pool-20210331

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, 2021


☐			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 26, 2021, there were 40,106,026 shares of common stock outstanding.

POOL CORPORATION

Form 10-Q

For the Quarter Ended March 31, 2021

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		11

	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,
	2021		2020
Net sales	$	1,060,745	$	677,288
Cost of sales	759,614		487,659
Gross profit	301,131		189,629
Selling and administrative expenses	172,100		147,097
Impairment of goodwill and other assets	—		6,944
Operating income	129,031		35,588
Interest and other non-operating expenses, net	2,582		4,789
Income before income taxes and equity earnings	126,449		30,799
Income tax provision (benefit)	27,869		(25)
Equity earnings in unconsolidated investments, net	75		88


Net income	$	98,655	$	30,912


Earnings per share:
Basic	$	2.45	$	0.77
Diluted	$	2.42	$	0.75
Weighted average shares outstanding:
Basic	40,215		40,125
Diluted	40,846		40,955

Cash dividends declared per common share	$	0.58	$	0.55

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,
	2021		2020
Net income	$	98,655	$	30,912
Other comprehensive income (loss):
Foreign currency translation losses	(1,268)		(5,430)
Change in unrealized gains (losses) on interest rate swaps, net of change in taxes of $(3,046) and $2,837	9,137		(8,510)
Total other comprehensive income (loss)	7,869		(13,940)
Comprehensive income	$	106,524	$	16,972

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,
	2021		2020		2020 (1)
	(Unaudited)		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	27,078	$	17,808	$	34,128
Receivables, net	122,938		66,328		122,252
Receivables pledged under receivables facility	364,664		279,587		166,948
Product inventories, net	977,228		858,190		780,989
Prepaid expenses and other current assets	25,390		16,465		17,610
Total current assets	1,517,298		1,238,378		1,121,927

Property and equipment, net	109,830		113,987		108,241
Goodwill	267,914		193,380		268,167
Other intangible assets, net	11,854		9,832		12,181
Equity interest investments	1,305		1,260		1,292
Operating lease assets	209,036		174,653		205,875
Other assets	24,456		16,291		21,987
Total assets	$	2,141,693	$	1,747,781	$	1,739,670

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	634,998	$	517,620	$	266,753
Accrued expenses and other current liabilities	134,670		62,614		143,694
Short-term borrowings and current portion of long-term debt	12,409		16,353		11,869
Current operating lease liabilities	61,265		55,703		60,933
Total current liabilities	843,342		652,290		483,249

Deferred income taxes	31,134		30,464		27,653
Long-term debt, net	420,762		569,697		404,149
Other long-term liabilities	38,945		26,470		38,261
Non-current operating lease liabilities	149,582		120,462		146,888
Total liabilities	1,483,765		1,399,383		1,100,200



Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,086,256, 39,930,962 and 40,232,210 shares issued and outstanding at March 31, 2021, March 31, 2020 and December 31, 2020, respectively	40		40		40
Additional paid-in capital	526,328		495,251		519,579
Retained earnings (deficit)	137,710		(122,594)		133,870
Accumulated other comprehensive loss	(6,150)		(24,299)		(14,019)
Total stockholders’ equity	657,928		348,398		639,470
Total liabilities and stockholders’ equity	$	2,141,693	$	1,747,781	$	1,739,670

(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,
	2021		2020
Operating activities
Net income	$	98,655	$	30,912
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	6,884		7,001
Amortization	421		336
Share-based compensation	3,837		3,654

Equity earnings in unconsolidated investments, net	(75)		(88)
Impairment of goodwill and other assets	—		6,944
Other	2,723		3,715
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables	(199,672)		(124,542)
Product inventories	(200,185)		(156,856)
Prepaid expenses and other assets	(5,507)		4,633
Accounts payable	369,665		256,874
Accrued expenses and other current liabilities	367		(12,855)
Net cash provided by operating activities	77,113		19,728

Investing activities
Acquisition of businesses, net of cash acquired	(683)		(13,642)
Purchases of property and equipment, net of sale proceeds	(8,839)		(8,340)



Net cash used in investing activities	(9,522)		(21,982)

Financing activities
Proceeds from revolving line of credit	342,500		248,700
Payments on revolving line of credit	(308,656)		(256,543)
Proceeds from asset-backed financing	110,000		97,400
Payments on asset-backed financing	(125,000)		(17,300)
Payments on term facility	(2,313)		(2,313)
Proceeds from short-term borrowings and current portion of long-term debt	4,280		6,479
Payments on short-term borrowings and current portion of long-term debt	(3,740)		(1,871)
Payments of deferred financing costs	—		(12)
Payments of deferred and contingent acquisition consideration	(362)		(281)


Proceeds from stock issued under share-based compensation plans	2,912		6,358
Payments of cash dividends	(23,299)		(22,147)
Purchases of treasury stock	(71,516)		(66,619)
Net cash used in financing activities	(75,194)		(8,149)
Effect of exchange rate changes on cash and cash equivalents	553		(372)
Change in cash and cash equivalents	(7,050)		(10,775)
Cash and cash equivalents at beginning of period	34,128		28,583
Cash and cash equivalents at end of period	$	27,078	$	17,808

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		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


	Common Stock			Additional Paid-In		Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
Balance at December 31, 2019	40,074	$	40	$	485,239	$	(64,740)	$	(10,359)	$	410,180
Net income	—	—		—		30,912		—		30,912
Foreign currency translation	—	—		—		—		(5,430)		(5,430)
Interest rate swaps, net of the change in taxes of $2,837	—	—		—		—		(8,510)		(8,510)
Repurchases of common stock, net of retirements	(362)	—		—		(66,619)		—		(66,619)
Share-based compensation	—	—		3,654		—		—		3,654

Issuance of stock under share-based compensation plans	219	—		6,358		—		—		6,358
Declaration of cash dividends	—	—		—		(22,147)		—		(22,147)
Balance at March 31, 2020	39,931	$	40	$	495,251	$	(122,594)	$	(24,299)	$	348,398

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 2020 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 2020 Annual Report on Form 10-K. The results for our three month period ended March 31, 2021 are not necessarily indicative of the expected results for our fiscal year ending December 31, 2021.

Newly Adopted Accounting Pronouncements

On January 1, 2021, we adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This new standard simplified the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. Most amendments were required to be applied on a prospective basis, while certain amendments were required to be applied on a retrospective or modified retrospective basis. 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 awards lapse. We recorded excess tax benefits of $4.0 million in the first quarter of 2021 compared to $8.0 million in the first quarter of 2020.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings (deficit). As of March 31, 2021, 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 $1.6 billion and cumulative dividends of $694.1 million.

Accumulated Other Comprehensive Loss

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


	March 31,				December 31,
	2021		2020		2020
Foreign currency translation adjustments	$	(6,185)	$	(15,557)	$	(4,917)
Unrealized gains (losses) on interest rate swaps, net of tax	35		(8,742)		(9,102)
Accumulated other comprehensive loss	$	(6,150)	$

SEC Form 10-Q filed by Pool Corporation