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April 23, 2020, 7:00 a.m. EDT

Pool Corporation Provides Business Update and Reports First Quarter Results

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COVINGTON, Apr 23, 2020 (GLOBE NEWSWIRE via COMTEX) -- Highlights

-- Record net sales for Q1 2020 resulting in both overall and base business sales growth of 13%

-- Q1 2020 diluted EPS of $0.75 compared to $0.80 last year, or excluding tax benefits and non-cash impairments, $0.71 this year compared to $0.59 last year

-- POOLCORP sells essential products and has been continuously open in most markets with no major supply chain disruptions anticipated

-- Strong liquidity with a 1.49 leverage ratio and $552.4 million available under our revolving credit facility

-- Updates 2020 earnings guidance to $5.30 - $5.90 per diluted share or $5.45 - $6.05, excluding non-cash impairments, from $6.47 - $6.77 per diluted share previously

______________________

"As we move from the end of the tumultuous first quarter and into the second, it is an appropriate time to provide an update on how our business has progressed since the start of the year and how we are responding to the challenges brought on by the COVID-19 pandemic," said Peter D. Arvan, Pool Corporation President and CEO. (nasdaq/gsm:POOL)

"Entering 2020, POOLCORP was well positioned financially to deal with the impacts of the COVID-19 pandemic to our business. Our balance sheet was strong with adequate access to capital. Our leverage ratio, as measured on a trailing twelve-month debt to EBITDA basis, was 1.61 at December 31, 2019, and has improved to 1.49 at March 31, 2020. We also updated and expanded our credit facilities in the fourth quarter of 2019, including adding a 7-year, $185.0 million term facility. At March 31, 2020, we had $552.4 million available for borrowing under our revolving credit facility, which matures in September 2022. We believe this provides us with substantial flexibility and liquidity to deal with uncertain future economic conditions and to take advantage of opportunities during and after a recovery."

"At POOLCORP, the majority of our North American operations are and have been continuously open for business as we are designated 'essential' in almost all of our markets. In Europe, our operations closed for a short period in France, Spain and Italy, in order to comply with local authorities' orders. Very early on, we organized an internal task force to collaboratively guide our efforts to ensure business continuity and employee and customer well-being. We are working hard to care for our employees, so they are safe as they serve our customers. We have provided our employees with enhanced personal protective equipment (PPE), augmented our employee benefits and altered our standard operating procedures to minimize contact while serving our customers. For customers, we are helping them navigate this unprecedented period by providing them with numerous options to interact and transact with us remotely in a safe and efficient manner, including through our Pool360 and Horizon 24/7 platforms and our BlueStreak mobile kiosks. But, most of all, we are proud of our people as they continue to show extraordinary dedication and creativity in working through new challenges and uncertainties in order to serve our customers. Thanks to them, we believe POOLCORP is weathering the COVID-19 pandemic well."

"As evidenced by our first quarter results, we started the year with robust growth as underlying demand for our products has been strong. Beginning in the middle of March when stay-at-home orders were being issued, sales growth began to level off. Our products and services are used to maintain and protect outdoor commercial, residential and municipal environments, including chemically-balanced, virus and bacteria-free swimming pool water and in the prevention of runoff, flood, fire and other natural disasters, and are 'essential' to the health and safety of the general public. As a result, our supply chain remains relatively intact, and with some exceptions, our customers are continuing to meet end-user needs."

"Stay-at-home orders of varying degrees are now in place in almost all jurisdictions in which we operate, resulting in year-over-year sales declines for the month of April to date of five to ten percent as these orders impact our business unevenly throughout our network. It is unclear how long these conditions will last and what the continuing social and economic impact will be on our business after these restrictions are lifted. We have taken steps to preserve capital and reduce costs where warranted, while retaining options for further business adjustments as conditions evolve and we gain more clarity. We are working closely with our suppliers to maintain the flow of essential products to provide customers with the materials they need to serve their communities. Given the seasonality of our business, our warehouses were already stocked with inventory in preparation for the upcoming peak season prior to the implementation of most stay-at-home orders. As a result, the limited vendor supply interruptions experienced to date have had a minimal impact on our business, although that could change depending on the duration and severity of social distancing conditions."

"During the first quarter of 2020, we benefited from earlier pool openings, as mild weather combined with school closures have driven greater early-season residential pool usage. The majority of our business is driven by recurring revenue streams from the installed base of pools. Based on customer feedback and results at locations that have had minimal business disruption, underlying demand for most discretionary products, including those serving the renovation and construction markets, remains strong. As a result, we believe we can still deliver solid business results in 2020. At the same time, the impact of extended stay-at-home and social distancing orders, as well as unfavorable economic conditions resulting from the pandemic, could have a more severe adverse impact on our business including an easing of demand for products dependent on discretionary spending. Given this uncertainty, we are updating our annual earnings guidance to encompass a wide range of outcomes and expect 2020 diluted EPS of $5.30 to $5.90, including the impact of first quarter tax benefits of $0.19 and the $0.15 impact of non-cash impairments recorded in the first quarter of 2020," commented Arvan. "Excluding the impact of non-cash impairments, we expect 2020 adjusted diluted EPS of $5.45 to $6.05. Our previous 2020 earnings guidance range disclosed earlier in the year was $6.47 to $6.77 per diluted share, including an estimated $0.06 tax benefit." See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

In the first quarter of 2020, net sales increased 13% to a record $677.3 million compared to $597.5 million in the first quarter of 2019. Base business sales also grew 13%. During the quarter, sales benefited from strong demand for discretionary products as evidenced by higher sales growth in construction materials and products used in the remodel and replacement of in-ground pools. In addition, sales were favorably impacted by a pull forward of lower margin customer early-buy purchases from the second quarter into the first and by an additional selling day in the first quarter of 2020 compared to the first quarter of 2019.

Gross profit increased 9% to a record $189.6 million in the first quarter of 2020 from $174.6 million in the same period of 2019. Base business gross profit improved 8% over the first quarter of 2019. Gross margin decreased 120 basis points to 28.0% in the first quarter of 2020 compared to 29.2% in the first quarter of 2019. Gross margin in the first quarter of 2019 reflected benefits from strategic inventory purchases ahead of vendor price increases resulting in a comparative decline in the first quarter of 2020 in addition to the impact of the customer early-buys mentioned above.

Selling and administrative expenses (operating expenses) and base business operating expenses increased 13% in the first quarter of 2020 compared to the first quarter of 2019. In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a long-term note, as collectability was impacted by the COVID-19 pandemic, and non-cash goodwill and intangibles impairment charges of $4.4 million, equal to the total goodwill and intangibles carrying amount of our Australian reporting units. Excluding impairment charges, operating expenses and base business operating expenses were up 8%, reflecting increases in growth-driven variable labor and freight expenses as well as greater facility-related costs.

Operating income in the first quarter of 2020 decreased 7% to $35.6 million compared to the same period in 2019. Adjusted operating income, excluding non-cash impairments, was $42.5 million in the first quarter of 2020 compared to operating income of $38.4 million in the first quarter of 2019, an 11% increase. Operating margin was 5.3% in the first quarter of 2020, or 6.3% excluding impairment charges, compared to 6.4% in the first quarter of 2019.

We recorded an $8.0 million, or $0.19 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, 2020, compared to a tax benefit of $8.8 million, or $0.21 per diluted share, realized in the same period of 2019.

Net income decreased 5% to $30.9 million in the first quarter of 2020 compared to $32.6 million in the first quarter of 2019. Adjusted net income in the first quarter of 2020, excluding the tax-effected impact of non-cash impairments of $6.3 million, or $0.15 per diluted share, increased 14% to $37.2 million. Earnings per share decreased 6% to $0.75 per diluted share in the first quarter of 2020 compared to $0.80 in the same period of 2019. Excluding non-cash impairments, net of tax, in the first quarter of 2020 and tax benefits in both periods, earnings per diluted share increased 20% to $0.71 in the first quarter of 2020 compared to $0.59 in the first quarter of 2019. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release. In the first quarter of 2020, we repurchased 362,000 shares for $66.6 million, which included 344,000 shares purchased in the open market for $62.8 million.

On the balance sheet at March 31, 2020, total net receivables, including pledged receivables, increased 10%, driven by our March sales growth. Inventory levels grew 5% compared to March 31, 2019. Total debt outstanding was $586.1 million at March 31, 2020, a $112.9 million decrease from total debt at March 31, 2019.

Cash provided by operations was $19.7 million in the first three months of 2020 compared to $28.8 million in the first three months of 2019. Adjusted EBITDA (as defined in the addendum to this release) was $53.4 million and $48.6 million for the three months ended March 31, 2020, and March 31, 2019, respectively. Interest expense decreased compared to last year primarily due to lower average debt levels and lower average interest rates.

"During this period of economic uncertainty, our management team will continue to explore opportunities to further enhance operational efficiencies available to us due to our size and scale. We will continue our efforts to expand our market share across all of our business units and pursue margin enhancement opportunities. We believe our strong balance sheet and financial liquidity will allow us to continue making strategic investments in our business. Similar to the 2008 business downturn, we believe our industry leading position, our strong financial condition and our experienced management team positions us to best take advantage of a return to more normal business conditions in the future," commented Arvan.

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 378 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, the sensitivity of our business to weather conditions, changes in the economy and the housing market, our ability to maintain favorable relationships with suppliers and manufacturers, competition from other leisure product alternatives and mass merchants, excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP's 2019 Annual Report on Form 10-K 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,
                                                           2020            2019
        Net sales                                          $   677,288     $   597,456
        Cost of sales                                      487,659         422,825
        Gross profit                                       189,629         174,631
        Percent                                            28.0        %   29.2        %
        Selling and administrative expenses                147,097         136,245
        Impairment of goodwill and other assets            6,944           --
        Operating income                                   35,588          38,386
        Percent                                            5.3         %   6.4         %
        Interest and other non-operating expenses, net     4,789           6,616
        Income before income taxes and equity earnings     30,799          31,770
        Income tax benefit                                 (25         )   (802        )
        Equity earnings in unconsolidated investments, net 88              65
        Net income                                         $   30,912      $   32,637
        Earnings per share:
        Basic                                              $   0.77        $   0.83
        Diluted                                            $   0.75        $   0.80
        Weighted average shares outstanding:
        Basic                                              40,125          39,479
        Diluted                                            40,955          40,696
        Cash dividends declared per common share           $   0.55        $   0.45
        


POOL CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)







                                                                                          March 31,       March 31,         Change
                                                                                          2020            2019              $            %
        Assets
        Current assets:
                              Cash and cash equivalents                                   $   17,808      $   28,581      $ (10,773  )   (38 )  %
                              Receivables, net                                                66,328          72,352        (6,024   )   (8  )
                              Receivables pledged under receivables facility                  279,587         240,775       38,812       16
                              Product inventories, net                                        858,190         815,742       42,448       5
                              Prepaid expenses and other current assets                       16,465          16,116        349          2
        Total current assets                                                                  1,238,378       1,173,566     64,812       6
        Property and equipment, net                                                           113,987         107,690       6,297        6
        Goodwill                                                                              193,380         188,478       4,902        3
        Other intangible assets, net                                                          9,832           11,744        (1,912   )   (16 )
        Equity interest investments                                                           1,260           1,200         60           5
        Operating lease assets                                                                174,653         177,293       (2,640   )   (1  )
        Other assets                                                                          16,291          18,379        (2,088   )   (11 )
        Total assets                                                                      $   1,747,781   $   1,678,350   $ 69,431       4      %
        Liabilities and stockholders' equity
        Current liabilities:
                              Accounts payable                                            $   517,620     $   472,487     $ 45,133       10     %
                              Accrued expenses and other current liabilities                  62,614          47,658        14,956       31
                              Short-term borrowings and current portion of long-term debt     16,353          21,734        (5,381   )   (25 )
                              Current operating lease liabilities                             55,703          55,744        (41      )   --
        Total current liabilities                                                             652,290         597,623       54,667       9
        Deferred income taxes                                                                 30,464          29,368        1,096        4
        Long-term debt, net                                                                   569,697         677,243       (107,546 )   (16 )
        Other long-term liabilities                                                           26,470          26,469        1            --
        Non-current operating lease liabilities                                               120,462         122,770       (2,308   )   (2  )
        Total liabilities                                                                     1,399,383       1,453,473     (54,090  )   (4  )
        Total stockholders' equity                                                            348,398         224,877       123,521      55
        Total liabilities and stockholders' equity                                        $   1,747,781   $   1,678,350   $ 69,431       4      %
        


The allowance for doubtful accounts was $6.9 million at March 31, 2020 and $5.6 million at March 31, 2019.

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