Highlights

  • Net sales growth of 7% with base business net sales growth of 5% for the quarter
  • Operating income growth of 13% for the quarter, 17% year to date
  • Q3 2016 diluted EPS increased 14% to $1.03 with year to date diluted EPS up 20% to $3.39
  • Updated 2016 earnings guidance range to $3.40 - $3.46 per diluted share

COVINGTON, La., Oct. 20, 2016 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ:POOL) today reported record results for the third quarter of 2016 and the nine months ended September 30, 2016.

“We experienced a solid third quarter with results that were slightly better than our expectations.  It is at this time of the year, when our customers are working to get as much as possible done before the season ends, that our service is most critical.  Our results reflect our ability to continually improve execution and provide exceptional service.  The breadth and depth of our product and service offerings, coupled with the commitment of our people, continue to positively distinguish us in the marketplace,” said Manuel Perez de la Mesa, President and CEO.

Net sales for the third quarter of 2016 increased 7% to a record $691.4 million compared to $645.8 million in the third quarter of 2015, with base business sales up 5% for the period.  Our sales continue to benefit from market share gains and stronger consumer discretionary spending evidenced by our increase in sales of pool construction materials and ancillary equipment and supplies, as consumers continue to invest in enhancing their outdoor living spaces.

Gross profit for the third quarter of 2016 increased 8% to a record $199.6 million from $184.3 million in the same period of 2015.  Base business gross profit improved 6% over the third quarter of last year.  Gross profit as a percentage of net sales (gross margin) increased 40 basis points to 28.9% compared to the third quarter of 2015.  This increase reflects gains from supply chain management initiatives this year compared to last. 

Selling and administrative expenses (operating expenses) increased approximately 6% to $125.4 million in the third quarter of 2016 compared to the third quarter of 2015, with base business operating expenses up 3% over the comparable 2015 period.  While the overall increase in operating expenses includes expenses from our recent acquisitions, the increase in base business operating expenses was primarily due to higher growth-driven labor and freight expenses. 

Operating income for the third quarter increased 13% to a record $74.2 million compared to the same period in 2015.  Operating income as a percentage of net sales (operating margin) was 10.7% for the third quarter of 2016 compared to 10.1% in the third quarter of 2015. 

Net income attributable to Pool Corporation increased 13% to a record $44.5 million in the third quarter of 2016 compared to $39.4 million for the third quarter of 2015.  Earnings per share increased to a record $1.03 per diluted share for the three months ended September 30, 2016 versus $0.90 per diluted share for the comparable period in 2015.

Net sales for the nine months ended September 30, 2016 increased 9% to a record $2,125.6 million from $1,948.1 million in the comparable 2015 period, with much of this growth coming from the 7% improvement in base business sales. Gross margin improved approximately 30 basis points to 28.9% in the first nine months of 2016 compared to the same period last year.

Operating expenses increased 6% compared to the first nine months of 2015, with base business operating expenses up 4%.  Operating income for the first nine months of 2016 increased 17% to $246.1 million compared to $210.2 million in the same period last year.

Earnings per share for the first nine months of 2016 increased 20% to a record $3.39 per diluted share on Net income attributable to Pool Corporation of $146.3 million, compared to $2.83 per diluted share on Net income attributable to Pool Corporation of $125.8 million in the comparable 2015 period.

On the balance sheet, total net receivables increased 6% while inventory levels grew 10% compared to September 30, 2015.  Total debt outstanding at September 30, 2016 was $390.2 million, a $3.2 million decrease from total debt at September 30, 2015.

Cash provided by operations was $143.2 million for the first nine months of 2016 compared to $78.0 million for the first nine months of 2015.  The improvement in cash provided by operations is primarily related to our net income growth and the deferral of our third quarter estimated tax payments as allowed for areas affected by severe storms and flooding in Louisiana.  Adjusted EBITDA (as defined in the addendum to this release) was $83.0 million and $72.1 million for the third quarters of 2016 and 2015, respectively, and $269.9 million and $229.6 million for the nine months ended September 30, 2016 and September 30, 2015, respectively.

“As we transition to what is traditionally a slower quarter for us, we are confident that our momentum will continue and we will have a strong finish to 2016.  To that end, we are updating our 2016 earnings guidance to a range of $3.40 to $3.46 per diluted share, from our previous range of $3.30 to 3.45 per diluted share.  Looking ahead to 2017, we are excited to employ the tools, products and resources uniquely available to us to provide exceptional value to our customers,” said Perez de la Mesa.

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products.  Currently, POOLCORP operates 346 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.

 
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2016 2015 2016 2015
Net sales$691,429  $645,779  $2,125,568  $1,948,064 
Cost of sales491,878  461,491  1,512,258  1,390,715 
Gross profit199,551  184,288  613,310  557,349 
Percent28.9% 28.5% 28.9% 28.6%
        
Selling and administrative expenses125,385  118,776  367,194  347,106 
Operating income74,166  65,512  246,116  210,243 
Percent10.7% 10.1% 11.6% 10.8%
        
Interest and other non-operating expenses, net2,989  2,473  9,954  6,368 
Income before income taxes and equity earnings71,177  63,039  236,162  203,875 
Provision for income taxes26,807  23,704  90,244  78,489 
Equity earnings in unconsolidated investments, net    51  68  113  259 
Net income44,421  39,403  146,031  125,645 
Net loss attributable to noncontrolling interest113  44  309  144 
Net income attributable to Pool Corporation$44,534  $39,447  $146,340  $125,789 
        
Earnings per share:       
Basic$1.06  $0.92  $3.48  $2.91 
Diluted$1.03  $0.90  $3.39  $2.83 
Weighted average shares outstanding:       
Basic42,020  42,826  42,092  43,266 
Diluted43,119  43,939  43,201  44,407 
        
Cash dividends declared per common share$0.31  $0.26  $0.88  $0.74 


  
 POOL CORPORATION
 Condensed Consolidated Balance Sheets
 (Unaudited)
 (In thousands)
  
   September 30,  September 30,  Change 
   2016  2015  $ % 
             
Assets           
Current assets:           
 Cash and cash equivalents$30,292  $29,504  $788  3 %
 Receivables, net 81,072   70,399   10,673  15  
 Receivables pledged under receivables facility 152,333   149,375   2,958  2  
 Product inventories, net 455,156   412,587   42,569  10  
 Prepaid expenses and other current assets 12,084   11,062   1,022  9  
 Deferred income taxes 5,288   3,256   2,032  62  
Total current assets 736,225   676,183   60,042  9  
             
Property and equipment, net 84,643   66,296   18,347  28  
Goodwill 185,486   172,150   13,336  8  
Other intangible assets, net 13,645   11,393   2,252  20  
Equity interest investments 1,152   1,196   (44) (4) 
Other assets 16,370   13,682   2,688  20  
Total assets$1,037,521  $940,900  $96,621  10 %
             
Liabilities, redeemable noncontrolling interest and stockholders’ equity           
Current liabilities:           
 Accounts payable$199,922  $170,582  $29,340  17 %
 Accrued expenses and other current liabilities 126,654   77,298   49,356  64  
 Short-term borrowings and current portion of long-term debt and other long-term liabilities     1,298   1,799   (501) (28) 
Total current liabilities 327,874   249,679   78,195  31  
             
Deferred income taxes 28,359   22,755   5,604  25  
Long-term debt, net 388,891   391,571   (2,680) (1) 
Other long-term liabilities 17,945   13,216   4,729  36  
Total liabilities 763,069   677,221   85,848  13  
Redeemable noncontrolling interest 2,467   2,457   10    
Total stockholders’ equity 271,985   261,222   10,763  4  
Total liabilities, redeemable noncontrolling interest and stockholders’ equity$1,037,521  $940,900  $96,621  10 %

__________________

  1. The allowance for doubtful accounts was $3.7 million at September 30, 2016 and $3.5 million at September 30, 2015.
  2. The inventory reserve was $8.1 million at September 30, 2016 and $8.3 million at September 30, 2015.
  3. Net financing costs of $1.2 million were included in Long-term debt, net at September 30, 2016 and net financing costs of $1.5 million at September 30, 2015 were reclassed from Other assets to Long-term debt, net upon adoption of ASU 2015-03 in the first quarter of 2016. 
  
POOL CORPORATION 
Condensed Consolidated Statements of Cash Flows 
(Unaudited) 
(In thousands) 
  
  Nine Months Ended    
  September 30,    
  2016  2015  Change 
Operating activities         
Net income$146,031  $125,645  $20,386  
Adjustments to reconcile net income to cash provided by operating activities:         
 Depreciation 15,020   11,920   3,100  
 Amortization 1,288   771   517  
 Share-based compensation 7,373   7,112   261  
 Excess tax benefits from share-based compensation (6,582)  (4,916)  (1,666) 
 Equity earnings in unconsolidated investments, net (113)  (259)  146  
 Other 3,799   2,314   1,485  
Changes in operating assets and liabilities, net of effects of acquisitions:         
 Receivables (71,936)  (78,662)  6,726  
 Product inventories 23,624   52,463   (28,839) 
 Prepaid expenses and other assets (1,094)  296   (1,390) 
 Accounts payable (49,479)  (66,035)  16,556  
 Accrued expenses and other current liabilities 75,239   27,334   47,905  
Net cash provided by operating activities 143,170   77,983   65,187  
          
Investing activities         
Acquisition of businesses, net of cash acquired (19,314)  (602)  (18,712) 
Purchases of property and equipment, net of sale proceeds (30,388)  (21,299)  (9,089) 
Payments to fund credit agreement (3,852)  (6,300)  2,448  
Collections from credit agreement 3,300   4,557   (1,257) 
Other investments, net 21   75   (54) 
Net cash used in investing activities (50,233)  (23,569)  (26,664) 
          
Financing activities         
Proceeds from revolving line of credit 873,854   721,835   152,019  
Payments on revolving line of credit (866,801)  (690,677)  (176,124) 
Proceeds from asset-backed financing 145,000   128,400   16,600  
Payments on asset-backed financing (90,000)  (85,800)  (4,200) 
Proceeds from short-term borrowings, long-term debt and other long-term liabilities       15,705   4,948   10,757  
Payments on short-term borrowings, long-term debt and other long-term liabilities (16,107)  (4,678)  (11,429) 
Excess tax benefits from share-based compensation 6,582   4,916   1,666  
Proceeds from stock issued under share-based compensation plans 10,978   10,906   72  
Payments of cash dividends (37,007)  (32,008)  (4,999) 
Purchases of treasury stock (117,901)  (90,306)  (27,595) 
Net cash used in financing activities (75,697)  (32,464)  (43,233) 
Effect of exchange rate changes on cash and cash equivalents (185)  (7,276)  7,091  
Change in cash and cash equivalents 17,055   14,674   2,381  
Cash and cash equivalents at beginning of period 13,237   14,830   (1,593) 
Cash and cash equivalents at end of period$30,292  $29,504  $788  
 

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 BusinessExcludedTotal
(in thousands)Three Months EndedThree Months EndedThree Months Ended
 September 30,September 30,September 30,
 2016 2015 2016 2015 2016 2015
Net sales$677,198  $645,779  $14,231  $  $691,429  $645,779 
            
Gross profit195,133  184,288  4,418    199,551  184,288 
Gross margin28.8% 28.5% 31.0% % 28.9% 28.5%
            
Operating expenses122,436  118,776  2,949    125,385  118,776 
Expenses as a % of net sales    18.1% 18.4% 20.7% % 18.1% 18.4%
            
Operating income72,697  65,512  1,469    74,166  65,512 
Operating margin10.7% 10.1% 10.3% % 10.7% 10.1%


      
(Unaudited)Base Business Excluded Total
(in thousands)Nine Months Ended Nine Months Ended Nine Months Ended
 September 30, September 30, September 30,
 2016 2015 2016 2015 2016 2015
Net sales$2,089,745  $1,947,386  $35,823  $678  $2,125,568  $1,948,064 
            
Gross profit602,623  557,174  10,687  175  613,310  557,349 
Gross margin28.8% 28.6% 29.8% 25.8% 28.9% 28.6%
            
Operating expenses360,025  346,805  7,169  301  367,194  347,106 
Expenses as a % of net sales    17.2% 17.8% 20.0% 44.4% 17.3% 17.8%
            
Operating income (loss)242,598  210,369  3,518  (126) 246,116  210,243 
Operating margin11.6% 10.8% 9.8% (18.6)% 11.6% 10.8%

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



 

Acquired (1)
 

Acquisition
Date
 Net
Sales Centers
Acquired
 

Periods
Excluded
Metro Irrigation Supply Company Ltd. April 2016 8 April - September 2016
The Melton Corporation November 2015 2 January - September 2016
Seaboard Industries, Inc. October 2015 3 January - September 2016
Poolwerx Development LLC April 2015 1 January - June 2016 and
April - June 2015
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 nine months of 2016.

December 31, 2015336  
Acquired locations8  
New locations4  
Consolidated locations                          (2) 
September 30, 2016346 

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  Nine Months Ended 
(In thousands) September 30,  September 30, 
   2016  2015  2016  2015 
Net income$44,421  $39,403  $146,031  $125,645  
 Add:            
 Interest and other non-operating expenses (1) 2,989   2,473   9,954   6,368  
 Provision for income taxes 26,807   23,704   90,244   78,489  
 Share-based compensation 2,523   2,262   7,373   7,112  
 Goodwill impairment 613      613     
 Equity earnings in unconsolidated investments     (51)  (68)  (113)  (259) 
 Depreciation 5,277   4,233   15,020   11,920  
 Amortization (2) 418   82   796   300  
Adjusted EBITDA$82,997  $72,089  $269,918  $229,575  

(1) Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) Excludes amortization of deferred financing costs of $135 and $157 for the three months ended September 30, 2016 and September 30, 2015, respectively, and $492 and $471 for the nine months ended September 30, 2016 and September 30, 2015, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by operating activities.  Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

       
(Unaudited) Three Months Ended  Nine Months Ended 
(In thousands) September 30,  September 30, 
   2016  2015  2016  2015 
Adjusted EBITDA$82,997  $72,089  $269,918  $229,575  
 Add:            
 Interest and other non-operating expenses, net of interest income     (2,854)  (2,316)  (9,462)  (5,897) 
 Provision for income taxes (26,807)  (23,704)  (90,244)  (78,489) 
 Excess tax benefits from share-based compensation (3,379)  (348)  (6,582)  (4,916) 
 Other 916   975   3,186   2,314  
 Change in operating assets and liabilities 106,054   87,933   (23,646)  (64,604) 
Net cash provided by operating activities$156,927  $134,629  $143,170  $77,983  
  

 

CONTACT:
Craig K. Hubbard
985.801.5117
craig.hubbard@poolcorp.com