What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-24 · 123 added, 156 removed, 874 unchanged (24% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Pool Corporation

To the Stockholders and the Board of Directors of Pool Corporation

Opinion on the Financial Statements

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Valuation of Goodwill

Description of the Matter At December 31, 2022, the Company’s goodwill was $692.0 million.

Description of the Matter At December 31, 2023, the Company’s goodwill was $700.1 million, including $403.5 million of goodwill relating to one reporting unit .

As discussed in Note 3 of the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.

The Company’s goodwill is assigned to reporting units as of the acquisition date.

Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the estimation required to determine the fair value of the reporting units.

Auditing management’s annual goodwill impairment test for this reporting unit was complex and highly judgmental due to the estimation required to determine the fair value of the reporting unit.

In particular, the fair value estimate is sensitive to certain assumptions, such as changes in the weighted average cost of capital, revenue growth rate, operating margin, and terminal growth rate which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the Company’s reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

To test the estimated fair value of the Company’s largest reporting unit, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to current industry and economic trends and other relevant factors, such as historical results.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

We also involved a specialist to assist in our evaluation of the valuation methodology applied by the Company and certain significant assumptions used in estimating the fair value of the Company.

In addition, we reviewed the allocation of the Company’s fair value to its reporting units and the comparison of the Company’s fair value to its market capitalization.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

We also involved a specialist to assist in our evaluation of the valuation methodology applied by the Company and certain significant assumptions used in estimating the fair value of the reporting unit.

In addition, we reviewed the comparison of the Company’s fair value of its largest reporting unit and the fair value of all other reporting units to the Company’s market capitalization.

/s/ Ernst & Young LLP

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Selling and administrative expenses 913,477 907,629 784,308

Impairment of goodwill and other 605 ( 2,500 ) 6,944

Operating income 746,567 1,025,783 832,784

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Foreign currency translation adjustments 6,909 ( 10,028 ) ( 4,663 )

Change in unrealized gains (losses) on interest rate swaps,

Unrealized (losses) gains on interest rate swaps,

net of the change in taxes of $ 2,074 , $( 7,802 ) and $( 3,733 )

( 6,222 ) 23,407 11,198

Total other comprehensive income (loss) 13,379 6,535 ( 3,660 )

Total other comprehensive income 687 13,379 6,535

Comprehensive income $ 523,916 $ 761,841 $ 657,159

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Retained earnings 699,990 653,484

Accumulated other comprehensive income (loss) 5,895 ( 7,484 )

Accumulated other comprehensive income 6,582 5,895

Total stockholders’ equity 1,312,787 1,235,194

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Provision for inventory obsolescence, net of write-offs 1,930 5,869 3,798

Provision (benefit) for deferred income taxes 15,169 4,650 ( 2,542 )

(Gains) losses on sales of property and equipment ( 527 ) ( 93 ) 38

Provision for deferred income taxes 10,359 15,169 4,650

Gains on sales of property and equipment ( 317 ) ( 527 ) ( 93 )

Equity in earnings of unconsolidated investments, net ( 177 ) ( 353 ) ( 291 )

Net losses on foreign currency transactions 48 325 1,748

Impairment of goodwill and other assets 605 — 6,944

Net (gains) losses on foreign currency transactions ( 813 ) 48 325

Goodwill impairment 550 605 —

Other 200 472 473

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Proceeds from term loan under credit facility — 250,000 250,000

Payments on term loan under credit facility ( 12,500 ) — —

Proceeds from asset-backed financing 552,500 220,000 495,000

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Payments of cash dividends ( 167,461 ) ( 150,624 ) ( 119,581 )

Purchases of treasury stock ( 471,229 ) ( 138,039 ) ( 76,199 )

Net cash (used in) provided by financing activities ( 411,658 ) 526,131 ( 244,371 )

Repurchases of common stock ( 306,359 ) ( 471,229 ) ( 138,039 )

Net cash used in financing activities ( 798,132 ) ( 411,658 ) 526,131

Effect of exchange rate changes on cash and cash equivalents 2,449 ( 1,056 ) 186

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Common Stock Additional

Paid-In Retained Earnings Accumulated

Paid-In Retained Accumulated

Comprehensive

Shares Amount Capital (Deficit) Income (Loss) Total

Shares Amount Capital Earnings (Loss) Income Total

Balance at December 31, 2020 40,232 40 519,579 133,870 ( 14,019 ) 639,470

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Repurchases of common stock, net of retirements ( 1,234 ) ( 1 ) — ( 471,228 ) — ( 471,229 )

( 360 ) — — ( 138,039 ) — ( 138,039 )

Share-based compensation — — 14,879 — — 14,879

— — 15,187 — — 15,187

Issuance of stock under share-based compensation plans 110 — 8,934 — — 8,934

321 — 17,197 — — 17,197

Declaration of cash dividends — — — ( 150,624 ) — ( 150,624 )

— — — ( 119,581 ) — ( 119,581 )

Balance at December 31, 2022 39,069 39 575,776 653,484 5,895 1,235,194

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Description of Business

As of December 31, 2022, Pool Corporation and our subsidiaries (the Company , which may be referred to as we, us or our ) operated 420 sales centers in North America, Europe and Australia from which we sell swimming pool supplies, equipment and related leisure products, irrigation and landscape products and hardscape, tile and stone products to pool builders, retail stores, service companies, landscape contractors and others.

As of December 31, 2023, Pool Corporation and our subsidiaries (the Company , which may also be referred to as we, us or our ) operated 439 sales centers in North America, Europe and Australia from which we sell swimming pool supplies, equipment and related leisure products, irrigation and landscape maintenance products and hardscape, tile and stone products to pool builders, retail stores, service companies, landscape contractors and others.

We distribute products through five networks:

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Newly Adopted Accounting Pronouncements

On January 1, 2021, we adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes .

This new standard simplified 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 were required to be applied on a prospective basis, while certain amendments were required to be applied on a retrospective or modified retrospective basis.

On June 30, 2023, we adopted Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and all related amendments, which are codified into Accounting Standards Codification (ASC) 848 .

This standard provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met.

These transactions include contract modifications, hedging relationships and sale or transfer of debt securities classified as held-to-maturity.

Prior to our debt amendments in June 2023, discussed further in Note 5, we adopted the hedge accounting expedient related to the probability of forecasted transactions to assert probability of the hedged interest regardless of any expected modification related to reference rate reform.

The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures, and we do not expect a material impact in future periods .

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$ 28,532 $ 28,778 $ 9,409

The increase in advertising costs in 2022 is related to the December 2021 acquisition of Porpoise Pool & Patio, Inc., which primarily relate to an advertising fund based on a percentage of Pinch A Penny franchisee sales.

The increase in advertising costs from 2021 to 2022 is driven by our December 2021 acquisition of Porpoise Pool & Patio, Inc., and primarily relates to an advertising fund based on a percentage of Pinch A Penny franchisee sales.

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.

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We record all excess tax benefits as a component of income tax benefit or expense in the income statement in the period in which stock options are exercised or restrictions on stock awards lapse.

We record Global Intangible Low Tax Income (GILTI) on foreign earnings as period costs if and when incurred, although we have not realized any impacts since the December 2017 enactment of U.S.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA implemented a corporate alternative minimum tax (CAMT) of 15 percent on book income of certain large corporations, a one percent excise tax on net stock repurchases and several tax incentives to promote clean energy, among other items.

Both the CAMT and the excise tax provisions of the IRA are effective for tax years beginning after December 31, 2022.

Based on our historical activity, we do not expect the excise tax and other provisions of the IRA to materially impact our results of operations, financial position, or statement of cash flows.

We record Global Intangible Low Tax Income (GILTI) on foreign earnings as period costs if and when incurred, although we have not realized any impacts since the U.S.

first imposed taxes on GILTI in December 2017.

For additional information regarding income taxes, see Note 7.

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dollars based on published exchange rates.

We include these translation adjustments as a component of Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.

We include these translation adjustments as a component of Accumulated other comprehensive income on the Consolidated Balance Sheets.

We include realized transaction gains and losses that arise from exchange rate fluctuations in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

We realized net foreign currency transaction losses of $ 0.1 million in 2022, $ 0.3 million in 2021 and $ 1.7 million in 2020.

We realized a net foreign currency transaction gain of $ 0.8 million in 2023 and losses of $ 0.1 million in 2022 and $ 0.3 million in 2021.

Fair Value Measurements

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Contingent consideration liabilities Level 3 Accrued expenses and other current liabilities

Unrealized losses on interest rate swaps Level 2 Accrued expenses and other current liabilities

Deferred compensation plan liability Level 1 Other long-term liabilities 15,347 13,148

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Generally, our assets are recorded at fair value on a nonrecurring basis as a result of impairment charges or business combinations.

We recorded goodwill impairment of $ 0.6 million in 2022 and impairment of both goodwill and other assets of $ 6.9 million in 2020.

Our impairment charges in 2020 included goodwill and intangibles impairment charges of $ 4.4 million and $ 2.5 million from a long-term note.

The note balance was subsequently recovered in 2021.

We acquired Porpoise Pool & Patio, Inc.

on December 16, 2021 for $ 788.7 million, net of cash acquired and recognized tangible assets of $ 84.2 million, identifiable intangible assets of $ 301.0 million and resulting goodwill of $ 403.5 million.

For additional discussion of goodwill and intangible assets and impairment, see Note 3.

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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.

At the end of each quarter, we perform

a reserve analysis of all accounts with balances greater than $ 20,000 that are more than 60 days past due.

At the end of each quarter, we perform a reserve analysis of all accounts with balances greater than $ 20,000 that are 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.

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Our fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of market participants.

Significant assumptions related to the acquisition of Porpoise Pool & Patio, Inc.

include expected revenue growth rates, earnings metrics and discount rates.

Unanticipated market or macroeconomic events and circumstances may occur, which could affect the underlying estimates and assumptions.

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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.

To estimate the fair value of our reporting units, we project future cash flows using management’s assumptions for sales growth rates, operating margins, discount rates and earnings multiples.

To estimate the fair value of our reporting units, we project company-wide future cash flows using management’s assumptions for sales growth rates, operating margins, discount rates and earnings multiples.

The earnings multiples are then used to estimate the fair value of each reporting unit.

These assumptions are considered unobservable inputs (Level 3 inputs as defined in the accounting guidance).

To the extent the carrying value of a reporting unit is greater than its estimated fair value, we record a goodwill impairment charge for the difference, up to the carrying value of the goodwill.

To the extent the carrying value of a reporting unit is greater than its estimated fair value, we perform a discounted cash flow analysis at the reporting unit level to further evaluate our initial fair value estimate.

If the carrying value of the reporting unit exceeds the fair value, we record a goodwill impairment charge for the difference, up to the carrying value of the goodwill.

We recognize any impairment loss in operating income.

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Our management reviews these reserves based on consideration of various factors, including but not limited to the age of existing claims, estimated settlement amounts and other historical claims data.

Accumulated Other Comprehensive Income (Loss)

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

Accumulated Other Comprehensive Income

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

Foreign currency translation adjustments $ ( 12,699 ) $ ( 19,608 )

Unrealized gains on interest rate swaps, net of tax

Accumulated other comprehensive income (loss) $ 5,895 $ ( 7,484 )

19,281 25,503

Accumulated other comprehensive income $ 6,582 $ 5,895

Retained Earnings

We account for the retirement of treasury share repurchases as a decrease to our Retained earnings on our Consolidated Balance Sheets.

As of December 31, 2022, the retained earnings reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, treasury share retirements since the inception of our share repurchase programs of $ 2.1 billion and cumulative dividends of $ 941.0 million.

We account for the retirement of share repurchases as a decrease to our Retained earnings on our Consolidated Balance Sheets.

As of December 31, 2023, the retained earnings reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, treasury share retirements since the inception of our share repurchase programs of $ 2.4 billion and cumulative dividends of $ 1.1 billion.

Supplemental Cash Flow Information

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Standard Description Effective Date Effect on Financial Statements and Other Significant Matters

ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting

ASU 2021-01, Reference Rate Reform (Topic 848):

ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848,

Provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The 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.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope, which refined the scope of ASC 848 and clarified some of its guidance as it relates to recent rate reform activities.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which extended the date to December 31, 2024.

The provisions of this update are available until December 31, 2024.

In 2022, we adopted the hedge accounting expedient related to the probability of forecasted transactions to assert probability of the hedged interest regardless of any expected modification related to reference rate reform.

We may apply other elections as applicable.

We do not expect that there will be a material impact to the financial statements as a result of adopting this ASU.

ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes- Improvements to Income Tax Disclosures , which will require enhancements and further transparency for decision usefulness to various income tax disclosures, most notably the tax rate reconciliation and income taxes paid.

Annual periods beginning after December 15, 2024 on a prospective basis and retrospective application is permitted.

Early adoption is also permitted.

We are currently evaluating the effect this standard will have on our disclosures.

ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which intends to improve reportable segment disclosures through requirement of enhanced disclosures about significant segment expenses, enhanced interim disclosure requirements, refines situations in which an entity can disclose multiple segment measures of profit or loss, provides advanced segment disclosure requirements for entities with a single reportable segment, as well as other disclosure requirements.

Annual periods beginning after December 15, 2023 on a retrospective basis.

Early adoption is permitted.

We are currently evaluating the effect this standard will have on our disclosures.

ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative

In October 2023, the FASB issued ASU 2023-06, D isclosure Agreements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative , which will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets.

The amendments in ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027.

Early adoption is prohibited.

We are currently evaluating the effect this standard will have on our disclosures.

Note 2 - Acquisitions

2023 Acquisitions

In December 2023, we acquired the distribution assets of A.C.

Solucoes para Piscinas, Lda., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Braga, Portugal.

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

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

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

2022 Acquisitions

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

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We recognized goodwill of $ 403.5 million, other intangible assets of $ 301.0 million and tangible assets of $ 84.2 million, which included $ 57.4 million of acquired land and buildings.

For additional discussion of goodwill and other intangible assets, see Note 3.

The acquisition was funded with borrowings on our Credit Facility.

Porpoise’s primary operations consist of Sun Wholesale Supply, Inc., a wholesale distributor of swimming pool and outdoor-living products, adding one distribution location in Florida.

Porpoise’s primary operations consist of Sun Wholesale Supply, a wholesale distributor of swimming pool and outdoor-living products, adding one distribution location in Florida.

It also services Pinch A Penny, Inc., a franchisor of independently owned and operated pool and outdoor living-related specialty retail stores.

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In April 2021, we acquired Pool Source, LLC, a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Tennessee.

2020 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.

In September 2020, we acquired the distribution assets of Northeastern Swimming Pool Distributors, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding two locations in Ontario, Canada.

In October 2020, we acquired Jet Line Products, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding three locations in New Jersey, three locations in New York, two locations in Texas and one location in Florida.

In December 2020, we acquired TWC Distributors, Inc., a wholesale distributor of irrigation and landscape maintenance products, adding nine locations in Florida and one in Georgia.

We have completed our acquisition accounting for all acquisitions discussed above.

We have completed our acquisition accounting for all acquisitions discussed above, subject to adjustments for standard holdback provisions per the terms of the purchase agreements, which are not material.

Note 3 - Goodwill and Other Intangible Assets

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Goodwill (net) at December 31, 2023

(1) Primarily includes the acquisition of Porpoise Pool & Patio, Inc.

On December 16, 2021, we acquired Porpoise Pool & Patio, Inc.

(“Porpoise”) for $ 788.7 million, net of cash acquired.

The purchase price of Porpoise was allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of acquisition.

Tangible assets acquired were $ 84.2 million, which included $ 57.4 million of acquired land and buildings.

As a result of the acquisition, we recognized goodwill of $ 403.5 million.

Other intangible assets of $ 301.0 million acquired as part of our acquisition of Porpoise included the following:

• $ 169.0 million for the Pinch A Penny brand name, which was determined to be indefinite-lived;

• $ 109.0 million for customer relationships and $ 22.0 million for franchise agreements, both of which were determined to have useful lives of 20 years;

• $ 1.0 million for a non-compete agreement.

We determined the Pinch A Penny brand name to be indefinite-lived based on our plan of continued franchise expansion using the brand name and Pinch A Penny’s well-established reputation and recognized brand name within the swimming pool industry, including their competitive market position, and history of successful performance by branded stores.

The fair value of intangible assets was determined using income methodologies.

We valued the acquired brand name and franchise agreements using the relief from royalty method.

For customer relationships, we used the multi-period excess

earnings method.

Significant assumptions (Level 3 inputs) used in developing these valuations included the estimated annual net cash flows for each intangible asset, royalty rates, the discount rate that appropriately reflects the risk inherent in each future cash flow stream and the assessment of each asset’s life cycle, among other factors.

We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions.

In October 2022, we performed our annual goodwill impairment test and recorded goodwill impairment of $ 0.6 million related to the closure of a Horizon reporting unit in that period.

As of October 1, 2022, we had 249 reporting units with allocated goodwill balances.

Other than our Porpoise reporting unit with $ 403.5 million of goodwill, the most significant goodwill balance for a reporting unit was $ 12.1 million and the average goodwill balance per reporting unit was $ 1.2 million.

In October 2021, we performed our annual goodwill impairment test and did not record any goodwill impairment at the reporting unit level.

In the first quarter of 2020, we recorded impairment equal to the total goodwill and intangibles carrying amounts of our five Australian reporting units, which included goodwill impairment of $ 3.5 million and intangibles impairment, related to the Pool Systems tradename and trademark, of $ 0.9 million.

We determined certain impairment triggers had occurred due to the impact of the COVID-19 pandemic on expected future operating cash flows, and performed interim goodwill impairment analyses, which included discounted cash flow analyses, and determined that the estimated fair values of our Australian reporting units no longer exceeded their carrying values.

We record goodwill and intangibles impairment in Impairment of goodwill and other on our Consolidated Statements of Income.

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).

In September 2023, we recorded goodwill impairment of $ 0.6 million, primarily related to one of our Horizon reporting units in Texas that we previously identified as being most at risk of goodwill impairment.

We had been monitoring this location’s results, which came in below expectations at the end of the 2023 season.

We performed an interim goodwill impairment analysis, which included a discounted cash flow analysis, and determined that the estimated fair value of the reporting unit no longer exceeded its carrying value.

In October 2023, we performed our annual goodwill impairment test and did not record any additional goodwill impairment at the reporting unit level.

As of October 1, 2023, we had 250 reporting units with allocated goodwill balances.

Our most significant goodwill balance of $ 403.5 million was related to our Porpoise Pool & Patio reporting unit and the next largest goodwill balance for a reporting unit was $ 12.1 million.

The average goodwill balance per reporting unit was $ 2.8 million.

In October 2022, we performed our annual goodwill impairment test and recorded goodwill impairment of $ 0.6 million related to the closure of a Horizon reporting unit in that period.

We record goodwill and intangibles impairment in Selling and administrative expenses on our Consolidated Statements of Income.

Other intangible assets consisted of the following (in thousands):

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Variable rate debt

Short-term borrowings $ — $ 953

Current portion of long-term debt:

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Credit Facility

On December 30, 2021, we entered into the First Amendment to the Second Amended and Restated Credit Agreement Credit Agreement, which increased the total borrowing capacity of our Credit Facility to $ 1.25 billion from $ 1.0 billion through the addition of an incremental delayed-draw term loan facility of $ 250.0 million.

On January 4, 2022, we drew the $ 250.0 million incremental term loan and used the net proceeds to reduce our revolving borrowings under the Credit Facility.

Previously, on September 27, 2021, we entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) among us, as U.S.

Borrower, SCP Distributors Canada Inc., as Canadian Borrower, SCP International, Inc., as Euro Borrower, Wells Fargo Bank, National Association, as Administrative Agent (the “Agent”), and certain other lenders party thereto.

The Credit Agreement amended and restated the predecessor senior credit facility (as amended, the “Credit Facility”) principally by increasing the total borrowing capacity from $ 750.0 million to $ 1.0 billion through the addition of a delayed-draw term loan facility of $ 250.0 million.

We drew the entire $ 250.0 million delayed-draw term loan on December 15, 2021 and used the proceeds to fund our acquisition of Porpoise Pool & Patio, Inc.

The Credit Facility matures on September 25, 2026.

Term loans under the credit facility require quarterly amortization payments beginning in September 2023 aggregating to 20 % of the original principal amount of the loan during the third, fourth and fifth years of the loan, with all remaining principal due on September 25, 2026.

Our Credit Facility, most recently amended on June 30, 2023, provides for $ 1.25 billion in borrowing capacity, consisting of a $ 750.0 million revolving credit facility and a $ 500.0 million term loan facility.

The Credit Facility also includes sublimits for the issuance of swingline loans and standby letters of credit and matures on September 25, 2026.

On June 30, 2023, we entered into the Second Amendment to the Second Amended and Restated Credit Agreement (the Credit Agreement) among us as U.S.

Borrower, SCP Distributors Canada Inc.

as Canadian Borrower, SCP International, Inc.

as Euro Borrower, the Subsidiary Guarantors party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto.

The amendment updated the index used for the Base Rate (as further defined within the Credit Facility Amendment) from LIBOR to Term SOFR.

The amendment also increased the maximum amount for the Accounts Securitization (as further defined within the Credit Agreement) from $ 350.0 million to $ 500.0 million and increased the Canadian Dollar Commitment, Euro Commitment and Swingline Commitment (all as further defined within the Credit Facility Agreement) to $ 50.0 million each.

Our term loans under the credit facility require quarterly amortization payments beginning in September 2023 aggregating to 20 % of the original principal amount of the loan during the third, fourth and fifth years of the loan, with all remaining principal due on September 25, 2026.

All other terms of any such term loans would be substantially similar to those governing revolving credit loans under the Credit Agreement.

At December 31, 2022, the $ 500.0 million of term loans available under the Credit Facility were fully drawn.

The Credit Agreement continues to include a $ 750.0 million revolving credit facility and sublimits for the issuance of swingline loans and standby letters of credit.

All obligations under the Credit Agreement continue to be guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries.

The Credit Agreement also continues to contain various customary affirmative and negative covenants and events of default.

All obligations under the Credit Agreement are guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries.

The Credit Agreement also contains various customary affirmative and negative covenants and events of default.

The occurrence of any of these events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Credit Agreement.

At December 31, 2022, there was $ 1.0 billion outstanding, a $ 4.8 million standby letter of credit outstanding and $ 225.5 million available for borrowing under the Credit Facility.

The weighted average effective interest rate for the Credit Facility as of December 31, 2022 was approximately 4.4 %, excluding commitment fees.

At December 31, 2023, there was $ 740.0 million outstanding, including a $ 487.5 million term loan, a $ 16.0 million standby letter of credit outstanding and $ 481.5 million available for borrowing under the Credit Facility.

The weighted average effective interest rate for the Credit Facility as of December 31, 2023 was approximately 4.7 %, excluding commitment fees and including the impact of our interest rate swaps.

Revolving and term borrowings under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the highest of (i) the Agent’s prime rate, (ii) the Federal Funds Rate plus 0.500 % and (iii) (a) prior to the USD LIBOR Transition Date, the Adjusted Eurocurrency Rate for Dollars for a one-month term in effect on such day plus 1.000 % and (b) on and after the USD LIBOR Transition Date, Daily Simple RFR for Dollars in effect on such day plus 1.000 %;

(i) prior to the USD LIBOR Transition Date, the Eurocurrency Rate and (ii) on or after the USD LIBOR Transition Date or a Benchmark Transition Event, the applicable Benchmark Replacement.

a base rate, which is the highest of (i) the Agent’s prime rate, (ii) the Federal Funds Rate plus 0.500 % and (iii) Adjusted Term SOFR (defined below) for a one-month tenor in effect on such day plus 1.000 %;

Adjusted Term SOFR, the rate per annum equal to Term SOFR for such calculation plus the Term SOFR adjustment of 0.10 %.

Borrowings by the Canadian Borrower bear interest, at the Canadian Borrower’s option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the greatest of (i) the Canadian Reference Bank prime rate and (ii) the Canadian Dealer Offered Rate (CDOR) plus 1.000 %;

Borrowings by the Euro Borrower bear interest at the Eurocurrency rate plus an applicable margin.

Borrowings by the Euro Borrower bear interest at the Adjusted Eurocurrency rate plus an applicable margin.

Borrowings under any swingline loans under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

the LIBOR Market Index Rate;

The interest rate margins on the borrowings and letters of credit issued under the Credit Agreement are based on our leverage ratio and will range from 0.000 % to 0.425 % on Base Rate and Canadian Base Rate loans and from 0.910 % to 1.425 % on CDOR, LIBOR and swingline loans (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Credit Agreement).

the Term SOFR Swingline Rate, the greater of (i) Adjusted Term SOFR for a period equal to one month (commencing on the date of determination of such interest rate) and (ii) a floor rate specified in the Credit Agreement;

a base rate, which is the highest of (i) the Agent’s prime rate, (ii) the Federal Funds Rate plus 0.500 % and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.000 %.

The interest rate margins on the borrowings and letters of credit issued under the Credit Agreement are based on our leverage ratio and will range from 0.000 % to 0.425 % on Base Rate, Canadian Base Rate and Base Rate swingline loans and from 0.910 % to 1.425 % on CDOR, Adjusted Term SOFR, Adjusted Eurocurrency rate and Term SOFR Swingline Rate loans (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Credit Agreement).

We are also required to pay an annual facility fee with respect to the lenders’ aggregate revolving credit agreement, the amount of which is based on our leverage ratio.

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On December 30, 2019, we along with certain of our subsidiaries entered into a $ 185.0 million term facility (the “Term Facility”) with Bank of America, N.A.

pursuant to a credit agreement subsequently amended on October 12, 2021, (as amended, the “Term Facility Agreement”) among us, as Borrower and Bank of America, N.A., as the Lender.

Among other items, the amendment provided additional capacity under certain negative covenants related to indebtedness, liens, investments, acquisitions, share repurchases and dividends.

pursuant to a credit agreement subsequently amended on October 12, 2021, among us, as Borrower and Bank of America, N.A., as the Lender.

On June 30, 2023, we entered into the Second Amendment to Credit Agreement (the “Term Facility Agreement”) among us, as Borrower, the Guarantors party thereto and Bank of America, N.A.

The amendment updated the index used for the Base Rate (as further defined within the Term Facility Agreement) from LIBOR to Term SOFR.

The Term Facility matures on December 30, 2026.

Under the Term Facility, we are required to make quarterly amortization payments in installments of 1.250 % of the Term Facility on the last business day of each quarter.

We classify the entire outstanding balance as Long-term debt on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis.

The total of the quarterly payments will be equal to 33.75 % of the Term Facility with the final principal repayment, equal to 66.25 % of the Term Facility, due on the maturity date.

We may prepay amounts outstanding under the Term Facility without penalty other than interest breakage costs.

In June 2023, we made a prepayment on the Term Facility of $ 45.0 million with $ 32.4 million applied against the remaining quarterly installments and the remainder applied against the amount due at maturity.

Our obligations under the Term Facility are guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries.

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Borrowings under the Term Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin:

a base rate, which is the greatest of (i) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day plus 0.50 %, (ii) Bank of America’s “prime rate,” or (iii) the Eurodollar Rate (defined below) plus 1.00 %;

the Eurodollar Rate, which is the greater of (i) the rate per annum equal to the USD LIBOR as administered by the ICE Benchmark Administration, or a comparable or successor administrator approved by the Lender or (ii) a floor rate specified in the Term Facility Agreement.

The interest rate margins on the borrowings under the Term Facility are based on our leverage ratio and will range from 0.000 % to 0.625 % on Base Rate borrowings and 1.000 % to 1.625 % on Eurodollar Rate borrowings (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Term Facility Agreement).

the Term SOFR Rate, which is the greater of (i) the rate per annum equal to the Term SOFR Screen Rate administered by CME Group Benchmark Administration Limited or any successor administrator plus the SOFR adjustment of 0.10 % or (ii) a floor rate specified in the Term Facility Agreement.

The interest rate margins on the borrowings under the Term Facility are based on our leverage ratio and will range from 0.000 % to 0.625 % on Base Rate borrowings and 1.000 % to 1.625 % on Adjusted Term SOFR Rate borrowings (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Term Facility Agreement).

Receivables Securitization Facility

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As amended, the Receivables Facility has a maximum facility limit of $ 350.0 million in the months of April through August and a funding capacity that ranges from $ 210.0 million to $ 340.0 million during the remaining months of the year.

The amendment also updated the benchmark rate from the London Interbank Offered Rate Market Index Rate to the Term Secured Overnight Financing Rate Index Rate (“TSIR”) and extended the maturity date to November 1, 2024.

Amounts outstanding under the Receivables Facility bear interest at TSIR plus an applicable margin of 0.75 %.

We classify the entire outstanding balance as Long-term debt on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis.

The maturity date of the Receivables Facility is November 1, 2024.

Amounts outstanding under the Receivables Facility bear interest at Term SOFR plus an applicable margin of 0.75 %.

The Receivables Facility provides for the sale of certain of our receivables to a wholly owned subsidiary (the “Securitization Subsidiary”).

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2024 $ 229,903

2026 1,074,211

Our Receivables Facility matures November 1, 2024 and is included in the table above according to its stated maturity date.

On our Consolidated Balance Sheets, we classify the entire outstanding balance of the Receivables Facility as Long-term debt as we intend and have the ability to refinance the obligations on a long-term basis.

Interest Rate Swaps

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Changes in the estimated fair value of these interest rate swap contracts were recorded to Accumulated other comprehensive loss on the Consolidated Balance Sheets.

Two of our interest rate swap contracts terminated on September 29, 2022.

The following table provides additional details related to these former swap contracts:

Derivative Inception Date Effective Date Termination Date Notional

(in millions) Fixed

Interest rate swap 1 May 7, 2019 November 20, 2020 September 29, 2022 $ 75.0 2.0925 %

Interest rate swap 2 July 25, 2019 November 20, 2020 September 29, 2022 $ 75.0 1.5500 %

We currently have two interest rate swap contracts in place.

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Forward-starting interest rate swap March 9, 2020 February 28, 2025 February 26, 2027 $ 150.0 0.7630 %

The net difference between interest paid and interest received related to our swap agreements resulted in an interest benefit of $ 0.8 million in 2022, and incremental expense of $ 4.3 million in 2021 and $ 0.9 million in 2020.

Two of our interest rate swap contracts terminated on September 29, 2022.

The following table provides additional details related to these former swap contracts:

Derivative Inception Date Effective Date Termination Date Notional

(in millions) Fixed

Former interest rate swap 1 May 7, 2019 November 20, 2020 September 29, 2022 $ 75.0 2.0925 %

Former interest rate swap 2 July 25, 2019 November 20, 2020 September 29, 2022 $ 75.0 1.5500 %

The net difference between interest paid and interest received related to our swap agreements resulted in an interest benefit of $ 12.2 million in 2023 and $ 0.8 million in 2022 and expense of $ 4.3 million in 2021.

Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements.

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The Credit Facility and Term Facility limit the declaration and payment of dividends on our common stock to a manner consistent with past practice, provided no default or event of default has occurred and is continuing, or would result from the payment of dividends.

We may declare and pay quarterly dividends so long as (i) the amount per share of such dividends is not

greater than the most recently publicly announced amount dividends per share and (ii) our Average Total Leverage Ratio is less than 3.25 to 1.00 both immediately before and after giving pro forma effect to such dividends.

We may declare and pay quarterly dividends so long as (i) the amount per share of such dividends is not greater than the most recently publicly announced dividends per share and (ii) our Average Total Leverage Ratio is less than 3.25 to 1.00 both immediately before and after giving pro forma effect to such dividends.

Under the Credit Facility and Term Facility, we may repurchase shares of our common stock provided no default or event of default has occurred and is continuing, or would result from the repurchase of shares, and our maximum average total leverage ratio (determined on a pro forma basis) is less than 3.25 to 1.00.

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Financing costs deferred 52 170

Write-off of fully amortized deferred financing costs — ( 3,726 )

Balance at end of year 4,264 4,212

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however, if it is not met by the end of the extended performance period, then all shares of performance-based restricted stock will be immediately forfeited and canceled.

For each of the performance-based grants from 2016 through 2020, we achieved the performance condition in the initial three-year

performance period.

For each of the performance-based grants from 2016 through 2021, we achieved the performance condition in the initial three-year performance period.

For the performance-based grants in 2022 and 2023, we have concluded that the performance condition is probable to be attained in the initial three-year performance period.

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$ 58.26 to $ 80.78

214,410 1.26 $ 70.78 214,410 $ 70.78

$ 80.79 to $ 220.01

216,574 4.53 155.78 155,415 142.35

$ 220.02 to $ 515.41

139,738 8.26 357.05 1,726 370.02

570,722 4.22 $ 173.13 371,551 $ 102.10

The following table summarizes the cash proceeds and tax benefits realized from the exercise of stock options:

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We estimated the expected term based on the vesting period of the awards and our historical exercise activity for awards with similar characteristics.

The risk-free

interest rate is based on the U.S.

The risk-free interest rate is based on the U.S.

Treasury zero-coupon issues with a remaining term approximating the expected term of the option.

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At December 31, 2023, the unamortized compensation expense related to stock option awards totaled $ 8.1 million .

We anticipate recognizing this expense over a weighted average period of 3.3 years.

We anticipate recognizing this expense over a weighted average period o f 2.8 yea rs.

Restricted Stock Awards

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Vested 58,705 172.24

23,016 273.55

Balance unvested at December 31, 2023 203,637 $ 306.79

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We record interest expense related to unrecognized tax benefits in Interest and other non-operating expenses, net, while we record related penalties in Selling and administrative expenses on our Consolidated Statements of Income.

For unrecognized tax benefits, we had interest income of $ 0.1 million in 2022 and $ 0.6 million in 2021 and interest expense of $ 1.0 million in 2020.

For unrecognized tax benefits, we had interest expense of $ 0.4 million in 2023 and interest income of $ 0.1 million in 2022 and $ 0.6 million in 2021.

Accrued interest related to unrecognized tax benefits was approximately $ 1.9 million at December 31, 2023 and $ 1.6 million at December 31, 2022.

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income tax examinations by tax authorities for years before 2020.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

Among other items, the IRA implemented a CAMT of 15 percent on book income of certain large corporations, a one percent excise tax on net stock repurchases and several tax incentives to promote clean energy.

Both the CAMT and the excise tax provisions of the IRA are effective for tax years beginning after December 31, 2022.

Based on our historical activity, we do not expect the excise tax and other provisions of the IRA to materially impact our results of operations, financial position, statement of cash flows.

Note 8 - Earnings Per Share

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Our participating securities include share-based payment awards that contain a non-forfeitable right to receive dividends and are considered to participate in undistributed earnings with common shareholders.

Participating securities excluded from weighted average common shares outstanding were 221,000 for the year ended December 31, 2022 and 268,000 for the year ended December 31, 2021.

Participating securities excluded from weighted average common shares outstanding were 207,000 for the year ended December 31, 2023, 221,000 for the year ended December 31, 2022 and 268,000 for the year ended December 31, 2021.

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

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Weighted-average discount rate 4.04 % 3.05 % 2.57 %

The table below presents the amount of cash paid for amounts included in the measurement of lease liabilities (in thousands):

The table below presents the amount of cash paid for amounts included in the measurement of lease liabilities and lease assets obtained in exchange for lease obligations (in thousands):

2023 2022 2021

Operating cash flows for lease liabilities $ 84,703 $ 75,281 $ 67,197

Operating lease assets obtained in exchange for operating lease obligations $ 107,869 $ 91,622 $ 94,493

Contingencies

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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 8. Financial Statements and Supplementary Data