1. POOL CORPORATION (NASDAQ: POOL) Rakesh Venkatayogi
Guanrong (Rachel) Fu
Presented: April 24, 2014

2. agenda Business Overview Macro-Economic & Industry Overview
Technical Analysis
Financial Ratios
Valuation
Recommendation

3. Company business overview
Incorporated in 1993, in the States of Delaware
3600 employees
Market Cap : $2.7bn
321 Sales Centers in North America, South America and Europe
Industry Classification: Distributor
Business :
Pool: Distributes swimming pool supplies, equipment and related leisure products
Irrigation and Landscape: Distributes irrigation and landscape products
Manufacturers
Remodelers and builders
contractors
Insert a map of your country.
Source: POOL 10-K Report

4. Product Overview Pool Maintenance Products:
Chemicals
Supplies
Pool accessories
Pool Replacement /Refurbishment Products:
Cleaners
Filters
Heaters & Pumps
Lights
Pool Construction Products:
Concrete
Plumbing
Electrical components
Pool decking materials
Irrigation and Landscape:
Irrigation system components
Lawn care equipment and supplies
Offers more than 160,000 national brand and Pool Corp branded products to 80,000 customers
Insert a picture illustrating a season in your country.
Source: POOL 10-K Report

5. Sales Network SCP / Superior (253 Centers):
Distributes swimming pool supplies, equipment and related leisure products
Horizon (59): Distributes irrigation and landscape products
Insert a picture of one of the geographic features of your country.
Source: Pool Investor Presentation

6. Financial Overview Net Sales Minimum Rent Expense Schedule
Included in SG&A
Insert a picture of one of the geographic features of your country.
Consistent growth of sales
Improving operating margins
Leases 308 sales centers of 312
Majority of the leases have 3 to 7 year terms
Source: POOL 10-K Report

7. Management Guidance Sales Growth Drivers Five Year Forecast 1%-2%
Growth from Installed Base
1%-2%
Inflation
Market Recovery
2%-4%
Subtotal
4%-7%
Additional Growth from Market Share Gains &
New Products
2%-3%
Total
6%-10%
Source: Pool Investor Presentation

8. MACRO-ECONOMIC & INDUSTRY OVERVIEW
Insert a picture illustrating a custom or tradition here.

9. External Factors Per Capita Spending: Housing Starts:
Greater number of people returning to work and improved housing will mean consumers are willing to spend on purchases delayed due to recession
So rising per capita disposable income is positively correlated with higher demand for swimming pool products
Forecast Value for 2018: $37,249
Compound Growth: 2.5%
Housing Starts
Housing Starts:
Demand for swimming pool equipment partly relates to the number of swimming pools installed
Increasing trend is a potential opportunity for the industry
Source: IBIS World Pool Equipment Stores Industry Report

10. Industry Forecast
US new pool construction poised to recover to “normalized” levels through 2020
CAGR ‘14-’20: ~13%
Insert a picture that illustrates some part of your country’s economy.
Source: Pool Investor Presentation

11. Industry Forecast
Insert a picture that illustrates some part of your country’s economy.
Demand for pool equipment and accessories expected to increase because of increasing demand for construction and refurbishment
Source: Pool Investor Presentation and IBIS World Pool Equipment Stores Industry Report

12. Industry Life Cycle Early Maturity
Industry value added is experiencing moderate growth
a high degree of public acceptance of swimming pools and related equipment
stable demand for industry products
Introduction
Growth
Maturity
Decline
Time
Total Industry Revenue

13. Porter’s Five forces for POOL
Rivalry Competition
Medium
Competitive factors: price, capital, avilability, quality of customer services, business relationship
Largest distributor of swimming pool, one of the three largest distributors of irrigation
Supplier’s bargaining power
Good relationship with vendors, who offer competitive pricing, return policies and promotional allowance
Three big suppliers, which accounted for around 37% of the cost of products sold in 2013
Buyer’s bargaining power
MED-Low
Serve roughly 80,000 customers, none of which account for more than 1% of our sales
Customers are small, family owned businesses with relatively limited capital resources
Substitutes
MED-LOW
No substitutes for pool
Rare e-commerce for pool
Threat of new entrants
Med-High
No significant regulations or licensing requirements that may deter entrants into the industry
The initial startup costs for operating in this industry are relatively low and mainly involve the leasing of a retail store and purchasing of inventory
Threat of entry of new competitors
First, to give some background, there was an open skies agreement between the US and Japan which gave four daily slots to US carriers once the Haneda airport "closed" and Japan's airlines had completed their daily routes. Hawaiian Airlines received a route from Honolulu to Haneda
Intensity of competitive rivalries
 HA is the only provider of nonstop service between Honolulu, Hawaii and Pago Pago, American Samoa and Papeete, Tahiti. They also operate roundtrip flights between Honolulu, Hawaii and Sydney, Australia (competing directly with Qantas Airways and its low-cost affiliate Jetstar) and between Honolulu, Hawaii and Manila, Philippines (competing directly with Philippine Airlines). 

14. OPPORTUNITIES THREATS STRENGTHS WEAKNESSES
SWOT Analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
Largest distributor of swimming pool, one of the three largest distributors of irrigation
Serve roughly 80,000 customers, none of which account for more than 1% of our sales
Few threats from substitutes
Stable demand for products
Highly related to the swimming pool market
Have three big suppliers
Low entry barriers
Competition from local small companies
Weakness: Macroeconomic view: Hawaiin people reluctant to spend
Expansion into the international market, such as Europe and South America
Economy is recovering
Increasing demands for new houses
Expansion into irrigation and landscape
New competitors
Possible bad weather condition
Compliance with environmental, health, transportation and safety regulations

15. Financials

16. Technical Analysis
Insert a picture of one of the points of interest for your country.
Source: finance.yahoo.com

17. Financial Analysis –Ratios
Liquidity Ratios
2011A
2012A
2013A
Current Ratio
1.083
1.088
1.075
Quick Ratio
0.296
0.286
0.276
Cash Ratio
0.036
0.025
0.015
Solvency Ratios
2011A
2012A
2013A
Debt/Assets
0.32
0.30
Debt/Equity
0.88
0.82
0.86
Interest Coverage
15.90
23.47
24.52
Profitability Ratios
2011A
2012A
2013A
Operating Profit Margin
7.06%
7.77%
7.96%
Net Income Margin
4.01%
4.20%
4.68%
ROA
9.43%
10.99%
11.79%
ROE (Book Value)
26.00%
30.45%
33.95%
Profitability Ratios
2011A
2012A
2013A
A/R Turnover
16.41
17.16
16.60
Days Sales of Inventory
111.93
105.38
105.25
Days Sales Outstanding
22.24
21.27
21.99
Fixed Asset Turnover
43.32
41.96
39.74
Total Asset Turnover
2.33
2.50
2.52
Source: POOL 10K_2013

18. Financial Analysis –Ratios
DuPont Analysis
2011A
2012A
2013A
Tax Burden
61.30%
59.00%
61.20%
Interest Burden
93.71%
95.74%
95.92%
Operating Margin
7.06%
7.77%
7.96%
Asset Turnover
2.33
2.50
2.52
Leverage Ratio
2.76
2.77
2.88
Return on Equity
26.00%
30.45%
33.95%
Greenblatt Ratios
2011A
2012A
2013A
TEV
1,682
2,166
2,909
EBIT / Tangible Assets
38.44%
46.11%
46.20%
EBIT/TEV
7.53%
7.01%
5.69%
Source: POOL 10K_2013

19. Industry Comparables The Home Depot= 30%
Sears Hometown and Outlet Stores = 30%
Lowe’s = 30%
W W Grainger = 10%
Source: Capital IQ and POOL 10K_2013

20. Comparable Valuation Estimated Share Price $36.71 P/E – 30%
EV/Revenue – 20%
EV/EBITDA – 30%
P/B – 30%
$36.71
Estimated Share Price

21. Cost to capital Share Price (as of 4/17/14) $57.66
Shares outstanding (millions) 48
Market Capitalization ($mm)
2,741
Market value of debt ($mm)
246
Weight of Equity
92%
Weight of Debt 8%
Risk Free Rate 3%
Market Risk Premium 5%
Beta
0.90
Return on Equity (80%)
7.48%
Realized return (20%)
24.00%
Weighted Cost of Equity
10.78%
Cost of Debt
2.69%
Effective tax rate
39.5%
WACC
10.0%
Other Business risk premium
1.0%
Discount Rate
11.0%
Source: Yahoo Finance and POOL 10K 2013

22. Forecast Assumptions 2013A 2014E 2015E 2016E 2017E 2018E
2013A
2014E
2015E
2016E
2017E
2018E
Revenues ($mm)
2,080
2,230
2,408
2,625
2,863
3,158
Growth (%) 6% 7% 8% 9%
10%
Number of sales centers
321
331
342
355
367
382
Sales centers added 9 10 11 13 12 15
Sales / Center ($mm)
6.5
6.7
7.0
7.4
7.8
8.3
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
Source: POOL 10K 2013

23. Discounted Cash FLOW Valuation
For the year ended December 31
($mm, unless noted)
2013A
2014E
2015E
2016E
2017E
2018E
EBIT
165
180
225
245
262
342
Tax rate (%)
39%
40%
Add: Depreciation and amortization 15 16 17 19 21
Less: Capital Expenditure 23 25 27 30
Less: Change in working capital 31 33 37 46
Unlevered FCF 72
102
108
114
153
Terminal Value (growth rate of 3.5%)
2,099
PV of FCF 65 83 79 75 90
PV of Terminal Value
1,244
% of total Value
76%
Implied Enterprise Value
1,635
Total Debt
246
Cash 8
Implied Market Cap
1,396
Shares Outstanding 48
Implied Share Price ($)
29.38
Implied Share Price Sensitivity Analysis
Terminal Growth Rate
2.5%
3.0%
3.5%
4.0%
4.5%
10.0%
30.56
32.63
35.02
37.81
41.09
WACC
10.5%
28.18
29.96
32.00
34.34
37.08
11.0%
26.09
27.63
29.38
31.38
33.68
11.5%
24.23
25.57
27.09
28.81
30.77
12.0%
22.56
23.75
25.07
26.56
28.25

24. Implied Share Price and Drivers
Key Drivers
Strong Fundamentals
Market leader
Positive external drivers
Expansion into irrigation and landscape
Weights
Implied Share Price
DCF Valuation
75%
$22.03
Comps Valuation
25%
$9.18
Implied Share Price 
$31.21
Current Price (4/23/2014)
$57.99

25. Watch List
Recommendation: