POOL CORPORATION REPORTS RECORD THIRD QUARTER RESULTS
AND INCREASES 2021 EARNINGS GUIDANCE
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
______________________
COVINGTON, LA. (October 21, 2021) – 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 billion in 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 $148.2 million 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 $8.5 million, or $0.21 per diluted share, realized in the same period of 2020.
Net income increased 55% to $184.7 million in 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 September 30, 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 September 30, 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 September 30, 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 September 30, 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 September 30, 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 September 30, 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.
2
POOLCORP is the world’s 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 POOLCORP’s 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings with the Securities and Exchange Commission (SEC).
CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com
3
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net 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 and administrative expenses
206,023
180,465
591,223
495,186
(Recovery) impairment of goodwill and other assets
(1,400)
—
(1,400)
6,944
Operating income
237,276
148,233
704,893
389,677
Percent
16.8
%
13.0
%
16.5
%
12.6
%
Interest and other non-operating expenses, net
2,317
1,861
6,862
9,292
Income before income taxes and equity earnings
234,959
146,372
698,031
380,385
Provision for income taxes
50,386
27,360
155,240
73,068
Equity earnings in unconsolidated investments, net
92
86
224
248
Net 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
Weighted average shares outstanding:
Basic
40,101
40,123
40,146
40,073
Diluted
40,691
40,839
40,766
40,849
Cash dividends declared per common share
$
0.80
$
0.58
$
2.18
$
1.71
4
POOL CORPORATION
Condensed 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 receivables facility
301,163
230,857
70,306
30
Product inventories, net (2)
1,043,407
612,824
430,583
70
Prepaid expenses and other current assets
23,368
12,696
10,672
84
Total current assets
1,626,400
1,066,681
559,719
52
Property and equipment, net
111,339
109,086
2,253
2
Goodwill
281,300
199,360
81,940
41
Other intangible assets, net
12,067
10,522
1,545
15
Equity interest investments
1,242
1,314
(72)
(5)
Operating 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’ equity
Current liabilities:
Accounts payable
$
414,156
$
268,412
$
145,744
54
%
Accrued expenses and other current liabilities
231,794
145,420
86,374
59
Short-term borrowings and current portion of long-term debt
10,744
11,709
(965)
(8)
Current operating lease liabilities
65,442
56,977
8,465
15
Total 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 liabilities
34,176
32,846
1,330
4
Non-current operating lease liabilities
158,359
125,023
33,336
27
Total liabilities
1,297,021
998,088
298,933
30
Total stockholders’ equity
985,212
589,501
395,711
67
Total liabilities and stockholders’ equity
$
2,282,233
$
1,587,589
$
694,644
44
%
(1)The allowance for doubtful accounts was $5.4 million at September 30, 2021 and $5.3 million at September 30, 2020.
(2)The inventory reserve was $15.7 million at September 30, 2021 and $11.4 million at September 30, 2020.
5
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2021
2020
Change
Operating activities
Net income
$
543,015
$
307,565
$
235,450
Adjustments to reconcile net income to 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 investments, net
(224)
(248)
24
Impairment of goodwill and other assets
—
6,944
(6,944)
Other
5,256
1,092
4,164
Changes in operating assets and liabilities, 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 liabilities
107,343
72,178
35,165
Net cash provided by operating activities
359,065
388,914
(29,849)
Investing activities
Acquisition of businesses, net of cash acquired
(17,887)
(24,655)
6,768
Purchases of property and equipment, net of sale proceeds
(24,223)
(16,897)
(7,326)
Net cash used in investing activities
(42,110)
(41,552)
(558)
Financing activities
Proceeds from revolving line of credit
791,508
749,840
41,668
Payments 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 borrowings and current portion of long-term debt
7,880
13,255
(5,375)
Payments on short-term borrowings and current portion of long-term debt
(9,006)
(13,291)
4,285
Payments of deferred financing costs
(1,610)
(12)
(1,598)
Payments of deferred and contingent acquisition consideration
(362)
(281)
(81)
Proceeds from stock issued under share-based compensation plans
11,524
16,696
(5,172)
Payments of cash dividends
(87,509)
(68,599)
(18,910)
Purchases of treasury stock
(137,975)
(76,194)
(61,781)
Net cash used in financing activities
(267,765)
(300,161)
32,396
Effect of exchange rate changes on cash and cash equivalents
157
(1,035)
1,192
Change in cash and cash equivalents
49,347
46,166
3,181
Cash and cash equivalents at beginning of period
34,128
28,583
5,545
Cash and cash equivalents at end of period
$
83,475
$
74,749
$
8,726
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
September 30,
September 30,
September 30,
2021
2020
2021
2020
2021
2020
Net sales
$
1,348,758
$
1,136,946
$
62,690
$
2,283
$
1,411,448
$
1,139,229
Gross profit
423,238
328,140
18,661
558
441,899
328,698
Gross margin
31.4
%
28.9
%
29.8
%
24.4
%
31.3
%
28.9
%
Operating expenses (1)
192,061
179,990
12,562
475
204,623
180,465
Expenses as a % of net sales
14.2
%
15.8
%
20.0
%
20.8
%
14.5
%
15.8
%
Operating income (1)
231,177
148,150
6,099
83
237,276
148,233
Operating margin
17.1
%
13.0
%
9.7
%
3.6
%
16.8
%
13.0
%
(1)Base business and total reflect a $1.4 million recovery of goodwill and other assets in 2021.
(Unaudited)
Base Business
Excluded
Total
(in thousands)
Nine Months Ended
Nine Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
2021
2020
2021
2020
2021
2020
Net sales
$
4,052,044
$
3,091,270
$
207,983
$
6,092
$
4,260,027
$
3,097,362
Gross profit
1,237,728
889,494
56,988
2,313
1,294,716
891,807
Gross margin
30.5
%
28.8
%
27.4
%
38.0
%
30.4
%
28.8
%
Operating expenses (1)
549,913
500,196
39,910
1,934
589,823
502,130
Expenses as a % of net sales
13.6
%
16.2
%
19.2
%
31.7
%
13.8
%
16.2
%
Operating income (1)
687,815
389,298
17,078
379
704,893
389,677
Operating margin
17.0
%
12.6
%
8.2
%
6.2
%
16.5
%
12.6
%
(1)Base business and total reflect a $1.4 million recovery of goodwill and other assets in 2021 and a $6.9 million impairment of goodwill and other assets in 2020.
7
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 - September 2021
Pool Source, LLC
April 2021
1
April - September 2021
TWC Distributors, Inc.
December 2020
10
January - September 2021
Jet Line Products, Inc.
October 2020
9
January - September 2021
Northeastern Swimming Pool Distributors, Inc.
September 2020
2
January - September 2021 and September 2020
Master Tile Network LLC
February 2020
4
January - May 2021 and 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
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 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
2020
Net income
$
184,665
$
119,098
$
543,015
$
307,565
Add:
Interest and other non-operating expenses (1)
2,317
1,861
6,862
9,292
Provision for income taxes
50,386
27,360
155,240
73,068
Share-based compensation
4,206
3,874
11,755
11,095
Equity earnings in unconsolidated investments
(92)
(86)
(224)
(248)
(Recovery) impairment of goodwill and other assets
(1,400)
—
(1,400)
6,944
Depreciation
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 September 30, 2020, respectively, and $243 and $310 for the nine months ended September 30, 2021 and September 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 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
2020
Net 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.
