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Feb. 13, 2020, 7:00 a.m. EST

Pool Corporation Reports Record 2019 Results and Provides 2020 Earnings Guidance

COVINGTON, La., Feb 13, 2020 (GLOBE NEWSWIRE via COMTEX) -- Highlights include:

Pool Corporation (nasdaq/gsm:POOL) today announced fourth quarter and full year 2019 results.

"2019 was an exciting year for POOLCORP as we achieved record sales, operating margin and earnings per share. We also achieved a record return on invested capital of 29.3%. Our focus on market share gains and capacity creation allowed us to capitalize on our competitive advantages and deliver solid results, particularly considering the impact of weather on our results in the first half of the year," commented Peter D. Arvan, president and CEO.

Net sales increased 7% to a record high of $3.2 billion for the year ended December 31, 2019 compared to $3.0 billion in 2018. Base business sales increased 5% driven by our continued expansion in commercial and building material products and healthy demand for discretionary products, such as construction materials and products used in the remodel and replacement of in-ground pools. We achieved these favorable results despite inclement weather throughout much of the first half of the year.

Gross profit reached a record $924.9 million for the year ended December 31, 2019, a 6% increase over gross profit of $870.2 million in 2018. Gross margin was relatively flat year over year at 28.9% in 2019 compared to 29.0% in 2018, with base business gross margin at 29.0% in both years.

Selling and administrative expenses (operating expenses) increased 5% to $583.7 million in 2019, up from $556.3 million in 2018, with base business operating expenses up 3% over 2018. The increase in base business operating expenses was primarily attributable to higher growth-driven labor and freight expenses, as well as greater facility-related costs.

Operating income for the year increased 9% to $341.2 million, up from $313.9 million in 2018. Operating margin increased to 10.7% in 2019 compared to 10.5% in 2018, while base business operating margin improved 40 basis points to 10.9% in 2019.

We recorded a $23.5 million, or $0.57 per diluted share, benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, for the year ended December 31, 2019 compared to a benefit of $15.3 million, or $0.36 per diluted share, realized in 2018.

Net income increased 12% to a record $261.6 million in 2019 compared to $234.5 million in 2018. Earnings per share increased 14% to a record $6.40 per diluted share compared to $5.62 per diluted share in 2018. Excluding the impact from ASU 2016-09 in both periods, earnings per diluted share increased 11% to $5.83 in 2019 compared to $5.26 in 2018. Adjusted EBITDA (as defined in the addendum to this release) increased 8% to $382.2 million in 2019 compared to $353.4 million in 2018 and was 11.9% of net sales in 2019 compared to 11.8% of net sales in 2018.

On the balance sheet at December 31, 2019, total net receivables, including pledged receivables, increased 9% compared to 2018, driven by our December sales growth. Inventory levels grew 4% to $702.3 million compared to $672.6 million in 2018, reflecting inventory from acquired businesses of $10.3 million and normal business growth. Total debt outstanding decreased $155.4 million, or 23%, compared to last year's balance.

Cash provided by operations was $298.8 million in 2019, compared to $118.7 million in 2018, an improvement of $180.1 million. The strategic inventory purchases that we made in the latter half of 2018 negatively impacted our 2018 cash flows due to timing differences that reversed in 2019. Our return on invested capital (as defined in the addendum to this release) for 2019 was 29.3% compared to 27.7% in 2018.

Net sales increased 7% to $582.2 million in the fourth quarter of 2019 compared to $543.1 million in the fourth quarter of 2018. Gross margin decreased 170 basis points to 27.8% in the fourth quarter of 2019 compared to the fourth quarter of 2018. Gross margin in the fourth quarter of 2018 reflected benefits from strategic inventory purchases ahead of vendor price increases resulting in a comparative decline in the fourth quarter of 2019. Operating income in the fourth quarter of 2019 decreased 1% to $25.8 million compared to $26.0 million in the same period of 2018. Operating margin decreased 40 basis points in the fourth quarter, including a 10 basis point decrease in base business operating margin. We recorded a $2.4 million benefit from ASU 2016-09 in the fourth quarter of 2019 compared to a benefit of $1.4 million realized in the fourth quarter of 2018. Net income in the fourth quarter of 2019 was $18.0 million compared to $16.8 million in the comparable 2018 period. Earnings per diluted share was $0.44 in the fourth quarter of 2019, or $0.38 excluding the $0.06 per diluted share impact from ASU 2016-09, compared to $0.41, or $0.37 excluding the $0.04 impact from ASU 2016-09, for the same period in 2018.

"In 2020, we will continue to focus on our operating priorities and making strategic investments that benefit our customers, employees and shareholders. We believe that our competitive advantages continue to grow and underlying demand throughout our industry remains strong. Based on these factors, we expect earnings for 2020 will be in the range of $6.47 to $6.77 per diluted share, including an estimated $0.06 favorable impact from ASU 2016-09," said Arvan.







                                                     2020 Guidance Range
                                           2019      Floor       Ceiling
        Diluted EPS                        $  6.40   $  6.47     $  6.77
        Less: tax benefit                  0.57      0.06        0.06
        Diluted EPS, excluding tax benefit $  5.83   $  6.41     $  6.71
        Year-over-year growth                        10      %   15      %
        


Based on our December 31, 2019 stock price, we estimate that we have approximately $2.3 million in unrealized excess tax benefits related to stock options that will expire and restricted stock awards that will vest in the first quarter of 2020, adding $0.06 in diluted earnings per share in that period. We have included the estimated first quarter benefit in our annual earnings guidance; however, additional tax benefits could be recognized related to stock option exercises in 2020 from grants that expire in years after 2020, for which we have not included any expected benefits.

POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products. As of December 31, 2019, POOLCORP operates 373 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 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 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

Curtis J. Scheel

Director of Investor Relations

985.801.5341

curtis.scheel@poolcorp.com

POOL CORPORATION

Consolidated Statements of Income

(In thousands, except per share data)







                                                           Three Months Ended             Year Ended
                                                           December 31,                   December 31,
                                                           2019            2018           2019              2018
        Net sales                                          $   582,234     $   543,082    $    3,199,517    $    2,998,097
        Cost of sales                                      420,184         382,640        2,274,592         2,127,924
        Gross profit                                       162,050         160,442        924,925           870,173
        Percent                                            27.8         %  29.5         % 28.9            % 29.0            %
        Selling and administrative expenses                136,252         134,472        583,679           556,284
        Operating income                                   25,798          25,970         341,246           313,889
        Percent                                            4.4          %  4.8          % 10.7            % 10.5            %
        Interest and other non-operating expenses, net     5,234           6,448          23,772            20,896
        Income before income taxes and equity earnings     20,564          19,522         317,474           292,993
        Provision for income taxes                         2,592           2,786          56,161            58,774
        Equity earnings in unconsolidated investments, net 52              75             262               242
        Net income                                         $   18,024      $   16,811     $    261,575      $    234,461
        Earnings per share:
        Basic                                              $   0.45        $   0.42       $    6.57         $    5.82
        Diluted                                            $   0.44        $   0.41       $    6.40         $    5.62
        Weighted average shares outstanding:
        Basic                                              40,047          40,002         39,833            40,311
        Diluted                                            40,952          41,274         40,865            41,693
        Cash dividends declared per common share           $   0.55        $   0.45       $    2.10         $    1.72
        


Derived from audited financial statements.

POOL CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)







                                                                                          December 31,     December 31,     Change
                                                                                          2019             2018             $              %
        Assets
        Current assets:
                              Cash and cash equivalents                                   $    28,583      $    16,358      $    12,225    75    %
                              Receivables, net                                            76,648           69,493           7,155          10
                              Receivables pledged under receivables facility              149,891          138,308          11,583         8
                              Product inventories, net                                    702,274          672,579          29,695         4
                              Prepaid expenses and other current assets                   16,172           18,506           (2,334       ) (13 )
        Total current assets                                                              973,568          915,244          58,324         6
        Property and equipment, net                                                       112,246          106,964          5,282          5
        Goodwill                                                                          188,596          188,472          124            --
        Other intangible assets, net                                                      11,038           12,004           (966         ) (8  )
        Equity interest investments                                                       1,227            1,213            14             1
        Operating lease assets                                                            176,689          --               176,689        100
        Other assets                                                                      19,902           16,974           2,928          17
        Total assets                                                                      $    1,483,266   $    1,240,871   $    242,395   20    %
        Liabilities and stockholders' equity
        Current liabilities:
                              Accounts payable                                            $    261,963     $    237,835     $    24,128    10    %
                              Accrued expenses and other current liabilities              60,813           58,607           2,206          4
                              Short-term borrowings and current portion of long-term debt 11,745           9,168            2,577          28
                              Current operating lease liabilities                         56,325           --               56,325         100
        Total current liabilities                                                         390,846          305,610          85,236         28
        Deferred income taxes                                                             32,598           29,399           3,199          11
        Long-term debt, net                                                               499,662          657,593          (157,931     ) (24 )
        Other long-term liabilities                                                       27,970           24,679           3,291          13
        Non-current operating lease liabilities                                           122,010          --               122,010        100
        Total liabilities                                                                 1,073,086        1,017,281        55,805         5
        Total stockholders' equity                                                        410,180          223,590          186,590        83
        Total liabilities and stockholders' equity                                        $    1,483,266   $    1,240,871   $    242,395   20    %
        








        (1) Derived from audited financial statements.
        (2) The allowance for doubtful accounts was $5.5 million at December 31, 2019 and $6.2 million at December 31, 2018.
        (3) The inventory reserve was $9.0 million at December 31, 2019 and $7.7 million at December 31, 2018.
        (4) We adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019. Upon adoption, we recorded operating lease assets and operating lease liabilities
		 based on the present value of future lease obligations. We applied the practical expedient available in this guidance, which does not require the
		 restatement of prior year balances.
        (5) Due to ASU 2016-02, our straight-line rent liability of $5.1 million, reported in Accounts payable under previous accounting guidance, offsets
		 our Operating lease assets.
        (6) As of December 31, 2019, we presented pre-paid rent of $4.8 million in Operating lease assets as required under the new guidance (presented in
		 Prepaid expenses and other current assets as of December 31, 2018).
        


POOL CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands)







                                                                                                    Year Ended
                                                                                                    December 31,
                                                                                                    2019             2018            Change
        Operating activities
        Net income                                                                                  $     261,575    $    234,461    $    27,114
        Adjustments to reconcile net income to net cash provided by operating activities:
                                                 Depreciation                                       27,885           26,122          1,763
                                                 Amortization                                       1,389            1,793           (404        )
                                                 Share-based compensation                           13,472           12,874          598
                                                 Equity earnings in unconsolidated investments, net (262          )  (242         )  (20         )
                                                 Net losses on foreign currency transactions        1,347            560             787
                                                 Other                                              7,551            8,928           (1,377      )
        Changes in operating assets and liabilities, net of effects of acquisitions:
                                                 Receivables                                        (15,691       )  (14,371      )  (1,320      )
                                                 Product inventories                                (14,165       )  (142,170     )  128,005
                                                 Prepaid expenses and other assets                  (4,218        )  1,018           (5,236      )
                                                 Accounts payable                                   16,860           (6,567       )  23,427
                                                 Accrued expenses and other current liabilities     3,033            (3,750       )  6,783
        Net cash provided by operating activities                                                   298,776          118,656         180,120
        Investing activities
        Acquisition of businesses, net of cash acquired                                             (8,901        )  (2,578       )  (6,323      )
        Purchase of property and equipment, net of sale proceeds                                    (33,362       )  (31,580      )  (1,782      )
        Net cash used in investing activities                                                       (42,263       )  (34,158      )  (8,105      )
        Financing activities
        Proceeds from revolving line of credit                                                      1,066,529        1,138,195       (71,666     )
        Payments on revolving line of credit                                                        (1,415,988    )  (998,503     )  (417,485    )
        Proceeds from asset-backed financing                                                        189,000          198,400         (9,400      )
        Payments on asset-backed financing                                                          (182,500      )  (189,900     )  7,400
        Proceeds from term facility                                                                 185,000          --              185,000
        Proceeds from short-term borrowings and current portion of long-term debt                   30,863           17,127          13,736
        Payments on short-term borrowings and current portion of long-term debt                     (28,286       )  (18,793      )  (9,493      )
        Payments of deferred acquisition consideration                                              (312          )  (661         )  349
        Payments of deferred financing costs                                                        (406          )  (106         )  (300        )
        Proceeds from stock issued under share-based compensation plans                             18,574           13,569          5,005
        Payments of cash dividends                                                                  (83,772       )  (69,430      )  (14,342     )
        Purchases of treasury stock                                                                 (23,188       )  (187,469     )  164,281
        Net cash used in financing activities                                                       (244,486      )  (97,571      )  (146,915    )
        Effect of exchange rate changes on cash and cash equivalents                                198              (509         )  707
        Change in cash and cash equivalents                                                         12,225           (13,582      )  25,807
        Cash and cash equivalents at beginning of period                                            16,358           29,940          (13,582     )
        Cash and cash equivalents at end of period                                                  $     28,583     $    16,358     $    12,225
        


Derived from audited financial statements.

ADDENDUM

Base Business

The following tables break 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,
                                     2019            2018            2019             2018            2019            2018
        Net sales                    $   575,791     $   538,555     $   6,443        $  4,527        $   582,234     $   543,082
        Gross profit                 160,721         159,537         1,329            905             162,050         160,442
        Gross margin                 27.9        %   29.6        %   20.6         %   20.0        %   27.8        %   29.5        %
        Operating expenses           133,369         133,178         2,883            1,294           136,252         134,472
        Expenses as a % of net sales 23.2        %   24.7        %   44.7         %   28.6        %   23.4        %   24.8        %
        Operating income (loss)      27,352          26,359          (1,554    )      (389     )      25,798          25,970
        Operating margin             4.8         %   4.9         %   (24.1     )  %   (8.6     )  %   4.4         %   4.8         %
        








        (Unaudited)                  Base Business                     Excluded                        Total
        (in thousands)               Year Ended                        Year Ended                      Year Ended
                                     December 31,                      December 31,                    December 31,
                                     2019             2018             2019            2018            2019             2018
        Net sales                    $   3,152,253    $   2,987,937    $   47,264      $   10,160      $   3,199,517    $   2,998,097
        Gross profit                 912,680          867,980          12,245          2,193           924,925          870,173
        Gross margin                 29.0          %  29.0          %  25.9         %  21.6         %  28.9          %  29.0          %
        Operating expenses           569,458          552,841          14,221          3,443           583,679          556,284
        Expenses as a % of net sales 18.1          %  18.5          %  30.1         %  33.9         %  18.2          %  18.6          %
        Operating income (loss)      343,222          315,139          (1,976     )    (1,250     )    341,246          313,889
        Operating margin             10.9          %  10.5          %  (4.2       ) %  (12.3      ) %  10.7          %  10.5          %
        


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







        Acquired                     Acquisition    Net            Periods
                                     Date           Sales Centers  Excluded
                                                    Acquired
        W.W. Adcock, Inc.            January 2019   4              January - December 2019
        Turf & Garden, Inc.          November 2018  4              January - December 2019 and
                                                                   November - December 2018
        Tore Pty. Ltd. (Pool Power)  January 2018   1              January - April 2019 and
                                                                   January - April 2018
        Chem Quip, Inc.              December 2017  5              January - March 2019 and
                                                                   January - March 2018
        Intermark                    December 2017  1              January - February 2019 and
                                                                   January - February 2018
        


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 centers during 2019.







        December 31, 2018             364
        Acquired locations            4
        New locations                 9
        Closed/consolidated locations (4  )
        December 31, 2019             373
        


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 Adjusted EBITDA to net cash provided by operating activities. Please see page 6 for our Condensed Consolidated Statements of Cash Flows.







        (Unaudited)                                                                            Year Ended December 31,
        (in thousands)                                                                         2019             2018
        Adjusted EBITDA                                                                        $   382,212      $    353,427
                             Add:
                             Interest and other non-operating expenses, net of interest income (21,992     )    (19,645      )
                             Provision for income taxes                                        (56,161     )    (58,774      )
                             Net losses on foreign currency transactions                       1,347            560
                             Other                                                             7,551            8,928
                             Change in operating assets and liabilities                        (14,181     )    (165,840     )
        Net cash provided by operating activities                                              $   298,776      $    118,656
        


Shown net of losses on foreign currency transactions.

The table below presents a reconciliation of net income to Adjusted EBITDA.







        (Unaudited)                                                Year Ended December 31,
        (in thousands)                                             2019             2018
        Net income                                                 $   261,575      $   234,461
                Add:
                Interest and other non-operating expenses          22,425           20,336
                Provision for income taxes                         56,161           58,774
                Share-based compensation                           13,472           12,874
                Equity earnings in unconsolidated investments, net (262        )    (242        )
                Depreciation                                       27,885           26,122
                Amortization                                       956              1,102
        Adjusted EBITDA                                            $   382,212      $   353,427
        








        (1) Shown net of interest income and net of losses on foreign currency transactions and includes amortization of deferred financing costs as discussed
		 below.
        (2) Excludes amortization of deferred financing costs of $433 for 2019 and $691 for 2018. This non-cash expense is included in Interest and other
		 non-operating expenses, net on the Consolidated Statements of Income.
        


Return on Invested Capital

We calculate Return on Invested Capital (ROIC) using trailing four quarter results. We define ROIC as Net income adjusted for Interest and other non-operating expenses, net (net of taxes at the effective tax rate), divided by the sum of average Long-term debt, net, average Short-term borrowings and the current portion of long-term debt and average Total stockholders' equity from our financial statements as filed with the SEC. We have included ROIC as a supplemental disclosure because we believe that it may be used by our investors, industry analysts and others as a measure of the efficiency and effectiveness of our use of capital.

ROIC is not a measure of financial performance under GAAP. We believe ROIC 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, balance sheet or cash flow statement line items reported in accordance with GAAP. Other companies may calculate ROIC differently than we do, which may limit its usefulness as a comparative measure.

The table below presents our calculation of ROIC at December 31, 2019 and 2018.







        (Unaudited)                                                            Year Ended December 31,
        (in thousands)                                                         2019               2018
        Numerator (trailing four quarters total):
        Net income                                                             $   261,575        $   234,461
        Interest and other non-operating expenses, net                         23,772             20,896
        Less: taxes on Interest and other non-operating expenses, net at 17.7% (4,208      )      (4,200      )
        and 20.1%, respectively
                                                                               $   281,139        $   251,157
        Denominator (average of trailing four quarters):
        Long-term debt, net                                                    $   595,247        $   602,984
        Short-term borrowings and current portion of long-term debt            17,323             15,190
        Total stockholders' equity                                             346,049            289,979
                                                                               $   958,619        $   908,153
        Return on invested capital                                             29.3           %   27.7           %
        


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