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Pool Corporation Reports Record Second Quarter Results and Narrows 2015 Earnings Guidance Range

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Highlights include:  

  • Record second quarter and year to date results
  • Q2 diluted EPS of $1.75, up 9% over Q2 2014; year to date diluted EPS of $1.94, up 15% over first half of 2014 
  • Updated 2015 earnings guidance range to $2.72 - $2.82 per diluted share 


COVINGTON, La., July 23, 2015 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ: POOL) today reported record results for the second quarter of 2015. 

"Our domestic blue business realized 6% sales growth year to date and 3% sales growth in the second quarter of 2015 compared to the prior year periods.  Adverse weather conditions in a number of our significant markets affected our second quarter growth, as did the shift of early buy shipments into the first quarter.  Our customers currently have a larger than normal backlog, given lost workdays, as a result of record rainfall in many important markets.  Conversely, in markets where weather was normal, our results met or exceeded our expectations.  In local currencies, our international business generated an estimated 8% aggregate sales growth rate year to date and an estimated 6% aggregate sales growth rate for the quarter.  When translated into U.S. dollars, our international business negatively impacted our consolidated sales growth rates due to the nearly 20% appreciation of the U.S. dollar relative to most international currencies since this time last year," said Manuel Perez de la Mesa, President and CEO. 

Net sales for the second quarter of 2015 were a record $851.9 million compared to $848.2 million in the second quarter of 2014, with base business sales flat for the period.  The decline in foreign currency exchange rates relative to the U.S. dollar negatively impacted our consolidated sales growth rate by approximately 2% period over period.  Excessive precipitation in Texas and adjacent states significantly impacted our second quarter sales, delaying construction projects and reducing spending on related discretionary products.  Cooler than normal temperatures in the Midwest and the Northeast delayed pool openings and inhibited sales growth in these markets.  

Gross profit for the second quarter of 2015 increased 1% to a record $248.3 million from $247.0 million in the same period of 2014.  Gross profit as a percentage of net sales (gross margin) was 29.1% in both the second quarter of 2015 and 2014. 

Selling and administrative expenses (operating expenses) decreased 4% to $119.1 million in the second quarter of 2015 compared to the second quarter of 2014, with base business operating expenses down 6% for the period.  The stronger U.S. dollar relative to foreign currencies favorably impacted our operating expenses by approximately 2%.  A reduction in performance-based employee compensation also contributed to this decline. 

Operating income for the quarter increased 5% to a record $129.1 million compared to the same period in 2014.  Operating income as a percentage of net sales (operating margin) was 15.2% for the second quarter of 2015 compared to 14.4% in the second quarter of 2014.  The effect of foreign currency fluctuations from the strengthening of the U.S. dollar on consolidated operating income is an estimated $2.2 million, which includes the comparison of our foreign subsidiaries' second quarter 2015 local currency operating income translated at historical second quarter 2014 exchange rates, to their reported second quarter 2014 U.S. dollar operating income. 

Net income attributable to Pool Corporation increased 5% to a record $77.9 million in the second quarter of 2015, compared to $73.9 million for the second quarter of 2014.   Earnings per share was a record $1.75 per diluted share for the three months ended June 30, 2015 versus $1.61 per diluted share for the comparable period in 2014.  We estimate a $0.03 negative impact on earnings per share in the quarter versus the comparable 2014 period, due to the impact of the stronger U.S. dollar on the translation of foreign currency denominated earnings. 

Net sales for the six months ended June 30, 2015 increased 4% to a record $1,302.3 million from $1,254.6 million in the comparable 2014 period, with much of this growth coming from the 3% improvement in base business sales.  There was a 2% negative foreign currency translation impact on our consolidated sales growth rate for the first half of 2015 compared to the first half of 2014.  Gross margin decreased approximately 15 basis points to 28.6% in the first half of 2015 from the same period last year. 

Operating expenses declined 1% compared to the first half of 2014, with base business operating expenses down 2%.  The stronger U.S. dollar relative to foreign currencies favorably impacted our year to date operating expenses by approximately 2%.  Operating income for the first six months of 2015 increased 10% to $144.7 million compared to $131.1 million in the same period last year.  Operating income was adversely affected by an estimated $1.9 million from the impact of foreign currency translation. 

Earnings per share for the first six months of 2015 increased 15% to a record $1.94 per diluted share on net income attributable to Pool Corporation of $86.3 million, compared to $1.69 per diluted share on net income of $78.1 million in the comparable 2014 period.  We estimate a $0.03 negative impact on earnings per share versus the comparable 2014 period due to the impact of the stronger U.S. dollar on the translation of foreign currency denominated earnings. 

On the balance sheet, total net receivables and net inventory levels increased 4% and 5%, respectively, compared to June 30, 2014.  Total debt outstanding at June 30, 2015 was $495.3 million, up 15% compared to June 30, 2014. 

Cash used in operations was $56.6 million for the first six months of 2015 compared to $50.9 million for the first six months of 2014.  The increase in cash used is primarily related to our accounts receivable growth as well as timing differences in our accounts payable cycle.  Adjusted EBITDA (as defined in the addendum to this release) was $135.9 million and $128.9 million for the second quarter of 2015 and 2014, respectively, and $157.5 million and $143.3 million for the first six months of 2015 and 2014, respectively. 

"With the first half of 2015 behind us, we are narrowing our annual earnings guidance range to $2.72 to $2.82 per diluted share, compared to our previous range of $2.72 to $2.87 per diluted share.  Achieving this would represent another year of solid earnings growth as we strive to provide exceptional value to our customers and suppliers.  It is in the heat of the season that our unprecedented investments make us THE source for industry professionals," said Perez de la Mesa. 

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products.  Currently, POOLCORP operates 331 sales centers in North America, Europe, South America and Australia, through which it distributes more than 160,000 national brand and private label products to roughly 100,000 wholesale customers.  For more information, please visit www.poolcorp.com. 

This news release includes "forward-looking" statements that involve risk 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 and other risks detailed in POOLCORP's 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission.  

 
POOL CORPORATION 
Consolidated Statements of Income 
(Unaudited) 
(In thousands, except per share data) 
    
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
Net sales$851,855  $848,240  $1,302,285  $1,254,584 
Cost of sales603,595  601,264  929,224  893,508 
Gross profit248,260  246,976  373,061  361,076 
Percent29.1% 29.1% 28.6% 28.8%
        
Selling and administrative expenses119,128  124,477  228,330  229,931 
Operating income129,132  122,499  144,731  131,145 
Percent15.2% 14.4% 11.1% 10.5%
        
Interest expense, net1,900  1,894  3,895  3,827 
Income before income taxes and equity earnings127,232  120,605  140,836  127,318 
Provision for income taxes49,493  46,796  54,785  49,400 
Equity earnings in unconsolidated investments70  54  191  133 
Net income77,809  73,863  86,242  78,051 
Add: net loss attributable to noncontrolling interest115    101   
Net income attributable to Pool Corporation$77,924  $73,863  $86,343  $78,051 
        
Earnings per share:       
Basic$1.80  $1.65  $1.99  $1.74 
Diluted$1.75  $1.61  $1.94  $1.69 
Weighted average shares outstanding:       
Basic43,322  44,769  43,461  44,972 
Diluted44,458  45,971  44,606  46,160 
        
Cash dividends declared per common share$0.26  $0.22  $0.48  $0.41 

  

  
 POOL CORPORATION 
 Condensed Consolidated Balance Sheets 
 (Unaudited) 
 (In thousands) 
           
   June 30,  June 30,  Change 
   2015  2014  $ % 
             
Assets           
Current assets:           
 Cash and cash equivalents$38,944  $27,563  $11,381  41 %
 Receivables, net 93,709   97,527   (3,818) (4) 
 Receivables pledged under receivables facility 224,789   208,973   15,816  8  
 Product inventories, net 473,362   451,507   21,855  5  
 Prepaid expenses and other current assets 11,226   10,055   1,171  12  
 Deferred income taxes 3,104   5,416   (2,312) (43) 
Total current assets 845,134   801,041   44,093  6  
             
Property and equipment, net 65,151   57,275   7,876  14  
Goodwill 172,815   173,800   (985) (1) 
Other intangible assets, net 11,643   10,725   918  9  
Equity interest investments 1,328   1,263   65  5  
Other assets, net 15,511   11,344   4,167  37  
Total assets$1,111,582  $1,055,448  $56,134  5 %
             
Liabilities, redeemable noncontrolling interest and stockholders' equity           
Current liabilities:           
 Accounts payable$236,868  $233,549  $3,319  1 %
 Accrued expenses and other current liabilities 80,480   89,200   (8,720) (10) 
 Short-term borrowings and current portion of long-term debt and other long-term liabilities 3,430      3,430  100  
Total current liabilities 320,778   322,749   (1,971) (1) 
             
Deferred income taxes 23,642   19,979   3,663  18  
Long-term debt 491,820   430,971   60,849  14  
Other long-term liabilities 13,837   10,432   3,405  33  
Total liabilities 850,077   784,131   65,946  8  
Redeemable noncontrolling interest 2,766      2,766  100  
Total stockholders' equity 258,739   271,317   (12,578) (5) 
Total liabilities, redeemable noncontrolling interest and stockholders' equity$1,111,582  $1,055,448  $56,134  5 %

 __________________  

  1. The allowance for doubtful accounts was $3.3 million at June 30, 2015 and $4.4 million at June 30, 2014.
  2. The inventory reserve was $7.9 million at June 30, 2015 and $8.5 million at June 30, 2014. 
 
 POOL CORPORATION 
 Condensed Consolidated Statements of Cash Flows 
 (Unaudited) 
 (In thousands) 
       
  Six Months Ended    
  June 30,    
  2015  2014  Change 
Operating activities         
Net income$86,242  $78,051  $8,191  
Adjustments to reconcile net income to net cash used in operating activities:         
 Depreciation 7,687   7,021   666  
 Amortization 532   696   (164) 
 Share-based compensation 4,850   4,657   193  
 Excess tax benefits from share-based compensation (4,568)  (3,920)  (648) 
 Equity earnings in unconsolidated investments (191)  (133)  (58) 
 Other 1,339   2,982   (1,643) 
Changes in operating assets and liabilities, net of effects of acquisitions:         
 Receivables (177,193)  (180,075)  2,882  
 Product inventories (7,849)  (21,936)  14,087  
 Prepaid expenses and other assets 4   (1,350)  1,354  
 Accounts payable 487   18,065   (17,578) 
 Accrued expenses and other current liabilities 32,014   45,054   (13,040) 
Net cash used in operating activities (56,646)  (50,888)  (5,758) 
          
Investing activities         
Acquisition of businesses, net of cash acquired (479)  (4,612)  4,133  
Purchase of property and equipment, net of sale proceeds (16,200)  (11,921)  (4,279) 
Payments to fund credit agreement (5,350)     (5,350) 
Collections from credit agreement 3,407      3,407  
Other investments, net 59   96   (37) 
Net cash used in investing activities (18,563)  (16,437)  (2,126) 
          
Financing activities         
Proceeds from revolving line of credit 526,116   457,218   68,898  
Payments on revolving line of credit (466,005)  (380,665)  (85,340) 
Proceeds from asset-backed financing 128,400   121,600   6,800  
Payments on asset-backed financing (16,000)  (13,600)  (2,400) 
Proceeds from short-term borrowings, long-term debt and other long-term liabilities 4,110      4,110  
Payments on short-term borrowings, long-term debt and other long-term liabilities (2,209)     (2,209) 
Excess tax benefits from share-based compensation 4,568   3,920   648  
Proceeds from stock issued under share-based compensation plans 8,372   6,335   2,037  
Payments of cash dividends (20,855)  (18,410)  (2,445) 
Purchases of treasury stock (62,701)  (88,745)  26,044  
Net cash provided by financing activities 103,796   87,653   16,143  
Effect of exchange rate changes on cash and cash equivalents (4,473)  (771)  (3,702) 
Change in cash and cash equivalents 24,114   19,557   4,557  
Cash and cash equivalents at beginning of period 14,830   8,006   6,824  
Cash and cash equivalents at end of period$38,944  $27,563  $11,381  


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 BusinessExcludedTotal
(in thousands)Three Months EndedThree Months EndedThree Months Ended
 June 30,June 30,June 30,
 2015 2014 2015 2014 2015 2014
Net sales$847,263  $846,511  $4,592  $1,729  $851,855  $848,240 
            
Gross profit246,683  246,392  1,577  584  248,260  246,976 
Gross margin29.1% 29.1% 34.3% 33.8% 29.1% 29.1%
            
Operating expenses117,205  124,139  1,923  338  119,128  124,477 
Expenses as a % of net sales13.8% 14.7% 41.9% 19.5% 14.0% 14.7%
            
Operating income (loss)129,478  122,253  (346) 246  129,132  122,499 
Operating margin15.3% 14.4% (7.5)% 14.2% 15.2% 14.4%

 

(Unaudited)Base BusinessExcludedTotal
(in thousands)Six Months EndedSix Months EndedSix Months Ended
 June 30,June 30,June 30,
 2015 2014 2015 2014 2015 2014
Net sales$1,292,138  $1,252,518  $10,147  $2,066  $1,302,285  $1,254,584 
            
Gross profit369,322  360,356  3,739  720  373,061  361,076 
Gross margin28.6% 28.8% 36.8% 34.8% 28.6% 28.8%
            
Operating expenses223,910  229,439  4,420  492  228,330  229,931 
Expenses as a % of net sales17.3% 18.3% 43.6% 23.8% 17.5% 18.3%
            
Operating income (loss)145,412  130,917  (681) 228  144,731  131,145 
Operating margin11.3% 10.5% (6.7)% 11.0% 11.1% 10.5%


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

Acquired Acquisition
Date
 Net
Sales Centers
Acquired
 Periods
Excluded
Poolwerx Development LLC (1) April 2015 1 April - June 2015
St. Louis Hardscape Material & Supply, LLC (1) (2) December 2014 1 January - June 2015
Pool Systems Pty. Ltd. July 2014 3 January - June 2015
DFW Stone Supply, LLC (1) March 2014 2 January - May 2015 and March - May 2014
Atlantic Chemical & Aquatics Inc. (1) February 2014 2 January - April 2015 and February - April 2014

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

(2) We completed this acquisition on December 31, 2014. This sales center is included in our sales center count beginning in January 2015, as shown in the table below which summarizes the changes in our sales centers during 2015. 

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 in the first six months of 2015.  Please see footnote 2 to the acquisition table presented above for further information about our acquired locations. 

December 31, 2014 328  
Acquired  
New locations  
Consolidated locations —  
June 30, 2015 331 


Adjusted EBITDA 

We define Adjusted EBITDA as net income or net loss plus interest expense, 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, 
   2015  2014  2015  2014 
Net income$77,809  $73,863  $86,242  $78,051  
 Add:            
 Interest expense (1) 1,900   1,894   3,895   3,827  
 Provision for income taxes 49,493   46,796   54,785   49,400  
 Share-based compensation 2,679   2,599   4,850   4,657  
 Equity earnings in unconsolidated investments (70)  (54)  (191)  (133) 
 Depreciation 3,976   3,587   7,687   7,021  
 Amortization (2) 97   235   218   430  
Adjusted EBITDA$135,884  $128,920  $157,486  $143,253  

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

(2) Excludes amortization of deferred financing costs of $157 and $133 for the three months ended June 30, 2015 and June 30, 2014, respectively, and $314 and $266 for the six months ended June 30, 2015 and June 30, 2014, 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, 
   2015  2014  2015  2014 
Adjusted EBITDA$135,884  $128,920  $157,486  $143,253  
 Add:            
 Interest expense, net of interest income (1,743)  (1,761)  (3,581)  (3,561) 
 Provision for income taxes (49,493)  (46,796)  (54,785)  (49,400) 
 Excess tax benefits from share-based compensation (830)  (2,433)  (4,568)  (3,920) 
 Other (768)  2,647   1,339   2,982  
 Change in operating assets and liabilities (82,043)  (94,120)  (152,537)  (140,242) 
Net cash provided by (used in) operating activities$1,007  $(13,543) $(56,646) $(50,888) 

 

CONTACT: Craig K. Hubbard 985.801.5117 craig.hubbard@poolcorp.com

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