PATRICK INDUSTRIES INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures The Company maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule 13a-15(e) or 15d-15(e), that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and the Company’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control Over Financial Reporting We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the fair and reliable preparation and presentation of our published financial statements. We continually evaluate our system of internal control over financial reporting to determine if changes are appropriate based upon changes in our operations or the business environment in which we operate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This assessment included a review of the documentation of controls, an assessment of the design effectiveness of controls, testing of the operating effectiveness of controls, and a conclusion on this evaluation. As permitted under SEC guidance, management’s assessment of and conclusion regarding the design and effectiveness of internal control over financial reporting excluded the internal control over financial reporting of the operations of businesses acquired in 2024, which are described in Note 3 "Acquisitions" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. Businesses acquired in 2024 represented approximately 8% of consolidated net sales for the year ended December 31, 2024 and approximately 3% of consolidated total assets as of December 31, 2024. Based on our assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2024. The Company’s independent registered public accounting firm, Deloitte & Touche LLP, audited our internal control over financial reporting as of December 31, 2024, as stated in their report in the section entitled “Report of Independent Registered Public Accounting Firm” included elsewhere in this Form 10-K, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. Changes in internal control over financial reporting There have been no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2024 or subsequent to the date the Company completed its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 38 Table of Contents ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 39 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors of the Company The information required by this item with respect to directors is set forth in our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC pursuant to Regulation 14A (the “2025 Proxy Statement”) under the captions “Election of Directors” and “Delinquent Section 16(a) Reports,” which information is hereby incorporated herein by reference. Executive Officers of the Registrant The information required by this item is set forth under the caption “Executive Officers of the Company” in Part I of this Annual Report on Form 10-K. Audit Committee Information on our Audit Committee is contained under the caption “Audit Committee” in the Company's 2025 Proxy Statement and is incorporated herein by reference. Code of Ethics and Business Conduct We have adopted a Code of Ethics and Business Conduct Policy applicable to all employees. Our Code of Ethics and Business Conduct Policy is available on the Company’s web site at www.patrickind.com under “For Investors”. We intend to post on our web site any substantive amendments to, or waivers from, our Code of Ethics and Business Conduct Policy as well as our Corporate Governance Guidelines. We will provide shareholders with a copy of these policies without charge upon written request directed to the Company’s Corporate Secretary at the Company’s address. Corporate Governance Information on our corporate governance practices is contained under the caption “Corporate Governance Highlights” in the Company's 2025 Proxy Statement and incorporated herein by reference. Insider Trading Policies and Procedures We have adopted an Insider Trading Policy governing the purchase, sale and other disposition of our securities by directors, officers, and employees that is designed to promote compliance with insider trading laws, rules and regulations, and applicable listing standards, as well as procedures designed to further the foregoing purposes. In addition, it is our intent to comply with applicable laws and regulations relating to the Company trading in its own securities. A copy of our Insider Trading Policy is filed with this Annual Report on Form 10-K as Exhibit 19.1 ITEM 11. EXECUTIVE COMPENSATION The information required by this item is set forth in our 2025 Proxy Statement under the caption “Executive Compensation," "Compensation Committee Interlocks and Director Participation," and "Compensation Committee Report," and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is set forth in our 2025 Proxy Statement under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference. 40 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is set forth in our 2025 Proxy Statement under the captions “Related Party Transactions” and “Corporate Governance Highlights”, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is set forth in our 2025 Proxy Statement under the heading “Independent Public Accountants,” and is incorporated herein by reference. 41 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) The financial statements listed in the accompanying Index to the Financial Statements on page F-1 of the separate financial section of this Report are incorporated herein by reference. (3) The exhibits required to be filed as part of this Annual Report on Form 10-K are listed under (c) below. (c) Exhibits Exhibit Number Exhibits 3.1 Articles of Incorporation of Patrick Industries, Inc. (filed as Exhibit 3.1 to the Company’s Form 10-K filed on March 30, 2010 and incorporated herein by reference). 3.2 Amendment to the Articles of Incorporation of Patrick Industries, Inc. dated June 5, 2018 (filed as Exhibit 3.2 to the Company's Form 10-K filed on February 28, 2019 and incorporated herein by reference). 3.3 Amended and Restated By-laws of Patrick Industries, Inc. (filed as Exhibit 3.1 to the Company's Form 8-K filed on May 8, 2020 and incorporated herein by reference). 4.1 Indenture (including Form of Note), dated as of September 17, 2019, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank, National Association, as Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on September 18, 2019 and incorporated herein by reference). 4.2 Indenture (including Form of Note), dated as of April 20, 2021, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank, National Association, as Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on April 26, 2021 and incorporated herein by reference). 4.3 Indenture (including Form of Note) with respect to the Company's 1.75% Convertible Senior Notes due 2028, dated as of December 13, 2021. between Patrick Industries, Inc. and U.S. Bank National Association, as trustee. (filed as Exhibit 4.1 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 4.4 Indenture, dated as of October 22, 2024, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank Trust Company, National Association, as Trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed on October 2 8 , 2024 and incorporated herein by reference). 4.5 Supplemental Indenture, dated as of October 24, 2024, to the indenture dated as of October 22, 2024, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank Trust Company, National Association, as Trustee (filed as Exhibit 4.2 to the Company's Form 8-K filed on October 2 8 , 2024 and incorporated herein by reference). 4.6 Indenture, dated as of October 24, 2024, to the indenture dated as of April 20, 2021, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank Trust Company, National Association, as Trustee (filed as Exhibit 4.3 to the Company's Form 8-K filed on October 2 8 , 2024 and incorporated herein by reference). 4.7 Indenture, dated as of October 24, 2024, to the indenture dated as of December 13, 2021, among Patrick Industries, Inc., the guarantors from time to time party thereto and U.S. Bank Trust Company, National Association, as Trustee (filed as Exhibit 4.4 to the Company's Form 8-K filed on October 2 8 , 2024 and incorporated herein by reference). 4.8** Description of the Company’s common stock. 10.1 Patrick Industries, Inc. 2009 Omnibus Incentive Plan (filed as Appendix A to the Company’s revised Definitive Proxy Statement on Schedule 14A filed on October 20, 2009 and incorporated herein by reference). 10.2* Form of Employment Agreement with Executive Officers (filed as Exhibit 10.2 to the Company’s Form 10-K filed on March 30, 2010 and incorporated herein by reference). 10.3* Form of Non-Qualified Stock Option Agreement (filed as Exhibit 10.3 to the Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference). 42 Table of Contents 10.4* Form of Officer and Employee Time-Based Restricted Share Award (filed as Exhibit 10.4 to the Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference). 10.5* Form of Officer and Employee Time-Based Restricted Share Award and Performance Contingent Restricted Share Award (filed as exhibit 10.5 to the Company's Form 10-K filed on February 24, 2023 and incorporated herein by reference). 10.6* Form of Non-Employee Director Restricted Share Award (filed as Exhibit 10.6 to the Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference). 10.7* Form of Stock Appreciation Rights Agreement (filed as Exhibit 10.7 to the Company’s Form 10-K filed on February 24, 2023 and incorporated herein by reference). 10.8 Fifth Amended and Restated Credit Agreement dated October 24, 2024 by and among the Company, the Guarantors, the lenders from time to time a party thereto and Wells Fargo Bank, National Association (filed as Exhibit 10.1 to the Company's Form 8-K filed on October 28, 2024 and incorporated herein by reference). 10.9 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Bank of America, N.A. (filed as Exhibit 10.1 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.10 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Nomura Global Financial Products Inc. (filed as Exhibit 10.2 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.11 Base Convertible Bond Hedge Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.3 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.12 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Bank of America, N.A. (filed as Exhibit 10.4 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.13 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Nomura Global Financial Products Inc. (filed as Exhibit 10.5 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.14 Base Issuer Warrant Transaction Confirmation, dated as of December 7, 2021, by and between Patrick Industries. Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.6 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.15 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Bank of America, N.A. (filed as Exhibit 10.7 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.16 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Nomura Global Financial Products Inc. (filed as Exhibit 10.8 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.17 Additional Convertible Bond Hedge Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.9 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.18 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Bank of America, N.A. (filed as Exhibit 10.10 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.19 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Nomura Global Financial Products Inc. (filed as Exhibit 10.11 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 43 Table of Contents 10.20 Additional Issuer Warrant Transaction Confirmation, dated as of December 9, 2021, by and between Patrick Industries, Inc. and Wells Fargo Bank, National Association. (filed as Exhibit 10.12 to the Company's Form 8-K filed on December 13, 2021 and incorporated herein by reference) 10.21* Employment Agreement with Executive Chairman of the Board of Directors. (filed as Exhibit 10.1 to the Company's Form 8-K filed on January 10, 2022 and incorporated herein by reference) 10.22* Employment Agreement, dated March 5, 2024, by and between Patrick Industries, Inc. and Andrew C. Roeder (filed as Exhibit 10.1 to the Company's Form 8-K filed on March 5, 2024 and incorporated herein by reference) 19.1** Insider Trading Policy 21** Subsidiaries of the Registrant. 23.1** Consent of Deloitte & Touche LLP. 31.1** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer. 31.2** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer. 32** Certification pursuant to 18 U.S.C. Section 1350. 97** Incentive Compensation Recovery Policy XBRL Exhibits. Interactive Data Files. The following materials are filed electronically with this Annual Report on Form 10-K: 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Schema Document 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Label Linkbase Document 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 formatted in XBRL (“eXtensible Business Reporting Language”): (i) the Consolidated Balance Sheet; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Shareholders’ Equity; and (v) the Consolidated Statements of Cash Flows, and the related Notes to these financial statements in detail tagging format. *Management contract or compensatory plan or arrangement. **Filed herewith. All other financial statement schedules are omitted because they are not applicable or the required information is immaterial or is shown in the Notes to Consolidated Financial Statements. ITEM 16. FORM 10-K SUMMARY None. 44 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized PATRICK INDUSTRIES, INC. Date: February 20, 2025 By: /s/ Andy L. Nemeth Andy L. Nemeth Chief Executive Officer Pursuant to the Requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Andy L. Nemeth Chairman of the Board February 20, 2025 Andy L. Nemeth Chief Executive Officer (Principal Executive Officer) /s/ Andrew C. Roeder Executive Vice President - Finance, February 20, 2025 Andrew C. Roeder Chief Financial Officer, and Treasurer (Principal Financial Officer) /s/ Matthew S. Filer Senior Vice President - Finance, February 20, 2025 Matthew S. Filer Chief Accounting Officer (Principal Accounting Officer) /s/ Joseph M. Cerulli Director February 20, 2025 Joseph M. Cerulli /s/ Todd M. Cleveland Director February 20, 2025 Todd M. Cleveland /s/ John A. Forbes Lead Independent Director February 20, 2025 John A. Forbes /s/ Michael A. Kitson Director February 20, 2025 Michael A. Kitson /s/ Pamela R. Klyn Director February 20, 2025 Pamela R. Klyn /s/ Derrick B. Mayes Director February 20, 2025 Derrick B. Mayes /s/ Denis G. Suggs Director February 20, 2025 Denis G. Suggs /s/ M. Scott Welch Director February 20, 2025 M. Scott Welch 45 Table of Contents PATRICK INDUSTRIES, INC. Index to the Financial Statements Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP (Firm ID No. 34 ) F-2 Financial Statements: Consolidated Statements of Income F-5 Consolidated Statements of Comprehensive Income F-6 Consolidated Balance Sheets F-7 Consolidated Statements of Cash Flows F-8 Consolidated Statements of Shareholders' Equity F-9 Notes to Consolidated Financial Statements F-10 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Patrick Industries, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Patrick Industries, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. As described in the accompanying Management's Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at the operations of businesses acquired in 2024, which are described in Note 3, whose financial statements constitute less than 8% of consolidated net sales for the year ended December 31, 2024 and approximately 3% of consolidated total assets as of December 31, 2024. Accordingly, our audit did not include the internal control over financial reporting at these businesses. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the F-2 Table of Contents company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Acquisitions - Sportech - Customer Relationships and Trademark Intangible Assets - Refer to Note 3 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Sportech for approximately $319 million in January 2024. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including a customer relationships intangible asset and a trademark intangible asset of $152 million and $21 million, respectively. Management estimated the fair value of the customer relationships intangible asset using the multi-period excess earnings method and the fair value of the trademark intangible asset using the relief-from-royalty method, both such methods being specific discounted cash flow methods. The fair value determination of these intangible assets required management to make significant estimates and assumptions related to future cash flows, specifically revenue growth and profit margins, and the selection of the discount rates and, specifically for the trademark intangible asset, the selection of the royalty rate. We identified these intangible assets for Sportech as a critical audit matter because of the significant estimates and assumptions management made to fair value these assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s valuation methodologies, forecasts of future cash flows, specifically revenue growth and profit margins, and the selection of the discount rates and, for the trademark intangible asset, the royalty rate. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation methodologies, the forecasts of future cash flows, specifically revenue growth and profit margins, and the selection of the discount rates and trademark intangible asset royalty rate included the following, among others: • We tested the effectiveness of controls over the valuation of the customer relationships and trademark intangible assets, including management’s controls over the valuation methodologies, forecasts of future cash flows, specifically revenue growth and profit margins, and selection of the discount rates and trademark intangible asset royalty rate. • We assessed the reasonableness of management’s forecast of future cash flows, specifically revenue growth and profit margins, by comparing the projections to historical results and certain peer companies. • With the assistance of our internal fair value specialists, we evaluated the reasonableness of the valuation methodologies, discount rates, and trademark intangible asset royalty rate by: ◦ Assessing whether the selected valuation methodologies align with generally accepted valuation methodologies. ◦ Testing the source information underlying the determination of the discount rates and trademark intangible asset royalty rate. F-3 Table of Contents ◦ Testing the mathematical accuracy of the calculations. ◦ Developing ranges of independent estimates and comparing those to the rates selected by management. /s/ Deloitte & Touche LLP Chicago, Illinois February 20, 2025 We have served as the Company's auditor since 2019. F-4 Table of Contents PATRICK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, ($ in thousands, except per share data) 2024 2023 2022 NET SALES $ 3,715,683 $ 3,468,045 $ 4,881,872 Cost of goods sold 2,879,793 2,685,812 3,821,934 GROSS PROFIT 835,890 782,233 1,059,938 Operating Expenses: Warehouse and delivery 155,821 143,921 163,026 Selling, general and administrative 325,754 299,418 327,513 Amortization of intangible assets 96,275 78,694 73,229 Total operating expenses 577,850 522,033 563,768 OPERATING INCOME 258,040 260,200 496,170 Interest expense, net 79,470 68,942 60,760 Income before income taxes 178,570 191,258 435,410 Income taxes 40,169 48,361 107,214 NET INCOME $ 138,401 $ 142,897 $ 328,196 BASIC EARNINGS PER COMMON SHARE (1) $ 4.25 $ 4.43 $ 9.88 DILUTED EARNINGS PER COMMON SHARE (1) $ 4.11 $ 4.33 $ 8.99 Weighted average shares outstanding - Basic (1) 32,568 32,278 33,210 Weighted average shares outstanding - Diluted (1) 33,699 33,038 36,707 (1) Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. See accompanying Notes to Consolidated Financial Statements. F-5 Table of Contents PATRICK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, ($ in thousands) 2024 2023 2022 NET INCOME $ 138,401 $ 142,897 $ 328,196 Other comprehensive income (loss), net of tax: Change in unrealized gain on hedge derivatives — — 757 Foreign currency translation loss ( 40 ) ( 75 ) ( 97 ) Other 113 ( 229 ) 873 Total other comprehensive income (loss) 73 ( 304 ) 1,533 COMPREHENSIVE INCOME $ 138,474 $ 142,593 $ 329,729 See accompanying Notes to Consolidated Financial Statements. F-6 Table of Contents PATRICK INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS December 31, ($ in thousands) 2024 2023 ASSETS Current Assets: Cash and cash equivalents $ 33,561 $ 11,409 Trade and other receivables, net 178,206 163,838 Inventories 551,617 510,133 Prepaid expenses and other 59,233 49,251 Total current assets 822,617 734,631 Property, plant and equipment, net 384,903 353,625 Operating lease right-of-use-assets 200,697 177,717 Goodwill 797,236 637,393 Intangible assets, net 802,889 651,153 Other non-current assets 12,612 7,929 TOTAL ASSETS $ 3,020,954 $ 2,562,448 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Current maturities of long-term debt $ 6,250 $ 7,500 Current operating lease liabilities 53,697 48,761 Accounts payable 187,915 140,524 Accrued liabilities 105,753 111,711 Total current liabilities 353,615 308,496 Long-term debt, less current maturities, net 1,311,684 1,018,356 Long-term operating lease liabilities 151,026 132,444 Deferred tax liabilities, net 61,346 46,724 Other long-term liabilities 14,917 11,091 TOTAL LIABILITIES 1,892,588 1,517,111 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY Preferred stock, no par value; authorized 1,000,000 shares; none issued or outstanding — — Common stock, no par value, 40,000,000 shares authorized, 33,567,048 and 33,240,912 issued and outstanding as of December 31, 2024 and 2023, respectively (1) 202,353 203,258 Accumulated other comprehensive loss ( 926 ) ( 999 ) Retained earnings 926,939 843,078 TOTAL SHAREHOLDERS’ EQUITY 1,128,366 1,045,337 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,020,954 $ 2,562,448 (1) The prior year period reflects the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. See accompanying Notes to Consolidated Financial Statements. F-7 Table of Contents PATRICK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, ($ in thousands) 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 138,401 $ 142,897 $ 328,196 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 166,545 144,543 130,757 Amortization of deferred debt financing costs 3,270 3,239 3,892 Stock-based compensation expense 16,775 19,429 21,751 Deferred income taxes ( 6,481 ) ( 591 ) ( 9,349 ) (Gain) loss on sale of property, plant and equipment ( 237 ) 585 ( 5,560 ) Loss on extinguishment of debt 2,549 — — Other 376 ( 325 ) 2,744 Change in operating assets and liabilities, net of business acquisitions: Trade and other receivables, net 10,847 8,923 26,056 Inventories ( 1,863 ) 162,181 ( 11,896 ) Prepaid expenses and other assets ( 7,609 ) ( 3,931 ) 20,123 Accounts payable, accrued liabilities and other 4,268 ( 68,278 ) ( 94,976 ) Net cash provided by operating activities 326,841 408,672 411,738 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant, and equipment ( 75,682 ) ( 58,987 ) ( 79,883 ) Proceeds from sale of property, plant, and equipment 2,411 1,362 7,620 Business acquisitions, net of cash acquired ( 411,747 ) ( 25,859 ) ( 248,899 ) Purchase of intangible assets and other investing activities ( 27,831 ) ( 3,061 ) ( 305 ) Net cash used in investing activities ( 512,849 ) ( 86,545 ) ( 321,467 ) CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings 125,000 — — Term debt repayments ( 130,938 ) ( 7,500 ) ( 7,500 ) Borrowing on revolver 1,320,385 488,440 839,436 Repayments on revolver ( 1,220,385 ) ( 568,728 ) ( 894,147 ) Repayment of convertible notes — ( 172,500 ) — Proceeds from senior notes offering 500,000 — — Repayment of senior notes ( 300,000 ) — — Cash dividends paid to shareholders ( 50,187 ) ( 42,140 ) ( 32,869 ) Stock repurchases under buyback program ( 4,661 ) ( 18,808 ) ( 77,117 ) Taxes paid for share-based payment arrangements ( 17,334 ) ( 12,132 ) ( 10,227 ) Payment of deferred financing costs ( 9,212 ) — ( 2,464 ) Payment of contingent consideration from business acquisitions ( 4,652 ) ( 1,460 ) ( 5,580 ) Proceeds from exercise of common stock options 21 1,413 195 Other financing activities 123 ( 150 ) — Net cash provided by (used in) financing activities 208,160 ( 333,565 ) ( 190,273 ) Net increase (decrease) in cash and cash equivalents 22,152 ( 11,438 ) ( 100,002 ) Cash and cash equivalents at beginning of year 11,409 22,847 122,849 Cash and cash equivalents at end of year $ 33,561 $ 11,409 $ 22,847 See accompanying Notes to Consolidated Financial Statements. F-8 Table of Contents PATRICK INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ($ in thousands) Common Stock Additional Paid-in- Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Balance at January 1, 2022 $ 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 — — — 328,196 328,196 Dividends declared — — — ( 33,160 ) ( 33,160 ) Other comprehensive income, net of tax — — 1,533 — 1,533 Share repurchases under buyback program ( 11,099 ) — — ( 65,884 ) ( 76,983 ) Issuance of shares upon exercise of common stock options 195 — — — 195 Repurchase of shares for tax payments related to the vesting and exercise of share-based grants ( 10,227 ) — — — ( 10,227 ) Stock-based compensation expense 21,751 — — — 21,751 Balance at December 31, 2022 $ 197,003 $ — $ ( 695 ) $ 758,861 $ 955,169 Net income — — — 142,897 142,897 Dividends declared — — — ( 42,327 ) ( 42,327 ) Other comprehensive loss, net of tax — — ( 304 ) — ( 304 ) Share repurchases under buyback program ( 2,455 ) — — ( 16,353 ) ( 18,808 ) Issuance of shares upon exercise of common stock options 1,413 — — — 1,413 Repurchase of shares for tax payments related to the vesting and exercise of share-based grants ( 12,132 ) — — — ( 12,132 ) Stock-based compensation expense 19,429 — — — 19,429 Balance at December 31, 2023 $ 203,258 $ — $ ( 999 ) $ 843,078 $ 1,045,337 Net income — — — 138,401 138,401 Dividends declared — — — ( 50,246 ) ( 50,246 ) Other comprehensive income, net of tax — — 73 — 73 Stock repurchases under buyback program ( 367 ) — — ( 4,294 ) ( 4,661 ) Issuance of shares upon exercise of common stock options 21 — — — 21 Repurchase of shares for tax payments related to the vesting and exercise of share-based grants ( 17,334 ) — — — ( 17,334 ) Stock-based compensation expense 16,775 — — — 16,775 Balance at December 31, 2024 $ 202,353 $ — $ ( 926 ) $ 926,939 $ 1,128,366 See accompanying Notes to Consolidated Financial Statements. F-9 Table of Contents PATRICK INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Patrick Industries, Inc. (“Patrick” or the “Company”) operations consist of the manufacture and distribution of component products and materials for use primarily by the recreational vehicle (“RV”), marine, powersports, manufactured housing (“MH”) and industrial markets for customers throughout the United States and Canada. As of December 31, 2024, the Company maintained approximately 179 manufacturing plants and 47 distribution facilities located in 25 states with a small presence in Mexico, China and Canada. Patrick operates in two business segments: Manufacturing and Distribution. Reclassified Amounts Certain amounts have been reclassified in prior years' financial statements to conform with current year presentation. These reclassifications are immaterial to the overall financial statements. Previously, our sales to the powersports end market were included in the Company’s marine end market sales. Effective with the first quarter of 2024, powersports net sales are being reported separately after the January 2024 acquisition of Sportech, LLC, as disclosed in Note 2 "Revenue Recognition". Principles of Consolidation The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Patrick and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates include the valuation of goodwill and indefinite-lived intangible assets, the valuation of long-lived assets, the allowance for credit losses, excess and obsolete inventories, assets acquired and liabilities assumed in a business combination, the valuation of estimated contingent consideration, deferred tax asset valuation allowances, and certain accrued liabilities. Actual results could differ from the amounts reported. Revenue Recognition The Company is a major manufacturer and distributor of component products and materials serving original equipment manufacturers and other customers in the RV, marine, powersports, MH, and industrial industries. Revenue is recognized when or as control of the promised goods transfers to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The Company’s contracts typically consist of a single performance obligation to manufacture and provide the promised goods. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using the standalone selling price of each distinct good in the contract. The transaction price for contracts may include reductions to the transaction price for estimated volume discounts and rebates and other customer incentives. There are no material instances in any period presented where variable consideration was constrained and not recorded at the initial time of sale. Manufacturing segment revenue is recognized when control of the products transfers to the customer which is the point when the customer gains the ability to direct the use of and obtain substantially all the remaining benefits from the asset, which is generally upon delivery of goods, or upon shipment of goods in certain circumstances. In limited circumstances, where the products are customer specific with no alternative use to the Company, and the Company has a legally enforceable right to payment for performance to date with a reasonable margin, revenue is recognized over the contract term based on the cost-to- F-10 Table of Contents cost method. However, the financial impact of these contracts is immaterial considering the short production cycles and limited inventory days on hand. Distribution segment revenue from product sales is recognized on a gross basis upon shipment or delivery of goods at which point control transfers to the customer. The Company acts as a principal in such arrangements because it controls the promised goods before delivery to the customer. The Company uses direct shipment arrangements with certain vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses. The Company is the principal in the transaction and recognizes revenue for direct shipment arrangements on a gross basis. Our role as principal in our distribution sales is generally characterized by (i) customers entering into contracts with the Company, not the vendor; (ii) our obligation to pay the vendor irrespective of our ability to collect from the customer; (iii) our discretion in determining the price of the good provided to the customer; (iv) our title to the goods before the customer receives or accept the goods; and (v) our responsibility for the quality and condition of goods delivered to the customer. Sales and other taxes collected concurrent with revenue-producing activities are excluded from net sales. The Company records freight billed to customers in net sales. The corresponding costs incurred for shipping and handling related to these customer-billed freight costs are accounted for as costs to fulfill the contract and are included in warehouse and delivery expenses. The Company’s contracts across each of its businesses typically do not result in situations where there is a time period greater than one year between performance under the contract and collection of the related consideration. The Company does not account for a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the incurred costs that the Company otherwise would have capitalized is one year or less. These costs, representing primarily sales commissions, are included in selling, general and administrative expenses. The Company does not disclose information about the transaction price being allocated to the remaining performance obligations at period end, as the Company does not have material contracts that have original expected durations of more than one year. Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial in all periods presented and changes in contract liabilities were immaterial in all periods presented. Contract assets, representing the Company’s rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time), were immaterial in all periods presented. Costs and Expenses Cost of goods sold includes material costs, direct and indirect labor, depreciation, overhead expenses, inbound freight charges, inspection costs, internal transfer costs, receiving costs, and other costs. Warehouse and delivery expenses include salaries and wages, building rent and insurance, and other overhead costs related to distribution operations and delivery costs related to the shipment of finished and distributed products to customers. Stock Based Compensation Compensation expense related to the fair value of restricted stock awards as of the grant date is calculated based on the Company’s closing stock price on the date of grant. In addition, the Company estimates the fair value of all stock option and stock appreciation ri ghts (“SARS”) awards as of the grant date by applying the Black-Scholes option-pricing model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense, including the expected option term, dividend yield, risk-free interest rate and volatility of the Company's common stock. Expected volatilities take into consideration the historical volatility of the Company’s common stock. The expected term of options and SARS represents the period of time that the options and SARS granted are expected to be outstanding based on historical Company trends. The risk free interest rate is based on the U.S. Trea sury yield curve in effect at the time F-11 Table of Contents of grant for instruments of a similar term. New shares are issued upon exercise of options. Forfeitures of stock based compensation are recognized as incurred. Earnings Per Common Share Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income available for diluted shares (calculated as net income plus the after-tax effect of interest on potentially dilutive convertible notes, where applicable) by the weighted-average number of common shares outstanding, plus the weighted-average impact of potentially dilutive convertible notes, plus the dilutive effect of stock options, SARS, and certain restricted stock awards (collectively, “Common Stock Equivalents”). The dilutive effect of Common Stock Equivalents is calculated under the treasury stock method using the average market price for the period. Common Stock Equivalents are not included in the computation of diluted earnings per common share if their effect would be anti-dilutive. On November 18, 2024, the Board of Directors declared a three-for-two stock split of the Company's common stock, to be effected in the form of a stock dividend. Shareholders of record as of the close of business on November 29, 2024 received one additional share for every two shares held which was paid on December 13, 2024. The Company's stock began trading on a post-split basis on December 16, 2024. Cash paid in lieu of fractional shares was immaterial. All share and per share information has been updated on a retrospective basis for all periods presented . See Note 13 "Earnings Per Common Share" for the calculation of both basic and diluted earnings per common share. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. The Company held no cash equivalents as of December 31, 2024 and 2023, respectively. Trade and Other Receivables Trade receivables consist primarily of amounts due to the Company from its normal business activities. In assessing the carrying value of its trade receivables, the Company estimates the recoverability by making assumptions based on historical and forward-looking factors, such as historical and anticipated customer performance, current overall and industry-specific economic conditions, historical write-off and collection experience, the level of past-due amounts, and specific risks identified in the trade receivables portfolio. Other receivables consist of employee advances, insurance claims, amounts owed from vendors pertaining to importation costs, and other miscellaneous items. As of December 31, ($ in thousands) 2024 2023 Trade receivables $ 149,146 $ 136,796 Other receivables 32,768 31,046 Allowance for credit losses ( 3,708 ) ( 4,004 ) Total $ 178,206 $ 163,838 Inventories Inventories are generally stated at the lower of cost (first-in, first-out method or, for certain inventories, average costing method) and net realizable value. Based on the inventory aging and other considerations for realizable value, the Company writes down the carrying value to net realizable value where appropriate. The Company reviews inventory on-hand and records provisions for excess and obsolete inventory based on current assessments of future demand, market conditions, and related management initiatives. The cost of manufactured inventories includes raw materials, inbound freight, labor and overhead. The Company’s distribution inventories include the cost of materials purchased for resale and inbound freight. F-12 Table of Contents Prepaid Expenses and Other As of December 31, ($ in thousands) 2024 2023 Vendor rebates receivable $ 9,877 $ 9,303 Prepaid expenses 31,543 22,868 Vendor and other deposits 14,503 8,211 Prepaid income taxes 3,310 8,869 Total $ 59,233 $ 49,251 Property, Plant and Equipment The costs of major improvements that materially extend the useful life of property are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is determined based on a straight-line method over the assets' estimated useful lives. Leasehold improvements are amortized over the lesser of their useful lives or the related lease term. Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets are not amortized but are subject to an annual impairment test based on their estimated fair value. The Company reviews goodwill and indefinite-lived intangible assets for impairment in the fourth quarter, or more frequently, if events or changes in circumstances indicate the assets might be impaired. The impairment test was performed on September 30, 2024. In conducting its impairment testing, the Company estimates the fair value of our reporting units using both an income and market based approach and the fair value of our indefinite-lived intangible assets using an income based approach. The market approach includes a comparison of multiples of earnings before interest, taxes, depreciation and amortization for the reporting units to similar businesses or guideline companies whose securities are actively traded in public markets. The income approach calculates the present value of expected cash flows to determine the estimated fair value of our reporting units or indefinite-lived intangible assets. Additionally, the income approach requires us to estimate future cash flows, the timing of these cash flows, and a discount rate (based on a weighted average cost of capital), which represents the time value of money and the inherent risk and uncertainty of the future cash flows. Estimated royalty rates applied to projected revenues are based on comparable industry studies and consideration of operating margins. The assumptions we use to estimate future cash flows are consistent with the assumptions that our reporting units use for internal planning purposes. When calculating the present value of future cash flows under the income approach, we take into consideration multiple variables, including forecasted sales volumes and operating income, current industry and economic conditions, and historical results. If we determine that the estimated fair value of each reporting unit or indefinite-lived intangible asset exceeds its carrying amount, the reporting unit's goodwill or indefinite-lived intangible asset is not impaired. Our fourth quarter 2024 goodwill impairment test concluded that the fair values of each of our reporting units exceeded their carrying values. Our 2024 indefinite-lived intangibles test also concluded that the fair values of these intangibles exceeded their respective carrying values. Long-Lived Assets When events or conditions warrant, the Company evaluates the recoverability of long-lived assets other than goodwill and indefinite-lived intangible assets, which includes property, plant and equipment, finite-lived intangible assets, and lease right-of-use assets, and considers whether these assets are impaired. The Company assesses the recoverability of these assets based upon several factors, including management's intention with respect to the assets and their projected future undiscounted cash flows. If projected undiscounted cash flows are less than the carrying amount of the assets, the Company adjusts the carrying amounts of such assets to their estimated fair value. A significant adverse change in the Company’s business climate in future periods could result in a significant loss of market share or the inability to achieve previously projected revenue growth and could lead to a required assessment of the recoverability of the Company’s long-lived assets, which may subsequently result in an impairment charge. F-13 Table of Contents Finite-lived intangible assets are amortized on a straight-line basis over their useful lives, as detailed further in Note 6 "Goodwill and Intangible Assets". Income Taxes Income tax expense is calculated based on statutory tax rates of the federal, state, and international jurisdictions in which the Company operates and income earned or apportioned to each of these respective jurisdictions, as well as any additional tax planning available to the Company in these jurisdictions. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred taxes are provided on an asset and liability method whereby deferred taxes are recognized based on temporary differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets may not be realized. The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Leases The Company determines whether an arrangement is a lease at inception. For leases where the Company is the lessee, a lease liability and a right-of-use asset are recognized for all leases, with the exception of short-term leases with terms of twelve months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease, and is measured as the present value of the lease payments. As the rate implicit in the lease is usually not known at lease commencement, the Company uses its incremental borrowing rate to discount the lease obligation. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and is measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the Company’s initial direct costs. Additionally, the Company has lease agreements containing lease and non-lease components which are accounted for as a single lease component. See Note 14 "Leases" for additional information. Recently Issued Accounting Pronouncements Adoption of New Accounting Standards In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 , “Segment Reporting (Topic 280): 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. The Company adopted the ASU during the year ended December 31, 2024 and applied the requirements for the fiscal year ended December 31, 2024 on a retrospective basis to all periods presented. The Company will begin to apply the disclosure requirements in interim periods beginning in 2025. The adoption of this guidance did not have a significant impact on Patrick’s consolidated financial statements. See Note 17 "Segment Reporting" for further detail. Accounting Standards Not Yet Adopted In November 2024, the FASB" issued ASU 2024-03 , "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in this update require public business entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in the notes to the financial statements. Public business entities are required to apply the guidance prospectively or retrospectively. This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is F-14 Table of Contents currently evaluating the effects that the adoption of ASU 2024-03 will have on the Company's consolidated financial statements. In November 2024, the FASB issued ASU 2024-04 , "Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments". The amendments in this update are intended to clarify disclosure requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions rather than as debt extinguishments. This ASU is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2024-04 will have on the Company's consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, " Income Taxes (Topic 740): 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 impact our consolidated financial statements. 2. REVENUE RECOGNITION In the following table, revenue from contracts with customers, is disaggregated by market type and by reportable segment, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors: Year Ended December 31, 2024 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 1,121,128 $ 504,083 $ 1,625,211 Marine 530,828 39,896 570,724 Powersports 338,904 13,329 352,233 Manufactured Housing 300,689 381,401 682,090 Industrial 449,685 35,740 485,425 Total $ 2,741,234 $ 974,449 $ 3,715,683 Year Ended December 31, 2023 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 1,018,003 $ 485,339 $ 1,503,342 Marine 743,826 38,749 782,575 Powersports 109,362 12,592 121,954 Manufactured Housing 258,551 309,659 568,210 Industrial 457,041 34,923 491,964 Total $ 2,586,783 $ 881,262 $ 3,468,045 F-15 Table of Contents Year Ended December 31, 2022 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 1,777,584 $ 815,478 $ 2,593,062 Marine 868,996 44,515 913,511 Powersports 89,977 13,024 103,001 Manufactured Housing 344,983 359,618 704,601 Industrial 522,226 45,471 567,697 Total $ 3,603,766 $ 1,278,106 $ 4,881,872 3. 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, or gain key technology. Acquisitions meeting the definition of a business combination 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 the acquisitions representing business combinations discussed below during the years ended December 31, 2024, 2023 and 2022. The acquisitions were funded through cash on hand or borrowings under the Company’s credit facility in existence at the time of acquisition. For each of the acquisitions discussed, we either acquired the assets and assumed the liabilities of the business, or acquired 100 % of the equity interests. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s consolidated balance sheet at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one-year measurement period. For those acquisitions where the purchase price allocation is provisional, which includes certain acquisitions completed in 2024, the Company is still in the process of finalizing the fair values of acquired intangible assets and fixed assets. For the years ended December 31, 2024, 2023 and 2022, revenue of approximately $ 295.7 million, $ 17.7 million and $ 121.8 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year. For the years ended December 31, 2024, 2023 and 2022, operating income of approximately $ 47.2 million, $ 1.0 million and $ 19.4 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year. Acquisition-related costs associated with the businesses acquired in 2024 were $ 5.0 million. Acquisition-related costs associated with the businesses acquired in 2023 and 2022 were immaterial in each respective year. Contingent Consideration In connection with certain acquisitions, the Company is required to pay additional cash consideration to the sellers 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. The following table provides a reconciliation of the beginning and ending aggregate fair values of the contingent consideration: F-16 Table of Contents Year Ended December 31, ($ in thousands) 2024 2023 Balance at January 1 $ 8,510 $ 9,213 Additions 2,030 3,590 Fair value adjustments ( 1,900 ) 917 Settlements ( 5,032 ) ( 5,210 ) Balance at December 31 $ 3,608 $ 8,510 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 December 31, ($ in thousands) 2024 2023 Accrued liabilities $ 1,665 $ 7,500 Other long-term liabilities 1,943 1,010 Total fair value of contingent consideration $ 3,608 $ 8,510 Maximum amount of contingent consideration $ 8,618 $ 8,510 2024 Acquisitions The Company completed seven acquisitions in the year ended December 31, 2024, including the following previously announced acquisitions (collectively, the "2024 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. ICON Direct LLC doing business as RecPro ("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. Changes to preliminary purchase accounting estimates recorded in 2024 related to the 2024 Acquisitions were immaterial. 2023 Acquisitions The Company completed three acquisitions in the year ended December 31, 2023, including the following previously announced acquisition (collectively, the "2023 Acquisitions"): 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. F-17 Table of Contents 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 2024 related to the 2023 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets. 2022 Acquisitions The Company completed five acquisitions in the year ended December 31, 2022, including the following three previously announced acquisitions (collectively, the "2022 Acquisitions"): 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. Pro Forma Information (Unaudited) The following pro forma information 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 each 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 the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition. In addition, the pro forma information includes incremental amortization expense, net of tax related to intangible assets acquired of $ 3.7 million and $ 14.9 million for the years ended December 31, 2024 and 2023, respectively, in connection with the acquisitions as if they occurred as of the beginning of the year immediately preceding each such acquisition. Year Ended December 31, ($ in thousands, except per share data) 2024 2023 Net sales $ 3,801,996 $ 3,841,655 Net income $ 145,102 $ 152,117 Basic earnings per common share (1) $ 4.46 $ 4.71 Diluted earnings per common share (1) $ 4.31 $ 4.60 (1) The prior year period reflects the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results. F-18 Table of Contents The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2024, 2023, and 2022 Acquisitions: 2024 Acquisitions 2023 Acquisitions 2022 Acquisitions ($ in thousands) Sportech All Others Total Acquisition A Acquisition B All Others Total Consideration: Cash, net of cash acquired $ 319,073 $ 92,631 $ 411,704 $ 26,294 $ 132,557 $ 94,705 $ 20,824 $ 248,086 Working capital holdback and other, net — 4,201 4,201 — — — — — Contingent consideration (1) — 2,030 2,030 1,600 — — 1,840 1,840 Total consideration $ 319,073 $ 98,862 $ 417,935 $ 27,894 $ 132,557 $ 94,705 $ 22,664 $ 249,926 Assets Acquired: Trade receivables $ 21,588 $ 2,258 $ 23,846 $ 1,293 $ 20,640 $ 4,880 $ 905 $ 26,425 Inventories 20,611 19,010 39,621 4,430 32,744 8,732 2,352 43,828 Prepaid expenses & other 1,766 4,139 5,905 105 1,325 164 127 1,616 Property, plant & equipment 18,766 7,083 25,849 8,165 4,681 8,086 1,464 14,231 Operating lease right-of-use assets 15,096 1,283 16,379 1,044 2,917 1,435 599 4,951 Identifiable intangible assets: Customer relationships 152,000 17,560 169,560 10,075 58,000 30,970 7,055 96,025 Non-compete agreements 2,000 2,375 4,375 270 500 — 310 810 Patents 17,500 600 18,100 — 7,500 9,500 — 17,000 Trademarks 20,500 8,000 28,500 — 17,000 8,080 1,310 26,390 Liabilities Assumed: Current portion of operating lease obligations ( 1,437 ) ( 585 ) ( 2,022 ) ( 262 ) ( 512 ) ( 289 ) ( 273 ) ( 1,074 ) Accounts payable & accrued liabilities ( 32,398 ) ( 4,068 ) ( 36,466 ) ( 514 ) ( 24,521 ) ( 3,336 ) ( 1,279 ) ( 29,136 ) Operating lease obligations ( 13,658 ) ( 699 ) ( 14,357 ) ( 781 ) ( 2,405 ) ( 1,146 ) ( 326 ) ( 3,877 ) Deferred tax liabilities ( 21,288 ) — ( 21,288 ) — ( 19,930 ) ( 12,684 ) — ( 32,614 ) Total fair value of net assets acquired 201,046 56,956 258,002 23,825 97,939 54,392 12,244 164,575 Goodwill (2) 118,027 41,906 159,933 5,814 34,618 40,313 10,420 85,351 Bargain purchase gain — — — ( 1,745 ) — — — — $ 319,073 $ 98,862 $ 417,935 $ 27,894 $ 132,557 $ 94,705 $ 22,664 $ 249,926 (1) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions. (2) Goodwill is tax-deductible for the 2024 Acquisitions, except for Sportech which is only partially tax-deductible, for the 2023 Acquisitions, and for the 2022 Acquisitions, except Acquisition A and Acquisition B (totaling approximately $ 74.9 million). F-19 Table of Contents 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. The estimated useful life for customer relationships is 10 years. 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. Trademarks have an indefinite useful life. 4. INVENTORIES As of December 31, ($ in thousands) 2024 2023 Raw materials $ 292,730 $ 269,786 Work in process 18,157 16,596 Finished goods 103,318 107,675 Less: reserve for inventory excess and obsolescence ( 16,456 ) ( 15,990 ) Total manufactured goods, net 397,749 378,067 Materials purchased for resale (distribution products) 161,492 140,147 Less: reserve for inventory excess and obsolescence ( 7,624 ) ( 8,081 ) Total materials purchased for resale (distribution products), net 153,868 132,066 Total inventories $ 551,617 $ 510,133 5. PROPERTY, PLANT AND EQUIPMENT Estimated Useful Lives (years) As of December 31, ($ in thousands) 2024 2023 Land and improvements $ 26,512 $ 19,502 Building and improvements 30 85,629 85,941 Machinery and equipment 3 - 7 545,791 470,689 Capitalized software 3 20,159 14,331 Transportation equipment 5 24,788 21,900 Leasehold improvements (1) 41,378 33,736 Property, plant and equipment, gross 744,257 646,099 Less: accumulated depreciation ( 359,354 ) ( 292,474 ) Property, plant and equipment, net $ 384,903 $ 353,625 (1) Leasehold improvements are amortized over the shorter of the useful life of those leasehold improvements and the remaining life of the lease term. Total depreciation expense for property, plant and equipment for the years ended December 31, 2024, 2023, and 2022 was $ 70.2 million, $ 65.8 million and $ 57.5 million, respectively. Accrued capital expenditures were approximately $ 7.3 million, $ 2.1 million and $ 1.7 million for the years ended December 31, 2024, 2023, and 2022, respectively. F-20 Table of Contents 6. GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023 by segment are as follows: ($ in thousands) Manufacturing Distribution Total Balance at January 1, 2023 $ 558,362 $ 70,901 $ 629,263 Acquisitions — 5,905 5,905 Adjustment to prior year preliminary purchase price allocation 2,008 217 2,225 Balance at December 31, 2023 $ 560,370 $ 77,023 $ 637,393 Acquisitions 119,859 40,074 159,933 Adjustment to prior year preliminary purchase price allocation 17 ( 107 ) ( 90 ) Balance at December 31, 2024 $ 680,246 $ 116,990 $ 797,236 As of December 31, 2024 and 2023, accumulated impairment of goodwill in the Manufacturing segment was $ 27.4 million. Intangible assets, net consist of the following : As of December 31, ($ in thousands) 2024 2023 Customer relationships $ 924,720 $ 729,664 Non-compete agreements 25,776 21,561 Patents 89,641 69,401 Trademarks 225,527 197,027 Intangible assets, gross 1,265,664 1,017,653 Less: accumulated amortization: Customer relationships ( 419,358 ) ( 332,220 ) Non-compete agreements ( 20,065 ) ( 18,322 ) Patents ( 23,352 ) ( 15,958 ) Intangible assets, net $ 802,889 $ 651,153 Changes in the carrying value of intangible assets for the years ended December 31, 2024 and 2023 by segment are as follows: ($ in thousands) Manufacturing Distribution Total Balance at January 1, 2023 $ 622,647 $ 97,583 $ 720,230 Additions (1) 3,061 11,000 14,061 Amortization ( 67,645 ) ( 11,049 ) ( 78,694 ) Adjustment to prior year preliminary purchase price allocation ( 4,360 ) ( 84 ) ( 4,444 ) Balance at December 31, 2023 $ 553,703 $ 97,450 $ 651,153 Additions (1) 199,966 48,400 248,366 Amortization ( 82,538 ) ( 13,737 ) ( 96,275 ) Adjustment to prior year preliminary purchase price allocation — ( 355 ) ( 355 ) Balance at December 31, 2024 $ 671,131 $ 131,758 $ 802,889 F-21 Table of Contents (1) Includes intangible assets acquired that did not meet the definition of a business combination of $ 27.8 million and $ 3.4 million for the years ended December 31, 2024 and 2023, respectively. Estimated amortization expense for the years ending December 31, 2025 through 2029 is presented below: ($ in thousands) 2025 $ 90,696 2026 $ 84,924 2027 $ 78,292 2028 $ 65,787 2029 $ 61,712 7. DEBT The following table presents a summary of total debt outstanding: As of December 31, ($ in thousands) 2024 2023 Long-term debt: Term loan due 2027 $ — $ 129,375 Term loan due 2029 123,438 — Revolver due 2029 100,000 — 7.50 % senior notes due 2027 — 300,000 1.75 % convertible notes due 2028 258,750 258,750 4.75 % senior notes due 2029 350,000 350,000 6.375 % senior notes due 2032 500,000 — Total debt 1,332,188 1,038,125 Less: convertible notes debt discount, net ( 3,915 ) ( 4,917 ) Less: term loan deferred financing costs, net ( 543 ) ( 548 ) Less: senior notes deferred financing costs, net ( 9,796 ) ( 6,804 ) Less: current maturities of long-term debt ( 6,250 ) ( 7,500 ) Total long-term debt, less current maturities, net $ 1,311,684 $ 1,018,356 2021 Credit Facility On August 11, 2022, the Company entered into the first amendment of its Fourth Amended and Restated Credit Agreement dated April 20, 2021 (as amended, the “2021 Credit Agreement”), under which the senior secured credit facility was increased to $ 925 million from $ 700 million and the maturity date was extended to August 11, 2027 from April 20, 2026. Following this amendment, the senior credit facility under the 2021 Credit Agreement was comprised of a $ 775 million revolving credit facility (the "Revolver due 2027") and the remaining balance of the $ 150 million term loan (the "Term Loan due 2027" and together with the Revolver due 2027, the "2021 Credit Facility"). The Company recorded a $ 0.3 million write-off of deferred financing costs as a result of the amendment, which is included in "Selling, general and administrative" in the Company's consolidated statements of income for the year ended December 31, 2022. Pursuant to the amendment, interest rates for borrowings under the 2021 Credit Agreement transitioned to a Secured Overnight Financing Rate ("SOFR") based option from a London Inter-Bank Offered Rate ("LIBOR") based option. During 2024, the Company entered into the Fifth Amended and Restated Credit Agreement (the “2024 Credit Agreement”), and used borrowings under the 2024 Credit Facility (as defined below), together with a portion of the proceeds from the issuance of the 6.375 % Senior Notes (as defined below), to repay all borrowings under its existing 2021 Credit Facility. F-22 Table of Contents 2024 Credit Facility On October 24, 2024, the Company entered into the 2024 Credit Agreement, under which the Company's credit facility was increased to $ 1.0 billion from $ 925.0 million and the maturity date was extended to October 24, 2029 from August 11, 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"). Pursuant to the terms of the 2024 Credit Agreement, the interest rate for borrowings under the Revolver due 2029 and the Term Loan due 2029 is either the Prime Rate or SOFR plus a margin, which ranges from 0.00 % to 0.75 % for Prime Rate loans and from 1.00 % to 1.75 % for SOFR loans depending on the Company’s consolidated total leverage ratio. The interest rate for incremental borrowings as of December 31, 2024 was SOFR plus 1.75 % (or 6.11 %) for the SOFR-based option. The Company is required to pay fees on committed but unused portions of the Revolver due 2029, which range from 0.15 % to 0.225 %. The fee payable on committed but unused portions of the Revolver due 2029 was 0.225 % as of December 31, 2024. The Term Loan due 2029 requires quarterly installments of $ 1,562,500 the last business day of each March, June, September and December, commencing December 31, 2024. Borrowings under the 2024 Credit Facility are secured by substantially all personal property assets of the Company and any domestic subsidiary guarantors. Under the terms of the 2024 Credit Agreement, the covenant requiring the Company to have a minimum consolidated fixed charge coverage ratio of 1.5 to 1.0 was replaced with a covenant requiring the Company to have a consolidated 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. In addition, the 2024 Credit Agreement continues to have a covenant requiring the Company to have a maximum consolidated secured net leverage ratio of 2.75 to 1.00 (increasing to 3.25 to 1.00 in certain circumstances). The Company determined that the amended terms of the 2024 Credit Agreement were not substantially different from the terms of the Company’s 2021 Credit Agreement prior to the amendment. Accordingly, debt modification accounting treatment was applied and the related impacts were immaterial. The amount of deferred financing costs write-off as a result of the amendment of the 2021 Credit Facility was immaterial in the Company's consolidated statements of income for the year ended December 31, 2024. 6.375 % Senior Notes due 2032 On October 22, 2024, the Company issued $ 500.0 million aggregate principal amount of 6.375 % Senior Notes due 2032 (the “ 6.375 % Senior Notes”) in a transaction pursuant to Rule 144A under the Securities Act. The proceeds from the issuance, together with borrowings under the 2024 Credit Facility, 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 all borrowings under the 2021 Credit Facility and to pay fees and expenses in connection with the foregoing. The 6.375 % Senior Notes will mature on November 1, 2032. Interest on the 6.375 % Senior Notes is payable semi-annually in cash in arrears on May 1 and November 1 of each year, beginning on May 1, 2025. The effective interest rate on the 6.375 % Senior Notes, which includes debt issuance costs, is approximately 6.60 %. In connection with the issuance of the 6.375 % Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 6.375 % Senior Notes approximately $ 6.9 million in deferred financing costs which are being amortized using the effective interest rate over the term of the 6.375 % Senior Notes. The 6.375 % Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2024 Credit Facility. If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the 6.375 % Senior Notes (unless otherwise redeemed) at a price equal to 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest. The Company may redeem the 6.375 % Senior Notes, in whole or in part, at any time (a) prior to November 1, 2027, at a price equal to 100 % of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after November 1, 2027 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest. In addition, prior to November 1, 2027, the Company may redeem, in one or more transactions, up to an aggregate of 40 % of the original principal amount of the 6.375 % Senior Notes at a redemption price equal to 106.375 % of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings. F-23 Table of Contents 1.75 % Convertible Senior Notes due 2028 In December 2021, the Company issued $ 258.75 million aggregate principal amount of 1.75 % Convertible Senior Notes due 2028 (the “ 1.75 % Convertible Notes”). The total debt discount of $ 56.1 million at issuance consisted of two components: (i) the conversion option component, recorded to shareholders' equity, in the amount of $ 48.8 million, representing the difference between the principal amount of the 1.75 % Convertible Notes upon issuance less the present value of the future cash flows of the 1.75 % Convertible Notes using a borrowing rate for a similar non-convertible debt instrument and (ii) debt issuance costs of $ 7.3 million. The conversion option component of the 1.75 % Convertible Notes was valued using Level 2 inputs under the fair value hierarchy. The unamortized portion of the total debt discount is being amortized to interest expense over the life of the 1.75 % Convertible Notes. The effective interest rate on the 1.75 % Convertible Notes, which includes the non-cash interest expense of debt discount amortization and debt issuance costs, was 2.14 % as of December 31, 2024. The net proceeds from the issuance of the 1.75 % Convertible Notes were approximately $ 249.7 million, after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company, but before deducting the net cost of the 1.75 % Convertible Note Hedge Transactions and the 1.75 % Convertible Note Warrant Transactions (each as defined herein) described in Note 9 "Derivative Financial Instruments". The 1.75 % Convertible Notes are senior unsecured obligations of the Company and pay interest semi-annually in arrears on June 1 and December 1 of each year at an annual rate of 1.75 %. The 1.75 % Convertible Notes will mature on December 1, 2028 unless earlier repurchased or converted in accordance with their terms. Prior to June 1, 2028, the 1.75 % Convertible Notes may be converted at the option of the holders only upon the occurrence of specified events and during certain periods, and thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date. The Company will satisfy any conversion by paying cash up to the aggregate principal amount of the 1.75 % Convertible Notes to be converted and by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 1.75 % Convertible Notes being converted. The initial conversion rate for the 1.75 % Convertible Notes is 14.9831 shares of the Company's common stock per $1,000 principal amount of the 1.75 % Convertible Notes (or 3,876,867 shares in the aggregate) and is equal to an initial conversion price of approximately $ 66.74 per share. If an event of default on the 1.75 % Convertible Notes occurs, the principal amount of the 1.75 % Convertible Notes, plus accrued and unpaid interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions. The 1.75 % Convertible Notes are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2024 Credit Facility. 1.75 % Convertible Notes holders may convert their Convertible Notes on or after June 28, 2028 at any time at their option. Holders may convert 1.75 % Convertible Notes prior to June 28, 2028, only under the following circumstances: (i) during any calendar quarter, if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day and (iii) upon the occurrence of certain specified distributions or corporate events. As of December 31, 2024, the conditional conversion feature of the 1.75 % Convertible Notes related to the price of our common stock equaling or exceeding 130 % of the conversion price was triggered. As a result, the 1.75 % Convertible Notes are convertible, in whole or in part, at the option of the holders from January 1, 2025 to March 31, 2025. Whether the 1.75 % Convertible Notes will be convertible in subsequent periods will depend on the continued satisfaction of this condition or another conversion condition in the future. The 1.75 % Convertible Notes were also convertible from October 1, 2024 to December 31, 2024 based on satisfying this condition in the prior calendar quarter. No 1.75 % Convertible Notes were converted during the period from October 1, 2024 to December 31, 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. 4.75 % Senior Notes due 2029 In April 2021, the Company issued $ 350.0 million aggregate principal amount of 4.75 % Senior Notes due 2029 (the " 4.75 % Senior Notes"). The 4.75 % Senior Notes will mature on May 1, 2029. Interest on the 4.75 % Senior Notes started accruing April 20, 2021 and is payable semi-annually in cash in arrears May 1 and November 1 of each year, beginning on November F-24 Table of Contents 1, 2021. The effective interest rate on the 4.75 % Senior Notes, which includes debt issuance costs, is approximately 4.97 %. In connection with the issuance of the 4.75 % Senior Notes, the Company incurred and capitalized as a reduction of the principal amount of the 4.75 % Senior Notes approximately $ 5.1 million in deferred financing costs which are being amortized using the effective interest rate over the term of the 4.75 % Senior Notes. The 4.75 % Senior Notes are senior unsecured indebtedness of the Company and are guaranteed by each of the Company’s subsidiaries that guarantee the obligations of the Company under the 2024 Credit Facility. If the Company experiences specific kinds of changes of control, the Company must offer to repurchase all of the 4.75 % Senior Notes (unless otherwise redeemed) at a price equal to 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest. The Company may redeem the 4.75 % Senior Notes, in whole or in part, at any time (a) prior to May 1, 2024, at a price equal to 100 % of the principal amount thereof, plus the applicable premium described in the associated indenture and accrued and unpaid interest and (b) on or after May 1, 2024 at specified redemption prices set forth in the indenture, plus accrued and unpaid interest. In addition, prior to May 1, 2024, the Company may redeem, in one or more transactions, up to an aggregate of 40 % of the original principal amount of the 4.75 % Senior Notes at a redemption price equal to 104.75 % of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings. 7.50 % Senior Notes due 2027 In September 2019, the Company issued $ 300.0 million aggregate principal amount of 7.50 % Senior Notes due 2027 (the “ 7.50 % Senior Notes”). As noted above, the Company utilized proceeds from the issuance the 6.375 % Senior Notes to redeem at par all of its outstanding $ 300 million aggregate principal amount of its 7.50 % Senior Notes. The Company recorded a $ 2.5 million write-off of deferred financing costs as a result of the redemption of the 7.50 % Senior Notes which is included in "Selling, general and administrative" in the Company's consolidated statement of income for the year ended December 31, 2024. Debt Maturities As of December 31, 2024, the aggregate maturities of total long-term debt for the next five fiscal years and thereafter are as follows (in thousands): 2025 $ 6,250 2026 6,250 2027 6,250 2028 265,000 2029 548,438 Thereafter 500,000 Total $ 1,332,188 Letters of credit totaling $ 5.0 million and $ 6.9 million were outstanding as of December 31, 2024 and 2023, respectively, that exist to meet credit requirements for the Company’s insurance providers. Cash paid for interest for the years ended December 31, 2024, 2023 and 2022 was $ 75.9 million, $ 66.3 million and $ 56.9 million, respectively. 8. FAIR VALUE AND FINANCIAL INSTRUMENTS The Company accounts for certain assets and liabilities at fair value. The fair values are separated into three broad levels (Levels 1, 2 and 3) based on the assessment of the availability of observable market data and the significance of non-observable data used to determine fair value. Each fair value measurement must be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three levels are as follows: • Level 1 inputs, which are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. F-25 Table of Contents • Level 2 inputs, which are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. • Level 3 inputs, which are unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data). The following table presents fair values of certain assets and liabilities as of for the years ended December 31, 2024 and December 31, 2023: As of December 31, 2024 2023 ($ in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 7.50 % senior notes due 2027 (1) $ — $ — $ — $ — $ 303.7 $ — 1.75 % convertible notes due 2028 (1) $ — $ 351.3 $ — $ — $ 295.2 $ — 4.75 % senior notes due 2029 (1) $ — $ 330.3 $ — $ — $ 320.2 $ — 6.375 % senior notes due 2032 (1) $ — $ 485.0 $ — $ — $ — $ — Term loan due 2029 (1) (2) $ — $ 123.4 $ — $ — $ — $ — Term loan due 2027 (1) (2) $ — $ — $ — $ — $ 129.4 $ — Revolver due 2029 (1) (2) $ — $ 100.0 $ — $ — $ — $ — Contingent consideration (3) $ — $ — $ 3.6 $ — $ — $ 8.5 (1) The amounts of these notes listed above are the fair values for disclosure purposes only, and they are recorded in the Company's consolidated balance sheets as of December 31, 2024 and 2023 at carrying value. (2) The carrying amounts of our term loan and revolving credit facility approximate fair value as of December 31, 2024 and 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 3 "Acquisitions". 9. DERIVATIVE FINANCIAL INSTRUMENTS 1.75 % Convertible Note Hedge Transactions and Warrant Transactions In December 2021, in connection with the 1.75 % Convertible Notes offering, the Company entered into privately negotiated convertible note hedge transactions (together, the “ 1.75 % Convertible Note Hedge Transactions”) with each of Bank of America, N.A., Wells Fargo Bank, National Association and Nomura Global Financial Products, Inc. (together, the “ 1.75 % Convertible Note Hedge Counterparties”). Pursuant to the 1.75 % Convertible Note Hedge Transactions, the Company acquired options to purchase the same number of shares of the Company's common stock (or 3,876,867 shares) initially underlying the 1.75 % Convertible Notes at an initial strike price equal to the initial strike price of the 1.75 % Convertible Notes of approximately $ 66.74 per share, subject to customary anti-dilution adjustments. The options expire on December 1, 2028, subject to earlier exercise. At the same time, the Company also entered into separate, privately negotiated warrant transactions (the “ 1.75 % Convertible Note Warrant Transactions”) with each of the 1.75 % Convertible Note Hedge Counterparties, pursuant to which the Company sold warrants giving the counterparties the right to purchase the same number of shares of the Company's common stock (or 3,876,867 shares) underlying the 1.75 % Convertible Notes, at an initial strike price of approximately $ 85.30 per share, subject to customary anti-dilution adjustments. The warrants have a final expiration date of July 25, 2029. The Company paid $ 57.4 million associated with the cost of the 1.75 % Convertible Note Hedge Transactions and received proceeds of $ 43.7 million related to the 1.75 % Convertible Note Warrant Transactions. Together, the 1.75 % Convertible Note Hedge Transactions and the 1.75 % Convertible Note Warrant Transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the 1.75 % Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 1.75 % Convertible Notes compared to the potential dilution from the 1.75 % Convertible Notes without such transactions. The 1.75 % Convertible Note Warrant Transactions may have a dilutive effect on the Company's common stock to the extent that the market price per share F-26 Table of Contents of the common stock exceeds the strike price of the warrants. See Note 13 "Earnings Per Common Share" for additional information on the dilutive impact of the 1.75 % Convertible Note Warrant Transactions. As these transactions meet certain accounting criteria, the 1.75 % Convertible Note Hedge Transactions and 1.75 % Convertible Note Warrant Transactions are recorded in stockholders’ equity and are not accounted for as derivatives. 10. ACCRUED LIABILITIES As of December 31, ($ in thousands) 2024 2023 Employee compensation and benefits $ 50,098 $ 57,702 Property taxes 5,643 6,038 Customer incentives 19,185 21,724 Accrued interest 8,884 7,998 Accrued warranty 5,838 6,130 Income tax payable 6,302 2,372 Other 9,803 9,747 Total accrued liabilities $ 105,753 $ 111,711 The table below summarizes the change in accrued warranty liabilities. Year Ended December 31, ($ in thousands) 2024 2023 2022 Beginning balance $ 6,130 $ 12,103 $ 13,827 Provision 32,091 23,820 29,918 Settlements made during the year (in cash or in kind) ( 32,424 ) ( 29,793 ) ( 32,998 ) Acquisitions 41 — 1,356 Ending balance $ 5,838 $ 6,130 $ 12,103 11. INCOME TAXES The provision for income taxes consists of the following: Year Ended December 31, ($ in thousands) 2024 2023 2022 Current income tax expense: U.S. federal $ 35,288 $ 44,126 $ 92,783 U.S. state and local 11,324 4,816 23,724 Foreign 38 10 56 Total current 46,650 48,952 116,563 Deferred income tax (benefit) expense, net: U.S federal ( 5,509 ) ( 3,578 ) ( 7,348 ) U.S. state and local ( 971 ) 2,994 ( 2,027 ) Foreign ( 1 ) ( 7 ) 26 Total deferred ( 6,481 ) ( 591 ) ( 9,349 ) Total income tax provision $ 40,169 $ 48,361 $ 107,214 The Company has accounted for in its 2024, 2023, and 2022 income tax provision the impact of Global Intangible Low-Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j) of the Internal Revenue Code of F-27 Table of Contents 1986, and foreign-derived intangible income deductions, although such provisions were either not applicable or resulted in a zero or immaterial impact to the consolidated financial statements. A reconciliation of the differences between the actual provision for income taxes and income taxes at the federal statutory income tax rate of 21% is as follows: Year Ended December 31, ($ in thousands) 2024 2023 2022 Rate applied to pretax income $ 37,500 21.0 % $ 40,201 21.0 % $ 91,436 21.0 % State taxes, net of federal tax effect 7,975 4.5 % 6,797 3.6 % 16,715 3.8 % Research and development tax credits ( 3,750 ) ( 2.1 ) % ( 2,889 ) ( 1.5 ) % ( 4,542 ) ( 1.0 ) % Section 162(m) permanent addback 4,603 2.6 % 6,315 3.3 % 7,421 1.7 % Excess tax benefit on stock-based compensation ( 6,469 ) ( 3.6 ) % ( 3,513 ) ( 1.8 ) % ( 3,292 ) ( 0.7 ) % Other 310 0.1 % 1,450 0.7 % ( 524 ) ( 0.1 ) % Income taxes $ 40,169 22.5 % $ 48,361 25.3 % $ 107,214 24.7 % The composition of the deferred tax assets and liabilities is as follows: As of December 31, ($ in thousands) 2024 2023 Deferred tax assets: Trade receivables allowance $ 1,215 $ 1,339 Inventory capitalization 4,329 3,696 Inventory reserves 8,503 8,322 Federal NOL carryforwards 386 417 State NOL carryforwards 453 745 Accrued expenses 18,831 20,819 Deferred compensation 805 750 Operating lease liabilities 50,784 45,371 Share-based compensation 6,498 7,045 Capitalized research & experimentation costs 30,140 23,751 Other 278 — Total deferred tax assets before valuation allowance 122,222 112,255 Less: valuation allowance ( 480 ) ( 477 ) Total deferred tax assets, net of valuation allowance $ 121,742 $ 111,778 Deferred tax liabilities: Prepaid expenses $ ( 5,569 ) $ ( 2,948 ) Operating lease right-of-use assets ( 49,785 ) ( 44,498 ) Depreciation expense ( 45,026 ) ( 46,783 ) Intangibles ( 82,708 ) ( 63,977 ) Other — ( 296 ) Total deferred tax liabilities ( 183,088 ) ( 158,502 ) Net deferred tax liabilities $ ( 61,346 ) $ ( 46,724 ) Cash paid by the Company for income taxes was $ 38.1 million, $ 84.3 million and $ 117.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024 and December 31, 2023, the Company had gross federal, state, and foreign net operating losses, of approximately $ 12.8 million and $ 15.4 million, respectively. These loss carryforwards generally expire between tax years F-28 Table of Contents ending December 31, 2024 and December 31, 2041. The components of the valuation allowance relate to certain acquired federal, state and foreign net operating loss carryforwards that the Company anticipates will not be utilized prior to their expiration, either due to income limitations or limitations under Section 382 of the Internal Revenue Code of 1986. The tax effected values of these net operating losses are $ 0.8 million and $ 1.2 million at December 31, 2024 and 2023, respectively, exclusive of valuation allowances of $ 0.5 million and $ 0.5 million at December 31, 2024 and 2023, respectively. The Company is subject to periodic audits by domestic tax authorities. For the majority of tax jurisdictions, the U.S. federal statute of limitations remains open for the years 2021 and later. Uncertain tax benefits were immaterial as of December 31, 2024 and 2023 and activity related to uncertain tax benefits was immaterial for all periods presented. 12. STOCK REPURCHASE PROGRAMS In November 2024, the Company's Board of Directors ("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 $ 200 million, including the $ 72.9 million remaining under the previous authorization. As of December 31, 2024, Patrick has $ 200 million remaining in the amount of the Company's common stock that may be acquired under the current stock repurchase program. Under the stock repurchase plans, the Company made repurchases of common stock for 2024, 2023, and 2022 as follows: Year Ended December 31, ($ in millions, except average price data) 2024 2023 2022 Shares repurchased (1) 60,000 415,176 1,988,346 Average price (1) $ 77.68 $ 45.30 $ 38.72 Aggregate cost $ 4.7 $ 18.8 $ 77.0 (1) Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. The Company’s common stock does not have a stated par value. As a result, repurchases of common stock have been reflected, using an average cost method, as a reduction of common stock and retained earnings in the Company’s consolidated balance sheets. 13. EARNINGS PER COMMON SHARE Earnings per common share is calculated as follows: Year Ended December 31, ($ and shares in thousands, except per share data) 2024 2023 2022 Numerator: Earnings for basic earnings per common share calculation $ 138,401 $ 142,897 $ 328,196 Effect of interest on potentially dilutive convertible notes, net of tax — 162 1,927 Earnings for diluted earnings per common share calculation $ 138,401 $ 143,059 $ 330,123 Denominator: (1) Weighted average common shares outstanding - basic 32,568 32,278 33,210 Weighted average impact of potentially dilutive convertible notes 644 248 3,089 Weighted average impact of potentially dilutive warrants 137 — — Weighted average impact of potentially dilutive securities 350 512 408 Weighted average common shares outstanding - diluted 33,699 33,038 36,707 Earnings per common share: (1) Basic earnings per common share $ 4.25 $ 4.43 $ 9.88 Diluted earnings per common share $ 4.11 $ 4.33 $ 8.99 (1) Prior year periods reflect the impact of the three-for-two stock split paid on December 13, 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. F-29 Table of Contents The impact on diluted earnings per share from antidilutive securities excluded from the calculation was immaterial for all periods presented. 14. LEASES The Company has operating leases for certain facilities, trailers, forklifts and other assets. Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense related to these short-term leases was immaterial for the years ended December 31, 2024, 2023 and 2022. Variable lease payments, principally related to trucks, forklifts, and index-related facility rent escalators, was immaterial for the years ended December 31, 2024, 2023 and 2022. The leases have remaining lease terms of 1 to 15 years. Certain leases include options to renew for an additional term. Where there is reasonable certainty to utilize a renewal option, we include the renewal option in the lease term used to calculate operating lease right-of-use assets and lease liabilities. Lease expense, supplemental cash flow information, and other information related to leases were as follows: Year Ended December 31, ($ in thousands) 2024 2023 2022 Operating lease cost $ 64,391 $ 56,370 $ 50,674 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 63,958 $ 55,933 $ 49,938 Right-of-use assets obtained in exchange for new lease obligations: Operating leases $ 77,558 $ 65,505 $ 50,719 Other information related to leases was as follows: As of December 31, 2024 2023 Weighted average remaining lease term, operating leases (in years) 5.2 4.8 Weighted average discount rate, operating leases 5.8 % 5.4 % Maturities of operating lease liabilities were as follows as of December 31, 2024 (in thousands): 2025 $ 63,870 2026 52,568 2027 37,810 2028 27,333 2029 18,504 Thereafter 40,253 Total lease payments 240,338 Less imputed interest ( 35,615 ) Total $ 204,723 The Company had no operating leases that were entered into and have not yet commenced as of December 31, 2024. 15. 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 F-30 Table of Contents 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 consolidated balance sheet, results of operations, or cash flows. In August 2019, a group of companies calling itself the Lusher Site Remediation Group (the “Group”) commenced litigation against the Company in Lusher Site Remediation Group v. Sturgis Iron & Metal Co., Inc., et al., Case Number 3:18-cv-00506, pending in the U.S. District Court for the Northern District of Indiana, relating to a site owned by the Company (the "Lusher Street Site"). The Group’s Second Amended Complaint, which was the first to assert claims against Patrick, asserted claims under the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., an Indiana state environmental statute and Indiana common law. One defendant in the case, Sturgis Iron & Metal Co., Inc. (“Sturgis”), subsequently filed two cross claims against Patrick, asserting against the Company a claim for (i) contribution under CERCLA and (ii) contractual indemnity. The Company moved to dismiss the Group’s claims and also moved to dismiss Sturgis’s cross claims. On August 21, 2020, the court granted Patrick’s two motions to dismiss. The Group subsequently moved for reconsideration of the court’s decision. On July 3, 2023, the Court granted the Company’s Joint Motion to Dismiss without prejudice, dismissing all remaining claims against the Company for non-consent decree costs and entered an order on June 3, 2024, denying the plaintiff’s motion to bar contribution claims, thereby ending the case against the Company. On March 19, 2021, the Company received a General Notice of Potential Liability from the U.S. Environmental Protection Agency (the “EPA”), pursuant to Section 107(a) of CERCLA (the “Notice”). The Notice provides that the EPA has incurred and will likely incur additional costs relative to conducting a Remedial Investigation/Feasibility Study ("RI/FS"), conducting Remedial Design/Remedial Action ("RD/RA"), and other investigation, planning, response, oversight, and enforcement activities related to the Lusher Street Site (the "Superfund Site"). Because the Company was the owner of and former operator within the Lusher Street Site and as such may be a potentially responsible party pursuant to CERCLA, the Company received the Notice and an indication that it may have a responsibility to contribute to the costs of RI/FS, RD/RA or additional mitigation efforts incurred or to be incurred by the EPA. 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 consolidated statement of income for year ended December 31, 2022. The purchaser agreed to indemnify, defend and hold the Company harmless for all liability and exposure, both private and to all EPA claims, concerning and relating to the Divested Properties. No further proceedings occurred in the years ended December 31, 2024 and 2023. As to the real properties that were not among the Divested Properties but remain the subject of the litigation, the Company does not currently believe that the litigation or the Superfund Site matter are likely to have a material adverse impact on its financial condition, results of operations, or cash flows. However, any litigation is inherently uncertain, the EPA has yet to select a final remedy for the Superfund Site, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects. 16. COMPENSATION PLANS Stock-Based Compensation The Company has various stock option and stock-based incentive plans and various agreements whereby stock options, restricted stock awards, and SARS are made available to certain key employees, directors, and others based upon meeting various individual, divisional or company-wide performance criteria and time-based criteria. All such awards qualify and are accounted for as equity awards. Equity incentive plan awards, which are granted under the Company's 2009 Omnibus Incentive Plan, are intended to retain and reward key employees for outstanding performance and efforts as they relate to the Company’s short-term and long-term objectives and its strategic plan. As of December 31, 2024, approximately 2.0 million common shares remain available for stock-based compensation grants. Stock-based compensation expense was $ 16.8 million, $ 19.4 million and $ 21.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Income tax benefit for stock-based compensation expense was $ 4.3 million, $ 4.8 million F-31 Table of Contents and $ 5.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was approximately $ 20.9 million of total unrecognized compensation cost related to share-based compensation arrangements granted under incentive plans. That cost is expected to be recognized over a weighted-average period of approximately 16.5 months. Stock Options: No stock options were granted during the years ended December 31, 2024, 2023 and 2022. Outstanding stock options granted in prior years vest ratably over either three or four years and have nine-year contractual terms. The following table summarizes the Company’s option activity: Years ended December 31, 2024 2023 2022 ($ and shares in thousands, except per share data) Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding beginning of year 171 $ 27.55 543 $ 29.17 552 $ 29.15 Forfeited during the year — — — — ( 1 ) 27.55 Exercised during the year ( 143 ) 27.55 ( 372 ) 29.92 ( 8 ) 27.55 Outstanding end of year 28 $ 27.55 171 $ 27.55 543 $ 29.17 Vested Options: Vested during the year — $ — 207 $ 28.65 242 $ 28.65 Eligible end of year for exercise 28 $ 27.55 171 $ 27.55 334 $ 29.50 Aggregate intrinsic value: Total options outstanding $ 1,562 $ 6,711 $ 6,204 Options exercisable $ 1,562 $ 6,711 $ 3,716 Options exercised $ 8,357 $ 10,888 $ 91 Weighted average fair value of options granted during the year N/A N/A N/A The aggregate intrinsic value (excess of market value over the option exercise price) in the table above is before income taxes, and assuming the Company’s closing stock price of $ 83.08 , $ 66.90 and $ 40.40 per share as of December 31, 2024, 2023 and 2022, respectively, is the price that would have been received by the option holders had those option holders exercised their options as of that date. As of December 31, 2024, the weighted average remaining contractual term for options outstanding was 4.4 years and the weighted average remaining contractual term for options exercisable was 4.4 years. The cash received from the exercise of stock options was immaterial for 2024, $ 1.4 million for 2023 and $ 0.2 million for 2022. The income tax benefit related to the stock options exercised was immaterial for all periods presented. The grant date fair value of stock options vested in 2023 and 2022 was $ 5.9 million and $ 6.9 million, respectively; no stock options vested in 2024. As of December 31, 2024, there was no unrecognized compensation expense related to the stock options. F-32 Table of Contents Stock Appreciation Rights (SARS): No SARS were granted or forfeited in the years ended December 31, 2024, 2023 and 2022. The following table summarizes the Company’s SARS activity: Years ended December 31, 2024 2023 2022 ($ and shares in thousands, except per share data) Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Total SARS: Outstanding beginning of year 336 $ 42.89 336 $ 42.89 336 $ 42.89 Exercised during the year ( 336 ) 42.89 — — — — Outstanding end of year — $ — 336 $ 42.89 336 $ 42.89 Vested SARS: Vested during the year — $ — — $ — — $ — Eligible end of year for exercise — $ — 336 $ 42.89 336 $ 42.89 Aggregate intrinsic value: Total SARS outstanding $ — $ 8,078 $ 383 SARS exercisable $ — $ 8,078 $ 383 SARS exercised $ 10,802 $ — $ — Weighted average fair value of SARS granted during the year N/A N/A N/A The aggregate intrinsic value (excess of market value over the SARS exercise price) in the table above is before income taxes, and assuming the Company’s closing stock price of $ 83.08 , $ 66.90 and $ 40.40 per share as of December 31, 2024, 2023 and 2022, respectively, is the price that would have been received by the SARS holder had that SARS holder exercised the SARS as of that date. SARS vest ratably over four years and have nine-year contractual terms. There were no SARS outstanding as of December 31, 2024 because all SARS outstanding as of December 31, 2023 were exercised during 2024. As of December 31, 2024, there was no unrecognized compensation expense related to the SARS. Restricted Stock: The Company’s stock-based awards include restricted stock awards. As of December 31, 2024, there was approximately $ 20.9 million of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted-average remaining life of approximately 16.5 months. Restricted stock awards possess voting rights, are included in the calculation of actual shares outstanding, and include both performance- and time-based contingencies. The grant date fair value of the awards is expensed over the related service or performance period. Time-based shares cliff vest at the conclusion of the required service period, which ranges from less than one year to seven years . The performance contingent shares are earned based on the achievement of a cumulative financial performance target, which ranges from less than one year to a seven-year period and vest at the conclusion of the measurement period. F-33 Table of Contents A summary of restricted stock activity, including grants, vesting and forfeitures, is provided below: Year Ended December 31, 2024 2023 2022 (shares in thousands) Shares Weighted-Average Grant Date Stock Price Shares Weighted-Average Grant Date Stock Price Shares Weighted-Average Grant Date Stock Price Unvested beginning of year 1,020 $ 45.65 1,138 $ 42.92 1,394 $ 36.71 Granted during the year 413 64.38 497 43.04 381 43.08 Vested during the year ( 423 ) 48.26 ( 492 ) 37.76 ( 612 ) 28.82 Forfeited during the year ( 21 ) 49.53 ( 123 ) 45.21 ( 25 ) 44.20 Unvested end of year 989 $ 51.94 1,020 $ 45.65 1,138 $ 42.92 Aggregate fair values of restricted stock vested for the years ended December 31, 2024, 2023 and 2022 were $ 20.4 million, $ 18.6 million, and $ 17.6 million, respectively. 17. SEGMENT INFORMATION The Company has two reportable segments, Manufacturing and Distribution, which are defined based on the way in which internally reported information is regularly reviewed and evaluated by the Company’s chief operating decision maker (the "CODM"), who is our Chairman and Chief Executive Officer, to allocate resources, evaluate financial results and make decisions. The Company does not measure profitability at the end market (RV, marine, powersports, MH and industrial) level. Manufacturing – This segment includes the following products: laminated products that are utilized to produce furniture, shelving, walls, countertops and cabinet products; cabinet doors; fiberglass bath fixtures and tile systems; hardwood furniture; vinyl printing; RV and marine furniture; audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers; decorative vinyl and paper laminated panels; solid surface, granite, and quartz countertop fabrication; RV painting; fabricated aluminum products; fiberglass and plastic components; fiberglass bath fixtures and tile systems; softwoods lumber; custom cabinetry; polymer-based and other flooring; electrical systems components including instrument and dash panels; wrapped vinyl, paper and hardwood profile mouldings; interior passage doors; air handling products; slide-out trim and fascia; thermoformed shower surrounds; specialty bath and closet building products; fiberglass and plastic helm systems and components products; treated, untreated and laminated plywood; wiring and wire harnesses; adhesives and sealants; boat towers, tops, trailers and frames; marine hardware and accessories; protective covers for boats, RVs, aircraft, and military and industrial equipment; aluminum and plastic fuel tanks; CNC molds and composite parts; roofs/canopies; wiper systems; integrated door systems; windshield systems; slotwall panels and components; fender flares and rear panels; and other products. Distribution – The Company distributes pre-finished wall and ceiling panels; drywall and drywall finishing products; electronics and audio systems components; appliances; marine accessories and components; wiring, electrical and plumbing products; fiber reinforced polyester products; cement siding; raw and processed lumber; interior passage doors; roofing products; laminate and ceramic flooring; tile; shower doors; furniture; fireplaces and surrounds; interior and exterior lighting products; RV awnings, windows, fiberglass siding and roofing; marine windshields; and other miscellaneous products in addition to providing transportation and logistics services. The CODM evaluates the performance of the Company's segments and allocates resources to them based on a variety of indicators including but not limited to net sales, gross profit and operating income. On at least a quarterly basis, the CODM considers actual to budget variances as well as actual to prior year actual performance for both profit measures when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit and segment operating income to assess the performance of each segment by comparing the results of each segment with one another. The accounting policies of the segments are the same as those described in Note 1 "Basis of Presentation and Significant Accounting Policies". Segment net sales data includes inter-segment sales. The Company accounts for inter-segment sales similar to third party transactions, which reflect current market prices. Certain income from purchase incentive agreements is F-34 Table of Contents not allocated to the segments and instead recorded at the corporate level. Assets are identified to the segments except for cash, prepaid expenses, land and buildings, and certain deferred assets, which are identified with corporate. Corporate charges rent to the segments for use of the land and buildings based upon estimated market rates. The following tables summarize key financial information by segment: Year Ended December 31, 2024 ($ in thousands) Manufacturing Distribution Total Total net sales $ 2,756,547 $ 980,127 $ 3,736,674 Cost of goods sold 2,143,995 755,272 2,899,267 Gross profit $ 612,552 $ 224,855 $ 837,407 Operating expenses 271,591 120,140 391,731 Operating income $ 340,961 $ 104,715 $ 445,676 Reconciliation of reportable segment operating income to consolidated income before income tax: Selling, general and administrative 92,902 Amortization of intangible assets 96,235 Interest expense, net 79,470 Elimination of inter-segment profits 1,501 Other ( 3,002 ) Consolidated income before income taxes $ 178,570 Total assets $ 2,402,533 $ 524,827 $ 2,927,360 Capital expenditures $ 62,342 $ 10,808 $ 73,150 Depreciation and amortization $ 143,844 $ 15,728 $ 159,572 F-35 Table of Contents Year Ended December 31, 2023 ($ in thousands) Manufacturing Distribution Total Total net sales $ 2,653,257 $ 889,408 $ 3,542,665 Cost of goods sold 2,075,973 693,902 2,769,875 Gross Profit $ 577,284 $ 195,506 $ 772,790 Operating expenses 256,188 105,411 361,599 Operating income $ 321,096 $ 90,095 $ 411,191 Reconciliation of reportable segment operating income to consolidated income before income tax: Selling, general and administrative 82,674 Amortization of intangible assets 78,616 Interest expense, net 68,942 Elimination of inter-segment profits ( 10,299 ) Consolidated income before income taxes $ 191,258 Total assets $ 2,071,500 $ 426,931 $ 2,498,431 Capital expenditures $ 50,771 $ 8,094 $ 58,865 Depreciation and amortization $ 126,431 $ 12,710 $ 139,141 Year Ended December 31, 2022 ($ in thousands) Manufacturing Distribution Total Total net sales $ 3,681,412 $ 1,287,597 $ 4,969,009 Cost of goods sold 2,862,452 1,032,711 3,895,163 Gross Profit $ 818,960 $ 254,886 $ 1,073,846 Operating expenses 287,413 117,997 405,410 Operating income $ 531,547 $ 136,889 $ 668,436 Reconciliation of reportable segment operating income to consolidated income before income tax: Selling, general and administrative 85,181 Amortization of intangible assets 73,177 Interest expense, net 60,760 Elimination of inter-segment profits 13,908 Consolidated income before income taxes $ 435,410 Total assets $ 2,302,745 $ 407,861 $ 2,710,606 Capital expenditures $ 67,635 $ 3,801 $ 71,436 Depreciation and amortization $ 114,782 $ 11,422 $ 126,204 F-36 Table of Contents A reconciliation of certain line items pertaining to the total reportable segments to the consolidated financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands): Year Ended December 31, ($ in thousands) 2024 2023 2022 Net sales: Total sales for reportable segments $ 3,736,674 $ 3,542,665 $ 4,969,009 Elimination of intersegment sales (1) ( 20,991 ) ( 74,620 ) ( 87,137 ) Consolidated net sales $ 3,715,683 $ 3,468,045 $ 4,881,872 Depreciation and amortization: Depreciation and amortization for reportable segments $ 159,572 $ 139,141 $ 126,204 Corporate depreciation and amortization 6,973 5,402 4,553 Consolidated depreciation and amortization $ 166,545 $ 144,543 $ 130,757 Capital expenditures: Capital expenditures for reportable segments $ 73,150 $ 58,865 $ 71,436 Corporate capital expenditures 2,532 3,183 8,447 Consolidated capital expenditures $ 75,682 $ 62,048 $ 79,883 ($ in thousands) As of December 31, Total assets: 2024 2023 Identifiable assets for reportable segments $ 2,927,360 $ 2,498,431 Corporate assets unallocated to segments 60,033 52,608 Cash and cash equivalents 33,561 11,409 Consolidated total assets $ 3,020,954 $ 2,562,448 (1) Eliminations for the year ended December 31, 2024 include only the elimination of inter-segment transactions. The Company's revenue from external customers and long-lived assets are substantially all attributed to the U.S. Major Customers The Company had two major customers that accounted for the following consolidated net sales for the years ended December 31, 2024, 2023 and 2022 and trade receivables as of December 31, 2024 and 2023 as shown in the table below: Year Ended December 31, 2024 2023 2022 Customer 1 Net sales 15 % 15 % 21 % Trade receivables 6 % 8 % Customer 2 Net sales 14 % 14 % 17 % Trade receivables 8 % 5 % F-37