EX-99 3 pool4q02er.htm EARNINGS RELEASE DATED FEBRUARY 13, 2003 EXHIBIT 99
SCP Logo

SCP Pool Corporation

  

Craig K. Hubbard
Chief Financial Officer
985.801.5117
craig.hubbard@scppool.com

FOR IMMEDIATE RELEASE

SCP POOL CORPORATION REPORTS RECORD FISCAL 2002 RESULTS

_________________

2002 EARNINGS PER SHARE INCREASE 22% TO $1.62

COVINGTON, La. (February 13, 2003) – SCP Pool Corporation (the “Company” or “SCP”) (Nasdaq/NM: POOL) today reported record net sales and net income for 2002.

Net sales for the year ended December 31, 2002 increased $129.0 million, or 15%, to $983.2 million, compared to $854.2 million in 2001. Base business growth of 10% contributed $84.5 million to the increase, while acquired service centers and service centers consolidated with acquired locations accounted for the remaining increase. Same store sales growth was also 10% in 2002.

Gross profit for the twelve months ended December 31, 2002 increased $34.6 million, or 16%, to $255.5 million from $220.9 million in 2001. This increase was primarily due to the increase in net sales. Gross profit margin increased 10 basis points to 26.0% for the year ended December 31, 2002 from 25.9% for the same period last year.

Operating expenses in 2002 increased $25.8 million, or 16%, to $182.8 million from $157.0 million in 2001. Excluding the impact of acquisitions and 2001 goodwill amortization, operating expenses as a percentage of net sales was unchanged at 17.9%.

Operating income for the year increased $8.8 million, or 14%, to $72.7 million, or 7.4% of net sales, compared to operating income of $63.9 million, or 7.5% of net sales, in the prior year. Excluding the impact of acquisitions and 2001 goodwill amortization, operating income increased $7.8 million, or 12%, to $73.5 million from $65.7 million and operating income as a percentage of net sales (operating margin) increased 10 basis points to 8.1% in 2002 from 8.0% in 2001.

Earnings per share for 2002 increased 22% to $1.62 per diluted share on net income of $41.3 million, compared to $1.33 per diluted share on net income of $35.4 million last year. Excluding the 2002 dilutive impact of the Fort Wayne acquisition and goodwill amortization in 2001, earnings per diluted share increased 19% to $1.64 per diluted share in 2002 from $1.38 in 2001.

Cash flow from operations in 2002 was $59.2 million compared to $26.8 million in 2001. The increase in cash flow from operations was primarily due to increased net earnings and reduced pre-payments of inventory purchases with extended terms.

“We completed another solid year of performance with notable improvements in many facets of our sales and operational execution. In addition, we see opportunities for continued growth as we complete the integration of the Fort Wayne acquisition and continue to improve our execution. We remain comfortable with our estimated $1.95 in earnings per share for 2003,” commented Manuel Perez de la Mesa, President and CEO.

POOL Reports Record Year End Results
Page 2
February 13, 2003

Net sales for the quarter ended December 31, 2002 increased $27.4 million, or 21%, to $159.0 million from $131.6 million in the comparable quarter last year. Base business sales growth of 11% contributed $15.0 million to the increase, while acquired service centers and service centers consolidated with acquired locations accounted for the remaining increase. Same store sales grew 10% in the fourth quarter of 2002.

Gross profit for the three months ended December 31, 2002 increased $7.0 million, or 21%, to $40.3 million from $33.3 million in 2001. This increase was primarily due to the increase in net sales. Gross profit margin was unchanged between quarters at 25.3%.

Operating loss for the quarter increased to $4.5 million, or 2.8% of net sales, compared to an operating loss of $3.9 million, or 3.0% of net sales, in the prior year. Excluding the impact of acquisitions and 2001 goodwill amortization, the operating loss for the quarter decreased $0.9 million, to $1.5 million in 2002 from $2.4 million in 2001.

In the fourth quarters of 2002 and 2001, the Company reported a net loss of $0.15 per share. Excluding the 2002 dilutive impact of the Fort Wayne acquisition and goodwill amortization in 2001, the net loss per diluted share decreased to $0.11 in 2002 from $0.14 in 2001.

“The Board is pleased with SCP’s continued success despite the economic challenges of 2002. It once again demonstrates the resiliency of the swimming pool industry and SCP’s strong performance in this industry,” remarked W.B. Sexton, Chairman.

Beginning in the fourth quarter of 2002, we began calculating our “base business” growth, which is consistent with measures used by other distributors. At December 31, 2002, there were 161 service centers included in the calculation of base business sales. Of the excluded service centers, 11 were acquired within the last 15 months and 13 were existing service centers that were consolidated with acquired service centers. In addition to the 24 service centers excluded from the calculation of base business sales, the same store sales calculation also excluded seven new service centers open less than 15 months and eight locations affected by new service center openings in the immediate market areas within the last 15 months.

SCP Pool Corporation is the world’s largest distributor of swimming pool supplies and related products. As of February 13, 2003, the Company distributes more than 60,000 national brand and private label products to over 51,000 customers through 185 service centers in North America and Europe. For more information about SCP, please visit www.scppool.com.

This news release includes “forward-looking” statements that include risk and uncertainties. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of factors, including the sensitivity of the swimming pool supply business to weather conditions and other risks detailed in the Company’s latest Form 10-Q filed with the Securities and Exchange Commission.

POOL Reports Record Year End Results
Page 3
February 13, 2003

Consolidated Statements of Income            
(Unaudited)       Twelve Months   Three Months  
(In thousands, except per share data)       Ended   Ended
        December 31,   December 31,  
        2002   2001   2002   2001  
Net sales   $ 983,246   $ 854,234   $ 159,005   $ 131,600  
Cost of sales     727,714     633,360     118,739     98,347  
       Gross profit     255,532     220,874     40,266     33,253  
       Percent     26.0 %  25.9 %  25.3 %  25.3 % 
   
Selling and operating expenses  
       Selling and administrative expenses     182,845     154,827     44,732     36,664  
       Goodwill amortization     —     2,179     —     506  
Total selling and operating expenses     182,845     157,006     44,732     37,170  
   
Operating income (loss)     72,687     63,868     (4,466 )   (3,917 )
       Percent     7.4 %  7.5 %  (2.8 )%  (3.0 )% 
   
       Interest expense     4,977     5,283     1,116     1,335  
   
Income (loss) before income taxes  
       and extraordinary items     67,710     58,585     (5,582 )   (5,252 )
Provision for income taxes     26,407     23,141     (2,177 )   (1,436 )
Net income (loss)     41,303     35,444     (3,405 )   (3,816 )
Net income (loss) per share of common stock  
Basic     1.70   1.39   (0.15 )  (0.15 ) 
Diluted     1.62   1.33   (0.15 )  (0.15 ) 
Average shares outstanding  
Basic     24,231     25,425     23,319     24,949  
Diluted     25,525     26,725     24,650     26,262  

POOL Reports Record Year End Results
Page 4
February 13, 2003

Condensed Consolidated Balance Sheets        
(Unaudited)  
(In thousands)       December 31,    
        2002   2001 (1)  
Assets   
Current assets  
        Cash and cash equivalents   $ 5,132   $ 3,524  
        Receivables, net (2) (3)     70,142    60,231  
        Product inventories, net (2) (4)     183,720    181,462  
        Prepaid expenses    2,372    2,517  
        Deferred income taxes    1,708    2,599  
Total current assets    263,074    250,333  
   
Property and equipment, net    20,921    15,844  
Goodwill, net    107,739    73,582  
Intangible assets, net    8,579    6,446  
Other assets, net    1,781    2,385  
Total assets     402,094    348,590  
Liabilities and stockholders’ equity   
Current liabilities  
        Accounts payable    93,307    95,588  
        Accrued and other current liabilities    24,708    17,798  
        Current portion of long-term debt    885    91  
Total current liabilities    118,900    113,477  
   
Deferred income taxes    12,536    5,541  
Long-term debt, less current portion    125,175    85,000  
Other long-term liabilities    3,542    —  
   
Total stockholders’ equity    141,941    144,572  
Total liabilities and stockholders’ equity     402,094    348,590  
1.

The balance sheet at December 31, 2001 has been derived from the 2001 audited financial statements but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.


2.

At December 31, 2002, the estimated accounts receivable and inventory balances from the acquired Fort Wayne operations were $5.9 million and $20.9 million, respectively.


3.

The allowance for doubtful accounts (AFDA) was $3.3 million in 2002 and $2.8 million in 2001. The AFDA represented 5.7% and 6.1% of gross trade accounts receivable in 2002 and 2001, respectively, and 48% and 46% of the accounts receivable greater than 60 days past due in 2002 and 2001, respectively.


4.

The inventory reserve was $3.1 million in 2002 and $3.9 million in 2001. The reserve is calculated by reserving 5% of slower moving inventory classes 4-13 with an additional 5% reserve provided for excess inventory in classes 4-12 and an additional 45% provided for excess inventory in class 13. Estimated slowest moving inventory class 13 decreased to $7.7 million in 2002 from $8.5 million in 2001.


POOL Reports Record Year End Results
Page 5
February 13, 2003

Condensed Consolidated Statements of Cash Flows  
(In thousands) Year Ended
  December 31,
        2002   2001  
Operating activities   
Net income   $ 41,303   $ 35,444  
Adjustments to reconcile net income to net cash provided by  
      operating activities     12,146     8,449  
          Changes in operating assets and liabilities, net of effects  
               of acquisitions  
                    Receivables     6,086     5,678  
                    Product inventories     16,635     (34,912 )
                    Prepaid expenses and other assets     1,312     (3,601 )
                    Accounts payable     (18,306 )   15,203  
                    Accrued expenses and other current liabilities     (17 )   492  
Net cash provided by operating activities     59,159     26,753  
   
Investing activities   
Acquisition of businesses, net of cash acquired     (45,350 )   (50,684 )
Purchase of property and equipment     (6,430 )   (6,325 )
Proceeds from sale of property and equipment     14     52  
Net cash used in investing activities     (51,766 )   (56,957 )
   
Financing activities   
Net borrowings from revolving loan     40,175     52,350  
Payments on long-term debt     —     (8,250 )
Issuance of common stock     1,111     3,125  
Purchase of treasury stock     (47,505 )   (16,958 )
Net cash provided by (used in) financing activities     (6,219 )   30,267  
Effect of exchange rate changes on cash     434     30  
Change in cash and cash equivalents     1,608     93  
Cash and cash equivalents at beginning of year     3,524     3,431  
Cash and cash equivalents at end of year     5,132     3,524  

POOL Reports Record Year End Results
Page 6
February 13, 2003

Addendum

(In thousands) Base Business
  Quarter Year
  Ended Ended
  December 31, December 31,
        2002   2001*   2002   2001*  
Net sales   $ 145,404   $ 130,418   $ 908,822   $ 824,340  
   
Gross profit     36,701     33,020     236,027     213,238  
Gross margin     25.2 %  25.3 %  26.0 %  25.9 % 
   
Selling and operating expenses     38,206     35,460     162,508     147,523  
Expenses as a % of net sales     26.3 %  27.2 %  17.9 %  17.9 % 
   
Operating income (loss)     (1,505 )   (2,440 )   73,519     65,715  
Operating margin     (1.0 )%  (1.9 )%  8.1 %  8.0 % 


(In thousands) Acquisitions
  Quarter Year
  Ended Ended
  December 31, December 31,
        2002   2001*   2002   2001*  
Net sales   $ 13,601   $ 1,182   $ 74,424   $ 29,894  
   
Gross profit    3,565    233    19,505    7,636  
Gross margin     26.2 %   19.7 %   26.2 %  25.5 %
   
Selling and operating expenses    6,526    1,204    20,337    7,304  
Expenses as a % of net sales    48.0 %  101.9 %  27.3 %  24.4 %
   
Operating income (loss)    (2,961 )  (971 )  (832 )  332  
Operating margin    (21.8 )%  (82.1 )%  (1.1 )%  1.1 %

*Excludes goodwill amortization

We calculate base business growth by excluding the following service centers from the calculation for 15 months:

  • Service centers acquired within the past 15 months;
  • Service centers consolidated with acquired service centers; and
  • New service centers opened in purely new markets in the past 15 months.

The effect of acquisitions in the 2002 compared to 2001 tables above includes the operations of the following:

  • Fort Wayne Pools - August 2002 through December 2002
  • Service centers consolidated with Fort Wayne locations – December 2002 and December 2001
  • Capital Pools (Canada) – October 2001 through December 2002
  • Exporlinea (Portugal) – July through September of 2002 and July through September of 2001
  • The pool division of Hughes Supply, Inc – January through April of 2002 and January through April of 2001

POOL Reports Record Year End Results
Page 7
February 13, 2003

(In thousands)   Acquisitions and
  Base Business New Markets
  Year Ended Year Ended
  December 31, December 31,
        2001   2000   2001   2000  
Net sales   $ 663,660   $ 646,561   $ 190,574   $ 25,712  
   
Gross profit    175,915    160,115    44,959    4,265  
Gross margin     26.5 %  24.8 %   23.6 %  16.6 %
   
Selling and operating expenses    119,742    111,091    37,264    4,475  
Expenses as a % of net sales    18.0 %  17.2 %  19.6 %  17.4 %
   
Operating income    56,174    49,024    7,694    (210 )
Operating margin    8.5 %  7.6 %  4.0 %  (0.8 )%

The effect of acquisitions and new markets in the 2001 compared to 2000 tables includes the operations of the following:

  • Jean Albouy, SA (France) – January through March of 2001 and January through March of 2000
  • Kalamazoo, MI – January through March of 2001 and January through March of 2000
  • Fort Lauderdale, FL – October 2000 through December 2001
  • Superior Pool Products – August 2000 through October 2001
  • The pool division of Hughes Supply, Inc. – January 2001 through December 2001
  • Exporlinea (Portugal) – July 2001 through December 2001
  • Capital Pools (Canada) – October 2001 through December 2001