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Pool Corporation Reports Record Third Quarter Results and Updates 2016 Earnings Guidance Range

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Highlights

  • Net sales growth of 7% with base business net sales growth of 5% for the quarter
  • Operating income growth of 13% for the quarter, 17% year to date
  • Q3 2016 diluted EPS increased 14% to $1.03 with year to date diluted EPS up 20% to $3.39
  • Updated 2016 earnings guidance range to $3.40 - $3.46 per diluted share

COVINGTON, La., Oct. 20, 2016 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ: POOL) today reported record results for the third quarter of 2016 and the nine months ended September 30, 2016. "We experienced a solid third quarter with results that were slightly better than our expectations.  It is at this time of the year, when our customers are working to get as much as possible done before the season ends, that our service is most critical.  Our results reflect our ability to continually improve execution and provide exceptional service.  The breadth and depth of our product and service offerings, coupled with the commitment of our people, continue to positively distinguish us in the marketplace," said Manuel Perez de la Mesa, President and CEO. Net sales for the third quarter of 2016 increased 7% to a record $691.4 million compared to $645.8 million in the third quarter of 2015, with base business sales up 5% for the period.  Our sales continue to benefit from market share gains and stronger consumer discretionary spending evidenced by our increase in sales of pool construction materials and ancillary equipment and supplies, as consumers continue to invest in enhancing their outdoor living spaces. Gross profit for the third quarter of 2016 increased 8% to a record $199.6 million from $184.3 million in the same period of 2015.  Base business gross profit improved 6% over the third quarter of last year.  Gross profit as a percentage of net sales (gross margin) increased 40 basis points to 28.9% compared to the third quarter of 2015.  This increase reflects gains from supply chain management initiatives this year compared to last.  Selling and administrative expenses (operating expenses) increased approximately 6% to $125.4 million in the third quarter of 2016 compared to the third quarter of 2015, with base business operating expenses up 3% over the comparable 2015 period.  While the overall increase in operating expenses includes expenses from our recent acquisitions, the increase in base business operating expenses was primarily due to higher growth-driven labor and freight expenses.  Operating income for the third quarter increased 13% to a record $74.2 million compared to the same period in 2015.  Operating income as a percentage of net sales (operating margin) was 10.7% for the third quarter of 2016 compared to 10.1% in the third quarter of 2015.  Net income attributable to Pool Corporation increased 13% to a record $44.5 million in the third quarter of 2016 compared to $39.4 million for the third quarter of 2015.  Earnings per share increased to a record $1.03 per diluted share for the three months ended September 30, 2016 versus $0.90 per diluted share for the comparable period in 2015. Net sales for the nine months ended September 30, 2016 increased 9% to a record $2,125.6 million from $1,948.1 million in the comparable 2015 period, with much of this growth coming from the 7% improvement in base business sales. Gross margin improved approximately 30 basis points to 28.9% in the first nine months of 2016 compared to the same period last year. Operating expenses increased 6% compared to the first nine months of 2015, with base business operating expenses up 4%.  Operating income for the first nine months of 2016 increased 17% to $246.1 million compared to $210.2 million in the same period last year. Earnings per share for the first nine months of 2016 increased 20% to a record $3.39 per diluted share on Net income attributable to Pool Corporation of $146.3 million, compared to $2.83 per diluted share on Net income attributable to Pool Corporation of $125.8 million in the comparable 2015 period. On the balance sheet, total net receivables increased 6% while inventory levels grew 10% compared to September 30, 2015.  Total debt outstanding at September 30, 2016 was $390.2 million, a $3.2 million decrease from total debt at September 30, 2015. Cash provided by operations was $143.2 million for the first nine months of 2016 compared to $78.0 million for the first nine months of 2015.  The improvement in cash provided by operations is primarily related to our net income growth and the deferral of our third quarter estimated tax payments as allowed for areas affected by severe storms and flooding in Louisiana.  Adjusted EBITDA (as defined in the addendum to this release) was $83.0 million and $72.1 million for the third quarters of 2016 and 2015, respectively, and $269.9 million and $229.6 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. "As we transition to what is traditionally a slower quarter for us, we are confident that our momentum will continue and we will have a strong finish to 2016.  To that end, we are updating our 2016 earnings guidance to a range of $3.40 to $3.46 per diluted share, from our previous range of $3.30 to 3.45 per diluted share.  Looking ahead to 2017, we are excited to employ the tools, products and resources uniquely available to us to provide exceptional value to our customers," said Perez de la Mesa. POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products.  Currently, POOLCORP operates 346 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 2015 Annual Report on Form 10-K filed with the Securities and Exchange Commission.  POOL CORPORATIONConsolidated Statements of Income(Unaudited)(In thousands, except per share data)  Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015Net sales$691,429  $645,779  $2,125,568  $1,948,064 Cost of sales491,878  461,491  1,512,258  1,390,715 Gross profit199,551  184,288  613,310  557,349 Percent28.9% 28.5% 28.9% 28.6%        Selling and administrative expenses125,385  118,776  367,194  347,106 Operating income74,166  65,512  246,116  210,243 Percent10.7% 10.1% 11.6% 10.8%        Interest and other non-operating expenses, net2,989  2,473  9,954  6,368 Income before income taxes and equity earnings71,177  63,039  236,162  203,875 Provision for income taxes26,807  23,704  90,244  78,489 Equity earnings in unconsolidated investments, net    51  68  113  259 Net income44,421  39,403  146,031  125,645 Net loss attributable to noncontrolling interest113  44  309  144 Net income attributable to Pool Corporation$44,534  $39,447  $146,340  $125,789         Earnings per share:       Basic$1.06  $0.92  $3.48  $2.91 Diluted$1.03  $0.90  $3.39  $2.83 Weighted average shares outstanding:       Basic42,020  42,826  42,092  43,266 Diluted43,119  43,939  43,201  44,407         Cash dividends declared per common share$0.31  $0.26  $0.88  $0.74     POOL CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (In thousands)     September 30,  September 30,  Change    2016  2015  $ %              Assets           Current assets:            Cash and cash equivalents$30,292  $29,504  $788  3 % Receivables, net 81,072   70,399   10,673  15   Receivables pledged under receivables facility 152,333   149,375   2,958  2   Product inventories, net 455,156   412,587   42,569  10   Prepaid expenses and other current assets 12,084   11,062   1,022  9   Deferred income taxes 5,288   3,256   2,032  62  Total current assets 736,225   676,183   60,042  9               Property and equipment, net 84,643   66,296   18,347  28  Goodwill 185,486   172,150   13,336  8  Other intangible assets, net 13,645   11,393   2,252  20  Equity interest investments 1,152   1,196   (44) (4) Other assets 16,370   13,682   2,688  20  Total assets$1,037,521  $940,900  $96,621  10 %             Liabilities, redeemable noncontrolling interest and stockholders' equity           Current liabilities:            Accounts payable$199,922  $170,582  $29,340  17 % Accrued expenses and other current liabilities 126,654   77,298   49,356  64   Short-term borrowings and current portion of long-term debt and other long-term liabilities     1,298   1,799   (501) (28) Total current liabilities 327,874   249,679   78,195  31               Deferred income taxes 28,359   22,755   5,604  25  Long-term debt, net 388,891   391,571   (2,680) (1) Other long-term liabilities 17,945   13,216   4,729  36  Total liabilities 763,069   677,221   85,848  13  Redeemable noncontrolling interest 2,467   2,457   10  —  Total stockholders' equity 271,985   261,222   10,763  4  Total liabilities, redeemable noncontrolling interest and stockholders' equity$1,037,521  $940,900  $96,621  10 % __________________ The allowance for doubtful accounts was $3.7 million at September 30, 2016 and $3.5 million at September 30, 2015.The inventory reserve was $8.1 million at September 30, 2016 and $8.3 million at September 30, 2015.Net financing costs of $1.2 million were included in Long-term debt, net at September 30, 2016 and net financing costs of $1.5 million at September 30, 2015 were reclassed from Other assets to Long-term debt, net upon adoption of ASU 2015-03 in the first quarter of 2016.    POOL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)     Nine Months Ended      September 30,      2016  2015  Change Operating activities         Net income$146,031  $125,645  $20,386  Adjustments to reconcile net income to cash provided by operating activities:          Depreciation 15,020   11,920   3,100   Amortization 1,288   771   517   Share-based compensation 7,373   7,112   261   Excess tax benefits from share-based compensation (6,582)  (4,916)  (1,666)  Equity earnings in unconsolidated investments, net (113)  (259)  146   Other 3,799   2,314   1,485  Changes in operating assets and liabilities, net of effects of acquisitions:          Receivables (71,936)  (78,662)  6,726   Product inventories 23,624   52,463   (28,839)  Prepaid expenses and other assets (1,094)  296   (1,390)  Accounts payable (49,479)  (66,035)  16,556   Accrued expenses and other current liabilities 75,239   27,334   47,905  Net cash provided by operating activities 143,170   77,983   65,187            Investing activities         Acquisition of businesses, net of cash acquired (19,314)  (602)  (18,712) Purchases of property and equipment, net of sale proceeds (30,388)  (21,299)  (9,089) Payments to fund credit agreement (3,852)  (6,300)  2,448  Collections from credit agreement 3,300   4,557   (1,257) Other investments, net 21   75   (54) Net cash used in investing activities (50,233)  (23,569)  (26,664)           Financing activities         Proceeds from revolving line of credit 873,854   721,835   152,019  Payments on revolving line of credit (866,801)  (690,677)  (176,124) Proceeds from asset-backed financing 145,000   128,400   16,600  Payments on asset-backed financing (90,000)  (85,800)  (4,200) Proceeds from short-term borrowings, long-term debt and other long-term liabilities       15,705   4,948   10,757  Payments on short-term borrowings, long-term debt and other long-term liabilities (16,107)  (4,678)  (11,429) Excess tax benefits from share-based compensation 6,582   4,916   1,666  Proceeds from stock issued under share-based compensation plans 10,978   10,906   72  Payments of cash dividends (37,007)  (32,008)  (4,999) Purchases of treasury stock (117,901)  (90,306)  (27,595) Net cash used in financing activities (75,697)  (32,464)  (43,233) Effect of exchange rate changes on cash and cash equivalents (185)  (7,276)  7,091  Change in cash and cash equivalents 17,055   14,674   2,381  Cash and cash equivalents at beginning of period 13,237   14,830   (1,593) Cash and cash equivalents at end of period$30,292  $29,504  $788    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 September 30,September 30,September 30, 2016 2015 2016 2015 2016 2015Net sales$677,198  $645,779  $14,231  $—  $691,429  $645,779             Gross profit195,133  184,288  4,418  —  199,551  184,288 Gross margin28.8% 28.5% 31.0% —% 28.9% 28.5%            Operating expenses122,436  118,776  2,949  —  125,385  118,776 Expenses as a % of net sales    18.1% 18.4% 20.7% —% 18.1% 18.4%            Operating income72,697  65,512  1,469  —  74,166  65,512 Operating margin10.7% 10.1% 10.3% —% 10.7% 10.1%       (Unaudited)Base Business Excluded Total(in thousands)Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, 2016 2015 2016 2015 2016 2015Net sales$2,089,745  $1,947,386  $35,823  $678  $2,125,568  $1,948,064             Gross profit602,623  557,174  10,687  175  613,310  557,349 Gross margin28.8% 28.6% 29.8% 25.8% 28.9% 28.6%            Operating expenses360,025  346,805  7,169  301  367,194  347,106 Expenses as a % of net sales    17.2% 17.8% 20.0% 44.4% 17.3% 17.8%            Operating income (loss)242,598  210,369  3,518  (126) 246,116  210,243 Operating margin11.6% 10.8% 9.8% (18.6)% 11.6% 10.8% We have excluded the following acquisitions from base business for the periods identified:   Acquired (1)  AcquisitionDate NetSales CentersAcquired  PeriodsExcludedMetro Irrigation Supply Company Ltd. April 2016 8 April - September 2016The Melton Corporation November 2015 2 January - September 2016Seaboard Industries, Inc. October 2015 3 January - September 2016Poolwerx Development LLC April 2015 1 January - June 2016 andApril - June 2015St. Louis Hardscape Material & Supply, LLC   December 2014 1 January - March 2016 andJanuary - March 2015 (1) We acquired certain distribution assets of each of these companies. 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 center count in the first nine months of 2016. December 31, 2015336  Acquired locations8  New locations4  Consolidated locations                          (2) September 30, 2016346  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  Nine Months Ended (In thousands) September 30,  September 30,    2016  2015  2016  2015 Net income$44,421  $39,403  $146,031  $125,645   Add:             Interest and other non-operating expenses (1) 2,989   2,473   9,954   6,368   Provision for income taxes 26,807   23,704   90,244   78,489   Share-based compensation 2,523   2,262   7,373   7,112   Goodwill impairment 613   —   613   —   Equity earnings in unconsolidated investments     (51)  (68)  (113)  (259)  Depreciation 5,277   4,233   15,020   11,920   Amortization (2) 418   82   796   300  Adjusted EBITDA$82,997  $72,089  $269,918  $229,575   (1) Shown net of interest income and includes amortization of deferred financing costs as discussed below.(2) Excludes amortization of deferred financing costs of $135 and $157 for the three months ended September 30, 2016 and September 30, 2015, respectively, and $492 and $471 for the nine months ended September 30, 2016 and September 30, 2015, respectively. 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) Three Months Ended  Nine Months Ended (In thousands) September 30,  September 30,    2016  2015  2016  2015 Adjusted EBITDA$82,997  $72,089  $269,918  $229,575   Add:             Interest and other non-operating expenses, net of interest income     (2,854)  (2,316)  (9,462)  (5,897)  Provision for income taxes (26,807)  (23,704)  (90,244)  (78,489)  Excess tax benefits from share-based compensation (3,379)  (348)  (6,582)  (4,916)  Other 916   975   3,186   2,314   Change in operating assets and liabilities 106,054   87,933   (23,646)  (64,604) Net cash provided by operating activities$156,927  $134,629  $143,170  $77,983    

 

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

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