EX-99.1 2 pool-q12014xer.htm POOL Q1 2014 EARNINGS RELEASE POOL-Q1 2014-ER

    
Exhibit 99.1

FOR IMMEDIATE RELEASE


POOL CORPORATION REPORTS FIRST QUARTER RESULTS
AND AFFIRMS 2014 EARNINGS GUIDANCE RANGE

______________________

COVINGTON, LA. (April 17, 2014) – Pool Corporation (NASDAQ/GSM:POOL) today reported results for the first quarter of 2014.

“As we focus on the emerging 2014 season, we believe our first quarter results are a solid starting point. From an operational perspective, the first quarter offers us an opportunity to further every aspect of our business. We have expanded into new areas and have enhanced our product offerings to extend our reach and our ability to better serve our customers,” said Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended March 31, 2014 increased 10% to a record $406.3 million compared to $370.4 million in the first quarter of 2013, with base business sales up 9% for the period. Increased replacement and remodel activity led our base business growth, as evidenced by double-digit sales growth in building materials and equipment, primarily in our largest year-round markets. Approximately 2% of our sales growth reflected a change in the timing of customer early buy purchases, which effectively shifted sales into the first quarter of 2014 that have historically occurred in the second quarter. This change enables our customers to better position themselves to meet demand during the 2014 season, but alters the year over year comparability of our first and second quarter results.

Gross profit for the first quarter of 2014 increased 9% to a record $114.1 million from $104.8 million in the same period of 2013. Gross profit as a percentage of net sales (gross margin) declined 20 basis points to 28.1% in the first quarter of 2014. The shift in customer early buy purchases negatively impacted first quarter gross margin. Excluding this impact, gross margin was essentially flat compared to the first quarter of last year.
  
Selling and administrative expenses (operating expenses) increased 8% to $105.5 million in the first quarter of 2014 compared to the first quarter of 2013, with base business operating expenses up 7% for the period. This increase primarily reflects incremental costs to support our first quarter net sales growth, inflationary cost increases, higher outside professional fees and increased costs due to the expansion in 2014 of our annual retail marketing event. These increases had a proportionately larger impact on our results given the seasonality of our first quarter sales.

Operating income for the quarter increased 25% to $8.6 million compared to the same period in 2013. Operating income as a percentage of net sales (operating margin) was 2.1% for the first quarter of 2014 compared to 1.9% in the first quarter of 2013.

Net income increased 22% to $4.2 million in the first quarter of 2014, compared to $3.4 million for the first quarter of 2013. Earnings per share was up $0.02 to $0.09 per diluted share for the three months ended March 31, 2014 versus $0.07 per diluted share for the comparable period in 2013.

On the balance sheet, total net receivables and net inventory levels increased 12% and 7% compared to March 31, 2013. Total debt outstanding at March 31, 2014 was $324.2 million, up 16% compared to March 31, 2013.



Cash used in operations was $37.3 million for the first three months of 2014 compared to $40.0 million for the first three months of 2013. Adjusted EBITDA (as defined in the addendum to this release) was $14.3 million for the first quarter of 2014 compared to $12.1 million for the first quarter of 2013.

“We are now fully engaged in 2014, with our team dedicated to exceeding customers' expectations every day to earn their business. We affirm our 2014 annual earnings guidance of $2.35 to $2.45 per diluted share. All in all, we believe we have the tools, the programs, the inventory, the support and especially, the people to uniquely provide more value than anyone in the industry,” said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 325 sales centers in North America, Europe and South America, through which it distributes more than 160,000 national brand and private label products to roughly 80,000 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 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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

2


POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

 
Three Months Ended
 
 
March 31,
 
 
2014
 
2013
 
 
 
 
 
 
 
Net sales
$
406,344

 
$
370,362

 
Cost of sales
 
292,244

 
 
265,601

 
Gross profit
 
114,100

 
 
104,761

 
Percent
 
28.1

%
 
28.3

%
 
 
 
 
 
 
 
Selling and administrative expenses
 
105,454

 
 
97,829

 
Operating income
 
8,646

 
 
6,932

 
Percent
 
2.1

%
 
1.9

%
 
 
 
 
 
 
 
Interest expense, net
 
1,933

 
 
1,614

 
Income before income taxes and equity earnings
 
6,713

 
 
5,318

 
Provision for income taxes
 
2,604

 
 
1,896

 
Equity earnings in unconsolidated investments
 
79

 
 
18

 
Net income
$
4,188

 
$
3,440

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
Basic
$
0.09

 
$
0.07

 
Diluted
$
0.09

 
$
0.07

 
Weighted average shares outstanding:
 
 
 
 
 
 
Basic
 
45,178

 
 
46,385

 
Diluted
 
46,375

 
 
47,580

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.19

 
$
0.16

 




3


POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

 
 
 
March 31,
 
 
March 31,
 
 
Change
 
 
 
 
2014
 
 
2013
 
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,257

 
$
12,873

 
$
(5,616
)
 
(44
)
%
 
Receivables, net
 
47,694

 
 
188,294

 
 
(140,600
)
 
(75
)
 
 
Receivables pledged under receivables facility
 
163,413

 
 
—

 
 
163,413

 
100

 
 
Product inventories, net
 
527,304

 
 
494,321

 
 
32,983

 
7

 
 
Prepaid expenses and other current assets
 
9,944

 
 
13,029

 
 
(3,085
)
 
(24
)
 
 
Deferred income taxes
 
5,427

 
 
5,153

 
 
274

 
5

 
Total current assets
 
761,039

 
 
713,670

 
 
47,369

 
7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
55,212

 
 
48,755

 
 
6,457

 
13

 
Goodwill
 
173,554

 
 
169,983

 
 
3,571

 
2

 
Other intangible assets, net
 
10,991

 
 
10,793

 
 
198

 
2

 
Equity interest investments
 
1,272

 
 
1,179

 
 
93

 
8

 
Other assets, net
 
11,132

 
 
9,360

 
 
1,772

 
19

 
Total assets
$
1,013,200

 
$
953,740

 
$
59,460

 
6

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
370,002

 
$
338,026

 
$
31,976

 
9

%
 
Accrued expenses and other current liabilities
 
28,069

 
 
30,413

 
 
(2,344
)
 
(8
)
 
 
Current portion of long-term debt and other long-term liabilities
 
4

 
 
21

 
 
(17
)
 
(81
)
 
Total current liabilities
 
398,075

 
 
368,460

 
 
29,615

 
8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
19,747

 
 
14,207

 
 
5,540

 
39

 
Long-term debt
 
324,226

 
 
278,542

 
 
45,684

 
16

 
Other long-term liabilities
 
9,474

 
 
7,549

 
 
1,925

 
26

 
Total liabilities
 
751,522

 
 
668,758

 
 
82,764

 
12

 
Total stockholders’ equity
 
261,678

 
 
284,982

 
 
(23,304
)
 
(8
)
 
Total liabilities and stockholders’ equity
$
1,013,200

 
$
953,740

 
$
59,460

 
6

%
__________________

1.
The allowance for doubtful accounts was $4.8 million at March 31, 2014 and $5.4 million at March 31, 2013.

2.
The inventory reserve was $7.8 million at March 31, 2014 and $8.5 million at March 31, 2013.




4


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three Months Ended
 
 
 
 
 
 
March 31,
 
 
 
 
 
 
2014
 
 
2013
 
 
Change
 
Operating activities
 
 
 
 
 
 
 
 
 
Net income
$
4,188

 
$
3,440

 
$
748

 
Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
 
 
 
 
 
 
Depreciation
 
3,434

 
 
3,073

 
 
361

 
 
Amortization
 
328

 
 
321

 
 
7

 
 
Share-based compensation
 
2,058

 
 
1,905

 
 
153

 
 
Excess tax benefits from share-based compensation
 
(1,487
)
 
 
(1,703
)
 
 
216

 
 
Equity earnings in unconsolidated investments
 
(79
)
 
 
(18
)
 
 
(61
)
 
 
Other
 
335

 
 
(38
)
 
 
373

 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
 
 
 
Receivables
 
(85,018
)
 
 
(74,283
)
 
 
(10,735
)
 
 
Product inventories
 
(97,032
)
 
 
(94,786
)
 
 
(2,246
)
 
 
Prepaid expenses and other assets
 
(1,197
)
 
 
(2,461
)
 
 
1,264

 
 
Accounts payable
 
154,675

 
 
137,896

 
 
16,779

 
 
Accrued expenses and other current liabilities
 
(17,550
)
 
 
(13,332
)
 
 
(4,218
)
 
Net cash used in operating activities
 
(37,345
)
 
 
(39,986
)
 
 
2,641

 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
Acquisition of businesses, net of cash acquired
 
(4,512
)
 
 
(325
)
 
 
(4,187
)
 
Purchase of property and equipment, net of sale proceeds
 
(5,870
)
 
 
(4,882
)
 
 
(988
)
 
Other investments, net
 
49

 
 
9

 
 
40

 
Net cash used in investing activities
 
(10,333
)
 
 
(5,198
)
 
 
(5,135
)
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
Proceeds from revolving line of credit
 
184,988

 
 
149,760

 
 
35,228

 
Payments on revolving line of credit
 
(163,549
)
 
 
(102,100
)
 
 
(61,449
)
 
Proceeds from asset-backed financing
 
66,569

 
 
—

 
 
66,569

 
Payments on asset-backed financing
 
(10,200
)
 
 
—

 
 
(10,200
)
 
Payments on long-term debt and other long-term liabilities
 
—

 
 
(5
)
 
 
5

 
Excess tax benefits from share-based compensation
 
1,487

 
 
1,703

 
 
(216
)
 
Proceeds from stock issued under share-based compensation plans
 
5,231

 
 
6,438

 
 
(1,207
)
 
Payments of cash dividends
 
(8,569
)
 
 
(7,434
)
 
 
(1,135
)
 
Purchases of treasury stock
 
(28,168
)
 
 
(3,829
)
 
 
(24,339
)
 
Net cash provided by financing activities
 
47,789

 
 
44,533

 
 
3,256

 
Effect of exchange rate changes on cash and cash equivalents
 
(860
)
 
 
1,061

 
 
(1,921
)
 
Change in cash and cash equivalents
 
(749
)
 
 
410

 
 
(1,159
)
 
Cash and cash equivalents at beginning of period
 
8,006

 
 
12,463

 
 
(4,457
)
 
Cash and cash equivalents at end of period
$
7,257

 
$
12,873

 
$
(5,616
)
 


5

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 Business
Excluded
Total
(in thousands)
Three Months Ended
Three Months Ended
Three Months Ended
 
March 31,
March 31,
March 31,
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Net sales
$
404,618

 
$
370,244

 
$
1,726

 
$
118

 
$
406,344

 
$
370,362

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
113,547

 
104,720

 
553

 
41

 
114,100

 
104,761

Gross margin
28.1
%
 
28.3
%
 
32.0
 %
 
34.7
 %
 
28.1
%
 
28.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
104,583

 
97,751

 
871

 
78

 
105,454

 
97,829

Expenses as a % of net sales
25.8
%
 
26.4
%
 
50.5
 %
 
66.1
 %
 
26.0
%
 
26.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
8,964

 
6,969

 
(318
)
 
(37
)
 
8,646

 
6,932

Operating margin
2.2
%
 
1.9
%
 
(18.4
)%
 
(31.4
)%
 
2.1
%
 
1.9
%

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


Acquired (1)
 

Acquisition
Date
 
Net
Sales Centers
Acquired
 

Periods
Excluded
DFW Stone Supply, LLC
 
March 2014
 
2
 
March 2014
Atlantic Chemical & Aquatics Inc.
 
February 2014
 
2
 
February - March 2014
B. Shapiro Supply, LLC
 
May 2013
 
1
 
January - March 2014
Swimming Pool Supply Center, Inc.
 
March 2013
 
1
 
January - March 2014 and March 2013
(1)    We acquired certain distribution assets of each of these companies.

We exclude sales centers that are acquired, closed or opened in new markets from base business results 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. As of March 31, 2014, we excluded one sales center opened in a new market from base business.

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 three months of 2014:

December 31, 2013
321

 
Acquired
4

 
New locations
1

 
Consolidated locations
(1
)
 
March 31, 2014
325

 

6

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
 
(In thousands)
 
March 31,
 
 
 
 
2014
 
 
2013
 
Net income
$
4,188

 
$
3,440

 
 
Add:
 
 
 
 
 
 
 
Interest expense (1)
 
1,933

 
 
1,614

 
 
Provision for income taxes
 
2,604

 
 
1,896

 
 
Share-based compensation
 
2,058

 
 
1,905

 
 
Equity earnings in unconsolidated investments
 
(79
)
 
 
(18
)
 
 
Depreciation
 
3,434

 
 
3,073

 
 
Amortization (2)
 
195

 
 
225

 
Adjusted EBITDA
$
14,333

 
$
12,135

 
    
(1) 
Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) 
Excludes amortization of deferred financing costs of $133 and $96 for the three months ended March 31, 2014 and March 31, 2013, 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
 
(In thousands)
 
March 31,
 
 
 
 
2014
 
 
2013
 
Adjusted EBITDA
$
14,333

 
$
12,135

 
 
Add:
 
 
 
 
 
 
 
Interest expense, net of interest income
 
(1,800
)
 
 
(1,518
)
 
 
Provision for income taxes
 
(2,604
)
 
 
(1,896
)
 
 
Excess tax benefits from share-based compensation
 
(1,487
)
 
 
(1,703
)
 
 
Other
 
335

 
 
(38
)
 
 
Change in operating assets and liabilities
 
(46,122
)
 
 
(46,966
)
 
Net cash used in operating activities
$
(37,345
)
 
$
(39,986
)
 

7