation.

In preparation of Patrick’s consolidated financial statements as of December 31, 2020, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-K to determine those requiring recognition or disclosure in the consolidated financial statements.

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The first three quarters of fiscal year 2020 ended on March 29, 2020, June 28, 2020 and September 27, 2020.

The first three quarters of fiscal year 2019 ended on March 31, 2019, June 30, 2019 and September 29, 2019.

The first three quarters of fiscal year 2018 ended on April 1, 2018, July 1, 2018 and September 30, 2018.

The first three quarters of 2017 ended on March 26, 2017, June 25 2017, and September 24, 2017.

Use of Estimates

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Costs and Expenses

Cost of goods sold includes material costs, direct and indirect labor, overhead expenses, inbound freight charges, inspection costs, internal transfer costs, receiving costs, and other costs.

Cost of goods sold includes material costs, direct and indirect labor, depreciation, overhead expenses, inbound freight charges, inspection costs, internal transfer costs, receiving costs, and other costs.

Warehouse and delivery expenses include salaries and wages, building rent and insurance, and other overhead costs related to distribution operations and delivery costs related to the shipment of finished and distributed products to customers.

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In addition, the Company estimates the fair value of all stock option and stock appreciation rights (“SARS”) awards as of the grant date by applying the Black-Scholes option-pricing model.

The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the dividend yield and exercise price.

The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense, including the expected option term, dividend yield, risk-free interest rate and volatility of the Company's common stock.

Expected volatilities take into consideration the historical volatility of the Company’s common stock.

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Treasury yield curve in effect at the time of grant for instruments of a similar term.

Income Per Common Share

New shares are issued upon exercise of options.

Forfeitures of stock based compensation are recognized as incurred.

Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding.

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The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the average market price for the period.

Certain Common Stock Equivalents were not included in the computation of diluted net income per common share because the exercise prices of those Common Stock Equivalents were greater than the average market price of the common shares.

Common Stock Equivalents are not included in the computation of diluted net income per common share if their effect would be anti-dilutive.

See Note 14 for the calculation of both basic and diluted net income per common share.

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The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

Trade Receivables

Trade and Other Receivables

Trade receivables consist primarily of amounts due to the Company from its normal business activities.

In assessing the carrying value of its trade receivables, the Company estimates the recoverability by making assumptions based on factors such as current overall and industry-specific economic conditions, historical and anticipated customer performance, historical write-off and collection experience, the level of past-due amounts, and specific risks identified in the trade receivables portfolio.

In assessing the carrying value of its trade receivables, the Company estimates the recoverability by making assumptions based on historical and forward-looking factors, such as historical and anticipated customer performance, current overall and industry-specific economic conditions, historical write-off and collection experience, the level of past-due amounts, and specific risks identified in the trade receivables portfolio.

Allowance for doubtful accounts was immaterial at December 31, 2020 and 2019, and changes in the allowance were immaterial for the years ended December 31, 2020, 2019 and 2018.

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Prepaid Expenses and Other

The following table summarizes balances in prepaid expenses and other:

Prepaid expenses and other consists of the following at December 31, 2020 and 2019:

(thousands) 2020 2019

Vendor rebates receivable $ 6,527 $ 11,524

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Prepaid expenses 16,510 7,571

Deposits 14,945 1,409

Prepaid income taxes — 11,639

Total $ 37,982 $ 36,038

Property, Plant and Equipment

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Goodwill and indefinite-lived intangible assets are not amortized but are subject to an annual impairment test based on their estimated fair value.

The Company performs the required test for goodwill and indefinite-lived intangible assets impairment in the fourth quarter, or more frequently, if events or changes in circumstances indicate that the carrying value may exceed the fair value.

The Company performs the required test for goodwill and indefinite-lived intangible assets for impairment in the fourth quarter, or more frequently, if events or changes in circumstances indicate that the carrying value may exceed the fair value.

As part of the annual goodwill test, we estimate the fair value of our reporting units using both an income and market based approach.

The market approach includes a comparison of multiples of earnings before interest, taxes, depreciation and amortization for the reporting units to similar businesses or guideline companies whose securities are actively traded in public markets.

The income approach calculates the present value of expected cash flows to determine the estimated fair value of our reporting units.

Additionally, the income approach requires us to estimate future cash flows, the timing of these cash flows, and a discount rate (based on a weighted average cost of capital), which represents the time value of money and the inherent risk and uncertainty of the future cash flows.

The assumptions we use to estimate future cash flows are consistent with the assumptions that our reporting units use for internal planning purposes.

When calculating the present value of future cash flows under the income approach, we take into consideration multiple variables, including forecasted sales volumes and operating income, current industry and economic conditions, and historical results.

If we determine that the estimated fair value of each reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired.

Our fourth quarter 2020 goodwill impairment test concluded that the fair values of each of our reporting units exceeded their carrying values.

Our fourth quarter indefinite-lived intangibles test also concluded that the fair values of intangibles exceeded their respective carrying values.

Definite-lived intangible assets are amortized over their useful lives, as detailed further in Note 7, and are also subject to an impairment test based on estimated undiscounted cash flows when impairment indicators exist.

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When events or conditions warrant, the Company evaluates the recoverability of long-lived assets other than goodwill and indefinite-lived intangible assets and considers whether these assets are impaired.

The Company assesses the recoverability of these assets based upon several factors, including management's intention with respect to the assets and their projected future undiscounted cash flows.

The Company assesses the recoverability of these assets based upon several factors, including management's intention with respect

to the assets and their projected future undiscounted cash flows.

If projected undiscounted cash flows are less than the carrying amount of the assets, the Company adjusts the carrying amounts of such assets to their estimated fair value.

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These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).

(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Cash Equivalents (1)

— — — 132.6 — —

Senior Note — 329.0 — — 320.3 —

Convertible Note — 180.0 — — 162.5 —

Interest Rate Swaps (2)

— 6.6 — — 5.9 —

Contingent consideration (3)

— — 6.9 — — 9.6

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

The carrying amount of cash equivalents at December 31, 2019, which approximated fair value because of the relatively short maturities, was approximately $ 132.6 million , valued using Level 1 inputs, with no corresponding amount at December 31, 2018 .

The carrying amounts of the 2019 Term Loan and the 2019 Revolver (each as defined herein) and of the 2018 Term Loan and the 2018 Revolver (each as defined herein) approximated fair value as of December 31, 2019 and 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 (as defined herein), calculated using Level 2 inputs, was approximately $ 162.5 million and $ 130.3 million as of December 31, 2019 and 2018, respectively.

The estimated fair value of the Senior Notes (as defined herein), calculated using Level 2 inputs, was approximately $ 320.3 million as of December 31, 2019.

The estimated fair value of the Company's interest rate swaps are valued using Level 2 inputs and discussed in further detail in Note 9.

The Company held no Cash Equivalents as of December 31, 2020.

(2) The interest rate swaps are comprised of over-the-counter derivatives, which are valued using models that primarily rely on observable inputs such as yield curves, and are classified as Level 2 in the fair value hierarchy and discussed further in Note 9.

(3) The estimated fair value of the Company's contingent consideration is valued using Level 3 inputs and is discussed further in Note 4.

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The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Reclassified Amounts

Certain amounts have been reclassified in prior year financial statements to conform with current year presentation.

These reclassifications have no impact on the overall financial information and relate to the following:

• Gross versus net presentation of earnings in accumulated other comprehensive income (loss) - Note 10

• Presentation of discrete items in the Company's income tax rate reconciliation - Note 12

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 $ 88 million in lease right-of-use assets and corresponding lease liabilities, with no material impact on the consolidated statement of shareholders' equity, income, comprehensive income or cash flows.

See Note 16 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 ".

This ASU simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test.

The standard requires that the impairment loss be measured as the excess of the

reporting unit's carrying amount over its fair value.

The standard requires that the impairment loss be measured as the excess of the reporting unit's carrying amount over its fair value.

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

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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.

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The Company adopted ASU 2016-13 on January 1, 2020 and the adoption did not have a material effect on its 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.

The Company adopted ASU 2019-12 on January 1, 2021 and the adoption is not expected to have a material effect on its 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 U.S.

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

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

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

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

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

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

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

In August 2020, the FASB issued ASU 2020-06, " Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ", a new standard that simplifies certain accounting treatments for convertible debt instruments.

The guidance eliminates certain requirements that require separate accounting for embedded conversion features and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification.

In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the diluted net income per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares, with certain exceptions.

Furthermore, the guidance requires new disclosures about events that occur during the reporting period that cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things.

The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

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

REVENUE RECOGNITION

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Our role as principal in our distribution sales is generally characterized by (i) customers entering into contracts with the Company, not the vendor;

(ii) our obligation to pay the vendor irrespective of our ability to collect from the customer;

(ii) our obligation to pay the vendor

irrespective of our ability to collect from the customer;

(iii) our discretion in determining the price of the good provided to the customer;

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Year Ended December 31, 2020

Manufacturing

(thousands) Manufacturing Distribution Total

Recreational Vehicle $ 938,301 $ 453,907 $ 1,392,208

Manufactured Housing 180,136 252,227 432,363

Industrial 286,764 36,601 323,365

Marine 324,250 14,411 338,661

Total $ 1,729,451 $ 757,146 $ 2,486,597

Year Ended December 31, 2019

Manufacturing

(thousands) Manufacturing Distribution Total

Recreational Vehicle $ 897,848 $ 389,345 $ 1,287,193

Manufactured Housing 176,665 260,121 436,786

Industrial 250,969 33,595 284,564

Marine 316,781 11,758 328,539

Total $ 1,642,263 $ 694,819 $ 2,337,082

Year Ended December 31, 2018

(thousands) Manufacturing Distribution Total

Recreational Vehicle $ 1,069,981 $ 364,276 $ 1,434,257

Manufactured Housing 163,513 111,178 274,691

Industrial 246,168 33,813 279,981

Marine 265,805 8,327 274,132

Total $ 1,745,467 $ 517,594 $ 2,263,061

Sales and other taxes collected concurrent with revenue-producing activities are excluded from net sales.

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

The Company completed the acquisitions discussed below during December 31, 2019 , 2018 and 2017.

The Company completed the acquisitions discussed below during the years ended December 31, 2020, 2019 and 2018.

The acquisitions were funded through cash on hand or through borrowings under the Company’s credit facility in existence at the time of acquisition.

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For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one-year measurement period.

For those acquisitions where the purchase price allocation is provisional, which includes only those acquisitions completed in 2019, the Company generally is still in the process of finalizing the fair values of acquired intangible assets, fixed assets, and, if applicable, contingent consideration and deferred tax assets and liabilities.

For those acquisitions where the purchase price allocation is provisional, which includes certain acquisitions completed in 2020, the Company is still in the process of finalizing the fair values of acquired intangible assets and fixed assets.

In general, the acquisitions described below provided the opportunity for the Company to either establish a new presence in a particular market and/or expand its product offerings in an existing market and increase its market share and per unit content.

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

The goodwill recognized is expected to be deductible for income tax purposes for each of the acquisitions with the exception of the 2018 acquisition of Marine Accessories Corporation and the 2017 acquisition of Leisure Product Enterprises, LLC, for which goodwill is expected to be partially deductible for income tax purposes, and the 2019 acquisition of G.G.

Schmitt & Sons, Inc.

and the 2018 acquisition of LaSalle Bristol, for which goodwill is not deductible for income tax purposes.

Intangible asset values were estimated using income-based valuation methodologies.

See Note 7 for information regarding the amortization periods assigned to acquired definite-lived intangible assets.

For the years ended December 31, 2020, 2019 and 2018, revenue of approximately $ 81.9 million, $ 8.3 million and $ 249.3 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such year.

For the years ended December 31, 2020, 2019 and 2018, operating income of approximately $ 10.7 million, $ 0.9 million and $ 23.2 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such year.

Acquisition-related costs associated with the businesses acquired in 2019 , 2018 and 2017 were immaterial.

Acquisition-related costs associated with the businesses acquired in 2020, 2019 and 2018 were immaterial in each respective year.

Contingent Consideration

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The contingent consideration arrangements are subject to a maximum payment amount of up to $ 14.5 million in the aggregate as of December 31, 2020.

In 2019, the Company recorded a $ 3.1 million non-cash decrease to accrued liabilities, which is included within selling, general and administrative expense in the consolidated statement of

income, partly offset by a $ 0.7 million non-cash accretion of other long term liabilities, representing changes in the amount of consideration expected to be paid.

In 2020, the Company recorded a $ 4.2 million non-cash decrease to accrued liabilities, which is included within selling, general and administrative expense in the consolidated statement of income, partly offset by a $ 0.2 million non-cash accretion of other long term liabilities, representing changes in the amount of consideration expected to be paid.

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

2020 Acquisitions

Acquisitions completed in 2019 include previously announced 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 $ 54.3 million , plus contingent consideration over a one -year period based on future performance in connection with the acquisition of G.G.

The Company completed the following seven previously announced acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"):

Company Segment Description

Maple City Woodworking Corporation Manufacturing Manufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana

SEI Manufacturing, Inc.

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

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

Synergy RV Transport Distribution Transportation and logistics service provider primarily for original equipment manufacturers and dealers in the RV market located in Goshen, Indiana

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

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

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

Inclusive of four immaterial acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $ 307.0 million, plus contingent consideration over a one to three-year period based on future performance in connection with certain acquisitions.

One acquisition in 2020 accounted for $ 129.7 million of cash consideration, $ 49.3 million of fixed assets, $ 49.1 million of intangible assets and $ 32.1 million of goodwill.

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.

These acquisitions are included in the Manufacturing segment.

Changes to preliminary purchase accounting estimates recorded in 2020 related to the 2020 Acquisitions were immaterial.

2019 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 over a one -year period based on future performance.

MMC is included in the Manufacturing segment.

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 and roofing products, primarily for the RV, industrial and marine markets, for a net purchase price of $ 17.8 million .

AMC is included in the Manufacturing segment.

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 contingent consideration over a three -year period based on future performance.

IMP is included in the Manufacturing segment.

The Company completed the following two previously announced acquisitions in the year ended December 31, 2019 (the "2019 Acquisitions"):

Company Segment Description

Schmitt & Sons, Inc.

Manufacturing Designer and manufacturer of customized hardware and structural components for the marine industry based in Sarasota, Florida

Topline Counters, LLC Manufacturing Designer and manufacturer of kitchen and bathroom countertops for residential and commercial markets based in Sumner, Washington

Inclusive of two immaterial acquisitions not discussed above, total cash consideration for the 2019 Acquisitions was $ 53.3 million, plus contingent consideration over a one year period based on future performance in connection with one acquisition.

Purchase price allocations and all valuation activities in connection with the 2019 Acquisitions have been finalized.

2018 Acquisitions

The Company completed the following nine previously announced acquisitions in the year ended December 31, 2018 (the "2018 Acquisitions"):

Company Segment Description

Metal Moulding Corporation ("MAC") Manufacturing 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 based in Madison, Tennessee

Aluminum Metals Company, LLC Manufacturing Manufacturer of aluminum products including coil, fabricated sheets and extrusions and roofing products, primarily for the RV, industrial and marine markets based in Elkhart, Indiana

IMP Holdings, LLC d/b/a Indiana Marine Products Manufacturing Manufacturer of fully-assembled helm assemblies, including electrical wiring harnesses, dash panels, instrumentation and gauges, and other products primarily for the marine market based in Angola, Indiana

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 .

Collins is included in the Distribution segment.

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.

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 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.

Dehco is included in the Manufacturing and Distribution segments.

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.

Dowco is included in the Manufacturing segment.

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.

MAC is included in the Manufacturing and Distribution segments.

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 .

Distribution 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 based in Bristol, Indiana

Manufacturing & Distribution 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 MH, marine, and other industrial markets operating facilities in Indiana, Oregon, Pennsylvania, and Alabama

Manufacturing 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 operating facilities in Wisconsin, Missouri, Indiana, and Minnesota

Marine Accessories Corporation Manufacturing & Distribution 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 based in Maryville, Tennessee

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.

EMC is included in the Manufacturing segment.

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 $ 51.5 million , net of cash acquired.

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

LaSalle is included in the Manufacturing and Distribution segments.

After adjusting for a $ 1.5 million increase in the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $ 1.5 million , changes from previously reported estimated amounts as of December 31, 2018 are related primarily to a $ 6.7 million increase to intangible assets, a $ 0.8 decrease to deferred tax liabilities, a $ 0.8 million increase to goodwill, a $ 0.7 million increase to accounts receivable and a $ 0.3 million increase to prepaid expenses, partly offset by a $ 6.7 million decrease to inventory, a $ 0.8 million decrease to property, plant and equipment and a $ 0.3 million increase in accounts payable and accrued liabilities.

2017 Acquisitions

Medallion Plastics, Inc.

(“Medallion”)

In March 2017, the Company acquired the business and certain assets of Elkhart, Indiana-based Medallion, a designer, engineer and manufacturer of custom thermoformed products and components which include dash and trim panels and fender skirts for the RV market, and complete interior packages, bumper covers, hoods, and trims for the automotive, specialty transportation and other industrial markets, for a net purchase price of $ 9.9 million .

Medallion is included in the Manufacturing segment.

Leisure Product Enterprises, LLC (“LPE”)

In April 2017, the Company acquired 100 % of the membership interests of LPE for a net purchase price of approximately $ 73.3 million .

LPE is comprised of three complementary manufacturing companies primarily serving the marine and industrial markets:

Marine Electrical Products, located in Lebanon, Missouri, supplies marine OEMs with fully-assembled boat dash and helm assemblies, including electrical wire harnesses as well as custom parts and assemblies for the industrial, commercial, and off-road vehicle markets;

Florida Marine Tanks, located in Henderson, North Carolina, supplies aluminum fuel and holding tanks for marine and industrial customers;

and Marine Concepts/Design Concepts, with facilities located in Sarasota, Florida and Cape Coral, Florida, designs, engineers and manufactures CNC plugs, open and closed composite molds, and CNC molds for fiberglass boat manufacturers.

LPE is included in the Manufacturing segment.

Indiana Technologies, Inc.

d/b/a Wire Design (“Wire Design”)

In July 2017, the Company acquired the business and certain assets of Elkhart, Indiana-based Wire Design, a manufacturer of wire harnesses for the RV, marine and industrial markets, for a net purchase price of $ 10.8 million .

Wire Design is included in the Manufacturing segment.

Baymont, Inc.

In September 2017, the Company acquired the business and certain assets of Baymont, a manufacturer and supplier of fiberglass showers, tubs, and tile systems for the MH and industrial markets, with operating facilities located in Golden, Mississippi and Belmont, Mississippi.

The net purchase price was $ 3.8 million , plus contingent consideration over a six -year period based on future performance.

Baymont is included in the Manufacturing segment.

Indiana Transport, Inc.

(“Indiana Transport”)

In November 2017, the Company acquired the business and certain assets of Elkhart, Indiana-based Indiana Transport, a transportation and logistics service provider primarily to OEMs and dealers in the RV market, for a net purchase price of $ 58.8 million .

Indiana Transport is included in the Distribution segment.

and Related Companies (collectively, “LMI”)

In November 2017, the Company acquired LMI, a designer, fabricator, and installer of specialty glass, mirror, bath and closet building products to residential housing and commercial high-rise builders, general contractors, retailers, and RV manufacturers in the U.S., for a purchase price of $ 80.3 million , net of cash acquired.

LMI is headquartered in Ontario, California and operates six manufacturing and distribution centers in California and Nevada and an additional manufacturing facility in China.

LMI is included in the Manufacturing segment.

Nickell Moulding Company, Inc.

In December 2017, the Company acquired the business and certain assets of Elkhart, Indiana-based Nickell, a manufacturer of hardwood and wrapped mouldings and trim, custom wood frames, and door components for the RV, retail and hospitality, MH, and other markets, for a net purchase price of $ 12.6 million .

Nickell is included in the Manufacturing segment.

Manufacturing Designer and manufacturer of custom marine towers, frames, and other fabricated component products for OEMs in the marine industry based in West Columbia, South Carolina

LaSalle Bristol Distribution & Manufacturing Distributor and manufacturer of plumbing, flooring, tile, lighting, air handling and building products for the MH, RV, and industrial markets headquartered in Elkhart, Indiana and operating a total of 15

manufacturing and distribution centers located in North America

Inclusive of one immaterial acquisition not discussed above, total cash consideration for the 2018 Acquisitions was $ 342.7 million, plus contingent consideration over a 3 -month to 3 -year period based on future performance in connection with certain acquisitions.

Purchase price allocations and all valuation activities in connection with the 2018 Acquisitions have been finalized.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2020, 2019 and 2018 Acquisitions:

As noted above, the purchase price allocations for the 2019 acquisitions are preliminary and subject to finalization:

(thousands) 2020 Acquisitions 2019 Acquisitions 2018 Acquisitions

Consideration

Cash, net of cash acquired $ 307,011 $ 53,300 $ 342,696

Working capital holdback and other, net (1)

Contingent consideration (2)

4,763 1,160 11,775

Total consideration 311,642 54,460 354,471

Assets Acquired

Trade receivables $ 15,359 $ 9,859 $ 32,109

Property, plant and equipment

Inventories 26,001 5,641 91,672

Prepaid expenses & other 949 20 8,362

Intangible assets

Total liabilities

Deferred taxes

Total net assets acquired

Indiana Transport

(1) Total net assets acquired for the 2019 acquisitions reflect the estimated liability of $ 2.6 million pertaining to the fair value of contingent consideration relating to the acquisition of G.G.

The actual net cash paid for 2019 acquisitions of $ 54.3 million is included in “Cash Flows from Investing Activities - Business Acquisitions” on the consolidated statement of cash flows for the year ended December 31, 2019.

None of the 2019 acquisitions were individually material and therefore aggregated information has been presented.

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

The actual net cash paid for the MMC acquisition of $ 19.9 million is included in “Cash Flows from Investing Activities - Business Acquisitions” on the consolidated statement of cash flows for the year ended December 31, 2018.

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

The actual net cash paid for the IMP acquisition of $ 18.6 million is included in “Cash Flows from Investing Activities - Business Acquisitions” on the consolidated statement of cash flows for the year ended December 31, 2018.

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

The actual net cash paid for the EMC acquisition of $ 25.3 million is included in the amount of $ 25.2 million in “Cash Flows from Investing

Activities - Business Acquisitions” on the consolidated statement of cash flows for the year ended December 31, 2018 and $ 0.1 million on the consolidated statement of cash flows for the year ended December 31, 2019.

(5) Total net assets acquired for Baymont include the estimated liability of $ 4.0 million pertaining to the fair value of the contingent consideration.

The actual net cash paid for the Baymont acquisition of $ 3.8 million is included in "Cash Flows from Investing Activities - Business Acquisitions" on the consolidated statement of cash flows for the year ended December 31, 2017.

Property, plant & equipment 66,574 6,469 46,015

Operating lease right-of-use assets 20,029 5,653 —

Identifiable intangible assets 136,070 23,715 146,583

Liabilities Assumed

Current portion of operating lease obligations ( 2,721 ) ( 2,328 ) —

Accounts payable & accrued liabilities ( 12,127 ) ( 6,721 ) ( 50,667 )

Operating lease obligations ( 17,308 ) ( 3,325 ) —

Deferred tax liabilities ( 4,322 ) ( 1,922 ) ( 6,969 )

Total fair value of net assets acquired 228,504 37,061 267,105

83,138 17,399 87,366

$ 311,642 $ 54,460 $ 354,471

(1) Certain acquisitions contain working capital holdbacks which are typically settled in a 90-day period following the close of the acquisition.

This value represents the remaining amounts due to (from) sellers as of December 31, 2020.

(2) These amounts reflect the acquisition date fair value of contingent consideration based on future performance relating to certain acquisitions.

(3) Goodwill is tax-deductible for the 2020 Acquisitions, except Front Range Stone (approximately $ 10.0 million);

for the 2019 Acquisitions, except GG Schmitt (approximately $ 5.4 million);

and for the 2018 Acquisitions, except MAC, whose goodwill is partially tax-deductible, and LaSalle Bristol, whose goodwill is not tax deductible (for total goodwill not tax-deductible for the 2018 Acquisitions of approximately $ 28.4 million).

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

The following table presents our estimates of identifiable intangibles for the 2020, 2019, and 2018 Acquisitions:

(thousands except year data) Estimated Useful Life (in years) 2020 Acquisitions 2019 Acquisitions 2018 Acquisitions

Customer relationships 10 $ 104,790 $ 18,112 $ 100,684

Non-compete agreements 5 1,210 150 1,674

Patents 10 - 18

6,470 — 15,290

Trademarks Indefinite 23,600 5,453 28,935

$ 136,070 $ 23,715 $ 146,583

We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation of the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset.

Non-compete agreements are valued using a discounted cash flow approach, which is a variation of the income approach, with and without the individual counterparties to the non-compete agreements.

Trademarks are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.

Pro Forma Information (Unaudited)

The following pro forma information 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 each 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 assumes the 2020 Acquisitions and 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 each 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 the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition.

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired of $ 1.3 million and $ 7.0 million for the years ended December 31, 2019 and 2018 , respectively, in connection with the acquisitions as if they occurred as of the beginning of the year immediately preceding each such acquisition.

In addition, the pro forma information includes incremental amortization expense related to intangible assets acquired of $ 8.7 million and $ 11.7 million for the years ended December 31, 2020 and 2019, respectively, in connection with the acquisitions as if they occurred as of the beginning of the year immediately preceding each such acquisition.

(thousands except per share data) 2020 2019

Net sales $ 2,633,388 $ 2,600,568

Net income 100,069 97,872

Basic net income per common share 4.40 4.24

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Inventories as of December 31, 2020 and 2019 consist of the following:

(thousands) 2020 2019

Raw materials $ 157,219 $ 162,238

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Property, plant and equipment, net, consists of the following at December 31, 2020 and 2019:

(thousands) 2020 2019

Land and improvements $ 12,670 $ 9,754

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Total depreciation expense for property, plant and equipment for fiscal 2020, 2019, and 2018 was $ 32.3 million, $ 26.9 million and $ 20.8 million, respectively.

Accrued capital expenditures were approximately $ 3.8 million, $ 0.4 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018.

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the years ended December 31, 2020 and 2019 by segment are as follows:

Manufacturing

(thousands) Manufacturing Distribution Total

Balance - January 1, 2019 $ 235,345 $ 46,389 $ 281,734

Acquisitions 21,488 — 21,488

Adjustment to prior year preliminary purchase price allocation 11,569 4,558 16,127

Balance - December 31, 2019 268,402 50,947 319,349

Acquisitions 78,055 5,083 83,138

Adjustment to prior year preliminary purchase price allocation ( 8,412 ) 1,725 ( 6,687 )

Balance - December 31, 2020 $ 338,045 $ 57,755 $ 395,800

Goodwill at December 31, 2019 and 2018 includes $ 27.4 million of accumulated impairment in the manufacturing segment.

For the definite-lived intangible assets attributable to the 2019 acquisitions, the useful life pertaining to non-compete agreements was three years, and the useful life pertaining to customer relationships for 2019 acquisitions was 10 years .

As of December 31, 2020 and 2019, accumulated impairment of goodwill in the Manufacturing segment was $ 27.4 million.

Intangible assets, net consist of the following at December 31, 2020 and 2019 :

(thousands) 2020 2019

Customer relationships $ 461,754 $ 357,513

Non-compete agreements 15,949 16,202

Patents 23,025 16,495

Trademarks 113,796 88,524

614,524 478,734

accumulated amortization ( 158,248 ) ( 121,720 )

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Changes in the carrying value of intangible assets for the years ended December 31, 2020 and 2019 by segment are as follows:

Manufacturing

(thousands) Manufacturing Distribution Total

Balance - January 1, 2019 $ 304,485 $ 78,497 $ 382,982

Acquisitions 17,922 — 17,922

Amortization ( 29,457 ) ( 6,451 ) ( 35,908 )

Adjustment to prior year preliminary purchase price allocation ( 10,827 ) 2,845 ( 7,982 )

Balance - December 31, 2019 282,123 74,891 357,014

Acquisitions 119,130 17,000 136,130

Amortization ( 33,505 ) ( 7,363 ) ( 40,868 )

Impairment of intangible assets (1)

( 119 ) ( 1,831 ) ( 1,950 )

Adjustment to prior year preliminary purchase price allocation 6,088 ( 138 ) 5,950

Balance - December 31, 2020 $ 373,717 $ 82,559 $ 456,276

Amortization expense for the next five fiscal years ending December 31 related to definite-lived intangible assets as of December 31, 2019 is estimated to be (in thousands):

2020 - $ 38,208 ;

2021 - $ 37,669 ;

2022 - $ 36,844 ;

(1) Certain operations permanently ceased activities during the year ended December 31, 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 consolidated statements of income for the year ended December 31, 2020.

Amortization expense for the next five fiscal years ending December 31 related to definite-lived intangible assets as of December 31, 2020 is estimated to be as follows (in thousands):

2021 $ 48,918

and 2024 - $ 34,045 .

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

(thousands) 2020 2019

Long-term debt:

Convertible Notes

1.0 % convertible notes due 2023

$ 172,500 $ 172,500

Term loan due 2024 92,500 97,500

Revolver due 2024 275,000 135,000

7.5 % senior notes due 2027

300,000 300,000

Total long-term debt 840,000 705,000

Convertible Notes discount and deferred financing costs, net

convertible notes debt discount, net ( 16,072 ) ( 23,260 )

term loan deferred financing costs, net ( 434 ) ( 542 )

senior notes deferred financing costs, net ( 5,087 ) ( 5,844 )

current maturities of long-term debt ( 7,500 ) ( 5,000 )

Term Loan deferred financing costs, net

Total long-term debt, less current maturities, net $ 810,907 $ 670,354

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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.

Interest on the Senior Notes is payable semi-annually in cash in arrears on April 15 and October 15 of each year.

The effective interest rate on the Senior Notes, which includes debt issuance costs, is 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 million in deferred financing costs which is 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).

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• 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;

(i) 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.

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The fee payable on committed but unused portions of the 2019 Revolver was 0.20 % at December 31, 2020.

The weighted average interest rate for 2019 borrowings under the 2018 Revolver and 2019 Revolver was 4.59 % , and 4.53 % for 2019 borrowings under the 2018 Term Loan and 2019 Term Loan.

The weighted average interest rate was 4.14 % for 2020 borrowings under the 2019 Revolver, and 3.67 % for 2020 borrowings under the 2019 Term Loan.

The weighted average interest rate was 4.59 % for 2019 borrowings under the 2018 Revolver (as defined herein) and 2019 Revolver, and 4.53 % for 2019 borrowings under the 2018 Term Loan (as defined herein) and 2019 Term Loan.

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.

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 (as defined herein) with the 2019 Credit Facility.

The Company's previous credit agreement (the "2018 Credit Agreement") consisted of 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”).

At December 31, 2018, the Company had $ 96.3 million outstanding under the 2018 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2018 Revolver of:

(i) $ 388.0 million under the LIBOR-based option and (ii) $ 4.3 million under the Base Rate-based option.

The interest rate for incremental borrowings at December 31, 2018 was the Prime Rate plus 1.00 % (or 6.50 % ) for the Base Rate-based option, or LIBOR plus 2.00 % (or 4.56 % ) for the LIBOR-based option.

The weighted average interest rate on borrowings in 2018 was 4.05 % for the 2018 Term Loan and 4.20 % for the 2018 Revolver.

2015 Credit Facility

Prior to June 5, 2018, the Company's credit facility was established under its Amended and Restated Credit Agreement, dated April 28, 2015, with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent and a lender, and the lenders party thereto, as amended (the “2015 Credit Agreement”).

The 2015 Credit Agreement consisted of a $ 417.3 million revolving credit loan (the “2015 Revolver”) and up to an $ 82.7 million term loan (the “2015 Term Loan” and, together with the Revolver, the “2015 Credit Facility”).

The 2015 Credit Facility had a maturity date of March 17, 2022 and was replaced by the 2018 Credit Facility.

Convertible Senior Notes

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The net proceeds from the issuance of the Convertible Notes were approximately $ 167.5 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the Convertible Note Hedge Transactions and the Warrant Transactions (each as defined herein) described in Note 9.

The Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually in arrears on February 1 and August 1 of each year at an annual rate of 1.00 % beginning August 1, 2018.

The Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually in arrears on February 1 and August 1 of each year at an annual rate of 1.00 %.

The Convertible Notes will mature on February 1, 2023 unless earlier repurchased or converted in accordance with their terms.

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Holders may convert Convertible Notes prior to August 1, 2022, only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018, if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day and (iii) upon the occurrence of certain specified distributions or corporate events.

(i) during any calendar quarter, if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day and (iii) upon the occurrence of certain specified distributions or corporate events.

Debt Maturities

As of December 31, 2020, the aggregate maturities of total long-term debt for the next five fiscal years and thereafter are as follows (in thousands):

Five standby letters of credit totaling $ 3.9 million were outstanding at December 31, 2019 that exist to meet credit requirements for the Company’s insurance providers.

Thereafter 300,000

Total $ 840,000

Letters of credit totaling $ 5.2 million were outstanding at December 31, 2020 that exist to meet credit requirements for the Company’s insurance providers.

Cash paid for interest for the years ended December 31, 2020, 2019 and 2018 was $ 36.1 million, $ 22.1 million and $ 18.4 million, respectively.

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However, the Warrant Transactions could separately have a dilutive effect on the Company's common stock to the extent that the market price per share of the common stock exceeds the strike price of the warrants.

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

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

Interest Rate Swaps

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Fair value of derivative liabilities

Derivatives accounted for as cash flow hedges

Balance sheet location

December 31, 2019

December 31, 2018

Interest rate swap agreements

Other long-term liabilities

Derivatives accounted for as cash flow hedges Balance sheet location December 31, 2020 December 31, 2019

Interest rate swap agreements Other long-term liabilities $ 6,567 $ 5,868

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

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

The activity in accumulated other comprehensive loss was as follows:

Cash Flow Hedges

Foreign Currency Items

The activity in accumulated other comprehensive loss for the years ended December 31, 2020 and 2019 was as follows:

(thousands) Cash Flow Hedges Other Foreign Currency Translation Total

Balance at January 1, 2019 $ ( 1,973 ) $ ( 675 ) $ ( 32 ) $ ( 2,680 )

Other comprehensive loss (net of tax benefit of $679, $254 and $0)

Other comprehensive income (loss) before reclassifications, net of tax ( 3,340 ) ( 595 ) ( 22 ) ( 3,957 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 939 — — 939

Net current period other comprehensive loss ( 2,401 ) ( 595 ) ( 22 ) ( 3,018 )

Balance at December 31, 2019 $ ( 4,374 ) $ ( 1,270 ) $ ( 54 ) $ ( 5,698 )

Other comprehensive loss (net of tax benefit of $816, $204 and $0)

Other comprehensive income (loss) before reclassifications, net of tax ( 3,973 ) 7 154 ( 3,812 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 3,458 — — 3,458

Net current period other comprehensive income (loss) ( 515 ) 7 154 ( 354 )

Balance at December 31, 2020 $ ( 4,889 ) $ ( 1,263 ) $ 100 $ ( 6,052 )

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Accrued liabilities as of December 31, 2020 and 2019 include the following:

(thousands) 2020 2019

Employee compensation and benefits $ 46,061 $ 28,717

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Accrued interest 5,819 7,460

Other 8,562 5,902

Total accrued liabilities $ 83,202 $ 58,033

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”).

The TCJA makes broad and complex changes to the U.S.

tax code, including, but not limited to:

(1) reducing the U.S.

federal corporate tax rate from 35% to 21% for tax years ending after December 31, 2017;

(2) bonus depreciation that will allow for full expensing in the year placed in service of qualified property acquired and placed in service after September 27, 2017;

(3) repealing the Domestic Production Activities Deduction for years beginning after December 31, 2017;

and (4) requiring a current inclusion in U.S.

federal taxable income of certain earnings of controlled foreign corporations.

The Company has accounted for in its 2019 and 2018 income tax provision the impact of Global Intangible Low-Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j), and foreign-derived intangible income deductions, although such provisions were either not applicable or resulted in a zero or immaterial impact to the consolidated financial statements.

The provision for income taxes for the years ended December 31, 2020, 2019 and 2018 consists of the following:

(thousands) 2020 2019 2018

Federal $ 16,627 $ 17,587 $ 22,578

State 8,584 5,019 8,725

Foreign 9 61 85

Total current 25,220 22,667 31,388

Federal 8,344 4,529 1,529

State ( 253 ) 1,064 ( 770 )

Total deferred 8,091 5,593 759

A reconciliation of the differences between the actual provision for income taxes and income taxes at the federal statutory income tax rate of 21% for the years ended December 31, 2019 and 2018 and at the federal statutory income tax rate of 35% for the year ended December 31, 2017 is as follows:

Income taxes $ 33,311 $ 28,260 $ 32,147

The Company has accounted for in its 2020, 2019 and 2018 income tax provision the impact of Global Intangible Low-Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j), and foreign-derived intangible income deductions, although such provisions were either not applicable or resulted in a zero or immaterial impact to the consolidated financial statements.

(thousands) 2020 2019 2018

Rate applied to pretax income $ 27,378 21.0 % $ 24,744 21.0 % $ 31,916 21.0 %

State taxes, net of federal tax effect 6,026 4.6 % 5,147 4.4 % 6,427 4.2 %

Remeasurement of net deferred tax liabilities

Research and development tax credits ( 1,647 ) ( 1.3 ) % ( 343 ) ( 0.3 ) % — — %

Excess tax benefit on stock-based compensation ( 350 ) ( 0.3 ) % ( 833 ) ( 0.7 ) % ( 6,685 ) ( 4.4 ) %

Other 1,904 1.6 % ( 455 ) ( 0.4 ) % 489 0.4 %

Income taxes $ 33,311 25.6 % $ 28,260 24.0 % $ 32,147 21.2 %

The composition of the deferred tax assets and liabilities as of December 31, 2020 and 2019 is as follows:

(thousands) 2020 2019

Long-term deferred income tax assets (liabilities):

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Operating lease liabilities 15,710 24,160

Other 1,454 2,015

Intangibles ( 28,992 ) ( 28,160 )

Depreciation expense ( 37,661 ) ( 22,368 )

1 unchanged sentence

Net deferred tax liabilities $ ( 39,516 ) $ ( 27,284 )

The Company paid income taxes of $ 36.1 million , $ 28.2 million and $ 38.6 million in 2019 , 2018 and 2017, respectively.

Cash paid by the Company for income taxes was $ 7.9 million, $ 36.1 million and $ 28.2 million in 2020, 2019 and 2018, respectively.

As of December 31, 2020 and December 31, 2019, the Company had gross federal, state, and foreign net operating losses, of approximately $ 26.2 million and $ 24.5 million, respectively.

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federal statute of limitations remains open for the years 2017 and later.

The Company is currently under audit by the Internal Revenue Service for the 2015 and 2016 tax years.

Uncertain tax benefits were immaterial at December 31, 2020 and 2019 and activity related to uncertain tax benefits was immaterial for all periods presented.

SHAREHOLDERS’ EQUITY

Preferred Stock

The Company has 1,000,000 shares of preferred stock authorized, without par value, the issuance of which is subject to approval by the Board of Directors (the “Board”).

The Board has the authority to fix the number, rights, preferences and limitations of the shares, subject to applicable laws and the provisions of the Articles of Incorporation.

In May 2017, the Company's shareholders approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized, without par value, from 20,000,000 shares to 40,000,000 shares, of which 23,753,551 and 23,527,307 shares were issued and outstanding as of December 31, 2019 and 2018 , respectively.

The Company issued 428,852 shares in 2019, 226,595 shares in 2018 and 411,212 shares in 2017 related to stock-based compensation plans and for the exercise of stock options and SARS.

The Company made repurchases of 83,512 shares in 2019, 43,900 shares in 2018 and 82,970 shares in 2017 for the sole purpose of satisfying the minimum tax withholding obligations of employees upon the vesting of stock awards held by the employees.

In addition, in 2019 and 2018, the Company repurchased 102,932 shares and 1,984,095 shares, respectively, of its common stock through a stock repurchase program.

There were no shares repurchased under a stock repurchase program in 2017.

See Note 14 for further details.

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

The net proceeds from the offering of $ 93.3 million were used to pay down a portion of the Company's outstanding indebtedness.

STOCK REPURCHASE PROGRAMS

In January 2018, the Board approved a stock repurchase program that authorized the repurchase of up to $ 50.0 million of the Company's common stock over a 24 -month period (the "2018 Repurchase Plan") to replace a 2016 Repurchase Plan that expired in January 2018.

In May 2018, the Board approved an increase in the amount of the Company's common stock that may be acquired over 24 months under the current stock repurchase program to $ 50.0 million , which included $ 8.5 million remaining under the original $ 50.0 million authorization announced in January 2018.

In October 2018, the Board approved an increase in the amount of the Company's common stock that may be acquired over 24 months under the current stock repurchase program to $ 50.0 million , which included $ 3.6 million remaining under the $ 50.0 million authorization announced in May 2018.

In 2018, the Company repurchased 1,984,095 shares under the 2018 repurchase program at an average price of $ 54.21 per share for a total cost of $ 107.6 million .

In 2019, the Company repurchased 102,932 shares under the 2018 repurchase program at an average price of $ 37.06 per share for a total cost of $ 3.8 million .

In October 2018, the Company's Board of Directors ("the Board") approved an increase in the amount of the Company's common stock that may be acquired over 24 months under the current stock repurchase program to $ 50.0 million, including amounts remaining under previous authorizations.

In March 2020, the Board approved a new stock repurchase program for up to $ 50.0 million of its common stock, including amounts remaining under previous authorizations.

Approximately $ 36.0 million of common stock repurchases remains available at December

31, 2020 as part of this authorization.

Under the stock repurchase plans, the Company made repurchases of common stock for 2020, 2019 and 2018 as follows:

2020 2019 2018

Shares repurchased 595,805 102,932 1,984,095

Average price $ 38.78 $ 37.06 $ 54.21

Aggregate cost (in millions) $ 23.1 $ 3.8 $ 107.6

The Company’s common stock does not have a stated par value.

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(thousands except per share data) 2020 2019 2018

Net income $ 97,061 $ 89,566 $ 119,832

Weighted average common shares outstanding - basic 22,730 23,058 23,995

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The impact on diluted net income per common share from antidilutive securities excluded from the calculation was immaterial for all periods presented.

On February 25, 2020, the Company’s Board of Directors declared a cash dividend of $ 0.25 per share of common stock.

The dividend will be payable on March 23, 2020 to shareholders of record at the close of business on March 9, 2020.

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.

Accordingly, 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 was immaterial for fiscal 2019.

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 year ended December 31, 2019.

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

We lease certain facilities, trailers, forklifts and other assets.

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 was immaterial for fiscal 2020 and 2019.

Variable lease expense, principally related to trucks, forklifts, and index-related facility rent escalators, was immaterial for the years ended December 31, 2020 and 2019.

Leases have remaining lease terms of one year to nineteen 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:

December 31, 2019

Lease expense, supplemental cash flow information, and other information related to leases for the years ended December 31, 2020 and 2019 were as follows:

(thousands) 2020 2019

Operating lease cost $ 34,243 $ 31,653

3 unchanged sentences

Operating leases $ 56,526 $ 37,112

Balance sheet information related to leases was as follows:

Balance sheet information related to leases as of December 31, 2020 and 2019 was as follows:

(thousands, except lease term and discount rate) 2020 2019

December 31, 2019

Operating lease right-of-use assets $ 117,816 $ 93,546

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Weighted average discount rate, operating leases 4.1 % 3.7 %

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

Maturities of operating lease liabilities were as follows at December 31, 2020 (in thousands):

2021 $ 34,996

Thereafter 17,489

Total lease payments 134,079

Less imputed interest ( 15,003 )

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

Future minimum lease payments were as follows at December 31, 2018:

Total $ 119,076

COMMITMENTS AND CONTINGENCIES

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These accruals are adjusted from time to time as developments warrant.

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

the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

In August 2019, a group of companies calling itself the Lusher Site Remediation Group (the “Group”) commenced litigation against the Company in Lusher Site Remediation Group v.

Sturgis Iron & Metal Co., Inc., et al., Case Number 3:18-cv-00506, pending in the U.S.

District Court for the Northern District of Indiana.

The Group’s Second Amended Complaint, which was the first to assert claims against Patrick, asserted claims under the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C.

§ 9601 et seq., an Indiana state environmental statute and Indiana common law.

One defendant in the case, Sturgis Iron & Metal Co., Inc.

(“Sturgis”), subsequently filed two cross claims against Patrick, asserting against the Company a claim for (i) contribution under CERCLA and (ii) contractual indemnity.

The Company moved to dismiss the Group’s claims and also moved to dismiss Sturgis’s cross claims.

On August 21, 2020, the court granted Patrick’s two motions to dismiss.

The Group subsequently moved for reconsideration of the court’s decision.

That reconsideration motion is still pending.

The Company does not currently believe that this matter is likely to have a material adverse impact on its financial condition, results of operations, or cash flows.

However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects.

COMPENSATION PLANS

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All such awards qualify and are accounted for as equity awards.

Equity incentive plan awards, which are granted under

the Company's 2009 Omnibus Incentive Plan (the "2009 Plan"), are intended to retain and reward key employees for outstanding performance and efforts as they relate to the Company’s short-term and long-term objectives and its strategic plan.

The Company recorded compensation expense of $ 15.4 million , $ 14.0 million and $ 10.4 million for the years ended December 31, 2019 , 2018 and 2017, respectively, on the consolidated statements of income for its stock-based compensation plans.

Equity incentive plan awards, which are granted under the Company's 2009 Omnibus Incentive Plan, are intended to retain and reward key employees for outstanding performance and efforts as they relate to the Company’s short-term and long-term objectives and its strategic plan.

At December 31, 2020, approximately one million common shares remain available for stock-based compensation grants.

Stock-based compensation expense was $ 16.0 million, $ 15.4 million and $ 14.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Income tax benefit for stock-based compensation expense was $ 4.1 million, $ 3.9 million and $ 3.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was approximately $ 23.8 million of total unrecognized compensation cost related to share-based compensation arrangements granted under incentive plans.

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Stock options vest ratably over either three or four years and have nine-year contractual terms.

On January 17, 2017, the Company’s Compensation Committee of the Board (the "Compensation Committee") approved the grant of 340,110 stock options under the 2009 Plan at an exercise price per share of $ 53.83 .

The stock options vest pro-rata over four years , commencing on January 17, 2018, and have nine -year contractual terms.

There were no stock options granted in 2018 and 2019.

In 2020, we granted 495,000 stock options to certain employees at an average exercise price per share of $ 42.87 .

The stock options vest 35 %, 35 % and 30 % over years one, two, and three, respectively, and have nine-year contractual terms.

No stock options were granted in 2019 and 2018.

The following table summarizes the Company’s option activity during the years ended December 31, 2020, 2019 and 2018:

Years ended December 31 2020 2019 2018

(shares in thousands)

(shares in thousands) Shares Weighted

Price Shares Weighted

Outstanding beginning of year 536 $ 45.11 545 $ 44.35 548 $ 44.07

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Options exercised $ 97 $ 381 $ 195

Weighted average fair value of options granted during the year

Weighted average fair value of options granted during the year $ 15.17 N/A N/A

The aggregate intrinsic value (excess of market value over the option exercise price) in the table above is before income taxes, and assuming the Company’s closing stock price of $ 68.35 , $ 52.43 and $ 29.61 per share as of December 31, 2020, 2019 and 2018, respectively, is the price that would have been received by the option holders had those option holders exercised their options as of that date.

The cash received from the exercise of stock options was immaterial in 2019 and 2018 , and approximately $ 0.9 million in 2017.

The income tax benefit related to the stock options exercised in 2019 and 2018 was immaterial and

was approximately $ 0.9 million in 2017.

At December 31, 2020, the weighted average remaining contractual term for options outstanding was 6.4 years and the weighted average remaining contractual term for options exercisable was 4.4 years.

The cash received from the exercise of stock options was $ 0.6 million in 2020 and immaterial in 2019 and 2018.

The income tax benefit related to the stock options exercised in 2020, 2019 and 2018 was immaterial.

The grant date fair value of stock options vested in 2020, 2019 and 2018 was $ 5.8 million, $ 5.8 million and $ 5.8 million, respectively.

A summary of options outstanding and exercisable at December 31, 2019 is as follows:

(shares in thousands)

Options Outstanding

Options Exercisable

Remaining Contractual

Exercise Price

Exercise price - $12.30

Exercise price - $40.95

Exercise price - $53.83

The following table presents assumptions used in the Black-Scholes model for the stock options granted in 2020:

There were no stock options granted in 2019 and 2018.

Dividend rate 2.37 %

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Stock Appreciation Rights (SARS):

On January 17, 2017, the Compensation Committee approved the grant of 340,128 SARS under the 2009 Plan divided into four tranches of 85,032 shares each, at strike prices of $ 53.83 , $ 60.03 , $ 66.93 and $ 74.63 per share.

The SARS vest pro-ratably over four years from the grant date and have nine -year contractual terms.

The SARS are to be settled in shares of common stock, or at the sole discretion of the Board in cash.

The grant date fair value of these awards totaled $ 5.0 million and this amount is being amortized over the four -year vesting period.

There were no SARS granted in 2018 and 2019.

No SARS were granted in the years ended December 31, 2020, 2019 and 2018.

The following table summarizes the Company’s SARS activity during the years ended December 31, 2020, 2019 and 2018:

Years ended December 31 2020 2019 2018

(shares in thousands)

(shares in thousands) Shares Weighted

Price Shares Weighted

Outstanding beginning of year 535 $ 54.53 535 $ 54.53 535 $ 54.53

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SARS exercised $ 1,918 $ — $ —

Weighted average fair value of SARS granted during the year

Weighted average fair value of SARS granted during the year N/A N/A N/A

The aggregate intrinsic value (excess of market value over the SARS exercise price) in the table above is before income taxes, and assuming the Company’s closing stock price of $ 68.35 , $ 52.43 and $ 29.61 per share as of December 31, 2020, 2019 and 2018, respectively, is the price that would have been received by the SARS holder had that SARS holder exercised the SARS as of that date.

A summary of SARS outstanding and exercisable at December 31, 2019 is as follows:

SARS Outstanding

SARS Exercisable

(shares in thousands)

Remaining Contractual

Exercise price - $12.30

Exercise price - $14.75

Exercise price - $17.71

Exercise price - $21.25

Exercise price - $40.95

Exercise price - $47.51

Exercise price - $55.11

Exercise price - $63.93

Exercise price - $53.83

Exercise price - $60.03

Exercise price - $66.93

Exercise price - $74.63

The following table presents assumptions used in the Black-Scholes model for the SARS granted in 2017.

There were no SARS granted in 2019 and 2018.

Dividend rate

Risk-free interest rate

Expected option life (years)

Price volatility

As of December 31, 2019 , there was approximately $ 1.6 million of total unrecognized compensation expense related to the SARS which is expected to be recognized over a weighted-average remaining life of approximately 12.3 months.

As of December 31, 2020, there was approximately $ 0.1 million of total unrecognized compensation expense related to the SARS which is expected to be recognized over a weighted-average remaining life of approximately one month .

Restricted Stock:

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Time-based shares cliff vest at the conclusion of the required service period, which ranges from one to three years .

The performance contingent shares are earned based on the achievement of a cumulative financial performance target, which ranges from a one to five-year period and vest at the conclusion of the measurement period.

The performance contingent shares are earned based on the

achievement of a cumulative financial performance target, which ranges from a one to five-year period and vest at the conclusion of the measurement period.

The following table summarizes the activity for restricted stock for the years ended December 31, 2020, 2019 and 2018:

(shares in thousands)

Weighted-Average

2020 2019 2018

(shares in thousands) Shares Weighted-Average

Stock Price Shares Weighted-Average

Unvested beginning of year 738 $ 49.65 606 $ 48.56 634 $ 35.68

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Forfeited during the year ( 79 ) 55.87 ( 16 ) 50.49 ( 1 ) 57.93

Unvested end of year 790 $ 50.39 738 $ 49.65 606 $ 48.56

SEGMENT INFORMATION

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softwoods lumber;

treated, untreated and laminated plywood;

custom cabinetry;

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marine hardware;

aluminum fuel tanks;

aluminum and plastic fuel tanks;

CNC molds and composite parts;

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The Company also records certain income from purchase incentive agreements at the corporate division.

The Company evaluates the performance of its segments and allocates resources to them based on a variety of indicators including but not limited to sales and operating income as presented in the tables below.

The Company evaluates the

performance of its segments and allocates resources to them based on a variety of indicators including but not limited to sales and operating income as presented in the tables below.

The tables below present information that is provided to the chief operating decision maker of the Company as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Manufacturing

Manufacturing Distribution Total

Net outside sales $ 1,729,451 $ 757,146 $ 2,486,597

Intersegment sales 36,367 5,326 41,693

Total sales 1,765,818 762,472 2,528,290

Operating income 190,518 54,376 244,894

Total assets 1,337,920 343,170 1,681,090

Capital expenditures 30,588 788 31,376

Depreciation and amortization 61,407 8,527 69,934

Manufacturing

Manufacturing Distribution Total

Net outside sales $ 1,642,263 $ 694,819 $ 2,337,082

Intersegment sales 31,223 4,340 35,563

Total sales 1,673,486 699,159 2,372,645

Operating income 174,913 38,953 213,866

Total assets 990,692 304,230 1,294,922

Capital expenditures 25,291 1,973 27,264

Depreciation and amortization 52,036 7,534 59,570

Manufacturing

Manufacturing Distribution Total

Net outside sales $ 1,745,467 $ 517,594 $ 2,263,061

Intersegment sales 33,581 3,641 37,222

Total sales 1,779,048 521,235 2,300,283

Operating income 215,246 31,491 246,737

2 unchanged sentences

A reconciliation of certain line items pertaining to the total reportable segments to the consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):

2020 2019 2018

Total sales for reportable segments $ 2,528,290 $ 2,372,645 $ 2,300,283

4 unchanged sentences

Unallocated corporate expenses ( 30,653 ) ( 23,516 ) ( 34,109 )

Amortization ( 40,868 ) ( 35,908 ) ( 34,213 )

Consolidated operating income $ 173,373 $ 154,442 $ 178,415

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Major Customers

One RV customer accounted for approximately 14 % and 12 % of the trade receivables balance at December 31, 2019 and 2018, respectively.

In addition, a second RV customer accounted for approximately 13 % of the trade receivables balance at December 31, 2018 .

One RV customer accounted for approximately 23 % , 29 % and 32 % of consolidated net sales in 2019, 2018 and 2017, respectively.

In addition, a second RV customer accounted for approximately 17 % , 20 % and 25 % of consolidated net sales in 2019 , 2018 and 2017, respectively.

The Company had two major customers that accounted for the following sales for 2020, 2019, 2018 and trade receivables balances at December 31, 2020 and 2019 as shown in the table below:

2020 2019 2018

Net sales 22 % 23 % 29 %

Trade receivables 13 % 6 %

Net sales 17 % 17 % 20 %

Trade receivables 17 % 14 %

QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the years ended December 31, 2020 and 2019 is as follows:

(thousands except per share data)

(thousands except per share data) 1Q 2Q 3Q 4Q 2020

Net sales $ 589,232 $ 424,045 $ 700,707 $ 772,613 $ 2,486,597

Gross profit 109,481 73,721 133,497 142,318 459,017

Net income 21,187 714 37,336 37,824 97,061

Net income per common share (1)

Basic $ 0.92 $ 0.03 $ 1.65 $ 1.68 $ 4.27

Diluted 0.91 0.03 1.62 1.64 4.20

Cash dividends paid per common share $ 0.25 $ 0.25 $ 0.25 $ 0.28 $ 1.03

(thousands except per share data)

(thousands except per share data) 1Q 2Q 3Q 4Q 2019

Net sales $ 608,218 $ 613,218 $ 566,186 $ 549,460 $ 2,337,082

Gross profit 106,548 112,661 104,335 99,327 422,871

Net income 20,849 27,416 21,317 19,984 89,566

Net income per common share (1)

Basic $ 0.90 $ 1.19 $ 0.92 $ 0.87 $ 3.88

Diluted 0.90 1.18 0.92 0.86 3.85

Cash dividends paid per common share $ — $ — $ — $ 0.25 $ 0.25

(1) Basic and diluted net income per common share are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted net income per common share information may not equal annual basic and diluted net income per common share.

RELATED PARTY TRANSACTIONS

During 2019 , 2018, and 2017, the Company entered into transactions with companies affiliated with three of its independent Board members.

The Company purchased approximately $ 1.1 million , $ 1.1 million , and $ 1.0 million in fiscal years 2019, 2018 and 2017, respectively, 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 sold approximately $ 0.4 million , $ 0.6 million and $ 0.4 million in fiscal years 2019, 2018 and 2017, respectively, of RV component products to DNA Enterprises, Inc.

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

In addition, in 2017 the Company sold approximately $ 1.1 million of various fiberglass and plastic components and wood products to a company with which John A.

Forbes was formerly affiliated.

Forbes was not affiliated with this company during 2019 or 2018.

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-K

Item 9A. Controls and Procedures