PATRICK INDUSTRIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) First Quarter Ended ($ in thousands, except per share data) March 31, 2024 April 2, 2023 NET SALES $ 933,492 $ 900,100 Cost of goods sold 728,637 705,856 GROSS PROFIT 204,855 194,244 Operating expenses: Warehouse and delivery 37,449 35,845 Selling, general and administrative 85,246 82,401 Amortization of intangible assets 22,818 19,764 Total operating expenses 145,513 138,010 OPERATING INCOME 59,342 56,234 Interest expense, net 20,090 18,484 Income before income taxes 39,252 37,750 Income taxes 4,159 7,577 NET INCOME $ 35,093 $ 30,173 BASIC EARNINGS PER COMMON SHARE $ 1.62 $ 1.40 DILUTED EARNINGS PER COMMON SHARE $ 1.59 $ 1.35 Weighted average shares outstanding – Basic 21,653 21,591 Weighted average shares outstanding – Diluted 22,080 22,512 See accompanying Notes to Condensed Consolidated Financial Statements. 3 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) First Quarter Ended ($ in thousands) March 31, 2024 April 2, 2023 NET INCOME $ 35,093 $ 30,173 Other comprehensive income, net of tax: Foreign currency translation loss ( 32 ) ( 9 ) Total other comprehensive loss ( 32 ) ( 9 ) COMPREHENSIVE INCOME $ 35,061 $ 30,164 See accompanying Notes to Condensed Consolidated Financial Statements. 4 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) As of ($ in thousands) March 31, 2024 December 31, 2023 ASSETS Current Assets Cash and cash equivalents $ 17,610 $ 11,409 Trade and other receivables, net 278,337 163,838 Inventories 514,543 510,133 Prepaid expenses and other 48,884 49,251 Total current assets 859,374 734,631 Property, plant and equipment, net 371,128 353,625 Operating lease right-of-use assets 190,507 177,717 Goodwill 755,729 637,393 Intangible assets, net 848,753 651,153 Other non-current assets 7,385 7,929 TOTAL ASSETS $ 3,032,876 $ 2,562,448 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Current maturities of long-term debt $ 7,500 $ 7,500 Current operating lease liabilities 51,839 48,761 Accounts payable 196,747 140,524 Accrued liabilities 104,456 111,711 Total current liabilities 360,542 308,496 Long-term debt, less current maturities, net 1,392,099 1,018,356 Long-term operating lease liabilities 142,799 132,444 Deferred tax liabilities, net 67,903 46,724 Other long-term liabilities 10,997 11,091 TOTAL LIABILITIES 1,974,340 1,517,111 SHAREHOLDERS’ EQUITY Common stock 193,930 203,258 Accumulated other comprehensive loss ( 1,031 ) ( 999 ) Retained earnings 865,637 843,078 TOTAL SHAREHOLDERS’ EQUITY 1,058,536 1,045,337 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,032,876 $ 2,562,448 See accompanying Notes to Condensed Consolidated Financial Statements. 5 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 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 (used in) operating activities: Depreciation and amortization 40,335 35,510 Stock-based compensation expense 5,460 5,242 Other 853 2,056 Change in operating assets and liabilities, net of acquisitions of businesses: Trade and other receivables, net ( 89,565 ) ( 83,354 ) Inventories 17,781 39,502 Prepaid expenses and other assets 2,619 6,314 Accounts payable, accrued liabilities and other 22,600 ( 36,393 ) Net cash provided by (used in) operating activities 35,176 ( 950 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment ( 15,495 ) ( 20,266 ) Proceeds from sale of property, plant and equipment 167 92 Business acquisitions, net of cash acquired ( 329,642 ) ( 478 ) Other investing activities ( 25,754 ) ( 2,925 ) Net cash used in investing activities ( 370,724 ) ( 23,577 ) CASH FLOWS FROM FINANCING ACTIVITIES Term debt repayments ( 1,875 ) ( 1,875 ) Borrowings on revolver 688,958 354,324 Repayments on revolver ( 313,958 ) ( 124,613 ) Repayments of convertible notes — ( 172,500 ) Stock repurchases under buyback program — ( 3,660 ) Cash dividends paid to shareholders ( 13,013 ) ( 10,761 ) Taxes paid for share-based payment arrangements ( 14,788 ) ( 7,499 ) Payment of contingent consideration from a business acquisition ( 3,500 ) ( 1,370 ) Proceeds from exercise of common stock options — 492 Other financing activities ( 75 ) ( 75 ) 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 Cash and cash equivalents at end of period $ 17,610 $ 30,783 See accompanying Notes to Condensed Consolidated Financial Statements. 6 PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) First Quarter Ended March 31, 2024 ($ in thousands) Common Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance December 31, 2023 $ 203,258 $ ( 999 ) $ 843,078 $ 1,045,337 Net income — — 35,093 35,093 Dividends declared — — ( 12,534 ) ( 12,534 ) Other comprehensive loss, net of tax — ( 32 ) — ( 32 ) Repurchases of shares for tax payments related to the vesting and exercising of share-based grants ( 14,788 ) — — ( 14,788 ) Stock-based compensation expense 5,460 — — 5,460 Balance March 31, 2024 $ 193,930 $ ( 1,031 ) $ 865,637 $ 1,058,536 First Quarter Ended April 2, 2023 ($ in thousands) Common Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance December 31, 2022 $ 197,003 $ ( 695 ) $ 758,861 $ 955,169 Net income — — 30,173 30,173 Dividends declared — — ( 10,086 ) ( 10,086 ) Other comprehensive loss, net of tax — ( 9 ) — ( 9 ) Stock repurchases under buyback program ( 485 ) — ( 3,175 ) ( 3,660 ) Repurchase of shares for tax payments related to the vesting and exercising of share-based grants ( 7,499 ) — — ( 7,499 ) Issuance of shares upon exercise of common stock options 492 — — 492 Stock-based compensation expense 5,242 — — 5,242 Balance April 2, 2023 $ 194,753 $ ( 704 ) $ 775,773 $ 969,822 See accompanying Notes to Condensed Consolidated Financial Statements. 7 PATRICK INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. 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 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. GAAP"). The accompanying unaudited condensed consolidated financial statements for Patrick do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to Patrick’s Audited Consolidated Financial Statements for the year ended December 31, 2023, and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Sunday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The 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 A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024 New Accounting Standards Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s unaudited condensed consolidated financial statements. Accounting Pronouncements Not Yet Adopted 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 8 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. NOTE 2. REVENUE RECOGNITION In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segment: First Quarter Ended March 31, 2024 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 291,811 $ 129,178 $ 420,989 Marine 146,045 9,270 155,315 Powersports 79,959 2,711 82,670 Manufactured Housing 69,425 86,699 156,124 Industrial 110,303 8,091 118,394 Total $ 697,543 $ 235,949 $ 933,492 First Quarter Ended April 2, 2023 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 252,444 $ 114,516 $ 366,960 Marine 227,230 10,741 237,971 Powersports 29,562 3,239 32,801 Manufactured Housing 64,189 69,235 133,424 Industrial 118,971 9,973 128,944 Total $ 692,396 $ 207,704 $ 900,100 Contract Liabilities Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial as of the beginning and end of all periods presented and changes in contract liabilities were immaterial during all periods presented. 9 NOTE 3. INVENTORY Inventories consist of the following: ($ in thousands) March 31, 2024 December 31, 2023 Raw materials $ 274,553 $ 269,786 Work in process 18,939 16,596 Finished goods 106,977 107,675 Less: reserve for inventory obsolescence ( 17,882 ) ( 15,990 ) Total manufactured goods, net 382,587 378,067 Materials purchased for resale (distribution products) 142,301 140,147 Less: reserve for inventory obsolescence ( 10,345 ) ( 8,081 ) Total materials purchased for resale (distribution products), net 131,956 132,066 Total inventories $ 514,543 $ 510,133 NOTE 4. GOODWILL AND INTANGIBLE ASSETS 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 Balance - December 31, 2023 $ 560,370 $ 77,023 $ 637,393 Acquisitions 118,320 — 118,320 Adjustments to preliminary purchase price allocations 16 — 16 Balance - March 31, 2024 $ 678,706 $ 77,023 $ 755,729 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 Non-compete agreements 22,646 21,561 Patents 86,964 69,401 Trademarks 217,527 197,027 Intangible assets, gross 1,238,071 1,017,653 Less: accumulated amortization ( 389,318 ) ( 366,500 ) Intangible assets, net $ 848,753 $ 651,153 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 Balance - December 31, 2023 $ 553,703 $ 97,450 $ 651,153 Additions 194,728 25,690 220,418 Amortization ( 19,965 ) ( 2,853 ) ( 22,818 ) Balance - March 31, 2024 $ 728,466 $ 120,287 $ 848,753 10 NOTE 5. ACQUISITIONS General 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 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 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 three months ended March 31, 2024 are as follows: ($ in thousands) Balance - December 31, 2023 $ 8,510 Settlements ( 3,880 ) Balance - March 31, 2024 $ 4,630 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 March 31, 2024 and December 31, 2023: ($ in thousands) March 31, 2024 December 31, 2023 Accrued liabilities $ 3,620 $ 7,500 Other long-term liabilities 1,010 1,010 Total fair value of contingent consideration $ 4,630 $ 8,510 Maximum amount of contingent consideration $ 4,630 $ 8,510 11 2024 Acquisitions The Company completed four acquisitions in the first three months ended March 31, 2024, including the following previously announced acquisition: Company Segment Description 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. 2023 Acquisitions The Company completed three acquisitions in the year ended December 31, 2023, including the following previously announced acquisition: Company Segment Description 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. 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 first quarter ended March 31, 2024 related to the 2023 Acquisitions were immaterial. 12 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: 2024 Acquisitions 2023 Acquisitions ($ in thousands) Sportech All Others Total Total Consideration Cash, net of cash acquired $ 320,078 $ 9,570 $ 329,648 $ 26,294 Working capital holdback and other, net ( 2,489 ) 110 ( 2,379 ) — Contingent consideration (1) — — — 3,500 Total consideration $ 317,589 $ 9,680 $ 327,269 $ 29,794 Assets Acquired Trade receivables $ 21,544 $ 953 $ 22,497 $ 619 Inventories 21,021 1,170 22,191 4,430 Prepaid expenses & other 1,676 203 1,879 105 Property, plant & equipment 19,685 1,486 21,171 10,277 Operating lease right-of-use assets 15,096 1,283 16,379 1,044 Identifiable intangible assets Customer relationships 151,000 4,580 155,580 10,270 Non-compete agreements 1,000 85 1,085 430 Patents and developed technology 17,500 — 17,500 — Trademarks 20,500 — 20,500 — Liabilities Assumed Current portion of operating lease obligations ( 1,437 ) ( 585 ) ( 2,022 ) ( 262 ) Accounts payable & accrued liabilities ( 31,831 ) ( 444 ) ( 32,275 ) ( 514 ) Operating lease obligations ( 13,658 ) ( 699 ) ( 14,357 ) ( 781 ) Deferred tax liabilities ( 21,179 ) — ( 21,179 ) — Total fair value of net assets acquired $ 200,917 $ 8,032 $ 208,949 $ 25,618 Goodwill (2) 116,672 1,648 118,320 5,921 Bargain purchase gain (3) — — — ( 1,745 ) $ 317,589 $ 9,680 $ 327,269 $ 29,794 (1) These amounts reflect the acquisition date fair value of contingent consideration based on expected future results relating to certain acquisitions. (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 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. We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation of the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete agreements are valued using a discounted cash flow approach, which is a variation of the income approach, with and without the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value. 13 The estimated useful life for customer relationships is 10 years. The estimated useful life for non-compete agreements is 5 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 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 $ 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 Net income $ 34,380 $ 29,048 Basic earnings per common share $ 1.59 $ 1.35 Diluted earnings per common share $ 1.56 $ 1.30 The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of the periods indicated above. NOTE 6. 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 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. 14 NOTE 7. EARNINGS PER COMMON SHARE 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 Numerator: Earnings for basic earnings per common share calculation $ 35,093 $ 30,173 Effect of interest on potentially dilutive convertible notes, net of tax — 162 Earnings for diluted earnings per common share calculation $ 35,093 $ 30,335 Denominator: Weighted average common shares outstanding - basic 21,653 21,591 Weighted average impact of potentially dilutive convertible notes 205 658 Weighted average impact of potentially dilutive securities 222 263 Weighted average common shares outstanding - diluted 22,080 22,512 Earnings per common share: Basic earnings per common share $ 1.62 $ 1.40 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 for the periods presented. NOTE 8. DEBT 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: Term loan due 2027 $ 127,500 $ 129,375 Revolver due 2027 375,000 — 7.50 % senior notes due 2027 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 1,411,250 1,038,125 Less: convertible notes debt discount, net ( 4,668 ) ( 4,917 ) Less: term loan deferred financing costs, net ( 510 ) ( 548 ) Less: senior notes deferred financing costs, net ( 6,473 ) ( 6,804 ) Less: current maturities of long-term debt ( 7,500 ) ( 7,500 ) Total long-term debt, less current maturities, net $ 1,392,099 $ 1,018,356 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. 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. 15 NOTE 9. FAIR VALUE MEASUREMENTS 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 Cash equivalents (1) $ 5.6 $ — $ — $ 6.1 $ — $ — 7.50 % senior notes due 2027 (2) $ — $ 302.5 $ — $ — $ 303.7 $ — 4.75 % senior notes due 2029 (2) $ — $ 327.2 $ — $ — $ 320.2 $ — 1.75 % convertible notes due 2028 (2) $ — $ 321.1 $ — $ — $ 295.2 $ — Term loan due 2027 (3) $ — $ 127.5 $ — $ — $ 129.4 $ — Revolver due 2027 (3) $ — $ 375.0 $ — $ — $ — $ — Contingent consideration (4) $ — $ — $ 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 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". NOTE 10. INCOME TAXES 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. 16 NOTE 11. SEGMENT INFORMATION Financial results for the Company's reportable segments have been prepared using a management approach, which is consistent with the basis and manner in which financial information is evaluated by the Company's Chief Operating Decision Maker ("CODM") in allocating resources and in assessing performance. The Company has two reportable segments, Manufacturing and Distribution. 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. First Quarter Ended March 31, 2024 ($ in thousands) Manufacturing Distribution Total Net outside sales $ 697,543 $ 235,949 $ 933,492 Intersegment sales 16,967 2,553 19,520 Total sales $ 714,510 $ 238,502 $ 953,012 Operating income $ 87,450 $ 23,720 $ 111,170 First Quarter Ended April 2, 2023 ($ in thousands) Manufacturing Distribution Total Net outside sales $ 692,396 $ 207,704 $ 900,100 Intersegment sales 16,419 2,455 18,874 Total sales $ 708,815 $ 210,159 $ 918,974 Operating income $ 87,165 $ 18,307 $ 105,472 The following table presents a reconciliation of segment operating income to consolidated operating income: First Quarter Ended ($ in thousands) March 31, 2024 April 2, 2023 Operating income for reportable segments $ 111,170 $ 105,472 Unallocated corporate expenses ( 29,010 ) ( 29,474 ) Amortization ( 22,818 ) ( 19,764 ) Consolidated operating income $ 59,342 $ 56,234 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 17 NOTE 12. 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 $ 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: First Quarter Ended March 31, 2024 April 2, 2023 Shares repurchased — 54,620 Average price $ — $ 67.01 Aggregate cost (in millions) $ — $ 3.7 NOTE 13. COMMITMENTS AND CONTINGENCIES The Company is subject to proceedings, lawsuits, audits, and other claims arising in the normal course of business. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. Accruals for these items, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are adjusted from time to time as developments warrant. Although the ultimate outcome of these matters cannot be ascertained, on the basis of present information, amounts already provided, availability of insurance coverage and legal advice received, it is the opinion of management that the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In the Company's Form 10-K for the year ended December 31, 2023, the Company described the current status of litigation concerning the Lusher Site Remediation Group. In early July 2023, the Court granted the Company’s Rule 54(b) Motion for Final Judgment on previously dismissed claims and granted the Company’s Motion to Dismiss the plaintiff’s remaining claims against the defendants, without prejudice (the Company’s Motion to Dismiss having been joined by the remaining defendants in the litigation.) The only remaining issue pending in the litigation for the Court’s determination is the plaintiff’s motion to bar contribution claims. 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"). 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.