StockSelector.com
  Research, Select, & Monitor Friday, March 22, 2019 12:40:23 PM ET  
Trade Ideas The Market Industries Stocks Portfolio

 
Ticker Lookup
Pool Corp$157.89($1.87)(1.17%)

  Quote | Ranking | Chart | Valuations | Sentiment | Industry | News | Earnings | Analysts | More...

Your Target?

 Pool Corporation Reports Record Second Quarter Results
   Thursday, July 19, 2018 7:00:00 AM ET

Highlights

  • Net sales growth for both Q2 and YTD 2018 of 7%, with 6% growth in base business sales
  • Q2 2018 diluted EPS increase of 27% to $2.80; YTD growth of 30% to $3.55, each including tax benefits
  • Updates 2018 earnings guidance range to $5.50 - $5.70 per diluted share from previous $5.45 - $5.70 range

______________________

COVINGTON, La., July 19, 2018 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ:POOL) today reported record results for the second quarter of 2018.

“We had a solid May and June, following the delayed spring in many of our seasonal markets.  Despite weather challenges and seasonal capacity constraints on the part of our customers, consumer demand remains high and strongly contributed to our record sales and gross profit growth in the second quarter,” said Manuel Perez de la Mesa, President and CEO.

Net sales increased 7% to a record $1,057.8 million in the second quarter of 2018 compared to $988.2 million in the second quarter of 2017.  Base business sales grew 6% over the same quarter of last year, with discretionary products such as building materials and equipment leading our sales growth.  The impact of a weaker U.S. dollar on sales outside the U.S., primarily Europe, compared to the same period last year also favorably impacted our sales growth by approximately 1%.

Gross profit increased 7% to a record $308.7 million in the second quarter of 2018 from $289.7 million in the same period of 2017.  Base business gross profit improved 6% over the second quarter of last year.  Gross profit as a percentage of net sales (gross margin) was 29.2% for the second quarter of 2018 compared to 29.3% for the second quarter of 2017.  Product mix was the principal factor leading to the slightly lower margin.

Selling and administrative expenses (operating expenses) increased 8% to $146.6 million in the second quarter of 2018 compared to the second quarter of 2017, with base business operating expenses up approximately 7% over the comparable 2017 period.  While acquisitions contributed to our overall expense growth, changes in certain non-executive performance-based compensation programs that impact the timing of our expense recognition also resulted in higher compensation expense in the quarter.  We believe our results later in the year, particularly in the fourth quarter, should benefit from this timing change.  Base business operating expenses also increased due to the unfavorable impact of foreign currency fluctuations, which collectively impacted the quarter’s expenses by 1%.  As a percentage of sales, base business operating expenses were consistent year over year at 13.6% of sales.

Operating income for the second quarter increased 5% to a record $162.0 million compared to the same period in 2017.  Foreign currency exchange rate increases favorably impacted our operating income growth by 1%.  Operating income as a percentage of net sales (operating margin) was 15.3% for the second quarter of 2018 and 15.6% for the same period in 2017, while base business operating margin was 15.5% for the second quarter of 2018 and 15.7% for the same period in 2017.

Interest and other non-operating expenses, net increased to $6.0 million in the second quarter of 2018 from $4.0 million in the second quarter of 2017.  The $2.0 million increase primarily relates to higher interest rates on our debt and increased borrowings to fund working capital investments and share repurchases, as well as greater realized foreign currency conversion losses compared to the same period last year.

Both Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, which we adopted on January 1, 2017, and U.S. tax reform enacted in December 2017 impacted our income tax provision for the second quarter of 2018.  Our effective tax rate was 25.0% and 37.0% for the second quarters of 2018 and 2017, respectively.  We recorded a $1.5 million benefit from ASU 2016-09 in the quarter ended June 30, 2018, compared to a benefit of $1.9 million realized in the same period last year.  Excluding the benefits from ASU 2016-09, our effective tax rate was 26.0% and 38.3% for the second quarters of 2018 and 2017, respectively.  As previously reported, we expect our annual effective tax rate (excluding the benefit from ASU 2016-09) for 2018 and future periods to approximate 25.5%, which is a reduction compared to our historical rate of approximately 38.5% due to the impact of the recent U.S. tax reform.

Net income attributable to Pool Corporation was $117.0 million in the second quarter of 2018 compared to $94.9 million in the second quarter of 2017.  Earnings per share increased 27% to a record $2.80 per diluted share for the three months ended June 30, 2018 versus $2.21 per diluted share for the same period in 2017.  The reduction in our effective tax rate from 37.0% to 25.0% as discussed above reduced our income tax expense by approximately $18.7 million, or $0.45 per diluted share, in the second quarter of 2018.

Net sales for the six months ended June 30, 2018 increased 7% to a record $1,643.7 million from $1,534.6 million in the comparable 2017 period, with most of this growth coming from the 6% improvement in base business sales. Gross margin was in line with last year at 28.9%.

Operating expenses increased 8% compared to the first half of 2017, with base business operating expenses up 6%. Operating income for the first six months of 2018 increased 6% to $195.6 million compared to $185.2 million in the same period last year.

Our effective tax rate was 20.3% for the six months ended June 30, 2018 compared to 34.2% for the six months ended June 30, 2017.  ASU 2016-09 benefited our income tax provision by $10.6 million in the first half of 2018 and $7.4 million in the first half of 2017.  Excluding the benefits from ASU 2016-09, our effective tax rate was 26.0% and 38.4% for the six months ended June 30, 2018 and June 30, 2017, respectively.

Net income attributable to Pool Corporation for the six months ended June 30, 2018 was $148.4 million, compared to Net income attributable to Pool Corporation of $117.2 million for the six months ended June 30, 2017.  Earnings per share for the first six months of 2018 increased 30% to a record $3.55 per diluted share versus $2.73 per diluted share for the first six months of 2017.  The reduction in our effective tax rate as discussed above from 34.2% to 20.3% reduced our income tax expense by approximately $25.9 million, or $0.62 per diluted share, in the first six months of 2018.

On the balance sheet at June 30, 2018, total net receivables, including pledged receivables, increased 9%, while inventory levels grew 12% compared to June 30, 2017.  The growth in receivables and inventory includes growth from acquired businesses, while the inventory growth also includes purchases made in advance of certain mid-year vendor price increases.  Total debt outstanding was $657.1 million at June 30, 2018, a $103.6 million increase from total debt at June 30, 2017.

Cash used in operations was $36.8 million in the first half of 2018 compared to $41.3 million in the first half of 2017.  Adjusted EBITDA (as defined in the addendum to this release) was $172.1 million and $163.8 million in the second quarters of 2018 and 2017, respectively.

“We believe that consumer demand is strong and despite constraints on customer capacity, we should have solid results in the second half of the year.  I am confident in our team’s ability to address the many opportunities available as is our legacy and to that end have updated our annual earnings guidance to reflect the $0.04 contribution from ASU 2016-09 in the quarter,” said Perez de la Mesa.

We have not projected any additional tax benefit from ASU 2016-09 in our earnings guidance range for the remainder of the year.  Our current earnings guidance range for 2018 includes only the year to date benefit realized as of June 30, 2018.

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products.  As of June 30, 2018, POOLCORP operated 358 sales centers in North America, Europe, South America and Australia, through which it distributes more than 180,000 national brand and private label products to roughly 120,000 wholesale customers.  For more information, please visit www.poolcorp.com .

This news release includes “forward-looking” statements that involve risks 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, excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP’s 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission.  In addition, this press release includes forward-looking statements and estimates regarding the effects of the Tax Cuts and Jobs Act, which are based on our current interpretation of this legislation and on reasonable estimates and may change as a result of new guidance issued by regulators or changes in our estimates.



CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com


POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
Net sales$1,057,804  $988,163  $1,643,704  $1,534,603 
Cost of sales749,149  698,499  1,168,976  1,091,318 
Gross profit308,655  289,664  474,728  443,285 
Percent29.2% 29.3% 28.9% 28.9%
        
Selling and administrative expenses146,613  135,478  279,145  258,101 
Operating income162,042  154,186  195,583  185,184 
Percent15.3% 15.6% 11.9% 12.1%
        
Interest and other non-operating expenses, net5,991  3,952  9,518  7,599 
Income before income taxes and equity earnings156,051  150,234  186,065  177,585 
Provision for income taxes39,062  55,654  37,783  60,772 
Equity earnings in unconsolidated investments, net60  40  106  78 
Net income117,049  94,620  148,388  116,891 
Net loss attributable to noncontrolling interest  283    294 
Net income attributable to Pool Corporation$117,049  $94,903  $148,388  $117,185 
        
Earnings per share:       
Basic$2.89  $2.30  $3.67  $2.84 
Diluted$2.80  $2.21  $3.55  $2.73 
Weighted average shares outstanding:       
Basic40,453  41,349  40,413  41,271 
Diluted41,814  42,985  41,840  42,937 
        
Cash dividends declared per common share$0.45  $0.37  $0.82  $0.68 
                


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

   June 30,  June 30,  Change 
   2018  2017  $ % 
             
Assets           
Current assets:           
 Cash and cash equivalents$42,167  $26,666  $15,501  58 %
 Receivables, net (1) 135,104   112,802   22,302  20  
 Receivables pledged under receivables facility 269,311   257,483   11,828  5  
 Product inventories, net (2) 606,583   542,805   63,778  12  
 Prepaid expenses and other current assets 17,169   15,514   1,655  11  
Total current assets 1,070,334   955,270   115,064  12  
             
Property and equipment, net 113,048   106,787   6,261  6  
Goodwill 189,066   186,124   2,942  2  
Other intangible assets, net 12,608   13,430   (822) (6) 
Equity interest investments 1,130   1,158   (28) (2) 
Other assets 18,095   16,367   1,728  11  
Total assets$1,404,281  $1,279,136  $125,145  10 %
             
Liabilities and stockholders’ equity           
Current liabilities:           
 Accounts payable$300,232  $273,309  $26,923  10 %
 Accrued expenses and other current liabilities 83,271   98,225   (14,954) (15) 
 Short-term borrowings and current portion of long-term debt 21,462   14,901   6,561  44  
Total current liabilities 404,965   386,435   18,530  5  
             
Deferred income taxes 24,729   28,445   (3,716) (13) 
Long-term debt, net 635,658   538,579   97,079  18  
Other long-term liabilities 25,128   22,418   2,710  12  
Total liabilities 1,090,480   975,877   114,603  12  
Total stockholders’ equity 313,801   303,259   10,542  3  
Total liabilities and stockholders’ equity$1,404,281  $1,279,136  $125,145  10 %

(1)       The allowance for doubtful accounts was $4.1 million at June 30, 2018 and $3.6 million at June 30, 2017.
(2)       The inventory reserve was $8.4 million at June 30, 2018 and $8.1 million at June 30, 2017.


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

  Six Months Ended    
  June 30,    
  2018  2017  Change 
Operating activities         
Net income$148,388  $116,891  $31,497  
Adjustments to reconcile net income to cash used in operating activities:         
 Depreciation 12,888   11,617   1,271  
 Amortization 938   743   195  
 Share-based compensation 6,481   6,299   182  
 Equity earnings in unconsolidated investments, net (106)  (78)  (28) 
 Other 1,861   2,122   (261) 
Changes in operating assets and liabilities, net of effects of acquisitions:         
 Receivables (210,327)  (199,055)  (11,272) 
 Product inventories (76,286)  (53,546)  (22,740) 
 Prepaid expenses and other assets 2,100   (2,389)  4,489  
 Accounts payable 55,964   38,673   17,291  
 Accrued expenses and other current liabilities 21,290   37,378   (16,088) 
Net cash used in operating activities (36,809)  (41,345)  4,536  
          
Investing activities         
Acquisition of businesses, net of cash acquired (578)  (3,296)  2,718  
Purchases of property and equipment, net of sale proceeds (24,620)  (34,495)  9,875  
Other investments, net    3   (3) 
Net cash used in investing activities (25,198)  (37,788)  12,590  
          
Financing activities         
Proceeds from revolving line of credit 554,536   606,623   (52,087) 
Payments on revolving line of credit (545,574)  (641,752)  96,178  
Proceeds from asset-backed financing 177,500   156,600   20,900  
Payments on asset-backed financing (60,000)  (20,100)  (39,900) 
Proceeds from short-term borrowings and current portion of long-term debt 13,957   22,609   (8,652) 
Payments on short-term borrowings and current portion of long-term debt (3,330)  (8,813)  5,483  
Payments of deferred financing costs (8)     (8) 
Payments of deferred and contingent acquisition consideration (265)  (199)  (66) 
Purchase of redeemable noncontrolling interest    (2,573)  2,573  
Proceeds from stock issued under share-based compensation plans 9,383   7,502   1,881  
Payments of cash dividends (33,194)  (28,108)  (5,086) 
Purchases of treasury stock (38,876)  (8,672)  (30,204) 
Net cash provided by financing activities 74,129   83,117   (8,988) 
Effect of exchange rate changes on cash and cash equivalents 105   726   (621) 
Change in cash and cash equivalents 12,227   4,710   7,517  
Cash and cash equivalents at beginning of period 29,940   21,956   7,984  
Cash and cash equivalents at end of period$42,167  $26,666  $15,501  


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
 June 30,June 30,June 30,
 2018 2017 2018 2017 2018 2017
Net sales$1,043,685  $982,511  $14,119  $5,652  $1,057,804  $988,163 
            
Gross profit304,242  287,939  4,413  1,725  308,655  289,664 
Gross margin29.2% 29.3% 31.3% 30.5% 29.2% 29.3%
            
Operating expenses142,261  133,552  4,352  1,926  146,613  135,478 
Expenses as a % of net sales13.6% 13.6% 30.8% 34.1% 13.9% 13.7%
            
Operating income (loss)161,981  154,387  61  (201) 162,042  154,186 
Operating margin15.5% 15.7% 0.4% (3.6)% 15.3% 15.6%


(Unaudited)Base Business Excluded Total
(in thousands)Six Months Ended Six Months Ended Six Months Ended
 June 30, June 30, June 30,
 2018 2017 2018 2017 2018 2017
Net sales$1,618,795  $1,527,995  $24,909  $6,608  $1,643,704  $1,534,603 
            
Gross profit467,217  441,355  7,511  1,930  474,728  443,285 
Gross margin28.9% 28.9% 30.2% 29.2% 28.9% 28.9%
            
Operating expenses270,399  255,636  8,746  2,465  279,145  258,101 
Expenses as a % of net sales16.7% 16.7% 35.1% 37.3% 17.0% 16.8%
            
Operating income (loss)196,818  185,719  (1,235) (535) 195,583  185,184 
Operating margin12.2% 12.2% (5.0)% (8.1)% 11.9% 12.1%


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

Acquired Acquisition
Date
 Net
Sales Centers
Acquired
 Periods
Excluded
Tore Pty. Ltd. (Pool Power) (1) January 2018 1 January - June 2018
Chem Quip, Inc. (1) December 2017 5 January - June 2018

 
Intermark December 2017 1 January - June 2018

 
E-Grupa October 2017 1 January - June 2018
New Star Holdings Pty. Ltd. (Newline) July 2017 1 January - June 2018
Lincoln Aquatics (1) April 2017 1 January - June 2018 and
May - June 2017

(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 six months of 2018.

December 31, 2017351  
Acquired location1  
New locations7  
Consolidated location(1) 
June 30, 2018358  

Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, 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, 
   2018  2017  2018  2017 
Net income$117,049  $94,620  $148,388  $116,891  
 Add:            
 Interest and other non-operating expenses (1) 5,991   3,952   9,518   7,599  
 Provision for income taxes 39,062   55,654   37,783   60,772  
 Share-based compensation 3,160   3,296   6,481   6,299  
 Equity earnings in unconsolidated investments (60)  (40)  (106)  (78) 
 Depreciation 6,589   6,060   12,888   11,617  
 Amortization (2) 275   242   551   471  
Adjusted EBITDA$172,066  $163,784  $215,503  $203,571  

(1)       Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2)       Excludes amortization of deferred financing costs of $193 and $136 for the three months ended June 30, 2018 and June 30, 2017, respectively, and $387 and $272 for the six months ended June 30, 2018 and June 30, 2017, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities.  Please see page 6 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited) Three Months Ended  Six Months Ended 
(In thousands) June 30,  June 30, 
   2018  2017  2018  2017 
Adjusted EBITDA$172,066  $163,784  $215,503  $203,571  
 Add:            
 Interest and other non-operating expenses, net of interest income (5,798)  (3,816)  (9,131)  (7,327) 
 Provision for income taxes (39,062)  (55,654)  (37,783)  (60,772) 
 Other 1,180   275   1,861   2,122  
 Change in operating assets and liabilities (121,046)  (113,510)  (207,259)  (178,939) 
Net cash provided by (used in) operating activities$7,340  $(8,921) $(36,809) $(41,345) 
 

Primary Logo

Source: Pool Corporation


Register |  Password |  Feedback |  Copyright |  Usage Agreement |  Privacy Policy |  Advertising |  About Us |  Contact Us |  FAQ 

Past performance is not indicative of future results

StockSelector.com, the StockSelector.com logo, and News Selects are trademarks of StockSelector.com.
Copyright © 1998 - 2019 StockSelector.com. All rights reserved.