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Debt | 12 Months Ended
--- | ---
Dec. 31, 2023
Debt Disclosure [Abstract] |
Debt | Debt The table below presents the components of our debt (in thousands):
|  | December 31,
|  | 2023 |  | 2022
Variable rate debt |  |  |  |
Current portion of long-term debt: |  |  |  |
Australian credit facility |  | $ | 13,203 |  |  | $ | 12,542 |
Current portion of term loans under credit facility |  | 25,000 |  |  | 12,500 |
Short-term borrowings and current portion of long-term debt |  | 38,203 |  |  | 25,042 |
Long-term portion: |  |  |  |
Revolving credit facility |  | 252,500 |  |  | 519,711 |
Term loans under credit facility |  | 462,500 |  |  | 487,500 |
Term facility |  | 109,937 |  |  | 157,250 |
Receivables securitization facility |  | 191,700 |  |  | 199,500 |
Less: financing costs, net |  | 1,520 |  |  | 2,200 |
Long-term debt, net |  | 1,015,117 |  |  | 1,361,761 |
Total debt |  | $ | 1,053,320 |  |  | $ | 1,386,803 |
Credit Facility Our Credit Facility, most recently amended on June 30, 2023, provides for $1.25 billion in borrowing capacity, consisting of a $750.0 million revolving credit facility and a $500.0 million term loan facility. The Credit Facility also includes sublimits for the issuance of swingline loans and standby letters of credit and matures on September 25, 2026. On June 30, 2023, we entered into the Second Amendment to the Second Amended and Restated Credit Agreement (the Credit Agreement) among us as U.S. Borrower, SCP Distributors Canada Inc. as Canadian Borrower, SCP International, Inc. as Euro Borrower, the Subsidiary Guarantors party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and certain other lenders party thereto. The amendment updated the index used for the Base Rate (as further defined within the Credit Facility Amendment) from LIBOR to Term SOFR. The amendment also increased the maximum amount for the Accounts Securitization (as further defined within the Credit Agreement) from $350.0 million to $500.0 million and increased the Canadian Dollar Commitment, Euro Commitment and Swingline Commitment (all as further defined within the Credit Facility Agreement) to $50.0 million each. Our term loans under the credit facility require quarterly amortization payments beginning in September 2023 aggregating to 20% of the original principal amount of the loan during the third, fourth and fifth years of the loan, with all remaining principal due on September 25, 2026. All other terms of any such term loans would be substantially similar to those governing revolving credit loans under the Credit Agreement. All obligations under the Credit Agreement are guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries. The Credit Agreement also contains various customary affirmative and negative covenants and events of default. The occurrence of any of these events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Credit Agreement. At December 31, 2023, there was $740.0 million outstanding, including a $487.5 million term loan, a $16.0 million standby letter of credit outstanding and $481.5 million available for borrowing under the Credit Facility. The weighted average effective interest rate for the Credit Facility as of December 31, 2023 was approximately 4.7%, excluding commitment fees and including the impact of our interest rate swaps. Revolving and term borrowings under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin: a.a base rate, which is the highest of (i) the Agent’s prime rate, (ii) the Federal Funds Rate plus 0.500% and (iii) Adjusted Term SOFR (defined below) for a one-month tenor in effect on such day plus 1.000%; or b.Adjusted Term SOFR, the rate per annum equal to Term SOFR for such calculation plus the Term SOFR adjustment of 0.10%. Borrowings by the Canadian Borrower bear interest, at the Canadian Borrower’s option, at either of the following and, in each case, plus an applicable margin: a.a base rate, which is the greatest of (i) the Canadian Reference Bank prime rate and (ii) the Canadian Dealer Offered Rate (CDOR) plus 1.000%; or b.CDOR. Borrowings by the Euro Borrower bear interest at the Adjusted Eurocurrency rate plus an applicable margin. Borrowings under any swingline loans under the Credit Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin: a.the Term SOFR Swingline Rate, the greater of (i) Adjusted Term SOFR for a period equal to one month (commencing on the date of determination of such interest rate) and (ii) a floor rate specified in the Credit Agreement; or b.a base rate, which is the highest of (i) the Agent’s prime rate, (ii) the Federal Funds Rate plus 0.500% and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.000%. The interest rate margins on the borrowings and letters of credit issued under the Credit Agreement are based on our leverage ratio and will range from 0.000% to 0.425% on Base Rate, Canadian Base Rate and Base Rate swingline loans and from 0.910% to 1.425% on CDOR, Adjusted Term SOFR, Adjusted Eurocurrency rate and Term SOFR Swingline Rate loans (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Credit Agreement). We are also required to pay an annual facility fee with respect to the lenders’ aggregate revolving credit agreement, the amount of which is based on our leverage ratio. Term Facility On December 30, 2019, we along with certain of our subsidiaries entered into a $185.0 million term facility (the “Term Facility”) with Bank of America, N.A. pursuant to a credit agreement subsequently amended on October 12, 2021, among us, as Borrower and Bank of America, N.A., as the Lender. On June 30, 2023, we entered into the Second Amendment to Credit Agreement (the “Term Facility Agreement”) among us, as Borrower, the Guarantors party thereto and Bank of America, N.A. as Lender. The amendment updated the index used for the Base Rate (as further defined within the Term Facility Agreement) from LIBOR to Term SOFR. The Term Facility matures on December 30, 2026. Under the Term Facility, we are required to make quarterly amortization payments in installments of 1.250% of the Term Facility on the last business day of each quarter. We may prepay amounts outstanding under the Term Facility without penalty other than interest breakage costs. In June 2023, we made a prepayment on the Term Facility of $45.0 million with $32.4 million applied against the remaining quarterly installments and the remainder applied against the amount due at maturity. Our obligations under the Term Facility are guaranteed on an unsecured basis by substantially all of our existing and future domestic subsidiaries. The Term Facility Agreement contains various customary affirmative and negative covenants and events of default. The occurrence of any of these events of default would permit the lenders to, among other things, require immediate payment of all amounts outstanding under the Term Facility Agreement. At December 31, 2023, the Term Facility had an outstanding balance of $109.9 million at a weighted average effective interest rate of 6.6%. Borrowings under the Term Facility bear interest, at our option, at either of the following and, in each case, plus an applicable margin: a.a base rate, which is the greatest of (i) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day plus 0.50%, (ii) Bank of America’s “prime rate,” or (iii) the Term SOFR Rate (defined below) plus 1.00%; or b.the Term SOFR Rate, which is the greater of (i) the rate per annum equal to the Term SOFR Screen Rate administered by CME Group Benchmark Administration Limited or any successor administrator plus the SOFR adjustment of 0.10% or (ii) a floor rate specified in the Term Facility Agreement. The interest rate margins on the borrowings under the Term Facility are based on our leverage ratio and will range from 0.000% to 0.625% on Base Rate borrowings and 1.000% to 1.625% on Adjusted Term SOFR Rate borrowings (with all such rates being calculated in accordance with the terms and by reference to the definitions specified in the Term Facility Agreement). Receivables Securitization Facility On November 1, 2022, we and certain of our subsidiaries entered into an agreement (the “Amended Receivables Purchase Agreement”) amending our two-year receivable securitization facility. As amended, the Receivables Facility has a maximum facility limit of $350.0 million in the months of April through August and a funding capacity that ranges from $210.0 million to $340.0 million during the remaining months of the year. The maturity date of the Receivables Facility is November 1, 2024. Amounts outstanding under the Receivables Facility bear interest at Term SOFR plus an applicable margin of 0.75%. The Receivables Facility provides for the sale of certain of our receivables to a wholly owned subsidiary (the “Securitization Subsidiary”). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third-party financial institutions in exchange for cash proceeds, limited to the applicable funding capacities. Upon payment of the receivables by customers, rather than remitting to the financial institutions the amounts collected, we retain such collections as proceeds for the sale of new receivables until payments become due to the financial institutions. The Receivables Facility is subject to terms and conditions (including representations, covenants and conditions precedent) customary for transactions of this type. Additionally, an amortization event will occur if we fail to meet certain covenants, including maintaining a maximum average total leverage ratio (average total funded debt/EBITDA) of 3.25 to 1.00 and a minimum fixed charge coverage ratio (EBITDAR/cash interest expense plus rental expense) of 2.25 to 1.00. At December 31, 2023, there was $191.7 million outstanding under the Receivables Facility at a weighted average effective interest rate of 6.2%, excluding commitment fees. We also pay an unused fee on the excess of the facility limit over the average daily capital outstanding. The unused fee is 0.25% if utilization is less than 50% or 0.35% otherwise. We pay this fee monthly in arrears. Australian Seasonal Credit Facility In the second quarter of 2017, Pool Systems Pty. Ltd. (PSL) entered into a credit facility to fund expansion and supplement working capital needs. The credit facility provides a borrowing capacity of AU$20.0 million. Cash Pooling Arrangement Certain of our foreign subsidiaries entered into a cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows the participating subsidiaries to withdraw cash from the financial institution to the extent that aggregate cash deposits held by these subsidiaries are available at the financial institution. To the extent the participating subsidiaries are in an overdraft position, such overdrafts are recorded as short-term borrowings under a committed cash overdraft facility. These borrowings bear interest at a variable rate based on 3-month Euro Interbank Offered Rate (EURIBOR), plus a fixed margin. We also pay a commitment fee on the average outstanding balance. This fee is paid annually in advance. Our borrowing capacity is €14.0 million. Maturities of Long-Term Debt The table below presents maturities of long-term debt, excluding unamortized deferred financing costs, for the next five years (in thousands):
2024 |  | $ | 229,903 |
2025 |  | 37,500 |
2026 |  | 787,438 |
2027 |  | — |
2028 |  | — |
Our Receivables Facility matures November 1, 2024 and is included in the table above according to its stated maturity date. On our Consolidated Balance Sheets, we classify the entire outstanding balance of the Receivables Facility as Long-term debt as we intend and have the ability to refinance the obligations on a long-term basis. Interest Rate Swaps Our interest rate swaps in effect during the year were previously forward-starting and converted the variable interest rate to a fixed interest rate on a portion of our variable rate borrowings. Interest expense related to the notional amounts under our swap contracts was based on the fixed rates plus the applicable margin on our variable rate borrowings. Changes in the estimated fair value of these interest rate swap contracts were recorded to Accumulated other comprehensive loss on the Consolidated Balance Sheets. We currently have two interest rate swap contracts in place. The following table provides additional details related to these swap contracts:
Derivative |  | Inception Date |  | Effective Date |  | Termination Date |  | Notional Amount (in millions) |  | Fixed Interest Rate
Interest rate swap 1 |  | February 5, 2020 |  | February 26, 2021 |  | February 28, 2025 |  | $150.0 |  | 1.3260%
Interest rate swap 2 |  | March 9, 2020 |  | September 29, 2022 |  | February 26, 2027 |  | $150.0 |  | 0.6690%
We have entered into an additional forward-starting interest rate swap contract to extend the hedged period for future interest payments on a portion of our variable rate borrowings. The following table provides details related to our forward-starting interest rate swap contract:
Derivative |  | Inception Date |  | Effective Date |  | Termination Date |  | Notional Amount (in millions) |  | Fixed Interest Rate
Forward-starting interest rate swap |  | March 9, 2020 |  | February 28, 2025 |  | February 26, 2027 |  | $150.0 |  | 0.7630%
Two of our interest rate swap contracts terminated on September 29, 2022. The following table provides additional details related to these former swap contracts:
Derivative |  | Inception Date |  | Effective Date |  | Termination Date |  | Notional Amount (in millions) |  | Fixed Interest Rate
Former interest rate swap 1 |  | May 7, 2019 |  | November 20, 2020 |  | September 29, 2022 |  | $75.0 |  | 2.0925%
Former interest rate swap 2 |  | July 25, 2019 |  | November 20, 2020 |  | September 29, 2022 |  | $75.0 |  | 1.5500%
The net difference between interest paid and interest received related to our swap agreements resulted in an interest benefit of $12.2 million in 2023 and $0.8 million in 2022 and expense of $4.3 million in 2021. Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position. Financial and Other Covenants The Credit Facility and Term Facility limit the declaration and payment of dividends on our common stock to a manner consistent with past practice, provided no default or event of default has occurred and is continuing, or would result from the payment of dividends. We may declare and pay quarterly dividends so long as (i) the amount per share of such dividends is not greater than the most recently publicly announced dividends per share and (ii) our Average Total Leverage Ratio is less than 3.25 to 1.00 both immediately before and after giving pro forma effect to such dividends. Under the Credit Facility and Term Facility, we may repurchase shares of our common stock provided no default or event of default has occurred and is continuing, or would result from the repurchase of shares, and our maximum average total leverage ratio (determined on a pro forma basis) is less than 3.25 to 1.00. Other covenants include restrictions on our ability to grant liens, incur indebtedness, make investments, merge or consolidate, and sell or transfer assets. Failure to comply with any of our financial covenants or any other terms of the Credit Facility and the Term Facility could result in higher interest rates on our borrowings or the acceleration of the maturities of our outstanding debt. As of December 31, 2023, we were in compliance with all covenants and financial ratio requirements related to the Credit Facility, the Term Facility and the Receivables Facility. Deferred Financing Costs We capitalize financing costs we incur related to implementing and amending our debt arrangements. We record these costs as a reduction of Long-term debt, net on our Consolidated Balance Sheets and amortize them over the contractual life of the related debt arrangements. The table below summarizes changes in deferred financing costs for the past two years (in thousands):
|  | December 31,
|  | 2023 |  | 2022
Deferred financing costs: |  |  |  |
Balance at beginning of year |  | $ | 4,212 |  |  | $ | 4,042 |
Financing costs deferred |  | 52 |  |  | 170 |
Balance at end of year |  | 4,264 |  |  | 4,212 |
Less: Accumulated amortization |  | (2,744) |  |  | (2,012) |
Deferred financing costs, net of accumulated amortization |  | $ | 1,520 |  |  | $ | 2,200 |

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