- Net sales growth of 8% with base business net sales growth of 7% for Q2 2017
- Q2 2017 diluted EPS increased 12% to $2.21, with year to date diluted EPS up 16% to a record $2.73
- Affirms 2017 earnings guidance range of $4.12 - $4.32 per diluted share
COVINGTON, La., July 20, 2017 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ:POOL) today reported record results for the second quarter of 2017.
“Our second quarter results show solid sales and earnings growth, founded on strong execution. Our continued focus on improving operational leverage enabled us to create real value for our customers and suppliers. As we pass the halfway mark of 2017, we are pleased to affirm that we are on track to meet expectations,” said Manuel Perez de la Mesa, President and CEO.
Net sales for the second quarter of 2017 increased 8% to a record $988.2 million compared to $918.9 million in the second quarter of 2016. We realized base business sales growth of 7% over the same period last year, with increases in swimming pool repair and remodel activities, including major pool refurbishment and replacement of key pool equipment.
Gross profit for the second quarter of 2017 increased 7% to a record $289.7 million from $270.7 million in the same period of 2016. Base business gross profit improved 6% over the second quarter of last year. Gross profit as a percentage of net sales (gross margin) was 29.3% for the second quarter of 2017 compared to 29.5% for the second quarter of 2016. Gross margin decreased approximately 15 basis points from the second quarter of 2016, which comes on top of a 30 basis point increase in the first quarter of 2017.
Selling and administrative expenses (operating expenses) increased approximately 6% to $135.5 million in the second quarter of 2017 compared to the second quarter of 2016, with base business operating expenses up 5% over the comparable 2016 period. The increase in operating expenses is in line with the increase in sales growth, which resulted in operating expenses as a percentage of net sales of 14% for both the second quarter of 2017 and 2016. The increase includes seasonally higher growth-driven labor and freight expenses, as well as higher employee-related insurance costs.
Operating income for the second quarter increased 8% to a record $154.2 million compared to the same period in 2016. Operating income as a percentage of net sales (operating margin) was 15.6% for the second quarter of 2017 compared to 15.5% for the second quarter of 2016.
During the first quarter of 2017, we adopted Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, on a prospective basis. This adoption resulted in a tax benefit recorded in our provision for income taxes, which positively impacted our net income and earnings per share. The net income impact on our earnings per share was offset by an increase of approximately 550,000 diluted weighted average shares outstanding used to calculate our earnings per diluted share. Net income attributable to Pool Corporation, including the tax benefit of $1.9 million from the impact of adopting ASU 2016-09, was $94.9 million in the second quarter of 2017 compared to $85.4 million for the second quarter of 2016. Earnings per share, including a favorable $0.02 per diluted share impact from the adoption of this accounting pronouncement, increased 12% to a record $2.21 per diluted share for the three months ended June 30, 2017 versus $1.98 per diluted share for the same period in 2016.
Net sales for the six months ended June 30, 2017 increased 7% to a record $1,534.6 million from $1,434.1 million in the comparable 2016 period, with much of this growth coming from the 6% improvement in base business sales. Gross margin remained flat compared to the same period last year and was 28.9% in both the first half of 2017 and 2016.
Operating expenses increased 7% compared to the first half of 2016, with base business operating expenses up 6%. Operating income for the first six months of 2017 increased 8% to $185.2 million compared to $172.0 million in the same period last year.
Earnings per share for the first six months of 2017, including a favorable $0.14 per diluted share impact from the adoption of ASU 2016-09 as discussed above, increased 16% to a record $2.73 per diluted share versus $2.35 per diluted share for the first six months of 2016. Net income attributable to Pool Corporation for the six months ended June 30, 2017 was $117.2 million, including the tax benefit of $7.4 million from the impact the new accounting guidance, compared to Net income attributable to Pool Corporation of $101.8 million for the six months ended June 30, 2016.
On the balance sheet at June 30, 2017, total net receivables, including pledged receivables, increased 5% while inventory levels grew 10% compared to June 30, 2016. Total debt outstanding at June 30, 2017 was $553.5 million, a $52.9 million increase from total debt at June 30, 2016.
Cash used in operations was $41.3 million for the first six months of 2017 compared to $13.8 million for the first six months of 2016. In addition to reflecting growth-related increases in inventories and receivables, the increase in cash used in operations includes the normal scheduled payment of our second quarter 2017 estimated taxes, whereas our second quarter 2016 estimated tax payments were deferred as allowed for areas affected by severe storms and flooding in Louisiana. Adjusted EBITDA (as defined in the addendum to this release) was $163.8 million and $150.3 million for the second quarter of 2017 and 2016, respectively, and $203.6 million and $186.9 million for the first six months of 2017 and 2016, respectively.
“We are pleased with our results for the first half of the year, and we affirm our previously communicated earnings guidance range of $4.12 to $4.32 per diluted share. Our season is in full swing, and we are just hitting our stride. Our team continues to exemplify the energy and passion for providing the best quality service, which is what truly differentiates us during the busiest times of the year and is a key factor to our continued success,” said Perez de la Mesa.
POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. As of June 30, 2017, POOLCORP operated 345 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 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
|Consolidated Statements of Income|
|(In thousands, except per share data)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Cost of sales||698,499||648,153||1,091,318||1,020,380|
|Selling and administrative expenses||135,478||128,316||258,101||241,809|
|Interest and other non-operating expenses, net||3,952||4,001||7,599||6,965|
|Income before income taxes and equity earnings||150,234||138,419||177,585||164,985|
|Provision for income taxes (1)||55,654||53,209||60,772||63,437|
|Equity earnings in unconsolidated investments, net||40||37||78||62|
|Net loss attributable to noncontrolling interest||283||188||294||196|
|Net income attributable to Pool Corporation||$||94,903||$||85,435||$||117,185||$||101,806|
|Earnings per share:|
|Weighted average shares outstanding:|
|Cash dividends declared per common share||$||0.37||$||0.31||$||0.68||$||0.57|
(1) Upon adoption of ASU 2016-09, we were required to recognize all excess tax benefits or deficiencies related to share-based compensation as a component of our income tax provision on our Consolidated Statements of Income, rather than a component of stockholders’ equity on our Condensed Consolidated Balance Sheets. We adopted this guidance during the first quarter of 2017 on a prospective basis, and as such, our prior year presentation has not changed.
|Condensed Consolidated Balance Sheets|
|June 30,||June 30,||Change|
|Cash and cash equivalents||$||26,666||$||30,551||$||(3,885||)||(13||)||%|
|Receivables, net (1)||112,802||119,113||(6,311||)||(5||)|
|Receivables pledged under receivables facility||257,483||231,899||25,584||11|
|Product inventories, net (2)||542,805||493,254||49,551||10|
|Prepaid expenses and other current assets||15,514||13,044||2,470||19|
|Deferred income taxes (3)||—||5,533||(5,533||)||(100||)|
|Total current assets||955,270||893,394||61,876||7|
|Property and equipment, net||106,787||85,387||21,400||25|
|Other intangible assets, net||13,430||14,058||(628||)||(4||)|
|Equity interest investments||1,158||1,119||39||3|
|Other assets (3)||16,367||15,613||754||5|
|Liabilities, redeemable noncontrolling interest |
and stockholders’ equity
|Accrued expenses and other current liabilities (3)||98,225||114,993||(16,768||)||(15||)|
|Short-term borrowings and current portion of |
long-term debt and other long-term liabilities
|Total current liabilities||386,435||387,165||(730||)||—|
|Deferred income taxes (3)||28,445||28,239||206||1|
|Long-term debt, net||538,579||493,783||44,796||9|
|Other long-term liabilities||22,418||17,875||4,543||25|
|Redeemable noncontrolling interest||—||2,511||(2,511||)||(100||)|
|Total stockholders’ equity||303,259||266,090||37,169||14|
|Total liabilities, redeemable noncontrolling |
interest and stockholders’ equity
(1) The allowance for doubtful accounts was $3.6 million at June 30, 2017 and $3.3 million at June 30, 2016.
(2) The inventory reserve was $8.1 million at June 30, 2017 and $8.6 million at June 30, 2016.
(3) Upon adoption of ASU 2015-17, Balance Sheet Classification of Deferred Taxes, we were required to reclassify all of our deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets. We adopted this guidance on a prospective basis, and as such, our prior year balances or classifications have not changed.
|Condensed Consolidated Statements of Cash Flows|
|Six Months Ended|
|Adjustments to reconcile net income to cash used in operating activities:|
|Excess tax benefits from share-based compensation (1)||—||(3,203||)||3,203|
|Equity earnings in unconsolidated investments, net||(78||)||(62||)||(16||)|
|Changes in operating assets and liabilities, net of effects of acquisitions:|
|Prepaid expenses and other assets||(2,389||)||(1,729||)||(660||)|
|Accrued expenses and other current liabilities||37,378||58,995||(21,617||)|
|Net cash used in operating activities||(41,345||)||(13,757||)||(27,588||)|
|Acquisition of businesses, net of cash acquired||(3,296||)||(19,211||)||15,915|
|Purchases of property and equipment, net of sale proceeds||(34,495||)||(25,779||)||(8,716||)|
|Payments to fund credit agreement||—||(2,232||)||2,232|
|Collections from credit agreement||—||2,475||(2,475||)|
|Other investments, net||3||17||(14||)|
|Net cash used in investing activities||(37,788||)||(44,730||)||6,942|
|Proceeds from revolving line of credit||606,623||629,351||(22,728||)|
|Payments on revolving line of credit||(641,752||)||(604,470||)||(37,282||)|
|Proceeds from asset-backed financing||156,600||145,000||11,600|
|Payments on asset-backed financing||(20,100||)||(2,800||)||(17,300||)|
|Proceeds from short-term borrowings, long-term debt and other long-term liabilities||22,609||12,110||10,499|
|Payments on short-term borrowings, long-term debt and other long-term liabilities||(8,813||)||(6,987||)||(1,826||)|
|Payments of deferred and contingent acquisition consideration||(199||)||—||(199||)|
|Purchase of redeemable noncontrolling interest||(2,573||)||—||(2,573||)|
|Excess tax benefits from share-based compensation (1)||—||3,203||(3,203||)|
|Proceeds from stock issued under share-based compensation plans||7,502||5,699||1,803|
|Payments of cash dividends||(28,108||)||(23,957||)||(4,151||)|
|Purchases of treasury stock||(8,672||)||(80,478||)||71,806|
|Net cash provided by financing activities||83,117||76,671||6,446|
|Effect of exchange rate changes on cash and cash equivalents||726||(870||)||1,596|
|Change in cash and cash equivalents||4,710||17,314||(12,604||)|
|Cash and cash equivalents at beginning of period||21,956||13,237||8,719|
|Cash and cash equivalents at end of period||$||26,666||$||30,551||$||(3,885||)|
(1) Upon adoption of ASU 2016-09, the excess tax benefit from share-based compensation is no longer reclassified out of operating income tax cash flows, and no longer reported as a financing activity. We adopted this guidance on a prospective basis, and as such, our prior year presentation has not changed.
The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):
|(in thousands)||Three Months Ended||Three Months Ended||Three Months Ended|
|June 30,||June 30,||June 30,|
|Expenses as a % of net sales||13.6||%||13.9||%||21.3||%||20.6||%||13.7||%||14.0||%|
|(in thousands)||Six Months Ended||Six Months Ended||Six Months Ended|
|June 30,||June 30,||June 30,|
|Expenses as a % of net sales||16.7||%||16.8||%||22.2||%||22.5||%||16.8||%||16.9||%|
We have excluded the following acquisitions from base business for the periods identified:
|Lincoln Aquatics||April 2017||2||May - June 2017|
|Metro Irrigation Supply Company Ltd.||April 2016||8||January - June 2017 and|
April - June 2016
|The Melton Corporation||November 2015||2||January 2017 and January 2016|
|Seaboard Industries, Inc.||October 2015||3||January 2017 and January 2016|
(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 2017.
|December 31, 2016||344|
|June 30, 2017||345|
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,|
|Interest and other non-operating expenses (1)||3,952||4,001||7,599||6,965|
|Provision for income taxes||55,654||53,209||60,772||63,437|
|Equity earnings in unconsolidated investments||(40||)||(37||)||(78||)||(62||)|
(1) Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) Excludes amortization of deferred financing costs of $136 and $134 for the three months ended June 30, 2017 and June 30, 2016, respectively and $272 and $357 for the six months ended June 30, 2017 and June 30, 2016, respectively.
The table below presents a reconciliation of Adjusted EBITDA to net cash (used in) provided by operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.
|(Unaudited)||Three Months Ended||Six Months Ended|
|(In thousands)||June 30,||June 30,|
|Interest and other non-operating expenses, net of interest income||(3,816||)||(3,867||)||(7,327||)||(6,608||)|
|Provision for income taxes||(55,654||)||(53,209||)||(60,772||)||(63,437||)|
|Excess tax benefits from share-based compensation||—||(423||)||—||(3,203||)|
|Change in operating assets and liabilities||(113,510||)||(66,700||)||(178,939||)||(129,700||)|
|Net cash (used in) provided by operating activities||$||(8,921||)||$||25,996||$||(41,345||)||$||(13,757||)|
CONTACT: Curtis J. Scheel Director of Investor Relations 985.801.5341 email@example.com