Peter D. Arvan
President and Chief Executive Officer at Pool
Thanks, Melanie, and good morning to everyone on the call, and thank you for joining us. As you all saw in this morning's release, our fourth quarter results capped off an extraordinary year. Favorable weather, combined with strong demand and tremendous execution by our team, helped us post yet another record quarter. This amazing performance helped propel our full year 2021 net sales to $5.3 billion, which represents an increase of $1.4 billion over an impressive 2020. Certainly, acquisitions helped drive growth throughout the year, adding $257 million in revenue to our net sales, but the real star of the show and a testament to our people and strong operating model is that our base business grew 29% or $1.1 billion in very difficult operating environment.
By focusing on execution, we were able to leverage this growth to achieve incredible earnings. For the full year, our diluted earnings per share soared to $15.97, a 78% improvement over 2020, yet another masterpiece. Our unmatched operating model and capabilities, coupled with the best, most dedicated team in the industry, allowed us to help more people enjoy a backyard oasis than ever before. We could not be prouder or more thankful for our team's efforts, our customer resilience and the support from our manufacturing partners who work diligently in a challenging business environment. In this busy year, we also completed four acquisitions.
We added Pool Source in the Nashville market, Vak Pak Builders Supply in the Jacksonville market to our pool distribution network. Additionally, we added Wingate Supply to Horizon in the Tampa market. And we also completed the very strategic acquisition of Porpoise Pool & Patio in December. This business based out of Clearwater, Florida is a distributor of swimming pool products, a chemical packaging operation and a franchisor of best-in-class swimming pool retail stores throughout the state of Florida with additional franchise locations in Alabama, Georgia, Louisiana and Texas. I'll cover this in more detail in a minute. In addition to the four acquisitions, we opened 10 new locations this past year, four locations as part of our Horizon business and six locations on the pool side.
Before getting into our review of the upcoming season, let me add some color around our amazing fourth quarter. In the last quarter, we posted net sales of $1.04 billion, which is a 23% increase over the previous year's very strong fourth quarter and helped us achieve another milestone, marking four consecutive quarters with net sales above the $1 billion mark. Base business revenues in the fourth quarter rose 22% with acquisitions contributing 1% to the growth during the quarter. From a geographic perspective, our four largest markets ended the year strong. California grew by 16% in the quarter and 24% for the year. Arizona was up 24% in the quarter and 23% for the year.
Texas posted 22% growth in the quarter and 34% for the year. Florida continues to be a strong area for us with 26% growth in the quarter and 30% for the year. Combined, our year-round markets grew 22% for the fourth quarter and 28% for the year. Seasonal markets had similarly strong results with 23% growth for the quarter and 30% for the year. Although it is still a preliminary number, we believe that new pool construction numbers in 2021 will come in around 120,000 units, which implies a growth rate of approximately 25% over the 96,000 pools that were built in 2020. Moving on to end markets. Commercial had a very strong fourth quarter with sales up 26% and 24% for the year.
After a tough 2020, this market has rebounded nicely and continues to drive growth with a strong maintenance and repair market and new construction picking up once again. Retail sales climbed 18% for the quarter and 20% for the year. Let me provide a couple of comments on inflation in the quarter. Most manufacturers announced increases in the fourth quarter as we discussed on our last call, but many came back again and announced additional increases, subsequent to those previously declared.
We expect these increases to pass through the channel as is normal for this business with no impact on demand. In the fourth quarter, we saw increased announcements of approximately 7%. So far this year, we have seen additional increases, which I will quantify for you later in my comments. Turning to product sales performance, beginning with equipment. We saw sales increased 21% for the quarter, bringing the total year to 35%. Heaters, automation products and variable speed pumps led this category's growth. Chemical sales driven largely by inflation grew 26% in the quarter and 20% for the year as supply problems continue to plague us and the industry.
Lastly, building material sales, which is a key indicator of the health of the construction remodel business, saw sales climb by 20% in the quarter and 28% for the year. As a reminder, the fourth quarter of 2020 was incredibly strong in this category as we saw sales for that period grow by 42%, making the 20% growth this quarter even more impressive. Now let me turn your attention to Europe. Once again, a tremendous performance. For the fourth quarter, net sales increased by 18%, and this was on top of a 48% increase for the same period last year. For the full year, Europe grew by 39%, another incredible performance by our dedicated and talented European team. Moving on to our Horizon business.
We are incredibly proud of the performance of this strategic business and very fortunate to have such a talented team. As mentioned previously, we opened four new branches and completed one acquisition late in December that, when combined with our existing locations, helped Horizon grow by 28% in the quarter and 29% for the full year. Looking only at base business growth, Horizon posted 20% growth in the quarter and 22% growth for the full year, proof that our focus on the customer experience is helping us gain share there as well. Turning to gross margin. Overall, gross margin for the quarter ended at an impressive 31.1%, up 260 basis points over the same quarter last year.
For the full year, we ended at 30.5%, a 180 basis point improvement over 2020. Volume-related incentive programs, along with supply chain initiatives, pricing management and product mix, all played a part in this improvement. Operating expenses as a percent of sales came in at 18.8% for the quarter, which is an 80 basis point improvement over the same period last year. For the full year, operating expenses as a percent of sales ended at 14.8%, which is a 210 basis point improvement over full year 2020. The team continues its relentless focus on capacity creation, and when combined with strong growth, the results are very impressive. POOL360 continues to be one of our biggest productivity tools for our team and the customer.
Revenue growth through the tool was 46% in the quarter and makes up about 10% of our order line volume. We expect continued gains in this area as we are now rolling out our next generation of POOL360 with many enhancements that will continue to drive adoption, customer engagement and provide additional value to our customers. Wrapping up the income statement. We are exceptionally proud to report operating income of $128 million for the quarter, which is 72% higher than the same period in 2020. Operating margin came in at 12.3%, which is a 340 basis point improvement when compared to the fourth quarter of 2020. For the full year, operating income totaled $883 million, which is up 79%.
Operating margins for the year ended at 15.7%, which is 390 basis points better than 2020. Again, this would not be possible without a strong market, dedicated and talented dealers, excellent manufacturing partners and the world-class team here at POOLCORP. Before moving on to the outlook for next year, I thought it might be helpful if I provided some insight into the strategic acquisition of Porpoise Pool & Patio and SunCoast Chemical Packaging. We paid $789 million, and we funded this transaction through our existing credit facilities and remain well below our targeted leverage range of 1.5 to two times trailing 12-month EBITDA. This unique acquisition is essentially three businesses.
One is a pool products distribution business that provides supplies to 262 individually owned and operated franchise pool and outdoor living retail stores and three company-owned stores. The second part of this business is a world-class chemical packaging operation that packages and sells chemicals to these franchise stores and other distributors and retailers in the industry. The third part of this business is a franchisor, Pinch A Penny, an award-winning, best-in-class franchisor with a stellar reputation in the franchising world and in the swimming pool retail market.
Their retailing and customer support expertise developed over a 45-year history include a cutting-edge technology platform will provide new capabilities to POOLCORP that can be leveraged to benefit all our current customer base segments. When combined with our tremendous buying power, our international distribution network and proven execution-focused operating model, this is an extremely powerful and unmatched combination. As I mentioned, the business includes a world-class chemical packaging operation that produces and packages trichlor tablets and other proprietary specialty chemicals, including a variety of proprietary liquid chemical blends under several well-known brands for use in swimming pool maintenance.
The operation enhances our cost position, improves supply consistency and reliability and is scalable for future growth. Today, all products are warehoused in one state-of-the-art distribution center located in Clearwater, Florida and delivered to the retail stores by a fleet of dedicated delivery vehicles. As previously mentioned, the business has 262 stores. 232 of the stores are located in Florida, with the remaining 30 located in Alabama, Southern Georgia, Louisiana and Texas. Supplying to now 21 Texas stores from South Florida is a challenge, so you can see that our existing distribution network creates tremendous synergies. It is our intent to leverage these capabilities over time and establish franchise locations throughout the Sunbelt to enhance our service to the significant number of homeowners maintaining their own pools.
One of the most strategic capabilities and key motivation for the acquisition of Porpoise Pool & Patio was the technology platforms and tools they have developed that can -- that we can leverage across all of our customer segments. Best-in-class tools such as a point-of-sale system, a water chemistry chemical application guide and customer apps, demand-creation tools, service management software and valuable local pool market databases that will help fuel our business growth and product sales for many years to come. Jim Eisch, a 28-year veteran and key architect of this amazing business, has joined the POOLCORP team and will help us integrate and grow this business going forward.
Jim will report to me and has already become a key contributor and confidant to our team. We plan to expand the Pinch A Penny franchise store network at an initial rate of eight to 12 locations per year, focusing on maintaining and enhancing the brand while providing the high level of support that the franchisees have come to expect. To date, we have opened one new store in 2022. The acquired Porpoise Pool & Patio operations are expected to contribute approximately 5% to POOLCORP's total revenue in 2022. We are confident that over time, this operation will accelerate our penetration into the important DIY pool maintenance customer sector, comprised of highly desirable recurring revenue maintenance products for the growing installed base of swimming pools.
Finally and before I turn this over to Melanie for her commentary, let me provide some thoughts for 2022 and our initial guidance range for full year EPS. The pool and outdoor living industry driven by consumers' desire to spend more time outdoors in the comfort of their own backyard is strong. Whether it's an afternoon in a pool or spa with family and friends or grilling dinner on the patio in an amazing outdoor kitchen or simply enjoying a quiet evening in a manicured backyard that is accented with beautiful hardscapes and outdoor lighting, we are an integral part of the equation and demand is growing. Dealers are reporting very strong backlogs.
Realtors are reporting that homeowners seek properties with a backyard retreat, including a pool, are in very high demand. COVID has accelerated the movement to the suburbs, fueled the southern migration and changed the way people work, allowing millions of people to work from home. It created an environment that supercharged our industry. Demand remains very strong across all our geographies, and we see some encouraging signs as the supply chain is improving as well. Inflationary pressures continue but have yet to curtail demand. So we remain optimistic that the underlying -- about the underlying strength of the industry. We see labor constraints as continuing to be one of the biggest limiting factors on pool construction and remodeling growth but again are encouraged by signs of our contractor customers wanting to expand the size of their crews in many areas.
Labor will continue to be a limiting factor on how fast the industry can grow. Whether we're talking about new construction or remodel or service, skilled labor is required, and there is a war for talent. This war also affects our suppliers and their suppliers, which is continuing to impact the product availability for the coming season. Chemicals will continue to be tight, and the products that contain computer chips, such as automation and some variable speed pumps, will remain challenged. Inflation increased more than we previously expected. We ended the year with a benefit from inflation of 7% to 8%, including 8% to 9% in the fourth quarter.
Inflation now looks to be in the 9% to 10% range as we move into 2022. Acquisitions and new locations will add 5% to 6% to our revenue growth. Taking all of this into account, we expect top line growth to be in the 17% to 19% on top of an amazing 2021. Earnings per share are projected to reach $17.19 to $17.94 per share. In closing, I would like to thank the POOLCORP team, our amazing customers and incredible supply partners for helping us bring outdoor living to life for so many people.
I will now turn the call over to Melanie Hart, Vice President and Chief Financial Officer, for her comments.