EX-99 2 pool1q05er.htm


 


Craig K. Hubbard

Treasurer

985.801.5117

craig.hubbard@poolcorp.com

FOR IMMEDIATE RELEASE

SCP POOL CORPORATION REPORTS RECORD FIRST QUARTER RESULTS

EARNINGS PER SHARE INCREASES TO $0.09

COVINGTON, La. (April 21, 2005) – SCP Pool Corporation (the “Company” or “POOL”) (Nasdaq/NM: POOL) today reported record sales and net income for the first quarter of 2005.

Earnings per share for the first quarter of 2005 increased to $0.09 per diluted share on net income of $4.8 million, compared to $0.07 per diluted share on net income of $4.1 million last year.

Net sales for the quarter ended March 31, 2005 increased $30.6 million, or 13%, to $265.2 million, compared to $234.6 million in the first quarter of 2004. Base business sales also increased 13% from the first quarter of 2004. Although northern markets experienced less than favorable weather throughout much of the first quarter, other markets compensated with strong sales growth. Contributing to this sales growth were price increases, which were passed through the supply chain, and the continued strong growth of complementary product sales, which increased by 27% over the first quarter of 2004.

Gross profit for the first quarter of 2005 increased $7.0 million, or 11%, to $72.0 million from $65.0 million in the comparable 2004 period. Gross profit as a percentage of net sales (gross margin) decreased 60 basis points to 27.1% from 27.7% in the first quarter of 2004. This decrease is attributable to the disposition of POOL’s North American manufacturing assets in December 2004 and market and product mix changes coupled with some margin erosion on the pass through of price increases.

Operating expenses increased $3.3 million, or 6%, to $60.7 million in the first quarter of 2005 from $57.4 million in the first quarter of 2004. Operating expenses as a percentage of net sales decreased to 22.9% in 2005 from 24.4% in 2004 as net sales increased at a rate faster than labor and other business support costs during the first quarter.

Operating profit increased $3.6 million, or 47%, to $11.3 million from $7.7 million. The Company’s equity investment in Latham Acquisition Corporation, which was consummated in December 2004 and included in first quarter 2005 net income, generated an expected seasonal first quarter net loss of $1.5 million.

The seasonal use of cash in operations decreased $18.8 million to $51.1 million in the first quarter of 2005 compared to $69.9 million in the same period in 2004. This change is primarily due to the increase in inventory and accounts receivable in the first quarter of 2005, which was more than offset by a deferral of payment on purchases.

 

 

POOL Reports Record First Quarter Results

Page 2

April 21, 2005

 

 

“While it is still very early in the year, we are pleased to be off to a strong start. Our ongoing improvements in execution continue to provide increasing value to both our customers and suppliers. Despite these strong results, we believe it premature to change our earnings growth estimate for 2005 of 15-18% growth in diluted earnings per share. We remain optimistic for 2005 and our long-term future in the young swimming pool industry,” commented Manuel Perez de la Mesa, President and CEO.

SCP Pool Corporation is the world’s largest wholesale distributor of swimming pool supplies and related products. As of April 21, 2005, POOL distributes more than 91,000 national brand and private label products to roughly 48,000 customers through 203 service centers in North America and Europe. For more information about POOL, please visit www.poolcorp.com.

This news release may include “forward-looking” statements that involve 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 POOL’s 2004 Form 10-K filed with the Securities and Exchange Commission.

 

 

POOL Reports Record First Quarter Results

Page 3

April 21, 2005

 

 

 

Consolidated Statements of Income

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended

 

(In thousands, except per share data)

 

March 31,

 

 

 

 

2005

 

2004

 

Net sales

$

265,161

$

234,648

 

Cost of sales

 

193,210

 

169,616

 

 

Gross profit

 

71,951

 

65,032

 

 

Percent

 

27.1

%

27.7

%

 

 

 

 

 

 

 

Selling and administrative expenses

 

60,650

 

57,360

 

 

Operating income

 

11,301

 

7,672

 

 

Percent

 

4.3

%

3.3

%

 

 

 

 

 

 

 

Interest expense

 

1,080

 

983

 

 

 

 

 

 

 

 

Income before income taxes and equity loss

 

10,221

 

6,689

 

Provision for income taxes

 

3,986

 

2,609

 

Equity loss in unconsolidated investment

 

(1,482)

 

—

 

Net income

$

4,753

$

4,080

 

Earnings per share

 

 

 

 

 

Basic

$

0.09

$

0.08

 

Diluted

$

0.09

$

0.07

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

52,273

 

53,264

 

Diluted

 

55,494

 

56,389

 

Cash dividends declared per common share

$

0.07

$

—

 

 

 

 

POOL Reports Record First Quarter Results

Page 4

April 21, 2005

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

(In thousands)

 

 

March 31,

 

 

2005

 

2004

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

14,565

$

2,859

 

 

Receivables, net

 

33,646

 

30,406

 

 

Receivables pledged under receivables facility

 

130,861

 

116,691

 

 

Product inventories, net

 

281,267

 

241,903

 

 

Prepaid expenses

 

3,841

 

7,111

 

 

Deferred income taxes

 

2,570

 

1,864

 

Total current assets

 

466,750

 

400,834

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

20,087

 

25,536

 

Goodwill

 

104,687

 

112,447

 

Other intangible assets, net

 

11,723

 

13,609

 

Equity interest investment

 

17,134

 

—

 

Other assets, net

 

2,983

 

1,798

 

Total assets

 

$

623,364

$

554,224

 

Liabilities and stockholders' equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

219,290

 

166,305

 

 

Accrued and other current liabilities

 

23,038

 

25,492

 

 

Short-term financing

 

57,665

 

49,998

 

 

Current portion of long-term debt

 

1,350

 

94,245

 

Total current liabilities

 

301,343

 

336,040

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

11,624

 

10,570

 

Long-term debt, less current portion

 

82,914

 

3,472

 

Other long-term liabilities

 

3,116

 

4,466

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

224,367

 

199,676

 

Total liabilities and stockholders' equity

$

623,364

$

554,224

 

 

1.      The allowance for doubtful accounts (AFDA) was $2.9 million at March 31, 2005 and $3.7 million at March 31, 2004. The AFDA represented 53% and 65% of the accounts receivable greater than 60 days past due in March 2005 and March 2004, respectively.

2.      The inventory reserve was $3.4 million at March 31, 2005 and $3.0 million at March 31, 2004. The slowest moving class of inventory as a percentage of total inventory decreased slightly between periods.

 

 

POOL Reports Record First Quarter Results

Page 5

April 21, 2005

 

 

 

Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

(Unaudited)

 

 

Three Months Ended March 31,

(In thousands) 

 

 

 

 

2005

 

2004

 

Operating activities

 

 

 

 

 

Net income

 

 

$

4,753

$

4,080

 

Adjustments to reconcile net income

 

 

 

 

 

to net cash used in operating activities

 

 

 

 

 

 

Depreciation

 

1,216

 

1,578

 

 

Amortization

 

1,013

 

1,125

 

 

Equity loss in unconsolidated investment

 

1,482

 

—

 

 

Other

 

(110)

 

(1,022)

 

Changes in operating assets and liabilities,

 

 

 

 

 

 

net of effects of acquisitions

 

 

 

 

 

 

 

Receivables

 

(66,706)

 

(63,116)

 

 

 

Product inventories

 

(85,750)

 

(47,922)

 

 

 

Accounts payable

 

106,176

 

47,993

 

 

 

Other current assets and liabilities

 

(13,213)

 

(12,574)

 

Net cash used in operating activities

 

(51,139)

 

(69,858)

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Acquisition of businesses

 

(2)

 

(307)

 

Purchase of property and equipment, net of sale proceeds

 

(2,772)

 

(2,493)

 

Net cash used in investing activities

 

(2,774)

 

(2,800)

 

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from revolving line of credit

 

77,378

 

84,035

 

Payments on revolving line of credit

 

(44,884)

 

(30,040)

 

Proceeds from asset-backed financing

 

19,835

 

16,520

 

Payments on asset-backed financing

 

(4,765)

 

(8,940)

 

Payments on other long-term debt

 

(23)

 

(158)

 

Issuance of common stock under stock option plans

 

5,917

 

1,806

 

Payment of cash dividends

 

(3,672)

 

—

 

Purchase of treasury stock

 

(3,024)

 

(1,874)

 

Net cash provided by financing activities

 

46,762

 

61,349

 

Effect of exchange rate changes on cash

 

(46)

 

1,356

 

Change in cash and cash equivalents

 

(7,197)

 

(9,953)

 

Cash and cash equivalents at beginning of period

 

21,762

 

12,812

 

Cash and cash equivalents at end of period

$

14,565

$

2,859