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Pool Corporation Reports Record First Quarter Results and Increases 2021 Earnings Guidance

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Highlights

  • Record net sales for Q1 2021 with overall growth of 57% and 51% growth in base business
  • Record Q1 2021 operating income of $129.0 million, up 263% from Q1 2020 with a 690 basis point improvement in operating margin
  • Q1 2021 diluted EPS increase of 223% to a record $2.42, or an increase of 227% to $2.32, excluding tax benefits in both periods and non-cash impairments recorded in Q1 2020
  • Net cash provided by operations of $77.1 million, an increase of $57.4 million from the first three months of 2020
  • 2021 earnings guidance increased to $11.85 - $12.60 per diluted share from previous $9.12 - $9.62 range

COVINGTON, La., April 22, 2021 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the first quarter of 2021 and increased 2021 earnings guidance.

"What an incredible quarter, backed by an incredible team. We kicked off the year with truly remarkable results, including record net sales and phenomenal bottom line results. We achieved over $1.0 billion in net sales in the first quarter of 2021, a milestone in our company's history and a reflection of our focus on providing extraordinary customer service. Looking ahead at the remainder of the year, we expect to achieve strong growth tempered by tougher comps in the back half of the year. We are well-positioned to accomplish our strategic initiatives and have the right team in place to continue to build on our legacy of success," commented Peter D. Arvan, president and CEO.

In the first quarter of 2021, net sales increased 57% to a record $1.06 billion compared to $677.3 million in the first quarter of 2020, while base business sales grew 51%. Our sales have continued to benefit from elevated demand for residential pool products, driven by home-centric trends influenced by the COVID-19 pandemic. Maintenance, replacement, refurbishment and construction activity remains strong as families create and expand home-based outdoor living and entertainment spaces, resulting in broad sales gains across nearly all product categories.

Gross profit increased 59% to a record $301.1 million in the first quarter of 2021 from $189.6 million in the same period of 2020. Base business gross profit improved 54% over the first quarter of 2020. Gross margin increased 40 basis points to 28.4% in the first quarter of 2021 compared to 28.0% in the first quarter of 2020. Gross margin was favorably impacted by improvements from supply chain initiatives and timing differences in customer early buy purchases year-over-year, which were partially offset by increased sales of lower margin, big-ticket items in the first quarter of 2021 compared to the first quarter of 2020.

Selling and administrative expenses (operating expenses) increased 12% to $172.1 million in the first quarter of 2021 compared to $154.0 million in the first quarter of 2020, reflecting an increase of $11.5 million in performance-based compensation expense and increases in other growth-driven costs. As a percentage of net sales, operating expenses decreased to 16.2% in the first quarter of 2021 compared to 22.7% in the same period of 2020 due to strong expense control and our ability to leverage our existing network.

Operating income in the first quarter of 2021 increased 263% to $129.0 million compared to $35.6 million in the same period in 2020. Operating margin was 12.2% in the first quarter of 2021 compared to 5.3% in the first quarter of 2020.

We recorded a $4.0 million, or $0.10 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended March 31, 2021, compared to a tax benefit of $8.0 million, or $0.19 per diluted share, realized in the same period of 2020.

Net income increased 219% to $98.7 million in the first quarter of 2021 compared to $30.9 million in the first quarter of 2020. Adjusted net income, excluding the prior year impact of non-cash impairments, net of tax, increased 165% in the first quarter of 2021 compared to the prior year period. Earnings per diluted share increased 223% to $2.42 in the first quarter of 2021 compared to $0.75 in the same period of 2020. Excluding the impact from ASU 2016-09 in both periods and the impact of non-cash impairments, net of tax, in 2020, adjusted earnings per diluted share increased 227% to $2.32 in the first quarter of 2021 compared to $0.71 in the first quarter of 2020. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

On the balance sheet at March 31, 2021, total net receivables, including pledged receivables, increased 41% compared to March 31, 2020, driven by our March sales growth and partially offset by improved collections. Inventory levels increased 14% to $977.2 million compared to March 31, 2020, reflecting organic business growth and inventory from recently acquired businesses of $55.5 million. Total debt outstanding was $433.2 million at March 31, 2021, a $152.9 million decrease from total debt at March 31, 2020, as we continue to utilize operating cash flows to decrease debt balances.

The increase in net income drove net cash provided by operations to $77.1 million in the first three months of 2021 compared to $19.7 million in the first three months of 2020. Adjusted EBITDA (as defined in the addendum to this release) was $140.1 million for the three months ended March 31, 2021, compared to $53.4 million in the same period of the prior year. Interest expense decreased compared to last year primarily due to lower average debt levels and lower average interest rates.

"We believe that our industry-leading position, combined with strong demand trends and a solid backlog of projects, will benefit our results throughout the 2021 season. While we expect to face tougher year-over-year comparisons and potential industry capacity constraints as the year progresses, our outstanding results in the first quarter of 2021 and increased confidence in growth through the remainder of the year leads us to update our annual earnings guidance range to $11.85 to $12.60 per diluted share, including the impact of year-to-date tax benefits of $0.10. Our previous 2021 earnings guidance range was $9.12 to $9.62 per diluted share, including an estimated $0.11 tax benefit," said Arvan.

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 400 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers. For more information, please visit www.poolcorp.com.

This news release includes "forward-looking" statements that involve risks and uncertainties that are generally identifiable through the use of words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "should" and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including impacts on our business from the COVID-19 pandemic and the extent to which home-centric trends will continue, accelerate or reverse; the sensitivity of our business to weather conditions; changes in the economy and the housing market; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives and mass merchants; our ability to continue to execute our growth strategies; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP's 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com


POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

  Three Months Ended
  March 31,
  2021   2020
Net sales $ 1,060,745     $ 677,288  
Cost of sales 759,614     487,659  
Gross profit 301,131     189,629  
Percent 28.4 %   28.0 %
       
Selling and administrative expenses 172,100     147,097  
Impairment of goodwill and other assets     6,944  
Operating income 129,031     35,588  
Percent 12.2 %   5.3 %
       
Interest and other non-operating expenses, net 2,582     4,789  
Income before income taxes and equity earnings 126,449     30,799  
Income tax provision (benefit) 27,869     (25 )
Equity earnings in unconsolidated investments, net 75     88  
Net income $ 98,655     $ 30,912  
       
Earnings per share:      
Basic $ 2.45     $ 0.77  
Diluted $ 2.42     $ 0.75  
Weighted average shares outstanding:      
Basic 40,215     40,125  
Diluted 40,846     40,955  
       
Cash dividends declared per common share $ 0.58     $ 0.55  


POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

    March 31,   March 31,     Change
    2021   2020     $   %
                       
Assets                    
Current assets:                    
  Cash and cash equivalents $ 27,078     $ 17,808     $ 9,270     52 %  
  Receivables, net (1)   122,938       66,328       56,610     85    
  Receivables pledged under receivables facility   364,664       279,587       85,077     30    
  Product inventories, net (2)   977,228       858,190       119,038     14    
  Prepaid expenses and other current assets   25,390       16,465       8,925     54    
Total current assets   1,517,298       1,238,378       278,920     23    
                       
Property and equipment, net   109,830       113,987       (4,157 )   (4 )  
Goodwill   267,914       193,380       74,534     39    
Other intangible assets, net   11,854       9,832       2,022     21    
Equity interest investments   1,305       1,260       45     4    
Operating lease assets   209,036       174,653       34,383     20    
Other assets   24,456       16,291       8,165     50    
Total assets $ 2,141,693     $ 1,747,781     $ 393,912     23 %  
                       
Liabilities and stockholders' equity                    
Current liabilities:                    
  Accounts payable $ 634,998     $ 517,620     $ 117,378     23 %  
  Accrued expenses and other current liabilities   134,670       62,614       72,056     115    
  Short-term borrowings and current portion of long-term debt   12,409       16,353       (3,944 )   (24 )  
  Current operating lease liabilities   61,265       55,703       5,562     10    
Total current liabilities   843,342       652,290       191,052     29    
                       
Deferred income taxes   31,134       30,464       670     2    
Long-term debt, net   420,762       569,697       (148,935 )   (26 )  
Other long-term liabilities   38,945       26,470       12,475     47    
Non-current operating lease liabilities   149,582       120,462       29,120     24    
Total liabilities   1,483,765       1,399,383       84,382     6    
Total stockholders' equity   657,928       348,398       309,530     89    
Total liabilities and stockholders' equity $ 2,141,693     $ 1,747,781     $ 393,912     23 %  

(1)   The allowance for doubtful accounts was $4.7 million at March 31, 2021 and $6.9 million at March 31, 2020.
(2)   The inventory reserve was $13.7 million at March 31, 2021 and $10.3 million at March 31, 2020.

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

    Three Months Ended      
    March 31,      
    2021     2020     Change
Operating activities                
Net income $ 98,655       $ 30,912       $ 67,743    
Adjustments to reconcile net income to net cash provided by operating activities:                
  Depreciation   6,884         7,001         (117 )  
  Amortization   421         336         85    
  Share-based compensation   3,837         3,654         183    
  Equity earnings in unconsolidated investments, net   (75 )       (88 )       13    
  Impairment of goodwill and other assets           6,944         (6,944 )  
  Other   2,723         3,715         (992 )  
Changes in operating assets and liabilities, net of effects of acquisitions:                
  Receivables   (199,672 )       (124,542 )       (75,130 )  
  Product inventories   (200,185 )       (156,856 )       (43,329 )  
  Prepaid expenses and other assets   (5,507 )       4,633         (10,140 )  
  Accounts payable   369,665         256,874         112,791    
  Accrued expenses and other current liabilities   367         (12,855 )       13,222    
Net cash provided by operating activities   77,113         19,728         57,385    
                 
Investing activities                
Acquisition of businesses, net of cash acquired   (683 )       (13,642 )       12,959    
Purchases of property and equipment, net of sale proceeds   (8,839 )       (8,340 )       (499 )  
Net cash used in investing activities   (9,522 )       (21,982 )       12,460    
                 
Financing activities                
Proceeds from revolving line of credit   342,500         248,700         93,800    
Payments on revolving line of credit   (308,656 )       (256,543 )       (52,113 )  
Proceeds from asset-backed financing   110,000         97,400         12,600    
Payments on asset-backed financing   (125,000 )       (17,300 )       (107,700 )  
Payments on term facility   (2,313 )       (2,313 )          
Proceeds from short-term borrowings and current portion of long-term debt   4,280         6,479         (2,199 )  
Payments on short-term borrowings and current portion of long-term debt   (3,740 )       (1,871 )       (1,869 )  
Payments of deferred financing costs           (12 )       12    
Payments of deferred and contingent acquisition consideration   (362 )       (281 )       (81 )  
Proceeds from stock issued under share-based compensation plans   2,912         6,358         (3,446 )  
Payments of cash dividends   (23,299 )       (22,147 )       (1,152 )  
Purchases of treasury stock   (71,516 )       (66,619 )       (4,897 )  
Net cash used in financing activities   (75,194 )       (8,149 )       (67,045 )  
Effect of exchange rate changes on cash and cash equivalents   553         (372 )       925    
Change in cash and cash equivalents   (7,050 )       (10,775 )       3,725    
Cash and cash equivalents at beginning of period   34,128         28,583         5,545    
Cash and cash equivalents at end of period $ 27,078       $ 17,808       $ 9,270    


ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):

(Unaudited)   Base Business   Excluded   Total
(in thousands)   Three Months Ended   Three Months Ended   Three Months Ended
    March 31,   March 31,   March 31,
    2021   2020   2021   2020   2021   2020
Net sales   $ 1,015,632     $ 674,082     $ 45,113       $ 3,206     $ 1,060,745     $ 677,288  
                         
Gross profit   290,115     188,292     11,016       1,337     301,131     189,629  
Gross margin   28.6 %   27.9 %   24.4 %     41.7 %   28.4 %   28.0 %
                         
Operating expenses (1)   160,995     152,815     11,105       1,226     172,100     154,041  
Expenses as a % of net sales   15.9 %   22.7 %   24.6 %     38.2 %   16.2 %   22.7 %
                         
Operating income (loss) (1)   129,120     35,477     (89 )     111     129,031     35,588  
Operating margin   12.7 %   5.3 %   (0.2 )%     3.5 %   12.2 %   5.3 %

(1)    Base business and total for 2020 reflect $6.9 million of impairment from goodwill and other assets.

We have excluded the following acquisitions from our base business results for the periods identified:


Acquired
  Acquisition
Date
  Net
Sales Centers
Acquired
  Periods
Excluded
TWC Distributors, Inc. (1)   December 2020   10   January - March 2021
Jet Line Products, Inc.   October 2020   9   January - March 2021
Northeastern Swimming Pool Distributors, Inc. (1)   September 2020   2   January - March 2021
Master Tile Network LLC (1)   February 2020   4   January - March 2021 and
February - March 2020

(1)    We acquired certain distribution assets of each of these companies.

When calculating our base business results, we exclude sales centers that are acquired, closed or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales. After 15 months of operations, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.

The table below summarizes the changes in our sales center count in the first three months of 2021.

December 31, 2020 398    
Acquired locations    
New locations 3    
Consolidated location (1 )  
March 31, 2021 400    


Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other non-cash impairments and equity earnings or loss in unconsolidated investments.  Adjusted EBITDA is not a measure of cash flow or liquidity as determined by generally accepted accounting principles (GAAP). We have included Adjusted EBITDA as a supplemental disclosure because we believe that it is widely used by our investors, industry analysts and others as a useful supplemental accrual-based liquidity measure in conjunction with net cash flows provided by or used in operating activities to help investors understand our ability to provide cash flows to fund growth, service debt, repurchase shares and pay dividends as well as compare our cash flow generating capacity from period to period, excluding the impact of period-to-period changes in working capital.

We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited)   Three Months Ended
(in thousands)   March 31,
      2021     2020
Adjusted EBITDA $ 140,092       $ 53,419    
  Add:          
  Interest and other non-operating expenses, net of interest income   (2,501 )       (4,685 )  
  Income tax provision (benefit)   (27,869 )       25    
  Other   2,723         3,715    
  Change in operating assets and liabilities   (35,332 )       (32,746 )  
Net cash provided by operating activities $ 77,113       $ 19,728    

The table below presents a reconciliation of net income to Adjusted EBITDA.

(Unaudited)   Three Months Ended
(in thousands)   March 31,
      2021     2020
Net income $ 98,655       $ 30,912    
  Add:          
  Interest and other non-operating expenses (1)   2,582         4,789    
  Income tax provision (benefit)   27,869         (25 )  
  Share-based compensation   3,837         3,654    
  Equity earnings in unconsolidated investments   (75 )       (88 )  
  Impairment of goodwill and other assets           6,944    
  Depreciation   6,884         7,001    
  Amortization (2)   340         232    
Adjusted EBITDA $ 140,092       $ 53,419    

(1)   Shown net of interest income and includes gains and losses on foreign currency transactions and amortization of deferred financing costs as discussed below.
(2)   Excludes amortization of deferred financing costs of $81 and $104 for the three months ended March 31, 2021 and March 31, 2020, respectively. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

Adjusted Income Statement Information

We have included adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures, in this press release as supplemental disclosures, because we believe these measures are useful to investors and others in assessing our year-over-year operating performance. We believe these measures should be considered in addition to, not as a substitute for, net income and diluted EPS presented in accordance with GAAP, respectively, and in the context of our other disclosures in this press release. Other companies may calculate these non-GAAP financial measures differently than we do, which may limit their usefulness as comparative measures.  

The table below presents a reconciliation of net income to adjusted net income.

(Unaudited) Three Months Ended
(in thousands) March 31,
  2021   2020
Net income $ 98,655     $ 30,912    
Impairment of goodwill and other assets     6,944    
Tax impact on impairment of long-term note (1)     (654 )  
Adjusted net income $ 98,655     $ 37,202    

(1)  As described in our April 23, 2020 earnings release, our effective tax rate at March 31, 2020 was a 0.1% benefit. Excluding impairment from goodwill and intangibles and tax benefits from ASU 2016-09 recorded in the first quarter of 2020, our effective tax rate for the first quarter of 2020 was 25.4%, which we used to calculate the tax impact related to the $2.5 million long-term note impairment.

The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.

(Unaudited) Three Months Ended
  March 31,
  2021   2020
Diluted EPS $ 2.42       $ 0.75    
After-tax non-cash impairment charges       0.15    
Adjusted diluted EPS excluding after-tax non-cash impairment charges 2.42       0.90    
ASU 2016-09 tax benefit (0.10 )     (0.19 )  
Adjusted diluted EPS excluding after-tax non-cash impairment charges and tax benefit $ 2.32       $ 0.71    


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