UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-26640


POOL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware		36-3943363
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

109 Northpark Boulevard,
Covington,	Louisiana	70433-5001
(Address of principal executive offices)		(Zip Code)

(985) 892-5521

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	POOL	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~July~~April 24, ~~2023,~~2024, there were ~~39,051,971~~38,328,780 shares of common stock outstanding.

POOL CORPORATION

Form 10-Q

For the Quarter Ended ~~June 30, 2023~~March 31, 2024

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements (Unaudited)

		Consolidated Statements of Income	1
		Consolidated Statements of Comprehensive Income	2
		Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Cash Flows	4
		Consolidated Statements of Changes in Stockholders’ Equity	5
		Notes to Consolidated Financial Statements	76

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		1213

	Item 3. Quantitative and Qualitative Disclosures about Market Risk		2725

	Item 4. Controls and Procedures		2725

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings		2826

	Item 1A. Risk Factors		2826

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2826

	Item 5. Other Information		26

	Item 6. Exhibits		2927

SIGNATURE			3128

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

POOL CORPORATION

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)


		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2023		2022		2023		2022
Net sales	Net sales	$	1,857,363	$	2,055,818	$	3,064,138	$	3,468,468
Net sales
Net sales
Cost of sales
Cost of sales
Cost of sales	Cost of sales	1,289,580		1,389,014		2,126,599		2,354,474
Gross profit	Gross profit	567,783		666,804		937,539		1,113,994
Gross profit
Gross profit
Selling and administrative expenses
Selling and administrative expenses
Selling and administrative expenses	Selling and administrative expenses	240,774		247,916		464,758		459,382

Operating income	Operating income	327,009		418,888		472,781		654,612

Operating income

Operating income
Interest and other non-operating expenses, net
Interest and other non-operating expenses, net
Interest and other non-operating expenses, net	Interest and other non-operating expenses, net	16,892		8,523		32,728		13,722
Income before income taxes and equity in earnings	Income before income taxes and equity in earnings	310,117		410,365		440,053		640,890
Income before income taxes and equity in earnings
Income before income taxes and equity in earnings
Provision for income taxes	Provision for income taxes	77,987		103,160		106,260		154,482
Provision for income taxes
Provision for income taxes
Equity in earnings of unconsolidated investments, net
Equity in earnings of unconsolidated investments, net
Equity in earnings of unconsolidated investments, net	Equity in earnings of unconsolidated investments, net	120		78		156		136

Net income	Net income	$	232,250	$	307,283	$	333,949	$	486,544

Net income

Net income

Earnings per share attributable to common stockholders:

Earnings per share attributable to common stockholders:

Earnings per share attributable to common stockholders:	Earnings per share attributable to common stockholders:
Basic	Basic	$	5.95	$	7.71	$	8.55	$	12.16
Basic
Basic
Diluted
Diluted
Diluted	Diluted	$	5.91	$	7.63	$	8.48	$	12.03
Weighted average common shares outstanding:	Weighted average common shares outstanding:
Weighted average common shares outstanding:
Weighted average common shares outstanding:
Basic	Basic	38,837		39,660		38,857		39,795
Basic
Basic
Diluted
Diluted
Diluted	Diluted	39,115		40,064		39,155		40,231

Cash dividends declared per common share	Cash dividends declared per common share	$	1.10	$	1.00	$	2.10	$	1.80

Cash dividends declared per common share

Cash dividends declared per common share

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Net income $ 232,250 $ 307,283 $ 333,949 $ 486,544
Other comprehensive income (loss):
Foreign currency translation gain (loss) 2,801 (7,125) 5,271 (7,339)
Unrealized gains (losses) on interest rate swaps, net of the change in taxes of $(1,166), $(1,631), $104, and $(5,497) 3,497 4,893 (313) 16,491
Total other comprehensive income (loss) 6,298 (2,232) 4,958 9,152
Comprehensive income $ 238,548 $ 305,051 $ 338,907 $ 495,696


	Three Months Ended
	March 31,
	2024		2023
Net income	$	78,885	$	101,699
Other comprehensive (loss) income:
Foreign currency translation (loss) gain	(3,668)		2,469
Unrealized gain (loss) on interest rate swaps, net of the change in taxes of $(742) and $1,269	2,226		(3,809)
Total other comprehensive loss	(1,442)		(1,340)
Comprehensive income	$	77,443	$	100,359

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Balance Sheets

(In thousands, except share data)


			June 30,		June 30,		December 31,
			2023		2022		2022
		March 31,									March 31,		March 31,		December 31,
		2024									2024			2023
			(Unaudited)		(Unaudited)		(Audited)			(Unaudited)		(Audited)
Assets	Assets								Assets
Current assets:	Current assets:								Current assets:
Cash and cash equivalents	Cash and cash equivalents		$	53,225	$	91,481	$	45,591
Receivables, net	Receivables, net		203,459		239,639		128,247
Receivables pledged under receivables facility	Receivables pledged under receivables facility		427,491		516,946		223,201
Product inventories, net	Product inventories, net		1,392,886		1,579,101		1,591,060
Prepaid expenses and other current assets	Prepaid expenses and other current assets		19,994		43,317		30,892
Total current assets	Total current assets		2,097,055		2,470,484		2,018,991

Property and equipment, net	Property and equipment, net		209,541		183,480		193,709
Property and equipment, net
Property and equipment, net
Goodwill	Goodwill		699,918		692,972		691,993
Other intangible assets, net	Other intangible assets, net		302,444		309,375		305,450
Equity interest investments	Equity interest investments		1,278		1,179		1,248
Operating lease assets	Operating lease assets		279,468		259,571		269,608
Other assets	Other assets		90,875		45,044		84,438
Total assets	Total assets		$	3,680,579	$	3,962,105	$	3,565,437

Liabilities and stockholders’ equity
Liabilities and stockholders’ equity
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:								Current liabilities:
Accounts payable	Accounts payable		$	485,100	$	604,225	$	406,667
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities		170,658		195,529		168,521
Short-term borrowings and current portion of long-term debt	Short-term borrowings and current portion of long-term debt		36,219		19,731		25,042
Current operating lease liabilities	Current operating lease liabilities		79,763		71,550		75,484
Total current liabilities	Total current liabilities		771,740		891,035		675,714

Deferred income taxes	Deferred income taxes		58,151		42,380		58,759
Deferred income taxes
Deferred income taxes
Long-term debt, net	Long-term debt, net		1,148,367		1,575,667		1,361,761
Other long-term liabilities	Other long-term liabilities		39,236		32,109		35,471
Non-current operating lease liabilities	Non-current operating lease liabilities		204,553		191,856		198,538
Total liabilities	Total liabilities		2,222,047		2,733,047		2,330,243

Stockholders’ equity:	Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 39,048,604, 39,588,231 and 39,069,419 shares issued and outstanding at June 30, 2023, June 30, 2022 and December 31, 2022, respectively			39		40		39

Stockholders’ equity:

Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 38,462,331, 39,032,631 and 38,354,829 shares issued and outstanding at March 31, 2024, March 31, 2023 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital		593,081		564,641		575,776
Retained earnings	Retained earnings		854,559		662,709		653,484
Accumulated other comprehensive income	Accumulated other comprehensive income		10,853		1,668		5,895
Total stockholders’ equity	Total stockholders’ equity		1,458,532		1,229,058		1,235,194
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	3,680,579	$	3,962,105	$	3,565,437

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


			Six Months Ended					Three Months Ended
			June 30,
		March 31,								March 31,
			2023		2022			2024	2023
Operating activities	Operating activities						Operating activities
Net income	Net income		$	333,949	$	486,544
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation		15,292		15,376
Amortization	Amortization		4,237		4,358
Share-based compensation	Share-based compensation		9,996		7,571

Equity in earnings of unconsolidated investments, net	Equity in earnings of unconsolidated investments, net		(156)		(136)
Equity in earnings of unconsolidated investments, net
Equity in earnings of unconsolidated investments, net

Other
Other
Other	Other		3,563		7,185
Changes in operating assets and liabilities, net of effects of acquisitions:	Changes in operating assets and liabilities, net of effects of acquisitions:						Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables	Receivables		(276,945)		(384,245)
Product inventories	Product inventories		201,380		(251,090)
Prepaid expenses and other assets	Prepaid expenses and other assets		(4,423)		(20,573)
Accounts payable	Accounts payable		76,140		208,017
Accrued expenses and other liabilities	Accrued expenses and other liabilities		13,744		(44,276)
Net cash provided by operating activities	Net cash provided by operating activities		376,777		28,731

Investing activities	Investing activities
Investing activities
Investing activities
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired		(11,500)		(7,629)
Purchases of property and equipment, net of sale proceeds	Purchases of property and equipment, net of sale proceeds		(30,191)		(19,802)

Other investments, net	Other investments, net		(169)		—

Other investments, net

Other investments, net
Net cash used in investing activities	Net cash used in investing activities		(41,860)		(27,431)

Financing activities	Financing activities
Financing activities
Financing activities
Proceeds from revolving line of credit	Proceeds from revolving line of credit		698,795		1,122,186
Payments on revolving line of credit	Payments on revolving line of credit		(1,001,399)		(1,128,902)
Proceeds from term loan under credit facility			—		250,000

Payments on term loan under credit facility
Payments on term loan under credit facility
Payments on term loan under credit facility
Proceeds from asset-backed financing	Proceeds from asset-backed financing		388,900		215,000
Payments on asset-backed financing	Payments on asset-backed financing		(240,200)		(50,000)
Payments on term facility	Payments on term facility		(47,313)		(4,625)
Proceeds from short-term borrowings and current portion of long-term debt	Proceeds from short-term borrowings and current portion of long-term debt		17,859		24,767
Payments on short-term borrowings and current portion of long-term debt	Payments on short-term borrowings and current portion of long-term debt		(19,182)		(16,808)

Payments of deferred and contingent acquisition consideration	Payments of deferred and contingent acquisition consideration		(551)		(1,374)
Payments of deferred and contingent acquisition consideration
Payments of deferred and contingent acquisition consideration

Proceeds from stock issued under share-based compensation plans	Proceeds from stock issued under share-based compensation plans		7,309		5,107

Proceeds from stock issued under share-based compensation plans

Proceeds from stock issued under share-based compensation plans
Payments of cash dividends	Payments of cash dividends		(82,018)		(72,028)
Purchases of treasury stock			(50,742)		(278,680)
Net cash (used in) provided by financing activities			(328,542)		64,643
Repurchases of common stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents		1,259		1,217
Change in cash and cash equivalents	Change in cash and cash equivalents		7,634		67,160
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period		45,591		24,321
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period		$	53,225	$	91,481

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands)


		Common Stock
		Common Stock
		Common Stock

		Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive
		Shares	Amount		Capital		Earnings		Income		Total		Shares	Amount	Capital	Earnings	Income	Total
Balance at December 31, 2022		39,069	$	39	$	575,776	$	653,484	$	5,895	$	1,235,194
Balance at December 31, 2023
Net income	Net income	—	—		—		101,699		—		101,699
Foreign currency translation	Foreign currency translation	—	—		—		—		2,469		2,469
Interest rate swaps, net of the change in taxes of $1,269		—	—		—		—		(3,809)		(3,809)
Interest rate swaps, net of the change in taxes of $(742)
Repurchases of common stock, net of retirements	Repurchases of common stock, net of retirements	(144)	—		—		(50,549)		—		(50,549)
Share-based compensation	Share-based compensation	—	—		4,923		—		—		4,923
Issuance of stock under share-based compensation plans	Issuance of stock under share-based compensation plans	108	—		5,896		—		—		5,896
Declaration of cash dividends	Declaration of cash dividends	—	—		—		(39,073)		—		(39,073)
Balance at March 31, 2023		39,033	$	39	$	586,595	$	665,561	$	4,555	$	1,256,750
Net income		—	—		—		232,250		—		232,250
Foreign currency translation		—	—		—		—		2,801		2,801
Interest rate swaps, net of the change in taxes of $(1,166)		—	—		—		—		3,497		3,497
Repurchases of common stock, net of retirements		—	—		—		—		—		—
Share-based compensation		—	—		5,073		—		—		5,073
Issuance of stock under share-based compensation plans		16	—		1,413		—		—		1,413
Declaration of cash dividends		—	—		—		(42,945)		—		(42,945)
Other		—	—		—		(307)		—		(307)
Balance at June 30, 2023		39,049	$	39	$	593,081	$	854,559	$	10,853	$	1,458,532
Balance at March 31, 2024

Common Stock Additional
Paid-In Retained Accumulated
Other
Comprehensive
Shares Amount Capital Earnings Income Total
Balance at December 31, 2021 40,193 $ 40 $ 551,963 $ 526,874 $ (7,484) $ 1,071,393
Net income — — — 179,261 — 179,261
Foreign currency translation — — — — (214) (214)
Interest rate swaps, net of the change in taxes of $(3,866) — — — — 11,598 11,598
Repurchases of common stock, net of retirements (138) — — (62,420) — (62,420)
Share-based compensation — — 3,657 — — 3,657
Issuance of stock under share-based compensation plans 55 — 3,135 — — 3,135
Declaration of cash dividends — — — (32,132) — (32,132)
Balance at March 31, 2022 40,110 $ 40 $ 558,755 $ 611,583 $ 3,900 $ 1,174,278
Net income — — — 307,283 — 307,283
Foreign currency translation — — — — (7,125) (7,125)
Interest rate swaps, net of the change in taxes of $(1,631) — — — — 4,893 4,893
Repurchases of common stock, net of retirements (547) — — (216,261) — (216,261)
Share-based compensation — — 3,914 — — 3,914
Issuance of stock under share-based compensation plans 25 — 1,972 — — 1,972
Declaration of cash dividends — — — (39,896) — (39,896)
Balance at June 30, 2022 39,588 $ 40 $ 564,641 $ 662,709 $ 1,668 $ 1,229,058


	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Earnings		Income		Total
Balance at December 31, 2022	39,069	$	39	$	575,776	$	653,484	$	5,895	$	1,235,194
Net income	—	—		—		101,699		—		101,699
Foreign currency translation	—	—		—		—		2,469		2,469
Interest rate swaps, net of the change in taxes of $1,269	—	—		—		—		(3,809)		(3,809)
Repurchases of common stock, net of retirements	(144)	—		—		(50,549)		—		(50,549)
Share-based compensation	—	—		4,923		—		—		4,923
Issuance of stock under share-based compensation plans	108	—		5,896		—		—		5,896
Declaration of cash dividends	—	—		—		(39,073)		—		(39,073)
Balance at March 31, 2023	39,033	$	39	$	586,595	$	665,561	$	4,555	$	1,256,750

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Summary of Significant Accounting Policies

Pool Corporation (the Company, which may also be referred to as we, us or our) prepared the unaudited interim Consolidated Financial Statements following U.S. generally accepted accounting principles (GAAP) and the requirements of the Securities and Exchange Commission (SEC) for interim financial information. As permitted under those rules, we have condensed or omitted certain footnotes and other financial information required for complete financial statements.

The interim Consolidated Financial Statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. All significant intercompany accounts and intercompany transactions have been eliminated.

A description of our significant accounting policies is included in our ~~2022~~2023 Annual Report on Form 10-K. You should read the interim Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and accompanying notes in our ~~2022~~2023 Annual Report on Form 10-K. The results for our ~~three and six-month periods~~three-month period ended ~~June 30, 2023,~~March 31, 2024, are not necessarily indicative of the expected results for our fiscal year ending December 31, ~~2023.~~

~~Newly Adopted Accounting Pronouncements~~

~~As of June 30, 2023, we adopted Accounting Standards Update (ASU) 2020-04,~~ 2024.~~Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting,~~ ~~and all related amendments, which are codified into Accounting Standards Codification (ASC) 848~~. This new standard provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships and sale or transfer of debt securities classified as held-to-maturity. The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures, and we do not expect a material impact in future periods.

Income Taxes

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of nonqualified stock options and the lapse of restrictions on restricted stock awards. To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit. We record all excess tax benefits as a component of income tax benefit or expense on the Consolidated Statements of Income in the period in which stock options are exercised or restrictions on restricted stock awards lapse. We recorded excess tax benefits of ~~$0.6~~$7.4 million in the ~~second~~first quarter of ~~2023~~2024 compared to ~~$1.6~~$4.8 million in the ~~second~~first quarter of ~~2022 and $5.4 million in the six months ended June 30, 2023, compared to $8.9 million in the six months ended June 30, 2022.~~2023.

Retained Earnings

We account for the retirement of ~~treasury~~repurchased shares as a reduction of Retained earnings. As of ~~June 30, 2023,~~March 31, 2024, the Retained earnings on our Consolidated Balance Sheets reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, ~~treasury~~ share retirements since the inception of our share repurchase programs of ~~$2.2~~$2.5 billion and cumulative dividends of ~~$1.0 billion.~~$1.2 billion.

Accumulated Other Comprehensive Income

The table below presents the components of our Accumulated other comprehensive income balance (in thousands):


		June 30,				December 31,
		2023		2022		2022
	March 31,								March 31,			December 31,
	2024							2024		2023	2023
Foreign currency translation adjustments	Foreign currency translation adjustments	$	(14,338)	$	(16,919)	$	(19,608)
Unrealized gains on interest rate swaps, net of tax	Unrealized gains on interest rate swaps, net of tax	25,191		18,587		25,503
Accumulated other comprehensive income	Accumulated other comprehensive income	$	10,853	$	1,668	$	5,895

Recent Accounting Pronouncements Pending Adoption

The following table summarizes recent accounting pronouncements that we plan to adopt in future periods:


Standard	Description	Effective Date	Effect on Financial Statements and Other Significant Matters
Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures	In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes- Improvements to Income Tax Disclosures, which will require enhancements and further transparency to various income tax disclosures, most notably the tax rate reconciliation and income taxes paid.	Annual periods beginning after December 15, 2024 on a prospective basis. Retrospective application for all periods presented is permitted. Early adoption is also permitted.	We are currently evaluating the effect this standard will have on our disclosures.
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, whichintends to improve reportable segment disclosures by requiring enhanced disclosures about significant segment expenses, enhance interim disclosure requirements, refine situations in which an entity can disclose multiple segment measures of profit or loss and provide advanced segment disclosure requirements for entities with a single reportable segment, as well as other disclosure requirements.	Annual periods beginning after December 15, 2023 on a retrospective basis for all periods presented. Early adoption is permitted.	We are currently evaluating the effect this standard will have on our disclosures.
ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative	In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives and transfers of financial assets.	The amendments in ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited.	We are currently evaluating the effect this standard will have on our disclosures.

Note 2 – Earnings Per Share

We calculate basic and diluted earnings per share using the two-class method. Earnings per share under the two-class method is calculated using net income attributable to common stockholders, which is net income reduced by the earnings allocated to participating securities. Our participating securities include share-based payment awards that contain a non-forfeitable right to receive dividends and are considered to participate in undistributed earnings with common shareholders. Participating securities excluded from weighted average common shares outstanding were 205,000 for the three months ended ~~June 30, 2023~~March 31, 2024 and ~~218,000~~213,000 for the three months ended ~~June 30, 2022, and 209,000 for the six months ended June 30, 2023 and 229,000 for the six months ended June 30, 2022.~~March 31, 2023.

The table below presents the computation of earnings per share, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except per share data):


		Three Months Ended					Six Months Ended
		June 30,					June 30,
											Three Months Ended
				March 31,									March 31,
		2023			2022		2023		2022			2024		2023
Net income	Net income	$	232,250		$	307,283	$	333,949	$	486,544
Amounts allocated to participating securities	Amounts allocated to participating securities	(1,219)			(1,680)		(1,779)		(2,762)
Net income attributable to common stockholders	Net income attributable to common stockholders	$	231,031		$	305,603	$	332,170	$	483,782

Weighted average common shares outstanding:	Weighted average common shares outstanding:
Weighted average common shares outstanding:
Weighted average common shares outstanding:
Basic
Basic
Basic	Basic	38,837			39,660		38,857		39,795
Effect of dilutive securities:	Effect of dilutive securities:
Stock options and employee stock purchase plan
Stock options and employee stock purchase plan
Stock options and employee stock purchase plan	Stock options and employee stock purchase plan	278			404		298		436
Diluted	Diluted	39,115			40,064		39,155		40,231

Earnings per share attributable to common stockholders:	Earnings per share attributable to common stockholders:
Earnings per share attributable to common stockholders:
Earnings per share attributable to common stockholders:
Basic
Basic
Basic	Basic	$	5.95		$	7.71	$	8.55	$	12.16
Diluted	Diluted	$	5.91		$	7.63	$	8.48	$	12.03

Anti-dilutive stock options excluded from diluted earnings per share computations (1)	Anti-dilutive stock options excluded from diluted earnings per share computations (1)	64			33		65		1
Anti-dilutive stock options excluded from diluted earnings per share computations (1)
Anti-dilutive stock options excluded from diluted earnings per share computations (1)

(1)Since these options have exercise prices that are higher than the average market prices of our common stock, including them in the calculation would have an anti-dilutive effect on earnings per share.

Note 3 – Acquisitions

In January 2024, we acquired the distribution assets of Shoreline Pool Distribution, a wholesale distributor of swimming pool products and supplies, adding one location in Mississippi.

In December 2023, we acquired the distribution assets of A.C. Solucoes para Piscinas, Lda., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Braga, Portugal.

In June 2023, we acquired the distribution assets of Pioneer Pool Products, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Alabama.

In May 2023, we acquired the distribution assets of Recreation Supply Company, a wholesale distributor of commercial swimming pool products, adding one location in North Dakota.

In March 2023, we acquired the distribution assets of Pro-Water Irrigation & Landscape Supply, Inc., a wholesale distributor of irrigation and landscape supply products, adding two locations in Arizona.

~~In April 2022, we acquired the distribution assets of Tri-State Pool Distributors, a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in West Virginia.~~

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.

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 our deferred compensation plan asset and ~~liability and contingent consideration related to recent acquisitions.~~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:

•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.

The table below presents our assets and liabilities measured and recorded at fair value on a recurring basis (in thousands):

Fair Value at June 30,

Fair Value at March 31,

Input Level

Classification

2023

2022

Input Level

Classification

2024

2023

Assets

Unrealized gains on interest rate swaps

Level 2

Other assets

33,632

24,828

Deferred compensation plan asset

Level 1

Other assets

14,633

16,306

Liabilities

Contingent consideration liabilities

Level 3

Accrued expenses and other current liabilities

—

582

Liabilities

Deferred compensation plan liability

Level 1

Other long-term liabilities

14,633

16,306

Deferred compensation plan liability

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 variable rate borrowings.

We use significant other observable market data or assumptions (Level 2 inputs) in determining the fair value of our interest rate swap contracts 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 recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. To 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 our interest rate swap contracts to Accumulated other comprehensive income on the Consolidated Balance Sheets.

We currently have two swap contracts in place. These swap contracts were previously forward-starting and convert the variable interest rate to a fixed interest rate on a portion of our variable rate borrowings. Interest expense related to the notional 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 these interest rate swap contracts are recorded to Accumulated other comprehensive income on the Consolidated Balance Sheets.

910

The following table provides additional details related to these 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%

For the interest rate swap contracts in effect at ~~June 30, 2023,~~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 income 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 six-month~~three-month periods ended ~~June 30, 2023~~March 31, 2024 or ~~June 30, 2022.~~March 31, 2023.

We 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 variable rate borrowings. The following table provides details related to our 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%

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 were in a net pay position.

We amended the floating rate option for our interest rate swap contracts and forward-starting interest rate swap contract, effective June 30, 2023, to reflect the change in the reference rate in our debt agreements from the one month London Interbank Offered Rate Market Index Rate (LIBOR) to the one month Term Secured Overnight Financing Rate Index Rate (Term SOFR). As permitted by ASC 848, a change in rate only does not qualify as a hedge modification, and we have accounted for and presented our interest rate swaps contracts and forward-starting interest rate swap contract in the same manner as prior to the amendments.

Our interest rate swap contracts and forward-starting interest rate swap contract 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.

Other

Our deferred compensation plan asset represents investments in securities (primarily mutual funds) traded in an active market (Level 1 inputs) held for the benefit of certain employees as part of our deferred compensation plan. We record an equal and offsetting deferred compensation plan liability, which represents our obligation to participating employees. Changes in the fair value of the plan asset and liability are reflected in Selling and administrative expenses inon the Consolidated Statements of Income.

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. The carrying value of our 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).

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Note 5 – Debt

The table below presents the components of our debt (in thousands):

June 30,
2023 2022
Variable rate debt
Short-term borrowings $ — $ 10,152
Current portion of long-term debt:
Australian credit facility 11,219 9,579
Current portion of term loans under credit facility 25,000 —
Short-term borrowings and current portion of long-term debt $ 36,219 $ 19,731
Long-term portion:
Revolving credit facility 217,106 566,210
Term loan under credit facility 475,000 500,000
Term facility 109,938 161,875
Receivables securitization facility 348,200 350,000
Less: financing costs, net 1,877 2,418
Long-term debt, net 1,148,367 1,575,667
Total debt $ 1,184,586 $ 1,595,398

On June 30, 2023, we entered into the Second Amendment to the Second Amended and Restated Credit Agreement (the Credit Facility Amendment) among us as U.S. Borrower, SCP Distributors Canada Inc. as Canadian Borrower, SCP International, Inc. as Euro Borrower, the Subsidiary Guarantors party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto. The Credit Facility Amendment updated the index used for the Base Rate (as further defined within the Credit Facility Amendment) from LIBOR to Term SOFR. The Credit Facility Amendment also increased the maximum amount for the Accounts Securitization (as further defined within the Credit Facility Amendment) from $350.0 million to $500.0 million and increased the Canadian Dollar Commitment, Euro Commitment and Swingline Commitment (all as further defined within the Credit Facility Amendment) to $50.0 million each.

We also entered into the Second Amendment to Credit Agreement (the Term Facility Amendment) on June 30, 2023, among us, as Borrower, the Guarantors party thereto and Bank of America, N.A. as Lender. The Term Facility Amendment updated the index used for the Base Rate (as further defined within the Term Facility Amendment) from LIBOR to SOFR.


	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

Our accounts receivable securitization facility (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.

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-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.

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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 ~~2022~~2023 Annual Report on Form 10-K and Management’s Discussion and Analysis in our ~~2022~~2023 Annual Report on Form 10-K.

Forward-Looking Statements

This report contains forward-looking information that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of earnings and other financial performance measures, statements of management’s expectations regarding our strategic, operational and capital allocation plans and objectives, management's views on industry, economic, competitive, technological and regulatory 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 statement will be achieved, and actual results may differ materially due to one or more factors, including the sensitivity of our business to weather conditions; changes in economic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; the extent to which home-centric trends associated with the pandemic will continue to moderate or reverse; competition from other leisure product alternatives or mass 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 ~~2022~~2023 Annual Report on Form 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 of 1995.

OVERVIEW

Financial Results

~~A slow start~~Net sales decreased 7% in the first quarter of 2024 to ~~the swimming pool season combined with cautious consumer sentiment resulted in net sales of $1.9~~$1.1 billion compared to $1.2 billion in the ~~second~~first quarter of 2023 ~~a decrease of 10%~~following significant growth in 2021 and 2022. Base business results approximated consolidated results for the 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 ~~$2.1 billion~~a benefit of 4% to 5% in the ~~second~~first quarter of 2022. This decrease in net sales follows 15% net sales growth in the second quarter of 2022 and 40% net sales growth in the second quarter of 2021. From 2019 to 2023, our second quarter net sales grew at a compound annual growth rate (“CAGR”) of 13%. Our results in the second quarter of 2023 reflect challenging macro trends and negative impacts from cooler weather at the beginning of the quarter across many of our markets. These conditions led to slower maintenance activity than anticipated, reduced outdoor living construction activity and deferred discretionary replacement activity.2023.

Gross profit decreased ~~15%~~8% to ~~$567.8~~$338.6 million in the ~~second~~first quarter of ~~2023~~2024 from ~~$666.8~~$369.8 million in the same period of ~~2022. Our gross profit increased at a 15% CAGR from~~2023. Gross margin decreased 40 basis points to 30.2% in the ~~second~~first quarter of ~~2019 to the second quarter of 2023. Consistent with our expectations, gross margin decreased 180 basis points~~2024 compared to 30.6% in the ~~second~~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 first 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 ~~32.4% in the second quarter~~last year and a higher concentration of ~~2022.~~sales to larger customers negatively impacted our margin.

Selling and administrative expenses (operating expenses) ~~decreased~~increased 3% to ~~$240.8~~$229.8 million in the ~~second~~first quarter of ~~2023~~2024 compared to ~~$247.9~~$224.0 million in the ~~second~~first quarter of ~~2022 as~~2023. While we managed variable ~~expenses~~costs in line with ~~reduced~~lower sales ~~volumes.~~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, operating expenses increased to ~~13.0%~~20.5% in the ~~second~~first quarter of ~~2023~~2024 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 ~~same period of 2022.~~

~~While operating income in the second~~first quarter of 2023 decreased 22% to $327.0 million from a record high of $418.9 million in the second quarter of 2022, operating income increased at a 17% CAGR from the second quarter of 2019 to the second quarter of 2023. ~~Operating margin was 17.6% in the second quarter of 2023 compared to 20.4% in the second quarter of 2022.~~

We recorded a ~~$0.6~~$7.4 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended ~~June 30, 2023,~~March 31, 2024, compared to a tax benefit of ~~$1.6~~$4.8 million realized in the same period of ~~2022.~~2023. This resulted in a ~~$0.02~~$0.19 per diluted share tax benefit in the ~~second~~first quarter of ~~2023~~2024 compared to a ~~$0.04~~$0.12 per

diluted share tax benefit realized in the same period of ~~2022.~~2023.

Net income decreased ~~24%~~ 22% to ~~$232.3~~$78.9 million in the ~~second~~first quarter of ~~2023~~2024 compared to ~~$307.3~~$101.7 million in the ~~second~~first quarter of ~~2022.~~2023. Earnings per diluted share decreased ~~23%~~21% to ~~$5.91~~$2.04 in the ~~second~~first quarter of ~~2023~~2024 compared to ~~$7.63~~$2.58 in the same period of ~~2022.~~2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased ~~22%~~ 25% to ~~$5.89~~$1.85 compared to ~~$7.59~~$2.46 in the ~~second~~first quarter of ~~2022. Our earnings per diluted share increased at a 16% CAGR from the second quarter of 2019 to the second quarter of 2023 and an 18% CAGR without the impact of ASU 2016-19 over the same period.~~ 2023. See RESULTS OF OPERATIONS below for 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 report generally reflect data related to the North American swimming pool market, as this 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

~~As of June 30, 2023, total~~Total net receivables, including pledged receivables, ~~decreased 17%~~trended in line with net sales activity at March 31, 2024 compared to ~~June 30, 2022, primarily due to lower sales.~~March 31, 2023. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was ~~26.2~~26.9 days at ~~June 30, 2023~~March 31, 2024 and ~~27.2~~26.5 days at ~~June 30, 2022.~~March 31, 2023. Our allowance for doubtful accounts balance was ~~$10.1~~$9.3 million at ~~June 30, 2023~~March 31, 2024 and ~~$6.5~~$9.0 million at ~~June 30, 2022.~~March 31, 2023.

~~Net~~We reduced net inventory levels ~~of $1.4 billion decreased $186.2 million, or 12%,~~ compared to ~~June 30, 2022. This decrease also compares to our~~ March 31, 2023 ~~net inventory balance of $1.7~~by $189.7 million, or 11%, to $1.5 billion, ~~which was 3% higher than March 31, 2022. This ongoing improvement reflects progress toward reducing~~consistent with the trends stemming from our inventory ~~balance~~management efforts executed over the 2023 swimming pool season following strategic buys in prior ~~year strategic purchases made to mitigate supply chain challenges.~~years. Our inventory reserve was ~~$25.4~~$24.2 million at ~~June 30, 2023~~March 31, 2024 and ~~$20.9~~$24.5 million at ~~June 30, 2022.~~March 31, 2023. Our inventory turns, as calculated on a trailing four quarters basis, were 2.7 times at March 31, 2024 and 2.5 times at ~~June 30, 2023 and 2.8 times at June 30, 2022.~~March 31, 2023.

Total debt outstanding was $979.2 million at ~~June 30, 2023 was $1.2 billion compared to $1.6 billion at June 30, 2022~~March 31, 2024, down ~~$410.8~~$386.6 million from ~~June 30, 2022 and $202.2 million lower than December~~March 31, ~~2022,~~ 2023, as we have used operating cash flows to reduce our ~~debt. Our~~ debt ~~proceeds~~ over the past ~~twelve months have been utilized primarily to fund share repurchases, dividends, capital expenditures and acquisitions.~~

year.

Current Trends and Outlook

For a detailed discussion of trends impacting us through ~~2022,~~2023, see the Current Trends and Outlook section of Management’s Discussion and Analysis included in Part II, Item 7 of our ~~2022~~2023 Annual Report on Form 10-K.

~~Based on our results to date and trends observed through the first half of 2023, we now~~We expect sales for the full year of ~~2023~~2024 to be flat to slightly positive compared to 2023, impacted by the following factors and assumptions:

•normal weather patterns for the remainder 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 ~~range~~remodeling, renovation and upgrading of ~~around~~swimming pools to be flat to down 10% ~~compared to 2022 versus our expectation of a mid-single digit decline disclosed in our First Quarter 2023 Report on Form 10-Q. Considering the slower than expected start to the pool season~~; and greater visibility as the season progresses, we believe the possible trends outlined in our First Quarter 2023 Report on Form 10-Q for new pool construction and repair and remodel will fall to the lower end of the sales ranges. Further, the slower start resulted in reduced revenues for maintenance needs, such as chemicals, further leading us to reduce our sales expectations for the full year.

•inflationary product cost increases of approximately 2% to 3%.

As previously disclosed in our ~~2022~~2023 Annual Report on Form 10-K, we project gross margin for the full year of ~~2023~~2024 to be in line with our long-term outlook of approximately 30.0%, with ~~higher gross~~our highest margin in the ~~first half of 2023 compared to the latter half~~second quarter of the ~~year as we sold through most~~year. Our actual gross margin will depend on amounts and timing of ~~our prior year strategic inventory purchases in the first half of the year.~~

inflationary price increases, customer and product mix.

We ~~plan~~expect to leverage our existing infrastructure and manage discretionary spending to ~~limit operating expense growth to 1% compared to~~maintain expenses for the full year of ~~2022, not considering any acquisitions that may arise~~2024 in ~~the second half~~line with sales expectations to achieve an operating margin of ~~the year.~~

approximately 13.0%.

We project that our annual effective tax rate (without the benefit from ASU 2016-09) for ~~2023~~2024 will approximate ~~our 2022 annual tax rate of 25.2%~~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. We recorded a ~~$5.4~~$7.4 million, or ~~$0.14~~$0.19 per diluted share, tax benefit from ASU 2016-09 for the ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024. We may recognize additional tax benefits related to stock option exercises in ~~2023~~2024 from grants that expire in future years. We have not included any expected tax benefits in our full year guidance beyond what we have recognized as of ~~June 30, 2023.~~

March 31, 2024.

We expect ~~2023~~2024 diluted EPS in the range of ~~$13.14~~$13.19 to ~~$14.14,~~$14.19, including the impact of year-to-date tax benefits of ~~$0.14.~~$0.19. We

expect to continue to use cash for the payment of cash dividends as and when declared by our Board of Directors (Board) and to fund opportunistic share repurchases ~~through the remainder of 2023.~~

under our Board-authorized share repurchase program.

The forward-looking statements in 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 ~~June 30, 2023,~~March 31, 2024, we conducted operations through ~~432~~442 sales centers in North America, Europe and Australia. For the ~~six~~three months ended ~~June 30, 2023,~~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					Six Months Ended
		June 30,					June 30,
					Three Months Ended
					Three Months Ended
					Three Months Ended
				March 31,										March 31,
		2023			2022		2023		2022			2024			2023
Net sales	Net sales	100.0	%		100.0	%	100.0	%	100.0	%	Net sales	100.0	%		100.0	%
Cost of sales	Cost of sales	69.4			67.6		69.4		67.9
Gross profit	Gross profit	30.6			32.4		30.6		32.1
Selling and administrative expenses	Selling and administrative expenses	13.0			12.1		15.2		13.2

Operating income	Operating income	17.6			20.4		15.4		18.9
Operating income
Operating income
Interest and other non-operating expenses, net	Interest and other non-operating expenses, net	0.9			0.4		1.1		0.4
Income before income taxes and equity in earnings	Income before income taxes and equity in earnings	16.7	%		20.0	%	14.4	%	18.5	%	Income before income taxes and equity in earnings	8.5	%		10.8	%

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

We have included the results of operations from acquisitions in ~~2023~~2024 and ~~2022~~2023 in our consolidated results since the acquisition dates.

1415

Three Months Ended ~~June 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~June 30, 2022~~March 31, 2023

Base Business

When calculating our base business results, we exclude sales centers that are acquired, 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 we 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, 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 three months of 2024:


December 31, 2023			439
Acquired location			1
New locations			3
Consolidated location			(1)
March 31, 2024			442

Net Sales


			Three Months Ended									Three Months Ended
			June 30,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)		2023		2022		Change				2024				2023				Change
Net sales	Net sales		$	1,857.4	$	2,055.8	$	(198.4)	(10)%	Net sales		$	1,120.8	$		$	1,206.8	$		$	(86.0)	(7)%	(7)%

~~Following 15% net sales growth in the second quarter of 2022 and 40% net sales growth in the second quarter of 2021 (in both cases compared to the prior year quarter), net~~Net sales of ~~$1.9~~$1.1 billion in the ~~second~~first quarter of 2024 decreased 7% compared to $1.2 billion in the first quarter of 2023, reflecting challenges from current macroeconomic conditions and mixed weather. Our base business results approximated our consolidated results for the period. Maintenance activities were down 10% compared to the second quarter of 2022. From 2019 to 2023, our second quarter net sales grew at a CAGR of 13%. Our results in the current quarter reflect challenging macro trends and negative impacts from cooler weather at the beginning ofstable during the quarter, ~~across many of our markets. These conditions led to slower maintenance activity than anticipated, reduced outdoor living~~indicating steady demand for non-discretionary products, while pool construction ~~activity~~ and ~~deferred~~ discretionary ~~replacement activity.~~ activities were weaker.

The following factors ~~also~~ impacted our sales during the quarter and are listed in order of estimated magnitude.

•~~Net~~Our net sales ~~benefited approximately 3% to 4%~~were negatively impacted by lower sales volumes from ~~inflationary product cost increases, which compares to a benefit of 10% to 11% in the second quarter of 2022.~~reduced pool construction activity and discretionary activity (see discussion below).

•We estimate that unfavorable weather conditions ~~in the second quarter~~ negatively impacted sales by approximately ~~$30.0 million.~~2%.

•Net sales benefited approximately 1% to 2% from inflationary product cost increases, which is net of price deflation for some products, primarily chemical sanitizers and PVC pipe. This compares to a benefit of 4% to 5% in the first quarter of 2023.

•Sales ~~were also negatively impacted 1% from lower~~included a greater concentration of customer early buy activity in the ~~second~~first quarter of ~~2023 versus~~2024 than the ~~second~~first quarter of ~~2022.~~2023.

~~Related to our product~~In the first quarter of 2024, sales ~~following a period~~ of ~~significant growth over the past three years, we observed a period-over-period decline~~equipment, which is used in ~~volumes of discretionary products sold as~~maintenance, renovation and new construction activities ~~moderated. In the second quarter of 2023, sales of equipment, which~~and includes swimming pool heaters, pumps, lights, filters and automation, decreased 8%3% compared to the same period last year, and collectively represented approximately ~~27%~~34% of net sales for the period. Sales of building materials, which is primarily used in new construction and remodeling, decreased 8%11% compared to the ~~second~~first quarter of ~~2022~~2023 and represented approximately ~~12%~~13% of net sales in the ~~second~~first quarter of ~~2023.~~

2024.

Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial installations are included in the appropriate existing product categories, and sales trends in these areas are reflected in the discussion above. Sales to retail customers decreased ~~11%~~4% in the ~~second~~first quarter of ~~2023~~2024 compared to the ~~second~~first quarter of ~~2022~~2023 and represented approximately 15% of our total net sales. ~~As consumers take advantage of travel opportunities, sales~~Sales to commercial swimming pool customers ~~increased 8%~~were flat in the ~~second~~first quarter of 2024 compared to the first quarter of 2023 ~~compared to the second quarter of 2022~~ and represented approximately 4%5% of our net sales for the ~~second~~first quarter of ~~2023.~~

~~Gross Profit~~

Three Months Ended
June 30,
(in millions) 2023 2022 Change
Gross profit $ 567.8 $ 666.8 $ (99.0) (15)%
Gross margin 30.6 % 32.4 %

Gross margin decreased 180 basis points to 30.6% in the second quarter of 2023 compared to the second quarter of 2022 when gross margin increased 150 basis points (over the same period in 2021) to 32.4%. Our prior year gross margin benefited from higher levels of inflation and price increases, while gross margin in the second quarter of 2023 began to trend more in line with our longer-term annual gross margin outlook of 30.0%. Gross margin in the second quarter of 2023 reflects a seasonal benefit that is typical for the second quarter.

2024.

1516

~~Operating Expenses~~Gross Profit

Three Months Ended
June 30,
(in millions) 2023 2022 Change
Selling and administrative expenses $ 240.8 $ 247.9 $ (7.1) (3)%
Operating expenses as a % of net sales 13.0 % 12.1 %


	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 benefited from ongoing supply chain management initiatives.

•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 ~~decreased~~increased 3% in the ~~second~~first quarter of ~~2023~~2024 compared to the ~~second~~first quarter of ~~2022. During the second quarter, we were able to better offset~~2023. Expense growth drivers included rent and facility costs, inflationary ~~expense~~wage increases, ~~with productivity actions. Our operating expenses reflect lower employee-related~~insurance costs, ~~variable~~technology initiatives and discretionary expenses and reduced delivery and vehicle operating costs. Employee-related expenses were down 10% from the second quarter of 2022, primarily reflecting lower performance-based compensation expense and controlled overtime and temporary employee pay with lower sales volumes. Freight related costs declined due to lower fuel costs and lower sales.investments in greenfield locations. These ~~expense decreases~~increases were partially offset by ~~higher building~~lower variable costs, including performance-based compensation and ~~insurance costs between periods related~~freight costs. As a percentage of net sales, operating expenses increased to ~~inflation and~~20.5% in the ~~expansion~~first quarter of ~~our network.~~2024 compared to 18.6% in the same period of 2023.

Interest and Other Non-Operating Expenses, Net

Interest and other non-operating expenses, net for the ~~second~~first quarter of ~~2023 increased $8.4~~2024 decreased $2.4 million compared to the ~~second~~first quarter of ~~2022,~~ 2023, primarily due to ~~higher~~a decrease in average ~~interest rates~~debt between periods. Our weighted average effective interest rate increased to ~~5.2%~~5.3% in the ~~second~~first quarter of ~~2023~~2024 from ~~2.0%~~4.8% in the ~~second~~first quarter of ~~2022~~2023 on average outstanding debt of ~~$1.3~~$1.0 billion and ~~$1.6~~$1.3 billion for the respective periods.

Income Taxes

Our effective income tax rate was ~~25.1%~~17.3% for ~~both~~ the three months ended ~~June 30, 2023, and~~March 31, 2024, compared to 21.8% for the three months ended ~~June 30, 2022.~~March 31, 2023. We recorded a ~~$0.6~~$7.4 million tax benefit from ASU 2016-09 in the quarter ended ~~June 30, 2023,~~March 31, 2024, compared to a tax benefit of ~~$1.6~~$4.8 million realized in the same period last year. Without the benefit from ASU 2016-09 in both periods, our effective tax rate was ~~25.4%~~25.1% for the ~~second~~first quarter of ~~2023~~2024 and 25.5% for the ~~second~~first quarter of ~~2022.~~2023.

Net Income and Earnings Per Share

~~Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022~~

We have not provided separate base business income statements within this Form 10-Q as base business results approximated consolidated results, and acquisitions and sales centers excluded from base business impacted net sales growth less than 1% in the second quarter of 2023.

~~The table below summarizes the changes in our sales center count during the first six months of 2023:~~


~~December 31, 2022~~			~~420~~
~~Acquired locations~~			4
~~New locations~~			8

~~June 30, 2023~~			~~432~~

~~Net Sales~~

Six Months Ended
June 30,
(in millions) 2023 2022 Change
Net sales $ 3,064.1 $ 3,468.5 $ (404.4) (12)%

Net sales for the first six months of 2023 decreased 12% compared to the same period last year. Differing weather conditions throughout the first half of 2023 contributed to variability in our results across our geographic markets. While our southern markets experienced more typical weather during the first quarter of 2023 and generated encouraging results, higher precipitation and cooler temperatures suppressed results in our western markets, including two of our largest markets, California and Arizona. In the second quarter of 2023, cautious consumer sentiment combined with a slow start to the swimming pool season after unfavorable weather early in the second quarter led to slower maintenance activity than anticipated, reduced outdoor living construction activity and deferred discretionary replacement activity.

~~The following factors impacted our sales and are listed in order of estimated magnitude.~~

•~~Net sales benefited approximately 4% from inflationary product cost increases, which compares to a benefit of 10% to 11% in the first half of 2022.~~

•~~We estimate that unfavorable weather conditions in the first half of 2023 negatively impacted sales by approximately 3%.~~

•~~Sales were also negatively impacted 2% from lower customer early buy activity in the first half of 2023 versus the first half of 2022.~~

The impact of differing weather patterns contributed to variability in the results of our markets in the first half of the year. Net sales in our North American seasonal markets, representing 44% of our net sales in the first six months of 2023, decreased 15% compared to the first six months of 2022 as these markets are more sensitive to weather conditions, particularly in the shoulders of the season when unfavorable weather delays the openings of swimming pools. Comparatively, net sales in our year-round markets, representing 51% of our net sales in the first six months of 2023, decreased 9% compared to the first six months of 2022.

Related to our product sales, following a period of significant growth over the past three years, we observed a year-over-year decline in volumes of discretionary products sold as new construction activities moderated. In the first six months of 2023, sales of equipment, which includes swimming pool heaters, pumps, lights, filters and automation, decreased approximately 10% compared to the same period last year and collectively represented 29% of net sales in the first six months of 2023. Sales of building materials decreased 8% compared to the first six months of 2022 and represented approximately 13% of net sales in the first six months of 2023.

Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial installations are included in the appropriate existing product categories, and sales trends in these areas are reflected in the discussion above. Sales to retail customers decreased 12% in the first six months of 2023 compared to the first six months of 2022 and represented approximately 15% of our consolidated net sales. As consumers take advantage of travel opportunities, sales to commercial customers increased 10% in the first six months of 2023 compared to the first six months of 2022 and represented approximately 4% of our consolidated net sales in the first six months of 2023.

~~Gross Profit~~

Six Months Ended
June 30,
(in millions) 2023 2022 Change
Gross profit $ 937.5 $ 1,114.0 $ (176.5) (16)%
Gross margin 30.6 % 32.1 %

Gross margin declined 150 basis points to 30.6% in the six months ended June 30, 2023, compared to 32.1% in the first six months of 2022. Our prior year gross margin benefited from higher levels of inflation and price increases, while gross margin in the first half of 2023 began to trend more in line with our longer-term annual gross margin outlook of 30.0%. Our gross margin in the first half of 2023 reflected benefits from sales of strategic lower cost inventory purchases ahead of vendor price increases, which was more impactful$1.85 in the first quarter of ~~2023 when a higher portion of lower-priced inventory was sold. Gross margin in the second quarter of 2023 reflected a seasonal benefit that is typical for the period.~~

~~Operating Expenses~~

Six Months Ended
June 30,
(in millions) 2023 2022 Change
Selling and administrative expenses $ 464.8 $ 459.4 $ 5.4 1%
Operating expenses as a % of net sales 15.2 % 13.2 %

~~Operating expenses for the six months ended June 30, 2023, moderated~~2024 compared to ~~a 1% increase over the prior year period following the 6% increase realized~~$2.46 in the first quarter of 2023. During the second quarter, we were able to better offset inflationary expense increases with productivity actions. Our largest expense growth drivers related to higher rent and facility costs, increased insurance and healthcare-related costs, the return of in-person customer-facing retail events and investments in customer-focused projects. These increases were largely offset by lower employee-related costs, variable and discretionary expenses and reduced delivery and vehicle operating costs.

~~Interest and Other Non-Operating Expenses, Net~~

Interest and other non-operating expenses, net for the first six months of 2023 increased $19.0 million compared to the same period last year, primarily due to higher average interest rates between periods. Our weighted average effective interest rate increased to 5.0% from 1.8% for the respective periods on average outstanding debt of $1.3 billion for the first six months of 2023 versus $1.4 billion for the same period of 2022.

~~Income Taxes~~

Our effective income tax rate was 24.1% for both the six months ended June 30, 2023, and the six months ended June 30, 2022. We recorded a $5.4 million, or $0.14 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2023,compared to an $8.9 million, or $0.22 per diluted share, tax benefit in the same period of 2022. Without the benefits from ASU 2016-09, our effective tax rate was 25.4% for the six months ended June 30, 2023, and 25.5% for the six months ended June 30, 2022.

~~Net Income and Earnings Per Share~~

Net income decreased 31% to $333.9 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. Earnings per diluted share decreased 30% to $8.48 for the six months ended June 30, 2023, versus $12.03 per diluted share for the six months ended June 30, 2022. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 29% to $8.34 for the six months ended June 30, 2023, compared to $11.81 for the six months ended June 30, 2022. See the reconciliation of GAAP to non-GAAP measures below.

1917

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 ~~within~~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)	(Unaudited)	Three Months Ended				Six Months Ended
(Unaudited)
(Unaudited)
				March 31,
				March 31,
				March 31,
						2024
						2024
						2024
Diluted EPS
Diluted EPS
Diluted EPS
		June 30,				June 30,
		2023		2022		2023		2022
Diluted EPS		$	5.91	$	7.63	$	8.48	$	12.03

ASU 2016-09 tax benefit

ASU 2016-09 tax benefit

ASU 2016-09 tax benefit	ASU 2016-09 tax benefit	(0.02)		(0.04)		(0.14)		(0.22)

Adjusted diluted EPS	Adjusted diluted EPS	$	5.89	$	7.59	$	8.34	$	11.81

Adjusted diluted EPS

Adjusted diluted EPS

2018

Seasonality and Quarterly Fluctuations

Our business is seasonal. In general, sales and operating income are highest during the second and third quarters, which represent the peak months of both swimming pool use and installation and irrigation and landscape installations and maintenance. Sales are lower during the first and fourth quarters. In ~~2022,~~2023, we generated approximately ~~59%~~60% of our net sales and ~~67%~~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 income statement and balance sheet data for the most recent eight quarters to ~~allow for a meaningful comparison of the~~illustrate seasonal fluctuations in these amounts. We believe this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. The results of any one or more quarters are not necessarily a good indication of results for an entire fiscal year or of continuing future trends for a variety of reasons, including the seasonal nature of our business and the impact of new and acquired sales centers.


(Unaudited)	(Unaudited)	QUARTER																(Unaudited)	QUARTER
(in thousands)	(in thousands)	2023				2022								2021				(in thousands)	2024	2023	2022
		Second		First		Fourth		Third		Second		First		Fourth		Third
Statement of Income Data	Statement of Income Data
Statement of Income Data
Statement of Income Data
Net sales
Net sales
Net sales	Net sales	$	1,857,363	$	1,206,774	$	1,095,920	$	1,615,339	$	2,055,818	$	1,412,650	$	1,035,557	$	1,411,448
Gross profit	Gross profit	567,783		369,755		315,731		503,687		666,804		447,189		322,376		441,899
Gross profit
Gross profit
Operating income	Operating income	327,009		145,771		107,295		263,877		418,888		235,723		127,891		237,276
Operating income
Operating income
Net income
Net income
Net income	Net income	232,250		101,699		71,863		190,055		307,283		179,261		107,609		184,665

Balance Sheet Data	Balance Sheet Data

Balance Sheet Data

Balance Sheet Data
Total receivables, net
Total receivables, net
Total receivables, net	Total receivables, net	$	630,950	$	564,171	$	351,448	$	549,796	$	756,585	$	679,927	$	376,571	$	476,150
Product inventories, net	Product inventories, net	1,392,886		1,686,683		1,591,060		1,539,572		1,579,101		1,641,155		1,339,100		1,043,407
Product inventories, net
Product inventories, net
Accounts payable
Accounts payable
Accounts payable	Accounts payable	485,100		739,749		406,667		442,226		604,225		685,946		398,697		414,156
Total debt	Total debt	1,184,586		1,365,750		1,386,803		1,512,545		1,595,398		1,505,073		1,183,350		362,819
Total debt
Total debt

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.

2119

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


Weather		Possible Effects
Hot and dry	•	Increased purchases of chemicals and supplies
		for existing swimming pools
	•	Increased purchases of above-ground pools and
		irrigation and lawn care products

Unseasonably cool weather or extraordinary amounts	•	Fewer pool and irrigation and landscape
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	•	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	•	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 ~~2023~~2024 and ~~2022~~2023 Results

~~Overall, weather conditions unfavorably impacted sales~~The first quarter of 2024 was the tenth wettest quarter on record leading to mixed impacts across our markets, particularly in the ~~second quarter~~month of ~~2023, particularly at the beginning~~March, which is seasonally our highest sales month of the ~~second~~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 ~~first week~~adverse effects of ~~April through Easter weekend was much~~ cooler ~~across the West versus both average temperatures~~ and ~~prior year. The last week of April was also significantly cooler than normal from Texas through the mid-Atlantic region, excluding the coastal Southeast. While the Northeast had warmer than average~~wetter weather ~~the first few weeks of April, temperatures cooled dramatically through the first week of May and smoke from wildfires in Canada unfavorably impacted sales in early June. Weather~~ in Florida ~~was more normal~~ and ~~consistent with prior year, while favorable weather conditions~~the Southeast compared to the second quarter of 2022 were limited to the Pacific Northwest and Europe. Similarly, sales growth in the second quarter of 2022 was challenged by unfavorable weather conditions when compared to the second quarter of 2021 in our seasonal markets and Europe; however, our southern markets benefited from above-average temperatures, particularly in Texas.

~~Weather conditions varied across the contiguous United States throughout~~ the first quarter of ~~2023.~~last year and excessive precipitation in Texas and the Northeast outweighed the positives, resulting in an unfavorable impact on net sales. In the first quarter of 2023, varied weather conditions had a more pronounced unfavorable impact on net sales due to unusually wet and cold weather in the western U.S., particularly California and Arizona. Conditions were generally favorable in our southern markets, where sales benefited from warmer weather and below-average precipitation. In contrast, results were unfavorably impacted by unusually wet and cold weather in the western U.S., particularly in California and Arizona, which are two of our largest markets. Comparatively, in the first quarter of 2022, overall weather conditions were generally favorable, and sales benefited from above-average temperatures along much of the west and the east coast, although Texas experienced cooler-than-normal temperatures.

CRITICAL ACCOUNTING ESTIMATES

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

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

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

Management has discussed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board. For a description of our critical accounting estimates that require us to make the most difficult, subjective or complex judgments, please see our ~~2022~~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;

•the quality of our receivables;

•acquisitions;

•dividend payments;

•capital expenditures;

•changes in income tax laws and regulations;

•the timing and extent of share repurchases; and

•the ability to attract long-term capital with satisfactory terms.

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

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

•capital expenditures primarily for maintenance and growth of our sales center network, technology-related investments and fleet vehicles;

•inventory and other operating expenses;

•strategic acquisitions executed opportunistically;

•payment of cash dividends as and when declared by our Board;

•repayment of debt to maintain an average total target leverage ratio (as defined below) between 1.5 and 2.0; and

•discretionary repurchases of our common stock under our Board-authorized share repurchase program.

We focus our capital expenditure plans ~~principally~~based on the needs of our sales ~~centers,~~centers. Our capital spending primarily relates to leasehold improvements, delivery and inservice vehicles and information technology. In recent years, we have increased our ~~spending on information technology.~~ investment in technology and automation enabling us to operate more efficiently and better serve our customers.

Historically, our capital expenditures have averaged roughly 1.0% of net sales. Capital expenditures were 1.1% of net sales in 2023 and 0.7% of net sales in 2022 and ~~2021~~2021. In 2022 and ~~0.6% of net sales in 2020. From 2020 to 2022,~~2021, our capital expenditures as a percentage of net sales were lower than our historical average ~~primarily~~ due to our significant sales ~~growth.~~growth in those years. Based on management’s current plans, ~~and our spending through June 30, 2023,~~ we project capital expenditures ~~in 2023~~for 2024 will ~~approximate~~be 1.0% to 1.5% of net sales.

2321

Sources and Uses of Cash

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


			Six Months Ended				Three Months Ended
			June 30,
		March 31,							March 31,
			2023		2022		2024	2023
Operating activities	Operating activities		$	376,777	$	28,731
Investing activities	Investing activities		(41,860)		(27,431)
Financing activities	Financing activities		(328,542)		64,643

Net cash provided by operations improved to ~~$376.8~~$145.4 million for the first ~~six~~three months of ~~2023~~2024 from ~~$28.7~~$103.2 million for the first ~~six~~three months of ~~2022,~~ 2023, primarily driven by positive changes in working capital, ~~particularly as we sell through our prior year strategic inventory purchases,~~ partially offset by lower net income.

Net cash used in investing activities for the first ~~six~~three months of ~~2023~~2024 increased ~~$14.4~~$1.4 million compared to the first ~~six~~three months of ~~2022,~~2023, primarily due to a ~~$10.4~~$1.5 million increase in net capital ~~expenditures and a $3.9 million increase in cash used for acquisitions.~~expenditures.

Net cash used in financing activities was ~~$328.5~~$124.2 million for the first ~~six~~three months of ~~2023~~2024 compared to ~~net cash provided by financing activities of $64.6~~$105.5 million for the first ~~six~~three months of ~~2022,~~ 2023, primarily reflecting ~~$202.5~~a $53.1 million ofincrease in net debt payments in the first ~~six~~three months of ~~2023 versus $411.6 million of net debt proceeds in~~2024 compared to the first ~~six~~three months of ~~2022 and an increase in dividends paid of $10.0 million,~~2023, partially offset by a ~~$227.9~~$34.2 million decrease in share 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). Effective June 30, 2023, we amended the index rate used to pay interest on our Credit Facility and Term Facility, from the one month London Interbank Offer Rate (LIBOR) to the one month Term Secured Overnight Financing Rate Index Rate (Term SOFR). For additional details regarding these facilities, ~~including recent amendments,~~ 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 ~~2022~~2023 Annual Report on Form 10-K and Note 5 of “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Form 10-Q.

Credit Facility

Our Credit Facility provides for $1.25 billion in borrowing capacity consisting of a $750.0 million five-year unsecured revolving credit facility and a $500.0 million term loan facility. The Credit Facility also includes sublimits for the issuance of swingline loans and standby letters of credit. We pay interest on revolving and term loan borrowings under the Credit Facility at a variable rate based on ~~one month Term SOFR,~~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 the loan, beginning in September 2023 aggregating to 20% of the original principal amount of the loan, with all remaining principal due on the Credit Facility maturity date of September 25, 2026. We intend to continue to use the Credit Facility for general corporate purposes, for future share repurchases and to fund future growth initiatives.

At ~~June 30, 2023,~~March 31, 2024, there was ~~$217.1~~$115.4 million of revolving borrowings outstanding, a ~~$500.0~~$481.3 million term loan, a ~~$14.3~~$16.0 million standby letter of credit outstanding and ~~$518.6~~$618.6 million available for borrowing under the Credit Facility. The weighted average effective interest rate for the Credit Facility as of ~~June 30, 2023,~~March 31, 2024, was approximately ~~4.5%~~4.3%, excluding commitment ~~fees.~~

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. ~~We classify~~In June 2023, we made a prepayment on the ~~entire outstanding balance as Long-term debt on our Consolidated~~

~~Balance Sheets as we intend~~Term Facility of $45.0 million with $32.4 million applied against the remaining quarterly installments and ~~have~~ the ~~ability to refinance~~remainder applied against the ~~obligations on a long-term basis.~~

amount due at maturity.

At ~~June 30, 2023,~~March 31, 2024, there was $109.9 million outstanding under the Term Facility with a weighted average effective interest rate of ~~6.3%~~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 ~~June 30, 2023,~~March 31, 2024, there was ~~$348.2~~$262.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of ~~6.0%~~6.2%, excluding commitment fees.

Financial Covenants

Financial covenants of the Credit Facility, Term Facility and Receivables Facility include maintenance of a maximum average total leverage ratio and a minimum fixed charge coverage ratio, which are our most restrictive financial covenants. As of ~~June 30, 2023,~~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 and (iii) the TTM Average Accounts Securitization Proceeds divided by TTM EBITDA (as those terms are defined in the Credit Facility). As of ~~June 30, 2023,~~March 31, 2024, our average total leverage ratio equaled ~~1.48~~1.36 (compared to ~~1.48~~1.39 as of ~~March~~December 31, 2023) and the TTM average total indebtedness amount used in this calculation was ~~$1.3~~$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 ~~June 30, 2023,~~March 31, 2024, our fixed charge ratio equaled ~~6.74~~5.71 (compared to ~~7.96~~5.94 as of ~~March~~December 31, 2023) and TTM Rental Expense was ~~$85.7~~$95.0 million.

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

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

Interest Rate Swaps

amounts under all swap contracts is based on the fixed rates plus the applicable margin on the respective borrowings.

As of ~~June 30, 2023,~~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 ~~June 30, 2023,~~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 ~~2022~~2023 Annual Report on Form 10-K, as updated by Note 5 of “Notes to Consolidated Financial Statements,” included in Part I, Item 1 of this Form 10-Q.

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

As of ~~July~~April 24, ~~2023, $600.0~~2024, $283.8 million remained available to purchase shares of our common stock under our current Board-approved share repurchase program. We expect to repurchase shares on the open market from time to time subject to market conditions. We plan to fund these repurchases with cash provided by operations and borrowings under the above-described credit facilities.

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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 ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, from what we reported in our ~~2022~~2023 Annual Report on Form 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 ~~2022~~2023 Annual Report on Form 10-K.

Currency Risk

There have been no material changes in our exposure to currency risk during the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, from what we reported in our ~~2022~~2023 Annual Report on Form 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 ~~2022~~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 ~~June 30, 2023,~~March 31, 2024, management, including our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on that evaluation, management, including our CEO and CFO, concluded that as of ~~June 30, 2023,~~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.

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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

Our 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 discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~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, ~~2022.~~2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below summarizes the repurchases of our common stock in the ~~second~~first quarter of ~~2023:~~2024:
Period
Total Number
of Shares
Purchased (1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
Maximum Approximate
Dollar Value of Shares
That May Yet be Purchased
Under the Plan (2)
April 1-30, 2023 6 $ 351.32 — $ 186,382,518
May 1-31, 2023 — $ — — $ 600,000,000
June 1-30, 2023 — $ — — $ 600,000,000
Total 6 $ 351.32 —


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 615,974 shares surrendered for this purpose in the ~~second~~first quarter of ~~2023.~~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 ~~July~~April 24, ~~2023, $600.0~~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).

Item 6. Exhibits

Exhibits filed as part of this report are listed below.

Incorporated by Reference

No.

Description

Filed/ Furnished with this
Form 10-Q

Form

File No.

Date Filed

3.1

Restated Certificate of Incorporation of the Company.

10-Q

000-26640

8/9/2006

3.2

Amended and Restated Bylaws of the Company.

8-K

000-26640

~~2/8/2019~~10/25/2023

4.1

Form of certificate representing shares of common stock of the Company.

8-K

000-26640

5/19/2006

~~10.1~~

Second Amendment to the Second Amended and Restated Credit Agreement, dated June 30, 2023, among Pool Corporation as U.S. Borrower, SCP Distributors Canada Inc. as Canadian Borrower, SCP International, Inc. as Euro Borrower, the Subsidiary Guarantors party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto.

~~8-K~~

~~000-26640~~

~~7/5/2023~~

~~10.2~~

~~Second Amendment to Credit Agreement, dated June 30, 2023, among Pool Corporation as Borrower, the Guarantors party thereto and Bank of America, N.A. as Lender.~~

~~8-K~~

~~000-26640~~

~~7/5/2023~~

31.1

Certification by Chief 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.

31.2

Certification by Chief 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.

32.1

Certification by Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

+ Attached as Exhibit 101 to this report are the following items formatted in iXBRL (Inline Extensible Business Reporting Language):

1.Consolidated Statements of Income for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~June 30, 2022;~~March 31, 2023;

2.Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~June 30, 2022;~~March 31, 2023;

3.Consolidated Balance Sheets at ~~June 30, 2023,~~March 31, 2024, December 31, ~~2022~~2023 and ~~June 30, 2022;~~March 31, 2023;

4.Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and ~~June 30, 2022;~~March 31, 2023;

5.Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~June 30, 2022;~~March 31, 2023; and

6.Notes to Consolidated Financial Statements.

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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 ~~July 27, 2023.~~April 29, 2024.


						POOL CORPORATION




			By:			/s/ Melanie Housey Hart
						Melanie Housey Hart
						Vice President and Chief Financial Officer, and duly authorized signatory on behalf of the registrant

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