OREANDA-NEWS. Pool Corporation (NASDAQ: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.  

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   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  

 

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. 

 

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 )