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Pool Corporation Reports Record 2020 Results and Provides 2021


GlobeNewswire Inc | Feb 11, 2021 07:00AM EST

February 11, 2021

Highlights include:

-- Record annual net sales of $3.9 billion for 2020, up 23% from 2019, including a 44% increase in Q4 2020 -- 2020 operating margin of 11.8%, up 110 bps from 2019 -- Record 2020 diluted EPS of $8.97, an increase of 40% over 2019, or an increase of 44% excluding tax benefits in both periods and non-cash impairments recorded in Q1 2020 -- Cash provided by operations of $397.6 million, an improvement of $98.8million from 2019 -- 2021 diluted EPS guidance range of $9.12 - $9.62, including an estimated $0.11 tax benefit

COVINGTON, La., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today announced fourth quarter and full year 2020 results.

As the pandemic forced families to spend more time at home in 2020, they sought out opportunities to create or expand existing home-based outdoor living and entertainment spaces. This created unprecedented demand throughout our markets. Our scale and execution, combined with favorable weather conditions, drove truly remarkable results for the year, including an exceptionally strong fourth quarter. I am extremely proud of the outstanding efforts of the POOLCORP team, whose commitment to our customers, while maintaining a safe environment for fellow employees and our communities under very challenging conditions, is second to none, commented Peter D. Arvan, president and CEO.

Net sales increased 23% to a record high of $3.9 billion for the year ended December31, 2020 compared to $3.2 billion in 2019, while base business sales increased 22%. We realized broad sales gains across nearly all product categories. Our sales benefited from greater swimming pool usage and high demand for residential pool products, which was driven by home-centric trends influenced by the COVID-19 pandemic and aided by warmer weather conditions during the year.

Gross profit reached a record $1.1 billion for the year ended December31, 2020, a 22% increase over gross profit of $924.9 million in 2019. Gross margin declined 20 basis points to 28.7% in 2020 compared to 28.9% in 2019. The decline in gross margin is primarily due to sales of lower margin, big-ticket items, such as pool equipment and in-ground and above-ground pools, which comprised a larger portion of our product mix in 2020 compared to 2019.

Selling and administrative expenses (operating expenses) increased 14%, or $83.2 million, to $666.9 million in 2020, up from $583.7 million in 2019, with base business operating expenses up 12% over 2019. Over half of the increase in operating expenses, or $43.9 million, reflects higher performance-based compensation earned by employees in 2020, while another 20% of the increase, or $16.9 million, came from acquired businesses. Excluding $6.9million of impairment charges we recorded in the first quarter of 2020 and performance-based compensation in both periods, operating expenses increased 6%, reflecting growth-driven labor and freight expenses and greater facility-related costs partially offset by lower discretionary spending. As a result of strong expense control and our ability to leverage our existing network, operating expenses as a percentage of net sales declined 130 basis points to 16.9% in 2020 compared to 18.2% in 2019.

Operating income for the year increased 36% to $464.0 million, up from $341.2 million in 2019. Adjusted operating income, excluding non-cash impairments, increased 38% from the prior year to $471.0 million. See the reconciliation of GAAP to non-GAAP measures below and in the addendum of this release. Operating margin increased 110 basis points to 11.8% in 2020 compared to 10.7% in 2019.

We recorded a $28.6 million, or $0.70 per diluted share, benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, for the year endedDecember31, 2020compared to a benefit of$23.5 million, or $0.57 per diluted share, realized in2019.

Net income increased 40% to a record $366.7 million in 2020 compared to $261.6 million in 2019. Adjusted net income, excluding the $6.3 million, or $0.15 per diluted share, impact of non-cash impairments, net of tax, increased 43% to $373.0 million. Earnings per share increased 40% to a record $8.97 per diluted share compared to $6.40 per diluted share in 2019. Excluding the impact of non-cash impairments, net of tax, in 2020 and the impact from ASU 2016-09 in both periods, adjusted diluted earnings per share increased 44% to $8.42 in 2020 compared to $5.83 in 2019. Adjusted EBITDA (as defined in the addendum to this release) increased 34% to $512.7 million in 2020 compared to $382.2 million in 2019 and was 13.0% of net sales in 2020 compared to 11.9% of net sales in 2019.

On the balance sheet at December31, 2020, total net receivables, including pledged receivables, increased 28% compared to 2019, driven by our December sales growth and partially offset by improved collections. Inventory levels increased 11% to $781.0 million compared to $702.3 million in 2019, reflecting normal inventory growth and $42.2 million of inventory from recently acquired businesses. Accrued expenses and other current liabilities increased $82.9 million to $143.7 million in 2020, primarily reflecting increases in accrued performance-based compensation, unrealized losses on interest rate swaps and deferred payroll tax payments. Total debt outstanding decreased $95.4 million, or 19%, compared to last years balance, as we have utilized our operating cash flows to decrease debt balances.

Cash provided by operations was $397.6 million in 2020 compared to $298.8 million in 2019, an improvement of $98.8million. The improvement in cash provided by operations primarily reflects an increase in net income and accrued expenses and other current liabilities, which was partially offset by year-over-year increases in our accounts receivables and inventory balances. Our return on invested capital (as defined in the addendum to this release) for 2020 was 39.2% compared to 29.3% in 2019.

Net sales increased 44% to $839.3 million in the fourth quarter of 2020 compared to $582.2 million in the fourth quarter of 2019. Sales in the fourth quarter of 2020 benefited from continued stay-at-home trends, favorable weather nationwide and acquisitions. Acquisitions added 4% to sales growth in the quarter. Gross margin increased 70basis points to 28.5% in the fourth quarter of 2020 from 27.8% in the fourth quarter of 2019 with increased purchase volumes driving improvements in supply chain management.

Operating expenses increased 21% to $164.7 million in the fourth quarter of 2020 compared to $136.3 million in the fourth quarter of 2019, primarily reflecting higher performance-based compensation earned by employees and expenses from recently acquired businesses. As a percentage of net sales, operating expenses decreased to 19.6% in the fourth quarter of 2020 compared to 23.4% in the same period of 2019.

Operating income in the fourth quarter of 2020 increased 188% to $74.4 million compared to $25.8 million in the same period of 2019. Operating margin increased 450 basis points in the fourth quarter. We recorded a $6.0million benefit from ASU 2016-09, or $0.15 per diluted share, in the fourth quarter of 2020compared to a benefit of$2.4million, or $0.06 per diluted share, realized inthe fourth quarter of 2019. Net income in the fourth quarter of 2020 was $59.2 million compared to $18.0 million in the comparable 2019 period. Earnings per diluted share increased 230% to $1.45 in the fourth quarter of 2020 compared to $0.44 for the same period in 2019. Excluding the impact from ASU 2016-09 in both periods, earnings per diluted share increased 242% to $1.30 compared to $0.38 for the same period in 2019.

We expect the benefits from our investments in capacity creation and our most recent acquisitions, along with new sales center openings, will contribute to solid growth in 2021. Long-term demand within our industry remains strong, and we believe results in 2021 will continue to benefit from robust consumer interest in outdoor living. Building on the momentum that we gained in 2020, our guidance range assumes strong growth in the first half of the year. In the second half of the year, we expect to face tougher year-over-year comparisons and inherent industry capacity constraints, although we remain encouraged by positive industry outlooks. We project earnings for 2021 will grow on top of the incredible results delivered in 2020 and be in the range of $9.12 to $9.62 per diluted share, including an estimated $0.11 favorable impact from ASU 2016-09, said Arvan.

(Unaudited) 2021 Guidance Range 2020 Floor CeilingDiluted EPS $ 8.97 $ 9.12 $ 9.62 After-tax non-cash impairment charges 0.15 ? ? ASU 2016-09 tax benefit (0.70 ) (0.11 ) (0.11 )Adjusted Diluted EPS $ 8.42 $ 9.01 $ 9.51 Year-over-year growth 7 % 13 %

Based on our December31, 2020 stock price, we estimate that we have approximately $4.5 million in unrealized excess tax benefits related to stock options that will expire and restricted stock awards that will vest in the first quarter of 2021, adding $0.11 in diluted earnings per share in that period. We have included the estimated first quarter benefit in our annual earnings guidance; however, additional tax benefits could be recognized related to stock option exercises in 2021 from grants that expire in years after 2021, for which we have not included any expected benefits.

POOLCORP is the worlds largest wholesale distributor of swimming pool and related backyard products. As of December31, 2020, POOLCORP operates 398 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 POOLCORPs 2019 Annual Report on Form10-K, 2020 Quarterly Reports on Form 10-Q and other reports and filings filed with the Securities and Exchange Commission (SEC) as updated by POOLCORPs subsequent filings with the SEC.

Curtis J. ScheelDirector of Investor Relations985.801.5341curtis.scheel@poolcorp.com

POOL CORPORATIONConsolidated Statements of Income (In thousands, except per share data)

Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 ^(1) Net sales $ 839,261 $ 582,234 $ 3,936,623 $ 3,199,517 Cost of sales 600,166 420,184 2,805,721 2,274,592 Gross profit 239,095 162,050 1,130,902 924,925 Percent 28.5 % 27.8 % 28.7 % 28.9 % Selling andadministrative 164,744 136,252 659,931 583,679 expensesImpairment ofgoodwill and ? ? 6,944 ? other assetsOperating income 74,351 25,798 464,027 341,246 Percent 8.9 % 4.4 % 11.8 % 10.7 % Interest andother 3,061 5,234 12,353 23,772 non-operatingexpenses, netIncome beforeincome taxes and 71,290 20,564 451,674 317,474 equity earningsProvision for 12,163 2,592 85,231 56,161 income taxesEquity earningsin unconsolidated 47 52 295 262 investments, netNet income $ 59,174 $ 18,024 $ 366,738 $ 261,575 Earnings per share:Basic $ 1.47 $ 0.45 $ 9.14 $ 6.57 Diluted $ 1.45 $ 0.44 $ 8.97 $ 6.40 Weighted averageshares outstanding:Basic 40,202 40,047 40,106 39,833 Diluted 40,873 40,952 40,865 40,865 Cash dividendsdeclared per $ 0.58 $ 0.55 $ 2.29 $ 2.10 common share

(1) Derived from audited financial statements.

POOL CORPORATIONCondensed Consolidated Balance Sheets(In thousands)

December 31, December 31, Change 2020 2019 ^(1) $ % Assets Current assets: Cash and cash equivalents $ 34,128 $ 28,583 $ 5,545 19 %Receivables, net ^(2) 122,252 76,648 45,604 59 Receivables pledged under 166,948 149,891 17,057 11 receivables facilityProduct inventories, net ^ 780,989 702,274 78,715 11 (3)Prepaid expenses and other 17,610 16,172 1,438 9 current assetsTotal current assets 1,121,927 973,568 148,359 15 Property and equipment, 108,241 112,246 (4,005 ) (4 )netGoodwill 268,167 188,596 79,571 42 Other intangible assets, 12,181 11,038 1,143 10 netEquity interest 1,292 1,227 65 5 investmentsOperating lease assets 205,875 176,689 29,186 17 Other assets 21,987 19,902 2,085 10 Total assets $ 1,739,670 $ 1,483,266 $ 256,404 17 % Liabilities and stockholders? equityCurrent liabilities: Accounts payable $ 266,753 $ 261,963 $ 4,790 2 %Accrued expenses and other 143,694 60,813 82,881 136 current liabilitiesShort-term borrowings andcurrent portion of 11,869 11,745 124 1 long-term debtCurrent operating lease 60,933 56,325 4,608 8 liabilitiesTotal current liabilities 483,249 390,846 92,403 24 Deferred income taxes 27,653 32,598 (4,945 ) (15 )Long-term debt, net 404,149 499,662 (95,513 ) (19 )Other long-term 38,261 27,970 10,291 37 liabilitiesNon-current operating 146,888 122,010 24,878 20 lease liabilitiesTotal liabilities 1,100,200 1,073,086 27,114 3 Total stockholders? equity 639,470 410,180 229,290 56 Total liabilities and $ 1,739,670 $ 1,483,266 $ 256,404 17 %stockholders? equity

(1)Derived from audited financial statements.

(2)The allowance for doubtful accounts was $4.8 million at December31, 2020 and $5.5 million at December31, 2019.

(3)The inventory reserve was $11.4 million at December31, 2020 and $9.0 million at December31, 2019.

POOL CORPORATIONCondensed Consolidated Statements of Cash Flows(In thousands)

Year Ended December 31, 2020 2019 ^(1) ChangeOperating activities Net income $ 366,738 $ 261,575 $ 105,163 Adjustments to reconcile net incometo net cash provided by operating activities:Depreciation 27,967 27,885 82 Amortization 1,431 1,389 42 Share-based compensation 14,516 13,472 1,044 Equity earnings in unconsolidated (295 ) (262 ) (33 )investments, netNet losses on foreign currency 1,748 1,347 401 transactionsImpairment of goodwill and other 6,944 ? 6,944 assetsOther (396 ) 7,551 (7,947 )Changes in operating assets andliabilities, net of effects of acquisitions:Receivables (38,688 ) (15,691 ) (22,997 )Product inventories (42,447 ) (14,165 ) (28,282 )Prepaid expenses and other assets (13,744 ) (4,218 ) (9,526 )Accounts payable (9,212 ) 16,860 (26,072 )Accrued expenses and other current 83,019 3,033 79,986 liabilitiesNet cash provided by operating 397,581 298,776 98,805 activities Investing activities Acquisition of businesses, net of (124,587 ) (8,901 ) (115,686 )cash acquiredPurchase of property and equipment, (21,702 ) (33,362 ) 11,660 net of sale proceedsNet cash used in investing activities (146,289 ) (42,263 ) (104,026 ) Financing activities Proceeds from revolving line of 1,053,968 1,066,529 (12,561 )creditPayments on revolving line of credit (1,145,616 ) (1,415,988 ) 270,372 Proceeds from asset-backed financing 326,700 189,000 137,700 Payments on asset-backed financing (321,700 ) (182,500 ) (139,200 )Proceeds from term facility ? 185,000 (185,000 )Payments on term facility (9,250 ) ? (9,250 )Proceeds from short-term borrowings 13,822 30,863 (17,041 )and current portion of long-term debtPayments on short-term borrowings and (13,698 ) (28,286 ) 14,588 current portion of long-term debtPayments of deferred acquisition (281 ) (312 ) 31 considerationPayments of deferred financing costs (12 ) (406 ) 394 Proceeds from stock issued under 19,824 18,574 1,250 share-based compensation plansPayments of cash dividends (91,929 ) (83,772 ) (8,157 )Purchases of treasury stock (76,199 ) (23,188 ) (53,011 )Net cash used in financing activities (244,371 ) (244,486 ) 115 Effect of exchange rate changes on (1,376 ) 198 (1,574 )cash and cash equivalentsChange in cash and cash equivalents 5,545 12,225 (6,680 )Cash and cash equivalents at 28,583 16,358 12,225 beginning of periodCash and cash equivalents at end of $ 34,128 $ 28,583 $ 5,545 period

(1) Derived from audited financial statements.

ADDENDUM

Base Business

The following tables break out our consolidated results into the base business component and the excluded components (sales centers excluded from base business):

(Unaudited) Base Business Excluded Total(in Three Months Ended Three Months Ended Three Months Endedthousands) December 31, December 31, December 31, 2020 2019 2020 2019 2020 2019Net sales $ 807,156 $ 581,817 $ 32,105 $ 417 $ 839,261 $ 582,234 Gross 232,247 162,312 6,848 (262 ) 239,095 162,050 profitGross 28.8 % 27.9 % 21.3 % (62.8 )% 28.5 % 27.8 %margin Operating 154,335 136,004 10,409 248 164,744 136,252 expensesExpenses asa % of net 19.1 % 23.4 % 32.4 % 59.5 % 19.6 % 23.4 %sales Operatingincome 77,912 26,308 (3,561 ) (510 ) 74,351 25,798 (loss)Operating 9.7 % 4.5 % (11.1 )% (122.3 )% 8.9 % 4.4 %margin

(Unaudited) Base Business Excluded Total(in Year Ended Year Ended Year Endedthousands) December 31, December 31, December 31, 2020 2019 2020 2019 2020 2019Net sales $ 3,886,079 $ 3,183,940 $ 50,544 $ 15,577 $ 3,936,623 $ 3,199,517 Gross 1,117,303 922,193 13,599 2,732 1,130,902 924,925 profitGross 28.8 % 29.0 % 26.9 % 17.5 % 28.7 % 28.9 %margin Operatingexpenses ^ 650,020 579,068 16,855 4,611 666,875 583,679 (1)Expenses asa % of net 16.7 % 18.2 % 33.3 % 29.6 % 16.9 % 18.2 %sales Operatingincome 467,283 343,125 (3,256 ) (1,879 ) 464,027 341,246 (loss) ^(1)Operating 12.0 % 10.8 % (6.4 )% (12.1 )% 11.8 % 10.7 %margin

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

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

Net Acquisition Sales Periods Date Centers Excluded AcquiredAcquiredTWC Distributors, Inc. ^ December 10 December 2020(1) 2020Jet Line Products, Inc. October 9 October - December 2020 2020Northeastern Swimming September September - DecemberPool Distributors, Inc. ^ 2020 2 2020(1)Master Tile Network LLC ^ February 4 February - December(1) 2020 2020 January January - March 2020W.W. Adcock, Inc.^ (1) 2019 4 and January - March 2019Turf & Garden, Inc. ^(1) November 4 January 2020 2018 andJanuary 2019

(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 centers during 2020.

December 31, 2019 373 Acquired locations 25 New locations 3 Closed/consolidated locations (3 )December 31, 2020 398

Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expense, income taxes, depreciation, amortization, share-based compensation, goodwill and other non-cash impairments and equity earnings or losses 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 liquidity measure in conjunction with cash flows provided by or usedin 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 year to year.

We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, 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 page6 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited) Year Ended December 31,(in thousands) 2020 2019 Adjusted EBITDA $ 512,738 $ 382,212 Add: Interest and other non-operating expenses, net of (10,206 ) (21,992 )interest income ^(1)Provision for income taxes (85,231 ) (56,161 )Net losses on foreign currency transactions 1,748 1,347 Other (396 ) 7,551 Change in operating assets and liabilities (21,072 ) (14,181 )Net cash provided by operating activities $ 397,581 $ 298,776

(1)Shown net of net losses on foreign currency transactions and excludes amortization of deferred financing costs as discussed below.

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

(Unaudited) Year Ended December 31,(in thousands) 2020 2019 Net income $ 366,738 $ 261,575 Add: Interest and other non-operating expenses ^(1) 10,605 22,425 Provision for income taxes 85,231 56,161 Share-based compensation 14,516 13,472 Equity earnings in unconsolidated investments, net (295 ) (262 )Impairment of goodwill and other assets 6,944 ? Depreciation 27,967 27,885 Amortization ^(2) 1,032 956 Adjusted EBITDA $ 512,738 $ 382,212

(1)Shown net of interest income and net losses on foreign currency transactions and includes amortization of deferred financing costs as discussed below. (2)Excludes amortization of deferred financing costs of $399 for 2020 and $433 for 2019. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

Return on Invested Capital

We calculate Return on Invested Capital (ROIC) using trailing four quarter results. We define ROIC as Net income adjusted for Interest and other non-operating expenses, net (net of taxes at the effective tax rate), divided by the sum of average Long-term debt, net, average Short-term borrowings and the current portion of long-term debt and average Total stockholders equity from our financial statements.We have included ROIC as a supplemental disclosure, because we believe that it may be used by our investors, industry analysts and others as a measure of the efficiency and effectiveness of our use of capital.

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

The table below presents our calculation of ROIC at December 31, 2020 and 2019.

(Unaudited) Year Ended December 31,(in thousands) 2020 2019Numerator (trailing four quarters total): Net income $ 366,738 $ 261,575 Interest and other non-operating expenses, net 12,353 23,772 Less: taxes on Interest and other non-operatingexpenses, net at 18.9% (2,335 ) (4,208 )and 17.7%, respectively $ 376,756 $ 281,139 Denominator (average of trailing four quarters): Long-term debt, net $ 432,829 $ 595,247 Short-term borrowings and current portion of long-term 12,373 17,323 debtTotal stockholders? equity 516,040 346,049 $ 961,242 $ 958,619 Return on invested capital 39.2 % 29.3 %

Adjusted Diluted EPS and Adjusted 2021 Diluted EPS Guidance

We have included adjusted diluted EPS, which is a non-GAAP financial measure, in this press release as a supplemental disclosure to demonstrate the impact of our non-cash impairment charge recorded in the first quarter of 2020 and tax benefits from ASU 2016-09 on our 2020 and 2019 diluted EPS and to provide investors and others with additional information about our potential future operating performance. We believe adjusted diluted EPS should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP and in the context of our other forward-looking and cautionary statements in this press release.

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

(Unaudited) Year Ended December 31, 2020 2019Diluted EPS $ 8.97 $ 6.40 After-tax non-cash impairment charges 0.15 ? ASU 2016-09 tax benefit (0.70 ) (0.57 )Adjusted Diluted EPS $ 8.42 $ 5.83

Please see page 3 for a reconciliation of projected 2021 diluted EPS to adjusted projected 2021 diluted EPS. We have included adjusted projected 2021 diluted EPS, which is a non-GAAP financial measure, in this press release as a supplemental disclosure to demonstrate the impact of projected tax benefits from ASU 2016-09 on our projected 2021 diluted EPS and to provide investors and others with additional information about our potential future operating performance. We believe adjusted projected 2021 diluted EPS should be considered in addition to, not as a substitute for, projected 2021 diluted EPS presented in accordance with GAAP and in the context of our other forward-looking and cautionary statements in this press release.

Adjusted Income Statement Information

We have included adjusted operating income and adjusted net income, 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, operating income and net income 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 operating income to adjusted operating income.

(Unaudited) Year Ended December 31,(in thousands) 2020Operating income $ 464,027 Impairment of goodwill and other assets 6,944 Adjusted operating income $ 470,971

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

(Unaudited) Year Ended December 31,(in thousands) 2020Net income $ 366,738 Impairment of goodwill and other assets 6,944 Tax impact on impairment of long-term note ^(1) (654 )Adjusted net income $ 373,028

(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.







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