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 February 14, 2019, announcing fiscal 2018 results and providing 2019 earnings guidance. |
• | Record annual sales of $3.0 billion for 2018, up 8% from 2017 |
• | 2018 operating margin of 10.5%, up 30 bps from 2017 |
• | Record 2018 diluted EPS of $5.62, an increase of 25% over 2017 including a $0.36 ASU tax benefit |
• | 2019 diluted EPS guidance range of $6.05 to $6.35 including an estimated $0.18 ASU tax benefit |
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 (1) | |||||||||||||
Net sales | $ | 543,082 | $ | 510,183 | $ | 2,998,097 | $ | 2,788,188 | ||||||||
Cost of sales | 382,640 | 364,785 | 2,127,924 | 1,982,899 | ||||||||||||
Gross profit | 160,442 | 145,398 | 870,173 | 805,289 | ||||||||||||
Percent | 29.5 | % | 28.5 | % | 29.0 | % | 28.9 | % | ||||||||
Selling and administrative expenses | 134,472 | 128,139 | 556,284 | 520,918 | ||||||||||||
Operating income | 25,970 | 17,259 | 313,889 | 284,371 | ||||||||||||
Percent | 4.8 | % | 3.4 | % | 10.5 | % | 10.2 | % | ||||||||
Interest and other non-operating expenses, net | 6,448 | 3,581 | 20,896 | 15,189 | ||||||||||||
Income before income taxes and equity earnings | 19,522 | 13,678 | 292,993 | 269,182 | ||||||||||||
Provision for income taxes (2) | 2,786 | (11,969 | ) | 58,774 | 77,982 | |||||||||||
Equity earnings in unconsolidated investments, net | 75 | 18 | 242 | 139 | ||||||||||||
Net income | 16,811 | 25,665 | 234,461 | 191,339 | ||||||||||||
Net loss attributable to noncontrolling interest | — | — | — | 294 | ||||||||||||
Net income attributable to Pool Corporation | $ | 16,811 | $ | 25,665 | $ | 234,461 | $ | 191,633 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.42 | $ | 0.64 | $ | 5.82 | $ | 4.69 | ||||||||
Diluted | $ | 0.41 | $ | 0.62 | $ | 5.62 | $ | 4.51 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 40,002 | 40,164 | 40,311 | 40,838 | ||||||||||||
Diluted | 41,274 | 41,715 | 41,693 | 42,449 | ||||||||||||
Cash dividends declared per common share | $ | 0.45 | $ | 0.37 | $ | 1.72 | $ | 1.42 |
(1) | Derived from audited financial statements. |
(2) | Our income tax provision for the fourth quarter of 2017 reflects a benefit realized related to the enactment of the Tax Cuts and Jobs Act. |
December 31, | December 31, | Change | |||||||||||||
2018 | 2017 (1) | $ | % | ||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 16,358 | $ | 29,940 | $ | (13,582 | ) | (45 | )% | ||||||
Receivables, net (2) | 69,493 | 76,597 | (7,104 | ) | (9 | ) | |||||||||
Receivables pledged under receivables facility | 138,308 | 119,668 | 18,640 | 16 | |||||||||||
Product inventories, net (3) | 672,579 | 536,474 | 136,105 | 25 | |||||||||||
Prepaid expenses and other current assets | 18,506 | 19,569 | (1,063 | ) | (5 | ) | |||||||||
Total current assets | 915,244 | 782,248 | 132,996 | 17 | |||||||||||
Property and equipment, net | 106,964 | 100,939 | 6,025 | 6 | |||||||||||
Goodwill | 188,472 | 189,435 | (963 | ) | (1 | ) | |||||||||
Other intangible assets, net | 12,004 | 13,223 | (1,219 | ) | (9 | ) | |||||||||
Equity interest investments | 1,213 | 1,127 | 86 | 8 | |||||||||||
Other assets | 16,974 | 14,090 | 2,884 | 20 | |||||||||||
Total assets | $ | 1,240,871 | $ | 1,101,062 | $ | 139,809 | 13 | % | |||||||
Liabilities and stockholders’ equity | |||||||||||||||
Current liabilities: | |||||||||||||||
Accounts payable | $ | 237,835 | $ | 245,249 | $ | (7,414 | ) | (3 | )% | ||||||
Accrued expenses and other current liabilities | 58,607 | 65,482 | (6,875 | ) | (10 | ) | |||||||||
Short-term borrowings and current portion of long-term debt | 9,168 | 10,835 | (1,667 | ) | (15 | ) | |||||||||
Total current liabilities | 305,610 | 321,566 | (15,956 | ) | (5 | ) | |||||||||
Deferred income taxes | 29,399 | 24,585 | 4,814 | 20 | |||||||||||
Long-term debt, net | 657,593 | 508,815 | 148,778 | 29 | |||||||||||
Other long-term liabilities | 24,679 | 22,950 | 1,729 | 8 | |||||||||||
Total liabilities | 1,017,281 | 877,916 | 139,365 | 16 | |||||||||||
Total stockholders’ equity | 223,590 | 223,146 | 444 | — | |||||||||||
Total liabilities and stockholders’ equity | $ | 1,240,871 | $ | 1,101,062 | $ | 139,809 | 13 | % |
(1) | Derived from audited financial statements. |
(2) | The allowance for doubtful accounts was $6.2 million at December 31, 2018 and $3.9 million at December 31, 2017. |
(3) | The inventory reserve was $7.7 million at December 31, 2018 and $6.3 million at December 31, 2017. |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2018 | 2017 (1) | Change | ||||||||||
Operating activities | ||||||||||||
Net income | $ | 234,461 | $ | 191,339 | $ | 43,122 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 26,122 | 24,157 | 1,965 | |||||||||
Amortization | 1,793 | 1,568 | 225 | |||||||||
Share-based compensation | 12,874 | 12,482 | 392 | |||||||||
Equity earnings in unconsolidated investments, net | (242 | ) | (139 | ) | (103 | ) | ||||||
Net losses (gains) on foreign currency transactions | 560 | (171 | ) | 731 | ||||||||
Other (2) | 8,928 | (3,976 | ) | 12,904 | ||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||||||
Receivables | (14,371 | ) | (21,903 | ) | 7,532 | |||||||
Product inventories | (142,170 | ) | (35,783 | ) | (106,387 | ) | ||||||
Prepaid expenses and other assets | 1,018 | (4,096 | ) | 5,114 | ||||||||
Accounts payable | (6,567 | ) | 5,077 | (11,644 | ) | |||||||
Accrued expenses and other current liabilities | (3,750 | ) | 6,756 | (10,506 | ) | |||||||
Net cash provided by operating activities | 118,656 | 175,311 | (56,655 | ) | ||||||||
Investing activities | ||||||||||||
Acquisition of businesses, net of cash acquired | (2,578 | ) | (12,834 | ) | 10,256 | |||||||
Purchase of property and equipment, net of sale proceeds | (31,580 | ) | (39,390 | ) | 7,810 | |||||||
Other investments, net | — | 4 | (4 | ) | ||||||||
Net cash used in investing activities | (34,158 | ) | (52,220 | ) | 18,062 | |||||||
Financing activities | ||||||||||||
Proceeds from revolving line of credit | 1,138,195 | 1,067,868 | 70,327 | |||||||||
Payments on revolving line of credit | (998,503 | ) | (1,011,977 | ) | 13,474 | |||||||
Proceeds from asset-backed financing | 198,400 | 161,600 | 36,800 | |||||||||
Payments on asset-backed financing | (189,900 | ) | (145,100 | ) | (44,800 | ) | ||||||
Proceeds from short-term borrowings and current portion of long-term debt | 17,127 | 27,333 | (10,206 | ) | ||||||||
Payments on short-term borrowings and current portion of long-term debt | (18,793 | ) | (17,603 | ) | (1,190 | ) | ||||||
Payments of deferred acquisition consideration | (661 | ) | (324 | ) | (337 | ) | ||||||
Payments of deferred financing costs | (106 | ) | (1,104 | ) | 998 | |||||||
Purchase of redeemable non-controlling interest | — | (2,573 | ) | 2,573 | ||||||||
Proceeds from stock issued under share-based compensation plans | 13,569 | 11,466 | 2,103 | |||||||||
Payments of cash dividends | (69,430 | ) | (58,029 | ) | (11,401 | ) | ||||||
Purchases of treasury stock | (187,469 | ) | (146,006 | ) | (41,463 | ) | ||||||
Net cash used in financing activities | (97,571 | ) | (114,449 | ) | 16,878 | |||||||
Effect of exchange rate changes on cash and cash equivalents | (509 | ) | (658 | ) | 149 | |||||||
Change in cash and cash equivalents | (13,582 | ) | 7,984 | (21,566 | ) | |||||||
Cash and cash equivalents at beginning of period | 29,940 | 21,956 | 7,984 | |||||||||
Cash and cash equivalents at end of period | $ | 16,358 | $ | 29,940 | $ | (13,582 | ) |
(1) | Derived from audited financial statements. |
(2) | The Tax Cuts and Jobs Act resulted in an additional $12.0 million of net income in 2017, all of which was non-cash. |
(Unaudited) | Base Business | Excluded | Total | ||||||||||||||||||||
(in thousands) | Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||
December 31, | December 31, | December 31, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Net sales | $ | 537,396 | $ | 509,791 | $ | 5,686 | $ | 392 | $ | 543,082 | $ | 510,183 | |||||||||||
Gross profit | 158,576 | 145,305 | 1,866 | 93 | 160,442 | 145,398 | |||||||||||||||||
Gross margin | 29.5 | % | 28.5 | % | 32.8 | % | 23.7 | % | 29.5 | % | 28.5 | % | |||||||||||
Operating expenses | 131,749 | 127,912 | 2,723 | 227 | 134,472 | 128,139 | |||||||||||||||||
Expenses as a % of net sales | 24.5 | % | 25.1 | % | 47.9 | % | 57.9 | % | 24.8 | % | 25.1 | % | |||||||||||
Operating income (loss) | 26,827 | 17,393 | (857 | ) | (134 | ) | 25,970 | 17,259 | |||||||||||||||
Operating margin | 5.0 | % | 3.4 | % | (15.1 | )% | (34.2 | )% | 4.8 | % | 3.4 | % |
(Unaudited) | Base Business | Excluded | Total | ||||||||||||||||||||
(in thousands) | Year Ended | Year Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | December 31, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Net sales | $ | 2,957,006 | $ | 2,776,103 | $ | 41,091 | $ | 12,085 | $ | 2,998,097 | $ | 2,788,188 | |||||||||||
Gross profit | 857,590 | 801,716 | 12,583 | 3,573 | 870,173 | 805,289 | |||||||||||||||||
Gross margin | 29.0 | % | 28.9 | % | 30.6 | % | 29.6 | % | 29.0 | % | 28.9 | % | |||||||||||
Operating expenses | 541,462 | 516,183 | 14,822 | 4,735 | 556,284 | 520,918 | |||||||||||||||||
Expenses as a % of net sales | 18.3 | % | 18.6 | % | 36.1 | % | 39.2 | % | 18.6 | % | 18.7 | % | |||||||||||
Operating income (loss) | 316,128 | 285,533 | (2,239 | ) | (1,162 | ) | 313,889 | 284,371 | |||||||||||||||
Operating margin | 10.7 | % | 10.3 | % | (5.4 | )% | (9.6 | )% | 10.5 | % | 10.2 | % |
Acquired | Acquisition Date | Net Sales Centers Acquired | Periods Excluded | |||
Turf & Garden, Inc. (1) | November 2018 | 4 | November - December 2018 | |||
Tore Pty. Ltd. (Pool Power) (1) | January 2018 | 1 | January - December 2018 | |||
Chem Quip, Inc. (1) | December 2017 | 5 | December 2017 and January - December 2018 | |||
Intermark | December 2017 | 1 | December 2017 and January - December 2018 | |||
E-Grupa | October 2017 | 1 | October - December 2017 and January - December 2018 | |||
New Star Holdings Pty. Ltd. | July 2017 | 1 | January - September 2018 and July - September 2017 | |||
Lincoln Aquatics (1) | April 2017 | 1 | January - July 2018 and May - July 2017 |
(1) | We acquired certain distribution assets of each of these companies. |
December 31, 2017 | 351 | |
Acquired locations | 5 | |
New locations | 9 | |
Consolidated locations | (1 | ) |
December 31, 2018 | 364 |
(Unaudited) | Year Ended December 31, | |||||||
(in thousands) | 2018 | 2017 | ||||||
Net income | $ | 234,461 | $ | 191,339 | ||||
Add: | ||||||||
Interest and other non-operating expenses (1) | 20,336 | 15,360 | ||||||
Provision for income taxes | 58,774 | 77,982 | ||||||
Share-based compensation | 12,874 | 12,482 | ||||||
Equity earnings in unconsolidated investments, net | (242 | ) | (139 | ) | ||||
Depreciation | 26,122 | 24,157 | ||||||
Amortization (2) | 1,102 | 976 | ||||||
Adjusted EBITDA | $ | 353,427 | $ | 322,157 |
(1) | Shown net of interest income and net of gains and losses on foreign currency transactions and includes amortization of deferred financing costs as discussed below. |
(2) | Excludes amortization of deferred financing costs of $691 for 2018 and $592 for 2017. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income. |
(Unaudited) | Year Ended December 31, | |||||||
(in thousands) | 2018 | 2017 | ||||||
Adjusted EBITDA | $ | 353,427 | $ | 322,157 | ||||
Add: | ||||||||
Interest and other non-operating expenses, net of interest income | (19,645 | ) | (14,768 | ) | ||||
Provision for income taxes | (58,774 | ) | (77,982 | ) | ||||
Net losses (gains) on foreign currency transactions | 560 | (171 | ) | |||||
Other | 8,928 | (3,976 | ) | |||||
Change in operating assets and liabilities | (165,840 | ) | (49,949 | ) | ||||
Net cash provided by operating activities | $ | 118,656 | $ | 175,311 |
(Unaudited) | Year Ended December 31, | ||||||
(in thousands) | 2018 | 2017 (1) | |||||
Numerator (trailing four quarters total): | |||||||
Net income attributable to Pool Corporation | $ | 234,461 | $ | 179,633 | |||
Interest and other non-operating expenses, net | 20,896 | 15,189 | |||||
Less: taxes on Interest and other non-operating expenses, net at 20.1% and 33.4%, respectively | (4,200 | ) | (5,073 | ) | |||
$ | 251,157 | $ | 189,749 | ||||
Denominator (average of trailing four quarters): | |||||||
Long-term debt, net | $ | 602,984 | $ | 520,950 | |||
Short-term borrowings and current portion of long-term debt | 15,190 | 11,030 | |||||
Total stockholders’ equity | 289,979 | 236,901 | |||||
$ | 908,153 | $ | 768,881 | ||||
Return on invested capital | 27.7 | % | 24.7 | % |
(1) | To calculate ROIC for 2017, we reduced Net income attributable to Pool Corporation by $12.0 million, which represents our benefit related to the enactment of the Tax Cuts and Jobs Act. We also adjusted our effective tax rate and our December 31, 2017 retained earnings balance for this benefit. ROIC for 2017 based on reported amounts is 26.2%. |
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