# EDGAR Filing Document

**Accession Number:** 0000945841
**File Stem:** 0000945841-23-000003
**Filing Date:** 2023-2
**Character Count:** 37129
**Document Hash:** 5925b74a1ce810c513866f1b94fc1bfa
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000945841-23-000003.hdr.sgml**: 20230216

**ACCESSION NUMBER**: 0000945841-23-000003

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230216

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Regulation FD Disclosure

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230216

**DATE AS OF CHANGE**: 20230216

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** POOL CORP
- **CENTRAL INDEX KEY:** 0000945841
- **STANDARD INDUSTRIAL CLASSIFICATION:** WHOLESALE-MISC DURABLE GOODS [5090]
- **IRS NUMBER:** 363943363
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-26640
- **FILM NUMBER:** 23637412

**BUSINESS ADDRESS:**
- **STREET 1:** 109 NORTHPARK BLVD
- **STREET 2:** 4TH FLOOR
- **CITY:** COVINGTON
- **STATE:** LA
- **ZIP:** 70433-5001
- **BUSINESS PHONE:** 9858925521

**MAIL ADDRESS:**
- **STREET 1:** 109 NORTHPARK BLVD
- **STREET 2:** 4TH FLOOR
- **CITY:** COVINGTON
- **STATE:** LA
- **ZIP:** 70433-5001

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SCP POOL CORP
- **DATE OF NAME CHANGE:** 19950526

?xml version="1.0" ? pool-20230216

**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) February 16, 2023

**______________**

---

| | | | |
|:---|:---|:---|:---|
| **POOL CORPORATION** | **POOL CORPORATION** | **POOL CORPORATION** | **POOL CORPORATION** |
| (Exact name of registrant as specified in its charter) | (Exact name of registrant as specified in its charter) | (Exact name of registrant as specified in its charter) | (Exact name of registrant as specified in its charter) |
| **Delaware** | **Delaware** | **0-26640** | **36-3943363** |
| (State or other jurisdiction of | (State or other jurisdiction of | (Commission | (IRS Employer |
| incorporation or organization) | incorporation or organization) | File Number) | Identification No.) |
| **109 Northpark Boulevard,** | **109 Northpark Boulevard,** |  |  |
| **Covington,** | **Louisiana** |  | **70433-5001** |
| (Address of principal executive offices) | (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 ☐

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. □

------

**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 February 16, 2023, Pool Corporation, a Delaware corporation, issued a press release announcing fiscal 2022 results and providing 2023 earnings guidance.

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

**Item 7.01 Regulation FD Disclosure.**

On February 16, 2023, Pool Corporation issued the press release included herein as Exhibit 99.1.

**Item 9.01 Financial Statements and Exhibits.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| (d) Exhibits | |
| <u>[99.1](pool-q42022xer.htm)</u> | Press Release issued by Pool Corporation on February 16, 2023, announcing fiscal 2022 results and providing 2023 earnings guidance. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

**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 | POOL CORPORATION |
| By: | /s/ Melanie Housey Hart |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Melanie Housey Hart |
|  | &nbsp;&nbsp;&nbsp;&nbsp; Vice President and Chief Financial Officer |

---

Dated: February 16, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

## Exhibit 99.1

![poolcorplogoa10.jpg](poolcorplogoa10.jpg)

**Exhibit 99.1**

**FOR IMMEDIATE RELEASE**

**POOL CORPORATION REPORTS YEAR END AND FOURTH QUARTER 2022 RESULTS;** 

**PROVIDES 2023 EARNINGS GUIDANCE**

**Highlights include:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Record annual net sales of $6.2 billion, up 17% from 2021** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Operating income of $1.0 billion, up 23% from 2021 with a 90 bps improvement in operating margin**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• Record 2022 diluted EPS of $18.70, an increase of 17% over 2021 or an increase of 21% to $18.43 without tax benefits in both periods**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**• 2023 diluted EPS guidance range of $16.03 - $17.03, including an estimated $0.03 tax benefit**

______________________

**COVINGTON, LA. (February 16, 2023)** – Pool Corporation (Nasdaq/GSM:POOL) today announced full year and fourth quarter 2022 results.

"I am proud to present another year of record results with annual sales growth of 17% to $6.2 billion, nearly double our 2019 sales. The relentless focus of our highly talented team on capacity creation and their dedication to serving our customers drove our operating income for the full year up 23% to a record $1.0 billion on top of 79% growth in 2021. We leveraged our strong capital position and operating capabilities to invest in inventory ahead of challenging supply chain and inflationary conditions to serve our customers and bring new products to the market in a dynamic environment. Our results speak to the strength of our team who work collaboratively with our customers and suppliers to make POOLCORP such an incredible business. We celebrate our successes over the past year and remain well-positioned to execute our long-term growth strategy and grow our industry-leading position," commented Peter D. Arvan, president and CEO.

**Year ended December 31, 2022 compared to the year ended December 31, 2021**

Net sales increased 17% to a record $6.2 billion for the year ended December 31, 2022 compared to $5.3 billion in 2021. Base business sales increased 12%. Net sales benefited approximately 10% from inflationary product cost increases and were aided by solid consumer demand for outdoor living products throughout the year. Net sales were also unfavorably impacted 1% from currency exchange rate fluctuations, 1% from softness in our European markets and generally less favorable weather conditions on a year-over-year comparison.

Gross profit reached a record $1.9 billion for the year ended December 31, 2022, a 20% increase over gross profit of $1.6 billion in 2021. Gross margin improved 80 basis points to 31.3% in 2022 compared to 30.5% in 2021, reflecting benefits from acquisitions, increased pricing and supply chain management initiatives to address inflation. These increases were partially offset by $13.0 million recorded within Cost of sales in the fourth quarter of 2022 related to increased duties and tariffs for certain imported chemicals. Given supply chain improvements through the latter half of 2022, we do not expect to import a significant portion of this product in 2023.

Selling and administrative expenses (operating expenses) increased 16%, or $123.3 million, to $907.6 million in 2022, including a 1% benefit from currency exchange rate fluctuations. As a percentage of net sales, operating expenses declined 10 basis points to 14.7% in 2022 compared to 14.8% in 2021. Our operating expenses have generally increased in line with sales growth to support our business, including recent acquisitions.

------

Operating income for the year increased 23% to $1.0 billion, up from $832.8 million in 2021. Operating margin increased 90 basis points to 16.6% in 2022 compared to 15.7% in 2021.

Interest and other non-operating expenses, net for the year increased $32.3 million compared to 2021, primarily reflecting higher average debt levels and higher average interest rates.

We recorded a $10.8 million, or $0.27 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, *Improvements to Employee Share-Based Payment Accounting,* for the year ended December 31, 2022 compared to a tax benefit of $30.0 million, or $0.74 per diluted share, realized in 2021.

Net income increased 15% to a record $748.5 million in 2022 compared to $650.6 million in 2021. Earnings per share increased 17% to a record $18.70 per diluted share compared to $15.97 per diluted share in 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 21% to $18.43 per diluted share compared to $15.23 per diluted share in 2021.

Adjusted EBITDA increased 23% to $1.1 billion in 2022 compared to $874.8 million in 2021 and was 17.5% of net sales in 2022 compared to 16.5% of net sales in 2021.

**Balance Sheet and Liquidity**

On the balance sheet at December 31, 2022, total net receivables, including pledged receivables, decreased 7% compared to 2021. Inventory levels increased 19% to $1.6 billion, compared to $1.3 billion at December 31, 2021, reflecting increased purchasing to stock new locations and ensure product availability across our sales center network and impacts from inflation. Total debt outstanding increased $203.5 million to $1.4 billion as we have utilized debt proceeds over the past year to supplement cash provided by operating activities and fund a portion of $471.2 million in share repurchases, $150.6 million in dividends paid to our shareholders and $342.4 million of investments in working capital.

Net cash provided by operations was $484.9 million in 2022 compared to $313.5 million in 2021, an increase of $171.4 million, primarily driven by an increase in net income and changes in working capital. Our operating cash flows were also impacted by federal tax payments of $79.5 million in 2022, which were allowed to be deferred and included in accrued expenses and other liabilities at December 31, 2021.

**Fourth quarter ended December 31, 2022 compared to the fourth quarter ended December 31, 2021**

Net sales increased 6% to $1.1 billion in the fourth quarter of 2022 compared to $1.0 billion in the fourth quarter of 2021. Base business net sales increased 1%. Net sales benefited approximately 8% from inflationary product cost increases versus 10% last year. Weather conditions, particularly in the month of December when an Arctic blast moved across the U.S., were much less favorable compared to the fourth quarter of 2021. Weather conditions were especially impactful in Canada and the Northeast where sales were down in the mid-teens. Net sales were also unfavorably impacted 1% from currency exchange rate fluctuations and 1% from softness in our European markets.

Gross margin decreased 230 basis points to 28.8% in the fourth quarter of 2022 compared to the fourth quarter of 2021 when gross margin increased 260 basis points to 31.1% (over the same period in 2020). The decline in our gross margin reflects lower inflationary benefits from vendor price increases compared to last year, lower incentives earned under our volume-based vendor programs and an impact of 120 basis points from the $13.0 million increase in duties and tariffs discussed above.

Operating expenses increased 7% to $208.4 million in the fourth quarter of 2022 compared to $194.5 million in the fourth quarter of 2021, including a 1% benefit from currency exchange rate fluctuations. As a percentage of net sales, operating expenses were 19.0% in the fourth quarter of 2022 compared to 18.8% in the same period of 2021.

Operating income in the fourth quarter of 2022 decreased 16% to $107.3 million compared to $127.9 million in the same period of 2021 as gross margin declined, which is typical in our fourth quarter, and we lapped higher inflationary benefits from the fourth quarter of 2021. Operating margin decreased 250 basis points in the fourth quarter.

------

Interest and other non-operating expenses, net for the fourth quarter of 2022 increased $13.7 million compared to the fourth quarter of 2021, primarily reflecting higher average debt levels and higher average interest rates.

We recorded a $1.2 million, or $0.03 per diluted share, tax benefit from ASU 2016-09 in the fourth quarter of 2022 compared to a tax benefit of $14.2 million, or $0.35 per diluted share, realized in the fourth quarter of 2021. Net income decreased 33% in the fourth quarter of 2022 to $71.9 million compared to $107.6 million in 2021. Earnings per diluted share decreased 31% to $1.82 in the fourth quarter of 2022 compared to $2.65 for the same period in 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share decreased 22% to $1.79 compared to $2.30 in 2021.

**2023 Outlook**

"Thinking about the year ahead, we believe that increasing demand for non-discretionary maintenance products, expansion of the installed base of pools and continued renovation activity, combined with our extensive sales center network, will enable us to deliver solid results even if new pool construction levels are challenged against the higher comparison we saw over the last two years. Consumer preferences for smart pool products and our expanded ability to efficiently serve the DIY market will be a focus as we expect inflation to moderate in 2023. We are well-positioned and confident in our ability to continue our long-term trends of consistent growth and exceptional shareholder return despite the current uncertainty presented by short-term market concerns. We expect earnings for 2023 will be in the range of $16.03 to $17.03 per diluted share, including an estimated $0.03 favorable impact from ASU 2016-09," added Arvan.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (Unaudited) |  | **2023 Guidance Range** | **2023 Guidance Range** | **2023 Guidance Range** | **2023 Guidance Range** |
|  | **2022** | **Floor** | **% Change** | **Ceiling** | **% Change** |
| Diluted EPS | $**18.70** | $16.03 | (14)% | $17.03 | (9)% |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: ASU 2016-09 tax benefit | **0.27** | 0.03 |  | 0.03 |  |
| Adjusted Diluted EPS | $**18.43** | $16.00 | (13)% | $17.00 | (8)% |

---

We estimate that we have approximately $1.1 million in unrealized excess tax benefits related to stock options that will expire and restricted stock awards that will vest in the first quarter of 2023, adding $0.03 in diluted earnings per share in that period. We have included the estimated first quarter benefit in our annual earnings guidance; however, additional tax benefits could be recognized related to stock option exercises in 2023 from grants that expire in years after 2023, for which we have not included any expected benefits.

**Non-GAAP Financial Measures**

This press release contains certain non-GAAP measures (adjusted EBITDA, adjusted diluted EPS and projected adjusted diluted EPS). See the addendum to this release for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.

**About Pool Corporation**

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products. As of December 31, 2022, POOLCORP operates 420 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 125,000 wholesale customers. For more information, please visit www.poolcorp.com.

------

**Forward-Looking Statements**

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," "will," "may," 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 economic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; the extent to which home-centric trends will moderate or reverse; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP's 2021 Annual Report on Form 10-K, 2022 Quarterly Reports on Form 10-Q and other reports and filings filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

Curtis J. Scheel

Director of Investor Relations

985.801.5341 <u>curtis.scheel@poolcorp.com</u>

------

**POOL CORPORATION**

**Consolidated Statements of Income**

(Unaudited)

(In thousands, except per share data)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Year Ended** | **Year Ended** | **Year Ended** |
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | | **2021** | **2022** | | **2021** <sup>(1)</sup> |
| Net sales | $**1095920** |  | $1035557 | $**6179727** |  | $5295584 |
| Cost of sales | **780189** |  | 713181 | **4246315** |  | 3678492 |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross profit | **315731** |  | 322376 | **1933412** |  | 1617092 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Percent | **28.8** | **%** | 31.1 | **31.3** | **%** | 30.5 |
| Selling and administrative expenses <sup>(2)</sup> | **208436** |  | 194485 | **907629** |  | 784308 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating income | **107295** |  | 127891 | **1025783** |  | 832784 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Percent | **9.8** | **%** | 12.3 | **16.6** | **%** | 15.7 |
| Interest and other non-operating expenses, net | **15482** |  | 1777 | **40911** |  | 8639 |
| Income before income taxes and equity in earnings | **91813** |  | 126114 | **984872** |  | 824145 |
| Provision for income taxes | **20076** |  | 18572 | **236763** |  | 173812 |
| Equity in earnings of unconsolidated investments, net | **126** |  | 67 | **353** |  | 291 |
| Net income | $**71863** |  | $107609 | $**748462** |  | $650624 |
| Earnings per share attributable to common stockholders: <sup>(3)</sup> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $**1.84** |  | $2.68 | $**18.89** |  | $16.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $**1.82** |  | $2.65 | $**18.70** |  | $15.97 |
| Weighted average common shares outstanding: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | **38843** |  | 39877 | **39409** |  | 39876 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | **39168** |  | 40418 | **39806** |  | 40480 |
| Cash dividends declared per common share | $**1.00** |  | $0.80 | $**3.80** |  | $2.98 |

---

<sup>(1)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Derived from audited financial statements.

<sup>(2)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Selling and administrative expenses include a note receivable recovery, which was $1.1 million for the three months ended December 31, 2021 and $2.5 million for the year ended December 31, 2021.

<sup>(3)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Earnings per share under the two-class method is calculated using net income attributable to common stockholders (net income reduced by earnings allocated to participating securities), which was $71.5 million and $106.9 million for the three months ended December 31, 2022 and December 31, 2021, respectively, and $744.3 million and $646.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Participating securities excluded from weighted average common shares outstanding were 216 thousand and 260 thousand for the three months ended December 31, 2022 and December 31, 2021, respectively, and 221 thousand and 268 thousand for the years ended December 31, 2022 and December 31, 2021, respectively.

------

**POOL CORPORATION**

**Condensed Consolidated Balance Sheets**

(Unaudited)

(In thousands)

---

| | | | |
|:---|:---|:---|:---|
| | &nbsp;&nbsp;&nbsp;**December 31,**<br>&nbsp;&nbsp;&nbsp;**2022** | **December 31,**<br>**2021** <sup>(1)</sup> | **Change**<br>$**%** |
| **Assets** |  |  |  |
| Current assets: |  |  |  |
| Cash and cash equivalents | $**45591** | $24321 | 87% |
| Receivables, net <sup>(2)</sup> | **128247** | 155259 | (17) |
| Receivables pledged under receivables facility | **223201** | 221312 | 1 |
| Product inventories, net <sup>(3)</sup> | **1591060** | 1339100 | 19 |
| Prepaid expenses and other current assets | **30892** | 29093 | 6 |
| Total current assets | **2018991** | 1769085 | 14 |
| Property and equipment, net | **193709** | 179008 | 8 |
| Goodwill | **691993** | 688364 | 1 |
| Other intangible assets, net | **305450** | 312814 | (2) |
| Equity interest investments | **1248** | 1231 | 1 |
| Operating lease assets | **269608** | 241662 | 12 |
| Other assets  | **84438** | 37967 | 122 |
| **Total assets** | $**3565437** | $3230131 | 10% |
| **Liabilities and stockholders' equity** |  |  |  |
| Current liabilities: |  |  |  |
| Accounts payable | $**406667** | $398697 | 2% |
| Accrued expenses and other current liabilities  | **168521** | 264877 | (36) |
| Short-term borrowings and current portion of long-term debt  | **25042** | 11772 | 113 |
| Current operating lease liabilities | **75484** | 69070 | 9 |
| Total current liabilities | **675714** | 744416 | (9) |
| Deferred income taxes  | **58759** | 35840 | 64 |
| Long-term debt, net | **1361761** | 1171578 | 16 |
| Other long-term liabilities | **35471** | 31545 | 12 |
| Non-current operating lease liabilities | **198538** | 175359 | 13 |
| Total liabilities | **2330243** | 2158738 | 8 |
| Total stockholders' equity | **1235194** | 1071393 | 15 |
| **Total liabilities and stockholders' equity** | $**3565437** | $3230131 | 10% |

---

<sup>(1)</sup> Derived from audited financial statements.

<sup>(2)</sup> The allowance for doubtful accounts was $9.5 million at December 31, 2022 and $5.9 million at December 31, 2021.

<sup>(3)</sup> The inventory reserve was $21.2 million at December 31, 2022 and $15.2 million at December 31, 2021.

------

**POOL CORPORATION**

**Condensed Consolidated Statements of Cash Flows**

(Unaudited)

(In thousands)

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended** | **Year Ended** | |
| | **December 31,** | **December 31,** | |
| | **2022** | **2021** <sup>(1)</sup> |<br>**Change** |
| **Operating activities** |  |  |  |
| Net income | $**748462** | $650624 | $97838 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| Depreciation | **30381** | 28287 | 2094 |
| Amortization | **8644** | 1739 | 6905 |
| Share-based compensation | **14879** | 15187 | (308) |
| Equity in earnings of unconsolidated investments, net | **(353)** | (291) | (62) |
| Net losses on foreign currency transactions | **48** | 325 | (277) |
| Goodwill impairment | **605** |  | 605 |
| Other | **24563** | 9962 | 14601 |
| Changes in operating assets and liabilities, net of effects of acquisitions: |  |  |  |
| Receivables | **19685** | (79940) | 99625 |
| Product inventories | **(263567)** | (525207) | 261640 |
| Prepaid expenses and other assets | **(52815)** | (51199) | (1616) |
| Accounts payable | **7597** | 114893 | (107296) |
| Accrued expenses and other liabilities | **(53275)** | 149110 | (202385) |
| Net cash provided by operating activities | **484854** | 313490 | 171364 |
| **Investing activities** |  |  |  |
| Acquisition of businesses, net of cash acquired | **(9264)** | (811956) | 802692 |
| Purchase of property and equipment, net of sale proceeds | **(43619)** | (37658) | (5961) |
| Other investments, net | **2013** |  | 2013 |
| Net cash used in investing activities | **(50870)** | (849614) | 798744 |
| **Financing activities** |  |  |  |
| Proceeds from revolving line of credit | **1917173** | 1438408 | 478765 |
| Payments on revolving line of credit | **(1970388)** | (974506) | (995882) |
| Proceeds from term loan under credit facility | **250000** | 250000 |  |
| Proceeds from asset-backed financing | **220000** | 495000 | (275000) |
| Payments on asset-backed financing | **(205500)** | (430000) | 224500 |
| Payments on term facility | **(9250)** | (9250) |  |
| Proceeds from short-term borrowings and current portion of long-term debt | **28445** | 9279 | 19166 |
| Payments on short-term borrowings and current portion of long-term debt | **(27675)** | (9377) | (18298) |
| Payments of deferred acquisition consideration | **(1374)** | (362) | (1012) |
| Payments of deferred financing costs | **(170)** | (2638) | 2468 |
| Proceeds from stock issued under share-based compensation plans | **8934** | 17197 | (8263) |
| Payments of cash dividends | **(150624)** | (119581) | (31043) |
| Purchases of treasury stock | **(471229)** | (138039) | (333190) |
| Net cash (used in) provided by financing activities | **(411658)** | 526131 | (937789) |
| Effect of exchange rate changes on cash and cash equivalents | **(1056)** | 186 | (1242) |
| Change in cash and cash equivalents | **21270** | (9807) | 31077 |
| Cash and cash equivalents at beginning of period | **24321** | 34128 | (9807) |
| Cash and cash equivalents at end of period | $**45591** | $24321 | $21270 |

---

<sup>(1)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Derived from audited financial statements.

------

**ADDENDUM**

**Base Business**

The following tables break out our consolidated results into the base business component and the excluded components (sales centers excluded from base business):

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (Unaudited) | **Base Business** | **Base Business** | **Excluded** | **Excluded** | **Total** | **Total** |
| (in thousands) | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** |
| Net sales | $**1045186** | $1031230 | $**50734** | $4327 | $**1095920** | $1035557 |
| Gross profit | **292747** | 320785 | **22984** | 1591 | **315731** | 322376 |
| Gross margin | **28.0%** | 31.1% | **45.3%** | 36.8% | **28.8%** | 31.1% |
| Operating expenses | **189616** | 191901 | **18820** | 2584 | **208436** | 194485 |
| Expenses as a % of net sales | **18.1%** | 18.6% | **37.1%** | 59.7% | **19.0%** | 18.8% |
| Operating income (loss) | **103131** | 128884 | **4164** | (993) | **107295** | 127891 |
| Operating margin | **9.9%** | 12.5% | **8.2%** | (22.9)% | **9.8%** | 12.3% |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (Unaudited) | **Base Business** | **Base Business** | **Excluded** | **Excluded** | **Total** | **Total** |
| (in thousands) | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** |
| Net sales | $**5889497** | $5281773 | $**290230** | $13811 | $**6179727** | $5295584 |
| Gross profit | **1804744** | 1613252 | **128668** | 3840 | **1933412** | 1617092 |
| Gross margin | **30.6%** | 30.5% | **44.3%** | 27.8% | **31.3%** | 30.5% |
| Operating expenses | **830525** | 779897 | **77104** | 4411 | **907629** | 784308 |
| Expenses as a % of net sales | **14.1%** | 14.8% | **26.6%** | 31.9% | **14.7%** | 14.8% |
| Operating income (loss) | **974219** | 833355 | **51564** | (571) | **1025783** | 832784 |
| Operating margin | **16.5%** | 15.8% | **17.8%** | (4.1)% | **16.6%** | 15.7% |

---

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

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| | | | |
|:---|:---|:---|:---|
| <br>**Acquired**  | <br>**Acquisition**<br>**Date** | **Net<br>Sales Centers <br>Acquired** | <br>**Periods**<br>**Excluded** |
| Tri-State Pool Distributors | April 2022 | 1 | May - December 2022 |
| Porpoise Pool & Patio, Inc. | December 2021 | 1 | January - December 2022 and December 2021 |
| Wingate Supply, Inc. | December 2021 | 1 | January - December 2022 and December 2021 |
| Vak Pak Builders Supply, Inc. | June 2021 | 1 | January - August 2022 and June - August 2021 |
| Pool Source, LLC | April 2021 | 1 | January - June 2022 and April - June 2021 |
| TWC Distributors, Inc. | December 2020 | 10 | January - February 2022 and January - February 2021 |

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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 centers during 2022.

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| | |
|:---|:---|
| December 31, 2021 | 410 |
| &nbsp;&nbsp;Acquired location | 1 |
| &nbsp;&nbsp;New locations | 10 |
| &nbsp;&nbsp;Closed location | (1) |
| December 31, 2022 | 420 |

---

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**Reconciliation of Non-GAAP Financial Measures**

The non-GAAP measures described below should be considered in the context of all of our other disclosures in this press release.

**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 impairments (recoveries) and equity in earnings or loss of unconsolidated investments. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

Adjusted EBITDA is not a measure of performance as determined by generally accepted accounting principles (GAAP). We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net 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.

We have included Adjusted EBITDA as a supplemental disclosure because management uses it to monitor our performance, we believe that it is widely used by our investors, industry analysts and others as a useful supplemental performance measure. We believe that Adjusted EBITDA, when viewed with our GAAP results and the accompanying reconciliations, provides an additional measure that enables management and investors to monitor factors and trends affecting our ability to service debt, pay taxes and fund capital expenditures.

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

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| | | |
|:---|:---|:---|
| (Unaudited) | **Year Ended December 31,** | **Year Ended December 31,** |
| (in thousands) | **2022** | **2021** |
| Net income | $**748462** | $650624 |
| Add: |  |  |
| &nbsp;&nbsp;&nbsp;Interest and other non-operating expenses <sup>(1)</sup> | **40863** | 8314 |
| &nbsp;&nbsp;&nbsp;Provision for income taxes | **236763** | 173812 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | **14879** | 15187 |
| &nbsp;&nbsp;&nbsp;Goodwill impairment | **605** |  |
| &nbsp;&nbsp;&nbsp;Equity in earnings of unconsolidated investments, net | **(353)** | (291) |
| &nbsp;&nbsp;&nbsp;Note receivable recovery | **—** | (2500) |
| &nbsp;&nbsp;&nbsp;Depreciation | **30381** | 28287 |
| &nbsp;&nbsp;&nbsp;Amortization <sup>(2)</sup> | **7826** | 1325 |
| Adjusted EBITDA | $**1079426** | $874758 |

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<sup>(1)</sup> Shown net of losses on foreign currency transactions of $48 for 2022 and $325 for 2021.

<sup>(2)</sup> Excludes amortization of deferred financing costs of $818 for 2022 and $414 for 2021, which is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

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**Adjusted Diluted EPS**

We have included adjusted diluted EPS, a non-GAAP financial measure, in this press release as a supplemental disclosure, because we believe this measure is useful to management, investors and others in assessing our year-over-year operating performance.

Adjusted diluted EPS is a key measure used by management to demonstrate the impact of tax benefits from ASU 2016-09 on our diluted EPS and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.

We believe this measure should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP, and in the context of our other disclosures in this press release. Other companies may calculate this non-GAAP financial measure differently than we do, which may limit its usefulness as a comparative measure.

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

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Year Ended** | **Year Ended** |
| (Unaudited) | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Diluted EPS | $**1.82** | $2.65 | $**18.70** | $15.97 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: ASU 2016-09 tax benefit | **0.03** | 0.35 | **0.27** | 0.74 |
| Adjusted diluted EPS | $**1.79** | $2.30 | $**18.43** | $15.23 |

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**Adjusted 2023 Diluted EPS Guidance**

Please see page 3 for a reconciliation of projected 2023 diluted EPS to adjusted projected 2023 diluted EPS. We have included adjusted projected 2023 diluted EPS, which is a non-GAAP financial measure, in this press release as a supplemental disclosure to demonstrate the impact of projected tax benefits from ASU 2016-09 on our projected 2023 diluted EPS and to provide investors and others with additional information about our potential future operating performance. We believe adjusted projected 2023 diluted EPS should be considered in addition to, not as a substitute for, projected 2023 diluted EPS presented in accordance with GAAP and in the context of our other forward-looking and cautionary statements in this press release.

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