PATRICK INDUSTRIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Third Quarter Ended Nine Months Ended (thousands except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 NET SALES $ 1,060,177 $ 700,707 $ 2,930,613 $ 1,713,984 Cost of goods sold 852,016 567,210 2,356,443 1,397,285 GROSS PROFIT 208,161 133,497 574,170 316,699 Operating Expenses: Warehouse and delivery 35,885 25,263 100,613 70,204 Selling, general and administrative 64,245 38,184 175,842 105,681 Amortization of intangible assets 14,758 10,221 40,695 29,600 Total operating expenses 114,888 73,668 317,150 205,485 OPERATING INCOME 93,273 59,829 257,020 111,214 Interest expense, net 15,436 10,507 41,195 31,820 Income before income taxes 77,837 49,322 215,825 79,394 Income taxes 20,440 11,986 51,930 20,157 NET INCOME $ 57,397 $ 37,336 $ 163,895 $ 59,237 BASIC NET INCOME PER COMMON SHARE $ 2.52 $ 1.65 $ 7.18 $ 2.60 DILUTED NET INCOME PER COMMON SHARE $ 2.45 $ 1.62 $ 7.01 $ 2.57 Weighted average shares outstanding – Basic 22,789 22,674 22,826 22,784 Weighted average shares outstanding – Diluted 23,403 23,072 23,375 23,088 See accompanying Notes to Condensed Consolidated Financial Statements. 3 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Third Quarter Ended Nine Months Ended (thousands) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 NET INCOME $ 57,397 $ 37,336 $ 163,895 $ 59,237 Other comprehensive income (loss), net of tax: Unrealized gain (loss) of hedge derivatives 1,031 989 3,024 ( 1,553 ) Other 74 60 4 8 Total other comprehensive income (loss) 1,105 1,049 3,028 ( 1,545 ) COMPREHENSIVE INCOME $ 58,502 $ 38,385 $ 166,923 $ 57,692 See accompanying Notes to Condensed Consolidated Financial Statements. 4 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) As of (thousands) September 26, 2021 December 31, 2020 ASSETS Current Assets Cash and cash equivalents $ 44,882 $ 44,767 Trade and other receivables, net 292,932 132,505 Inventories 485,766 312,809 Prepaid expenses and other 39,205 37,982 Total current assets 862,785 528,063 Property, plant and equipment, net 309,170 251,493 Operating lease right-of-use assets 142,719 117,816 Goodwill 478,955 395,800 Intangible assets, net 558,040 456,276 Other non-current assets 6,789 3,987 TOTAL ASSETS $ 2,358,458 $ 1,753,435 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Current maturities of long-term debt $ 7,500 $ 7,500 Current operating lease liabilities 36,955 30,901 Accounts payable 219,153 105,786 Accrued liabilities 145,865 83,202 Total current liabilities 409,473 227,389 Long-term debt, less current maturities, net 1,077,664 810,907 Long-term operating lease liabilities 107,753 88,175 Deferred tax liabilities, net 49,344 39,516 Other long-term liabilities 22,176 28,007 TOTAL LIABILITIES 1,666,410 1,193,994 SHAREHOLDERS’ EQUITY Common stock 195,402 180,892 Additional paid-in-capital 23,981 24,387 Accumulated other comprehensive loss ( 3,024 ) ( 6,052 ) Retained earnings 475,689 360,214 TOTAL SHAREHOLDERS’ EQUITY 692,048 559,441 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,358,458 $ 1,753,435 See accompanying Notes to Condensed Consolidated Financial Statements. 5 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended (thousands) September 26, 2021 September 27, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 163,895 $ 59,237 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 76,298 52,955 Stock-based compensation expense 17,307 11,177 Amortization of convertible notes debt discount 5,528 5,302 Deferred income taxes 6,540 ( 4,057 ) Other non-cash items 1,644 3,521 Change in operating assets and liabilities, net of acquisitions of businesses: Trade and other receivables, net ( 142,550 ) ( 78,701 ) Inventories ( 127,464 ) ( 12,885 ) Prepaid expenses and other assets ( 593 ) 23,787 Accounts payable, accrued liabilities and other 146,812 52,422 Net cash provided by operating activities 147,417 112,758 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ( 44,155 ) ( 22,159 ) Proceeds from sale of property, plant and equipment 140 117 Business acquisitions, net of cash acquired ( 297,701 ) ( 123,382 ) Other ( 2,000 ) — Net cash used in investing activities ( 343,716 ) ( 145,424 ) CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings 58,750 — Term debt repayments ( 3,125 ) ( 2,500 ) Borrowings on revolver 425,930 8,198 Repayments on revolver ( 565,475 ) ( 8,198 ) Proceeds from senior notes offering 350,000 — Stock repurchases under buyback program ( 31,945 ) ( 20,286 ) Cash dividends paid to shareholders ( 19,487 ) ( 17,265 ) Taxes paid for share-based payment arrangements ( 14,898 ) ( 2,910 ) Payment of deferred financing costs and other ( 6,638 ) ( 58 ) Payment of contingent consideration from a business acquisition ( 1,600 ) ( 2,000 ) Proceeds from exercise of common stock options 4,902 642 Net cash provided by (used in) financing activities 196,414 ( 44,377 ) Increase (decrease) in cash and cash equivalents 115 ( 77,043 ) Cash and cash equivalents at beginning of year 44,767 139,390 Cash and cash equivalents at end of period $ 44,882 $ 62,347 See accompanying Notes to Condensed Consolidated Financial Statements. 6 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Third Quarter Ended September 26, 2021 (thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Balance June 27, 2021 $ 191,131 $ 24,387 $ ( 4,129 ) $ ( 21,550 ) $ 453,432 $ 643,271 Net income — — — — 57,397 57,397 Dividends declared — — — — ( 6,613 ) ( 6,613 ) Other comprehensive income, net of tax — — 1,105 — — 1,105 Share repurchases under buyback program ( 999 ) ( 135 ) — — ( 9,261 ) ( 10,395 ) Retirement of treasury stock ( 2,013 ) ( 271 ) — 21,550 ( 19,266 ) — Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 13 ) — — — — ( 13 ) Issuance of shares upon exercise of common stock options 325 — — — — 325 Stock-based compensation expense 6,971 — — — — 6,971 Balance September 26, 2021 $ 195,402 $ 23,981 $ ( 3,024 ) $ — $ 475,689 $ 692,048 Nine Months Ended September 26, 2021 (thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Balance December 31, 2020 $ 180,892 $ 24,387 $ ( 6,052 ) $ — $ 360,214 $ 559,441 Net income — — — — 163,895 163,895 Dividends declared — — — — ( 19,893 ) ( 19,893 ) Other comprehensive income, net of tax — — 3,028 — — 3,028 Share repurchases under buyback program ( 999 ) ( 135 ) — ( 21,550 ) ( 9,261 ) ( 31,945 ) Retirement of Treasury Stock ( 2,013 ) ( 271 ) — 21,550 ( 19,266 ) — Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 14,898 ) — — — — ( 14,898 ) Issuance of shares in connection with a business combination 10,211 — — — — 10,211 Issuance of shares upon exercise of common stock options 4,902 — — — — 4,902 Stock-based compensation expense 17,307 — — — — 17,307 Balance September 26, 2021 $ 195,402 $ 23,981 $ ( 3,024 ) $ — $ 475,689 $ 692,048 7 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.) Third Quarter Ended September 27, 2020 (thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Balance June 28, 2020 $ 173,178 $ 24,534 $ ( 8,292 ) $ — $ 303,848 $ 493,268 Net income — — — 37,336 37,336 Dividends declared — — — ( 5,865 ) ( 5,865 ) Other comprehensive income, net of tax — — 1,049 — 1,049 Stock repurchases under buyback program ( 647 ) ( 94 ) — ( 3,995 ) ( 4,736 ) Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 53 ) — — — ( 53 ) Stock-based compensation expense 4,830 — — — 4,830 Balance September 27, 2020 $ 177,308 $ 24,440 $ ( 7,243 ) $ — $ 331,324 $ 525,829 Nine Months Ended September 27, 2020 (thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Retained Earnings Total Balance December 31, 2019 $ 172,662 $ 25,014 $ ( 5,698 ) $ — $ 305,503 $ 497,481 Net income — — — — 59,237 59,237 Dividends declared — — — — ( 17,666 ) ( 17,666 ) Other comprehensive loss, net of tax — — ( 1,545 ) — — ( 1,545 ) Stock repurchases under buyback program ( 3,962 ) ( 574 ) — — ( 15,750 ) ( 20,286 ) Issuance of shares upon exercise of common stock options 642 — — — — 642 Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 3,211 ) — — — — ( 3,211 ) Stock-based compensation expense 11,177 — — — — 11,177 Balance September 27, 2020 $ 177,308 $ 24,440 $ ( 7,243 ) $ — $ 331,324 $ 525,829 See accompanying Notes to Condensed Consolidated Financial Statements 8 PATRICK INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc. (“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of September 26, 2021 and December 31, 2020, its results of operations for the third quarter and nine months ended September 26, 2021 and September 27, 2020, and its cash flows for the nine months ended September 26, 2021 and September 27, 2020. Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation of other non-current assets in the condensed consolidated balance sheets and accumulated other comprehensive loss in Note 11. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The December 31, 2020 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the third quarter and nine months ended September 26, 2021 are not necessarily indicative of the results that we will realize or expect for the full year ending December 31, 2021. The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Sunday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The third quarter of fiscal year 2021 ended on September 26, 2021 and the third quarter of fiscal year 2020 ended on September 27, 2020. In preparation of Patrick’s condensed consolidated financial statements as of and for the third quarter and nine months ended September 26, 2021, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements. See Note 18 for further information. 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Income Taxes In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 did not have a material effect on its condensed consolidated financial statements. 9 Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848) ", a new standard providing final guidance to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements. Accounting for Convertible Instruments and Contracts in an Entity's Own Equity In August 2020, the FASB issued ASU 2020-06, " Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ", a new standard that simplifies certain accounting treatments for convertible debt instruments. The guidance eliminates certain requirements that require separate accounting for embedded conversion features and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the diluted net income per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares, with certain exceptions. Furthermore, the guidance requires new disclosures about events that occur during the reporting period that cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements. At this point in time, we anticipate the primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our convertible notes referenced in Note 9. 3. REVENUE RECOGNITION In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors: Third Quarter Ended September 26, 2021 (thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 434,029 $ 199,208 $ 633,237 Marine 164,535 8,491 173,026 Manufactured Housing 65,785 68,840 134,625 Industrial 107,886 11,403 119,289 Total $ 772,235 $ 287,942 $ 1,060,177 10 Nine Months Ended September 26, 2021 (thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 1,161,254 $ 568,840 $ 1,730,094 Marine 453,223 23,105 476,328 Manufactured Housing 190,786 203,648 394,434 Industrial 296,769 32,988 329,757 Total $ 2,102,032 $ 828,581 $ 2,930,613 Third Quarter Ended September 27, 2020 (thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 290,326 $ 130,845 $ 421,171 Marine 88,861 4,590 93,451 Manufactured Housing 45,845 61,908 107,753 Industrial 69,242 9,090 78,332 Total $ 494,274 $ 206,433 $ 700,707 Nine Months Ended September 27, 2020 (thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 656,739 $ 288,778 $ 945,517 Marine 219,150 11,400 230,550 Manufactured Housing 127,857 182,579 310,436 Industrial 202,368 25,113 227,481 Total $ 1,206,114 $ 507,870 $ 1,713,984 Contract Liabilities Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial as of the beginning and end of all periods presented and changes in contract liabilities were immaterial during all periods presented. 11 4. INVENTORIES Inventories consist of the following: (thousands) September 26, 2021 December 31, 2020 Raw materials $ 261,775 $ 157,219 Work in process 30,221 19,282 Finished goods 66,189 37,632 Less: reserve for inventory obsolescence ( 13,604 ) ( 8,320 ) Total manufactured goods, net 344,581 205,813 Materials purchased for resale (distribution products) 147,502 112,158 Less: reserve for inventory obsolescence ( 6,317 ) ( 5,162 ) Total materials purchased for resale (distribution products), net 141,185 106,996 Total inventories $ 485,766 $ 312,809 5. GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the nine months ended September 26, 2021 by segment are as follows: (thousands) Manufacturing Distribution Total Balance - December 31, 2020 $ 338,045 $ 57,755 $ 395,800 Acquisitions 64,312 11,458 75,770 Adjustments to preliminary purchase price allocations 7,366 19 7,385 Balance - September 26, 2021 $ 409,723 $ 69,232 $ 478,955 Intangible assets, net consist of the following as of September 26, 2021 and December 31, 2020: (thousands) September 26, 2021 December 31, 2020 Customer relationships $ 549,314 $ 461,754 Non-compete agreements 19,144 15,949 Patents 36,528 23,025 Trademarks (non-amortizing, indefinite lived) 151,997 113,796 756,983 614,524 Less: accumulated amortization ( 198,943 ) ( 158,248 ) Intangible assets, net $ 558,040 $ 456,276 Changes in the carrying value of intangible assets for the nine months ended September 26, 2021 by segment are as follows: (thousands) Manufacturing Distribution Total Balance - December 31, 2020 $ 373,717 $ 82,559 $ 456,276 Acquisitions 114,833 32,715 147,548 Amortization ( 33,543 ) ( 7,152 ) ( 40,695 ) Adjustments to preliminary purchase price allocations ( 5,089 ) — ( 5,089 ) Balance - September 26, 2021 $ 449,918 $ 108,122 $ 558,040 12 6. ACQUISITIONS General The Company completed three acquisitions in the third quarter of 2021 and completed ten acquisitions in the nine months ended September 26, 2021 (the "2021 Acquisitions"). For the third quarter and nine months ended September 26, 2021, net sales included in the Company's condensed consolidated statements of income related to the 2021 Acquisitions were $ 84.0 million and $ 146.1 million, respectively, and operating income was $ 6.6 million and $ 12.6 million, respectively, for each of these periods. One of the 2021 Acquisitions accounted for $ 53.5 million in net sales and $ 2.6 million in operating income for the third quarter of 2021 and $ 85.6 million in net sales and $ 4.5 million in operating income for the nine months ended September 26, 2021. Acquisition-related costs associated with the businesses acquired in the third quarter of 2021 and first nine months of 2021 were immaterial. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s condensed consolidated balance sheet at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one year measurement period. The Company completed six acquisitions in the third quarter of 2020 and nine acquisitions in the nine months ended September 27, 2020. Net sales included in the Company's condensed consolidated statements of income in the third quarter and nine months ended September 27, 2020 related to acquisitions completed in the first nine months of 2020 were $ 19.6 million and $ 23.3 million, respectively, and operating income was $ 2.1 million and $ 2.2 million, respectively, for the same periods. For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income. In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company records a liability for the estimated fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition. As of September 26, 2021, the aggregate fair value of the estimated contingent consideration payments was $ 9.8 million, $ 3.7 million of which is included in "Accrued liabilities" and $ 6.1 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet. At December 31, 2020, the aggregate fair value of the estimated contingent consideration payments was $ 6.9 million, $ 1.6 million of which was included in the line item "Accrued liabilities" and $ 5.3 million was included in "Other long-term liabilities". The liabilities for contingent consideration expire at various dates through December 2023. The contingent consideration arrangements are subject to a maximum payment amount of up to $ 19.6 million in the aggregate. In the third quarter and nine months ended September 26, 2021, the Company made $ 1.5 million and $ 2.5 million in cash payments, respectively, related to contingent consideration liabilities. In connection with cash payments on contingent consideration, the Company recorded a $ 0.9 million charge in selling general and administrative expense in the condensed consolidated statement of income for the nine months ended September 26, 2021, representing changes from the amounts initially expected to be paid to what was ultimately paid. 13 2021 Acquisitions The Company completed ten acquisitions in the nine months ended September 26, 2021, including the following five previously announced acquisitions: Company Segment Description Sea-Dog Corporation & Sea-Lect Plastics (collectively, "Sea-Dog") Distribution & Manufacturing Distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailers, and manufacturers that provides plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington Hyperform, Inc. Manufacturing Manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida Alpha Systems, LLC Manufacturing & Distribution Manufacturer and distributor of component products and accessories for the recreational vehicle ("RV"), marine, manufactured housing and industrial end markets that includes adhesives, sealants, rubber roofing, roto/blow molding, injection molding, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of nine facilities in Elkhart, Indiana. Coyote Manufacturing Company Manufacturing Designer, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia. Tumacs Covers Manufacturing & Distribution Manufacturer of custom designed boat covers, canvas frames, and bimini tops, primary serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan. Inclusive of five acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $ 298.4 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2021 Acquisitions accounted for $ 149.3 million in cash and $ 10.2 million in common stock as consideration, $ 25.8 million in inventory, $ 28.4 million in fixed assets, $ 85.0 million in intangible assets, $ 18.1 million in accounts payable and accrued liabilities, $ 11.5 million in operating lease right-of-use assets and liabilities, and $ 33.6 million in 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. Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2021 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets. 14 2020 Acquisitions The Company completed eleven acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"), including the following seven previously announced acquisitions: Company Segment Description Maple City Woodworking Corporation Manufacturing Manufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana SEI Manufacturing, Inc. Manufacturing Manufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana Inland Plywood Company Manufacturing Supplier, laminator, and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida Synergy RV Transport Distribution Transportation and logistics service provider primarily for OEMs and dealers in the RV market located in Goshen, Indiana Front Range Stone Manufacturing Fabricator and installer of natural stone, quartz, solid surface, and laminate countertops, primarily serving big box home improvement retailers, home builders and commercial contractors in the industrial market based in Englewood, Colorado Geremarie Corporation Manufacturing Designer, manufacturer, and fabricator of a full suite of high-precision aluminum components serving the marine industry, in addition to the medical, aerospace, defense, commercial and industrial markets located in Lake Zurich, Illinois Taco Metals, LLC Manufacturing Manufacturer of boating products including rub rail systems, canvas and tower components, sport fishing and outrigger systems, helm chairs and pedestals, and specialty hardware for OEMs in the recreational boating industry and the related aftermarket headquartered in Miami, Florida, with manufacturing facilities in Tennessee and Florida, and distribution centers in Tennessee, Florida, South Carolina, and Massachusetts Inclusive of four acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $ 306.3 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2020 Acquisitions accounted for $ 129.7 million in cash consideration, $ 2.9 million in inventory, $ 49.3 million in fixed assets, $ 49.1 million in intangible assets, $ 2.6 million in accounts payable and accrued liabilities, $ 4.9 million in operating lease right-of-use assets and liabilities, and $ 32.6 million in goodwill. Purchase accounting adjustments are complete on all 2020 Acquisitio ns. Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2020 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets. 15 The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 2021 Acquisitions and the 2020 Acquisitions: (thousands) 2021 Acquisitions 2020 Acquisitions Consideration Cash, net of cash acquired $ 298,384 $ 306,319 Working capital holdback and other, net (1) 1,189 ( 37 ) Common stock issuance (2) 10,211 — Contingent consideration (3) 4,540 4,763 Total consideration $ 314,324 $ 311,045 Assets Acquired Trade receivables $ 18,582 $ 15,320 Inventories 46,099 25,395 Prepaid expenses & other 975 725 Property, plant & equipment 53,570 65,083 Operating lease right-of-use assets 16,438 20,029 Identifiable intangible assets 147,495 130,981 Liabilities Assumed Current portion of operating lease obligations ( 3,984 ) ( 2,721 ) Accounts payable & accrued liabilities ( 26,171 ) ( 12,405 ) Operating lease obligations ( 12,454 ) ( 17,308 ) Deferred tax liabilities ( 1,996 ) ( 4,576 ) Total fair value of net assets acquired 238,554 220,523 Goodwill (4) 75,770 90,522 $ 314,324 $ 311,045 (1) Certain acquisitions contain working capital holdbacks which are typically settled after a 90 -day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of September 26, 2021. (2) In connection with one acquisition, the Company issued 113,961 shares of common stock at a closing price of $ 89.60 as of the acquisition date. (3) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions. (4) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $ 6.2 million), and the 2020 Acquisitions, except Front Range Stone (approximately $ 11.0 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. We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation on the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete agreements are valued using a discounted cash flow approach, which is a variation of an income approach, with and without the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value. 16 The following table presents our estimates of identifiable intangible assets for the 2021 Acquisitions and the 2020 Acquisitions: (thousands, except year info) Estimated Useful Life (in years) 2021 Acquisitions 2020 Acquisitions Customer relationships 10 $ 92,453 $ 99,897 Non-compete agreements 5 3,255 1,150 Patents 10 - 18 13,450 6,470 Trademarks Indefinite 38,337 23,464 $ 147,495 $ 130,981 Pro Forma Information The following pro forma information for the third quarter and nine months ended September 27, 2020 assumes the 2021 Acquisitions and the 2020 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of the 2021 Acquisitions and 2020 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition. The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.2 million and $ 4.0 million for the third quarter and nine months ended September 26, 2021, respectively and $ 5.2 million and $ 16.3 million for the third quarter and nine months ended September 27, 2020, respectively. Third Quarter Ended Nine Months Ended (thousands, except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 Revenue $ 1,067,111 $ 802,753 $ 3,040,971 $ 2,049,211 Net income 58,190 43,183 172,574 66,967 Basic net income per common share 2.55 1.90 7.56 2.94 Diluted net income per common share 2.49 1.87 7.38 2.90 The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of the periods indicated above. 7. STOCK-BASED COMPENSATION The Company recorded expense of approximately $ 7.0 million and $ 17.3 million the third quarter and nine months ended September 26, 2021, respectively, for its stock-based compensation plans in the condensed consolidated statements of income. Stock-based compensation expense of $ 4.9 million and $ 11.2 million was recorded in the third quarter and nine months ended September 27, 2020, which includes a $ 2.3 million reduction of expense in the nine month period due to certain forfeitures and adjustments. The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first nine months of 2021 totaling 296,073 shares in the aggregate at an average fair value of $ 73.31 at grant date for a total fair value at grant date of $ 21.7 million. As of September 26, 2021, there was approximately $ 31.5 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans. That cost is expected to be recognized over a weighted-average period of 18.5 months. 17 8. NET INCOME PER COMMON SHARE Net income per common share calculated for the third quarter and nine months of 2021 and 2020 is as follows: Third Quarter Ended Nine Months Ended (thousands except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 Net income for basic and diluted per share calculation $ 57,397 $ 37,336 $ 163,895 $ 59,237 Weighted average common shares outstanding - basic 22,789 22,674 22,826 22,784 Effect of potentially dilutive securities 614 398 549 304 Weighted average common shares outstanding - diluted 23,403 23,072 23,375 23,088 Basic net income per common share $ 2.52 $ 1.65 $ 7.18 $ 2.60 Diluted net income per common share $ 2.45 $ 1.62 $ 7.01 $ 2.57 An immaterial amount of securities was not included in the computation of diluted income per share as they are considered anti-dilutive under the treasury stock method for all periods presented. 9. DEBT A summary of total debt outstanding at September 26, 2021 and December 31, 2020 is as follows: (thousands) September 26, 2021 December 31, 2020 Long-term debt: 1.0 % convertible notes due 2023 $ 172,500 $ 172,500 Term loan due 2026 148,125 92,500 Revolver due 2026 135,455 275,000 7.50 % senior notes due 2027 300,000 300,000 4.75 % senior notes due 2029 350,000 — Total long-term debt 1,106,080 840,000 Less: convertible notes debt discount, net ( 10,545 ) ( 16,072 ) Less: term loan deferred financing costs, net ( 660 ) ( 434 ) Less: senior notes deferred financing costs, net ( 9,711 ) ( 5,087 ) Less: current maturities of long-term debt ( 7,500 ) ( 7,500 ) Total long-term debt, less current maturities, net $ 1,077,664 $ 810,907 4.75 % Senior Notes due 2029 On April 20, 2021, the Company issued $ 350.0 million aggregate principal amount of 4.75 % Senior Notes due 2029 (the " 4.75 % Senior Notes"). The 4.75 % Senior Notes were not registered under the Securities Act of 1933, as amended (the "Securities Act") and were offered under rule 144A under the Securities Act. The 4.75 % Senior Notes will mature on May 1, 2029. Interest on the 4.75 % Senior Notes started accruing April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November 1, 2021. The effective interest rate on the 4.75 % Senior Notes, which includes debt issuance costs, is approximately 4.98 %. In connection with the issuance of the 4.75 % Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75 % Senior Notes 18 approximately $ 5.3 million in deferred financing costs which are being amortized using the effective interest rate over the term of the 4.75 % Senior Notes. The 4.75 % Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2021 Credit Facility (as defined herein). The Company may redeem the 4.75 % Senior Notes at any time according to the following timeframes with the respective restrictions and prices: Timeframe Redemption Restrictions Redemption Prices Prior to May 1, 2024 Up to 40 % of the notes 104.750 % After May 1, 2024 In whole, or in part 102.375 % After May 1, 2025 In whole, or in part 101.188 % After May 1, 2026 In whole, or in part 100.000 % 2021 Credit Facility Simultaneously with the issuance of the 4.75 % Senior Notes, the Company entered into the Fourth Amended and Restated Credit Agreement (the "2021 Credit Agreement"). The 2021 Credit Agreement amended and extended the Company's 2019 Credit Agreement (as defined herein) and consists of a senior secured revolver (the "2021 Revolver") and a senior secured term loan (the "2021 Term Loan" and together with the 2021 Revolver, the "2021 Credit Facility"). The maturity date for borrowings under the 2021 Credit Agreement is April 20, 2026. Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2021 Credit Facility by up to $ 250.0 million for acquisitions. The Company determined that the terms of the 2021 Credit Agreement were not substantially different from the terms of the Company’s 2019 Credit Agreement. Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial. Borrowings under the 2021 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Pursuant to the 2021 Credit Agreement: • The 2021 Term Loan is due in consecutive quarterly installments in the following amounts: (i) beginning June 30, 2021, through and including March 31, 2024, $ 1,875,000 and (ii) beginning June 30, 2024, and each quarter thereafter, $ 3,750,000 , with the remaining balance due at maturity; • The interest rates for borrowings under the 2021 Revolver and the 2021 Term Loan are the Prime Rate or LIBOR plus a margin, which ranges from 0.00 % to 0.75 % for Prime Rate loans and from 1.00 % to 1.75 % for LIBOR loans depending on the Company's consolidated total leverage ratio, as defined below. The Company is required to pay fees on unused but committed portions of the 2021 Revolver, which range from 0.15 % to 0.225 %; and • Covenants include requirements as to a maximum consolidated secured net leverage ratio ( 2.75 :1.00, increasing to 3.25 :1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixed charge coverage ratio ( 1.50 :1.00) that are tested on a quarterly basis, a minimum liquidity requirement applicable during the six-month period preceding the maturity of the Company's 1.00 % Convertible Notes due 2023, and other customary covenants. The total face value of the 2021 Term Loan is $ 150.0 million. Total available borrowing capacity under the 2021 Revolver is $ 550.0 million. At September 26, 2021, the Company had $ 148.1 million outstanding under the 2021 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2021 Revolver of $ 135.5 million under the LIBOR-based option. The interest rate for incremental borrowings at September 26, 2021 was LIBOR plus 1.50 % (or 1.63 %) for the LIBOR-based option. The fee payable on committed but unused portions of the 2021 Revolver was 0.20 % at September 26, 2021. 19 Total cash interest paid for the third quarter of 2021 and 2020 was $ 3.7 million and $ 3.2 million, respectively, and $ 21.2 million and $ 21.4 million for the comparative nine month periods, respectively. 2019 Credit Facility See Note 8 of the Notes to Consolidated Financial Statements section of the Fiscal 2020 Form 10-K regarding the Company's previous credit agreement (the "2019 Credit Agreement") which established a $ 550 million revolving credit loan (the "2019 Revolver") and a $ 100 million term loan (the "2019 Term Loan" and, together with 2019 Revolver, the "2019 Credit Facility"). The 2019 Credit Agreement was amended by the 2021 Credit Agreement on April 20, 2021 as discussed above. 10. DERIVATIVE FINANCIAL INSTRUMENTS The Company's credit facility exposes the Company to risks associated with the variability in interest expense associated with fluctuations in LIBOR. To partially mitigate this risk, the Company entered into interest rate swaps. As of September 26, 2021, the Company had a combined notional principal amount of $ 200 million of interest rate swap agreements, all of which are designated as cash flow hedges. These swap agreements effectively convert the interest expense associated with a portion of the Company's variable rate debt from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022. The following table summarizes the fair value of derivative contracts included in the condensed consolidated balance sheets (in thousands): Fair value of derivative instruments Derivatives accounted for as cash flow hedges Balance sheet location September 26, 2021 December 31, 2020 Interest rate swaps Accrued liabilities $ 2,506 $ — Interest rate swaps Other long-term liabilities $ — $ 6,567 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. See Note 11 for information regarding accumulated other comprehensive loss on interest rate swaps, which qualify as cash flow hedges. 11. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss includes unrealized gains and losses on derivatives that qualify as cash flow hedges, cumulative foreign currency translation and other adjustments. The activity in accumulated other comprehensive loss during the third quarter and nine months ended September 26, 2021 and September 27, 2020 was as follows: Third Quarter Ended September 26, 2021 (thousands) Cash Flow Hedges Other Foreign Currency Translation Total Balance at June 27, 2021 $ ( 2,896 ) $ ( 1,263 ) $ 30 $ ( 4,129 ) Other comprehensive income (loss) before reclassifications, net of tax ( 19 ) — 74 55 Amounts reclassified from accumulated other comprehensive loss, net of tax 1,050 — — 1,050 Other comprehensive income 1,031 — 74 1,105 Balance at September 26, 2021 $ ( 1,865 ) $ ( 1,263 ) $ 104 $ ( 3,024 ) 20 Nine Months Ended September 26, 2021 (thousands) Cash Flow Hedges Other Foreign Currency Translation Total Balance at December 31, 2020 $ ( 4,889 ) $ ( 1,263 ) $ 100 $ ( 6,052 ) Other comprehensive income (loss) before reclassifications, net of tax ( 70 ) — 4 ( 66 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 3,094 — — 3,094 Other comprehensive income 3,024 — 4 3,028 Balance at September 26, 2021 $ ( 1,865 ) $ ( 1,263 ) $ 104 $ ( 3,024 ) Third Quarter Ended September 27, 2020 (thousands) Cash Flow Hedges Other Foreign Currency Translation Total Balance at June 28, 2020 $ ( 6,916 ) $ ( 1,270 ) $ ( 106 ) $ ( 8,292 ) Other comprehensive income (loss) before reclassifications, net of tax ( 38 ) — 60 22 Amounts reclassified from accumulated other comprehensive loss, net of tax 1,027 — — 1,027 Other comprehensive income 989 — 60 1,049 Balance at September 27, 2020 $ ( 5,927 ) $ ( 1,270 ) $ ( 46 ) $ ( 7,243 ) Nine Months Ended September 27, 2020 (thousands) Cash Flow Hedges Other Foreign Currency Translation Total Balance at December 31, 2019 $ ( 4,374 ) $ ( 1,270 ) $ ( 54 ) $ ( 5,698 ) Other comprehensive income (loss) before reclassifications, net of tax ( 3,940 ) — 8 ( 3,932 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 2,387 — — 2,387 Other comprehensive income (loss) ( 1,553 ) — 8 ( 1,545 ) Balance at September 27, 2020 $ ( 5,927 ) $ ( 1,270 ) $ ( 46 ) $ ( 7,243 ) 12. LEASES Lease expense, supplemental cash flow information, and other information related to leases were as follows: Third Quarter Ended (thousands) September 26, 2021 September 27, 2020 Operating lease cost $ 10,760 $ 8,525 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 10,440 $ 8,317 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 12,573 $ 17,091 21 Nine Months Ended (thousands) September 26, 2021 September 27, 2020 Operating lease cost $ 30,697 $ 25,093 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 29,945 $ 24,680 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 52,564 $ 34,993 Balance sheet information related to leases was as follows: (thousands, except lease term and discount rate) September 26, 2021 December 31, 2020 Assets Operating lease right-of-use assets $ 142,719 $ 117,816 Liabilities Operating lease liabilities, current portion $ 36,955 $ 30,901 Long-term operating lease liabilities 107,753 88,175 Total lease liabilities $ 144,708 $ 119,076 Weighted average remaining lease term, operating leases (in years) 5.1 5.3 Weighted average discount rate, operating leases 3.9 % 4.1 % Maturities of lease liabilities were as follows at September 26, 2021: (thousands) 2021 (excluding the nine months ended September 26, 2021) $ 10,617 2022 41,015 2023 35,238 2024 27,629 2025 18,787 Thereafter 27,681 Total lease payments 160,967 Less imputed interest ( 16,259 ) Total $ 144,708 As of September 26, 2021, outstanding leases have remaining lease terms ranging from 1 year to 18 years. The Company has additional operating leases that have not yet commenced as of September 26, 2021 and, therefore, were not included as operating lease right-of-use assets and corresponding operating lease liabilities on our balance sheet at September 26, 2021. These operating leases will commence between the fourth quarter of fiscal 2021 and the second quarter of fiscal 2022 with lease terms of 5 years to 10 years. The estimated fair value of these operating lease right-of-use assets and corresponding operating lease liabilities to be recorded on our balance sheet upon lease commencement is approximately $ 5.8 million. 22 13. FAIR VALUE MEASUREMENTS The following table presents fair values of certain assets and liabilities at September 26, 2021 and December 31, 2020: September 26, 2021 December 31, 2020 (in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash equivalents (1) $ 41.0 $ — $ — $ — $ — $ — 7.50 % senior notes due 2027 (2) — 326.3 — — 329.0 — 4.75 % senior notes due 2029 (2) — 359.7 — — — — Convertible note (2) — 193.0 — — 180.0 — Term loan due 2026 (3) — 148.1 — — 92.5 — Revolver due 2026 (3) — 135.5 — — 275.0 — Interest rate swaps (4) — 2.5 — — 6.6 — Contingent consideration (5) — — 9.8 — — 6.9 (1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of September 26, 2021 as a component of "Cash and cash equivalents". The Company held no cash equivalents as of December 31, 2020. (2) The amounts of these notes listed above are the current fair values for disclosure purposes only, valued using Level 2 inputs, and they are recorded in the Company's condensed consolidated balance sheets as of September 26, 2021 and December 31, 2020 using the interest rate method as described in Note 9. (3) The carrying amounts of our term loan and revolver, valued using Level 2 inputs, approximate fair value as of September 26, 2021 and December 31, 2020 based upon their terms and conditions in comparison to the terms and conditions available at those dates. (4) The interest rate swaps are classified as Level 2 in the fair value hierarchy and discussed further in Note 10. (5) The estimated fair value of the Company's contingent consideration is valued using Level 3 inputs and is discussed further in Note 6. 14. INCOME TAXES The effective tax rate in the third quarter of 2021 and 2020 was 26.3 % and 24.3 %, respectively, and the effective tax rate for the comparable nine month periods was 24.1 % and 25.4 %, respectively. The effective tax rate for the first nine months of 2020 reflects the impact of $ 2.2 million of permanent tax differences due to certain Coronavirus Aid, Relief, and Economic Security Act payroll tax credits. In addition, the first nine months of 2021 includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $ 5.7 million. Cash paid for income taxes, net of refunds, was $ 19.7 million and $ 43.9 million, respectively, in the third quarter and first nine months of 2021 and $ 1.8 million and $ 1.6 million, respectively, in the third quarter and nine months of 2020. 23 15. SEGMENT INFORMATION The Company has two reportable segments, Manufacturing and Distribution, which are based on its method of internal reporting, which segregates its businesses based on the manner in which its chief operating decision maker allocates resources, evaluates financial results, and determines compensation. The tables below present information about the sales and operating income of those segments. Third Quarter Ended September 26, 2021 (thousands) Manufacturing Distribution Total Net outside sales $ 772,235 $ 287,942 $ 1,060,177 Intersegment sales 20,064 1,880 21,944 Total sales 792,299 289,822 1,082,121 Operating income 91,370 31,187 122,557 Third Quarter Ended September 27, 2020 (thousands) Manufacturing Distribution Total Net outside sales $ 494,274 $ 206,433 $ 700,707 Intersegment sales 12,004 1,640 13,644 Total sales 506,278 208,073 714,351 Operating income 63,312 16,444 79,756 Nine Months Ended September 26, 2021 (thousands) Manufacturing Distribution Total Net outside sales $ 2,102,032 $ 828,581 $ 2,930,613 Intersegment sales 49,914 4,800 54,714 Total sales 2,151,946 833,381 2,985,327 Operating income 269,227 83,563 352,790 Nine Months Ended September 27, 2020 (thousands) Manufacturing Distribution Total Net outside sales $ 1,206,114 $ 507,870 $ 1,713,984 Intersegment sales 24,691 4,025 28,716 Total sales 1,230,805 511,895 1,742,700 Operating income 131,426 33,350 164,776 The following table presents a reconciliation of segment operating income to consolidated operating income: Third Quarter Ended Nine Months Ended (thousands) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020 Operating income for reportable segments $ 122,557 $ 79,756 $ 352,790 $ 164,776 Unallocated corporate expenses ( 14,526 ) ( 9,706 ) ( 55,075 ) ( 23,962 ) Amortization ( 14,758 ) ( 10,221 ) ( 40,695 ) ( 29,600 ) Consolidated operating income $ 93,273 $ 59,829 $ 257,020 $ 111,214 Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other. 24 The following table presents an allocation of total assets to the reportable segments of the Company and a reconciliation to consolidated total assets: (thousands) September 26, 2021 December 31, 2020 Manufacturing assets $ 1,838,583 $ 1,337,920 Distribution assets 453,839 343,170 Assets for reportable segments 2,292,422 1,681,090 Corporate assets unallocated to segments 21,154 27,578 Cash and cash equivalents 44,882 44,767 Consolidated total assets $ 2,358,458 $ 1,753,435 16. STOCK REPURCHASE PROGRAMS In March 2020, the Board approved a new stock repurchase program for up to $ 50 million of its common stock, including amounts remaining under previous authorizations. In August 2021, the Company's Board authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program to $ 50 million, including the $ 14.4 million remaining under the previous authorization. Approximately $ 39.6 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of September 26, 2021. The Company repurchased 128,929 shares of its common stock at an average price of $ 80.62 for an aggregate cost of $ 10.4 million in the third quarter ended September 26, 2021 and repurchased 388,929 shares of its common stock at an average price of $ 82.14 for an aggregate cost of $ 31.9 million in the nine months ended September 26, 2021. Prior to 2021, the Company retired shares as repurchased. Beginning in 2021, the Company elected not to retire shares as repurchased and the shares repurchased in the first six months of 2021 were instead held as "Treasury Stock." However, the Company retired these shares during the third quarter ended September 26, 2021 and has elected to retire shares immediately upon repurchase going forward. In the third quarter ended September 27, 2020, the Company repurchased 88,950 shares of its common stock at an average price of $ 53.24 per share for an aggregate cost of $ 4.7 million. In the first nine months ended September 27, 2020, the Company repurchased 545,105 shares of its common stock at an average price of $ 37.22 per share for an aggregate cost of approximately $ 20.3 million. 17. COMMITMENTS AND CONTINGENCIES The Company is subject to proceedings, lawsuits, audits, and other claims arising in the normal course of business. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. Accruals for these items, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are adjusted from time to time as developments warrant. Although the ultimate outcome of these matters cannot be ascertained, on the basis of present information, amounts already provided, availability of insurance coverage and legal advice received, it is the opinion of management that the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. Certain of our customers in the RV end market recently have initiated recalls involving certain products which are sold by our Distribution segment. We are currently evaluating the extent to which this matter will impact our consolidated financial statements. At this time, we are unable to reasonably estimate any such impact. 18. SUBSEQUENT EVENTS In November 2021, we completed the acquisition of Wet Sounds, Inc., a manufacturer of premium audio products and accessories for the marine OEM market and aftermarket as well as other adjacent OEM markets and aftermarkets. Products include speakers, subwoofers, amplifiers, soundbars, and media units. Wet Sounds, Inc. is headquartered in Rosenberg, Texas . 25