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

·20 min read

Highlights

  • Record net sales for Q2 2021 with overall growth of 40% and 32% growth in base business

  • Q2 2021 operating income of $338.6 million, up 64% from Q2 2020 with a 280 basis point improvement in operating margin

  • Q2 2021 diluted EPS increase of 65% to a record $6.37 or an increase of 66% to $6.18, excluding tax benefits in both periods

  • 2021 earnings guidance increased to $13.75 - $14.25 per diluted share from previous $11.85 - $12.60 range

______________________

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

“I am thrilled to announce that we, again, achieved spectacular results this quarter. Demand remains high, and paired with our team's outstanding execution, business thrived. Through our supply chain management discipline and our capacity creation initiatives, we yielded exceptional improvement in both gross margin and operating margin during the quarter. As part of our strategic growth initiatives, we continued to add to our network through new sales center openings and two acquisitions that closed in the second quarter. Our employees remain committed to providing unmatched service to our customers while leveraging our network and executing on our expense management strategies in the latter half of the year,” commented Peter D. Arvan, president and CEO.

In the second quarter of 2021, net sales increased 40% to a record $1.79 billion compared to $1.28 billion in the second quarter of 2020, while base business sales grew 32%. Households continued to invest in outdoor living spaces, contributing to the robust demand for our products. We observed sales gains across nearly all product categories and geographies reflecting strong growth in maintenance, replacement, refurbishment and construction activity among our customers.

Gross profit increased 48% to a record $551.7 million in the second quarter of 2021 from $373.5 million in the same period of 2020. Base business gross profit improved 41% over the second quarter of 2020. Gross margin increased 170 basis points to 30.9% in the second quarter of 2021 compared to 29.2% in the second quarter of 2020 while base business gross margin increased 200 basis points, primarily driven by benefits from focused supply chain management initiatives.

Selling and administrative expenses (operating expenses) increased 27% to $213.1 million in the second quarter of 2021 compared to $167.6 million in the second quarter of 2020, while base business operating expenses grew 18%, primarily due to growth-driven labor, facility and freight costs, along with increased investments in technology and higher performance-based compensation expense. As a percentage of net sales, operating expenses decreased to 11.9% in the second quarter of 2021 compared to 13.1% in the same period of 2020 as we continue to exercise strong expense control.

Operating income in the second quarter of 2021 increased 64% to $338.6 million compared to $205.9 million in the same period in 2020 with acquisitions contributing $11.0 million to operating income in the second quarter of 2021. Operating margin was 18.9% in the second quarter of 2021 compared to 16.1% in the second quarter of 2020 while base business operating margin was 19.4%, up 330 basis points from the prior year period.

We recorded a $7.7 million, or $0.19 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended June 30, 2021, compared to a tax benefit of $6.2 million, or $0.15 per diluted share, realized in the same period of 2020.

Net income increased 65% to $259.7 million in the second quarter of 2021 compared to $157.6 million in the second quarter of 2020. Earnings per diluted share increased 65% to $6.37 in the second quarter of 2021 compared to $3.87 in the same period of 2020. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 66% to $6.18 in the second quarter of 2021 compared to $3.72 in the second quarter of 2020.

Net sales for the six months ended June 30, 2021 increased 45% to a record $2.85 billion from $1.96 billion in the six months ended June 30, 2020. Base business sales increased 38% for the period. Gross margin improved 110 basis points to 29.9% compared to 28.8% in the same period last year with base business gross margin 140 basis points higher, favorably impacted by improvements in supply chain management initiatives.

Operating expenses for the six months ended June 30, 2021 increased 20% compared to the first six months of 2020. In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a long-term note, as collectability was impacted by the COVID-19 pandemic, and non-cash goodwill and intangibles impairment charges of $4.4 million, equal to the total goodwill and intangibles carrying amounts of our Australian reporting units. Without the impact of impairment charges in the prior year, operating expenses were up 22% with base business operating expenses up 14%.

Operating income for the first six months of 2021 increased 94% to a record $467.6 million compared to $241.4 million in the same period last year. Operating income, without the impact of non-cash impairments recorded in 2020, increased 88% in the first half of 2021. Operating margin for the six months ended June 30, 2021 was 16.4% compared to 12.3% for the six months ended June 30, 2020, while base business operating margin increased 460 basis points.

We recorded an $11.7 million, or $0.29 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2021 compared to a $14.2 million, or $0.34 per diluted share, tax benefit in the same period of 2020.

Net income for the six months ended June 30, 2021 increased 90% to a record $358.4 million compared to $188.5 million for the six months ended June 30, 2020. Adjusted net income for the first six months of 2021, without the prior year impact of non-cash impairments, net of tax, increased 84%. Earnings per share for the first six months of 2021 increased 90% to $8.78 per diluted share versus $4.62 in the first six months of 2020. Excluding the impact from ASU 2016-09 in both periods and the impact of non-cash impairments, net of tax, adjusted diluted EPS increased 92% in 2021 compared to the prior year. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

On the balance sheet at June 30, 2021, total net receivables, including pledged receivables, increased 29% compared to June 30, 2020, driven by our sales growth and recent acquisitions and partially offset by improved collections. Inventory levels increased 42% to $894.7 million compared to June 30, 2020, reflecting our supply chain efforts to support organic business growth as well as inventory from recently acquired businesses. Total debt outstanding was $423.1 million at June 30, 2021, a $15.7 million reduction from total debt at June 30, 2020, as we utilize operating cash flows to pay down debt balances.

Net cash provided by operations was $187.2 million in the first six months of 2021 compared to $221.2 million in the first six months of 2020 reflecting our supply chain investments in inventory and higher income tax payments in 2021. Adjusted EBITDA (as defined in the addendum to this release) was $349.5 million for the six months ended June 30, 2021, compared to $270.1 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.

“Based on exceeding our second quarter expectations, and with better visibility to demand as we head into the back half of the year, we are updating our annual earnings guidance range to $13.75 to $14.25 per diluted share, including the impact of year-to-date tax benefits of $0.29. Our previous 2021 earnings guidance range was $11.85 to $12.60 per diluted share, including our $0.10 first quarter 2021 tax benefit. We believe that the strong demand trends and pipeline of projects will continue through the remainder of the year and beyond. I would like to especially thank our incredible team of employees for demonstrating a level of resiliency and grit that enables us to deliver during these times of unprecedented demand,” said Arvan.

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 408 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 publicly 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 and First Quarter 2021 Quarterly Report on Form 10-Q, each 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

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Net sales

$

1,787,833

$

1,280,846

$

2,848,579

$

1,958,134

Cost of sales

1,236,148

907,365

1,995,762

1,395,024

Gross profit

551,685

373,481

852,817

563,110

Percent

30.9

%

29.2

%

29.9

%

28.8

%

Selling and administrative expenses

213,099

167,624

385,200

314,721

Impairment of goodwill and other assets

6,944

Operating income

338,586

205,857

467,617

241,445

Percent

18.9

%

16.1

%

16.4

%

12.3

%

Interest and other non-operating expenses, net

1,963

2,643

4,545

7,432

Income before income taxes and equity earnings

336,623

203,214

463,072

234,013

Provision for income taxes

76,985

45,733

104,854

45,708

Equity earnings in unconsolidated investments, net

57

74

132

162

Net income

$

259,695

$

157,555

$

358,350

$

188,467

Earnings per share:

Basic

$

6.47

$

3.94

$

8.92

$

4.71

Diluted

$

6.37

$

3.87

$

8.78

$

4.62

Weighted average shares outstanding:

Basic

40,125

39,973

40,169

40,049

Diluted

40,745

40,715

40,800

40,837

Cash dividends declared per common share

$

0.80

$

0.58

$

1.38

$

1.13

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

June 30,

June 30,

Change

2021

2020

$

%

Assets

Current assets:

Cash and cash equivalents

$

58,465

$

44,185

$

14,280

32

%

Receivables, net (1)

210,318

144,842

65,476

45

Receivables pledged under receivables facility

375,248

308,563

66,685

22

Product inventories, net (2)

894,654

628,418

266,236

42

Prepaid expenses and other current assets

18,716

11,139

7,577

68

Total current assets

1,557,401

1,137,147

420,254

37

Property and equipment, net

111,661

111,258

403

Goodwill

283,284

193,784

89,500

46

Other intangible assets, net

12,350

9,615

2,735

28

Equity interest investments

1,293

1,274

19

1

Operating lease assets

221,068

183,126

37,942

21

Other assets

26,978

18,593

8,385

45

Total assets

$

2,214,035

$

1,654,797

$

559,238

34

%

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

439,453

$

346,272

$

93,181

27

%

Accrued expenses and other current liabilities

184,437

139,661

44,776

32

Short-term borrowings and current portion of long-term debt

10,058

9,558

500

5

Current operating lease liabilities

63,786

56,625

7,161

13

Total current liabilities

697,734

552,116

145,618

26

Deferred income taxes

30,440

29,399

1,041

4

Long-term debt, net

413,058

429,246

(16,188

)

(4

)

Other long-term liabilities

38,079

29,008

9,071

31

Non-current operating lease liabilities

159,976

128,237

31,739

25

Total liabilities

1,339,287

1,168,006

171,281

15

Total stockholders’ equity

874,748

486,791

387,957

80

Total liabilities and stockholders’ equity

$

2,214,035

$

1,654,797

$

559,238

34

%

(1) The allowance for doubtful accounts was $5.4 million at June 30, 2021 and $6.0 million at June 30, 2020.
(2) The inventory reserve was $15.2 million at June 30, 2021 and $10.8 million at June 30, 2020.


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

Six Months Ended

June 30,

2021

2020

Change

Operating activities

Net income

$

358,350

$

188,467

$

169,883

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

13,884

13,993

(109

)

Amortization

723

655

68

Share-based compensation

7,549

7,221

328

Equity earnings in unconsolidated investments, net

(132

)

(162

)

30

Impairment of goodwill and other assets

6,944

(6,944

)

Other

4,812

3,171

1,641

Changes in operating assets and liabilities, net of effects of acquisitions:

Receivables

(295,342

)

(229,506

)

(65,836

)

Product inventories

(114,792

)

75,199

(189,991

)

Prepaid expenses and other assets

(16,865

)

(677

)

(16,188

)

Accounts payable

170,368

84,190

86,178

Accrued expenses and other current liabilities

58,673

71,705

(13,032

)

Net cash provided by operating activities

187,228

221,200

(33,972

)

Investing activities

Acquisition of businesses, net of cash acquired

(15,162

)

(13,711

)

(1,451

)

Purchases of property and equipment, net of sale proceeds

(17,333

)

(13,031

)

(4,302

)

Net cash used in investing activities

(32,495

)

(26,742

)

(5,753

)

Financing activities

Proceeds from revolving line of credit

549,008

318,155

230,853

Payments on revolving line of credit

(505,636

)

(504,140

)

(1,496

)

Proceeds from asset-backed financing

260,000

191,700

68,300

Payments on asset-backed financing

(290,000

)

(71,700

)

(218,300

)

Payments on term facility

(4,625

)

(4,625

)

Proceeds from short-term borrowings and current portion of long-term debt

4,466

10,731

(6,265

)

Payments on short-term borrowings and current portion of long-term debt

(6,277

)

(12,918

)

6,641

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

7,918

10,811

(2,893

)

Payments of cash dividends

(55,418

)

(45,312

)

(10,106

)

Purchases of treasury stock

(90,135

)

(70,203

)

(19,932

)

Net cash used in financing activities

(131,061

)

(177,794

)

46,733

Effect of exchange rate changes on cash and cash equivalents

665

(1,062

)

1,727

Change in cash and cash equivalents

24,337

15,602

8,735

Cash and cash equivalents at beginning of period

34,128

28,583

5,545

Cash and cash equivalents at end of period

$

58,465

$

44,185

$

14,280

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

June 30,

June 30,

June 30,

2021

2020

2021

2020

2021

2020

Net sales

$

1,687,651

$

1,279,429

$

100,182

$

1,417

$

1,787,833

$

1,280,846

Gross profit

524,378

372,848

27,307

633

551,685

373,481

Gross margin

31.1

%

29.1

%

27.3

%

44.7

%

30.9

%

29.2

%

Operating expenses

196,764

167,131

16,335

493

213,099

167,624

Expenses as a % of net sales

11.7

%

13.1

%

16.3

%

34.8

%

11.9

%

13.1

%

Operating income

327,614

205,717

10,972

140

338,586

205,857

Operating margin

19.4

%

16.1

%

11.0

%

9.9

%

18.9

%

16.1

%

(Unaudited)

Base Business

Excluded

Total

(in thousands)

Six Months Ended

Six Months Ended

Six Months Ended

June 30,

June 30,

June 30,

2021

2020

2021

2020

2021

2020

Net sales

$

2,703,285

$

1,954,323

$

145,294

$

3,811

$

2,848,579

$

1,958,134

Gross profit

814,490

561,354

38,327

1,756

852,817

563,110

Gross margin

30.1

%

28.7

%

26.4

%

46.1

%

29.9

%

28.8

%

Operating expenses (1)

357,852

320,206

27,348

1,459

385,200

321,665

Expenses as a % of net sales

13.2

%

16.4

%

18.8

%

38.3

%

13.5

%

16.4

%

Operating income (1)

456,638

241,148

10,979

297

467,617

241,445

Operating margin

16.9

%

12.3

%

7.6

%

7.8

%

16.4

%

12.3

%

(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

Vak Pak Builders Supply, Inc.

June 2021

1

June 2021

Pool Source, LLC

April 2021

1

April - June 2021

TWC Distributors, Inc.

December 2020

10

January - June 2021

Jet Line Products, Inc.

October 2020

9

January - June 2021

Northeastern Swimming Pool Distributors, Inc.

September 2020

2

January - June 2021

Master Tile Network LLC

February 2020

4

January - May 2021 and February - May 2020

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 six months of 2021.

December 31, 2020

398

Acquired locations

2

New locations

9

Consolidated location

(1

)

June 30, 2021

408

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. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

Adjusted EBITDA is not a measure of performance as determined by generally accepted accounting principles (GAAP). 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.

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 performance measure. We believe that Adjusted EBITDA, when viewed with our GAAP results and the accompanying reconciliations, provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay taxes and fund capital expenditures.


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

(Unaudited)

Three Months Ended

Six Months Ended

(in thousands)

June 30,

June 30,

2021

2020

2021

2020

Net income

$

259,695

$

157,555

$

358,350

$

188,467

Add:

Interest and other non-operating expenses (1)

1,963

2,643

4,545

7,432

Provision for income taxes

76,985

45,733

104,854

45,708

Share-based compensation

3,712

3,567

7,549

7,221

Equity earnings in unconsolidated investments

(57

)

(74

)

(132

)

(162

)

Impairment of goodwill and other assets

6,944

Depreciation

7,000

6,992

13,884

13,993

Amortization (2)

221

216

561

448

Adjusted EBITDA

$

349,519

$

216,632

$

489,611

$

270,051

(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 $103 for the three months ended June 30, 2021 and June 30, 2020, respectively, and $162 and $207 for the six months ended June 30, 2021 and June 30, 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.

Adjusted net income and adjusted diluted EPS are key measures used by management to demonstrate the impact of our non-cash and non-recurring charges and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.

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)

Six Months Ended

(in thousands)

June 30,

2021

2020

Net income

$

358,350

$

188,467

Impairment of goodwill and other assets

6,944

Tax impact on impairment of long-term note (1)

(654

)

Adjusted net income

$

358,350

$

194,757

(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)

Six Months Ended

June 30,

2021

2020

Diluted EPS

$

8.78

$

4.62

After-tax non-cash impairment charges

0.15

Adjusted diluted EPS excluding after-tax non-cash impairment charges

8.78

4.77

ASU 2016-09 tax benefit

(0.29

)

(0.34

)

Adjusted diluted EPS excluding after-tax non-cash impairment charges and tax benefit

$

8.49

$

4.43