PATRICK INDUSTRIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) First Quarter Ended ($ and shares in thousands, except per share data) March 30, 2025 March 31, 2024 Net sales $ 1,003,420 $ 933,492 Cost of goods sold 774,829 728,637 Gross profit 228,591 204,855 Operating expenses: Warehouse and delivery 44,582 37,449 Selling, general and administrative 93,931 85,246 Amortization of intangible assets 24,509 22,818 Total operating expenses 163,022 145,513 Operating income 65,569 59,342 Interest expense, net 19,112 20,090 Income before income taxes 46,457 39,252 Income taxes 8,219 4,159 Net income $ 38,238 $ 35,093 Basic earnings per common share (1) $ 1.17 $ 1.08 Diluted earnings per common share (1) $ 1.11 $ 1.06 Weighted average shares outstanding – Basic (1) 32,671 32,480 Weighted average shares outstanding – Diluted (1) 34,416 33,120 (1) The prior year period reflects the impact of the three-for-two stock split paid in December 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) First Quarter Ended ($ in thousands) March 30, 2025 March 31, 2024 Net income $ 38,238 $ 35,093 Other comprehensive income (loss), net of tax: Foreign currency translation gain (loss) 4 ( 32 ) Total other comprehensive income (loss) 4 ( 32 ) Comprehensive income $ 38,242 $ 35,061 See accompanying Notes to Condensed Consolidated Financial Statements. 4 Table of Contents PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ($ in thousands) March 30, 2025 December 31, 2024 ASSETS Current Assets: Cash and cash equivalents $ 86,561 $ 33,561 Trade and other receivables, net 289,059 178,206 Inventories 553,924 551,617 Prepaid expenses and other 46,140 59,233 Total current assets 975,684 822,617 Property, plant and equipment, net 406,798 384,903 Operating lease right-of-use assets 199,215 200,697 Goodwill 801,865 797,236 Intangible assets, net 790,915 802,889 Other non-current assets 12,300 12,612 Total assets $ 3,186,777 $ 3,020,954 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Current maturities of long-term debt $ 6,250 $ 6,250 Current operating lease liabilities 55,489 53,697 Accounts payable 223,230 187,915 Accrued liabilities 119,853 105,753 Total current liabilities 404,822 353,615 Long-term debt, less current maturities, net 1,422,272 1,311,684 Long-term operating lease liabilities 147,900 151,026 Deferred tax liabilities, net 55,609 61,346 Other long-term liabilities 14,906 14,917 Total liabilities 2,045,509 1,892,588 Shareholders' equity Preferred shares, no par value per share, 1,000,000 shares authorized, none issued and outstanding — — Common stock, no par value per share, 40,000,000 shares authorized, 33,533,091 and 33,567,048 issued and outstanding as of March 30, 2025 and December 31, 2024, respectively 198,408 202,353 Accumulated other comprehensive loss ( 922 ) ( 926 ) Retained earnings 943,782 926,939 Total shareholders' equity 1,141,268 1,128,366 Total liabilities and shareholders' equity $ 3,186,777 $ 3,020,954 See accompanying Notes to Condensed Consolidated Financial Statements. 5 Table of Contents PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) First Quarter Ended ($ in thousands) March 30, 2025 March 31, 2024 Cash flows from operating activities Net income $ 38,238 $ 35,093 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 42,646 40,335 Stock-based compensation expense 5,249 5,460 Deferred income taxes ( 5,737 ) — Amortization deferred debt financing costs 794 804 Loss (gain) on sale of property, plant and equipment 2,042 ( 14 ) Other ( 1,604 ) 63 Change in operating assets and liabilities, net of acquisitions of businesses: Trade and other receivables, net ( 107,807 ) ( 89,565 ) Inventories 5,366 17,781 Prepaid expenses and other assets 13,371 2,619 Accounts payable, accrued liabilities and other 47,519 22,600 Net cash provided by operating activities 40,077 35,176 Cash flows from investing activities Purchases of property, plant and equipment ( 20,171 ) ( 15,495 ) Proceeds from sale of property, plant and equipment 1,684 167 Business acquisitions, net of cash acquired ( 47,559 ) ( 329,642 ) Other investing activities ( 40 ) ( 25,754 ) Net cash used in investing activities ( 66,086 ) ( 370,724 ) Cash flows from financing activities Term debt repayments — ( 1,875 ) Borrowings on revolver 263,434 688,958 Repayments on revolver ( 153,434 ) ( 313,958 ) Stock repurchases under buyback program ( 8,511 ) — Cash dividends paid to shareholders ( 13,862 ) ( 13,013 ) Taxes paid for share-based payment arrangements ( 8,593 ) ( 14,788 ) Payment of contingent consideration from business acquisitions ( 16 ) ( 3,500 ) Other financing activities ( 9 ) ( 75 ) Net cash provided by financing activities 79,009 341,749 Net increase in cash and cash equivalents 53,000 6,201 Cash and cash equivalents at beginning of year 33,561 11,409 Cash and cash equivalents at end of period $ 86,561 $ 17,610 See accompanying Notes to Condensed Consolidated Financial Statements. 6 Table of Contents PATRICK INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) First Quarter Ended March 30, 2025 ($ in thousands) Common Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at December 31, 2024 $ 202,353 $ ( 926 ) $ 926,939 $ 1,128,366 Net income — — 38,238 38,238 Dividends declared — — ( 13,485 ) ( 13,485 ) Other comprehensive income, net of tax — 4 — 4 Stock repurchases under buyback program ( 601 ) — ( 7,910 ) ( 8,511 ) Repurchase of shares for tax payments related to the vesting and exercising of share-based grants ( 8,593 ) — — ( 8,593 ) Stock-based compensation expense 5,249 — — 5,249 Balance at March 30, 2025 $ 198,408 $ ( 922 ) $ 943,782 $ 1,141,268 First Quarter Ended March 31, 2024 ($ in thousands) Common Stock Accumulated Other Comprehensive Loss Retained Earnings Total Balance at December 31, 2023 $ 203,258 $ ( 999 ) $ 843,078 $ 1,045,337 Net income — — 35,093 35,093 Dividends declared — — ( 12,534 ) ( 12,534 ) Other comprehensive loss, net of tax — ( 32 ) — ( 32 ) Repurchase of shares for tax payments related to the vesting and exercising of share-based grants ( 14,788 ) — — ( 14,788 ) Stock-based compensation expense 5,460 — — 5,460 Balance at March 31, 2024 $ 193,930 $ ( 1,031 ) $ 865,637 $ 1,058,536 See accompanying Notes to Condensed Consolidated Financial Statements. 7 Table of Contents PATRICK INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Patrick Industries, Inc. (“Patrick”, the “Company”, "we", "our") contain all adjustments (consisting of normal recurring adjustments) that we believe are necessary to present fairly the Company’s financial position as of March 30, 2025 and December 31, 2024, its results of operations for the first quarter ended March 30, 2025 and March 31, 2024, and its cash flows for the three months ended March 30, 2025 and March 31, 2024. Patrick's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The accompanying unaudited condensed consolidated financial statements for Patrick do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to Patrick’s Audited Consolidated Financial Statements and corresponding notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025. The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Sunday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The first quarter of fiscal year 2025 ended on March 30, 2025, and the first quarter of fiscal year 2024 ended on March 31, 2024. 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 and warrants, plus the dilutive effect of stock options, stock appreciation rights ("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 Company's Board of Directors (the "Board") 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 common 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 7 "Earnings Per Common Share" for the calculation of both basic and diluted earnings per common share. Summary of Significant Accounting Policies A summary of significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025. 8 Table of Contents Major Customer Concentration The Company had two major customers that accounted for the following consolidated net sales for the quarter ended March 30, 2025 and March 31, 2024: First Quarter Ended March 30, 2025 March 31, 2024 Percentage of total net sales: Customer 1 16 % 16 % Customer 2 16 % 14 % New Accounting Standards Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were either assessed and determined to be not applicable or are expected to have an immaterial impact on the Company’s unaudited condensed consolidated financial statements. Recently Issued Accounting Pronouncements Accounting Standards Not Yet Adopted 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 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 currently evaluating the effects that the adoption of ASU 2024-03 will have on the Company's consolidated financial statements. In January 2025, the FASB issued ASU 2025-01 , "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date". This update revises the effective date of ASU 2024-03 to clarify that the guidance is to be adopted by all public entities for annual reporting periods beginning after December 15, 2026 and for interim periods within annual reporting periods beginning after December 15, 2027. The intent of this update is to prevent non-calendar year-end entities from concluding that the initial adoption is required to be in an interim reporting period, rather than an annual reporting period. 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 impact only the notes to our consolidated financial statements. 9 Table of Contents NOTE 2. REVENUE RECOGNITION In the following table, revenue from contracts with customers, net of all intercompany sales, is disaggregated by market type and by reportable segment: First Quarter Ended March 30, 2025 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 345,973 $ 132,919 $ 478,892 Marine 139,366 9,681 149,047 Powersports 77,234 3,706 80,940 Manufactured Housing 76,327 96,899 173,226 Industrial 111,862 9,453 121,315 Total $ 750,762 $ 252,658 $ 1,003,420 First Quarter Ended March 31, 2024 ($ in thousands) Manufacturing Distribution Total Market type: Recreational Vehicle $ 291,811 $ 129,178 $ 420,989 Marine 146,045 9,270 155,315 Powersports 79,959 2,711 82,670 Manufactured Housing 69,425 86,699 156,124 Industrial 110,303 8,091 118,394 Total $ 697,543 $ 235,949 $ 933,492 Contract Liabilities Contract liabilities, representing upfront payments from customers received prior to satisfying performance obligations, were immaterial as of the beginning and end of all periods presented and changes in contract liabilities were immaterial during all periods presented. NOTE 3. INVENTORY Inventories consisted of the following: ($ in thousands) March 30, 2025 December 31, 2024 Raw materials $ 307,043 $ 292,730 Work in process 17,553 18,157 Finished goods 102,105 103,318 Less: reserve for inventory excess and obsolescence ( 19,056 ) ( 16,456 ) Total manufactured goods, net 407,645 397,749 Materials purchased for resale (distribution products) 155,634 161,492 Less: reserve for inventory excess and obsolescence ( 9,355 ) ( 7,624 ) Total materials purchased for resale (distribution products), net 146,279 153,868 Total inventories $ 553,924 $ 551,617 10 Table of Contents NOTE 4. GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill for the three months ended March 30, 2025 by segment are as follows: ($ in thousands) Manufacturing Distribution Total Balance at December 31, 2024 $ 680,246 $ 116,990 $ 797,236 Acquisitions 4,169 — 4,169 Adjustments to preliminary purchase price allocations 48 412 460 Balance at March 30, 2025 $ 684,463 $ 117,402 $ 801,865 Intangible assets, net consisted of the following as of March 30, 2025 and December 31, 2024: ($ in thousands) March 30, 2025 December 31, 2024 Customer relationships $ 934,715 $ 924,720 Non-compete agreements 26,176 25,776 Patents 90,881 89,641 Trademarks 226,427 225,527 Intangible assets, gross 1,278,199 1,265,664 Less: accumulated amortization Customer relationships ( 441,439 ) ( 419,358 ) Non-compete agreements ( 20,643 ) ( 20,065 ) Patents ( 25,202 ) ( 23,352 ) Intangible assets, net $ 790,915 $ 802,889 Changes in the carrying value of intangible assets for the three months ended March 30, 2025 by segment are as follows: ($ in thousands) Manufacturing Distribution Total Balance at December 31, 2024 $ 671,131 $ 131,758 $ 802,889 Additions 10,940 — 10,940 Amortization ( 20,704 ) ( 3,805 ) ( 24,509 ) Adjustments to preliminary purchase price allocations 357 1,238 1,595 Balance at March 30, 2025 $ 661,724 $ 129,191 $ 790,915 NOTE 5. ACQUISITIONS General Business combinations generally take place to strengthen Patrick's positions in existing markets and increase its market share and per unit content, expand into additional markets, and gain key technology. Acquisitions are accounted for under the acquisition method of accounting. For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, market share growth and net income. 11 Table of Contents The Company completed two acquisitions in the first three months of 2025 (the "2025 Acquisitions"). Acquisition-related costs associated with the 2025 Acquisitions were immaterial. For the first quarter ended March 30, 2025, net sales included in the Company's condensed consolidated statements of income related to the 2025 Acquisitions were $ 4.3 million and operating losses were $ 0.1 million. Assets acquired and liabilities assumed in the acquisitions were recorded on the Company's condensed consolidated balance sheet at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one year measurement period. The Company completed four acquisitions in the first three months of 2024. Acquisition-related costs associated with the acquisitions completed in the first three months of 2024 were approximately $ 5.0 million. For the first quarter ended March 31, 2024, net sales included in the Company's condensed consolidated statements of income related to the acquisitions completed in such quarter were $ 58.1 million, and operating income was $ 11.0 million. In connection with certain acquisitions, the Company is required to pay additional cash consideration if certain financial results of the acquired businesses are achieved. The Company records a liability for the estimated fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition. Changes in the contingent consideration liability for the three months ended March 30, 2025 and March 31, 2024 are as follows: First Quarter Ended ($ in thousands) March 30, 2025 March 31, 2024 Fair value at beginning of period $ 3,608 $ 8,510 Additions 1,800 — Fair value adjustments ( 1,600 ) — Settlements ( 16 ) ( 3,880 ) Fair value at end of period $ 3,792 $ 4,630 The following table shows the balance sheet location of the fair value of contingent consideration and the maximum amount of contingent consideration payments the Company may be subject to: ($ in thousands) March 30, 2025 December 31, 2024 Accrued liabilities $ 1,565 $ 1,665 Other long-term liabilities 2,227 1,943 Total fair value of contingent consideration $ 3,792 $ 3,608 Maximum amount of contingent consideration $ 6,892 $ 8,618 2025 Acquisitions The Company completed two acquisitions in the first three months ended March 30, 2025. Total cash consideration for the 2025 Acquisitions were approximately $ 43.1 million, plus working capital holdbacks and contingent consideration over a less than one-year period based on future performance. As the Company finalizes the fair value of the acquired assets and assumed liabilities, additional purchase price adjustments may be recorded during the measurement period. 2024 Acquisitions The Company completed seven acquisitions in the year ended December 31, 2024, including the following previously announced acquisitions (collectively, the “2024 Acquisitions”): 12 Table of Contents 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 $ 416.1 million, plus contingent consideration over a three-year period based on future performance. Purchase price allocations and all valuation activities in connection with the 2024 Acquisitions have been finalized for four of the 2024 Acquisitions. Changes to preliminary purchase accounting estimates recorded in the three months ended March 30, 2025 related to the 2024 Acquisitions were immaterial. The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of each of the 2025 Acquisitions and 2024 Acquisitions: 2025 Acquisitions 2024 Acquisitions ($ in thousands) Total Sportech All Others Total Consideration: Cash, net of cash acquired $ 43,132 $ 319,073 $ 96,998 $ 416,071 Working capital holdback and other, net 703 — — — Contingent consideration (1) 1,800 — 2,030 2,030 Total consideration $ 45,635 $ 319,073 $ 99,028 $ 418,101 Assets Acquired: Trade receivables $ 3,049 $ 21,587 $ 2,256 $ 23,843 Inventories 7,673 20,611 19,010 39,621 Prepaid expenses & other 149 1,719 4,138 5,857 Property, plant & equipment 28,032 18,766 7,083 25,849 Operating lease right-of-use assets — 15,096 1,284 16,380 Identifiable intangible assets: Customer relationships 8,400 152,000 17,560 169,560 Non-compete agreements 400 2,000 2,375 4,375 Patents and developed technology 1,200 17,500 600 18,100 Trademarks 900 20,500 8,000 28,500 Liabilities Assumed: Current portion of operating lease obligations — ( 1,437 ) ( 585 ) ( 2,022 ) Accounts payable & accrued liabilities ( 8,337 ) ( 32,398 ) ( 4,313 ) ( 36,711 ) Operating lease obligations — ( 13,658 ) ( 699 ) ( 14,357 ) Deferred tax liabilities — ( 21,288 ) — ( 21,288 ) Total fair value of net assets acquired 41,466 200,998 56,709 257,707 Goodwill (2) 4,169 118,075 42,319 160,394 Total purchase price allocation $ 45,635 $ 319,073 $ 99,028 $ 418,101 (1) These amounts reflect the acquisition date fair value of contingent consideration based on expected future results relating to certain acquisitions. (2) Goodwill is tax-deductible for the 2025 Acquisitions and 2024 Acquisitions, except for Sportech which is only partially tax-deductible. 13 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 average estimated useful life for non-compete agreements is 5 years. The estimated useful life for patents is 13 years, individually ranging from 10 to 18 years. Trademarks have an indefinite useful life. Pro Forma Information (Unaudited) The following pro forma information for the first quarter ended March 30, 2025 and March 31, 2024 assumes the 2025 Acquisitions and 2024 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of the 2025 Acquisitions and 2024 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition. The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction. In addition, the pro forma information includes incremental amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $ 0.1 million for the first quarter ended March 30, 2025 and $ 2.0 million for the first quarter ended March 31, 2024. First Quarter Ended ($ in thousands, except per share data) March 30, 2025 March 31, 2024 Revenue $ 1,009,873 $ 988,325 Net income $ 37,713 $ 34,929 Basic earnings per common share $ 1.15 $ 1.08 Diluted earnings per common share $ 1.10 $ 1.05 The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisitions been consummated as of the periods indicated above. NOTE 6. STOCK-BASED COMPENSATION The Company recorded stock-based compensation expense, net of forfeitures, of approximately $ 5.2 million and $ 5.5 million in the first quarter ended March 30, 2025 and March 31, 2024, respectively. The Board approved various share grants under the Company’s 2009 Omnibus Incentive Plan in the three months ended March 30, 2025 totaling 216,078 shares in the aggregate at an average fair value of $ 95.91 per share at grant date for a total fair value at grant date of $ 20.7 million. 14 Table of Contents Stock Appreciation Rights ("SARs"): On February 25, 2025, the Board approved the grant of 329,850 SARs divided into four tranches at exercise prices of $ 92.72 , $ 110.76 , $ 132.31 and $ 158.05 per share. The SARs vest pro-ratably over four years from the grant date and have nine-year contractual terms. The SARs are to be settled in shares of common stock or, at the sole discretion of the Board, in cash. The total remaining cost to be expensed over the four-year vesting period will be $ 6.1 million which will be expensed ratably over the four-year vesting period. Stock Options: On February 25, 2025, the Board approved the grant of 329,850 stock options at an exercise price per share of $ 92.72 . The stock options vest pro-rata over four years from the grant date and have nine-year contractual terms. The total remaining cost will be $ 8.6 million which will be expensed ratably over the four-year vesting period. The Company estimates the fair value of the stock options and SARs awards as of the grant date by applying the Black-Scholes option-pricing model. The following are the assumptions that were used in calculating the fair value of stock options and SARs granted during the first quarter of 2025: Expected term 9 years Expected volatility 24 % Risk-free interest rate 4.25 % Dividend yield 1.77 % NOTE 7. EARNINGS PER COMMON SHARE Earnings per common share calculated for the first quarter of 2025 and 2024 is as follows: First Quarter Ended ($ and shares in thousands, except per share data) March 30, 2025 March 31, 2024 Numerator: Earnings for basic earnings per common share calculation $ 38,238 $ 35,093 Denominator: (1) Weighted average common shares outstanding - basic 32,671 32,480 Weighted average impact of potentially dilutive convertible notes 1,067 307 Weighted average impact of potentially dilutive warrants 395 — Weighted average impact of potentially dilutive securities 283 333 Weighted average common shares outstanding - diluted 34,416 33,120 Earnings per common share: (1) Basic earnings per common share $ 1.17 $ 1.08 Diluted earnings per common share $ 1.11 $ 1.06 (1) The prior year period reflects the impact of the three-for-two stock split paid in December 2024. See Note 1 "Basis of Presentation and Significant Accounting Policies" for further details. An immaterial amount of securities were not included in the computation of diluted earnings per common share as they are considered anti-dilutive for the periods presented. 15 Table of Contents NOTE 8. DEBT A summary of total debt outstanding at March 30, 2025 and December 31, 2024 is as follows: ($ in thousands) March 30, 2025 December 31, 2024 Long-term debt: Term loan due 2029 $ 123,438 $ 123,438 Revolver due 2029 210,000 100,000 1.75 % convertible notes due 2028 258,742 258,750 4.75 % senior notes due 2029 350,000 350,000 6.375 % senior notes due 2032 500,000 500,000 Total debt 1,442,180 1,332,188 Less: convertible notes deferred financing costs, net ( 3,671 ) ( 3,915 ) Less: term loan deferred financing costs, net ( 515 ) ( 543 ) Less: senior notes deferred financing costs, net ( 9,472 ) ( 9,796 ) Less: current maturities of long-term debt ( 6,250 ) ( 6,250 ) Total long-term debt, less current maturities, net $ 1,422,272 $ 1,311,684 As of March 30, 2025, the Company maintained a senior secured credit facility comprised of a $ 875 million revolving credit facility (the "Revolver due 2029") and a $ 125 million term loan (the "Term Loan due 2029") and together with the Revolver due 2029, (the "2024 Credit Facility"). The interest rate for incremental borrowings under the Revolver due 2029 as of March 30, 2025 was the Secured Overnight Financing Rate (“SOFR”) plus 1.75 % (or 6.07 %) for the SOFR-based option. The fee payable on committed but unused portions of the Revolver due 2029 was 0.225 % as of March 30, 2025. Total cash interest paid for the first quarter of 2025 and 2024 was $ 1.7 million and $ 8.5 million, respectively. Conditional Conversion Feature of the 1.75 % Convertible Senior Notes due 2028 As of March 30, 2025, the conditional conversion feature of the 1.75 % Convertible Senior Notes due 2028 (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 April 1, 2025 to June 30, 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 January 1, 2025 to March 31, 2025 based on satisfying this condition in the prior calendar quarter. The 1.75 % Convertible Notes converted during the period from January 1, 2025 to March 31, 2025 were immaterial. 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. 16 Table of Contents NOTE 9. FAIR VALUE MEASUREMENTS The following table presents fair values of certain assets and liabilities as of March 30, 2025 and December 31, 2024: March 30, 2025 December 31, 2024 ($ in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1.75 % convertible notes due 2028 (1) $ — $ 367.0 $ — $ — $ 351.3 $ — 4.75 % senior notes due 2029 (1) $ — $ 328.5 $ — $ — $ 330.3 $ — 6.375 % senior notes due 2032 (1) $ — $ 485.6 $ — $ — $ 485.0 $ — Term loan due 2029 (1) (2) $ — $ 123.4 $ — $ — $ 123.4 $ — Revolver due 2029 (1) (2) $ — $ 210.0 $ — $ — $ 100.0 $ — Contingent consideration (3) $ — $ — $ 3.8 $ — $ — $ 3.6 (1) The amounts of these notes listed above are the fair values for disclosure purposes only, and they are recorded in the Company's condensed consolidated balance sheets as of March 30, 2025 and December 31, 2024 at carrying value. (2) The carrying amounts of our term loan and revolving credit facility approximate fair value as of March 30, 2025 and December 31, 2024 based upon their terms and conditions in comparison to the terms and conditions of debt instruments with similar terms and conditions available at those dates. (3) The estimated fair value of the Company's contingent consideration is discussed further in Note 5 "Acquisitions". NOTE 10. INCOME TAXES The effective tax rate in the first quarter of 2025 and 2024 was 17.7 % and 10.6 %, respectively. The first quarter of 2025 and 2024 tax rates include the impact of the recognition of excess tax benefits on share-based compensation that was recorded as a reduction to income tax expense in the amount of $ 3.2 million and $ 6.0 million, respectively. Cash paid for income taxes, net of refunds, was $ 7.4 million and $ 0.1 million in the first quarter of 2025 and 2024, respectively. NOTE 11. 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. 17 Table of Contents 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" included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 20, 2025. 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 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: First Quarter Ended March 30, 2025 ($ in thousands) Manufacturing Distribution Total Total net sales $ 754,487 $ 254,086 $ 1,008,573 Cost of goods sold 585,096 192,385 777,481 Gross profit $ 169,391 $ 61,701 $ 231,092 Operating expenses 71,270 36,701 107,971 Operating income $ 98,121 $ 25,000 $ 123,121 Reconciliation of reportable segment operating income to consolidated income before income tax: Selling, general and administrative 31,579 Amortization of intangible assets 24,461 Interest expense, net 19,112 Elimination of inter-segment profits 1,512 Consolidated income before income taxes $ 46,457 Capital expenditures $ 17,565 $ 546 $ 18,111 Depreciation and amortization $ 36,503 $ 4,572 $ 41,075 18 Table of Contents First Quarter Ended March 31, 2024 ($ in thousands) Manufacturing Distribution Total Total net sales $ 714,510 $ 238,502 $ 953,012 Cost of goods sold 557,846 188,445 746,291 Gross Profit $ 156,664 $ 50,057 $ 206,721 Operating expenses 69,214 26,337 95,551 Operating income $ 87,450 $ 23,720 $ 111,170 Reconciliation of reportable segment operating income to consolidated income before income tax: Selling, general and administrative 27,923 Amortization of intangible assets 22,834 Interest expense, net 20,090 Elimination of inter-segment profits 1,071 Consolidated income before income taxes $ 39,252 Capital expenditures $ 10,496 $ 3,584 $ 14,080 Depreciation and amortization $ 35,417 $ 3,321 $ 38,738 A reconciliation of certain line items pertaining to the total reportable segments to the condensed consolidated financial statements in the first quarter ended March 30, 2025 and March 31, 2024 and as of March 30, 2025 and December 31, 2024 is as follows: First Quarter Ended ($ in thousands) March 30, 2025 March 31, 2024 Net sales: Total sales for reportable segments $ 1,008,573 $ 953,012 Elimination of inter-segment sales (1) ( 5,153 ) ( 19,520 ) Consolidated net sales $ 1,003,420 $ 933,492 Depreciation and amortization: Depreciation and amortization for reportable segments $ 41,075 $ 38,738 Corporate depreciation and amortization 1,571 1,597 Consolidated depreciation and amortization $ 42,646 $ 40,335 Capital expenditures: Capital expenditures for reportable segments $ 18,111 $ 14,080 Corporate capital expenditures 2,060 1,415 Consolidated capital expenditures $ 20,171 $ 15,495 (1) Eliminations for the first quarter ended March 30, 2025 include only the elimination of inter-segment transactions. 19 Table of Contents As of ($ in thousands) March 30, 2025 December 31, 2024 Total assets: Manufacturing segment assets $ 2,498,348 $ 2,402,533 Distribution segment assets 547,165 524,827 Corporate assets unallocated to segments 54,703 60,033 Cash and cash equivalents 86,561 33,561 Consolidated total assets $ 3,186,777 $ 3,020,954 The Company's revenue from external customers and long-lived assets are substantially all attributed to the U.S. NOTE 12. STOCK REPURCHASE PROGRAMS In November 2024, 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 March 30, 2025, Patrick had approximately $ 191.5 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 plan, the Company made repurchases of common stock as follows for the respective periods: First Quarter Ended ($ in millions, except average price data) March 30, 2025 March 31, 2024 Shares repurchased 99,763 — Average price $ 85.31 $ — Aggregate cost $ 8.5 $ — NOTE 13. COMMITMENTS AND CONTINGENCIES The Company is subject to proceedings, lawsuits, audits, and other claims arising in the normal course of business. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. Accruals for these items, when applicable, have been provided to the extent that losses are deemed probable and are reasonably estimable. These accruals are adjusted from time to time as developments warrant. Although the ultimate outcome of these matters cannot be ascertained, on the basis of present information, amounts already provided, availability of insurance coverage and legal advice received, it is the opinion of management that the ultimate resolution of these proceedings, lawsuits, and other claims will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In the Company's Form 10-K for the year ended December 31, 2024, the Company described the current status of litigation concerning the Lusher Site Remediation Group. In early July 2023, the Court granted the Company’s Rule 54(b) Motion for Final Judgment on previously dismissed claims and granted the Company’s Motion to Dismiss the plaintiff’s remaining claims against the defendants, without prejudice (the Company’s Motion to Dismiss having been joined by the remaining defendants in the litigation.) The only remaining issue pending in the litigation for the Court’s determination is the plaintiff’s motion to bar contribution claims. The Company has also been named as a potentially responsible party for the related Lusher Street Groundwater Contamination Superfund Site (the "Superfund Site") by the U.S. Environmental Protection Agency (the "EPA"). There has been no change in the status of the proceedings as described in the 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025. 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. 20 Table of Contents