EX-99.1
2
pool-q22021xer.htm
POOL Q2 2021 EARNINGS RELEASE
Document
Exhibit 99.1
FOR IMMEDIATE RELEASE
POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS
AND INCREASES 2021 EARNINGS GUIDANCE
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) – Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the second quarter of 2021 and increased 2021 earnings guidance.
“I am thrilled to announce that we, again, achieved spectacular results this quarter. Demand remains high, and paired with our team's outstanding execution, business thrived. Through our supply chain management discipline and our capacity creation initiatives, we yielded exceptional improvement in both gross margin and operating margin during the quarter. As part of our strategic growth initiatives, we continued to add to our network through new sales center openings and two acquisitions that closed in the second quarter. Our employees remain committed to providing unmatched service to our customers while leveraging our network and executing on our expense management strategies in the latter half of the year,” commented Peter D. Arvan, president and CEO.
In the second quarter of 2021, net sales increased 40% to a record $1.79 billion compared to $1.28 billion in the second quarter of 2020, while base business sales grew 32%. Households continued to invest in outdoor living spaces, contributing to the robust demand for our products. We observed sales gains across nearly all product categories and geographies reflecting strong growth in maintenance, replacement, refurbishment and construction activity among our customers.
Gross profit increased 48% to a record $551.7 million in the second quarter of 2021 from $373.5 million in the same period of 2020. Base business gross profit improved 41% over the second quarter of 2020. Gross margin increased 170 basis points to 30.9% in the second quarter of 2021 compared to 29.2% in the second quarter of 2020 while base business gross margin increased 200 basis points, primarily driven by benefits from focused supply chain management initiatives.
Selling and administrative expenses (operating expenses) increased 27% to $213.1 million in the second quarter of 2021 compared to $167.6 million in the second quarter of 2020, while base business operating expenses grew 18%, primarily due to growth-driven labor, facility and freight costs, along with increased investments in technology and higher performance-based compensation expense. As a percentage of net sales, operating expenses decreased to 11.9% in the second quarter of 2021 compared to 13.1% in the same period of 2020 as we continue to exercise strong expense control.
Operating income in the second quarter of 2021 increased 64% to $338.6 million compared to $205.9 million in the same period in 2020 with acquisitions contributing $11.0 million to operating income in the second quarter of 2021. Operating margin was 18.9% in the second quarter of 2021 compared to 16.1% in the second quarter of 2020 while base business operating margin was 19.4%, up 330 basis points from the prior year period.
We recorded a $7.7 million, or $0.19 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended June 30, 2021, compared to a tax benefit of $6.2 million, or $0.15 per diluted share, realized in the same period of 2020.
Net income increased 65% to $259.7 million in the second quarter of 2021 compared to $157.6 million in the second quarter of 2020. Earnings per diluted share increased 65% to $6.37 in the second quarter of 2021 compared to $3.87 in the same period of 2020. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 66% to $6.18 in the second quarter of 2021 compared to $3.72 in the second quarter of 2020.
Net sales for the six months ended June 30, 2021 increased 45% to a record $2.85 billion from $1.96 billion in the six months ended June 30, 2020. Base business sales increased 38% for the period. Gross margin improved 110 basis points to 29.9% compared to 28.8% in the same period last year with base business gross margin 140 basis points higher, favorably impacted by improvements in supply chain management initiatives.
Operating expenses for the six months ended June 30, 2021 increased 20% compared to the first six months of 2020. In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a long-term note, as collectability was impacted by the COVID-19 pandemic, and non-cash goodwill and intangibles impairment charges of $4.4 million, equal to the total goodwill and intangibles carrying amounts of our Australian reporting units. Without the impact of impairment charges in the prior year, operating expenses were up 22% with base business operating expenses up 14%.
Operating income for the first six months of 2021 increased 94% to a record $467.6 million compared to $241.4 million in the same period last year. Operating income, without the impact of non-cash impairments recorded in 2020, increased 88% in the first half of 2021. Operating margin for the six months ended June 30, 2021 was 16.4% compared to 12.3% for the six months ended June 30, 2020, while base business operating margin increased 460 basis points.
We recorded an $11.7 million, or $0.29 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2021 compared to a $14.2 million, or $0.34 per diluted share, tax benefit in the same period of 2020.
Net income for the six months ended June 30, 2021 increased 90% to a record $358.4 million compared to $188.5 million for the six months ended June 30, 2020. Adjusted net income for the first six months of 2021, without the prior year impact of non-cash impairments, net of tax, increased 84%. Earnings per share for the first six months of 2021 increased 90% to $8.78 per diluted share versus $4.62 in the first six months of 2020. Excluding the impact from ASU 2016-09 in both periods and the impact of non-cash impairments, net of tax, adjusted diluted EPS increased 92% in 2021 compared to the prior year. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.
On the balance sheet at June 30, 2021, total net receivables, including pledged receivables, increased 29% compared to June 30, 2020, driven by our sales growth and recent acquisitions and partially offset by improved collections. Inventory levels increased 42% to $894.7 million compared to June 30, 2020, reflecting our supply chain efforts to support organic business growth as well as inventory from recently acquired businesses. Total debt outstanding was $423.1 million at June 30, 2021, a $15.7 million reduction from total debt at June 30, 2020, as we utilize operating cash flows to pay down debt balances.
Net cash provided by operations was $187.2 million in the first six months of 2021 compared to $221.2 million in the first six months of 2020 reflecting our supply chain investments in inventory and higher income tax payments in 2021. Adjusted EBITDA (as defined in the addendum to this release) was $349.5 million for the six months ended June 30, 2021, compared to $270.1 million in the same period of the prior year. Interest expense decreased compared to last year primarily due to lower average debt levels and lower average interest rates.
“Based on exceeding our second quarter expectations, and with better visibility to demand as we head into the back half of the year, we are updating our annual earnings guidance range to $13.75 to $14.25 per diluted share, including the impact of year-to-date tax benefits of $0.29. Our previous 2021 earnings guidance range was $11.85 to $12.60 per diluted share, including our $0.10 first quarter 2021 tax benefit. We believe that the strong demand trends and pipeline of projects will continue through the remainder of the year and beyond. I would like to especially thank our incredible team of employees for demonstrating a level of resiliency and grit that enables us to deliver during these times of unprecedented demand,” said Arvan.
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 408 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers. For more information, please visit www.poolcorp.com.
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This news release includes “forward-looking” statements that involve risks and uncertainties that are generally identifiable through the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “should” and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to publicly update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including impacts on our business from the COVID-19 pandemic and the extent to which home-centric trends will continue, accelerate or reverse; the sensitivity of our business to weather conditions; changes in the economy and the housing market; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives and mass merchants; our ability to continue to execute our growth strategies; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP’s 2020 Annual Report on Form 10-K and First Quarter 2021 Quarterly Report on Form 10-Q, each filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.
CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com
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POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Net sales
$
1,787,833
$
1,280,846
$
2,848,579
$
1,958,134
Cost of sales
1,236,148
907,365
1,995,762
1,395,024
Gross profit
551,685
373,481
852,817
563,110
Percent
30.9
%
29.2
%
29.9
%
28.8
%
Selling and administrative expenses
213,099
167,624
385,200
314,721
Impairment of goodwill and other assets
—
—
—
6,944
Operating income
338,586
205,857
467,617
241,445
Percent
18.9
%
16.1
%
16.4
%
12.3
%
Interest and other non-operating expenses, net
1,963
2,643
4,545
7,432
Income before income taxes and equity earnings
336,623
203,214
463,072
234,013
Provision for income taxes
76,985
45,733
104,854
45,708
Equity earnings in unconsolidated investments, net
57
74
132
162
Net income
$
259,695
$
157,555
$
358,350
$
188,467
Earnings per share:
Basic
$
6.47
$
3.94
$
8.92
$
4.71
Diluted
$
6.37
$
3.87
$
8.78
$
4.62
Weighted average shares outstanding:
Basic
40,125
39,973
40,169
40,049
Diluted
40,745
40,715
40,800
40,837
Cash dividends declared per common share
$
0.80
$
0.58
$
1.38
$
1.13
4
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
June 30,
June 30,
Change
2021
2020
$
%
Assets
Current assets:
Cash and cash equivalents
$
58,465
$
44,185
$
14,280
32
%
Receivables, net (1)
210,318
144,842
65,476
45
Receivables pledged under receivables facility
375,248
308,563
66,685
22
Product inventories, net (2)
894,654
628,418
266,236
42
Prepaid expenses and other current assets
18,716
11,139
7,577
68
Total current assets
1,557,401
1,137,147
420,254
37
Property and equipment, net
111,661
111,258
403
—
Goodwill
283,284
193,784
89,500
46
Other intangible assets, net
12,350
9,615
2,735
28
Equity interest investments
1,293
1,274
19
1
Operating lease assets
221,068
183,126
37,942
21
Other assets
26,978
18,593
8,385
45
Total assets
$
2,214,035
$
1,654,797
$
559,238
34
%
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
439,453
$
346,272
$
93,181
27
%
Accrued expenses and other current liabilities
184,437
139,661
44,776
32
Short-term borrowings and current portion of long-term debt
10,058
9,558
500
5
Current operating lease liabilities
63,786
56,625
7,161
13
Total current liabilities
697,734
552,116
145,618
26
Deferred income taxes
30,440
29,399
1,041
4
Long-term debt, net
413,058
429,246
(16,188)
(4)
Other long-term liabilities
38,079
29,008
9,071
31
Non-current operating lease liabilities
159,976
128,237
31,739
25
Total liabilities
1,339,287
1,168,006
171,281
15
Total stockholders’ equity
874,748
486,791
387,957
80
Total liabilities and stockholders’ equity
$
2,214,035
$
1,654,797
$
559,238
34
%
(1)The allowance for doubtful accounts was $5.4 million at June 30, 2021 and $6.0 million at June 30, 2020.
(2)The inventory reserve was $15.2 million at June 30, 2021 and $10.8 million at June 30, 2020.
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POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2021
2020
Change
Operating activities
Net income
$
358,350
$
188,467
$
169,883
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
13,884
13,993
(109)
Amortization
723
655
68
Share-based compensation
7,549
7,221
328
Equity earnings in unconsolidated investments, net
(132)
(162)
30
Impairment of goodwill and other assets
—
6,944
(6,944)
Other
4,812
3,171
1,641
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables
(295,342)
(229,506)
(65,836)
Product inventories
(114,792)
75,199
(189,991)
Prepaid expenses and other assets
(16,865)
(677)
(16,188)
Accounts payable
170,368
84,190
86,178
Accrued expenses and other current liabilities
58,673
71,705
(13,032)
Net cash provided by operating activities
187,228
221,200
(33,972)
Investing activities
Acquisition of businesses, net of cash acquired
(15,162)
(13,711)
(1,451)
Purchases of property and equipment, net of sale proceeds
(17,333)
(13,031)
(4,302)
Net cash used in investing activities
(32,495)
(26,742)
(5,753)
Financing activities
Proceeds from revolving line of credit
549,008
318,155
230,853
Payments on revolving line of credit
(505,636)
(504,140)
(1,496)
Proceeds from asset-backed financing
260,000
191,700
68,300
Payments on asset-backed financing
(290,000)
(71,700)
(218,300)
Payments on term facility
(4,625)
(4,625)
—
Proceeds from short-term borrowings and current portion of long-term debt
4,466
10,731
(6,265)
Payments on short-term borrowings and current portion of long-term debt
(6,277)
(12,918)
6,641
Payments of deferred financing costs
—
(12)
12
Payments of deferred and contingent acquisition consideration
(362)
(281)
(81)
Proceeds from stock issued under share-based compensation plans
7,918
10,811
(2,893)
Payments of cash dividends
(55,418)
(45,312)
(10,106)
Purchases of treasury stock
(90,135)
(70,203)
(19,932)
Net cash used in financing activities
(131,061)
(177,794)
46,733
Effect of exchange rate changes on cash and cash equivalents
665
(1,062)
1,727
Change in cash and cash equivalents
24,337
15,602
8,735
Cash and cash equivalents at beginning of period
34,128
28,583
5,545
Cash and cash equivalents at end of period
$
58,465
$
44,185
$
14,280
6
ADDENDUM
Base Business
The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):
(Unaudited)
Base Business
Excluded
Total
(in thousands)
Three Months Ended
Three Months Ended
Three Months Ended
June 30,
June 30,
June 30,
2021
2020
2021
2020
2021
2020
Net sales
$
1,687,651
$
1,279,429
$
100,182
$
1,417
$
1,787,833
$
1,280,846
Gross profit
524,378
372,848
27,307
633
551,685
373,481
Gross margin
31.1
%
29.1
%
27.3
%
44.7
%
30.9
%
29.2
%
Operating expenses
196,764
167,131
16,335
493
213,099
167,624
Expenses as a % of net sales
11.7
%
13.1
%
16.3
%
34.8
%
11.9
%
13.1
%
Operating income
327,614
205,717
10,972
140
338,586
205,857
Operating margin
19.4
%
16.1
%
11.0
%
9.9
%
18.9
%
16.1
%
(Unaudited)
Base Business
Excluded
Total
(in thousands)
Six Months Ended
Six Months Ended
Six Months Ended
June 30,
June 30,
June 30,
2021
2020
2021
2020
2021
2020
Net sales
$
2,703,285
$
1,954,323
$
145,294
$
3,811
$
2,848,579
$
1,958,134
Gross profit
814,490
561,354
38,327
1,756
852,817
563,110
Gross margin
30.1
%
28.7
%
26.4
%
46.1
%
29.9
%
28.8
%
Operating expenses (1)
357,852
320,206
27,348
1,459
385,200
321,665
Expenses as a % of net sales
13.2
%
16.4
%
18.8
%
38.3
%
13.5
%
16.4
%
Operating income (1)
456,638
241,148
10,979
297
467,617
241,445
Operating margin
16.9
%
12.3
%
7.6
%
7.8
%
16.4
%
12.3
%
(1)Base business and total for 2020 reflect $6.9 million of impairment from goodwill and other assets.
We have excluded the following acquisitions from our base business results for the periods identified:
Acquired
Acquisition
Date
Net Sales Centers Acquired
Periods
Excluded
Vak Pak Builders Supply, Inc.
June 2021
1
June 2021
Pool Source, LLC
April 2021
1
April - June 2021
TWC Distributors, Inc.
December 2020
10
January - June 2021
Jet Line Products, Inc.
October 2020
9
January - June 2021
Northeastern Swimming Pool Distributors, Inc.
September 2020
2
January - June 2021
Master Tile Network LLC
February 2020
4
January - May 2021 and February - May 2020
7
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
8
Adjusted EBITDA
We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other non-cash impairments and equity earnings or loss in unconsolidated investments. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.
Adjusted EBITDA is not a measure of performance as determined by generally accepted accounting principles (GAAP). We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP.
We have included Adjusted EBITDA as a supplemental disclosure because we believe that it is widely used by our investors, industry analysts and others as a useful supplemental performance measure. We believe that Adjusted EBITDA, when viewed with our GAAP results and the accompanying reconciliations, provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay taxes and fund capital expenditures.
The table below presents a reconciliation of net income to Adjusted EBITDA.
(Unaudited)
Three Months Ended
Six Months Ended
(in thousands)
June 30,
June 30,
2021
2020
2021
2020
Net income
$
259,695
$
157,555
$
358,350
$
188,467
Add:
Interest and other non-operating expenses (1)
1,963
2,643
4,545
7,432
Provision for income taxes
76,985
45,733
104,854
45,708
Share-based compensation
3,712
3,567
7,549
7,221
Equity earnings in unconsolidated investments
(57)
(74)
(132)
(162)
Impairment of goodwill and other assets
—
—
—
6,944
Depreciation
7,000
6,992
13,884
13,993
Amortization (2)
221
216
561
448
Adjusted EBITDA
$
349,519
$
216,632
$
489,611
$
270,051
(1)Shown net of interest income and includes gains and losses on foreign currency transactions and amortization of deferred financing costs as discussed below.
(2)Excludes amortization of deferred financing costs of $81 and $103 for the three months ended June 30, 2021 and June 30, 2020, respectively, and $162 and $207 for the six months ended June 30, 2021 and June 30, 2020, respectively. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.
9
Adjusted Income Statement Information
We have included adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures, in this press release as supplemental disclosures, because we believe these measures are useful to investors and others in assessing our year-over-year operating performance.
Adjusted net income and adjusted diluted EPS are key measures used by management to demonstrate the impact of our non-cash and non-recurring charges and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.
We believe these measures should be considered in addition to, not as a substitute for, net income and diluted EPS presented in accordance with GAAP, respectively, and in the context of our other disclosures in this press release. Other companies may calculate these non-GAAP financial measures differently than we do, which may limit their usefulness as comparative measures.
The table below presents a reconciliation of net income to adjusted net income.
(Unaudited)
Six Months Ended
(in thousands)
June 30,
2021
2020
Net income
$
358,350
$
188,467
Impairment of goodwill and other assets
—
6,944
Tax impact on impairment of long-term note (1)
—
(654)
Adjusted net income
$
358,350
$
194,757
(1)As described in our April 23, 2020 earnings release, our effective tax rate at March 31, 2020 was a 0.1% benefit. Excluding impairment from goodwill and intangibles and tax benefits from ASU 2016-09 recorded in the first quarter of 2020, our effective tax rate for the first quarter of 2020 was 25.4%, which we used to calculate the tax impact related to the $2.5 million long-term note impairment.
The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.