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Pool Corporation Reports Record Second Quarter Results

Highlights

  • Record net sales for Q2 2020 with both overall and base business sales growth of 14%
  • Q2 2020 diluted EPS increase of 20% to a record $3.87 or an increase of 23% to $3.72, excluding tax benefits in both periods
  • Record cash provided by operations of $221.2 million, an increase of $123.8 million from the first half of 2019
  • 2020 earnings guidance increased to $6.90 - $7.30 per diluted share or $7.05 - $7.45, excluding non-cash impairments recorded in Q1 2020, from previous $5.30 - $5.90 range or $5.45 - $6.05, excluding impairments

COVINGTON, La., July 23, 2020 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the second quarter of 2020.

"The second quarter of 2020 presented a unique opportunity for our business as families continued to search for safe, at-home leisure activities, which drove earlier pool openings and increased demand for a variety of products.  We are pleased to announce exceptional results for the quarter, as our team capitalized on the opportunities presented and successfully navigated through a series of unprecedented challenges, while continuing to provide unparalleled service to our customers.  As stay-at-home restrictions eased in late April through early May, our business not only rebounded, but accelerated, resulting in record net sales of $1.28 billion for the second quarter of 2020," said Peter D. Arvan, president and CEO.

"We believe that industry demand remains healthy, which is reflected through reports of significantly more leads and a larger than normal backlog from pool construction and remodel companies.  We are confident that our strong balance sheet, ample liquidity and robust supply chain, coupled with disciplined execution from our team, has positioned us to achieve solid results through the second half of the year.  Based on our results to date and expectations for the remainder of the year, we are increasing our annual earnings guidance to $6.90 to $7.30 per diluted share, including the impact of year-to-date tax benefits of $0.34 and the $0.15 impact of non-cash impairments recorded in the first quarter of 2020," commented Arvan.  "Excluding the impact of non-cash impairments, we expect 2020 adjusted diluted EPS of $7.05 to $7.45.  Our previous 2020 earnings guidance range disclosed in our April 23, 2020 earnings release was $5.30 to $5.90 per diluted share or $5.45 to $6.05, excluding the impact of non-cash impairments."  See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

In the second quarter of 2020, net sales increased 14% to a record $1.28 billion compared to $1.12 billion in the second quarter of 2019.  As families are spending more time at home, our sales have benefited from greater swimming pool demand and usage, resulting in broad sales gains across our product categories and geographies. 

Gross profit increased 13% to a record $373.5 million in the second quarter of 2020 from $330.3 million in the same period of 2019.  Gross margin decreased 30 basis points to 29.2% in the second quarter of 2020 compared to 29.5% in the second quarter of 2019.  Gross margin in the second quarter of 2019 reflected benefits from strategic inventory purchases ahead of vendor pricing increases.  In addition, sales of some lower margin, big-ticket items, such as in-ground and above-ground pools and pool equipment, comprised a larger portion of our product mix in the second quarter of 2020 compared to the second quarter of 2019, which, combined with the difficult prior year comparison, resulted in a decline in gross margin between periods. 

Selling and administrative expenses (operating expenses) increased 6% to $167.6 million in the second quarter of 2020 compared to $157.8 million in the second quarter of 2019, reflecting an increase in performance-based compensation in the second quarter of 2020.  Excluding performance-based compensation in both periods, operating expenses declined 2% due to control measures put in place over a number of discretionary spending categories at the start of the COVID-19 pandemic.  As a percentage of net sales, base business operating expenses decreased to 13.0% in the second quarter of 2020 compared to 14.0% in the same period of 2019 as we continue to closely monitor discretionary operating expenses.

Operating income in the second quarter of 2020 increased 19% to $205.9 million compared to $172.5 million in the same period in 2019.  Operating margin was 16.1% in the second quarter of 2020 compared to 15.4% in the second quarter of 2019.

We recorded a $6.2 million, or $0.15 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, 2020, compared to a tax benefit of $7.8 million, or $0.19 per diluted share, realized in the same period of 2019. 

Net income increased 20% to $157.6 million in the second quarter of 2020 compared to $131.4 million in the second quarter of 2019.  Earnings per share increased 20% to $3.87 per diluted share in the second quarter of 2020 compared to $3.22 in the same period of 2019.  Excluding the impact from ASU 2016-09 in both periods, earnings per diluted share increased 23% to $3.72 in the second quarter of 2020 compared to $3.03 in the second quarter of 2019. 

Net sales for the six months ended June 30, 2020 increased 14% to a record $1.96 billion from $1.72 billion in the six months ended June 30, 2019.  Gross margin declined 60 basis points to 28.8% compared to 29.4% in the same period last year, primarily due to benefits from strategic inventory purchases recognized in the first half of 2019.

Operating expenses for the six months ended June 30, 2020 increased 9% compared to the first six months of 2019.  In the first quarter of 2020, we recorded impairment charges of $6.9 million, which included $2.5 million from a long-term note, as collectability was impacted by the COVID-19 pandemic, and non-cash goodwill and intangibles impairment charges of $4.4 million, equal to the total goodwill and intangibles carrying amounts of our Australian reporting units.  Excluding impairment charges, operating expenses were up 7%, reflecting increases in performance-based compensation, growth-driven freight expenses and greater facility-related costs.  See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

Operating income for the first six months of 2020 increased 14% to a record $241.4 million compared to $210.9 million in the same period last year.  Adjusted operating income, excluding non-cash impairments, for the first six months of 2020 increased 18% from the prior year to $248.4 million.  Operating margin was 12.3% for the six months ended June 30, 2020 and June 30, 2019.  Excluding impairment charges, operating margin increased 40 basis points between periods.   

We recorded a $14.2 million, or $0.34 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2020 compared to a $16.6 million, or $0.40 per diluted share, tax benefit in the same period of 2019.

Net income for the six months ended June 30, 2020 increased 15% to a record $188.5 million compared to $164.0 million for the six months ended June 30, 2019.  Adjusted net income for the first six months of 2020, excluding the $6.3 million, or $0.15 per diluted share, impact of non-cash impairments, net of tax, increased 19% to $194.8 million.  Earnings per share for the first six months of 2020 increased 15% to $4.62 per diluted share versus $4.02 in the first six months of 2019.  Excluding the impact of non-cash impairments, net of tax, adjusted diluted EPS increased 19% over 2019.

On the balance sheet at June 30, 2020, total net receivables, including pledged receivables, increased 9%, driven by our June sales growth.  Inventory levels decreased 10% compared to June 30, 2019, reflecting the strong pace of sales in the second quarter of 2020 and the normalization of inventory levels following the sale of strategic inventory purchases included in our prior year inventory balance.  Total debt outstanding was $438.8 million at June 30, 2020, a $253.5 million decrease from total debt at June 30, 2019 as we have utilized our operating cash flows to decrease debt balances.

Cash provided by operations was $221.2 million in the first six months of 2020 compared to $97.4 million in the first six months of 2019, an improvement of $123.8 million.  The improvement in cash provided by operations primarily reflects an increase in net income, a decline in inventory balances between periods and increases in accrued expenses and other current liabilities, primarily due to deferred tax payments.  Adjusted EBITDA (as defined in the addendum to this release) was $270.1 million and $231.6 million for the six months ended June 30, 2020, and June 30, 2019, respectively.  Interest expense decreased compared to last year primarily due to lower average debt levels and lower average interest rates.

"I am extremely proud of our POOLCORP team and the resiliency and innovation they have displayed in adapting during this challenging, but successful, swimming pool season.  Our employees remain dedicated to safely serving our customers under new operational protocols established in our sales centers.  It's because of their contributions and perseverance that we have been able to achieve our exceptional results in the second quarter," commented Arvan.

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products.  POOLCORP operates 378 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers.  For more information, please visit www.poolcorp.com.

This news release includes "forward-looking" statements that involve risks and uncertainties that are generally identifiable through the use of words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "should" and similar expressions and include projections of earnings.  The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.  Actual results may differ materially due to a variety of factors, including impacts on our business from the COVID-19 pandemic, the sensitivity of our business to weather conditions, changes in the economy and the housing market, our ability to maintain favorable relationships with suppliers and manufacturers, competition from other leisure product alternatives and mass merchants, excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP's 2019 Annual Report on Form 10-K and First Quarter 2020 Quarterly Report on Form 10-Q, each filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com

POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net sales$1,280,846  $1,121,328  $1,958,134  $1,718,784 
Cost of sales907,365  791,014  1,395,024  1,213,839 
Gross profit373,481  330,314  563,110  504,945 
Percent29.2 % 29.5% 28.8 % 29.4%
        
Selling and administrative expenses167,624  157,791  314,721  294,036 
Impairment of goodwill and other assets-  -  6,944  - 
Operating income205,857  172,523  241,445  210,909 
Percent16.1% 15.4% 12.3 % 12.3%
        
Interest and other non-operating expenses, net2,643  6,424  7,432  13,040 
Income before income taxes and equity earnings203,214  166,099  234,013  197,869 
Provision for income taxes45,733  34,778  45,708  33,976 
Equity earnings in unconsolidated investments, net74  69  162  134 
Net income$157,555  $131,390  $188,467  $164,027 
        
Earnings per share:       
Basic$3.94  $3.30  $4.71  $4.14 
Diluted$3.87  $3.22  $4.62  $4.02 
Weighted average shares outstanding:       
Basic39,973  39,827  40,049  39,654 
Diluted40,715  40,848  40,837  40,773 
        
Cash dividends declared per common share$0.58  $0.55  $1.13  $1.00 


POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
 June 30, June 30,  Change 
 2020 2019  $
%
           
Assets          
Current assets:          
Cash and cash equivalents$44,185 $60,694 $(16,509)(27)%
Receivables, net (1) 144,842  127,260  17,582 14  
Receivables pledged under receivables facility 308,563  289,866  18,697 6  
Product inventories, net (2) 628,418  694,447  (66,029)(10) 
Prepaid expenses and other current assets 11,139  10,922  217 2  
Total current assets 1,137,147  1,183,189  (46,042)(4) 
           
Property and equipment, net 111,258  113,360  (2,102)(2) 
Goodwill 193,784  188,665  5,119 3  
Other intangible assets, net 9,615  11,502  (1,887)(16) 
Equity interest investments 1,274  1,213  61 5  
Operating lease assets 183,126  173,854  9,272 5  
Other assets 18,593  18,799  (206)(1) 
Total assets$1,654,797 $1,690,582 $(35,785)(2)%
           
Liabilities and stockholders' equity          
Current liabilities:          
Accounts payable$346,272 $342,335 $3,937 1 %
Accrued expenses and other current liabilities 139,661  81,626  58,035 71  
Short-term borrowings and current portion of long-term debt 9,558  23,974  (14,416)(60) 
Current operating lease liabilities 56,625  55,692  933 2  
Total current liabilities 552,116  503,627  48,489 10  
           
Deferred income taxes 29,399  28,852  547 2  
Long-term debt, net 429,246  668,363  (239,117)(36) 
Other long-term liabilities 29,008  27,191  1,817 7  
Non-current operating lease liabilities 128,237  119,380  8,857 7  
Total liabilities 1,168,006  1,347,413  (179,407)(13) 
Total stockholders' equity 486,791  343,169  143,622 42  
Total liabilities and stockholders' equity$1,654,797 $1,690,582 $(35,785)(2)%

  

(1)The allowance for doubtful accounts was $6.0 million at June 30, 2020 and $6.4 million at June 30, 2019.
(2)The inventory reserve was $10.8 million at June 30, 2020 and $9.5 million at June 30, 2019.



POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
  Six Months Ended   
  June 30,   
  2020  2019  Change
Operating activities        
Net income$188,467  $164,027  $24,440 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation 13,993   13,558   435 
Amortization 655   713   (58)
Share-based compensation 7,221   6,594   627 
Equity earnings in unconsolidated investments, net (162)  (134)  (28)
Impairment of goodwill and other assets 6,944   -   6,944 
Other 3,171   2,558   613 
Changes in operating assets and liabilities, net of effects of acquisitions:        
Receivables (229,506)  (206,271)  (23,235)
Product inventories 75,199   (5,380)  80,579 
Prepaid expenses and other assets (677)  4,831   (5,508)
Accounts payable 84,190   97,232   (13,042)
Accrued expenses and other current liabilities 71,705   19,713   51,992 
Net cash provided by operating activities 221,200   97,441   123,759 
         
Investing activities        
Acquisition of businesses, net of cash acquired (13,711)  (9,345)  (4,366)
Purchases of property and equipment, net of sale proceeds (13,031)  (19,193)  6,162 
Net cash used in investing activities (26,742)  (28,538)  1,796 
         
Financing activities        
Proceeds from revolving line of credit 318,155   545,834   (227,679)
Payments on revolving line of credit (504,140)  (657,180)  153,040 
Proceeds from asset-backed financing 191,700   176,100   15,600 
Payments on asset-backed financing (71,700)  (54,200)  (17,500)
Payments on term facility (4,625)  -   (4,625)
Proceeds from short-term borrowings and current portion of long-term debt 10,731   22,687   (11,956)
Payments on short-term borrowings and current portion of long-term debt (12,918)  (7,881)  (5,037)
Payments of deferred financing costs (12)  -   (12)
Payments of deferred and contingent acquisition consideration (281)  (311)  30 
Proceeds from stock issued under share-based compensation plans 10,811   12,603   (1,792)
Payments of cash dividends (45,312)  (39,753)  (5,559)
Purchases of treasury stock (70,203)  (23,097)  (47,106)
Net cash used in financing activities (177,794)  (25,198)  (152,596)
Effect of exchange rate changes on cash and cash equivalents (1,062)  631   (1,693)
Change in cash and cash equivalents 15,602   44,336   (28,734)
Cash and cash equivalents at beginning of period 28,583   16,358   12,225 
Cash and cash equivalents at end of period$44,185  $60,694  $(16,509)

ADDENDUM

Base Business

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 Business Excluded Total
(in thousands)Three Months Ended Three Months Ended Three Months Ended
 June 30, June 30, June 30,
 2020 2019 2020 2019 2020 2019
Net sales$1,276,551  $1,117,922  $4,295  $3,406   $1,280,846  $1,121,328 
            
Gross profit371,500  329,725  1,981  589   373,481  330,314 
Gross margin29.1% 29.5% 46.1% 17.3 % 29.2% 29.5%
            
Operating expenses166,068  156,879  1,556  912   167,624  157,791 
Expenses as a % of net sales13.0% 14.0% 36.2 % 26.8 % 13.1% 14.1%
            
Operating income (loss)205,432  172,846  425  (323)  205,857  172,523 
Operating margin16.1% 15.5% 9.9% (9.5)% 16.1% 15.4%


(Unaudited)Base Business Excluded Total
(in thousands)Six Months Ended Six Months Ended Six Months Ended
 June 30, June 30, June 30,
 2020 2019 2020 2019 2020 2019
Net sales$1,944,855  $1,706,312  $13,279  $12,472   $1,958,134  $1,718,784 
            
Gross profit558,310  502,333  4,800  2,612   563,110  504,945 
Gross margin28.7 % 29.4% 36.1% 20.9 % 28.8% 29.4%
            
Operating expenses (1)316,941  290,477  4,724  3,559   321,665  294,036 
Expenses as a % of net sales16.3% 17.0% 35.6 % 28.5 % 16.4% 17.1%
            
Operating income (loss) (1)241,369  211,856  76  (947)  241,445  210,909 
Operating margin12.4 % 12.4% 0.6% (7.6)% 12.3% 12.3%


(1)Base business and total include $6.9 million of impairment from goodwill and other assets.

We have excluded the following acquisitions from base business for the periods identified:

Acquired  Acquisition
Date
 Net
Sales Centers
Acquired
 Periods
Excluded
Master Tile Network LLC (1) February 2020 4 February - June 2020
       
W.W. Adcock, Inc. (1) January 2019 4 January - March 2020 and
January - March 2019
       
Turf & Garden, Inc. (1) November 2018 4 January 2020 and
January 2019


(1)We acquired certain distribution assets of each of these companies.

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 in the first six months of 2020.

December 31, 2019373 
Acquired locations4 
New locations3 
Closed/consolidated locations(2)
June 30, 2020378 





Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other non-cash impairments and equity earnings or loss in unconsolidated investments.  Adjusted EBITDA is not a measure of cash flow or liquidity as determined by generally accepted accounting principles (GAAP).  We have included Adjusted EBITDA as a supplemental disclosure because we believe that it is widely used by our investors, industry analysts and others as a useful supplemental liquidity measure in conjunction with cash flows provided by or used in operating activities to help investors understand our ability to provide cash flows to fund growth, service debt, repurchase shares and pay dividends as well as compare our cash flow generating capacity from year to year.

We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP.  Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by operating activities.  Please see page 6 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited) Three Months Ended  Six Months Ended
(in thousands) June 30,  June 30,
  2020  2019  2020  2019
Adjusted EBITDA$216,632  $182,997  $270,051  $231,558 
Add:           
Interest and other non-operating expenses, net of interest income (2,540)  (6,316)  (7,225)  (12,824)
Provision for income taxes (45,733)  (34,778)  (45,708)  (33,976)
Other (544)  2,046   3,171   2,558  
Change in operating assets and liabilities 33,657   (75,312)  911   (89,875)
Net cash provided by operating activities$201,472  $68,637  $221,200  $97,441 

The table below presents a reconciliation of net income to Adjusted EBITDA.

(Unaudited) Three Months Ended  Six Months Ended
(in thousands) June 30,  June 30,
  2020  2019  2020  2019
Net income$157,555  $131,390  $188,467  $164,027 
Add:           
Interest and other non-operating expenses (1) 2,643   6,424   7,432   13,040 
Provision for income taxes 45,733   34,778   45,708   33,976 
Share-based compensation 3,567   3,335   7,221   6,594 
Equity earnings in unconsolidated investments (74)  (69)  (162)  (134)
Impairment of goodwill and other assets    -   6,944   - 
Depreciation 6,992   6,909   13,993   13,558 
Amortization (2) 216   230   448   497 
Adjusted EBITDA$216,632  $182,997  $270,051  $231,558 

  

(1)Shown net of interest income and includes gains and losses on foreign currency transactions and amortization of deferred financing costs as discussed below. 
(2)Excludes amortization of deferred financing costs of $103 and $108 for the three months ended June 30, 2020 and June 30, 2019, respectively, and $207 and $216 for the six months ended June 30, 2020 and June 30, 2019, respectively.  This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

2020 Diluted EPS Guidance

We have included adjusted projected 2020 diluted EPS, a non-GAAP financial measure, in this press release as a supplemental disclosure in order to demonstrate the impact of our non-cash impairment charge recorded in the first quarter of 2020 on our projected 2020 diluted EPS and provide investors and others with additional information about our potential future operating performance.  We believe adjusted projected 2020 diluted EPS should be considered in addition to, not as a substitute for, our projected 2020 diluted EPS presented in accordance with GAAP, and in the context of our other forward-looking and cautionary statements in this press release.

The table below presents a reconciliation of projected 2020 diluted EPS to adjusted projected 2020 diluted EPS.

(Unaudited)2020 Guidance Range
 Floor Ceiling
Diluted EPS (1)$6.90 $7.30
After-tax non-cash impairment charges0.15 0.15
Adjusted Diluted EPS (1)$7.05 $7.45






       

(1)Includes 2020 year-to-date ASU 2016-09 tax benefit of $0.34 per diluted share and does not include potential additional tax benefits.

Adjusted Income Statement Information

We have included adjusted operating income, adjusted net income and adjusted diluted EPS, which are non-GAAP financial measures, in this press release as supplemental disclosures because we believe these measures are useful to investors and others in assessing our year-over-year operating performance.  We believe these measures should be considered in addition to, not as a substitute for, operating income, net income, and diluted EPS presented in accordance with GAAP, respectively, and in the context of our other disclosures in this press release.  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 operating income to adjusted operating income.

(Unaudited)Six Months Ended
(in thousands)June 30,
 2020
Operating income$241,445
Impairment of goodwill and other assets6,944
Adjusted operating income$248,389





The table below presents a reconciliation of net income to adjusted net income.

(Unaudited)Six Months Ended
(in thousands)June 30,
 2020
Net income$188,467 
Impairment of goodwill and other assets6,944 
Tax impact on impairment of long-term note (1)(654)
Adjusted net income$194,757 






(1)As described in our April 23, 2020 earnings release, our effective tax rate at March 31, 2020 was a 0.1% benefit.  Excluding impairment from goodwill and intangibles and tax benefits from ASU 2016-19 recorded in the first quarter of 2020, our effective tax rate 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,
 2020 2019
Diluted EPS$4.62  $4.02 
After-tax non-cash impairment charges0.15  - 
Adjusted diluted EPS excluding after-tax non-cash impairment charges4.77  4.02 
Tax benefit(0.34) (0.40)
Adjusted diluted EPS excluding after-tax non-cash impairment charges and tax benefit$4.43  $3.62 

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Jul 23, 2020
Disclaimer:

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995


Matters discussed in this website contain forward-looking information that involves risks and uncertainties. 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 plans and objectives, and industry, general economic and other financial forecasts of trends and other matters. 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", "believe," "will likely result," "outlook," "project," "should" and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following:
  • The demand for our swimming pool, irrigation and related outdoor lifestyle products may be adversely affected by unfavorable economic conditions.
  • We are susceptible to adverse weather conditions.
  • Our distribution business is highly dependent on our ability to maintain favorable relationships with suppliers.
  • We face intense competition both from within our industry and from other leisure product alternatives.
  • More aggressive competition by store- and internet-based mass merchants and large pool or irrigation supply retailers could adversely affect our sales.
  • We depend on our ability to attract, develop and retain highly qualified personnel.
  • Past growth may not be indicative of future growth, and while we contemplate continued growth through internal expansion and acquisitions, no assurance can be made as to our ability to:
    • penetrate new markets;
    • generate sufficient cash flows to support expansion plans and general operating activities;
    • obtain financing;
    • maintain favorable supplier arrangements and relationships; and
    • identify and divest assets which do not continue to create value consistent with our objectives.
  • Our business is highly seasonal.
  • The nature of our business subjects us to compliance with employment, environmental, health, transportation, safety, and other governmental regulations.
  • We store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.
  • We conduct business internationally, which exposes us to additional risks
  • Changes in tax laws and accounting standards related to tax matters have caused, and may in the future cause, fluctuations in our effective tax rate.
  • We depend on a global network of suppliers to source our products. Product quality or safety concerns could negatively impact our sales and expose us to legal claims.
  • We rely on information technology systems to support our business operations. Any disturbance or breach of our technological infrastructure could adversely affect our financial condition and results of operations. Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation.
  • A terrorist attack or the threat of a terrorist attack could have a material adverse effect on our business.
The foregoing factors are not exhaustive and new factors may emerge which impact our business. It is impossible for us to predict all such factors. Therefore, forward-looking statements should not be relied upon as a prediction of actual future results. We cannot guarantee that any future event or result will be realized, although we believe we have been prudent in our plans and assumptions. Should additional risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from those anticipated. Investors should bear this in mind as they consider forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of subsequent events, new information or otherwise.


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