POOL CORP
For the period ended Sep 30, 2024. Filed Oct 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.
Sep 30, 2024 · Filed Oct 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 2024-06-30; filed 2024-07-30.
0000945841-24-000136
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0000945841-24-000160
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 158 previous paragraphs and 160 current paragraphs.
95 unchanged; 51 reworded; 14 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 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 (14)
Current report
Net sales decreased 3% in the third quarter of 2024 to $1.4 billion compared to $1.5 billion in the third quarter of 2023. Base business results approximated consolidated results for the period. Following similar trends from the first half of the year, our third quarter results were anchored by strong sales of non-discretionary maintenance products, while sales of pool construction and discretionary products remained soft compared to the third quarter of 2023. Net sales benefited approximately 2% from one more selling day in the third quarter of 2024 versus the same period in 2023.
Current report
Gross profit decreased 3% to $416.4 million in the third quarter of 2024 from $428.7 million in the same period of 2023. Gross margin remained consistent at 29.1% for each of the third quarters of 2024 and 2023.
Current report
Interest and other non-operating expenses, net for the third quarter of 2024 decreased $1.2 million compared to the third quarter of 2023, primarily due to a decrease in average debt between periods.
Current report
As allowed for companies impacted by Hurricane Francine, we deferred our 2024 third quarter estimated federal tax payment of $42.0 million, which will be paid in February 2025.
Current report
•approximately 2% benefit from one more selling day in the third quarter of 2024 compared to the same quarter in 2023;
Current report
•approximately net 1% benefit from price comprised of a 2% benefit from inflation-driven price increases on equipment, offset by moderate declines in areas like chemical sanitizers and commodities; and
Current report
•lower sales volumes due to a decline in pool construction and discretionary spending (see discussion below).
Current report
Gross margin remained consistent at 29.1% in both the third quarters of 2024 and 2023. While being affected by unfavorable product and customer mix in the current environment, strategic gross margin-related initiatives and progress on our pricing optimization efforts sustained our gross margin.
Current report
Operating expenses increased 2% in the third quarter of 2024 compared to the third quarter of 2023. Expense growth drivers included inflationary increases, costs associated with opening new locations and investments in our technology initiatives. These increases were partially offset by lower variable costs and a shift of certain expenses from the third quarter of 2024 to the fourth quarter of 2024.
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
•approximately 1% benefit from inflationary product cost increases; and
Current report
•less favorable product and customer mix;
Current report
The third quarter of 2024 saw a mix of weather conditions across the continental U.S. Several regions faced notable weather events during the quarter. Tropical weather brought localized flooding and heavy rainfall particularly to the coastal areas of Florida, Louisiana and the Carolinas. Wetter conditions and cooler temperatures in July of 2024, compared to July of 2023, impacted maintenance activities in Texas, a key market, during a prominent selling month. The Northeast and Midwest regions experienced generally warm and dry conditions throughout the quarter, which was favorable for pool-related activities. The West, particularly in California, continued its trend of above-average temperatures and dry conditions, which supported outdoor and construction activities. Collectively, weather conditions in the third quarter of 2024 had a relatively neutral impact on the overall business.
Current report
Net cash provided by operations decreased to $488.6 million for the first nine months of 2024 from $750.0 million for the first nine months of 2023, impacted by our prior year inventory reduction efforts of $330.9 million during the first nine months of 2023 and lower net income in 2024.
Removed paragraphs (12)
Previous 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.
Previous 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.
Previous 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.
Previous report
•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.
Previous 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.
Previous report
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 report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Previous report
•Net sales were negatively impacted by lower sales volumes resulting from reduced pool construction and discretionary activities (see discussion below).
Previous report
•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 report
•We estimate that unfavorable weather conditions negatively impacted sales by approximately 1%, primarily in the first quarter.
Previous 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.
Previous report
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.
Reworded paragraphs (51)
Previous wording
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 wording
Increases in our selling and administrative expenses (operating expenses) moderated during the third quarter of 2024, growing 2% to $240.1 million compared to $234.3 million in the third quarter of 2023. Expense increases in the quarter primarily related to inflationary impacts, the expansion of our network and our technology initiatives and were partially offset by lower variable costs and a timing shift of certain expenses from the third quarter of 2024 to the fourth quarter of 2024. As a percentage of net sales, operating expenses increased to 16.8% in the third quarter of 2024 compared to 15.9% in the same period of 2023.
Previous 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.
Current wording
Operating income in the third quarter of 2024 decreased 9% to $176.4 million from $194.4 million in 2023. Operating margin was 12.3% in the third quarter of 2024 compared to 13.2% in the third quarter of 2023.
Previous 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.
Current wording
We recorded a $0.5 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended September 30, 2024, compared to a tax benefit of $0.4 million realized in the same period of 2023. This resulted in a $0.01 per diluted share tax benefit in the third quarter of 2024 consistent with the $0.01 per diluted share tax benefit realized in the same period of 2023.
Previous 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.
Current wording
Net income decreased 9% to $125.7 million in the third quarter of 2024 compared to $137.8 million in the third quarter of 2023. Earnings per diluted share decreased 7% to $3.27 in the third quarter of 2024 compared to $3.51 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 7% to $3.26 compared to $3.50 in the third 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 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.
Current wording
Total net receivables, including pledged receivables, trended in line with net sales activity at September 30, 2024 compared to September 30, 2023. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 26.7 days at September 30, 2024 and 26.3 days at September 30, 2023. Our allowance for doubtful accounts balance was $10.0 million at September 30, 2024 and $10.6 million at September 30, 2023.
Previous 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.
Current wording
Our inventory management efforts reduced our inventory levels compared to September 30, 2023 by $78.8 million, or 6%, to $1.2 billion. Our inventory reserve was $28.6 million at September 30, 2024 and $25.9 million at September 30, 2023. Our inventory turns, as calculated on a trailing four quarters basis, were 2.8 times at September 30, 2024 and 2.6 times at September 30, 2023.
Previous 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.
Current wording
Total debt outstanding was $923.8 million at September 30, 2024, down $110.1 million from September 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 down around 6% compared to 2023, impacted by the following factors and assumptions:
Current wording
We expect sales for the full year of 2024 to decline by approximately 5% from 2023 based on the following factors and assumptions:
Previous wording
•volumes of discretionary products used for swimming pool construction to decline 15% to 20%;
Current wording
•a 15-20% decline in volumes of discretionary products used for swimming pool construction;
Previous wording
•volumes of products used in the remodeling, renovation and upgrading of swimming pools to decline as much as 15%;
Current wording
•a 10-15% decline in volumes of products used in the remodeling, renovation and upgrading of swimming pools;
Previous wording
•sustained demand for pool maintenance products; and
Current wording
•sustained demand for pool maintenance products, although less prominent to our fourth quarter sales mix; and
Previous wording
•inflationary product cost increases of approximately 1% to 2%.
Current wording
•inflationary product cost increases of approximately 1%.
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%. 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 expect 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, product mix and customer mix.
Previous 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%.
Current wording
We expect to leverage our existing infrastructure and manage discretionary spending to mitigate inflationary impacts while continuing to invest in our business.
Previous 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.
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 an $8.3 million, or $0.21 per diluted share, tax benefit from ASU 2016-09 for the nine months ended September 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 September 30, 2024.
Previous 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.
Current wording
We expect 2024 diluted EPS in the range of $11.06 to $11.46, including the impact of year-to-date tax benefits of $0.21. 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 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.
Current wording
As of September 30, 2024, we conducted operations through 447 sales centers in North America, Europe and Australia. For the nine months ended September 30, 2024, approximately 96% 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 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.
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 nine months ending September 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 six months of 2024:
Current wording
The table below summarizes the changes in our sales center count during the first nine months of 2024:
Previous wording
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 wording
Net sales of $1.4 billion in the third quarter of 2024 decreased 3% compared to $1.5 billion in the third quarter of 2023. In the third quarter, recurring maintenance product sales remained strong, while spending on larger semi-discretionary items, as well as new pool construction and renovation projects, showed a more measured pace.
Previous wording
•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 wording
•stability from maintenance-related activities evidenced by volume growth in chemicals; sales of chemicals increased 2% compared to the third quarter of 2023 and represented 17% of our net sales;
Previous 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.
Current wording
In the third quarter of 2024, sales of equipment, which is used across maintenance, renovation and new construction and includes swimming pool heaters, pumps, lights, filters and automation, grew 1% versus the same period 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 9% compared to the third quarter of 2023 and represented approximately 11% of net sales in the third 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 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.
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 product categories are reflected in the discussion above. Sales to our retail customers declined by 2% in the third quarter of 2024, as steady maintenance sales during a key seasonal period partially offset ongoing weakness in discretionary demand, compared to the third quarter of 2023. Retail sales represented approximately 14% of our total net sales in the third quarter of 2024. Sales to commercial swimming pool customers remained strong with an increase of 7% in the third quarter of 2024 compared to the third quarter of 2023 and represented approximately 5% of our net sales for the third quarter of 2024.
Previous 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.
Current wording
Interest and other non-operating expenses, net for the third quarter of 2024 decreased $1.2 million compared to the third quarter of 2023, primarily due to a decrease in average debt between periods. Our weighted average effective interest rate remained unchanged at 5.2% in the third quarter of 2024 compared to the third quarter of 2023 on average outstanding debt of $946.1 million and $1.0 billion for the respective periods.
Previous 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.
Current wording
Our effective income tax rate was 23.4% for the three months ended September 30, 2024, compared to 23.8% for the three months ended September 30, 2023. We recorded a $0.5 million tax benefit from ASU 2016-09 in the quarter ended September 30, 2024, compared to a tax benefit of $0.4 million realized in the same period last year. Without the benefit from ASU 2016-09 in both periods, our effective tax rate was 23.7% for the third quarter of 2024 and 24.1% for the third quarter of 2023. Our third quarter effective income tax rate is typically lower compared to other quarters due to the annual expiration of statutes of limitations in the various jurisdictions where we have recorded uncertain tax positions.
Previous 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.
Current wording
Net income decreased 9% to $125.7 million in the third quarter of 2024 compared to $137.8 million in the third quarter of 2023. Earnings per diluted share decreased 7% to $3.27 in the third quarter of 2024 compared to $3.51 in the same period of 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 7% to $3.26 in the third quarter of 2024 compared to $3.50 in the third quarter of 2023. See the reconciliation of GAAP to non-GAAP measures below.
Previous 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.
Current wording
Net sales for the first nine months of 2024 decreased 5% compared to the same period last year. In the first nine months of 2024, maintenance activities were stable, reflecting steady demand for non-discretionary products, while pool construction and discretionary spending were softer, impacted by current macroeconomic conditions.
Previous wording
•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 wording
•stability from maintenance-related activities evidenced by volume growth in chemicals; sales of chemicals increased 1% compared to the first nine months of 2023 and represented 15% of our net sales;
Previous wording
•Net sales were negatively impacted by lower sales volumes resulting from reduced pool construction and discretionary activities (see discussion below).
Current wording
•negative volume impacts from reduced pool construction and discretionary activities (see discussion below).
Previous wording
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 wording
In the first nine months of 2024, sales of equipment, which is used across maintenance, renovation and new construction and includes swimming pool heaters, pumps, lights, filters and automation, decreased approximately 1% compared to the same period last year and collectively represented 30% of net sales in the first nine months of 2024. Sales of building materials, which are primarily used in new pool construction and remodeling, decreased 10% compared to the first nine months of 2023 and represented approximately 12% of net sales in the first nine months 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 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 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 nine months of 2024 compared to the first nine months of 2023 and represented approximately 15% of our consolidated net sales. Sales to commercial customers increased 8% in the first nine months of 2024 compared to the first nine months of 2023 and represented approximately 5% of our consolidated net sales in the first nine months of 2024.
Previous 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.
Current wording
Gross margin declined 40 basis points to 29.7% in the nine months ended September 30, 2024, compared to 30.1% in the first nine months of 2023. In the first nine months of 2024, our gross margin was impacted by:
Previous 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.
Current wording
•carrying a large amount of lower cost strategically-purchased inventory in the beginning of 2023 that was successfully reduced to normalized levels by the end of 2023;
Previous wording
•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 wording
•higher levels of vendor incentives earned versus 2023 due to increased purchasing as compared to the prior year when we were actively reducing inventory levels; and
Previous 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.
Current wording
•a benefit of $12.6 million, or 30 basis points, related to a reduction of estimated import taxes previously recorded in the fourth quarter of 2022.
Previous wording
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 wording
Operating expenses for the nine months ended September 30, 2024 were up 4% compared to the prior year period. Expense growth drivers included inflationary wage, rent and insurance increases, higher costs associated with the expansion of our network and additions related to our technology initiatives. We partially mitigated these increases with close management of variable costs.
Previous wording
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 wording
Interest and other non-operating expenses, net for the first nine months of 2024 decreased $6.5 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 5.2% from 5.1% for the respective periods on average outstanding debt of $1.0 billion for the first nine months of 2024 versus $1.2 billion for the same period of 2023.
Previous wording
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 wording
Our effective income tax rate was 23.2% for the nine months ended September 30, 2024, compared to 24.1% for the nine months ended September 30, 2023. We recorded an $8.3 million, or $0.21 per diluted share, tax benefit from ASU 2016-09 in the nine months ended September 30, 2024, compared to a $5.9 million, or $0.15 per diluted share, tax benefit in the same period of 2023. Without the benefits from ASU 2016-09, our effective tax rate was 24.8% for the nine months ended September 30, 2024, and 25.0% for the nine months ended September 30, 2023.
Previous wording
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 wording
Net income decreased 16% to $397.0 million for the nine months ended September 30, 2024, compared to $471.8 million for the nine months ended September 30, 2023. Earnings per diluted share decreased 14% to $10.30 for the nine months ended September 30, 2024, versus $12.00 per diluted share for the nine months ended September 30, 2023. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 15% to $10.09 for the nine months ended September 30, 2024, compared to $11.85 for the nine months ended September 30, 2023. See the reconciliation of GAAP to non-GAAP measures below.
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 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.
Current wording
The first quarter of 2024 was the tenth wettest first 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.
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