POOL CORP 10-Q

Item 1. Financial Statements POOL CORPORATION Consolidated Statements of Income (Unaudited) (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Net sales $ 1,432,879 $ 1,474,407 $ 4,323,474 $ 4,538,545 Cost of sales 1,016,476 1,045,676 3,038,370 3,172,276 Gross profit 416,403 428,731 1,285,104 1,366,269 Selling and administrative expenses 240,050 234,288 728,550 699,046 Operating income 176,353 194,443 556,554 667,223 Interest and other non-operating expenses, net 12,355 13,599 39,818 46,327 Income before income taxes and equity in earnings 163,998 180,844 516,736 620,896 Provision for income taxes 38,361 43,079 119,891 149,339 Equity in earnings of unconsolidated investments, net 64 78 180 235 Net income $ 125,701 $ 137,843 $ 397,025 $ 471,792 Earnings per share attributable to common stockholders: Basic $ 3.29 $ 3.54 $ 10.37 $ 12.09 Diluted $ 3.27 $ 3.51 $ 10.30 $ 12.00 Weighted average common shares outstanding: Basic 37,983 38,735 38,104 38,816 Diluted 38,187 39,023 38,330 39,112 Cash dividends declared per common share $ 1.20 $ 1.10 $ 3.50 $ 3.20 The accompanying Notes are an integral part of the Consolidated Financial Statements. 1 POOL CORPORATION Consolidated Statements of Comprehensive Income (Unaudited) (In thousands) Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Net income $ 125,701 $ 137,843 $ 397,025 $ 471,792 Other comprehensive income (loss): Foreign currency translation gain (loss) 5,066 ( 5,025 ) ( 3,286 ) 245 Unrealized (loss) gain on interest rate swaps, net of the change in taxes of $ 2,192 , $( 305 ), $ 1,909 and $( 202 ) ( 6,577 ) 916 ( 5,727 ) 604 Total other comprehensive (loss) income ( 1,511 ) ( 4,109 ) ( 9,013 ) 849 Comprehensive income $ 124,190 $ 133,734 $ 388,012 $ 472,641 The accompanying Notes are an integral part of the Consolidated Financial Statements. 2 POOL CORPORATION Consolidated Balance Sheets (In thousands, except share data) September 30, September 30, December 31, 2024 2023 2023 (Unaudited) (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 91,347 $ 85,220 $ 66,540 Receivables, net 119,538 140,997 145,723 Receivables pledged under receivables facility 306,155 320,585 197,187 Product inventories, net 1,180,491 1,259,308 1,365,466 Prepaid expenses and other current assets 43,168 26,414 40,444 Total current assets 1,740,699 1,832,524 1,815,360 Property and equipment, net 243,308 213,732 223,929 Goodwill 700,147 699,270 700,078 Other intangible assets, net 292,722 300,237 298,282 Equity interest investments 1,434 1,383 1,305 Operating lease assets 309,648 293,673 305,688 Other assets 79,431 89,915 83,426 Total assets $ 3,367,389 $ 3,430,734 $ 3,428,068 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 401,702 $ 429,436 $ 508,672 Accrued expenses and other current liabilities 185,118 157,172 134,676 Short-term borrowings and current portion of long-term debt 44,683 37,788 38,203 Current operating lease liabilities 95,412 84,724 89,215 Total current liabilities 726,915 709,120 770,766 Deferred income taxes 65,106 55,226 67,421 Long-term debt, net 879,146 996,109 1,015,117 Other long-term liabilities 43,612 37,885 40,028 Non-current operating lease liabilities 220,101 214,168 221,949 Total liabilities 1,934,880 2,012,508 2,115,281 Stockholders’ equity: Common stock, 0.001 par value; 100,000,000 shares authorized; 38,083,401 , 38,676,960 and 38,354,829 shares issued and outstanding at September 30, 2024, September 30, 2023 and December 31, 2023, respectively 38 39 38 Additional paid-in capital 632,523 600,009 606,177 Retained earnings 802,379 811,434 699,990 Accumulated other comprehensive (loss) income ( 2,431 ) 6,744 6,582 Total stockholders’ equity 1,432,509 1,418,226 1,312,787 Total liabilities and stockholders’ equity $ 3,367,389 $ 3,430,734 $ 3,428,068 The accompanying Notes are an integral part of the Consolidated Financial Statements. 3 POOL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended September 30, 2024 2023 Operating activities Net income $ 397,025 $ 471,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 26,848 23,355 Amortization 6,514 6,425 Share-based compensation 14,391 14,592 Equity in earnings of unconsolidated investments, net ( 180 ) ( 235 ) Goodwill impairment — 550 Other 3,123 1,157 Changes in operating assets and liabilities, net of effects of acquisitions: Receivables ( 80,362 ) ( 110,078 ) Product inventories 181,326 330,850 Prepaid expenses and other assets 57,151 ( 23,431 ) Accounts payable ( 109,021 ) 20,667 Accrued expenses and other liabilities ( 8,196 ) 14,374 Net cash provided by operating activities 488,619 750,018 Investing activities Acquisition of businesses, net of cash acquired ( 4,435 ) ( 11,500 ) Purchases of property and equipment, net of sale proceeds ( 45,951 ) ( 42,958 ) Other investments, net 944 ( 48 ) Net cash used in investing activities ( 49,442 ) ( 54,506 ) Financing activities Proceeds from revolving line of credit 1,146,900 1,154,601 Payments on revolving line of credit ( 1,274,400 ) ( 1,497,501 ) Payments on term loan under credit facility ( 18,750 ) ( 6,250 ) Proceeds from asset-backed financing 623,900 465,500 Payments on asset-backed financing ( 606,300 ) ( 422,700 ) Payments on term facility — ( 47,313 ) Proceeds from short-term borrowings and current portion of long-term debt 8,873 19,428 Payments on short-term borrowings and current portion of long-term debt ( 8,643 ) ( 19,182 ) Payments of deferred financing costs ( 1,731 ) ( 52 ) Payments of deferred and contingent acquisition consideration — ( 551 ) Proceeds from stock issued under share-based compensation plans 11,955 9,278 Payments of cash dividends ( 134,181 ) ( 124,983 ) Repurchases of common stock ( 159,408 ) ( 187,110 ) Net cash used in financing activities ( 411,785 ) ( 656,835 ) Effect of exchange rate changes on cash and cash equivalents ( 2,585 ) 952 Change in cash and cash equivalents 24,807 39,629 Cash and cash equivalents at beginning of period 66,540 45,591 Cash and cash equivalents at end of period $ 91,347 $ 85,220 The accompanying Notes are an integral part of the Consolidated Financial Statements. 4 POOL CORPORATION Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) (In thousands) Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Shares Amount Capital Earnings Income (Loss) Total Balance at December 31, 2023 38,355 $ 38 $ 606,177 $ 699,990 $ 6,582 $ 1,312,787 Net income — — — 78,885 — 78,885 Foreign currency translation — — — — ( 3,668 ) ( 3,668 ) Interest rate swaps, net of the change in taxes of $( 742 ) — — — — 2,226 2,226 Repurchases of common stock, net of retirements ( 41 ) — — ( 16,304 ) — ( 16,304 ) Share-based compensation — — 5,328 — — 5,328 Issuance of stock under share-based compensation plans 148 — 8,773 — — 8,773 Declaration of cash dividends — — — ( 42,343 ) — ( 42,343 ) Balance at March 31, 2024 38,462 $ 38 $ 620,278 $ 720,228 $ 5,140 $ 1,345,684 Net income — — — 192,439 — 192,439 Foreign currency translation — — — — ( 4,684 ) ( 4,684 ) Interest rate swaps, net of the change in taxes of $ 459 — — — — ( 1,376 ) ( 1,376 ) Repurchases of common stock, net of retirements ( 181 ) — — ( 68,519 ) — ( 68,519 ) Share-based compensation — — 5,016 — — 5,016 Issuance of stock under share-based compensation plans 8 — 1,053 — — 1,053 Declaration of cash dividends — — — ( 45,944 ) — ( 45,944 ) Balance at June 30, 2024 38,289 $ 38 $ 626,347 $ 798,204 $ ( 920 ) $ 1,423,669 Net income — — — 125,701 — 125,701 Foreign currency translation — — — — 5,066 5,066 Interest rate swaps, net of the change in taxes of $ 2,192 — — — — ( 6,577 ) ( 6,577 ) Repurchases of common stock, net of retirements ( 219 ) — — ( 75,632 ) — ( 75,632 ) Share-based compensation — — 4,047 — — 4,047 Issuance of stock under share-based compensation plans 13 — 2,129 — — 2,129 Declaration of cash dividends — — — ( 45,894 ) — ( 45,894 ) Balance at September 30, 2024 38,083 $ 38 $ 632,523 $ 802,379 $ ( 2,431 ) $ 1,432,509 5 Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Shares Amount Capital Earnings Income (Loss) Total Balance at December 31, 2022 39,069 $ 39 $ 575,776 $ 653,484 $ 5,895 $ 1,235,194 Net income — — — 101,699 — 101,699 Foreign currency translation — — — — 2,469 2,469 Interest rate swaps, net of the change in taxes of $ 1,269 — — — — ( 3,809 ) ( 3,809 ) Repurchases of common stock, net of retirements ( 144 ) — — ( 50,549 ) — ( 50,549 ) Share-based compensation — — 4,923 — — 4,923 Issuance of stock under share-based compensation plans 108 — 5,896 — — 5,896 Declaration of cash dividends — — — ( 39,073 ) — ( 39,073 ) Balance at March 31, 2023 39,033 $ 39 $ 586,595 $ 665,561 $ 4,555 $ 1,256,750 Net income — — — 232,250 — 232,250 Foreign currency translation — — — — 2,801 2,801 Interest rate swaps, net of the change in taxes of $( 1,166 ) — — — — 3,497 3,497 Repurchases of common stock, net of retirements — — — — — — Share-based compensation — — 5,073 — — 5,073 Issuance of stock under share-based compensation plans 16 — 1,413 — — 1,413 Declaration of cash dividends — — — ( 42,945 ) — ( 42,945 ) Other — — ( 307 ) — ( 307 ) Balance at June 30, 2023 39,049 $ 39 $ 593,081 $ 854,559 $ 10,853 $ 1,458,532 Net income — — — 137,843 — 137,843 Foreign currency translation — — — — ( 5,025 ) ( 5,025 ) Interest rate swaps, net of the change in taxes of $( 305 ) — — — — 916 916 Repurchases of common stock, net of retirements ( 385 ) — — ( 138,003 ) — ( 138,003 ) Share-based compensation — — 4,596 — — 4,596 Issuance of stock under share-based compensation plans 13 — 2,332 — — 2,332 Declaration of cash dividends — — — ( 42,965 ) — ( 42,965 ) Balance at September 30, 2023 38,677 $ 39 $ 600,009 $ 811,434 $ 6,744 $ 1,418,226 The accompanying Notes are an integral part of the Consolidated Financial Statements. 6 POOL CORPORATION Notes to Consolidated Financial Statements (Unaudited) Note 1 – Summary of Significant Accounting Policies Pool Corporation (the Company , which may also be referred to as we, us or our ) prepared the unaudited interim Consolidated Financial Statements following U.S. generally accepted accounting principles (GAAP) and the requirements of the Securities and Exchange Commission (SEC) for interim financial information. As permitted under those rules, we have condensed or omitted certain footnotes and other financial information required for complete financial statements. The interim Consolidated Financial Statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. All significant intercompany accounts and intercompany transactions have been eliminated. A description of our significant accounting policies is included in our 2023 Annual Report on Form 10-K. You should read the interim Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and accompanying notes in our 2023 Annual Report on Form 10-K. The results for our three and nine-month periods ended September 30, 2024, are not necessarily indicative of the expected results for our fiscal year ending December 31, 2024. Income Taxes We reduce federal and state income taxes payable by the tax benefits associated with the exercise of nonqualified stock options and the lapse of restrictions on restricted stock awards. To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit. We record all excess tax benefits as a component of income tax benefit or expense on the Consolidated Statements of Income in the period in which stock options are exercised or restrictions on restricted stock awards lapse. We recorded excess tax benefits of $ 0.5 million in the third quarter of 2024 compared to $ 0.4 million in the third quarter of 2023 and $ 8.3 million in the nine months ended September 30, 2024, compared to $ 5.9 million in the nine months ended September 30, 2023. Retained Earnings We account for the retirement of repurchased shares as a reduction of Retained earnings. As of September 30, 2024, the Retained earnings on our Consolidated Balance Sheets reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, share retirements since the inception of our share repurchase programs of $ 2.6 billion and cumulative dividends of $ 1.2 billion . Accumulated Other Comprehensive (Loss) Income The table below presents the components of our Accumulated other comprehensive (loss) income balance (in thousands): September 30, December 31, 2024 2023 2023 Foreign currency translation adjustments $ ( 15,985 ) $ ( 19,363 ) $ ( 12,699 ) Unrealized gains on interest rate swaps, net of tax 13,554 26,107 19,281 Accumulated other comprehensive (loss) income $ ( 2,431 ) $ 6,744 $ 6,582 7 Recent Accounting Pronouncements Pending Adoption The following table summarizes recent accounting pronouncements that we plan to adopt in future periods: Standard Description Effective Date Effect on Financial Statements and Other Significant Matters Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures , which will require enhancements and further transparency to various income tax disclosures, most notably the tax rate reconciliation and income taxes paid. Annual periods beginning after December 15, 2024 on a prospective basis. Retrospective application for all periods presented is permitted. Early adoption is also permitted. We are currently evaluating the effect this standard will have on our disclosures. ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which intends to improve reportable segment disclosures by requiring enhanced disclosures about significant segment expenses, enhance interim disclosure requirements, refine situations in which an entity can disclose multiple segment measures of profit or loss and provide advanced segment disclosure requirements for entities with a single reportable segment, as well as other disclosure requirements. Annual periods beginning after December 15, 2023 on a retrospective basis for all periods presented. Early adoption is permitted. We are currently evaluating the effect this standard will have on our disclosures. ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative , which will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives and transfers of financial assets. The amendments in ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. We are currently evaluating the effect this standard will have on our disclosures. 8 Note 2 – Earnings Per Share We calculate basic and diluted earnings per share using the two-class method. Earnings per share under the two-class method is calculated using net income attributable to common stockholders, which is net income reduced by the earnings allocated to participating securities. Our participating securities include share-based payment awards that contain a non-forfeitable right to receive dividends and are considered to participate in undistributed earnings with common shareholders. Participating securities excluded from weighted average common shares outstanding were 206,000 for the three months ended September 30, 2024 and 205,000 for the three months ended September 30, 2023, and 206,000 for the nine months ended September 30, 2024 and 207,000 for the nine months ended September 30, 2023. The table below presents the computation of earnings per share, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Net income $ 125,701 $ 137,843 $ 397,025 $ 471,792 Amounts allocated to participating securities ( 654 ) ( 726 ) ( 2,071 ) ( 2,504 ) Net income attributable to common stockholders $ 125,047 $ 137,117 $ 394,954 $ 469,288 Weighted average common shares outstanding: Basic 37,983 38,735 38,104 38,816 Effect of dilutive securities: Stock options and employee stock purchase plan 204 288 226 296 Diluted 38,187 39,023 38,330 39,112 Earnings per share attributable to common stockholders: Basic $ 3.29 $ 3.54 $ 10.37 $ 12.09 Diluted $ 3.27 $ 3.51 $ 10.30 $ 12.00 Anti-dilutive stock options excluded from diluted earnings per share computations (1) 88 31 57 64 (1) Since these options have exercise prices that are higher than the average market prices of our common stock, including them in the calculation would have an anti-dilutive effect on earnings per share. 9 Note 3 – Acquisitions In May 2024, we acquired the distribution assets of Swimline Distributors, Inc., a wholesale distributor of swimming pool products and supplies, adding one location in Georgia . In January 2024, we acquired the distribution assets of Shoreline Pool Distribution, a wholesale distributor of swimming pool products and supplies, adding one location in Mississippi. In December 2023, we acquired the distribution assets of A.C. Solucoes para Piscinas, Lda., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Braga, Portugal. In June 2023, we acquired the distribution assets of Pioneer Pool Products, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Alabama. In May 2023, we acquired the distribution assets of Recreation Supply Company, a wholesale distributor of commercial swimming pool products, adding one location in North Dakota. In March 2023, we acquired the distribution assets of Pro-Water Irrigation & Landscape Supply, Inc., a wholesale distributor of irrigation and landscape supply products, adding two locations in Arizona. We have completed our acquisition accounting for these acquisitions, subject to adjustments for standard holdback provisions per the terms of the purchase agreements, which are not material. 10 Note 4 – Fair Value Measurements and Interest Rate Swaps Recurring Fair Value Measurements Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and our deferred compensation plan asset and liability. The three levels of the fair value hierarchy under the accounting guidance are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include: • quoted prices for similar assets or liabilities in active markets; • quoted prices for identical or similar assets or liabilities in inactive markets; • inputs other than quoted prices that are observable for the asset or liability; or • inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The table below presents our assets and liabilities measured and recorded at fair value on a recurring basis (in thousands): Fair Value at September 30, Input Level Classification 2024 2023 Assets Unrealized gains on interest rate swaps Level 2 Prepaid expenses and other current assets $ 1,905 $ — Unrealized gains on interest rate swaps Level 2 Other assets 16,213 34,854 Deferred compensation plan asset Level 1 Other assets 18,179 14,075 Liabilities Deferred compensation plan liability Level 1 Other long-term liabilities $ 18,179 $ 14,075 Interest Rate Swaps We utilize interest rate swap contracts and forward-starting interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on a portion of our variable rate borrowings. We use significant other observable market data or assumptions (Level 2 inputs) in determining the fair value of our interest rate swap contracts and forward-starting interest rate swap contract that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. We recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, we record the changes in the estimated fair value of our interest rate swap contracts to Accumulated other comprehensive (loss) income on the Consolidated Balance Sheets. We currently have two swap contracts in place. These swap contracts were previously forward-starting and convert the variable interest rate to a fixed interest rate on a portion of our variable rate borrowings. Interest expense related to the notional amounts under these swap contracts is based on the fixed rates plus the applicable margin on a portion of our variable rate borrowings. Changes in the estimated fair value of these interest rate swap contracts are recorded to Accumulated other comprehensive (loss) income on the Consolidated Balance Sheets. 11 The following table provides additional details related to these swap contracts: Derivative Inception Date Effective Date Termination Date Notional Amount (in millions) Fixed Interest Rate Interest rate swap 1 February 5, 2020 February 26, 2021 February 28, 2025 $ 150.0 1.3260 % Interest rate swap 2 March 9, 2020 September 29, 2022 February 26, 2027 $ 150.0 0.6690 % For the interest rate swap contracts in effect at September 30, 2024, a portion of the change in the estimated fair value between periods relates to future interest expense. Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive (loss) income on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. These amounts were not material in the three and nine-month periods ended September 30, 2024 or September 30, 2023. We also have in place a forward-starting interest rate swap contract to extend the hedged period for future interest payments on a portion of our variable rate borrowings. The following table provides details related to our forward-starting interest rate swap contract: Derivative Inception Date Effective Date Termination Date Notional Amount (in millions) Fixed Interest Rate Forward-starting interest rate swap March 9, 2020 February 28, 2025 February 26, 2027 $ 150.0 0.7630 % Failure of any of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we were in a net pay position. Our interest rate swap contracts and forward-starting interest rate swap contract are subject to master netting arrangements. According to our accounting policy, we do not offset the fair values of assets with the fair values of liabilities related to these contracts. Other Our deferred compensation plan asset represents investments in securities (primarily mutual funds) traded in an active market (Level 1 inputs) held for the benefit of certain employees as part of our deferred compensation plan. We record an equal and offsetting deferred compensation plan liability, which represents our obligation to participating employees. Changes in the fair value of the plan asset and liability are reflected in Selling and administrative expenses on the Consolidated Statements of Income. The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying value of our long-term debt approximates its fair value. Our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to borrowing rates (Level 3 inputs). 12 Note 5 – Debt The table below presents the components of our debt (in thousands): September 30, 2024 2023 Variable rate debt Current portion of long-term debt: Australian credit facility $ 13,433 $ 12,788 Current portion of term loans under credit facility 31,250 25,000 Short-term borrowings and current portion of long-term debt $ 44,683 $ 37,788 Long-term portion: Revolving credit facility $ 125,000 $ 176,811 Term loan under credit facility 437,500 468,750 Term facility 109,938 109,938 Receivables securitization facility 209,300 242,300 Less: financing costs, net 2,592 1,690 Long-term debt, net 879,146 996,109 Total debt $ 923,829 $ 1,033,897 Credit Facility On September 30, 2024, we entered into the Third Amended and Restated Credit Agreement (the Amended Agreement) by and 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, and certain other lenders party thereto. The Amended Agreement amended and restated the terms of the Company’s predecessor revolving credit facility principally by increasing its borrowing capacity from $ 750.0 million to $ 800.0 million and extending its maturity date from September 25, 2026 to September 30, 2029. Otherwise, the Amended Agreement retained the core features of the predecessor credit agreement, including: • a $ 500.0 million term loan facility; • an accordion feature permitting us to request one or more incremental term loans or revolving credit facility commitment increases up to $ 250.0 million; • an option permitting us to extend the maturity date of the revolving credit facility up to two years, subject to various conditions and restrictions; and • sublimits for the issuance of swingline loans and standby letters of credit. Revolving and term loan borrowings under the Amended Agreement bear interest at a variable rate based on a one-month Term Secured Overnight Financing Rate (Term SOFR), plus an applicable margin. The term loan under the Amended Agreement continues to require quarterly amortization payments, with all remaining principal due on the term loan maturity date of September 25, 2026. Substantially all of the other terms of the term loan and revolving credit facility in the Amended Agreement remain similar to the predecessor credit agreement. The Amended Agreement continues to require us to maintain a maximum average total leverage ratio and a minimum fixed charge coverage ratio consistent with the terms specified in the predecessor credit agreement. All obligations under the Amended Agreement continue to be guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries. The Amended Agreement also continues to contain various customary affirmative and negative covenants and events of default. Failure to comply with any of the financial covenants or the occurrence of any other events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Amended Agreement. 13 Receivables Securitization Facility Our accounts receivable securitization facility (the Receivables Facility) provides for the sale of certain of our receivables to a wholly-owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third-party financial institutions in exchange for cash proceeds, limited to the applicable funding capacities. We account for the sale of the receivable interests as a secured borrowing on our Consolidated Balance Sheets. The receivables subject to the agreement collateralize the cash proceeds received from the third-party financial institutions. We classify the entire outstanding balance as Long-term debt, net on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis. We present the receivables that collateralize the cash proceeds separately as Receivables pledged under receivables facility on our Consolidated Balance Sheets . 14