What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-27 · 86 added, 92 removed, 156 unchanged (53% of the section changed)

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The risks discussed below are not the only risks we face.

Other risks or uncertainties not presently known to us, or that we currently believe are immaterial, may materially affect our business if they occur.

Moreover, new risks emerge from time to time.

Other risks or uncertainties not presently known to us, or that we currently believe are immaterial, may emerge or materially affect our business if they occur.

Further, our business may also be affected by additional factors that generally apply to all companies operating in the U.S.

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Demand for our products is subject to fluctuations and is difficult to predict, often due to factors outside of our control.

Consumer discretionary spending significantly affects our sales and is impacted by a variety of factors, including general economic conditions, the residential housing market, unemployment rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit.

In economic downturns or recessions, the demand for swimming pool, irrigation, landscape and related outdoor living products typically declines, often corresponding with declines in discretionary consumer spending, the growth rate of pool eligible households and swimming pool construction.

Currently over 86% of our net sales are derived from sales of maintenance, repair, replacement and renovation products necessary to maintain existing swimming pools.

However, the growth in this portion of our business depends on the expansion of the installed pool base, which could also be adversely affected by decreases in construction activities, similar to the trends experienced this past year.

Consumer discretionary spending significantly affects our sales and is impacted by a variety of factors, including changes in general economic conditions, the housing market, unemployment rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit.

In times of economic uncertainty, the demand for swimming pool, irrigation, landscape and related outdoor living products typically declines, often corresponding with declines in discretionary consumer spending.

Currently, we estimate that approximately 64% of our net sales are derived from maintenance and minor repair products, while approximately 22% of our sales are derived from products used in the remodel, renovation, and upgrade of pools.

However, the growth in these portions of our business depends on the expansion of the installed pool base, which has been and could in the future be adversely affected by decreases in construction activities, similar to the trends experienced in 2023 and 2024.

A weak economy may also cause consumers to defer discretionary replacement and renovation activity.

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Such downturns expose us to certain additional risks, including but not limited to the risk of customer closures or bankruptcies, which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.

We believe that homeowners’ access to consumer credit at attractive interest rates is a critical factor enabling the purchase of new pools, irrigation systems and outdoor living products.

Unfavorable economic conditions or a downturn in the housing market could result in a significant tightening of credit markets, which can limit the ability of consumers to access financing for new swimming pools and irrigation systems.

During 2022 and 2023, interest and inflation rates were higher than the three years prior to 2022, economic uncertainties increased, and consumer credit tightened, which led to a slowdown in new pool permits (signaling a decline in new construction projects).

During 2023, the heightened demand for our products during the pandemic moderated as consumers applied less disposable income to pools and other home improvements.

These economic events reduced our revenues in 2023 and are expected to similarly impact our revenues in 2024.

We believe that homeowners’ access to consumer credit at attractive interest rates is a critical factor enabling the purchase of new pools, irrigation systems and outdoor living products and to a lesser extent, major renovations and remodel projects.

Over the past couple years, new pool construction projects have decreased, impacted by higher interest rates and inflation, increased economic uncertainties, and tightened consumer credit.

While inflation and interest rates have recently moderated, uncertainty remains, including as to the timing and magnitude of further reductions by the Federal Reserve of its overnight borrowing rate and its corresponding impact on the market.

Discretionary spending is often adversely affected during times of economic, social or political uncertainty, whether caused by health threats, man-made or natural disasters, or other similar events discussed below in this item 1A.

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Changes in our customer base could also impact us.

Our business could be adversely impacted if (i) consolidation of our customers leads to changes in purchasing habits, (ii) more people choose to live in urban settings or (iii) more homeowners bypass our customers by directly procuring their own supplies or undertaking their own improvement projects.

An outbreak of disease or similar public health threat, such as the recent COVID-19 pandemic, could adversely impact our business and results of operations.

An outbreak of disease or similar public health threat, such as the recent COVID-19 pandemic and its negative impact on the worldwide economy, could have an adverse impact on our workforce, supply chain or operations.

Our business could be adversely impacted if (i) consolidation of our customers leads to changes in purchasing habits, (ii) more people choose to live in urban settings or rented space or (iii) more homeowners bypass our customers by directly procuring their own supplies or undertaking their own improvement projects.

An outbreak of disease or similar public health threat could adversely impact our business and results of operations.

An outbreak of disease or similar public health threat, such as the COVID-19 pandemic and its negative impact on the worldwide economy, could have an adverse impact on our workforce, supply chain or operations.

Although our revenues increased during the COVID-19 pandemic that began in early 2020, we cannot assure you that our revenues would increase in the event of a future public health emergency.

New variants of COVID-19 could continue to cause outbreaks and uncertainties, and any future epidemics, pandemics or similar public health crises could adversely impact our business and results of operations.

Any future public health crises, and any corresponding governmental response, could adversely impact our business and results of operations in ways that we cannot predict.

Other catastrophic events or societal unrest could adversely impact our operations.

Terrorist attacks, wars, rioting, labor strife, civil disturbances, societal unrest or political instability could negatively impact us directly by interfering with our ability to operate or indirectly by depressing macroeconomic conditions.

Terrorism and other acts of violence, wars, rioting, labor strife, civil disturbances, societal unrest, geopolitical tensions or political instability could negatively impact us directly by interfering with our ability to operate or indirectly by depressing macroeconomic conditions.

Our customers could also encounter hardships that negatively impact their ability to make timely payments to us or to continue doing business with us.

Risks Relating to Our Business and Industry

We are susceptible to adverse weather conditions, which could intensify as a result of climate change.

We are susceptible to adverse weather conditions, which could intensify as a result of changing climate patterns.

Given the nature of our business, weather is one of the principal external factors affecting our business and the effect of seasonality has a significant impact on our results.

In 2023, we generated approximately 60% of our net sales and 70% of our operating income in the second and third quarters of the year.

These quarters represent the peak months of swimming pool use, pool and irrigation installation and remodeling and repair activities.

Unfavorable weather during these quarters in our largest geographic regions can significantly affect our results.

Unseasonably late warming trends in the spring or early cooling trends in the fall can shorten the length of the pool season.

Also, unseasonably cool weather or excessive rainfall during the peak season can have an adverse impact on demand due to decreased swimming pool use, installation and maintenance, as well as decreased irrigation installations.

While warmer weather conditions generally impact our sales favorably, global warming trends and other significant climate changes can create more variability in the short term or lead to other unfavorable weather conditions that could adversely impact our sales or operations.

In 2024, we generated 60% of our net sales and 73% of our operating income in the second and third quarters of the year.

These quarters represent the peak months of swimming pool use, pool and irrigation installation and maintenance activities.

Unfavorable weather during these quarters in our largest geographic regions can significantly affect our results, as further described in “Seasonality and Weather” in Item 1 of this Form 10-K.

While warmer weather conditions generally impact our sales favorably, natural disasters and other significant weather events can create more variability in our reported results in the short term or otherwise adversely impact our sales or operations.

Drought conditions or water management initiatives may lead to government-imposed water use restrictions.

Such restrictions could result in decreased pool and irrigation system installations which could negatively impact our sales.

Certain extreme weather events and natural disasters, such as hurricanes, tornadoes, earthquakes, tropical storms, floods, drought and wildfires, may adversely impact us in several ways, including interfering with our ability to deliver our products and services, interfering with our receipt of supplies from our vendors, reducing demand for our products and services, and damaging our facilities.

We have experienced short-term impacts on our sales due to closures from weather events in recent years, including Hurricane Ian in Florida in 2022.

Certain extreme weather events and natural disasters, such as hurricanes, tornadoes, earthquakes, tropical storms, floods, intense storms, drought and wildfires, may adversely impact us in several ways, including interfering with our ability to deliver our products and services, interfering with our receipt of supplies from our vendors, reducing demand for our products and services, and damaging our facilities.

We have experienced short-term impacts on our sales due to closures from weather events such as Hurricane Ian in 2022 and Hurricanes Helene, Francine and Milton in 2024.

Although these events have not had any material lasting impacts on our business or resulted in any material permanent operational challenges, similar events could adversely affect our business in the future.

The areas in which we operate, including California, Florida, Texas and other coastal areas, have experienced recent natural disasters or present increased risks of adverse weather or natural disasters.

The physical effects of climate change may increase the frequency or severity of natural disasters and other extreme weather events in the future, which would increase our exposure to these risks.

The areas in which we operate, including Florida, California, Texas and other coastal areas, have experienced, and are expected to continue to experience, natural disasters and extreme weather events.

The physical effects of changing climate patterns may increase the frequency or severity of natural disasters and extreme weather events in the future, which would increase our exposure to these risks.

For additional discussion regarding seasonality and weather, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Fluctuations,” of this Form 10-K.

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However, any failure to maintain favorable relationships with our suppliers could have an adverse effect on our business.

Our largest suppliers are Pentair plc, Hayward Pool Products, Inc.

and Zodiac Pool Systems, Inc., which accounted for approximately 19%, 10% and 10%, respectively, of the costs of products we sold in 2023.

A decision by our largest suppliers, acting individually or in concert, to sell their products directly to retailers or other end users of their products, bypassing distribution companies like ours, would have an adverse effect on our business.

Additionally, if our suppliers experience difficulties or disruptions in their operations, if there is any material interruption in our supply chain (such as the interruptions caused by the COVID-19 pandemic and exacerbated by the war in Ukraine) or if we lose a single significant supplier due to financial failure or a decision to sell exclusively to retailers or end-use consumers, we may experience increased supply costs or delays in establishing replacement supply sources that meet our quality and control standards, which may affect our profitability.

Our largest suppliers are Pentair plc, Zodiac Pool Systems, Inc., Hayward Pool Products, Inc., which accounted for 20%, 12% and 11%, respectively, of the costs of products we sold in 2024.

A decision by our largest suppliers, acting individually or in concert, to sell their products directly to retailers or other end users, bypassing distribution companies like ours, would have an adverse effect on our business.

Additionally, if our suppliers experience difficulties or disruptions in their operations, if there is any material interruption in our supply chain or if we lose any significant supplier due to financial failure or any other reason, we may experience increased supply costs or delays in establishing replacement supply sources that meet our quality and control standards, which may affect our profitability.

We purchase many of our products from suppliers pursuant to vendor arrangements that entitle us under certain conditions to receive rebates.

These rebates effectively reduce the costs of our products.

Rebate arrangements are subject to renegotiation with our suppliers from time to time.

If we fail to qualify for these rebates or are unable to renew rebate programs at desirable terms, or a supplier materially reduces or stops offering rebates, our costs could increase substantially, and our gross margin and net income could be materially adversely affected.

Failure to achieve and maintain a high level of product and service quality and safety could damage our reputation, expose us to litigation and negatively impact our financial performance.

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To succeed, we must continue to maintain effective business relationships with qualified suppliers who can timely and efficiently supply us with high quality products.

As we increase the number of our proprietary and exclusive brand products.

we distribute, our exposure to potential liability claims may increase.

As we increase the number of proprietary and exclusive brand products we distribute, our exposure to potential liability claims may increase.

Product and service quality issues could negatively impact customer confidence in our brands and our business.

If our product and service offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we could experience lost sales and increased costs and be exposed to legal, financial and reputational risks, as well as governmental enforcement actions.

Actual, potential or perceived product safety concerns, including health-related concerns, could damage our reputation with current or prospective customers, vendors and employees.

Product quality or safety issues could also expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities.

If our product and service offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we could experience lost sales, increased costs and be exposed to legal, financial and reputational risks, including litigation, governmental enforcement actions and costly product recalls.

Similar concerns impacting our competitors could damage the reputation of our industry and indirectly have an unfavorable impact on our operations.

We face intense competition both from within our industry and from other leisure product alternatives.

Within our industry, we directly compete against various regional and local distributors for the business of pool owners and other end-use customers.

Within our industry, we directly compete against national, regional and local distributors for the business of pool owners and other end-use customers.

We indirectly compete against mass market retailers and large pool or irrigation supply retailers as they purchase the great majority of their supplies directly from manufacturers.

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Outside of our industry, we compete indirectly with alternative suppliers of big-ticket consumer discretionary products, such as boat and motor home distributors, and with other companies who rely on discretionary homeowner expenditures, such as home remodelers.

We may not be able to compete effectively against our competitors and other leisure product alternatives, which could have an adverse impact on our business.

New competitors may emerge as there are low barriers to entry in our industry, which has led to highly competitive markets consisting of various-sized entities, ranging from small or local operators to large regional businesses.

If our customers are attracted by the alternatives afforded by any of our competitors, they may be less inclined to purchase products or services from us, impacting our results of operations.

Given the density and demand for pool products, some geographic markets that we serve also tend to have a higher concentration of competitors than others, particularly California, Texas, Florida and Arizona.

Given the density and demand for pool products, some geographic markets that we serve also tend to have a higher concentration of competitors than others, particularly Florida, California, Texas and Arizona.

These states encompass our four largest markets and represented approximately 54% of our net sales in 2024.

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Mass market retailers today carry a limited range of, and devote a limited amount of shelf space to, merchandise and products targeted to our industry.

Historically, mass market retailers have generally expanded by adding new stores and product breadth, but their product offering of pool and irrigation related products has remained relatively constant.

Historically, mass market retailers have generally expanded by adding new stores and products, but their offering of pool and irrigation related products has remained relatively constant.

Should store‑ and internet-based mass market retailers increase their focus on the pool or irrigation industries or increase the breadth of their pool and irrigation and related product offerings, they may become a more significant competitor for our direct customers and end-use consumers, which could have an adverse impact on our business.

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This includes succession planning related to our executive officers and key management personnel.

Hiring and retaining such qualified individuals may be adversely impacted by several factors, including (i) uncertainties regarding general economic conditions or our industry, (ii) our failure to offer competitive compensation and (iii) increased competition for qualified individuals.

Hiring and retaining such qualified individuals may be adversely impacted by several factors, including (i) uncertainties regarding general economic conditions or industry conditions, (ii) our failure to offer competitive compensation and (iii) increased competition for qualified individuals.

If we are unable to attract and retain key personnel, our operating results could be adversely affected.

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Additionally, competition for qualified employees could require us to pay higher wages to attract and retain a sufficient number of employees.

The pandemic and other events over the past few years have increased employees’ expectations regarding compensation, workplace flexibility and work-home balance.

These developments have made it more difficult for us to attract and retain top talent.

Inflation and other events over the past few years have increased employees’ expectations regarding compensation and benefits and workplace flexibility.

These developments have made it more difficult and costly for us to attract and retain top talent.

While we do not expect these developments to have a material adverse impact on us, we can provide no assurances to this effect.

Past growth may not be indicative of future growth.

Historically, we have experienced substantial sales growth through organic market share gains, new sales center openings, expanded product offerings and acquisitions that have increased our size, scope and geographic distribution.

Our various business strategies and initiatives, including our growth initiatives, are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control.

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• maintain favorable supplier arrangements and relationships;

• identify and divest assets which do not continue to create value consistent with our objectives.

• identify and divest assets which no longer meet our objectives.

If we do not successfully manage these potential difficulties or successfully execute our business strategies and initiatives, our operating results could be adversely affected.

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This surge abated in mid-2022, when spending on these products began to decrease.

Although we expect our financial performance to match or exceed pre-pandemic levels, we do not expect our near-term sales to match the levels experienced at the height of the pandemic.

We do not expect our near-term sales to match the levels experienced at the height of the pandemic.

We are subject to inventory management risks.

Insufficient inventory may result in lost sales opportunities or delayed revenue, while excess inventory may negatively impact our gross margin.

We balance the need to maintain inventory levels that are sufficient to ensure competitive lead times and mitigate potential supply chain constraints against the risk of inventory obsolescence due to changing customer or consumer requirements and fluctuating commodity prices.

We balance the need to maintain inventory levels that are sufficient to maximize operational efficiencies and minimize potential supply chain constraints against the risk of inventory obsolescence due to changing consumer preferences and fluctuating commodity prices.

In order to successfully manage our inventories, we must estimate demand from our customers and purchase products that substantially correspond to consumer demand.

If we overestimate demand and purchase too much of a particular product, we face a risk that the price of that product will fall, leaving us with inventory that we cannot sell at normal profit margins.

If we overestimate demand and purchase too much of a particular product, we face a risk that the price of that product will fall, leaving us with inventory that we cannot sell at optimal profit margins.

In addition, we may have to write down such inventory if we are unable to sell it for its recorded value.

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If we maintain insufficient inventory levels and prices rise for these products, we could be forced to purchase products at higher prices and forego profitability in order to meet customer demand.

While always present, these challenges have been heightened over the past couple of years, as the pandemic altered consumer spending trends and caused us to increase our investments in inventory.

Our business, financial condition and results of operations could be negatively impacted if we are unable to accurately forecast demand for our products.

Our business, financial condition and results of operations could be negatively impacted if we fail to accurately forecast demand for our products or successfully manage our inventories.

Risks Relating to Technology, Cybersecurity and Data Privacy

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A significant disruption, breach or cybersecurity attack of our technological infrastructure could adversely affect our financial condition and results of operations.

Information technology supports several aspects of our business, including among others, product sourcing, pricing, customer service, transaction processing, inventory management, financial reporting, collections and cost management.

Information technology supports several aspects of our business, including among others, transaction processing, customer service, pricing, product sourcing, inventory management, financial reporting, collections and cost management.

Our ability to operate effectively on a day-to-day basis, communicate with our customers and accurately report our results depends on a reliable technological infrastructure, which is inherently susceptible to internal and external threats.

We are vulnerable to interruption, including by fire, natural disaster, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.

We are vulnerable to interruption, including by fire, natural disaster, extreme weather events, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.

Exposure to various types of cyber-attacks such as malware, computer viruses, worms, ransomware, social engineering or other malicious acts, as well as human error, could also potentially disrupt our operations, result in a significant interruption in the delivery of our goods and services or result in the loss of sensitive data.

We are making, and expect to continue to make, investments in technology to maintain and update our computer systems and to expand our ability to engage in e-commerce with our customers.

We may experience delays in making these updates and may not implement these changes as quickly or successfully as our customers expect.

We may experience delays in making these updates and may not implement these changes as quickly or successfully as our customers expect, or as quickly or successfully as changes implemented by our competitors.

In addition, implementing significant system changes increases the risk of computer system disruption.

The potential problems and interruptions associated with implementing technology initiatives or conversions (including those contemplated under our multi-year digital transformation project), as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency.

The potential problems and interruptions associated with implementing technology initiatives or conversions, as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency.

Advances in computer and software capabilities, encryption technology and other discoveries increase the complexity of our technological environment, including how each interact with our various software platforms.

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A lack of sophistication or reliability of our information systems could adversely impact our operations and customer service and could require major repairs or replacements, resulting in significant costs and foregone revenue.

Increasing complexity of technology could increase our cost of doing business.

We devote significant resources to protect our systems and data from cyber-attacks.

Refer to Item 1C.

“Cybersecurity” for further information on our cybersecurity risk management and strategy and governance.

In recent years we have faced, and expect to continue to face, various attempted cyber-attacks of increasing sophistication.

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However, we cannot guarantee that we will not experience such an incident in the future.

The risk of breaches is likely to continue to increase due to several factors, including the increasing sophistication of cyber-attacks, the wider accessibility of cyber-attack tools, the expanded size, use and complexity of our systems, and our increased reliance on e-commerce, open source software, cloud computer services and work-from-home staffing.

Known and newly discovered software and hardware vulnerabilities are constantly evolving, which increases the difficulty of detecting and successfully defending against them.

The risk of breaches is likely to continue to increase due to several factors, including (i) the increasing use of machine learning, artificial intelligence (AI) and other sophisticated techniques to initiate cyber and phishing attacks, (ii) the wider accessibility of cyber-attack tools that can circumvent security controls and evade detection, (iii) the expanded size, use and complexity of our systems, and (iv) our increased reliance on e-commerce, open source software, cloud computer services and work-from-home staffing.

Consequently, we may not be able to implement security barriers or other preventative measures that repel all future cyber-attacks or detect such attacks in a timely manner, which may result in significant expenses from system downtime, lower sales, increases in insurance costs, fines and fees, lost business relationships, managerial distractions, litigation, increases to regulatory oversight, expenditures for additional threat prevention technologies or reputational harm, any of which could materially impact us.

We also participate in a broader ecosystem of supply chain partners, both digital and physical, who face similar risks.

Cyber-attacks on our partners could negatively impact our business.

Although we maintain insurance coverage that may, subject to policy terms and conditions (including self-insured deductibles, coverage restrictions and monetary coverage caps), cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses.

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Additionally, changes in data privacy laws and our ability to comply with them could have a material adverse effect on us.

We collect and store data that is sensitive to us and our employees, customers and vendors.

The failure to maintain security over and prevent unauthorized access to our data, our customers’ personal information, including credit card information, or data belonging to our suppliers, could put us at a competitive disadvantage.

In the course of doing business, we collect and store data that is sensitive to us and our employees, customers and vendors.

The failure to prevent unauthorized access to our data or the personal data of our customers or suppliers could put us at a competitive disadvantage.

Such a breach could result in damage to our reputation and subject us to potential litigation, liability, fines and penalties and require us to incur significant expense to address and remediate or otherwise resolve these issues, resulting in a possible material adverse impact on our financial condition and results of operations.

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The nature of our business subjects us to compliance with employment, environmental, health, transportation, safety and other governmental regulations.

Our costs of doing business could increase as a result of changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations.

Changes in, expanded enforcement of, or adoption of new federal, state, local or international laws and regulations could increase our costs of doing business.

We are subject to numerous federal, state, local and international laws and regulations, many of which are complex and subject to varying interpretations, including regulations related to employment, environmental, health, transportation and safety requirements, which govern such things as packaging, labeling, handling, transportation, storage and sale of chemicals and fertilizers.

These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events.

Changes in, expanded enforcement of, or adoption of new federal, state, local or international laws and regulations, including those governing minimum wage or living wage requirements, the classification of exempt and non-exempt employees or other wage, labor or workplace regulations, could increase our costs of doing business and adversely impact our results of operations.

These laws and regulations, and related enforcement levels, may change as a result of a variety of factors, including political, economic or social events.

We sell algaecides and pest control products that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and various state pesticide laws.

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However, failure to comply with these laws and regulations may result in investigations, the assessment of administrative, civil and criminal fines, damages, seizures, disgorgements, penalties or the imposition of injunctive relief.

Moreover, compliance with such laws and regulations in the future could prove to be costly.

Although we presently do not expect to incur any capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future.

These laws and regulations have changed substantially and rapidly over the last 25 years, and we anticipate that there will be continuing changes.

The clear trend in environmental, health, transportation and safety regulations is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of chemicals and the discharge of greenhouse gases.

Increasingly, strict restrictions and limitations have resulted in higher operating costs for us, and it is possible that the costs of compliance with such laws and regulations will continue to increase.

Our attempts to anticipate future regulatory requirements that might be imposed and our plans to remain in compliance with changing regulations and to minimize the costs of such compliance may not be as effective as we anticipate.

Governmental actions designed to address climate change or the failure to meet environmental social and governance (ESG) expectations or standards or achieve our ESG goals could adversely affect our business.

Concern over climate change has led to, and may in the future lead to, new or increased legal and regulatory requirements designed to reduce or mitigate the effects of climate change, which could increase our operating or capital expenses and compliance burdens.

These laws and regulations have changed substantially and rapidly over the years, and we anticipate that there will be continuing changes.

It is possible that the costs of compliance with increasingly prescriptive laws and regulations will continue to increase.

We might not be able to successfully anticipate and remain in compliance with evolving future regulatory requirements.

Governmental actions designed to address changing climate patterns or the failure to meet environmental social and governance (ESG) expectations or standards or achieve our ESG commitments could adversely affect our business and increase our costs of doing business.

Concerns over changing climate patterns have led to, and may in the future lead to, new or increased legal and regulatory requirements designed to reduce or mitigate the effects of changing climate patterns, which could increase our compliance obligations.

In particular, advocates of change are continuing to explore ways to reduce greenhouse gas emissions.

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The regulation of greenhouse gas emissions could result in additional taxes or other costs to us or require us to modify our facilities or vehicle fleet.

Changes in customers’ attitudes toward the environmental impact of pools’ energy consumption or pool chemical products could reduce demand for our products.

We have set certain targets aimed at reducing our impact on the environment and climate change.

These initiatives reflect our current plans and aspirations, and it is possible that we may not be able to achieve such targets or our desired impact, which may cause us to suffer from legal claims, reputational damage or a loss of demand for our products.

Actions we take to achieve our strategy or targets could result in increased costs to our operations.

Investors or other stakeholders could react negatively to our targets or other positions we take on ESG matters, which could negatively impact our relationships with such stakeholders.

Changes in customers’ attitudes toward the environmental impact of a pool’s energy consumption or pool chemical products could reduce demand for our products.

Our initiatives aimed at reducing our impact on the environment and climate change reflect our current plans and aspirations, and it is possible that we may not be able to achieve our desired impact, which may cause us to suffer from legal claims, reputational damage or a loss of demand for our products.

Investors or other stakeholders could react negatively to our targets or other positions we take on ESG matters, which could negatively impact our relationships with such stakeholders or result in claims that our initiatives harmed them or us.

Various governmental bodies in Europe and the United States, particularly in the state of California, have adopted or proposed laws or regulations increasing the obligations of companies to disclose information about their emissions and other similar data.

We expect that these initiatives will increase our operating costs and expose us to additional risk.

We expect that these initiatives will expose us to additional risk.

We store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.

We store chemicals and fertilizers, including certain combustibles and oxidizing compounds, at our sales centers.

A fire, explosion or flood affecting one of our facilities could give rise to fire, safety and casualty losses and related liability claims.

We maintain what we believe is prudent insurance protection.

In addition to training our employees on safety protocols and procedures, we follow local fire marshal regulations at our facilities, which vary by jurisdiction and are subject to change, and assess the need for sprinklers and chemical storage vaults.

A fire, explosion or flood affecting one of our facilities could give rise to safety and casualty losses and related liability claims.

We also maintain what we believe is prudent insurance protection.

However, we cannot guarantee that our insurance coverage will be adequate to cover future claims that may arise or that we will be able to maintain adequate insurance in the future at rates we consider reasonable.

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operations, as well as unique costs and difficulties of managing international operations.

Our international operations, including Canada and Mexico, which accounted for 7% of our total net sales in 2023, expose us to certain additional risks, including:

Our international operations, including Canada and Mexico, accounted for 7% of our total net sales in 2024 and expose us to certain additional risks, including:

• difficulty in staffing international subsidiary operations;

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• adverse consequences for violating anti-corruption, anti-competition, economic sanctions, immigration and other laws governing international commerce.

For foreign-sourced products, we may be subject to certain trade restrictions that would prevent us from obtaining products.

There is also a greater risk that we may not be able to access products in a timely and efficient manner.

Fluctuations in other factors relating to international trade, such as tariffs, transportation costs and inflation are additional risks for our international operations.

We do not have operations in Israel, Russia or Ukraine.

However, the contributory effects of the wars in Israel or Ukraine and prolonged geopolitical conflict globally may result in higher inflation, labor costs, energy and commodity prices and costs of materials and services (together with shortages or inconsistent availability of materials and services), which could negatively affect our business (particularly our European operations), results of operations and financial condition.

For foreign-sourced products, we may be subject to certain trade restrictions that would prevent us from obtaining products, as well as delivery delays or failures if we order products from vendors with whom we have no prior relations.

Fluctuations in other factors relating to international trade, such as tariffs, trade restrictions, transportation costs and inflation are additional risks for our international operations.

We do not have operations in the Middle East, Russia or Ukraine.

However, the contributory effects of the geopolitical conflicts in these and other areas globally may result in higher inflation, labor costs, energy and commodity prices and costs of materials and services (together with shortages or inconsistent availability of materials and services), which could negatively affect our business (particularly our European operations), results of operations and financial condition.

Changes in import policy or trade relations, interruptions in our supply chain or increased commodity or supply chain costs could adversely affect our results of operations.

Like other companies globally, we faced supply chain disruptions across our business in 2021 and the early part of 2022, which led to increased costs, delays and in some cases lost opportunities.

As a result of these supply chain disruptions, our procurement and operational business functions increased planning and strategic purchasing and sourced products internationally where needed.

Because we source certain products from outside the United States, major changes in tax policy, import or export regulations or trade relations, such as the disallowance of tax deductions for imported products or the imposition of additional tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income.

Because we source certain products from outside the United States, major changes in tax policy, import or export regulations, other trade restrictions or trade relations, such as the imposition of additional tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income.

The variability and complexity of tariffs and duties exposes us to the risk of higher costs and inadvertent noncompliance associated with our imported products.

In December 2022, we recorded $13.0 million within Cost of sales related to duties and tariffs for certain imported chemicals that we determined, prior to submission of final liquidation amounts of our import duties and tariffs, that the initial code we used to classify the product may only apply to bulk purchases.

To protect against potential penalties and receive clarification on the issue, we voluntarily filed a disclosure with U.S.

Customs and Border Protection in December 2022.

Moreover, in recent years the United States has generally increased its tariff rates and indicated that additional increases could be forthcoming.

Changes in laws, court rulings, or differences in interpretation on product classification could lead to changes in duty and tariff rates on these or other imported products.

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Excess tax benefits or deficiencies recognized under ASU 2016-09 vary from quarter to quarter and past results may not be indicative of future results.

Risks Relating to Our Indebtedness

Financial Risks

The cost of servicing our debt could reduce our profitability if interest rates remain at elevated levels.

Our unsecured syndicated senior credit facility, term facility and receivable facility bear interest at variable rates.

Our unsecured syndicated senior credit facility, term facility and receivables facility bear interest at variable rates.

We have entered into interest rate swap contracts and a forward-starting interest rate swap contract to reduce our exposure to fluctuations in variable interest rates on current and future interest payments that we owe on a portion of our variable rate borrowings.

Interest rates over the past two years have been substantially higher than the three years prior to 2022, which has increased our debt expense.

While the Federal Reserve began cutting interest rates in the latter part of 2024, interest rates remain relatively high.

If interest rates remain elevated or increase, the cost of servicing our variable rate debt not covered by our interest rate swaps could materially reduce our profitability and cash flows.

For additional information regarding our interest rate risk, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K.

General Risks

Changes in tax laws and accounting standards related to tax matters have caused, and may in the future cause, fluctuations in our effective tax rate.

Taxation and tax policy changes, tax rate changes, new tax laws, revised tax law interpretations and changes in accounting standards and guidance related to tax matters may cause fluctuations in or adversely affect our effective tax rate.

We file income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

Taxation and tax policy changes, tax rate changes, new tax laws, changes in tax law interpretations and changes in accounting standards and guidance related to tax matters may cause fluctuations in or adversely affect our effective tax rate.

Our effective tax rate may also be impacted by changes in the geographic mix of our earnings.

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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 1A. Risk Factors