pool-20230630

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 June 30, 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 July 24, 2023, there were 39,051,971 shares of common stock outstanding.

POOL CORPORATION

Form 10-Q

For the Quarter Ended June 30, 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	7

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

	Item 3. Quantitative and Qualitative Disclosures about Market Risk		27

	Item 4. Controls and Procedures		27

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings		28

	Item 1A. Risk Factors		28

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		28

	Item 6. Exhibits		29

SIGNATURE			31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

POOL CORPORATION

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net sales	$	1,857,363	$	2,055,818	$	3,064,138	$	3,468,468
Cost of sales	1,289,580		1,389,014		2,126,599		2,354,474
Gross profit	567,783		666,804		937,539		1,113,994
Selling and administrative expenses	240,774		247,916		464,758		459,382

Operating income	327,009		418,888		472,781		654,612
Interest and other non-operating expenses, net	16,892		8,523		32,728		13,722
Income before income taxes and equity in earnings	310,117		410,365		440,053		640,890
Provision for income taxes	77,987		103,160		106,260		154,482
Equity in earnings of unconsolidated investments, net	120		78		156		136


Net income	$	232,250	$	307,283	$	333,949	$	486,544


Earnings per share attributable to common stockholders:
Basic	$	5.95	$	7.71	$	8.55	$	12.16
Diluted	$	5.91	$	7.63	$	8.48	$	12.03
Weighted average common shares outstanding:
Basic	38,837		39,660		38,857		39,795
Diluted	39,115		40,064		39,155		40,231

Cash dividends declared per common share	$	1.10	$	1.00	$	2.10	$	1.80

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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	232,250	$	307,283	$	333,949	$	486,544
Other comprehensive income (loss):
Foreign currency translation gain (loss)	2,801		(7,125)		5,271		(7,339)
Unrealized gains (losses) on interest rate swaps, net of the change in taxes of $(1,166), $(1,631), $104, and $(5,497)	3,497		4,893		(313)		16,491
Total other comprehensive income (loss)	6,298		(2,232)		4,958		9,152
Comprehensive income	$	238,548	$	305,051	$	338,907	$	495,696

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

POOL CORPORATION

Consolidated Balance Sheets

(In thousands, except share data)


	June 30,		June 30,		December 31,
	2023		2022		2022
	(Unaudited)		(Unaudited)		(Audited)
Assets
Current assets:
Cash and cash equivalents	$	53,225	$	91,481	$	45,591
Receivables, net	203,459		239,639		128,247
Receivables pledged under receivables facility	427,491		516,946		223,201
Product inventories, net	1,392,886		1,579,101		1,591,060
Prepaid expenses and other current assets	19,994		43,317		30,892
Total current assets	2,097,055		2,470,484		2,018,991

Property and equipment, net	209,541		183,480		193,709
Goodwill	699,918		692,972		691,993
Other intangible assets, net	302,444		309,375		305,450
Equity interest investments	1,278		1,179		1,248
Operating lease assets	279,468		259,571		269,608
Other assets	90,875		45,044		84,438
Total assets	$	3,680,579	$	3,962,105	$	3,565,437

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	485,100	$	604,225	$	406,667
Accrued expenses and other current liabilities	170,658		195,529		168,521
Short-term borrowings and current portion of long-term debt	36,219		19,731		25,042
Current operating lease liabilities	79,763		71,550		75,484
Total current liabilities	771,740		891,035		675,714

Deferred income taxes	58,151		42,380		58,759
Long-term debt, net	1,148,367		1,575,667		1,361,761
Other long-term liabilities	39,236		32,109		35,471
Non-current operating lease liabilities	204,553		191,856		198,538
Total liabilities	2,222,047		2,733,047		2,330,243



Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 39,048,604, 39,588,231 and 39,069,419 shares issued and outstanding at June 30, 2023, June 30, 2022 and December 31, 2022, respectively	39		40		39
Additional paid-in capital	593,081		564,641		575,776
Retained earnings	854,559		662,709		653,484
Accumulated other comprehensive income	10,853		1,668		5,895
Total stockholders’ equity	1,458,532		1,229,058		1,235,194
Total liabilities and stockholders’ equity	$	3,680,579	$	3,962,105	$	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)


	Six Months Ended
	June 30,
	2023		2022
Operating activities
Net income	$	333,949	$	486,544
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	15,292		15,376
Amortization	4,237		4,358
Share-based compensation	9,996		7,571

Equity in earnings of unconsolidated investments, net	(156)		(136)

Other	3,563		7,185
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables	(276,945)		(384,245)
Product inventories	201,380		(251,090)
Prepaid expenses and other assets	(4,423)		(20,573)
Accounts payable	76,140		208,017
Accrued expenses and other liabilities	13,744		(44,276)
Net cash provided by operating activities	376,777		28,731

Investing activities
Acquisition of businesses, net of cash acquired	(11,500)		(7,629)
Purchases of property and equipment, net of sale proceeds	(30,191)		(19,802)


Other investments, net	(169)		—
Net cash used in investing activities	(41,860)		(27,431)

Financing activities
Proceeds from revolving line of credit	698,795		1,122,186
Payments on revolving line of credit	(1,001,399)		(1,128,902)
Proceeds from term loan under credit facility	—		250,000
Proceeds from asset-backed financing	388,900		215,000
Payments on asset-backed financing	(240,200)		(50,000)
Payments on term facility	(47,313)		(4,625)
Proceeds from short-term borrowings and current portion of long-term debt	17,859		24,767
Payments on short-term borrowings and current portion of long-term debt	(19,182)		(16,808)

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


Proceeds from stock issued under share-based compensation plans	7,309		5,107
Payments of cash dividends	(82,018)		(72,028)
Purchases of treasury stock	(50,742)		(278,680)
Net cash (used in) provided by financing activities	(328,542)		64,643
Effect of exchange rate changes on cash and cash equivalents	1,259		1,217
Change in cash and cash equivalents	7,634		67,160
Cash and cash equivalents at beginning of period	45,591		24,321
Cash and cash equivalents at end of period	$	53,225	$	91,481

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
Net income	—	—		—		232,250		—		232,250
Foreign currency translation	—	—		—		—		2,801		2,801
Interest rate swaps, net of the change in taxes of $(1,166)	—	—		—		—		3,497		3,497
Repurchases of common stock, net of retirements	—	—		—		—		—		—
Share-based compensation	—	—		5,073		—		—		5,073
Issuance of stock under share-based compensation plans	16	—		1,413		—		—		1,413
Declaration of cash dividends	—	—		—		(42,945)		—		(42,945)
Other	—	—		—		(307)		—		(307)
Balance at June 30, 2023	39,049	$	39	$	593,081	$	854,559	$	10,853	$	1,458,532


	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
Net income	—	—		—		307,283		—		307,283
Foreign currency translation	—	—		—		—		(7,125)		(7,125)
Interest rate swaps, net of the change in taxes of $(1,631)	—	—		—		—		4,893		4,893
Repurchases of common stock, net of retirements	(547)	—		—		(216,261)		—		(216,261)
Share-based compensation	—	—		3,914		—		—		3,914
Issuance of stock under share-based compensation plans	25	—		1,972		—		—		1,972
Declaration of cash dividends	—	—		—		(39,896)		—		(39,896)
Balance at June 30, 2022	39,588	$	40	$	564,641	$	662,709	$	1,668	$	1,229,058

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 and six-month periods ended June 30, 2023, are not necessarily indicative of the expected results for our fiscal year ending December 31, 2023.

Newly Adopted Accounting Pronouncements

As of June 30, 2023, we adopted Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and all related amendments, which are codified into Accounting Standards Codification (ASC) 848. This new standard provides optional expedients and exceptions for applying GAAP 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. The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures, and we do not expect a material impact in future periods.

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 $0.6 million in the second quarter of 2023 compared to $1.6 million in the second quarter of 2022 and $5.4 million in the six months ended June 30, 2023, compared to $8.9 million in the six months ended June 30, 2022.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings. As of June 30, 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 $1.0 billion.

Accumulated Other Comprehensive Income

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


	June 30,				December 31,
	2023		2022		2022
Foreign currency translation adjustments	$	(14,338)	$	(16,919)	$	(19,608)
Unrealized gains on interest rate swaps, net of tax	25,191		18,587		25,503
Accumulated other comprehensive income	$	10,853	$	1,668	$	5,895

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 205,000 for the three months ended June 30, 2023 and 218,000 for the three months ended June 30, 2022, and 209,000 for the six months ended June 30, 2023 and 229,000 for the six months ended June 30, 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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	232,250	$	307,283	$	333,949	$	486,544
Amounts allocated to participating securities	(1,219)		(1,680)		(1,779)		(2,762)
Net income attributable to common stockholders	$	231,031	$	305,603	$	332,170	$	483,782

Weighted average common shares outstanding:
Basic	38,837		39,660		38,857		39,795
Effect of dilutive securities:
Stock options and employee stock purchase plan	278		404		298		436
Diluted	39,115		40,064		39,155		40,231

Earnings per share attributable to common stockholders:
Basic	$	5.95	$	7.71	$	8.55	$	12.16
Diluted	$	5.91	$	7.63	$	8.48	$	12.03

Anti-dilutive stock options excluded from diluted earnings per share computations

SEC Form 10-Q filed by Pool Corporation