• Pool Corporation Reports Record First Quarter Results and Increases 2022 Earnings Guidance

    Source: Nasdaq GlobeNewswire / 21 Apr 2022 06:00:01   America/Chicago

    Highlights

    • Record net sales of $1.4 billion, up 33% from Q1 2021
    • Operating income of $235.7 million, up 83% from Q1 2021 with a 450 bps improvement in operating margin
    • Q1 2022 diluted EPS of $4.41, an increase of 82% from Q1 2021
    • Annual earnings guidance increased to $18.34 - $19.09 per diluted share from previous range of $17.19 - $17.94

    ______________________

    COVINGTON, La., April 21, 2022 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the first quarter of 2022 and increased its 2022 earnings guidance.

    “The first quarter of 2022 proved to be another for the record books, marking our 36th consecutive quarter of historic revenue growth. Healthy contractor backlogs and robust demand for outdoor living products continued to drive net sales growth, and our focus on capacity creation and operating efficiency generated solid operating margin improvement and outstanding bottom line results. Throughout the quarter, inflationary pressures and supply chain constraints persisted, but our skilled execution allowed us to deliver remarkable results once again. I am proud of our POOLCORP teams around the world, who continue to demonstrate resilience in a rapidly evolving global environment,” commented Peter D. Arvan, president and CEO.

    Net sales increased 33% in the first quarter of 2022 to a record $1.4 billion compared to $1.1 billion in the first quarter of 2021. This year's sales growth was realized on top of an impressive 57% sales growth in the prior year period. Base business sales grew 26%. The increase in our sales reflects continued strong demand for outdoor living products in addition to elevated price inflation of approximately 10% to 12%. Sales also benefited approximately 5% from both a pull forward of customer early buys and an extra selling day in the first quarter of 2022 compared to the first quarter of 2021.

    Gross profit increased 49% to a record $447.2 million in the first quarter of 2022 from $301.1 million in the same period of 2021. Base business gross profit improved 38% over the first quarter of 2021. Gross margin increased 330 basis points to 31.7% in the first quarter of 2022 compared to 28.4% in the first quarter of 2021. Base business gross margin increased 270 basis points. Our prior year strategic initiative to build inventory benefited our gross margin in the first quarter of 2022.

    Selling and administrative expenses (operating expenses) increased 23% to $211.5 million in the first quarter of 2022 compared to $172.1 million in the first quarter of 2021. Our operating expenses have increased as we expand our workforce and reward our employees through performance-based compensation. Other incremental operating expense increases relate to growth-driven facility and freight costs and increased investments in our digital transformation initiatives. As a percentage of net sales, operating expenses decreased to 15.0% in the first quarter of 2022 compared to 16.2% in the same period of 2021.

    Operating income in the first quarter of 2022 increased 83%, on top of 263% growth in the prior year period. Operating income was $235.7 million compared to $129.0 million in the same period in 2021. Operating margin was 16.7% in the first quarter of 2022 compared to 12.2% in the first quarter of 2021. Base business operating margin was 16.5%, up 430 basis points from the prior year period.

    We recorded a $7.3 million, or $0.18 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended March 31, 2022, compared to a tax benefit of $4.0 million, or $0.10 per diluted share, realized in the same period of 2021.

    Net income increased 82% to $179.3 million in the first quarter of 2022 compared to $98.7 million in the first quarter of 2021. Earnings per diluted share increased 82% to $4.41 in the first quarter of 2022 compared to $2.42 in the same period of 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share was $4.23 in the first quarter of 2022 compared to $2.32 in the first quarter of 2021.

    On the balance sheet at March 31, 2022, total net receivables, including pledged receivables, increased 39% compared to March 31, 2021, driven by our sales growth and recent acquisitions. Inventory levels increased 68% to $1.6 billion compared to March 31, 2021. We increased our purchasing beginning in the second half of 2021 to alleviate the impact of longer lead times from our vendors and ensure product availability for our customers. Our inventory balance also reflects impacts from inflation and recent acquisitions. Total debt outstanding was $1.5 billion at March 31, 2022, a $1.1 billion increase from total debt at March 31, 2021. We utilized debt proceeds to fund investments in working capital and our 2021 acquisitions.

    Net cash used in operations was $208.1 million in the first three months of 2022 compared to net cash provided by operations of $77.1 million in the first three months of 2021. The decrease in our operating cash flows was driven by incremental net working capital outflows, which reflect increased inventory purchases and other working capital changes due to our sales growth and recent acquisitions. In addition, our operating cash flows were impacted by federal tax payments of $79.5 million in the first quarter of 2022, which were allowed to be deferred and included in accrued expenses and other liabilities at December 31, 2021. Adjusted EBITDA (as defined in the addendum to this release) increased 78% to $249.0 million for the three months ended March 31, 2022 compared to $140.1 million in the same period of the prior year.

    “We are raising our annual earnings guidance range to $18.34 to $19.09 per diluted share, including the impact of year-to-date tax benefits of $0.18, to reflect our confidence in our industry's dynamics, which supports the sustained momentum and long-term growth of our business. Our previous earnings guidance range was $17.19 to $17.94, including an estimated $0.19 tax benefit. As we dive into the 2022 swimming pool season, we remain focused on our operating priorities and delivering a best-in-class customer experience,” said Arvan.

    POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 414 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers. For more information, please visit www.poolcorp.com.

    This news release includes “forward-looking” statements that involve risks and uncertainties that are generally identifiable through the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “should” and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including impacts on our business from the COVID-19 pandemic and the extent to which home-centric trends will continue, accelerate or reverse; the sensitivity of our business to weather conditions; changes in the economy, consumer discretionary spending, the housing market or inflation rates; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives or 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 2021 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings 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


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

     Three Months Ended
     March 31,
      2022   2021 
    Net sales$1,412,650  $1,060,745 
    Cost of sales 965,461   759,614 
    Gross profit 447,189   301,131 
    Percent 31.7%  28.4%
        
    Selling and administrative expenses 211,466   172,100 
    Operating income 235,723   129,031 
    Percent 16.7%  12.2%
        
    Interest and other non-operating expenses, net 5,198   2,582 
    Income before income taxes and equity in earnings 230,525   126,449 
    Provision for income taxes 51,322   27,869 
    Equity in earnings of unconsolidated investments, net 58   75 
    Net income$179,261  $98,655 
        
    Earnings per share attributable to common stockholders: (1)   
    Basic$4.46  $2.45 
    Diluted$4.41  $2.42 
    Weighted average common shares outstanding:   
    Basic 39,932   40,215 
    Diluted 40,392   40,846 
        
    Cash dividends declared per common share$0.80  $0.58 

    (1) Earnings per share under the two-class method is calculated using net income attributable to common stockholders (net income reduced by earnings allocated to participating securities), which was $178.2 million for the three months ended March 31, 2022. Participating securities excluded from weighted average common shares outstanding were 239,000 for the three months ended March 31, 2022.


    POOL CORPORATION
    Condensed Consolidated Balance Sheets
    (Unaudited)
    (In thousands)

      March 31, March 31,  Change 
      2022 2021  $ % 
                 
    Assets           
    Current assets:           
     Cash and cash equivalents$35,365 $27,078 $8,287  31%
     Receivables, net (1) 195,951  122,938  73,013  59 
     Receivables pledged under receivables facility 483,976  364,664  119,312  33 
     Product inventories, net (2) 1,641,155  977,228  663,927  68 
     Prepaid expenses and other current assets 42,310  25,390  16,920  67 
    Total current assets 2,398,757  1,517,298  881,459  58 
                 
    Property and equipment, net 180,504  109,830  70,674  64 
    Goodwill 688,350  267,914  420,436  157 
    Other intangible assets, net 310,848  11,854  298,994  2,522 
    Equity interest investments 1,184  1,305  (121) (9) 
    Operating lease assets 260,285  209,036  51,249  25 
    Other assets 42,213  24,456  17,757  73 
    Total assets$3,882,141 $2,141,693 $1,740,448  81%
                 
    Liabilities and stockholders’ equity           
    Current liabilities:           
     Accounts payable$685,946 $634,998 $50,948  8%
     Accrued expenses and other current liabilities 179,552  134,670  44,882  33 
     Short-term borrowings and current portion of long-term debt 21,265  12,409  8,856  71 
     Current operating lease liabilities 71,685  61,265  10,420  17 
    Total current liabilities 958,448  843,342  115,106  14 
                 
    Deferred income taxes 40,944  31,134  9,810  32 
    Long-term debt, net 1,483,808  420,762  1,063,046  253 
    Other long-term liabilities 32,940  38,945  (6,005) (15) 
    Non-current operating lease liabilities 191,723  149,582  42,141  28 
    Total liabilities 2,707,863  1,483,765  1,224,098  82 
    Total stockholders’ equity 1,174,278  657,928  516,350  78 
    Total liabilities and stockholders’ equity$3,882,141 $2,141,693 $1,740,448  81%

    (1)   The allowance for doubtful accounts was $6.0 million at March 31, 2022 and $4.7 million at March 31, 2021.
    (2)   The inventory reserve was $19.8 million at March 31, 2022 and $13.7 million at March 31, 2021.


    POOL CORPORATION
    Condensed Consolidated Statements of Cash Flows
    (Unaudited)
    (In thousands)

      Three Months Ended    
      March 31,    
      2022   2021   Change 
    Operating activities         
    Net income$179,261  $98,655  $80,606  
    Adjustments to reconcile net income to net cash (used in) provided by operating activities:         
     Depreciation 7,663   6,884   779  
     Amortization 2,192   421   1,771  
     Share-based compensation 3,657   3,837   (180) 
     Equity in earnings of unconsolidated investments, net (58)  (75)  17  
     Other 5,777   2,723   3,054  
    Changes in operating assets and liabilities, net of effects of acquisitions:         
     Receivables (303,400)  (199,672)  (103,728) 
     Product inventories (306,582)  (200,185)  (106,397) 
     Prepaid expenses and other assets (23,330)  (5,507)  (17,823) 
     Accounts payable 287,449   369,665   (82,216) 
     Accrued expenses and other current liabilities (60,738)  367   (61,105) 
    Net cash (used in) provided by operating activities (208,109)  77,113   (285,222) 
              
    Investing activities         
    Acquisition of businesses, net of cash acquired    (683)  683  
    Purchases of property and equipment, net of sale proceeds (9,159)  (8,839)  (320) 
    Net cash used in investing activities (9,159)  (9,522)  363  
              
    Financing activities         
    Proceeds from revolving line of credit 564,288   342,500   221,788  
    Payments on revolving line of credit (604,960)  (308,656)  (296,304) 
    Proceeds from term loan under credit facility 250,000      250,000  
    Proceeds from asset-backed financing 155,000   110,000   45,000  
    Payments on asset-backed financing (50,000)  (125,000)  75,000  
    Payments on term facility (2,313)  (2,313)    
    Proceeds from short-term borrowings and current portion of long-term debt 10,277   4,280   5,997  
    Payments on short-term borrowings and current portion of long-term debt (784)  (3,740)  2,956  
    Payments of deferred and contingent acquisition consideration (1,374)  (362)  (1,012) 
    Proceeds from stock issued under share-based compensation plans 3,135   2,912   223  
    Payments of cash dividends (32,132)  (23,299)  (8,833) 
    Purchases of treasury stock (62,420)  (71,516)  9,096  
    Net cash provided by (used in) financing activities 228,717   (75,194)  303,911  
    Effect of exchange rate changes on cash and cash equivalents (405)  553   (958) 
    Change in cash and cash equivalents 11,044   (7,050)  18,094  
    Cash and cash equivalents at beginning of period 24,321   34,128   (9,807) 
    Cash and cash equivalents at end of period$35,365  $27,078  $8,287  
     

    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
      March 31, March 31, March 31,
       2022   2021   2022   2021   2022   2021 
    Net sales $1,328,126  $1,057,782  $84,524  $2,963  $1,412,650  $1,060,745 
                 
    Gross profit  413,278   300,439   33,911   692   447,189   301,131 
    Gross margin  31.1%  28.4%  40.1%  23.4%  31.7%  28.4%
                 
    Operating expenses  193,927   171,285   17,539   815   211,466   172,100 
    Expenses as a % of net sales  14.6%  16.2%  20.8%  27.5%  15.0%  16.2%
                 
    Operating income (loss)  219,351   129,154   16,372   (123)  235,723   129,031 
    Operating margin  16.5%  12.2%  19.4% (4.2)        %  16.7%  12.2%
                           

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





    Acquired
     

    Acquisition
    Date
     Net
    Sales Centers
    Acquired
     

    Periods
    Excluded
    Porpoise Pool & Patio, Inc. December 2021 1 January - March 2022
    Wingate Supply, Inc. December 2021 1 January - March 2022
    Vak Pak Builders Supply, Inc. June 2021 1 January - March 2022
    Pool Source, LLC April 2021 1 January - March 2022
    TWC Distributors, Inc. December 2020 10 January - February 2022 and January - February 2021

    When calculating our base business results, we exclude sales centers that are acquired, closed or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

    We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales. After 15 months of operations, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.

    The table below summarizes the changes in our sales center count in the first three months of 2022.

    December 31, 2021410
    New locations4
    March 31, 2022414

    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 in 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 an additional measure that enables management and investors to monitor 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
    (in thousands) March 31,
       2022   2021 
    Net income$179,261  $98,655 
     Add:     
     Interest and other non-operating expenses (1) 5,198   2,582 
     Provision for income taxes 51,322   27,869 
     Share-based compensation 3,657   3,837 
     Equity in earnings of unconsolidated investments, net (58)  (75)
     Depreciation 7,663   6,884 
     Amortization (2) 1,977   340 
    Adjusted EBITDA$249,020  $140,092 

    (1) Shown net of losses on foreign currency transactions of $76 and $13 for the three months ended March 31, 2022 and March 31, 2021, respectively, and includes amortization of deferred financing costs as discussed in Note 2 below.

    (2) Excludes amortization of deferred financing costs of $215 and $81 for the three months ended March 31, 2022 and March 31, 2021, respectively. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.


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