| Summary of Significant Accounting Policies | Note 1 – Summary of Significant Accounting Policies Pool Corporation (the Company , which may 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 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 2018 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 2018 Annual Report on Form 10-K. The results for our three and six month periods ended June 30, 2019 are not necessarily indicative of the expected results for our fiscal year ending December 31, 2019 . Newly Adopted Accounting Pronouncements On January 1, 2019 , we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), and all the related amendments, which are codified into Accounting Standards Codification (ASC) 842. The adoption of ASU 2016-02 significantly increased assets and liabilities on our Consolidated Balance Sheets as we recorded a right-of-use asset and corresponding liability for each of our existing operating leases. We adopted this guidance using the modified retrospective approach by recognizing a cumulative adjustment to retained earnings on the adoption date, which was not material. Additionally, we elected to apply the practical expedient that allows us to exclude comparative presentation; thus, we did not restate our prior period balance sheets to reflect the new guidance. We recorded operating lease assets of approximately $175.7 million and operating lease liabilities of approximately $181.6 million as of January 1, 2019 . The difference between the operating lease assets and operating lease liabilities primarily represents our straight-line rent liability of $5.1 million recorded under previous accounting guidance. Under ASU 2016-02, this liability is considered a reduction of the operating lease asset. We recorded the remaining difference between our operating lease assets and operating lease liabilities, net of the deferred tax impact, as an adjustment to retained earnings. Additionally, we reclassified prepaid rent of $4.9 million as of January 1, 2019 to our operating lease asset resulting in a balance of $180.6 million as of the adoption date. The adoption of this guidance did not materially impact our results of operations or cash flows. See Commitments and Contingencies within this note below for additional information regarding our adoption of this new guidance. On January 1, 2019 , we adopted ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. This new standard expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The adoption of this guidance did not impact our results of operations, statement of financial position or cash flows. Commitments and Contingencies We lease facilities for our corporate and administrative offices, sales centers and centralized shipping locations under operating leases that expire in various years through 2032 . Most of our leases contain five-year terms with renewal options that allow us to extend the lease term beyond the initial period, subject to terms agreed upon at lease inception. Based on our leasing practices and contract negotiations, we determined that we are not reasonably certain to exercise the renewal options and, as such, we have not included optional renewal periods in our measurement of operating lease assets, liabilities and expected lease terms. We elected to apply the package of practical expedients available within ASU 2016-02, which is intended to provide some relief to issuers. Electing this option allowed us to retain our existing assessment of whether an arrangement is or contains a lease, is classified as an operating or financing lease and contains initial direct costs. We also elected the practical expedients that allow us to exclude short-term leases from our Consolidated Balance Sheets and to combine lease and non-lease components. For leases with step rent provisions whereby the rental payments increase incrementally over the life of the lease, we recognize expense on a straight-line basis determined by the total lease payments over the lease term. To the extent we determine that future obligations related to real estate taxes, insurance and other lease components are variable, we exclude them from the measurement of our operating lease assets and liabilities. Some of our real estate agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The table below presents expense associated with facility and vehicle operating leases (in thousands): Three Months Ended Six Months Ended June 30, June 30, Lease Cost Classification 2019 2018 2019 2018 Operating lease cost (1) Selling and administrative expenses $ 16,261 $ 15,230 $ 31,331 $ 29,783 Variable lease cost Selling and administrative expenses 3,348 3,042 6,607 6,063 (1) Includes short-term lease cost, which is not material. Based on our lease portfolio as of June 30, 2019 , the table below sets forth the approximate future lease payments related to operating leases with initial terms of one year or more (in thousands): 2019 $ 24,460 2020 52,655 2021 41,439 2022 32,093 2023 20,099 Thereafter 19,413 Total lease payments 190,159 Less: interest 15,087 Present value of lease liabilities 175,072 To calculate the present value of our lease liabilities, we determined our incremental borrowing rate based on the effective interest rate on our unsecured syndicated senior credit facility (the Credit Facility) adjusted for a collateral feature similar to that of our leased properties. The table below presents the weighted-average remaining lease term (years) of our operating leases and the weighted-average discount rate used in the above calculation: June 30, Lease Term and Discount Rate 2019 Weighted-average remaining lease term (years) Operating leases 4.49 Weighted-average discount rate Operating leases 3.5 % The table below presents the amount of cash paid for amounts included in the measurement of lease liabilities (in thousands): Six Months Ended June 30, 2019 Operating cash flows for lease liabilities $ 28,202 We lease corporate and administrative offices from Northpark Corporate Center, LLC (NCC), an entity in which we have held a 50% ownership interest since May 2005 . NCC owns and operates an office building in Covington, Louisiana. As of June 30, 2019 , we occupy approximately 60,293 square feet of office space and we pay rent of $99,232 per month. Our lease term ends in May 2025 . We recorded rent expense of $0.6 million for each of the six month periods ended June 30, 2019 and June 30, 2018 . 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 awards lapse. We recorded excess tax benefits of $7.8 million and $1.5 million in the second quarters of 2019 and 2018 , respectively, and $16.6 million in the first six months of 2019 compared to $10.6 million in the same period of 2018 . Retained Deficit We account for the retirement of treasury shares as a reduction of retained earnings (deficit). As of June 30, 2019 , the Retained deficit 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 $1.4 billion and cumulative dividends of $534.8 million . Accumulated Other Comprehensive Loss The table below presents the components of our Accumulated other comprehensive loss balance (in thousands): June 30, December 31, 2019 2018 2018 Foreign currency translation adjustments $ (11,000 ) $ (10,382 ) $ (12,422 ) Unrealized (losses) gains on interest rate swaps, net of tax (1) (84 ) 1,527 1,425 Accumulated other comprehensive loss $ (11,084 ) $ (8,855 ) $ (10,997 ) (1) In February 2018, the Financial Accounting Standards Board (FASB) issued guidance that allows entities the option to reclassify the tax effects related to items in accumulated other comprehensive income (loss) to retained earnings (deficit) if deemed to be stranded in accumulated other comprehensive income (loss) due to U.S. tax reform. We do not have any material amounts stranded in Accumulated other comprehensive loss as a result of U.S. tax reform. Recent Accounting Pronouncements Pending Adoption The following table summarizes the recent accounting pronouncements that we plan to adopt in future periods: Standard Description Effective Date Effect on Financial Statements and Other Significant Matters ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. Annual periods beginning after December 15, 2019 We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (commonly referred to as Step 2 under the current guidance). Rather, the measurement of a goodwill impairment charge will be based on the excess of a reporting unit’s carrying value over its fair value (Step 1 under the current guidance). This guidance should be applied prospectively. Annual and interim impairment tests performed in periods beginning after December 15, 2019 We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. |
