Delaware | 0-26640 | 36-3943363 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
109 Northpark Boulevard, Covington, Louisiana | 70433-5001 |
(Address of principal executive offices) | (Zip Code) |
985-892-5521 | |
(Registrant's telephone number, including area code) |
(d) | Exhibits |
Press Release issued by Pool Corporation on April 20, 2017, announcing first quarter 2017 results and updating its 2017 earnings guidance range. |
• | Net sales growth of 6% with base business net sales growth of 5% for Q1 2017, which is on top of 13% base business growth in Q1 2016 |
• | Operating income growth of 5% for Q1 2017, on top of an 89% increase in operating income in Q1 2016 |
• | Q1 2017 diluted EPS increased to $0.52 from $0.38 in Q1 2016, including a $0.12 favorable impact from new accounting pronouncement |
• | Updated 2017 earnings guidance range to $4.12 - $4.32 per diluted share |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Net sales | $ | 546,441 | $ | 515,250 | |||
Cost of sales | 392,820 | 372,227 | |||||
Gross profit | 153,621 | 143,023 | |||||
Percent | 28.1 | % | 27.8 | % | |||
Selling and administrative expenses | 122,623 | 113,493 | |||||
Operating income | 30,998 | 29,530 | |||||
Percent | 5.7 | % | 5.7 | % | |||
Interest and other non-operating expenses, net | 3,647 | 2,964 | |||||
Income before income taxes and equity earnings | 27,351 | 26,566 | |||||
Provision for income taxes (1) | 5,119 | 10,228 | |||||
Equity earnings in unconsolidated investments, net | 38 | 25 | |||||
Net income | 22,270 | 16,363 | |||||
Net loss attributable to noncontrolling interest | 11 | 8 | |||||
Net income attributable to Pool Corporation | $ | 22,281 | $ | 16,371 | |||
Earnings per share: | |||||||
Basic | $ | 0.54 | $ | 0.39 | |||
Diluted | $ | 0.52 | $ | 0.38 | |||
Weighted average shares outstanding: | |||||||
Basic | 41,192 | 42,226 | |||||
Diluted | 42,877 | 43,317 | |||||
Cash dividends declared per common share | $ | 0.31 | $ | 0.26 |
(1) | Upon adoption of ASU 2016-09, we are required to recognize all excess tax benefits or deficiencies related to share-based compensation expense, as a component of our income tax provision on our Consolidated Statements of Income, rather than a component of stockholders’ equity on our Condensed Consolidated Balance Sheets. We adopted this guidance on a prospective basis, and as such, our prior year presentation has not changed. |
March 31, | March 31, | Change | ||||||||||||||
2017 | 2016 | $ | % | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 13,409 | $ | 9,965 | $ | 3,444 | 35 | % | ||||||||
Receivables, net (1) | 61,264 | 67,802 | (6,538 | ) | (10 | ) | ||||||||||
Receivables pledged under receivables facility | 228,755 | 215,956 | 12,799 | 6 | ||||||||||||
Product inventories, net (2) | 647,884 | 595,393 | 52,491 | 9 | ||||||||||||
Prepaid expenses and other current assets | 15,740 | 13,022 | 2,718 | 21 | ||||||||||||
Deferred income taxes (3) | — | 5,536 | (5,536 | ) | (100 | ) | ||||||||||
Total current assets | 967,052 | 907,674 | 59,378 | 7 | ||||||||||||
Property and equipment, net | 97,140 | 78,210 | 18,930 | 24 | ||||||||||||
Goodwill | 185,062 | 173,605 | 11,457 | 7 | ||||||||||||
Other intangible assets, net | 13,172 | 11,835 | 1,337 | 11 | ||||||||||||
Equity interest investments | 1,174 | 1,271 | (97 | ) | (8 | ) | ||||||||||
Other assets (3) | 17,269 | 20,646 | (3,377 | ) | (16 | ) | ||||||||||
Total assets | $ | 1,280,869 | $ | 1,193,241 | $ | 87,628 | 7 | % | ||||||||
Liabilities, redeemable noncontrolling interest and stockholders’ equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 465,928 | $ | 438,705 | $ | 27,223 | 6 | % | ||||||||
Accrued expenses and other current liabilities (3) | 48,982 | 49,370 | (388 | ) | (1 | ) | ||||||||||
Short-term borrowings and current portion of long-term debt and other long-term liabilities | 9,775 | 5,996 | 3,779 | 63 | ||||||||||||
Total current liabilities | 524,685 | 494,071 | 30,614 | 6 | ||||||||||||
Deferred income taxes (3) | 29,234 | 29,267 | (33 | ) | — | |||||||||||
Long-term debt, net | 480,442 | 444,461 | 35,981 | 8 | ||||||||||||
Other long-term liabilities | 21,430 | 16,438 | 4,992 | 30 | ||||||||||||
Total liabilities | 1,055,791 | 984,237 | 71,554 | 7 | ||||||||||||
Redeemable noncontrolling interest | 2,424 | 2,769 | (345 | ) | (12 | ) | ||||||||||
Total stockholders’ equity | 222,654 | 206,235 | 16,419 | 8 | ||||||||||||
Total liabilities, redeemable noncontrolling interest and stockholders’ equity | $ | 1,280,869 | $ | 1,193,241 | $ | 87,628 | 7 | % |
(1) | The allowance for doubtful accounts was $4.2 million at March 31, 2017 and $4.3 million at March 31, 2016. |
(2) | The inventory reserve was $7.3 million at March 31, 2017 and $8.3 million at March 31, 2016. |
(3) | Upon adoption of ASU 2015-17, Balance Sheet Classification of Deferred Taxes, we were required to reclassify all of our deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets. We adopted this guidance on a prospective basis, and as such, our prior year balances or classifications have not changed. |
Three Months Ended | |||||||||||||
March 31, | |||||||||||||
2017 | 2016 | Change | |||||||||||
Operating activities | |||||||||||||
Net income | $ | 22,270 | $ | 16,363 | $ | 5,907 | |||||||
Adjustments to reconcile net income to cash used in operating activities: | |||||||||||||
Depreciation | 5,557 | 4,736 | 821 | ||||||||||
Amortization | 365 | 339 | 26 | ||||||||||
Share-based compensation | 3,003 | 2,280 | 723 | ||||||||||
Excess tax benefits from share-based compensation (1) | — | (2,780 | ) | 2,780 | |||||||||
Equity earnings in unconsolidated investments, net | (38 | ) | (25 | ) | (13 | ) | |||||||
Other | 1,847 | 2,334 | (487 | ) | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||||
Receivables | (123,515 | ) | (125,331 | ) | 1,816 | ||||||||
Product inventories | (161,668 | ) | (119,300 | ) | (42,368 | ) | |||||||
Prepaid expenses and other assets | (2,617 | ) | (2,477 | ) | (140 | ) | |||||||
Accounts payable | 234,581 | 189,915 | 44,666 | ||||||||||
Accrued expenses and other current liabilities | (12,209 | ) | (5,807 | ) | (6,402 | ) | |||||||
Net cash used in operating activities | (32,424 | ) | (39,753 | ) | 7,329 | ||||||||
Investing activities | |||||||||||||
Acquisition of businesses, net of cash acquired | — | (100 | ) | 100 | |||||||||
Purchases of property and equipment, net of sale proceeds | (19,121 | ) | (13,405 | ) | (5,716 | ) | |||||||
Payments to fund credit agreement | — | (2,315 | ) | 2,315 | |||||||||
Other investments, net | 2 | 11 | (9 | ) | |||||||||
Net cash used in investing activities | (19,119 | ) | (15,809 | ) | (3,310 | ) | |||||||
Financing activities | |||||||||||||
Proceeds from revolving line of credit | 213,189 | 286,845 | (73,656 | ) | |||||||||
Payments on revolving line of credit | (206,319 | ) | (233,952 | ) | 27,633 | ||||||||
Proceeds from asset-backed financing | 55,000 | 65,000 | (10,000 | ) | |||||||||
Payments on asset-backed financing | (18,500 | ) | — | (18,500 | ) | ||||||||
Proceeds from short-term borrowings, long-term debt and other long-term liabilities | 11,441 | 5,995 | 5,446 | ||||||||||
Payments on short-term borrowings, long-term debt and other long-term liabilities | (2,771 | ) | (1,700 | ) | (1,071 | ) | |||||||
Payments of deferred and contingent acquisition consideration | (199 | ) | — | (199 | ) | ||||||||
Excess tax benefits from share-based compensation (1) | — | 2,780 | (2,780 | ) | |||||||||
Proceeds from stock issued under share-based compensation plans | 6,149 | 4,934 | 1,215 | ||||||||||
Payments of cash dividends | (12,799 | ) | (10,927 | ) | (1,872 | ) | |||||||
Purchases of treasury stock | (2,725 | ) | (65,860 | ) | 63,135 | ||||||||
Net cash provided by financing activities | 42,466 | 53,115 | (10,649 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 530 | (825 | ) | 1,355 | |||||||||
Change in cash and cash equivalents | (8,547 | ) | (3,272 | ) | (5,275 | ) | |||||||
Cash and cash equivalents at beginning of period | 21,956 | 13,237 | 8,719 | ||||||||||
Cash and cash equivalents at end of period | $ | 13,409 | $ | 9,965 | $ | 3,444 |
(1) | Upon adoption of ASU 2016-09, the excess tax benefit from share-based compensation is no longer reclassified out of operating income tax cash flows to be reported as financing activity. We adopted this guidance on a prospective basis, and as such, our prior year presentation has not changed. |
(Unaudited) | Base Business | Excluded | Total | |||||||||||||||||||||
(in thousands) | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||
March 31, | March 31, | March 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Net sales | $ | 538,284 | $ | 514,124 | $ | 8,157 | $ | 1,126 | $ | 546,441 | $ | 515,250 | ||||||||||||
Gross profit | 151,095 | 142,776 | 2,526 | 247 | 153,621 | 143,023 | ||||||||||||||||||
Gross margin | 28.1 | % | 27.8 | % | 31.0 | % | 21.9 | % | 28.1 | % | 27.8 | % | ||||||||||||
Operating expenses | 120,684 | 113,146 | 1,939 | 347 | 122,623 | 113,493 | ||||||||||||||||||
Expenses as a % of net sales | 22.4 | % | 22.0 | % | 23.8 | % | 30.8 | % | 22.4 | % | 22.0 | % | ||||||||||||
Operating income (loss) | 30,411 | 29,630 | 587 | (100 | ) | 30,998 | 29,530 | |||||||||||||||||
Operating margin | 5.6 | % | 5.8 | % | 7.2 | % | (8.9 | )% | 5.7 | % | 5.7 | % |
Acquired (1) | Acquisition Date | Net Sales Centers Acquired | Periods Excluded | |||
Metro Irrigation Supply Company Ltd. | April 2016 | 8 | January - March 2017 | |||
The Melton Corporation | November 2015 | 2 | January 2017 and January 2016 | |||
Seaboard Industries, Inc. | October 2015 | 3 | January 2017 and January 2016 |
(1) | We acquired certain distribution assets of each of these companies. |
December 31, 2016 | 344 | ||
Acquired locations | — | ||
New location | 1 | ||
Closed location | (1 | ) | |
March 31, 2017 | 344 |
(Unaudited) | Three Months Ended | ||||||||
(In thousands) | March 31, | ||||||||
2017 | 2016 | ||||||||
Net income | $ | 22,270 | $ | 16,363 | |||||
Add: | |||||||||
Interest and other non-operating expenses (1) | 3,647 | 2,964 | |||||||
Provision for income taxes | 5,119 | 10,228 | |||||||
Share-based compensation | 3,003 | 2,280 | |||||||
Equity earnings in unconsolidated investments | (38 | ) | (25 | ) | |||||
Depreciation | 5,557 | 4,736 | |||||||
Amortization (2) | 229 | 116 | |||||||
Adjusted EBITDA | $ | 39,787 | $ | 36,662 |
(1) | Shown net of interest income and includes amortization of deferred financing costs as discussed below. |
(2) | Excludes amortization of deferred financing costs of $136 and $223 for the three months ended March 31, 2017 and March 31, 2016, respectively. |
(Unaudited) | Three Months Ended | ||||||||
(In thousands) | March 31, | ||||||||
2017 | 2016 | ||||||||
Adjusted EBITDA | $ | 39,787 | $ | 36,662 | |||||
Add: | |||||||||
Interest and other non-operating expenses, net of interest income | (3,511 | ) | (2,741 | ) | |||||
Provision for income taxes | (5,119 | ) | (10,228 | ) | |||||
Excess tax benefits from share-based compensation | — | (2,780 | ) | ||||||
Other | 1,847 | 2,334 | |||||||
Change in operating assets and liabilities | (65,428 | ) | (63,000 | ) | |||||
Net cash used in operating activities | $ | (32,424 | ) | $ | (39,753 | ) |
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