0000950170-24-093092.txt : 20240808 0000950170-24-093092.hdr.sgml : 20240808 20240807182158 ACCESSION NUMBER: 0000950170-24-093092 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20240629 FILED AS OF DATE: 20240808 DATE AS OF CHANGE: 20240807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Leslie's, Inc. CENTRAL INDEX KEY: 0001821806 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] ORGANIZATION NAME: 07 Trade & Services IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39667 FILM NUMBER: 241185376 BUSINESS ADDRESS: STREET 1: 2005 E. INDIAN SCHOOL ROAD CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 602-366-3817 MAIL ADDRESS: STREET 1: 2005 E. INDIAN SCHOOL ROAD CITY: PHOENIX STATE: AZ ZIP: 85016 10-Q 1 lesl-20240629.htm 10-Q 10-Q
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9184

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39667

 

LESLIE’S, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

20-8397425

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2005 East Indian School Road

Phoenix, AZ

85016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 366-3999

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

LESL

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of August 2, 2024, the Registrant had 184,912,804, shares of common stock, $0.001 par value per share, outstanding.

 

 

 


Table of Contents

 

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Stockholders’ Deficit

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to the Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

 

 

 

Signatures

 

28

 

i


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, legal proceedings, competitive advantages, market size, growth opportunities, industry expectations, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions. Our actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

our ability to execute on our growth strategies;
supply disruptions;
our ability to maintain favorable relationships with suppliers and manufacturers;
competition from mass merchants and specialty retailers;
impacts on our business from the sensitivity of our business to weather conditions, changes in the economy (including rising interest rates, recession fears, and inflationary pressures), geopolitical events or conflicts, and the housing market;
disruptions in the operations of our distribution centers;
our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;
our ability to attract and retain senior management and other qualified personnel;
regulatory changes and development affecting our current and future products including evolving legal standards and regulations concerning environmental, social and governance (“ESG”) matters;
our ability to obtain additional capital to finance operations;
commodity price inflation and deflation;
impacts on our business from epidemics, pandemics, or natural disasters;
impacts on our business from cyber incidents and other security threats or disruptions;
our ability to remediate material weaknesses or other deficiencies in our internal control over financial reporting or to maintain effective disclosure controls and procedures and internal control over financial reporting; and
other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission (“SEC”).

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2023 and in our other filings with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q, and, while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, changed expectations, the occurrence of unanticipated events or otherwise, except as required by law. We may not actually achieve the plans, intentions, outcomes, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

1


PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

LESLIE’S, INC.

CONDENSED Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

 

 

(Unaudited)

 

 

(Audited)

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,438

 

 

$

55,420

 

 

$

19,430

 

Accounts and other receivables, net

 

 

45,817

 

 

 

29,396

 

 

 

49,263

 

Inventories

 

 

302,209

 

 

 

311,837

 

 

 

436,557

 

Prepaid expenses and other current assets

 

 

34,545

 

 

 

23,633

 

 

 

31,454

 

Total current assets

 

 

457,009

 

 

 

420,286

 

 

 

536,704

 

Property and equipment, net

 

 

94,135

 

 

 

90,285

 

 

 

85,396

 

Operating lease right-of-use assets

 

 

282,556

 

 

 

251,460

 

 

 

250,378

 

Goodwill and other intangibles, net

 

 

216,041

 

 

 

218,855

 

 

 

219,835

 

Deferred tax assets

 

 

15,409

 

 

 

7,598

 

 

 

194

 

Other assets

 

 

40,038

 

 

 

45,951

 

 

 

44,918

 

Total assets

 

$

1,105,188

 

 

$

1,034,435

 

 

$

1,137,425

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

108,935

 

 

$

58,556

 

 

$

147,436

 

Accrued expenses and other current liabilities

 

 

107,208

 

 

 

90,598

 

 

 

95,074

 

Operating lease liabilities

 

 

61,638

 

 

 

62,794

 

 

 

61,342

 

Income taxes payable

 

 

 

 

 

5,782

 

 

 

3,345

 

Current portion of long-term debt

 

 

8,100

 

 

 

8,100

 

 

 

8,100

 

Total current liabilities

 

 

285,881

 

 

 

225,830

 

 

 

315,297

 

Operating lease liabilities, noncurrent

 

 

216,756

 

 

 

193,222

 

 

 

193,004

 

Revolving Credit Facility

 

 

 

 

 

 

 

 

31,000

 

Long-term debt, net

 

 

768,598

 

 

 

773,276

 

 

 

774,884

 

Other long-term liabilities

 

 

2,110

 

 

 

3,469

 

 

 

3,050

 

Total liabilities

 

 

1,273,345

 

 

 

1,195,797

 

 

 

1,317,235

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 1,000,000,000 shares authorized and 184,912,804, 184,333,670, and 184,004,936 issued and outstanding as of June 29, 2024, September 30, 2023, and July 1, 2023, respectively.

 

 

185

 

 

 

184

 

 

 

184

 

Additional paid in capital

 

 

105,940

 

 

 

99,280

 

 

 

97,313

 

Retained deficit

 

 

(274,282

)

 

 

(260,826

)

 

 

(277,307

)

Total stockholders’ deficit

 

 

(168,157

)

 

 

(161,362

)

 

 

(179,810

)

Total liabilities and stockholders’ deficit

 

$

1,105,188

 

 

$

1,034,435

 

 

$

1,137,425

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

2


LESLIE’S, INC.

CONDENSED Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 29, 2024

 

 

July 1, 2023

 

 

June 29, 2024

 

 

July 1, 2023

 

Sales

 

$

569,638

 

 

$

610,891

 

 

$

932,262

 

 

$

1,018,839

 

Cost of merchandise and services sold

 

 

340,798

 

 

 

359,295

 

 

 

598,686

 

 

 

630,777

 

Gross profit

 

 

228,840

 

 

 

251,596

 

 

 

333,576

 

 

 

388,062

 

Selling, general and administrative expenses

 

 

131,145

 

 

 

135,789

 

 

 

302,879

 

 

 

324,427

 

Operating income

 

 

97,695

 

 

 

115,807

 

 

 

30,697

 

 

 

63,635

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

18,156

 

 

 

17,675

 

 

 

53,380

 

 

 

48,282

 

Total other expense

 

 

18,156

 

 

 

17,675

 

 

 

53,380

 

 

 

48,282

 

Income (loss) before taxes

 

 

79,539

 

 

 

98,132

 

 

 

(22,683

)

 

 

15,353

 

Income tax expense (benefit)

 

 

18,889

 

 

 

25,585

 

 

 

(9,227

)

 

 

4,592

 

Net income (loss)

 

$

60,650

 

 

$

72,547

 

 

$

(13,456

)

 

$

10,761

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.33

 

 

$

0.39

 

 

$

(0.07

)

 

$

0.06

 

Diluted

 

$

0.33

 

 

$

0.39

 

 

$

(0.07

)

 

$

0.06

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

184,834

 

 

 

183,932

 

 

 

184,614

 

 

 

183,725

 

Diluted

 

 

184,861

 

 

 

184,760

 

 

 

184,614

 

 

 

184,752

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

3


LESLIE’S, INC.

CONDENSED Consolidated Statements of Stockholders’ Deficit

(Amounts in Thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid in Capital

 

 

Retained Deficit

 

 

Stockholders’ Deficit

 

Balance, April 1, 2023

 

 

183,843

 

 

$

184

 

 

$

94,705

 

 

$

(349,854

)

 

$

(254,965

)

Issuance of common stock under the Plan

 

 

166

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,649

 

 

 

 

 

 

2,649

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(4

)

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

Net income

 

 

 

 

 

 

 

 

 

 

 

72,547

 

 

 

72,547

 

Balance, July 1, 2023

 

 

184,005

 

 

$

184

 

 

$

97,313

 

 

$

(277,307

)

 

$

(179,810

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2024

 

 

184,743

 

 

$

185

 

 

$

103,775

 

 

$

(334,932

)

 

$

(230,972

)

Issuance of common stock under the Plan

 

 

186

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,246

 

 

 

 

 

 

2,246

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(16

)

 

 

 

 

 

(81

)

 

 

 

 

 

(81

)

Net income

 

 

 

 

 

 

 

 

 

 

 

60,650

 

 

 

60,650

 

Balance, June 29, 2024

 

 

184,913

 

 

$

185

 

 

$

105,940

 

 

$

(274,282

)

 

$

(168,157

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid in Capital

 

 

Retained Deficit

 

 

Stockholders’ Deficit

 

Balance, October 1, 2022

 

 

183,481

 

 

$

183

 

 

$

89,934

 

 

$

(288,068

)

 

$

(197,951

)

Issuance of common stock under the Plan

 

 

643

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

9,159

 

 

 

 

 

 

9,159

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(119

)

 

 

 

 

 

(1,780

)

 

 

 

 

 

(1,780

)

Net income

 

 

 

 

 

 

 

 

 

 

 

10,761

 

 

 

10,761

 

Balance, July 1, 2023

 

 

184,005

 

 

$

184

 

 

$

97,313

 

 

$

(277,307

)

 

$

(179,810

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

 

184,334

 

 

$

184

 

 

$

99,280

 

 

$

(260,826

)

 

$

(161,362

)

Issuance of common stock under the Plan

 

 

727

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

7,629

 

 

 

 

 

 

7,629

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(148

)

 

 

 

 

 

(969

)

 

 

 

 

 

(969

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,456

)

 

 

(13,456

)

Balance, June 29, 2024

 

 

184,913

 

 

$

185

 

 

$

105,940

 

 

$

(274,282

)

 

$

(168,157

)

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

4


LESLIE’S, INC.

CONDENSED Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)

 

 

Nine Months Ended

 

 

 

June 29, 2024

 

 

July 1, 2023

 

Operating Activities

 

 

 

 

 

 

Net income (loss)

 

$

(13,456

)

 

$

10,761

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

24,420

 

 

 

25,569

 

Equity-based compensation

 

 

7,629

 

 

 

9,159

 

Amortization of deferred financing costs and debt discounts

 

 

1,647

 

 

 

1,541

 

Provision for doubtful accounts

 

 

1,007

 

 

 

25

 

Deferred income taxes

 

 

(7,811

)

 

 

1,074

 

Loss on asset dispositions

 

 

52

 

 

 

103

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

(17,428

)

 

 

(3,399

)

Inventories

 

 

9,628

 

 

 

(70,393

)

Prepaid expenses and other current assets

 

 

(10,912

)

 

 

(9,614

)

Other assets

 

 

6,561

 

 

 

(8,864

)

Accounts payable

 

 

50,379

 

 

 

(9,019

)

Accrued expenses and other current liabilities

 

 

14,428

 

 

 

(12,827

)

Income taxes payable

 

 

(5,782

)

 

 

(9,166

)

Operating lease assets and liabilities, net

 

 

48

 

 

 

237

 

Net cash provided by (used in) operating activities

 

 

60,410

 

 

 

(74,813

)

Investing Activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(34,324

)

 

 

(26,733

)

Business acquisitions, net of cash acquired

 

 

 

 

 

(15,549

)

Proceeds from asset dispositions

 

 

77

 

 

 

1,384

 

Net cash used in investing activities

 

 

(34,247

)

 

 

(40,898

)

Financing Activities

 

 

 

 

 

 

Borrowings on Revolving Credit Facility

 

 

140,500

 

 

 

264,000

 

Payments on Revolving Credit Facility

 

 

(140,500

)

 

 

(233,000

)

Repayment of long-term debt

 

 

(6,075

)

 

 

(6,075

)

Payment of deferred financing costs

 

 

(101

)

 

 

(297

)

Payments of employee tax withholdings related to restricted stock vesting

 

 

(969

)

 

 

(1,780

)

Net cash (used in) provided by financing activities

 

 

(7,145

)

 

 

22,848

 

Net increase (decrease) in cash and cash equivalents

 

 

19,018

 

 

 

(92,863

)

Cash and cash equivalents, beginning of period

 

 

55,420

 

 

 

112,293

 

Cash and cash equivalents, end of period

 

$

74,438

 

 

$

19,430

 

Supplemental Information:

 

 

 

 

 

 

Cash paid for interest

 

$

51,762

 

 

$

46,413

 

Cash paid for income taxes, net of refunds received

 

 

6,702

 

 

 

12,648

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

5


LESLIE’S, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Operations

Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, and cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through over 1,000 company-operated locations in 39 states and e-commerce websites.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We prepared the accompanying interim condensed consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The interim condensed consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim condensed consolidated financial statements and the related notes should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended September 30, 2023.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on our results of operations.

Fiscal Periods

We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended June 29, 2024 and July 1, 2023 refer to the 13 weeks ended June 29, 2024 and July 1, 2023, respectively. References to the nine months ended June 29, 2024 and July 1, 2023 refer to the 26 weeks ended June 29, 2024 and July 1, 2023, respectively.

Use of Estimates

Management is required to make certain estimates and assumptions during the preparation of the condensed consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed consolidated financial statements. They also impact the reported amount of net income (loss) during any period. Actual results could differ from those estimates.

Significant estimates underlying the accompanying condensed consolidated financial statements include inventory reserves, lease assumptions, vendor rebate programs, our loyalty program, the determination of income taxes payable and deferred income taxes, sales returns reserve, self-insurance liabilities, the recoverability of intangible assets and goodwill, fair value of assets acquired in a business combination, and contingent consideration related to business combinations.

Seasonality

Our business is highly seasonal. Sales and earnings are highest during our third and fourth fiscal quarters, being April through September, which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters.

Summary of Other Significant Accounting Policies

There have been no changes to our Significant Accounting Policies since our Annual Report on Form 10-K for the year ended September 30, 2023. For more information regarding our Significant Accounting Policies and Estimates, see Note 2—Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended September 30, 2023.

6


Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which require an entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”) and the significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss. This update is effective for annual periods beginning after December 15, 2023 and interim disclosures beginning after December 15, 2024, though early adoption is permitted. This update is effective retrospectively upon adoption to all periods presented in the financial statements. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.

Note 3 —Goodwill and Other Intangibles, Net

Goodwill

The following table details the changes in goodwill (in thousands):

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Balance at beginning of the period

 

$

180,698

 

 

$

173,513

 

 

$

173,513

 

Acquisitions, net of measurement period adjustments

 

 

 

 

 

7,185

 

 

 

7,185

 

Balance at the end of the period

 

$

180,698

 

 

$

180,698

 

 

$

180,698

 

Other Intangible Assets

Other intangible assets consisted of the following as of June 29, 2024 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

9.2

 

 

$

22,100

 

 

$

(4,861

)

 

$

17,239

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

4.6

 

 

 

2,260

 

 

 

(1,317

)

 

 

943

 

Consumer relationships

 

 

6.8

 

 

 

15,400

 

 

 

(7,685

)

 

 

7,715

 

Other intangibles

 

 

4.3

 

 

 

4,000

 

 

 

(3,904

)

 

 

96

 

Total

 

 

 

 

$

53,110

 

 

$

(17,767

)

 

$

35,343

 

 

Other intangible assets consisted of the following as of September 30, 2023 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

9.8

 

 

$

26,740

 

 

$

(7,958

)

 

$

18,782

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

5.4

 

 

 

8,683

 

 

 

(7,585

)

 

 

1,098

 

Consumer relationships

 

 

7.4

 

 

 

24,100

 

 

 

(15,317

)

 

 

8,783

 

Other intangibles

 

 

5.1

 

 

 

6,620

 

 

 

(6,476

)

 

 

144

 

Total

 

 

 

 

$

75,493

 

 

$

(37,336

)

 

$

38,157

 

 

7


Other intangible assets consisted of the following as of July 1, 2023 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

10.1

 

 

$

26,740

 

 

$

(7,436

)

 

$

19,304

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

5.6

 

 

 

8,683

 

 

 

(7,534

)

 

 

1,149

 

Consumer relationships

 

 

7.6

 

 

 

24,100

 

 

 

(14,935

)

 

 

9,165

 

Other intangibles

 

 

5.3

 

 

 

6,620

 

 

 

(6,451

)

 

 

169

 

Total

 

 

 

 

$

75,493

 

 

$

(36,356

)

 

$

39,137

 

 

Amortization expense was $0.9 million and $1.1 million for the three months ended June 29, 2024 and July 1, 2023, respectively. Amortization expense was $2.8 million and $3.4 million for the nine months ended June 29, 2024 and July 1, 2023, respectively. No impairment of goodwill or other intangible assets was recorded during the three and nine months ended June 29, 2024 and July 1, 2023.

The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our condensed consolidated balance sheet as of June 29, 2024 (in thousands):

 

 

Amount

 

Remainder of fiscal 2024

 

$

914

 

2025

 

 

3,632

 

2026

 

 

3,385

 

2027

 

 

3,262

 

2028

 

 

3,154

 

Thereafter

 

 

11,646

 

Total

 

$

25,993

 

 

Note 4—Accounts and Other Receivables, Net

Accounts and other receivables, net consisted of the following (in thousands):

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Vendor and other rebates receivable

 

$

20,393

 

 

$

6,818

 

 

$

23,298

 

Customer receivables

 

 

21,592

 

 

 

18,334

 

 

 

21,175

 

Other receivables

 

 

6,031

 

 

 

5,900

 

 

 

6,436

 

Allowance for doubtful accounts

 

 

(2,199

)

 

 

(1,656

)

 

 

(1,646

)

Total

 

$

45,817

 

 

$

29,396

 

 

$

49,263

 

 

Note 5—Inventories

Inventories consisted of the following (in thousands):

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Raw materials

 

$

4,787

 

 

$

3,076

 

 

$

8,342

 

Finished goods

 

 

297,422

 

 

 

308,761

 

 

 

428,215

 

Total

 

$

302,209

 

 

$

311,837

 

 

$

436,557

 

 

8


 

Note 6—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Prepaid insurance

 

$

3,449

 

 

$

1,236

 

 

$

3,629

 

Prepaid occupancy costs

 

 

2,173

 

 

 

1,967

 

 

 

1,955

 

Prepaid sales tax

 

 

6,788

 

 

 

4,060

 

 

 

7,679

 

Prepaid maintenance

 

 

5,038

 

 

 

4,426

 

 

 

2,492

 

Prepaid other

 

 

5,626

 

 

 

1,813

 

 

 

1,816

 

Income taxes receivable

 

 

2,337

 

 

 

 

 

 

 

Other current assets

 

 

9,134

 

 

 

10,131

 

 

 

13,883

 

Total

 

$

34,545

 

 

$

23,633

 

 

$

31,454

 

 

Note 7—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Accrued payroll and employee benefits

 

 

12,484

 

 

 

18,558

 

 

 

14,437

 

Customer deposits

 

 

5,428

 

 

 

7,356

 

 

 

7,477

 

Interest

 

 

555

 

 

 

581

 

 

 

630

 

Inventory related accruals

 

 

14,323

 

 

 

13,843

 

 

 

23,635

 

Loyalty and deferred revenue

 

 

6,685

 

 

 

6,785

 

 

 

5,932

 

Sales tax

 

 

15,442

 

 

 

9,146

 

 

 

15,729

 

Self-insurance reserves

 

 

11,228

 

 

 

9,138

 

 

 

9,517

 

Other accrued liabilities

 

 

41,063

 

 

 

25,191

 

 

 

17,717

 

Total

 

$

107,208

 

 

$

90,598

 

 

$

95,074

 

As of June 29, 2024, September 30, 2023, and July 1, 2023, capital expenditures included in other accrued liabilities were $2.0 million, $1.5 million, and $0.9 million, respectively.

Note 8—Long-Term Debt, Net

Our long-term debt, net consisted of the following (in thousands, except interest rates):

 

 

 

Effective
Interest Rate
(1)

 

 

June 29, 2024

 

 

September 30, 2023

 

 

July 1, 2023

 

Term Loan

 

 

8.19

%

(2)

$

783,675

 

 

$

789,750

 

 

$

791,775

 

Revolving Credit Facility

 

 

6.72

%

(3)

 

 

 

 

 

 

 

31,000

 

Total long-term debt

 

 

 

 

 

783,675

 

 

 

789,750

 

 

 

822,775

 

Less: current portion of long-term debt

 

 

 

 

 

(8,100

)

 

 

(8,100

)

 

 

(8,100

)

Less: noncurrent Revolving Credit Facility

 

 

 

 

 

 

 

 

 

 

 

(31,000

)

Less: unamortized discount

 

 

 

 

 

(1,944

)

 

 

(2,316

)

 

 

(2,439

)

Less: deferred financing charges

 

 

 

 

 

(5,033

)

 

 

(6,058

)

 

 

(6,352

)

Total long-term debt, net

 

 

 

 

$

768,598

 

 

$

773,276

 

 

$

774,884

 

 

(1)
Effective interest rates as of June 29, 2024.
(2)
Carries interest at a specified margin over the Term Secured Overnight Financing Rate (“SOFR”) between 2.50% and 2.75% with a minimum SOFR of 0.50% plus a SOFR adjustment.
(3)
Carries interest at a specific margin between 0.25% and 0.75% with respect to base rate loans and between 1.25% and 1.75% with respect to Term SOFR loans, with a SOFR adjustment.

 

9


Term Loan

In June 2023, we entered into Amendment No. 1 (“Term Loan Amendment”) to our Amended and Restated Term Loan Credit Agreement (“Term Loan”). The Term Loan Amendment (i) replaced the existing LIBOR-based interest rate benchmark with a Term SOFR-based benchmark and (ii) amended certain other related terms and provisions, including the addition of a SOFR adjustment of (a) 0.11448% per annum for one-month, (b) 0.26161% per annum for three months, and (c) 0.42826% per annum for six months. The other material terms of the Term Loan remained substantially unchanged.

The Term Loan provides for an $810.0 million secured term loan facility with a maturity date of March 9, 2028. Borrowings under the Term Loan have an initial applicable rate, at our option, of (i) 2.75% for loans that are Term SOFR loans and (ii) 1.75% for loans that are ABR loans (the “Applicable Rate”). The Applicable Rate of the Term Loan is based on our first lien leverage ratio as follows: (a) if the first lien leverage ratio is greater than 2.75 to 1.00, the applicable rate will be 2.75% for Term SOFR loans and 1.75% for ABR loans and (b) if the first lien leverage ratio is less than or equal to 2.75 to 1.00, the applicable rate will be 2.50% for Term SOFR loans and 1.50