PATRICK INDUSTRIES, INC. OVERVIEW
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the Company's Condensed
Consolidated Financial Statements and Notes thereto included in Item 1 of this
Report. In addition, this MD&A contains certain statements relating to future
results which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. See "Information Concerning
Forward-Looking Statements" on page 32 of this Report. The Company undertakes no
obligation to update these forward-looking statements.
OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE
Second Quarter and Six Months 2022 Financial Overview
Recreational Vehicle ("RV") Industry
The RV industry is our primary market and comprised 57% and 58% of the Company's sales in the second quarter endedJune 26, 2022 andJune 27, 2021 , respectively, and 59% for each of the comparative six month periods. Sales to the RV industry increased 41% in the second quarter of 2022 and increased 51% in the first six months of 2022, compared to the prior year periods. According to theRecreation Vehicle Industry Association ("RVIA"), RV wholesale shipments in the second quarter of 2022 totaled approximately 152,400 units, compared to approximately 151,800 units in the second quarter of 2021. RV wholesale unit shipments for the first six months of 2022 totaled approximately 323,800 units, an increase of 8% from approximately 300,300 units in the comparative prior year period. We estimate RV retail unit sales for the second quarter of 2022 decreased 29% compared to the second quarter of 2021. We believe the excess of RV wholesale unit shipments over RV retail unit sales in the first six months of 2022 primarily indicates replenishment of RV dealer inventories compared to the historically low levels in the latter half of 2020 and 2021. 23 --------------------------------------------------------------------------------
Marine Industry
Sales to the marine industry, which represented approximately 20% and 16% of the Company's consolidated net sales in the second quarter of 2022 and 2021, respectively, increased 74% in the second quarter of 2022 compared to the prior year quarter. For the first six months of 2022 and 2021, sales to the marine industry represented 18% and 16% of our consolidated net sales, respectively, increasing 69% in 2022 compared to the prior year period. Our marine revenue is generally correlated to marine wholesale powerboat unit shipments, which, according to Company estimates based on data published by theNational Marine Manufacturers Association ("NMMA"), increased 11% for the second quarter of 2022 and increased 3% for the first six months of 2022, compared to the prior year periods. Marine retail powerboat unit sales decreased an estimated 17% in the second quarter and first six months of 2022 compared to the prior year periods, primarily as a result of a limited retail units available for purchase caused in part by shortages in motors and certain electronic components used in OEM production. Estimated retail shipments continued to outpace wholesale shipments in the second quarter of 2022, and we estimate that marine dealer inventory levels continue to remain low.
Sales to the MH industry, which represented 13% and 14% of the Company's sales in the second quarter of 2022 and 2021, respectively, increased 44% in the second quarter of 2022 compared to the second quarter of 2021. MH sales represented 13% and 14% of the Company's sales in the first six months of 2022 and 2021, respectively, and increased 44% in the first six months of 2022 compared to the first six months of 2021. Based on industry data from theManufactured Housing Institute , MH wholesale unit shipments increased 17% in the second quarter of 2022 and increased 15% in the first six months of 2022 compared to the prior year periods.
Industrial Market
The industrial market is comprised primarily of the kitchen cabinet and countertop industry, hospitality market, retail and commercial fixtures market, office and household furniture market and regional distributors. Sales to this market represented 10% and 12% of our sales in the second quarter of 2022 and 2021, respectively, and increased 24% in the second quarter of 2022 compared to the prior year quarter. Industrial sales represented 10% and 11% of the Company's sales in the first six months of 2022 and 2021, respectively, and increased 30% in the first six months of 2022 compared to the first six months of 2021. Overall, our revenues in these markets are focused on residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets. We estimate that, in general, approximately 60-70% of our industrial business is directly tied to the residential housing market, with the remaining 30-40% directly tied to the non-residential and commercial markets. While this mix shifted more toward the residential market in the second quarter of 2022 as a result of strong housing market activity, we expect the mix to return to our historical range over time. According to theU.S. Census Bureau , combined new housing starts increased 3% in the second quarter of 2022 compared to the prior year quarter, with single family housing starts decreasing 3% and multifamily housing starts increasing 20% for the same period. For the first six months of 2022, combined new housing starts increased 6%, with single family housing starts remaining flat and multifamily housing starts increasing 20% for the same period. Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months. 24 --------------------------------------------------------------------------------
REVIEW OF CONSOLIDATED OPERATING RESULTS
Second Quarter and Six Months Ended
The following table sets forth the percentage relationship to net sales of certain items on the Company's Condensed Consolidated Statements of Income.
Second Quarter Ended
($ in thousands) June 26, 2022 June 27, 2021 Amount Change % Change
Net sales $ 1,475,693 100.0 % $ 1,019,953 100.0 % $ 455,740 45 %
Cost of goods sold 1,148,589 77.8 % 815,476 80.0 % 333,113 41 %
Gross profit 327,104 22.2 % 204,477 20.0 % 122,627 60 %
Warehouse and delivery expenses 44,047 3.0 % 34,815 3.4 % 9,232 27 %
Selling, general and administrative
expenses 90,485 6.1 % 60,365 5.9 % 30,120 50 %
Amortization of intangible assets 18,545 1.3 % 14,031 1.4 % 4,514 32 %
Operating income 174,027 11.8 % 95,266 9.3 % 78,761 83 %
Interest expense, net 14,802 1.0 % 14,580 1.4 % 222 2 %
Income taxes 42,701 2.9 % 21,701 2.1 % 21,000 97 %
Net income $ 116,524 7.9 % $ 58,985 5.8 % $ 57,539 98 %
Six Months Ended
($ in thousands) June 26, 2022 June 27, 2021 Amount Change % Change
Net sales $ 2,817,868 100.0 % $ 1,870,436 100.0 % $ 947,432 51 %
Cost of goods sold 2,195,419 77.9 % 1,504,427 80.4 % 690,992 46 %
Gross profit 622,449 22.1 % 366,009 19.6 % 256,440 70 %
Warehouse and delivery expenses 85,216 3.0 % 64,728 3.5 % 20,488 32 %
Selling, general and administrative
expenses 166,045 5.9 % 111,597 6.0 % 54,448 49 %
Amortization of intangible assets 35,406 1.3 % 25,937 1.4 % 9,469 37 %
Operating income 335,782 11.9 % 163,747 8.8 % 172,035 105 %
Interest expense, net 29,688 1.1 % 25,759 1.4 % 3,929 15 %
Income taxes 76,897 2.7 % 31,490 1.7 % 45,407 144 %
Net income $ 229,197 8.1 % $ 106,498 5.7 % $ 122,699 115 %
Net Sales . Net sales in the second quarter of 2022 increased $455.7 million , or
45%, to $1,475.7 million from $1,020.0 million in the second quarter of 2021.
The net sales increase in the second quarter of 2022 reflects strong demand for
our products across all end markets as well as the contribution of acquisitions
completed in 2021 and 2022. The Company's RV market sales increased 41%, marine
market sales increased 74%, MH market sales increased 44% and industrial market
sales increased 24% when compared to the prior year quarter.
Net sales in the first six months of 2022 increased $947.5 million , or 51%, to
$2,817.9 million from $1,870.4 million in the first six months of 2021. The net
sales increase in the first six months of 2022 reflects strong demand for our
products across all end markets as well as the contribution of acquisitions
completed in 2021 and 2022. The Company's RV market sales increased 51%, marine
market sales increased 69%, MH market sales increased 44% and industrial market
sales increased 30% when compared to the prior year period.
Revenue attributable to acquisitions completed in the first six months of 2022
was $40.8 million in the second quarter of 2022 and $49.2 million in the first
six months of 2022. Revenue attributable to acquisitions completed in the first
six months of 2021 was $56.7 million in the second quarter of 2021 and $62.1
million in the first six months of 2021.
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The Company's RV content per wholesale unit (on a trailing twelve-month basis)
for the second quarter of 2022 increased approximately 34% to $4,754 from $3,543
for the second quarter of 2021. Marine powerboat content per wholesale unit (on
a trailing twelve-month basis) for the second quarter of 2022 increased
approximately 66% to an estimated $4,692 from $2,823 for the second quarter of
2021. MH content per wholesale unit (on a trailing twelve-month basis) for the
second quarter of 2022 increased approximately 21% to $5,800 from $4,799 for the
second quarter of 2021.
Cost of Goods Sold. Cost of goods sold increased $333.1 million , or 41%, to
$1,148.6 million in the second quarter of 2022 from $815.5 million in 2021. As a
percentage of net sales, cost of goods sold decreased 220 basis points during
the second quarter of 2022 to 77.8% from 80.0% in 2021.
Cost of goods sold increased $691.0 million , or 46%, to $2,195.4 million in the
first six months of 2022 from $1,504.4 million in 2021. As a percentage of net
sales, cost of goods sold decreased 250 basis points during the first six months
of 2022 to 77.9% from 80.4% in 2021.
Cost of goods sold as a percentage of net sales decreased in the second quarter
and first six months of 2022 primarily as a result of (i) continued cost
reduction and automation initiatives we deployed throughout 2021 and into 2022
that have begun to have a positive impact on costs, (ii) volume-driven
efficiencies as a result of leveraging fixed costs, (iii) improved labor
efficiencies as a result of investment in human capital and improved retention
rates, and (iv) synergies and different cost profiles from acquisitions
completed in 2021 and 2022. For the second quarter of 2022, these four factors
contributed to a 230 basis point decrease in labor as a percentage of net sales
and 70 basis point decrease in overhead as a percentage of net sales, partially
offset by a 80 basis point increase in material costs as a percentage of net
sales as a result of supply-chain constraints, an increase in certain commodity
cost inputs, and $3.7 million of inventory step-up adjustments from purchase
accounting related to acquisitions. For the first six months of 2022, these four
factors contributed to a 290 basis point decrease in labor as a percentage of
net sales and 90 basis point decrease in overhead as a percentage of net sales,
partially offset by a 120 basis point increase in material costs as a percentage
of net sales as a result of supply-chain constraints, an increase in certain
commodity cost inputs, and $6.8 million of inventory step-up adjustments from
purchase accounting related to acquisitions. In general, the Company's cost of
goods sold percentage can be impacted from quarter-to-quarter by demand changes
in certain market sectors that can result in fluctuating costs of certain raw
materials and commodity-based components that are utilized in production.
Gross Profit. Gross profit increased $122.6 million , or 60%, to $327.1 million
in the second quarter of 2022 from $204.5 million in 2021. As a percentage of
net sales, gross profit increased 220 basis points to 22.2% in the second
quarter of 2022 from 20.0% in the same period in 2021.
Gross profit increased $256.4 million , or 70%, to $622.4 million in the first
six months of 2022 from $366.0 million in 2021. As a percentage of net sales,
gross profit increased 250 basis points to 22.1% in the first six months of 2022
from 19.6% in the same period in 2021.
The increase in gross profit as a percentage of net sales in the second quarter
and six months ended June 26, 2022 compared to the same periods in 2021 reflects
the impact of the factors discussed above under "Cost of Goods Sold".
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $9.2
million , or 27%, to $44.0 million in the second quarter of 2022 from $34.8
million in the second quarter of 2021. As a percentage of net sales, warehouse
and delivery expenses decreased 40 basis points to 3.0% in the second quarter of
2022 compared to 3.4% in the second quarter of 2021.
Warehouse and delivery expenses increased $20.5 million , or 32%, to $85.2
million in the first six months of 2022 from $64.7 million in the first six
months of 2021. As a percentage of net sales, warehouse and delivery expenses
decreased 50 basis points to 3.0% in the first six months of 2022 compared to
3.5% in the first six months of 2021.
The increase in warehouse and delivery expenses in the second quarter and first
six months ended June 26, 2022 compared to the same 2021 periods is attributable
to the increase in sales. However, the decrease as a percentage of net sales in
these periods is primarily attributable to leveraging certain fixed warehousing
costs and the lower proportion of MH sales in the second quarter and first six
months of 2022 as compared to 2021, which have higher warehouse and delivery
costs as a percentage of net sales.
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Selling, General and Administrative ("SG&A") Expenses. SG&A expenses increased
$30.1 million , or 50%, to $90.5 million in the second quarter of 2022 from $60.4
million in the prior year quarter. As a percentage of net sales, SG&A expenses
were 6.1% in the second quarter of 2022 compared to 5.9% in the second quarter
of 2021.
SG&A expenses increased $54.4 million , or 49%, to $166.0 million in the first
six months of 2022 from $111.6 million in the comparative prior year period. As
a percentage of net sales, SG&A expenses were 5.9% in the first six months of
2022 compared to 6.0% in the first six months of 2021.
The increase in SG&A expenses in the second quarter and first six months of 2022
compared to 2021 is primarily due to (i) the increase in net sales, and (ii)
increases in the breadth and depth of corporate resources, specifically our
investments in human capital, technology and other initiatives to support the
size and growth of the Company. As a percentage of sales, SG&A expenses
increased 20 basis points for the second quarter of 2022 compared to the second
quarter of 2021. This increase is primarily a result of $1.9 million of
performance-related adjustments to contingent considerations in the second
quarter of 2022 and increased expenses related to the enhancement of the
Company's healthcare and employee benefit plans. Excluding these factors, SG&A
expenses remained stable as a percent of sales in the second quarter and six
months ended June 26, 2022 as compared to the prior year periods.
Amortization of Intangible Assets. Amortization of intangible assets increased
$4.5 million , or 32%, to $18.5 million in the second quarter of 2022 from $14.0
million in the prior year quarter. Amortization of intangible assets increased
$9.5 million , or 37%, to $35.4 million in the first six months of 2022 from
$25.9 million in the prior year period. The increase in the second quarter and
first six months of 2022 compared to the prior year period primarily reflects
the impact of businesses acquired in 2021 and 2022.
Operating Income. Operating income increased $78.7 million , or 83%, to $174.0
million in the second quarter of 2022 from $95.3 million in 2021. As a
percentage of net sales, operating income increased 250 basis points to 11.8% in
the second quarter of 2022 versus 9.3% in the same period in 2021. For the first
six months of 2022, operating income increased $172.1 million , or 105%, to
$335.8 million in 2022 from $163.7 million in 2021. As a percentage of net
sales, operating income increased 310 basis points to 11.9% in the first six
months of 2022 versus 8.8% in the same period in 2021. The change in operating
income and operating margin is primarily attributable to the items discussed
above.
Interest Expense, Net. Interest expense increased $0.2 million , or 2%, to $14.8
million in the second quarter of 2022 from $14.6 million in the prior year
period. Interest expense increased $3.9 million , or 15%, to $29.7 million in the
first six months of 2022 from $25.8 million in the prior year period.
The increase in interest expense reflects (i) increased borrowings related to
2021 and 2022 acquisitions and (ii) the Company's issuance of its 1.75%
Convertible Notes due 2028 in December 2021 . These increases were partially
offset by (i) a reduction in non-cash interest expense related to our 1.00%
Convertible Notes due 2023 as a result of the adoption of ASU 2020-06 in the
first quarter of 2022 and (ii) a reduction in interest expense on our credit
facility due to the maturity of our interest rate swaps.
Income Taxes. Income tax expense increased $21.0 million in the second quarter
of 2022 to $42.7 million from $21.7 million in the prior year period. Income tax
expense increased $45.4 million in the first six months of 2022 to $76.9 million
from $31.5 million in the prior year period.
The increase in income tax expense is due primarily to an increase in pretax
income for the second quarter and first six months of 2022, as well as an
increased effective tax rate for the first six months of 2022. The effective tax
rate in the second quarter of 2022 and 2021 was 26.8% and 26.9%, respectively.
The effective tax rate in the first six months of 2022 and 2021 was 25.1% and
22.8%, respectively. The first six months of 2022 and 2021 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 $4.0
million and $5.7 million , respectively.
Use of Financial Metrics
Our MD&A includes financial metrics, such as RV, marine and MH content per unit,
which we believe are important measures of the Company's business performance.
Content per unit metrics are generally calculated using our market
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sales divided by Company estimates based on third-party measures of industry
volume. These metrics should not be considered alternatives to U.S. GAAP. Our
computations of content per unit may differ from similarly titled measures used
by others. These metrics should not be considered in isolation or as substitutes
for an analysis of our results as reported under U.S. GAAP.
REVIEW BY BUSINESS SEGMENT
The Company's reportable segments, Manufacturing and Distribution, are based on its method of internal reporting. The Company regularly evaluates the performance of the Manufacturing and Distribution segments and allocates resources to them based on a variety of indicators including sales and operating income. The Company does not measure profitability at the customer market (RV, marine, MH and industrial) level.
Second Quarter and Six Months Ended
General
In the discussion that follows, sales attributable to the Company's reportable segments include intersegment sales and gross profit includes the impact of intersegment operating activity.
The table below presents information about the sales, gross profit and operating
income of the Company's reportable segments. A reconciliation of consolidated
operating income is presented in Note 14 of the Notes to Condensed Consolidated
Financial Statements.
Second Quarter Ended
(thousands) June 26, 2022 June 27, 2021 Amount Change % Change
Sales
Manufacturing $ 1,108,944 $ 745,083 $ 363,861 49%
Distribution 393,634 292,429 101,205 35%
Gross Profit
Manufacturing 259,224 150,560 108,664 72%
Distribution 75,556 56,548 19,008 34%
Operating Income
Manufacturing 180,685 99,428 81,257 82%
Distribution 43,641 31,201 12,440 40%
Six Months Ended
(thousands) June 26, 2022 June 27, 2021 Amount Change % Change
Sales
Manufacturing $ 2,107,529 $ 1,359,647 $ 747,882 55%
Distribution 759,368 543,559 215,809 40%
Gross Profit
Manufacturing 495,511 271,486 224,025 83%
Distribution 151,323 100,698 50,625 50%
Operating Income
Manufacturing 351,229 177,857 173,372 97%
Distribution 89,607 52,376 37,231 71%
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Manufacturing
Sales. Sales increased$363.8 million , or 49%, to$1,108.9 million in the second quarter of 2022 from$745.1 million in the prior year quarter. For the first six months of 2022, sales increased$747.9 million , or 55%, to$2,107.5 million in the first six months of 2022 from$1,359.6 million in the prior year period. This segment accounted for approximately 74% and 72% of the Company's sales for the second quarter of 2022 and 2021, respectively, and 74% and 71% of the Company's sales for the first six months of 2022 and 2021, respectively. The sales increase in the second quarter of 2022 compared to 2021 was attributed to sales increases in all four of the Company's end markets, where sales to the RV end market increased 45%, marine increased 75%, MH increased 45% and industrial increased 28%. The sales increase in the first six months of 2022 compared to 2021 was attributed to sales increases in all four of the Company's end markets, where sales to the RV end market increased 57%, marine increased 66%, MH increased 47% and industrial increased 34%. Net sales in the second quarter and first six months of 2022 attributable to acquisitions completed in the first six months of 2022 was approximately$40.8 million and$49.2 million , respectively. Net sales in the second quarter and first six months of 2021 attributable to acquisitions completed in the first six months of 2021 was approximately$41.9 million and$46.7 million , respectively. Gross Profit. Gross profit increased$108.6 million , or 72%, to$259.2 million in the second quarter of 2022 from$150.6 million in the second quarter of 2021. For the first six months of 2022, gross profit increased$224.0 million , or 83%, to$495.5 million from$271.5 million in the first six months of 2021. As a percentage of sales, gross profit increased to 23.4% in the second quarter of 2022 from 20.2% in the second quarter of 2021, and increased to 23.5% in the first six months of 2022 from 20.0% in the first six months of 2021. Gross profit margin increased during the second quarter of 2022 compared to second quarter of 2021 primarily due to a 190 basis point decrease in manufacturing labor as a percentage of sales and a 140 basis point decrease in manufacturing overhead as a percentage of sales, partially offset by a 10 basis point increase in manufacturing material expense as a percentage of sales as a result of supply-chain constraints and increased material costs. Gross profit margin increased during the first six months of 2022 compared to the first six months of 2021 primarily due to a 200 basis point decrease in manufacturing labor as a percentage of sales and a 180 basis point decrease in manufacturing overhead as a percentage of sales, partially offset by a 30 basis point increase in manufacturing material expense as a percentage of sales as a result of supply-chain constraints and increased material costs. Operating Income. Operating income increased$81.3 million , or 82%, to$180.7 million in the second quarter of 2022 from$99.4 million in the prior year quarter. For the first six months of 2022, operating income increased$173.3 million , or 97%, to$351.2 million from$177.9 million in the prior year period. The overall increase in operating income in the second quarter and first six months of 2022 primarily reflects the items discussed above.
Distribution
Sales. Sales increased$101.2 million , or 35%, to$393.6 million in the second quarter of 2022 from$292.4 million in the prior year quarter. For the first six months of 2022, sales increased$215.8 million , or 40%, to$759.4 million in the first six months of 2022 from$543.6 million in the prior year period. This segment accounted for approximately 26% and 28% of the Company's sales for the second quarter of 2022 and 2021, respectively, and approximately 26% and 29% of the Company's sales for the first six months of 2022 and 2021, respectively. The sales increase in the second quarter of 2022 compared to the second quarter of 2021 was attributed to a 32% increase in our RV market sales, a 71% increase in marine market sales and a 43% increase in MH market sales, partially offset by a 11% decrease in industrial market sales. The sales increase in the first six months of 2022 compared to the first six months of 2021 was attributed to a 39% increase in our RV market sales, a 111% increase in marine market sales, and a 41% increase in MH market sales, partially offset by a 3% decrease in industrial market sales. None of the net sales in the second quarter and first six months of 2022 were attributable to acquisitions completed in the first six months of 2022. Net sales in the second quarter and first six months of 2021 attributable to acquisitions completed in the first six months of 2021 were approximately$14.8 million and$15.4 million , respectively. Gross Profit. Gross profit increased$19.1 million , or 34%, to$75.6 million in the second quarter of 2022 from$56.5 million in the second quarter of 2021. For the first six months of 2022, gross profit increased$50.6 million , or 50%, to 29 --------------------------------------------------------------------------------
Gross profit margin decreased during the second quarter of 2022 compared to second quarter of 2021 primarily due to a 230 basis point increase in distribution material expense as a percentage of sales as a result of supply-chain constraints and increased material costs, partially offset by a 210 basis point decrease in distribution labor as a percentage of sales.
Gross profit margin increased during the first six months of 2022 compared to first six months of 2021 primarily due to a 400 basis point decrease in distribution labor as a percentage of sales, partially offset by a 260 basis point increase in distribution material expense as a percentage of sales as a result of supply-chain constraints and increased material costs. Operating Income. Operating income increased$12.4 million , or 40%, to$43.6 million in the second quarter of 2022 from$31.2 million in the prior year quarter. For the first six months of 2022, operating income increased$37.2 million , or 71%, to$89.6 million from$52.4 million in the prior year period. The improvement in operating income in the second quarter and first six months of 2022 primarily reflects the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity at
Cash Flows
Operating Activities
Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for non-cash items and changes in operating assets and liabilities.
Net cash provided by operating activities was$74.3 million in the first six months of 2022 compared to$78.7 million in the first six months of 2021. The decrease is primarily attributable to an increase in use of cash for net working capital of$126.8 million , associated primarily with investments in inventory to support customer needs and growth of accounts receivable in line with net sales. In addition, there was a decrease in a source of cash for deferred income taxes of$8.5 million and an increase in a use of cash for gain on sale of property, plant and equipment of$5.5 million . This increased use of cash was partially offset by an increased source of cash from (i) a$122.7 million increase in net income and (ii) a$14.3 million increase in depreciation and amortization.
Investing Activities
Net cash used in investing activities decreased$93.3 million to$187.6 million in the first six months of 2022 from$280.9 million in the first six months of 2021 primarily due to a decrease in cash used in business acquisitions of$102.3 million , partially offset by an increase in capital expenditures of$18.2 million .
Financing Activities
Net cash provided by financing activities was$67.4 million in the first six months of 2022 compared to$215.8 million in the first six months of 2021. This change is primarily due to proceeds of$350.0 million from the Company's issuance of its 4.75% Senior Notes due 2029 in the first six months of 2021 and an additional$58.8 million in term loan borrowings in the first six months of 2021. These changes were partially offset by$140.0 million in net revolver borrowings compared to$140.0 million in net revolver payments in the prior year period and a$21.4 million increase in stock repurchases and dividends to shareholders. 30 --------------------------------------------------------------------------------
Summary of Liquidity and Capital Resources
At
The ability to access unused borrowing capacity under the Company's current credit facility as a source of liquidity is dependent on maintaining compliance with the financial covenants as specified under the terms of the credit agreement that established the credit facility (the "2021 Credit Agreement").
As of and for the reporting period endedJune 26, 2022 , the Company was in compliance with its financial covenants as required under the terms of its 2021 Credit Agreement. The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as ofJune 26, 2022 and for the fiscal period then ended are as follows: Required
Actual
Consolidated secured net leverage ratio (12-month period) 2.75
0.41
Consolidated fixed charge coverage ratio (12-month period) 1.50
6.42
In addition, as ofJune 26, 2022 , the Company's consolidated total net leverage ratio (12-month period) was 1.92. While this ratio was a covenant under the Company's credit agreement in existence prior to the 2021 Credit Agreement, it is not a covenant under the 2021 Credit Agreement. However, it is used in the determination of the applicable borrowing margin under the 2021 Credit Agreement. Working capital requirements vary from period to period depending on manufacturing volumes primarily related to the RV, MH, marine and industrial markets we serve, the timing of deliveries, and the payment cycles of customers. In the event that operating cash flow is inadequate and one or more of the Company's capital resources were to become unavailable, the Company would seek to revise its operating strategies accordingly. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.
CRITICAL ACCOUNTING POLICIES
There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . OTHER Seasonality Manufacturing operations in the RV, marine and MH industries historically have been seasonal and at their highest levels when the weather is moderate. Accordingly, the Company's sales and profits had generally been the highest in the second quarter and lowest in the fourth quarter. Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August/September timeframe as well as marine open houses in the January/February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows. In addition, current and future seasonal industry trends may be different than in prior years due to the impact of national and regional economic conditions and consumer confidence on retail sales of RVs and other products for which the Company sells its components, timing of dealer orders, fluctuations in dealer inventories, the impact of the COVID-19 pandemic on consumer buying patterns, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments. 31 --------------------------------------------------------------------------------
Russia-Ukraine War
InFebruary 2022 ,Russia invadedUkraine . As military activity proceeds and sanctions, export controls and other measures are imposed againstRussia ,Belarus and specific areas ofUkraine , the war is increasingly affecting the global economy and financial markets, as well as exacerbating ongoing economic challenges, including rising inflation and global supply-chain disruption. We will continue to monitor the impacts of theRussia -Ukraine war on macroeconomic conditions and continually assess the effect these matters may have on consumer demand, our suppliers' ability to deliver products, cybersecurity risks and our liquidity and access to capital.
Subsequent Events
We 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.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
The Company makes forward-looking statements with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the common stock ofPatrick Industries, Inc. and other matters from time to time and desires to take advantage of the "safe harbor" which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in the foregoing "Management's Discussion and Analysis of Financial Condition and Results of Operations", as well as other statements contained in this quarterly report and statements contained in future filings with theSecurities and Exchange Commission ("SEC"), publicly disseminated press releases, quarterly earnings conference calls, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. The Company does not undertake to publicly update or revise any forward-looking statements. Information about certain risks that could affect our business and cause actual results to differ from those expressed or implied in the forward-looking statements are contained in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 , and in the Company's Forms 10-Q for subsequent quarterly periods, which are filed with theSEC and are available on theSEC's website at www.sec.gov.
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