PoolCorp (POOL) Q4 2015 earnings summary

Executive summary

• Record 2015 results: sales and gross profit each grew 5%, operating income rose 14%, and diluted EPS increased 19%; Q4 was profitable for the first time.

• Base-business operating margin reached a record 9.3%, up from 8.4%, supported by expense discipline despite new pool construction remaining ~70% below peak.

Financial highlights

• FY2015 net sales were $2,363.1M, up 5% YoY; base-business sales also rose 5%, while foreign currency reduced reported sales growth by close to 2%.

• Gross profit increased 5% to $675.6M; gross margin was 28.6%, unchanged YoY.

• Operating income rose 14% to $216.2M; net income attributable to shareholders increased 16% to $128.3M, and diluted EPS rose 19% to $2.90.

• Operating expenses increased 1% to $459.4M, declining to 19.4% of sales from 20.2%; reported operating margin was 9.1%, up from 8.4%.

Outlook and guidance

• FY2016 base-business sales growth expected at 5%–7%, including close to 4% early-buy shipment timing benefit concentrated in Q1; product cost inflation expected at ~1%.

• Gross margin expected to be relatively neutral for FY2016; lower Q1 and higher Q2 margins anticipated due to early-buy shipments.

• Operating expenses projected to grow at approximately half the rate of gross profit; base-business operating profit growth expected in the low-to-mid teens.

• FY2016 diluted EPS guidance was $3.20–$3.35; operating cash flow expected to approximate net income, with $100M–$150M planned for share repurchases.

• Plans included 5–7 new sales centers in 2016 and selective acquisitions; capital expenditures projected at 1.0%–1.5% of sales.