POOL CORP - FORM 8-K - EX-99..1 - POOL Q1 2012 EARNINGS RELEASE - April 19, 2012

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8-K - POOL Q1 2012 EARNINGS RELEASE FORM 8-K - POOL CORPpoolq12012er8k.htm
 
 
 

Exhibit 99.1
 
FOR IMMEDIATE RELEASE
 
 
POOL CORPORATION REPORTS FIRST QUARTER RESULTS
AND INCREASES 2012 EARNINGS GUIDANCE RANGE

Highlights for the quarter include:

  ·   
16% sales growth, including 13% from base business
·   
$5.4 million increase in operating income
·   
Diluted EPS of $0.08, versus a loss per share of $0.01 in Q1-11
·   
Updated 2012 earnings guidance range to $1.75 - $1.85 per diluted share
______________________

COVINGTON, LA. (April 19, 2012) – Pool Corporation (NASDAQ/GSM: POOL) today reported results for the first quarter of 2012.

“We realized strong sales and earnings growth in the seasonally slow first quarter as favorable weather spurred an early start to the 2012 season.  Base business sales growth also reflected continued market share gains and the gradual improvement in discretionary expenditures, including those related to the installed base of swimming pools.  With the momentum provided by our first quarter results and our strong team of engaged employees, we are poised for another great season in 2012,” commented Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended March 31, 2012 increased 16% to $362.0 million, compared to $312.9 million in the first quarter of 2011.  Base business sales increased 13% overall, including 14% growth on the swimming pool side of the business and 2% growth on the irrigation side of the business.  Sales benefited from record warm temperatures across the Northeast and Midwest, including sales that shifted into the first quarter as customers began work that normally would have started in the second quarter.

Gross profit for the first quarter of 2012 increased 14% to $104.6 million from $91.4 million in the comparable 2011 period.  Gross profit as a percentage of net sales (gross margin) declined 30 basis points to 28.9% in the first quarter of 2012, reflecting a difficult comparison to the first quarter of 2011 when gross margin was up 90 basis points compared to the first quarter of 2010.

Selling and administrative expenses (operating expenses) increased roughly 8% to $98.5 million in the first quarter of 2012 compared to the same period in 2011.  Base business operating expenses were up 5% compared to the first quarter of 2011 due primarily to higher payroll related costs and increases in other variable expenses related to the growth in sales.

Operating income improved to $6.0 million in the first quarter of 2012 compared to $0.6 million in the same period in 2011.  Earnings per share for the first quarter of 2012 was $0.08 per diluted share on net income of $3.7 million, compared to a loss in the first quarter of 2011 of $0.01 per diluted share on a net loss of $0.6 million.  Diluted EPS for the first quarter of 2012 included a benefit of approximately $0.02 related to the expiration of statutes of limitations for income tax returns filed in the first quarter of 2009.  Adjusted EBITDA (as defined in the addendum) was $11.0 million in the first quarter of 2012 compared to $5.0 million in the first quarter of 2011.

On the balance sheet, total net receivables were up 16% compared to March 31, 2011, including 13% from an increase in trade receivables attributed to higher March 2012 sales and balances related to recent acquisitions.  Inventory levels were up roughly 5% to $462.8 million at March 31, 2012, including an increase of approximately 3% attributed to recent acquisitions.

The seasonal use of cash in operations was $34.0 million in the first quarter of 2012 compared to $37.1 million in the same period of 2011.


 
 
 

“While our expectations for sales, gross margin and operating expenses for the remainder of 2012 are generally unchanged from our previous guidance, based on our strong first quarter results we have increased our 2012 earnings guidance to a range of $1.75 to $1.85 per diluted share from our initial guidance of $1.69 to $1.79 per diluted share,” continued Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 307 sales centers in North America and Europe, through which it distributes more than 160,000 national brand and private label products to roughly 80,000 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” 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 2011 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 (Loss)
(Unaudited)
(In thousands, except per share data)
 
 
 
Three Months Ended
  
 
March 31,
  
   
2012
    
2011
  
             
Net sales
$
361,954
  
$
312,889
  
Cost of sales
  
257,391
    
221,479
  
Gross profit
  
104,563
    
91,410
  
Percent
  
28.9
%
  
29.2
%
             
Selling and administrative expenses
  
98,542
    
90,834
  
Operating income
  
6,021
    
576
  
Percent
  
1.7
%
  
0.2
%
             
Interest expense, net
  
1,477
    
1,645
  
Income (loss) before income taxes and equity earnings
  
4,544
    
(1,069
)
Provision (benefit) for income taxes
  
1,037
    
(419
)
Equity earnings in unconsolidated investments
  
144
    
12
  
Net income (loss)
$
3,651
  
$
(638
)
             
Earnings (loss) per share:
            
Basic
$
0.08
  
$
(0.01
)
Diluted
$
0.08
  
$
(0.01
)
Weighted average shares outstanding:
            
Basic
  
47,519
    
48,864
  
Diluted
  
48,598
    
48,864
  
             
Cash dividends declared per common share
$
0.14
  
$
0.13
  
 

 
 
3
 


POOL CORPORATION
Condensed Consolidated Balance Sheets
 (Unaudited)
(In thousands)
 

   
March 31,
    
March 31,
    
Change
  
   
2012
    
2011
    
$
    
%
  
                         
Assets
                        
Current assets:
                        
 
Cash and cash equivalents
$
20,681
  
$
11,420
  
$
9,261
    
81
%
 
Receivables, net
  
201,792
    
173,787
    
28,005
    
16
  
 
Product inventories, net
  
462,810
    
438,791
    
24,019
    
5
  
 
Prepaid expenses and other current assets
  
12,590
    
6,850
    
5,740
    
84
  
 
Deferred income taxes
  
11,737
    
10,211
    
1,526
    
15
  
Total current assets
  
709,610
    
641,059
    
68,551
    
11
  
                         
Property and equipment, net
  
45,355
    
34,746
    
10,609
    
31
  
Goodwill
  
177,103
    
178,516
    
(1,413
)
  
(1
)
Other intangible assets, net
  
11,717
    
12,597
    
(880
)
  
(7
)
Equity interest investments
  
1,099
    
903
    
196
    
22
  
Other assets, net
  
29,381
    
28,822
    
559
    
2
  
Total assets
$
974,265
  
$
896,643
  
$
77,622
    
9
%
                         
Liabilities and stockholders’ equity
                        
Current liabilities:
                        
 
Accounts payable
$
319,462
  
$
303,395
  
$
16,067
    
5
%
 
Accrued expenses and other current liabilities
  
34,240
    
29,096
    
5,144
    
18
  
 
Current portion of long-term debt and other
long-term liabilities
  
23
    
100,064
    
(100,041
)
  
(100
)
Total current liabilities
  
353,725
    
432,555
    
(78,830
)
  
(18
)
                         
Deferred income taxes
  
32,957
    
25,870
    
7,087
    
27
  
Long-term debt
  
299,011
    
180,157
    
118,854
    
66
  
Other long-term liabilities
  
7,006
    
7,491
    
(485
)
  
(6
)
Total liabilities
  
692,699
    
646,073
    
46,626
    
7
  
Total stockholders’ equity
  
281,566
    
250,570
    
30,996
    
12
  
Total liabilities and stockholders’ equity
$
974,265
  
$
896,643
  
$
77,622
    
9
%
          __________________
   
1.  
The allowance for doubtful accounts was $5.8 million at March 31, 2012 and $6.5 million at March 31, 2011.
 
2.  
The inventory reserve was $8.6 million at March 31, 2012 and $7.3 million at March 31, 2011.


 
4
 


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
   
Three Months Ended
March 31,
        
   
2012
    
2011
    
Change
  
Operating activities
                  
Net income (loss)
$
3,651
  
$
(638
)
$
4,289
  
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
                  
 
Depreciation
  
2,664
    
2,207
    
457
  
 
Amortization
  
320
    
444
    
(124
)
 
Share-based compensation
  
2,101
    
1,892
    
209
  
 
Excess tax benefits from share-based compensation
  
(1,138
)
  
(1,405
)
  
267
  
 
Equity earnings in unconsolidated investments
  
(144
)
  
(12
)
  
(132
)
 
Other
  
941
    
(1,192
)
  
2,133
  
Changes in operating assets and liabilities, net of effects of acquisitions:
                  
 
Receivables
  
(90,350
)
  
(71,602
)
  
(18,748
)
 
Product inventories
  
(72,788
)
  
(91,525
)
  
18,737
  
 
Accounts payable
  
140,530
    
133,674
    
6,856
  
 
Other current assets and liabilities
  
(19,814
)
  
(8,971
)
  
(10,843
)
Net cash used in operating activities
  
(34,027
)
  
(37,128
)
  
3,101
  
                   
Investing activities
                  
Acquisition of businesses, net of cash acquired
  
(3,855
)
  
–
    
(3,855
)
Purchase of property and equipment, net of sale proceeds
  
(6,661
)
  
(6,246
)
  
(415
)
Other investments
  
(53
)
  
–
    
(53
)
Net cash used in investing activities
  
(10,569
)
  
(6,246
)
  
(4,323
)
                   
Financing activities
                  
Proceeds from revolving line of credit
  
215,411
    
167,257
    
48,154
  
Payments on revolving line of credit
  
(63,700
)
  
(85,800
)
  
22,100
  
Payments on long-term debt and other long-term liabilities
  
(100,005
)
  
(89
)
  
(99,916
)
Excess tax benefits from share-based compensation
  
1,138
    
1,405
    
(267
)
Proceeds from stock issued under share-based compensation plans
  
4,178
    
4,512
    
(334
)
Payments of cash dividends
  
(6,668
)
  
(6,321
)
  
(347
)
Purchases of treasury stock
  
(2,369
)
  
(35,953
)
  
33,584
  
Net cash provided by financing activities
  
47,985
    
45,011
    
2,974
  
Effect of exchange rate changes on cash and cash equivalents
  
(195
)
  
62
    
(257
)
Change in cash and cash equivalents
  
3,194
    
1,699
    
1,495
  
Cash and cash equivalents at beginning of period
  
17,487
    
9,721
    
7,766
  
Cash and cash equivalents at end of period
$
20,681
  
$
11,420
  
$
9,261
  



 
5
 


ADDENDUM

Base Business Results

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
   
March 31,
March 31,
  
March 31,
   
2012
  
2011
  
2012
  
2011
    
2012
  
2011
  
Net sales
$
350,797
$
311,663
$
11,157
$
1,226
  
$
361,954
$
312,889
  
                             
Gross profit
  
101,273
  
91,057
  
3,290
  
353
    
104,563
  
91,410
  
Gross margin
  
28.9
%
29.2
%
29.5
%
28.8
%
  
28.9
%
29.2
%
                             
Operating expenses
  
94,623
  
90,302
  
3,919
  
532
    
98,542
  
90,834
  
Expenses as a % of net sales
  
27.0
%
29.0
%
35.1
%
43.4
%
  
27.2
%
29.0
%
                             
Operating income (loss)
  
6,650
  
755
  
(629
)
(179
)
  
6,021
  
576
  
Operating margin
  
1.9
%
0.2
%
(5.6
)%
(14.6
)%
  
1.7
%
0.2
%

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

 
 
Acquired (1)
  
 
Acquisition
Date
  
Net
Sales Centers Acquired
  
 
Periods
Excluded
CCR Distribution
  
March 2012
  
1
  
March 2012
Ideal Distributors Ltd.
  
February 2012
  
4
  
February–March 2012
G.L. Cornell Company
  
December 2011
  
1
  
January–March 2012
Poolway Schwimmbadtechnik GmbH
  
November 2011
  
1
  
January–March 2012
The Kilpatrick Company, Inc.
  
May 2011
  
4
  
January–March 2012
Turf Equipment Supply Co.
  
December 2010
  
3
  
January–February 2012 and
  January–February 2011
Pool Boat and Leisure, S.A.
  
December 2010
  
1
  
January–February 2012 and
  January–February 2011

(1)
We acquired certain distribution assets of each of these companies.

We exclude the following sales centers from base business results for a period of 15 months (parenthetical numbers for each category indicate the number of sales centers excluded as of March 31, 2012):

·  
acquired sales centers (see table above);
·  
existing sales centers consolidated with acquired sales centers (0);
·  
closed sales centers (0);
 ·  
consolidated sales centers in cases where we do not expect to maintain the majority of the existing business (0); and
·  
sales centers opened in new markets (2).

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.

 
6
 



The table below summarizes the changes in our sales centers in the first quarter of 2012:

December 31, 2011
298
  
  Acquired
5
  
  New Locations
4
  
March 31, 2012
307
  

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 (loss) to Adjusted EBITDA.

(Unaudited)
  
Three Months Ended
March 31,
  
(in thousands)
  
2012
  
2011
  
    Net income (loss)
$
3,651
  
$
(638
)
 
Add:
            
 
Interest expense (1)
  
1,477
    
1,645
  
 
Provision (benefit) for income taxes
  
1,037
    
(419
)
 
Share-based compensation
  
2,101
    
1,892
  
 
Equity earnings in unconsolidated investments
  
(144
)
  
(12
)
 
Depreciation
  
2,664
    
2,207
  
 
Amortization (2)
  
221
    
370
  
    Adjusted EBITDA
$
11,007
  
$
5,045
  

(1)  
Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2)  
Excludes amortization of deferred financing costs of $99 for 2012 and $74 for 2011.  This non-cash expense is included in Interest expense, net on the Consolidated Statements of Income (Loss).

The table below presents a reconciliation of Adjusted EBITDA to net cash used in operating activities.  Please see page 5 for our Condensed Consolidated Statements of Cash Flows.
 
(Unaudited)
  
Three Months Ended
March 31,
  
(in thousands)
  
2012
  
2011
  
Adjusted EBITDA
$
11,007
  
$
5,045
  
 
Add:
            
 
Interest expense, net of interest income
  
(1,378
)
  
(1,571
)
 
Provision (benefit) for income taxes
  
(1,037
)
  
419
  
 
Excess tax benefits from share-based compensation
  
(1,138
)
  
(1,405
)
 
Other
  
941
    
(1,192
)
 
Change in operating assets and liabilities
  
(42,422
)
  
(38,424
)
Net cash used in operating activities
$
(34,027
)
 $
(37,128
)


 
7
 

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