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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-02-26 · 96 added, 79 removed, 185 unchanged (49% of the section changed)

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The RV industry is our primary market and comprised 59% of the Company’s consolidated net sales in 2021.

Sales from the RV industry increased 8% in 2020 compared to 2019.

This increase in sales occurred despite an approximate 6-week operations shutdown in the late first quarter and early second quarter of 2020 in certain of our RV facilities in alignment with production shutdowns by certain OEM customers in response to the COVID-19 pandemic.

In the second half of 2020, OEM production improved sharply in response to a strong increase in retail and wholesale demand for RVs, and our sales to RV OEMs also improved.

According to the Recreation Vehicle Industry Association (“RVIA”), wholesale industry shipments totaled 430,000 units in 2020, an increase of 6% compared to 406,000 units in 2019.

RV industry retail unit sales increased 12% in 2020 according to Statistical Surveys, Inc ("SSI"), outpacing wholesale industry unit shipments.

As a result, RV industry dealer inventories, which were already at historically low levels entering 2020, declined by more than 80,000 units in 2020, resulting in dealer inventories at their lowest levels in the last decade.

Sales to the RV industry increased 73% in 2021 compared to 2020.

An approximate 6-week operations shutdown occurred in the late first quarter and early second quarter of 2020 in certain of our RV facilities in alignment with production shutdowns by certain OEM customers in response to the COVID-19 pandemic.

In the second half of 2020, OEM production improved sharply in response to a strong increase in retail and wholesale demand for RVs, and our sales to RV OEMs also improved for 2020, with demand continuing through 2021.

According to the Recreation Vehicle Industry Association (“RVIA”), wholesale industry shipments totaled approximately 600,200 units in 2021, an increase of 39% compared to 430,400 units in 2020.

RV industry retail unit sales totaled approximately 564,400 units in 2021, an increase of 8% compared to 2020 retail unit sales of 520,500 units according to Statistical Surveys, Inc ("SSI").

Marine Industry

Sales to the marine industry, which represented approximately 16% of the Company's consolidated net sales in 2021, increased 96% in 2021 compared to 2020.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which were impacted by marine OEM COVID-19 production shutdowns late in the first quarter and early in the second quarter of 2020.

While marine wholesale powerboat unit shipments began to improve in the second half of 2020, total 2020 marine wholesale powerboat unit shipments decreased an estimated 14% according to the National Marine Manufacturers Association.

At the same time, marine retail powerboat shipments increased 15% for 2020, benefiting from increased demand for powerboats, resulting in marine dealer inventory levels that are at their lowest since 2014 as retail sales outpaced marine wholesale unit shipments in 2020.

Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which increased 11% to approximately 138,400 units in 2021 compared to approximately 124,200 units in 2020, according to the National Marine Manufacturers Association.

Estimated marine retail powerboat shipments totaled approximately 214,200 units in 2021, a decrease of 9% compared to 2020 retail powerboat shipments of approximately 234,800 units.

Manufactured Housing ("MH") Industry

Sales to the MH industry, which represented 17% of the Company’s consolidated sales in 2020, decreased 1% in 2020 compared to 2019.

MH sales are correlated to MH industry wholesale unit shipments, which were impacted by temporary MH OEM production shutdowns as a result of COVID-19 in the late first quarter and early second quarter of 2020, slowly recovering in the second half of 2020 as MH OEMs worked through labor and supply constraints.

Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments were flat in 2020.

Sales to the MH industry, which represented 14% of the Company’s consolidated net sales in 2021, increased 26% in 2021 compared to 2020.

MH sales are generally correlated to MH industry wholesale unit shipments.

Based on industry data from the Manufactured Housing Institute, MH wholesale industry unit shipments totaled 105,800 units in 2021, an increase of 12% compared to 2020 MH wholesale industry unit shipments of 94,400 units.

Industrial Market

The industrial market is comprised primarily of the kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors.

The industrial market is comprised primarily of the solid surface countertop industry, kitchen cabinet industry, high-rise, hospitality, retail and commercial fixtures market, office and household furniture market and regional distributors.

Sales to this market represented 11% of our consolidated net sales in 2021, increasing 43% in 2021 compared to 2020.

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We estimate that a pproximately 70% of our industrial business is directly tied to the residential housing market, with the remaining 30% directly tied to the non-residential and commercial markets.

Combined new housing starts increased 7% in 2020 compared to 2019, with single family housing starts increasing 12% and multifamily residential starts decreasing 3% for the same period.

Combined new housing starts increased 16% in 2021 compared to 2020, with single family housing starts increasing 13% and multifamily residential starts increasing 23% for the same period.

Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.

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Year Ended December 31, 2021 Compared to 2020

Net sales in 2020 increased approximately $149.5 million, or 6%, to $2.49 billion from $2.34 billion in 2019.

The increase was attributable to an 8% increase in sales from the RV industry, a 14% increase in the Company’s sales from the industrial markets and a 3% increase in sales from the marine industry, partially offset by a 1% decrease in sales from the MH industry.

Net sales in 2021 increased approximately $1.59 billion, or 64%, to $4.08 billion from $2.49 billion in 2020.

The increase was attributable to a 73% increase in sales to our RV end market, a 96% increase in sales to our marine end market, a 26% increase in sales to our MH end market, and a 43% increase in sales to our industrial end market.

In 2021 and 2020 , net sales attributable to acquisitions completed in each of those years was $259.9 million and $81.9 million, respectively.

Net sales in 2020 were adversely impacted by the COVID-19 pandemic and the related approximate 6-week operations shutdown that occurred in the late first quarter and early second quarter of 2020 in certain of our facilities in alignment with production shutdowns by certain OEM customers in response to the COVID-19 pandemic.

The Company’s RV content per wholesale unit for 2021 increased 24% to $4,006 from $3,235 in 2020.

Marine powerboat content per wholesale unit for 2020 increased 24% to an estimated $2,098 from $1,696 in 2019.

MH content per wholesale unit for 2020 decreased 1% to $4,580 in 2020 from $4,616 in 2019.

Marine powerboat content per wholesale unit for 2021 increased 76% to $3,632 from $2,069 in 2020.

The Company's MH content per wholesale unit for 2021 increased 13% to $5,153 in 2021 from $4,580 in 2020.

Cost of Goods Sold.

Cost of goods sold increased $113.4 million, or 6%, to $2.03 billion in 2020 from $1.91 billion in 2019.

As a percentage of net sales, cost of goods sold decreased during 2020 to 81.5% from 81.9% in 2019.

The decrease in cost of goods sold as a percentage of net sales is attributed to certain fixed overhead components against the overall increase in net sales in 2020, partially offset by an increase in labor as an overall percentage of net sales.

Cost of goods sold increased $1.25 billion, or 62%, to $3.28 billion in 2021 from $2.03 billion in 2020.

As a percentage of net sales, cost of goods sold decreased 110 basis points during 2021 to 80.4% from 81.5% in 2020.

Cost of goods sold as a percentage of net sales decreased for 2021 compared to 2020 primarily as a result of (i) continued cost reduction and automation initiatives we deployed throughout 2020 and 2021, (ii) volume-driven efficiencies as a result of leveraging fixed overhead, (iii) a recovery from the production inefficiencies experienced while operating in a COVID-19 environment, and (iv) synergies and different cost profiles from our 2021 and 2020 acquisitions, partially offset by an increase in labor costs and certain labor inefficiencies, the impact of supply-chain constraints, and an increase in certain commodity cost inputs.

In general, the Company's cost of goods sold percentage can be impacted by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials and commodity-based components that are utilized in the production of our products.

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The increase in gross profit as a percentage of net sales in 2021 compared to 2020 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

Economic or industry-wide factors affecting the profitability of our RV, MH, marine and industrial businesses include the costs of commodities and the labor used to manufacture our products, the competitive environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

Economic or industry-wide factors affecting the profitability of our RV, marine, MH and industrial businesses include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the competitive environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

Warehouse and Delivery Expenses.

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As a percentage of net sales, warehouse and delivery expenses were 3.4% in 2021 and 4.0% in 2020.

The decrease as a percentage of net sales in 2020 compared to 2019 was primarily attributable to the lower proportion of MH industry net sales in 2020 compared to 2019, which have higher warehousing and delivery costs as a percentage of net sales.

The increase in warehouse and delivery expenses is attributable to the significant increase in sales.

The decrease of warehouse and delivery expenses as a percentage of net sales in 2021 compared to 2020 was primarily attributable to the lower proportion of MH industry net sales in 2021 compared to 2020, which have higher warehousing and delivery costs as a percentage of net sales.

In addition, the percentage of warehousing and delivery expenses as a percentage of sales decreased as we leveraged certain fixed warehousing costs in proportion to our overall sales growth.

Selling, General and Administrative ("SG&A") Expenses.

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As a percentage of net sales, SG&A expenses were 6.2% in 2021 and 5.9% in 2020.

The increase in SG&A expenses as a percentage of net sales in 2020 is primarily due to an expansion of general and administrative resources to support end market demand.

The increase in SG&A expenses in 2021 is primarily due to (i) the increase in net sales;

(ii) increases in the breadth and depth of corporate resources, specifically our investments in human capital and other technological initiatives to support the size and growth of the Company, (iii) the comparison to the prior year, which includes SG&A cost reduction measures implemented in the second quarter of 2020 that continued into the third quarter of 2020, and (iv) increased incentive compensation.

As a percentage of sales, SG&A expenses increased 30 basis points for 2021 compared 2020.

This increase is primarily a result of the aforementioned investment in human capital and incentive compensation.

Amortization of Intangible Assets.

Amortization of intangible assets increased $15.5 million, or 38%, in 2021 compared to 2020.

The increase in 2020 compared to 2019 primarily reflects the impact of an increase in intangible assets from businesses acquired in 2019 and 2020.

The increase in 2021 compared to 2020 primarily reflects the impact of intangible assets of businesses acquired in 2021 and 2020.

Operating Income.

Operating income increased $178.2 million, or 103%, to $351.7 million in 2021 from $173.4 million in 2020.

Operating income in 2020 and 2019 included $10.7 million and $0.9 million, respectively, from the businesses acquired in each year.

Operating income as a percentage of net sales was 7.0% in 2020 and 6.6% in 2019.

The increase in operating income is primarily attributable to the items discussed above as well as the operating margin profiles of businesses acquired in 2020.

Operating income in 2021 and 2020 included $25.0 million and $10.7 million, respectively, from the businesses acquired in each respective year.

Operating income as a percentage of net sales increased 160 basis points to 8.6% in 2021 from 7.0% in 2020.

The increase in operating income and operating margin is primarily attributable to the items discussed above as well as the operating margin profiles of businesses acquired in 2021 and 2020.

Interest Expense, Net.

Interest expense, net, increased $14.9 million, or 35%, to $57.9 million in 2021 from $43.0 million in 2020.

The increase in net interest expense reflects increased borrowings related to 2020 acquisitions, partly offset by decreases in the average interest rate on the variable rate portion of the Company's debt, which reflects a lower weighted average LIBOR in 2020 compared to 2019.

The increase in interest expense reflects (i) increased borrowings related to 2021 and 2020 acquisitions and (ii) the Company's issuance of its 4.75% Senior Notes (as defined herein) in April 2021 and 1.75% Convertible Notes (as defined herein) in December 2021.

Income Taxes.

Income tax expense increased $5.0 million, or 18%, to $33.3 million in 2020 from $28.3 million in 2019.

Income tax expense increased $35.6 million, or 107%, to $68.9 million in 2021 from $33.3 million in 2020, attributed to an increase in pre-tax income.

For 2021, the effective tax rate was 23.5% compared to 25.6% in 2020.

The increase in the effective tax rate in 2020 was mostly attributable to a change in the mix of state taxes and decreased benefits from stock-based compensation.

The decrease in the effective tax rate in 2021 was mostly attributable to increased benefits from stock-based compensation as well as a decrease in certain state tax rates.

See our Form 10-K for the year ended December 31, 2020 for a discussion of our consolidated operating results for the year ended December 31, 2020 compared to 2019.

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cabinet doors;

fiberglass bath fixtures

and tile systems;

fiberglass bath fixtures and tile systems;

hardwood furniture;

vinyl printing;

RV and marine furniture;

audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers;

decorative vinyl and paper laminated panels;

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custom cabinetry;

polymer-based flooring;

polymer-based and other flooring;

electrical systems components including instrument and dash panels;

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wiring and wire harnesses;

boat covers, towers, tops and frames;

marine hardware;

adhesives and sealants;

boat covers, towers, tops, trailers and frames;

marine hardware and accessories;

aluminum and plastic fuel tanks;

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and other products.

• Distribution – The Company distributes pre-finished wall and ceiling panels;

• Distribution – This segment includes the distribution of pre-finished wall and ceiling panels;

drywall and drywall finishing products;

electronics and audio systems components;

marine accessories and components;

wiring, electrical and plumbing products;

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The table below presents information about the net sales, gross profit, and operating income of the Company’s segments.

Reconciliations of the amounts below to consolidated totals are presented in Note 18 to Consolidated Financial Statements.

Reconciliations of the amounts below to consolidated totals are presented in Note 18 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Year Ended December 31,

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Manufacturing

Sales increased $92.3 million, or 6%, to $1.77 billion from $1.67 billion in 2019.

This segment accounted for approximately 70% of the Company’s consolidated net sales in 2020 and 2019.

Sales increased $1.23 billion, or 70%, to $3.00 billion in 2021 from $1.77 billion in 2020.

This segment accounted for approximately 72% of the Company’s consolidated net sales in 2021 compared to approximately 70% of the Company's consolidated net sales in 2020.

The sales increase reflected increased net sales across all of our end markets.

In 2020 and 2019, net sales attributable to acquisitions completed in each of those periods was $52.5 million and $8.3 million, respectively.

In 2021 and 2020, net sales attributable to acquisitions completed in each of those periods was approximately $202.2 million and $52.5 million, respectively.

Gross Profit.

Gross profit increased $274.0 million, or 84%, to $598.9 million in 2021 from $324.9 million in 2020.

As a percentage of net sales, gross profit was 18.4% in 2020 and 2019.

As a percentage of net sales, gross profit was 20.0% in 2021 compared to 18.4% in 2020.

Gross profit margin increased in 2021 compared to 2020 primarily due to (i) an improvement in manufacturing overhead expense as a percentage of net sales, and (ii) an improvement in direct labor as a percentage of net sales, partially offset by an increase in material costs as a percentage of net sales.

Operating Income.

Operating income increased $189.4 million, or 99%, to $379.9 million in 2021 from $190.5 million in 2020.

Operating income attributable to acquisitions completed in 2020 and 2019 was $7.0 million and $0.9 million, respectively.

Operating income for the manufacturing segment attributable to acquisitions completed in 2021 and 2020 was approximately $14.5 million and $7.0 million, respectively.

The increase in operating income primarily reflects the increase in gross profit mentioned above.

Sales increased $392.2 million, or 51%, to $1,154.7 million in 2021 from $762.5 million in 2020.

This segment accounted for approximately 30% of the Company’s consolidated net sales for 2020 and 2019.

The increase in net sales in 2020 is primarily attributed to an increase in RV, industrial and marine end market net sales, partially offset by a decrease in net sales to the MH market.

Revenue attributable to acquisitions completed in 2020 was $29.4 million.

This segment accounted for approximately 28% of the Company’s consolidated net sales for 2021 compared to 30% of the Company's

consolidated net sales in 2020.

The increase in net sales in 2021 is attributed to an increase in sales across all end markets.

In 2021 and 2020, net sales attributable to acquisitions completed in each of those periods was approximately $57.7 million and $29.4 million, respectively.

Gross Profit.

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As a percentage of net sales, gross profit was 18.3% in 2021 compared to 17.5% in 2020.

The increase in gross profit as a percentage of net sales for 2020 reflected the contribution of increased net sales in our higher margin transportation business and the positive impact of leveraging fixed costs on higher sales volumes in our other distribution businesses.

The increase in gross profit as a percentage of net sales for 2021 is primarily attributed to the higher margin profiles of certain 2021 and 2020 acquisitions as well as the benefit of leveraging certain fixed costs on increased net sales.

Operating Income.

Operating income in 2021 increased $51.9 million, or 95%, to $106.2 million from $54.4 million in 2020.

The businesses acquired in 2020 contributed approximately $3.7 million to operating income in the Distribution segment in 2020.

Operating income for the Distribution segment attributable to acquisitions completed in 2021 and 2020 was approximately $10.4 million and $3.7 million, respectively.

The overall improvement in operating income in 2021 primarily reflects the items discussed above.

Unallocated Corporate Expenses

As presented in Note 18 to the Consolidated Financial Statements, unallocated corporate expenses in 2020 increased $7.2 million, or 30%, to $30.7 million from $23.5 million in 2019.

As presented in Note 18 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K, unallocated corporate expenses in 2021 increased $47.4 million, or 155%, to $78.1 million from $30.7 million in 2020.

The increase in 2021 was mostly attributed to an increase in professional fees, administrative wages and incentive compensation.

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Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities decreased $32.2 million to $160.2 million in 2020 from $192.4 million in 2019 primarily due to:

(i) an increase in cash used by inventories of $54.2 million, which is primarily due to an increase in inventories purchased at year end to support a strong increase in end market demand for our products and (ii) an increase in cash used by trade and other receivables of $35.0 million, primarily due to an increase in year end sales as well as the timing of collection of trade receivables.

Partially offsetting the above increase in the use of operating cash flows were:

(i) an increase in cash from prepaid expenses, accounts payable, accrued liabilities and

other of $30.1 million;

(ii) an increase in depreciation and amortization of $10.5 million;

(iii) an increase in other operating items of $8.8 million and (iv) an increase in net income of $7.5 million.

Net cash provided by operating activities increased $91.9 million, or 57%, to $252.1 million in 2021 from $160.2 million in 2020 primarily due to:

(i) an increase in net income of $127.8 million;

(ii) an increase in cash from accounts payable, accrued liabilities and other of $129.1 million;

and (iii) an increase in depreciation and amortization of $31.5 million.

Partially offsetting these sources of cash was an increase in cash used for the purchase of inventory of $197.9 million as we strategically secured inventory to support a strong increase in end market demand for our products.

Investing Activities

Net cash used in investing activities increased $258.7 million to $337.9 million in 2020 from $79.2 million in 2019 primarily due to (i) an increase in cash used in business acquisitions of $250.0 million;

an increase in capital expenditures of $4.4 million and (iii) a decrease in cash provided by proceeds from sale of property, plant and equipment and other investing activities of $4.1 million.

N et cash used in i nvesting activities increased $236.8 million, or 70%, to $574.7 million in 2021 from $337.9 million in 2020 primarily due to a n increase in cash used in business acquisitions of $202.1 million and an increase in capital expenditures of $32.7 million .

Financing Activities

Net cash flows provided by financing activities increased $63.7 million to $83.0 million in 2020 from $19.3 million in 2019 primarily due to:

(i) an increase in net borrowings of $135.0 million in 2020 compared to an increase in net borrowings of $43.9 million in 2019, due primarily to our use of the 2019 Revolver (as defined herein) to fund 2020 business acquisitions and (ii) a decrease in payments of deferred financing, debt issuance, contingent consideration and other of $9.9 million.

These increases in cash from financing activities were partially offset by increases in cash paid for dividends and stock repurchases under our buyback program of $37.1 million.

Net cash flows provided by financing activities increased $317.6 million, or 382%, to $400.7 million in 2021 from $83.1 million in 2020 primarily due to:

(i) proceeds of $350.0 million from the Company's issuance of its 4.75% Senior Notes;

(ii) proceeds of $258.8 million from the Company's issuance of 1.75% Convertible Notes;

and (iii) an additional $51.9 million in term loan borrowings, net of repayments.

These sources of cash were partially offset by (i) $140.0 million of net revolver repayments in 2021 versus $140.0 million of net revolver borrowings in 2020, and (ii) a $29.2 million increase in stock repurchases and dividends to shareholders.

See our Form 10-K for the year ended December 31, 2020 for a discussion of cash flows for the year ended December 31, 2020 compared to 2019.

Summary of Liquidity and Capital Resources

The Company believes that existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2019 Credit Facility will be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.

At December 31, 2021, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under its 2021 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on its current cash flow budgets and forecast of short-term and long-term liquidity needs.

Following the issuance of the 4.75% Senior Notes, the Company amended and restated its credit agreement to establish a new $700 million senior secured credit facility consisting of a $550 million revolving credit facility and a $150 million term loan facility (the "2021 Credit Facility").

The maturity date for borrowings under the 2021 Credit Facility is April 2026.

The ability to access unused borrowing capacity under the 2021 Credit Facility as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the credit agreement that established the 2021 Credit Facility (the "2021 Credit Agreement").

In 2020, the Company was in compliance with its financial debt covenants as required under the terms of the 2019 Credit Agreement.

The required maximum consolidated total leverage ratio and the required minimum consolidated fixed charge coverage ratio compared to the actual amounts as of December 31, 2020 and for the fiscal year then ended are as follows:

See Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for aggregate maturities of total long-term debt for the next five fiscal years and thereafter.

As of and for the reporting period ended December 31, 2021, the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement.

The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of December 31, 2021 and for the fiscal period then ended are as follows:

Required Actual

Consolidated total leverage ratio (12-month period) 4.50 2.44

Consolidated secured net leverage ratio (12-month period) 2.75 0.29

Consolidated fixed charge coverage ratio (12-month period) 1.50 5.83

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH and marine industries as well as the industrial markets we serve, the timing of deliveries, and the payment cycles of customers.

In addition, as of December 31, 2021, the Company's consolidated total net leverage ratio (12-month period) was 2.33.

While this ratio was a covenant under the Company’s previous credit agreement and is not a covenant under the 2021 Credit Agreement, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement.

Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH, marine and industrial markets we serve, the timing of deliveries, and the payment cycles of customers.

In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly.

The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

Borrowings under the revolving credit loan (the "2019 Revolver") and the term loan (the "2019 Term Loan" and, together with the 2019 Revolver, the "2019 Credit Facility") established under the 2019 Credit Agreement, which are subject to variable rates of interest, are subject to a maximum total borrowing limit of $650.0 million (effective September 17, 2019).

See Note 8 of the Notes to the Consolidated Financial Statements for further information.

See Note 9 of the Notes to Consolidated Financial Statements for information on interest rate swaps used to partially hedge variable interest rates under the 2019 Revolver and 2019 Term Loan.

The unused availability under the 2019 Credit Facility as of December 31, 2020 was $314.6 million.

In April 2021, we issued $350.0 million aggregate principal amount of 4.75% Senior Notes due 2029 (the "4.75% Senior Notes"), which accrue interest at a rate of 4.75% per annum and mature on May 1, 2029.

The Company may redeem the 4.75% Senior Notes, in whole or in part, at any time (a) prior to May 1, 2024, at a price equal to 100% of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after May 1, 2024 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest.

In addition, prior to May 1, 2024, the Company may redeem, in one or more transactions, up to an aggregate of 40% of the original principal amount of the 4.75% Senior Notes at a redemption price equal to 104.75% of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings.

In December 2021, we completed the issuance of $258.8 million aggregate principal amount of 1.75% Convertible Senior Notes due 2028 (the “1.75% Convertible Notes”).

The net proceeds from the issuance of the 1.75% Convertible Notes were approximately $249.7 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the 1.75% Convertible Note Hedge Transactions and the Warrant Transactions (each as defined herein) of $13.8 million described in Note 9 of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

The 1.75% Convertible Notes are senior unsecured obligations of the Company, accrue interest at 1.75% per annum and mature on December 1, 2028.

The 1.75% Convertible Notes are convertible, in certain circumstances and subject to certain

conditions, into cash, or a combination of cash and common stock, at the Company’s election.

The initial conversion rate for the 1.75% Convertible Notes is 9.9887 shares of the Company’s common stock per $1,000 principal amount of 1.75% Convertible Notes (equal to an initial conversion price of $100.11 per share).

Prior to June 1, 2028, the 1.75% Convertible Notes may be converted at the option of the holders only upon the occurrence of specified events and during certain periods, and thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date, the Notes may be converted at any time.

The Company will satisfy any conversion by paying cash up to the aggregate principal amount of the 1.75% Convertible Notes to be converted and by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 1.75% Convertible Notes being converted.

The Company may redeem for cash all or any portion of the 1.75% Convertible Notes, at its option, on or after December 5, 2025 if the closing sale price per share of the Company’s common stock exceeds 130% of the conversion price of the 1.75% Convertible Notes for a specified period of time.

Off-Balance Sheet Arrangements

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Actual results may differ materially from these estimates under different assumptions or conditions.

Other material accounting policies are described in Notes 1, 3 and 15 of the Notes to Consolidated Financial Statements.

The Company has identified the following critical accounting policies and estimates:

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When estimating reporting unit fair value with the quantitative assessment, the Company uses a combination of market and income-based methodologies.

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 market approach includes a comparison of the multiple of a reporting unit's carrying value to its earnings before interest, taxes, depreciation and amortization with the multiples of similar businesses or guideline companies whose securities are actively traded in the public markets.

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

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Impairment reviews of indefinite-lived intangible assets (trademarks) consist of a comparison of the fair value of the trademark to its carrying value.

Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow method.

Fair value is measured using a relief-from-royalty approach, a form of discounted cash flow

Estimated royalty rates applied to projected revenues are based on comparable industry studies and consideration of operating margins.

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Based on the results of the Company's analyses, the estimated fair value of each of the Company's reporting units and trademarks was determined to exceed the carrying value for each of the years ended December 31, 2021, 2020 and 2019 and so no impairments were recognized.

Further, based on the results of the impairment analyses, none of

the Company’s reporting units or trademarks were at risk of failing the impairment assessments discussed above that would have a material effect on the Company’s Consolidated Financial Statements for any period presented.

See Note 7 of the Notes to Consolidated Financial Statements for information regarding immaterial impairments recorded in 2020 unrelated to the annual goodwill and trademark tests.

Finite-lived intangible assets that meet certain criteria continue to be amortized over their useful lives and are also subject to an impairment test based on estimated undiscounted cash flows when impairment indicators exist.

Further, based on the results of the impairment analyses, none of the Company’s reporting units or trademarks were at risk of failing the impairment assessments discussed above that would have a material effect on the Company’s Consolidated Financial Statements for any period presented.

Business Combinations.

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The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of property, plant and equipment, identifiable intangible assets, contingent consideration and other financial assets and liabilities.

Significant estimates and assumptions include subjective and/or complex judgments regarding items such as discount rates, customer attrition rates, royalty rates, economic lives and other factors, including estimated future cash flows that we expect to generate from the acquired assets.

Significant estimates and assumptions include subjective and/or complex judgments regarding items such as discount rates, customer attrition rates, royalty rates, and other factors, including estimated future cash flows that we expect to generate from the acquired assets.

The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

If we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations.

No changes in fiscal 2020 to provisional fair value estimates of assets and liabilities assumed in acquisitions were material.

No changes in the year ended December 31, 2021 to provisional fair value estimates of assets acquired and liabilities assumed in acquisitions were material.

If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop the acquisition date fair value estimates, we could record future impairment charges.

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What changed 10-K

Item 7. Management’s Discussion and Analysis