Docoh
Loading...

POOL Pool

Filed: 29 Jul 21, 12:04pm

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, 2021
or
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-20210630_g1.jpg 
POOL CORPORATION
(Exact name of registrant as specified in its charter)
  
Delaware36-3943363
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per sharePOOLNasdaq 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 filerxAccelerated filer
  
Non-accelerated filer  oSmaller 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 26, 2021, there were 40,100,826 shares of common stock outstanding.




POOL CORPORATION
Form 10-Q
For the Quarter Ended June 30, 2021

TABLE OF CONTENTS





PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data) 
Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Net sales$1,787,833 $1,280,846 $2,848,579 $1,958,134 
Cost of sales1,236,148 907,365 1,995,762 1,395,024 
Gross profit551,685 373,481 852,817 563,110 
Selling and administrative expenses213,099 167,624 385,200 314,721 
Impairment of goodwill and other assets0 0 6,944 
Operating income338,586 205,857 467,617 241,445 
Interest and other non-operating expenses, net1,963 2,643 4,545 7,432 
Income before income taxes and equity earnings336,623 203,214 463,072 234,013 
Provision for income taxes76,985 45,733 104,854 45,708 
Equity earnings in unconsolidated investments, net57 74 132 162 
Net income$259,695 $157,555 $358,350 $188,467 
Earnings per share:  
Basic$6.47 $3.94 $8.92 $4.71 
Diluted$6.37 $3.87 $8.78 $4.62 
Weighted average shares outstanding:  
Basic40,125 39,973 40,169 40,049 
Diluted40,745 40,715 40,800 40,837 
Cash dividends declared per common share$0.80 $0.58 $1.38 $1.13 

The accompanying Notes are an integral part of the Consolidated Financial Statements.
1


POOL CORPORATION
Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
Three Months EndedSix Months Ended
June 30,June 30,
  2021202020212020
Net income$259,695 $157,555 $358,350 $188,467 
Other comprehensive income (loss):  
Foreign currency translation gains (losses)1,302 2,134 34 (3,296)
Change in unrealized gains (losses) on interest rate swaps, net of change in taxes of $719, $855, $(2,327), and $3,692(2,157)(2,567)6,980 (11,077)
Total other comprehensive income (loss)(855)(433)7,014 (14,373)
Comprehensive income$258,840 $157,122 $365,364 $174,094 

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









2


POOL CORPORATION
Consolidated Balance Sheets
(In thousands, except share data)
June 30,June 30,December 31,
20212020
2020 (1)
 (Unaudited)(Unaudited) 
Assets   
Current assets:   
Cash and cash equivalents$58,465 $44,185 $34,128 
Receivables, net210,318 144,842 122,252 
Receivables pledged under receivables facility375,248 308,563 166,948 
Product inventories, net894,654 628,418 780,989 
Prepaid expenses and other current assets18,716 11,139 17,610 
Total current assets1,557,401 1,137,147 1,121,927 
Property and equipment, net111,661 111,258 108,241 
Goodwill283,284 193,784 268,167 
Other intangible assets, net12,350 9,615 12,181 
Equity interest investments1,293 1,274 1,292 
Operating lease assets221,068 183,126 205,875 
Other assets26,978 18,593 21,987 
Total assets$2,214,035 $1,654,797 $1,739,670 
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$439,453 $346,272 $266,753 
Accrued expenses and other current liabilities184,437 139,661 143,694 
Short-term borrowings and current portion of long-term debt10,058 9,558 11,869 
Current operating lease liabilities63,786 56,625 60,933 
Total current liabilities697,734 552,116 483,249 
Deferred income taxes30,440 29,399 27,653 
Long-term debt, net413,058 429,246 404,149 
Other long-term liabilities38,079 29,008 38,261 
Non-current operating lease liabilities159,976 128,237 146,888 
Total liabilities1,339,287 1,168,006 1,100,200 
Stockholders’ equity:   
Common stock, $0.001 par value; 100,000,000 shares authorized;
40,131,570, 40,041,683 and 40,232,210 shares issued and
outstanding at June 30, 2021, June 30, 2020 and
December 31, 2020, respectively
40 40 40 
Additional paid-in capital535,046 503,271 519,579 
Retained earnings346,667 8,212 133,870 
Accumulated other comprehensive loss(7,005)(24,732)(14,019)
Total stockholders’ equity874,748 486,791 639,470 
Total liabilities and stockholders’ equity$2,214,035 $1,654,797 $1,739,670 
(1)  Derived from audited financial statements.
The accompanying Notes are an integral part of the Consolidated Financial Statements.
3


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 Six Months Ended
June 30,
 20212020
Operating activities  
Net income$358,350 $188,467 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation13,884 13,993 
Amortization723 655 
Share-based compensation7,549 7,221 
Equity earnings in unconsolidated investments, net(132)(162)
Impairment of goodwill and other assets0 6,944 
Other4,812 3,171 
Changes in operating assets and liabilities, net of effects of acquisitions:  
Receivables(295,342)(229,506)
Product inventories(114,792)75,199 
Prepaid expenses and other assets(16,865)(677)
Accounts payable170,368 84,190 
Accrued expenses and other current liabilities58,673 71,705 
Net cash provided by operating activities187,228 221,200 
Investing activities  
Acquisition of businesses, net of cash acquired(15,162)(13,711)
Purchases of property and equipment, net of sale proceeds(17,333)(13,031)
Net cash used in investing activities(32,495)(26,742)
Financing activities  
Proceeds from revolving line of credit549,008 318,155 
Payments on revolving line of credit(505,636)(504,140)
Proceeds from asset-backed financing260,000 191,700 
Payments on asset-backed financing(290,000)(71,700)
Payments on term facility(4,625)(4,625)
Proceeds from short-term borrowings and current portion of long-term debt4,466 10,731 
Payments on short-term borrowings and current portion of long-term debt(6,277)(12,918)
Payments of deferred financing costs0 (12)
Payments of deferred and contingent acquisition consideration(362)(281)
Proceeds from stock issued under share-based compensation plans7,918 10,811 
Payments of cash dividends(55,418)(45,312)
Purchases of treasury stock(90,135)(70,203)
Net cash used in financing activities(131,061)(177,794)
Effect of exchange rate changes on cash and cash equivalents665 (1,062)
Change in cash and cash equivalents24,337 15,602 
Cash and cash equivalents at beginning of period34,128 28,583 
Cash and cash equivalents at end of period$58,465 $44,185 

The accompanying Notes are an integral part of the Consolidated Financial Statements.
4


POOL CORPORATION
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(In thousands)

Common StockAdditional
Paid-In
RetainedAccumulated
Other
Comprehensive
 SharesAmountCapitalEarningsLossTotal
Balance at December 31, 202040,232 $40 $519,579 $133,870 $(14,019)$639,470 
Net income98,655 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 compensation3,837 3,837 
Issuance of stock under share-based compensation plans69 2,912 2,912 
Declaration of cash dividends(23,299)(23,299)
Balance at March 31, 202140,086 $40 $526,328 $137,710 $(6,150)$657,928 
Net income259,695 259,695 
Foreign currency translation1,302 1,302 
Interest rate swaps, net of the change in taxes of $719(2,157)(2,157)
Repurchases of common stock, net of retirements(45)(18,619)(18,619)
Share-based compensation3,712 3,712 
Issuance of stock under share-based compensation plans90 5,006 5,006 
Declaration of cash dividends(32,119)(32,119)
Balance at June 30, 202140,131 $40 $535,046 $346,667 $(7,005)$874,748 
5


Common StockAdditional
Paid-In
Retained EarningsAccumulated
Other
Comprehensive
SharesAmountCapital(Deficit)LossTotal
Balance at December 31, 201940,074 $40 $485,239 $(64,740)$(10,359)$410,180 
Net income30,912 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 compensation3,654 3,654 
Issuance of stock under share-based compensation plans219 6,358 6,358 
Declaration of cash dividends(22,147)(22,147)
Balance at March 31, 202039,931$40 $495,251 $(122,594)$(24,299)$348,398 
Net income157,555 157,555 
Foreign currency translation2,134 2,134 
Interest rate swaps, net of the change in taxes of $855(2,567)(2,567)
Repurchases of common stock, net of retirements(19)(3,584)(3,584)
Share-based compensation3,567 3,567 
Issuance of stock under share-based compensation plans130 4,453 4,453 
Declaration of cash dividends(23,165)(23,165)
Balance at June 30, 202040,042$40 $503,271 $8,212 $(24,732)$486,791 

The accompanying Notes are an integral part of the Consolidated Financial Statements.
6


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 and six month periods ended June 30, 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 $7.7 million in the second quarter of 2021 compared to $6.2 million in the second quarter of 2020 and $11.7 million in the six months ended June 30, 2021 compared to $14.2 million in the six months ended June 30, 2020.

Retained Earnings

We account for the retirement of treasury shares as a reduction of Retained earnings. As of June 30, 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 $726.2 million.

Accumulated Other Comprehensive Loss

The table below presents the components of our Accumulated other comprehensive loss balance (in thousands):
June 30,December 31,
202120202020
Foreign currency translation adjustments$(4,882)$(13,423)$(4,917)
Unrealized losses on interest rate swaps, net of tax(2,123)(11,309)(9,102)
Accumulated other comprehensive loss$(7,005)$(24,732)$(14,019)

7



Recent Accounting Pronouncements Pending Adoption
The following table summarizes the recent accounting pronouncements that we plan to adopt in future periods:
StandardDescriptionEffective DateEffect 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 and ASU 2021-01, Reference Rate Reform (Topic 848): Scope
Provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new 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. The amendments in this ASU refine the scope of ASC 848 and clarify some of its guidance as it relates to recent rate reform activities.
The provisions of these updates are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed.We are currently evaluating the effect these standards will have on our financial position, results of operations and related disclosures.


Note 2 – Earnings Per Share

We calculate basic earnings per share (EPS) by dividing Net income by the weighted average number of common shares outstanding.  Diluted EPS reflects the dilutive effects of potentially dilutive securities, which include in-the-money outstanding stock options and shares to be purchased under our employee stock purchase plan. Using the treasury stock method, the effect of dilutive securities includes these additional shares of common stock that would have been outstanding based on the assumption that these potentially dilutive securities had been issued.

Stock options with exercise prices that are higher than the average market prices of our common stock for the periods presented are excluded from the diluted EPS calculation because the effect is anti-dilutive.

8


The table below presents the computation of EPS, including the reconciliation of basic and diluted weighted average shares outstanding (in thousands, except EPS):
 Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Net income$259,695 $157,555 $358,350 $188,467 
Weighted average shares outstanding:  
Basic40,125 39,973 40,169 40,049 
Effect of dilutive securities:  
Stock options and employee stock purchase plan620 742 631 788 
Diluted40,745 40,715 40,800 40,837 
Earnings per share:  
Basic$6.47 $3.94 $8.92 $4.71 
Diluted$6.37 $3.87 $8.78 $4.62 
Anti-dilutive stock options excluded from diluted earnings per share computations0 0 


Note 3 – Acquisitions

In June 2021, we acquired the distribution assets of Vak Pak Builders Supply, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding 1 location in Florida.

In April 2021, we acquired Pool Source, LLC, a wholesale distributor of swimming pool equipment, chemicals and supplies, adding 1 location in Tennessee.

In December 2020, we acquired the distribution assets of TWC Distributors, Inc., a wholesale distributor of irrigation and landscape maintenance products, adding 9 locations in Florida and 1 in Georgia.

In October 2020, we acquired Jet Line Products, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding 3 locations in New Jersey, 3 locations in New York, 2 locations in Texas and 1 location in Florida.

In September 2020, we acquired the distribution assets of Northeastern Swimming Pool Distributors, Inc., a wholesale distributor of swimming pool equipment, chemicals and supplies, adding 2 locations in Ontario, Canada.

In February 2020, we acquired the distribution assets of Master Tile Network LLC, a wholesale distributor of swimming pool tile and hardscape products, adding 2 locations in Texas, 1 location in Nevada and 1 location in Oklahoma.

We have completed our acquisition accounting for these acquisitions, subject to adjustments for standard holdback provisions per the terms of the purchase agreements, which are not material.

These acquisitions did not have a material impact on our financial position or results of operations, either individually or in the aggregate.


9


Note 4 – Fair Value Measurements and Interest Rate Swaps

Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and contingent consideration related to recent acquisitions. The three levels of the fair value hierarchy under the accounting guidance are described below:

Level 1    Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2     Inputs to the valuation methodology include:
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical or similar assets or liabilities in inactive markets;
inputs other than quoted prices that are observable for the asset or liability; or
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3    Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Recurring Fair Value Measurements

The table below presents the estimated fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilities (in thousands):
 Fair Value at June 30,
20212020
Level 2
Unrealized gains on interest rate swaps$4,641 $
Unrealized losses on interest rate swaps7,425 15,033 
Level 3
Contingent consideration liabilities$1,008 $442 

Interest Rate Swaps

We utilize interest rate swap contracts and forward-starting interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on our variable rate borrowings. 

For determining the fair value of our interest rate swap contracts and forward-starting interest rate swap contracts, we use significant other observable market data or assumptions (Level 2 inputs) that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk.  Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. We include unrealized gains in Prepaid expenses and other current assets and unrealized losses in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

We recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, we record the changes in the estimated fair value of our interest rate swap contracts to Accumulated other comprehensive loss on the Consolidated Balance Sheets.

We currently have three interest rate swap contracts in place, two of which became effective on November 20, 2020, and terminate on September 29, 2022, and a third that became effective on February 26, 2021, and terminates on February 28, 2025. These swap contracts were previously forward-starting and convert the variable interest rate to a fixed interest rate on our variable rate borrowings. Interest expense related to the notional amounts under these swap contracts is based on the fixed rates plus the applicable margin on our variable rate borrowings. Changes in the estimated fair value of these interest rate swap contracts are recorded to Accumulated other comprehensive loss on the Consolidated Balance Sheets.

10


The following table provides additional details related to these swap contracts:
DerivativeInception DateEffective DateTermination DateNotional Amount
(in millions)
Fixed Interest Rate
Interest rate swap 1May 7, 2019November 20, 2020September 29, 2022$75.02.0925%
Interest rate swap 2July 25, 2019November 20, 2020September 29, 2022$75.01.5500%
Interest rate swap 3February 5, 2020February 26, 2021February 28, 2025$150.01.3800%

For the interest rate swap contracts in effect at June 30, 2021, a portion of the change in the estimated fair value between periods relates to future interest expense. Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive loss on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. This amount was not material in the six-month period ended June 30, 2021.

We have entered into forward-starting interest rate swap contracts to extend the hedged period for future interest payments on our variable rate borrowings. These swap contracts will convert the variable interest rate to a fixed interest rate on our variable rate borrowings. Changes in the estimated fair value of these forward-starting interest rate swap contracts are recorded to Accumulated other comprehensive loss on the Consolidated Balance Sheets.

The following table provides details related to each of our forward-starting interest rate swap contracts:
DerivativeInception DateEffective DateTermination DateNotional
Amount
(in millions)
Fixed
Interest
Rate
Forward-starting interest rate swap 1March 9, 2020September 29, 2022February 26, 2027$150.00.7400%
Forward-starting interest rate swap 2March 9, 2020February 28, 2025February 26, 2027$150.00.8130%

Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements.  Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position.

Our interest rate swap contracts and forward-starting interest rate swap contracts are subject to master netting arrangements. According to our accounting policy, we do not offset the fair values of assets with the fair values of liabilities related to these contracts.

Nonrecurring Fair Value Measurements

In addition to our assets and liabilities that we measure at fair value on a recurring basis, our assets and liabilities are also subject to nonrecurring fair value measurements. Generally, our assets, including long-lived assets, goodwill and intangible assets, are recorded at fair value on a nonrecurring basis as a result of impairment charges. In the six months ended June 30, 2021, we did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition.

Other

The carrying values of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying value of long-term debt approximates fair value (Level 3 inputs).  Our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to borrowing rates (Level 3 inputs).

11


Note 5 – Debt

The table below presents the components of our debt (in thousands):

 June 30,
 20212020
Variable rate debt
Short-term borrowings$0 $
Current portion of long-term debt:
Australian credit facility10,058 9,558 
Short-term borrowings and current portion of long-term debt10,058 9,558 
Long-term portion:  
Revolving credit facility152,396 14,688 
Term facility171,125 180,375 
Receivables securitization facility90,000 235,000 
Less: financing costs, net463 817 
Long-term debt, net413,058 429,246 
Total debt $423,116 $438,804 

Our accounts receivable securitization facility (the Receivables Facility) provides for the sale of certain of our receivables to a wholly owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third-party financial institutions in exchange for cash proceeds, limited to the applicable funding capacities.

We account for the sale of the receivable interests as a secured borrowing on our Consolidated Balance Sheets. The receivables subject to the agreement collateralize the cash proceeds received from the third-party financial institutions. We classify the entire outstanding balance as Long-term debt, net on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis. We present the receivables that collateralize the cash proceeds separately as Receivables pledged under receivables facility on our Consolidated Balance Sheets.

12


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

You should read the following discussion in conjunction with the accompanying interim Consolidated Financial Statements and notes, the Consolidated Financial Statements and accompanying notes in our 2020 Annual Report on Form 10-K and with Management’s Discussion and Analysis in our 2020 Annual Report on Form 10-K.  

For a discussion of our base business calculations, see the Results of Operations section below.

Forward-Looking Statements

This report contains forward-looking information that involves risks and uncertainties.  Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of earnings and other financial performance measures, statements of management’s expectations regarding our plans and objectives and industry, general economic and other forecasts of trends, future dividend payments and share repurchases, and other matters. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to publicly update or revise such statements to reflect new circumstances or unanticipated events as they occur.  You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate,” “estimate,” “expect,” “intend,” “believe,” “will likely result,” “outlook,” “project,” “may,” “can,” “plan,” “target,” “potential,” “should” and other words and expressions of similar meaning.

No assurance can be given that the expected results in any forward-looking statement will be achieved, and actual results may differ materially due to one or more factors, including impacts on our business from the COVID-19 pandemic and the extent to which strong demand driven by home-centric trends will continue, accelerate or reverse; 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 our 2020 Annual Report on Form 10-K.  For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

OVERVIEW

Impact of the COVID-19 Pandemic

We continue to monitor the effects of the COVID-19 pandemic, which began impacting our business and the global economy in the first quarter of 2020.

We are designated as an essential business in almost all of our markets. Our products are used to maintain and protect outdoor commercial, residential and municipal environments through chemically-balanced, virus and bacteria-free swimming pool water. We also supply products used in the prevention of runoff, flood, fire and other natural disasters. These products are essential to the health and safety of the general public. In limited instances, we have had to close facilities as a result of government regulations, as well as COVID-19 testing results. The direct impact of any closures to date have not had a material impact on our operations.

Beginning in the middle of March 2020, when stay-at-home orders related to the COVID-19 pandemic were initially issued, we experienced sales declines across most markets. As stay-at-home restrictions eased in late April through early May, our business not only rebounded, but accelerated. Throughout the remainder of 2020, we experienced unprecedented demand as families spent more time at home and sought out opportunities to create or expand existing home-based outdoor living and entertainment spaces, and these trends have continued in 2021 to date. While the short-term impact of this trend has had a positive impact on our business to date, it is unclear what the long-term impact will be. In addition, governmental restrictions in 2020 had a material impact on some of our customers, limiting their ability to operate in certain geographies for a short period of time. While these restrictions were lifted, new stay-at-home orders or other government mandates could have a material impact on our results.

Our balance sheet is strong with low leverage and sufficient access to additional capital. Supply disruptions have largely been limited to categories with the greatest demand (including heat-related equipment, chemicals, in-ground swimming pools and above-ground swimming pools) and have not been material to our business. Continued impacts from the COVID-19 pandemic, coupled with heightened demand, could adversely impact our supply chain, making it difficult to source and receive products needed to keep our customers adequately supplied throughout the swimming pool season.
13



Given the uncertainties caused by the COVID-19 pandemic in 2020, we reduced capital expenditures and operating costs for labor, fuel, utilities, advertising, meetings, travel and entertainment. Capital expenditures in 2020 were $21.7 million or approximately 65% of 2019 capital expenditures. We expect capital expenditures in 2021 to approximate the historical average of 1.0% of net sales. Our expense growth in the first half of 2021 was partially offset by lower discretionary spending for advertising, meetings, travel and entertainment. However, we believe that discretionary spending in the latter part of 2021 will increase depending on vaccination progress, additional outbreaks and the extent individuals return to travel, particularly when comparing these considerations to the same period of 2020.

The health, safety and security of our employees has been, and remains, one of our highest priorities. We have adapted our operations and implemented a number of measures to facilitate a safer sales center environment for both our customers and employees, which includes following best practices and guidelines from the Centers for Disease Control and Prevention (CDC). We implemented enhanced hygiene and sanitation practices at our sales centers and at our corporate offices in 2020, and we continue to evaluate and maintain them.

We expect the impact of the pandemic on our business and financial results in 2021 will continue to vary by location and depend on numerous evolving factors that we are not able to accurately predict. These factors include the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken (or may be taken in the future) in response to the pandemic, the possibility of additional subsequent outbreaks and changes in customer and supplier behavior in response to the pandemic.

Financial Results

In the second quarter of 2021, net sales increased 40% to $1.79 billion compared to $1.28 billion in the second quarter of 2020, while base business sales grew 32%. Households continued to invest in outdoor living spaces, contributing to the robust demand for our products. We observed sales gains across nearly all product categories and geographies reflecting strong growth in maintenance, replacement, refurbishment and construction activity among our customers.
Gross profit increased 48% to $551.7 million in the second quarter of 2021 from $373.5 million in the same period of 2020. Base business gross profit improved 41% over the second quarter of 2020. Gross margin increased 170 basis points to 30.9% in the second quarter of 2021 compared to 29.2% in the second quarter of 2020 while base business gross margin increased 200 basis points, primarily driven by benefits from focused supply chain management initiatives.
Selling and administrative expenses (operating expenses) increased 27% to $213.1 million in the second quarter of 2021 compared to $167.6 million in the second quarter of 2020, while base business operating expenses grew 18%, primarily due to growth-driven labor, facility and freight costs, along with increased investments in technology and higher performance-based compensation expense. As a percentage of net sales, operating expenses decreased to 11.9% in the second quarter of 2021 compared to 13.1% in the same period of 2020 as we continue to exercise strong expense control.
Operating income in the second quarter of 2021 increased 64% to $338.6 million compared to $205.9 million in the same period in 2020 with acquisitions contributing $11.0 million to operating income in the second quarter of 2021. Operating margin was 18.9% in the second quarter of 2021 compared to 16.1% in the second quarter of 2020 while base business operating margin was 19.4%, up 330 basis points from the prior year period.
We recorded a $7.7 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 June 30, 2021, compared to a tax benefit of $6.2 million, or $0.15 per diluted share, realized in the same period of 2020.
Net income increased 65% to $259.7 million in the second quarter of 2021 compared to $157.6 million in the second quarter of 2020. Earnings per diluted share increased 65% to $6.37 in the second quarter of 2021 compared to $3.87 in the same period of 2020. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 66% to $6.18 in the second quarter of 2021 compared to $3.72 in the second quarter of 2020.
References to product line and product category data throughout this report generally reflect data related to the North American swimming pool market, as it is more readily available for analysis and represents the largest component of our operations.
14


Financial Position and Liquidity

As of June 30, 2021, total net receivables, including pledged receivables, increased 29% compared to June 30, 2020, driven by our sales growth and recent acquisitions and partially offset by improved collections. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 25.8 days at June 30, 2021 and 28.5 days at June 30, 2020. Our allowance for doubtful accounts balance was $5.4 million at June 30, 2021 and $6.0 million at June 30, 2020.

Net inventory levels increased 42% compared to levels at June 30, 2020, reflecting our supply chain efforts to support organic business growth as well as inventory from recently acquired businesses. The inventory reserve was $15.2 million at June 30, 2021 and $10.8 million at June 30, 2020. Our inventory turns, as calculated on a trailing four quarters basis, were 4.1 times at June 30, 2021 and 3.5 times at June 30, 2020.

Accrued expenses and other current liabilities increased 32% compared to June 30, 2020, primarily reflecting growth-driven increases in accrued performance-based compensation and accrued tax payments.

Total debt outstanding at June 30, 2021 was $423.1 million, down 4% compared to total debt at June 30, 2020, as we continue to utilize operating cash flows to pay down debt balances. We have used debt proceeds over the past 12 months primarily to fund business-driven working capital growth, acquisitions, payments of cash dividends and share repurchases.

Current Trends and Outlook

For a detailed discussion of trends through 2020, see the Current Trends and Outlook section of Management’s Discussion and Analysis included in Part II, Item 7 of our 2020 Annual Report on Form 10-K.  

Upon reporting our results through the second quarter of 2021, we increased our 2021 diluted EPS guidance range to $13.75 to $14.25, including the impact of year-to-date tax benefits of $0.29. Our previous 2021 earnings guidance range disclosed in our First Quarter 2021 Quarterly Report on Form 10-Q was $11.85 to $12.60, including first quarter tax benefits of $0.10. We increased our range based on exceeding our second quarter expectations, along with expected gross margin improvement in the latter half of 2021. Our 2021 earnings guidance range assumes average weather conditions and no adverse impacts from a resurgence of COVID-19 and related government responses.

We project net sales growth for 2021 to exceed 25% based on expectations of continued elevated demand trends, a solid backlog of customer projects and inflationary benefits. We estimate that sales will be favorably impacted by inflationary product cost increases of 5% to 6% (above our historical average of 1% to 2%), of which we began to realize in the second quarter of 2021, but expect a greater impact in the latter half of the year. Impacts from the COVID-19 pandemic, coupled with heightened demand, could adversely impact our supply chain, making it difficult to source and receive products needed to keep our customers adequately supplied. However we remain encouraged by positive industry outlooks, the visibility attained on demand throughout the second quarter and our ability to project and maintain appropriate stock levels.

Based on our supply chain management efforts implemented during the second quarter of 2021, coupled with the current inflationary environment, we believe gross margin for the full year of 2021 has the potential to increase 100 basis points compared to the full year of 2020, with greater improvement in the third quarter than in the fourth quarter given the 70 basis points improvement realized in the fourth quarter 2020.

We expect operating expenses to reflect inflationary increases and incremental costs to support our sales growth expectations, which we believe will enable us to achieve operating margin improvement of 250 to 300 basis points for the full year of 2021 compared to 2020. We believe that discretionary spending for advertising, meetings, travel and entertainment in the latter part of 2021 will increase depending on vaccination progress, additional outbreaks and the extent individuals return to travel. We also expect slightly higher performance-based compensation expense for the full year 2021 than the full year of 2020 based on our results to date and our updated 2021 outlook.

We project that our annual effective tax rate (excluding the benefit from ASU 2016-09) for 2021 will approximate 25.0%, which is consistent with 2020. Due to ASU 2016-09, we expect our effective tax rate will fluctuate from quarter to quarter, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We recorded an $11.7 million, or $0.29 per diluted share, tax benefit from ASU 2016-09 for the six months ended June 30, 2021. We may recognize additional tax benefits related to stock option exercises in 2021 from grants that expire in years after 2021. We have not included any expected benefits in our guidance beyond what we have recognized as of June 30, 2021.

15


We believe that cash provided by operations will approximate net income for the 2021 fiscal year. We expect to continue to use cash to fund opportunistic share repurchases through the remainder of 2021. We also expect to use cash for the payment of cash dividends as and when declared by our Board of Directors (the Board).

The forward-looking statements in the foregoing section are based on current market conditions, speak only as of the filing date of this report, and are subject to significant risks and uncertainties. See “Cautionary Statement for Forward-Looking Statements.”

RESULTS OF OPERATIONS

As of June 30, 2021, we conducted operations through 408 sales centers in North America, Europe and Australia. For the six months ended June 30, 2021, approximately 93% of our net sales were from our operations in North America.

The following table presents information derived from the Consolidated Statements of Income expressed as a percentage of net sales:
Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of sales69.1 70.8 70.1 71.2 
Gross profit30.9 29.2 29.9 28.8 
Selling and administrative expenses11.9 13.1 13.5 16.1 
Impairment of goodwill and other assets —  0.4 
Operating income18.9 16.1 16.4 12.3 
Interest and other non-operating expenses, net0.1 0.2 0.2 0.4 
Income before income taxes and equity earnings18.8 %15.9 %16.3 %12.0 %

Note: Due to rounding, percentages presented in the table above may not add to Operating income or Income before income taxes and equity earnings.

We have included the results of operations from acquisitions in 2021 and 2020 in our consolidated results since the acquisition dates.

16


Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):
(Unaudited)Base BusinessExcludedTotal
(in thousands)Three Months EndedThree Months EndedThree Months Ended
 June 30,June 30,June 30,
 202120202021202020212020
Net sales$1,687,651 $1,279,429 $100,182 $1,417 $1,787,833 $1,280,846 
Gross profit524,378 372,848 27,307 633 551,685 373,481 
Gross margin31.1 %29.1 %27.3 %44.7 %30.9 %29.2 %
Operating expenses196,764 167,131 16,335 493 213,099 167,624 
Expenses as a % of net sales11.7 %13.1 %16.3 %34.8 %11.9 %13.1 %
Operating income327,614 205,717 10,972 140 338,586 205,857 
Operating margin19.4 %16.1 %11.0 %9.9 %18.9 %16.1 %

In our calculation of our base business results, we have excluded the following acquisitions for the periods identified:


Acquired

Acquisition
Date
Net
Sales Centers
Acquired

Periods
Excluded
Vak Pak Builders Supply, Inc.June 20211June 2021
Pool Source, LLCApril 20211April - June 2021
TWC Distributors, Inc.December 202010April - June 2021
Jet Line Products, Inc.October 20209April - June 2021
Northeastern Swimming Pool Distributors, Inc.September 20202April - June 2021
Master Tile Network LLC
February 20204April - May 2021 and
April - May 2020

When calculating our base business results, we exclude sales centers that are acquired, closed, or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales.  After 15 months of operations, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.

The table below summarizes the changes in our sales center count during the first six months of 2021:

December 31, 2020398 
Acquired locations
New locations
Consolidated location(1)
June 30, 2021408 

17


Net Sales
 Three Months Ended 
June 30,
(in millions)20212020Change
Net sales$1,787.8 $1,280.8 $507.0 40%

Net sales increased 40% in the second quarter of 2021 compared to the second quarter of 2020, while base business net sales grew 32% over the same period. Households continued to invest in outdoor living spaces, contributing to the robust demand for our products. We observed sales gains across nearly all product categories reflecting strong growth in maintenance, replacement, refurbishment and construction activity among our customers.

The following factors benefited our sales (listed in order of estimated magnitude):

strong demand for discretionary products, as evidenced by improvements in sales growth rates for product offerings such as equipment and building materials (see discussion below);
increased demand for residential swimming pool maintenance supplies due to increased usage, as evidenced by improvements in sales growth rates to retail customers (see discussion below);
market share gains, including those in building materials (see discussion below);
8% sales growth from recent acquisitions; and
inflationary product cost increases of approximately 4% to 6% (compared to our historical average of 1% to 2%).

Higher sales growth rates for certain product offerings, such as equipment and building materials, reflect increased spending in traditionally discretionary areas, such as pool construction, pool remodeling and equipment upgrades. In the second quarter of 2021, sales for equipment, which includes swimming pool heaters, pumps, lights, filters and automation, increased 35% compared to the same period last year, and collectively represented approximately 27% of net sales for the period. Sales of building materials grew 33% compared to the second quarter of 2020 and represented approximately 11% of net sales in the second quarter of 2021.

Sales to customers who service large commercial installations and specialty retailers that sell swimming pool supplies are included in the appropriate existing product categories, and growth or decline in these areas are reflected in the numbers above. Sales to retail customers increased 20% in the second quarter of 2021 compared to the second quarter of 2020 and represented approximately 14% of our net sales for the second quarter of 2021. Sales to commercial customers increased 45% in the second quarter of 2021 compared to the second quarter of 2020, as business and leisure travel gained momentum in 2021 following COVID-19 related closures in 2020. Sales to commercial customers represented approximately 3% of our net sales for the second quarter of 2021.

Gross Profit
 Three Months Ended 
June 30,
(in millions)20212020Change
Gross profit$551.7 $373.5 $178.2 48%
Gross margin30.9 %29.2 %  

Gross margin increased 170 basis points to 30.9% in the second quarter of 2021 compared to 29.2% in the second quarter of 2020. Gross margin was favorably impacted by benefits from focused supply chain management initiatives during this inflationary environment. With our increased purchase volumes, improvements in rates earned under our vendor programs also benefited our gross margin compared to the second quarter of last year. Lastly, we realized some gross margin benefit from product and customer mix changes in the second quarter of 2021. In the second quarter of 2020, a larger portion of lower margin, bigger ticket items comprised our product mix, along with a comparatively larger contribution from internet retailers to our customer mix at the onset of the pandemic.
18


Operating Expenses
 Three Months Ended 
June 30,
(in millions)20212020Change
Selling and administrative expenses$213.1 $167.6 $45.5 27%
Operating expenses as a % of net sales11.9 %13.1 %  

Operating expenses increased 27% in the second quarter of 2021 compared to the second quarter of 2020, while base business operating expenses grew 18%. The increase primarily relates to growth-driven labor, facility and freight costs along with increased investments in technology and higher performance-based compensation expense. As a percentage of net sales, operating expenses decreased to 11.9% in the second quarter of 2021 compared to 13.1% in the same period of 2020 as we continue to leverage our network.

Interest and Other Non-Operating Expenses, Net

Interest and other non-operating expenses, net for the second quarter of 2021 decreased $0.7 million compared to the second quarter of 2020. Our weighted average effective interest rate increased to 2.7% for the second quarter of 2021 from 1.8% for the second quarter of 2020 on lower average outstanding debt of $376.8 million versus $493.4 million for the respective periods.

Income Taxes

Our effective income tax rate was 22.9% for the three months ended June 30, 2021 compared to 22.5% for the three months ended June 30, 2020. We recorded a $7.7 million tax benefit from ASU 2016-09 in the quarter ended June 30, 2021 compared to a tax benefit of $6.2 million realized in the same period last year. Without the benefits from ASU 2016-09, our effective tax rate was 25.2% for the second quarter of 2021 and 25.6% for the second quarter of 2020.

Net Income and Earnings Per Share

Net income increased 65% to $259.7 million in the second quarter of 2021 compared to $157.6 million in the second quarter of 2020. Earnings per diluted share increased 65% to $6.37 in the second quarter of 2021 compared to $3.87 in the same period of 2020. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 66% to $6.18 in the second quarter of 2021 compared to $3.72 in the second quarter of 2020.

19


Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):
(Unaudited)Base BusinessExcludedTotal
(in thousands)Six Months EndedSix Months EndedSix Months Ended
 June 30,June 30,June 30,
 202120202021202020212020
Net sales$2,703,285 $1,954,323 $145,294 $3,811 $2,848,579 $1,958,134 
Gross profit814,490 561,354 38,327 1,756 852,817 563,110 
Gross margin30.1 %28.7 %26.4 %46.1 %29.9 %28.8 %
Operating expenses (1)
357,852 320,206 27,348 1,459 385,200 321,665 
Expenses as a % of net sales13.2 %16.4 %18.8 %38.3 %13.5 %16.4 %
Operating income (1)
456,638 241,148 10,979 297 467,617 241,445 
Operating margin16.9 %12.3 %7.6 %7.8 %16.4 %12.3 %

(1)Base business and total include $6.9 million of impairment from goodwill and other assets recorded in the first quarter of 2020.

In our calculation of base business results, we have excluded the following acquisitions for the periods identified:


Acquired

Acquisition
Date
Net
Sales Centers
Acquired

Periods
Excluded
Vak Pak Builders Supply, Inc.June 20211June 2021
Pool Source, LLCApril 20211April - June 2021
TWC Distributors, Inc.December 202010January - June 2021
Jet Line Products, Inc.October 20209January - June 2021
Northeastern Swimming Pool Distributors, Inc.September 20202January - June 2021
Master Tile Network LLCFebruary 20204January - May 2021 and February - May 2020

For a more detailed explanation of how we calculated base business results and a summary of the changes in our sales centers since December 31, 2020, please refer to the discussion under the heading Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020.

20


Net Sales
 Six Months Ended 
June 30,
(in millions)20212020Change
Net sales$2,848.6 $1,958.1 $890.5 45%

Net sales for the first six months of 2021 increased 45% compared to the same period last year, while base business net sales increased 38%. During the first half of 2021, maintenance, refurbishment and construction activity remained strong as families created and expanded home-based outdoor living spaces. Through the second quarter of 2021, households continued to invest in outdoor living spaces, contributing to the robust demand for our products and yielding sales gains across nearly all categories.

The following factors benefited our sales (listed in order of estimated magnitude):

strong demand for discretionary products, as evidenced by improvements in sales growth rates for product offerings such as equipment and building materials(see discussion below);
increased demand for residential swimming pool maintenance supplies due to earlier pool openings and increased usage, as evidenced by improvements in sales growth rates to retail customers (see discussion below);
market share gains, including those in building materials (see discussion below); and
inflationary product cost increases of approximately 4% to 5% (compared to our historical average of 1% to 2%).

We believe that sales growth rates for certain product offerings, such as equipment, building materials and above-ground pools and spas evidence increased spending in traditionally discretionary areas, such as pool construction, pool remodeling and equipment upgrades. In the first six months of 2021, sales for equipment, which includes swimming pool heaters, pumps, lights, filters and automation, increased approximately 45% compared to the same period last year. Equipment collectively represented 29% of net sales in the first six months of 2021. Sales of building materials grew 34% compared to the first six months of 2020 and represented approximately 11% of net sales in the first six months of 2021.

Sales to customers who service large commercial installations and specialty retailers that sell swimming pool supplies are included in the appropriate existing product categories, and growth or decline in these areas are reflected in the numbers above. In the first six months of 2021, sales to retail customers increased 26% and represented approximately 13% of our consolidated net sales. Sales to commercial customers increased 23% in the first six months of 2021, as business and leisure travel resumed in 2021 following COVID-19 related closures in 2020. Sales to commercial customers represented approximately 3% of our consolidated net sales in the first six months of 2021.

Gross Profit
 Six Months Ended 
June 30,
(in millions)20212020Change
Gross profit$852.8 $563.1 $289.7 51%
Gross margin29.9 %28.8 %  

Gross margin improved 110 basis points to 29.9% in the six months ended June 30, 2021 compared to 28.8% in the first six months of 2020. This improvement primarily reflects focused supply chain management initiatives to address inflation, with most of the year-to-date benefits realized in the second quarter of 2021. Also, with our increased purchase volumes, improvements in rates earned under our vendor programs benefited our gross margin compared to the same period in 2020.
21


Operating Expenses
 Six Months Ended 
June 30,
(in millions)20212020Change
Selling and administrative expenses$385.2 $314.7 $70.5 22%
Impairment of goodwill and other assets 6.9 (6.9)(100)%
Operating expenses as a % of net sales13.5 %16.4 %  

Operating expenses for the six months ended June 30, 2021 increased 20% compared to the first six months of 2020. 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 amounts of our Australian reporting units. Without the impact of impairment charges in the prior year, operating expenses were up 22%, primarily due to growth-driven labor, facility and freight costs along with increased investments in technology and higher performance-based compensation.

Interest and Other Non-Operating Expenses, Net

Interest and other non-operating expenses, net for the first six months of 2021 decreased $2.9 million compared to the same period last year. Our weighted average effective interest rate increased to 2.5% for the first six months of 2021 from 2.2% for the same period of 2020 on average outstanding debt of $387.1 million versus $493.6 million for the respective periods.

Income Taxes

Our effective income tax rate was 22.6% for the six months ended June 30, 2021 compared to 19.5% for the six months ended June 30, 2020. We recorded an $11.7 million, or $0.29 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2021 compared to a $14.2 million, or $0.34 per diluted share, tax benefit in the same period of 2020. Without the benefits from ASU 2016-09, our effective tax rate was 25.2% for the six months ended June 30, 2021 and 25.6% for the six months ended June 30, 2020.

Net Income and Earnings Per Share

Net income increased 90% to $358.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Adjusted net income for the first six months of 2021, without the prior year impact of non-cash impairments, net of tax, increased 84%. Earnings per diluted share increased to $8.78 for the six months ended June 30, 2021 versus $4.62 per diluted share for the six months ended June 30, 2020. Excluding the impact of non-cash impairments, net of tax, and tax benefits from ASU 2016-09 in both periods, adjusted diluted EPS increased 92% to $8.49 for the six months ended June 30, 2021 compared to $4.43 for the six months ended June 30, 2020. See the reconciliation of GAAP to non-GAAP measures below.


22


Reconciliation of Non-GAAP Financial Measures

Adjusted Income Statement Information
We have included adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures, as supplemental disclosures, because we believe these measures are useful to investors and others in assessing our year-over-year operating performance.
Adjusted net income and adjusted diluted EPS are key measures used by management to demonstrate the impact of our non-cash and non-recurring charges and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.
We believe these measures should be considered in addition to, not as a substitute for, net income and diluted EPS presented in accordance with GAAP, respectively, and in the context of our other disclosures within this Form 10-Q. Other companies may calculate these non-GAAP financial measures differently than we do, which may limit their usefulness as comparative measures.

The table below presents a reconciliation of net income to adjusted net income.
(Unaudited)Six Months Ended
(in thousands)June 30,
20212020
Net income$358,350 $188,467 
Impairment of goodwill and other assets 6,944 
Tax impact on impairment of long-term note (1)
 (654)
Adjusted net income$358,350 $194,757 
(1)As described in our First Quarter 2020 Quarterly Report on Form 10-Q, our effective tax rate at March 31, 2020 was a 0.1% benefit. Excluding impairment from goodwill and intangibles and tax benefits from ASU 2016-09 recorded in the first quarter of 2020, our effective tax rate for the first quarter of 2020 was 25.4%, which we used to calculate the tax impact related to the $2.5 million long-term note impairment.

The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.
(Unaudited)Six Months Ended
June 30,
20212020
Diluted EPS$8.78 $4.62 
After-tax non-cash impairment charges 0.15 
Adjusted diluted EPS excluding after-tax non-cash impairment charges8.78 4.77 
ASU 2016-09 tax benefit(0.29)(0.34)
Adjusted diluted EPS excluding after-tax non-cash impairment charges and tax benefit$8.49 $4.43 

23


Seasonality and Quarterly Fluctuations

Our business is highly seasonal. In general, sales and operating income are highest during the second and third quarters, which represent the peak months of both swimming pool use and installation and irrigation and landscape installations and maintenance. Sales are substantially lower during the first and fourth quarters, when we may incur net losses. In 2020, we generated approximately 61% of our net sales and 76% of our operating income in the second and third quarters of the year.

We typically experience a build-up of product inventories and accounts payable during the winter months in anticipation of the peak selling season.  Excluding borrowings to finance acquisitions and share repurchases, our peak borrowing usually occurs during the second quarter, primarily because extended payment terms offered by our suppliers typically are payable in April, May and June, while our peak accounts receivable collections typically occur in June, July and August.

The following table presents certain unaudited quarterly data for the first and second quarters of 2021, the four quarters of 2020 and the third and fourth quarters of 2019.  We have included income statement and balance sheet data for the most recent eight quarters to allow for a meaningful comparison of the seasonal fluctuations in these amounts.  In our opinion, this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data.  Due to the seasonal nature of our industry (and recent pandemic-driven increased demand for our products), the results of any one or more quarters are not necessarily a good indication of results for an entire fiscal year or of continuing future trends.

(Unaudited)QUARTER
(in thousands)202120202019
 SecondFirstFourthThirdSecondFirstFourthThird
Statement of Income Data
Net sales$1,787,833 $1,060,745 $839,261 $1,139,229 $1,280,846 $677,288 $582,234 $898,500 
Gross profit551,685 301,131 239,095 328,698 373,481 189,629 162,050 257,931 
Operating income338,586 129,031 74,351 148,233 205,857 35,588 25,798 104,540 
Net income259,695 98,655 59,174 119,098 157,555 30,912 18,024 79,525 
Balance Sheet Data
Total receivables, net$585,566 $487,602 $289,200 $366,412 $453,405 $345,915 $226,539 $307,798 
Product inventories, net894,654 977,228 780,989 612,824 628,418 858,190 702,274 616,217 
Accounts payable439,453 634,998 266,753 268,412 346,272 517,620 261,963 214,309 
Total debt423,116 433,171 416,018 339,934 438,804 586,050 511,407 547,560 

We expect that our quarterly results of operations will continue to fluctuate depending on the timing and amount of revenue contributed by new and acquired sales centers.  Based on our peak summer selling season, we generally open new sales centers and close or consolidate sales centers, when warranted, either in the first quarter before the peak selling season begins or in the fourth quarter after the peak selling season ends.

24


Weather is one of the principal external factors affecting our business.  The table below presents some of the possible effects resulting from various weather conditions.

Weather Possible Effects
Hot and dryIncreased purchases of chemicals and supplies
for existing swimming pools
 Increased purchases of above-ground pools and
irrigation and lawn care products
Unseasonably cool weather or extraordinary amountsFewer pool and irrigation and landscape
of raininstallations
Decreased purchases of chemicals and supplies
 Decreased purchases of impulse items such as
above-ground pools and accessories
Unseasonably early warming trends in spring/late coolingA longer pool and landscape season, thus positively
trends in fallimpacting our sales
(primarily in the northern half of the U.S. and Canada)  
Unseasonably late warming trends in spring/early coolingA shorter pool and landscape season, thus negatively
trends in fallimpacting our sales
(primarily in the northern half of the U.S. and Canada)  

Weather Impacts on 2021 and 2020 Results

Overall, varied weather conditions in the second quarter of 2021 favorably impacted our sales growth. While the southern states saw mild temperatures and above average precipitation, the western states, particularly California, experienced severely high temperatures and drought. The average U.S. temperature in June was the hottest on record in 127 years. Comparatively, in the second quarter of 2020, we observed generally mild weather conditions with warmer weather throughout the western United States.

Sales in the first quarter of 2021 benefited from generally mild weather conditions throughout the contiguous United States. In February 2021, Texas experienced the most costly winter storm event on record for the United States, which damaged many swimming pools and added to the existing, strong replacement opportunity in that market. In contrast, sales in the first quarter of 2020 benefited from much above-average temperatures throughout the United States, particularly in the southern United States.

CRITICAL ACCOUNTING ESTIMATES
We prepare our Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (GAAP), which require management to make estimates and assumptions that affect reported amounts and related disclosures. Management identifies critical accounting estimates as:
those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made; and
those for which changes in the estimates or assumptions, or the use of different estimates and assumptions, could have a material impact on our consolidated results of operations or financial condition.
Management has discussed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board.  For a description of our critical accounting estimates that require us to make the most difficult, subjective or complex judgments, please see our 2020 Annual Report on Form 10-K.  We have not changed any of these policies from those previously disclosed in that report.

Recent Accounting Pronouncements
See Note 1 of “Notes to Consolidated Financial Statements,” included in Part I, Item 1 of this Form 10-Q for discussion of recent accounting pronouncements.
25


LIQUIDITY AND CAPITAL RESOURCES

Liquidity is defined as the ability to generate adequate amounts of cash to meet short-term and long-term cash needs. We assess our liquidity in terms of our ability to generate cash to fund our operating activities, taking into consideration the seasonal nature of our business. Significant factors which could affect our liquidity include the following:

cash flows generated from operating activities;
the adequacy of available bank lines of credit;
the quality of our receivables;
acquisitions;
dividend payments;
capital expenditures;
changes in income tax laws and regulations;
the timing and extent of share repurchases; and
the ability to attract long-term capital with satisfactory terms.

Our primary capital needs are seasonal working capital obligations, debt repayment obligations and other general corporate initiatives, including acquisitions, opening new sales centers, dividend payments and share repurchases. Our primary working capital obligations are for the purchase of inventory, payroll, rent, other facility costs and selling and administrative expenses. Our working capital obligations fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases. Our primary sources of working capital are cash from operations supplemented by bank borrowings, which have historically been sufficient to support our growth and finance acquisitions. We have funded our capital expenditures and share repurchases in substantially the same manner.

We prioritize our use of cash based on investing in our business, maintaining a prudent capital structure, including a modest amount of debt, and returning cash to our shareholders through dividends and share repurchases. Our specific priorities for the use of cash are as follows:

capital expenditures primarily for maintenance and growth of our sales center network, technology-related investments and fleet vehicles;
strategic acquisitions executed opportunistically;
payment of cash dividends as and when declared by our Board of Directors (Board);
repayment of debt to maintain an average total target leverage ratio (as defined below) between 1.5 and 2.0; and
repurchases of our common stock under our Board-authorized share repurchase program.

Capital expenditures were 0.6% of net sales in 2020, 1.0% of net sales in 2019 and 1.1% of net sales in 2018. Over the last five years, capital expenditures have averaged roughly 1.0% of net sales. Capital expenditures in 2020 were lower than our historical average due to cost-saving measures implemented at the beginning of the COVID-19 pandemic. We project capital expenditures in 2021 will continue to approximate the historical average.

As of June 30, 2021, our average total leverage ratio equaled 0.53 compared to 0.69 as of March 31, 2021. Our strong operating results and cash flow from operations in 2020 and through the second quarter of 2021 enabled us to reduce our debt balances. We expect our average total leverage ratio through the third quarter of 2021 will continue to be below our above-mentioned target range.

Sources and Uses of Cash

The following table summarizes our cash flows (in thousands):
 Six Months Ended
June 30,
 20212020
Operating activities$187,228 $221,200 
Investing activities(32,495)(26,742)
Financing activities(131,061)(177,794)

26


Net cash provided by operations of $187.2 million for the first six months of 2021 decreased $34.0 million compared to the first six months of 2020, reflecting our supply chain investments in inventory and higher income tax payments in 2021.
Net cash used in investing activities for the first six months of 2021 increased compared to the first six months of 2020 primarily due to increases in cash used for the acquisition of businesses and other capital expenditures following the delay in capital spending at this time last year due to the onset of the COVID-19 pandemic.
Net cash used in financing activities was $131.1 million for the first six months of 2021 compared to $177.8 million for the first six months of 2020, which reflects a $79.7 million decrease in net debt payments, additional share repurchases of $19.9 million and an increase in dividends paid of $10.1 million during the first six months of 2021.

Future Sources and Uses of Cash

Revolving Credit Facility
Our Credit Facility provides for $750.0 million in borrowing capacity under a five-year unsecured revolving credit facility and includes sublimits for the issuance of swingline loans and standby letters of credit.  Pursuant to an accordion feature, the aggregate maximum principal amount of the commitments under the Credit Facility may be increased at our request and with agreement by the lenders by up to $75.0 million, to a total of $825.0 million.  The Credit Facility matures on September 29, 2022. We intend to continue to use the Credit Facility for general corporate purposes, for future share repurchases and to fund future growth initiatives.
At June 30, 2021, there was $152.4 million outstanding, a $4.8 million standby letter of credit outstanding and $592.8 million available for borrowing under the Credit Facility.  We pay interest on revolving borrowings under the Credit Facility at a variable rate based on the one month London Interbank Offered Rate (LIBOR), plus an applicable margin. The weighted average effective interest rate for the Credit Facility as of June 30, 2021 was approximately 2.2%, excluding commitment fees.
Term Facility
Our Term Facility provides for $185.0 million in borrowing capacity and matures on December 30, 2026. Proceeds from the Term Facility were used to pay down the Credit Facility, adding capacity for future share repurchases, acquisitions and growth-oriented working capital expansion. The Term Facility is repaid in quarterly installments of 1.250% of the facility's debt balance on the last business day of each quarter beginning in the first quarter of 2020. We classify the entire outstanding balance as Long-term debt on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis. The total of quarterly payments over the life of the facility will be equal to 33.75% of the Term Facility with the final principal payment, equal to 66.25% of the Term Facility, due on the maturity date. We may prepay amounts outstanding under the Term Facility without penalty other than interest breakage costs.
At June 30, 2021, there was $171.1 million outstanding under the Term Facility with a weighted average effective interest rate of 2.9%. We pay interest on borrowings under the Term Facility at a variable rate based on the one month LIBOR, plus an applicable margin.

Financial Covenants
Financial covenants of the Credit Facility and the Term Facility include maintenance of a maximum average total leverage ratio and a minimum fixed charge coverage ratio, which are our most restrictive financial covenants.  As of June 30, 2021, the calculations of these two covenants are detailed below:
Maximum Average Total Leverage Ratio. On the last day of each fiscal quarter, our average total leverage ratio must be less than 3.25 to 1.00.  Average Total Leverage Ratio is the ratio of the trailing twelve months (TTM) Average Total Funded Indebtedness plus the TTM Average Accounts Securitization Proceeds divided by the TTM EBITDA (as those terms are defined in the Credit Facility).  As of June 30, 2021, our average total leverage ratio equaled 0.53 (compared to 0.69 as of March 31, 2021) and the TTM average total debt amount used in this calculation was $387.3 million.

Minimum Fixed Charge Coverage Ratio. On the last day of each fiscal quarter, our fixed charge ratio must be greater than or equal to 2.25 to 1.00.  Fixed Charge Ratio is the ratio of the TTM EBITDAR divided by TTM Interest Expense paid or payable in cash plus TTM Rental Expense (as those terms are defined in the Credit Facility).  As of June 30, 2021, our fixed charge ratio equaled 10.48 (compared to 9.00 as of March 31, 2021) and TTM Rental Expense was $67.8 million.
27


The Credit Facility and the Term Facility also limit the declaration and payment of dividends on our common stock to no more than 50% of the preceding year’s Net Income (as defined in the Credit Facility and the Term Facility), provided no default or event of default has occurred and is continuing, or would result from the payment of dividends.  Additionally, we may declare and pay quarterly dividends notwithstanding that the aggregate amount of dividends paid would be in excess of the 50% limit described above so long as (i) the amount per share of such dividends does not exceed the amount per share paid during the most recent fiscal year in which we were in compliance with the 50% limit and (ii) our Average Total Leverage Ratio is less than 3.00 to 1.00 both immediately before and after giving pro forma effect to such dividends. Further, dividends must be declared and paid in a manner consistent with our past practice.

Under the Credit Facility and the Term Facility, we may repurchase shares of our common stock provided no default or event of default has occurred and is continuing, or would result from the repurchase of shares, and our maximum average total leverage ratio (determined on a pro forma basis) is less than 2.50 to 1.00.  Other covenants include restrictions on our ability to grant liens, incur indebtedness, make investments, merge or consolidate, and sell or transfer assets.  Failure to comply with any of our financial covenants or any other terms of the Credit Facility and the Term Facility could result in higher interest rates on our borrowings or the acceleration of the maturities of our outstanding debt.

Receivables Securitization Facility

Our two-year accounts receivable securitization facility (the Receivables Facility) offers us a lower cost form of financing, with a peak funding capacity of up to $295.0 million between May 1 and May 31, which includes an additional seasonal funding capacity that is available between March 1 and July 31. Other funding capacities range from $120.0 million to $275.0 million throughout the remaining months of the year. The Receivables Facility matures on November 1, 2021. We classify the entire outstanding balance as Long-term debt on our Consolidated Balance Sheets as we intend and have the ability to refinance the obligations on a long-term basis.

The Receivables Facility provides for the sale of certain of our receivables to a wholly owned subsidiary (the Securitization Subsidiary). The Securitization Subsidiary transfers variable undivided percentage interests in the receivables and related rights to certain third-party financial institutions in exchange for cash proceeds, limited to the applicable funding capacities. Upon payment of the receivables by customers, rather than remitting to the financial institutions the amounts collected, we retain such collections as proceeds for the sale of new receivables until payments become due.
The Receivables Facility contains terms and conditions (including representations, covenants and conditions precedent) customary for transactions of this type. Additionally, an amortization event will occur if we fail to maintain a maximum average total leverage ratio (average total funded debt/EBITDA) of 3.25 to 1.00 and a minimum fixed charge coverage ratio (EBITDAR/cash interest expense plus rental expense) of 2.25 to 1.00.
At June 30, 2021, there was $90.0 million outstanding under the Receivables Facility at a weighted average effective interest rate of 0.9%, excluding commitment fees.

Interest Rate Swaps
We utilize interest rate swap contracts and forward-starting interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on our variable rate borrowings.   Interest expense related to the notional amounts under all swap contracts is based on the fixed rates plus the applicable margin on the respective borrowings.
As of June 30, 2021, we had three interest rate swap contracts in place, two of which became effective on November 20, 2020, and terminate on September 29, 2022. These swap contracts were previously forward-starting and convert the variable interest rates on our variable rate borrowings to fixed interest rates of 2.0925% and 1.5500% on notional amounts of $75.0 million each. The third interest rate swap contract currently in place became effective on February 26, 2021, and terminates on February 28, 2025. This swap contract was previously forward-starting and converts the variable interest rate on our variable rate borrowings to a fixed rate of 1.3800% on a notional amount of $150.0 million. Interest expense related to the notional amounts under these swap contracts is based on the fixed rate plus the applicable margin on our variable rate borrowings.
We have entered into forward-starting interest rate swap contracts to extend the hedged period for future interest payments on our variable rate borrowings. These swap contracts will convert the variable interest rate to a fixed interest rate on our variable rate borrowings.

28


The following table provides details related to each of our forward-starting interest rate swap contracts:
DerivativeInception DateEffective DateTermination DateNotional
Amount
(in millions)
Fixed
Interest
Rate
Forward-starting interest rate swap 1March 9, 2020September 29, 2022February 26, 2027$150.00.7400%
Forward-starting interest rate swap 2March 9, 2020February 28, 2025February 26, 2027$150.00.8130%

Compliance and Future Availability
As of June 30, 2021, we believe we were in compliance with all material covenants and financial ratio requirements under our Credit Facility, our Term Facility and our Receivables Facility.  We believe we will remain in compliance with all material covenants and financial ratio requirements throughout the next twelve months.  For additional information regarding our debt arrangements, see Note 5 of “Notes to Consolidated Financial Statements,” included in Part II, Item 8 of our 2020 Annual Report on Form 10-K and in Part I, Item 1 of this Form 10-Q.
We believe we have adequate availability of capital to fund present operations and the current capacity to finance any working capital needs that may arise.  We continually evaluate potential acquisitions and hold discussions with acquisition candidates.  If suitable acquisition opportunities arise that would require financing, we believe that we have the ability to finance any such transactions.
As of July 26, 2021, $528.3 million of the current Board-authorized amount under our share repurchase program remained available.  We expect to repurchase shares on the open market from time to time depending on market conditions.  We plan to fund these repurchases with cash provided by operations and borrowings under the Credit and Receivables Facilities.

29


Item 3.  Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
There have been no material changes during the six months ended June 30, 2021 from what we reported in our 2020 Annual Report on Form 10-K. For additional information on our interest rate risk, refer to “Quantitative and Qualitative Disclosures about Market Risk” included in Part II, Item 7A in our 2020 Annual Report on Form 10-K.
Currency Risk
There have been no material changes during the six months ended June 30, 2021 from what we reported in our 2020 Annual Report on Form 10-K. For additional information on our currency risk, refer to “Quantitative and Qualitative Disclosures about Market Risk” included in Part II, Item 7A in our 2020 Annual Report on Form 10-K.

Item 4.  Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Act).  The rules refer to the controls and other procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  As of June 30, 2021, management, including our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures.  Based on that evaluation, management, including our CEO and CFO, concluded that as of June 30, 2021, our disclosure controls and procedures were effective.
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  Based on the most recent evaluation, we have concluded that no change in our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The effectiveness of our system of disclosure controls and procedures or internal control over financial reporting is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating such systems, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely. As a result, there can be no assurance that our control systems will detect all errors or fraud. By their nature, our system can provide only reasonable assurance regarding management's control objectives.
30



PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings
From time to time, we are subject to various claims and litigation arising in the ordinary course of business, including product liability, personal injury, commercial, contract and employment matters. While the outcome of any litigation is inherently unpredictable, based on currently available facts and our current insurance coverages, we do not believe that the ultimate resolution of any of these matters will have a material adverse impact on our financial condition, results of operations or cash flows.

Item 1A.  Risk Factors
There have been no material changes from the risk factors disclosed in Part I, Item 1A “Risk Factors” in our 2020 Annual Report on Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
The table below summarizes the repurchases of our common stock in the second quarter of 2021:
Period
Total Number
of Shares
Purchased (1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
Maximum Approximate
Dollar Value of Shares
That May Yet be Purchased
Under the Plan (2)
April 1-30, 202110,634 $340.53 10,634 $107,378,609 
May 1-31, 2020— $— — $557,378,609 
June 1-30, 202133,929 $442.02 33,929 $542,381,348 
Total44,563 $417.80 44,563  
(1)These shares may include shares of our common stock surrendered to us by employees in order to satisfy minimum tax withholding obligations in connection with certain exercises of employee stock options or lapses upon vesting of restrictions on previously restricted share awards, and/or to cover the exercise price of such options granted under our share-based compensation plans. No shares were surrendered for this purpose in the second quarter of 2021.
(2)In May 2021, our Board authorized an additional $450.0 million under our share repurchase program for the repurchase of shares of our common stock in the open market at prevailing market prices. As of July 26, 2021, $528.3 million of the authorized amount remained available under our current share repurchase program.
Our Board may declare future dividends at their discretion, after considering various factors, including our earnings, capital requirements, financial position, contractual restrictions and other relevant business considerations. For a description of restrictions on dividends in our Credit Facility, Term Facility and Receivables Facility, see the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis in Part I, Item 2. We cannot assure shareholders or potential investors that dividends will be declared or paid any time in the future if our Board determines that there is a better use of our funds.

31


Item 6.  Exhibits

Exhibits filed as part of this report are listed below.
      Incorporated by Reference
No. Description Filed/ Furnished with this
Form 10-Q
 Form File No. Date Filed
 Restated Certificate of Incorporation of the Company.   10-Q 000-26640 8/9/2006
 Amended and Restated Bylaws of the Company.   8-K 000-26640 2/8/2019
 Form of certificate representing shares of common stock of the Company.   8-K 000-26640 5/19/2006
 Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X      
 Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X      
 Certification by Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X      
101.INS+Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X      
101.SCH+Inline XBRL Taxonomy Extension Schema Document X      
101.CAL+Inline XBRL Taxonomy Extension Calculation Linkbase Document X      
101.DEF+Inline XBRL Taxonomy Extension Definition Linkbase Document X      
101.LAB+Inline XBRL Taxonomy Extension Label Linkbase Document X      
101.PRE+Inline XBRL Taxonomy Extension Presentation Linkbase Document X      
104+Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)X
+ Attached as Exhibit 101 to this report are the following items formatted in iXBRL (Inline Extensible Business Reporting Language):
1.Consolidated Statements of Income for the three and six months ended June 30, 2021 and June 30, 2020;
2.Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and June 30, 2020;
3.Consolidated Balance Sheets at June 30, 2021, December 31, 2020 and June 30, 2020;
4.Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020;
5.Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2021 and June 30, 2020; and
6.Notes to Consolidated Financial Statements.








32




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on July 29, 2021.
  POOL CORPORATION
   
   
   
   
 By:/s/ Mark W. Joslin
  Mark W. Joslin
Senior Vice President and Chief Financial Officer, and duly authorized signatory on behalf of the registrant







33