What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 166 added, 304 removed, 318 unchanged (60% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Third Quarter Ended Nine Months Ended

(thousands except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

First Quarter Ended

(thousands except per share data) March 27, 2022 March 28, 2021

NET SALES $ 1,342,175 $ 850,483

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Third Quarter Ended Nine Months Ended

(thousands) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

First Quarter Ended

(thousands) March 27, 2022 March 28, 2021

NET INCOME $ 112,673 $ 47,513

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) of hedge derivatives 1,031 989 3,024 ( 1,553 )

Other comprehensive income, net of tax:

Unrealized gain of hedge derivatives 757 975

Other 29 ( 59 )

Total other comprehensive income (loss) 1,105 1,049 3,028 ( 1,545 )

Total other comprehensive income 786 916

COMPREHENSIVE INCOME $ 113,459 $ 48,429

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(thousands) September 26, 2021 December 31, 2020

(thousands) March 27, 2022 December 31, 2021

Current Assets

32 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

(thousands) September 26, 2021 September 27, 2020

First Quarter Ended

(thousands) March 27, 2022 March 28, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Amortization of convertible notes debt discount 449 1,769

Deferred income taxes 6,540 ( 4,057 )

(Gain) loss on sale of property, plant and equipment ( 5,501 ) 45

Other non-cash items 1,697 1,550

4 unchanged sentences

Accounts payable, accrued liabilities and other 37,785 63,757

Net cash provided by operating activities 147,417 112,758

Net cash (used in) provided by operating activities ( 23,039 ) 50,292

CASH FLOWS FROM INVESTING ACTIVITIES

5 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Term debt borrowings 58,750 —

Term debt repayments ( 3,125 ) ( 2,500 )

Borrowings on revolver 303,712 117,475

Repayments on revolver ( 149,712 ) ( 144,475 )

Proceeds from senior notes offering 350,000 —

Stock repurchases under buyback program ( 24,778 ) —

1 unchanged sentence

Taxes paid for share-based payment arrangements ( 9,999 ) ( 14,464 )

Payment of deferred financing costs and other ( 6,638 ) ( 58 )

Payment of contingent consideration from a business acquisition ( 3,780 ) —

1 unchanged sentence

Net cash provided by (used in) financing activities 107,155 ( 43,843 )

Increase (decrease) in cash and cash equivalents 115 ( 77,043 )

Decrease in cash and cash equivalents ( 59,003 ) ( 38,596 )

Cash and cash equivalents at beginning of year 122,849 44,767

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Third Quarter Ended September 26, 2021

(thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Treasury Stock Retained

Earnings Total

Balance June 27, 2021 $ 191,131 $ 24,387 $ ( 4,129 ) $ ( 21,550 ) $ 453,432 $ 643,271

Net income — — — — 57,397 57,397

Dividends declared — — — — ( 6,613 ) ( 6,613 )

Other comprehensive income, net of tax — — 1,105 — — 1,105

Share repurchases under buyback program ( 999 ) ( 135 ) — — ( 9,261 ) ( 10,395 )

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

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 13 ) — — — — ( 13 )

Issuance of shares upon exercise of common stock options 325 — — — — 325

Stock-based compensation expense 6,971 — — — — 6,971

Balance September 26, 2021 $ 195,402 $ 23,981 $ ( 3,024 ) $ — $ 475,689 $ 692,048

Nine Months Ended September 26, 2021

First Quarter Ended March 27, 2022

(thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Treasury Stock Retained

Comprehensive Loss Retained

Earnings Total

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

Net income — — — — 163,895 163,895

Dividends declared — — — — ( 19,893 ) ( 19,893 )

Other comprehensive income, net of tax — — 3,028 — — 3,028

Share repurchases under buyback program ( 999 ) ( 135 ) — ( 21,550 ) ( 9,261 ) ( 31,945 )

Retirement of Treasury Stock ( 2,013 ) ( 271 ) — 21,550 ( 19,266 ) —

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 14,898 ) — — — — ( 14,898 )

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

Issuance of shares upon exercise of common stock options 4,902 — — — — 4,902

Stock-based compensation expense 17,307 — — — — 17,307

Balance September 26, 2021 $ 195,402 $ 23,981 $ ( 3,024 ) $ — $ 475,689 $ 692,048

PATRICK INDUSTRIES, INC.

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

Third Quarter Ended September 27, 2020

(thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Treasury Stock Retained

Earnings Total

Balance June 28, 2020 $ 173,178 $ 24,534 $ ( 8,292 ) $ — $ 303,848 $ 493,268

Impact of adoption of ASU 2020-06 — ( 59,668 ) — 15,975 ( 43,693 )

Net income — — — 112,673 112,673

2 unchanged sentences

Stock repurchases under buyback program ( 3,062 ) — — ( 21,717 ) ( 24,779 )

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 53 ) — — — ( 53 )

Repurchase of shares for tax payments related to the vesting and exercising of share-based grants ( 9,999 ) — — — ( 9,999 )

Stock-based compensation expense 5,111 — — — 5,111

Balance September 27, 2020 $ 177,308 $ 24,440 $ ( 7,243 ) $ — $ 331,324 $ 525,829

Nine Months Ended September 27, 2020

Balance March 27, 2022 $ 188,433 $ — $ ( 1,442 ) $ 612,981 $ 799,972

First Quarter Ended March 28, 2021

(thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Treasury Stock Retained

Comprehensive Loss Retained

Earnings Total

2 unchanged sentences

Dividends declared — — — ( 6,623 ) ( 6,623 )

Other comprehensive loss, net of tax — — ( 1,545 ) — — ( 1,545 )

Stock repurchases under buyback program ( 3,962 ) ( 574 ) — — ( 15,750 ) ( 20,286 )

Issuance of shares upon exercise of common stock options 642 — — — — 642

Other comprehensive income, net of tax — — 916 — 916

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 14,464 ) — — — ( 14,464 )

Issuance of shares upon exercise of common stock options 4,194 — — — 4,194

Stock-based compensation expense 4,298 — — — 4,298

Balance September 27, 2020 $ 177,308 $ 24,440 $ ( 7,243 ) $ — $ 331,324 $ 525,829

Balance March 28, 2021 $ 174,920 $ 24,387 $ ( 5,136 ) $ 401,104 $ 595,275

See accompanying Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of September 26, 2021 and December 31, 2020, its results of operations for the third quarter and nine months ended September 26, 2021 and September 27, 2020, and its cash flows for the nine months ended September 26, 2021 and September 27, 2020.

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of March 27, 2022 and December 31, 2021, and its results of operations and cash flows for the three months ended March 27, 2022 and March 28, 2021.

Patrick’s unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S.

3 unchanged sentences

GAAP have been condensed or omitted pursuant to those rules or regulations.

Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation of other non-current assets in the condensed consolidated balance sheets and accumulated other comprehensive loss in Note 11.

Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation of other non-cash items in the condensed consolidated statements of cash flows.

For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The December 31, 2021 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

Operating results for the third quarter and nine months ended September 26, 2021 are not necessarily indicative of the results that we will realize or expect for the full year ending December 31, 2021.

Operating results for the three months ended March 27, 2022 are not necessarily indicative of the results that we will realize or expect for the full year ending December 31, 2022.

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks.

1 unchanged sentence

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

The third quarter of fiscal year 2021 ended on September 26, 2021 and the third quarter of fiscal year 2020 ended on September 27, 2020.

In preparation of Patrick’s condensed consolidated financial statements as of and for the third quarter and nine months ended September 26, 2021, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.

See Note 18 for further information.

The first quarter of fiscal year 2022 ended on March 27, 2022 and the first quarter of fiscal year 2021 ended on March 28, 2021.

In preparation of Patrick’s condensed consolidated financial statements as of and for the three months ended March 27, 2022, management evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, " Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ", a new standard to simplify the accounting for income taxes.

The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries.

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

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

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

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

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

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

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

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

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

We adopted ASU 2020-06 on January 1, 2022 using a modified retrospective transition approach.

The primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 was a reduction in non-cash interest expense for our 1.00 % Convertible Notes due 2023, an increase in diluted shares outstanding used to calculate diluted net income per share and a resulting reduction in diluted net income per share for the first quarter of

2022 attributable to the application of the if-converted method for such convertible notes.

In addition, the adoption resulted in the recognition of a $ 56.0 million increase to the carrying value of convertible notes payable, a $ 12.4 million decrease in "Deferred tax liabilities, net", and a $ 59.7 million decrease in "Additional paid-in-capital", resulting in a cumulative adjustment to the opening balance of retained earnings as an increase of $ 16.0 million.

Additionally, in line with the adoption, our diluted share count increased by approximately 2.0 million shares, a 9.0 % increase.

Diluted net income per share increased $ 0.3 million in relation to the effect of interest on potentially dilutive convertible notes, as shown in Note 8.

The adoption resulted in an overall decrease of $ 0.39 to diluted net income per share for the first quarter of 2022.

There was no impact on the Company's condensed consolidated statement of cash flows upon adoption of ASU 2020-06.

Reference Rate Reform

6 unchanged sentences

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

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

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

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

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

At this point in time, we anticipate the primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our convertible notes referenced in Note 9.

REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors:

Third Quarter Ended September 26, 2021

(thousands) Manufacturing Distribution Total

Recreational Vehicle $ 434,029 $ 199,208 $ 633,237

Marine 164,535 8,491 173,026

Manufactured Housing 65,785 68,840 134,625

Industrial 107,886 11,403 119,289

Total $ 772,235 $ 287,942 $ 1,060,177

Nine Months Ended September 26, 2021

(thousands) Manufacturing Distribution Total

Recreational Vehicle $ 1,161,254 $ 568,840 $ 1,730,094

Marine 453,223 23,105 476,328

Manufactured Housing 190,786 203,648 394,434

Industrial 296,769 32,988 329,757

Total $ 2,102,032 $ 828,581 $ 2,930,613

Third Quarter Ended September 27, 2020

First Quarter Ended March 27, 2022

(thousands) Manufacturing Distribution Total

4 unchanged sentences

Total $ 979,609 $ 362,566 $ 1,342,175

Nine Months Ended September 27, 2020

First Quarter Ended March 28, 2021

(thousands) Manufacturing Distribution Total

7 unchanged sentences

Inventories consist of the following:

(thousands) September 26, 2021 December 31, 2020

(thousands) March 27, 2022 December 31, 2021

Raw materials $ 365,387 $ 315,269

8 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended September 26, 2021 by segment are as follows:

Changes in the carrying amount of goodwill for the three months ended March 27, 2022 by segment are as follows:

(thousands) Manufacturing Distribution Total

2 unchanged sentences

Adjustments to preliminary purchase price allocations 2,966 110 3,076

Balance - September 26, 2021 $ 409,723 $ 69,232 $ 478,955

Intangible assets, net consist of the following as of September 26, 2021 and December 31, 2020:

(thousands) September 26, 2021 December 31, 2020

Balance - March 27, 2022 $ 530,538 $ 69,581 $ 600,119

Intangible assets, net consist of the following as of March 27, 2022 and December 31, 2021:

(thousands) March 27, 2022 December 31, 2021

Customer relationships $ 656,777 $ 617,814

1 unchanged sentence

Patents 60,988 50,038

Trademarks (non-amortizing, indefinite lived) 151,997 113,796

Trademarks 181,432 165,897

922,048 855,033

1 unchanged sentence

Intangible assets, net $ 690,610 $ 640,456

Changes in the carrying value of intangible assets for the nine months ended September 26, 2021 by segment are as follows:

Changes in the carrying value of intangible assets for the three months ended March 27, 2022 by segment are as follows:

(thousands) Manufacturing Distribution Total

3 unchanged sentences

Adjustments to preliminary purchase price allocations ( 2,655 ) ( 330 ) ( 2,985 )

Balance - September 26, 2021 $ 449,918 $ 108,122 $ 558,040

The Company completed three acquisitions in the third quarter of 2021 and completed ten acquisitions in the nine months ended September 26, 2021 (the "2021 Acquisitions").

For the third quarter and nine months ended September 26, 2021, net sales included in the Company's condensed consolidated statements of income related to the 2021 Acquisitions were $ 84.0 million and $ 146.1 million, respectively, and operating income was $ 6.6 million and $ 12.6 million, respectively, for each of these periods.

One of the 2021 Acquisitions accounted for $ 53.5 million in net sales and $ 2.6 million in operating income for the third quarter of 2021 and $ 85.6 million in net sales and $ 4.5 million in operating income for the nine months ended September 26, 2021.

Acquisition-related costs associated with the businesses acquired in the third quarter of 2021 and first nine months of 2021 were immaterial.

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

Balance - March 27, 2022 $ 587,858 $ 102,752 $ 690,610

The Company completed one acquisition in the first quarter of 2022 (the "2022 Acquisition").

For the first quarter ended March 27, 2022, net sales included in the Company's condensed consolidated statements of income related to the 2022 Acquisition were $ 8.4 million, and operating income was $ 1.4 million.

Acquisition-related costs associated with the 2022 Acquisition were immaterial.

Assets acquired and liabilities assumed in the acquisition were recorded on the Company’s condensed consolidated balance sheet at their estimated fair values as of the respective date of acquisition.

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

The Company completed six acquisitions in the third quarter of 2020 and nine acquisitions in the nine months ended September 27, 2020.

Net sales included in the Company's condensed consolidated statements of income in the third quarter and nine months ended September 27, 2020 related to acquisitions completed in the first nine months of 2020 were $ 19.6 million and $ 23.3 million, respectively, and operating income was $ 2.1 million and $ 2.2 million, respectively, for the same periods.

The Company completed four acquisitions in the first quarter of 2021.

Net sales included in the Company's condensed consolidated statements of income in the first quarter ended March 28, 2021 related to acquisitions completed in the first three months of 2021 were $ 5.4 million, and operating income relating to acquisitions was immaterial for the same period.

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

1 unchanged sentence

The Company records a liability for the estimated fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition.

As of September 26, 2021, the aggregate fair value of the estimated contingent consideration payments was $ 9.8 million, $ 3.7 million of which is included in "Accrued liabilities" and $ 6.1 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet.

At December 31, 2020, the aggregate fair value of the estimated contingent consideration payments was $ 6.9 million, $ 1.6 million of which was included in the line item "Accrued liabilities" and $ 5.3 million was included in "Other long-term liabilities".

As of March 27, 2022, the aggregate fair value of the estimated contingent consideration payments was $ 8.1 million, of which $ 3.7 million is included in "Accrued liabilities" and $ 4.4 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet.

At December 31, 2021, the fair value of the estimated contingent consideration payments was $ 12.3 million, of which $ 7.0 million was included in the line item "Accrued liabilities" and $ 5.3 million was included in "Other long-term liabilities".

The liabilities for contingent consideration expire at various dates through December 2023.

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

In the third quarter and nine months ended September 26, 2021, the Company made $ 1.5 million and $ 2.5 million in cash payments, respectively, related to contingent consideration liabilities.

In connection with cash payments on contingent consideration, the Company recorded a $ 0.9 million charge in selling general and administrative expense in the condensed consolidated statement of income for the nine months ended September 26, 2021, representing changes from the amounts initially expected to be paid to what was ultimately paid.

2021 Acquisitions

The Company completed ten acquisitions in the nine months ended September 26, 2021, including the following five previously announced acquisitions:

The contingent consideration arrangements are subject to a maximum payment amount of up to $ 14.0 million in the aggregate as of March 27, 2022.

In the first quarter ended March 27, 2022, the Company recorded $ 1.1 million in non-cash increases to contingent consideration liabilities, which is reflected as charges within selling, general and administrative expense in the condensed 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 the first quarter ended March 27, 2022, the Company made cash payments of approximately $ 5.4 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2022 Acquisition

The Company completed the following previously announced acquisition in the three months ended March 27, 2022:

Company Segment Description

Sea-Dog Corporation & Sea-Lect Plastics

(collectively, "Sea-Dog") Distribution & Manufacturing Distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailers, and manufacturers that provides plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington

Hyperform, Inc.

Manufacturing Manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida

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

Coyote Manufacturing Company Manufacturing Designer, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia.

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

Inclusive of five acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $ 298.4 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions.

One of the 2021 Acquisitions accounted for $ 149.3 million in cash and $ 10.2 million in common stock as consideration, $ 25.8 million in inventory, $ 28.4 million in fixed assets, $ 85.0 million in intangible assets, $ 18.1 million in accounts payable and accrued liabilities, $ 11.5 million in operating lease right-of-use assets and liabilities, and $ 33.6 million in goodwill.

Rockford Corporation Manufacturing Designs and produces audio systems and components through its brand Rockford Fosgate®, primarily serving the powersports and automotive aftermarkets, based in Tempe, Arizona, acquired in March 2022

Total cash consideration for the 2022 Acquisition was approximately $ 130.1 million.

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

Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2021 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

2021 Acquisitions

The Company completed eleven acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"), including the following seven previously announced 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 OEMs and dealers in the RV market located in Goshen, Indiana

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

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

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

Inclusive of four acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $ 306.3 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions.

One of the 2020 Acquisitions accounted for $ 129.7 million in cash consideration, $ 2.9 million in inventory, $ 49.3 million in fixed assets, $ 49.1 million in intangible assets, $ 2.6 million in accounts payable and accrued liabilities, $ 4.9 million in operating lease right-of-use assets and liabilities, and $ 32.6 million in goodwill.

Purchase accounting adjustments are complete on all 2020 Acquisitio ns.

Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2020 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

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

(thousands) 2021 Acquisitions 2020 Acquisitions

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 tooling to companies and government entities, based in Everett, Washington, acquired in March 2021.

Hyperform, Inc.

Alpha Systems, LLC Manufacturing & Distribution Manufacturer and distributor of component products and accessories for the RV, marine, manufactured housing and industrial end markets including 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.

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 $ 510.2 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, primarily related to the valuation of property, plant, and equipment and intangible assets, 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 the first quarter ended March 27, 2022 related to the 2021 Acquisitions, individually and in the aggregate, were immaterial and relate primarily to the valuation of intangible and fixed assets.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 2022 Acquisition and the 2021 Acquisitions:

(thousands) 2022 Acquisition 2021 Acquisitions

Consideration

Cash, net of cash acquired (1)

$ 130,058 $ 510,229

Working capital holdback and other, net (2)

2,500 ( 1,190 )

Common stock issuance (3)

16 unchanged sentences

$ 132,558 $ 523,980

(1) Amounts include cash used to pay off outstanding debt obligations at the time of acquisition.

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

This value represents the remaining amounts due to (from) sellers as of September 26, 2021.

(2) In connection with one acquisition, the Company issued 113,961 shares of common stock at a closing price of $ 89.60 as of the acquisition date.

This value represents the remaining amounts due to (from) sellers as of March 27, 2022.

(3) In connection with one of the 2021 Acquisitions, the Company issued 113,961 shares of common stock at a closing price of $ 89.60 as of the acquisition date.

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

(4) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $ 6.2 million), and the 2020 Acquisitions, except Front Range Stone (approximately $ 11.0 million).

(5) Goodwill is not tax-deductible for the 2022 Acquisition and is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $ 6.2 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.

2 unchanged sentences

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.

The following table presents our estimates of identifiable intangible assets for the 2021 Acquisitions and the 2020 Acquisitions:

(thousands, except year info) Estimated Useful Life (in years) 2021 Acquisitions 2020 Acquisitions

The following table presents our estimates of identifiable intangible assets for the 2022 Acquisition and the 2021 Acquisitions:

(thousands, except year data) Estimated Useful Life (in years) 2022 Acquisition 2021 Acquisitions

Customer relationships 10 $ 42,000 $ 157,916

1 unchanged sentence

Patents 10 - 18

10,500 27,310

Trademarks Indefinite 15,400 52,372

1 unchanged sentence

Pro Forma Information

The following pro forma information for the third quarter and nine months ended September 27, 2020 assumes the 2021 Acquisitions and the 2020 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The pro forma information contains the actual operating results of the 2021 Acquisitions and 2020 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The following pro forma information for the first quarter ended March 27, 2022 and March 28, 2021 assumes the 2022 Acquisition and the 2021 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The pro forma information contains the actual operating results of the 2022 Acquisition and 2021 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction.

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.2 million and $ 4.0 million for the third quarter and nine months ended September 26, 2021, respectively and $ 5.2 million and $ 16.3 million for the third quarter and nine months ended September 27, 2020, respectively.

Third Quarter Ended Nine Months Ended

(thousands, except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.8 million and $ 5.9 million for the first quarter ended March 27, 2022 and March 28, 2021, respectively.

First Quarter Ended

(thousands, except per share data) March 27, 2022 March 28, 2021

Revenue $ 1,369,234 $ 989,281

4 unchanged sentences

STOCK-BASED COMPENSATION

The Company recorded expense of approximately $ 7.0 million and $ 17.3 million the third quarter and nine months ended September 26, 2021, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 4.9 million and $ 11.2 million was recorded in the third quarter and nine months ended September 27, 2020, which includes a $ 2.3 million reduction of expense in the nine month period due to certain forfeitures and adjustments.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first nine months of 2021 totaling 296,073 shares in the aggregate at an average fair value of $ 73.31 at grant date for a total fair value at grant date of $ 21.7 million.

As of September 26, 2021, there was approximately $ 31.5 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

The Company recorded stock-based compensation expense of approximately $ 5.1 million and $ 4.3 million in the first quarter ended March 27, 2022 and March 28, 2021, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

The Board approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the first quarter ended March 27, 2022 totaling 220,450 shares in the aggregate at an average fair value of $ 64.74 at grant date for a total fair value at grant date of $ 14.4 million.

As of March 27, 2022, there was approximately $ 35.3 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

That cost is expected to be recognized over a weighted-average period of 21.1 months.

NET INCOME PER COMMON SHARE

Net income per common share calculated for the third quarter and nine months of 2021 and 2020 is as follows:

Third Quarter Ended Nine Months Ended

(thousands except per share data) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

Net income for basic and diluted per share calculation $ 57,397 $ 37,336 $ 163,895 $ 59,237

Net income per common share calculated for the first quarter of 2022 and 2021 is as follows:

First Quarter Ended

(thousands except per share data) March 27, 2022 March 28, 2021

Net income for basic per share calculation $ 112,673 $ 47,513

Effect of interest on potentially dilutive convertible notes, net of tax 317 —

Net income for dilutive per share calculation $ 112,990 $ 47,513

Weighted average common shares outstanding - basic 22,517 22,737

Effect of potentially dilutive securities 614 398 549 304

Weighted average impact of potentially dilutive convertible notes 2,046 —

Weighted average impact of potentially dilutive securities 319 549

Weighted average common shares outstanding - diluted 24,882 23,286

Net income per common share:

Basic net income per common share $ 5.00 $ 2.09

1 unchanged sentence

An immaterial amount of securities was not included in the computation of diluted income per share as they are considered anti-dilutive under the treasury stock method for all periods presented.

A summary of total debt outstanding at September 26, 2021 and December 31, 2020 is as follows:

(thousands) September 26, 2021 December 31, 2020

A summary of total debt outstanding at March 27, 2022 and December 31, 2021 is as follows:

(thousands) March 27, 2022 December 31, 2021

Long-term debt:

5 unchanged sentences

300,000 300,000

1.75 % convertible notes due 2028

258,750 258,750

4.75 % senior notes due 2029

350,000 350,000

Total long-term debt 1,514,625 1,360,625

4 unchanged sentences

Total long-term debt, less current maturities, net $ 1,489,811 $ 1,278,989

4.75 % Senior Notes due 2029

On April 20, 2021, the Company issued $ 350.0 million aggregate principal amount of 4.75 % Senior Notes due 2029 (the " 4.75 % Senior Notes").

The 4.75 % Senior Notes were not registered under the Securities Act of 1933, as amended (the "Securities Act") and were offered under rule 144A under the Securities Act.

The 4.75 % Senior Notes will mature on May 1, 2029.

Interest on the 4.75 % Senior Notes started accruing April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November 1, 2021.

The effective interest rate on the 4.75 % Senior Notes, which includes debt issuance costs, is approximately 4.98 %.

In connection with the issuance of the 4.75 % Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75 % Senior Notes

approximately $ 5.3 million in deferred financing costs which are being amortized using the effective interest rate over the term of the 4.75 % Senior Notes.

The 4.75 % Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2021 Credit Facility (as defined herein).

The Company may redeem the 4.75 % Senior Notes at any time according to the following timeframes with the respective restrictions and prices:

Timeframe Redemption Restrictions Redemption Prices

Prior to May 1, 2024 Up to 40 % of the notes

After May 1, 2024 In whole, or in part 102.375 %

After May 1, 2025 In whole, or in part 101.188 %

After May 1, 2026 In whole, or in part 100.000 %

2021 Credit Facility

Simultaneously with the issuance of the 4.75 % Senior Notes, the Company entered into the Fourth Amended and Restated Credit Agreement (the "2021 Credit Agreement").

The 2021 Credit Agreement amended and extended the Company's 2019 Credit Agreement (as defined herein) and consists of a senior secured revolver (the "2021 Revolver") and a senior secured term loan (the "2021 Term Loan" and together with the 2021 Revolver, the "2021 Credit Facility").

The maturity date for borrowings under the 2021 Credit Agreement is April 20, 2026.

Upon the satisfaction of certain conditions, and obtaining incremental commitments from its lenders, the Company may be able to increase the borrowing capacity of the 2021 Credit Facility by up to $ 250.0 million for acquisitions.

The Company determined that the terms of the 2021 Credit Agreement were not substantially different from the terms of the Company’s 2019 Credit Agreement.

Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial.

Borrowings under the 2021 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors.

Pursuant to the 2021 Credit Agreement:

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

(i) beginning June 30, 2021, through and including March 31, 2024, $ 1,875,000 and (ii) beginning June 30, 2024, and each quarter thereafter, $ 3,750,000 , with the remaining balance due at maturity;

• The interest rates for borrowings under the 2021 Revolver and the 2021 Term Loan are the Prime Rate or LIBOR plus a margin, which ranges from 0.00 % to 0.75 % for Prime Rate loans and from 1.00 % to 1.75 % for LIBOR loans depending on the Company's consolidated total leverage ratio, as defined below.

The Company is required to pay fees on unused but committed portions of the 2021 Revolver, which range from 0.15 % to 0.225 %;

• Covenants include requirements as to a maximum consolidated secured net leverage ratio ( 2.75 :1.00, increasing to 3.25 :1.00 in certain circumstances in connection with Company acquisitions) and a minimum consolidated fixed charge coverage ratio ( 1.50 :1.00) that are tested on a quarterly basis, a minimum liquidity requirement applicable during the six-month period preceding the maturity of the Company's 1.00 % Convertible Notes due 2023, and other customary covenants.

The total face value of the 2021 Term Loan is $ 150.0 million.

Total available borrowing capacity under the 2021 Revolver is $ 550.0 million.

At September 26, 2021, the Company had $ 148.1 million outstanding under the 2021 Term Loan under the LIBOR-based option, and borrowings outstanding under the 2021 Revolver of $ 135.5 million under the LIBOR-based option.

The interest rate for incremental borrowings at September 26, 2021 was LIBOR plus 1.50 % (or 1.63 %) for the LIBOR-based option.

The fee payable on committed but unused portions of the 2021 Revolver was 0.20 % at September 26, 2021.

Total cash interest paid for the third quarter of 2021 and 2020 was $ 3.7 million and $ 3.2 million, respectively, and $ 21.2 million and $ 21.4 million for the comparative nine month periods, respectively.

2019 Credit Facility

See Note 8 of the Notes to Consolidated Financial Statements section of the Fiscal 2020 Form 10-K regarding the Company's previous credit agreement (the "2019 Credit Agreement") which established a $ 550 million revolving credit loan (the "2019 Revolver") and a $ 100 million term loan (the "2019 Term Loan" and, together with 2019 Revolver, the "2019 Credit Facility").

The 2019 Credit Agreement was amended by the 2021 Credit Agreement on April 20, 2021 as discussed above.

There were no material changes to any of our debt arrangements during the quarter ended March 27, 2022.

The decrease in the convertible notes debt discount reflects the impact of the adoption of ASU 2020-06 on the carrying value of the convertible notes.

The interest rate for incremental borrowings at March 27, 2022 was LIBOR plus 1.50 % (or 1.75 %) for the LIBOR-based option.

The fee payable on committed but unused portions of the Revolver due 2026 was 0.20 % at March 27, 2022.

Total cash interest paid for the first quarter of 2022 and 2021 was $ 3.2 million and $ 3.3 million, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

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

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

As of September 26, 2021, the Company had a combined notional principal amount of $ 200 million of interest rate swap agreements, all of which are designated as cash flow hedges.

These swap agreements effectively convert the interest expense associated with a portion of the Company's variable rate debt from variable interest rates to fixed interest rates and have maturities ranging from February 2022 to March 2022.

To partially mitigate this risk, the Company previously entered into interest rate swaps, which matured in March 2022, and therefore have no further associated liability as of March 27, 2022.

The following table summarizes the fair value of derivative contracts included in the condensed consolidated balance sheets (in thousands):

Fair value of derivative instruments

Derivatives accounted for as cash flow hedges Balance sheet location September 26, 2021 December 31, 2020

Derivatives accounted for as cash flow hedges Balance sheet location March 27, 2022 December 31, 2021

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 and are classified as Level 2 in the fair value hierarchy.

See Note 11 for information regarding accumulated other comprehensive loss on interest rate swaps, which qualify as cash flow hedges.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

The activity in accumulated other comprehensive loss during the third quarter and nine months ended September 26, 2021 and September 27, 2020 was as follows:

Third Quarter Ended September 26, 2021

(thousands) Cash Flow Hedges Other Foreign Currency Translation Total

Balance at June 27, 2021 $ ( 2,896 ) $ ( 1,263 ) $ 30 $ ( 4,129 )

Other comprehensive income (loss) before reclassifications, net of tax ( 19 ) — 74 55

Amounts reclassified from accumulated other comprehensive loss, net of tax 1,050 — — 1,050

Other comprehensive income 1,031 — 74 1,105

Balance at September 26, 2021 $ ( 1,865 ) $ ( 1,263 ) $ 104 $ ( 3,024 )

Nine Months Ended September 26, 2021

(thousands) Cash Flow Hedges Other Foreign Currency Translation Total

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

Other comprehensive income (loss) before reclassifications, net of tax ( 70 ) — 4 ( 66 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 3,094 — — 3,094

Other comprehensive income 3,024 — 4 3,028

Balance at September 26, 2021 $ ( 1,865 ) $ ( 1,263 ) $ 104 $ ( 3,024 )

Third Quarter Ended September 27, 2020

(thousands) Cash Flow Hedges Other Foreign Currency Translation Total

Balance at June 28, 2020 $ ( 6,916 ) $ ( 1,270 ) $ ( 106 ) $ ( 8,292 )

Other comprehensive income (loss) before reclassifications, net of tax ( 38 ) — 60 22

Amounts reclassified from accumulated other comprehensive loss, net of tax 1,027 — — 1,027

Other comprehensive income 989 — 60 1,049

Balance at September 27, 2020 $ ( 5,927 ) $ ( 1,270 ) $ ( 46 ) $ ( 7,243 )

Nine Months Ended September 27, 2020

(thousands) Cash Flow Hedges Other Foreign Currency Translation Total

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

Other comprehensive income (loss) before reclassifications, net of tax ( 3,940 ) — 8 ( 3,932 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 2,387 — — 2,387

Other comprehensive income (loss) ( 1,553 ) — 8 ( 1,545 )

Balance at September 27, 2020 $ ( 5,927 ) $ ( 1,270 ) $ ( 46 ) $ ( 7,243 )

The interest rate swaps were 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.

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

Third Quarter Ended

(thousands) September 26, 2021 September 27, 2020

Operating lease cost $ 10,760 $ 8,525

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

Operating cash flows for operating leases $ 10,440 $ 8,317

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

Operating leases $ 12,573 $ 17,091

Nine Months Ended

(thousands) September 26, 2021 September 27, 2020

First Quarter Ended

(thousands) March 27, 2022 March 28, 2021

Operating lease cost $ 12,164 $ 9,585

4 unchanged sentences

Balance sheet information related to leases was as follows:

(thousands, except lease term and discount rate) September 26, 2021 December 31, 2020

(thousands, except lease term and discount rate) March 27, 2022 December 31, 2021

Operating lease right-of-use assets $ 170,875 $ 158,183

4 unchanged sentences

Weighted average discount rate, operating leases 3.8 %

Maturities of lease liabilities were as follows at September 26, 2021:

2021 (excluding the nine months ended September 26, 2021)

Maturities of lease liabilities were as follows at March 27, 2022:

2022 (excluding the three months ended March 27, 2022) $ 36,617

Thereafter 31,411

2 unchanged sentences

Total $ 173,391

As of September 26, 2021, outstanding leases have remaining lease terms ranging from 1 year to 18 years.

The Company has additional operating leases that have not yet commenced as of September 26, 2021 and, therefore, were not included as operating lease right-of-use assets and corresponding operating lease liabilities on our balance sheet at September 26, 2021.

These operating leases will commence between the fourth quarter of fiscal 2021 and the second quarter of fiscal 2022 with lease terms of 5 years to 10 years.

The estimated fair value of these operating lease right-of-use assets and corresponding operating lease liabilities to be recorded on our balance sheet upon lease commencement is approximately $ 5.8 million.

As of March 27, 2022, outstanding leases have remaining lease terms ranging from 1 year to 17 years.

FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities at September 26, 2021 and December 31, 2020:

September 26, 2021 December 31, 2020

The following table presents fair values of certain assets and liabilities at March 27, 2022 and December 31, 2021:

March 27, 2022 December 31, 2021

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

5 unchanged sentences

— 307.0 — — 350.6 —

Convertible note (2)

1.75 % convertible notes due 2028 (2)

— 237.2 — — 269.8 —

1.00 % convertible notes due 2023 (2)

— 170.8 — — 194.1 —

Term loan due 2026 (3)

6 unchanged sentences

— — 8.1 — — 12.3

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of September 26, 2021 as a component of "Cash and cash equivalents".

The Company held no cash equivalents as of December 31, 2020.

(2) The amounts of these notes listed above are the current fair values for disclosure purposes only, valued using Level 2 inputs, and they are recorded in the Company's condensed consolidated balance sheets as of September 26, 2021 and December 31, 2020 using the interest rate method as described in Note 9.

(3) The carrying amounts of our term loan and revolver, valued using Level 2 inputs, approximate fair value as of September 26, 2021 and December 31, 2020 based upon their terms and conditions in comparison to the terms and conditions available at those dates.

(4) The interest rate swaps are classified as Level 2 in the fair value hierarchy and discussed further in Note 10.

(5) The estimated fair value of the Company's contingent consideration is valued using Level 3 inputs and is discussed further in Note 6.

The effective tax rate in the third quarter of 2021 and 2020 was 26.3 % and 24.3 %, respectively, and the effective tax rate for the comparable nine month periods was 24.1 % and 25.4 %, respectively.

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

In addition, the first nine months of 2021 includes the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense upon realization in the amount of $ 5.7 million.

Cash paid for income taxes, net of refunds, was $ 19.7 million and $ 43.9 million, respectively, in the third quarter and first nine months of 2021 and $ 1.8 million and $ 1.6 million, respectively, in the third quarter and nine months of 2020.

(1) The carrying amounts of cash equivalents, representing government and other money market funds traded in an active market with relatively short maturities, are reported on the condensed consolidated balance sheet as of March 27, 2022 as a component of "Cash and cash equivalents".

(2) The amounts of these notes listed above are the current fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of March 27, 2022 and December 31, 2021 using the interest rate method.

(3) The carrying amounts of our term loan and revolver approximate fair value as of March 27, 2022 and December 31, 2021 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 10.

(5) The estimated fair value of the Company's contingent consideration is discussed further in Note 6.

The effective tax rate in the first quarter of 2022 and 2021 was 23.3 % and 17.1 %, respectively.

The 2022 and 2021 rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $ 4.0 million and $ 5.7 million, respectively.

Cash paid for income taxes, net of refunds, in the first quarter of 2022 was $ 18.4 million.

No income tax payments were made in the first quarter of 2021.

SEGMENT INFORMATION

1 unchanged sentence

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

Third Quarter Ended September 26, 2021

(thousands) Manufacturing Distribution Total

Net outside sales $ 772,235 $ 287,942 $ 1,060,177

Intersegment sales 20,064 1,880 21,944

Total sales 792,299 289,822 1,082,121

Operating income 91,370 31,187 122,557

Third Quarter Ended September 27, 2020

(thousands) Manufacturing Distribution Total

Net outside sales $ 494,274 $ 206,433 $ 700,707

Intersegment sales 12,004 1,640 13,644

Total sales 506,278 208,073 714,351

Operating income 63,312 16,444 79,756

Nine Months Ended September 26, 2021

First Quarter Ended March 27, 2022

(thousands) Manufacturing Distribution Total

3 unchanged sentences

Operating income 170,544 45,966 216,510

Nine Months Ended September 27, 2020

First Quarter Ended March 28, 2021

(thousands) Manufacturing Distribution Total

4 unchanged sentences

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

Third Quarter Ended Nine Months Ended

(thousands) September 26, 2021 September 27, 2020 September 26, 2021 September 27, 2020

First Quarter Ended

(thousands) March 27, 2022 March 28, 2021

Operating income for reportable segments $ 216,510 $ 99,604

2 unchanged sentences

Consolidated operating income $ 161,755 $ 68,481

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages, insurance, taxes, supplies, travel and entertainment, professional fees and other.

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages and other compensation, insurance, taxes, supplies, travel and entertainment, professional fees, amortization of inventory step-up adjustments, and other.

The following table presents an allocation of total assets to the reportable segments of the Company and a reconciliation to consolidated total assets:

(thousands) September 26, 2021 December 31, 2020

(thousands) March 27, 2022 December 31, 2021

Manufacturing assets $ 2,359,183 $ 2,031,465

5 unchanged sentences

STOCK REPURCHASE PROGRAMS

In March 2020, the Board approved a new stock repurchase program for up to $ 50 million of its common stock, including amounts remaining under previous authorizations.

In August 2021, the Company's Board authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program to $ 50 million, including the $ 14.4 million remaining under the previous authorization.

Approximately $ 39.6 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of September 26, 2021.

The Company repurchased 128,929 shares of its common stock at an average price of $ 80.62 for an aggregate cost of $ 10.4 million in the third quarter ended September 26, 2021 and repurchased 388,929 shares of its common stock at an average price of $ 82.14 for an aggregate cost of $ 31.9 million in the nine months ended September 26, 2021.

Prior to 2021, the Company retired shares as repurchased.

Beginning in 2021, the Company elected not to retire shares as repurchased and the shares repurchased in the first six months of 2021 were instead held as "Treasury Stock." However, the Company retired these shares during the third quarter ended September 26, 2021 and has elected to retire shares immediately upon repurchase going forward.

In the third quarter ended September 27, 2020, the Company repurchased 88,950 shares of its common stock at an average price of $ 53.24 per share for an aggregate cost of $ 4.7 million.

In the first nine months ended September 27, 2020, the Company repurchased 545,105 shares of its common stock at an average price of $ 37.22 per share for an aggregate cost of approximately $ 20.3 million.

In January 2022, the Company's Board authorized an increase in the amount of the Company's common stock that may be acquired over the next 24 months under the current stock repurchase program to $ 100 million, including the $ 11.0 million remaining under the previous authorization.

Approximately $ 86.8 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of March 27, 2022.

The Company repurchased 365,627 shares of its common stock at an average price of $ 67.77 for an aggregate cost of $ 24.8 million in the first quarter ended March 27, 2022.

The Company did no t repurchase any of its common stock in the first quarter ended March 28, 2021.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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

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

Certain of our customers in the RV end market recently have initiated recalls involving certain products which are sold by our Distribution segment.

We are currently evaluating the extent to which this matter will impact our consolidated financial statements.

At this time, we are unable to reasonably estimate any such impact.

SUBSEQUENT EVENTS

In November 2021, we completed the acquisition of Wet Sounds, Inc., a manufacturer of premium audio products and accessories for the marine OEM market and aftermarket as well as other adjacent OEM markets and aftermarkets.

Products include speakers, subwoofers, amplifiers, soundbars, and media units.

Wet Sounds, Inc.

is headquartered in Rosenberg, Texas .

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 financial position, results of operations, or cash flows.

The Company disclosed litigation concerning the Lusher Site Remediation Group in the Company's 2021 Form 10-K.

The Company has also been named as a potentially responsible party for the related Lusher Street Groundwater Contamination Superfund Site (the "Superfund Site") by the U.S.

Environmental Protection Agency (the "EPA").

The Company sold certain parcels of real property that the EPA contends are connected to the Superfund Site (the "Divested Properties") in January 2022 for a pretax gain on disposal of $ 5.5 million that is included in Selling, general and administrative expenses in the Company's Condensed Consolidated Statements of Income for the first quarter of 2022.

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.

No further proceedings have occurred in the first quarter of 2022.

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

However, any litigation is inherently uncertain, the EPA has yet to select a final remedy for the Superfund Site, 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 financial position, results of operations, or cash flows, and there have been no further proceedings in the first quarter of 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-Q

Item 1. Financial Statements