GlobeNewswire Inc | Apr 22, 2021 07:00AM EDT

April 22, 2021

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 companys 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 millionin 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 $172.1million 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 $35.6million 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 $8.0million, or $0.19 per diluted share, realized in the same period of 2020.

Net income increased 219% to $98.7 millionin 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 March31, 2020, driven by our March sales growth and partially offset by improved collections. Inventory levels increased 14% to $977.2 million compared to March31, 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 March31, 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 worlds 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 POOLCORPs 2020 Annual Report on Form10-K filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

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

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

Three Months Ended March 31, 2021 2020Net 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 CORPORATIONCondensed Consolidated Balance Sheets(Unaudited)(In thousands)

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

(1)The allowance for doubtful accounts was $4.7 million at March 31, 2021 and $6.9 million at March31, 2020.(2)The inventory reserve was $13.7 million at March 31, 2021 and $10.3 million at March31, 2020.

POOL CORPORATIONCondensed Consolidated Statements of Cash Flows(Unaudited)(In thousands)

Three Months Ended March 31, 2021 2020 ChangeOperating activities Net income $ 98,655 $ 30,912 $ 67,743 Adjustments to reconcile netincome 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, (75 ) (88 ) 13 net Impairment of goodwill and ? 6,944 (6,944 ) other assets Other 2,723 3,715 (992 ) Changes in operating assetsand 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 (5,507 ) 4,633 (10,140 ) assets Accounts payable 369,665 256,874 112,791 Accrued expenses and other 367 (12,855 ) 13,222 current liabilitiesNet cash provided by operating 77,113 19,728 57,385 activities Investing activities Acquisition of businesses, net (683 ) (13,642 ) 12,959 of cash acquiredPurchases of property andequipment, net of sale (8,839 ) (8,340 ) (499 ) proceedsNet cash used in investing (9,522 ) (21,982 ) 12,460 activities Financing activities Proceeds from revolving line 342,500 248,700 93,800 of creditPayments on revolving line of (308,656 ) (256,543 ) (52,113 ) creditProceeds from asset-backed 110,000 97,400 12,600 financingPayments on asset-backed (125,000 ) (17,300 ) (107,700 ) financingPayments on term facility (2,313 ) (2,313 ) ? Proceeds from short-termborrowings and current portion 4,280 6,479 (2,199 ) of long-term debtPayments on short-termborrowings and current portion (3,740 ) (1,871 ) (1,869 ) of long-term debtPayments of deferred financing ? (12 ) 12 costsPayments of deferred andcontingent acquisition (362 ) (281 ) (81 ) considerationProceeds from stock issuedunder share-based compensation 2,912 6,358 (3,446 ) plansPayments of cash dividends (23,299 ) (22,147 ) (1,152 ) Purchases of treasury stock (71,516 ) (66,619 ) (4,897 ) Net cash used in financing (75,194 ) (8,149 ) (67,045 ) activitiesEffect of exchange ratechanges on cash and cash 553 (372 ) 925 equivalentsChange in cash and cash (7,050 ) (10,775 ) 3,725 equivalentsCash and cash equivalents at 34,128 28,583 5,545 beginning of periodCash and cash equivalents at $ 27,078 $ 17,808 $ 9,270 end of period

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

(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:

Net Acquisition Sales PeriodsAcquired Date Centers Excluded AcquiredTWC Distributors, Inc. ^(1) December 10 January - March 2020 2021Jet Line Products, Inc. October 9 January - March 2020 2021Northeastern Swimming Pool September 2 January - MarchDistributors, Inc. ^(1) 2020 2021 January - MarchMaster Tile Network LLC ^(1) February 4 2021 and 2020 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 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 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 page5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited) Three Months Ended(in thousands) March 31, 2021 2020Adjusted EBITDA $ 140,092 $ 53,419 Add: Interest and other non-operating (2,501 ) (4,685 ) expenses, net of interest income Income tax provision (benefit) (27,869 ) 25 Other 2,723 3,715 Change in operating assets and (35,332 ) (32,746 ) liabilitiesNet 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 2020Net 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 March31, 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 2020Net 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 2020Diluted EPS $ 2.42 $ 0.75 After-tax non-cash impairment charges ? 0.15 Adjusted diluted EPS excluding after-tax non-cash 2.42 0.90 impairment chargesASU 2016-09 tax benefit (0.10 ) (0.19 ) Adjusted diluted EPS excluding after-tax non-cash $ 2.32 $ 0.71 impairment charges and tax benefit