8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 8-K

______________

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 18, 2019

______________

POOL CORPORATION

(Exact name of registrant as specified in its charter)

______________

Delaware	0-26640	36-3943363
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer 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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	POOL	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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

Item 2.02 Results of Operations and Financial Condition.

The following information is being provided under Form 8-K Item 2.02 and should not be deemed incorporated by reference by any general statement incorporating by reference this Current Report on Form 8-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates this information by reference, and none of this information should be deemed "filed" under such acts.

On July 18, 2019, Pool Corporation, a Delaware corporation, issued a press release announcing second quarter 2019 results and updating fiscal 2019 earnings guidance.

A copy of the release is included herein as Exhibit 99.1.

Item 7.01 Regulation FD Disclosure.

On July 18, 2019, Pool Corporation issued the press release included herein as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits
99.1	Press Release issued by Pool Corporation on July 18, 2019, announcing second quarter 2019 results and updating fiscal 2019 earnings guidance

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 hereunto duly authorized.

POOL CORPORATION

By:    /s/ Mark W. Joslin

Mark W. Joslin

Senior Vice President and Chief Financial Officer

Dated: July 18, 2019

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS

Highlights

• Net sales growth of 6% for Q2 2019, with 4% growth in base business sales

• Q2 2019 diluted EPS increase of 15% to $3.22 or an increase of 10% to $3.03, excluding tax benefits

• Cash provided by operations improved $134.3 million from the first half of 2018

• Narrows 2019 earnings guidance range to $6.09 - $6.34 per diluted share from $6.09 - $6.39 per diluted share

______________________

COVINGTON, LA. (July 18, 2019) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the second quarter of 2019.

“We realized record sales and earnings in the quarter despite unprecedented levels of rainfall and cooler temperatures in many of our key markets. Consumer demands and dealer backlog remain high and our team remains focused on execution throughout the remainder of the season,” said Peter D. Arvan, President and CEO.

Net sales increased 6% to a record $1.12 billion in the second quarter of 2019 compared to $1.06 billion in the second quarter of 2018, while base business sales grew 4%. In the southeastern United States, favorable weather conditions and solid execution by our teams delivered strong sales growth in these markets. This growth was offset by record rainfall and cooler temperatures in three of our largest markets, California, Texas and Arizona, particularly in the month of May, which was the second wettest May on record for the contiguous United States. Sales were also negatively impacted approximately 1% compared to the second quarter of 2018 from unfavorable currency exchange rate fluctuations. During the quarter, sales benefited from strong demand for discretionary products as evidenced by higher sales growth in construction materials and products used in the repair and replacement of in-ground pools.

Gross profit increased 7% to a record $330.3 million in the second quarter of 2019 from $308.7 million in the same period of 2018. Base business gross profit improved 5% over the second quarter of 2018, including a negative currency exchange impact of 1%. Gross margin increased 30 basis points to 29.5% in the second quarter of 2019 compared to 29.2% in the second quarter of 2018, reflecting benefits from strategic inventory purchases.

Selling and administrative expenses (operating expenses) increased 8% to $157.8 million in the second quarter of 2019 compared to the second quarter of 2018. Base business operating expenses were up 5% over the comparable 2018 period, including a 1% currency benefit. As a percentage of net sales, base business operating expenses increased to 13.9% in the second quarter of 2019 compared to 13.8% in the second quarter of 2018, reflecting disciplined expense controls in line with sales growth.

Operating income for the second quarter of 2019 increased to a record $172.5 million, up 6% compared to the same period in 2018. Operating margin was 15.4% in the second quarter of 2019 compared to 15.3% in the second quarter of 2018, while base business operating margin improved 30 basis points from the prior year to 15.6% in the second quarter of 2019.

We recorded a $7.8 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, 2019 compared to a tax benefit of $1.5 million, or $0.04 per diluted share, realized in the same period of 2018.

Net income was $131.4 million in the second quarter of 2019 compared to $117.0 million in the second quarter of 2018. Earnings per share increased 15% to a record $3.22 per diluted share in the three months ended June 30, 2019 compared to $2.80 per diluted share in the same period of 2018. Excluding the impact from ASU 2016-09 in both periods, earnings per diluted share increased 10% to $3.03 in the second quarter of 2019 compared to $2.76 in the second quarter of 2018.

1

Net sales for thesixmonths endedJune 30, 2019increased5%to a record$1.72 billionfrom$1.64 billionin thesixmonths endedJune 30, 2018, with most of this growth coming from the3%improvement in base business sales. In addition, sales were negatively impacted approximately 1% from unfavorable currency exchange rate fluctuations. Gross margin increased 50 basis points to29.4%compared to 28.9% in the same period last year.

Operating expenses increased5%compared to the first half of2018, with base business operating expenses up3%, including a 1% currency benefit. Operating income for the firstsixmonths of2019 increased 8% to a record $210.9 million compared to $195.6 millionin the same period last year. Operating margin for the sixmonths endedJune 30, 2019was12.3%compared to11.9%for thesixmonths endedJune 30, 2018, while our base business operating margin improved 50 basis points from the prior year to12.5%for thesixmonths endedJune 30, 2019.

We recorded a $16.6 million, or $0.40 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2019compared to a$10.6 million, or$0.25per diluted share, tax benefit in the same period of2018.

Net income for the sixmonths endedJune 30, 2019was a record$164.0 millioncompared to$148.4 millionfor thesixmonths endedJune 30, 2018. Earnings per share for the firstsixmonths of2019 increased 13% to $4.02 per diluted share versus $3.55 in the first sixmonths of2018.

On the balance sheet at June 30, 2019, total net receivables, including pledged receivables, increased 3%. Inventory levels grew 14% compared to June 30, 2018, reflecting strategic inventory purchases, cost inflation on purchases and inventory from recently acquired businesses of $13.0 million. Accounts payable increased 14%, which is consistent with our inventory growth. Total debt outstanding was $692.3 million at June 30, 2019, a $35.2 million increase from total debt at June 30, 2018.

Cash provided by operations was $97.4 million in the first six months of 2019 compared to $36.8 million used in operations in the first six months of 2018, an improvement of $134.3 million. The increase in cash provided by operations primarily relates to payments for pre-price increase inventory purchases in 2018 ahead of the 2019 season. Adjusted EBITDA (as defined in the addendum to this release) was $231.6 million and $215.5 million for the six months ended June 30, 2019 and June 30, 2018, respectively. Interest expense increased compared to last year primarily due to higher debt levels and higher interest rates.

“Our strong customer base and knowledgeable team members remain a key component of our achievements and greatly contribute to our continued success in a challenging weather year. Based on our results to date and expectations for the remainder of the year, we are narrowing our annual earnings guidance range from $6.09 to $6.39 per diluted share to $6.09 to $6.34 per diluted share,” said Arvan.

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 372 sales centers in North America, Europe, South America and Australia, through which it distributes more than 180,000 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,” “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 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 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP’s subsequent filings with the SEC.

CONTACT:

Curtis J. Scheel

Director of Investor Relations

985.801.5341

curtis.scheel@poolcorp.com

2

POOL CORPORATION

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net sales	$	1,121,328		$	1,057,804		$	1,718,784		$	1,643,704
Cost of sales	791,014			749,149			1,213,839			1,168,976
Gross profit	330,314			308,655			504,945			474,728
Percent	29.5		%	29.2		%	29.4		%	28.9		%
Selling and administrative expenses	157,791			146,613			294,036			279,145
Operating income	172,523			162,042			210,909			195,583
Percent	15.4		%	15.3		%	12.3		%	11.9		%
Interest and other non-operating expenses, net	6,424			5,991			13,040			9,518
Income before income taxes and equity earnings	166,099			156,051			197,869			186,065
Provision for income taxes	34,778			39,062			33,976			37,783
Equity earnings in unconsolidated investments, net	69			60			134			106
Net income	$	131,390		$	117,049		$	164,027		$	148,388
Earnings per share:
Basic	$	3.30		$	2.89		$	4.14		$	3.67
Diluted	$	3.22		$	2.80		$	4.02		$	3.55
Weighted average shares outstanding:
Basic	39,827			40,453			39,654			40,413
Diluted	40,848			41,814			40,773			41,840
Cash dividends declared per common share	$	0.55		$	0.45		$	1.00		$	0.82

3

POOL CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

			June 30,		June 30,		Change
			2019		2018		$		%
Assets
Current assets:
	Cash and cash equivalents	$	60,694	$	42,167	$	18,527		44		%
	Receivables, net (1)		127,260		135,104		(7,844	)	(6	)
	Receivables pledged under receivables facility		289,866		269,311		20,555		8
	Product inventories, net (2)		694,447		606,583		87,864		14
	Prepaid expenses and other current assets (5)		10,922		17,169		(6,247	)	(36	)
Total current assets			1,183,189		1,070,334		112,855		11
Property and equipment, net			113,360		113,048		312		—
Goodwill			188,665		189,066		(401	)	—
Other intangible assets, net			11,502		12,608		(1,106	)	(9	)
Equity interest investments			1,213		1,130		83		7
Operating lease assets (3),(4),(5)			173,854		—		173,854		100
Other assets			18,799		18,095		704		4
Total assets		$	1,690,582	$	1,404,281	$	286,301		20		%
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable (4)	$	342,335	$	300,232	$	42,103		14		%
	Accrued expenses and other current liabilities		81,626		83,271		(1,645	)	(2	)
	Short-term borrowings and current portion of long-term debt		23,974		21,462		2,512		12
	Current operating lease liabilities (3)		55,692		—		55,692		100
Total current liabilities			503,627		404,965		98,662		24
Deferred income taxes			28,852		24,729		4,123		17
Long-term debt, net			668,363		635,658		32,705		5
Other long-term liabilities			27,191		25,128		2,063		8
Non-current operating lease liabilities (3)			119,380		—		119,380		100
Total liabilities			1,347,413		1,090,480		256,933		24
Total stockholders’ equity			343,169		313,801		29,368		9
Total liabilities and stockholders’ equity		$	1,690,582	$	1,404,281	$	286,301		20		%

⁽¹⁾  The allowance for doubtful accounts was $6.4 million at June 30, 2019 and $4.1 million at June 30, 2018.

⁽²⁾  The inventory reserve was $9.5 million at June 30, 2019 and $8.4 million at June 30, 2018.

⁽³⁾  We adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019. Upon adoption, we recorded operating lease assets and operating lease liabilities based on the present value of future lease obligations. We applied the practical expedient available in this guidance, which does not require the restatement of prior year balances.

⁽⁴⁾  Due to ASU 2016-02, our straight-line rent liability of $5.0 million, reported in Accounts payable under previous accounting guidance, offsets our Operating lease assets.

⁽⁵⁾  As of June 30, 2019, we presented pre-paid rent of $4.8 million in Operating lease assets as required under the new guidance (presented in Prepaid expenses and other current assets as of June 30, 2018).

4

POOL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

			Six Months Ended
			June 30,
			2019			2018			Change
Operating activities
Net income		$	164,027		$	148,388		$	15,639
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Depreciation		13,558			12,888			670
	Amortization		713			938			(225	)
	Share-based compensation		6,594			6,481			113
	Equity earnings in unconsolidated investments, net		(134	)		(106	)		(28	)
	Other		2,558			1,861			697
Changes in operating assets and liabilities, net of effects of acquisitions:
	Receivables		(206,271	)		(210,327	)		4,056
	Product inventories		(5,380	)		(76,286	)		70,906
	Prepaid expenses and other assets		4,831			2,100			2,731
	Accounts payable		97,232			55,964			41,268
	Accrued expenses and other current liabilities		19,713			21,290			(1,577	)
Net cash provided by (used in) operating activities			97,441			(36,809	)		134,250
Investing activities
Acquisition of businesses, net of cash acquired			(9,345	)		(578	)		(8,767	)
Purchases of property and equipment, net of sale proceeds			(19,193	)		(24,620	)		5,427
Net cash used in investing activities			(28,538	)		(25,198	)		(3,340	)
Financing activities
Proceeds from revolving line of credit			545,834			554,536			(8,702	)
Payments on revolving line of credit			(657,180	)		(545,574	)		(111,606	)
Proceeds from asset-backed financing			176,100			177,500			(1,400	)
Payments on asset-backed financing			(54,200	)		(60,000	)		5,800
Proceeds from short-term borrowings and current portion of long-term debt			22,687			13,957			8,730
Payments on short-term borrowings and current portion of long-term debt			(7,881	)		(3,330	)		(4,551	)
Payments of deferred financing costs			—			(8	)		8
Payments of deferred and contingent acquisition consideration			(311	)		(265	)		(46	)
Proceeds from stock issued under share-based compensation plans			12,603			9,383			3,220
Payments of cash dividends			(39,753	)		(33,194	)		(6,559	)
Purchases of treasury stock			(23,097	)		(38,876	)		15,779
Net cash (used in) provided by financing activities			(25,198	)		74,129			(99,327	)
Effect of exchange rate changes on cash and cash equivalents			631			105			526
Change in cash and cash equivalents			44,336			12,227			32,109
Cash and cash equivalents at beginning of period			16,358			29,940			(13,582	)
Cash and cash equivalents at end of period		$	60,694		$	42,167		$	18,527

5

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,
	2019			2018			2019			2018			2019			2018
Net sales	$	1,103,419		$	1,057,273		$	17,909		$	531		$	1,121,328		$	1,057,804
Gross profit	325,438			308,551			4,876			104			330,314			308,655
Gross margin	29.5		%	29.2		%	27.2		%	19.6		%	29.5		%	29.2		%
Operating expenses	153,846			146,393			3,945			220			157,791			146,613
Expenses as a % of net sales	13.9		%	13.8		%	22.0		%	41.4		%	14.1		%	13.9		%
Operating income (loss)	171,592			162,158			931			(116		)	172,523			162,042
Operating margin	15.6		%	15.3		%	5.2		%	(21.8		)%	15.4		%	15.3		%

(Unaudited)	Base Business						Excluded						Total
(in thousands)	Six Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2019			2018			2019			2018			2019			2018
Net sales	$	1,690,739		$	1,640,095		$	28,045		$	3,609		$	1,718,784		$	1,643,704
Gross profit	497,144			473,885			7,801			843			504,945			474,728
Gross margin	29.4		%	28.9		%	27.8		%	23.4		%	29.4		%	28.9		%
Operating expenses	286,394			277,643			7,642			1,502			294,036			279,145
Expenses as a % of net sales	16.9		%	16.9		%	27.2		%	41.6		%	17.1		%	17.0		%
Operating income (loss)	210,750			196,242			159			(659		)	210,909			195,583
Operating margin	12.5		%	12.0		%	0.6		%	(18.3		)%	12.3		%	11.9		%

6

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

Acquired	Acquisition Date	Net Sales Centers Acquired	Periods Excluded
W.W. Adcock, Inc. (1)	January 2019	4	January - June 2019
Turf & Garden, Inc. (1)	November 2018	4	January - June 2019
Tore Pty. Ltd. (Pool Power) (1)	January 2018	1	January - April 2019 and January - April 2018
Chem Quip, Inc. (1)	December 2017	5	January - March 2019 and January - March 2018
Intermark	December 2017	1	January - February 2019 and January - February 2018

⁽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 2019.

December 31, 2018	364
Acquired locations	4
New locations	5
Consolidated location	(1	)
June 30, 2019	372

7

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 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 net income to Adjusted EBITDA.

(Unaudited)			Three Months Ended						Six Months Ended
(in thousands)			June 30,						June 30,
			2019			2018			2019			2018
Net income		$	131,390		$	117,049		$	164,027		$	148,388
	Add:
	Interest and other non-operating expenses (1)		6,424			5,991			13,040			9,518
	Provision for income taxes		34,778			39,062			33,976			37,783
	Share-based compensation		3,335			3,160			6,594			6,481
	Equity earnings in unconsolidated investments		(69	)		(60	)		(134	)		(106	)
	Depreciation		6,909			6,589			13,558			12,888
	Amortization (2)		230			275			497			551
Adjusted EBITDA		$	182,997		$	172,066		$	231,558		$	215,503

⁽¹⁾  Shown net of interest income and includes amortization of deferred financing costs as discussed below.

⁽²⁾  Excludes amortization of deferred financing costs of $108 and $193 for the three months ended June 30, 2019 and June 30, 2018, respectively, and $216 and $387 for the six months ended June 30, 2019 and June 30, 2018, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited)			Three Months Ended						Six Months Ended
(in thousands)			June 30,						June 30,
			2019			2018			2019			2018
Adjusted EBITDA		$	182,997		$	172,066		$	231,558		$	215,503
	Add:
	Interest and other non-operating expenses, net of interest income		(6,316	)		(5,798	)		(12,824	)		(9,131	)
	Provision for income taxes		(34,778	)		(39,062	)		(33,976	)		(37,783	)
	Other		2,046			1,180			2,558			1,861
	Change in operating assets and liabilities		(75,312	)		(121,046	)		(89,875	)		(207,259	)
Net cash provided by (used in) operating activities		$	68,637		$	7,340		$	97,441		$	(36,809	)

8