Market Overview

Pool Corporation Reports Record 2015 Results and Provides 2016 Earnings Guidance

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Highlights include:

•      Record 2015 diluted EPS of $2.90, an increase of 19% over 2014
•      Record annual sales of $2.36 billion
•      Record 2015 operating margin of 9.1%, up 70 basis points from 2014
•      2016 diluted EPS guidance of $3.20 to $3.35
______________________

COVINGTON, La., Feb. 18, 2016 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ: POOL) today announced fourth quarter and full year 2015 results.

"We had a record-setting year in 2015 topped off with favorable warmer weather in the fourth quarter, which contributed to record fourth quarter sales and our first profitable fourth quarter ever. We grew annual sales by 5% over 2014, despite an almost 2% negative impact from foreign currency fluctuations.  Strict margin discipline and expense management resulted in a strong contribution margin enabling us to expand our operating margin by more than 70 basis points," commented Manuel Perez de la Mesa, President and CEO. 

Net sales for the year ended December 31, 2015 increased 5% to a record high of $2.36 billion, compared to $2.25 billion in 2014.  Base business sales also increased 5%.  Annual sales benefited from increased consumer spending on discretionary products, particularly related to replacement and remodel activity.  Pool owners are investing to upgrade existing pools and outdoor systems to increase energy efficiency and incorporate more technologically advanced products.  Record warm temperatures through much of the fourth quarter extended the pool season well into November and December in many markets, which spurred greater sales in both our building materials and equipment product categories.

Gross profit for the year ended December 31, 2015 reached a record $675.6 million, a 5% increase over gross profit of $643.3 million in 2014.  Gross profit as a percentage of net sales (gross margin) remained constant at 28.6% for both 2015 and 2014.

Selling and administrative expenses (operating expenses) for 2015 increased just 1% to $459.4 million from $454.5 million in 2014.  Increases in performance-based incentive compensation and technology related expenses were offset by tight expense controls and an approximate 2% favorable impact on operating expenses from the stronger U.S. dollar relative to foreign currencies.

Operating income for the year improved 14% to $216.2 million from $188.9 million in 2014.  Operating income as a percentage of net sales (operating margin) increased to a record 9.1% in 2015 compared to 8.4% in 2014.

Net income attributable to Pool Corporation increased 16% to a record $128.3 million in 2015 compared to $110.7 million in 2014.  Earnings per share was up 19% to a record $2.90 per diluted share compared to $2.44 per diluted share in 2014.  Adjusted EBITDA (as defined in the addendum to this release) increased 14% to $241.8 million in 2015 compared to $213.0 million in 2014, or 10.2% of net sales in 2015 compared to 9.5% of net sales in 2014.

On the balance sheet at December 31, 2015, total net receivables, including pledged receivables, increased 11% over the prior year, reflecting our December 2015 sales growth.  Inventory levels grew 2% to $474.3 million compared to $467.0 million last year.  Total debt outstanding was $329.7 million, an increase of $8.9 million or 3% over the prior year's balance.

Cash provided by operations was $146.1 million in 2015, or $17.8 million more than net income.  Compared to 2014, cash provided by operations was $24.2 million higher primarily due to the increase in net income and improvements in the seasonal purchasing and payment cycle.

Net sales for the fourth quarter increased 10% to $415.1 million compared to $376.4 million in the fourth quarter of 2014.  Gross margin improved 30 basis points to 28.5% in the fourth quarter of 2015.  Operating income for the fourth quarter of 2015 was $6.0 million compared to a loss of $0.7 million in the same period last year.  Net income attributable to Pool Corporation for the fourth quarter of 2015 was $2.5 million compared to a loss of $2.2 million in the comparable 2014 period.  Earnings per diluted share for the fourth quarter of 2015 was $0.06 versus a loss of $0.05 per diluted share in the fourth quarter of 2014.

"Our 2015 results are a testament to the caliber and commitment of our people. We believe the resiliency of our business model, together with ongoing investments in our unique tools and resources will foster another year of solid growth.  As we enter the new year, we project earnings will range from $3.20 to $3.35 per diluted share for fiscal 2016. We look forward to building on the foundation laid in 2015 to achieve sustained success through exceptional execution," said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products.  Currently, POOLCORP operates 336 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
(In thousands, except per share data)
 
 Three Months Ended Year Ended 
 December 31, December 31, 
 2015 2014 2015 2014 (1) 
         
Net sales$415,075  $376,442  $2,363,139  $2,246,562  
Cost of sales296,780  270,422  1,687,495  1,603,222  
Gross profit118,295  106,020  675,644  643,340  
Percent28.5 %28.2 %28.6 %28.6 %
         
Selling and administrative expenses112,316  106,752  459,422  454,470  
Operating income (loss)5,979  (732) 216,222  188,870  
Percent1.4 %(0.2)%9.1 %8.4 %
         
Interest and other non-operating expenses, net1,704  1,794  8,072  7,485  
Income (loss) before income taxes and equity earnings (loss)4,275  (2,526) 208,150  181,385  
Provision for income taxes1,648  (552) 80,137  70,559  
Equity earnings (loss) in unconsolidated investments, net(48) (5) 211  204  
Net income (loss)2,579  (1,979) 128,224  111,030  
Net (income) loss attributable to noncontrolling interest(93) (216) 51  (338) 
Net income (loss) attributable to Pool Corporation$2,486  $(2,195) $128,275  $110,692  
         
Earnings (loss) per share:        
Basic$0.06  $(0.05) $2.98  $2.50  
Diluted$0.06  $(0.05) $2.90  $2.44  
Weighted average shares outstanding:        
Basic42,696  43,444  43,105  44,281  
Diluted43,834  43,444  44,254  45,441  
         
Cash dividends declared per common share$0.26  $0.22  $1.00  $0.85  
 
(1)  Derived from audited financial statements.




POOL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
 
  December 31, December 31, Change
  2015 2014 (1) $ %
         
Assets       
Current assets:       
 Cash and cash equivalents$13,237  $14,830  $(1,593) (11)%
 Receivables, net (2)54,173  51,014  3,159  6 
 Receivables pledged under receivables facility102,583  89,631  12,952  14 
 Product inventories, net (3)474,275  466,962  7,313  2 
 Prepaid expenses and other current assets11,946  11,659  287  2 
 Deferred income taxes5,530  3,117  2,413  77 
Total current assets661,744  637,213  24,531  4 
         
Property and equipment, net69,854  56,475  13,379  24 
Goodwill172,761  173,924  (1,163) (1)
Other intangible assets, net11,845  11,995  (150) (1)
Equity interest investments1,231  1,244  (13) (1)
Other assets, net18,596  12,086  6,510  54 
Total assets$936,031  $892,937  $43,094  5%
         
Liabilities, redeemable noncontrolling interest and stockholders' equity       
Current liabilities:       
 Accounts payable$246,554  $236,294  $10,260  4%
 Accrued expenses and other current liabilities56,591  54,085  2,506  5 
 Current portion of long-term debt and other long-term liabilities1,700  1,529  171  11 
Total current liabilities304,845  291,908  12,937  4 
         
Deferred income taxes29,808  23,504  6,304  27 
Long-term debt328,015  319,309  8,706  3 
Other long-term liabilities14,955  10,751  4,204  39 
Total liabilities677,623  645,472  32,151  5 
Redeemable noncontrolling interest2,665  3,113  (448) (14)
Total stockholders' equity255,743  244,352  11,391  5 
Total liabilities, redeemable noncontrolling interest and stockholders' equity$936,031  $892,937  $43,094  5%
 
(1)  Derived from audited financial statements.
(2)  The allowance for doubtful accounts was $4.2 million at December 31, 2015 and $4.0 million at December 31, 2014.
(3)  The inventory reserve was $7.0 million at December 31, 2015 and $6.4 million at December 31, 2014.




POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
 (In thousands)
 
 Year Ended  
 December 31,  
 2015 2014 (1) Change
Operating activities     
Net income$128,224  $111,030  $17,194 
Adjustments to reconcile net income to net cash provided by operating activities:     
 Depreciation16,373  14,495  1,878 
 Amortization1,015  1,387  (372)
 Share-based compensation9,543  9,065  478 
 Excess tax benefits from share-based compensation(7,706) (5,524) (2,182)
 Equity earnings in unconsolidated investments, net(211) (204) (7)
 Losses on foreign currency transactions774  277  497 
 Other4,832  6,145  (1,313)
Changes in operating assets and liabilities, net of effects of acquisitions:     
 Receivables(16,656) (12,751) (3,905)
 Product inventories(10,848) (30,409) 19,561 
 Prepaid expenses and other assets(434) (2,265) 1,831 
 Accounts payable9,956  20,090  (10,134)
 Accrued expenses and other current liabilities11,188  10,479  709 
Net cash provided by operating activities146,050  121,815  24,235 
      
Investing activities     
Acquisition of businesses, net of cash acquired(4,483) (10,648) 6,165 
Purchase of property and equipment, net of sale proceeds(29,095) (17,328) (11,767)
Other investments, net88  165  (77)
Payments to fund credit agreement(8,860)   (8,860)
Collections from credit agreement4,557    4,557 
Net cash used in investing activities(37,793) (27,811) (9,982)
      
Financing activities     
Proceeds from revolving line of credit911,712  820,720  90,992 
Payments on revolving line of credit(890,406) (763,429) (126,977)
Proceeds from asset-backed financing143,400  121,600  21,800 
Payments on asset-backed financing(156,000) (106,000) (50,000)
Proceeds from short-term borrowings, long-term debt and other long-term liabilities8,119  3,607  4,512 
Payments on short-term borrowings, long-term debt and other long-term liabilities(7,948) (3,075) (4,873)
Payments of deferred financing costs(320) (394) 74 
Excess tax benefits from share-based compensation7,706  5,524  2,182 
Proceeds from stock issued under share-based compensation plans18,269  13,530  4,739 
Payments of cash dividends(43,117) (37,600) (5,517)
Purchases of treasury stock(99,219) (136,466) 37,247 
Net cash used in financing activities(107,804) (81,983) (25,821)
Effect of exchange rate changes on cash and cash equivalents(2,046) (5,197) 3,151 
Change in cash and cash equivalents(1,593) 6,824  (8,417)
Cash and cash equivalents at beginning of period14,830  8,006  6,824 
Cash and cash equivalents at end of period$13,237  $14,830  $(1,593)
 
(1) Derived from audited financial statements.


ADDENDUM

Base Business

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

(Unaudited)Base Business Excluded Total
(in thousands)Three Months Ended Three Months Ended Three Months Ended
 December 31, December 31, December 31,
 2015 2014 2015 2014 2015 2014
Net sales$411,068  $374,311  $4,007  $2,131  $415,075  $376,442 
            
Gross profit117,089  105,137  1,206  883  118,295  106,020 
Gross margin28.5% 28.1% 30.1% 41.4% 28.5% 28.2%
            
Operating expenses110,634  105,936  1,682  816  112,316  106,752 
Expenses as a % of net sales26.9% 28.3% 42.0% 38.3% 27.1% 28.4%
            
Operating income (loss)6,455  (799) (476) 67  5,979  (732)
Operating margin1.6% (0.2)% (11.9)% 3.1% 1.4% (0.2)%


(Unaudited)Base Business Excluded Total
(in thousands)Year Ended Year Ended Year Ended
 December 31, December 31, December 31,
 2015 2014 2015 2014 2015 2014
Net sales$2,344,410  $2,238,929  $18,729  $7,633  $2,363,139  $2,246,562 
            
Gross profit669,037  640,259  6,607  3,081  675,644  643,340 
Gross margin28.5% 28.6% 35.3% 40.4% 28.6% 28.6%
            
Operating expenses451,383  451,882  8,039  2,588  459,422  454,470 
Expenses as a % of net sales19.3% 20.2% 42.9% 33.9% 19.4% 20.2%
            
Operating income (loss)217,654  188,377  (1,432) 493  216,222  188,870 
Operating margin9.3% 8.4% (7.6)% 6.5% 9.1% 8.4%


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

 

 

Acquired
  

Acquisition
Date
 Net
Sales Centers
Acquired
  

Periods
Excluded
The Melton Corporation (1) November 2015 2 November - December 2015
Seaboard Industries, Inc. (1) October 2015 3 November - December 2015
Poolwerx Development LLC (1) April 2015 1 April - December 2015
St. Louis Hardscape Material & Supply, LLC (1)(2) December 2014 1 January - December 2015 and December 2014
Pool Systems Pty. Ltd. July 2014 3 January - October 2015 and August - October 2014
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.  We excluded this sales center from base business for the periods identified as per our definition of base business, but also because no results of operations are included in fiscal 2014 due to the acquisition date.  This sales center is not in our sales center count as of December 31, 2014, but is included in the table below as an acquired location during fiscal 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 during 2015.  Please see footnote 2 to the Acquisition table presented above for further information about our acquired locations.

December 31, 2014328
Acquired locations7
New locations4
Consolidated locations(3)
December 31, 2015336


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 losses 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)Year Ended December 31,
(in thousands)2015 2014
    
Net income$128,224  $111,030 
 Add:   
 Interest and other non-operating expenses (1)7,298  7,208 
 Provision for income taxes80,137  70,559 
 Share-based compensation9,543  9,065 
 Equity earnings in unconsolidated investments, net(211) (204)
 Depreciation16,373  14,495 
 Amortization (2)398  845 
Adjusted EBITDA$241,762  $212,998 
 
(1)  Shown net of interest income and losses on foreign currency transactions and includes amortization of deferred financing costs as discussed below.
(2)  Excludes amortization of deferred financing costs of $617 for 2015 and $542 for 2014.  This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.


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

(Unaudited)Year Ended December 31,
(in thousands)2015 2014
    
Adjusted EBITDA$241,762  $212,998 
 Add:   
 Interest and other non-operating expenses, net of interest income(6,681) (6,666)
 Provision for income taxes(80,137) (70,559)
 Losses on foreign currency transactions774  277 
 Excess tax benefits from share-based compensation(7,706) (5,524)
 Other4,832  6,145 
 Change in operating assets and liabilities(6,794) (14,856)
Net cash provided by operating activities$146,050  $121,815 

 

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

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