POOL CORP - FORM 8-K - EX-99.1 - POOL 2015 EARNINGS RELEASE - February 18, 2016

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Exhibit 99.1

FOR IMMEDIATE RELEASE


POOL CORPORATION REPORTS RECORD 2015 RESULTS
AND PROVIDES 2016 EARNINGS GUIDANCE

Highlights include:

•
Record 2015 diluted EPS of $2.90, an increase of 19% over 2014
•
Record annual sales of $2.36 billion
•
Record 2015 operating margin of 9.1%, up 70 basis points from 2014
•
2016 diluted EPS guidance of $3.20 to $3.35
______________________

COVINGTON, LA. (February 18, 2016) – Pool Corporation (NASDAQ/GSM:POOL) today announced fourth quarter and full year 2015 results.

“We had a record-setting year in 2015 topped off with favorable warmer weather in the fourth quarter, which contributed to record fourth quarter sales and our first profitable fourth quarter ever. We grew annual sales by 5% over 2014, despite an almost 2% negative impact from foreign currency fluctuations. Strict margin discipline and expense management resulted in a strong contribution margin enabling us to expand our operating margin by more than 70 basis points,” commented Manuel Perez de la Mesa, President and CEO.

Net sales for the year ended December 31, 2015 increased 5% to a record high of $2.36 billion, compared to $2.25 billion in 2014. Base business sales also increased 5%. Annual sales benefited from increased consumer spending on discretionary products, particularly related to replacement and remodel activity. Pool owners are investing to upgrade existing pools and outdoor systems to increase energy efficiency and incorporate more technologically advanced products. Record warm temperatures through much of the fourth quarter extended the pool season well into November and December in many markets, which spurred greater sales in both our building materials and equipment product categories.

Gross profit for the year ended December 31, 2015 reached a record $675.6 million, a 5% increase over gross profit of $643.3 million in 2014. Gross profit as a percentage of net sales (gross margin) remained constant at 28.6% for both 2015 and 2014.

Selling and administrative expenses (operating expenses) for 2015 increased just 1% to $459.4 million from $454.5 million in 2014. Increases in performance-based incentive compensation and technology related expenses were offset by tight expense controls and an approximate 2% favorable impact on operating expenses from the stronger U.S. dollar relative to foreign currencies.

Operating income for the year improved 14% to $216.2 million from $188.9 million in 2014. Operating income as a percentage of net sales (operating margin) increased to a record 9.1% in 2015 compared to 8.4% in 2014.

Net income attributable to Pool Corporation increased 16% to a record $128.3 million in 2015 compared to $110.7 million in 2014. Earnings per share was up 19% to a record $2.90 per diluted share compared to $2.44 per diluted share in 2014. Adjusted EBITDA (as defined in the addendum to this release) increased 14% to $241.8 million in 2015 compared to $213.0 million in 2014, or 10.2% of net sales in 2015 compared to 9.5% of net sales in 2014.


1

On the balance sheet at December 31, 2015, total net receivables, including pledged receivables, increased 11% over the prior year, reflecting our December 2015 sales growth. Inventory levels grew 2% to $474.3 million compared to $467.0 million last year. Total debt outstanding was $329.7 million, an increase of $8.9 million or 3% over the prior year’s balance.

Cash provided by operations was $146.1 million in 2015, or $17.8 million more than net income. Compared to 2014, cash provided by operations was $24.2 million higher primarily due to the increase in net income and improvements in the seasonal purchasing and payment cycle.

Net sales for the fourth quarter increased 10% to $415.1 million compared to $376.4 million in the fourth quarter of 2014. Gross margin improved 30 basis points to 28.5% in the fourth quarter of 2015. Operating income for the fourth quarter of 2015 was $6.0 million compared to a loss of $0.7 million in the same period last year. Net income attributable to Pool Corporation for the fourth quarter of 2015 was $2.5 million compared to a loss of $2.2 million in the comparable 2014 period. Earnings per diluted share for the fourth quarter of 2015 was $0.06 versus a loss of $0.05 per diluted share in the fourth quarter of 2014.

“Our 2015 results are a testament to the caliber and commitment of our people. We believe the resiliency of our business model, together with ongoing investments in our unique tools and resources will foster another year of solid growth. As we enter the new year, we project earnings will range from $3.20 to $3.35 per diluted share for fiscal 2016. We look forward to building on the foundation laid in 2015 to achieve sustained success through exceptional execution,” said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 336 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 2014 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
(In thousands, except per share data)

 
Three Months Ended
 
Year Ended
 
 
December 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014 (1)
 
 
 
 
 
 
 
 
 
 
Net sales
$
415,075

 
$
376,442

 
$
2,363,139

 
$
2,246,562

 
Cost of sales
296,780

 
270,422

 
1,687,495

 
1,603,222

 
Gross profit
118,295

 
106,020

 
675,644

 
643,340

 
Percent
28.5

%
28.2

%
28.6

%
28.6

%
 
 
 
 
 
 
 
 
 
Selling and administrative expenses
112,316

 
106,752

 
459,422

 
454,470

 
Operating income (loss)
5,979

 
(732
)
 
216,222

 
188,870

 
Percent
1.4

%
(0.2
)
%
9.1

%
8.4

%
 
 
 
 
 
 
 
 
 
Interest and other non-operating expenses, net
1,704

 
1,794

 
8,072

 
7,485

 
Income (loss) before income taxes and equity earnings (loss)
4,275

 
(2,526
)
 
208,150

 
181,385

 
Provision for income taxes
1,648

 
(552
)
 
80,137

 
70,559

 
Equity earnings (loss) in unconsolidated investments, net
(48
)
 
(5
)
 
211

 
204

 
Net income (loss)
2,579

 
(1,979
)
 
128,224

 
111,030

 
Net (income) loss attributable to noncontrolling interest
(93
)
 
(216
)
 
51

 
(338
)
 
Net income (loss) attributable to Pool Corporation
$
2,486

 
$
(2,195
)
 
$
128,275

 
$
110,692

 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
Basic
$
0.06

 
$
(0.05
)
 
$
2.98

 
$
2.50

 
Diluted
$
0.06

 
$
(0.05
)
 
$
2.90

 
$
2.44

 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
42,696

 
43,444

 
43,105

 
44,281

 
Diluted
43,834

 
43,444

 
44,254

 
45,441

 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.26

 
$
0.22

 
$
1.00

 
$
0.85

 
_________________

(1) 
Derived from audited financial statements.



3

POOL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)

 
 
December 31,
 
December 31,
 
Change
 
 
2015
 
2014 (1)
 
$
 
%
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
13,237

 
$
14,830

 
$
(1,593
)
 
(11
)%
 
Receivables, net (2)
54,173

 
51,014

 
3,159

 
6

 
Receivables pledged under receivables facility
102,583

 
89,631

 
12,952

 
14

 
Product inventories, net (3)
474,275

 
466,962

 
7,313

 
2

 
Prepaid expenses and other current assets
11,946

 
11,659

 
287

 
2

 
Deferred income taxes
5,530

 
3,117

 
2,413

 
77

Total current assets
661,744

 
637,213

 
24,531

 
4

 
 
 
 
 
 
 
 
 
Property and equipment, net
69,854

 
56,475

 
13,379

 
24

Goodwill
172,761

 
173,924

 
(1,163
)
 
(1
)
Other intangible assets, net
11,845

 
11,995

 
(150
)
 
(1
)
Equity interest investments
1,231

 
1,244

 
(13
)
 
(1
)
Other assets, net
18,596

 
12,086

 
6,510

 
54

Total assets
$
936,031

 
$
892,937

 
$
43,094

 
5
 %
 
 
 
 
 
 
 
 
 
Liabilities, redeemable noncontrolling interest and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
$
246,554

 
$
236,294

 
$
10,260

 
4
 %
 
Accrued expenses and other current liabilities
56,591

 
54,085

 
2,506

 
5

 
Current portion of long-term debt and other long-term liabilities
1,700

 
1,529

 
171

 
11

Total current liabilities
304,845

 
291,908

 
12,937

 
4

 
 
 
 
 
 
 
 
 
Deferred income taxes
29,808

 
23,504

 
6,304

 
27

Long-term debt
328,015

 
319,309

 
8,706

 
3

Other long-term liabilities
14,955

 
10,751

 
4,204

 
39

Total liabilities
677,623

 
645,472

 
32,151

 
5

Redeemable noncontrolling interest
2,665

 
3,113

 
(448
)
 
(14
)
Total stockholders’ equity
255,743

 
244,352

 
11,391

 
5

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
936,031

 
$
892,937

 
$
43,094

 
5
 %
__________________

(1) 
Derived from audited financial statements.
(2) 
The allowance for doubtful accounts was $4.2 million at December 31, 2015 and $4.0 million at December 31, 2014.
(3) 
The inventory reserve was $7.0 million at December 31, 2015 and $6.4 million at December 31, 2014.


4

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
 
Year Ended
 
 
 
December 31,
 
 
 
2015
 
2014 (1)
 
Change
Operating activities
 
 
 
 
 
Net income
$
128,224

 
$
111,030

 
$
17,194

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation
16,373

 
14,495

 
1,878

 
Amortization
1,015

 
1,387

 
(372
)
 
Share-based compensation
9,543

 
9,065

 
478

 
Excess tax benefits from share-based compensation
(7,706
)
 
(5,524
)
 
(2,182
)
 
Equity earnings in unconsolidated investments, net
(211
)
 
(204
)
 
(7
)
 
Losses on foreign currency transactions
774

 
277

 
497

 
Other
4,832

 
6,145

 
(1,313
)
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
Receivables
(16,656
)
 
(12,751
)
 
(3,905
)
 
Product inventories
(10,848
)
 
(30,409
)
 
19,561

 
Prepaid expenses and other assets
(434
)
 
(2,265
)
 
1,831

 
Accounts payable
9,956

 
20,090

 
(10,134
)
 
Accrued expenses and other current liabilities
11,188

 
10,479

 
709

Net cash provided by operating activities
146,050

 
121,815

 
24,235

 
 
 
 
 
 
Investing activities
 
 
 
 
 
Acquisition of businesses, net of cash acquired
(4,483
)
 
(10,648
)
 
6,165

Purchase of property and equipment, net of sale proceeds
(29,095
)
 
(17,328
)
 
(11,767
)
Other investments, net
88

 
165

 
(77
)
Payments to fund credit agreement
(8,860
)
 
—

 
(8,860
)
Collections from credit agreement
4,557

 
—

 
4,557

Net cash used in investing activities
(37,793
)
 
(27,811
)
 
(9,982
)
 
 
 
 
 
 
Financing activities
 
 
 
 
 
Proceeds from revolving line of credit
911,712

 
820,720

 
90,992

Payments on revolving line of credit
(890,406
)
 
(763,429
)
 
(126,977
)
Proceeds from asset-backed financing
143,400

 
121,600

 
21,800

Payments on asset-backed financing
(156,000
)
 
(106,000
)
 
(50,000
)
Proceeds from short-term borrowings, long-term debt and other long-term liabilities
8,119

 
3,607

 
4,512

Payments on short-term borrowings, long-term debt and other long-term liabilities
(7,948
)
 
(3,075
)
 
(4,873
)
Payments of deferred financing costs
(320
)
 
(394
)
 
74

Excess tax benefits from share-based compensation
7,706

 
5,524

 
2,182

Proceeds from stock issued under share-based compensation plans
18,269

 
13,530

 
4,739

Payments of cash dividends
(43,117
)
 
(37,600
)
 
(5,517
)
Purchases of treasury stock
(99,219
)
 
(136,466
)
 
37,247

Net cash used in financing activities
(107,804
)
 
(81,983
)
 
(25,821
)
Effect of exchange rate changes on cash and cash equivalents
(2,046
)
 
(5,197
)
 
3,151

Change in cash and cash equivalents
(1,593
)
 
6,824

 
(8,417
)
Cash and cash equivalents at beginning of period
14,830

 
8,006

 
6,824

Cash and cash equivalents at end of period
$
13,237

 
$
14,830

 
$
(1,593
)
_________________
(1) Derived from audited financial statements.

5

ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded components (sales centers excluded from base business):

(Unaudited)
Base Business
 
Excluded
 
Total
(in thousands)
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
December 31,
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Net sales
$
411,068

 
$
374,311

 
$
4,007

 
$
2,131

 
$
415,075

 
$
376,442

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
117,089

 
105,137

 
1,206

 
883

 
118,295

 
106,020

Gross margin
28.5
%
 
28.1
 %
 
30.1
 %
 
41.4
%
 
28.5
%
 
28.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
110,634

 
105,936

 
1,682

 
816

 
112,316

 
106,752

Expenses as a % of net sales
26.9
%
 
28.3
 %
 
42.0
 %
 
38.3
%
 
27.1
%
 
28.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
6,455

 
(799
)
 
(476
)
 
67

 
5,979

 
(732
)
Operating margin
1.6
%
 
(0.2
)%
 
(11.9
)%
 
3.1
%
 
1.4
%
 
(0.2
)%

(Unaudited)
Base Business
 
Excluded
 
Total
(in thousands)
Year Ended
 
Year Ended
 
Year Ended
 
December 31,
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Net sales
$
2,344,410

 
$
2,238,929

 
$
18,729

 
$
7,633

 
$
2,363,139

 
$
2,246,562

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
669,037

 
640,259

 
6,607

 
3,081

 
675,644

 
643,340

Gross margin
28.5
%
 
28.6
%
 
35.3
 %
 
40.4
%
 
28.6
%
 
28.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
451,383

 
451,882

 
8,039

 
2,588

 
459,422

 
454,470

Expenses as a % of net sales
19.3
%
 
20.2
%
 
42.9
 %
 
33.9
%
 
19.4
%
 
20.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
217,654

 
188,377

 
(1,432
)
 
493

 
216,222

 
188,870

Operating margin
9.3
%
 
8.4
%
 
(7.6
)%
 
6.5
%
 
9.1
%
 
8.4
%


6

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



Acquired
 

Acquisition
Date
 
Net
Sales Centers
Acquired
 

Periods
Excluded
The Melton Corporation (1)
 
November 2015
 
2
 
November - December 2015
Seaboard Industries, Inc. (1)
 
October 2015
 
3
 
November - December 2015
Poolwerx Development LLC (1)
 
April 2015
 
1
 
April - December 2015
St. Louis Hardscape Material & Supply, LLC (1)(2)
 
December 2014
 
1
 
January - December 2015 and December 2014
Pool Systems Pty. Ltd.
 
July 2014
 
3
 
January - October 2015 and August - October 2014
DFW Stone Supply, LLC (1)
 
March 2014
 
2
 
January - May 2015 and March - May 2014
Atlantic Chemical & Aquatics Inc. (1)
 
February 2014
 
2
 
January - April 2015 and February - April 2014

(1) 
We acquired certain distribution assets of each of these companies.
(2) 
We completed this acquisition on December 31, 2014. We excluded this sales center from base business for the periods identified as per our definition of base business, but also because no results of operations are included in fiscal 2014 due to the acquisition date. This sales center is not in our sales center count as of December 31, 2014, but is included in the table below as an acquired location during fiscal 2015.

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 centers during 2015. Please see footnote 2 to the Acquisition table presented above for further information about our acquired locations.

December 31, 2014
328

Acquired locations
7

New locations
4

Consolidated locations
(3
)
December 31, 2015
336





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 losses 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)
Year Ended December 31,
(in thousands)
2015
 
2014
 
 
 
 
Net income
$
128,224

 
$
111,030

 
Add:
 
 
 
 
Interest and other non-operating expenses (1)
7,298

 
7,208

 
Provision for income taxes
80,137

 
70,559

 
Share-based compensation
9,543

 
9,065

 
Equity earnings in unconsolidated investments, net
(211
)
 
(204
)
 
Depreciation
16,373

 
14,495

 
Amortization (2)
398

 
845

Adjusted EBITDA
$
241,762

 
$
212,998


(1) 
Shown net of interest income and losses on foreign currency transactions and includes amortization of deferred financing costs as discussed below.
(2) 
Excludes amortization of deferred financing costs of $617 for 2015 and $542 for 2014. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

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)
Year Ended December 31,
(in thousands)
2015
 
2014
 
 
 
 
Adjusted EBITDA
$
241,762

 
$
212,998

 
Add:
 
 
 
 
Interest and other non-operating expenses, net of interest income
(6,681
)
 
(6,666
)
 
Provision for income taxes
(80,137
)
 
(70,559
)
 
Losses on foreign currency transactions
774

 
277

 
Excess tax benefits from share-based compensation
(7,706
)
 
(5,524
)
 
Other
4,832

 
6,145

 
Change in operating assets and liabilities
(6,794
)
 
(14,856
)
Net cash provided by operating activities
$
146,050

 
$
121,815




8

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