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 18, 2019, announcing first quarter 2019 results |
• | Net sales growth of 2% for Q1 2019, with 1% growth in base business sales |
• | Gross margin growth of 90 basis points and operating income growth of 14% |
• | Q1 2019 diluted EPS increase of 7% to $0.80 or an increase of 11% to $0.59, excluding tax benefits |
• | Updates 2019 earnings guidance range to $6.09 - $6.39 per diluted share from previous $6.05 - $6.35 range |
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Net sales | $ | 597,456 | $ | 585,900 | |||
Cost of sales | 422,825 | 419,827 | |||||
Gross profit | 174,631 | 166,073 | |||||
Percent | 29.2 | % | 28.3 | % | |||
Selling and administrative expenses | 136,245 | 132,532 | |||||
Operating income | 38,386 | 33,541 | |||||
Percent | 6.4 | % | 5.7 | % | |||
Interest and other non-operating expenses, net | 6,616 | 3,527 | |||||
Income before income taxes and equity earnings | 31,770 | 30,014 | |||||
Income tax benefit | (802 | ) | (1,279 | ) | |||
Equity earnings in unconsolidated investments, net | 65 | 46 | |||||
Net income | $ | 32,637 | $ | 31,339 | |||
Earnings per share: | |||||||
Basic | $ | 0.83 | $ | 0.78 | |||
Diluted | $ | 0.80 | $ | 0.75 | |||
Weighted average shares outstanding: | |||||||
Basic | 39,479 | 40,370 | |||||
Diluted | 40,696 | 41,862 | |||||
Cash dividends declared per common share | $ | 0.45 | $ | 0.37 |
March 31, | March 31, | Change | ||||||||||||||
2019 | 2018 | $ | % | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 28,581 | $ | 8,803 | $ | 19,778 | 225 | % | ||||||||
Receivables, net (1) | 72,352 | 75,889 | (3,537 | ) | (5 | ) | ||||||||||
Receivables pledged under receivables facility | 240,775 | 238,707 | 2,068 | 1 | ||||||||||||
Product inventories, net (2) | 815,742 | 703,793 | 111,949 | 16 | ||||||||||||
Prepaid expenses and other current assets (5) | 16,116 | 23,714 | (7,598 | ) | (32 | ) | ||||||||||
Total current assets | 1,173,566 | 1,050,906 | 122,660 | 12 | ||||||||||||
Property and equipment, net | 107,690 | 109,310 | (1,620 | ) | (1 | ) | ||||||||||
Goodwill | 188,478 | 189,759 | (1,281 | ) | (1 | ) | ||||||||||
Other intangible assets, net | 11,744 | 12,926 | (1,182 | ) | (9 | ) | ||||||||||
Equity interest investments | 1,200 | 1,150 | 50 | 4 | ||||||||||||
Operating lease assets (3),(4),(5) | 177,293 | — | 177,293 | 100 | ||||||||||||
Other assets | 18,379 | 15,615 | 2,764 | 18 | ||||||||||||
Total assets | $ | 1,678,350 | $ | 1,379,666 | $ | 298,684 | 22 | % | ||||||||
Liabilities and stockholders’ equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable (4) | $ | 472,487 | $ | 467,795 | $ | 4,692 | 1 | % | ||||||||
Accrued expenses and other current liabilities | 47,658 | 45,504 | 2,154 | 5 | ||||||||||||
Short-term borrowings and current portion of long-term debt | 21,734 | 20,786 | 948 | 5 | ||||||||||||
Current operating lease liabilities (3) | 55,744 | — | 55,744 | 100 | ||||||||||||
Total current liabilities | 597,623 | 534,085 | 63,538 | 12 | ||||||||||||
Deferred income taxes | 29,368 | 24,947 | 4,421 | 18 | ||||||||||||
Long-term debt, net | 677,243 | 547,324 | 129,919 | 24 | ||||||||||||
Other long-term liabilities | 26,469 | 23,525 | 2,944 | 13 | ||||||||||||
Non-current operating lease liabilities (3) | 122,770 | — | 122,770 | 100 | ||||||||||||
Total liabilities | 1,453,473 | 1,129,881 | 323,592 | 29 | ||||||||||||
Total stockholders’ equity | 224,877 | 249,785 | (24,908 | ) | (10 | ) | ||||||||||
Total liabilities and stockholders’ equity | $ | 1,678,350 | $ | 1,379,666 | $ | 298,684 | 22 | % |
(1) | The allowance for doubtful accounts was $5.6 million at March 31, 2019 and $4.0 million at March 31, 2018. |
(2) | The inventory reserve was $8.5 million at March 31, 2019 and $7.4 million at March 31, 2018. |
(3) | We adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019. Upon adoption, we recorded operating lease assets and operating lease liabilities based on the present value of future lease obligations. We applied the practical expedient available in this guidance, which does not require the restatement of prior year balances. |
(4) | Due to ASU 2016-02, our straight-line rent liability of $5.1 million, reported in Accounts payable under previous accounting guidance, offsets our Operating lease assets as of March 31, 2019. |
(5) | As of March 31, 2019, we presented pre-paid rent of $4.7 million in Operating lease assets as required under the new guidance (presented in Prepaid expenses and other current assets as of March 31, 2018). |
Three Months Ended | |||||||||||||
March 31, | |||||||||||||
2019 | 2018 | Change | |||||||||||
Operating activities | |||||||||||||
Net income | $ | 32,637 | $ | 31,339 | $ | 1,298 | |||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | |||||||||||||
Depreciation | 6,649 | 6,299 | 350 | ||||||||||
Amortization | 375 | 470 | (95 | ) | |||||||||
Share-based compensation | 3,259 | 3,321 | (62 | ) | |||||||||
Equity earnings in unconsolidated investments, net | (65 | ) | (46 | ) | (19 | ) | |||||||
Other | 512 | 681 | (169 | ) | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||||
Receivables | (103,122 | ) | (117,377 | ) | 14,255 | ||||||||
Product inventories | (128,206 | ) | (168,518 | ) | 40,312 | ||||||||
Prepaid expenses and other assets | (1,427 | ) | (3,843 | ) | 2,416 | ||||||||
Accounts payable | 230,030 | 222,285 | 7,745 | ||||||||||
Accrued expenses and other current liabilities | (11,838 | ) | (18,760 | ) | 6,922 | ||||||||
Net cash provided by (used in) operating activities | 28,804 | (44,149 | ) | 72,953 | |||||||||
Investing activities | |||||||||||||
Acquisition of businesses, net of cash acquired | (9,370 | ) | (578 | ) | (8,792 | ) | |||||||
Purchases of property and equipment, net of sale proceeds | (6,739 | ) | (14,639 | ) | 7,900 | ||||||||
Net cash used in investing activities | (16,109 | ) | (15,217 | ) | (892 | ) | |||||||
Financing activities | |||||||||||||
Proceeds from revolving line of credit | 206,190 | 148,335 | 57,855 | ||||||||||
Payments on revolving line of credit | (253,249 | ) | (170,012 | ) | (83,237 | ) | |||||||
Proceeds from asset-backed financing | 80,100 | 80,000 | 100 | ||||||||||
Payments on asset-backed financing | (13,500 | ) | (20,000 | ) | 6,500 | ||||||||
Proceeds from short-term borrowings and current portion of long-term debt | 13,713 | 10,798 | 2,915 | ||||||||||
Payments on short-term borrowings and current portion of long-term debt | (1,148 | ) | (848 | ) | (300 | ) | |||||||
Payments of deferred financing costs | — | (8 | ) | 8 | |||||||||
Payments of deferred and contingent acquisition consideration | (311 | ) | (265 | ) | (46 | ) | |||||||
Proceeds from stock issued under share-based compensation plans | 7,071 | 7,808 | (737 | ) | |||||||||
Payments of cash dividends | (17,819 | ) | (15,011 | ) | (2,808 | ) | |||||||
Purchases of treasury stock | (23,097 | ) | (2,592 | ) | (20,505 | ) | |||||||
Net cash (used in) provided by financing activities | (2,050 | ) | 38,205 | (40,255 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 1,578 | 24 | 1,554 | ||||||||||
Change in cash and cash equivalents | 12,223 | (21,137 | ) | 33,360 | |||||||||
Cash and cash equivalents at beginning of period | 16,358 | 29,940 | (13,582 | ) | |||||||||
Cash and cash equivalents at end of period | $ | 28,581 | $ | 8,803 | $ | 19,778 |
(Unaudited) | Base Business | Excluded | Total | ||||||||||||||||||||
(in thousands) | Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||
March 31, | March 31, | March 31, | |||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
Net sales | $ | 587,320 | $ | 582,822 | $ | 10,136 | $ | 3,078 | $ | 597,456 | $ | 585,900 | |||||||||||
Gross profit | 171,706 | 165,334 | 2,925 | 739 | 174,631 | 166,073 | |||||||||||||||||
Gross margin | 29.2 | % | 28.4 | % | 28.9 | % | 24.0 | % | 29.2 | % | 28.3 | % | |||||||||||
Operating expenses | 132,548 | 131,250 | 3,697 | 1,282 | 136,245 | 132,532 | |||||||||||||||||
Expenses as a % of net sales | 22.6 | % | 22.5 | % | 36.5 | % | 41.7 | % | 22.8 | % | 22.6 | % | |||||||||||
Operating income (loss) | 39,158 | 34,084 | (772 | ) | (543 | ) | 38,386 | 33,541 | |||||||||||||||
Operating margin | 6.7 | % | 5.8 | % | (7.6 | )% | (17.6 | )% | 6.4 | % | 5.7 | % |
Acquired | Acquisition Date | Net Sales Centers Acquired | Periods Excluded | |||
W.W. Adcock, Inc. (1) | January 2019 | 4 | January - March 2019 | |||
Turf & Garden, Inc. (1) | November 2018 | 4 | January - March 2019 | |||
Tore Pty. Ltd. (Pool Power) (1) | January 2018 | 1 | January - March 2019 and January - March 2018 | |||
Chem Quip, Inc. (1) | December 2017 | 5 | January - March 2019 and January - March 2018 | |||
Intermark | December 2017 | 1 | January - February 2019 and January - February 2018 |
(1) | We acquired certain distribution assets of each of these companies. |
December 31, 2018 | 364 | ||
Acquired locations | 4 | ||
New locations | 2 | ||
Consolidated location | (1 | ) | |
March 31, 2019 | 369 |
(Unaudited) | Three Months Ended | |||||||
(in thousands) | March 31, | |||||||
2019 | 2018 | |||||||
Net income | $ | 32,637 | $ | 31,339 | ||||
Add: | ||||||||
Interest and other non-operating expenses (1) | 6,616 | 3,527 | ||||||
Income tax benefit | (802 | ) | (1,279 | ) | ||||
Share-based compensation | 3,259 | 3,321 | ||||||
Equity earnings in unconsolidated investments | (65 | ) | (46 | ) | ||||
Depreciation | 6,649 | 6,299 | ||||||
Amortization (2) | 267 | 276 | ||||||
Adjusted EBITDA | $ | 48,561 | $ | 43,437 |
(1) | Shown net of interest income and includes amortization of deferred financing costs as discussed below. |
(2) | Excludes amortization of deferred financing costs of $108 and $194 for the three months ended March 31, 2019 and March 31, 2018, respectively. |
(Unaudited) | Three Months Ended | |||||||
(in thousands) | March 31, | |||||||
2019 | 2018 | |||||||
Adjusted EBITDA | $ | 48,561 | $ | 43,437 | ||||
Add: | ||||||||
Interest and other non-operating expenses, net of interest income | (6,508 | ) | (3,333 | ) | ||||
Income tax benefit | 802 | 1,279 | ||||||
Other | 512 | 681 | ||||||
Change in operating assets and liabilities | (14,563 | ) | (86,213 | ) | ||||
Net cash provided by (used in) operating activities | $ | 28,804 | $ | (44,149 | ) |
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