GlobeNewswire Inc | Oct 21, 2021 07:00AM EDT

October 21, 2021

Highlights

-- Record net sales for third quarter of 2021 reflect overall growth of 24% from Q3 2020 -- Q3 2021 operating income of $237.3 million, up 60% from Q3 2020 with a 380 basis point improvement in operating margin -- Q3 2021 diluted EPS increase of 55% to a record $4.54 or an increase of 64% to $4.44, without tax benefits in both periods -- 2021 earnings guidance for the full year increased to $14.85 - $15.35 per diluted share from previous $13.75 - $14.25 range

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COVINGTON, La., Oct. 21, 2021 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the third quarter of 2021 and increased 2021 earnings guidance.

I am incredibly proud of the POOLCORP team. Everyone in the field from our drivers, warehouse associates, customer service representatives, field management and those in support roles, came together to produce truly incredible results for the quarter. Their extraordinary efforts, tenacity and unending work ethic continued in the third quarter. Our net sales grew 24% to a record $1.4 billion, fueling 60% growth in operating income, on top of the 42% operating income growth that we posted in the third quarter of 2020. Each and every day, our teams have performed remarkably to meet customer demand in challenging conditions, commented Peter D. Arvan, president and CEO.

In the third quarter of 2021, net sales increased 24% to a record $1.4 billion compared to $1.1 billionin the third quarter of 2020, while base business sales grew 19%. This growth is on top of 27% growth in the third quarter of last year, bringing our year-to-date net sales growth to $1.2 billion. Our sales continued to benefit from elevated demand for outdoor living products along with favorable weather conditions. Our rigorous commitment to operating efficiency and capacity creation, along with our strategic focus on inventory purchases to serve demand has allowed us to fulfill our customers' high volumes.

Gross profit increased 34% to a record $441.9 million in the third quarter of 2021 from $328.7 million in the same period of 2020. Base business gross profit improved 29% over the third quarter of 2020. Gross margin increased 240 basis points to 31.3% in the third quarter of 2021 compared to 28.9% in the third quarter of 2020, while base business gross margin increased 250 basis points, primarily reflecting benefits from our supply chain management initiatives.

Selling and administrative expenses (operating expenses), including the recovery of goodwill and other assets, increased 13% to $204.6 million in the third quarter of 2021 compared to $180.5 million in the third quarter of 2020, while base business operating expenses grew 7%, primarily due to growth-driven labor, facility and freight costs, along with increased investments in technology. In the third quarter of 2021, we recovered $1.4 million of a $2.5 million note impairment recorded in the first quarter of 2020. As a percentage of net sales, operating expenses decreased to 14.5% in the third quarter of 2021 compared to 15.8% in the same period of 2020, reflecting continued strong expense control.

Operating income in the third quarter of 2021 increased 60% to $237.3 million compared to $148.2million in the same period in 2020. Operating margin was 16.8% in the third quarter of 2021 compared to 13.0% in the third quarter of 2020 while base business operating margin was 17.1%, up 410 basis points from the prior year period.

We recorded a $4.2 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 September 30, 2021, compared to a tax benefit of $8.5million, or $0.21 per diluted share, realized in the same period of 2020.

Net income increased 55% to $184.7 millionin the third quarter of 2021 compared to $119.1 million in the third quarter of 2020. Earnings per diluted share increased 55% to $4.54 in the third quarter of 2021 compared to $2.92 in the same period of 2020. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 64% to $4.44 in the third quarter of 2021 compared to $2.71 in the third quarter of 2020.

Net sales for the nine months ended September 30, 2021 increased 38% to a record $4.3 billion from $3.1 billion in the nine months ended September30, 2020. Base business sales increased 31% for the period. Gross margin improved 160 basis points to 30.4% compared to 28.8% in the same period last year with base business gross margin 170 basis points higher, favorably impacted by improvements in our supply chain management initiatives.

Operating expenses, including the recovery of goodwill and other assets in 2021 and the impairment in 2020, for the nine months ended September 30, 2021 increased 17% compared to the first nine months of 2020. In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a note and non-cash goodwill and intangibles impairment charges of $4.4 million. In the third quarter of 2021, we recovered $1.4 million of the previously impaired note. Without the impact of the recovery in 2021 and the prior year impairment charges, operating expenses were up 19% with base business operating expenses up 12%.

Operating income for the nine months ended September 30, 2021 increased 81% to a record $704.9 million compared to $389.7 million in the same period last year. Operating margin for the nine months ended September 30, 2021 was 16.5% compared to 12.6% for the nine months ended September30, 2020, while base business operating margin increased 440 basis points.

We recorded a $15.9 million, or $0.39 per diluted share, tax benefit from ASU 2016-09 in the nine months ended September 30, 2021 compared to a $22.6 million, or $0.55 per diluted share, tax benefit in the same period of 2020.

Net income for the nine months ended September 30, 2021 increased 77% to a record $543.0 million compared to $307.6 million for the nine months ended September30, 2020. Adjusted net income for the first nine months of 2021, without the note recovery in 2021 and the prior year impact of non-cash impairments, both net of tax, increased 73%. Earnings per share for the first nine months of 2021 increased 77% to $13.32 per diluted share versus $7.53 in the first nine months of 2020. Adjusted diluted EPS (as calculated in the addendum to this release) increased 81% during the first nine months of 2021 compared to the same period of the prior year. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

On the balance sheet at September 30, 2021, total net receivables, including pledged receivables, increased 30% compared to September30, 2020, primarily driven by our sales growth and recent acquisitions. Inventory levels increased 70% to $1.0 billion, or 63% without inventory from recently acquired businesses, compared to September30, 2020. Our inventory balance has increased as we have made significant investments in inventory throughout the year to support increased demand and help manage potential supply chain disruptions that could negatively impact customer service. Total debt outstanding was $362.8 million at September 30, 2021, a $22.9 million increase from total debt at September30, 2020. As previously announced, during the third quarter of 2021, we also amended and restated our credit facility to, among other things, extend the term approximately five years and enhance our borrowing capacity.

Net cash provided by operations decreased $29.8 million to $359.1 million in the first nine months of 2021 compared to $388.9 million in the first nine months of 2020, primarily reflecting our supply chain investments in inventory to enable us to continue to meet strong customer demand. Adjusted EBITDA (as defined in the addendum to this release) increased 72% to $737.1 million for the nine months ended September 30, 2021, compared to $429.4 million in the same period of the prior year.

In response to our fantastic third quarter results and considering our expectations for the remainder of the year, we are raising our 2021 earnings guidance range to $14.85 to $15.35 per diluted share, including the impact of year-to-date tax benefits of $0.39. Our previous 2021 earnings guidance range was $13.75 to $14.25 per diluted share, and included tax benefits of $0.29 for the first six months of 2021. The strong demand trends combined with our focused strategic initiatives and ability to execute them make us well-positioned for the remainder of 2021 and into next season, said Arvan.

POOLCORP is the worlds largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 409 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, Quarterly Reports on Form 10-Q and other reports and filings with the Securities and Exchange Commission (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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020Net sales $ 1,411,448 $ 1,139,229 $ 4,260,027 $ 3,097,362 Cost of sales 969,549 810,531 2,965,311 2,205,555 Gross profit 441,899 328,698 1,294,716 891,807 Percent 31.3 % 28.9 % 30.4 % 28.8 % Selling andadministrative 206,023 180,465 591,223 495,186 expenses(Recovery)impairment of (1,400 ) ? (1,400 ) 6,944 goodwill andother assetsOperating 237,276 148,233 704,893 389,677 incomePercent 16.8 % 13.0 % 16.5 % 12.6 % Interest andother 2,317 1,861 6,862 9,292 non-operatingexpenses, netIncome beforeincome taxes 234,959 146,372 698,031 380,385 and equityearningsProvision for 50,386 27,360 155,240 73,068 income taxesEquityearnings inunconsolidated 92 86 224 248 investments,netNet income $ 184,665 $ 119,098 $ 543,015 $ 307,565 Earnings per share:Basic $ 4.60 $ 2.97 $ 13.53 $ 7.68 Diluted $ 4.54 $ 2.92 $ 13.32 $ 7.53 Weightedaverage shares outstanding:Basic 40,101 40,123 40,146 40,073 Diluted 40,691 40,839 40,766 40,849 Cash dividendsdeclared per $ 0.80 $ 0.58 $ 2.18 $ 1.71 common share

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

September 30, September 30, Change 2021 2020 $ % Assets Current assets: Cash and cash equivalents $ 83,475 $ 74,749 $ 8,726 12 %Receivables, net ^(1) 174,987 135,555 39,432 29 Receivables pledged under 301,163 230,857 70,306 30 receivables facilityProduct inventories, net^ 1,043,407 612,824 430,583 70 (2)Prepaid expenses and other 23,368 12,696 10,672 84 current assetsTotal current assets 1,626,400 1,066,681 559,719 52 Property and equipment, 111,339 109,086 2,253 2 netGoodwill 281,300 199,360 81,940 41 Other intangible assets, 12,067 10,522 1,545 15 netEquity interest 1,242 1,314 (72 ) (5 ) investmentsOperating lease assets 221,007 180,230 40,777 23 Other assets 28,878 20,396 8,482 42 Total assets $ 2,282,233 $ 1,587,589 $ 694,644 44 % Liabilities and stockholders? equityCurrent liabilities: Accounts payable $ 414,156 $ 268,412 $ 145,744 54 %Accrued expenses and other 231,794 145,420 86,374 59 current liabilitiesShort-term borrowings andcurrent portion of 10,744 11,709 (965 ) (8 ) long-term debtCurrent operating lease 65,442 56,977 8,465 15 liabilitiesTotal current liabilities 722,136 482,518 239,618 50 Deferred income taxes 30,275 29,476 799 3 Long-term debt, net 352,075 328,225 23,850 7 Other long-term 34,176 32,846 1,330 4 liabilitiesNon-current operating 158,359 125,023 33,336 27 lease liabilitiesTotal liabilities 1,297,021 998,088 298,933 30 Total stockholders? equity 985,212 589,501 395,711 67 Total liabilities and $ 2,282,233 $ 1,587,589 $ 694,644 44 %stockholders? equity

(1) The allowance for doubtful accounts was $5.4 million at September 30, 2021 and $5.3 million at September30, 2020.(2) The inventory reserve was $15.7 million at September 30, 2021 and $11.4 million at September30, 2020.

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

Nine Months Ended September 30, 2021 2020 ChangeOperating activities Net income $ 543,015 $ 307,565 $ 235,450 Adjustments to reconcile net incometo net cash provided by operating activities:Depreciation 21,027 20,979 48 Amortization 1,064 975 89 Share-based compensation 11,755 11,095 660 Equity earnings in unconsolidated (224 ) (248 ) 24 investments, netImpairment of goodwill and other ? 6,944 (6,944 )assetsOther 5,256 1,092 4,164 Changes in operating assets andliabilities, net of effects of acquisitions:Receivables (186,772 ) (135,129 ) (51,643 )Product inventories (267,341 ) 99,767 (367,108 )Prepaid expenses and other assets (22,674 ) 311 (22,985 )Accounts payable 146,616 3,385 143,231 Accrued expenses and other current 107,343 72,178 35,165 liabilitiesNet cash provided by operating 359,065 388,914 (29,849 )activities Investing activities Acquisition of businesses, net of (17,887 ) (24,655 ) 6,768 cash acquiredPurchases of property and equipment, (24,223 ) (16,897 ) (7,326 )net of sale proceedsNet cash used in investing (42,110 ) (41,552 ) (558 )activities Financing activities Proceeds from revolving line of 791,508 749,840 41,668 creditPayments on revolving line of credit (730,277 ) (909,637 ) 179,360 Proceeds from asset-backed financing 310,000 261,700 48,300 Payments on asset-backed financing (415,000 ) (266,700 ) (148,300 )Payments on term facility (6,938 ) (6,938 ) ? Proceeds from short-term borrowingsand current portion of long-term 7,880 13,255 (5,375 )debtPayments on short-term borrowingsand current portion of long-term (9,006 ) (13,291 ) 4,285 debtPayments of deferred financing costs (1,610 ) (12 ) (1,598 )Payments of deferred and contingent (362 ) (281 ) (81 )acquisition considerationProceeds from stock issued under 11,524 16,696 (5,172 )share-based compensation plansPayments of cash dividends (87,509 ) (68,599 ) (18,910 )Purchases of treasury stock (137,975 ) (76,194 ) (61,781 )Net cash used in financing (267,765 ) (300,161 ) 32,396 activitiesEffect of exchange rate changes on 157 (1,035 ) 1,192 cash and cash equivalentsChange in cash and cash equivalents 49,347 46,166 3,181 Cash and cash equivalents at 34,128 28,583 5,545 beginning of periodCash and cash equivalents at end of $ 83,475 $ 74,749 $ 8,726 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) September 30, September 30, September 30, 2021 2020 2021 2020 2021 2020Net sales $ 1,348,758 $ 1,136,946 $ 62,690 $ 2,283 $ 1,411,448 $ 1,139,229 Gross 423,238 328,140 18,661 558 441,899 328,698 profitGross 31.4 % 28.9 % 29.8 % 24.4 % 31.3 % 28.9 %margin Operatingexpenses ^ 192,061 179,990 12,562 475 204,623 180,465 (1)Expenses asa % of net 14.2 % 15.8 % 20.0 % 20.8 % 14.5 % 15.8 %sales Operating 231,177 148,150 6,099 83 237,276 148,233 income ^(1)Operating 17.1 % 13.0 % 9.7 % 3.6 % 16.8 % 13.0 %margin

(1) Base business and total reflect a $1.4million recovery of goodwill and other assets in 2021.

(Unaudited) Base Business Excluded Total(in Nine Months Ended Nine Months Ended Nine Months Endedthousands) September 30, September 30, September 30, 2021 2020 2021 2020 2021 2020Net sales $ 4,052,044 $ 3,091,270 $ 207,983 $ 6,092 $ 4,260,027 $ 3,097,362 Gross 1,237,728 889,494 56,988 2,313 1,294,716 891,807 profitGross 30.5 % 28.8 % 27.4 % 38.0 % 30.4 % 28.8 %margin Operatingexpenses ^ 549,913 500,196 39,910 1,934 589,823 502,130 (1)Expenses asa % of net 13.6 % 16.2 % 19.2 % 31.7 % 13.8 % 16.2 %sales Operating 687,815 389,298 17,078 379 704,893 389,677 income ^(1)Operating 17.0 % 12.6 % 8.2 % 6.2 % 16.5 % 12.6 %margin

(1) Base business and total reflect a $1.4million recovery of goodwill and other assets in 2021 and a $6.9million impairment of goodwill and other assets in 2020.

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

Net Acquisition Sales PeriodsAcquired Date Centers Excluded AcquiredVak Pak Builders Supply, June 2021 1 June - September 2021Inc.Pool Source, LLC April 2021 1 April - September 2021TWC Distributors, Inc. December 10 January - September 2021 2020Jet Line Products, Inc. October 9 January - September 2021 2020Northeastern Swimming September 2 January - September 2021Pool Distributors, Inc. 2020 and September 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 nine months of 2021.

December 31, 2020 398 Acquired locations 2 New locations 10 Consolidated location (1 )September 30, 2021 409

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 impairments (recoveries) 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 Nine Months Ended(in thousands) September 30, September 30, 2021 2020 2021 2020Net income $ 184,665 $ 119,098 $ 543,015 $ 307,565 Add: Interest and othernon-operating expenses ^ 2,317 1,861 6,862 9,292 (1)Provision for income 50,386 27,360 155,240 73,068 taxesShare-based compensation 4,206 3,874 11,755 11,095 Equity earnings inunconsolidated (92 ) (86 ) (224 ) (248 )investments(Recovery) impairment of (1,400 ) ? (1,400 ) 6,944 goodwill and other assetsDepreciation 7,143 6,986 21,027 20,979 Amortization ^(2) 260 217 821 665 Adjusted EBITDA $ 247,485 $ 159,310 $ 737,096 $ 429,360

(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 September 30, 2021 and September30, 2020, respectively, and $243 and $310 for the nine months ended September 30, 2021 and September30, 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 period-to-period 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) Nine Months Ended(in thousands) September 30, 2021 2020Net income $ 543,015 $ 307,565 (Recovery) impairment of goodwill and other assets (1,400 ) 6,944 Tax impact on (recovery) impairment of note ^(1) 351 (654 )Adjusted net income $ 541,966 $ 313,855

(1) 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 note impairment.

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

(Unaudited) Nine Months Ended September 30, 2021 2020Diluted EPS $ 13.32 $ 7.53 After-tax (recovery) impairment charges (0.03 ) 0.15 Adjusted diluted EPS excluding after-tax (recovery) 13.29 7.68 impairment chargesASU 2016-09 tax benefit (0.39 ) (0.55 )Adjusted diluted EPS excluding after-tax (recovery) $ 12.90 $ 7.13 impairment charges and ASU 2016-19 tax benefit