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 endedMarch 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 -------------------------------------------------------------------------------- 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 ofMarch 31, 2022 , total net receivables, including pledged receivables, increased 39% compared toMarch 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 atMarch 31, 2022 and 26.6 days atMarch 31, 2021 . Our allowance for doubtful accounts balance was$6.0 million atMarch 31, 2022 and$4.7 million atMarch 31, 2021 . Net inventory levels increased 68% compared to levels atMarch 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 atMarch 31, 2022 and$13.7 million atMarch 31, 2021 . Our inventory turns, as calculated on a trailing four quarters basis, were 3.1 times atMarch 31, 2022 and 4.0 times atMarch 31, 2021 . Our inventory turns have averaged 3.4 times over the past five years.
Total debt outstanding at
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
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 -------------------------------------------------------------------------------- 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 endedMarch 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 ofMarch 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
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
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. 16 -------------------------------------------------------------------------------- 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 endedMarch 31, 2022 compared to 22.0% for the three months endedMarch 31, 2021 . We recorded a$7.3 million tax benefit from ASU 2016-09 in the quarter endedMarch 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. 17 --------------------------------------------------------------------------------
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. 18 -------------------------------------------------------------------------------- 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 theU.S. andCanada )
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 theU.S. andCanada )
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, althoughTexas 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 inEurope were hindered by unfavorable weather conditions. In the first quarter of 2021, sales benefited from favorable and generally mild weather conditions throughout the contiguousUnited States . InFebruary 2021 ,Texas experienced the most costly winter storm event on record forthe 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
•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) 20
-------------------------------------------------------------------------------- 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 atDecember 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 throughDecember 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 ofSeptember 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. AtMarch 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 ofMarch 31, 2022 was approximately 1.7%, excluding commitment fees.
Term Facility
Our Term Facility, as amended onOctober 12, 2021 , provides for$185.0 million in borrowing capacity and matures onDecember 30, 2026 . Proceeds from the Term Facility were used to pay down the Credit Facility inDecember 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. AtMarch 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 onNovember 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. 21 -------------------------------------------------------------------------------- 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
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 ofMarch 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 ofMarch 31, 2022 , our average total leverage ratio equaled 1.06 (compared to 0.77 as ofDecember 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 ofMarch 31, 2022 , our fixed charge ratio equaled 12.38 (compared to 11.76 as ofDecember 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 ofMarch 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. 22
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Compliance and Future Availability
As ofMarch 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 ofApril 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. 23
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