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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 126 added, 123 removed, 386 unchanged (39% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Second Quarter Ended Six Months Ended

($ in thousands, except per share data) June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

Third Quarter Ended Nine Months Ended

($ in thousands, except per share data) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

NET SALES $ 919,444 $ 866,073 $ 2,869,560 $ 2,686,858

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Second Quarter Ended Six Months Ended

($ in thousands) June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

Third Quarter Ended Nine Months Ended

($ in thousands) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

NET INCOME $ 40,866 $ 39,550 $ 123,843 $ 112,080

6 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in thousands) June 30, 2024 December 31, 2023

($ in thousands) September 29, 2024 December 31, 2023

Current Assets:

23 unchanged sentences

SHAREHOLDERS’ EQUITY

Common stock 198,138 203,258

Preferred shares, no par value per share, 1,000,000 shares authorized, none issued and outstanding

Common stock, no par value per share, 40,000,000 shares authorized, 22,420,560 and 22,160,608 issued and outstanding as of September 29, 2024 and December 31, 2023, respectively

200,530 203,258

Accumulated other comprehensive loss ( 985 ) ( 999 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

($ in thousands) June 30, 2024 July 2, 2023

Nine Months Ended

($ in thousands) September 29, 2024 October 1, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

24 unchanged sentences

Taxes paid for share-based payment arrangements ( 17,116 ) ( 8,762 )

Payment of contingent consideration from a business acquisition ( 4,560 ) ( 1,400 )

Payment of contingent consideration from business acquisitions ( 4,595 ) ( 1,430 )

Proceeds from exercise of common stock options 21 1,413

1 unchanged sentence

Net cash provided by (used in) financing activities 302,408 ( 224,764 )

Net increase in cash and cash equivalents 32,551 11,064

Net increase (decrease) in cash and cash equivalents 41,197 ( 6,397 )

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

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Second Quarter Ended June 30, 2024

Third Quarter Ended September 29, 2024

($ in thousands) Common

2 unchanged sentences

Earnings Total

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

Balance at June 30, 2024 $ 198,138 $ ( 1,028 ) $ 901,394 $ 1,098,504

Net income — — 40,866 40,866

2 unchanged sentences

Repurchases of shares for tax payments related to the vesting and exercising of share-based grants ( 2,233 ) — — ( 2,233 )

Issuance of shares upon exercise of common stock options 21 — — 21

Stock-based compensation expense 4,625 — — 4,625

Balance June 30, 2024 $ 198,138 $ ( 1,028 ) $ 901,394 $ 1,098,504

Second Quarter Ended July 2, 2023

Balance at September 29, 2024 $ 200,530 $ ( 985 ) $ 929,936 $ 1,129,481

Third Quarter Ended October 1, 2023

($ in thousands) Common

2 unchanged sentences

Earnings Total

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

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

Net income — — 39,550 39,550

5 unchanged sentences

Stock-based compensation expense 5,729 — — 5,729

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

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

PATRICK INDUSTRIES, INC.

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

Six Months Ended June 30, 2024

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Continued)

Nine Months Ended September 29, 2024

($ in thousands) Common

2 unchanged sentences

Earnings Total

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

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

Net income — — 123,843 123,843

4 unchanged sentences

Stock-based compensation expense 14,367 — — 14,367

Balance June 30, 2024 $ 198,138 $ ( 1,028 ) $ 901,394 $ 1,098,504

Six Months Ended July 2, 2023

Balance at September 29, 2024 $ 200,530 $ ( 985 ) $ 929,936 $ 1,129,481

Nine Months Ended October 1, 2023

($ in thousands) Common

2 unchanged sentences

Earnings Total

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

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

Net income — — 112,080 112,080

5 unchanged sentences

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

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

4 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 June 30, 2024 and December 31, 2023, its results of operations for the second quarter and six months ended June 30, 2024 and July 2, 2023, and its cash flows for the six months ended June 30, 2024 and July 2, 2023.

(“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 29, 2024 and December 31, 2023, its results of operations for the third quarter and nine months ended September 29, 2024 and October 1, 2023, respectively, and its cash flows for the nine months ended September 29, 2024 and October 1, 2023.

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

2 unchanged sentences

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.

For further information, refer to Patrick’s Audited Consolidated Financial Statements 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.

1 unchanged sentence

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

The second quarter of fiscal year 2024 ended on June 30, 2024 and the second quarter of fiscal year 2023 ended on July 2, 2023.

The third quarter of fiscal year 2024 ended on September 29, 2024, and the third quarter of fiscal year 2023 ended on October 1, 2023.

Reclassified Amounts

14 unchanged sentences

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

Early adoption is also permitted.

adoption is also permitted.

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

9 unchanged sentences

REVENUE RECOGNITION

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

Second Quarter Ended June 30, 2024

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

Third Quarter Ended September 29, 2024

($ in thousands) Manufacturing Distribution Total

5 unchanged sentences

Total $ 675,526 $ 243,918 $ 919,444

Second Quarter Ended July 2, 2023

Third Quarter Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

5 unchanged sentences

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

Six Months Ended June 30, 2024

Nine Months Ended September 29, 2024

($ in thousands) Manufacturing Distribution Total

5 unchanged sentences

Total $ 2,126,781 $ 742,779 $ 2,869,560

Six Months Ended July 2, 2023

Nine Months Ended October 1, 2023

($ in thousands) Manufacturing Distribution Total

7 unchanged sentences

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.

Inventories consist of the following:

($ in thousands) June 30, 2024 December 31, 2023

Inventories consisted of the following:

($ in thousands) September 29, 2024 December 31, 2023

Raw materials $ 302,202 $ 269,786

8 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the six months ended June 30, 2024 by segment are as follows:

Changes in the carrying amount of goodwill for the nine months ended September 29, 2024 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

Balance - December 31, 2023 $ 560,370 $ 77,023 $ 637,393

Balance at December 31, 2023 $ 560,370 $ 77,023 $ 637,393

Acquisitions 119,150 33,051 152,201

Adjustments to preliminary purchase price allocations 60 ( 237 ) ( 177 )

Balance - June 30, 2024

Balance at September 29, 2024

$ 679,580 $ 109,837 $ 789,417

Intangible assets, net consist of the following as of June 30, 2024 and December 31, 2023:

($ in thousands) June 30, 2024 December 31, 2023

Intangible assets, net consisted of the following as of September 29, 2024 and December 31, 2023:

($ in thousands) September 29, 2024 December 31, 2023

Customer relationships $ 932,939 $ 729,664

5 unchanged sentences

Intangible assets, net $ 838,941 $ 651,153

Changes in the carrying value of intangible assets for the six months ended June 30, 2024 by segment are as follows:

Changes in the carrying value of intangible assets for the nine months ended September 29, 2024 by segment are as follows:

($ in thousands) Manufacturing Distribution Total

Balance - December 31, 2023 $ 553,703 $ 97,450 $ 651,153

Balance at December 31, 2023 $ 553,703 $ 97,450 $ 651,153

Additions 197,999 61,690 259,689

1 unchanged sentence

Adjustments to preliminary purchase price allocations — ( 356 ) ( 356 )

Balance - June 30, 2024

Balance at September 29, 2024

$ 690,274 $ 148,667 $ 838,941

2 unchanged sentences

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

The Company completed two acquisitions in the second quarter of 2024 and six acquisitions in the first six months of 2024 (the "2024 Acquisitions").

For the second quarter and six months ended June 30, 2024, net sales included in the Company's condensed consolidated statements of income related to the 2024 Acquisitions were $ 79.6 million and $ 137.7 million, respectively, and operating income was $ 15.7 million and $ 26.6 million, respectively.

The Company completed one acquisition in the third quarter of 2024 and seven acquisitions in the first nine months of 2024 (the "2024 Acquisitions").

For the third quarter and nine months ended September 29, 2024, net sales included in the Company's condensed consolidated statements of income related to the 2024 Acquisitions were $ 78.6 million and $ 216.4 million, respectively, and operating income was $ 12.3 million and $ 38.9 million, respectively.

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

1 unchanged sentence

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 second quarter and first six months of 2023.

For the second quarter and six months ended July 2, 2023, net sales included in the Company's condensed consolidated statements of income related to the acquisitions completed in the first six months of 2023 were $ 2.3 million for both periods, and operating income was $ 0.2 million for both periods.

The Company completed three acquisitions in the first nine months of 2023.

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 acquisitions completed in the first nine months of 2023 were $ 7.3 million and $ 9.8 million, respectively.

For the third quarter and nine months ended October 1, 2023, operating losses of $ 0.1 million and operating income of $ 0.1 million, respectively, related to the acquisitions completed in the first nine months of 2023 are included in the Company's condensed consolidated statements of income.

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 six months ended June 30, 2024 are as follows:

Changes in the fair value of contingent consideration for the nine months ended September 29, 2024 are as follows:

($ in thousands)

Balance - December 31, 2023 $ 8,510

Balance at December 31, 2023 $ 8,510

Additions 3,131

1 unchanged sentence

Settlements ( 4,976 )

Balance - June 30, 2024

Balance at September 29, 2024

(1) The Company recorded a measurement period adjustment reducing the estimated fair value of contingent consideration in connection with one of the 2023 acquisitions.

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 as of June 30, 2024 and December 31, 2023:

($ in thousands) June 30, 2024 December 31, 2023

($ in thousands) September 29, 2024 December 31, 2023

Accrued liabilities $ 1,694 $ 7,500

3 unchanged sentences

2024 Acquisitions

The Company completed six acquisitions in the first six months ended June 30, 2024, including the following previously announced acquisition:

The Company completed seven acquisitions in the first nine months ended September 29, 2024, including the following previously announced acquisitions:

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 five acquisitions not discussed above, total cash consideration for the 2024 Acquisitions was approximately $ 330.9 million.

ICON Direct LLC ("RecPro") Distribution Leading e-commerce business and aftermarket platform specializing in creating and marketing component products, systems, and solutions for the RV and marine end markets, based in Bristol, Indiana, acquired in September 2024

Inclusive of five acquisitions not discussed above, total cash consideration for the 2024 Acquisitions was approximately $ 411.7 million, plus working capital holdbacks and contingent consideration over a three-year period based on future performance in connection with certain acquisitions.

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

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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.

Purchase price allocations and all valuation activities in connection with the 2023 Acquisitions have

been finalized.

Changes to preliminary purchase accounting estimates recorded in the second quarter and six months ended June 30, 2024 related to the 2023 Acquisitions were immaterial and relate primarily to the valuation of contingent consideration and property, plant, and equipment.

Purchase price allocations and all valuation activities in connection with the 2023 Acquisitions have been finalized.

Changes to preliminary purchase accounting estimates recorded in the nine months ended September 29, 2024 related to the 2023 Acquisitions were immaterial and relate primarily to the valuation of contingent consideration and property, plant, and equipment.

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:

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

Trademarks 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.

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 estimated useful life for customer relationships is 10 years.

3 unchanged sentences

Pro Forma Information

The following pro forma information for the second quarter and six months ended June 30, 2024 and July 2, 2023 assumes the 2024 Acquisitions and 2023 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition.

The following pro forma information for the third quarter and nine months ended September 29, 2024 and October 1, 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 incremental amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.1 million and $ 1.5 million, respectively, for the second quarter and six months ended June 30, 2024 and $ 5.4 million and $ 11.0 million, respectively, for the second quarter and six months ended July 2, 2023.

Second Quarter Ended

Six Months Ended

($ in thousands, except per share data) June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

In addition, the pro forma information includes incremental amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.4 million and $ 4.0 million, respectively, for the third quarter and nine months ended September 29, 2024 and $ 3.0 million and $ 12.3 million, respectively, for the third quarter and nine months ended October 1, 2023.

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Revenue $ 933,100 $ 955,841 $ 2,949,044 $ 2,970,700

2 unchanged sentences

Diluted earnings per common share $ 1.86 $ 1.89 $ 5.78 $ 5.36

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.

The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisitions been consummated as of the periods indicated above.

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 six months ended June 30, 2024 totaling 223,011 shares in the aggregate at an average fair value of $ 100.63 per share at grant date for a total fair value at grant date of $ 22.4 million.

The Company recorded expense, net of forfeitures, of approximately $ 4.2 million and $ 9.7 million in the second quarter and six months ended June 30, 2024, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense of $ 2.7 million and $ 7.9 million was recorded in the second quarter and six months ended July 2, 2023, respectively.

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 September 29, 2024 totaling 223,011 shares in the aggregate at an average fair value of $ 100.63 per share at grant date for a total fair value at grant date of $ 22.4 million.

The Company recorded stock-based compensation expense, net of forfeitures, of approximately $ 4.7 million and $ 14.4 million in the third quarter and nine months ended September 29, 2024, respectively, for its stock-based compensation plans in the condensed consolidated statements of income.

Stock-based compensation expense, net of forfeitures of $ 5.8 million and $ 13.7 million was recorded in the third quarter and nine months ended October 1, 2023, respectively.

EARNINGS PER COMMON SHARE

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

Second Quarter Ended

Six Months Ended

($ in thousands, except per share data) June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

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

Third Quarter Ended

Nine Months Ended

($ in thousands, except per share data) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Earnings for basic earnings per common share calculation $ 40,866 $ 39,550 $ 123,843 $ 112,080

3 unchanged sentences

Weighted average impact of potentially dilutive convertible notes 554 — 340 221

Weighted average impact of potentially dilutive warrants 117 — 39 —

Weighted average impact of potentially dilutive securities 230 373 212 301

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Diluted earnings per common share $ 1.80 $ 1.81 $ 5.55 $ 5.09

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 June 30, 2024 and December 31, 2023 is as follows:

($ in thousands) June 30, 2024 December 31, 2023

An immaterial amount of securities were 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 September 29, 2024 and December 31, 2023 is as follows:

($ in thousands) September 29, 2024 December 31, 2023

Long-term debt:

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Total long-term debt, less current maturities, net $ 1,377,727 $ 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 June 30, 2024 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 7.19 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.225 % at June 30, 2024.

Total cash interest paid for the second quarter of 2024 and 2023 was $ 31.6 million and $ 26.9 million, respectively, and $ 40.2 million and $ 32.7 million for the comparative six month periods, respectively.

As of September 29, 2024, the Company maintained a senior secured credit facility comprised of a $ 775 million revolving credit facility (the "Revolver due 2027") and a $ 150 million term loan (the "Term Loan due 2027" and together with the Revolver due 2027, the "2021 Credit Facility").

During the first nine months of 2024, the Company utilized borrowing capacity under the Revolver due 2027 to fund the acquisitions of Sportech and RecPro as discussed in Note 5 "Acquisitions".

The interest rate for incremental borrowings under the Revolver due 2027 as of September 29, 2024 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 6.71 %) for the SOFR-based option.

The fee payable on committed but unused portions of the Revolver due 2027 was 0.225 % as of September 29, 2024.

Total cash interest paid for the third quarter of 2024 and 2023 was $ 4.7 million and $ 8.1 million, respectively, and $ 44.9 million and $ 40.8 million for the comparative nine month periods, respectively.

FAIR VALUE MEASUREMENTS

The following table presents fair values of certain assets and liabilities as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

The following table presents fair values of certain assets and liabilities as of September 29, 2024 and December 31, 2023:

September 29, 2024 December 31, 2023

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

11 unchanged sentences

$ — $ — $ 4.8 $ — $ — $ 8.5

(1) 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 June 30, 2024 and December 31, 2023 using the interest rate method.

(2) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of June 30, 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.`

(1) 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 September 29, 2024 and December 31, 2023 using the interest rate method.

(2) The carrying amounts of our Term loan due 2027 and Revolver due 2027 approximate fair value as of September 29, 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.

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

The effective tax rate in the second quarter of 2024 and 2023 was 25.6 % and 26.1 %, respectively, and the effective tax rate for the comparable six month periods was 19.9 % and 23.7 %, respectively.

The first six months of 2024 and 2023 tax 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 $ 5.6 million and $ 1.8 million, respectively.

Cash paid for income taxes, net of refunds, was $ 19.1 million and $ 19.2 million in the second quarter and first six months of 2024, respectively, and $ 31.9 million and $ 49.0 million in the second quarter and first six months of 2023, respectively.

The effective tax rate in the third quarter of 2024 and 2023 was 24.8 % and 27.0 %, respectively, and the effective tax rate for the comparable nine month periods was 21.6 % and 24.9 %, respectively.

The first nine months of 2024 and 2023 tax 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 $ 6.7 million and $ 2.3 million, respectively.

Cash paid for income taxes, net of refunds, was $ 18.2 million and $ 37.4 million in the third quarter and first nine months of 2024, respectively, and $ 16.9 million and $ 65.9 million in the third quarter and first nine months of 2023, respectively.

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.

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 CODM in allocating resources and in assessing performance.

The Company has two reportable segments, Manufacturing and Distribution.

1 unchanged sentence

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.

Second Quarter Ended June 30, 2024

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 753,712 $ 262,912 $ 1,016,624

Intersegment sales 20,519 2,325 22,844

Total sales $ 774,231 $ 265,237 $ 1,039,468

Operating income for reportable segments $ 108,752 $ 30,158 $ 138,910

Second Quarter Ended July 2, 2023

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 688,098 $ 232,587 $ 920,685

Intersegment sales 16,193 2,159 18,352

Total sales $ 704,291 $ 234,746 $ 939,037

Operating income for reportable segments $ 95,204 $ 25,839 $ 121,043

Six Months Ended June 30, 2024

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 1,451,255 $ 498,861 $ 1,950,116

Intersegment sales 37,486 4,878 42,364

Total sales $ 1,488,741 $ 503,739 $ 1,992,480

Operating income for reportable segments $ 196,202 $ 53,878 $ 250,080

Six Months Ended July 2, 2023

($ in thousands) Manufacturing Distribution Total

Net outside sales $ 1,380,494 $ 440,291 $ 1,820,785

Intersegment sales 32,612 4,614 37,226

Total sales $ 1,413,106 $ 444,905 $ 1,858,011

Operating income for reportable segments $ 182,369 $ 44,146 $ 226,515

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

Second Quarter Ended Six Months Ended

($ in thousands) June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

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

Third Quarter Ended Nine Months Ended

($ in thousands) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Segment net sales:

Manufacturing $ 685,296 $ 659,493 $ 2,139,598 $ 2,072,599

Distribution 239,135 226,859 747,269 671,764

Eliminations (1)

( 4,987 ) ( 20,279 ) ( 17,307 ) ( 57,505 )

Consolidated net sales $ 919,444 $ 866,073 $ 2,869,560 $ 2,686,858

Operating income for reportable segments:

Manufacturing $ 86,429 $ 80,777 $ 282,631 $ 263,146

Distribution 23,400 24,026 77,278 68,172

Unallocated corporate expenses ( 10,963 ) ( 14,221 ) ( 69,916 ) ( 69,341 )

1 unchanged sentence

Consolidated operating income $ 74,417 $ 71,075 $ 218,448 $ 202,884

(1) Eliminations in the third quarter and nine months ended September 29, 2024 includes only the elimination of inter-segment transactions.

Unallocated corporate expenses include corporate general and administrative expenses comprised of wages and other compensation, insurance, taxes, supplies, travel and entertainment, professional fees, acquisition-related transaction costs, 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:

($ in thousands) June 30, 2024 December 31, 2023

($ in thousands) September 29, 2024 December 31, 2023

Manufacturing assets $ 2,467,214 $ 2,071,500

5 unchanged sentences

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 June 30, 2024.

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, which includes $ 38.2 million remaining under the previous authorization.

Approximately $ 77.6 million remains available for common stock repurchases under the current stock repurchase program as of September 29, 2024.

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

Second Quarter Ended

Six Months Ended

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

Third Quarter Ended

Nine Months Ended

($ in millions, except average price data) September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Shares repurchased — 6,184 — 185,993

Average price $ — $ 74.43 $ — $ 65.79

Aggregate cost (in millions) $ — $ 8.1 $ — $ 11.8

Aggregate cost $ — $ 0.5 $ — $ 12.2

COMMITMENTS AND CONTINGENCIES

11 unchanged sentences

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.

SUBSEQUENT EVENTS

2024 Credit Facility

On October 24, 2024, the Company entered into the Fifth Amended and Restated Credit Agreement dated October 24, 2024 (the “2024 Credit Agreement”), under which the 2021 Credit Facility was increased to $ 1.0 billion from $ 925.0 million and the maturity date was extended to October 24, 2029 from August 20, 2027.

The credit facility under the 2024 Credit Agreement (the "2024 Credit Facility") is comprised of an $ 875.0 million revolving credit facility (the "Revolver due 2029") and a $ 125.0 million term loan (the "Term Loan due 2029").

Under the terms of the 2024 Credit Agreement, the covenant requiring the Company to have a consolidated fixed charge coverage ratio of not more than 1.5 to 1.0 was replaced with a covenant requiring the Company to have an interest coverage ratio (the ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the 2024 Credit Agreement) of not less than 3.0 to 1.0 tested on a quarterly basis.

6.375 % Senior Notes due 2032

On October 22, 2024, the Company issued $ 500.0 million in aggregate principal amount of 6.375 % senior notes due November 1, 2032 (the “ 6.375 % Senior Notes”) in a transaction pursuant to Rule 144A under the Securities Act.

The proceeds from the issuance were utilized to redeem all of the Company's $ 300.0 million aggregate principal amount of 7.50 % Senior Notes due 2027 (the “ 7.50 % Senior Notes”) on November 7, 2024, to repay a portion of the Company’s borrowings under its existing senior secured credit facility and pay fees and expenses in connection with the foregoing.

Interest on the 6.375 % Senior Notes is payable semi-annually on May 1 and November 1 of each year to holders of record at the close of business on April 15 and October 15 immediately preceding the interest payment date.

7.50 % Senior Notes due 2027

On November 7, 2024, the Company redeemed all of its outstanding $ 300.0 million aggregate principal amount of its 7.50 % Senior Notes.

1.75 % Convertible Notes due 2028

On September 30, 2024, subsequent to the end of the Company’s fiscal third quarter of 2024, the conversion feature of the 1.75 % Convertible Senior Notes due 2028 (the “ 1.75 % Convertible Notes”) was triggered as the last reported price of our common stock was more than or equal to 130 % of the conversion price (or $ 128.66 ) for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter ended September 30, 2024.

Therefore, the 1.75 % Convertible Notes are convertible, in whole or in part, at the option of the holders from October 1, 2024 to December 31, 2024.

Whether the 1.75 % Convertible Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.

We had not received any conversion notices from the triggering date of the conversion feature through the issuance date of our unaudited Condensed Consolidated Financial Statements of November 7, 2024.

The Company has the intent and ability to utilize available borrowing capacity under the Revolver due 2029 to satisfy any cash conversion obligations that it may have, should holders choose to exercise their conversion rights during the period noted above.

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