| 1.
|
Organization and Summary
of Significant Accounting Policies (continued) |
Seasonality
and Weather
Our
business is highly seasonal, and weather is the principal external
factor affecting our business. The table below presents some of
the possible effects resulting from various weather conditions:
|
Weather
|
|
Possible Effects
|
| Hot and dry |
• |
Increased purchases of chemicals
and supplies |
| |
|
for existing swimming pools
|
| |
• |
Increased purchases of above-ground
pools |
| |
|
|
| Unseasonably cool weather or
extraordinary |
• |
Fewer pool installations |
| amounts of rain |
• |
Decreased purchases of chemicals
and supplies |
| |
• |
Decreased purchases of impulse
items such as |
| |
|
above-ground pools and accessories
|
| |
|
|
| Unseasonably early warming trends
|
• |
A longer pool season, thus increasing
our sales |
| (primarily in the northern half
of the US) |
| |
|
|
| Unseasonably late warming trends
|
• |
A shorter pool season, thus
decreasing our sales |
| (primarily in the northern half
of the US) |
In general, sales and net income
are highest during the second and third quarters, which represent
the peak months of swimming pool use and installation. Sales are
substantially lower during the first and fourth quarters when we
may incur net losses.
Earnings
Per Share
In
accordance with SFAS 128, Earnings per Share, we calculate
basic earnings per share by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per
share includes the dilutive effects of stock options and convertible
notes.
Financial
Instruments
The
carrying values of cash, receivables, accounts payable and accrued
liabilities approximate fair value due to the short maturity of
those instruments. The carrying amount of long-term debt approximates
fair value as it bears interest at variable rates.
Cash
Equivalents
We
consider all highly liquid investments with an original maturity
of three months or less when purchased to be cash equivalents.
Credit
Risk and Allowance for Doubtful Accounts
We
perform periodic credit evaluations of our customers and we typically
do not require collateral. Consistent with industry practices, we
require payment from our customers within 30 days except for sales
under early-buy programs for which we provide extended payment terms
to qualified customers. In the past, credit losses have been within
our expectations.
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