EX-99.1 2 pool-q12016xer.htm POOL Q1 2016 EARNINGS RELEASE Exhibit


Exhibit 99.1

FOR IMMEDIATE RELEASE

POOL CORPORATION REPORTS RECORD FIRST QUARTER RESULTS
AND UPDATES 2016 EARNINGS GUIDANCE

Highlights

•
Net sales growth of 14% with base business net sales growth of 13% for the quarter
•
Operating income growth of 89%
•
Q1 2016 diluted EPS doubled to $0.38
•
Increased 2016 earnings guidance range to $3.25 - $3.40 per diluted share
______________________

COVINGTON, LA. (April 21, 2016) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the first quarter of 2016.
“Warmer weather across most seasonal markets resulted in an earlier than normal start to the pool season. Accelerated customer early buy deliveries, an additional selling day compared to the same period last year, and continued exceptional execution by our team all contributed to our strong start in 2016. We leveraged the tools and resources uniquely available to us to provide a differentiated value proposition to help our customers succeed and we made the most of it,” said Manuel Perez de la Mesa, President and CEO.
Net sales for the first quarter of 2016 increased 14% to a record $515.3 million compared to $450.4 million in the first quarter of 2015, with base business sales up 13% for the period. Our sales growth is primarily attributable to continued strength in consumer discretionary spending and seasonably favorable weather. The increase also included a 3% impact from accelerated customer early buy purchases, an almost 2% impact from one additional selling day in the quarter, and market share gains.
Gross profit for the first quarter of 2016 increased 15% to a record $143.0 million from $124.8 million in the same period of 2015. Base business gross profit improved 14% over the first quarter of last year. Gross profit as a percentage of net sales (gross margin) increased 10 basis points to 27.8% compared to the first quarter of 2015.
Selling and administrative expenses (operating expenses) increased 4% to $113.5 million in the first quarter of 2016 compared to the first quarter of 2015, with base business operating expenses up 3% over the comparable 2015 period. These increases were due primarily to labor-related costs and marketing and volume-driven freight expenses.
Operating income for the first quarter increased 89% to a record $29.5 million compared to the same period in 2015. Operating income as a percentage of net sales (operating margin) was 5.7% for the first quarter of 2016 compared to 3.5% in the first quarter of 2015.
Net income attributable to Pool Corporation increased 94% to a record $16.4 million in the first quarter of 2016, compared to $8.4 million for the first quarter of 2015. Earnings per share doubled to a record $0.38 per diluted share for the three months ended March 31, 2016 versus $0.19 per diluted share for the comparable period in 2015.

1

On the balance sheet, total net receivables increased 19% while inventory levels grew 6% compared to March 31, 2015. Total debt outstanding at March 31, 2016 was $450.5 million, a $57.7 million, or 15% increase over total debt at March 31, 2015.
Cash used in operations was $39.8 million for the first three months of 2016 compared to $57.7 million for the first three months of 2015. The improvement in cash used in operations is primarily related to our net income growth. Adjusted EBITDA (as defined in the addendum to this release) was $36.7 million and $21.6 million for the first quarters of 2016 and 2015, respectively.
“We are updating our fiscal 2016 earnings guidance to a range of $3.25 to $3.40 per diluted share, from our previously reported range of $3.20 to $3.35 per diluted share, given our first quarter results and expectations for the balance of the year. While we have good momentum from the mild winter, we expect that second quarter results will be impacted by the acceleration of sales into the first quarter. We look forward to serving our customers and suppliers during the next several months when the pool season is most intense and when our service level is most distinctive. Our ongoing investments in our business enable us to address the opportunities market by market and customer by customer, and earn our business each and every day,” said Perez de la Mesa.
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 338 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.

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,
 
2016
 
2015
Net sales
$
515,250

 
$
450,430

Cost of sales
372,227

 
325,629

Gross profit
143,023

 
124,801

Percent
27.8
%
 
27.7
%
 
 
 
 
Selling and administrative expenses
113,493

 
109,202

Operating income
29,530

 
15,599

Percent
5.7
%
 
3.5
%
 
 
 
 
Interest and other non-operating expenses, net
2,964

 
1,995

Income before income taxes and equity earnings
26,566

 
13,604

Provision for income taxes
10,228

 
5,292

Equity earnings in unconsolidated investments, net
25

 
121

Net income
16,363

 
8,433

Net (income) loss attributable to noncontrolling interest
8

 
(14
)
Net income attributable to Pool Corporation
$
16,371

 
$
8,419

 
 
 
 
Earnings per share:
 
 
 
Basic
$
0.39

 
$
0.19

Diluted
$
0.38

 
$
0.19

Weighted average shares outstanding:
 
 
 
Basic
42,226

 
43,601

Diluted
43,317

 
44,756

 
 
 
 
Cash dividends declared per common share
$
0.26

 
$
0.22





3

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

 
 
 
March 31,
 
 
March 31,
 
 
Change
 
 
 
 
2016
 
 
2015
 
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9,965

 
$
5,048

 
$
4,917

 
97

%
 
Receivables, net
 
67,802

 
 
56,117

 
 
11,685

 
21

 
 
Receivables pledged under receivables facility
 
215,956

 
 
182,610

 
 
33,346

 
18

 
 
Product inventories, net
 
595,393

 
 
559,260

 
 
36,133

 
6

 
 
Prepaid expenses and other current assets
 
13,022

 
 
11,066

 
 
1,956

 
18

 
 
Deferred income taxes
 
5,536

 
 
3,091

 
 
2,445

 
79

 
Total current assets
 
907,674

 
 
817,192

 
 
90,482

 
11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
78,210

 
 
62,509

 
 
15,701

 
25

 
Goodwill
 
173,605

 
 
172,335

 
 
1,270

 
1

 
Other intangible assets, net
 
11,835

 
 
11,735

 
 
100

 
1

 
Equity interest investments
 
1,271

 
 
1,345

 
 
(74
)
 
(6
)
 
Other assets
 
20,646

 
 
17,488

 
 
3,158

 
18

 
Total assets
$
1,193,241

 
$
1,082,604

 
$
110,637

 
10

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities, redeemable noncontrolling interest and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
438,705

 
$
375,995

 
$
62,710

 
17

%
 
Accrued expenses and other current liabilities
 
49,370

 
 
32,188

 
 
17,182

 
53

 
 
Short-term borrowings and current portion of long-term debt and other long-term liabilities
 
5,996

 
 
—

 
 
5,996

 
NM

 
Total current liabilities
 
494,071

 
 
408,183

 
 
85,888

 
21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
29,267

 
 
23,918

 
 
5,349

 
22

 
Long-term debt, net
 
444,461

 
 
392,749

 
 
51,712

 
13

 
Other long-term liabilities
 
16,438

 
 
13,354

 
 
3,084

 
23

 
Total liabilities
 
984,237

 
 
838,204

 
 
146,033

 
17

 
Redeemable noncontrolling interest
 
2,769

 
 
2,911

 
 
(142
)
 
(5
)
 
Total stockholders’ equity
 
206,235

 
 
241,489

 
 
(35,254
)
 
(15
)
 
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
1,193,241

 
$
1,082,604

 
$
110,637

 
10

%
__________________

1.
The allowance for doubtful accounts was $4.3 million at March 31, 2016 and $4.1 million at March 31, 2015.
2.
The inventory reserve was $8.3 million at March 31, 2016 and $7.2 million at March 31, 2015.
3.
Net financing costs of $1.4 million at March 31, 2016 and $1.8 million at March 31, 2015 were reclassed from Other assets to Long-term debt upon adoption of ASU 2015-03.


4

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three Months Ended
 
 
 
 
 
 
March 31,
 
 
 
 
 
 
2016
 
 
2015
 
 
Change
 
Operating activities
 
 
 
 
 
 
 
 
 
Net income
$
16,363

 
$
8,433

 
$
7,930

 
Adjustments to reconcile net income to cash used in operating activities:
 
 
 
 
 
 
 
 
 
 
Depreciation
 
4,736

 
 
3,711

 
 
1,025

 
 
Amortization
 
339

 
 
278

 
 
61

 
 
Share-based compensation
 
2,280

 
 
2,171

 
 
109

 
 
Excess tax benefits from share-based compensation
 
(2,780
)
 
 
(3,738
)
 
 
958

 
 
Equity earnings in unconsolidated investments, net
 
(25
)
 
 
(121
)
 
 
96

 
 
Other
 
2,334

 
 
2,107

 
 
227

 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
 
 
 
Receivables
 
(125,331
)
 
 
(98,163
)
 
 
(27,168
)
 
 
Product inventories
 
(119,300
)
 
 
(93,133
)
 
 
(26,167
)
 
 
Prepaid expenses and other assets
 
(2,477
)
 
 
64

 
 
(2,541
)
 
 
Accounts payable
 
189,915

 
 
138,792

 
 
51,123

 
 
Accrued expenses and other current liabilities
 
(5,807
)
 
 
(18,054
)
 
 
12,247

 
Net cash used in operating activities
 
(39,753
)
 
 
(57,653
)
 
 
17,900

 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
Acquisition of businesses, net of cash acquired
 
(100
)
 
 
(319
)
 
 
219

 
Purchases of property and equipment, net of sale proceeds
 
(13,405
)
 
 
(8,797
)
 
 
(4,608
)
 
Payments to fund credit agreement
 
(2,315
)
 
 
(5,350
)
 
 
3,035

 
Other investments, net
 
11

 
 
(57
)
 
 
68

 
Net cash used in investing activities
 
(15,809
)
 
 
(14,523
)
 
 
(1,286
)
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
Proceeds from revolving line of credit
 
286,845

 
 
217,207

 
 
69,638

 
Payments on revolving line of credit
 
(233,952
)
 
 
(188,457
)
 
 
(45,495
)
 
Proceeds from asset-backed financing
 
65,000

 
 
62,500

 
 
2,500

 
Payments on asset-backed financing
 
—

 
 
(16,000
)
 
 
16,000

 
Proceeds from short-term borrowings, long-term debt and other long-term liabilities
 
5,995

 
 
680

 
 
5,315

 
Payments on short-term borrowings, long-term debt and other long-term liabilities
 
(1,700
)
 
 
(2,209
)
 
 
509

 
Excess tax benefits from share-based compensation
 
2,780

 
 
3,738

 
 
(958
)
 
Proceeds from stock issued under share-based compensation plans
 
4,934

 
 
6,229

 
 
(1,295
)
 
Payments of cash dividends
 
(10,927
)
 
 
(9,607
)
 
 
(1,320
)
 
Purchases of treasury stock
 
(65,860
)
 
 
(8,393
)
 
 
(57,467
)
 
Net cash provided by financing activities
 
53,115

 
 
65,688

 
 
(12,573
)
 
Effect of exchange rate changes on cash and cash equivalents
 
(825
)
 
 
(3,294
)
 
 
2,469

 
Change in cash and cash equivalents
 
(3,272
)
 
 
(9,782
)
 
 
6,510

 
Cash and cash equivalents at beginning of period
 
13,237

 
 
14,830

 
 
(1,593
)
 
Cash and cash equivalents at end of period
$
9,965

 
$
5,048

 
$
4,917

 

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,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net sales
$
510,517

 
$
449,824

 
$
4,733

 
$
606

 
$
515,250

 
$
450,430

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
141,854

 
124,624

 
1,169

 
177

 
143,023

 
124,801

Gross margin
27.8
%
 
27.7
%
 
24.7
 %
 
29.2
 %
 
27.8
%
 
27.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
112,002

 
108,927

 
1,491

 
275

 
113,493

 
109,202

Expenses as a % of net sales
21.9
%
 
24.2
%
 
31.5
 %
 
45.4
 %
 
22.0
%
 
24.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
29,852

 
15,697

 
(322
)
 
(98
)
 
29,530

 
15,599

Operating margin
5.8
%
 
3.5
%
 
(6.8
)%
 
(16.2
)%
 
5.7
%
 
3.5
%

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


Acquired (1) 
 

Acquisition
Date
 
Net
Sales Centers
Acquired
 

Periods
Excluded
The Melton Corporation
 
November 2015
 
2
 
January - March 2016
Seaboard Industries, Inc.
 
October 2015
 
3
 
January - March 2016
Poolwerx Development LLC
 
April 2015
 
1
 
January - March 2016
St. Louis Hardscape Material & Supply, LLC
 
December 2014
 
1
 
January - March 2016 and
January - 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 three months of 2016.
December 31, 2015
336

 
Acquired
—

 
New locations
2

 
Consolidated locations
—

 
March 31, 2016
338

 

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,
 
 
 
 
2016
 
 
2015
 
Net income
$
16,363

 
$
8,433

 
 
Add:
 
 
 
 
 
 
 
Interest and other non-operating expenses (1)
 
2,964

 
 
1,995

 
 
Provision for income taxes
 
10,228

 
 
5,292

 
 
Share-based compensation
 
2,280

 
 
2,171

 
 
Equity earnings in unconsolidated investments
 
(25
)
 
 
(121
)
 
 
Depreciation
 
4,736

 
 
3,711

 
 
Amortization (2)
 
116

 
 
121

 
Adjusted EBITDA
$
36,662

 
$
21,602

 
(1) 
Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) 
Excludes amortization of deferred financing costs of $223 and $157 for the three months ended March 31, 2016 and March 31, 2015, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash used in operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.
(Unaudited)
 
Three Months Ended
 
(In thousands)
 
March 31,
 
 
 
 
2016
 
 
2015
 
Adjusted EBITDA
$
36,662

 
$
21,602

 
 
Add:
 
 
 
 
 
 
 
Interest and other non-operating expenses, net of interest income
 
(2,741
)
 
 
(1,838
)
 
 
Provision for income taxes
 
(10,228
)
 
 
(5,292
)
 
 
Excess tax benefits from share-based compensation
 
(2,780
)
 
 
(3,738
)
 
 
Other
 
2,334

 
 
2,107

 
 
Change in operating assets and liabilities
 
(63,000
)
 
 
(70,494
)
 
Net cash used in operating activities
$
(39,753
)
 
$
(57,653
)
 

7