You should read the following discussion in conjunction with the accompanying
interim Consolidated Financial Statements and notes, the Consolidated Financial
Statements and accompanying notes in our 2021 Annual Report on Form 10-K and
with Management's Discussion and Analysis in our 2021 Annual Report on
Form 10-K.

For a discussion of our base business calculations, see the Results of Operations section below.

Forward-Looking Statements



This report contains forward-looking information that involves risks and
uncertainties. Our forward-looking statements express our current expectations
or forecasts of possible future results or events, including projections of
earnings and other financial performance measures, statements of management's
expectations regarding our plans and objectives and industry, general economic
and other forecasts of trends, future dividend payments and share repurchases,
and other matters. Forward-looking statements speak only as of the date of this
filing, and we undertake no obligation to publicly update or revise such
statements to reflect new circumstances or unanticipated events as they
occur. You can identify these statements by the fact that they do not relate
strictly to historic or current facts and often use words such as "anticipate,"
"estimate," "expect," "intend," "believe," "will likely result," "outlook,"
"project," "may," "can," "plan," "target," "potential," "should" and other words
and expressions of similar meaning.

No assurance can be given that the expected results in any forward-looking
statement will be achieved, and actual results may differ materially due to one
or more factors, including impacts on our business from the COVID-19 pandemic
and the extent to which strong demand driven by home-centric trends will
continue, accelerate or reverse; the sensitivity of our business to weather
conditions; changes in the economy; consumer discretionary spending; the housing
market or inflation rates; our ability to maintain favorable relationships with
suppliers and manufacturers; competition from other leisure product alternatives
or mass merchants; our ability to continue to execute our growth strategies;
excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks
detailed in our 2021 Annual Report on Form 10-K. For these statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995.

OVERVIEW

Financial Results



Net sales increased 33% in the first quarter of 2022 to $1.4 billion compared to
$1.1 billion in the first quarter of 2021. Base business sales grew 26%. The
increase in our sales reflects continued strong demand for outdoor living
products in addition to elevated price inflation of approximately 10% to 12%.
Sales also benefited approximately 5% from both accelerated customer early buys
and an extra selling day in the first quarter of 2022 compared to the first
quarter of 2021.

Gross profit increased 49% to $447.2 million in the first quarter of 2022 from
$301.1 million in the same period of 2021. Base business gross profit improved
38% over the first quarter of 2021. Gross margin increased 330 basis points to
31.7% in the first quarter of 2022 compared to 28.4% in the first quarter of
2021, while base business gross margin increased 270 basis points. Our prior
year strategic initiative to build inventory benefited our gross margin in the
first quarter of 2022.

Selling and administrative expenses (operating expenses) increased 23% to $211.5
million in the first quarter of 2022 compared to $172.1 million in the first
quarter of 2021. Our operating expenses have increased as we expand our
workforce and reward our employees through performance-based compensation. Other
incremental operating expense increases relate to recent acquisitions,
growth-driven facility and freight costs and increased investments in our
digital transformation initiatives. As a percentage of net sales, operating
expenses decreased to 15.0% in the first quarter of 2022 compared to 16.2% in
the same period of 2021.

Operating income in the first quarter of 2022 increased 83% to $235.7 million
compared to $129.0 million in the same period in 2021. Operating margin was
16.7% in the first quarter of 2022 compared to 12.2% in the first quarter of
2021. Base business operating margin was 16.5%, up 430 basis points from the
prior year period.

We recorded a $7.3 million, or $0.18 per diluted share, tax benefit from
Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based
Payment Accounting, in the quarter ended March 31, 2022, compared to a tax
benefit of $4.0 million, or $0.10 per diluted share, realized in the same period
of 2021.

                                       12
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Net income increased 82% to $179.3 million in the first quarter of 2022 compared
to $98.7 million in the first quarter of 2021. Earnings per diluted share
increased 82% to $4.41 in the first quarter of 2022 compared to $2.42 in the
same period of 2021. Without the impact from ASU 2016-09 in both periods,
earnings per diluted share was $4.23 in the first quarter of 2022 compared to
$2.32 in the first quarter of 2021.

References to product line and product category data throughout this report
generally reflect data related to the North American swimming pool market, as it
is more readily available for analysis and represents the largest component of
our operations.

COVID-19 Pandemic

We continue to monitor the ongoing impact of the COVID-19 pandemic, including
the effects of recent notable variants of the virus. The health, safety and
security of our employees and the communities in which we operate remains our
highest priority. We implemented enhanced hygiene and sanitation practices at
our sales centers and at our corporate offices in 2020, and we continue to
evaluate and maintain them where necessary.

Beginning in the second quarter of 2020 and through the first quarter of 2022, we experienced unprecedented demand as families spent more time at home and sought out opportunities to create or expand home-based outdoor living and entertainment spaces. While this trend has had a positive impact on our financial performance over the past couple of years, it is unclear what the long-term impact will be.



Our industry experienced constrained supply chain dynamics in 2021, which has
continued in the first quarter of 2022. In response, we have been proactive in
making significant investments in inventory to enable us to continue to meet
strong customer demand and position ourselves to provide exceptional customer
service into the 2022 swimming pool season. These trends, caused in large part
from global disruptions related to the COVID-19 pandemic, may persist in the
near-term.

We expect the impact of the pandemic on our business and financial results in
2022 will continue to vary by location and depend on numerous evolving factors
that we are unable to accurately predict. These factors include the duration and
scope of the pandemic, global economic conditions during and after the pandemic,
the possible re-institution of governmental restrictions on the activities of
our customers, vendors or employees, the possibility of additional subsequent
outbreaks, the sustainability of current home-centric trends and other changes
in customer and supplier behavior in response to the pandemic.

Financial Position and Liquidity



As of March 31, 2022, total net receivables, including pledged receivables,
increased 39% compared to March 31, 2021, primarily driven by our sales growth
and recent acquisitions. Our days sales outstanding (DSO), as calculated on a
trailing four quarters basis, was 26.4 days at March 31, 2022 and 26.6 days at
March 31, 2021. Our allowance for doubtful accounts balance was $6.0 million at
March 31, 2022 and $4.7 million at March 31, 2021.

Net inventory levels increased 68% compared to levels at March 31, 2021. We
increased our purchasing beginning in the second half of 2021 to alleviate the
impact of longer lead times from our vendors and ensure product availability for
our customers. Our inventory balance also reflects impacts from inflation and
recent acquisitions. Our inventory reserve was $19.8 million at March 31, 2022
and $13.7 million at March 31, 2021. Our inventory turns, as calculated on a
trailing four quarters basis, were 3.1 times at March 31, 2022 and 4.0 times at
March 31, 2021. Our inventory turns have averaged 3.4 times over the past five
years.

Total debt outstanding at March 31, 2022 was $1.5 billion, up $1.1 billion compared to total debt at March 31, 2021. We utilized debt proceeds to fund investments in working capital and our 2021 acquisitions.

Current Trends and Outlook



For a detailed discussion of trends through 2021, see the Current Trends and
Outlook section of Management's Discussion and Analysis included in Part II,
Item 7 of our 2021 Annual Report on Form 10-K.

We expect 2022 diluted EPS of $18.34 to $19.09, including the impact of year-to-date tax benefits of $0.18. Our previous earnings guidance range disclosed in our 2021 Annual Report on Form 10-K was $17.19 to $17.94, including an estimated $0.19 tax benefit. Our earnings guidance range assumes average weather conditions.

We expect sales growth at the higher end of the 17% to 19% range previously disclosed in our 2021 Annual Report on Form 10-K. We project 2022 inflationary product cost increases of approximately 10% to 11% (compared to 7% to 8% in 2021).


                                       13
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Our gross margin trends depend on the amounts and timing of inflationary price
increases, sales growth expectations and product mix. We expect relatively
neutral gross margin trends for the full year of 2022 compared to the full year
of 2021. Compared to 2021 periods, we project a modest improvement in the second
quarter of 2022 and declines in the latter half of the year.

We project our operating expense growth rate in 2022 will be less than our gross
profit growth rate. We expect that our operating expense growth will reflect
inflationary increases and incremental costs to support our investment
initiatives, including increased investments in our digital transformation
initiatives and expansion of our sales center network. We expect increased
expenses from tight labor and real estate markets in 2022, which are heightened
focus areas in our expense management.

We project that our annual effective tax rate (without the benefit from ASU
2016-09) for 2022 will approximate 25.5%. We expect our effective tax rate will
fluctuate from quarter to quarter due to ASU 2016-09, particularly in periods
when employees elect to exercise their vested stock options or when restrictions
on share-based awards lapse. We recorded a $7.3 million, or $0.18 per diluted
share, tax benefit from ASU 2016-09 for the three months ended March 31, 2022.
We may recognize additional tax benefits related to stock option exercises in
2022 from grants that expire in future years. We have not included any expected
tax benefits in our guidance beyond what we have recognized as of March 31,
2022.

We expect to continue to use cash to fund opportunistic share repurchases through the remainder of 2022 and to use cash for the payment of cash dividends as and when declared by our Board of Directors (our Board).



The forward-looking statements in the foregoing section are based on current
market conditions, speak only as of the filing date of this report, are based on
several assumptions, and are subject to significant risks and uncertainties. See
"Cautionary Statement for Forward-Looking Statements."

RESULTS OF OPERATIONS

As of March 31, 2022, we conducted operations through 414 sales centers in North America, Europe and Australia. For the three months ended March 31, 2022, approximately 94% of our net sales were from our operations in North America.

The following table presents information derived from the Consolidated Statements of Income expressed as a percentage of net sales:


                                                                 Three Months Ended
                                                                     March 31,
                                                                 2022              2021
   Net sales                                                         100.0  %     100.0  %
   Cost of sales                                                      68.3         71.6
   Gross profit                                                       31.7         28.4
   Selling and administrative expenses                                15.0         16.2

   Operating income                                                   16.7         12.2
   Interest and other non-operating expenses, net                      0.4          0.2
   Income before income taxes and equity in earnings                  16.3  %      11.9  %


Note: Due to rounding, percentages presented in the table above may not add to Operating income or Income before income taxes and equity in earnings.

We have included the results of operations from acquisitions in 2022 and 2021 in our consolidated results since the acquisition dates.


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Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021



The following table breaks out our consolidated results into the base business
component and the excluded component (sales centers excluded from base
business):

(Unaudited)                                    Base Business                            Excluded                                 Total
(in thousands)                              Three Months Ended                     Three Months Ended                     Three Months Ended
                                                 March 31,                              March 31,                              March 31,
                                         2022                 2021                2022              2021               2022                 2021
Net sales                           $ 1,328,126          $ 1,057,782          $  84,524          $ 2,963          $ 1,412,650          $ 1,060,745

Gross profit                            413,278              300,439             33,911              692              447,189              301,131
Gross margin                               31.1  %              28.4  %            40.1  %          23.4  %              31.7  %              28.4  %

Operating expenses                      193,927              171,285             17,539              815              211,466              172,100
Expenses as a % of net sales               14.6  %              16.2  %            20.8  %          27.5  %              15.0  %              16.2  %

Operating income (loss)                 219,351              129,154             16,372             (123)             235,723              129,031
Operating margin                           16.5  %              12.2  %            19.4  %          (4.2) %              16.7  %              12.2  %


In our calculation of our base business results, we have excluded the following acquisitions for the periods identified:



                                                                                      Net
                                                      Acquisition                Sales Centers                    Periods
Acquired                                                  Date                     Acquired                      Excluded
Porpoise Pool & Patio, Inc.                       December 2021                        1                 January - March 2022
Wingate Supply, Inc.                              December 2021                        1                 January - March 2022
Vak Pak Builders Supply, Inc.                     June 2021                            1                 January - March 2022
Pool Source, LLC                                  April 2021                           1                 January - March 2022
                                                                                                         January - February 2022
TWC Distributors, Inc.                            December 2020                       10                 and January - February
                                                                                                         2021



When calculating our base business results, we exclude sales centers that are
acquired, closed, or opened in new markets for a period of 15 months. We also
exclude consolidated sales centers when we do not expect to maintain the
majority of the existing business and existing sales centers that are
consolidated with acquired sales centers.


We generally allocate corporate overhead expenses to excluded sales centers on
the basis of their net sales as a percentage of total net sales. After 15 months
of operations, we include acquired, consolidated and new market sales centers in
the base business calculation including the comparative prior year period.

The table below summarizes the changes in our sales center count during the
first three months of 2022:

                             December 31, 2021     410

                             New locations           4

                             March 31, 2022        414



                                       15

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Net Sales
                                          Three Months Ended
                                              March 31,
                   (in millions)         2022           2021              Change
                   Net sales          $ 1,412.7      $ 1,060.7      $ 352.0       33%


Net sales increased 33% in the first quarter of 2022 compared to the first quarter of 2021, while base business net sales grew 26% over the same period. The following factors benefited our sales (listed in order of estimated magnitude):



•strong demand for discretionary products, as evidenced by improvements in sales
growth rates for product offerings such as equipment and building materials (see
discussion below);
•market share gains, including those in building materials (see discussion
below);
•increased demand for residential swimming pool maintenance supplies due to
increased usage, as evidenced by improvements in sales growth rates to retail
customers (see discussion below);
•inflationary product cost increases of approximately 10 to 12%;
•7% sales growth from recent acquisitions; and
•5% sales growth from both accelerated customer early buys and an extra selling
day in the first quarter of 2022 compared to the first quarter of 2021.

Higher sales growth rates for certain product offerings, such as equipment and
building materials, reflect continued strong demand in traditionally
discretionary areas, such as pool construction, pool remodeling and equipment
upgrades. In the first quarter of 2022, sales for equipment, which includes
swimming pool heaters, pumps, lights, filters and automation, increased 18%
compared to the same period last year, and collectively represented
approximately 29% of net sales for the period. Sales of building materials grew
29% compared to the first quarter of 2021 and represented approximately 14% of
net sales in the first quarter of 2022.

In the first quarter of 2022, sales for chemicals, representing 9% of total net sales, increased 58% compared to the first quarter of 2021. The increase in chemicals was driven by inflation, improved supply and strong demand for non-discretionary maintenance products.



Sales to customers who service large commercial installations and specialty
retailers that sell swimming pool supplies are included in the appropriate
existing product categories, and growth in these areas is reflected in the
numbers in the paragraphs above. Sales to retail customers increased 27% in the
first quarter of 2022 compared to the first quarter of 2021 and represented
approximately 10% of our net sales for the first quarter of 2022. Sales to
commercial customers increased 34% in the first quarter of 2022 compared to the
first quarter of 2021 and represented approximately 4% of our net sales for the
first quarter of 2022.

Gross Profit
                                          Three Months Ended
                                              March 31,
                   (in millions)          2022           2021             Change
                   Gross profit       $   447.2       $ 301.1       $ 146.1       49%
                   Gross margin            31.7  %       28.4  %



Gross margin increased 330 basis points to 31.7% in the first quarter of 2022
compared to 28.4% in the first quarter of 2021. Base business gross margin
increased 270 basis points. Our prior year strategic initiative to build
inventory benefited our gross margin in the first quarter of 2022. Product mix
and continued positive impacts from our ongoing pricing efforts also favorably
impacted our gross margin.

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Operating Expenses
                                                       Three Months Ended
                                                           March 31,
       (in millions)                                   2022           2021            Change
       Selling and administrative expenses         $   211.5       $ 172.1       $ 39.4       23%

       Operating expenses as a % of net sales           15.0  %       16.2  %



Operating expenses increased 23% in the first quarter of 2022 compared to the
first quarter of 2021. Our compensation expense has increased as we expand our
workforce and reward our employees through performance-based compensation. Other
incremental operating expense increases relate to recent acquisitions,
growth-driven facility and freight costs and increased investments in our
digital transformation initiatives. As a percentage of net sales, operating
expenses decreased to 15.0% in the first quarter of 2022 compared to 16.2% in
the same period of 2021.

Interest and Other Non-Operating Expenses, Net



Interest and other non-operating expenses, net for the first quarter of 2022
increased $2.6 million compared to the first quarter of 2021, primarily due to
higher average debt levels between periods. Our average outstanding debt was
$1.3 billion in the first quarter of 2022 versus $397.3 million for the first
quarter of 2021. Our weighted average effective interest rate decreased to 1.5%
from 2.2% for the respective periods.

Income Taxes



Our effective income tax rate was 22.3% for the three months ended March 31,
2022 compared to 22.0% for the three months ended March 31, 2021. We recorded a
$7.3 million tax benefit from ASU 2016-09 in the quarter ended March 31, 2022
compared to a tax benefit of $4.0 million realized in the same period last year.
Without the benefit from ASU 2016-09 in both periods, our effective tax rate was
25.4% for the first quarter of 2022 and 25.2% for the first quarter of 2021.

Net Income and Earnings Per Share



Net income increased 82% to $179.3 million in the first quarter of 2022 compared
to $98.7 million in the first quarter of 2021. Earnings per diluted share
increased to $4.41 in the first quarter of 2022 compared to $2.42 in the same
period of 2021. Without the impact from ASU 2016-09 in both periods, earnings
per diluted share increased 82% to $4.23 in the first quarter of 2022 compared
to $2.32 in the first quarter of 2021.

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Seasonality and Quarterly Fluctuations



Our business is seasonal. In general, sales and operating income are highest
during the second and third quarters, which represent the peak months of both
swimming pool use and installation and irrigation and landscape installations
and maintenance. Sales are lower during the first and fourth quarters. In 2021,
we generated approximately 60% of our net sales and 69% of our operating income
in the second and third quarters of the year.

We typically experience a build-up of product inventories and accounts payable
during the winter months in anticipation of the peak selling season.  Excluding
borrowings to finance acquisitions and share repurchases, our peak borrowing
usually occurs during the second quarter, primarily because extended payment
terms offered by our suppliers typically are payable in April, May and June,
while our peak accounts receivable collections typically occur in June, July and
August.

The following table presents certain unaudited quarterly data for the first
quarter of 2022, the four quarters of 2021 and the fourth, third and second
quarters of 2020. We have included income statement and balance sheet data for
the most recent eight quarters to allow for a meaningful comparison of the
seasonal fluctuations in these amounts. In our opinion, this information
reflects all normal and recurring adjustments considered necessary for a fair
presentation of this data. The results of any one or more quarters are not
necessarily a good indication of results for an entire fiscal year or of
continuing future trends for a variety of reasons, including the seasonal nature
of our business, the recent pandemic-driven increased demand for our products
and the impact of new and acquired sales centers.

(Unaudited)                                                                                                       QUARTER
(in thousands)                          2022                                                2021                                                                     2020
                                       First                Fourth               Third                Second               First               Fourth              Third                Second
Statement of Income Data
Net sales                          $ 1,412,650          $ 1,035,557          $ 1,411,448          $ 1,787,833          $ 1,060,745          $ 839,261          $ 1,139,229          $ 1,280,846
Gross profit                           447,189              322,376              441,899              551,685              301,131            239,095              328,698              373,481
Operating income                       235,723              127,891              237,276              338,586              129,031             74,351              148,233              205,857
Net income                             179,261              107,609              184,665              259,695               98,655             59,174              119,098              157,555

Balance Sheet Data
Total receivables, net             $   679,927          $   376,571          $   476,150          $   585,566          $   487,602          $ 289,200          $   366,412          $   453,405
Product inventories, net             1,641,155            1,339,100            1,043,407              894,654              977,228            780,989              612,824              628,418
Accounts payable                       685,946              398,697              414,156              439,453              634,998            266,753              268,412              346,272
Total debt                           1,505,073            1,183,350              362,819              423,116              433,171            416,018              339,934              438,804



We expect that our quarterly results of operations will continue to fluctuate
depending on the timing and amount of revenue contributed by new and acquired
sales centers. Based on our peak summer selling season, we generally open new
sales centers and close or consolidate sales centers, when warranted, either in
the first quarter before the peak selling season begins or in the fourth quarter
after the peak selling season ends.

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Weather is one of the principal external factors affecting our business. The
table below presents some of the possible effects resulting from various weather
conditions.

Weather                                                 Possible Effects
Hot and dry                                        •    Increased

purchases of chemicals and supplies


                                                        for existing 

swimming pools


                                                   •    Increased 

purchases of above-ground pools and


                                                        irrigation and lawn 

care products



Unseasonably cool weather or extraordinary         •    Fewer pool and irrigation and landscape
amounts
of rain                                                 installations
                                                   •    Decreased 

purchases of chemicals and supplies


                                                   •    Decreased 

purchases of impulse items such as


                                                        above-ground pools 

and accessories

Unseasonably early warming trends in spring/late • A longer pool and landscape season, thus cooling

                                                 positively
trends in fall                                          impacting our sales
(primarily in the northern half of the U.S. and
Canada)

Unseasonably late warming trends in spring/early • A shorter pool and landscape season, thus cooling

                                                 negatively
trends in fall                                          impacting our sales
(primarily in the northern half of the U.S. and
Canada)



Weather Impacts on 2022 and 2021 Results



Overall, weather conditions in the first quarter of 2022 were less favorable
than weather conditions in the first quarter of 2021. Sales benefited from
above-average temperatures along much of the west and the east coast, although
Texas experienced cooler-than-normal temperatures. In addition, some seasonal
markets had unfavorable weather compared to first quarter of 2021 when
construction activity started earlier than normal. Similarly, results in Europe
were hindered by unfavorable weather conditions. In the first quarter of 2021,
sales benefited from favorable and generally mild weather conditions throughout
the contiguous United States. In February 2021, Texas experienced the most
costly winter storm event on record for the United States, which damaged many
swimming pools and added to already strong replacement activity.

CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (GAAP), which require management to make estimates and assumptions that affect reported amounts and related disclosures. Management identifies critical accounting estimates as:

•those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made; and

•those for which changes in the estimates or assumptions, or the use of different estimates and assumptions, could have a material impact on our consolidated results of operations or financial condition.

Management has discussed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board. For a description of our critical accounting estimates that require us to make the most difficult, subjective or complex judgments, please see our 2021 Annual Report on Form 10-K. We have not changed any of these policies from those previously disclosed in that report.

Recent Accounting Pronouncements

See Note 1 of "Notes to Consolidated Financial Statements," included in Part I, Item 1 of this Form 10-Q for discussion of recent accounting pronouncements.


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LIQUIDITY AND CAPITAL RESOURCES



Liquidity is defined as the ability to generate adequate amounts of cash to meet
short-term and long-term cash needs. We assess our liquidity in terms of our
ability to generate cash to fund our operating activities, taking into
consideration the seasonal nature of our business. Significant factors which
could affect our liquidity include the following:

•cash flows generated from operating activities;
•the adequacy of available bank lines of credit;
•the quality of our receivables;
•acquisitions;
•dividend payments;
•capital expenditures;
•changes in income tax laws and regulations;
•the timing and extent of share repurchases; and
•the ability to attract long-term capital with satisfactory terms.

Our primary capital needs are seasonal working capital obligations, debt
repayment obligations and other general corporate initiatives, including
acquisitions, opening new sales centers, dividend payments and share
repurchases. Our primary working capital obligations are for the purchase of
inventory, payroll, rent, other facility costs and selling and administrative
expenses. Our working capital obligations fluctuate during the year, driven
primarily by seasonality and the timing of inventory purchases. Our primary
sources of working capital are cash from operations supplemented by bank
borrowings, which have historically been sufficient to support our growth and
finance acquisitions. We have funded our capital expenditures and share
repurchases in substantially the same manner.

We prioritize our use of cash based on investing in our business, maintaining a
prudent capital structure and returning cash to our shareholders through
dividends and share repurchases. Our specific priorities for the use of cash are
as follows:

•capital expenditures primarily for maintenance and growth of our sales center
network, technology-related investments and fleet vehicles;
•inventory and other operating expenses;
•strategic acquisitions executed opportunistically;
•payment of cash dividends as and when declared by our Board;
•repayment of debt to maintain an average total target leverage ratio (as
defined below) between 1.5 and 2.0; and
•repurchases of our common stock under our Board-authorized share repurchase
program.

We focus our capital expenditure plans principally on the needs of our sales
centers, and in recent years have increased our spending on information
technology. We project capital expenditures in 2022 will approximate our
historical average of 1.0% of net sales. Capital expenditures were 0.7% of net
sales in 2021, 0.6% of net sales in 2020 and 1.0% of net sales in 2019 and have
averaged roughly 1.0% of net sales over the past five years.

Sources and Uses of Cash

The following table summarizes our cash flows (in thousands):



                                                   Three Months Ended
                                                       March 31,
                                                   2022           2021
                     Operating activities      $ (208,109)     $ 77,113
                     Investing activities          (9,159)       (9,522)
                     Financing activities         228,717       (75,194)



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Net cash used in operations was $208.1 million for the first three months of
2022 compared to net cash provided by operations of $77.1 million for the first
three months of 2021. The decrease in our operating cash flows was driven by
incremental net working capital outflows, which reflect increased inventory
purchases and other working capital changes due to our sales growth and recent
acquisitions. In addition, our operating cash flows were impacted by federal tax
payments of $79.5 million in the first quarter of 2022, which were allowed to be
deferred and included in accrued expenses and other liabilities at December 31,
2021.

Net cash used in investing activities for the first three months of 2022
decreased slightly compared to the first three months of 2021 due to a decrease
in cash used for the acquisition of businesses of $0.7 million, offset by an
increase in capital expenditures of $0.3 million.

Net cash provided by financing activities increased $303.9 million to $228.7
million for the first three months of 2022 compared to net cash used in
financing activities of $75.2 million for the first three months of 2021. The
increase in cash provided by financing activities reflects a $304.4 million
increase in net debt proceeds and a $9.1 million decrease in share repurchases,
partially offset by an increase in dividends paid of $8.8 million.

Future Sources and Uses of Cash

Credit Facility



Our Credit Facility, as amended through December 30, 2021, provides for $1.25
billion in borrowing capacity consisting of a $750.0 million five-year unsecured
revolving credit facility and a $500.0 million term loan facility. The Credit
Facility includes a $750.0 million revolving credit facility and sublimits for
the issuance of swingline loans and standby letters of credit. The term loans
require quarterly amortization payments aggregating to 20% of the original
principal amount of the loan during the third, fourth and fifth years of the
loan, with all remaining principal due on the Credit Facility maturity date of
September 25, 2026. We intend to continue to use the Credit Facility for general
corporate purposes, for future share repurchases and to fund future growth
initiatives.

At March 31, 2022, there was $532.3 million of revolving borrowings outstanding,
a $500.0 million term loan, a $4.8 million standby letter of credit outstanding
and $212.9 million available for borrowing under the Credit Facility. Currently,
we pay interest on revolving borrowings under the Credit Facility at a variable
rate based on the one month London Interbank Offered Rate (LIBOR), plus an
applicable margin. The weighted average effective interest rate for the Credit
Facility as of March 31, 2022 was approximately 1.7%, excluding commitment fees.

Term Facility



Our Term Facility, as amended on October 12, 2021, provides for $185.0 million
in borrowing capacity and matures on December 30, 2026. Proceeds from the Term
Facility were used to pay down the Credit Facility in December 2019, adding
borrowing capacity for future share repurchases, acquisitions and
growth-oriented working capital expansion. The Term Facility is repaid in
quarterly installments of 1.250% of the Term Facility on the last business day
of each quarter beginning in the first quarter of 2020. We classify the entire
outstanding balance as Long-term debt on our Consolidated Balance Sheets as we
intend and have the ability to refinance the obligations on a long-term basis.
The total of the quarterly payments will be equal to 33.75% of the Term Facility
with the final principal repayment, equal to 66.25% of the Term Facility, due on
the maturity date. We may prepay amounts outstanding under the Term Facility
without penalty other than interest breakage costs.

At March 31, 2022, there was $164.2 million outstanding under the Term Facility
with a weighted average effective interest rate of 1.6%. We pay interest on
borrowings under the Term Facility at a variable rate based on the one month
LIBOR, plus an applicable margin.

Receivables Securitization Facility



Our two-year accounts receivable securitization facility (the Receivables
Facility) offers us a lower-cost form of financing. Under this facility, we can
borrow up to $350.0 million between April through June and from $175.0 million
to $315.0 million during the remaining months of the year. The Receivables
Facility matures on November 1, 2023. We classify the entire outstanding balance
as Long-term debt on our Consolidated Balance Sheets as we intend and have the
ability to refinance the obligations on a long-term basis.

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The Receivables Facility provides for the sale of certain of our receivables to
a wholly-owned subsidiary (the Securitization Subsidiary). The Securitization
Subsidiary transfers variable undivided percentage interests in the receivables
and related rights to certain third-party financial institutions in exchange for
cash proceeds, limited to the applicable funding capacities. Upon payment of the
receivables by customers, rather than remitting to the financial institutions
the amounts collected, we retain such collections as proceeds for the sale of
new receivables until payments become due.

The Receivables Facility contains terms and conditions (including representations, covenants and conditions precedent) customary for transactions of this type. Additionally, an amortization event will occur if we fail to maintain a maximum average total leverage ratio (average total funded debt/EBITDA) of 3.25 to 1.00 and a minimum fixed charge coverage ratio (EBITDAR/cash interest expense plus rental expense) of 2.25 to 1.00.

At March 31, 2022, there was $290.0 million outstanding under the Receivables Facility at a weighted average effective interest rate of 1.2%, excluding commitment fees.

Financial Covenants



Financial covenants of the Credit Facility and the Term Facility include
maintenance of a maximum average total leverage ratio and a minimum fixed charge
coverage ratio, which are our most restrictive financial covenants. As of March
31, 2022, the calculations of these two covenants are detailed below:

•Maximum Average Total Leverage Ratio. On the last day of each fiscal quarter,
our average total leverage ratio must be less than 3.25 to 1.00. Average Total
Leverage Ratio is the ratio of the trailing twelve months (TTM) Average Total
Funded Indebtedness plus the TTM Average Accounts Securitization Proceeds
divided by the TTM EBITDA (as those terms are defined in the Credit
Facility). As of March 31, 2022, our average total leverage ratio equaled 1.06
(compared to 0.77 as of December 31, 2021) and the TTM average total
indebtedness amount used in this calculation was $1.1 billion.

•Minimum Fixed Charge Coverage Ratio. On the last day of each fiscal quarter,
our fixed charge ratio must be greater than or equal to 2.25 to 1.00. Fixed
Charge Ratio is the ratio of the TTM EBITDAR divided by TTM Interest Expense
paid or payable in cash plus TTM Rental Expense (as those terms are defined in
the Credit Facility). As of March 31, 2022, our fixed charge ratio equaled 12.38
(compared to 11.76 as of December 31, 2021) and TTM Rental Expense was $73.2
million.

The Credit Facility and Term Facility limit the declaration and payment of
dividends on our common stock to a manner consistent with past practice,
provided no default or event of default has occurred and is continuing, or would
result from the payment of dividends. We may declare and pay quarterly dividends
so long as (i) the amount per share of such dividends is not greater than the
most recently publicly announced amount of dividends per share and (ii) our
Average Total Leverage Ratio is less than 3.25 to 1.00 both immediately before
and after giving pro forma effect to such dividends. Under the Credit Facility
and Term Facility, we may repurchase shares of our common stock provided no
default or event of default has occurred and is continuing, or would result from
the repurchase of shares, and our maximum average total leverage ratio
(determined on a pro forma basis) is less than 3.25 to 1.00.

Other covenants in each of our credit facilities include restrictions on our
ability to grant liens, incur indebtedness, make investments, merge or
consolidate, and sell or transfer assets. Failure to comply with any of our
financial covenants or any other terms of our credit facilities could result in,
among other things, higher interest rates on our borrowings or the acceleration
of the maturities of our outstanding debt.

Interest Rate Swaps



We utilize interest rate swap contracts and forward-starting interest rate swap
contracts to reduce our exposure to fluctuations in variable interest rates for
future interest payments on our variable rate borrowings.  Interest expense
related to the notional amounts under all swap contracts is based on the fixed
rates plus the applicable margin on the respective borrowings.

As of March 31, 2022, we had three interest rate swap contracts in place and two
forward-starting interest rate swap contracts, each of which has the effect of
converting our exposure to variable interest rates on our variable rate
borrowings to fixed interest rates. For more information, see Note 4 of "Notes
to Consolidated Financial Statements" included in Part I, Item 1 of this Form
10-Q.


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Compliance and Future Availability



As of March 31, 2022, we were in compliance with all material covenants and
financial ratio requirements under our Credit Facility, our Term Facility and
our Receivables Facility. We believe we will remain in compliance with all
material covenants and financial ratio requirements throughout the next twelve
months. For additional information regarding our debt arrangements, see Note 5
of "Notes to Consolidated Financial Statements," included in Part II, Item 8 of
our 2021 Annual Report on Form 10-K, as updated by Note 5 of "Notes to
Consolidated Financial Statements," included in Part I, Item 1 of this Form
10-Q.

We believe we have adequate availability of capital to fund present operations
and the current capacity to finance any working capital needs that may arise. We
continually evaluate potential acquisitions and hold discussions with
acquisition candidates. If suitable acquisition opportunities arise that would
require financing, we believe that we would have the ability to finance any such
transactions.

As of April 25, 2022, $427.1 million of the current Board-authorized amount
under our share repurchase program remained available. We expect to repurchase
shares on the open market from time to time depending on market conditions. We
plan to fund these repurchases with cash provided by operations and borrowings
under the above-described credit facilities.


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