Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 27, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 0-26640 | |
Entity Registrant Name | POOL CORPORATION | |
Entity Central Index Key | 0000945841 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 36-3943363 | |
Entity Address, Address Line One | 109 Northpark Boulevard, | |
Entity Address, City or Town | Covington, | |
Entity Address, State or Province | LA | |
Entity Address, Postal Zip Code | 70433-5001 | |
City Area Code | (985) | |
Local Phone Number | 892-5521 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | POOL | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 39,935,524 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Net sales | $ 677,288 | $ 597,456 |
Cost of sales | 487,659 | 422,825 |
Gross profit | 189,629 | 174,631 |
Selling and administrative expenses | 147,097 | 136,245 |
Impairment of goodwill and other assets | 6,944 | 0 |
Operating income | 35,588 | 38,386 |
Interest and other non-operating expenses, net | 4,789 | 6,616 |
Income before income taxes and equity earnings | 30,799 | 31,770 |
Income tax benefit | (25) | (802) |
Equity earnings in unconsolidated investments, net | 88 | 65 |
Net income | $ 30,912 | $ 32,637 |
Earnings per share: | ||
Basic (in dollars per share) | $ 0.77 | $ 0.83 |
Diluted (in dollars per share) | $ 0.75 | $ 0.80 |
Weighted average shares outstanding: [Abstract] | ||
Basic (in shares) | 40,125 | 39,479 |
Diluted (in shares) | 40,955 | 40,696 |
Cash dividends declared per common share | $ 0.55 | $ 0.45 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net Income | $ 30,912 | $ 32,637 |
Other comprehensive (loss) income: | ||
Foreign currency translation | (5,430) | 214 |
Change in unrealized losses on interest rate swaps, net of change in taxes of $2,837 and $90 | (8,510) | (269) |
Total other comprehensive loss | (13,940) | (55) |
Comprehensive income | 16,972 | 32,582 |
Tax effect of change in unrealized gains and losses on interest rate swaps | $ 2,837 | $ 90 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Current assets: | |||
Cash and cash equivalents | $ 17,808 | $ 28,583 | $ 28,581 |
Receivables, net | 66,328 | 76,648 | 72,352 |
Receivables pledged under receivables facility | 279,587 | 149,891 | 240,775 |
Product inventories, net | 858,190 | 702,274 | 815,742 |
Prepaid expenses and other current assets | 16,465 | 16,172 | 16,116 |
Total current assets | 1,238,378 | 973,568 | 1,173,566 |
Property and equipment, net | 113,987 | 112,246 | 107,690 |
Goodwill Balances | 193,380 | 188,596 | 188,478 |
Other intangible assets, net | 9,832 | 11,038 | 11,744 |
Equity interest investments | 1,260 | 1,227 | 1,200 |
Operating lease assets | 174,653 | 176,689 | 177,293 |
Other assets | 16,291 | 19,902 | 18,379 |
Total assets | 1,747,781 | 1,483,266 | 1,678,350 |
Current liabilities: | |||
Accounts payable | 517,620 | 261,963 | 472,487 |
Accrued expenses and other current liabilities | 62,614 | 60,813 | 47,658 |
Short-term borrowings and current portion of long-term debt | 16,353 | 11,745 | 21,734 |
Current operating lease liabilities | 55,703 | 56,325 | 55,744 |
Total current liabilities | 652,290 | 390,846 | 597,623 |
Deferred income taxes | 30,464 | 32,598 | 29,368 |
Long-term debt, net | 569,697 | 499,662 | 677,243 |
Other long-term liabilities | 26,470 | 27,970 | 26,469 |
Non-current operating lease liabilities | 120,462 | 122,010 | 122,770 |
Total liabilities | 1,399,383 | 1,073,086 | 1,453,473 |
Stockholders' equity: | |||
Common stock | 40 | 40 | 40 |
Additional paid-in capital | 495,251 | 485,239 | 463,522 |
Retained deficit | (122,594) | (64,740) | (227,633) |
Accumulated other comprehensive loss | (24,299) | (10,359) | (11,052) |
Total stockholders’ equity | 348,398 | 410,180 | 224,877 |
Total liabilities and stockholders' equity | $ 1,747,781 | $ 1,483,266 | $ 1,678,350 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 |
Common Stock, Shares, Outstanding | 39,930,962 | 40,074,160 | 39,679,157 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating activities | ||
Net Income | $ 30,912 | $ 32,637 |
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract] | ||
Depreciation | 7,001 | 6,649 |
Amortization | 336 | 375 |
Share-based compensation | 3,654 | 3,259 |
Equity earnings in unconsolidated investments, net | (88) | (65) |
Impairment of goodwill and other assets | 6,944 | 0 |
Other | 3,715 | 512 |
Changes in operating assets and liabilities, net of effects of acquisitions: | ||
Receivables | (124,542) | (103,122) |
Product inventories | (156,856) | (128,206) |
Prepaid expenses and other assets | 4,633 | (1,427) |
Accounts payable | 256,874 | 230,030 |
Accrued expenses and other current liabilities | (12,855) | (11,838) |
Net Cash Provided by operating activities | 19,728 | 28,804 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (13,642) | (9,370) |
Purchases of property and equipment, net of sale proceeds | (8,340) | (6,739) |
Net cash used in investing activities | (21,982) | (16,109) |
Financing activities | ||
Proceeds from revolving line of credit | 248,700 | 206,190 |
Payments on revolving line of credit | (256,543) | (253,249) |
Proceeds from asset-backed financing | 97,400 | 80,100 |
Payments on asset-backed financing | (17,300) | (13,500) |
Payments on term facility | 2,313 | 0 |
Proceeds from short-term borrowings and current portion of long-term debt | 6,479 | 13,713 |
Payments on short-term borrowings and current portion of long-term debt | (1,871) | (1,148) |
Payments of deferred and contingent acquisition consideration | (281) | (311) |
Payments of deferred financing costs | (12) | 0 |
Proceeds from stock issued under share-based compensation plans | 6,358 | 7,071 |
Payments of cash dividends | (22,147) | (17,819) |
Purchases of treasury stock | (66,619) | (23,097) |
Net cash used in financing activities | (8,149) | (2,050) |
Effect of exchange rate changes on cash and cash equivalents | (372) | 1,578 |
Change in cash and cash equivalents | (10,775) | 12,223 |
Cash and cash equivalents at beginning of period | 28,583 | 16,358 |
Cash and cash equivalents at end of period | $ 17,808 | $ 28,581 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income (Loss) |
Balance (in shares) at Dec. 31, 2018 | 39,506,000 | ||||
Balance at Dec. 31, 2018 | $ 223,590 | $ 40 | $ 453,193 | $ (218,646) | $ (10,997) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net Income | 32,637 | 0 | 0 | 32,637 | 0 |
Foreign currency translation | 214 | 0 | 0 | 0 | 214 |
Interest rate swaps, net of the change in taxes | (269) | $ 0 | 0 | 0 | (269) |
Repurchases of common stock, net of retirements (shares) | (155,000) | ||||
Repurchases of common stock, net of retirements | (23,097) | $ (1) | 0 | (23,096) | 0 |
Share-based compensation | 3,259 | $ 0 | 3,259 | 0 | 0 |
Issuance of shares under share-based compensation plans (shares) | 328,000 | ||||
Issuance of stock under share-based compensation plans | 7,071 | $ 1 | 7,070 | 0 | 0 |
Declaration of cash dividends | (17,819) | 0 | 0 | (17,819) | 0 |
Balance at Mar. 31, 2019 | $ 224,877 | $ 40 | 463,522 | (227,633) | (11,052) |
Balance (in shares) at Mar. 31, 2019 | 39,679,157 | 39,679,000 | |||
Balance (in shares) at Dec. 31, 2019 | 40,074,160 | 40,074,000 | |||
Balance at Dec. 31, 2019 | $ 410,180 | $ 40 | 485,239 | (64,740) | (10,359) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net Income | 30,912 | 0 | 0 | 30,912 | 0 |
Foreign currency translation | (5,430) | 0 | 0 | 0 | (5,430) |
Interest rate swaps, net of the change in taxes | (8,510) | $ 0 | 0 | 0 | (8,510) |
Repurchases of common stock, net of retirements (shares) | (362,000) | ||||
Repurchases of common stock, net of retirements | (66,619) | $ 0 | 0 | (66,619) | 0 |
Share-based compensation | 3,654 | $ 0 | 3,654 | 0 | 0 |
Issuance of shares under share-based compensation plans (shares) | 219,000 | ||||
Issuance of stock under share-based compensation plans | 6,358 | $ 0 | 6,358 | 0 | 0 |
Declaration of cash dividends | (22,147) | 0 | 0 | (22,147) | 0 |
Balance at Mar. 31, 2020 | $ 348,398 | $ 40 | $ 495,251 | $ (122,594) | $ (24,299) |
Balance (in shares) at Mar. 31, 2020 | 39,930,962 | 39,931,000 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax | $ 2,837 | $ 90 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
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 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 2019 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 2019 Annual Report on Form 10-K. The results for our three month period ended March 31, 2020 are not necessarily indicative of the expected results for our fiscal year ending December 31, 2020. Newly Adopted Accounting Pronouncements On January 1, 2020, we adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and all related amendments, which are codified into Accounting Standards Codification (ASC) 326, using the cumulative-effect transition method related to our trade receivables. This new standard 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 are 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 adoption of this standard did not have a material impact on our financial position or results of operations. We do not expect the adoption of this guidance to have a material effect on our results of operations in future periods. See Allowance for Doubtful Accounts within this note for more information. We adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, for our interim impairment tests performed in the period ended March 31, 2020. This new standard 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 previous guidance). Rather, the measurement of a goodwill impairment charge is based on the excess of a reporting unit’s carrying value over its fair value (Step 1 under the previous guidance). The impact of the new standard is dependent on the specific facts and circumstances of individual impairments, if any. The adoption of this guidance did not impact our results of operations, statement of financial position or cash flows. On January 1, 2020, we adopted ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, on a prospective basis. This new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The adoption of this guidance did not materially impact our results of operations, statement of financial position or cash flows. Allowance for Doubtful Accounts We record trade receivables at the invoiced amounts less an allowance for doubtful accounts for estimated losses we may incur if customers do not pay. We perform periodic credit evaluations of our customers, and we typically do not require collateral. Consistent with industry practices, we generally require payment from our North American customers within 30 days, except for sales under early buy programs for which we provide extended payment terms to qualified customers. As part of our adoption of ASU 2016-13, we did not recognize an adjustment to the beginning balance of retained earnings as the impact from adoption was not material. Our estimate of future losses is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, customers’ financial conditions and current and forecasted economic trends including certain trends in the housing market, the availability of consumer credit and general economic conditions (as commonly measured by Gross Domestic Product or GDP) . We monitor housing market trends through review of the House Price Index as published by the Federal Housing Finance Agency, which measures the movement of single-family house prices. Our assessment of future losses in the first quarter of 2020 considered the impact of the COVID-19 pandemic on forecasted economic trends. At the end of each quarter, we also perform a reserve analysis of all accounts with balances greater than $20,000 and more than 60 days past due. During the year, we write off account balances when we have exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against our allowance for doubtful accounts. Our allowance for doubtful accounts balance was $6.9 million at March 31, 2020 and $5.6 million at March 31, 2019. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, remained consistent between periods. We increased our allowance for doubtful accounts balance at March 31, 2020 from the prior period to reflect current economic conditions. The following table summarizes the changes in our allowance for doubtful accounts (in thousands): March 31, 2020 2019 Balance at beginning of quarter $ 5,472 $ 6,182 Bad debt expense 2,257 456 Write-offs, net of recoveries (876) (993) Balance at end of quarter $ 6,853 $ 5,645 Goodwill and Intangible Impairment As discussed in Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K, goodwill represents the excess of the amount we paid to acquire a company over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. We test goodwill and other indefinite lived intangible assets for impairment annually as of October 1st and at any other time when impairment indicators exist. As a result of the effect of COVID-19 on expected future operating cash flows, we determined certain impairment triggers had occurred and performed interim goodwill impairment analyses for our Australian reporting units during the first quarter of 2020. We performed discounted cash flow analyses and determined that the estimated fair values of our Australian reporting units no longer exceeded their carrying values. As a result of our interim impairment analysis, we recorded goodwill and intangibles impairment equal to the total goodwill and intangibles carrying amount of our five Australian reporting units. The total impairment charge of $4.4 million included goodwill impairment of $3.5 million and intangibles impairment of $0.9 million related to the Pool Systems tradename and trademarks. We also considered the impact of the COVID-19 pandemic on the expected future operating cash flows of the remainder of our reporting units. Although we do not currently anticipate any long-term impacts, we continue to monitor reporting units that we consider more at risk; these include our reporting unit in Italy with a goodwill balance of $3.5 million at March 31, 2020, and our three reporting units in Quebec, Canada, with an aggregate goodwill balance of $2.4 million at March 31, 2020. The determination of our reporting units’ goodwill and intangibles fair values includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions, all of which are considered Level 3 inputs, used in our cash flow analyses consisted of changes in market conditions, forecasted future operating results, including sales growth rates and operating margins, and discount rates, including our weighted-average cost of capital. 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 $8.0 million and $8.8 million in the first quarters of 2020 and 2019, respectively. Retained Deficit We account for the retirement of treasury shares as a reduction of retained earnings (deficit). As of March 31, 2020, 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 $1.5 billion and cumulative dividends of $601.0 million. Accumulated Other Comprehensive Loss The table below presents the components of our Accumulated other comprehensive loss balance (in thousands): March 31, December 31, 2020 2019 2019 Foreign currency translation adjustments $ (15,557) $ (12,208) $ (10,127) Unrealized (losses) gains on interest rate swaps, net of tax (8,742) 1,156 (232) Accumulated other comprehensive loss $ (24,299) $ (11,052) $ (10,359) 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 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes Simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. Most amendments are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Annual periods beginning after December 15, 2020 We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting Provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles 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. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 2 – Earnings Per Share We calculate basic earnings per share (EPS) by dividing Net income by the weighted average number of common shares outstanding. Diluted EPS reflects the dilutive effects of potentially dilutive securities, which include in-the-money outstanding stock options and shares to be purchased under our employee stock purchase plan. Using the treasury stock method, the effect of dilutive securities includes these additional shares of common stock that would have been outstanding based on the assumption that these potentially dilutive securities had been issued. Stock options with exercise prices that are higher than the average market prices of our common stock for the periods presented are excluded from the diluted EPS calculation because the effect is anti-dilutive. The table below presents the computation of EPS, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except EPS): Three Months Ended March 31, 2020 2019 Net income $ 30,912 $ 32,637 Weighted average shares outstanding: Basic 40,125 39,479 Effect of dilutive securities: Stock options and employee stock purchase plan 830 1,217 Diluted 40,955 40,696 Earnings per share: Basic $ 0.77 $ 0.83 Diluted $ 0.75 $ 0.80 Anti-dilutive stock options excluded from diluted earnings per share computations 66 65 |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | Note 3 – Acquisitions In February 2020, we acquired the distribution assets of Master Tile Network LLC, a wholesale distributor of swimming pool tile and hardscape products, adding two locations in Texas, one location in Nevada and one location in Oklahoma. We have completed our acquisition accounting for this acquisition, subject to adjustments for standard holdback provisions per the terms of the purchase agreement, which are not material. In January 2019, we acquired the distribution assets of W.W. Adcock, Inc., a wholesale distributor of swimming pool products, equipment, parts and supplies, adding two locations in Pennsylvania, one location in North Carolina and one location in Virginia. We have completed our acquisition accounting for this acquisition. These acquisitions did not have a material impact on our financial position or results of operations, either individually or in the aggregate. |
Fair Value Measurements and Int
Fair Value Measurements and Interest Rate Swaps | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Interest Rate Swaps | Note 4 – Fair Value Measurements and Interest Rate Swaps Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and contingent consideration related to recent acquisitions. 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. Recurring Fair Value Measurements The table below presents the estimated fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilities (in thousands): Fair Value at March 31, 2020 2019 Level 2 Unrealized gains on interest rate swaps $ — $ 1,785 Unrealized losses on interest rate swaps 11,611 — Level 3 Contingent consideration liabilities $ 433 $ 833 Interest Rate Swaps We utilize interest rate swap contracts and forward-starting interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on our variable rate borrowings. For determining the fair value of our interest rate swap and forward-starting interest rate swap contracts, we use significant other observable market data or assumptions (Level 2 inputs) that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. We include unrealized gains in Prepaid expenses and other current assets and unrealized losses in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. We recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. If determined to be effective cash flow hedges, we record the changes in the estimated fair value of the swaps to Accumulated other comprehensive loss on our Consolidated Balance Sheets. To the extent our interest rate swaps are determined to be ineffective, we recognize the changes in the estimated fair value of our swaps in Interest and other non-operating expenses, net on our Consolidated Statements of Income. We currently have one interest rate swap in place, which became effective on November 20, 2019, and terminates on November 20, 2020. This swap contract was previously forward-starting and converts the variable interest rate to a fixed interest rate on our variable rate borrowings. For this interest rate swap, we have not recognized any gains or losses through income, nor has there been any effect on income from hedge ineffectiveness over the term of the swap contract. The following table provides additional details related to this swap contract: Derivative Inception Date Effective Date Termination Date Notional Amount Fixed Interest Rate Interest rate swap 1 July 6, 2016 November 20, 2019 November 20, 2020 $150.0 1.1425% For the interest rate swap contract in effect at March 31, 2020, 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 loss on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. This amount was not material in the three month period ended March 31, 2020. We have entered into forward-starting interest rate swap contracts to extend the hedged period for future interest payments on our variable rate borrowings. These swap contracts will convert the variable interest rate to a fixed interest rate on our variable rate borrowings. The following table provides details related to each of our forward-starting interest rate swap contracts: Derivative Inception Date Effective Date Termination Date Notional Fixed Forward-starting interest rate swap 1 May 7, 2019 November 20, 2020 September 29, 2022 $75.0 2.0925% Forward-starting interest rate swap 2 July 25, 2019 November 20, 2020 September 29, 2022 $75.0 1.5500% Forward-starting interest rate swap 3 February 5, 2020 February 26, 2021 February 28, 2025 $150.0 1.3800% Forward-starting interest rate swap 4 March 9, 2020 September 29, 2022 February 26, 2027 $150.0 0.7400% Forward-starting interest rate swap 5 March 9, 2020 February 28, 2025 February 26, 2027 $150.0 0.8130% Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position. Our interest rate swap and forward-starting interest rate swap contracts 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. Nonrecurring Fair Value Measurements In addition to our assets and liabilities that we measure at fair value on a recurring basis, the Company's assets and liabilities are also subject to nonrecurring fair value measurements. Generally, our assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a long-term note, as collectability was impacted by the COVID-19 pandemic, and non-cash goodwill and intangibles impairment charges of $4.4 million, equal to the total goodwill and intangibles carrying amount of our Australian reporting units. See Goodwill and Intangibles Impairment within Note 1 for more information on goodwill and intangible impairment recognized in the period ended March 31, 2020. Other |
Debt
Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Note 5 – Debt The table below presents the components of our debt (in thousands): March 31, 2020 2019 Variable rate debt Short-term borrowings $ 8,126 $ 13,714 Current portion of long-term debt: Australian credit facility 8,227 8,020 Short-term borrowings and current portion of long-term debt 16,353 21,734 Long-term portion: Revolving credit facility 192,829 503,073 Term facility 182,688 — Receivables securitization facility 195,100 175,100 Less: financing costs, net 920 930 Long-term debt, net 569,697 677,243 Total debt $ 586,050 $ 698,977 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of changes in allowance for doubtful accounts | The following table summarizes the changes in our allowance for doubtful accounts (in thousands): March 31, 2020 2019 Balance at beginning of quarter $ 5,472 $ 6,182 Bad debt expense 2,257 456 Write-offs, net of recoveries (876) (993) Balance at end of quarter $ 6,853 $ 5,645 |
Schedule of Accumulated Other Comprehensive Loss | The table below presents the components of our Accumulated other comprehensive loss balance (in thousands): March 31, December 31, 2020 2019 2019 Foreign currency translation adjustments $ (15,557) $ (12,208) $ (10,127) Unrealized (losses) gains on interest rate swaps, net of tax (8,742) 1,156 (232) Accumulated other comprehensive loss $ (24,299) $ (11,052) $ (10,359) |
Schedule of Recent Accounting Pronouncements | 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 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes Simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. Most amendments are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Annual periods beginning after December 15, 2020 We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting Provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles 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. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. We are currently evaluating the effect this will have on our financial position, results of operations and related disclosures. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Computation of earnings per share and reconciliation of basic and diluted weighted average common shares outstanding | The table below presents the computation of EPS, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except EPS): Three Months Ended March 31, 2020 2019 Net income $ 30,912 $ 32,637 Weighted average shares outstanding: Basic 40,125 39,479 Effect of dilutive securities: Stock options and employee stock purchase plan 830 1,217 Diluted 40,955 40,696 Earnings per share: Basic $ 0.77 $ 0.83 Diluted $ 0.75 $ 0.80 Anti-dilutive stock options excluded from diluted earnings per share computations 66 65 |
Fair Value Measurements and I_2
Fair Value Measurements and Interest Rate Swaps (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative [Line Items] | |
Estimated fair value of contracts | The table below presents the estimated fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilities (in thousands): Fair Value at March 31, 2020 2019 Level 2 Unrealized gains on interest rate swaps $ — $ 1,785 Unrealized losses on interest rate swaps 11,611 — Level 3 Contingent consideration liabilities $ 433 $ 833 |
Interest Rate Swap [Member] | |
Derivative [Line Items] | |
Schedule of Interest Rate Derivatives | The following table provides additional details related to this swap contract: Derivative Inception Date Effective Date Termination Date Notional Amount Fixed Interest Rate Interest rate swap 1 July 6, 2016 November 20, 2019 November 20, 2020 $150.0 1.1425% |
Forward-Starting Interest Rate Swap Agreements[Member] | |
Derivative [Line Items] | |
Schedule of Interest Rate Derivatives | The following table provides details related to each of our forward-starting interest rate swap contracts: Derivative Inception Date Effective Date Termination Date Notional Fixed Forward-starting interest rate swap 1 May 7, 2019 November 20, 2020 September 29, 2022 $75.0 2.0925% Forward-starting interest rate swap 2 July 25, 2019 November 20, 2020 September 29, 2022 $75.0 1.5500% Forward-starting interest rate swap 3 February 5, 2020 February 26, 2021 February 28, 2025 $150.0 1.3800% Forward-starting interest rate swap 4 March 9, 2020 September 29, 2022 February 26, 2027 $150.0 0.7400% Forward-starting interest rate swap 5 March 9, 2020 February 28, 2025 February 26, 2027 $150.0 0.8130% |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The table below presents the components of our debt (in thousands): March 31, 2020 2019 Variable rate debt Short-term borrowings $ 8,126 $ 13,714 Current portion of long-term debt: Australian credit facility 8,227 8,020 Short-term borrowings and current portion of long-term debt 16,353 21,734 Long-term portion: Revolving credit facility 192,829 503,073 Term facility 182,688 — Receivables securitization facility 195,100 175,100 Less: financing costs, net 920 930 Long-term debt, net 569,697 677,243 Total debt $ 586,050 $ 698,977 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Allowance for Doubtful Accounts (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Valuation Allowance [Line Items] | ||
Threshold past due account balances for reserve analysis | $ 20,000 | |
Threshold Past Due Days For Reserve Analysis | 60 | |
SEC Schedule, 12-09, Allowance, Credit Loss [Member] | ||
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Balance at beginning of quarter | $ 5,472,000 | $ 6,182,000 |
Bad debt expense | 2,257,000 | 456,000 |
Write-offs, net of recoveries | (876,000) | (993,000) |
Balance at end of quarter | $ 6,853,000 | $ 5,645,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Goodwill and Intangible Impairment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | |
Goodwill [Line Items] | |||
Goodwill Balances | $ 193,380 | $ 188,596 | $ 188,478 |
AUSTRALIA | |||
Goodwill [Line Items] | |||
Goodwill and Intangible Asset Impairment | 4,400 | ||
Goodwill Impairment | 3,500 | ||
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill) | 900 | ||
ITALY | |||
Goodwill [Line Items] | |||
Goodwill Balances | 3,500 | ||
QUEBEC | |||
Goodwill [Line Items] | |||
Goodwill Balances | $ 2,400 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounting Policies [Abstract] | ||
Excess tax benefit | $ 8 | $ 8.8 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Retained Deficit (Details) $ in Millions | Mar. 31, 2020USD ($) |
Retained Earnings (Accumulated Deficit) [Abstract] | |
Cumulative share repurchases | $ 1,500 |
Cumulative dividends | $ 601 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 |
Accumulated Other Comprehensive Loss [Line Items] | |||
Accumulated other comprehensive loss | $ (24,299) | $ (10,359) | $ (11,052) |
AOCI Attributable to Parent | |||
Accumulated Other Comprehensive Loss [Line Items] | |||
Accumulated other comprehensive loss | (24,299) | (10,359) | (11,052) |
Foreign currency translation adjustments | |||
Accumulated Other Comprehensive Loss [Line Items] | |||
Accumulated other comprehensive loss | (15,557) | (10,127) | (12,208) |
Unrealized (losses) gains on interest rate swaps, net of tax | |||
Accumulated Other Comprehensive Loss [Line Items] | |||
Accumulated other comprehensive loss | $ (8,742) | $ (232) | $ 1,156 |
Earnings Per Share (Details)
Earnings Per Share (Details) - $ / shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Weighted average shares outstanding: [Abstract] | ||
Basic (in shares) | 40,125 | 39,479 |
Effect of dilutive securities: [Abstract] | ||
Stock options and employee stock purchase plan (in shares) | 830 | 1,217 |
Diluted (in shares) | 40,955 | 40,696 |
Basic (in dollars per share) | $ 0.77 | $ 0.83 |
Diluted (in dollars per share) | $ 0.75 | $ 0.80 |
Anti-dilutive stock options excluded from diluted earnings per share computations (in shares) | 66 | 65 |
Acquisitions (Details)
Acquisitions (Details) - locations | 1 Months Ended | |
Feb. 29, 2020 | Jan. 31, 2019 | |
PENNSYLVANIA | W.W. Adcock, Inc. [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 2 | |
NORTH CAROLINA | W.W. Adcock, Inc. [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 1 | |
VIRGINIA | W.W. Adcock, Inc. [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 1 | |
TEXAS | Master Tile Network LLC [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 2 | |
NEVADA | Master Tile Network LLC [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 1 | |
OKLAHOMA | Master Tile Network LLC [Member] | ||
Business Acquisition [Line Items] | ||
Number of locations added | 1 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||||
Mar. 31, 2020 | Mar. 09, 2020 | Feb. 05, 2020 | Jul. 25, 2019 | May 07, 2019 | Mar. 31, 2019 | Jul. 06, 2016 | |
Derivatives, Fair Value [Line Items] | |||||||
Unrealized gains on interest rate swaps | $ 0 | $ 1,785 | |||||
Unrealized losses on interest rate swaps | 11,611 | 0 | |||||
Contingent consideration liabilities | $ 433 | $ 833 | |||||
Interest Rate Swap 1 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | $ 150,000 | ||||||
Derivative [Line Items] | |||||||
Interest rate swap agreement, termination date | Nov. 20, 2020 | ||||||
Derivative, Notional Amount | $ 150,000 | ||||||
Forward-starting Interest Rate Swap 1 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | $ 75,000 | ||||||
Derivative [Line Items] | |||||||
Forward-starting interest rate swap agreement, effective date | Nov. 20, 2020 | ||||||
Interest rate swap agreement, termination date | Sep. 29, 2022 | ||||||
Derivative, Notional Amount | $ 75,000 | ||||||
Forward-starting Interest Rate Swap 2 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | $ 75,000 | ||||||
Derivative [Line Items] | |||||||
Forward-starting interest rate swap agreement, effective date | Nov. 20, 2020 | ||||||
Interest rate swap agreement, termination date | Sep. 29, 2022 | ||||||
Derivative, Notional Amount | $ 75,000 | ||||||
Forward-starting Interest Rate Swap 3 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | $ 150,000 | ||||||
Derivative [Line Items] | |||||||
Forward-starting interest rate swap agreement, effective date | Feb. 26, 2021 | ||||||
Interest rate swap agreement, termination date | Feb. 28, 2025 | ||||||
Derivative, Notional Amount | $ 150,000 | ||||||
Forward-starting Interest Rate Swap 4 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | $ 150,000 | ||||||
Derivative [Line Items] | |||||||
Forward-starting interest rate swap agreement, effective date | Sep. 29, 2022 | ||||||
Interest rate swap agreement, termination date | Feb. 26, 2027 | ||||||
Derivative, Notional Amount | 150,000 | ||||||
Forward-starting Interest Rate Swap 5 [Member] | |||||||
Derivatives, Fair Value [Line Items] | |||||||
Derivative, Notional Amount | 150,000 | ||||||
Derivative [Line Items] | |||||||
Forward-starting interest rate swap agreement, effective date | Feb. 28, 2025 | ||||||
Interest rate swap agreement, termination date | Feb. 26, 2027 | ||||||
Derivative, Notional Amount | $ 150,000 |
Interest Rate Swaps (Details 1)
Interest Rate Swaps (Details 1) - Interest Rate Swap 1 [Member] - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Jul. 06, 2016 | |
Derivative [Line Items] | ||
Derivative, Notional Amount | $ 150 | |
Interest rate swap agreement, fixed interest rate | 1.1425% | |
Interest rate swap agreement, termination date | Nov. 20, 2020 | |
Interest rate swap agreement, effective date | Nov. 20, 2019 |
Interest Rate Swaps (Details 2)
Interest Rate Swaps (Details 2) - USD ($) $ in Millions | 3 Months Ended | ||||
Mar. 31, 2020 | Mar. 09, 2020 | Feb. 05, 2020 | Jul. 25, 2019 | May 07, 2019 | |
Forward-starting Interest Rate Swap 1 [Member] | |||||
Derivative [Line Items] | |||||
Derivative, Notional Amount | $ 75 | ||||
Forward-starting interest rate swap agreement, effective date | Nov. 20, 2020 | ||||
Forward-starting interest rate swap agreement, fixed interest rate | 2.0925% | ||||
Forward-starting interest rate swap agreement, termination date | Sep. 29, 2022 | ||||
Forward-starting Interest Rate Swap 2 [Member] | |||||
Derivative [Line Items] | |||||
Derivative, Notional Amount | $ 75 | ||||
Forward-starting interest rate swap agreement, effective date | Nov. 20, 2020 | ||||
Forward-starting interest rate swap agreement, fixed interest rate | 1.55% | ||||
Forward-starting interest rate swap agreement, termination date | Sep. 29, 2022 | ||||
Forward-starting Interest Rate Swap 3 [Member] | |||||
Derivative [Line Items] | |||||
Derivative, Notional Amount | $ 150 | ||||
Forward-starting interest rate swap agreement, effective date | Feb. 26, 2021 | ||||
Forward-starting interest rate swap agreement, fixed interest rate | 1.38% | ||||
Forward-starting interest rate swap agreement, termination date | Feb. 28, 2025 | ||||
Forward-starting Interest Rate Swap 4 [Member] | |||||
Derivative [Line Items] | |||||
Derivative, Notional Amount | $ 150 | ||||
Forward-starting interest rate swap agreement, effective date | Sep. 29, 2022 | ||||
Forward-starting interest rate swap agreement, fixed interest rate | 0.74% | ||||
Forward-starting interest rate swap agreement, termination date | Feb. 26, 2027 | ||||
Forward-starting Interest Rate Swap 5 [Member] | |||||
Derivative [Line Items] | |||||
Derivative, Notional Amount | $ 150 | ||||
Forward-starting interest rate swap agreement, effective date | Feb. 28, 2025 | ||||
Forward-starting interest rate swap agreement, fixed interest rate | 0.813% | ||||
Forward-starting interest rate swap agreement, termination date | Feb. 26, 2027 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 3) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impairment of goodwill and other assets | $ 6,944 | $ 0 |
Increase (Decrease) in Notes Receivables | 2,500 | |
AUSTRALIA | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Goodwill and Intangible Asset Impairment | $ 4,400 |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Mar. 31, 2019 |
Debt Instrument [Line Items] | ||
Short-term borrowings | $ 8,126 | $ 13,714 |
Australian credit facility | 8,227 | 8,020 |
Short-term borrowings and current portion of long-term debt | 16,353 | 21,734 |
Long-term portion: | ||
Less: financing costs, net | 920 | 930 |
Long-term debt, net | 569,697 | 677,243 |
Total debt | 586,050 | 698,977 |
Revolving Credit Facility | ||
Long-term portion: | ||
Long-term debt, gross | 192,829 | 503,073 |
Receivables Securitization Facility | ||
Long-term portion: | ||
Long-term debt, gross | 195,100 | 175,100 |
Term Facility [Member] | ||
Long-term portion: | ||
Long-term Line of Credit, Noncurrent | $ 182,688 | $ 0 |
Uncategorized Items - pool-2020
Label | Element | Value |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (709,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (709,000) |