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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 26, 2021
OR
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
 
patk-20210926_g1.jpg
PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Indiana35-1057796
(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 classTrading SymbolName of each exchange on which registered
 Common Stock, no par value PATKNASDAQ
As of October 22, 2021, there were 23,656,016 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 Income
   Third Quarter and Nine Months ended September 26, 2021 and September 27, 2020
 
Condensed Consolidated Statements of Comprehensive Income
   Third Quarter and Nine Months ended September 26, 2021 and September 27, 2020
Condensed Consolidated Balance Sheets
   September 26, 2021 and December 31, 2020
Condensed Consolidated Statements of Cash Flows
   Nine Months ended September 26, 2021 and September 27, 2020
Condensed Consolidated Statements of Shareholders' Equity
   Third Quarter and Nine Months ended September 26, 2021 and September 27, 2020
Notes to Condensed Consolidated Financial Statements
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
ITEM 4. CONTROLS AND PROCEDURES
 
PART II. OTHER INFORMATION
 
ITEM 1A. RISK FACTORS
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
ITEM 6. EXHIBITS
 
SIGNATURES

2




PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Third Quarter EndedNine Months Ended
(thousands except per share data)September 26, 2021September 27, 2020September 26, 2021September 27, 2020
NET SALES$1,060,177 $700,707 $2,930,613 $1,713,984 
Cost of goods sold852,016 567,210 2,356,443 1,397,285 
GROSS PROFIT208,161 133,497 574,170 316,699 
Operating Expenses:    
  Warehouse and delivery35,885 25,263 100,613 70,204 
  Selling, general and administrative64,245 38,184 175,842 105,681 
  Amortization of intangible assets14,758 10,221 40,695 29,600 
    Total operating expenses114,888 73,668 317,150 205,485 
OPERATING INCOME93,273 59,829 257,020 111,214 
Interest expense, net15,436 10,507 41,195 31,820 
Income before income taxes77,837 49,322 215,825 79,394 
Income taxes20,440 11,986 51,930 20,157 
NET INCOME$57,397 $37,336 $163,895 $59,237 
BASIC NET INCOME PER COMMON SHARE $2.52 $1.65 $7.18 $2.60 
DILUTED NET INCOME PER COMMON SHARE $2.45 $1.62 $7.01 $2.57 
Weighted average shares outstanding – Basic 22,78922,67422,82622,784
Weighted average shares outstanding – Diluted 23,40323,07223,37523,088
See accompanying Notes to Condensed Consolidated Financial Statements.




3



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Third Quarter EndedNine Months Ended
(thousands)September 26, 2021September 27, 2020September 26, 2021September 27, 2020
NET INCOME$57,397 $37,336 $163,895 $59,237 
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) of hedge derivatives1,031 989 3,024 (1,553)
Other74 60 4 8 
Total other comprehensive income (loss)1,105 1,049 3,028 (1,545)
COMPREHENSIVE INCOME$58,502 $38,385 $166,923 $57,692 

See accompanying Notes to Condensed Consolidated Financial Statements.

4



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
As of
(thousands)September 26, 2021December 31, 2020
ASSETS
Current Assets
    Cash and cash equivalents$44,882 $44,767 
    Trade and other receivables, net292,932 132,505 
    Inventories485,766 312,809 
    Prepaid expenses and other39,205 37,982 
        Total current assets862,785 528,063 
Property, plant and equipment, net309,170 251,493 
Operating lease right-of-use assets142,719 117,816 
Goodwill478,955 395,800 
Intangible assets, net558,040 456,276 
Other non-current assets6,789 3,987 
        TOTAL ASSETS$2,358,458 $1,753,435 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
    Current maturities of long-term debt$7,500 $7,500 
    Current operating lease liabilities36,955 30,901 
    Accounts payable219,153 105,786 
    Accrued liabilities145,865 83,202 
        Total current liabilities409,473 227,389 
Long-term debt, less current maturities, net1,077,664 810,907 
Long-term operating lease liabilities107,753 88,175 
Deferred tax liabilities, net49,344 39,516 
Other long-term liabilities22,176 28,007 
        TOTAL LIABILITIES1,666,410 1,193,994 
SHAREHOLDERS’ EQUITY  
Common stock195,402 180,892 
Additional paid-in-capital23,981 24,387 
Accumulated other comprehensive loss(3,024)(6,052)
Retained earnings475,689 360,214 
        TOTAL SHAREHOLDERS’ EQUITY692,048 559,441 
        TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,358,458 $1,753,435 

See accompanying Notes to Condensed Consolidated Financial Statements.

5



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
(thousands)September 26, 2021September 27, 2020
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$163,895 $59,237 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization 76,298 52,955 
Stock-based compensation expense17,307 11,177 
Amortization of convertible notes debt discount5,528 5,302 
Deferred income taxes6,540 (4,057)
Other non-cash items1,644 3,521 
Change in operating assets and liabilities, net of acquisitions of businesses: 
Trade and other receivables, net(142,550)(78,701)
Inventories(127,464)(12,885)
Prepaid expenses and other assets(593)23,787 
Accounts payable, accrued liabilities and other146,812 52,422 
Net cash provided by operating activities147,417 112,758 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(44,155)(22,159)
Proceeds from sale of property, plant and equipment140 117 
Business acquisitions, net of cash acquired(297,701)(123,382)
Other(2,000) 
Net cash used in investing activities(343,716)(145,424)
CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings58,750  
Term debt repayments(3,125)(2,500)
Borrowings on revolver425,930 8,198 
Repayments on revolver(565,475)(8,198)
Proceeds from senior notes offering350,000  
Stock repurchases under buyback program(31,945)(20,286)
Cash dividends paid to shareholders(19,487)(17,265)
Taxes paid for share-based payment arrangements(14,898)(2,910)
Payment of deferred financing costs and other(6,638)(58)
Payment of contingent consideration from a business acquisition(1,600)(2,000)
Proceeds from exercise of common stock options4,902 642 
Net cash provided by (used in) financing activities196,414 (44,377)
Increase (decrease) in cash and cash equivalents115 (77,043)
Cash and cash equivalents at beginning of year44,767 139,390 
Cash and cash equivalents at end of period$44,882 $62,347 

See accompanying Notes to Condensed Consolidated Financial Statements.
6



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Third Quarter Ended September 26, 2021
(thousands)Common
Stock
Additional Paid-in CapitalAccumulated Other
Comprehensive Loss
Treasury StockRetained
Earnings
Total
Balance June 27, 2021$191,131 $24,387 $(4,129)$(21,550)$453,432 $643,271 
Net income    57,397 57,397 
Dividends declared    (6,613)(6,613)
Other comprehensive income, net of tax  1,105   1,105 
Share repurchases under buyback program(999)(135)  (9,261)(10,395)
Retirement of treasury stock(2,013)(271) 21,550 (19,266) 
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(13)    (13)
Issuance of shares upon exercise of common stock options325     325 
Stock-based compensation expense6,971     6,971 
Balance September 26, 2021$195,402 $23,981 $(3,024)$ $475,689 $692,048 
Nine Months Ended September 26, 2021
(thousands)Common
Stock
Additional Paid-in CapitalAccumulated Other
Comprehensive Loss
Treasury StockRetained
Earnings
Total
Balance December 31, 2020$180,892 $24,387 $(6,052)$ $360,214 $559,441 
Net income    163,895 163,895 
Dividends declared    (19,893)(19,893)
Other comprehensive income, net of tax  3,028   3,028 
Share repurchases under buyback program(999)(135) (21,550)(9,261)(31,945)
Retirement of Treasury Stock(2,013)(271) 21,550 (19,266) 
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(14,898)    (14,898)
Issuance of shares in connection with a business combination10,211     10,211 
Issuance of shares upon exercise of common stock options4,902     4,902 
Stock-based compensation expense17,307     17,307 
Balance September 26, 2021$195,402 $23,981 $(3,024)$ $475,689 $692,048 




7



PATRICK INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (cont.)

Third Quarter Ended September 27, 2020
(thousands)Common
Stock
Additional Paid-in CapitalAccumulated Other
Comprehensive Loss
Treasury StockRetained
Earnings
Total
Balance June 28, 2020$173,178 $24,534 $(8,292)$ $303,848 $493,268 
Net income— — — 37,336 37,336 
Dividends declared— — — (5,865)(5,865)
Other comprehensive income, net of tax— — 1,049 — 1,049 
Stock repurchases under buyback program(647)(94)— (3,995)(4,736)
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(53)— — — (53)
Stock-based compensation expense4,830 — — — 4,830 
Balance September 27, 2020$177,308 $24,440 $(7,243)$ $331,324 $525,829 
Nine Months Ended September 27, 2020
(thousands)Common
Stock
Additional Paid-in CapitalAccumulated Other
Comprehensive Loss
Treasury StockRetained
Earnings
Total
Balance December 31, 2019$172,662 $25,014 $(5,698)$ $305,503 $497,481 
Net income— — — — 59,237 59,237 
Dividends declared— — — — (17,666)(17,666)
Other comprehensive loss, net of tax— — (1,545)— — (1,545)
Stock repurchases under buyback program(3,962)(574)— — (15,750)(20,286)
Issuance of shares upon exercise of common stock options642 — — — — 642 
Repurchases of shares for tax payments related to the vesting and exercise of share-based grants(3,211)— — — — (3,211)
Stock-based compensation expense11,177 — — — — 11,177 
Balance September 27, 2020$177,308 $24,440 $(7,243)$ $331,324 $525,829 
See accompanying Notes to Condensed Consolidated Financial Statements
8




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 26, 2021 and December 31, 2020, its results of operations for the third quarter and nine months ended September 26, 2021 and September 27, 2020, and its cash flows for the nine months ended September 26, 2021 and September 27, 2020.
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 condensed 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 of other non-current assets in the condensed consolidated balance sheets and accumulated other comprehensive loss in Note 11. For a description of significant accounting policies used by the Company in the preparation of its consolidated financial statements, please refer to Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The December 31, 2020 condensed consolidated balance sheet 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 26, 2021 are not necessarily indicative of the results that we will realize or expect for the full year ending December 31, 2021.
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 2021 ended on September 26, 2021 and the third quarter of fiscal year 2020 ended on September 27, 2020.
In preparation of Patrick’s condensed consolidated financial statements as of and for the third quarter and nine months ended September 26, 2021, management evaluated all subsequent events and 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. See Note 18 for further information.
2.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", a new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a material effect on its condensed consolidated financial statements.
9



Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)", a new standard providing final guidance to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements.

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

In August 2020, the FASB issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity", a new standard that simplifies certain accounting treatments for convertible debt instruments. The guidance eliminates certain requirements that require separate accounting for embedded conversion features and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. In addition, the new guidance requires entities use the if-converted method for all convertible instruments in the diluted net income per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares, with certain exceptions. Furthermore, the guidance requires new disclosures about events that occur during the reporting period that cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on our condensed consolidated financial statements. At this point in time, we anticipate the primary impact on our condensed consolidated financial statements as a result of the adoption of ASU 2020-06 will be a reduction in non-cash interest expense as well as a reduction in diluted net income per share attributable to the application of the if-converted method for our convertible notes referenced in Note 9.
 3.REVENUE RECOGNITION
In the following table, revenue from contracts with customers, net of intersegment sales, 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:
Third Quarter Ended September 26, 2021
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$434,029 $199,208 $633,237 
Marine164,535 8,491 173,026 
Manufactured Housing65,785 68,840 134,625 
Industrial107,886 11,403 119,289 
Total$772,235 $287,942 $1,060,177 

10



Nine Months Ended September 26, 2021
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$1,161,254 $568,840 $1,730,094 
Marine453,223 23,105 476,328 
Manufactured Housing190,786 203,648 394,434 
Industrial296,769 32,988 329,757 
Total$2,102,032 $828,581 $2,930,613 

Third Quarter Ended September 27, 2020
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$290,326 $130,845 $421,171 
Marine88,861 4,590 93,451 
Manufactured Housing45,845 61,908 107,753 
Industrial69,242 9,090 78,332 
Total$494,274 $206,433 $700,707 

Nine Months Ended September 27, 2020
(thousands)ManufacturingDistributionTotal
Market type:
Recreational Vehicle$656,739 $288,778 $945,517 
Marine219,150 11,400 230,550 
Manufactured Housing127,857 182,579 310,436 
Industrial202,368 25,113 227,481 
Total$1,206,114 $507,870 $1,713,984 
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.
11



4.INVENTORIES
Inventories consist of the following:
(thousands)September 26, 2021December 31, 2020
Raw materials$261,775 $157,219 
Work in process30,221 19,282 
Finished goods66,189 37,632 
Less: reserve for inventory obsolescence(13,604)(8,320)
  Total manufactured goods, net344,581 205,813 
Materials purchased for resale (distribution products)147,502 112,158 
Less: reserve for inventory obsolescence(6,317)(5,162)
  Total materials purchased for resale (distribution products), net141,185 106,996 
Total inventories$485,766 $312,809 
5.GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the nine months ended September 26, 2021 by segment are as follows:
(thousands)ManufacturingDistributionTotal
Balance - December 31, 2020$338,045 $57,755 $395,800 
Acquisitions64,312 11,458 75,770 
Adjustments to preliminary purchase price allocations7,366 19 7,385 
Balance - September 26, 2021$409,723 $69,232 $478,955 
Intangible assets, net consist of the following as of September 26, 2021 and December 31, 2020:
(thousands)September 26, 2021December 31, 2020
Customer relationships$549,314 $461,754 
Non-compete agreements19,144 15,949 
Patents36,528 23,025 
Trademarks (non-amortizing, indefinite lived)151,997 113,796 
756,983 614,524 
Less: accumulated amortization(198,943)(158,248)
Intangible assets, net$558,040 $456,276 

Changes in the carrying value of intangible assets for the nine months ended September 26, 2021 by segment are as follows:
(thousands)ManufacturingDistributionTotal
Balance - December 31, 2020$373,717 $82,559 $456,276 
Acquisitions114,833 32,715 147,548 
Amortization(33,543)(7,152)(40,695)
Adjustments to preliminary purchase price allocations(5,089) (5,089)
Balance - September 26, 2021$449,918 $108,122 $558,040 
12



6.ACQUISITIONS
General 
The Company completed three acquisitions in the third quarter of 2021 and completed ten acquisitions in the nine months ended September 26, 2021 (the "2021 Acquisitions"). For the third quarter and nine months ended September 26, 2021, net sales included in the Company's condensed consolidated statements of income related to the 2021 Acquisitions were $84.0 million and $146.1 million, respectively, and operating income was $6.6 million and $12.6 million, respectively, for each of these periods. One of the 2021 Acquisitions accounted for $53.5 million in net sales and $2.6 million in operating income for the third quarter of 2021 and $85.6 million in net sales and $4.5 million in operating income for the nine months ended September 26, 2021. Acquisition-related costs associated with the businesses acquired in the third quarter of 2021 and first nine months of 2021 were immaterial. Assets acquired and liabilities assumed in the individual 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 six acquisitions in the third quarter of 2020 and nine acquisitions in the nine months ended September 27, 2020. Net sales included in the Company's condensed consolidated statements of income in the third quarter and nine months ended September 27, 2020 related to acquisitions completed in the first nine months of 2020 were $19.6 million and $23.3 million, respectively, and operating income was $2.1 million and $2.2 million, respectively, for the same periods.

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.
In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. 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. As of September 26, 2021, the aggregate fair value of the estimated contingent consideration payments was $9.8 million, $3.7 million of which is included in "Accrued liabilities" and $6.1 million is included in “Other long-term liabilities” on the condensed consolidated balance sheet. At December 31, 2020, the aggregate fair value of the estimated contingent consideration payments was $6.9 million, $1.6 million of which was included in the line item "Accrued liabilities" and $5.3 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 $19.6 million in the aggregate. In the third quarter and nine months ended September 26, 2021, the Company made $1.5 million and $2.5 million in cash payments, respectively, related to contingent consideration liabilities. In connection with cash payments on contingent consideration, the Company recorded a $0.9 million charge in selling general and administrative expense in the condensed consolidated statement of income for the nine months ended September 26, 2021, representing changes from the amounts initially expected to be paid to what was ultimately paid.
13



2021 Acquisitions
The Company completed ten acquisitions in the nine months ended September 26, 2021, including the following five previously announced acquisitions:
CompanySegmentDescription
Sea-Dog Corporation & Sea-Lect Plastics
(collectively, "Sea-Dog")
Distribution & ManufacturingDistributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailers, and manufacturers that provides plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington
Hyperform, Inc.ManufacturingManufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine original equipment manufacturer ("OEM") market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida
Alpha Systems, LLCManufacturing & Distribution
Manufacturer and distributor of component products and accessories for the recreational vehicle ("RV"), marine, manufactured housing and industrial end markets that includes adhesives, sealants, rubber roofing, roto/blow molding, injection molding, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of nine facilities in Elkhart, Indiana.
Coyote Manufacturing CompanyManufacturingDesigner, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia.
Tumacs CoversManufacturing & DistributionManufacturer of custom designed boat covers, canvas frames, and bimini tops, primary serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan.
Inclusive of five acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $298.4 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2021 Acquisitions accounted for $149.3 million in cash and $10.2 million in common stock as consideration, $25.8 million in inventory, $28.4 million in fixed assets, $85.0 million in intangible assets, $18.1 million in accounts payable and accrued liabilities, $11.5 million in operating lease right-of-use assets and liabilities, and $33.6 million in goodwill. The preliminary purchase price allocations are subject to valuation activities being finalized, and thus all required purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2021 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.
14



2020 Acquisitions
The Company completed eleven acquisitions in the year ended December 31, 2020 (the "2020 Acquisitions"), including the following seven previously announced acquisitions:
CompanySegmentDescription
Maple City Woodworking CorporationManufacturingManufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana
SEI Manufacturing, Inc.ManufacturingManufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana
Inland Plywood CompanyManufacturingSupplier, laminator, and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida
Synergy RV TransportDistributionTransportation and logistics service provider primarily for OEMs and dealers in the RV market located in Goshen, Indiana
Front Range StoneManufacturingFabricator and installer of natural stone, quartz, solid surface, and laminate countertops, primarily serving big box home improvement retailers, home builders and commercial contractors in the industrial market based in Englewood, Colorado
Geremarie CorporationManufacturingDesigner, manufacturer, and fabricator of a full suite of high-precision aluminum components serving the marine industry, in addition to the medical, aerospace, defense, commercial and industrial markets located in Lake Zurich, Illinois
Taco Metals, LLCManufacturingManufacturer of boating products including rub rail systems, canvas and tower components, sport fishing and outrigger systems, helm chairs and pedestals, and specialty hardware for OEMs in the recreational boating industry and the related aftermarket headquartered in Miami, Florida, with manufacturing facilities in Tennessee and Florida, and distribution centers in Tennessee, Florida, South Carolina, and Massachusetts
Inclusive of four acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $306.3 million, plus contingent consideration over a one to three-year period based on future results in connection with certain acquisitions. One of the 2020 Acquisitions accounted for $129.7 million in cash consideration, $2.9 million in inventory, $49.3 million in fixed assets, $49.1 million in intangible assets, $2.6 million in accounts payable and accrued liabilities, $4.9 million in operating lease right-of-use assets and liabilities, and $32.6 million in goodwill. Purchase accounting adjustments are complete on all 2020 Acquisitions. Changes to preliminary purchase accounting estimates recorded in the third quarter and nine months ended September 26, 2021 related to the 2020 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.
15



The following table summarizes the fair values of the assets acquired and the liabilities assumed as of the date of acquisition for the 2021 Acquisitions and the 2020 Acquisitions:
(thousands)2021 Acquisitions2020 Acquisitions
Consideration
Cash, net of cash acquired$298,384 $306,319 
Working capital holdback and other, net(1)
1,189 (37)
Common stock issuance(2)
10,211  
Contingent consideration(3)
4,540 4,763 
Total consideration$314,324 $311,045 
Assets Acquired
Trade receivables$18,582 $15,320 
Inventories46,099 25,395 
Prepaid expenses & other975 725 
Property, plant & equipment53,570 65,083 
Operating lease right-of-use assets16,438 20,029 
Identifiable intangible assets147,495 130,981 
Liabilities Assumed
Current portion of operating lease obligations(3,984)(2,721)
Accounts payable & accrued liabilities(26,171)(12,405)
Operating lease obligations(12,454)(17,308)
Deferred tax liabilities(1,996)(4,576)
Total fair value of net assets acquired238,554 220,523 
Goodwill(4)
75,770 90,522 
$314,324 $311,045 
(1) Certain acquisitions contain working capital holdbacks which are typically settled after a 90-day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of September 26, 2021.
(2) In connection with one acquisition, the Company issued 113,961 shares of common stock at a closing price of $89.60 as of the acquisition date.
(3) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions.
(4) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $6.2 million), and the 2020 Acquisitions, except Front Range Stone (approximately $11.0 million).

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 on 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 an 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.
16



The following table presents our estimates of identifiable intangible assets for the 2021 Acquisitions and the 2020 Acquisitions:
(thousands, except year info)Estimated Useful Life (in years)2021 Acquisitions2020 Acquisitions
Customer relationships10$92,453 $99,897 
Non-compete agreements53,255 1,150 
Patents
10 - 18
13,450 6,470 
TrademarksIndefinite38,337 23,464 
$147,495 $130,981 
Pro Forma Information
The following pro forma information for the third quarter and nine months ended September 27, 2020 assumes the 2021 Acquisitions and the 2020 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 2021 Acquisitions and 2020 Acquisitions combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.

The pro forma information includes financing and interest expense charges based on incremental borrowings incurred in connection with each transaction. In addition, the pro forma information includes amortization expense, in the aggregate, related to intangible assets acquired in connection with the transactions of $0.2 million and $4.0 million for the third quarter and nine months ended September 26, 2021, respectively and $5.2 million and $16.3 million for the third quarter and nine months ended September 27, 2020, respectively.
 Third Quarter EndedNine Months Ended
(thousands, except per share data)September 26, 2021September 27, 2020September 26, 2021September 27, 2020
Revenue$1,067,111 $802,753 $3,040,971 $2,049,211 
Net income58,190 43,183 172,574 66,967 
Basic net income per common share2.55 1.90 7.56 2.94 
Diluted net income per common share2.49 1.87 7.38