EXHIBIT 99.1
SCP POOL CORPORATION
REPORTS
26% EARNINGS PER SHARE INCREASE FOR ITS THIRD QUARTER
COVINGTON, LA (October 20, 2005) – SCP Pool Corporation (the “Company” or “POOL”) (Nasdaq/NM: POOL) today reported record results for the third quarter of 2005.
Earnings per share for the third quarter of 2005 increased 26% to $0.49 per diluted share on net income of $27.1 million, compared to $0.39 per diluted share on net income of $22.0 million in the third quarter last year.
Net sales for the three months ended September 30, 2005 increased $61.6 million, or 17%, to $423.7 million, compared to $362.1 million in the third quarter of 2004. Base business sales increased by 16% with complementary products sales increasing 29% over the third quarter of 2004.
Gross profit for the three months ended September 30, 2005 increased $10.4 million, or 10%, to $114.6 million from $104.2 million in the same period in 2004. Excluding the impact of the divestiture of POOL’s North American manufacturing assets in December 2004, gross profit increased 12%. Gross profit as a percentage of net sales (gross margin) decreased 180 basis points to 27.0% in the third quarter of 2005 from 28.8% in the comparable 2004 period. The decline in gross margin is attributable to unprecedented levels of price increases, which have been generally passed on, but partially on a dollar per unit basis instead of on a percentage basis, and to the divestiture of POOL’s North American manufacturing assets.
Operating expenses in the third quarter of 2005 increased $5.0 million, or 7%, to $72.2 million from $67.2 million in the third quarter of 2004. Operating expenses as a percentage of net sales decreased 160 basis points to 17.0% in 2005 from 18.6% in 2004.
Operating income for the third quarter of 2005 was $42.4 million, an increase of 15% over the third quarter of 2004 operating income of $36.9 million. The Company’s equity investment in Latham Acquisition Corporation also contributed $1.9 million to net income in the third quarter.
“We executed successfully in the quarter to produce solid results. At the same time we strengthened our position in the marketplace and proceeded to further our value added and complementary products initiatives. This was done despite the new price inflation reality in the industry as well as the national distraction of catastrophic storm systems,” commented Manuel Perez de la Mesa, President and CEO.
“In our specific case, a number of outstanding employees and the disciplines of disaster recovery and business continuity planning resulted in no disruption of service level to our customers other than in the locations directly in the path of the storms. In addition, our Covington administrative office was closed only two weeks, with most professional and management level employees fully functional within days of the storm, operating from a variety of remote locations,” added Perez de la Mesa.
Net sales for the nine months ended September 30, 2005 increased $152.0 million, or 14%, to $1,252.9 million, compared to $1,100.9 million in the comparable 2004 period. Base business net sales for the nine months ended September 30, 2005 increased 13% over the same period in 2004. Complementary products sales increased 30% over the nine months ended September 30, 2004. Gross margin decreased 70 basis points to 27.9% in the first nine months of 2005 from 28.6% for the same period last year, reflecting the divestiture of POOL’s North American manufacturing assets as well as the impact of product price increases. Operating income for the first nine months of 2005 increased 16% to $136.5 million, or 10.9% of net sales, compared to operating income of $117.2 million, or 10.6% of net sales in the same period last year. Earnings per share for the first nine months increased 21% to $1.50 per diluted share on net income of $83.5 million, compared to $1.24 per diluted share on net income of $69.7 million in the comparable 2004 period.
POOL Reports Record
Third Quarter 2005 Results
Page 2
October 20, 2005
Cash provided by operations was $51.3 million in the first nine months of 2005 compared to $30.9 million in the same period in 2004. The increase in cash provided by operations through September year-to-date is the result of higher net income and the deferral of third quarter estimated tax payments.
SCP Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates over 240 service centers in North America and Europe, through which it distributes more than 100,000 national brand and private label products to roughly 68,000 wholesale customers. 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.
CONTACT:
Craig K. Hubbard
Treasurer
985.801.5117
craig.hubbard@poolcorp.com
POOL Reports Record
Third Quarter 2005 Results
Page 3
October 20, 2005
Consolidated Statements of Income
| (Unaudited) | Three Months Ended | Nine Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands, except per share data) | September 30, | September 30, | ||||||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||||||
| Net Sales | $ | 423,729 | $ | 362,091 | $ | 1,252,868 | $ | 1,100,916 | ||||||||||||
| Cost of sales | 309,124 | 257,908 | 903,631 | 786,486 | ||||||||||||||||
| Gross profit | 114,605 | 104,183 | 349,237 | 314,430 | ||||||||||||||||
| Percent | 27.0 | % | 28.8 | % | 27.9 | % | 28.6 | % | ||||||||||||
| Selling and administrative expenses | 72,212 | 67,234 | 212,748 | 197,220 | ||||||||||||||||
| Operating income | 42,393 | 36,949 | 136,489 | 117,210 | ||||||||||||||||
| Percent | 10.0 | % | 10.2 | % | 10.9 | % | 10.6 | % | ||||||||||||
| Interest expense, net | 1,331 | 868 | 4,316 | 2,973 | ||||||||||||||||
| Income before income taxes and equity earnings | 41,062 | 36,081 | 132,173 | 114,237 | ||||||||||||||||
| Provision for income taxes | 15,854 | 14,071 | 51,032 | 44,552 | ||||||||||||||||
| Equity earnings in unconsolidated interests | 1,912 | — | 2,372 | — | ||||||||||||||||
| Net income | $ | 27,120 | $ | 22,010 | $ | 83,513 | $ | 69,685 | ||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 0.51 | $ | 0.42 | $ | 1.59 | $ | 1.31 | ||||||||||||
| Diluted | $ | 0.49 | $ | 0.39 | $ | 1.50 | $ | 1.24 | ||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 52,699 | 52,847 | 52,489 | 53,057 | ||||||||||||||||
| Diluted | 55,889 | 56,175 | 55,728 | 56,321 | ||||||||||||||||
| Cash dividends declared per common share | $ | 0.09 | $ | 0.07 | $ | 0.25 | $ | 0.13 | ||||||||||||
POOL Reports Record
Third Quarter 2005 Results
Page 4
October 20, 2005
Condensed Consolidated Balance Sheets
| (Unaudited) | September 30, | September 30, | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) |
2005 |
2004 |
||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 44,644 | $ | 30,427 | ||||||||||||||||
| Receivables, net | 41,924 | 39,250 | ||||||||||||||||||
| Receivables pledged under receivables facility | 110,113 | 91,110 | ||||||||||||||||||
| Product inventories, net | 197,135 | 167,024 | ||||||||||||||||||
| Prepaid expenses | 3,248 | 6,167 | ||||||||||||||||||
| Deferred income taxes | 4,171 | 1,864 | ||||||||||||||||||
| Total current assets | 401,235 | 335,842 | ||||||||||||||||||
| Property and equipment, net | 21,413 | 25,210 | ||||||||||||||||||
| Goodwill | 102,163 | 112,489 | ||||||||||||||||||
| Other intangible assets, net | 9,161 | 11,609 | ||||||||||||||||||
| Equity interest investments | 29,547 | — | ||||||||||||||||||
| Other assets, net | 2,312 | 1,657 | ||||||||||||||||||
| Total assets | $ | 565,831 | $ | 486,807 | ||||||||||||||||
| Liabilities and stockholders' equity | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Accounts payable | 99,920 | 76,454 | ||||||||||||||||||
| Accrued and other current liabilities | 69,148 | 55,903 | ||||||||||||||||||
| Short-term financing | 83,170 | 69,770 | ||||||||||||||||||
| Current portion of other long-term liabilities | 1,350 | 25,850 | ||||||||||||||||||
| Total current liabilities | 253,588 | 227,977 | ||||||||||||||||||
| Deferred income taxes | 13,116 | 10,570 | ||||||||||||||||||
| Long-term debt | — | 3,043 | ||||||||||||||||||
| Other long-term liabilities | 2,402 | 3,534 | ||||||||||||||||||
| Total liabilities | 269,106 | 245,124 | ||||||||||||||||||
| Total stockholders' equity | 296,725 | 241,683 | ||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 565,831 | $ | 486,807 | ||||||||||||||||
1.
The allowance for doubtful accounts (AFDA) was $3.1 million at September 30, 2005 and $3.6 million at September 30, 2004.
The total past due accounts receivable balance as a percentage of total accounts receivable decreased
11.4% between periods.
2.
The inventory reserve was $4.4 million, or 2.2% of total inventory at September 30, 2005 and $3.7 million, or 2.2% of total
inventory at September 30, 2004. The slowest moving class of inventory as a percentage of total inventory
decreased slightly
between periods.
POOL Reports Record
Third Quarter 2005 Results
Page 5
October 20, 2005
Condensed Consolidated Statements of Cash Flows
| (Unaudited) | Nine Months Ended September 30, | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) |
2005 |
2004 |
||||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net income | $ | 83,513 | $ | 69,685 | ||||||||||||||||
| Adjustments to reconcile net income | ||||||||||||||||||||
| to net cash used in operating activities | ||||||||||||||||||||
| Depreciation | 3,693 | 4,462 | ||||||||||||||||||
| Amortization | 3,228 | 3,345 | ||||||||||||||||||
| Equity earnings in unconsolidated investments | (2,373 | ) | — | |||||||||||||||||
| Other | 825 | (483 | ) | |||||||||||||||||
| Changes in operating assets and liabilities, | ||||||||||||||||||||
| net of effects of acquisitions | ||||||||||||||||||||
| Receivables | (54,410 | ) | (46,270 | ) | ||||||||||||||||
| Product inventories | (2,647 | ) | 26,307 | |||||||||||||||||
| Accounts payable | (15,017 | ) | (45,005 | ) | ||||||||||||||||
| Other current assets and liabilities | 34,453 | 18,840 | ||||||||||||||||||
| Net cash provided by operating activities | 51,265 | 30,881 | ||||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Acquisition of businesses | (3 | ) | (349 | ) | ||||||||||||||||
| Equity interest investment | (3,589 | ) | — | |||||||||||||||||
| Purchase of property and equipment, net of sale proceeds | (6,556 | ) | (5,060 | ) | ||||||||||||||||
| Net cash used in investing activities | (10,148 | ) | (5,409 | ) | ||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Proceeds from revolving line of credit | 189,013 | 218,069 | ||||||||||||||||||
| Payments on revolving line of credit | (239,433 | ) | (232,469 | ) | ||||||||||||||||
| Proceeds from asset-backed financing | 62,170 | 66,522 | ||||||||||||||||||
| Payments on asset-backed financing | (21,595 | ) | (39,170 | ) | ||||||||||||||||
| Payments on other long-term debt | (964 | ) | (1,519 | ) | ||||||||||||||||
| Issuance of common stock under stock option plans | 12,576 | 6,273 | ||||||||||||||||||
| Payment of cash dividends | (13,152 | ) | (7,053 | ) | ||||||||||||||||
| Purchase of treasury stock | (6,353 | ) | (20,085 | ) | ||||||||||||||||
| Net cash used in financing activities | (17,738 | ) | (9,432 | ) | ||||||||||||||||
| Effect of exchange rate changes on cash | (497 | ) | 1,575 | |||||||||||||||||
| Change in cash and cash equivalents | 22,882 | 17,615 | ||||||||||||||||||
| Cash and cash equivalents at beginning of period | 21,762 | 12,812 | ||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 44,644 | $ | 30,427 | ||||||||||||||||