Cautionary Note Regarding Forward-Looking Statements
With an operating history that spans over 65 years, we offer the industry's broadest portfolio of pools and related products, including in-ground swimming pools, pool liners and pool covers.
We conduct our business as one operating and reportable segment that designs, manufactures and markets in-ground swimming pools, liners and covers.
Highlights for the fiscal quarter ended
Increase in net sales of 14.3%, or $25.9 million, to $206.8 million for the
? fiscal quarter ended July 2, 2022, compared to $180.9 million for the fiscal
Increase in net income of $57.9 million, to $4.3 million for the fiscal quarter
? ended July 2, 2022, compared to a net loss of $53.6 million for the fiscal
quarter ended July 3, 2021, representing an 2.1% net income margin for the
Increase in Adjusted EBITDA (as defined below) of $5.9 million, to $48.7
? million for the fiscal quarter ended July 2, 2022, compared to $42.8 million
for the fiscal quarter ended July 3, 2021.
Highlights for the two fiscal quarters ended
Increase in net sales of 20.9%, or $68.8 million, to $398.4 million for the two
? fiscal quarters ended July 2, 2022, compared to $329.6 million for the two
Increase in net income of $46.6 million, to $1.5 million for the two fiscal
? quarters ended July 2, 2022, compared to a net loss of $45.1 million for the
two fiscal quarters ended July 3, 2021, representing an 0.4% net income margin
for the two fiscal quarters ended July 2, 2022.
Increase in Adjusted EBITDA of $20.2 million, to $96.6 million for the two
? fiscal quarters ended July 2, 2022, compared to $76.4 million for the two
concurrently retired 2,026,231 shares of the Company's common stock for an aggregate amount of $15.0 million, pursuant to the Repurchase Program. As of July 2, 2022, approximately $85.0 million remained available for share repurchases pursuant to our Repurchase Program.
Our sales are made through one-step and two-step business-to-business distribution channels. In our one-step distribution channel, we sell our products directly to dealers who, in turn, sell our products to consumers. In our two-step distribution channel, we sell our products to distributors who warehouse our products and sell them on to dealers, who ultimately sell our products to consumers.
Adjusted EBITDA and Adjusted EBITDA Margin
For a discussion of Adjusted EBITDA and Adjusted EBITDA margin and the limitations on their use, and the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and our calculation of Adjusted EBITDA margin see "-Non-GAAP Financial Measures" below.
Fiscal Quarter Ended July 2, 2022 Compared to Fiscal Quarter Ended July 3, 2021
The following table summarizes our results of operations for the fiscal quarter ended July 2, 2022 and July 3, 2021:
(a)Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" for a reconciliation to net income (loss), the most directly comparable GAAP measure, and for information regarding our use of Adjusted EBITDA.
Cost of Sales and Gross Margin
Selling, General and Administrative Expense
Amortization was $7.2 million for the fiscal quarter ended July 2, 2022, compared to $5.5 million for the fiscal quarter ended July 3, 2021. The $1.7 million, or 30.6%, increase in amortization was due to the increase in our definite-lived intangible assets resulting from our acquisition of Trojan Leisure Products, LLC d/b/a Radiant Pools ("Radiant") in November 2021.
Earnings from Equity Method Investment
Net income was $4.3 million for the fiscal quarter ended July 2, 2022, compared to $53.6 million of net loss for the fiscal quarter ended July 3, 2021. The $57.9 million, or 108.0%, increase in net income was primarily due to the factors described above.
Adjusted EBITDA margin was 23.5% for the fiscal quarter ended July 2, 2022, compared to 23.7% for the fiscal quarter ended July 3, 2021. The 0.2% decrease in Adjusted EBITDA margin was primarily due to a $5.9 million increase in Adjusted EBITDA and a $25.9 million increase in net sales, compared to the fiscal quarter ended July 3, 2021, as well as the other factors described above.
Two Fiscal Quarters Ended July 2, 2022 Compared to Two Fiscal Quarters Ended July 3, 2021
The following table summarizes our results of operations for the two fiscal quarters ended July 2, 2022 and July 3, 2021:
122,460 37.2 % (35,431) (15.4) % Underwriting fees related to offering of common stock
(a)Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" for a reconciliation to net income (loss), the most directly comparable GAAP measure, and for information regarding our use of Adjusted EBITDA.
Cost of Sales and Gross Margin
Selling, General and Administrative Expense
Underwriting Fees Related to Offering of Common Stock
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $3.5 million for the two fiscal quarters ended July 2, 2022, compared to none for the two fiscal quarters ended July 3, 2021 as our debt refinancing was completed in February 2022.
Earnings from Equity Method Investment
Adjusted EBITDA and Adjusted EBITDA Margin
? do not reflect every expenditure, future requirements for capital expenditures
? do not reflect changes in our working capital needs;
? do not reflect the interest expense, or the amounts necessary to service
interest or principal payments, on our outstanding debt;
do not reflect income tax (benefit) expense, and because the payment of taxes
? is part of our operations, tax expense is a necessary element of our costs and
? do not reflect non-cash equity compensation, which will remain a key element of
our overall equity-based compensation package; and
? do not reflect the impact of earnings or charges resulting from matters we
consider not to be indicative of our ongoing operations.
The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin:
(a) Represents severance and other costs for our executive management changes.
(b) Represents non-cash stock-based compensation expense.
(c) Represents unrealized foreign currency transaction (gains) and losses associated with our international subsidiaries.
(d) Represents fees paid to external consultants for our strategic initiatives.
(e) Represents acquisition and integration costs primarily related to the acquisition of Radiant, the equity investment in Premier Pools & Spas, as well as other costs related to potential transactions.
(f) Represents the loss on extinguishment of debt in connection with our Refinancing (as defined below).
(h) Represents underwriting fees related to our offering of common stock that was completed in January 2022.
(i) Represents costs incurred related to a production facility fire in Odessa, Texas.
As of July 2, 2022 we had $313.7 million of outstanding borrowings under the New Term Loan.
As of July 2, 2022, we were in compliance with all covenants under the New Revolving Credit Facility and the New Term Loan.
Net cash (used in) provided by operating activities $ (15,086)
borrowings of $284.8 million, the repurchase and retirement of common stock of $272.7 million, repayments on revolving credit facility borrowings of $25.0 million, and deferred financing fees paid of $6.9 million.
Critical Accounting Policies and Estimates
Recently Issued and Adopted Accounting Pronouncements
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