What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-02-25 · 116 added, 119 removed, 225 unchanged (51% of the section changed)

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(Sun Wholesale).

We believe that the swimming pool industry has room for continued growth from the increased penetration of new pools.

We believe that the swimming pool industry will continue to grow with the increased penetration of new pools into households with the discretionary income and physical capacity to install a swimming pool.

Significant growth opportunities also reside with pool remodel and pool equipment replacement activities due to the aging of the installed base of swimming pools, technological advancements and the development of environmentally sustainable, energy-efficient and more aesthetically attractive products.

Additionally, the desire for consumers to enhance their outdoor living spaces with hardscapes, lighting and outdoor kitchens also promotes growth in this area.

Favorable demographic and socioeconomic trends have positively impacted our industry, and we believe these trends will continue to do so in the long term.

The desire for consumers to enhance their outdoor living spaces with hardscapes, lighting and outdoor kitchens also promotes future growth opportunities in this area.

Favorable demographic and socioeconomic trends have positively impacted our industry, and we believe these trends will continue to do so over the long term.

These favorable trends include the following:

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• consumers increasing focus on environmentally sustainable, energy-efficient products;

• increased consumer spending driven by stay-at-home and remote work trends as homeowners seek to create attractive areas in their backyards as an extension of their home space.

Almost 60% of consumer spending in the pool industry is for maintenance and minor repair of existing swimming pools.

Maintaining a proper sanitization balance and the related upkeep and repair of swimming pool equipment, such as pumps, heaters, filters and safety equipment, creates a non-discretionary demand for pool chemicals, equipment and other related parts and supplies.

We also believe cosmetic considerations such as a pool’s appearance and the overall look of backyard environments create an ongoing demand for other maintenance-related goods and certain discretionary products.

We believe that the recurring nature of the maintenance and repair market has historically helped maintain a relatively consistent rate of industry growth.

• stay-at-home and remote work trends as homeowners seek to create attractive areas in their backyards as an extension of their home space.

About 60% of consumer spending in the pool industry is for maintenance and minor repair of existing swimming pools.

Maintaining a proper sanitization balance and the related upkeep and repair of swimming pool equipment, such as pumps, heaters, filters and safety equipment, creates non-discretionary demand for pool chemicals, equipment and other related parts and supplies.

We also believe cosmetic considerations such as a pool’s appearance and the overall look of backyard environments create ongoing demand for other maintenance-related goods and certain discretionary products that we supply.

We believe that consistent growth of the installed base of in-ground swimming pools and the recurring nature of the maintenance and repair market has historically helped maintain a relatively consistent rate of industry growth.

This characteristic has helped cushion the negative impact on revenues in periods when unfavorable economic conditions and softness in the housing market adversely impacted consumer discretionary spending, including pool construction and major replacement and refurbishment activities.

The following table reflects growth in the domestic installed base of in-ground swimming pools over the past 11 years (based on Company estimates and information from 2021 P.K.

The replacement and refurbishment market currently accounts for 20% to 25% of consumer spending in the pool industry.

The activity in this market, which includes major swimming pool remodeling, is driven by the aging of the installed base of pools.

The timing of these types of expenditures is more sensitive to economic factors including home values, single-family home sales and consumer confidence that impact consumer spending compared to the maintenance and minor repair market.

The swimming pool remodel, renovation and upgrade market currently accounts for 21% to 23% of consumer spending in the pool industry.

The activity in this market, which includes major swimming pool remodeling and upgrading, is driven by the aging of the installed base of pools and availability of enhanced feature products such as swimming pool automated controls, variable speed pumps, robotic cleaners and LED pool and hot tub lighting.

Many new homeowners with existing pools transform older pools into a modern backyard oasis through upgraded finishes and updated equipment.

Among other factors like southern migration and housing shortage trends, the timing of these types of expenditures is more sensitive to economic factors including home values, single-family home sales and consumer confidence that impact consumer spending compared to the maintenance and minor repair market.

New swimming pool construction comprises 17% to 18% of consumer spending in the pool industry.

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The irrigation and landscape industry shares many characteristics with the pool industry, and we believe that it will realize similar long-term growth rates.

Irrigation system installations often occur in tandem with new single-family home construction making it more susceptible to economic variables that drive new home sales.

Irrigation system installations often occur in tandem with new single-family home construction making them more susceptible to economic variables that drive new home sales.

However, the landscape industry offers similar maintenance-related growth opportunities as the swimming pool industry.

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The irrigation and landscape distribution business serves both residential and commercial markets, with the majority of sales related to the residential market.

Within the United States market, we believe that irrigation accounts for approximately 35% of total spending in the industry, with the remaining 65% of spending related to landscape maintenance products, power equipment, hardscapes and specialty outdoor products and accessories.

Our NPT network primarily serves the swimming pool market but does provide some overlap with the irrigation and landscape industries as we offer our market-leading brand of pool tile, composite pool finish products and hardscapes.

As more consumers create and enhance outdoor living areas and continue to invest in their outdoor environment, we believe we can focus our resources to address such demand, while leveraging our existing pool and irrigation and landscape customer base.

We feel the development of our NPT network is a natural extension of our distribution model.

In addition to our 20 standalone NPT sales centers, we currently have over 100 SCP and Superior sales centers that feature consumer showrooms where landscape and swimming pool contractors, as well as homeowners, can view and select pool components including pool tile, decking materials and interior pool finishes in various styles and grades, and serve as stocking locations for our NPT branded products.

We also offer virtual tools for homeowners to select and design their pool and outdoor environments, working with their chosen contractors to install these products.

Our NPT Backyard app allows our customers to virtually design, customize and view a pool in their own backyard within seconds.

We believe our showrooms, local stocking of products and virtual support provide us with a competitive advantage in these categories.

Given the more discretionary nature of these products, this business is more sensitive to external market factors compared to our business overall.

Within the United States market, we believe that irrigation accounts for approximately 30% to 35% of total spending in the industry, with the remaining 65% to 70% of spending related to landscape maintenance products, power equipment, hardscapes and specialty outdoor products and accessories.

Economic Environment

Certain trends in the housing market, the availability of consumer credit and general economic conditions (as commonly measured by Gross Domestic Product or GDP) affect our industry, particularly new pool and irrigation system starts as well as the timing and extent of pool refurbishments, equipment replacement, landscaping projects and outdoor living space renovations.

Certain trends in the housing market, the availability of consumer credit and general economic conditions (as commonly measured by Gross Domestic Product or GDP) affect our industry, particularly new pool and irrigation system starts as well as the timing and extent of pool refurbishments, equipment replacements, landscaping projects and outdoor living space renovations.

Consumers typically spend more on new pools, refurbishment and replacement when general economic conditions are strong.

We believe that over the long term, single-family housing turnover and home value appreciation may correlate with demand for new pool construction, with higher rates of home turnover and appreciation having a positive impact on new pool starts over time.

We also believe that homeowners’ good economic standing and access to consumer credit are critical factors enabling the purchase of new swimming pools and irrigation systems.

While most new swimming pools are installed in existing homes, there has also been a strong correlation of new pool construction activity to new home construction activities over time.

We also believe that homeowners’ good economic standing and availability of consumer credit are critical factors enabling the purchase of new swimming pools and irrigation systems.

Similar to other discretionary purchases, replacement and refurbishment activities are more heavily impacted by economic factors such as consumer confidence, GDP and employment levels.

Contractor labor availability has also become an issue in recent years, limiting our customers’ ability to fully meet consumer construction and renovation demand.

Labor supply constraints have intensified during the COVID-19 pandemic, which has limited our customers’ ability to meet increased demand for new pool construction and renovation.

Over the past decade, homeowners investing in their homes, including backyard renovations, have flourished.

Steady increases in home values and lack of affordable new homes have prompted homeowners to stay in their homes longer and upgrade their home environments, including their backyards.

In response to the COVID-19 pandemic over the past couple of years, many families spent more time at home and sought out opportunities to create or expand home-based outdoor living and entertainment spaces, which resulted in an increase in new pool construction and greater expenditures for maintenance and remodeling products.

We estimate that new pool construction increased to approximately 120,000 units in 2021 from 96,000 units in 2020, representing a 25% increase in new pool construction.

We expect that new pool and irrigation construction levels will continue to grow incrementally (subject to labor availability), but we believe that consumer investments in outdoor living spaces will generate greater growth over the next several years as backyards more increasingly become an extension of consumers’ home space.

Although some constraints exist around residential construction activities, we believe that we are well positioned to take advantage of both the market expansion and the inherent long-term growth opportunities in our industry.

Additionally, regulation passed by the U.S.

Department of Energy, which became effective in July 2021, mandates all new motors and pumps for swimming pools must meet certain compliance regulations.

We believe that this mandate, coupled with additional product developments and technological advancements as consumers focus on more environmentally sustainable and energy-efficient products, offers further growth opportunities over the next few years.

We estimate that price inflation has averaged 1% to 2% annually in our industry over the past ten years.

Over the past decade, consumers' investments in their homes, including backyard renovations, have flourished.

Particularly, over the past couple of years, steady increases in home values and lack of affordable new homes have prompted homeowners to stay in their homes longer and upgrade their home environments, including their backyards.

Many families have spent more time at home and sought opportunities to create or expand home-based outdoor living and entertainment spaces.

These trends resulted in an increase in new pool construction and greater expenditures for maintenance and remodeling products.

More recent trends, including a lower number of permits issued for new pools, suggest that new construction activities are moderating after significant growth over the past couple of years.

In 2022, we estimate that new pool construction decreased 16% to approximately 98,000 units from 117,000 units in 2021 when new pool construction units had increased 22% over 2020.

We expect that consumers will continue to invest in outdoor living spaces as consumers consider backyards an extension of their home space.

Despite the recent decline in residential construction activities, we believe that we are well positioned to benefit from the inherent long-term growth opportunities in our industry fueled by favorable population migration trends, strong housing demand dynamics and product developments and technological advancements as consumers focus on more environmentally sustainable and energy-efficient products.

We generally pass industry price increases through our supply chain and may make strategic volume inventory purchases ahead of vendor price increases in order to obtain favorable pricing.

Recently, supply chain interruptions, production shutdowns and weather-related events have resulted in increased inflation as higher costs to develop finished products are being passed down to consumers.

Our results in 2021 benefited from above-average inflationary product cost increases of approximately 7% to 8%.

We expect this trend to continue into 2022.

We expect sales growth in 2022 to be higher due to impacts from inflationary product cost increases of approximately 9% to 10%.

Business Strategy and Growth

Historically, annual price inflation averaged 1% to 2% in our industry.

During 2021 and 2022, supply chain interruptions, production shutdowns and weather-related events resulted in increased inflation as higher costs to develop finished products were passed down to consumers.

Our results in 2022 benefited from above-average inflationary product cost increases of approximately 10% compared to 7% to 8% in 2021.

We expect inflationary product cost increases to moderate in 2023, and project that our sales will benefit approximately 4% from inflationary product cost increases.

Business Strategy and Growth Strategy

Our mission is to provide exceptional value to our customers and suppliers, creating exceptional return to our shareholders, while providing exceptional opportunities to our employees.

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Our uniquely tailored programs include such features as customer lead generation, personalized websites, brochures, direct mail, marketing campaigns and business development training.

As a customer service, we also provide certain retail store customers assistance with all aspects of their business, including site selection, store layout and design, product merchandising, business management system implementation, comprehensive product offering selections and efficient ordering and inventory management processes.

In addition to these programs, we feature consumer showrooms in over 100 of our sales centers and host our annual Retail Summit to educate our customers about product offerings and the overall industry, although we did not host our annual Retail Summit over the past two years due to the COVID-19 pandemic.

As a customer service, we also provide certain customers assistance with all aspects of their business, including site selection, store layout and design, product merchandising, business management system implementation, comprehensive product offering selections and efficient ordering and inventory management processes.

In addition to these programs, we feature consumer showrooms in over 100 of our sales centers and host our annual Retail Summit to educate our customers about product offerings and the overall industry, which we successfully held in January 2023 after a two year hiatus due to the COVID-19 pandemic.

We also act as a day-to-day resource by offering product and market expertise to serve our customers’ unique needs.

In addition to our efforts aimed at industry and customer growth, we strive to operate more effectively by continuously focusing on improvements in our operations, which we define as capacity creation.

We aim to create capacity with business to business development tools and execution to ensure best-in-class service and value creation for our customers and suppliers.

In particular, we have developed the Pool360 and Horizon 24/7 platforms that help our customers be more productive by allowing them to get pricing, check availability, enter orders and make payments online while leveraging our customer service staff resources, particularly during peak business periods.

We create capacity with business to business development tools and execution to ensure best-in-class service and value creation for our customers and suppliers.

In particular, our Pool360 and Horizon 24/7 internet and mobile platforms help our customers be more productive by allowing them to digitally receive pricing and product availability information, and enter orders, while leveraging our customer service staff resources, particularly during peak business periods.

These tools not only offer real-time integration into our enterprise resource planning system, creating efficiencies in our business processes as well, but they also provide our customers graphical catalog presentation in the same platform.

We recently re-launched our Pool360 platform with enhanced features, including a new user-friendly design, improved speed and responsiveness, access to real-time inventory availability and an easier way for our customers to quickly and accurately find our products.

Our BlueStreak mobile ordering platform enables our sales associates to process orders faster, often eliminating the need for customers to get out of their vehicles.

We are also actively making improvements to our sales centers and warehouses, including improved showroom layouts, sales center merchandising, bin replenishment and velocity slotting.

We are also actively making improvements to our sales centers and warehouses through a focus on speed at the counter, improved showroom layouts, sales center merchandising, bin replenishment and velocity slotting.

Velocity slotting uses technology to identify fast moving, high velocity items, which are then color-coded and placed in an easily accessible location to create efficiencies for both our employees and customers.

In addition to these initiatives, we strive to expand our Pool Corporation-branded products and exclusive brand offerings.

We believe that ongoing investments in digital transformation and technology help us provide best-in-class service to our customers by improving the customer experience, enhancing our existing customer relationships and expanding our customer base.

To that end, a part of our growth strategy includes investing in technology that allows us to better serve our customers and using this information to make better data-driven decisions for our business.

We have grown our distribution networks through new sales center openings, acquisitions and the expansion of existing sales centers depending on our market presence and capacity.

In 2021, we have grown our distribution network through the acquisition of the Sun Wholesale distribution network.

Sun Wholesale distributes swimming pool supplies, equipment and related leisure products domestically, primarily servicing Pinch A Penny, Inc.

Pinch A Penny, Inc.

is a franchisor of pool and outdoor living-related specialty retail stores in the United States with approximately 260 independently owned and operated franchised stores in Florida, Texas, Louisiana, Alabama and Georgia.

Sun Wholesale also owns and operates a specialty chemical packaging operation.

For additional information regarding our new sales center openings, acquisitions and closures/consolidations, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, Note 2 of “Notes to Consolidated Financial Statements,” included in this Form 10-K.

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We believe that our high customer service levels and expanded product offerings have enabled us to gain market share historically.

Going forward, we expect to realize sales growth through market share gains and continued expansion of our product offerings.

Going forward, we expect to continue to realize sales growth through market share gains and continued expansion of our product offerings with a focus on our Pool Corporation-branded products and exclusive brand offerings.

Customers and Products

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These customers also buy from other distributors, mass merchants, home stores and certain specialty and internet retailers.

We provide extended payment terms to qualified customers for sales under early buy programs.

We provide extended payment terms to qualified customers for sales under pre-season early buy programs, which typically occur during the fourth and first quarters.

The extended terms usually require payments in equal installments during the second quarter of each year.

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• swimming pool remodelers and builders;

• specialty retailers that sell swimming pool supplies;

• specialty retailers that sell swimming pool supplies, including independently owned and operated Pinch A Penny franchise stores;

• swimming pool repair and service businesses;

• irrigation construction and landscape maintenance contractors;

• commercial customers who service large commercial installations such as hotels, universities and community recreational facilities.

• commercial pool operators and pool contractors who build, remodel or service large commercial installations such as hotels, universities and community recreational facilities.

We conduct our operations through 420 sales centers in North America, Europe and Australia.

Our primary markets, with the highest concentration of swimming pools, are California, Texas, Florida and Arizona, collectively representing approximately 53% of our 2022 net sales.

In 2021, we generated approximately 94% of our sales in North America (including Canada and Mexico), 5% in Europe and 1% in Australia.

While we continue to expand both domestically and internationally, we expect this geographic mix to be similar over the next few years.

In 2022, we generated approximately 96% of our sales in North America (including Canada and Mexico), 4% in Europe and less than 1% in Australia.

While we continue to expand both domestically and internationally, we

expect this geographic mix to be similar over the next few years.

References to product line and product category data throughout this Form 10-K generally reflect data related to the North American swimming pool market, as it is more readily available for analysis and represents the largest component of our operations.

We use a combination of local and international sales and marketing personnel to promote the growth of our business and develop and strengthen our customers’ businesses.

Our sales and marketing personnel focus on developing customer programs and promotional activities, creating and enhancing sales management tools and providing product and market expertise.

Our local sales personnel work from our sales centers and are charged with understanding and meeting our customers’ specific needs.

Our goal is to be a trusted resource for both industry professionals and consumers in the outdoor living industry.

We use local sales and marketing personnel to promote the growth of our business and develop and strengthen our customers’ businesses.

Our sales and marketing personnel focus on developing customer training programs and promotional activities, creating and enhancing sales management tools and providing product and market expertise.

Our local sales personnel work from our sales centers.

They are a trusted resource for our customers and are charged with understanding and meeting our customers’ specific needs.

Our sales center personnel help educate our customers on a variety of topics including innovative products and solutions that can elevate their businesses.

We offer our customers more than 200,000 manufacturer and Pool Corporation-branded products.

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• repair and replacement parts for pool equipment, such as cleaners, filters, heaters, pumps and lights;

• fiberglass pools and hot tubs and packaged pool kits including walls, liners, braces and coping for in-ground and above-ground pools;

• pool equipment and components for new pool construction and the remodeling of existing pools;

• irrigation and related products, including irrigation system components and professional lawn care equipment and supplies;

• building materials, such as concrete, plumbing and electrical components, both functional and decorative pool surfaces, decking materials, tile, hardscapes and natural stone, used for pool installations and remodeling;

• commercial products, including American Society of Material Engineers heaters, safety equipment and commercial pumps and filters;

• pool equipment and components for new pool construction and the remodeling and replacement of existing pools;

• irrigation and related products, including irrigation system components and professional turf care equipment and supplies;

• commercial pool products, including American Society of Material Engineers heaters, safety equipment, commercial decking equipment and commercial pumps and filters;

• fiberglass pools and hot tubs and packaged pool kits including walls, liners, braces and coping for in-ground and above-ground pools;

• other pool construction and recreational products, which consist of a number of product categories and include discretionary recreational and related outdoor living products, such as grills and components for outdoor kitchens.

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Based on our 2022 product classifications, sales for our pool and hot tub chemicals product category represented approximately 13% of total net sales for 2022, 9% of total net sales in 2021 and 10% of total net sales in 2020.

The increase in pool and hot tub chemicals as a percentage of our total net sales from 2021 to 2022 was driven by inflation, improved supply over last year, strong demand for non-discretionary maintenance products, and our December 2021 acquisition of Porpoise Pool & Patio, Inc., who operates a chemical packaging plant.

No other product categories accounted for 10% or more of total net sales in any of the last three fiscal years.

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New product technology provides opportunities not only for improved energy-efficiency but also new enticements for leisure activities.

Smart controls provide growth opportunities as most existing swimming pools run on mechanical time clocks.

Major equipment manufacturers have developed and will continue to develop more retrofit kits that allow homeowners to interact with their pools or hot tubs through their smartphones.

Robotic cleaners offer consumers a more efficient option for maintaining their swimming pools.

We see each of these developments as significant growth opportunities.

We offer a growing selection of energy-efficient and environmentally preferred products, which supports sustainability and helps our customers save energy, water and money.

Our green technology products include variable speed pumps, LED pool and hot tub lights and high-efficiency heat pumps.

Our Horizon sales centers offer organic fertilizers, organic pesticides, and irrigation products that reduce water usage, allowing our customers to have less of an impact on freshwater reserves.

Regulation passed by the U.S.

Department of Energy, which became effective in July 2021, mandates all new motors and pumps sold for swimming pools must meet certain compliance regulations.

As the regulation has only recently become effective, the impact from this change through the end of 2021 season was not significant.

Department of Energy, which became effective in July 2021, mandated all new pumps sold for swimming pools must meet certain compliance regulations.

We see each of these developments as significant growth opportunities.

We offer a growing selection of energy-efficient and environmentally preferred products, which supports sustainability and helps pool owners save energy, water, time and money.

Our environmentally-friendly technology products include variable speed pumps, LED pool and hot tub lights and high-efficiency heat pumps.

Our Horizon sales centers offer organic fertilizers, organic pesticides, and irrigation and drainage products that reduce water usage and soil erosion, allowing our customers and homeowners to have less of an impact on freshwater reserves.

Over the last several years, we have increased our product offerings and service abilities related to commercial swimming pools.

We consider the commercial market to be a key growth opportunity as we focus more attention on providing products to customers who service large commercial installations such as hotels, condominiums, apartment complexes, universities and community recreational facilities.

We continue to leverage our existing networks and relationships to grow this market.

We consider the commercial market to be a key growth opportunity as we focus more attention on providing products to customers who operate and service large commercial installations such as hotels, condominiums, apartment complexes, universities and community recreational facilities.

We continue to leverage our existing networks and relationships to grow this

Sales to commercial customers declined in 2020 due to COVID-19 related closures and the decline in both business and leisure travel.

In 2021, commercial sales have accelerated as business and leisure travel has increased and public facilities reopened following COVID-19 related closures in the prior year.

In 2021, the sale of maintenance and minor repair products (non-discretionary) accounted for almost 60% of our sales and gross profits, while just over 40% of our sales and gross profits were derived from the refurbishment, replacement, construction and installation (equipment, materials, plumbing, electrical, etc.) of swimming pools (partially discretionary).

During the economic downturn, which spanned from late 2006 to early 2010 and reached its low point in 2009, sales of maintenance and minor repair products had increased to approximately 70% of our sales and gross profits due to the significant declines in new pool construction and deferred remodeling and replacement activity.

The current trend reflects a partial shift back toward a greater percentage of our sales coming from major refurbishment and replacement products due to the recovery of these activities since levels reached their historic low point in 2009.

Since 2009, we have experienced product and customer mix changes, including a shift in consumer spending to some higher value, lower margin products such as variable speed pumps and high efficiency heaters.

In 2021, commercial sales accelerated as business and leisure travel increased and public facilities reopened.

This growth was sustained throughout 2022.

In 2022, the sale of maintenance and minor repair products (non-discretionary) accounted for approximately 60% of our sales and gross profits, while approximately 40% of our sales and gross profits were derived from the remodel, renovation, upgrade, construction and installation (equipment, materials, plumbing, electrical, etc.) of swimming pools (partially discretionary).

These components may vary from year to year.

Over the last several years, we have experienced product and customer mix changes, including a shift in consumer spending to some higher value, lower margin products such as variable speed pumps and high efficiency heaters.

We expect continued demand for these products, but believe our efforts in various pricing and sourcing initiatives, including growth in our higher margin private label and exclusive products (PLEX) and our expansion of building materials product offerings, have helped offset these gross margin declines.

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swimming pool market primarily to offer our customers a choice of distinctive product selections, locations and service personnel.

We distribute irrigation and related products through our Horizon network and tile, decking materials and interior pool finish products through our NPT network, as well as through SCP and Superior networks.

In December 2021, we acquired Sun Wholesale., which distributes swimming pool supplies, equipment and related leisure products domestically, primarily servicing independently owned and operated Pinch A Penny, Inc.

We distribute irrigation, landscape maintenance and related products through our Horizon network.

Swimming pool tile, decking materials and interior pool surfacing products are distributed through our NPT network, as well as through SCP and Superior networks.

As more consumers create and enhance outdoor living areas and continue to invest in their outdoor environment, we believe we can focus our resources to address such demand by leveraging our existing pool and irrigation and landscape customer base.

We feel the development of our NPT network is a natural extension of our distribution model.

In addition to our 19 standalone NPT sales centers, we currently have over 100 SCP and Superior sales centers that feature consumer showrooms where landscape and swimming pool contractors, as well as homeowners, can view and select pool components including pool tile, decking materials and interior pool finishes in various styles and grades, and serve as stocking locations for our NPT branded products.

We also offer virtual tools for homeowners to select and design their pool and outdoor environments, working with their chosen contractors to install these products.

Our NPT® Backyard mobile app and www.nptpool.com ® allow our customers to virtually design, customize and view a pool in their own backyard within seconds.

We believe our showrooms, local stocking of products and virtual support provide us with a competitive advantage in these categories.

Given the more discretionary nature of these products, this business is more sensitive to external market factors compared to our business overall.

In December 2021, we acquired Sun Wholesale Supply, Inc., which distributes swimming pool supplies, equipment and related leisure products, primarily servicing independently owned and operated Pinch A Penny, Inc.

franchise locations.

Going forward, we expect to expand our franchise operations through additional locations of Pinch A Penny franchised stores.

Going forward, we expect to expand Pinch A Penny franchise operations through additional locations of Pinch A Penny franchised stores.

Sun Wholesale Supply, Inc.

also owns and operates a specialty chemical packaging operation.

also owns and operates a specialty chemical packaging operation providing pool chemical products to the Pinch A Penny franchised store network and a portion of the chemical products sold through our SCP and Superior sales centers.

We evaluate our sales centers based on their performance relative to predetermined standards that include both financial and operational measures.

Our corporate support groups provide our field operations with various services, such as developing and coordinating customer and vendor related programs, human resources support, information systems support and expert resources to help them achieve their goals.

We believe our incentive programs and feedback tools, along with the competitive nature of our internal networks, stimulate and enhance employee performance.

Our corporate support groups provide our field operations with various services, such as developing and coordinating customer and vendor related programs, services from our real estate support function to find appropriate locations for our sales centers, human resources support, information systems support, support from our logistics and fleet teams, accounting and financial analysis support and expert resources to help them achieve their goals.

We believe our incentive programs and feedback tools, along with the competitive nature of our sales center network, stimulate and enhance employee performance.

Our sales centers are located within population centers near customer concentrations, typically in industrial, commercial or mixed-use zones.

Customers may pick up products at any sales center location, or we may deliver products to their premises or job sites via our trucks or third-party carriers.

For additional information on our sales centers, see Item 2, “Properties,” of this Form 10-K.

Our sales centers maintain well-stocked inventories to meet our customers’ immediate needs.

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These early buy purchases typically allow us to place orders in the fall at a modest discount, take delivery of product during the off-season months and pay for these purchases in the spring or early summer.

Due to vendor backlogs, these early buy opportunities were generally not available in 2021 or 2020.

Due to vendor backlogs resulting in product availability constraints, these early buy opportunities were generally not available in 2021 or 2020, but were re-established in 2022.

Our preferred vendor program encourages our distribution networks to stock and sell products from a smaller number of vendors offering the best overall terms and service to optimize profitability and shareholder return.

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and Zodiac Pool Systems, Inc., which accounted for approximately 18%, 11% and 9%, respectively, of the cost of products we sold in 2022.

We are the largest wholesale distributor of swimming pool and related backyard products (based on industry knowledge and available data) and the only truly national wholesale distributor focused on the swimming pool industry in the United States.

We are the largest wholesale distributor of swimming pool and related backyard products (based on industry knowledge and available data) and one of the only national wholesale distributors focused on the swimming pool industry in the United States.

We are also one of the leading distributors of irrigation and landscape products in the United States.

We face intense competition from many regional and local distributors in our markets and from one national wholesale distributor of landscape supplies.

We face intense competition from many regional and local distributors in our markets and from three national wholesale distributors of irrigation and landscape supplies.

We also face competition, both directly and indirectly, from mass market retailers (both store-based and internet) and large pool supply retailers who primarily buy directly from manufacturers.

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• the breadth and availability of products offered;

• the quality and level of customer service, including ease of ordering and product delivery;

• the quality and level of customer service, including ease of ordering and speed of product delivery;

• the breadth and depth of sales and marketing programs;

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We are committed to sustainable business practices, which includes offering eco-friendly products to our customers, closely monitoring our sourcing activities, and being good stewards within the communities we serve.

Currently, we are taking steps to trim our carbon footprint and to improve product choices that allow our customers to reduce their environmental impact.

Further, we are installing more energy-efficient systems throughout our network.

Currently, we are taking steps to reduce our carbon footprint and to improve product choices that allow pool and homeowners to reduce their environmental impact.

Further, we are installing more energy-efficient systems throughout our sales center network.

We are continually striving to ensure success in our business while protecting resources for future generations.

Our sustainability goals include the reduction of greenhouse gases and other harmful air emissions, water conservation, energy conservation and carbon footprint minimization.

We continue to improve the ways in which we handle, distribute, transport and dispose of all products, particularly the chemicals and fertilizers that we sell.

Among other initiatives in 2021, we believe our recent endeavors described further below will continue to create value for our customers, shareholders, employees, suppliers and communities.

• We partnered with the YMCA to provide swimming lessons and the opportunity to learn basic water safety skills to 1,500 children.

To reduce any barriers to participation, we also donated new swimsuits and towels.

• In celebration of World Water Day, we made a donation to DigDeep, a human rights nonprofit organization working to bring clean, hot and cold running water into American homes.

• In honor of Earth Day, we donated 5,000 trees through the National Forest Foundation in an effort to restore and expand the national forest ecosystems.

• Through our partnership with LightStream, we helped contribute to the reforestation of more than 50 acres of trees by American Forests.

Our sustainability goals include the

reduction of greenhouse gases and other harmful air emissions, water conservation, energy conservation and carbon footprint minimization.

We continuously endeavor to improve the ways in which we handle, distribute, transport and dispose of all products, particularly the chemicals and fertilizers that we sell.

Social - Human Capital Management

We employed approximately 6,000 people at December 31, 2022.

Given the seasonal nature of our business, our peak employment period is the summer and, depending on expected sales levels, we add 200 to 300 employees to our work force to meet seasonal demand.

Given the seasonal nature of our business, our peak employment period is the summer season and, depending on expected sales levels, we add 100 to 200 employees to our work force to meet seasonal demand.

Approximately 90% of our employees are located in the U.S.

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None of our employees are currently covered under any collective bargaining agreements.

We believe that our success is a direct result of the contributions and commitment of our employees.

We provide competitive pay and benefits, as well as training and other resources to our employees.

Our goal is to be an Employer of Choice through focusing on the engagement, development, retention, and health and well‑being of our employees.

We have established a set of standard operating procedures to optimize our human capital management function, including hiring and human resource policies, training practices and operational instruction manuals.

We believe that our success is a direct result of the contributions and commitment of our employees.

We provide competitive pay and benefits, training and continuing education, and professional development and promotional opportunities to engage and reward our team.

We focus on the following factors in implementing and developing our human capital strategy:

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We aim to achieve zero serious injuries through continued investment in, and focus on, our core safety programs and injury-reduction initiatives.

This effort begins immediately with new employees and is reinforced each day through a focus on safety awareness, risk identification and other essential safety protocols.

This effort begins immediately with new employees and is reinforced each day through a focus on training, safety awareness, risk identification and other essential safety protocols.

We closely monitor overall workers’ compensation and auto claims, OSHA recordable incidents, Department of Transportation compliance and other internally established safety prevention elements in an effort to make every workday safe.

Throughout the COVID-19 pandemic, we have taken a number of actions to protect the health and well-being of our employees and to reward our employees for their contributions to our success.

These actions include providing personal protective equipment, expanding healthcare benefits and re-configuring working spaces and arrangements.

In 2020 and 2021, we made efforts to reward our employees by extending paid leave and paying additional discretionary bonuses to our employees for their contributions.

Diversity, Equity and Inclusion (DEI)

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Recruit, develop and retain a diverse workforce and provide developmental opportunities for career advancement for all employees;

Review current policies, practices and procedures to remove possible impediments to equal employment opportunity for all prospective candidates and employees;

Review current policies, practices and procedures to remove possible impediments to equal employment opportunity for prospective candidates and employees;

Communicate that we, as an Employer of Choice, are committed to DEI with action-oriented programs that produce results and employee engagement.

Most recently, we established a DEI team, expanding existing content in core employee development programs and focused on improving our efforts to recruit and hire first-class diverse talent.

In 2021, we held our inaugural Women in Leadership Forum, which was devoted to discussing what it means to be a female leader in wholesale distribution.

In addition to our recent initiatives, we continue to support our existing employees with training and development aimed at creating and sustaining a more inclusive environment.

Our DEI efforts are focused on expanding content in core employee development programs and improving our ability to recruit and hire first-class diverse talent.

To create connection and community, we've established a Women’s Interactive Network (WIN) and diversity mentoring program to cultivate the growth and development of our female and diverse employees.

In addition to our recent initiatives, we continue to support our existing employees with training and development, which includes content aimed at creating and sustaining a more inclusive environment.

Employee Growth and Development

We strive to be an Employer of Choice by investing in our employees.

Our goal is to attract, develop and retain a talented team of people inspired by our mission to provide exceptional value to our customers and suppliers and create exceptional return to our shareholders, while providing exceptional opportunities for our employees.

Our goal is to attract, develop and retain a talented team of diverse people inspired by our mission to provide exceptional value to our customers and suppliers and create exceptional

return to our shareholders, while providing exceptional opportunities for our employees.

Our success depends on our employees understanding how their work contributes to the company’s overall strategy.

We use a variety of channels to facilitate open and direct communication with our employees, including open forums with executives and employee experience surveys.

When our employees succeed, the company succeeds.

To help our employees achieve success in their roles, we emphasize continuous training and development opportunities.

These include annual performance assessments, safety and security protocols, updates on new products and service offerings and deployment of technologies.

We also provide managerial training to mid-level managers and departmental leaders.

To help our employees achieve success in their roles, we emphasize continuous training and career development opportunities.

These include annual performance assessments, promotion and advancement opportunities, safety and security protocols, updates on new products and service offerings and deployment of technologies.

We also provide managerial training to emerging leaders, mid-level managers and departmental leaders.

This coursework covers topics such as talent review, development of underperforming employees, handling employee misconduct and coaching and success workshops.

Our employees are also involved in a multitude of volunteer efforts that positively impact our communities through support of charitable organizations.

Recently, we have donated over $2 million through our partnerships with YMCAs across the country to provide free water safety lessons and lifeguard training in underserved communities.

Our donations have funded more than 20,000 safety around water swimming lessons and lifeguard training scholarships from coast to coast.

Our local employees and partners donated their time and energy to make these events a success.

We also provide an entry level program to prepare Manager Trainees (MITs) for sales and operations management opportunities.

Our MITs are hosted at either our state-of-the-art EDGEucation Center, located in Plano, Texas or in a virtual classroom.

Our program includes lectures, projects and role play to provide MITs with industry knowledge, leadership skills and the tools necessary to succeed within our organization.

Our MITs are hosted at either our state-of-the-art EDGEucation Center or in a virtual classroom.

They gain valuable experience during their training program through field-based interaction with customers and operating management.

Our program includes lectures by subject matter experts, hands-on projects and role play to provide MITs with practical industry knowledge, leadership skills and the tools necessary to succeed within our organization.

Employee Compensation and Benefits

We strive to provide market-competitive compensation, benefits and services to our employees.

Our performance-based compensation philosophy is based on rewarding each employee’s individual contributions regardless of gender, race or ethnicity.

Our performance-based compensation philosophy rewards each employee’s individual contributions regardless of gender, race or ethnicity.

Our total compensation package includes cash compensation (base salary and incentive or bonus payments), company contributions toward additional benefits (such as health and disability plans), retirement plans with a company match and paid time off.

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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 late spring and summer, primarily because extended terms offered by our suppliers are typically payable during the second quarter of each year, while our peak accounts receivable collections typically occur in June, July and August.

Excluding borrowings to finance acquisitions, dividend payments and share repurchases, our peak borrowing usually occurs during the late spring and summer, primarily because extended terms offered by certain of our suppliers are typically payable during the second quarter of each year, while our peak accounts receivable collections typically occur in June, July and August.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business