EX-99.1 2 pool-q22016xer.htm POOL Q2 2016 EARNINGS RELEASE Exhibit

Exhibit 99.1

FOR IMMEDIATE RELEASE

POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS
AND UPDATES 2016 EARNINGS GUIDANCE RANGE

Highlights

•
Net sales growth of 8% with base business net sales growth of 6% for the quarter
•
Operating income growth of 10% for the quarter, 19% year to date
•
Q2 2016 diluted EPS increased 13% to $1.98 with year to date diluted EPS up 21% to $2.35
•
Updated 2016 earnings guidance range to $3.30 - $3.45 per diluted share
______________________

COVINGTON, LA. (July 21, 2016) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the second quarter of 2016 and the six months ended June 30, 2016.
“Our second quarter 2016 results modestly exceeded expectations with May and June sales each surpassing $300.0 million, a first in our company’s history. It is especially noteworthy, that in the height of the season, when our customers are relying on distribution the most, we believe we become their best resource. We work diligently to make sure we are stocking what our customers need, when and where they need it, while ensuring inventory integrity and timely replenishment. Our ability to provide exceptional service, coupled with our commitment to invest in helping our customers grow and succeed, reinforces our unique value proposition in the marketplace,” said Manuel Perez de la Mesa, President and CEO.
Net sales for the second quarter of 2016 increased 8% to a record $918.9 million compared to $851.9 million in the second quarter of 2015, with base business sales up 6% for the period. Our sales continue to benefit from stronger consumer discretionary spending as evidenced by our increase in sales of building materials and pool equipment, as consumers continue to invest in enhancing their outdoor living spaces. Overall, quarter over quarter weather comparisons were neutral.
Gross profit for the second quarter of 2016 increased 9% to a record $270.7 million from $248.3 million in the same period of 2015. Base business gross profit improved 7% over the second quarter of last year. Gross profit as a percentage of net sales (gross margin) increased almost 40 basis points to 29.5% compared to the second quarter of 2015, mostly reflecting improvements in our supply chain management.
Selling and administrative expenses (operating expenses) increased 8% to $128.3 million in the second quarter of 2016 compared to the second quarter of 2015, with base business operating expenses up 6% over the comparable 2015 period. These increases were due primarily to higher performance-based compensation recognized based on results through the second quarter compared to the same period last year, as well as higher volume-driven labor and freight expenses.
Operating income for the second quarter increased 10% to a record $142.4 million compared to the same period in 2015. Operating income as a percentage of net sales (operating margin) was 15.5% for the second quarter of 2016 compared to 15.2% in the second quarter of 2015.
Net income attributable to Pool Corporation increased 10% to a record $85.4 million in the second quarter of 2016, compared to $77.9 million for the second quarter of 2015. Earnings per share increased to a record $1.98 per diluted share for the three months ended June 30, 2016 versus $1.75 per diluted share for the comparable period in 2015.
Net sales for the six months ended June 30, 2016 increased 10% to a record $1,434.1 million from $1,302.3 million in the comparable 2015 period, with much of this growth coming from the 9% improvement in base business sales. Gross margin improved approximately 30 basis points to 28.9% in the first half of 2016 compared to the same period last year.


Operating expenses increased 6% compared to the first half of 2015, with base business operating expenses up 4%. Operating income for the first six months of 2016 increased 19% to $172.0 million compared to $144.7 million in the same period last year.
Earnings per share for the first six months of 2016 increased 21% to a record $2.35 per diluted share on Net income attributable to Pool Corporation of $101.8 million, compared to $1.94 per diluted share on Net income attributable to Pool Corporation of $86.3 million in the comparable 2015 period.
On the balance sheet, total net receivables increased 10% while inventory levels grew 4% compared to June 30, 2015. Total debt outstanding at June 30, 2016 was $500.6 million, a $7.0 million increase over total debt at June 30, 2015.
Cash used in operations was $13.8 million for the first six months of 2016 compared to $56.6 million for the first six months of 2015. The improvement in cash used in operations is primarily related to our net income growth and the deferral of our second 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 $150.3 million and $135.9 million for the second quarters of 2016 and 2015, respectively, and $186.9 million and $157.5 million for the six months ended June 30, 2016 and June 30, 2015, respectively.
“Factoring in our early second quarter acquisition and modestly better than expected second quarter base business sales, we are increasing our 2016 earnings guidance to a range of $3.30 to $3.45 per diluted share, from our previously disclosed range of $3.25 to $3.40 per diluted share. Our expectations for the second half of the year remain unchanged. We strive to be not only a source for our customers, but also a resource. Our ongoing investments in our business are all indirect investments in our customers. We believe that solid execution at every level of the company allows us to provide the highest service levels in our industry and is the key to our success,” said Perez de la Mesa.
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 344 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Net sales
$
918,889

 
$
851,855

 
$
1,434,139

 
$
1,302,285

Cost of sales
648,153

 
603,595

 
1,020,380

 
929,224

Gross profit
270,736

 
248,260

 
413,759

 
373,061

Percent
29.5
%
 
29.1
%
 
28.9
%
 
28.6
%
 
 
 
 
 
 
 
 
Selling and administrative expenses
128,316

 
119,128

 
241,809

 
228,330

Operating income
142,420

 
129,132

 
171,950

 
144,731

Percent
15.5
%
 
15.2
%
 
12.0
%
 
11.1
%
 
 
 
 
 
 
 
 
Interest and other non-operating expenses, net
4,001

 
1,900

 
6,965

 
3,895

Income before income taxes and equity earnings
138,419

 
127,232

 
164,985

 
140,836

Provision for income taxes
53,209

 
49,493

 
63,437

 
54,785

Equity earnings in unconsolidated investments, net
37

 
70

 
62

 
191

Net income
85,247

 
77,809

 
101,610

 
86,242

Net (income) loss attributable to noncontrolling interest
188

 
115

 
196

 
101

Net income attributable to Pool Corporation
$
85,435

 
$
77,924

 
$
101,806

 
$
86,343

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
2.03

 
$
1.80

 
$
2.42

 
$
1.99

Diluted
$
1.98

 
$
1.75

 
$
2.35

 
$
1.94

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
42,030

 
43,322

 
42,128

 
43,461

Diluted
43,152

 
44,458

 
43,230

 
44,606

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.31

 
$
0.26

 
$
0.57

 
$
0.48





3

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

 
 
 
June 30,
 
 
June 30,
 
 
Change
 
 
 
 
2016
 
 
2015
 
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
30,551

 
$
38,944

 
$
(8,393
)
 
(22
)
%
 
Receivables, net
 
119,113

 
 
93,709

 
 
25,404

 
27

 
 
Receivables pledged under receivables facility
 
231,899

 
 
224,789

 
 
7,110

 
3

 
 
Product inventories, net
 
493,254

 
 
473,362

 
 
19,892

 
4

 
 
Prepaid expenses and other current assets
 
13,044

 
 
11,226

 
 
1,818

 
16

 
 
Deferred income taxes
 
5,533

 
 
3,104

 
 
2,429

 
78

 
Total current assets
 
893,394

 
 
845,134

 
 
48,260

 
6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
85,387

 
 
65,151

 
 
20,236

 
31

 
Goodwill
 
186,092

 
 
172,815

 
 
13,277

 
8

 
Other intangible assets, net
 
14,058

 
 
11,643

 
 
2,415

 
21

 
Equity interest investments
 
1,119

 
 
1,328

 
 
(209
)
 
(16
)
 
Other assets
 
15,613

 
 
13,841

 
 
1,772

 
13

 
Total assets
$
1,195,663

 
$
1,109,912

 
$
85,751

 
8

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities, redeemable noncontrolling interest and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
265,349

 
$
236,868

 
$
28,481

 
12

%
 
Accrued expenses and other current liabilities
 
114,993

 
 
80,480

 
 
34,513

 
43

 
 
Short-term borrowings and current portion of long-term debt and other long-term liabilities
 
6,823

 
 
3,430

 
 
3,393

 
99

 
Total current liabilities
 
387,165

 
 
320,778

 
 
66,387

 
21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
28,239

 
 
23,642

 
 
4,597

 
19

 
Long-term debt, net
 
493,783

 
 
490,150

 
 
3,633

 
1

 
Other long-term liabilities
 
17,875

 
 
13,837

 
 
4,038

 
29

 
Total liabilities
 
927,062

 
 
848,407

 
 
78,655

 
9

 
Redeemable noncontrolling interest
 
2,511

 
 
2,766

 
 
(255
)
 
(9
)
 
Total stockholders’ equity
 
266,090

 
 
258,739

 
 
7,351

 
3

 
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
1,195,663

 
$
1,109,912

 
$
85,751

 
8

%
__________________

1.
The allowance for doubtful accounts was $3.3 million at June 30, 2016 and June 30, 2015.
2.
The inventory reserve was $8.6 million at June 30, 2016 and $7.9 million at June 30, 2015.
3.
Net financing costs of $1.3 million were included in Long-term debt at June 30, 2016 and $1.7 million at June 30, 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)
 
 
Six Months Ended
 
 
 
 
 
 
June 30,
 
 
 
 
 
 
2016
 
 
2015
 
 
Change
 
Operating activities
 
 
 
 
 
 
 
 
 
Net income
$
101,610

 
$
86,242

 
$
15,368

 
Adjustments to reconcile net income to cash used in operating activities:
 
 
 
 
 
 
 
 
 
 
Depreciation
 
9,743

 
 
7,687

 
 
2,056

 
 
Amortization
 
735

 
 
532

 
 
203

 
 
Share-based compensation
 
4,850

 
 
4,850

 
 
—

 
 
Excess tax benefits from share-based compensation
 
(3,203
)
 
 
(4,568
)
 
 
1,365

 
 
Equity earnings in unconsolidated investments, net
 
(62
)
 
 
(191
)
 
 
129

 
 
Other
 
2,270

 
 
1,339

 
 
931

 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
 
 
 
Receivables
 
(187,526
)
 
 
(177,193
)
 
 
(10,333
)
 
 
Product inventories
 
(14,481
)
 
 
(7,849
)
 
 
(6,632
)
 
 
Prepaid expenses and other assets
 
(1,729
)
 
 
4

 
 
(1,733
)
 
 
Accounts payable
 
15,041

 
 
487

 
 
14,554

 
 
Accrued expenses and other current liabilities
 
58,995

 
 
32,014

 
 
26,981

 
Net cash used in operating activities
 
(13,757
)
 
 
(56,646
)
 
 
42,889

 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
Acquisition of businesses, net of cash acquired
 
(19,211
)
 
 
(479
)
 
 
(18,732
)
 
Purchases of property and equipment, net of sale proceeds
 
(25,779
)
 
 
(16,200
)
 
 
(9,579
)
 
Payments to fund credit agreement
 
(2,232
)
 
 
(5,350
)
 
 
3,118

 
Collections from credit agreement
 
2,475

 
 
3,407

 
 
(932
)
 
Other investments, net
 
17

 
 
59

 
 
(42
)
 
Net cash used in investing activities
 
(44,730
)
 
 
(18,563
)
 
 
(26,167
)
 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
Proceeds from revolving line of credit
 
629,351

 
 
526,116

 
 
103,235

 
Payments on revolving line of credit
 
(604,470
)
 
 
(466,005
)
 
 
(138,465
)
 
Proceeds from asset-backed financing
 
145,000

 
 
128,400

 
 
16,600

 
Payments on asset-backed financing
 
(2,800
)
 
 
(16,000
)
 
 
13,200

 
Proceeds from short-term borrowings, long-term debt and other long-term liabilities
 
12,110

 
 
4,110

 
 
8,000

 
Payments on short-term borrowings, long-term debt and other long-term liabilities
 
(6,987
)
 
 
(2,209
)
 
 
(4,778
)
 
Excess tax benefits from share-based compensation
 
3,203

 
 
4,568

 
 
(1,365
)
 
Proceeds from stock issued under share-based compensation plans
 
5,699

 
 
8,372

 
 
(2,673
)
 
Payments of cash dividends
 
(23,957
)
 
 
(20,855
)
 
 
(3,102
)
 
Purchases of treasury stock
 
(80,478
)
 
 
(62,701
)
 
 
(17,777
)
 
Net cash provided by financing activities
 
76,671

 
 
103,796

 
 
(27,125
)
 
Effect of exchange rate changes on cash and cash equivalents
 
(870
)
 
 
(4,473
)
 
 
3,603

 
Change in cash and cash equivalents
 
17,314

 
 
24,114

 
 
(6,800
)
 
Cash and cash equivalents at beginning of period
 
13,237

 
 
14,830

 
 
(1,593
)
 
Cash and cash equivalents at end of period
$
30,551

 
$
38,944

 
$
(8,393
)
 

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
 
June 30,
June 30,
June 30,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net sales
$
902,057

 
$
851,777

 
$
16,832

 
$
78

 
$
918,889

 
$
851,855

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
265,619

 
248,262

 
5,117

 
(2
)
 
270,736

 
248,260

Gross margin
29.4
%
 
29.1
%
 
30.4
%
 
(2.6
)%
 
29.5
%
 
29.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
125,701

 
119,087

 
2,615

 
41

 
128,316

 
119,128

Expenses as a % of net sales
13.9
%
 
14.0
%
 
15.5
%
 
52.6
 %
 
14.0
%
 
14.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
139,918

 
129,175

 
2,502

 
(43
)
 
142,420

 
129,132

Operating margin
15.5
%
 
15.2
%
 
14.9
%
 
(55.1
)%
 
15.5
%
 
15.2
%

(Unaudited)
Base Business
 
Excluded
 
Total
(in thousands)
Six Months Ended
 
Six Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net sales
$
1,412,564

 
$
1,301,606

 
$
21,575

 
$
679

 
$
1,434,139

 
$
1,302,285

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
407,485

 
372,886

 
6,274

 
175

 
413,759

 
373,061

Gross margin
28.8
%
 
28.6
%
 
29.1
%
 
25.8
 %
 
28.9
%
 
28.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
237,604

 
228,028

 
4,205

 
302

 
241,809

 
228,330

Expenses as a % of net sales
16.8
%
 
17.5
%
 
19.5
%
 
44.5
 %
 
16.9
%
 
17.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
169,881

 
144,858

 
2,069

 
(127
)
 
171,950

 
144,731

Operating margin
12.0
%
 
11.1
%
 
9.6
%
 
(18.7
)%
 
12.0
%
 
11.1
%

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 - June 2016
The Melton Corporation
 
November 2015
 
2
 
January - June 2016
Seaboard Industries, Inc.
 
October 2015
 
3
 
January - June 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.


6

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 six months of 2016.
December 31, 2015
336

 
Acquired locations
8

 
New locations
2

 
Consolidated locations
(2
)
 
June 30, 2016
344

 

7

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
 
 
Six Months Ended
 
(In thousands)
 
June 30,
 
 
June 30,
 
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
Net income
$
85,247

 
$
77,809

 
$
101,610

 
$
86,242

 
 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and other non-operating expenses (1)
 
4,001

 
 
1,900

 
 
6,965

 
 
3,895

 
 
Provision for income taxes
 
53,209

 
 
49,493

 
 
63,437

 
 
54,785

 
 
Share-based compensation
 
2,570

 
 
2,679

 
 
4,850

 
 
4,850

 
 
Equity earnings in unconsolidated investments
 
(37
)
 
 
(70
)
 
 
(62
)
 
 
(191
)
 
 
Depreciation
 
5,007

 
 
3,976

 
 
9,743

 
 
7,687

 
 
Amortization (2)
 
262

 
 
97

 
 
378

 
 
218

 
Adjusted EBITDA
$
150,259

 
$
135,884

 
$
186,921

 
$
157,486

 
(1) 
Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) 
Excludes amortization of deferred financing costs of $134 and $157 for the three months ended June 30, 2016 and June 30, 2015, respectively, and $357 and $314 for the six months ended June 30, 2016 and June 30, 2015, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.
(Unaudited)
 
Three Months Ended
 
 
Six Months Ended
 
(In thousands)
 
June 30,
 
 
June 30,
 
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
Adjusted EBITDA
$
150,259

 
$
135,884

 
$
186,921

 
$
157,486

 
 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and other non-operating expenses, net of interest income
 
(3,867
)
 
 
(1,743
)
 
 
(6,608
)
 
 
(3,581
)
 
 
Provision for income taxes
 
(53,209
)
 
 
(49,493
)
 
 
(63,437
)
 
 
(54,785
)
 
 
Excess tax benefits from share-based compensation
 
(423
)
 
 
(830
)
 
 
(3,203
)
 
 
(4,568
)
 
 
Other
 
(64
)
 
 
(768
)
 
 
2,270

 
 
1,339

 
 
Change in operating assets and liabilities
 
(66,700
)
 
 
(82,043
)
 
 
(129,700
)
 
 
(152,537
)
 
Net cash provided by (used in) operating activities
$
25,996

 
$
1,007

 
$
(13,757
)
 
$
(56,646
)
 

8