pool-20230331

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, 2023


☐			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 24, 2023, there were 39,038,250 shares of common stock outstanding.

POOL CORPORATION

Form 10-Q

For the Quarter Ended March 31, 2023

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		25

	Item 4. Controls and Procedures		25

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings		26

	Item 1A. Risk Factors		26

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26

	Item 6. Exhibits		27

SIGNATURE			28

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,
	2023		2022
Net sales	$	1,206,774	$	1,412,650
Cost of sales	837,019		965,461
Gross profit	369,755		447,189
Selling and administrative expenses	223,984		211,466

Operating income	145,771		235,723
Interest and other non-operating expenses, net	15,835		5,198
Income before income taxes and equity in earnings	129,936		230,525
Provision for income taxes	28,273		51,322
Equity in earnings of unconsolidated investments, net	36		58


Net income	$	101,699	$	179,261


Earnings per share attributable to common stockholders:
Basic	$	2.60	$	4.46
Diluted	$	2.58	$	4.41
Weighted average common shares outstanding:
Basic	38,877		39,932
Diluted	39,189		40,392

Cash dividends declared per common share	$	1.00	$	0.80

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,
	2023		2022
Net income	$	101,699	$	179,261
Other comprehensive (loss) income:
Foreign currency translation gain (loss)	2,469		(214)
Unrealized (loss) gain on interest rate swaps, net of the change in taxes of $1,269 and $(3,866)	(3,809)		11,598
Total other comprehensive (loss) income	(1,340)		11,384
Comprehensive income	$	100,359	$	190,645

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,
	2023		2022		2022
	(Unaudited)		(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalents	$	26,470	$	35,365	$	45,591
Receivables, net	163,048		195,951		128,247
Receivables pledged under receivables facility	401,123		483,976		223,201
Product inventories, net	1,686,683		1,641,155		1,591,060
Prepaid expenses and other current assets	27,875		42,310		30,892
Total current assets	2,305,199		2,398,757		2,018,991

Property and equipment, net	200,997		180,504		193,709
Goodwill	693,242		688,350		691,993
Other intangible assets, net	303,753		310,848		305,450
Equity interest investments	1,206		1,184		1,248
Operating lease assets	274,428		260,285		269,608
Other assets	84,004		42,213		84,438
Total assets	$	3,862,829	$	3,882,141	$	3,565,437

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	739,749	$	685,946	$	406,667
Accrued expenses and other current liabilities	126,093		179,552		168,521
Short-term borrowings and current portion of long-term debt	33,080		21,265		25,042
Current operating lease liabilities	78,498		71,685		75,484
Total current liabilities	977,420		958,448		675,714

Deferred income taxes	57,868		40,944		58,759
Long-term debt, net	1,332,670		1,483,808		1,361,761
Other long-term liabilities	37,623		32,940		35,471
Non-current operating lease liabilities	200,498		191,723		198,538
Total liabilities	2,606,079		2,707,863		2,330,243



Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 39,032,631, 40,110,126 and 39,069,419 shares issued and outstanding at March 31, 2023, March 31, 2022 and December 31, 2022, respectively	39		40		39
Additional paid-in capital	586,595		558,755		575,776
Retained earnings	665,561		611,583		653,484
Accumulated other comprehensive income	4,555		3,900		5,895
Total stockholders’ equity	1,256,750		1,174,278		1,235,194
Total liabilities and stockholders’ equity	$	3,862,829	$	3,882,141	$	3,565,437

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,
	2023		2022
Operating activities
Net income	$	101,699	$	179,261
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	7,632		7,663
Amortization	2,135		2,192
Share-based compensation	4,923		3,657

Equity in earnings of unconsolidated investments, net	(36)		(58)

Other	2,732		5,777
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables	(211,015)		(303,400)
Product inventories	(96,011)		(306,582)
Prepaid expenses and other assets	(5,786)		(23,330)
Accounts payable	332,800		287,449
Accrued expenses and other liabilities	(35,870)		(60,738)
Net cash provided by (used in) operating activities	103,203		(208,109)

Investing activities
Acquisition of businesses, net of cash acquired	(1,760)		—
Purchases of property and equipment, net of sale proceeds	(15,570)		(9,159)


Other investments, net	(230)		—
Net cash used in investing activities	(17,560)		(9,159)

Financing activities
Proceeds from revolving line of credit	256,079		564,288
Payments on revolving line of credit	(376,895)		(604,960)
Proceeds from term loan under credit facility	—		250,000
Proceeds from asset-backed financing	151,200		155,000
Payments on asset-backed financing	(51,100)		(50,000)
Payments on term facility	(2,313)		(2,313)
Proceeds from short-term borrowings and current portion of long-term debt	3,011		10,277
Payments on short-term borrowings and current portion of long-term debt	(1,223)		(784)

Payments of deferred and contingent acquisition consideration	(551)		(1,374)


Proceeds from stock issued under share-based compensation plans	5,896		3,135
Payments of cash dividends	(39,073)		(32,132)
Purchases of treasury stock	(50,549)		(62,420)
Net cash (used in) provided by financing activities	(105,518)		228,717
Effect of exchange rate changes on cash and cash equivalents	754		(405)
Change in cash and cash equivalents	(19,121)		11,044
Cash and cash equivalents at beginning of period	45,591		24,321
Cash and cash equivalents at end of period	$	26,470	$	35,365

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, 2022	39,069	$	39	$	575,776	$	653,484	$	5,895	$	1,235,194
Net income	—	—		—		101,699		—		101,699
Foreign currency translation	—	—		—		—		2,469		2,469
Interest rate swaps, net of the change in taxes of $1,269	—	—		—		—		(3,809)		(3,809)
Repurchases of common stock, net of retirements	(144)	—		—		(50,549)		—		(50,549)
Share-based compensation	—	—		4,923		—		—		4,923
Issuance of stock under share-based compensation plans	108	—		5,896		—		—		5,896
Declaration of cash dividends	—	—		—		(39,073)		—		(39,073)
Balance at March 31, 2023	39,033	$	39	$	586,595	$	665,561	$	4,555	$	1,256,750


	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

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 2022 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 2022 Annual Report on Form 10-K. The results for our three-month period ended March 31, 2023, are not necessarily indicative of the expected results for our fiscal year ending December 31, 2023.

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 $4.8 million in the first quarter of 2023 compared to $7.3 million in the first quarter of 2022.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings. As of March 31, 2023, 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 $2.2 billion and cumulative dividends of $980.1 million.

Accumulated Other Comprehensive Income

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


	March 31,				December 31,
	2023		2022		2022
Foreign currency translation adjustments	$	(17,139)	$	(9,794)	$	(19,608)
Unrealized gains on interest rate swaps, net of tax	21,694		13,694		25,503
Accumulated other comprehensive income	$	4,555	$	3,900	$	5,895

Recent Accounting Pronouncements Pending Adoption

The following table summarizes 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 ASU 2021-01, Reference Rate Reform (Topic 848): Scope ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848	ASU 2020-04, Reference Rate Reform (Topic 848), provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The 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, which refined the scope of ASC 848 and clarified some of its guidance as it relates to recent rate reform activities. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the date for using optional expedients and exceptions to December 31, 2024.	The provisions of these updates are available until December 31, 2024.	In 2022, we adopted the hedge accounting expedient related to the probability of forecasted transactions to assert probability of the hedged interest regardless of any expected modification related to reference rate reform. We may apply other elections as applicable. We do not expect that there will be a material impact to the financial statements as a result of adopting any of the optional expedient or exceptions from 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 213,000 for the three months ended March 31, 2023 and 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,
	2023		2022
Net income	$	101,699	$	179,261
Amounts allocated to participating securities	(548)		(1,051)
Net income attributable to common stockholders	$	101,151	$	178,210

Weighted average common shares outstanding:
Basic	38,877		39,932
Effect of dilutive securities:
Stock options and employee stock purchase plan	312		460
Diluted

SEC Form 10-Q filed by Pool Corporation