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Highlights
COVINGTON, La., April 18, 2019 (GLOBE NEWSWIRE) -- Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the first quarter of 2019.
"I am pleased to report a solid first quarter of 2019 despite wetter and cooler conditions throughout most of the quarter in some of our major markets. Our team's strong execution, coupled with modest top line growth, delivered favorable results in the quarter," said Peter D. Arvan, President and CEO.
Net sales increased 2% to a record $597.5 million in the first quarter of 2019 compared to $585.9 million in the first quarter of 2018, while base business sales grew 1%. Cooler and wetter weather, particularly in the western US, combined with a later Easter holiday impacted first quarter sales. Pool openings and normal spring early buys from customers in seasonal markets are influenced by the timing of the Easter holiday. In addition, sales were negatively impacted approximately 2% by the loss of a selling day compared to the first quarter of 2018 and 1% from unfavorable currency exchange rates.
Gross profit increased 5% to a record $174.6 million in the first quarter of 2019 from $166.1 million in the same period of 2018. Base business gross profit improved 4% over the first quarter of 2018, including a negative currency exchange impact of 1%. Gross margin increased 90 basis points to 29.2% in the first quarter of 2019 compared to 28.3% in the first quarter of 2018, reflecting benefits from our strategic inventory purchases in 2018 and lower customer early buys.
Selling and administrative expenses (operating expenses) increased 3% to $136.2 million in the first quarter of 2019 compared to the first quarter of 2018. Base business operating expenses were up 1% over the comparable 2018 period including a 1% currency benefit. As a percentage of net sales, base business operating expenses increased to 22.6% in the first quarter of 2019 compared to 22.5% in the first quarter of 2018.
Operating income for the first quarter of 2019 increased to a record $38.4 million, up 14% compared to the same period in 2018. Operating margin was 6.4% in the first quarter of 2019 and 5.7% in the same period in 2018, while base business operating margin improved 90 basis points from the prior year to 6.7% in the first quarter of 2019.
We recorded an $8.8 million tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended March 31, 2019 compared to a tax benefit of $9.0 million realized in the same period of 2018.
Net income was $32.6 million in the first quarter of 2019 compared to $31.3 million in the first quarter of 2018. Earnings per share increased 7% to a record $0.80 per diluted share in the three months ended March 31, 2019 compared to $0.75 per diluted share in the same period of 2018. The benefit from ASU 2016-09 increased diluted earnings per share by $0.21 and $0.22 in the first quarters of 2019 and 2018, respectively. Excluding the impact from ASU 2016-09 in both periods, earnings per diluted share increased 11% to $0.59 in the first quarter of 2019 compared to $0.53 in the first quarter of 2018.
On the balance sheet at March 31, 2019, total net receivables, including pledged receivables, remained flat, while inventory levels grew 16% compared to March 31, 2018. The growth in inventory reflects strategic inventory purchases made in the second half of 2018 in advance of greater than normal vendor price increases, inventory from acquired businesses of $18.8 million and normal business growth as well as the slower start to the season. Total debt outstanding was $699.0 million at March 31, 2019, a $130.9 million increase from total debt at March 31, 2018.
Cash provided by operations was $28.8 million in the first three months of 2019 compared to $44.1 million used in operations in the first three months of 2018, an improvement of $72.9 million. The increase in cash provided by operations primarily relates to payments for pre-price increase inventory purchases in 2018 ahead of the 2019 season. Adjusted EBITDA (as defined in the addendum to this release) was $48.6 million and $43.4 million in the first quarters of 2019 and 2018, respectively. Interest expense increased compared to last year primarily due to higher debt levels and higher interest rates.
"As a result of the additional tax benefits realized from ASU 2016-09 in the first quarter, we are updating our earnings guidance to a range of $6.09 to $6.39 from $6.05 to $6.35 per diluted share. Other than the additional $0.04 per diluted share tax benefit, our earnings expectation for 2019 remains unchanged. Looking forward to the second quarter, we're excited about the many opportunities to continue to provide exceptional service to our customers as we head into the heart of the swimming pool season," said Arvan.
POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products. As of March 31, 2019, POOLCORP operates 369 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 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.
CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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):
We have excluded the following acquisitions from base business for the periods identified:
(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 three months of 2019.
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.
The table below presents a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.
Source: Pool Corporation
