pool-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-26640


POOL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware		36-3943363
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

109 Northpark Boulevard,
Covington,	Louisiana	70433-5001
(Address of principal executive offices)		(Zip Code)

(985) 892-5521

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	POOL	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of April 25, 2022, there were 40,073,690 shares of common stock outstanding.

POOL CORPORATION

Form 10-Q

For the Quarter Ended March 31, 2022

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements (Unaudited)

		Consolidated Statements of Income	1
		Consolidated Statements of Comprehensive Income	2
		Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Cash Flows	4
		Consolidated Statements of Changes in Stockholders’ Equity	5
		Notes to Consolidated Financial Statements	6

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		12

	Item 3. Quantitative and Qualitative Disclosures about Market Risk		24

	Item 4. Controls and Procedures		24

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings		25

	Item 1A. Risk Factors		25

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25

	Item 6. Exhibits		26

SIGNATURE			27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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
Selling and administrative expenses	211,466		172,100

Operating income	235,723		129,031
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:
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

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2022		2021
Net income	$	179,261	$	98,655
Other comprehensive (loss) income:
Foreign currency translation losses	(214)		(1,268)
Change in unrealized gains on interest rate swaps, net of change in taxes of $(3,866) and $(3,046)	11,598		9,137
Total other comprehensive income	11,384		7,869
Comprehensive income	$	190,645	$	106,524

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Balance Sheets

(In thousands, except share data)


	March 31,		March 31,		December 31,
	2022		2021		2021 (1)
	(Unaudited)		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	35,365	$	27,078	$	24,321
Receivables, net	195,951		122,938		155,259
Receivables pledged under receivables facility	483,976		364,664		221,312
Product inventories, net	1,641,155		977,228		1,339,100
Prepaid expenses and other current assets	42,310		25,390		29,093
Total current assets	2,398,757		1,517,298		1,769,085

Property and equipment, net	180,504		109,830		179,008
Goodwill	688,350		267,914		688,364
Other intangible assets, net	310,848		11,854		312,814
Equity interest investments	1,184		1,305		1,231
Operating lease assets	260,285		209,036		241,662
Other assets	42,213		24,456		37,967
Total assets	$	3,882,141	$	2,141,693	$	3,230,131

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	685,946	$	634,998	$	398,697
Accrued expenses and other current liabilities	179,552		134,670		264,877
Short-term borrowings and current portion of long-term debt	21,265		12,409		11,772
Current operating lease liabilities	71,685		61,265		69,070
Total current liabilities	958,448		843,342		744,416

Deferred income taxes	40,944		31,134		35,840
Long-term debt, net	1,483,808		420,762		1,171,578
Other long-term liabilities	32,940		38,945		31,545
Non-current operating lease liabilities	191,723		149,582		175,359
Total liabilities	2,707,863		1,483,765		2,158,738



Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,110,126, 40,086,256 and 40,192,901 shares issued and outstanding at March 31, 2022, March 31, 2021 and December 31, 2021, respectively	40		40		40
Additional paid-in capital	558,755		526,328		551,963
Retained earnings	611,583		137,710		526,874
Accumulated other comprehensive income (loss)	3,900		(6,150)		(7,484)
Total stockholders’ equity	1,174,278		657,928		1,071,393
Total liabilities and stockholders’ equity	$	3,882,141	$	2,141,693	$	3,230,131

(1) Derived from audited financial statements.

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2022		2021
Operating activities
Net income	$	179,261	$	98,655
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	7,663		6,884
Amortization	2,192		421
Share-based compensation	3,657		3,837

Equity in earnings of unconsolidated investments, net	(58)		(75)

Other	5,777		2,723
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables	(303,400)		(199,672)
Product inventories	(306,582)		(200,185)
Prepaid expenses and other assets	(23,330)		(5,507)
Accounts payable	287,449		369,665
Accrued expenses and other current liabilities	(60,738)		367
Net cash (used in) provided by operating activities	(208,109)		77,113

Investing activities
Acquisition of businesses, net of cash acquired	—		(683)
Purchases of property and equipment, net of sale proceeds	(9,159)		(8,839)



Net cash used in investing activities	(9,159)		(9,522)

Financing activities
Proceeds from revolving line of credit	564,288		342,500
Payments on revolving line of credit	(604,960)		(308,656)
Proceeds from term loan under credit facility	250,000		—
Proceeds from asset-backed financing	155,000		110,000
Payments on asset-backed financing	(50,000)		(125,000)
Payments on term facility	(2,313)		(2,313)
Proceeds from short-term borrowings and current portion of long-term debt	10,277		4,280
Payments on short-term borrowings and current portion of long-term debt	(784)		(3,740)

Payments of deferred and contingent acquisition consideration	(1,374)		(362)


Proceeds from stock issued under share-based compensation plans	3,135		2,912
Payments of cash dividends	(32,132)		(23,299)
Purchases of treasury stock	(62,420)		(71,516)
Net cash provided by (used in) financing activities	228,717		(75,194)
Effect of exchange rate changes on cash and cash equivalents	(405)		553
Change in cash and cash equivalents	11,044		(7,050)
Cash and cash equivalents at beginning of period	24,321		34,128
Cash and cash equivalents at end of period	$	35,365	$	27,078

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands)


	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Earnings		Income		Total
Balance at December 31, 2021	40,193	$	40	$	551,963	$	526,874	$	(7,484)	$	1,071,393
Net income	—	—		—		179,261		—		179,261
Foreign currency translation	—	—		—		—		(214)		(214)
Interest rate swaps, net of the change in taxes of $(3,866)	—	—		—		—		11,598		11,598
Repurchases of common stock, net of retirements	(138)	—		—		(62,420)		—		(62,420)
Share-based compensation	—	—		3,657		—		—		3,657

Issuance of stock under share-based compensation plans	55	—		3,135		—		—		3,135
Declaration of cash dividends	—	—		—		(32,132)		—		(32,132)
Balance at March 31, 2022	40,110	$	40	$	558,755	$	611,583	$	3,900	$	1,174,278


	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Earnings		Loss		Total
Balance at December 31, 2020	40,232	$	40	$	519,579	$	133,870	$	(14,019)	$	639,470
Net income	—	—		—		98,655		—		98,655
Foreign currency translation	—	—		—		—		(1,268)		(1,268)
Interest rate swaps, net of the change in taxes of $(3,046)	—	—		—		—		9,137		9,137
Repurchases of common stock, net of retirements	(215)	—		—		(71,516)		—		(71,516)
Share-based compensation	—	—		3,837		—		—		3,837
Issuance of stock under share-based compensation plans	69	—		2,912		—		—		2,912
Declaration of cash dividends	—	—		—		(23,299)		—		(23,299)
Balance at March 31, 2021	40,086	$	40	$	526,328	$	137,710	$	(6,150)	$	657,928

The accompanying Notes are an integral part of the Consolidated Financial Statements.

POOL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Summary of Significant Accounting Policies

Pool Corporation (the Company, which may be referred to as we, us or our) prepared the unaudited interim Consolidated Financial Statements following U.S. generally accepted accounting principles (GAAP) and the requirements of the Securities and Exchange Commission (SEC) for interim financial information. As permitted under those rules, we have condensed or omitted certain footnotes and other financial information required for complete financial statements.

The interim Consolidated Financial Statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. All significant intercompany accounts and intercompany transactions have been eliminated.

A description of our significant accounting policies is included in our 2021 Annual Report on Form 10-K. You should read the interim Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and accompanying notes in our 2021 Annual Report on Form 10-K. The results for our three-month period ended March 31, 2022, are not necessarily indicative of the expected results for our fiscal year ending December 31, 2022.

Income Taxes

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of nonqualified stock options and the lapse of restrictions on restricted stock awards. To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit. We record all excess tax benefits as a component of income tax benefit or expense on the Consolidated Statements of Income in the period in which stock options are exercised or restrictions on restricted stock awards lapse. We recorded excess tax benefits of $7.3 million in the first quarter of 2022 compared to $4.0 million in the first quarter of 2021.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings. As of March 31, 2022, the Retained earnings on our Consolidated Balance Sheets reflects cumulative net income, the cumulative impact of adjustments for changes in accounting pronouncements, treasury share retirements since the inception of our share repurchase programs of $1.7 billion and cumulative dividends of $822.5 million.

Accumulated Other Comprehensive Income (Loss)

The table below presents the components of our Accumulated other comprehensive income (loss) balance (in thousands):


	March 31,				December 31,
	2022		2021		2021
Foreign currency translation adjustments	$	(9,794)	$	(6,185)	$	(9,580)
Unrealized gains on interest rate swaps, net of tax	13,694		35		2,096
Accumulated other comprehensive income (loss)	$	3,900	$	(6,150)	$	(7,484)

Recent Accounting Pronouncements Pending Adoption

The following table summarizes the recent accounting pronouncements that we plan to adopt in future periods:


Standard	Description	Effective Date	Effect on Financial Statements and Other Significant Matters
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU 2021-01, Reference Rate Reform (Topic 848): Scope	Provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include: contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this ASU refine the scope of ASC 848 and clarify some of its guidance as it relates to recent rate reform activities.	The provisions of these updates are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed.	We do not expect that there will be a material impact to the financial statements as a result of adopting these ASUs.

Note 2 – Earnings Per Share

We calculate basic and diluted earnings per share using the two-class method. Earnings per share under the two-class method is calculated using net income attributable to common stockholders, which is net income reduced by the earnings allocated to participating securities. Our participating securities include share-based payment awards that contain a non-forfeitable right to receive dividends and are considered to participate in undistributed earnings with common shareholders. Participating securities excluded from weighted average common shares outstanding were 239,000 for the three months ended March 31, 2022.

The table below presents the computation of earnings per share, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except per share data):


	Three Months Ended
	March 31,
	2022		2021
Net income	$	179,261	$	98,655
Amounts allocated to participating securities	(1,051)		—
Net income attributable to common stockholders	$	178,210	$	98,655

Weighted average common shares outstanding:
Basic	39,932		40,215
Effect of dilutive securities:
Stock options and employee stock purchase plan	460		631
Diluted	40,392		40,846

Earnings per share attributable to common stockholders:
Basic	$	4.46	$	2.45
Diluted	$	4.41	$	2.42

Anti-dilutive stock options excluded from diluted earnings per share computations (1)	1		—

(1)Since these options have exercise prices that are higher than the average market prices of our common stock, including them in the calculation would have an anti-dilutive effect on earnings per share.

Note 3 – Acquisitions

SEC Form 10-Q filed by Pool Corporation