What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-27 · 135 added, 100 removed, 897 unchanged (21% of the section changed)

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Net income $ 434,325 $ 523,229 $ 748,462

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustments ( 16,389 ) 6,909 ( 10,028 )

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( 3,857 ) ( 6,222 ) 23,407

Total other comprehensive income 687 13,379 6,535

Total other comprehensive (loss) income ( 20,246 ) 687 13,379

Comprehensive income $ 414,079 $ 523,916 $ 761,841

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Retained earnings 648,476 699,990

Accumulated other comprehensive income 6,582 5,895

Accumulated other comprehensive (loss) income ( 13,664 ) 6,582

Total stockholders’ equity 1,273,465 1,312,787

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Share-based compensation 19,248 19,582 14,879

Provision for doubtful accounts receivable, net of write-offs 2,197 3,580 1,134

(Benefit) provision for doubtful accounts receivable, net of write-offs ( 3,122 ) 2,197 3,580

Provision for inventory obsolescence, net of write-offs 3,048 1,930 5,869

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Equity in earnings of unconsolidated investments, net ( 207 ) ( 177 ) ( 353 )

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

Net losses (gains) on foreign currency transactions 218 ( 813 ) 48

Goodwill impairment — 550 605

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Payments of cash dividends ( 179,633 ) ( 167,461 ) ( 150,624 )

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

Repurchases of common stock and payments of excise tax ( 306,300 ) ( 306,359 ) ( 471,229 )

Net cash used in financing activities ( 576,550 ) ( 798,132 ) ( 411,658 )

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Newly Adopted Accounting Pronouncements

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 .

Segment Reporting

Since all of our sales centers have similar operations and share similar economic characteristics, we aggregate our sales centers into a single reportable segment.

These similarities include (i) the nature of our products and services, (ii) the types of customers we sell to and (iii) the distribution methods we use.

Our chief operating decision maker (CODM) evaluates each sales center based on individual performance that includes both financial and operational measures.

These measures include operating income growth and accounts receivable and inventory management criteria.

Each sales center manager and eligible field employee earns performance-based compensation based on these measures developed at the sales center level.

A bottom-up approach is used to develop the operating budget for each individual sales center.

The CODM approves the budget and routinely monitors budget to actual results for each sales center.

Additionally, our CODM makes resource allocation decisions primarily on a sales center-by-sales center basis.

No single sales center meets any of the quantitative thresholds (10% of revenues, profit or assets) for separately reporting information about an operating segment.

We do not track sales by product lines and product categories on a consolidated basis.

We lack readily available financial information due to the number of our product lines and product categories and the fact that we make ongoing changes to product classifications within these groups, thus making it impracticable to report our sales by product category.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) - 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.

We adopted ASU 2023-07 for the year ended December 31, 2024, and have applied the guidance retrospectively for all periods presented within the notes to the consolidated financial statements in this Form 10-K.

The adoption of this ASU only impacted our disclosures.

For additional information regarding segment information, see Note 12.

Seasonality and Weather

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Our products are similar in nature, and our revenue recognition policy is the same across our distribution networks.

Our customers share similar characteristics and purchase products across all categories.

Our customers share similar characteristics and generally purchase products across all categories.

We recognize revenue when our customers take control of our products.

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$ 25,209 $ 28,532 $ 28,778

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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dollars based on published exchange rates.

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

We include these translation adjustments as a component of Accumulated other comprehensive (loss) 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 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.

We realized a net foreign currency transaction loss of $ 0.2 million in 2024, gain of $ 0.8 million in 2023 and loss of $ 0.1 million in 2022.

Fair Value Measurements

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, our deferred compensation plan asset and liability and contingent consideration related to recent acquisitions.

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:

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Input Level Classification 2024 2023

Unrealized gains on interest rate swaps Level 2 Prepaid expenses and other current assets $ 734 $ —

Unrealized gains on interest rate swaps Level 2 Other assets 19,876 25,752

Deferred compensation plan asset Level 1 Other assets 18,018 15,347

Contingent consideration liabilities Level 3 Accrued expenses and other current liabilities

Deferred compensation plan liability Level 1 Other long-term liabilities $ 18,018 $ 15,347

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In addition to our assets and liabilities that we measure at fair value on a recurring basis, our assets and liabilities are also subject to nonrecurring fair value measurements.

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

Certain of our assets are recorded at fair value on a nonrecurring basis, primarily assets acquired in a business combination or those subject to impairment charges.

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

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We formally assess, both at inception and at least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes in cash flows of the related underlying exposure.

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 income (loss) on the Consolidated Balance Sheets.

Our interest rate swap contracts and forward-starting interest rate swap contracts are subject to master netting arrangements.

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For our interest rate swap contracts currently in effect, 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 income (loss) to Interest and other non-operating expenses, net on the Consolidated Statements of Income.

Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive (loss) income to Interest and other non-operating expenses, net on the Consolidated Statements of Income.

These amounts were not material in any period presented.

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We record inventory at the lower of cost, using the moving average cost method, or net realizable value.

We establish our reserve for inventory obsolescence based on inventory turns by class with particular emphasis on stock keeping units with the weakest sales over the expected sellable period, which is the previous 12 months for most products.

We establish our reserve for inventory obsolescence based on inventory with lower sales velocity and inventory with no sales for the past 12 months, which we believe represent some exposure to inventory obsolescence.

The reserve is intended to reflect the net realizable value of inventory that we may not be able to sell at a profit.

In evaluating the adequacy of our reserve for inventory obsolescence, we consider a combination of factors including:

• the level of inventory in relation to historical sales by product, including inventory usage by classification based on product sales at both the sales center and on a company-wide basis;

• the level of inventory in relation to historical sales by product, including inventory usage based on product sales at both the sales center and on a company-wide basis;

• changes in customer preferences or regulatory requirements;

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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 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 perform a discounted cash flow analysis at the reporting unit level to further evaluate our initial fair value estimate.

We have the option of first analyzing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

When a qualitative goodwill test is performed, we analyze factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

The evaluation of qualitative factors includes an assessment of relevant facts, events and circumstances including but not limited to:

macroeconomic conditions, industry and market conditions, and the current and forecasted financial performance of the reporting unit.

In combination with our qualitative test, we also estimate the fair value of our reporting units by projecting company-wide future cash flows using management’s assumptions for sales growth rates, operating margins and discount rates.

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

To the extent our qualitative test indicates it is more likely than not that the fair value of a reporting unit is less than the carrying amount or for a reporting unit where we only perform a quantitative test, we perform a quantitative test using 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.

The assumptions used in our impairment test are considered unobservable inputs (Level 3 inputs as defined in the accounting guidance).

Since we define an operating segment as an individual sales center and we do not have operations below the sales center level, our reporting unit is an individual sales center.

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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

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

Accumulated Other Comprehensive (Loss) Income

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

Foreign currency translation adjustments $ ( 29,088 ) $ ( 12,699 )

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15,424 19,281

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

Accumulated other comprehensive (loss) income $ ( 13,664 ) $ 6,582

Retained Earnings

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Income taxes, net of refunds 42,990 153,157 314,714

In 2024, cash paid for income taxes was lower due to a $ 68.5 million deferral of our third and fourth quarter estimated tax payments, subsequently paid in February 2025, as allowed for companies impacted by Hurricane Francine.

Recent Accounting Pronouncements Pending Adoption

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

ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which introduces new disclosure requirements for public business entities to provide more detailed information about specific natural expense categories within their income statements.

For annual periods beginning after December 15, 2026, and interim periods within those annual periods beginning after December 15, 2027.

The ASU may be adopted on a prospective or retrospective basis with early adoption permitted.

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

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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.

We expect that the adoption of this standard will expand our disclosures and do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

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.

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.

We do not expect the adoption of this standard to have a material impact on our consolidated financial statements since we are already subject to the requirements under Regulation S-X and Regulation S-K.

Note 2 - Acquisitions

2024 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.

2023 Acquisitions

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

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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.

2021 Acquisitions

We acquired Porpoise Pool & Patio, Inc.

(Porpoise) on December 16, 2021 for $ 788.7 million, net of cash acquired.

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.

The acquisition was funded with borrowings on our Credit Facility.

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.

In December 2021, we acquired the distribution assets of Wingate Supply, Inc., a wholesale distributor of irrigation and landscape maintenance products, adding one location in Florida.

In June 2021, we acquired the distribution assets of Vak Pak Builders Supply, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding one location in Florida.

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

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.

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Goodwill (net) at December 31, 2024

The determination of our reporting units’ goodwill and intangibles fair values includes numerous assumptions that are subject to various risks and uncertainties.

(1) Includes a $ 2.0 million reduction of goodwill for our Porpoise Pool & Patio reporting unit for the sale of two Pinch A Penny retail stores in 2024.

The determination of our reporting units’ goodwill and intangibles fair values includes numerous assumptions that are subject to various risks and uncertainties when performing a quantitative test.

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 October 2024, we performed our annual goodwill impairment test and did not record any goodwill impairment at the reporting unit level.

As of October 1, 2024, we had 251 reporting units with allocated goodwill balances.

Our most significant goodwill balance of $ 401.6 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 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.

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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.

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Credit Facility

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.

On September 30, 2024, we entered into the Third Amended and Restated Credit Agreement (the “Amended Agreement”) by and among Pool Corporation, 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 amends and restates 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.

Our Credit Facility provides for $ 1.3 billion in borrowing capacity, consisting of a $ 800.0 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.

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.

All other terms of these term loans are substantially similar to those governing revolving credit loans under the Credit Agreement.

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

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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, 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.

At December 31, 2024, there was $ 657.1 million outstanding, including a $ 462.5 million term loan, $ 15.1 million in standby letter of credits outstanding, and $ 590.3 million available for borrowing under the Credit Facility.

The weighted average effective interest rate for the Credit Facility as of December 31, 2024 was approximately 4.0 %, excluding commitment fees and including the impact of our interest rate swaps.

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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 amendment updated the index used for the Base Rate from LIBOR to Term SOFR (with all such terms being defined within the Term Facility Agreement).

The Term Facility matures on December 30, 2026.

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Receivables Securitization Facility

On November 1, 2022, we and certain of our subsidiaries entered into an agreement (the “Amended Receivables Purchase Agreement”) amending our two-year receivable securitization facility.

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

On October 31, 2024, our subsidiaries entered into the Joinder and Amendment No.

13 to the Receivables Purchase Agreement by and among Superior Commerce LLC, as Seller, SCP Distributors LLC, as the Servicer, the purchasers from time to time party thereto (the “Purchasers”), and Wells Fargo Bank, National Association, as Administrative Agent (as amended, the “Amended Receivables Purchase Agreement”).

The Amended Receivables Purchase Agreement amended our receivable securitization facility principally to extend the facility termination date to October 30, 2026 and increase the maximum facility limit to $ 375.0 million in the months of April through May.

The funding capacity during the remaining months of year ranges from $ 210.0 million to $ 350.0 million.

Amounts outstanding under the Receivables Facility bear interest at Term SOFR plus an applicable margin of 0.85 %.

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

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This arrangement allows the participating subsidiaries to withdraw cash from the financial institution to the extent that aggregate cash deposits held by these subsidiaries are available at the financial institution.

To the extent the participating subsidiaries are in an overdraft position, such overdrafts are recorded as short-term borrowings under a committed cash overdraft facility.

To the extent the aggregate of the participating subsidiaries is in an overdraft position, such overdrafts are recorded as short-term borrowings under a committed cash overdraft facility.

These borrowings bear interest at a variable rate based on 3-month Euro Interbank Offered Rate (EURIBOR), plus a fixed margin.

We also pay a commitment fee on the average outstanding balance.

This fee is paid annually in advance.

Our borrowing capacity is € 14.0 million.

Our borrowing capacity under this overdraft facility is € 14.0 million.

Maturities of Long-Term Debt

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2025 $ 49,473

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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Interest expense related to the notional amounts under our swap contracts was based on the fixed rates plus the applicable margin on our variable rate borrowings.

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

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

We currently have two interest rate swap contracts in place.

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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.

The net difference between interest paid and interest received related to our swap agreements resulted in an interest benefit of $ 12.7 million in 2024, $ 12.2 million in 2023 and $ 0.8 million in 2022.

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

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Financing costs deferred 2,077 52

Write-off of fully amortized deferred financing costs ( 1,326 ) —

Balance at end of year 5,015 4,264

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Share-based awards to our non-employee directors vest one year from the grant date.

Restricted stock awards to our employees contain performance-based criteria in addition to the service-based vesting criteria described above.

Restricted stock awards granted to our employees from 2016 to 2023 contain performance-based criteria in addition to the service-based vesting criteria described above.

The awards provide for a three-year performance period for the metric to be achieved.

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For each of the performance-based grants from 2016 through 2022, 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.

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

Certain restricted stock awards granted to our employees from 2023 and 2024 contain performance-based criteria in addition to the service-based vesting criteria described above.

The awards provide for a three-year performance period for the metric to be achieved.

If the performance condition is not met, all shares of the performance-based restricted stock will be immediately forfeited and canceled.

We have not recognized any expense for these performance-based grants in 2023 or 2024.

Stock Option Awards

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Granted 28,312 391.62

122,300 87.89

Forfeited 7,955 336.98

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At December 31, 2024, the unamortized compensation expense related to stock option awards totaled $ 7.4 million.

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

We anticipate recognizing this expense over a weighted average period of 2.6 ye a rs.

Restricted Stock Awards

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Total effective tax rate 23.43 % 23.99 % 24.04 %

In 2024, several countries in which we operate have adopted the Global Anti-Base Erosion Model Rules (Pillar Two), which generally provides for a minimum effective tax rate of 15 %, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework.

The Pillar Two directive did not have a material effect on our financial statements for the year ended December 31, 2024.

We are continuing to evaluate the potential effect on future periods and will monitor additional guidance as it is released.

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of deductible nonqualified stock options and the lapse of restrictions on deductible restricted stock awards.

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Product inventories $ 13,625 $ 11,764

Trade discounts on purchases 1,044 —

Accrued expenses 824 4,724

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Decreases resulting from the expiration of the statute of limitations 2,709 2,075 3,347

Decreases relating to settlements — — 2,589

Balance at end of year $ 19,679 $ 17,871 $ 15,489

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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 expense of $ 0.4 million in 2023 and interest income of $ 0.1 million in 2022 and $ 0.6 million in 2021.

For unrecognized tax benefits, we had interest expense of $ 0.8 million in 2024 and $ 0.4 million in 2023 and interest income of $ 0.1 million in 2022.

Accrued interest related to unrecognized tax benefits was approximately $ 2.7 million at December 31, 2024 and $ 1.9 million at December 31, 2023.

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Note 9 - Commitments and Contingencies

Lease Commitments

We lease facilities for our corporate and administrative offices, sales centers and centralized shipping locations under operating leases that expire in various years through 2036.

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Our lease term ends May 2025.

We expect to renew this lease in the second quarter of 2025.

The table below presents rent expense associated with this lease for the past three years (in thousands):

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Deferred compensation plan 238 218 283

Note 12 - Quarterly Financial Data (Unaudited)

The table below summarizes the unaudited quarterly results of operations for the past two years (in thousands, except per share data):

First Second Third Fourth First Second Third Fourth

Note 12 - Segment Information

Since all of our sales centers have similar operations and share similar economic characteristics, we aggregate our sales centers into a single reportable segment and one reportable revenue stream.

These similarities include (i) the nature of our products and services, (ii) the types of customers we sell to and (iii) the distribution methods we use.

Our chief operating decision maker (CODM) is our president and chief executive officer.

Our CODM evaluates each sales center based on individual performance that includes both financial and operational measures.

These measures include operating income, accounts receivable and inventory management criteria.

A bottom-up approach is used to develop the operating budget for each individual sales center.

Our CODM makes resource allocation decisions primarily on a sales center-by-sales center basis.

No single sales center meets any of the quantitative thresholds (10% of revenues, profit or assets) for separately reporting information about an operating segment.

We do not track sales by product lines and product categories on a consolidated basis.

We lack readily available financial information due to the

number of our product lines and product categories and the fact that we make ongoing changes to product classifications within these groups, thus making it impracticable to report our sales by product category.

Our segment derives revenue from sales centers in North America, Europe and Australia that 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.

No single customer accounted for 10% or more of our sales.

The accounting policies for our segment are the same as those described in Note 1.

T he table below presents segment revenue, operating expenses and operating income and reconciles segment operating income to consolidated income before taxes and equity in earnings (in thousands):

Year Ended December 31,

2024 2023 2022

Net sales $ 5,310,953 $ 5,541,595 $ 6,179,727

Cost of sales 3,735,606 3,881,551 4,246,315

Gross profit 1,575,347 1,660,044 1,933,412

Net income 101,699 232,250 137,843 51,437 179,261 307,283 190,055 71,863

Earnings per share:

Basic $ 2.60 $ 5.95 $ 3.54 $ 1.33 $ 4.46 $ 7.71 $ 4.82 $ 1.84

Diluted $ 2.58 $ 5.91 $ 3.51 $ 1.32 $ 4.41 $ 7.63 $ 4.78 $ 1.82

The sum of basic and diluted earnings per share for each of the quarters may not equal the total basic and diluted earnings per share for the annual periods because of rounding differences and a difference in the way that in-the-money stock options are considered from quarter to quarter.

Compensation expenses 486,824 477,971 495,860

Freight out expenses 90,268 84,932 89,002

Other selling and administrative expenses 381,051 350,574 322,767

Operating income 617,204 746,567 1,025,783

Reconciliation:

Interest and other non-operating expenses, net 50,250 58,431 40,911

Income before income taxes and equity in earnings $ 566,954 $ 688,136 $ 984,872

The tables below present supplemental information for our segment (in thousands):

Year Ended December 31,

2024 2023 2022

Depreciation $ 36,784 $ 31,585 $ 30,381

Amortization 8,697 8,555 8,644

Goodwill impairment — 550 605

Receivables, net $ 115,835 $ 145,723

Receivables pledged under receivables facility 199,026 197,187

Product inventories, net 1,289,300 1,365,466

The table below presents net sales by geographic region, with international sales translated into U.S.

dollars at prevailing exchange rates, for the past three years (in thousands):

Year Ended December 31,

2024 2023 2022

United States $ 4,936,981 $ 5,126,308 $ 5,674,909

International 373,972 415,287 504,818

$ 5,310,953 $ 5,541,595 $ 6,179,727

The table below presents net property and equipment by geographic region, with international property and equipment balances translated into U.S.

dollars at prevailing exchange rates, for the past three years (in thousands):

2024 2023 2022

United States $ 241,891 $ 215,109 $ 185,117

International 9,433 8,820 8,592

$ 251,324 $ 223,929 $ 193,709

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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What changed 10-K

Item 8. Financial Statements and Supplementary Data