POOL CORP 10-Q

Item 1. Financial Statements POOL CORPORATION Consolidated Statements of Income (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2025 2024 Net sales $ 1,071,526 $ 1,120,810 Cost of sales 759,157 782,250 Gross profit 312,369 338,560 Selling and administrative expenses 234,831 229,840 Operating income 77,538 108,720 Interest and other non-operating expenses, net 11,164 13,419 Income before income taxes and equity in earnings 66,374 95,301 Provision for income taxes 12,883 16,473 Equity in earnings of unconsolidated investments, net 54 57 Net income $ 53,545 $ 78,885 Earnings per share attributable to common stockholders: Basic $ 1.42 $ 2.05 Diluted $ 1.42 $ 2.04 Weighted average common shares outstanding: Basic 37,460 38,205 Diluted 37,630 38,467 Cash dividends declared per common share $ 1.20 $ 1.10 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 March 31, 2025 2024 Net income $ 53,545 $ 78,885 Other comprehensive income (loss): Foreign currency translation gain (loss) 3,927 ( 3,668 ) Unrealized (loss) gain on interest rate swaps, net of the change in taxes of $ 970 and $( 742 ) ( 2,911 ) 2,226 Total other comprehensive income (loss) 1,016 ( 1,442 ) Comprehensive income $ 54,561 $ 77,443 The accompanying Notes are an integral part of the Consolidated Financial Statements. 2 POOL CORPORATION Consolidated Balance Sheets (In thousands, except share data) March 31, March 31, December 31, 2025 2024 2024 (Unaudited) (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 71,644 $ 67,974 $ 77,862 Receivables, net 146,209 150,240 115,835 Receivables pledged under receivables facility 350,867 376,935 199,026 Product inventories, net 1,460,680 1,496,947 1,289,300 Prepaid expenses and other current assets 48,177 44,521 47,091 Total current assets 2,077,577 2,136,617 1,729,114 Property and equipment, net 251,011 230,423 251,324 Goodwill 699,250 699,424 698,910 Other intangible assets, net 288,770 296,494 290,732 Equity interest investments 1,511 1,350 1,439 Operating lease assets 315,097 308,593 314,853 Other assets 79,233 85,926 81,812 Total assets $ 3,712,449 $ 3,758,827 $ 3,368,184 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 890,167 $ 907,806 $ 525,235 Accrued expenses and other current liabilities 109,893 99,557 171,194 Short-term borrowings and current portion of long-term debt 57,059 36,655 49,473 Current operating lease liabilities 100,697 92,162 98,284 Total current liabilities 1,157,816 1,136,180 844,186 Deferred income taxes 81,147 68,904 81,408 Long-term debt, net 968,031 942,522 900,883 Other long-term liabilities 45,473 42,807 44,959 Non-current operating lease liabilities 221,291 222,730 223,283 Total liabilities 2,473,758 2,413,143 2,094,719 Stockholders’ equity: Common stock, 0.001 par value; 100,000,000 shares authorized; 37,659,549 , 38,462,331 and 37,691,942 shares issued and outstanding at March 31, 2025, March 31, 2024 and December 31, 2024, respectively 38 38 38 Additional paid-in capital 651,053 620,278 638,615 Retained earnings 600,248 720,228 648,476 Accumulated other comprehensive (loss) income ( 12,648 ) 5,140 ( 13,664 ) Total stockholders’ equity 1,238,691 1,345,684 1,273,465 Total liabilities and stockholders’ equity $ 3,712,449 $ 3,758,827 $ 3,368,184 The accompanying Notes are an integral part of the Consolidated Financial Statements. 3 POOL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three Months Ended March 31, 2025 2024 Operating activities Net income $ 53,545 $ 78,885 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 9,840 8,661 Amortization 2,147 2,088 Share-based compensation 6,055 5,328 Equity in earnings of unconsolidated investments, net ( 54 ) ( 57 ) Other 1,377 ( 853 ) Changes in operating assets and liabilities, net of effects of acquisitions: Receivables ( 180,546 ) ( 181,705 ) Product inventories ( 168,410 ) ( 133,249 ) Prepaid expenses and other assets 19,051 15,741 Accounts payable 366,728 401,384 Accrued expenses and other liabilities ( 82,509 ) ( 50,781 ) Net cash provided by operating activities 27,224 145,442 Investing activities Acquisition of businesses, net of cash acquired — ( 1,348 ) Purchases of property and equipment, net of sale proceeds ( 13,295 ) ( 17,038 ) Other investments, net ( 266 ) ( 566 ) Net cash used in investing activities ( 13,561 ) ( 18,952 ) Financing activities Proceeds from revolving line of credit 427,700 228,400 Payments on revolving line of credit ( 454,600 ) ( 365,500 ) Payments on term loan under credit facility ( 6,250 ) ( 6,250 ) Proceeds from asset-backed financing 207,300 208,600 Payments on asset-backed financing ( 91,000 ) ( 138,000 ) Payments on term facility ( 9,938 ) — Proceeds from short-term borrowings and current portion of long-term debt 1,816 14 Payments on short-term borrowings and current portion of long-term debt ( 480 ) ( 1,561 ) Proceeds from stock issued under share-based compensation plans 6,383 8,773 Payments of cash dividends ( 45,226 ) ( 42,334 ) Repurchases of common stock ( 56,316 ) ( 16,304 ) Net cash used in financing activities ( 20,611 ) ( 124,162 ) Effect of exchange rate changes on cash and cash equivalents 730 ( 894 ) Change in cash and cash equivalents ( 6,218 ) 1,434 Cash and cash equivalents at beginning of period 77,862 66,540 Cash and cash equivalents at end of period $ 71,644 $ 67,974 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 Loss Total Balance at December 31, 2024 37,692 $ 38 $ 638,615 $ 648,476 $ ( 13,664 ) $ 1,273,465 Net income — — — 53,545 — 53,545 Foreign currency translation — — — — 3,927 3,927 Interest rate swaps, net of the change in taxes $ 970 — — — — ( 2,911 ) ( 2,911 ) Repurchases of common stock, net of retirements ( 169 ) — — ( 56,530 ) — ( 56,530 ) Share-based compensation — — 6,055 — — 6,055 Issuance of stock under share-based compensation plans 137 — 6,383 — — 6,383 Declaration of cash dividends — — — ( 45,243 ) — ( 45,243 ) Balance at March 31, 2025 37,660 $ 38 $ 651,053 $ 600,248 $ ( 12,648 ) $ 1,238,691 Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Shares Amount Capital Earnings Income 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 The accompanying Notes are an integral part of the Consolidated Financial Statements. 5 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 2024 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 2024 Annual Report on Form 10-K. The results for our three-month period ended March 31, 2025, are not necessarily indicative of the expected results for our fiscal year ending December 31, 2025. 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 $ 3.8 million in the first quarter of 2025 compared to $ 7.4 million in the first quarter of 2024. Retained Earnings We account for the retirement of repurchased shares as a reduction of Retained earnings. As of March 31, 2025, the Retained earnings on our Consolidated Balance Sheets reflects (i) cumulative net income, (ii) the cumulative impact of adjustments for changes in accounting pronouncements, (iii) share retirements since the inception of our share repurchase programs of $ 2.8 billion and (iv) cumulative dividends of $ 1.3 billion . Accumulated Other Comprehensive (Loss) Income The table below presents the components of our Accumulated other comprehensive (loss) income balance (in thousands): March 31, December 31, 2025 2024 2024 Foreign currency translation adjustments $ ( 25,161 ) $ ( 16,367 ) $ ( 29,088 ) Unrealized gains on interest rate swaps, net of tax 12,513 21,507 15,424 Accumulated other comprehensive (loss) income $ ( 12,648 ) $ 5,140 $ ( 13,664 ) 6 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 ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses and related amendments In November 2024, the FASB issued ASU 2024-03 and in January 2025, the FASB issued ASU 2025-01 , Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which adds new disclosure requirements, including more detailed information about certain income statement expense line items and a separate disclosure for selling expenses. For annual periods beginning after December 15, 2026, and interim 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 the adoption of 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 (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 expect that the adoption of this standard will expand our disclosures but do not expect the adoption of this standard to 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, 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 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. 7 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 184,000 for the three months ended March 31, 2025, and 205,000 for the three months ended March 31, 2024. 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 March 31, 2025 2024 Net income $ 53,545 $ 78,885 Amounts allocated to participating securities ( 263 ) ( 413 ) Net income attributable to common stockholders $ 53,282 $ 78,472 Weighted average common shares outstanding: Basic 37,460 38,205 Effect of dilutive securities: Stock options and employee stock purchase plan 170 262 Diluted 37,630 38,467 Earnings per share attributable to common stockholders: Basic $ 1.42 $ 2.05 Diluted $ 1.42 $ 2.04 Anti-dilutive stock options excluded from diluted earnings per share computations (1) 118 57 (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. 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. 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. 8 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 March 31, Input Level Classification 2025 2024 Assets Unrealized gains on interest rate swaps Level 2 Prepaid expenses and other current assets $ — $ 4,984 Unrealized gains on interest rate swaps Level 2 Other assets 16,728 23,738 Deferred compensation plan asset Level 1 Other assets 17,477 17,025 Liabilities Deferred compensation plan liability Level 1 Other long-term liabilities $ 17,477 $ 17,025 Interest Rate Swaps We utilize 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 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. Our interest rate swaps in effect during the quarter were previously forward-starting and converted 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 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) income on the Consolidated Balance Sheets. 9 One of our interest rate swap contracts terminated on February 28, 2025. The following table provides additional details related to this former swap contract: 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 % We currently have two swap contracts in place. 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 2 March 9, 2020 September 29, 2022 February 26, 2027 $ 150.0 0.6690 % Interest rate swap 3 March 9, 2020 February 28, 2025 February 26, 2027 $ 150.0 0.7630 % For the interest rate swap contracts in effect at March 31, 2025, 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-month periods ended March 31, 2025 or March 31, 2024. 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 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). 10 Note 5 – Debt The table below presents the components of our debt (in thousands): March 31, 2025 2024 Variable rate debt Short-term borrowings $ 1,733 $ — Current portion of long-term debt: Australian credit facility 11,576 11,655 Current portion of term loans under credit facility 43,750 25,000 Short-term borrowings and current portion of long-term debt $ 57,059 $ 36,655 Long-term portion: Revolving credit facility $ 167,700 $ 115,400 Term loan under credit facility 412,500 456,250 Term facility 100,000 109,937 Receivables securitization facility 290,400 262,300 Less: financing costs, net 2,569 1,365 Long-term debt, net 968,031 942,522 Total debt $ 1,025,090 $ 979,177 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 . 11 Note 6 - 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 served 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. The accounting policies for our segment are the same as those described in “Note 1 - Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2024, and in Note 1 above. 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): Three Months Ended March 31, 2025 2024 Net sales $ 1,071,526 $ 1,120,810 Cost of sales 759,157 782,250 Gross profit 312,369 338,560 Compensation expenses 120,369 119,209 Freight out expenses 17,122 17,896 Other selling and administrative expenses 97,340 92,735 Operating income 77,538 108,720 Reconciliation: Interest and other non-operating expenses, net 11,164 13,419 Income before income taxes and equity in earnings $ 66,374 $ 95,301 The tables below present supplemental information for our segment (in thousands): Three Months Ended March 31, 2025 2024 Depreciation $ 9,840 $ 8,661 Amortization 2,147 2,088 March 31, 2025 2024 Receivables, net $ 146,209 $ 150,240 Receivables pledged under receivables facility 350,867 376,935 Product inventories, net 1,460,680 1,496,947 12