We have completed our acquisition accounting for these acquisitions, subject to adjustments for standard holdback provisions per the terms of the purchase agreements, which are not material. These acquisitions did not have a material impact on our financial position or results of operations.
We have completed our acquisition accounting for this acquisition. This acquisition did not have a material impact on our financial position or results of operations.
Note 4 – Fair Value Measurements and Interest Rate Swaps
Recurring Fair Value Measurements
Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and contingent consideration related to recent acquisitions.our deferred compensation plan asset and liability. The three levels of the fair value hierarchy under the accounting guidance are described below:
| |
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. |
| |
Level 2 | Inputs to the valuation methodology include: |
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 Inputs to the valuation methodology include:
•quoted prices for similar assets or liabilities in active markets;
•quoted prices for identical or similar assets or liabilities in inactive markets;
•inputs other than quoted prices that are observable for the asset or liability; or
•inputs that are derived principally from or corroborated by observable market data by correlation or other means.
| |
Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The table below presents the estimatedour assets and liabilities measured and recorded at fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilitiesvalue on a recurring basis (in thousands):
|
| | | | | | | | |
| | | Fair Value at September 30, |
| | | 2017 | | 2016 |
| Level 2 | | | | |
| Unrealized gains on interest rate swaps | | $ | 1,201 |
| | $ | 32 |
|
| Unrealized losses on interest rate swaps | | 1,791 |
| | 6,174 |
|
| | | | | |
| Level 3 | | | | |
| Contingent consideration liabilities | | $ | 1,924 |
| | $ | 1,626 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Fair Value at March 31, |
| | Input Level | | Classification | | 2024 | | 2023 |
| Assets | | | | | | | | |
| Unrealized gains on interest rate swaps | | Level 2 | | Prepaid expenses and other current assets | | $ | 4,984 | | | $ | — | |
| Unrealized gains on interest rate swaps | | Level 2 | | Other assets | | 23,738 | | | 28,970 | |
| Deferred compensation plan asset | | Level 1 | | Other assets | | 17,025 | | | 14,014 | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Deferred compensation plan liability | | Level 1 | | Other long-term liabilities | | $ | 17,025 | | | $ | 14,014 | |
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 a portion of our unsecured syndicated senior credit facility (the Credit Facility).variable rate borrowings.
ForWe use significant other observable market data or assumptions (Level 2 inputs) in determining the fair value of our interest rate swap contracts we use significant other observable market data or assumptions (Level 2 inputs)and forward-starting interest rate swap contract that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. We include unrealized gains in Prepaid expenses and other current assets and unrealized losses in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.
We recognize any differences between the variable interest rate paymentsin effect and the fixed interest rate settlements fromrates per our swap counterpartiescontracts as an adjustment to interest expense over the life of the swaps. We designated these swaps as cash flow hedges, and toTo the extent our derivatives are effective in offsetting the variability of the hedged cash flows, we record the changes in the estimated fair value of the swapsour interest rate swap contracts to Accumulated other comprehensive lossincome on ourthe Consolidated Balance Sheets. To
We currently have two swap contracts in place. These swap contracts were previously forward-starting and convert the extent ourvariable interest rate swaps are determined to be ineffective, we recognizea fixed interest rate on a portion of our variable rate borrowings. Interest expense related to the changesnotional amounts under these swap contracts is based on the fixed rates plus the applicable margin on a portion of our variable rate borrowings. Changes in the estimated fair value of our swaps in earnings.
We currently have threethese interest rate swap contracts in place, which became effectiveare recorded to Accumulated other comprehensive income on October 19, 2016. These swaps were previously forward-starting contracts that were amended in October 2015 to bring the fixed rates per our forward-starting contracts in line with current market rates and extend the hedged period for future interest payments on our Credit Facility. As amended, these swap contracts terminate on November 20, 2019. In the first nine months of 2017, we recognized a benefit of $1.3 million as a result of our determination of ineffectiveness for the period. These amounts were recorded in Interest and other non-operating expenses, net on our Consolidated Statements of Income.Balance Sheets.
The following table provides additional details related to each of these amended swap contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative | | Inception Date | | Effective Date | | Termination Date | | Notional Amount
(in millions) | | Fixed Interest Rate |
| Interest rate swap 1 | | February 5, 2020 | | February 26, 2021 | | February 28, 2025 | | $150.0 | | 1.3260% |
| Interest rate swap 2 | | March 9, 2020 | | September 29, 2022 | | February 26, 2027 | | $150.0 | | 0.6690% |
|
| | | | | | |
| Derivative | | Amendment Date | | Notional Amount (in millions) | | Fixed Interest Rate |
| Interest rate swap 1 | | October 1, 2015 | | $75.0 | | 2.273% |
| Interest rate swap 2 | | October 1, 2015 | | $25.0 | | 2.111% |
| Interest rate swap 3 | | October 1, 2015 | | $50.0 | | 2.111% |
Upon amendment of the original hedge agreements, we were required to freeze the amounts related to the changes in the fair values of these swaps, which are recorded in Accumulated other comprehensive loss. At September 30, 2017, the remaining balance of the unrealized losses was $1.9 million and is being amortized over the effective period of the original forward-starting interest rate swap contracts from October 2016 to September 2018. In the first nine months of 2017, we recorded expense of $1.4 million as amortization of the unrealized loss in Interest and other non-operating expenses, net.
For the three interest rate swap contracts in effect at September 30, 2017,March 31, 2024, a portion of the change in the estimated fair value between periods relates to future interest expense. Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive lossincome on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. These amounts were not material in the three and nine monththree-month periods ended September 30, 2017 and September 30, 2016.March 31, 2024 or March 31, 2023.
In July 2016 we entered into an additionalWe also have in place a forward-starting interest rate swap contract to extend the hedged period for future interest payments on a portion of our Credit Facility to its maturity date at that time. This swap contract will convert the variable interest rate to a fixed interest rate on borrowings under the Credit Facility. This contract becomes effective on November 20, 2019 and terminates on November 20, 2020.borrowings. The following table provides additional details related to thisour forward-starting interest rate swap contract: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative | | Inception Date | | Effective Date | | Termination Date | | Notional
Amount
(in millions) | | Fixed
Interest
Rate |
| Forward-starting interest rate swap | | March 9, 2020 | | February 28, 2025 | | February 26, 2027 | | $150.0 | | 0.7630% |
|
| | | | | | |
| Derivative | | Inception Date | | Notional
Amount
(in millions) | | Fixed
Interest
Rate |
| Forward-starting interest rate swap 1 | | July 6, 2016 | | $150.0 | | 1.1425% |
Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to bewere in a net pay position.
Our interest rate swap contracts and forward-starting interest rate swap contractscontract are subject to master netting arrangements. According to our accounting policy, we do not offset the fair values of assets with the fair values of liabilities related to these contracts.
Contingent Consideration LiabilitiesOther
As of September 30, 2017, our Consolidated Balance Sheets reflected $0.7 millionOur deferred compensation plan asset represents investments in Accrued expenses and other current liabilities and $1.2 millionsecurities (primarily mutual funds) traded in Other long-term liabilities for contingent consideration related to future payouts for our acquisitions of The Melton Corporation, which we acquired in November 2015, Metro Irrigation Supply Company Ltd. and Newline Pool Products. In determining our original estimates for contingent consideration, which are based on a percentage of gross profit for certain products for The Melton Corporation and a multiple of gross profit for Metro Irrigation Supply Company Ltd., we applied a linear model using our best estimate of gross profit projections for fiscal years 2016 to 2020. The payout for Newline Pool Products is based on a multiple of earningsan active market (Level 1 inputs) held for the first fiscal yearbenefit of the acquisition. We based our estimate for the Newline payout on projected operating results for that year. Allcertain employees as part of our estimates of contingent consideration use Level 3 inputs as defineddeferred compensation plan. We record an equal and offsetting deferred compensation plan liability, which represents our obligation to participating employees. Changes in the accounting guidance. The maximum total payouts for Metro Irrigation Supply Company Ltd. and Newline Pool Products over the related time periods are $1.0 million and AU$0.5 million, respectively.
In the first nine months of 2017, we paid approximately $0.2 million in contingent consideration to The Melton Corporation based on 2016 results. Since the acquisition dates, we have recorded minimal adjustments to our original estimates based on the calculated 2017 payouts related to the fiscal year ended December 31, 2016. Adjustments to the fair value of contingent considerationthe plan asset and liability are recognizedreflected in earnings inSelling and administrative expenses on the period in which we determine that the fair value changed. AsConsolidated Statements of September 30, 2017, we have determined that the contingent consideration liability was in a range of acceptable estimates for all applicable fiscal periods.Income.
Other
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments (Level 1 inputs). For the note receivable with our variable interest entity, our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to collectibility (Level 3 inputs).instruments. The carrying value of this note receivable, including adjustments, approximates fair value. The carrying value ofour long-term debt approximates its fair value. Our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to borrowing rates (Level 3 inputs).
Note 5 – Debt
The table below presents the components of our debt (in thousands):
| | | | | | | | | | | | | | |
| | | March 31, |
| | | 2024 | | 2023 |
| Variable rate debt | | | | |
| Short-term borrowings | | $ | — | | | $ | 3,011 | |
| Current portion of long-term debt: | | | | |
| Australian credit facility | | 11,655 | | | 11,319 | |
| Current portion of term loans under credit facility | | 25,000 | | | 18,750 | |
| Short-term borrowings and current portion of long-term debt | | $ | 36,655 | | | $ | 33,080 | |
| | | | |
| Long-term portion: | | | | |
| Revolving credit facility | | $ | 115,400 | | | $ | 398,895 | |
| Term loan under credit facility | | 456,250 | | | 481,250 | |
| Term facility | | 109,937 | | | 154,938 | |
| Receivables securitization facility | | 262,300 | | | 299,600 | |
| Less: financing costs, net | | 1,365 | | | 2,013 | |
| Long-term debt, net | | 942,522 | | | 1,332,670 | |
| Total debt | | $ | 979,177 | | | $ | 1,365,750 | |
|
| | | | | | | | |
| | | September 30, |
| | | 2017 | | 2016 |
| Variable rate debt | | | | |
| Short-term borrowings | | $ | — |
| | $ | — |
|
| Current portion of long-term debt: | | | | |
| Australian credit facility | | 8,609 |
| | 1,298 |
|
| Short-term borrowings and current portion of long-term debt and other long-term liabilities | | 8,609 |
| | 1,298 |
|
| | | | | |
| Long-term portion: | | | | |
| Revolving credit facility | | 415,277 |
| | 280,068 |
|
| Receivables securitization facility | | 142,300 |
| | 110,000 |
|
| Less: financing costs, net | | 1,613 |
| | 1,177 |
|
| Long-term debt, net | | 555,964 |
| | 388,891 |
|
| Total debt | | $ | 564,573 |
| | $ | 390,189 |
|
Revolving Credit Facility
On September 29, 2017, we entered into the Amended and Restated Credit Agreement (the Agreement) among us, as US Borrower, SCP Distributors Canada Inc., as Canadian Borrower, SCP Pool B.V., as Dutch Borrower, Wells Fargo Bank, National Association, as Joint Lead Arranger and Administrative Agent, and certain other joint lead arrangers, syndication agents and lenders. The Agreement amends and restates our existing unsecured syndicated senior credit facility (the Credit Facility) principally in the following ways:
extends the maturity date to September 29, 2022;
increases the borrowing capacity to $750.0 million from $465.0 million; and
provides other changes to interest rates, fees and negative covenants as outlined below.
The Credit Facility includes sublimits for the issuance of swingline loans and standby letters of credit. Pursuant to an accordion feature, the aggregate maximum principal amount of the commitments under the Credit Facility may be increased at our request and with agreement by the lenders by up to $75.0 million, to a total of $825.0 million.
Our obligations under the Credit Facility are guaranteed by certain of our subsidiaries. The Credit Facility also contains affirmative and negative covenants and events of default customary for transactions of this type. If we default under the Credit Facility, the lenders may terminate their commitments and may require us to repay all amounts.
Revolving borrowings under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:
| |
a. | a base rate, which is the highest of (i) the Wells Fargo Bank, National Association prime rate, (ii) the Federal Funds Rate plus 0.500% and (iii) the London Interbank Offered Rate (LIBOR) Market Index Rate plus 1.000%; or |
Borrowings by the Canadian Borrower bear interest, at the Canadian Borrower’s option, at either of the following and, in each case, plus an applicable margin:
| |
a. | a base rate, which is the greatest of (i) the Canadian Reference Bank prime rate and (ii) the annual rate of interest equal to the sum of the Canadian Dealer Offered Rate (CDOR) plus 1.000%; or |
Borrowings by the Dutch Borrower bear interest at LIBOR plus an applicable margin.
The interest rate margins on the borrowings and letters of credit are based on our leverage ratio and will range from 1.025% to 1.425% on CDOR, LIBOR and swingline loans, and from 0.025% to 0.425% on Base Rate and Canadian Base Rate loans. Borrowings under the swingline loans are based on the LIBOR Market Index Rate (LMIR) plus any applicable margin. We are also required to pay an annualaccounts receivable securitization facility fee ranging from 0.100% to 0.200%, depending on our leverage ratio.
Receivables Securitization Facility
The Receivables Securitization Facility (the Receivables Facility) provides for the sale of certain of our receivables to a wholly ownedwholly-owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third partythird-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 to the third party financial institutions.
We account for the sale of the receivable interests as a secured borrowing on our Consolidated Balance Sheets. The receivables subject to the agreement collateralize the cash proceeds received from the third partythird-party financial institutions. We classify the entire outstanding balance as Long-term debt, net on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis. We present the receivables that collateralize the cash proceeds separately as Receivables pledged under receivables facility on our Consolidated Balance Sheets.
Cash Pooling Arrangement
Certain of our foreign subsidiaries entered into a cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows the participating subsidiaries to withdraw cash from the financial institution to the extent that aggregate cash deposits held by these subsidiaries are available at the financial institution. To the extent the participating subsidiaries are in an overdraft position, such overdrafts are recorded as short-term borrowings under a committed cash overdraft facility. These borrowings bear interest at a variable rate based on the 3-month Euro Interbank Offered Rate (EURIBOR), plus a fixed margin. The facility has a seasonal maximum borrowing capacity of €12.0 million. We are required to pay a commitment fee, which is based on the borrowing capacity schedule. We pay this fee annually, in advance.
Australian Credit Facility
In the second quarter of 2017, PSL entered into a new credit facility, which provides a borrowing capacity of AU$20.0 million, to fund expansion and supplement working capital needs. The facility balance at September 30, 2017 includes borrowings to fund the Newline Pool Products acquisition and the purchase of the noncontrolling interest.
Note 6 – Redeemable Noncontrolling Interest
As discussed in Note 1 - Summary of Significant Accounting Policies, in July 2014, we purchased a controlling interest in PSL. Included in the transaction documents was a put/call option deed that granted us an option to purchase the shares held by the noncontrolling interest, and granted the holder of the noncontrolling interest an option to require us to purchase its shares in one or two transactions. The put/call option deed in this transaction was considered an equity contract and therefore a financial instrument under the accounting guidance. In applying the guidance for this transaction, we determined that the financial instrument was embedded in the noncontrolling interest. As a public company, we were required to classify the noncontrolling interest and the embedded financial instrument as redeemable noncontrolling interest in a separate section of our Consolidated Balance Sheets, between liabilities and equity.
On June 29, 2017, we purchased the remaining 40% interest in PSL. The actual redemption value exceeded the carrying amount, and we recorded an adjustment to Additional paid in capital as there were no retained earnings attributable to the noncontrolling interest.
The table below presents the changes in Redeemable noncontrolling interest (in thousands):
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 2023 Annual Report on Form 10-K and Management’s Discussion and Analysis included in our 20162023 Annual Report on Form 10-K.
For a discussion of our base business calculations, see the RESULTS OF OPERATIONS section below.Forward-Looking Statements
Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995
Our disclosure and analysis in thisThis report contains forward-looking information that involves risks and uncertainties. Our forward‑lookingforward-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 strategic, operational and capital allocation plans and objectives, management's views on industry, economic, competitive, technological and industry, general economicregulatory conditions and other forecasts of trends 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 statementsstatement will be achieved, and actual results may differ materially due to one or more factors, including the sensitivity of our business to weather conditions,conditions; changes in the economy andeconomic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers,manufacturers; the extent to which home-centric trends associated with the pandemic will continue to moderate or reverse; competition from other leisure product alternatives andor mass merchants,merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in our 20162023 Annual Report on Form 10-K.10-K, as updated by our subsequent filings with the U.S. Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.Act of 1995.
OVERVIEW
Financial Results
Our business performed very wellNet sales decreased 7% in the thirdfirst quarter of 2017, despite severe weather in Florida, Texas, Puerto Rico and Mexico from Hurricanes Irma, Harvey, Maria and Katia and despite the devastating earthquake in Mexico. While these events are disruptive2024 to $1.1 billion compared to $1.2 billion in the short term, we believe they will not have a material impact on our operatingfirst quarter of 2023 following significant growth in 2021 and 2022. Base business results approximated consolidated results for the year.period. Maintenance activities were stable during the quarter, indicating steady demand for non-discretionary products, while pool construction and discretionary activities were weaker. Inflationary product cost increases moderated and net sales benefited approximately 2% compared to a benefit of 4% to 5% in the first quarter of 2023.
Net sales increasedGross profit decreased 8% to $743.4 million for the third quarter of 2017 compared to $691.4$338.6 million in the thirdfirst quarter of 2016. 2024 from $369.8 million in the same period of 2023. Gross margin decreased 40 basis points to 30.2% in the first quarter of 2024 compared to 30.6% in the first quarter of 2023. In the first quarter of 2024, our gross margin was impacted by the following factors.
•Gross margin in the first quarter of 2024 included a benefit of $12.6 million, or 110 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
•Gross margin benefited from ongoing supply chain management initiatives.
•We realized base business sales growtha higher cost of 6%. We had one less selling dayproduct in the thirdfirst quarter of 20172024 compared to the same periodfirst quarter of 2023. In 2023, we started the year carrying a large amount of lower cost strategically-purchased inventory and successfully reduced this excess inventory to normalized levels by the end of the 2023 season. The lower-cost inventory was more impactful on gross margin in the first quarter of 2023 when a higher portion was sold relative to the full year.
•Changes in product mix weighed on our gross margin; we expect this mix to shift as sales of higher margin products increase as the season progresses.
•Greater customer preseason early buys during the quarter compared to last year which we believe negatively impacted base businessand a higher concentration of sales growth by approximately 1%. Continued increases in in swimming pool repair and remodel activities, including major pool refurbishment and replacement of key pool equipment, led our sales growth. The recent weather eventsto larger customers negatively impacted our third quarter 2017 net sales by an estimated $4.0 million.margin.
Gross profit increased 9% for the third quarter of 2017 compared to the same period in 2016. Base business gross profit improved 7% over the third quarter of last year. Gross profit as a percentage of net sales (gross margin) increased approximately 20 basis points to 29.1% compared to the third quarter of 2016, reflecting product mix and benefits from sourcing initiatives.
Selling and administrative expenses (operating expenses) increased 7% 3% to $229.8 million in the first quarter of 2024 compared to $224.0 million in the thirdfirst quarter of 2016,2023. While we managed variable costs in line with base business operating expenses up 5% over the comparable 2016 period.lower sales volumes, expense growth drivers included rent and facility costs, inflationary wage increases, insurance costs, technology initiatives and investments in greenfield locations. As a percentage of net sales, base business operating expenses declinedincreased to 17.9% for the third quarter versus 18.1% last year.
Operating income for the third quarter increased 10% compared to the same period20.5% in 2016. Operating income as a percentage of net sales (operating margin) was 11.0% for the third quarter of 2017 compared to 10.7% for the third quarter of 2016.
During the first quarter of 2017, we adopted2024 compared to 18.6% in the same period of 2023.
Operating income in the first quarter of 2024 decreased 25% to $108.7 million from $145.8 million in 2023. Operating margin was 9.7% in the first quarter of 2024 compared to 12.1% in the first quarter of 2023.
Interest and other non-operating expenses, net for the first quarter of 2024 decreased $2.4 million compared to the first quarter of 2023, primarily due to a decrease in average debt between periods.
We recorded a $7.4 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, onin the quarter ended March 31, 2024, compared to a prospective basis.tax benefit of $4.8 million realized in the same period of 2023. This adoption resulted in a benefit recorded in our Provision for income taxes of $0.3 million for the three months ended September 30, 2017 and $7.7 million for the nine months ended September 30, 2017, which positively impacted our net income and earnings$0.19 per diluted share but was partially offset by a required increase of approximately 500,000 and 550,000 diluted weighted average shares outstanding, respectively, used to calculate our diluted earnings per share. The total first and second quartertax benefit to our diluted earnings per share from the adoption of this new accounting pronouncement was $0.14, and there was no impact in the thirdfirst quarter of 2017.2024 compared to a $0.12 per diluted share tax benefit realized in the same period of 2023.
Net income attributabledecreased 22% to Pool Corporation was $48.8$78.9 million in the thirdfirst quarter of 20172024 compared to $44.5$101.7 million forin the thirdfirst quarter of 2016.2023. Earnings per share increased to a record $1.16 per diluted share fordecreased 21% to $2.04 in the three months ended September 30, 2017 versus $1.03first quarter of 2024 compared to $2.58 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 25% to $1.85 compared to $2.46 in the first quarter of 2023. See RESULTS OF OPERATIONS below for the same period in 2016.definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.
References to product line and product category data throughout this Form 10-Qreport generally reflect data related to the North American swimming pool market, as itthis data is more readily available for analysis and represents the largest component of our operations.
In this Form 10-Q and other of our public disclosures, we estimate the impact that favorable or unfavorable weather had on our operating results. In connection with these estimates, we make several assumptions and rely on various third-party sources. It is possible that others assessing the same data could reach conclusions that differ from ours.
Financial Position and Liquidity
Total net receivables, including pledged receivables, increased 13% from September 30, 2016, including a 2% increase from acquisitions.trended in line with net sales activity at March 31, 2024 compared to March 31, 2023. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 29.826.9 days at September 30, 2017, an improvement from 30.3March 31, 2024 and 26.5 days at September 30, 2016, reflecting the effectiveness of our collection efforts.March 31, 2023. Our allowance for doubtful accounts balance was $4.1$9.3 million at September 30, 2017March 31, 2024 and $3.7$9.0 million at September 30, 2016.March 31, 2023.
NetWe reduced net inventory levels grew 6% compared to levels at September 30, 2016. TheMarch 31, 2023 by $189.7 million, or 11%, to $1.5 billion, consistent with the trends stemming from our inventory management efforts executed over the 2023 swimming pool season following strategic buys in prior years. Our inventory reserve was $7.8$24.2 million at September 30, 2017March 31, 2024 and $8.1$24.5 million at September 30, 2016.March 31, 2023. Our inventory turns, as calculated on a trailing four quarters basis, were 3.52.7 times at both September 30, 2017March 31, 2024 and September 30, 2016.2.5 times at March 31, 2023.
Total debt outstanding was $979.2 million at September 30, 2017 was $564.6March 31, 2024, down $386.6 million an increase of $174.4 million, or 45%, comparedfrom March 31, 2023, as we have used operating cash flows to totalreduce our debt at September 30, 2016, primarily because of share repurchases of $199.0 million over the last 12 months, as well as debt incurred to fund business driven working capital growth.
past year.
Current Trends and Outlook
For a detailed discussion of trends impacting us through 2016,2023, see the Current Trends and Outlook section of Management’s Discussion and Analysis included in Part II, Item 7 of our 20162023 Annual Report on Form 10-K.
We expect sales for the full year of 2024 to be flat to slightly positive compared to 2023, impacted by the following factors and assumptions:
In conjunction with•normal weather patterns for the releaseremainder of 2024;
•sustained demand for pool maintenance products;
•volumes of discretionary products used for swimming pool construction to be flat to down 10%;
•volumes of products used in the remodeling, renovation and upgrading of swimming pools to be flat to down 10%; and
•inflationary product cost increases of approximately 2% to 3%.
As previously disclosed in our first quarter 2017 results,2023 Annual Report on Form 10-K, we updated our 2017 earnings guidance from an initial rangeproject gross margin for the full year of $3.802024 to $4.00 per diluted share to a range of $4.12 to $4.32 per diluted share, which reflected both an estimated benefit of $0.30 due to the adoption of ASU 2016-09 and $0.02 from better than expected first quarter 2017 operating results. We maintained this guidance following the release of our second quarter 2017 earnings results, which were largelybe in line with our expectations. Given changes in employee stock option exercise patternslong-term outlook of approximately 30.0%, with our highest margin in the thirdsecond quarter of 2017, we updated our expectations for the remainderyear. Our actual gross margin will depend on amounts and timing of 2017 to include only the $0.14 tax benefit from ASU 2016-09 realized in the firstinflationary price increases, customer and second quarters of 2017. Our operating results were in line with our expectations, and we have narrowed our earnings guidance to a range of $4.01 to $4.11 per diluted share. The estimated impact related to ASU 2016-09 is subject to several assumptions which can vary significantly, including our estimated share price and the period that our employees will exercise shares of outstanding vested options.
product mix.
We project base business sales growth of 6%expect to 7%leverage our existing infrastructure and manage discretionary spending to maintain expenses for the full year and expect grossof 2024 in line with sales expectations to achieve an operating margin to be similar to 2016, including an expected decline in gross margin in the fourth quarter of 2017 due to anticipated product mix changes following major third quarter weather events as well as an unfavorable comparison to fourth quarter 2016 results, which benefited by 20 basis points from an increase in the vendor incentive accrual at year-end. For the year, we have incurred growth-driven expense increases related to labor, facilities expansion and delivery costs, although the growth in these types of operating expenses has moderated as we have moved throughout the year. We expect base business operating expenses as a percentage of net sales for 2017 to decline between 20 and 40 basis points as compared to 2016, resulting in a 20 to 40 basis points increase in base business operating income as a percentage of net sales.
Given our $174.4 million increase in debt as of September 30, 2017 over the prior year and the increase in 30-Day LIBOR of approximately 70 basis points over last year, we expect13.0%.
We project that our Interest and other non-operating expenses, net for the full year 2017 to increase by approximately $1.5 million to $2.0 million over 2016, depending on fourth quarter borrowings to fund future share repurchases.
Excluding the impact from the adoption of ASU 2016-09, we expect ourannual effective tax rate (without the benefit from ASU 2016-09) for 2024 will be consistent with 2016. Our effective tax rate is dependent upon our results of operations and may change if actual results are different from our current expectations, particularly any significant changes in our geographic mix. Due to the adoption of the new accounting standard, we approximate 25.3%. 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. Based on our comparison of our deferredWe recorded a $7.4 million, or $0.19 per diluted share, tax assetsbenefit from ASU 2016-09 for share-based compensationthe three months ended March 31, 2024. We may recognize additional tax benefits related to the current intrinsic value of the underlying awards, we expect to recognize material incomestock option exercises in 2024 from grants that expire in future years. We have not included any expected tax benefits in periods when these transactions occur. The impact related to ASU 2016-09 is subject to several variables, including our share price and the period in which our employees will exercise sharesfull year guidance beyond what we have recognized as of outstanding vested options.
March 31, 2024.
We expect 2024 diluted EPS in the range of $13.19 to $14.19, including the impact of year-to-date tax benefits of $0.19. We expect to continue to use cash provided by operations will exceed net income for the 2017 fiscal year. We anticipate that we may use approximately $140.0 million to $160.0 million inpayment of cash dividends as and when declared by our Board of Directors (Board) and to fund opportunistic share repurchases under our Board-authorized share repurchase program.
The forward-looking statements in 2017.the foregoing section and elsewhere in this report 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 September 30, 2017,March 31, 2024, we conducted operations through 346442 sales centers in North America, Europe South America and Australia. For the three months ended March 31, 2024, approximately 95% 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, |
| | | | | | | 2024 | | 2023 |
| Net sales | | | | | | 100.0 | % | | 100.0 | % |
| Cost of sales | | | | | | 69.8 | | | 69.4 | |
| Gross profit | | | | | | 30.2 | | | 30.6 | |
| Selling and administrative expenses | | | | | | 20.5 | | | 18.6 | |
| | | | | | | | |
| Operating income | | | | | | 9.7 | | | 12.1 | |
| Interest and other non-operating expenses, net | | | | | | 1.2 | | | 1.3 | |
| Income before income taxes and equity in earnings | | | | | | 8.5 | % | | 10.8 | % |
|
| | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| Net sales | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
| Cost of sales | | 70.9 |
| | 71.1 |
| | 71.0 |
| | 71.1 |
|
| Gross profit | | 29.1 |
| | 28.9 |
| | 29.0 |
| | 28.9 |
|
| Operating expenses | | 18.1 |
| | 18.1 |
| | 17.2 |
| | 17.3 |
|
| Operating income | | 11.0 |
| | 10.7 |
| | 11.7 |
| | 11.6 |
|
| Interest and other non-operating expenses, net | | 0.5 |
| | 0.4 |
| | 0.5 |
| | 0.5 |
|
| Income before income taxes and equity earnings | | 10.5 | % | | 10.3 | % | | 11.2 | % | | 11.1 | % |
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 the acquisitions in 20172024 and 20162023 in our consolidated results since the acquisition dates.
Three Months Ended September 30, 2017March 31, 2024 Compared to Three Months Ended September 30, 2016March 31, 2023
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 |
| | | September 30, | | September 30, | | September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Net sales | | $ | 734,175 |
| | $ | 691,204 |
| | $ | 9,226 |
| | $ | 225 |
| | $ | 743,401 |
| | $ | 691,429 |
|
| | | | | | | | | | | | | |
| Gross profit | | 213,788 |
| | 199,455 |
| | 2,818 |
| | 96 |
| | 216,606 |
| | 199,551 |
|
| Gross margin | | 29.1 | % | | 28.9 | % | | 30.5 | % | | 42.7 | % | | 29.1 | % | | 28.9 | % |
| | | | | | | | | | | | | |
| Operating expenses | | 131,066 |
| | 125,225 |
| | 3,612 |
| | 160 |
| | 134,678 |
| | 125,385 |
|
| Expenses as a % of net sales | | 17.9 | % | | 18.1 | % | | 39.2 | % | | 71.1 | % | | 18.1 | % | | 18.1 | % |
| | | | | | | | | | | | | |
| Operating income (loss) | | 82,722 |
| | 74,230 |
| | (794 | ) | | (64 | ) | | 81,928 |
| | 74,166 |
|
| Operating margin | | 11.3 | % | | 10.7 | % | | (8.6 | )% | | (28.4 | )% | | 11.0 | % | | 10.7 | % |
In our calculation of base business results, we have excluded the following acquisitions for the periods identified:
|
| | | | | | |
Acquired
| |
Acquisition
Date
| | Net
Sales Centers
Acquired
| |
Periods
Excluded
|
New Star Holdings Pty. Ltd. | | July 2017 | | 1 | | July - September 2017 |
Lincoln Aquatics (1)
| | April 2017 | | 2 | | July - September 2017 |
| |
(1)
| We acquired certain distribution assets of this company. |
Base Business
When calculating our base business results, we exclude sales centers that are acquired, closed, or opened in new markets or closed 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 consolidatedwe consolidate 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.
We have not provided separate base business income statements within this Form 10-Q as our base business results for the quarter ended March 31, 2024closelyapproximated consolidated results for the same period, and acquisitions and sales centers excluded from base business contributed less than 1% to the change in net sales.
The table below summarizes the changes in our sales center count during the first ninethree months of 2017:
| | | | | |
| | |
December 31, 20162023 | 344439 | |
Acquired locationslocation | 31 | |
New locationlocations | 13 | |
Closed locationsConsolidated location | (2(1) | | )
September 30, 2017March 31, 2024 | 346442 | |
Net Sales
| | | | | | | | | | | | | | | | | | Three Months Ended | | |
| | | Three Months Ended | | |
| | | September 30, | | |
| | March 31, | |
| (in millions) | |
| (in millions) | |
| (in millions) | | 2017 | | 2016 | | Change | | 2024 | | 2023 | | Change |
| Net sales | | $ | 743.4 |
| | $ | 691.4 |
| | $ | 52.0 |
| | 8% | Net sales | | $ | 1,120.8 | | | $ | | $ | 1,206.8 | | | $ | | $ | (86.0) | | | (7)% | | (7)% |
Net sales increased 8%of $1.1 billion in the thirdfirst quarter of 20172024 decreased 7% compared to $1.2 billion in the thirdfirst quarter of 2016, with2023, reflecting challenges from current macroeconomic conditions and mixed weather. Our base business sales up 6%results approximated our consolidated results for the period. Severe weather eventsMaintenance activities were stable during the third quarter, of this year, particularly Hurricanes Irmaindicating steady demand for non-discretionary products, while pool construction and Harvey,discretionary activities were the most disruptive impact to our sales growth. Sales in Texas largely recovered by the end of the quarter, but sales in Florida remain behind the growth levels experienced prior to Hurricane Irma. We estimate these recent weather events negatively impacted net sales by approximately $4.0 million. Our seasonal markets generated sales growth of 6% during the quarter.
weaker.
The following factors positively impacted our sales growth (listedduring the quarter and are listed in order of estimated magnitude):magnitude.
continued consumer investments in enhancing outdoor living spaces, as evidenced•Our net sales were negatively impacted by improvements inlower sales growth rates for product offerings such as building materialsvolumes from reduced pool construction activity and equipmentdiscretionary activity (see discussion below);.
market share gains;
pool and spa chemical sales, our largest product category at 14% of total net sales for the quarter, increased 2% over the third quarter of 2016 under less attractive•We estimate that unfavorable weather conditions in 2017 and excluding the recent Lincoln Aquatics acquisition; andnegatively impacted sales by approximately 2%.
•Net sales benefited approximately 1% to 2% from inflationary product cost increases, (estimated at closewhich is net of price deflation for some products, primarily chemical sanitizers and PVC pipe. This compares to 1%).
The following factors negatively impacted our sales growth (listed in ordera benefit of estimated magnitude):
one less selling day4% to 5% in the thirdfirst quarter of 20172023.
•Sales included a greater concentration of customer early buy activity in the first quarter of 2024 than the first quarter of 2023.
In the first quarter of 2024, sales of equipment, which is used in maintenance, renovation and new construction activities and includes swimming pool heaters, pumps, lights, filters and automation, decreased 3% compared to the same period last year, affectingand collectively represented approximately 34% of net sales growth approximately 1%; and
recent weather events (described above).
We believe that sales growth rates for certain product offerings, such as building materials and equipment, evidence increased spending in traditionally discretionary areas including pool construction and pool remodeling, as well as equipment upgrades. In the third quarter of 2017, the sales growth rate for equipment, such as swimming pool heaters, pumps, lights and filters, collectively, was similar to the 8% growth rate for total net sales compared to the third quarter of 2016. This increase reflects both the ongoing recovery of replacement activity and continued demand for higher-priced, more energy-efficient products.period. Sales of building materials, which includes tile, representis primarily used in new construction and remodeling, decreased 11% compared to the first quarter of 2023 and represented approximately 10%13% of net sales forin the thirdfirst quarter of 2017 and grew by 9% compared to the third quarter of 2016.
2024.
Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial swimming pool installations such as hotels, universities and community recreational facilities are included in the appropriate existing product categories, and growthsales trends in this area isthese areas are reflected in the numbersdiscussion above. These salesSales to retail customers decreased 4% in the first quarter of 2024 compared to the first quarter of 2023 and represented just over 4%approximately 15% of our consolidatedtotal net sales. Sales to commercial swimming pool customers were flat in the first quarter of 2024 compared to the first quarter of 2023 and represented approximately 5% of our net sales for the thirdfirst quarter of 2017 and increased 12%2024.
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| | March 31, | | |
| (in millions) | | 2024 | | 2023 | | Change |
| Gross profit | | $ | 338.6 | | | $ | 369.8 | | | $ | (31.2) | | | (8)% |
| Gross margin | | 30.2 | % | | 30.6 | % | | | | |
Gross margin decreased 40 basis points to 30.2% in the first quarter of 2024 compared to 30.6% in the first quarter of 2023. In the first quarter of 2024, our gross margin was impacted by the following factors.
•Gross margin in the first quarter of 2024 included a benefit of $12.6 million, or 110 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
•Gross margin benefited from ongoing supply chain management initiatives.
•We realized a higher cost of product in the first quarter of 2024 compared to the thirdfirst quarter of 2016, excluding2023. In 2023, we started the recent acquisitionyear carrying a large amount of Lincoln Aquatics. With Lincoln Aquatics, commercial sales represent approximately 5%lower cost strategically-purchased inventory and successfully reduced this excess inventory to normalized levels by the end of our consolidated net sales, and this acquisition furthers our efforts to increase not only our focusthe 2023 season. The lower-cost inventory was more impactful on gross margin in the commercial market, but also the resources assigned to this area, including designated warehouse space, increased staffing and additional vendor relationships.
Gross Profit
|
| | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| | | September 30, | | |
| (in millions) | | 2017 | | 2016 | | Change |
| Gross profit | | $ | 216.6 |
| | $ | 199.6 |
| | $ | 17.0 |
| | 9% |
| Gross margin | | 29.1 | % | | 28.9 | % | | | | |
Gross margin for the thirdfirst quarter of 20172023 when a higher portion was sold relative to the full year.
•Changes in product mix weighed on our gross margin; we expect this mix to shift as sales of higher margin products increase as the season progresses.
•Greater customer preseason early buys during the quarter compared to last year and a higher concentration of sales to larger customers negatively impacted our margin.
Operating Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| | March 31, | | |
| (in millions) | | 2024 | | 2023 | | Change |
| Selling and administrative expenses | | $ | 229.8 | | | $ | 224.0 | | | $ | 5.8 | | | 3% |
| | | | | | | | |
| Operating expenses as a % of net sales | | 20.5 | % | | 18.6 | % | | | | |
Operating expenses increased approximately 20 basis points3% in the first quarter of 2024 compared to the thirdfirst quarter of 2016. This increase primarily reflects product mix2023. Expense growth drivers included rent and benefits from sourcing initiatives.
Operating Expenses
|
| | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| | | September 30, | | |
| (in millions) | | 2017 | | 2016 | | Change |
| Operating expenses | | $ | 134.7 |
| | $ | 125.4 |
| | $ | 9.3 |
| | 7% |
| Operating expenses as a % of net sales | | 18.1 | % | | 18.1 | % | | | | |
Operating expenses increased 7%facility costs, inflationary wage increases, insurance costs, technology initiatives and investments in the third quarter of 2017 compared to the third quarter of 2016, with base business operating expenses up 5% compared to the same period last year. Increased growth-driven laborgreenfield locations. These increases were partially offset by lower variable costs, including performance-based compensation and freight expenses, as well as higher performance-based and equity-based compensation costs comprised the majority of our operating expense growth.costs. As a percentage of net sales, base business operating expenses declinedincreased to 17.9% for20.5% in the thirdfirst quarter versus 18.1% last year.of 2024 compared to 18.6% in the same period of 2023.
Interest and Other Non-operatingNon-Operating Expenses, Net
Interest and other non-operating expenses, net increased $1.0 million compared to the third quarter of 2016, primarily due to higher interest rates on our debt and an increase in borrowings. Our weighted average effective interest rate increased to 2.7% for the third quarter of 2017 from 2.0% for the third quarter of 2016 on higher average outstanding debt of $535.5 million versus $426.7 million for the respective periods.
Income Taxes
Our effective income tax rate was 37.4% for the three months ended September 30, 2017 and 37.7% for the three months ended September 30, 2016. Our third quarter effective income tax rate is typically lower compared to other quarters, primarily due to the timing of our accounting for uncertain tax positions, including the expiration of statutes of limitations. The decline also reflects a $0.3 million tax benefit recorded in our provision for income taxes from the adoption of ASU 2016-09.
Net Income and Earnings Per Share
Net income attributable to Pool Corporation increased 10% to $48.8 million in the third quarter of 2017 compared to the third quarter of 2016. Earnings per diluted share increased to $1.16 for the third quarter of 2017 versus $1.03 per diluted share for the comparable period in 2016. The adoption of ASU 2016-09 did not have an impact our earnings per diluted share in the third quarter of 2017.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
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) | | Nine Months Ended | | Nine Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, | | September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Net sales | | $ | 2,246,446 |
| | $ | 2,116,393 |
| | $ | 31,559 |
| | $ | 9,175 |
| | $ | 2,278,005 |
| | $ | 2,125,568 |
|
| | | | | | | | | | | | | |
| Gross profit | | 650,419 |
| | 610,454 |
| | 9,472 |
| | 2,856 |
| | 659,891 |
| | 613,310 |
|
| Gross margin | | 29.0 | % | | 28.8 | % | | 30.0 | % | | 31.1 | % | | 29.0 | % | | 28.9 | % |
| | | | | | | | | | | | | |
| Operating expenses | | 383,636 |
| | 365,287 |
| | 9,143 |
| | 1,907 |
| | 392,779 |
| | 367,194 |
|
| Expenses as a % of net sales | | 17.1 | % | | 17.3 | % | | 29.0 | % | | 20.8 | % | | 17.2 | % | | 17.3 | % |
| | | | | | | | | | | | | |
| Operating income | | 266,783 |
| | 245,167 |
| | 329 |
| | 949 |
| | 267,112 |
| | 246,116 |
|
| Operating margin | | 11.9 | % | | 11.6 | % | | 1.0 | % | | 10.3 | % | | 11.7 | % | | 11.6 | % |
In our calculation of base business results, we have excluded the following acquisitions for the periods identified:
|
| | | | | | |
Acquired
| |
Acquisition
Date
| | Net
Sales Centers
Acquired
| |
Periods
Excluded
|
New Star Holdings Pty. Ltd. | | July 2017 | | 1 | | July - September 2017 |
Lincoln Aquatics (1)
| | April 2017 | | 2 | | May - September 2017 |
Metro Irrigation Supply Company Ltd. (1)
| | April 2016 | | 8 | | January - June 2017 and
April - June 2016
|
The Melton Corporation (1)
| | November 2015 | | 2 | | January 2017 and
January 2016
|
Seaboard Industries, Inc. (1)
| | October 2015 | | 3 | | January 2017 and
January 2016
|
| |
(1)
| We acquired certain distribution assets of each of these companies. |
For a more detailed explanation of how we calculated base business results and a summary of the changes in our sales centers since December 31, 2016, please refer to the discussion under the heading Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016.
Net Sales
|
| | | | | | | | | | | | | | |
| | | Nine Months Ended | | |
| | | September 30, | | |
| (in millions) | | 2017 | | 2016 | | Change |
| Net sales | | $ | 2,278.0 |
| | $ | 2,125.6 |
| | $ | 152.4 |
| | 7% |
Net sales for the first nine months of 2017 increased 7% compared to the same period last year, with much of this growth resulting from the 6% improvement in base business sales.
The following factors contributed to our sales growth (listed in order of estimated magnitude):
continued improvement in consumer discretionary expenditures, including market recovery in remodeling and replacement activity (see discussion below);
market share growth, particularly in building materials and commercial product categories;
pool and spa chemical sales, our largest product category at 13% of total net sales for the nine months ended September 30, 2017, increased 3% compared to the first nine months of 2016, excluding the recent Lincoln Aquatics acquisition; and
inflationary (estimated at close to 1%) product cost increases.
We believe that sales growth rates for certain product offerings, such as building materials and equipment, evidence increased spending in traditionally discretionary areas including pool construction, pool remodeling, as well as equipment upgrades. In the first nine months of 2017, the sales growth rate for equipment, such as swimming pool heaters, pumps, lights and filters, collectively, was similar to the 7% growth rate for total net sales compared to the same period in 2016. This increase reflects both the ongoing recovery of replacement activity and continued demand for higher-priced, more energy-efficient products. Sales of building materials, which includes tile, represent approximately 11% of net sales for the first nine months of 2017 and grew by 12% compared to the first nine months of 2016.
Sales to customers who service large commercial installations such as hotels, universities and community recreational facilities are included in the appropriate existing product categories and growth in this area is reflected in the numbers above. These sales represented 4% of our consolidated net sales for the first nine months of 2017 and increased 12% compared to the same period in 2016, excluding the recent acquisition of Lincoln Aquatics.
Gross Profit
|
| | | | | | | | | | | | | | |
| | | Nine Months Ended | | |
| | | September 30, | | |
| (in millions) | | 2017 | | 2016 | | Change |
| Gross profit | | $ | 659.9 |
| | $ | 613.3 |
| | $ | 46.6 |
| | 8% |
| Gross margin | | 29.0 | % | | 28.9 | % | | | | |
Gross margin for the nine months ended September 30, 2017 was in line with gross margin for the nine months ended September 30, 2016.
Operating Expenses
|
| | | | | | | | | | | | | | |
| | | Nine Months Ended | | |
| | | September 30, | | |
| (in millions) | | 2017 | | 2016 | | Change |
| Operating expenses | | $ | 392.8 |
| | $ | 367.2 |
| | $ | 25.6 |
| | 7% |
| Operating expenses as a % of net sales | | 17.2 | % | | 17.3 | % | | | | |
For the first nine months of 2017, operating expenses were up 7% over the same period last year, with base business operating expenses up 5%. The increase in base business operating expenses was primarily due to higher growth-driven labor and freight expenses, as well as greater employee-related health insurance costs, equity-based compensation, and technology spending as we continue to invest in our business. Operating expenses as a percentage of net sales was consistent for the first nine months of 2017 and 2016 and improved by 20 basis points on a base business basis.
Interest and Other Non-operating Expenses, Net
Interest and other non-operating expenses, net for the first nine monthsquarter of 2017 increased $1.72024 decreased $2.4 million compared to the same period last year, first quarter of 2023, primarily due to higher interest rates on oura decrease in average debt and an increase in borrowings.between periods. Our weighted average effective interest rate increased to 2.6% for5.3% in the first nine monthsquarter of 20172024 from 2.0% for4.8% in the same periodfirst quarter of 20162023 on higher average outstanding debt of $501.0 million versus $437.3 million$1.0 billion and $1.3 billion for the respective periods.
Income Taxes
Our effective income tax rate was 35.2%17.3% for the ninethree months ended September 30, 2017March 31, 2024, compared to 38.2%21.8% for the ninethree months ended September 30, 2016. The decline in our effective income tax rate is primarily due to the $7.7March 31, 2023. We recorded a $7.4 million tax benefit recordedfrom ASU 2016-09 in the quarter ended March 31, 2024, compared to a tax benefit of $4.8 million realized in the same period last year. Without the benefit from ASU 2016-09 in both periods, our provisioneffective tax rate was 25.1% for income taxes, which reflects the impactfirst quarter of 2024 and 25.5% for the adoptionfirst quarter of ASU 2016-09.2023.
Net Income and Earnings Per Share
Earnings per share forNet income decreased 22% to $78.9 million in the first nine monthsquarter of 2017, including a favorable $0.142024 compared to $101.7 million in the first quarter of 2023. Earnings per diluted share decreased 21% to $2.04 in the first quarter of 2024 compared to $2.58 in the same period of 2023. Without the impact from the adoption of ASU 2016-09 increased to $3.89in both periods, earnings per diluted share on Net income attributabledecreased 25% to Pool Corporation$1.85 in the first quarter of $166.0 million,2024 compared to $3.39 per diluted share on Net income attributable to Pool Corporation of $146.3 million$2.46 in the comparable 2016 period.first quarter of 2023. See the reconciliation of GAAP to non-GAAP measures below.
Reconciliation of Non-GAAP Financial Measures
The non-GAAP measures described below should be considered in the context of all of our other disclosures in this Form 10-Q.
Adjusted Diluted EPS
We have included adjusted diluted EPS, a non-GAAP financial measure, as a supplemental disclosure, because we believe this measure is useful to management, investors and others in assessing our period-to-period operating performance.
Adjusted diluted EPS is a key measure used by management to demonstrate the impact of tax benefits from ASU 2016-09 on our diluted EPS and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.
We believe this measure should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP, and in the context of our other disclosures in this Form 10-Q. Other companies may calculate this non-GAAP financial measure differently than we do, which may limit its usefulness as a comparative measure.
The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.
| | | | | | | | | | | | | | | | | | | | | |
| (Unaudited) | | | | Three Months Ended | |
| | | | March 31, | |
| | | | | | 2024 | | 2023 | |
| Diluted EPS | | | | | | $ | 2.04 | | | $ | 2.58 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| ASU 2016-09 tax benefit | | | | | | (0.19) | | | (0.12) | | |
| | | | | | | | | |
| Adjusted diluted EPS | | | | | | $ | 1.85 | | | $ | 2.46 | | |
| | | | | | | | | |
| | | | | | | | | |
Seasonality and Quarterly Fluctuations
Our business is highly 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 maintenanceinstallations and installation.maintenance. Sales are substantially lower during the first and fourth quarters, when we may incur net losses. quarters. In 2016,2023, we generated approximately 63%60% of our net sales and 85%70% 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, second and third quarters of 2017, the four quarters of 2016 and the fourth quarter of 2015. We have included income statement and balance sheet data for the most recent eight quarters to allow for a meaningful comparison of theillustrate seasonal fluctuations in these amounts. In our opinion,We believe this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. Due to the seasonal nature of our industry, theThe results of any one or more quarters are not necessarily a good indication of results for an entire fiscal year or of continuing trends.future trends for a variety of reasons, including the seasonal nature of our business and the impact of new and acquired sales centers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited) | | QUARTER |
| (in thousands) | | 2024 | | 2023 | | 2022 |
| | | First | | Fourth | | Third | | Second | | First | | Fourth | | Third | | Second | |
| Statement of Income Data | | | | | | | | | | | | | | | | | |
| Net sales | | $ | 1,120,810 | | | $ | 1,003,050 | | | $ | 1,474,407 | | | $ | 1,857,363 | | | $ | 1,206,774 | | | $ | 1,095,920 | | | $ | 1,615,339 | | | $ | 2,055,818 | | |
| Gross profit | | 338,560 | | | 293,775 | | | 428,731 | | | 567,783 | | | 369,755 | | | 315,731 | | | 503,687 | | | 666,804 | | |
| Operating income | | 108,720 | | | 79,344 | | | 194,443 | | | 327,009 | | | 145,771 | | | 107,295 | | | 263,877 | | | 418,888 | | |
| Net income | | 78,885 | | | 51,437 | | | 137,843 | | | 232,250 | | | 101,699 | | | 71,863 | | | 190,055 | | | 307,283 | | |
| | | | | | | | | | | | | | | | | |
| Balance Sheet Data | | | | | | | | | | | | | | | | | |
| Total receivables, net | | $ | 527,175 | | | $ | 342,910 | | | $ | 461,582 | | | $ | 630,950 | | | $ | 564,171 | | | $ | 351,448 | | | $ | 549,796 | | | $ | 756,585 | | |
| Product inventories, net | | 1,496,947 | | | 1,365,466 | | | 1,259,308 | | | 1,392,886 | | | 1,686,683 | | | 1,591,060 | | | 1,539,572 | | | 1,579,101 | | |
| Accounts payable | | 907,806 | | | 508,672 | | | 429,436 | | | 485,100 | | | 739,749 | | | 406,667 | | | 442,226 | | | 604,225 | | |
| Total debt | | 979,177 | | | 1,053,320 | | | 1,033,897 | | | 1,184,586 | | | 1,365,750 | | | 1,386,803 | | | 1,512,545 | | | 1,595,398 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited) | | QUARTER |
| (in thousands) | | 2017 | | 2016 | | 2015 |
| | | Third | | Second | | First | | Fourth | | Third | | Second | | First | | Fourth |
| Statement of Income Data | | | | | | | | | | | | | | | | |
| Net sales | | $ | 743,401 |
| | $ | 988,163 |
| | $ | 546,441 |
| | $ | 445,235 |
| | $ | 691,429 |
| | $ | 918,889 |
| | $ | 515,250 |
| | $ | 415,075 |
|
| Gross profit | | 216,606 |
| | 289,664 |
| | 153,621 |
| | 127,777 |
| | 199,551 |
| | 270,736 |
| | 143,023 |
| | 118,295 |
|
| Operating income | | 81,928 |
| | 154,186 |
| | 30,998 |
| | 9,743 |
| | 74,166 |
| | 142,420 |
| | 29,530 |
| | 5,979 |
|
| Net income | | 48,783 |
| | 94,620 |
| | 22,270 |
| | 2,572 |
| | 44,421 |
| | 85,247 |
| | 16,363 |
| | 2,579 |
|
| | | | | | | | | | | | | | | | | |
| Balance Sheet Data | | | | | | | | | | | | | | | | |
| Total receivables, net | | $ | 262,796 |
| | $ | 370,285 |
| | $ | 290,019 |
| | $ | 166,151 |
| | $ | 233,405 |
| | $ | 351,012 |
| | 283,758 |
| | $ | 156,756 |
|
| Product inventories, net | | 484,287 |
| | 542,805 |
| | 647,884 |
| | 486,116 |
| | 455,156 |
| | 493,254 |
| | 595,393 |
| | 474,275 |
|
| Accounts payable | | 209,062 |
| | 273,309 |
| | 465,928 |
| | 230,728 |
| | 199,922 |
| | 265,349 |
| | 438,705 |
| | 246,554 |
|
| Total debt | | 564,573 |
| | 553,480 |
| | 490,217 |
| | 438,042 |
| | 390,189 |
| | 500,606 |
| | 450,457 |
| | 328,045 |
|
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.
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 |
| | |
Weather | | Possible Effects |
| Hot and dry | • | Increased purchases of chemicals and supplies
|
| | for existing swimming pools |
| • | Increased purchases of above-ground pools and irrigation products
|
| | irrigation and lawn care products |
| | |
Unseasonably cool weather or extraordinary amounts of rain | • | Fewer pool and irrigation and landscape installations |
| 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 cooling trends in fall | • | A longer pool and landscape season, thus 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 cooling trends in fall | • | A shorter pool and landscape season, thus negatively |
| trends in fall | | impacting our sales |
| (primarily in the northern half of the U.S. and Canada) | | |
Weather Impacts on 20172024 and 20162023 Results
Severe stormsThe first quarter of 2024 was the tenth wettest quarter on record leading to mixed impacts across our markets, particularly in the thirdmonth of March, which is seasonally our highest sales month of the first quarter. However, we also observed above-average temperatures during the quarter contributing positively to economic activities in many regions, such as improvement in California during March. The adverse effects of 2017, particularly Hurricanes Irmacooler and Harvey, hindered our sales growthwetter weather in Florida and Texas, although Texas largely recovered by the end of September. In the Central and Midwest, temperatures were normal for this time of year, contrasting with the above-average temperatures in the third quarter of 2016. The West experienced record heat and normal rainfall in the third quarter of 2017, similar to the above average heat in the same period last year.
Cold and wet weather throughout the Mid-South and North impacted those seasonal markets in the middle of the second quarter, while the weather impact overall for the quarter was fairly neutral. Temperatures and precipitation throughout most areas other than those described above, were normal, with only Texas benefiting from drier weather in the second quarter of 2017Southeast compared to the above average rainfall experienced in the same period of 2016.
Unseasonably mild weather benefited sales in the first quarter of 2017. However, while favorable weather trends early in the year normally have a seasonally larger impact, the comparison to the first quarter of 2016 was especially tough givenlast year and excessive precipitation in Texas and the benefit ofNortheast outweighed the warmer-than-normal weather across nearly all marketspositives, resulting in the United States inan unfavorable impact on net sales. In the first quarter of 2016. For the first quarter of 2017, Texas2023, varied weather conditions had a more pronounced unfavorable impact on net sales due to unusually wet and surrounding markets experienced record warm temperatures, which when coupled with below-average precipitation for that area, spurred higher sales growth. In two of the more seasonal regions where we operate, below-average temperaturescold weather in the Northwestern U.S., particularly California and above-average precipitationArizona. Conditions were generally favorable in our southern markets, where sales benefited from warmer weather and below-average precipitation.
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 West negatively impactedestimates or assumptions, or the use of different estimates and assumptions, could have a material impact on our first quarter 2017 sales growth.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 2023 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.
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;
acquisitions;•the quality of our receivables;
scheduled debt payments;•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 requirementsobligations, debt repayment obligations and other general corporate purposes,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. The same principle applies to funds used forWe have funded our capital expenditures and share repurchases.
repurchases in substantially the same manner.
We prioritize our use of cash based on investing in our business, maintaining a prudent capital structure, including a modest amount of debt, structure and returning moneycash to our shareholders.shareholders through dividends and share repurchases. Our specific priorities for the use of cash are as follows:
•capital expenditures primarily for maintenance and newgrowth of our sales center capital expenditures;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 of Directors (Board);Board;
•repayment of debt to maintain an average total target leverage ratio (as defined below) between 1.5 and 2.0; and
•discretionary repurchases of our common stock under our Board authorizedBoard-authorized share repurchase program.
We focus our capital expenditure plans based on the needs of our sales centers. Our capital spending primarily relates to leasehold improvements, delivery and service vehicles and information technology. In recent years, we have increased our investment in technology and automation enabling us to operate more efficiently and better serve our customers.
For 2017, we project capital expenditures will be approximately 1.5% of net sales as we expand facilities and purchase delivery vehicles to address growth opportunities. Over the last five years,Historically, our capital expenditures have averaged roughly 1.0% of net sales. Capital expenditures were 1.4%1.1% of net sales in 2016, 1.0%2023 and 0.7% of net sales in 20152022 and 0.8%2021. In 2022 and 2021, our capital expenditures as a percentage of net sales were lower than our historical average due to our significant sales growth in 2014.those years. Based on management’s current plans, we project capital expenditures for 2024 will be 1.0% to 1.5% of net sales.
Sources and Uses of Cash
The following table summarizes our cash flows (in thousands):
| | | | | | | | | | | | | | |
| | | Three Months Ended |
| | March 31, |
| | | 2024 | | 2023 |
| Operating activities | | $ | 145,442 | | | $ | 103,203 | |
| Investing activities | | (18,952) | | | (17,560) | |
| Financing activities | | (124,162) | | | (105,518) | |
|
| | | | | | | | |
| | | Nine Months Ended |
| | | September 30, |
| | | 2017 | | 2016 |
| Operating activities | | $ | 112,020 |
| | $ | 143,170 |
|
| Investing activities | | (44,584 | ) | | (50,233 | ) |
| Financing activities | | (52,746 | ) | | (75,697 | ) |
CashNet cash provided by operating activities of $112.0operations improved to $145.4 million decreased duringfor the first ninethree months of 2017 compared to2024 from $103.2 million for the first ninethree months of 2016 due to a combination of growth-related increases2023, primarily driven by positive changes in inventories and receivables and the payment of our normal scheduled payment of our third quarter estimated taxes. These estimated payments for the third quarter of 2016 were deferred as allowed for areas affectedworking capital, partially offset by severe storms and flooding in Louisiana.lower net income.
CashNet cash used in investing activities for the first ninethree months of 2017 decreased2024 increased $1.4 million compared to the first ninethree months of 2016. While we made increased investments2023, primarily due to a $1.5 million increase in net capital expenditures for vehicle additions in the first nine months of 2017, ourexpenditures.
Net cash used for acquisitions was considerably lower in the current period.
Cash used in financing activities decreasedwas $124.2 million for the first ninethree months of 20172024 compared to $105.5 million for the first three months of 2023, primarily reflecting a $53.1 million increase in net debt payments in the first three months of 2024 compared to the first ninethree months of 2016, which reflects a $65.4 million increase in amounts provided by net borrowings,2023, partially offset by a $23.7$34.2 million increasedecrease in amounts used for share repurchases. Dividends paid to shareholders increased by $6.2 million in the first nine months of 2017 compared to the first nine months of 2016.
repurchases between periods.
Future Sources and Uses of Cash
To supplement cash from operations as our primary source of working capital, we plan to continue to utilize our three major credit facilities, which are the Amended and Restated Revolving Credit Facility (the Credit Facility), the Term Facility (the Term Facility) and the Receivables Securitization Facility (the Receivables Facility). For additional details regarding these facilities, see the summary descriptions below and more complete descriptions in Note 5 of our “Notes to Consolidated Financial Statements,” included in Part II, Item 8 in our 2023 Annual Report on Form 10-K and Note 5of “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Form 10-Q.
On September 29, 2017, we amended and restated our existing seniorCredit Facility
Our Credit Facility provides for $1.25 billion in borrowing capacity consisting of a $750.0 million five-year unsecured revolving credit facility (theand a $500.0 million term loan facility. The Credit Facility) principally in the following ways:
extends the maturity date to September 29, 2022;
increases the borrowing capacity to $750.0 million from $465.0 million;
increasesFacility also includes sublimits for the issuance of swingline loans;
decreasesloans and standby letters of credit. We pay interest on revolving and term loan borrowings under the pricingCredit Facility at a variable rate based on the one-month term secured overnight financing rate (Term SOFR), plus an applicable margin. The term loan requires quarterly amortization payments during the third, fourth and fifth years of all loans; and
provides additional capacity under certain negative covenants relatedthe loan, beginning in September 2023 aggregating to indebtedness, liens, investments and dispositions20% of assets.
Pursuant to an accordion feature, the aggregate maximumoriginal principal amount of the commitments underloan, with all remaining principal due on the Credit Facility may be increased at our request and with agreement by the lenders by upmaturity date of September 25, 2026. We intend to $75.0 million, to a total of $825.0 million. We intendcontinue to use the Credit Facility for general corporate purposes, for future share repurchases and to fund future growth initiatives.
At September 30, 2017,March 31, 2024, there was $415.3$115.4 million of revolving borrowings outstanding, a $4.2$481.3 million term loan, a $16.0 million standby letter of credit outstanding and $330.5$618.6 million available for borrowing under the Credit Facility. 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 the Credit Facility. As of September 30, 2017, we have three interest rate swap contracts in place that became effective on October 19, 2016. These swap contracts were previously forward-starting and were amended in October 2015 to bring the fixed rates per our forward-starting contracts in line with current market rates and extend the hedged period for future interest payments on our Credit Facility. Now effective, these amended swap contracts convert the Credit Facility’s variable interest rate to fixed rates of 2.273% on a notional amount of $75.0 million and 2.111% on two separate notional amounts, one $25.0 million and the other $50.0 million, totaling $75.0 million. Interest expense related to the notional amounts under these swap contracts is based on the fixed rates plus the applicable margin on the Credit Facility. These interest rate swap contracts will terminate on November 20, 2019.
In July 2016 we entered into a forward-starting interest rate swap contract to extend the hedged period for future interest payments on our Credit Facility to its maturity date at that time. This swap contract will convert the Credit Facility’s variable interest rate to a fixed rate of 1.1425% on a notional amount of $150.0 million. The contract becomes effective on November 20, 2019 and terminates on November 20, 2020.
The weighted average effective interest rate for the Credit Facility as of September 30, 2017March 31, 2024, was approximately 2.7%4.3%, excluding commitment fees and including the impact of our interest rates swaps.
Term Facility
Our Term Facility 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. We pay interest on borrowings under the Term Facility at a variable rate based on one month Term SOFR, plus an applicable margin. 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 with the final principal repayment due on the maturity date. We may prepay amounts outstanding under the Term Facility without penalty other than interest breakage costs. In June 2023, we made a prepayment on the Term Facility of $45.0 million with $32.4 million applied against the remaining quarterly installments and the remainder applied against the amount due at maturity.
At March 31, 2024, there was $109.9 million outstanding under the Term Facility with a weighted average effective interest rate of 6.6%.
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 August and from $210.0 million to $340.0 million during the remaining months of the year. The Receivables Facility matures on November 1, 2024. 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 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.
At March 31, 2024, there was $262.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.2%, excluding commitment fees.
Financial Covenants
Financial covenants onof the Credit Facility, Term Facility and Receivables Facility include maintenance of a maximum average total leverage ratio and a minimum fixed charge coverage ratio.ratio, which are our most restrictive financial covenants. As of September 30, 2017,March 31, 2024, 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 sum of (i) Total Non-Revolving Funded Indebtedness as of such date, (ii) the trailing twelve months (TTM) Average Total Revolving Funded Indebtedness plusand (iii) the TTM Average Accounts Securitization Proceeds divided by the TTM EBITDA (as those terms are defined in the Credit Facility). As of September 30, 2017,March 31, 2024, our average total leverage ratio equaled 1.601.36 (compared to 1.541.39 as of June 30, 2017)December 31, 2023) and the TTM average total debtindebtedness amount used in this calculation was $496.5 million.
$1.0 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 September 30, 2017,March 31, 2024, our fixed charge ratio equaled 5.505.71 (compared to 5.525.94 as of June 30, 2017)December 31, 2023) and TTM Rental Expense was $53.5$95.0 million.
The Credit Facility also limitsand Term Facility limit the declaration and payment of dividends on our common stock to no more than 50% of the preceding year’s Net Income (as defined in the Credit Facility),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. Additionally, weWe may declare and pay quarterly dividends notwithstanding that the aggregate amount of dividends paid would be in excess of the 50% limit described above so long as (i) the amount per share of such dividends doesis not exceed the amount per share paid duringgreater than the most recent fiscal year in which we were in compliance with the 50% limitrecently publicly announced amount of dividends per share and (ii) our Average Total Leverage Ratio is less than 3.003.25 to 1.00 both immediately before and after giving pro forma effect to such dividends. Further, dividends must be declared and paid in a manner consistent with our past practice.
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 2.503.25 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 the Credit Facilityour credit facilities could result in, penalty payments,among other things, higher interest rates on our borrowings or the acceleration of the maturities of our outstanding debt.
Receivables Securitization FacilityInterest Rate Swaps
Our two-year Receivables Facility offers us a lower cost form of financing, with a peak funding capacity of upWe utilize interest rate swap contracts and forward-starting interest rate swap contracts to $220.0 million between May 1 and June 30, which includes an additional seasonal funding capacity that is available between March 1 and July 31. Other funding capacities range from $65.0 millionreduce our exposure to $150.0 million throughout the remaining months of the year.
The Receivables Facility providesfluctuations in variable interest rates for the sale of certain offuture interest payments on our receivables to a wholly owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables andrate borrowings. Interest expense related rights to certain third party financial institutions in exchange for cash proceeds, limited to the notional amounts under all swap contracts is based on the fixed rates plus the applicable funding capacities. Upon payment ofmargin on 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 September 30, 2017, there was $142.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of 2.0%, excluding commitment fees.respective borrowings.
As of September 30, 2017,March 31, 2024, we had two interest rate swap contracts in place and one forward-starting interest rate swap contract, each of which has the effect of converting our exposure to variable interest rates on a portion of 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.
Compliance and Future Availability
As of March 31, 2024, 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 20162023 Annual Report on Form 10-K.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 October 26, 2017, $53.4April 24, 2024, $283.8 million remained available to purchase shares of the current Board authorized amountour common stock under our current Board-approved share repurchase program remained available.program. We expect to repurchase additional shares on the open market from time to time depending onsubject to market conditions. We plan to fund these repurchases with cash provided by operations and borrowings under the above-described credit and receivables facilities.
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 estimate 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 2016 Annual Report on Form 10-K. We have not changed these policies from those previously disclosed.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09). The FASB also issued subsequent amendments to ASU 2014-09 to provide clarification on the guidance. ASU 2014-09 will be effective for annual periods beginning after December 15, 2017, which for us will be in the period beginning January 1, 2018. We are continuing to perform our detailed evaluation, using a five-step model specified in the guidance, to assess the impacts of the new standard.
Under the new standard, revenue will be recognized when we satisfy our performance obligation by transferring promised products or services to our customer. The standard allows for application of the guidance to a portfolio of contracts or performance obligations with similar characteristics. Since our individual sales transactions are very similar in nature, we anticipate applying the guidance to all transactions as a portfolio. We expect that the effects of applying this guidance to the portfolio would not differ materially from applying the guidance to individual performance obligations within that portfolio.
Our revenue recognition will be achieved upon delivery of products as there are no other promised services as part of our contracts with customers that are material in the context of the contract. Because our shipping and handling activities are performed before the customer obtains control of the goods, we do not consider these activities to be a promised service to the customer. Rather shipping and handling are activities to fulfill our promise to transfer the goods. Product warranties do not constitute a performance obligation for us, as products are warrantied directly by the manufacturer or the third party carrier.
To determine the amount of consideration to which we expect to be entitled in exchange for transferring promised goods, we have considered if variable consideration exists. We have reviewed our standard terms and conditions and our customary business practices to determine the transaction price. We have reviewed our pricing policies including marketing programs, coupons and free products for the purpose of determining whether we have any variable or non-cash consideration. We do not issue future-dated coupons or free product rebates. When we process manufacturer coupons, we record the customer sales price as revenue and receive reimbursement of the coupon value from the manufacturer. In addition, we reviewed our current accounting policies related to returns and price concessions for which no material changes in policy were noted. Volume rebates is a sales incentive program where we make a cash payment or apply credit to a customer account on a quarterly or annual basis, if the customer reaches a specified level of purchases. The volume rebates are accounted for as a reduction of the transaction price, and a liability is recorded until the related payment to the customer is made. We do not offer any volume discounts. We will continue our accounting policy election to exclude from revenue all amounts we collect and remit to governmental authorities.
The majority of our sales transactions do not require any additional performance obligation after delivery, therefore we do not have multiple performance obligations for which we will have to allocate the transaction price. We do not offer customer loyalty programs.
We expect to recognize revenue when control of the product has been transferred to the customer upon delivery to the customer or the freight carrier, if delivered by a third party, as we believe our performance obligation will be satisfied at that point in time.
We expect to apply the guidance using the modified retrospective transition method. Based on our analysis performed to date, we do not expect the adoption of ASU 2014-09 will have a material impact on our financial position or results of operations, but we expect it will result in additional disclosures regarding our revenue recognition policies. We also do not expect the adoption will require material or significant changes to our internal controls over financial reporting. We have expanded our revenue recognition inquiries to additional departments and updated our questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance. We are also in the process of drafting additional pricing policies to address potential revenue recognition implications.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to record most leases on their balance sheets but recognize expenses in a manner similar to current guidance. ASU 2016-02 will be effective for annual periods beginning after December 15, 2018. The guidance is required to be applied using a modified retrospective approach. The adoption of ASU 2016-02 will have a significant impact on our Consolidated Balance Sheets as we will be recording a right-of-use asset and corresponding liability for our current operating leases. We are evaluating the effect that ASU 2016-02 will have on our results of operations and related disclosures. We are primarily focused on evaluating our internal controls over financial reporting, including information technology requirements, related to the adoption of this new accounting pronouncement.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments, which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. ASU 2016-13 will be effective for annual periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018. We have not elected to early adopt this guidance. The guidance must be applied using a cumulative-effect transition method. We are currently evaluating the effect that ASU 2016-13 will have on our financial position, results of operations and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments, which may change the classification of certain cash receipts and cash payments on an entity’s statement of cash flows. The new guidance specifies how cash flows should be classified for debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds for the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, distributions from equity method investees and beneficial interests in securitization transactions. Current guidance for these topics is principles-based, requiring judgment in application and creating diversity in practice. ASU 2016-15 will be effective for annual periods beginning after December 15, 2017 and must be applied retrospectively. Early adoption is permitted for all entities. We have not elected to early adopt this guidance. We are currently evaluating the effect that ASU 2016-15 will have on our financial position and related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (commonly referred to as Step 2 under the current guidance). Rather, the measurement of a goodwill impairment charge will be based on the excess of a reporting unit’s carrying value over its fair value (Step 1 under the current guidance). ASU 2017-04 will be effective for annual and interim impairment tests performed in periods beginning after December 15, 2019 and should be applied prospectively. Early adoption is permitted for annual and interim goodwill impairment tests beginning after January 1, 2017. We are currently evaluating the effect that ASU 2017-04 will have on our financial position, results of operations and related disclosures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
There have been no material changes in our exposure to interest rate risk during the three months ended March 31, 2024, from what we reported in our 2023 Annual Report on Form 10-K for the year ended December 31, 2016 that affect fiscal 2017.10-K. For additional information on our interest rate risk, refer to “Quantitative and Qualitative Disclosures about Market Risk” included in Part II, Item 7A in our 2023 Annual Report on Form 10-K.
Currency Risk
There have been no material changes in our exposure to currency risk during the three months ended March 31, 2024, from what we reported in our 2023 Annual Report on Form 10-K for the year ended December 31, 2016 that affect fiscal 2017.10-K. For additional information on our currency risk, refer to “Quantitative and Qualitative Disclosures about Market Risk” included in Part II, Item 7A in our 2023 Annual Report on Form 10-K.
Item 4. Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Act). The rules refer to the controls and other procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As of September 30, 2017,March 31, 2024, management, including theour CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on that evaluation, management, including theour CEO and CFO, concluded that as of September 30, 2017,March 31, 2024, our disclosure controls and procedures were effective.
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Based on the most recent evaluation, we have concluded that no change in our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The effectiveness of our system of disclosure controls and procedures or internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating such systems, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely. As a result, there can be no assurance that our control systems will detect all errors or fraud. By their nature, our system can provide only reasonable assurance regarding management's control objectives.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various claims and litigation arising in the ordinary course of business, including product liability, personal injury, commercial, contract and employment matters. While the outcome of any litigation is inherently unpredictable, based on currently available facts and our current insurance coverages, we do not believe that the ultimate resolution of any of these matters will have a material adverse impact on our financial condition, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes fromOur operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition or future results. We urge you to carefully consider (i) the other information set forth in this report and (ii) the risk factors discloseddiscussed in Part I, Item 1A “Risk Factors” inof our Annual Report on Form 10-K for the year ended December 31, 2016.2023. There have been no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below summarizes the repurchases of our common stock in the thirdfirst quarter of 2017:2024: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased (1) | | Average Price
Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan(2) | | Maximum Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan (2) |
| January 1-31, 2024 | | — | | | $ | — | | | — | | | $ | 344,111,238 | |
| February 1-29, 2024 | | 15,967 | | | $ | 390.32 | | | — | | | $ | 344,111,238 | |
| March 1-31, 2024 | | 25,358 | | | $ | 397.18 | | | 25,351 | | | $ | 334,042,312 | |
| Total | | 41,325 | | | $ | 394.53 | | | 25,351 | | | |
(1)These shares may include shares of our common stock surrendered to us by employees in order to satisfy minimum tax withholding obligations in connection with certain exercises of employee stock options or lapses upon vesting of restrictions on previously restricted share awards, and/or to cover the exercise price of such options granted under our share-based compensation plans. There were 15,974 shares surrendered for this purpose in the first quarter of 2024.
(2)In May 2023, our Board authorized an additional $413.6 million under our share repurchase program for the repurchase of shares of our common stock in the open market at prevailing market prices bringing the total authorization available under the program to $600.0 million. As of April 24, 2024, $283.8 million of the authorized amount remained available for use under our current share repurchase program.
Our Board may declare future dividends at their discretion, after considering various factors, including our earnings, capital requirements, financial position, contractual restrictions and other relevant business considerations. For a description of restrictions on dividends in our Credit Facility, Term Facility and Receivables Facility, see the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis in Part I, Item 2 of this Form 10-Q. We cannot assure shareholders or potential investors that dividends will be declared or paid any time in the future if our Board determines that there is a better use of our funds.
Item 5. Other Information
During the quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation SK).
|
| | | | | | | | | | | | | | |
| Period | | Total Number
of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of
Shares Purchased
as Part of Publicly Announced Plan (2) | | Maximum Approximate
Dollar Value of Shares
That May Yet be Purchased Under the Plan (3) |
| July 1 - 31, 2017 | | 287,641 |
| | $ | 109.65 |
| | 287,641 |
| | $ | 159,133,234 |
|
| August 1 - 31, 2017 | | 871,775 |
| | $ | 107.25 |
| | 871,590 |
| | $ | 65,654,104 |
|
| September 1 - 30, 2017 | | 79,335 |
| | $ | 99.19 |
| | 79,335 |
| | $ | 57,785,144 |
|
| Total | | 1,238,751 |
| | $ | 107.29 |
| | 1,238,566 |
| | |
| |
| These shares may include shares of our common stock surrendered to us by employees in order to satisfy minimum tax withholding obligations in connection with certain exercises of employee stock options or lapses upon vesting of restrictions on previously restricted share awards, and/or to cover the exercise price of such options granted under our share-based compensation plans. There were 185 shares surrendered for this purpose in the third quarter of 2017. |
| |
(2)
| In May 2017, our Board authorized an additional $150.0 million under our share repurchase program for the repurchase of shares of our common stock in the open market at prevailing market prices or in privately negotiated transactions. |
| |
(3)
| As of October 26, 2017, $53.4 million of the authorized amount remained available under our current share repurchase program.
|
Item 6. Exhibits
Exhibits filed as part of this report are listed below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | Incorporated by Reference | | |
| No. | | Description | | FiledFiled/ Furnished with this
Form 10-Q
| | Form | | File No. | | Date Filed | | |
| | Restated Certificate of Incorporation of the Company. | | | | 10-Q | | 000-26640 | | 8/9/2006 | | |
| | Amended and Restated Composite Bylaws of the Company. | | | | 8-K | | 000-26640 | | 12/20/201210/25/2023 | | |
| | Form of certificate representing shares of common stock of the Company. | | | | 8-K | | 000-26640 | | 5/19/2006 | | |
| | Certification by Mark W. JoslinChief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | X | | | | | | | | |
| | Certification by Manuel J. Perez de la MesaChief Executive Officer pursuant to Rule 13a-14(a) and 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | X | | | | | | | | |
| | Certification by Manuel J. Perez de la MesaChief Executive Officer and Mark W. JoslinChief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | X | | | | | | | | |
| 101.INS | + | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | X | | | | | | | | |
| 101.SCH | + | Inline XBRL Taxonomy Extension Schema Document | | X | | | | | | | | |
| 101.CAL | + | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | X | | | | | | | | |
| 101.DEF | + | Inline XBRL Taxonomy Extension Definition Linkbase Document | | X | | | | | | | | |
| 101.LAB | + | Inline XBRL Taxonomy Extension Label Linkbase Document | | X | | | | | | | | |
| 101.PRE | + | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | X | | | | | | | | |
| 104 | + | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) | | X | | | | | | | | |
+ Attached as Exhibit 101 to this report are the following items formatted in XBRL (ExtensibleiXBRL (Inline Extensible Business Reporting Language):
| |
1. | Consolidated Statements of Income for the three and nine months ended September 30, 2017 and September 30, 2016; |
| |
2. | Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and September 30, 2016; |
| |
3. | Consolidated Balance Sheets at September 30, 2017, December 31, 2016 and September 30, 2016; |
| |
4. | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and |
September 30, 2016; and
| |
5. | Notes to Consolidated Financial Statements. |
1.Consolidated Statements of Income for the three months ended March 31, 2024 and March 31, 2023;
2.Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and March 31, 2023;
3.Consolidated Balance Sheets at March 31, 2024, December 31, 2023 and March 31, 2023;
4.Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and March 31, 2023;
5.Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and March 31, 2023; and
6.Notes to Consolidated Financial Statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on October 31, 2017.
| | | | | | | | |
| | POOL CORPORATION |
| | |
| | POOL CORPORATION |
| | |
| | |
| By: | /s/ Melanie Housey Hart |
| | Melanie Housey Hart |
| | By:/s/ Mark W. Joslin |
| | Mark W. Joslin |
| | Senior Vice President and Chief Financial Officer, and duly authorized signatory on behalf of the registrant |
