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

July 22, 2021

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 billionin 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 $213.1million 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 $205.9million 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 $6.2million, or $0.15 per diluted share, realized in the same period of 2020.

Net income increased 65% to $259.7 millionin 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 June30, 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 June30, 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 June30, 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 June30, 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 June30, 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 June30, 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 worlds 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 POOLCORPs 2020 Annual Report on Form10-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. ScheelDirector of Investor Relations985.801.5341curtis.scheel@poolcorp.com

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

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020Net 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 andadministrative 213,099 167,624 385,200 314,721 expensesImpairment ofgoodwill and ? ? ? 6,944 other assetsOperating 338,586 205,857 467,617 241,445 incomePercent 18.9 % 16.1 % 16.4 % 12.3 % Interest andother 1,963 2,643 4,545 7,432 non-operatingexpenses, netIncome beforeincome taxes 336,623 203,214 463,072 234,013 and equityearningsProvision for 76,985 45,733 104,854 45,708 income taxesEquity earningsinunconsolidated 57 74 132 162 investments,netNet 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 Weightedaverage shares outstanding:Basic 40,125 39,973 40,169 40,049 Diluted 40,745 40,715 40,800 40,837 Cash dividendsdeclared per $ 0.80 $ 0.58 $ 1.38 $ 1.13 common share

POOL CORPORATIONCondensed Consolidated Balance Sheets(Unaudited)(In thousands)

June 30, June 30, Change 2021 2020 $ % Assets Current assets: Cash and cash $ 58,465 $ 44,185 $ 14,280 32 % equivalents Receivables, net ^(1) 210,318 144,842 65,476 45 Receivables pledged under receivables 375,248 308,563 66,685 22 facility Product inventories, 894,654 628,418 266,236 42 net^ (2) Prepaid expenses and 18,716 11,139 7,577 68 other current assetsTotal current assets 1,557,401 1,137,147 420,254 37 Property and equipment, 111,661 111,258 403 ? netGoodwill 283,284 193,784 89,500 46 Other intangible assets, 12,350 9,615 2,735 28 netEquity interest 1,293 1,274 19 1 investmentsOperating 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? equityCurrent liabilities: Accounts payable $ 439,453 $ 346,272 $ 93,181 27 % Accrued expenses and other current 184,437 139,661 44,776 32 liabilities Short-term borrowings and current portion of 10,058 9,558 500 5 long-term debt Current operating lease 63,786 56,625 7,161 13 liabilitiesTotal 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 38,079 29,008 9,071 31 liabilitiesNon-current operating 159,976 128,237 31,739 25 lease liabilitiesTotal liabilities 1,339,287 1,168,006 171,281 15 Total stockholders? 874,748 486,791 387,957 80 equityTotal liabilities and $ 2,214,035 $ 1,654,797 $ 559,238 34 %stockholders? equity

(1) The allowance for doubtful accounts was $5.4 million at June 30, 2021 and $6.0 million at June30, 2020.(2) The inventory reserve was $15.2 million at June 30, 2021 and $10.8 million at June30, 2020.

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

Six Months Ended June 30, 2021 2020 ChangeOperating activities Net income $ 358,350 $ 188,467 $ 169,883 Adjustments to reconcile netincome 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, (132 ) (162 ) 30 net Impairment of goodwill and ? 6,944 (6,944 ) other assets Other 4,812 3,171 1,641 Changes in operating assetsand 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 (16,865 ) (677 ) (16,188 ) assets Accounts payable 170,368 84,190 86,178 Accrued expenses and other 58,673 71,705 (13,032 ) current liabilitiesNet cash provided by operating 187,228 221,200 (33,972 ) activities Investing activities Acquisition of businesses, net (15,162 ) (13,711 ) (1,451 ) of cash acquiredPurchases of property andequipment, net of sale (17,333 ) (13,031 ) (4,302 ) proceedsNet cash used in investing (32,495 ) (26,742 ) (5,753 ) activities Financing activities Proceeds from revolving line 549,008 318,155 230,853 of creditPayments on revolving line of (505,636 ) (504,140 ) (1,496 ) creditProceeds from asset-backed 260,000 191,700 68,300 financingPayments on asset-backed (290,000 ) (71,700 ) (218,300 ) financingPayments on term facility (4,625 ) (4,625 ) ? Proceeds from short-termborrowings and current portion 4,466 10,731 (6,265 ) of long-term debtPayments on short-termborrowings and current portion (6,277 ) (12,918 ) 6,641 of long-term debtPayments of deferred financing ? (12 ) 12 costsPayments of deferred andcontingent acquisition (362 ) (281 ) (81 ) considerationProceeds from stock issuedunder share-based compensation 7,918 10,811 (2,893 ) plansPayments of cash dividends (55,418 ) (45,312 ) (10,106 ) Purchases of treasury stock (90,135 ) (70,203 ) (19,932 ) Net cash used in financing (131,061 ) (177,794 ) 46,733 activitiesEffect of exchange ratechanges on cash and cash 665 (1,062 ) 1,727 equivalentsChange in cash and cash 24,337 15,602 8,735 equivalentsCash and cash equivalents at 34,128 28,583 5,545 beginning of periodCash and cash equivalents at $ 58,465 $ 44,185 $ 14,280 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) June 30, June 30, June 30, 2021 2020 2021 2020 2021 2020Net sales $ 1,687,651 $ 1,279,429 $ 100,182 $ 1,417 $ 1,787,833 $ 1,280,846 Gross 524,378 372,848 27,307 633 551,685 373,481 profitGross 31.1 % 29.1 % 27.3 % 44.7 % 30.9 % 29.2 %margin Operating 196,764 167,131 16,335 493 213,099 167,624 expensesExpenses asa % of net 11.7 % 13.1 % 16.3 % 34.8 % 11.9 % 13.1 %sales Operating 327,614 205,717 10,972 140 338,586 205,857 incomeOperating 19.4 % 16.1 % 11.0 % 9.9 % 18.9 % 16.1 %margin



(Unaudited) Base Business Excluded Total(in Six Months Ended Six Months Ended Six Months Endedthousands) June 30, June 30, June 30, 2021 2020 2021 2020 2021 2020Net sales $ 2,703,285 $ 1,954,323 $ 145,294 $ 3,811 $ 2,848,579 $ 1,958,134 Gross 814,490 561,354 38,327 1,756 852,817 563,110 profitGross 30.1 % 28.7 % 26.4 % 46.1 % 29.9 % 28.8 %margin Operatingexpenses ^ 357,852 320,206 27,348 1,459 385,200 321,665 (1)Expenses asa % of net 13.2 % 16.4 % 18.8 % 38.3 % 13.5 % 16.4 %sales Operating 456,638 241,148 10,979 297 467,617 241,445 income ^(1)Operating 16.9 % 12.3 % 7.6 % 7.8 % 16.4 % 12.3 %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 Sales Acquisition Centers Periods Date Acquired ExcludedAcquiredVak Pak Builders Supply, June 2021 1 June 2021Inc.Pool Source, LLC April 2021 1 April - June 2021TWC Distributors, Inc. December 10 January - June 2021 2020Jet Line Products, Inc. October 9 January - June 2021 2020Northeastern Swimming September 2 January - June 2021Pool Distributors, Inc. 2020Master Tile Network LLC February 4 January - May 2021 and 2020 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 2020Net income $ 259,695 $ 157,555 $ 358,350 $ 188,467 Add: Interest and other 1,963 2,643 4,545 7,432 non-operating expenses ^(1) Provision for 76,985 45,733 104,854 45,708 income taxes Share-based 3,712 3,567 7,549 7,221 compensation Equity earnings in (57 ) (74 ) (132 ) (162 ) unconsolidated investments Impairment of goodwill and ? ? ? 6,944 other assets Depreciation 7,000 6,992 13,884 13,993 Amortization ^ 221 216 561 448 (2)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 June30, 2020, respectively, and $162 and $207 for the six months ended June 30, 2021 and June30, 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 2020Net 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 2020Diluted EPS $ 8.78 $ 4.62 After-tax non-cash impairment charges ? 0.15 Adjusted diluted EPS excluding after-tax non-cash 8.78 4.77 impairment chargesASU 2016-09 tax benefit (0.29 ) (0.34 )Adjusted diluted EPS excluding after-tax non-cash $ 8.49 $ 4.43 impairment charges and tax benefit