POOL CORP
For the period ended Jun 30, 2024. Filed Jul 30, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 30, 2024
POOL$211.70-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-29.
0000945841-24-000089
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-30.
0000945841-24-000136
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 146 previous paragraphs and 158 current paragraphs.
89 unchanged; 43 reworded; 19 added; 12 removed; 2 previous and 7 current paragraphs rearranged.
Tables are not compared: 9 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Net sales decreased 5% in the second quarter of 2024 to $1.8 billion compared to $1.9 billion in the second quarter of 2023. Base business results approximated consolidated results for the period. Sales of recurring maintenance products, such as chemicals, parts and repair items, continued to perform well. Lower spending on discretionary products used in remodeling and new pool construction reflected consumer hesitancy. We saw an overall net 1% positive pricing impact on sales with sales benefiting from an approximately 2% to 3% realization on product cost increases for equipment, offset by lower realized net price on other products and some commodity pricing headwinds.
Current report
Gross profit decreased 7% to $530.1 million in the second quarter of 2024 from $567.8 million in the same period of 2023. Gross margin of 30.0% decreased 60 basis points compared to 30.6% in the second quarter of 2023 as our prior year gross margin benefited from sales of a larger amount of lower cost strategically-purchased inventory. Our current year gross margin also reflected product mix impacts, including lower sales of higher margin building materials.
Current report
Selling and administrative expenses (operating expenses) increased 7% to $258.7 million in the second quarter of 2024 compared to $240.8 million in the second quarter of 2023. In the second quarter, we increased spend due to the expansion of our network and our technology initiatives. We expect that year-over-year comparative expense increases will moderate in the third and fourth quarters of 2024. Through July, we have completed eight of our ten projected new sales center openings and have made significant headway with our technology tools. As a percentage of net sales, operating expenses increased to 14.6% in the second quarter of 2024 compared to 13.0% in the same period of 2023.
Current report
Interest and other non-operating expenses, net for the second quarter of 2024 decreased $2.8 million compared to the second quarter of 2023, primarily due to a decrease in average debt between periods.
Current report
For additional information, see "Liquidity and Capital Resources" below.
Current report
Net sales of $1.8 billion in the second quarter of 2024 decreased 5% compared to $1.9 billion in the second quarter of 2023. During the second quarter, recurring maintenance product sales performed well, while spending for larger semi-discretionary products and on new pool construction and renovation projects reflected consumer hesitancy for high dollar discretionary products.
Current report
•Maintenance-related revenues have remained stable as evidenced by volume growth in chemicals, representing 15% of our net sales. Sales of chemicals increased 1% from the second quarter of 2023.
Current report
Gross margin decreased 60 basis points to 30.0% in the second quarter of 2024 compared to 30.6% in the second quarter of 2023. Our prior year gross margin benefited from a larger amount of lower cost strategically-purchased inventory, while our current year gross margin was negatively impacted by changes in product mix between periods, including lower sales of higher margin building materials as discussed above. These impacts were partially offset by benefits from higher incentives earned under our vendor programs compared to the second quarter of 2023 when we were focused on inventory destocking.
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Current report
Net Sales
Current report
•Maintenance-related revenues showed stability through the first part of the season as evidenced by volume growth in chemicals, representing 14% of our net sales. Sales of chemicals were flat compared to the first half of 2023.
Current report
Gross Profit
Current report
•Gross margin in the first half of 2024 was impacted by a less advantageous product and customer mix with higher margin building materials making up a smaller portion of our sales and larger customers taking on more of the available projects.
Current report
•Our gross margin in the first half of 2024 benefited from higher levels of incentives earned due to increased purchasing as compared to the prior year when we were actively reducing inventory levels.
Current report
Operating Expenses
Current report
Interest and other non-operating expenses, net for the first six months of 2024 decreased $5.3 million compared to the same period last year, as a decrease in average debt between periods more than offset higher average interest rates. Our weighted average effective interest rate increased to 5.3% from 5.0% for the respective periods on average outstanding debt of $1.0 billion for the first six months of 2024 versus $1.3 billion for the same period of 2023.
Current report
Our effective income tax rate was 23.1% for the six months ended June 30, 2024, compared to 24.1% for the six months ended June 30, 2023. We recorded a $7.8 million, or $0.20 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2024, compared to a $5.4 million, or $0.14 per diluted share, tax benefit in the same period of 2023. Without the benefits from ASU 2016-09, our effective tax rate was 25.3% for the six months ended June 30, 2024, and 25.4% for the six months ended June 30, 2023.
Current report
Net income decreased 19% to $271.3 million for the six months ended June 30, 2024, compared to $333.9 million for the six months ended June 30, 2023. Earnings per diluted share decreased 17% to $7.03 for the six months ended June 30, 2024, versus $8.48 per diluted share for the six months ended June 30, 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 18% to $6.83 for the six months ended June 30, 2024, compared to $8.34 for the six months ended June 30, 2023. See the reconciliation of GAAP to non-GAAP measures below.
Current report
The second quarter of 2024 was marked by precipitation variability across the U.S. with wetter conditions in the central U.S. and Texas and below average precipitation in the western U.S. Maintenance activities benefited from warmer-than-average temperatures across most regions, particularly in June. Overall, mixed weather conditions led to varied impacts across our markets. In contrast, weather conditions in the second quarter of 2023 unfavorably impacted sales due to cooler temperatures across the West through the mid-Atlantic region and the impact of wildfires in Canada.
Removed paragraphs (12)
Previous report
Net sales decreased 7% in the first quarter of 2024 to $1.1 billion compared to $1.2 billion in the first quarter of 2023 following significant growth in 2021 and 2022. Base business results approximated consolidated results for the period. Maintenance activities were stable during the quarter, indicating steady demand for non-discretionary products, while pool construction and discretionary activities were weaker. Inflationary product cost increases moderated and net sales benefited approximately 2% compared to a benefit of 4% to 5% in the first quarter of 2023.
Previous report
Gross profit decreased 8% to $338.6 million in the first quarter of 2024 from $369.8 million in the same period of 2023. Gross margin decreased 40 basis points to 30.2% in the first quarter of 2024 compared to 30.6% in the first quarter of 2023. In the first quarter of 2024, our gross margin was impacted by the following factors.
Previous report
•Gross margin benefited from ongoing supply chain management initiatives.
Previous report
•Changes in product mix weighed on our gross margin; we expect this mix to shift as sales of higher margin products increase as the season progresses.
Previous report
•Greater customer preseason early buys during the quarter compared to last year and a higher concentration of sales to larger customers negatively impacted our margin.
Previous report
Selling and administrative expenses (operating expenses)increased 3% to $229.8 million in the first quarter of 2024 compared to $224.0 million in the first quarter of 2023. While we managed variable costs in line with lower sales volumes, expense growth drivers included rent and facility costs, inflationary wage increases, insurance costs, technology initiatives and investments in greenfield locations. As a percentage of net sales, operating expenses increased to 20.5% in the first quarter of 2024 compared to 18.6% in the same period of 2023.
Previous report
•normal weather patterns for the remainder of 2024;
Previous report
•Sales included a greater concentration of customer early buy activity in the first quarter of 2024 than the first quarter of 2023.
Previous report
•Gross margin benefited from ongoing supply chain management initiatives.
Previous report
•Changes in product mix weighed on our gross margin; we expect this mix to shift as sales of higher margin products increase as the season progresses.
Previous report
•Greater customer preseason early buys during the quarter compared to last year and a higher concentration of sales to larger customers negatively impacted our margin.
Reworded paragraphs (43)
Previous wording
Operating income in the first quarter of 2024 decreased 25% to $108.7 million from $145.8 million in 2023. Operating margin was 9.7% in the first quarter of 2024 compared to 12.1% in the first quarter of 2023.
Current wording
Operating income in the second quarter of 2024 decreased 17% to $271.5 million from $327.0 million in 2023. Operating margin was 15.3% in the second quarter of 2024 compared to 17.6% in the second quarter of 2023.
Previous wording
We recorded a $7.4 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended March 31, 2024, compared to a tax benefit of $4.8 million realized in the same period of 2023. This resulted in a $0.19 per diluted share tax benefit in the first quarter of 2024 compared to a $0.12 per diluted share tax benefit realized in the same period of 2023.
Current wording
We recorded a $0.4 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended June 30, 2024, compared to a tax benefit of $0.6 million realized in the same period of 2023. This resulted in a $0.01 per diluted share tax benefit in the second quarter of 2024 compared to a $0.02 per diluted share tax benefit realized in the same period of 2023.
Previous wording
Net income decreased 22% to $78.9 million in the first quarter of 2024 compared to $101.7 million in the first quarter of 2023. Earnings per diluted share decreased 21% to $2.04 in the first quarter of 2024 compared to $2.58 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 25% to $1.85 compared to $2.46 in the first quarter of 2023. See RESULTS OF OPERATIONS below for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.
Current wording
Net income decreased 17% to $192.4 million in the second quarter of 2024 compared to $232.3 million in the second quarter of 2023. Earnings per diluted share decreased 16% to $4.99 in the second quarter of 2024 compared to $5.91 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 15% to $4.98 compared to $5.89 in the second quarter of 2023. See RESULTS OF OPERATIONS below for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.
Previous wording
Total net receivables, including pledged receivables, trended in line with net sales activity at March 31, 2024 compared to March 31, 2023. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 26.9 days at March 31, 2024 and 26.5 days at March 31, 2023. Our allowance for doubtful accounts balance was $9.3 million at March 31, 2024 and $9.0 million at March 31, 2023.
Current wording
Total net receivables, including pledged receivables, trended in line with net sales activity at June 30, 2024 compared to June 30, 2023. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 26.8 days at June 30, 2024 and 26.2 days at June 30, 2023. Our allowance for doubtful accounts balance was $9.4 million at June 30, 2024 and $10.1 million at June 30, 2023.
Previous wording
We reduced net inventory levels compared to March 31, 2023 by $189.7 million, or 11%, to $1.5 billion, consistent with the trends stemming from our inventory management efforts executed over the 2023 swimming pool season following strategic buys in prior years. Our inventory reserve was $24.2 million at March 31, 2024 and $24.5 million at March 31, 2023. Our inventory turns, as calculated on a trailing four quarters basis, were 2.7 times at March 31, 2024 and 2.5 times at March 31, 2023.
Current wording
Our inventory management efforts executed over the first half of the year reduced our inventory levels compared to June 30, 2023 by $97.3 million, or 7%, to $1.3 billion. Our inventory reserve was $25.0 million at June 30, 2024 and $25.4 million at June 30, 2023. Our inventory turns, as calculated on a trailing four quarters basis, were 2.7 times at June 30, 2024 and 2.5 times at June 30, 2023.
Previous wording
Total debt outstanding was $979.2 million at March 31, 2024, down $386.6 million from March 31, 2023, as we have used operating cash flows to reduce our debt over the past year.
Current wording
Total debt outstanding was $1.1 billion at June 30, 2024, down $68.0 million from June 30, 2023, as we have used a portion of operating cash flows to reduce our debt over the past year.
Previous wording
We expect sales for the full year of 2024 to be flat to slightly positive compared to 2023, impacted by the following factors and assumptions:
Current wording
We expect sales for the full year of 2024 to be down around 6% compared to 2023, impacted by the following factors and assumptions:
Previous wording
•volumes of discretionary products used for swimming pool construction to be flat to down 10%;
Current wording
•volumes of discretionary products used for swimming pool construction to decline 15% to 20%;
Previous wording
•volumes of products used in the remodeling, renovation and upgrading of swimming pools to be flat to down 10%; and
Current wording
•volumes of products used in the remodeling, renovation and upgrading of swimming pools to decline as much as 15%;
Previous wording
•sustained demand for pool maintenance products;
Current wording
•sustained demand for pool maintenance products; and
Previous wording
•inflationary product cost increases of approximately 2% to 3%.
Current wording
•inflationary product cost increases of approximately 1% to 2%.
Previous wording
As previously disclosed in our 2023 Annual Report on Form 10-K, we project gross margin for the full year of 2024 to be in line with our long-term outlook of approximately 30.0%, with our highest margin in the second quarter of the year. Our actual gross margin will depend on amounts and timing of inflationary price increases, customer and product mix.
Current wording
As previously disclosed in our 2023 Annual Report on Form 10-K, we project gross margin for the full year of 2024 to be in line with our long-term outlook of approximately 30.0%. Our actual gross margin will depend on amounts and timing of inflationary price increases, customer and product mix.
Previous wording
We expect to leverage our existing infrastructure and manage discretionary spending to maintain expenses for the full year of 2024 in line with sales expectations to achieve an operating margin of approximately 13.0%.
Current wording
We expect to leverage our existing infrastructure and manage discretionary spending to mitigate inflationary impacts while continuing to invest in our business. For the full year of 2024, we expect to achieve an operating margin of approximately 12.0%.
Previous wording
We project that our annual effective tax rate (without the benefit from ASU 2016-09) for 2024 will approximate 25.3%. We expect our effective tax rate will fluctuate from quarter to quarter due to ASU 2016-09, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We recorded a $7.4 million, or $0.19 per diluted share, tax benefit from ASU 2016-09 for the three months ended March 31, 2024. We may recognize additional tax benefits related to stock option exercises in 2024 from grants that expire in future years. We have not included any expected tax benefits in our full year guidance beyond what we have recognized as of March 31, 2024.
Current wording
We project that our annual effective tax rate (without the benefit from ASU 2016-09) for 2024 will be around 25.0%. We expect our effective tax rate will fluctuate from quarter to quarter due to ASU 2016-09, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We recorded a $7.8 million, or $0.20 per diluted share, tax benefit from ASU 2016-09 for the six months ended June 30, 2024. We may recognize additional tax benefits related to stock option exercises in 2024 from grants that expire in future years. We have not included any expected tax benefits in our full year guidance beyond what we have recognized as of June 30, 2024.
Previous wording
We expect 2024 diluted EPS in the range of $13.19 to $14.19, including the impact of year-to-date tax benefits of $0.19. We expect to continue to use cash for the payment of cash dividends as and when declared by our Board of Directors (Board) and to fund opportunistic share repurchases under our Board-authorized share repurchase program.
Current wording
We expect 2024 diluted EPS in the range of $11.05 to $11.45, including the impact of year-to-date tax benefits of $0.20. We expect to continue to use cash for the payment of cash dividends as and when declared by our Board of Directors (Board) and to fund opportunistic share repurchases under our Board-authorized share repurchase program.
Previous wording
As of March 31, 2024, we conducted operations through 442 sales centers in North America, Europe and Australia. For the three months ended March 31, 2024, approximately 95% of our net sales were from our operations in North America.
Current wording
As of June 30, 2024, we conducted operations through 445 sales centers in North America, Europe and Australia. For the six months ended June 30, 2024, approximately 95% of our net sales were from our operations in North America.
Previous wording
We have not provided separate base business income statements within this Form 10-Q as our base business results for the quarter ended March 31, 2024 closely approximated consolidated results for the same period, and acquisitions and sales centers excluded from base business contributed less than 1% to the change in net sales.
Current wording
We have not provided separate base business income statements within this Form 10-Q as our base business results for the three and six months ended June 30, 2024 closely approximated consolidated results for the same period. Acquired and new market sales centers excluded from base business contributed less than 1% to the change in net sales.
Previous wording
The table below summarizes the changes in our sales center count during the first three months of 2024:
Current wording
The table below summarizes the changes in our sales center count during the first six months of 2024:
Previous wording
•Our net sales were negatively impacted by lower sales volumes from reduced pool construction activity and discretionary activity (see discussion below).
Current wording
•Net sales were negatively impacted by lower sales volumes resulting from reduced pool construction and discretionary activities (see discussion below).
Previous wording
In the first quarter of 2024, sales of equipment, which is used in maintenance, renovation and new construction activities and includes swimming pool heaters, pumps, lights, filters and automation, decreased 3% compared to the same period last year, and collectively represented approximately 34% of net sales for the period. Sales of building materials, which is primarily used in new construction and remodeling, decreased 11% compared to the first quarter of 2023 and represented approximately 13% of net sales in the first quarter of 2024.
Current wording
In the second quarter of 2024, sales of equipment, which is used in maintenance, renovation and new construction activities and includes swimming pool heaters, pumps, lights, filters and automation, were flat compared to the same period of last year, and collectively represented approximately 29% of net sales for the period. Sales of building materials, which are primarily used in new construction and remodeling, decreased 10% compared to the second quarter of 2023 and represented approximately 12% of net sales in the second quarter of 2024.
Previous wording
Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial installations are included in the appropriate existing product categories, and sales trends in these areas are reflected in the discussion above. Sales to retail customers decreased 4% in the first quarter of 2024 compared to the first quarter of 2023 and represented approximately 15% of our total net sales. Sales to commercial swimming pool customers were flat in the first quarter of 2024 compared to the first quarter of 2023 and represented approximately 5% of our net sales for the first quarter of 2024.
Current wording
Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial installations are included in the appropriate existing product categories, and sales trends in these areas are reflected in the discussion above. Sales to retail customers decreased 6% in the second quarter of 2024 compared to the second quarter of 2023 and represented approximately 15% of our total net sales. Sales to commercial swimming pool customers increased 16% in the second quarter of 2024 compared to the second quarter of 2023 and represented approximately 5% of our net sales for the second quarter of 2024.
Previous wording
Operating expenses increased 3% in the first quarter of 2024 compared to the first quarter of 2023. Expense growth drivers included rent and facility costs, inflationary wage increases, insurance costs, technology initiatives and investments in greenfield locations. These increases were partially offset by lower variable costs, including performance-based compensation and freight costs. As a percentage of net sales, operating expenses increased to 20.5% in the first quarter of 2024 compared to 18.6% in the same period of 2023.
Current wording
Operating expenses increased 7% in the second quarter of 2024 compared to the second quarter of 2023. Expense growth drivers included cost inflation, particularly on base wages, healthcare costs and rent and facility costs. We also increased investment spend to drive future growth through the expansion of our network and our technology initiatives. These increases were partially offset by lower variable costs, including performance-based compensation. As a percentage of net sales, operating expenses increased to 14.6% in the second quarter of 2024 compared to 13.0% in the same period of 2023.
Previous wording
Interest and other non-operating expenses, net for the first quarter of 2024 decreased $2.4 million compared to the first quarter of 2023, primarily due to a decrease in average debt between periods. Our weighted average effective interest rate increased to 5.3% in the first quarter of 2024 from 4.8% in the first quarter of 2023 on average outstanding debt of $1.0 billion and$1.3 billion for the respective periods.
Current wording
Interest and other non-operating expenses, net for the second quarter of 2024 decreased $2.8 million compared to the second quarter of 2023, primarily due to a decrease in average debt between periods. Our weighted average effective interest rate increased to 5.3% in the second quarter of 2024 from 5.2% in the second quarter of 2023 on average outstanding debt of $1.0 billion and $1.3 billion for the respective periods.
Previous wording
Our effective income tax rate was 17.3% for the three months ended March 31, 2024, compared to 21.8% for the three months ended March 31, 2023. We recorded a $7.4 million tax benefit from ASU 2016-09 in the quarter ended March 31, 2024, compared to a tax benefit of $4.8 million realized in the same period last year. Without the benefit from ASU 2016-09 in both periods, our effective tax rate was 25.1% for the first quarter of 2024 and 25.5% for the first quarter of 2023.
Current wording
Our effective income tax rate was 25.3% for the three months ended June 30, 2024, compared to 25.1% for the three months ended June 30, 2023. We recorded a $0.4 million tax benefit from ASU 2016-09 in the quarter ended June 30, 2024, compared to a tax benefit of $0.6 million realized in the same period last year. Without the benefit from ASU 2016-09 in both periods, our effective tax rate was 25.4% for the second quarter of 2024 and 25.4% for the second quarter of 2023.
Previous wording
Net income decreased 22% to $78.9 million in the first quarter of 2024 compared to $101.7 million in the first quarter of 2023. Earnings per diluted share decreased 21% to $2.04 in the first quarter of 2024 compared to $2.58 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 25% to $1.85 in the first quarter of 2024 compared to $2.46 in the first quarter of 2023. See the reconciliation of GAAP to non-GAAP measures below.
Current wording
Net income decreased 17% to $192.4 million in the second quarter of 2024 compared to $232.3 million in the second quarter of 2023. Earnings per diluted share decreased 16% to $4.99 in the second quarter of 2024 compared to $5.91 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 15% to $4.98 in the second quarter of 2024 compared to $5.89 in the second quarter of 2023. See the reconciliation of GAAP to non-GAAP measures below.
Previous wording
Net sales of $1.1 billion in the first quarter of 2024 decreased 7% compared to $1.2 billion in the first quarter of 2023, reflecting challenges from current macroeconomic conditions and mixed weather. Our base business results approximated our consolidated results for the period. Maintenance activities were stable during the quarter, indicating steady demand for non-discretionary products, while pool construction and discretionary activities were weaker.
Current wording
Net sales for the first six months of 2024 decreased 6% compared to the same period last year. In the first half of 2024, maintenance activities were stable, indicating steady demand for non-discretionary products, while pool construction and discretionary activities were weaker, impacted from current macroeconomic conditions. The first quarter of 2024 also reflected challenges from mixed weather, while the second quarter reflected a sequential improvement.
Previous wording
•Net sales benefited approximately 1% to 2% from inflationary product cost increases, which is net of price deflation for some products, primarily chemical sanitizers and PVC pipe. This compares to a benefit of 4% to 5% in the first quarter of 2023.
Current wording
•Net sales benefited approximately 1% to 2% from inflationary product cost increases, which is net of price deflation for some products, primarily chemical sanitizers and commodity-based products like PVC pipe. This compares to a benefit of 4% in the first six months of 2023.
Previous wording
•We estimate that unfavorable weather conditions negatively impacted sales by approximately 2%.
Current wording
•We estimate that unfavorable weather conditions negatively impacted sales by approximately 1%, primarily in the first quarter.
Previous wording
Gross margin decreased 40 basis points to 30.2% in the first quarter of 2024 compared to 30.6% in the first quarter of 2023. In the first quarter of 2024, our gross margin was impacted by the following factors.
Current wording
Gross margin declined 50 basis points to 30.1% in the six months ended June 30, 2024, compared to 30.6% in the first six months of 2023. In the first half of 2024, our gross margin was impacted by the following factors.
Previous wording
•We realized a higher cost of product in the first quarter of 2024 compared to the first quarter of 2023. In 2023, we started the year carrying a large amount of lower cost strategically-purchased inventory and successfully reduced this excess inventory to normalized levels by the end of the 2023 season. The lower-cost inventory was more impactful on gross margin in the first quarter of 2023 when a higher portion was sold relative to the full year.
Current wording
•In 2023, we started the year carrying a large amount of lower cost strategically-purchased inventory and successfully reduced this excess inventory to normalized levels by the end of the 2023 season resulting in a lower gross margin in 2024.
Previous wording
•Gross margin in the first quarter of 2024 included a benefit of $12.6 million, or 110 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
Current wording
•Gross margin in the first half of 2024 included a benefit of $12.6 million, or 40 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
Previous wording
Interest and other non-operating expenses, net for the first quarter of 2024 decreased $2.4 million compared to the first quarter of 2023, primarily due to a decrease in average debt between periods.
Current wording
Interest and Other Non-Operating Expenses, Net
Previous wording
The first quarter of 2024 was the tenth wettest quarter on record leading to mixed impacts across our markets, particularly in the month of March, which is seasonally our highest sales month of the first quarter. However, we also observed above-average temperatures during the quarter contributing positively to economic activities in many regions, such as improvement in California during March. The adverse effects of cooler and wetter weather in Florida and the Southeast compared to the first quarter of last year and excessive precipitation in Texas and the Northeast outweighed the positives, resulting in an unfavorable impact on net sales. In the first quarter of 2023, varied weather conditions had a more pronounced unfavorable impact on net sales due to unusually wet and cold weather in the western U.S., particularly California and Arizona. Conditions were generally favorable in our southern markets, where sales benefited from warmer weather and below-average precipitation.
Current wording
The first quarter of 2024 was the tenth wettest quarter on record leading to mixed impacts across our markets, particularly in the month of March, which is seasonally our highest sales month of the first quarter. However, we also observed above-average temperatures during the quarter contributing positively to economic activities in many regions, such as improvement in California during March. The adverse effects of cooler and wetter weather in Florida and the Southeast compared to the first quarter of last year and excessive precipitation in Texas and the Northeast outweighed the positives, resulting in an unfavorable net impact on net sales. In the first quarter of 2023, varied weather conditions had a more pronounced unfavorable impact on net sales due to unusually wet and cold weather in the western U.S., particularly California and Arizona. This wet and cold weather was partially offset by generally favorable conditions in our southern markets, where sales benefited from warmer weather and below-average precipitation.
Previous wording
Our primary capital needs are seasonal working capital obligations, debt repayment obligations and other general corporate initiatives, including acquisitions, opening new sales centers, dividend payments and share repurchases. Our primary working capital obligations are for the purchase of inventory, payroll, rent, other facility costs and selling and administrative expenses. Our working capital obligations fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases. Our primary sources of working capital are cash from operations supplemented by bank borrowings, which have historically been sufficient to support our growth and finance acquisitions. We have funded our capital expenditures and share repurchases in substantially the same manner.
Current wording
Our primary capital needs are seasonal working capital obligations, debt repayment obligations and other general corporate initiatives, including acquisitions, opening new sales centers, technology-related investments, dividend payments and share repurchases. Our primary working capital obligations are for the purchase of inventory, payroll, rent, other facility costs and selling and administrative expenses. Our working capital obligations fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases. Our primary sources of working capital are cash from operations supplemented by bank borrowings, which have historically been sufficient to support our growth and finance acquisitions. We have funded our capital expenditures and share repurchases in substantially the same manner.
Previous wording
Historically, our capital expenditures have averaged roughly 1.0% of net sales. Capital expenditures were 1.1% of net sales in 2023 and 0.7% of net sales in 2022 and 2021. In 2022 and 2021, our capital expenditures as a percentage of net sales were lower than our historical average due to our significant sales growth in those years. Based on management’s current plans, we project capital expenditures for 2024 will be 1.0% to 1.5% of net sales.
Current wording
Historically, our capital expenditures have averaged roughly 1.0% of net sales. Capital expenditures were 1.1% of net sales in 2023 and 0.7% of net sales in 2022 and 2021. In 2022 and 2021, our capital expenditures as a percentage of net sales were lower than our historical average due to our significant sales growth in those years. Based on management’s current plans, we project capital expenditures for 2024 will be approximately 1.0% to 1.5% of net sales.
Previous wording
Net cash provided by operations improved to $145.4 million for the first three months of 2024 from $103.2 million for the first three months of 2023, primarily driven by positive changes in working capital, partially offset by lower net income.
Current wording
Net cash provided by operations decreased to $172.1 million for the first six months of 2024 from $376.8 million for the first six months of 2023, primarily driven by decreases in working capital as we have utilized more cash for vendor early buy payments in 2024 versus 2023 and lower net income.
Previous wording
Net cash used in investing activities for the first three months of 2024 increased $1.4 million compared to the first three months of 2023, primarily due to a $1.5 million increase in net capital expenditures.
Current wording
Net cash used in investing activities for the first six months of 2024 decreased $3.5 million compared to the first six months of 2023, primarily due to a decrease of $7.1 million in cash used for acquisitions, partially offset by a $4.7 million increase in net capital expenditures.
Previous wording
Net cash used in financing activities was $124.2 million for the first three months of 2024 compared to $105.5 million for the first three months of 2023, primarily reflecting a $53.1 million increase in net debt payments in the first three months of 2024 compared to the first three months of 2023, partially offset by a $34.2 million decrease in share repurchases between periods.
Current wording
Net cash used in financing activities was $100.0 million for the first six months of 2024 compared to $328.5 million for the first six months of 2023, primarily reflecting $62.9 million of net debt proceeds in the first six months of 2024 versus $202.5 million of net debt payments in the first six months of 2023, partially offset by a $33.8 million increase in share repurchases and a $6.3 million increase in dividends paid in the first six months of 2024 compared to the same period in 2023.
Previous wording
At March 31, 2024, there was $115.4 million of revolving borrowings outstanding, a $481.3 million term loan, a $16.0 million standby letter of credit outstanding and $618.6 million available for borrowing under the Credit Facility. The weighted average effective interest rate for the Credit Facility as of March 31, 2024, was approximately 4.3%, excluding commitment fees and including the impact of our interest rates swaps.
Current wording
At June 30, 2024, there was $178.4 million of revolving borrowings outstanding, a $475.0 million term loan, a $16.0 million standby letter of credit outstanding and $561.9 million available for borrowing under the Credit Facility. The weighted average effective interest rate for the Credit Facility as of June 30, 2024, was approximately 4.5%, excluding commitment fees and including the impact of our interest rates swaps.
Previous wording
At March 31, 2024, there was $262.3 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.2%, excluding commitment fees.
Current wording
At June 30, 2024, there was $334.7 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.2%, excluding commitment fees.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
•Net sales benefited approximately 1% from inflationary product cost increases, which is net of price deflation for some products, primarily chemical sanitizers and commodity-based products like PVC pipe. This compares to a benefit of 3% to 4% in the second quarter of 2023.
Current report — wording carried from elsewhere
The following factors also impacted our sales and are listed in order of estimated magnitude.
Current report — wording carried from elsewhere
•Net sales were negatively impacted by lower sales volumes resulting from reduced pool construction and discretionary activities (see discussion below).
Current report — wording carried from elsewhere
In the first six months of 2024, sales of equipment, which includes swimming pool heaters, pumps, lights, filters and automation, decreased approximately 1% compared to the same period last year and collectively represented 31% of net sales in the first six months of 2024. Sales of building materials, which are primarily used in new pool construction and remodeling, decreased 10% compared to the first six months of 2023 and represented approximately 12% of net sales in the first six months of 2024.
Current report — wording carried from elsewhere
Sales to specialty retailers that sell swimming pool supplies and customers who service large commercial installations are included in the appropriate existing product categories, and sales trends in these areas are reflected in the discussion above. Sales to retail customers decreased 6% in the first six months of 2024 compared to the first six months of 2023 and represented approximately 15% of our consolidated net sales. As consumers take advantage of summer travel and recreational opportunities, sales to commercial customers increased 9% in the first six months of 2024 compared to the first six months of 2023 and represented approximately 5% of our consolidated net sales in the first six months of 2024.
Current report — wording carried from elsewhere
Operating expenses for the six months ended June 30, 2024 were up 5% compared to the prior year period. Expense growth drivers included rent and facility costs, inflationary wage increases, insurance costs, technology initiatives and investments in greenfield locations. These increases were partially offset by lower variable costs, including performance-based compensation.
Current report — wording carried from elsewhere
Net Income and Earnings Per Share
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•Gross margin in the first quarter of 2024 included a benefit of $12.6 million, or 110 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
Previous report — wording carried elsewhere
•We realized a higher cost of product in the first quarter of 2024 compared to the first quarter of 2023. In 2023, we started the year carrying a large amount of lower cost strategically-purchased inventory and successfully reduced this excess inventory to normalized levels by the end of the 2023 season. The lower-cost inventory was more impactful on gross margin in the first quarter of 2023 when a higher portion was sold relative to the full year.