EX-99.1 2 pool-q22015xer.htm POOL Q2 2015 EARNINGS RELEASE POOL-Q2 2015-ER



Exhibit 99.1

FOR IMMEDIATE RELEASE



POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS
AND NARROWS 2015 EARNINGS GUIDANCE RANGE

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) – Pool Corporation (NASDAQ/GSM: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.

1


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.

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
 
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 sales
603,595

 
601,264

 
929,224

 
893,508

Gross profit
248,260

 
246,976

 
373,061

 
361,076

Percent
29.1
%
 
29.1
%
 
28.6
%
 
28.8
%
 
 
 
 
 
 
 
 
Selling and administrative expenses
119,128

 
124,477

 
228,330

 
229,931

Operating income
129,132

 
122,499

 
144,731

 
131,145

Percent
15.2
%
 
14.4
%
 
11.1
%
 
10.5
%
 
 
 
 
 
 
 
 
Interest expense, net
1,900

 
1,894

 
3,895

 
3,827

Income before income taxes and equity earnings
127,232

 
120,605

 
140,836

 
127,318

Provision for income taxes
49,493

 
46,796

 
54,785

 
49,400

Equity earnings in unconsolidated investments
70

 
54

 
191

 
133

Net income
77,809

 
73,863

 
86,242

 
78,051

Add: net loss attributable to noncontrolling interest
115

 

 
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:
 
 
 
 
 
 
 
Basic
43,322

 
44,769

 
43,461

 
44,972

Diluted
44,458

 
45,971

 
44,606

 
46,160

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.26

 
$
0.22

 
$
0.48

 
$
0.41





3



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.


4



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

 

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
 
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 profit
246,683

 
246,392

 
1,577

 
584

 
248,260

 
246,976

Gross margin
29.1
%
 
29.1
%
 
34.3
 %
 
33.8
%
 
29.1
%
 
29.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
117,205

 
124,139

 
1,923

 
338

 
119,128

 
124,477

Expenses as a % of net sales
13.8
%
 
14.7
%
 
41.9
 %
 
19.5
%
 
14.0
%
 
14.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
129,478

 
122,253

 
(346
)
 
246

 
129,132

 
122,499

Operating margin
15.3
%
 
14.4
%
 
(7.5
)%
 
14.2
%
 
15.2
%
 
14.4
%
(Unaudited)
Base Business
Excluded
Total
(in thousands)
Six Months Ended
Six Months Ended
Six 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 profit
369,322

 
360,356

 
3,739

 
720

 
373,061

 
361,076

Gross margin
28.6
%
 
28.8
%
 
36.8
 %
 
34.8
%
 
28.6
%
 
28.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
223,910

 
229,439

 
4,420

 
492

 
228,330

 
229,931

Expenses as a % of net sales
17.3
%
 
18.3
%
 
43.6
 %
 
23.8
%
 
17.5
%
 
18.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
145,412

 
130,917

 
(681
)
 
228

 
144,731

 
131,145

Operating margin
11.3
%
 
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.

6



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
2

 
New locations
1

 
Consolidated locations

 
June 30, 2015
331

 

7


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
)
 

8