Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 29, 2019

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ……………… to ………………

Commission file number 000-03922

PATRICK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



Indiana	35-1057796
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



107 WEST FRANKLIN STREET, P.O. Box 638
ELKHART,	IN	46515
(Address of principal executive offices)		(ZIP Code)

(574) 294-7511

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	PATK	NASDAQ

As of October 25, 2019, there were 23,764,458 shares of the registrant’s common stock outstanding.

PATRICK INDUSTRIES, INC.

TABLE OF CONTENTS



	Page No.
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Financial Position September 29, 2019 and December 31, 2018	3

Condensed Consolidated Statements of Income Third Quarter and Nine Months Ended September 29, 2019 and September 30, 2018	4

Condensed Consolidated Statements of Comprehensive Income Third Quarter and Nine Months Ended September 29, 2019 and September 30, 2018	5

Condensed Consolidated Statements of Shareholders' Equity Third Quarter and Nine Months Ended September 29, 2019 and September 30, 2018	6

Condensed Consolidated Statements of Cash Flows Nine Months Ended September 29, 2019 and September 30, 2018	8

Notes to Condensed Consolidated Financial Statements	9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 4. CONTROLS AND PROCEDURES	36

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS	37

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37

ITEM 6. EXHIBITS	38

SIGNATURES	39

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)



	As of
(thousands)	September 29, 2019			December 31, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	116,712		$	6,895
Trade and other receivables, net	129,837			82,499
Inventories	262,558			272,898
Prepaid expenses and other	18,897			22,875
Total current assets	528,004			385,167
Property, plant and equipment, net	179,884			177,145
Operating lease right-of-use assets	81,064			—
Goodwill	308,358			281,734
Intangible assets, net	350,216			382,982
Deferred financing costs, net	3,130			3,688
Other non-current assets	474			515
TOTAL ASSETS	$	1,451,130		$	1,231,231
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current maturities of long-term debt	$	5,000		$	8,750
Current operating lease liabilities	25,990			—
Accounts payable	117,862			89,803
Accrued liabilities	53,423			59,202
Total current liabilities	202,275			157,755
Long-term debt, less current maturities, net	670,928			621,751
Long-term operating lease liabilities	55,553			—
Deferred tax liabilities, net	19,735			22,699
Other long-term liabilities	22,701			20,272
TOTAL LIABILITIES	971,192			822,477
SHAREHOLDERS’ EQUITY
Common stock	169,220			161,436
Additional paid-in-capital	25,020			25,124
Accumulated other comprehensive loss	(5,953		)	(2,680		)
Retained earnings	291,651			224,874
TOTAL SHAREHOLDERS’ EQUITY	479,938			408,754
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,451,130		$	1,231,231

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



	Third Quarter Ended				Nine Months Ended
(thousands except per share data)	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
NET SALES	$	566,186	$	575,139	$	1,787,622	$	1,731,850
Cost of goods sold	461,851		468,484		1,464,078		1,412,649
GROSS PROFIT	104,335		106,655		323,544		319,201
Operating Expenses:
Warehouse and delivery	23,917		19,789		74,228		55,540
Selling, general and administrative	33,817		33,284		104,403		98,999
Amortization of intangible assets	9,191		8,873		26,448		25,140
Total operating expenses	66,925		61,946		205,079		179,679
OPERATING INCOME	37,410		44,709		118,465		139,522
Interest expense, net	8,603		7,338		26,222		17,980
Income before income taxes	28,807		37,371		92,243		121,542
Income taxes	7,490		9,437		22,661		28,680
NET INCOME	$	21,317	$	27,934	$	69,582	$	92,862

BASIC NET INCOME PER COMMON SHARE	$	0.92	$	1.17	$	3.02	$	3.82
DILUTED NET INCOME PER COMMON SHARE	$	0.92	$	1.15	$	2.99	$	3.77

Weighted average shares outstanding – Basic	23,076		23,894		23,073		24,279
Weighted average shares outstanding – Diluted	23,273		24,232		23,279		24,619

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



	Third Quarter Ended						Nine Months Ended
(thousands)	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
NET INCOME	$	21,317		$	27,934		$	69,582		$	92,862
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain of hedge derivatives	(240		)	80			(3,225		)	80
Foreign currency translation gain (loss)	19			(28		)	(48		)	(31		)
Total other comprehensive (loss) gain	(221		)	52			(3,273		)	49
COMPREHENSIVE INCOME	$	21,096		$	27,986		$	66,309		$	92,911

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)



Third Quarter Ended September 29, 2019
(thousands)	Common Stock			Additional Paid-in- Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance June 30, 2019	$	166,086		$	25,124		$	(5,732	)	$	273,139		$	458,617
Net income	—			—			—			21,317			21,317
Other comprehensive loss, net of tax	—			—			(221		)	—			(221		)
Share repurchases under buyback program	(674		)	(104		)	—			(2,805		)	(3,583		)
Shares used to pay taxes on stock grants	(59		)	—			—			—			(59		)
Stock-based compensation expense	3,867			—			—			—			3,867
Balance September 29, 2019	$	169,220		$	25,020		$	(5,953	)	$	291,651		$	479,938

Nine Months Ended September 29, 2019
(thousands)	Common Stock			Additional Paid-in- Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance December 31, 2018	$	161,436		$	25,124		$	(2,680	)	$	224,874		$	408,754
Net income	—			—			—			69,582			69,582
Other comprehensive loss, net of tax	—			—			(3,273		)	—			(3,273		)
Share repurchases under buyback program	(674		)	(104		)	—			(2,805		)	(3,583		)
Shares used to pay taxes on stock grants	(3,587		)	—			—			—			(3,587		)
Issuance of shares upon exercise of common stock options	6			—			—			—			6
Stock-based compensation expense	12,039			—			—			—			12,039
Balance September 29, 2019	$	169,220		$	25,020		$	(5,953	)	$	291,651		$	479,938

Third Quarter Ended September 30, 2018
(thousands)	Common Stock			Additional Paid-in- Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance July 1, 2018	$	161,648		$	25,552		$	63		$	216,357		$	403,620
Net income	—			—			—			27,934			27,934
Other comprehensive income, net of tax	—			—			52			—			52
Stock repurchases under buyback program	(2,237		)	(113		)	—			(18,593		)	(20,943		)
Issuance of shares upon exercise of common stock options	(37		)	—			—			—			(37		)
Shares used to pay taxes on stock grants	9			—			—			—			9
Stock-based compensation expense	3,542			—			—			—			3,542
Equity component of convertible notes issuance	—			41			—			—			41
Balance September 30, 2018	$	162,925		$	25,480		$	115		$	225,698		$	414,218



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.)
Nine Months Ended September 30, 2018
(thousands)	Common Stock			Additional Paid-in- Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings			Total
Balance December 31, 2017	$	163,196		$	8,243		$	66	$	199,180		$	370,685
Net income	—			—			—		92,862			92,862
Other comprehensive loss, net of tax	—			—			49		—			49
Stock repurchases under buyback program	(8,266		)	(418		)	—		(66,344		)	(75,028		)
Issuance of shares upon exercise of common stock options	3			—			—		—			3
Shares used to pay taxes on stock grants	(2,919		)	—			—		—			(2,919		)
Stock-based compensation expense	10,911			—			—		—			10,911
Purchase of convertible notes hedges	—			(31,481		)	—		—			(31,481		)
Proceeds from sale of warrants	—			18,147			—		—			18,147
Equity component of convertible notes issuance	—			30,989			—		—			30,989
Balance September 30, 2018	$	162,925		$	25,480		$	115	$	225,698		$	414,218

See accompanying Notes to Condensed Consolidated Financial Statements

PATRICK INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Nine Months Ended
(thousands)	September 29, 2019			September 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	69,582		$	92,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	46,449			39,893
Stock-based compensation expense	12,039			10,911
Amortization of convertible notes debt discount	5,123			4,495
Deferred income taxes	(794		)	(1,088		)
Other	235			(2,739		)
Change in operating assets and liabilities, net of acquisitions of businesses:
Trade receivables	(44,359		)	(29,295		)
Inventories	9,084			(13,238		)
Prepaid expenses and other assets	4,319			4,299
Accounts payable, accrued liabilities and other	20,355			21,313
Net cash provided by operating activities	122,033			127,413
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(22,227		)	(26,073		)
Proceeds from sale of property, equipment and other investing activities	4,509			5,125
Business acquisitions, net of cash acquired	(22,350		)	(290,052		)
Net cash used in investing activities	(40,068		)	(311,000		)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings	7,500			36,981
Term debt repayments	(3,750		)	(6,441		)
Borrowings on revolver	648,460			954,535
Repayments on revolver	(905,792		)	(877,931		)
Stock repurchases under buyback program	(3,583		)	(75,028		)
Proceeds from issuance of senior notes	300,000			—
Proceeds from convertible notes offering	—			172,500
Purchase of convertible notes hedges	—			(31,481		)
Proceeds from sale of warrants	—			18,147
Payments related to vesting of stock-based awards, net of shares tendered for taxes	(3,359		)	(2,659		)
Payment of deferred financing costs	(7,214		)	(7,485		)
Payment of contingent consideration from a business acquisition	(4,416		)	—
Other financing activities	6			(12		)
Net cash provided by financing activities	27,852			181,126
Increase (decrease) in cash and cash equivalents	109,817			(2,461		)
Cash and cash equivalents at beginning of year	6,895			2,767
Cash and cash equivalents at end of period	$	116,712		$	306

See accompanying Notes to Condensed Consolidated Financial Statements.

PATRICK INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



1.	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 September 29, 2019 and December 31, 2018, and its results of operations for the three and nine months ended September 29, 2019 and September 30, 2018 and cash flows for the nine months ended September 29, 2019 and September 30, 2018.

Patrick’s unaudited condensed 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 preparation of the condensed 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. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. Certain immaterial reclassifications have been made to the prior period presentation to conform to the current period presentation. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 2 to Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The December 31, 2018 condensed consolidated statement of financial position data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the third quarter and nine months ended September 29, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.

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 third quarter of fiscal year 2019 ended on September 29, 2019 and the third quarter of fiscal year 2018 ended on September 30, 2018.

In preparation of Patrick’s condensed consolidated financial statements as of and for the three and nine months ended September 29, 2019, management evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date of issuance of the Form 10-Q that required recognition or disclosure in the condensed consolidated financial statements.



2.	RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, "Leases (Topic 842)", which requires in part that an entity recognize lease assets and lease liabilities on its statement of financial position for leases that were previously classified as operating leases under U.S. GAAP.

In July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements", which offered practical expedient alternatives to the modified retrospective adoption of Accounting Standards Codification (“ASC”) 842.

The Company adopted ASC 842 effective January 1, 2019, and recorded approximately $80 million in lease right-of-use assets and corresponding lease liabilities, with no material impact on the condensed consolidated statement of shareholders' equity, income, comprehensive income or cash flows. See Note 12 for further information.

Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". This ASU simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. The standard requires that the impairment loss be measured as the excess of the reporting unit's carrying amount over its fair value. It eliminates the second step that requires the impairment to be measured between the implied value of a reporting unit's goodwill and its carrying value. The standard is effective for annual and any interim impairment tests for periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting standard, which will depend on the outcomes of future goodwill impairment tests.

Credit Losses

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments”, which amends certain provisions of ASC 326, “Financial Instruments-Credit Loss”. The ASU changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held to maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. Additionally, entities will be required to disclose more information with respect to credit quality indicators, including information used to track credit quality by year of origination for most financing receivables. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and will be applied as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period for which the guidance is effective. The Company does not expect that the adoption of the ASU will have a material effect on its condensed consolidated financial statements.



3.	REVENUE RECOGNITION

In the following table, revenue from contracts with customers, net of intersegment sales, is disaggregated by market type and by reportable segments, consistent with how the Company believes the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors:



	Third Quarter Ended September 29, 2019
(thousands)	Manufacturing		Distribution		Total Reportable Segments
Market type:
Recreational Vehicle	$	218,706	$	91,313	$	310,019
Manufactured Housing	44,159		64,959		109,118
Industrial	64,541		7,566		72,107
Marine	72,306		2,636		74,942
Total	$	399,712	$	166,474	$	566,186



	Nine Months Ended September 29, 2019
(thousands)	Manufacturing		Distribution		Total Reportable Segments
Market type:
Recreational Vehicle	$	694,261	$	299,115	$	993,376
Manufactured Housing	131,101		193,975		325,076
Industrial	188,292		25,149		213,441
Marine	246,017		9,712		255,729
Total	$	1,259,671	$	527,951	$	1,787,622



	Third Quarter Ended September 30, 2018
(thousands)	Manufacturing		Distribution		Total Reportable Segments
Market type:
Recreational Vehicle	$	262,936	$	91,637	$	354,573
Manufactured Housing	41,428		26,334		67,762
Industrial	63,429		8,906		72,335
Marine	77,421		3,048		80,469
Total	$	445,214	$	129,925	$	575,139



	Nine Months Ended September 30, 2018
(thousands)	Manufacturing		Distribution		Total Reportable Segments
Market type:
Recreational Vehicle	$	847,944	$	280,082	$	1,128,026
Manufactured Housing	124,406		75,946		200,352
Industrial	186,890		25,701		212,591
Marine	184,848		6,033		190,881
Total	$	1,344,088	$	387,762	$	1,731,850

The following table provides information about contract balances:



(thousands)	September 29, 2019		December 31, 2018
Receivables, which are included in trade and other receivables, net	$	128,672	$	74,196
Contract liabilities	$	2,692	$	2,642

Significant changes in the contract liabilities balance during the nine months ended September 29, 2019 are as follows:



(thousands)	Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	(1,006	)
Increases due to cash received, excluding amounts recognized as revenue during the period	$	1,056



4.	INVENTORIES

Inventories consist of the following:



(thousands)	September 29, 2019			December 31, 2018
Raw materials	$	172,775		$	164,408
Work in process	14,235			12,829
Finished goods	25,403			28,341
Less: reserve for inventory obsolescence	(10,258		)	(5,354		)
Total manufactured goods, net	202,155			200,224
Materials purchased for resale (distribution products)	62,616			74,914
Less: reserve for inventory obsolescence	(2,213		)	(2,240		)
Total materials purchased for resale (distribution products), net	60,403			72,674
Total inventories	$	262,558		$	272,898



5.	GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for the nine months ended September 29, 2019 by segment are as follows:



(thousands)	Manufacturing		Distribution		Total
Balance - December 31, 2018	$	235,345	$	46,389	$	281,734
Acquisitions	7,177		—		7,177
Adjustments to preliminary purchase price allocations	8,428		11,019		19,447
Balance - September 29, 2019	$	250,950	$	57,408	$	308,358

Intangible assets, net consist of the following as of September 29, 2019 and December 31, 2018:



(thousands)	September 29, 2019			Weighted Average Useful Life (in years)	December 31, 2018			Weighted Average Useful Life (in years)
Customer relationships	$	348,947		10.1	$	366,228		10.1
Non-compete agreements	16,405			4.9	19,159			4.9
Patents	16,338			14.6	1,048			8.9
Trademarks	80,786			Indefinite	82,358			Indefinite
	462,476				468,793
Less: accumulated amortization	(112,260		)		(85,811		)
Intangible assets, net	$	350,216			$	382,982

Changes in the carrying value of intangible assets for the nine months ended September 29, 2019 by segment are as follows:



(thousands)	Manufacturing			Distribution			Total
Balance - December 31, 2018	$	304,485		$	78,497		$	382,982
Acquisitions	8,329			—			8,329
Amortization	(21,808		)	(4,640		)	(26,448		)
Adjustments to preliminary purchase price allocations	(12,023		)	(2,624		)	(14,647		)
Balance - September 29, 2019	$	278,983		$	71,233		$	350,216



6.	ACQUISITIONS

General

In addition to the acquisitions completed in 2018 as discussed below, the Company completed two acquisitions in the first nine months of 2019. For the third quarter and first nine months ended September 29, 2019, revenue and operating income included in the Company's condensed consolidated statements of income related to the 2019 acquisitions were immaterial. For the third quarter ended September 30, 2018, revenue and operating income of approximately $82.4 million and $8.8 million, respectively, were included in the Company’s condensed consolidated statements of income relating to the businesses acquired in the first nine months of 2018. The first nine months of 2018 included revenue and operating income of approximately $160.0 million and $17.3 million, respectively, related to these acquisitions. Acquisition-related costs in the aggregate associated with the businesses acquired in the first nine months of 2019 and 2018 were immaterial.

Contingent Consideration

In connection with certain acquisitions, if certain financial targets for the acquired businesses are achieved, the Company will be required to pay additional cash consideration. The Company has recorded a liability for the 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. As required, the liabilities for the contingent consideration associated with each of these acquisitions will be remeasured quarterly at fair value.

As of September 29, 2019, the aggregate fair value of the estimated contingent consideration payments was $12.0 million, $4.5 million of which is included in the line item "Accrued liabilities" and $7.5 million is included in “Other long-term liabilities” on the condensed consolidated statement of financial position. At December 31, 2018, the aggregate fair value of the estimated contingent consideration payments was $13.8 million, $4.4 million of which was included in the line item "Accrued liabilities" and $9.4 million was included in "Other long-term liabilities". The liabilities for contingent consideration expire at various dates through December 2023. The contingent consideration arrangements are subject to a maximum payment amount of up to $17.2 million in the aggregate. In the first quarter of 2019, the Company made cash payments of approximately $4.4 million related to contingent consideration liabilities, recording a corresponding reduction to accrued liabilities.

2019 Acquisitions

The Company completed two acquisitions in the third quarter and first nine months ended September 29, 2019, including the previously announced acquisition of G.G. Schmitt & Sons, Inc. ("G.G. Schmitt"), a Sarasota, Florida-based designer and manufacturer of customized hardware and structural components for the marine industry. The total initial consideration for these acquisitions was $21.1 million, plus subsequent contingent consideration payments over a one-year period based on future performance in connection with the acquisition of G.G. Schmitt. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

The results of operations for these acquisitions are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from their respective dates of acquisition.

2018 Acquisitions

Metal Moulding Corporation (“MMC”)

In February 2018, the Company completed the acquisition of the business and certain assets of Madison, Tennessee-based MMC, a manufacturer of custom metal fabricated products, primarily for the marine market, including hinges, arm rests, brackets, panels and trim, as well as plastic products including boxes, inlay tables, steps, and related components, for a net initial purchase price of $19.9 million, plus contingent consideration payments over a one-year period based on future performance.

The results of operations for MMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition.

Aluminum Metals Company, LLC (“AMC”)

In February 2018, the Company completed the acquisition of the business and certain assets of Elkhart, Indiana-based AMC, a manufacturer of aluminum products including coil, fabricated sheets and extrusions, in addition to roofing products, primarily for the recreational vehicle (“RV”), industrial, and marine markets, for a net purchase price of $17.8 million.

The results of operations for AMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition.

IMP Holdings, LLC d/b/a Indiana Marine Products (“IMP”)

In March 2018, the Company completed the acquisition of the business and certain assets of Angola, Indiana-based IMP, a manufacturer of fully-assembled helm assemblies, including electrical wiring harnesses, dash panels, instrumentation and gauges, and other products primarily for the marine market, for a net initial purchase price of $18.6 million, plus subsequent contingent consideration payments over a three-year period based on future performance.

The results of operations for IMP are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition.

Collins & Company, Inc. (“Collins”)

In March 2018, the Company completed the acquisition of the business and certain assets of Bristol, Indiana-based Collins, a distributor of appliances, trim products, fuel systems, flooring, tile, and other related building materials primarily to the RV market as well as the housing and industrial markets, for a net purchase price of $40.0 million.

The results of operations for Collins are included in the Company’s condensed consolidated financial statements and the Distribution operating segment from the date of acquisition. Changes from previously reported estimated amounts as of December 31, 2018 include a decrease to intangible assets of $3.6 million and a $3.6 million offsetting increase to goodwill. There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

Dehco, Inc. (“Dehco”)

In April 2018, the Company completed the acquisition of Dehco, a distributor and manufacturer of flooring, kitchen and bath products, adhesives and sealants, electronics, appliances and accessories, LP tanks, and other related building materials, primarily for the RV market as well as the manufactured housing (“MH”), marine and other industrial markets, for a net purchase price of $52.8 million. Dehco has operating facilities in Indiana, Oregon, Pennsylvania and Alabama.

The results of operations for Dehco are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating segments from the date of acquisition. Changes from previously reported estimated amounts as of December 31, 2018 include a decrease to intangible assets of $0.3 million and a $0.3 million offsetting increase to goodwill. There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

Dowco, Inc. (“Dowco”)

In May 2018, the Company completed the acquisition of Dowco, a designer and manufacturer of custom designed boat covers and bimini tops, full boat enclosures, mounting hardware, and other accessories and components for the marine market, for a net purchase price of $56.3 million, net of cash acquired. Dowco has operating facilities in Wisconsin, Missouri, Indiana, and Minnesota.

The results of operations for Dowco are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. Changes from previously reported estimated amounts as of December 31, 2018 include a $2.7 million increase to property, plant and equipment and a $3.3 million increase to goodwill, offset by a $5.9 million decrease to intangible assets and a $0.1 million increase in accounts payable and accrued liabilities. There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

Marine Accessories Corporation (“MAC”)

In June 2018, the Company acquired 100% of the membership interests of Maryville, Tennessee-based MAC, a manufacturer, distributor and aftermarket supplier of custom tower and canvas products and other related accessories to OEMs, dealers, retailers and distributors within the marine market, as well as direct to consumers, for a net purchase price of $57.0 million, net of cash acquired.

The results of operations for MAC are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating segments from the date of acquisition. Changes from previously reported estimated amounts as of December 31, 2018 include a $6.5 million decrease to intangible assets and a $1.0 million decrease to property, plant and equipment, offset by a decrease in deferred taxes and other liabilities of $1.1 million and an increase to goodwill of $6.4 million. There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

Engineered Metals and Composites, Inc. (“EMC”)

In September 2018, the Company completed the acquisition of the business and certain assets of West Columbia, South Carolina-based EMC, a designer and manufacturer of custom marine towers, frames, and other fabricated component products for OEMs in the marine industry, for a net initial purchase price of $25.3 million, plus contingent consideration over a three-month period based on future performance.

The results of operations for EMC are included in the Company’s condensed consolidated financial statements and the Manufacturing operating segment from the date of acquisition. After adjusting for a $0.1 million increase to the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $0.1 million, changes from previously reported estimated amounts as of December 31, 2018 include an increase to intangible assets of $1.6 million, an increase to inventory of $0.1 million, a decrease to property, plant and equipment of $0.8 million, a decrease to goodwill of $0.6 million and an increase to accounts payable of $0.2 million. There was no material impact to the condensed consolidated statement of income related to these changes in the period in which the purchase price allocation and all purchase accounting adjustments were finalized.

LaSalle Bristol (“LaSalle”)

In November 2018, the Company completed the acquisition of LaSalle, a distributor and manufacturer of plumbing, flooring, tile, lighting, air handling and building products for the MH, RV, and industrial markets, for a net purchase price of $51.1 million, net of cash acquired. LaSalle is headquartered in Elkhart, Indiana and operates a total of 15 manufacturing and distribution centers located in North America.

The results of operations for LaSalle are included in the Company’s condensed consolidated financial statements and the Manufacturing and Distribution operating segments from the date of acquisition. The preliminary purchase price allocation is subject to final review and approval, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its fair value estimates.

After adjusting for a $1.1 million increase in the estimated purchase price reported at December 31, 2018 due to a final working capital adjustment of $1.1 million, changes from previously reported estimated amounts as of December 31, 2018 are related primarily to a $6.7 million decrease to inventory, offset partly by a $0.8 million increase to accounts receivable, a $0.3 million increase to prepaid expenses and a $6.7 million increase to goodwill. There was no material impact to the condensed consolidated statement of income related to these changes.

The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of the acquisition for the 2019 and 2018 acquisitions:



(thousands)	Trade receivables		Inventories		Property, plant and equipment		Prepaid expenses & other		Intangible assets		Goodwill		Less: Total liabilities		Less: Deferred tax liability, net		Total net assets acquired

2019⁽¹⁾	$	2,245	$	5,296	$	1,650	$	133	$	8,329	$	7,177	$	1,135	$	—	$	23,695

2018
MMC ⁽²⁾	$	1,463	$	2,324	$	2,085	$	—	$	8,540	$	7,668	$	827	$	—	$	21,253
AMC	3,942		5,623		2,321		39		6,550		1,755		2,463		—		17,767
IMP ⁽³⁾	1,943		4,286		1,463		13		12,920		8,803		2,930		—		26,498
Collins	2,830		9,903		1,188		5		18,430		10,237		2,586		—		40,007
Dehco	4,771		16,923		13,755		208		13,950		6,580		3,392		—		52,795
Dowco	4,053		4,498		8,566		1,240		28,435		13,732		4,178		—		56,346
MAC	3,054		6,815		7,003		284		26,190		25,669		4,226		7,767		57,022
EMC ⁽⁴⁾	623		1,678		1,684		—		17,350		7,483		987		—		27,831
LaSalle	9,002		39,344		8,500		6,547		5,885		10,441		28,601		41		51,077
Other	473		329		280		13		1,667		919		195		—		3,486
2018 Totals	$	32,154	$	91,723	$	46,845	$	8,349	$	139,917	$