Pool Corp(POOL) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the quarter ended March 31, 2023 Consolidated Statements of Income Consolidated Statements of Income (Q1 2023 vs Q1 2022) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net sales | $1,206,774 | $1,412,650 | | Gross profit | $369,755 | $447,189 | | Operating income | $145,771 | $235,723 | | Net income | $101,699 | $179,261 | | Diluted EPS | $2.58 | $4.41 | - Cash dividends declared per common share increased to $1.00 in Q1 2023 from $0.80 in Q1 2022, a 25% increase[9] Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (Q1 2023 vs Q1 2022) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income | $101,699 | $179,261 | | Total other comprehensive (loss) income | $(1,340) | $11,384 | | Comprehensive income | $100,359 | $190,645 | Consolidated Balance Sheets Key Balance Sheet Items (in thousands) | Account | March 31, 2023 | March 31, 2022 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Total current assets | $2,305,199 | $2,398,757 | $2,018,991 | | Product inventories, net | $1,686,683 | $1,641,155 | $1,591,060 | | Total assets | $3,862,829 | $3,882,141 | $3,565,437 | | Total current liabilities | $977,420 | $958,448 | $675,714 | | Long-term debt, net | $1,332,670 | $1,483,808 | $1,361,761 | | Total liabilities | $2,606,079 | $2,707,863 | $2,330,243 | | Total stockholders' equity | $1,256,750 | $1,174,278 | $1,235,194 | Condensed Consolidated Statements of Cash Flows Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $103,203 | $(208,109) | | Net cash used in investing activities | $(17,560) | $(9,159) | | Net cash (used in) provided by financing activities | $(105,518) | $228,717 | | Change in cash and cash equivalents | $(19,121) | $11,044 | - Key financing activities in Q1 2023 included $39.1 million in dividend payments and $50.5 million in treasury stock purchases[16] Consolidated Statements of Changes in Stockholders' Equity Changes in Stockholders' Equity Q1 2023 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2022 | $1,235,194 | | Net income | $101,699 | | Repurchases of common stock | $(50,549) | | Declaration of cash dividends | $(39,073) | | Other comprehensive loss & share-based comp. | $(1,340) + $10,819 | | Balance at March 31, 2023 | $1,256,750 | Notes to Consolidated Financial Statements - In March 2023, the company acquired the distribution assets of Pro-Water Irrigation & Landscape Supply, Inc, adding two locations in Arizona[29] - The company utilizes interest rate swap contracts to convert variable interest rates to fixed rates on a portion of its borrowings to mitigate exposure to interest rate fluctuations[32][35] Components of Debt (in thousands) | Debt Component | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Short-term borrowings and current portion | $33,080 | $21,265 | | Revolving credit facility | $398,895 | $532,253 | | Term loan under credit facility | $481,250 | $500,000 | | Term facility | $154,938 | $164,188 | | Receivables securitization facility | $299,600 | $290,000 | | Total debt | $1,365,750 | $1,505,073 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 15% decrease in Q1 2023 net sales and updates full-year 2023 guidance Overview - Net sales decreased 15% in Q1 2023 to $1.2 billion, following exceptionally strong growth of 33% in Q1 2022 and 57% in Q1 2021[50] - Unusually wet and cold weather in western U.S. markets significantly impacted results, with combined base business sales down 21% YoY[50] - The company updated its full-year 2023 guidance, now expecting sales to be down in the mid-single digits and diluted EPS in the range of $14.62 to $16.12[62][65] Results of Operations Q1 2023 vs Q1 2022 Performance | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,206.8M | $1,412.7M | (15)% | | Gross Profit | $369.8M | $447.2M | (17)% | | Gross Margin | 30.6% | 31.7% | (110 bps) | | Operating Expenses | $224.0M | $211.5M | 6% | | Operating Income | $145.8M | $235.7M | (38)% | - Key factors impacting the 15% sales decline included unfavorable weather, lower early buy activity, and European market softness, partially offset by inflationary price increases[78] - Excluding a tax benefit from ASU 2016-09, adjusted diluted EPS decreased 42% to $2.46 in Q1 2023 from $4.23 in Q1 2022[83][89] Seasonality and Quarterly Fluctuations - The business is seasonal, with approximately 59% of net sales and 67% of operating income generated in the second and third quarters of 2022[90] - In Q1 2023, results were unfavorably impacted by unusually wet and cold weather in the western U.S, particularly in California and Arizona[96] Critical Accounting Estimates - There have been no changes to the critical accounting estimates from those previously disclosed in the 2022 Annual Report on Form 10-K[97] Liquidity and Capital Resources - Net cash provided by operations improved significantly to $103.2 million for Q1 2023 from a use of $208.1 million in Q1 2022, primarily due to positive changes in working capital[101] - The company's primary sources of liquidity are cash from operations and three major credit facilities[105][106][108][110] - As of March 31, 2023, the company was in compliance with all material covenants, with an average total leverage ratio of 1.48 and a fixed charge coverage ratio of 7.96[113][117] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures from the prior annual report - There have been no material changes in interest rate risk or currency risk during the three months ended March 31, 2023, from what was reported in the 2022 Annual Report on Form 10-K[121][122] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - Based on an evaluation as of March 31, 2023, the company's management concluded that disclosure controls and procedures were effective[123] - No changes in internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[124] PART II. OTHER INFORMATION Legal Proceedings Ongoing litigation is not expected to have a material adverse impact on the company's financial condition - The company is subject to various claims and litigation but does not believe their resolution will have a material adverse impact on its financial condition[128] Risk Factors No material changes to risk factors have occurred since the last annual report - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[129] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 144,005 shares in Q1 2023, with $186.4 million remaining under the buyback program Common Stock Repurchases in Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1-31, 2023 | — | $— | | February 1-28, 2023 | 34,851 | $356.99 | | March 1-31, 2023 | 109,154 | $350.18 | | Total | 144,005 | $351.83 | - As of April 24, 2023, $186.4 million remained available under the current share repurchase program[132] Exhibits This section lists the exhibits filed with the report, including CEO/CFO certifications and iXBRL data - The report includes required certifications by the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and financial statements formatted in iXBRL (Exhibit 101)[134]