What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 124 added, 206 removed, 322 unchanged (51% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Third Quarter Ended Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

First Quarter Ended

($ in thousands, except per share data) March 31, 2024 April 2, 2023

NET SALES $ 933,492 $ 900,100

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Third Quarter Ended Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

First Quarter Ended

($ in thousands) March 31, 2024 April 2, 2023

NET INCOME $ 35,093 $ 30,173

Other comprehensive income, net of tax:

Unrealized gain of hedge derivatives — — — 757

Foreign currency translation loss ( 32 ) ( 9 )

Total other comprehensive income (loss) ( 10 ) ( 118 ) ( 109 ) 593

Total other comprehensive loss ( 32 ) ( 9 )

COMPREHENSIVE INCOME $ 35,061 $ 30,164

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in thousands) October 1, 2023 December 31, 2022

($ in thousands) March 31, 2024 December 31, 2023

Current Assets

31 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022

First Quarter Ended

($ in thousands) March 31, 2024 April 2, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 35,093 $ 30,173

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

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 40,335 35,510

Stock-based compensation expense 5,460 5,242

Amortization of convertible notes debt discount 823 1,399

(Gain) loss on sale of property, plant and equipment 242 ( 5,713 )

Other non-cash items 2,959 5,049

Other 853 2,056

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

3 unchanged sentences

Accounts payable, accrued liabilities and other 22,600 ( 36,393 )

Net cash provided by operating activities 293,830 229,808

Net cash provided by (used in) operating activities 35,176 ( 950 )

CASH FLOWS FROM INVESTING ACTIVITIES

2 unchanged sentences

Business acquisitions, net of cash acquired ( 329,642 ) ( 478 )

Purchases of intangible assets ( 2,970 ) —

Other investing activities ( 25,754 ) ( 2,925 )

Net cash used in investing activities ( 370,724 ) ( 23,577 )

7 unchanged sentences

Taxes paid for share-based payment arrangements ( 14,788 ) ( 7,499 )

Payment of deferred financing costs and other — ( 2,142 )

Payment of contingent consideration from a business acquisition ( 3,500 ) ( 1,370 )

1 unchanged sentence

Other financing activities ( 75 ) ( 75 )

Net cash used in financing activities ( 224,764 ) ( 90,504 )

Decrease in cash and cash equivalents ( 6,397 ) ( 69,580 )

Net cash provided by financing activities 341,749 32,463

Net increase in cash and cash equivalents 6,201 7,936

Cash and cash equivalents at beginning of year 11,409 22,847

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Third Quarter Ended October 1, 2023

First Quarter Ended March 31, 2024

($ in thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Stock Accumulated Other

Comprehensive Loss Retained

Earnings Total

Balance July 2, 2023 $ 196,912 $ — $ ( 794 ) $ 801,304 $ 997,422

Balance December 31, 2023 $ 203,258 $ ( 999 ) $ 843,078 $ 1,045,337

Net income — — 35,093 35,093

1 unchanged sentence

Other comprehensive loss, net of tax — ( 32 ) — ( 32 )

Stock repurchases under buyback program ( 54 ) — — ( 406 ) ( 460 )

Repurchases of shares for tax payments related to the vesting and exercising of share-based grants ( 14,788 ) — — ( 14,788 )

Issuance of shares upon exercise of common stock options 270 — — — 270

Stock-based compensation expense 5,460 — — 5,460

Balance October 1, 2023 $ 201,680 $ — $ ( 804 ) $ 830,427 $ 1,031,303

Third Quarter Ended September 25, 2022

Balance March 31, 2024 $ 193,930 $ ( 1,031 ) $ 865,637 $ 1,058,536

First Quarter Ended April 2, 2023

($ in thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Stock Accumulated Other

Comprehensive Loss Retained

Earnings Total

Balance June 26, 2022 $ 191,295 $ — $ ( 1,517 ) $ 707,812 $ 897,590

Balance December 31, 2022 $ 197,003 $ ( 695 ) $ 758,861 $ 955,169

Net income — — 30,173 30,173

5 unchanged sentences

Stock-based compensation expense 5,242 — — 5,242

Balance September 25, 2022 $ 195,367 $ — $ ( 1,635 ) $ 752,944 $ 946,676

Nine Months Ended October 1, 2023

($ in thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Retained

Earnings Total

Balance December 31, 2022 $ 197,003 $ — $ ( 695 ) $ 758,861 $ 955,169

Net income — — — 112,080 112,080

Dividends declared — — — ( 29,927 ) ( 29,927 )

Other comprehensive loss, net of tax — — ( 109 ) — ( 109 )

Share repurchases under buyback program ( 1,649 ) — — ( 10,587 ) ( 12,236 )

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 8,762 ) — — — ( 8,762 )

Issuance of shares upon exercise of common stock options 1,413 — — — 1,413

Stock-based compensation expense 13,675 — — — 13,675

Balance October 1, 2023 $ 201,680 $ — $ ( 804 ) $ 830,427 $ 1,031,303

Nine Months Ended September 25, 2022

($ in thousands) Common

Stock Additional Paid-in Capital Accumulated Other

Comprehensive Loss Retained

Earnings Total

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

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

Net income — — — 288,016 288,016

Dividends declared — — — ( 22,803 ) ( 22,803 )

Other comprehensive income, net of tax — — 593 — 593

Share repurchases under buyback program ( 6,771 ) — — ( 41,978 ) ( 48,749 )

Repurchases of shares for tax payments related to the vesting and exercise of share-based grants ( 10,036 ) — — — ( 10,036 )

Issuance of shares upon exercise of common stock options 195 — — — 195

Stock-based compensation expense 15,596 — — — 15,596

Balance September 25, 2022 $ 195,367 $ — $ ( 1,635 ) $ 752,944 $ 946,676

Balance April 2, 2023 $ 194,753 $ ( 704 ) $ 775,773 $ 969,822

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

(“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of October 1, 2023 and December 31, 2022, its results of operations for the third quarter and nine months ended October 1, 2023 and September 25, 2022, and its cash flows for the nine months ended October 1, 2023 and September 25, 2022.

(“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 31, 2024 and December 31, 2023, its results of operations for the first quarter ended March 31, 2024 and April 2, 2023, and its cash flows for the three months ended March 31, 2024 and April 2, 2023.

Patrick's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S.

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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 2023 ended on October 1, 2023 and the third quarter of fiscal year 2022 ended on September 25, 2022.

The first quarter of fiscal year 2024 ended on March 31, 2024 and the first quarter of fiscal year 2023 ended on April 2, 2023.

Reclassified Amounts

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

These reclassifications are immaterial to the overall financial statements.

Summary of Significant Accounting Policies

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Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements." The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

The amendments in this ASU are effective for public business entities for interim periods beginning after June 30, 2027.

The Company is currently evaluating the impacts of the provisions of ASU 2023-06.

In November 2023, the FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures".

This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss

in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

This ASU will likely result in additional required disclosures when adopted.

The Company is currently evaluating this guidance to determine the impact on its disclosures;

however, adoption will not otherwise impact our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures" .

This ASU establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation.

They must also further disaggregate income taxes paid.

The new standard is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted.

The Company is currently evaluating this guidance to determine the impact on its disclosures;

however, adoption will not otherwise impact our consolidated financial statements.

REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment:

Third Quarter Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

Recreational Vehicle $ 273,804 $ 126,300 $ 400,104

Marine 193,066 12,148 205,214

Manufactured Housing 66,671 79,030 145,701

Industrial 107,644 7,410 115,054

Total $ 641,185 $ 224,888 $ 866,073

Third Quarter Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

Recreational Vehicle $ 355,791 $ 167,784 $ 523,575

Marine 256,357 14,768 271,125

Manufactured Housing 85,767 89,676 175,443

Industrial 130,495 11,451 141,946

Total $ 828,410 $ 283,679 $ 1,112,089

Nine Months Ended October 1, 2023

First Quarter Ended March 31, 2024

($ in thousands) Manufacturing Distribution Total

1 unchanged sentence

Marine 146,045 9,270 155,315

Powersports 79,959 2,711 82,670

Manufactured Housing 69,425 86,699 156,124

1 unchanged sentence

Total $ 697,543 $ 235,949 $ 933,492

Nine Months Ended September 25, 2022

First Quarter Ended April 2, 2023

($ in thousands) Manufacturing Distribution Total

1 unchanged sentence

Marine 227,230 10,741 237,971

Powersports 29,562 3,239 32,801

Manufactured Housing 64,189 69,235 133,424

4 unchanged sentences

Inventories consist of the following:

($ in thousands) October 1, 2023 December 31, 2022

($ in thousands) March 31, 2024 December 31, 2023

Raw materials $ 274,553 $ 269,786

8 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended October 1, 2023 by segment are as follows:

Changes in the carrying amount of goodwill for the three months ended March 31, 2024 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

2 unchanged sentences

Adjustments to preliminary purchase price allocations 16 — 16

Balance - October 1, 2023

Balance - March 31, 2024

$ 678,706 $ 77,023 $ 755,729

Intangible assets, net consist of the following as of October 1, 2023 and December 31, 2022:

($ in thousands) October 1, 2023 December 31, 2022

Intangible assets, net consist of the following as of March 31, 2024 and December 31, 2023:

($ in thousands) March 31, 2024 December 31, 2023

Customer relationships $ 910,934 $ 729,664

5 unchanged sentences

Intangible assets, net $ 848,753 $ 651,153

Changes in the carrying value of intangible assets for the nine months ended October 1, 2023 by segment are as follows:

Changes in the carrying value of intangible assets for the three months ended March 31, 2024 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

2 unchanged sentences

Amortization ( 19,965 ) ( 2,853 ) ( 22,818 )

Adjustments to preliminary purchase price allocations ( 4,359 ) ( 85 ) ( 4,444 )

Balance - October 1, 2023

Balance - March 31, 2024

$ 728,466 $ 120,287 $ 848,753

Business combinations generally take place to gain key technology, expand into additional markets, or strengthen Patrick's positions in existing markets.

Business combinations generally take place to strengthen Patrick's positions in existing markets and increase its market share and per unit content, expand into additional markets, and gain key technology.

Acquisitions are accounted for under the acquisition method of accounting.

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.

The Company completed three acquisitions in the first nine months of 2023 (the "2023 Acquisitions").

For the third quarter and nine months ended October 1, 2023, net sales included in the Company's condensed consolidated statements of income related to the 2023 Acquisitions were $ 7.3 million and $ 9.8 million, respectively, and operating income was $( 0.1 ) million and $ 0.1 million, respectively.

Acquisition-related costs associated with the 2023 Acquisitions were immaterial.

The Company completed four acquisitions in the first three months of 2024 (the "2024 Acquisitions").

For the first quarter ended March 31, 2024, net sales included in the Company's condensed consolidated statements of income related to the 2024 Acquisitions were $ 58.1 million, and operating income was $ 11.0 million.

Acquisition-related costs associated with the 2024 Acquisitions were $ 5.0 million.

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

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

The Company completed three acquisitions in the first nine months of 2022.

For the third quarter and nine months ended September 25, 2022, net sales included in the Company's condensed consolidated statements of income related to the acquisitions completed in the first nine months 2022 were $ 38.0 million and $ 87.3 million, respectively, and operating income was $ 6.9 million and $ 15.9 million, respectively.

Contingent Consideration

The Company completed no acquisitions in the first quarter of 2023.

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

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.

Changes in the fair value of contingent consideration for the nine months ended October 1, 2023 are as follows:

Changes in the fair value of contingent consideration for the three months ended March 31, 2024 are as follows:

($ in thousands)

Balance - December 31, 2023 $ 8,510

Additions 3,590

Fair value adjustments (1)

Settlements ( 3,880 )

Balance - October 1, 2023

(1) The Company records non-cash fair value adjustments to contingent consideration based on expected results, which are included in selling, general and administrative expenses in the Company's condensed consolidated statements of income for the first nine months of 2023.

The following table shows the balance sheet location of the fair value of contingent consideration and the maximum amount of contingent consideration payments the Company may be subject to at October 1, 2023 and December 31, 2022:

($ in thousands) October 1, 2023 December 31, 2022

Balance - March 31, 2024

($ in thousands) March 31, 2024 December 31, 2023

Accrued liabilities $ 3,620 $ 7,500

3 unchanged sentences

2024 Acquisitions

The Company completed three acquisitions in the first nine months ended October 1, 2023, including the following previously announced acquisition:

The Company completed four acquisitions in the first three months ended March 31, 2024, including the following previously announced acquisition:

Company Segment Description

BTI Transport Distribution Provider of transportation and logistics services to marine original equipment manufacturers ("OEMs") and dealers, based in Elkhart, Indiana, acquired in April 2023.

The acquired business operates under the Patrick Marine Transport brand.

Inclusive of two acquisitions not discussed above, total cash consideration for the 2023 Acquisitions was approximately $ 26.4 million, plus contingent consideration over a two-year period based on future performance in connection with certain acquisitions.

Sportech, LLC ("Sportech") Manufacturing Leading designer and manufacturer of high-value, complex component solutions sold to powersports original equipment manufacturers ("OEMs"), adjacent market OEMs and the aftermarket, including integrated door systems, roofs, canopies, bumpers, windshields, fender flares and cowls, based in Elk River, Minnesota, acquired in January 2024.

Inclusive of three acquisitions not discussed above, total cash consideration for the 2024 Acquisitions was approximately $ 329.6 million.

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 the third quarter and nine months ended October 1, 2023 related to the 2023 Acquisitions were immaterial.

2023 Acquisitions

The Company completed five acquisitions in the year ended December 31, 2022, including the following three previously announced acquisitions (collectively, the "2022 Acquisitions"):

The Company completed three acquisitions in the year ended December 31, 2023, including the following previously announced acquisition:

Company Segment Description

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

Diamondback Towers, LLC Manufacturing Manufacturer of wakeboard/ski towers and accessories for marine OEMs, based in Cocoa, Florida, acquired in May 2022.

Transhield Manufacturing Designer and manufacturer of customized and proprietary protection solutions for the marine, military and industrial markets, including covers and shrinkable packaging, to protect equipment during transport and storage, based in Elkhart, Indiana, acquired in November 2022.

Inclusive of two acquisitions not discussed above, total cash consideration for the 2022 Acquisitions was approximately $ 248.1 million, plus contingent consideration over a one to two-year period based on future performance in connection with certain acquisitions.

Purchase price allocations and all valuation activities in connection with the 2022 Acquisitions have been finalized, and adjustments made during the year related to changes in the preliminary purchase price allocation recorded in all periods related to the 2022 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.

BTI Transport Distribution Provider of transportation and logistics services to marine OEMs and dealers, based in Elkhart, Indiana, acquired in April 2023.

The acquired business operates under the Patrick Marine Transport brand.

Inclusive of two acquisitions not discussed above, total cash consideration for the 2023 Acquisitions was approximately $ 26.3 million, plus contingent consideration over a two-year period based on future performance in connection with certain acquisitions.

Changes to preliminary purchase accounting estimates recorded in the first quarter ended March 31, 2024 related to the 2023 Acquisitions were immaterial.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 2024 Acquisitions and 2023 Acquisitions:

Acquisitions 2023

($ in thousands) Acquisition A Acquisition B All Others Total

($ in thousands) Sportech All Others Total Total

Consideration

2 unchanged sentences

Contingent consideration (1)

3,500 — — 1,840 1,840

Total consideration $ 317,589 $ 9,680 $ 327,269 $ 29,794

8 unchanged sentences

Non-compete agreements 1,000 85 1,085 430

Patents — 7,500 9,500 — 17,000

Patents and developed technology 17,500 — 17,500 —

Trademarks 20,500 — 20,500 —

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

(2) Goodwill is not tax-deductible for Acquisition A and Acquisition B (totaling approximately $ 74.9 million) but is tax-deductible for the remaining 2022 Acquisitions and the 2023 Acquisitions.

(3) In connection with one of the 2023 Acquisitions, the Company anticipates it will recognize a bargain purchase gain.

(2) Goodwill is tax-deductible for all acquisitions, except Sportech, which is only partially tax-deductible.

(3) In connection with one of the 2023 Acquisitions, the Company recognized a $ 1.7 million bargain purchase gain.

A bargain purchase gain is recognized when the net assets acquired in a business combination have a higher fair value than the consideration paid.

This gain is primarily attributable to the fair value assigned to customer relationships, has been deferred for recognition until the Company finalizes all purchase accounting adjustments, and is included in "Accrued liabilities" on the condensed consolidated balance sheet.

This gain is primarily attributable to the fair value assigned to customer relationships in that acquisition and is included in "Selling, general, and administrative" in the consolidated statement of income for the year ended December 31, 2023.

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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The estimated useful life for non-compete agreements is 5 years.

The weighted average estimated useful life for patents is 13 years, ranging from 10 to 18 years.

The estimated useful life for patents and developed technology 10 years.

Trademarks have an indefinite useful life.

Pro Forma Information

The following pro forma information for the third quarter and nine months ended October 1, 2023 and September 25, 2022 assumes the 2023 Acquisitions and 2022 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The following pro forma information for the first quarter ended March 31, 2024 and April 2, 2023 assumes the 2024 Acquisitions and 2023 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 2024 Acquisitions and 2023 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 $ 0.0 million and $ 0.4 million, respectively, for the third quarter and nine months ended October 1, 2023, and $ 1.0 million and $ 5.1 million, respectively, for the third quarter and nine months ended September 25, 2022.

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 1.8 million and $ 5.6 million, for the first quarter ended March 31, 2024 and April 2, 2023, respectively.

First Quarter Ended

($ in thousands, except per share data) March 31, 2024 April 2, 2023

Revenue $ 957,363 $ 977,868

4 unchanged sentences

STOCK-BASED COMPENSATION

The Company's Board of Directors (the "Board") approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the nine months ended October 1, 2023 totaling 330,359 shares in the aggregate at an average fair value of $ 56.28 at grant date for a total fair value at grant date of $ 18.6 million.

The Company recorded expense, net of forfeitures, of approximately $ 5.8 million and $ 13.7 million in the third quarter and nine months ended October 1, 2023, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 5.4 million and $ 15.6 million was recorded in the third quarter and nine months ended September 25, 2022, respectively.

As of October 1, 2023, there was approximately $ 24.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under incentive plans.

The Company's Board of Directors (the "Board") approved various stock-based grants under the Company’s 2009 Omnibus Incentive Plan in the three months ended March 31, 2024 totaling 213,051 shares in the aggregate at an average fair value of $ 100.08 at grant date for a total fair value at grant date of $ 21.3 million.

The Company recorded expense, net of forfeitures, of approximately $ 5.5 million in the first quarter ended March 31, 2024 for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 5.2 million was recorded in the first quarter ended April 2, 2023.

As of March 31, 2024, there was approximately $ 34.0 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 21.9 months.

EARNINGS PER COMMON SHARE

Earnings per common share calculated for the third quarter and first nine months of 2023 and 2022 is as follows:

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Earnings per common share calculated for the first quarter of 2024 and 2023 is as follows:

First Quarter Ended

($ in thousands, except per share data) March 31, 2024 April 2, 2023

Earnings for basic earnings per common share calculation $ 35,093 $ 30,173

8 unchanged sentences

Diluted earnings per common share $ 1.59 $ 1.35

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

A summary of total debt outstanding at October 1, 2023 and December 31, 2022 is as follows:

($ in thousands) October 1, 2023 December 31, 2022

An immaterial amount of securities was not included in the computation of diluted earnings per common share as they are considered anti-dilutive for the periods presented.

A summary of total debt outstanding at March 31, 2024 and December 31, 2023 is as follows:

($ in thousands) March 31, 2024 December 31, 2023

Long-term debt:

1.00 % convertible notes due 2023

$ — $ 172,500

Term loan due 2027 $ 127,500 $ 129,375

13 unchanged sentences

The Company maintains a senior secured credit facility comprised of a $ 775 million revolving credit facility (the "Revolver due 2027") and the remaining balance of a $ 150 million term loan.

On February 1, 2023, the Company utilized borrowing capacity under the Revolver due 2027 to satisfy its repayment obligation at maturity of the 1.00 % Convertible Senior Notes due 2023 (the " 1.00 % Convertible Notes").

All noteholders elected to receive cash in repayment of the 1.00 % Convertible Notes.

The interest rate for incremental borrowings under the Revolver due 2027 at October 1, 2023 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 7.17 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.23 % at October 1, 2023.

Total cash interest paid for the third quarter of 2023 and 2022 was $ 8.1 million and $ 3.8 million, respectively, and $ 40.8 million and $ 30.9 million for the comparative nine months periods, respectively.

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

Third Quarter Ended

Nine Months Ended

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

Operating lease cost $ 14,350 $ 12,801 $ 41,602 $ 37,528

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

Operating cash flows for operating leases $ 14,253 $ 12,673 $ 41,286 $ 36,909

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

Operating leases $ 14,078 $ 10,297 $ 45,420 $ 40,029

Balance sheet information related to leases was as follows:

($ in thousands, except lease term and discount rate) October 1, 2023 December 31, 2022

Operating lease right-of-use assets $ 170,128 $ 163,674

Operating lease liabilities, current portion $ 47,262 $ 44,235

Long-term operating lease liabilities 126,231 122,471

Total lease liabilities $ 173,493 $ 166,706

Weighted average remaining lease term, operating leases (in years) 4.8 5.1

Weighted average discount rate, operating leases 5.1 % 4.4 %

Maturities of lease liabilities were as follows at October 1, 2023:

($ in thousands)

2023 (excluding the nine months ended October 1, 2023) $ 14,289

Thereafter 35,136

Total lease payments 197,774

Less imputed interest ( 24,281 )

Total $ 173,493

As of October 1, 2023, outstanding leases have remaining lease terms ranging from one year to 16 years.

The Company has additional operating leases that have not yet commenced as of October 1, 2023 and, therefore, were not included as operating right-of-use assets and corresponding operating lease liabilities on our condensed consolidated balance sheet at October 1, 2023.

These operating leases are anticipated to commence in the first quarter of fiscal 2024 with lease terms of five 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 $ 2.8 million.

In January 2024, the Company utilized borrowing capacity under the Revolver due 2027 to fund its acquisition of Sportech as discussed in Note 5 "Acquisitions".

The interest rate for incremental borrowings under the Revolver due 2027 at March 31, 2024 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 7.18 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.225 % at March 31, 2024.

Total cash interest paid for the first quarter of 2024 and 2023 was $ 8.5 million and $ 5.8 million, respectively.

FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities at October 1, 2023 and December 31, 2022:

October 1, 2023 December 31, 2022

The following table presents fair values of certain assets and liabilities at March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

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

7 unchanged sentences

$ — $ 321.1 $ — $ — $ 295.2 $ —

1.75 % convertible notes due 2028 (2)

$ — $ 247.2 $ — $ — $ 219.9 $ —

Term loan due 2027 (3)

4 unchanged sentences

$ — $ — $ 4.6 $ — $ — $ 8.5

(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 October 1, 2023 and December 31, 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 October 1, 2023 and December 31, 2022 using the interest rate method.

Repayment of the 1.00 % Convertible Notes at maturity is discussed further in Note 9 "Debt".

(3) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of October 1, 2023 and December 31, 2022 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.

(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 31, 2024 and December 31, 2023 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 31, 2024 and December 31, 2023 using the interest rate method.

(3) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of March 31, 2024 and December 31, 2023 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 estimated fair value of the Company's contingent consideration is discussed further in Note 5 "Acquisitions".

The effective tax rate in the third quarter of 2023 and 2022 was 27.0 % and 24.1 %, respectively, and the effective tax rate for the comparable nine months periods was 24.9 % and 24.9 %, respectively.

The first nine months of 2023 and 2022

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 $ 2.3 million and $ 4.0 million, respectively.

Cash paid for income taxes, net of refunds, was $ 16.9 million and $ 65.9 million, respectively, in the third quarter and first nine months of 2023 and $ 38.4 million and $ 114.9 million, respectively, in the third quarter and first nine months of 2022.

The effective tax rate in the first quarter of 2024 and 2023 was 10.6 % and 20.1 %, respectively.

The first quarter of 2024 and 2023 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 $ 6.0 million and $ 2.3 million, respectively.

Cash paid for income taxes, net of refunds, was $ 0.1 million and $ 17.2 million in the first quarter of 2024 and 2023, respectively.

SEGMENT INFORMATION

2 unchanged sentences

The operating results of the operating segments are regularly reviewed by the Company’s CODM, the Chief Executive Officer, to assess the performance of the individual operating segments and to make decisions about resources to be allocated to the operating segments.

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

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

Third Quarter Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 641,185 $ 224,888 $ 866,073

Intersegment sales 18,308 1,971 20,279

Total sales $ 659,493 $ 226,859 $ 886,352

Operating income $ 80,777 $ 24,026 $ 104,803

Third Quarter Ended September 25, 2022

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 828,410 $ 283,679 $ 1,112,089

Intersegment sales 18,481 2,859 21,340

Total sales $ 846,891 $ 286,538 $ 1,133,429

Operating income $ 109,462 $ 27,228 $ 136,690

Nine Months Ended October 1, 2023

First Quarter Ended March 31, 2024

($ in thousands) Manufacturing Distribution Total

3 unchanged sentences

Operating income $ 87,450 $ 23,720 $ 111,170

Nine Months Ended September 25, 2022

First Quarter Ended April 2, 2023

($ in 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

($ in thousands) October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

First Quarter Ended

($ in thousands) March 31, 2024 April 2, 2023

Operating income for reportable segments $ 111,170 $ 105,472

3 unchanged sentences

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) March 31, 2024 December 31, 2023

Manufacturing assets $ 2,494,241 $ 2,071,500

Distribution assets 463,549 426,931

Assets for reportable segments 2,957,790 2,498,431

Corporate assets unallocated to segments 57,476 52,608

Cash and cash equivalents 17,610 11,409

Consolidated total assets $ 3,032,876 $ 2,562,448

STOCK REPURCHASE PROGRAMS

In December 2022, the 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 $ 38.2 million remaining under the previous authorization.

Approximately $ 84.1 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of October 1, 2023.

Approximately $ 77.6 million remains in the amount of the Company's common stock that may be acquired under the current stock repurchase program as of March 31, 2024.

Under the stock repurchase plan, the Company made repurchases of common stock as follows for the respective periods:

Third Quarter Ended

Nine Months Ended

October 1, 2023 September 25, 2022 October 1, 2023 September 25, 2022

First Quarter Ended

March 31, 2024 April 2, 2023

Shares repurchased — 54,620

11 unchanged sentences

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 nine months 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.

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.

There has been no change in the status of the proceedings as described in the 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.

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.

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