What changed in this filing

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Item 9A. Controls and Procedures

2022-02-25 compared with 2021-02-26 · 353 added, 258 removed, 975 unchanged (39% of the section changed)

13 unchanged sentences

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

As permitted under SEC guidance, management’s

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

As permitted under SEC guidance, management’s assessment of and conclusion regarding the design and effectiveness of internal control over financial reporting excluded the internal control over financial reporting of the operations of businesses acquired in 2021, which are described in Note 4 of the Notes to Consolidated Financial Statements included elsewhere in this

Businesses acquired in 2021 represented less than 7% of consolidated net sales for the year ended December 31, 2021 and approximately 8% of consolidated total assets as of December 31, 2021.

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

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

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

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

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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

The information required by this item is set forth in our Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2022, under the captions “Related Party Transactions” and “Corporate Governance”, and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

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

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

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

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

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Bank, National Association, as Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on September 18, 2019 and incorporated herein by reference).

4.3 Indenture (including Form of Note), dated as of April 20, 2021 , among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S.

Bank, National Association, as Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on April 26, 2021 and incorporated herein by reference).

4.4 Indenture (including Form of Note) with respect to the Company's 1.75% Convertible Senior Notes due 2028, dated as of December 13, 2021.

between Patrick Industries, Inc.

Bank National Association, as trustee.

(filed as Exhibit 4.1 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

4.5** Description of the Company’s common stock.

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

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

10.9 Fourth Amended and Restated Credit Agreement dated April 20, 2021 by and among the Company, the Guarantors, the lenders from time to time a party thereto and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Form 8-K filed on April 20, 2021 and incorporated herein by reference).

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

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

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

10.18 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Bank of America, N.A.

(filed as Exhibit 10.1 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.19 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Nomura Global Financial Products Inc.

(filed as Exhibit 10.

2 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.20 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Wells Fargo Bank, National Association.

(filed as Exhibit 10.

3 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.21 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Bank of America, N.A.

(filed as Exhibit 10.

4 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.22 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Nomura Global Financial Products Inc.

(filed as Exhibit 10.

5 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.23 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries.

and Wells Fargo Bank, National Association.

(filed as Exhibit 10.

6 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.24 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Bank of America, N.A.

(filed as Exhibit 10.

7 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.25 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Nomura Global Financial Products Inc.

(filed as Exhibit 10.

8 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.26 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Wells Fargo Bank, National Association.

(filed as Exhibit 10.

9 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.27 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Bank of America, N.A.

(filed as Exhibit 10.1 0 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.28 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Nomura Global Financial Products Inc.

(filed as Exhibit 10.1 1 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

10.29 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc.

and Wells Fargo Bank, National Association.

(filed as Exhibit 10.1 2 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference)

21** Subsidiaries of the Registrant.

23.1** Consent of Deloitte & Touche LLP.

23.2** Consent of Crowe LLP.

31.1** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.

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Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 formatted in XBRL (“eXtensible Business Reporting Language”):

(i) the Consolidated Statements of Financial Position;

(i) the Consolidated Balance Sheet;

(ii) the Consolidated Statements of Income;

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February 25, 2022

President and Chief Executive Officer

Chief Executive Officer

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

Signature Title Date

Nemeth President and Chief Executive Officer February 26, 2021

Nemeth Chief Executive Officer February 25, 2022

Nemeth (Principal Executive Officer)

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(Principal Financial Officer)

Rose Principal Accounting Officer February 26, 2021

Rose (Principal Accounting Officer)

Rose Vice President Finance February 25, 2022

Rose and Principal Accounting Officer

(Principal Accounting Officer)

/s/ Joseph M.

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Index to the Financial Statements

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

Report of Independent Registered Public Accounting Firm, Crowe LLP

Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP (Firm ID No.

Financial Statements :

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Consolidated Statements of Comprehensive Income

Consolidated Statements of Financial Position

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

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Opinions on the Financial Statements and Internal Control over Financial Reporting

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

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

We have audited the accompanying consolidated balance sheets of Patrick Industries, Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in the accompanying Management's Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at the operations of businesses acquired in 2021, which are described in Note 4, whose financial statements constitute less than 7% of consolidated net sales for the year ended December 31, 2021 and approximately 8% of consolidated total assets as of December 31, 2021.

Accordingly, our audit did not include the internal control over financial reporting at these businesses.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

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

As described in Management's Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at the operations of businesses acquired in 2020, which are described in Note 4, whose financial statements constitute less than 3% of consolidated net sales for the year ended December 31, 2020 and approximately 19% of consolidated total assets as of December 31, 2020.

Accordingly, our audit did not include the internal control over financial reporting at these businesses.

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

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

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill-Refer to Notes 1 and 7 to the financial statements

Acquisitions—Refer to Note 4 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

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 (EBITDA) for the reporting units to similar businesses or guideline companies whose securities are actively traded in 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.

The income approach fair value estimate also includes estimates of long-term growth rates and discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and the internally-developed forecasts.

The goodwill balance was $396 million as of December 31, 2020.

The estimated fair value of each of the Company's reporting units was determined to exceed the carrying value for the year ended December 31, 2020, and so no impairment was recognized.

Given the significant judgments made by management to estimate the fair value of certain of the Company’s reporting units, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rates and forecasts of sales and operating income, specifically due to the sensitivity of the Company’s operations to periods of volatility in the Company’s end customer markets, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

The Company completed several acquisitions during the year ended December 31, 2021.

One of these acquisitions included total consideration of approximately $163 million.

The Company accounted for this acquisition under the acquisition method of accounting for business combinations and allocated the purchase price to the assets acquired and liabilities assumed based on their respective fair values.

The purchase price allocation included a customer relationships intangible asset of $48 million and a trademark intangible asset of $28 million.

The Company estimated the value of the customer relationships using the multi-period excess earnings method.

The Company estimated the value of the trademark using the relief-from-royalty method.

The fair value determination of these intangible assets required management to make significant estimates and assumptions related to future cash flows and the selection of the discount rate, customer attrition rate, and royalty rate.

We identified this acquisition as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the intangible assets discussed above.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate management’s valuation methodologies and the reasonableness of management’s assumptions related to future cash flows and the selection of the discount rate, customer attrition rate, and royalty rate.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the discount rate and forecasts of sales and operating income used by management to estimate the fair value of certain reporting units included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Company’s reporting units, such as controls related to management’s selection of the discount rates and forecasts of sales and operating income.

• We evaluated management’s ability to accurately forecast sales and operating income by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s sales and operating income assumptions included in the income approach model, and extent to which forecast projection risk had been contemplated in the selection of the discount rates, by comparing the forecasts to historical sales and operating income, the strategic plans communicated to the Board of Directors, and forecasted information included in analyst and industry reports.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and discount rates by testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to the discount rates selected by management.

Our audit procedures related to the fair value of the acquired intangible assets discussed above included the following, among others:

• We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the appropriateness of the valuation methodology, forecasts of future cash flows and selection of the discount rate, customer attrition rate, and royalty rate.

• With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methodology, the discount rate, customer attrition rate, and royalty rate by:

◦ Testing the source information underlying the determination of these rates and testing the mathematical accuracy of the calculations.

◦ Developing ranges of independent estimates and comparing those to the rates selected by management.

• We assessed the reasonableness of management’s forecast of future cash flows by comparing the projections to historical results and certain peer companies.

We also evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

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We have served as the Company's auditor since 2019.

Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors of Patrick Industries, Inc.

Elkhart, Indiana

Opinion on the Financial Statements

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

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

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

Basis for Opinion

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

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

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

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

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

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

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

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

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

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

/s/ Crowe LLP

We served as the Company's auditor from 2009 to 2018.

Oak Brook, Illinois

February 28, 2019

PATRICK INDUSTRIES, INC.

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NET INCOME $ 224,915 $ 97,061 $ 89,566

Other comprehensive (loss) income, net of tax:

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

Other comprehensive income (loss), net of tax:

Change in unrealized gain (loss) of hedge derivatives 4,131 ( 515 ) ( 2,401 )

Foreign currency translation gain (loss) 142 154 ( 22 )

Other ( 449 ) 7 ( 595 )

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

Total other comprehensive income (loss) 3,824 ( 354 ) ( 3,018 )

COMPREHENSIVE INCOME $ 228,739 $ 96,707 $ 86,548

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PATRICK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

(thousands except share data) 2021 2020

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Intangible assets, net 640,456 456,276

Deferred financing costs, net 2,382 2,978

Other non-current assets 7,147 3,987

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authorized 1,000,000 shares;

none issued or outstanding

Common stock, no par value;

authorized 40,000,000 shares;

issued 2020 - 23,360,619 shares;

issued 2019 - 23,753,551 shares

issued and outstanding 2021 - 23,453,639 shares;

issued and outstanding 2020 - 23,360,619 shares

196,383 180,892

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Capital expenditures ( 64,804 ) ( 32,100 ) ( 27,661 )

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

Proceeds from sale of property, equipment, facility and other 197 211 4,402

211 4,402 6,463

Business acquisitions, net of cash acquired ( 508,127 ) ( 305,995 ) ( 55,953 )

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

Other investing activities ( 2,000 ) — —

Net cash used in investing activities ( 574,734 ) ( 337,884 ) ( 79,212 )

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Borrowing on revolver 832,500 239,277 653,129

239,277 653,129 1,211,464

Repayments on revolver ( 972,500 ) ( 99,277 ) ( 910,461 )

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Purchase of convertible notes hedges ( 57,443 ) — —

— — ( 31,481 )

Proceeds from sale of warrants 43,677 — —

Cash dividends paid to shareholders ( 27,024 ) ( 23,630 ) ( 5,798 )

( 23,630 ) ( 5,798 ) —

Stock repurchases under buyback program ( 48,940 ) ( 23,106 ) ( 3,815 )

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

Taxes paid for share-based payment arrangements ( 17,814 ) ( 3,741 ) ( 3,380 )

Payment of deferred financing costs ( 15,745 ) ( 58 ) ( 7,219 )

Payment of contingent consideration from a business acquisition ( 2,000 ) ( 4,416 ) —

Other financing activities 643 7 ( 10 )

Payment of contingent consideration from business acquisitions ( 1,600 ) ( 2,000 ) ( 4,416 )

Proceeds from exercise of common stock options

Net cash provided by financing activities 400,686 83,108 19,297

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Comprehensive

Income (Loss) Retained

Income (Loss) Treasury Stock Retained

Earnings Total

Balance January 1, 2019 $ 161,436 $ 25,124 $ ( 2,680 ) $ — $ 224,874 $ 408,754

— — — 119,832 119,832

Net income — — — — 89,566 89,566

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

Other comprehensive loss, net of tax — — ( 3,018 ) — — ( 3,018 )

— — ( 2,746 ) — ( 2,746 )

Stock repurchases under buyback program ( 706 ) ( 110 ) — — ( 2,999 ) ( 3,815 )

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

Issuance of shares upon exercise of common stock options 7 — — — — 7

Shares used to pay taxes on stock grants ( 3,511 ) — — — — ( 3,511 )

( 2,961 ) — — — ( 2,961 )

Stock-based compensation expense 15,436 — — — — 15,436

13,981 — — — 13,981

Purchase of convertible notes hedges

— ( 31,481 ) — — ( 31,481 )

Proceeds from sale of warrants

— 18,147 — — 18,147

Equity component of convertible note issuance

— 30,861 — — 30,861

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

— — — 89,566 89,566

Net income — — — — 97,061 97,061

Dividends declared — — — — ( 24,202 ) ( 24,202 )

Other comprehensive loss, net of tax — — ( 354 ) — — ( 354 )

— — ( 3,018 ) — ( 3,018 )

Stock repurchases under buyback program ( 4,331 ) ( 627 ) — — ( 18,148 ) ( 23,106 )

( 706 ) ( 110 ) — ( 2,999 ) ( 3,815 )

Issuance of shares upon exercise of common stock options 643 — — — — 643

Shares used to pay taxes on stock grants

( 3,511 ) — — — ( 3,511 )

Repurchase of shares for tax payments related to the vesting and exercise of share-based grants ( 4,042 ) — — — — ( 4,042 )

Stock-based compensation expense 15,960 — — — — 15,960

15,436 — — — 15,436

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

— — — 97,061 97,061

Net income — — — — 224,915 224,915

Dividends declared — — — — ( 27,836 ) ( 27,836 )

— — — ( 24,202 ) ( 24,202 )

Other comprehensive loss, net of tax

— — ( 354 ) — ( 354 )

Stock repurchases under buyback program

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

Other comprehensive income, net of tax — — 3,824 — — 3,824

Share repurchases under buyback program ( 2,729 ) ( 368 ) — ( 21,550 ) ( 24,293 ) ( 48,940 )

Retirement of treasury stock ( 2,013 ) ( 271 ) — 21,550 ( 19,266 ) —

Issuance of shares upon exercise of common stock options 4,950 — — — — 4,950

643 — — — 643

Shares used to pay taxes on stock grants

( 4,042 ) — — — ( 4,042 )

Issuance of shares in connection with a business combination 10,211 — — — — 10,211

Repurchase of shares for tax payments related to the vesting and exercise of share-based grants ( 17,815 ) — — — — ( 17,815 )

Stock-based compensation expense 22,887 — — — — 22,887

Purchase of convertible notes hedges, net of tax of $ 14,556

— ( 42,887 ) — — — ( 42,887 )

Proceeds from sale of warrants — 43,677 — — — 43,677

Equity component of convertible note issuance, net of tax of $ 11,923

— 35,130 — — — 35,130

Balance December 31, 2021 $ 196,383 $ 59,668 $ ( 2,228 ) $ — $ 513,734 $ 767,557

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(“Patrick” or the “Company”) operations consist of the manufacture and distribution of component products and materials for use primarily by the recreational vehicle (“RV”), marine, manufactured housing (“MH”) and industrial markets for customers throughout the United States and Canada.

At December 31, 2020, the Company maintained 141 manufacturing plants and 58 distribution facilities located in 23 states, China, Canada and the Netherlands.

At December 31, 2021, the Company maintained 174 manufacturing plants and 64 distribution facilities located in 23 states with a small presence in China and Canada.

Patrick operates in two business segments:

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In preparation of Patrick’s consolidated financial statements as of December 31, 2021, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-K to determine those requiring recognition or disclosure in the consolidated financial statements.

See Note 20 for additional information relating to subsequent events.

Financial Periods

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

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

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

Use of Estimates

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Estimates include the valuation of goodwill and indefinite-lived intangible assets, the valuation of long-lived assets, the allowance for doubtful accounts, excess and obsolete inventories, the valuation of estimated contingent consideration and deferred tax asset valuation allowances.

Estimates include the valuation of goodwill and indefinite-lived intangible assets, the valuation of long-lived assets, the allowance for doubtful accounts, excess and obsolete inventories, assets acquired and liabilities assumed in a business combination, the valuation of estimated contingent consideration and deferred tax asset valuation allowances.

Actual results could differ from the amounts reported.

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Stock Based Compensation

Compensation expense related to the fair value of restricted stock and restricted stock unit ("RSU") awards as of the grant date is calculated based on the Company’s closing stock price on the date of grant.

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

Compensation expense related to the fair value of restricted stock awards as of the grant date is calculated based on the Company’s closing stock price on the date of grant.

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

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

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The risk free interest rate is based on the U.S.

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

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

New shares are issued upon exercise of options.

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

Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding, plus the dilutive effect of stock options, SARS, and restricted stock and RSU awards (collectively, “Common Stock Equivalents”).

Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding, plus the dilutive effect of stock optio ns, SARS, and certain restricted stock awards (collectively, “Common Stock Equivalents”).

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

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

Other receivables consist of employee advances, insurance claims and other miscellaneous items.

Allowance for doubtful accounts was immaterial at December 31, 2021 and 2020, and changes in the allowance were immaterial for the years ended December 31, 2021, 2020, and 2019.

Inventories are stated at the lower of cost (first-in, first-out method) and net realizable value.

Inventories are generally stated at the lower of cost (first-in, first-out method or, for certain inventories, average costing method) and net realizable value.

Based on the inventory aging and other considerations for realizable value, the Company writes down the carrying value to net realizable value where appropriate.

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Vendor rebates receivable $ 8,702 $ 6,527

Income tax receivable — 3,895

Prepaid expenses 20,380 16,510

Deposits 14,945 1,409

Prepaid income taxes — 11,639

Vendor and other deposits 35,396 14,945

Total $ 64,478 $ 37,982

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Our fourth quarter 2021 goodwill impairment test concluded that the fair values of each of our reporting units exceeded their carrying values.

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

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

Our 2021 indefinite-lived intangibles test also concluded that the fair values of intangibles exceeded their respective carrying values.

Impairment of Long-Lived Assets

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

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

to the assets and their projected future undiscounted cash flows.

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

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

A significant adverse change in the Company’s business climate in future periods could result in a significant loss of market share or the inability to achieve previously projected revenue growth and could lead to a required assessment of the recoverability of the Company’s long-lived assets, which may subsequently result in an impairment charge.

Fair Value and Financial Instruments

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$ 118.4 $ — $ — $ — $ — $ —

Senior Note — 329.0 — — 320.3 —

Convertible Note — 180.0 — — 162.5 —

7.50 % senior notes due 2027 (2)

— 319.5 — — 329.0 —

4.75 % senior notes due 2029 (2)

— 350.6 — — — —

1.75 % convertible notes due 2028 (2)

— 269.8 — — — —

1.00 % convertible notes due 2023 (2)

— 194.1 — — 180.0 —

Term loan due 2026 (3)

— 144.4 — — 92.5 —

Revolver due 2026 (3)

— 135.0 — — 275.0 —

Interest rate swaps (4)

2 unchanged sentences

— — 12.3 — — 6.9

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

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

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

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

(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 consolidated balance sheet as of December 31, 2021 as a component of "Cash and cash equivalents".

(2) The amounts of these notes listed above are the fair values for disclosure purposes only, and they are recorded in the Company's consolidated balance sheets as of December 31, 2021 and 2020 using the interest rate method.

(3) The carrying amounts of our term loan and revolver approximate fair value as of December 31, 2021 and 2020 based upon their terms and conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates.

(4) The interest rate swaps are discussed further in Note 9.

(5) The estimated fair value of the Company's contingent consideration is discussed further in Note 4.

Income tax expense is calculated based on statutory tax rates of the federal, state, and international jurisdictions in which the Company operates and income earned or apportioned to each of these respective jurisdictions, as well as any additional tax planning available to the Company in these jurisdictions.

Certain income and expenses are not reported in tax returns and financial statements in the same year.

The tax effect of such temporary differences is reported as deferred income taxes.

Deferred taxes are provided on an asset and liability method whereby deferred taxes are recognized based on temporary differences between the reported amounts of assets and liabilities and their tax basis.

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Reclassified Amounts

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

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

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

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

Certain amounts have been reclassified in prior year financial statements to conform with current year presentation, and these reclassifications have no impact on the overall financial information.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Goodwill Impairment

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

Simplifying the Test for Goodwill Impairment ".

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

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

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

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

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

Credit Losses

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

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

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

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

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

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

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

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

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

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

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

The standard was 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 consolidated financial statements.

Reference Rate Reform

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

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

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

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

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

The Company is currently evaluating the impact of this standard on our consolidated financial statements.

Accounting fo r 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.

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

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

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

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

We expect to adopt ASU 2020-06 using a modified transition approach.

T he primary impact on our consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense for our 1.00 % Convertible Notes due 2023 (described in Note 8) as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our 1.00 % Convertible Notes due 2023.

REVENUE RECOGNITION

The Company is a major manufacturer and distributor of component products and materials serving original equipment manufacturers in the RV, MH, marine, and industrial industries.

The Company is a major manufacturer and distributor of component products and materials serving original equipment manufacturers and other customers in the RV, MH, marine, and industrial industries.

Revenue is recognized when or as control of the promised goods transfers to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.

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The transaction price for contracts may include reductions to the transaction price for estimated volume discounts and rebates and other customer incentives.

Manufacturing segment revenue is recognized when control of the products transfers to the customer which is the point when the customer gains the ability to direct the use of and obtain substantially all the remaining benefits from the asset, which is generally upon delivery of goods.

In limited circumstances, where the products are customer specific with no alternative use to the Company, and the Company has a legally enforceable right to payment for performance to date with a reasonable margin, revenue is recognized over the contract term based on the cost-to-cost method.

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

(ii) our obligation to pay the vendor

irrespective of our ability to collect from the customer;

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

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

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Recreational Vehicle $ 1,617,852 $ 786,590 $ 2,404,442

Marine 633,848 31,417 665,265

Manufactured Housing 261,856 283,207 545,063

Industrial 416,910 46,412 463,322

Marine 324,250 14,411 338,661

Total $ 2,930,466 $ 1,147,626 $ 4,078,092

2 unchanged sentences

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

Marine 324,250 14,411 338,661

Manufactured Housing 180,136 252,227 432,363

Industrial 286,764 36,601 323,365

Marine 316,781 11,758 328,539

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

2 unchanged sentences

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

Marine 316,781 11,758 328,539

Manufactured Housing 176,665 260,121 436,786

Industrial 250,969 33,595 284,564

Marine 265,805 8,327 274,132

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

10 unchanged sentences

The Company completed the acquisitions discussed below during the years ended December 31, 2021, 2020 and 2019.

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

Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s consolidated statements of financial position at their estimated fair values as of the respective dates of acquisition.

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

For each of the acquisitions discussed, we either acquired the assets and assumed the liabilities of the business, or acquired 100 % of the equity interests.

Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s 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.

2 unchanged sentences

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

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

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

For the years ended December 31, 2021, 2020 and 2019, revenue of approximately $ 259.9 million, $ 81.9 million and $ 8.3 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year.

For the years ended December 31, 2021, 2020 and 2019, operating income of approximately $ 25.0 million, $ 10.7 million and $ 0.9 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year.

Acquisition-related costs associated with the businesses acquired in 2021, 2020 and 2019 were immaterial in each respective year.

Contingent Consideration

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

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 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.

The liability for the contingent consideration is measured at fair value in subsequent periods, with the changes in fair value recorded in the consolidated statements of income.

The aggregate fair value of the contingent consideration as of December 31, 2020 was $ 6.9 million, $ 1.6 million of which is included in the line item "Accrued liabilities" and $ 5.3 million is included in “Other long-term liabilities” on the consolidated statement of financial position.

The aggregate fair value of the contingent consideration as of December 31, 2021 was $ 12.3 million, $ 7.0 million of which is included in the line item "Accrued liabilities" and $ 5.3 million is included in “Other long-term liabilities” on the consolidated balance sheet.

At December 31, 2020, the fair value 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".

1 unchanged sentence

The contingent consideration arrangements are subject to a maximum payment amount of up to $ 19.6 million in the aggregate as of December 31, 2021.

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

In 2021, the Company recorded a $ 3.4 million in non-cash increases to contingent consideration liabilities, which is included within selling, general and administrative expense in the consolidated statement of income, representing changes in the amount of consideration expected to be paid.

These charges relate to changes in projected performance of certain acquisitions compared to the projected performance originally used in calculating the projected fair values of the contingent consideration of such acquisitions.

In 2021, the Company made cash payments of approximately $ 2.5 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2021 Acquisitions

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

The Company completed the following seven previously announced acquisitions in the year ended December 31, 2021 (together with six acquisitions not described below, the "2021 Acquisitions"):

Company Segment Description

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

SEI Manufacturing, Inc.

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

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

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

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

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

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

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

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

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

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 and provider of plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington, acquired in March 2021.

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, acquired in April 2021.

Alpha Systems, LLC Manufacturing & Distribution Manufacturer and distributor of component products and accessories for the RV, marine, manufactured housing and industrial end markets that includes adhesives, sealants, rubber roofing, roto/blow molding and injection molding products, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of nine facilities in Elkhart, Indiana, acquired in May 2021.

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, acquired in August 2021.

Tumacs Covers Manufacturing Manufacturer of custom designed boat covers, canvas frames, and bimini tops, primarily serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan, acquired in August 2021.

Wet Sounds, Inc.

& Katalyst Industries LLC (collectively "Wet Sounds") Manufacturing Designer, engineer, and fabricator of innovative audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers sold directly to OEMs and consumers, and to dealers and retailers, primarily within the marine market as well as to the home audio and powersports markets and aftermarkets, based in Rosenburg, Texas, acquired in November 2021.

Williamsburg Marine LLC & Williamsburg Furniture, Inc.

(collectively "Williamsburg") Manufacturing Manufacturer of seating for the RV and marine end markets sold primarily to OEMs, based in Milford and Nappanee, Indiana, acquired in November 2021.

Total cash consideration for the 2021 Acquisitions was approximately $ 509.8 million, plus contingent consideration over a one to three-year period based on future performance in connection with certain acquisitions.

The preliminary purchase price allocations are subject to valuation activities being finalized, and thus certain 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 2021 related to the 2021 Acquisitions were immaterial.

2020 Acquisitions

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

The Company completed the following seven previously announced acquisitions in the year ended December 31, 2020 (together with four acquisitions not mentioned below, the "2020 Acquisitions"):

Company Segment Description

Schmitt & Sons, Inc.

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

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

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

Maple City Woodworking Corporation Manufacturing Manufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana, acquired in March 2020.

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, acquired in March 2020.

Synergy RV Transport Distribution Transportation and logistics service provider primarily for original equipment manufacturers and dealers in the RV market located in Goshen, Indiana, acquired in August 2020.

Total cash consideration for the 2020 Acquisitions was approximately $ 307.0 million, plus contingent consideration over a one to three-year period based on future performance in connection with certain acquisitions.

One acquisition in 2020 accounted for $ 129.7 million in cash consideration, contingent consideration with an initial fair value of $ 3.4 million (subject to a $ 10.0 million maximum), $ 1.6 million in accounts receivable, $ 2.9 million in inventory, $ 49.0 million in fixed assets, $ 49.1 million in intangible assets (composed of $ 42.6 million in customer relationships, $ 0.6 million in non-competition agreements, and $ 5.9 million in trademarks), $ 2.6 million in accounts payable and accrued liabilities, $ 4.9 million in operating lease right-of-use assets and liabilities, and $ 32.9 million in goodwill.

Purchase price allocations and all valuation activities in connection with the 2020 Acquisitions have been finalized.

Changes to preliminary purchase accounting estimates recorded in 2021 related to the 2020 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

2019 Acquisitions

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

The Company completed the following two previously announced acquisitions in the year ended December 31, 2019 (together with two acquisitions not mentioned below, the "2019 Acquisitions"):

Company Segment Description

Metal Moulding Corporation ("MAC") Manufacturing Manufacturer of custom metal fabricated products, primarily for the marine market, including hinges, arm rests, brackets, panels and trim, as well as plastic products including boxes, inlay tables, steps, and related components based in Madison, Tennessee

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

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

Collins & Company, Inc.

Distribution Distributor of appliances, trim products, fuel systems, flooring, tile, and other related building materials primarily to the RV market as well as the housing and industrial markets based in Bristol, Indiana

Manufacturing & Distribution Distributor and manufacturer of flooring, kitchen and bath products, adhesives and sealants, electronics, appliances and accessories, LP tanks, and other related building materials, primarily for the RV market as well as the MH, marine, and other industrial markets operating facilities in Indiana, Oregon, Pennsylvania, and Alabama

Manufacturing Designer and manufacturer of custom designed boat covers and bimini tops, full boat enclosures, mounting hardware, and other accessories and components for the marine market operating facilities in Wisconsin, Missouri, Indiana, and Minnesota

Marine Accessories Corporation Manufacturing & Distribution Manufacturer, distributor and aftermarket supplier of custom tower and canvas products and other related accessories to OEMs, dealers, retailers and distributors within the marine market, as well as direct to consumers based in Maryville, Tennessee

Engineered Metals and Composites, Inc.

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

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

manufacturing and distribution centers located in North America

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

Schmitt & Sons, Inc.

Manufacturing Designer and manufacturer of customized hardware and structural components for the marine industry based in Sarasota, Florida, acquired in September 2019.

Topline Counters, LLC Manufacturing Designer and manufacturer of kitchen and bathroom countertops for residential and commercial markets based in Sumner, Washington, acquired in December 2019.

Total cash consideration for the 2019 Acquisitions was $ 53.3 million, plus contingent consideration over a one year period based on future performance in connection with one acquisition.

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

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2021, 2020 and 2019 Acquisitions:

(thousands) 2020 Acquisitions 2019 Acquisitions 2018 Acquisitions

Acquisitions 2020 Acquisitions 2019

(thousands) A B All Others Total

Consideration

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Working capital holdback and other, net (1)

— 584 362 946 155 —

Common stock issuance (2)

10,211 — — 10,211 — —

Contingent consideration (3)

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This value represents the remaining amounts due to (from) sellers as of December 31, 2021.

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

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

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

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

(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.

Contingent consideration associated with Company A is valued at $ 3.5 million, but subject to a $ 6.0 million maximum.

(4) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $ 6.2 million);

for the 2020 Acquisitions, except Front Range Stone (approximately $ 11.0 million);

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

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

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

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

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.

For the first of our 2021 Acquisitions individually outlined in the purchase price allocation table above, the $ 85.0 million in identifiable intangible assets consists of $ 47.7 million in customer relationships, $ 1.2 million in non-compete agreements, $ 8.6 million in patents (estimated useful life of 12 to 14 years), and $ 27.5 million in trademarks.

For the second of our 2021 Acquisitions individually outlined in the purchase price allocation table above, the $ 78.3 million in identifiable intangible assets consists of provisional estimates of $ 51.8 million in customer relationships, $ 1.7 million in non-compete agreements, $ 13.5 million in patents (estimated useful life of 10 to 12 years), and $ 11.4 million in trademarks.

Pro Forma Information (Unaudited)

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

Impairment of intangible assets (1)

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

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

2 unchanged sentences

Amortization ( 46,684 ) ( 9,645 ) ( 56,329 )

Impairment of intangible assets (1)

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

Adjustment to prior year preliminary purchase price allocation ( 5,089 ) — ( 5,089 )

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(1) Certain operations permanently ceased activities during the year ended December 31, 2020.

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

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

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

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300,000 300,000

1.75 % convertible notes due 2028

4.75 % senior notes due 2029

Total long-term debt 1,360,625 840,000

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Total long-term debt, less current maturities, net $ 1,278,989 $ 810,907

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

1.75 % Convertible Senior Notes due 2028

In December 2021, the Company issued $ 258.75 million aggregate principal amount of 1.75 % Convertible Senior Notes due 2028 (the “ 1.75 % Convertible Notes”).

The total debt discount of $ 56.1 million at issuance consisted of two components:

(i) the conversion option component, recorded to shareholders' equity, in the amount of $ 48.8 million, representing the difference between the principal amount of the 1.75 % Convertible Notes upon issuance less the present value of the future cash flows of the 1.75 % Convertible Notes using a borrowing rate for a similar non-convertible debt instrument and (ii) debt issuance costs of $ 7.3 million.

The conversion option component of the 1.75 % Convertible Notes was valued using Level 2 inputs under the fair value hierarchy.

The unamortized portion of the total debt discount is being amortized to interest expense over the life of the 1.75 % Convertible Notes.

The effective interest rate on the 1.75 % Convertible Notes, which includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 4.97 % as of December 31, 2021.

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) described in Note 9.

The 1.75 % Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually in arrears on June 1 and December 1 of each year at an annual rate of 1.75 %.

The 1.75 % Convertible Notes will mature on December 1, 2028 unless earlier repurchased or converted in accordance with their terms.

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 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 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 the 1.75 % Convertible Notes (or 2,584,578 shares in the aggregate) and is equal to an initial conversion price of approximately $ 100.11 per share.

If an event of default on the 1.75 % Convertible Notes occurs, the principal amount of the 1.75 % Convertible Notes, plus accrued and unpaid interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions.

The 1.75 % Convertible 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).

1.75 % Convertible Notes holders may convert their Convertibles Notes on or after June 28, 2028 at any time at their option.

Holders may convert 1.75 % Convertible Notes prior to June 28, 2028, only under the following circumstances:

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

4.75 % Senior Notes due 2029

In April 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 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 4.97 %.

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 approximately $ 5.1 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.

If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the 4.75 % Senior Notes (unless otherwise redeemed) at a price equal to 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest.

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.

7.50 % Senior Notes due 2027

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

The 7.50 % Senior Notes will mature on October 15, 2027.

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In connection with the issuance of the 7.50 % Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 7.50 % Senior Notes approximately $ 5.8 million in deferred financing costs which is amortized using the effective interest rate over the term of the 7.50 % Senior Notes.

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

The 7.50 % 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.

The Company may redeem the 7.50 % Senior Notes, in whole or in part, at any time (a) prior to October 15, 2022, at a price equal to 100 % of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after October 15, 2022 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest.

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2021 Credit Facility

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

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 $ 550 million senior secured revolver (the "2021 Revolver") and a $ 150 million 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 2019 Credit Agreement is September 17, 2024.

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

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.

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• The 2021 Term Loan is due in consecutive quarterly installments in the following amounts:

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

(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 %;

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

• 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 December 31, 2021, the Company had $ 144.4 million outstanding under the 2021 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2021 Revolver of $ 135.0 million under the LIBOR-based option.

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The fee payable on committed but unused portions of the 2021 Revolver was 0.20 % at December 31, 2021.

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

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

2019 Credit Facility

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

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

The Company's previous credit agreement (the "2018 Credit Agreement") consisted of an $ 800 million revolving credit loan (the “2018 Revolver”) and a $ 100 million term loan (the “2018 Term Loan” and, together with the 2018 Revolver, the “2018 Credit Facility”).

Convertible Senior Notes

The Company's previous credit agreement (the "2019 Credit Agreement") was amended by the 2021 Credit Agreement in April 2021 as discussed above.

The 2019 Credit Agreement consisted of a $ 550 million senior secured revolver (the “2019 Revolver”) and a $ 100 million senior secured term loan (the “2019 Term Loan” and together with the 2019 Revolver, the “2019 Credit Facility”).

1.00 % Convertible Senior Notes due 2023

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

The total debt discount of $ 36.2 million at issuance consisted of two components:

(i) the conversion option component, recorded to shareholders' equity, in the amount of $ 31.9 million, representing the difference between the principal amount of the Convertible Notes upon issuance less the present value of the future cash flows of the Convertible Notes and (ii) debt issuance costs of $ 4.1 million.

(i) the conversion option component, recorded to shareholders' equity, in the amount of $ 31.9 million, representing the difference between the principal amount of the 1.00 % Convertible Notes upon issuance less the present value of the future cash flows of the 1.00 % Convertible Notes using a borrowing rate for a similar non-convertible instrument and (ii) debt issuance costs of $ 4.3 million.

The unamortized portion of the total debt discount is being amortized to interest expense over the life of the 1.00 % Convertible Notes.

The effective interest rate on the 1.00 % Convertible Notes, which includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 5.25 % as of December 31, 2021 and 2020.

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

The net proceeds from the issuance of the 1.00 % Convertible Notes were approximately $ 167.5 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net

cost of the 1.00 % Convertible Note Hedge Transactions and the Warrant Transactions (each as defined herein) described in Note 9.

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

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If an event of default on the 1.00 % Convertible Notes occurs, the principal amount of the 1.00 % Convertible Notes, plus accrued and unpaid interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions.

Convertible Notes holders can convert their Convertibles Notes on or after August 1, 2022 at any time at their option.

The 1.00 % Convertible 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.

1.00 % Convertible Notes holders may convert their 1.00 % Convertibles Notes on or after August 1, 2022 at any time at their option.

Holders may convert 1.00 % Convertible Notes prior to August 1, 2022, only under the following circumstances:

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1.75 % Convertible Note Hedge Transactions and Warrant Transactions

In December 2021, in connection with the 1.75 % Convertible Notes offering, the Company entered into privately negotiated convertible note hedge transactions (together, the “ 1.75 % Convertible Note Hedge Transactions”) with each of Bank of America, N.A., Wells Fargo Bank, National Association and Nomura Global Financial Products, Inc.

(together, the “ 1.75 % Convertible Note Hedge Counterparties”).

Pursuant to the 1.75 % Convertible Note Hedge Transactions, the Company acquired options to purchase the same number of shares of the Company's common stock (or 2,584,578 shares) initially underlying the 1.75 % Convertible Notes at an initial strike price equal to the initial strike price of the 1.75 % Convertible Notes of approximately $ 100.11 per share, subject to customary anti-dilution adjustments.

The options expire on December 1, 2028, subject to earlier exercise.

At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “ 1.75 % Convertible Note Warrant Transactions”) with each of the 1.75 % Convertible Note Hedge Counterparties, pursuant to which the Company sold warrants to purchase the same number of shares of the Company's common stock (or 2,584,578 shares) underlying the 1.75 % Convertible Notes, at an initial strike price of approximately $ 123.22 per share, subject to customary anti-dilution adjustments.

The warrants have a final expiration date of July 25, 2029.

The Company paid $ 57.4 million associated with the cost of the 1.75 % Convertible Note Hedge Transactions and received proceeds of $ 43.7 million related to the 1.75 % Convertible Note Warrant Transactions.

The 1.75 % Convertible Note Hedge Transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the 1.75 % Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 1.75 % Convertible Notes.

However, the 1.75 % Convertible Note Warrant Transactions could separately have a dilutive effect on the Company's common stock to the extent that the market price per share of the common stock exceeds the strike price of the warrants.

As these transactions meet certain accounting criteria, the 1.75 % Convertible Note Hedge Transactions and 1.75 % Convertible Note Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

1.00 % Convertible Note Hedge Transactions and Warrant Transactions

In January 2018, in connection with the 1.00 % Convertible Notes offering, the Company entered into privately negotiated convertible note hedge transactions (together, the “ 1.00 % Convertible Note Hedge Transactions”) with each of Bank of America, N.A.

and Wells Fargo Bank, National Association (together, the “Hedge Counterparties”).

Pursuant to the Convertible Note Hedge Transactions, the Company acquired options to purchase the same number of shares of the Company's common stock (or 1,962,790 shares) initially underlying the Convertibles Notes at an initial strike price equal to the initial strike price of the Convertible Notes of approximately $ 87.89 per share, subject to customary anti-dilution adjustments.

and Wells Fargo Bank, National Association (together, the “ 1.00 % Convertible Note Hedge Counterparties”).

Pursuant to the 1.00 % Convertible Note Hedge Transactions, the Company acquired options to purchase the same number of shares of the Company's common stock (or 1,962,790 shares) initially underlying the 1.00 % Convertible Notes at an initial strike price equal to the initial strike price of the 1.00 % Convertible Notes of approximately $ 87.89 per share, subject to customary anti-dilution adjustments.

The options expire on February 1, 2023, subject to earlier exercise.

At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “Warrant Transactions”) with each of the Hedge Counterparties, pursuant to which the Company sold warrants to purchase the same number of shares of the Company’s common stock (or 1,962,790 shares) underlying the Convertible Notes, at an initial strike price of approximately $ 113.93 per share, subject to customary anti-dilution adjustments.

At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “ 1.00 % Convertible Note Warrant Transactions”) with each of the 1.00 % Convertible Note Hedge Counterparties, pursuant to which the Company sold warrants to purchase the same number of shares of the Company’s common stock (or 1,962,790 shares) underlying the 1.00 % Convertible Notes, at an initial strike price of approximately $ 113.93 per share, subject to customary anti-dilution adjustments.

The warrants have a final expiration date of September 20, 2023.

The Company paid $ 31.5 million associated with the cost of the Convertible Note Hedge Transactions and received proceeds of $ 18.1 million related to the Warrant Transactions.

The Company paid $ 31.5 million associated with the cost of the 1.00 % Convertible Note Hedge Transactions and received proceeds of $ 18.1 million related to the 1.00 % Convertible Note Warrant Transactions.

The 1.00 % Convertible Note Hedge Transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the 1.00 % Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 1.00 % Convertible Notes.

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

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

However, the 1.00 % Convertible Note Warrant Transactions could separately have a dilutive effect on the Company's common stock to the extent that the market price per share of the common stock exceeds the strike price of the warrants.

As these transactions meet certain accounting criteria, the 1.00 % Convertible Note Hedge Transactions and 1.00 % Convertible Note Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

Interest Rate Swaps

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.

To partially mitigate this risk, the Company entered into interest rate swaps in 2018.

As of December 31, 2021, the Company had a combined notional principal amount of $ 200.0 million of interest rate swap agreements, all of which are designated as cash flow hedges.

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Derivatives accounted for as cash flow hedges Balance sheet location December 31, 2021 December 31, 2020

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

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

Interest rate swaps Accrued liabilities $ 1,017 $ —

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.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

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

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

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Accrued interest 8,981 5,819

Accrued warranty 13,827 3,872

Income tax payable 28,422 1,666

Other 12,201 3,024

Total accrued liabilities $ 181,439 $ 83,202

Changes in our accrued warranty liabilities for the years ended December 31, 2021, 2020, and 2019 are as follows:

(thousands) 2021 2020 2019

Beginning balance $ 3,872 $ 2,950 $ 3,143

Provision 24,202 11,227 11,633

Payments ( 17,725 ) ( 10,342 ) ( 11,872 )

Acquisitions 3,478 37 46

Ending balance $ 13,827 $ 3,872 $ 2,950

Accrued warranty and provision as of and for the year ended December 31, 2021 includes the cost of the recall matter discussed in Note 16.

The provision for income taxes for the years ended December 31, 2021, 2020 and 2019 consists of the following:

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Research and development tax credits ( 1,990 ) ( 0.7 ) % ( 1,647 ) ( 1.3 ) % ( 343 ) ( 0.3 ) %

Section 162(m) permanent addback 5,825 2.0 % 1,951 1.5 % 1,019 0.9 %

Excess tax benefit on stock-based compensation ( 6,035 ) ( 2.1 ) % ( 350 ) ( 0.3 ) % ( 833 ) ( 0.7 ) %

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STOCK REPURCHASE PROGRAMS

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

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

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

31, 2020 as part of this authorization.

In March 2020, the Company's Board of Directors ("the Board") approved an increase in the amount of the Company's common stock that may be acquired over 24 months under the current stock repurchase program to $ 50.0 million, including amounts remaining under previous authorizations.

In August 2021, the Board approved a new stock repurchase program for up to $ 50.0 million of its common stock, including amounts remaining under previous authorizations.

Approximately $ 22.6 million of common stock repurchases remains available at December 31, 2021 as part of this authorization.

Under the stock repurchase plans, the Company made repurchases of common stock for 2021, 2020 and 2019 as follows:

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

As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock, additional paid-in-capital and retained earnings in the Company’s consolidated statements of financial position.

See Note 20 for information regarding an additional increase to the stock repurchase authorization subsequent to the year ended December 31, 2021.

NET INCOME PER COMMON SHARE

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

Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense related to these short-term leases was immaterial for fiscal 2020 and 2019.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense related to these short-term leases was immaterial for the years ended December 31, 2021, 2020 and 2019.

Variable lease expense, principally related to trucks, forklifts, and index-related facility rent escalators, was immaterial for the years ended December 31, 2021, 2020 and 2019.

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

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

Certain leases include options to renew for an additional term.

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Total $ 160,462

The Company has additional operating leases that have not yet commenced as of December 31, 2021, and therefore, approximately $ 2.4 million in operating lease right-of-use assets and corresponding operating lease liabilities were not included in our consolidated balance sheet at December 31, 2021.

These leases will commence through the second quarter of fiscal 2022 with lease terms of 5 to 10 years.

COMMITMENTS AND CONTINGENCIES

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

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.

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 balance sheet, results of operations, or cash flows.

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

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

District Court for the Northern District of Indiana.

District Court for the Northern District of Indiana, relating to a site owned by the Company (the "Lusher Street Site").

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

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

That reconsideration motion is still pending.

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

On March 19, 2021, the Company received a General Notice of Potential Liability from the U.S.

Environmental Protection Agency (the “EPA”), pursuant to Section 107(a) of CERCLA (the “Notice”).

The Notice provides that the EPA has incurred and will likely incur additional costs relative to conducting a Remedial Investigation/Feasibility Study ("RI/FS"), conducting Remedial Design/Remedial Action ("RD/RA"), and other investigation, planning, response, oversight, and enforcement activities related to the Lusher Street Site.

Because the Company was the owner of and former operator within the Lusher Street Site and as such may be a potentially responsible party pursuant to CERCLA, the Company received the Notice and an indication that it may have a responsibility to contribute to the costs of RI/FS, RD/RA or additional mitigation efforts incurred or to be incurred by the EPA.

On September 15, 2021, the Court granted the parties Joint Motion to Stay Proceedings Pending Negotiations with the EPA.

The proceedings remain subject to the Court-approved stay.

On January 26, 2022, the Company closed on the sale of certain parcels of real property that are subject to the litigation (the “Divested Properties”).

The purchaser agreed to indemnify, defend and hold the Company harmless for all liability and exposure, both private and to all EPA claims, concerning and relating to the Divested Properties, including as it concerns this litigation.

As to the remaining real properties that were not among the Divested Properties but remain the subject of the Lusher Street Site litigation, the Company does not currently believe that this matter is likely to have a material adverse impact on its financial condition, results of operations, or cash flows.

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

Certain of our customers in the RV end market initiated recalls in 2021 involving certain products that were produced by a third party and sold by our Distribution segment.

Although we do not believe we are legally responsible for costs related to the product recall, based on discussions with our customers and other developments subsequent to when these recalls were initiated, we believe it is probable that the Company will bear a portion of the total cost of the recalls.

In the fourth quarter of 2021, we recorded an estimate of the Company's cost related to this matter.

We do not expect this matter to have a material effect on our consolidated financial statements.

COMPENSATION PLANS

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

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

At December 31, 2021, approximately 1.4 million common shares remain available for stock-based compensation grants.

Stock-based compensation expense was $ 22.9 million, $ 16.0 million and $ 15.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

No stock options were granted in 2021 and 2019.

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

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

No stock options were granted in 2019 and 2018.

The following table summarizes the Company’s option activity during the years ended December 31, 2021, 2020 and 2019:

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At December 31, 2021, the weighted average remaining contractual term for options outstanding was 7.1 years and the weighted average remaining contractual term for options exercisable was 5.8 years.

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

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

The cash received from the exercise of stock options was $ 4.9 million and $ 0.6 million in 2021 and 2020, respectively, and immaterial in 2019.

The income tax benefit related to the stock options exercised was $ 6.7 million in 2021, and immaterial in 2020 and 2019.

The grant date fair value of stock options vested in 2021, 2020 and 2019 was $ 11.6 million, $ 5.8 million and $ 5.8 million, respectively.

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

There were no stock options granted in 2021 and 2019.

Dividend rate 2.37 %

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The aggregate intrinsic value (excess of market value over the SARS exercise price) in the table above is before income taxes, and assuming the Company’s closing stock price of $ 80.69 , $ 68.35 and $ 52.43 per share as of December 31, 2021, 2020 and 2019, respectively, is the price that would have been received by the SARS holder had that SARS holder exercised the SARS as of that date.

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

SARS vest ratably over four years and have nine-year contractual terms.

All SARS outstanding as of December 31, 2021 were fully vested.

As of December 31, 2021, there was no unrecognized compensation expense related to the SARS.

Restricted Stock:

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The grant date fair value of the awards is expensed over the related service or performance period.

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

The performance contingent shares are earned based on the

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

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

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

The following table summarizes the activity for restricted stock for the years ended December 31, 2021, 2020 and 2019:

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Unvested end of year 929 $ 55.06 790 $ 50.39 738 $ 49.65

Aggregate fair values of restricted stock vested for the years ended December 31, 2021, 2020 and 2019 were $ 11.9 million, $ 9.3 million, and $ 7.0 million, respectively.

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 way in which its chief operating decision maker allocates resources, evaluates financial results, and determines compensation.

The Company does not measure profitability at the end market (RV, marine, MH and industrial) level.

A description of the Company’s reportable segments is as follows:

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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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softwoods lumber;

treated, untreated and laminated plywood;

custom cabinetry;

polymer-based flooring;

polymer-based and other flooring;

electrical systems components including instrument and dash panels;

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fiberglass and plastic helm systems and components products;

treated, untreated and laminated plywood;

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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electronics and audio systems components;

marine accessories and components;

wiring, electrical and plumbing products;

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

The Company evaluates the

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

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

The tables below present information that is provided to the chief operating decision maker of the Company as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 (in thousands):

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Major Customers

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

The Company had two major customers that accounted for the following sales in our Manufacturing and Distribution segments for the years ended December 31, 2021, 2020, 2019 and trade receivables balances at December 31, 2021 and 2020 as shown in the table below:

2021 2020 2019

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

SUBSEQUENT EVENTS

In January 2022, the Company announced that the Board of Directors 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 $ 100.0 million, including the $ 11.0 million remaining under the previous authorization.

In February 2022, we signed a definitive agreement under which Arizona-based Rockford Corporation (“Rockford”) will become a wholly-owned subsidiary of Patrick by merger.

Rockford, through its brand Rockford Fosgate®, designs and distributes audio systems and components, primarily serving the powersports and the automotive aftermarkets.

The transaction is expected to close in March 2022.

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

What changed 10-K

Item 9A. Controls and Procedures