EX-99.1 2 poolq12010er.htm POOL Q1 2010 EARNINGS RELEASE poolq12010er.htm

Exhibit 99.1
 
FOR IMMEDIATE RELEASE
 
 
POOL CORPORATION REPORTS FIRST QUARTER RESULTS
 


COVINGTON, LA. (April 22, 2010) – Pool Corporation (the “Company” or “POOL”) (NASDAQ/GSM: POOL) today reported its results for the first quarter of 2010.

Net sales for the seasonally slow first quarter decreased approximately 3% to $269.8 million, compared to $276.6 million in the first quarter of 2009.  Base business sales declined 5% due to higher sales in the first quarter of 2009 for new drains and related safety products driven by regulatory changes, unfavorable weather conditions during the first two months of 2010 and continued weakness in irrigation construction markets, which generally lag trends in the pool construction markets by up to a year.

Gross profit for the quarter ended March 31, 2010 decreased 6% to $76.3 million from $81.2 million in the first quarter of 2009.  Gross profit as a percentage of net sales (gross margin) declined 110 basis points to 28.3% in the first quarter of 2010 due to the competitive pricing environment and the favorable impact to gross margin in the first quarter of 2009 that resulted from our volume of inventory purchases ahead of vendor price increases in the second half of 2008.

“March marked the official start of the pool season and we see positive signs that the first quarter of 2010 will likely mark the end of a three year downturn in our industry.  We continue to see moderating sales declines as evidenced by a 5% decrease in base business sales for the quarter versus double digit base business sales declines for each quarter in 2009.  More significantly, we realized flat base business sales in March, excluding the benefit of one extra selling day compared to March 2009, and sales through the first three weeks of April are trending up compared to the same period last year.  While we have increasing confidence in realizing positive sales comparisons in the second quarter and balance of 2010, we expect continued pressure on gross margins,” commented Manuel Perez de la Mesa, President and CEO.

Selling and administrative expenses (operating expenses) decreased 1% to $84.2 million in the first quarter of 2010 compared to the same period in 2009.  Base business operating expenses decreased 3% compared to the first quarter of 2009 due primarily to the benefit of cost measures implemented during 2009.

Operating loss was $7.9 million in the first quarter of 2010 compared to an operating loss of $3.6 million in the same period in 2009.  Interest expense decreased 29% compared to the first quarter of 2009 due to a $99.5 million decrease in average debt levels.  The Company no longer has an equity interest in Latham Acquisition Corporation (LAC) and did not recognize any impact related to LAC’s first quarter 2010 results.  In the first quarter of 2009, equity loss in unconsolidated investments, net included $2.1 million related to LAC.

Loss per share for the first quarter of 2010 was $0.12 per diluted share on a net loss of $6.1 million, compared to a loss of $0.13 per diluted share on a net loss of $6.2 million in the same period in 2009.  Adjusted EBITDA (as defined in the addendum) was a loss of $3.3 million in the first quarter of 2010 compared to earnings of $0.3 million in the first quarter of 2009.

On the balance sheet, total net receivables decreased 2% compared to March 31, 2009 due primarily to lower first quarter 2010 sales.  Inventory levels decreased 4% to $382.4 million at March 31, 2010, or decreased approximately 6% excluding inventory related to the October 2009 acquisition of General Pool and Spa Supply.

The seasonal use of cash in operations decreased to $25.3 million in the first quarter of 2010 compared to $46.0 million in the same period of 2009.  The 2009 amount was negatively impacted by a $30.0 million tax payment made in January 2009 for estimated third and fourth quarter 2008 federal income taxes, which were deferred as allowed by the IRS for taxpayers in areas affected by Hurricane Gustav.
 
 

 
 
 
 

 
“We believe our 2010 earnings guidance of $1.00 to $1.15 per diluted share continues to be reasonable.  We are confident that our combination of customer service, marketing and technology tools and business development resources, in conjunction with the dedication and commitment of our team, positively distinguish us from our competition and favorably position us to capitalize on the recovery in our industry,” continued Perez de la Mesa.

Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products.  Currently, POOL operates 288 sales centers in North America and Europe, through which it distributes more than 100,000 national brand and private label products to roughly 70,000 wholesale customers.  For more information about POOL, 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 POOL’s 2009 Annual Report on Form 10-K/A 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,
  
   
2010
    
2009
  
             
Net sales
$
269,833
  
$
276,626
  
Cost of sales
  
193,541
    
195,433
  
Gross profit
  
76,292
    
81,193
  
Percent
  
28.3
%
  
29.4
%
             
Selling and administrative expenses
  
84,180
    
84,839
  
Operating loss
  
(7,888
)
  
(3,646
)
Percent
  
(2.9
)%
  
(1.3
)%
             
Interest expense, net
  
2,354
    
3,327
  
Loss before income tax benefit and equity earnings (loss)
  
(10,242
)
  
(6,973
)
Income tax benefit
  
(4,025
)
  
(2,740
)
Equity earnings (loss) in unconsolidated investments, net
  
106
    
(2,003
)
Net loss
$
(6,111
)
$
(6,236
)
             
Loss per share:
            
Basic
$
(0.12
)
$
(0.13
)
Diluted
$
(0.12
)
$
(0.13
)
Weighted average shares outstanding:
            
Basic
  
49,194
    
48,287
  
Diluted
  
49,194
    
48,287
  
             
Cash dividends declared per common share
$
0.13
  
$
0.13
  
 
 

 
 
3
 

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

     
March 31,
    
March 31,
    
Change
  
     
2010
    
2009
    
$   
 
%
  
                         
Assets
                      
Current assets:
                      
 
Cash and cash equivalents
$
11,494
  
$
13,103
  
$
(1,609
)
(12
)%
 
Receivables, net
  
157,568
    
20,373
    
137,195
  
>100
  
 
Receivables pledged under receivables facility
  
—
    
139,945
    
(139,945
)
(100
)
 
Product inventories, net
  
382,380
    
397,863
    
(15,483
)
(4
)
 
Prepaid expenses and other current assets
  
13,513
    
7,973
    
5,540
  
69
  
 
Deferred income taxes
  
10,681
    
11,908
    
(1,227
)
(10
)
Total current assets
  
575,636
    
591,165
    
(15,529
)
(3
)
                         
Property and equipment, net
  
32,206
    
34,677
    
(2,471
)
(7
)
Goodwill
  
176,923
    
169,936
    
6,987
  
4
  
Other intangible assets, net
  
13,454
    
13,035
    
419
  
3
  
Equity interest investments
  
1,087
    
27,804
    
(26,717
)
(96
)
Other assets, net
  
28,556
    
27,158
    
1,398
  
5
  
Total assets
$
827,862
  
$
863,775
  
$
(35,913
)
(4
)%
                         
Liabilities and stockholders’ equity
                      
Current liabilities:
                      
 
Accounts payable
$
251,590
  
$
201,300
  
$
50,290
  
25
%
 
Accrued expenses and other current liabilities
  
25,429
    
24,911
    
518
  
2
  
 
Short-term financing
  
—
    
8,000
    
(8,000
)
(100
)
 
Current portion of long-term debt and other long-term liabilities
  
36,223
    
16,613
    
19,610
  
>100
  
Total current liabilities
  
313,242
    
250,824
    
62,418
  
25
  
                         
Deferred income taxes
  
21,979
    
19,014
    
2,965
  
16
  
Long-term debt
  
242,150
    
356,721
    
(114,571
)
(32
)
Other long-term liabilities
  
7,646
    
5,736
    
1,910
  
33
  
Total liabilities
  
585,017
    
632,295
    
(47,278
)
(7
)
Total stockholders’ equity
  
242,845
    
231,480
    
11,365
  
5
  
Total liabilities and stockholders’ equity
$
827,862
  
$
863,775
  
$
(35,913
)
(4
)%
             __________________
 
1.  
In August 2009, the Company’s accounts receivable securitization facility terminated and was not replaced.
 
2.  
The allowance for doubtful accounts was $10.0 million at March 31, 2010 and $13.4 million at March 31, 2009.
 
3.  
The inventory reserve was $7.5 million at March 31, 2010 and $7.6 million at March 31, 2009.


 
4
 


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
   
Three Months Ended
March 31,
        
   
2010
      2009     Change  
Operating activities
                  
Net loss
$
(6,111
)
$
(6,236
)
$
125
  
Adjustments to reconcile net loss to net cash used in operating activities:
                  
 
Depreciation
  
2,224
    
2,209
    
15
  
 
Amortization
  
567
    
662
    
(95
)
 
Share-based compensation
  
1,871
    
1,321
    
550
  
 
Excess tax benefits from share-based compensation
  
(795
)
  
(275
)
  
(520
)
 
Equity (earnings) loss in unconsolidated investments
  
(106
 )  
3,353
    
(3,459
)
 
Other
  
(2,329
 )  
(2,458
)
  
129
  
Changes in operating assets and liabilities, net of effects of acquisitions:
                  
 
Receivables
  
(59,755
 )    (44,221
)
  
(15,534
)
 
Product inventories
  
(26,576
 )  
7,510
    
(34,086
)
 
Accounts payable
  
73,244
    
27,600
    
45,644
  
  Other current assets and liabilities     (7,518
)
  
(35,432
 )    27,914  
Net cash used in operating activities     (25,284
)
  
(45,967
)
    20,683  
                   
Investing activities
                  
Purchase of property and equipment, net of sale proceeds     (3,133
)
  
(3,881
)
     748  
Net cash used in investing activities     (3,133
)
  
(3,881
)
  
748
 
                   
Financing activities                  
Proceeds from revolving line of credit     99,050    
87,121
      11,929  
Payments on revolving line of credit    (57,600
)
  
(19,400
)
     (38,200
)
Proceeds from asset-backed financing     —    
13,000
       (13,000
)
Payments on asset-backed financing     —    
(25,792
)
     25,792  
Payments on long-term debt and other long-term liabilities   (12,043
)
  
(1,536
)
     (10,507
)
Payments of deferred financing costs     (145
)
  
(188
)
     43  
Excess tax benefits from share-based compensation     795    
275
       520  
Proceeds from stock issued under share-based compensation plans     2,353    
1,000
       1,353  
Payments of cash dividends     (6,418
)
  
(6,279
)
     (139
)
Purchases of treasury stock     (1,533
)
  
(59
)
     (1,474
)
Net cash provided by financing activities     24,459    
48,142
       (23,683
)
Effect of exchange rate changes on cash     (391
)
  
(953
)
     562  
Change in cash and cash equivalents     (4,349
)
  
(2,659
)
     (1,690
)
Cash and cash equivalents at beginning of period     15,843    
15,762
       81  
Cash and cash equivalents at end of period
$
  11,494  
$
13,103
  
$
 (1,609
)



 
5
 


Addendum

(Unaudited)
  
Base Business
Excluded
Total
(In thousands)
  
Three Months
Three Months
Three Months
   
Ended
Ended
Ended
   
March 31,
March 31,
March 31,
   
2010
    
2009
    
2010
    
2009
    
2010
    
2009
  
Net sales
$
261,022
  
$
273,464
  
$
8,811
  
$
3,162
  
$
269,833
  
$
276,626
  
                                     
Gross profit
  
73,997
    
80,356
    
2,295
    
837
    
76,292
    
81,193
  
Gross margin
  
28.3
%
  
29.4
%
  
26.0
%
  
26.5
%
  
28.3
%
  
29.4
%
                                     
Operating expenses
  
80,828
    
83,624
    
3,352
    
1,215
    
84,180
    
84,839
  
Expenses as a % of net sales
  
31.0
%
  
30.6
%
  
38.0
%
  
38.4
%
  
31.2
%
  
30.7
%
                                     
Operating loss
  
(6,831
)
  
(3,268
)
  
(1,057
)
  
(378
)
  
(7,888
)
  
(3,646
)
Operating margin
  
(2.6
)%
  
(1.2
)%
  
(12.0
)%
  
(12.0
)%
  
(2.9
)%
  
(1.3
)%

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

 
 
Acquired
  
 
Acquisition
Date
  
Net
Sales Centers Acquired
  
 
Period
Excluded
General Pool & Spa Supply (GPS) (1)
  
October 2009
  
7
  
January–March 2010
Proplas Plasticos, S.L. (Proplas)
  
November 2008
  
0
  
January–February 2010 and January–February 2009

 
(1)    We acquired 10 GPS sales centers and have consolidated 3 of these with existing sales centers.

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, 2010):

·  
acquired sales centers (see table above);
·  
existing sales centers consolidated with acquired sales centers (3);
·  
closed sales centers (1);
·  
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 (0).

The table below summarizes the changes in our sales centers in the first quarter of 2010:

December 31, 2009
287
  
  Opened
1
  
March 31, 2010
288
  

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
 

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 loss in unconsolidated investments, net of income taxes.  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 loss to Adjusted EBITDA.

(Unaudited)
  
Three Months Ended
March 31,
  
(In thousands)
  
2010
  
2009
  
Net loss
$
(6,111
)
$
(6,236
)
 
Add:
            
 
Interest expense, net
  
2,354
    
3,327
  
 
Income tax benefit
  
(4,025
)
  
(2,740
)
 
Share-based compensation
  
1,871
    
1,321
  
 
Equity (earnings) loss in unconsolidated investments, net of tax (1)
  
(106
)
  
2,003
  
 
Depreciation
  
2,224
    
2,209
  
 
Amortization (2)
  
466
    
453
  
Adjusted EBITDA
$
(3,327
)
$
337
  

            (1)  Tax related to our equity loss is disclosed as Income tax benefit on equity loss in the table below.
            (2)  Excludes amortization of deferred finance charges of $101 for 2010 and $209 for 2009.

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)
  
2010
  
2009
  
Adjusted EBITDA
$
(3,327
)
$
337
  
 
Add:
            
 
Interest expense, net (1)
  
(2,253
)
  
(3,118
)
 
Income tax benefit
  
4,025
    
2,740
  
 
Income tax benefit on equity loss
  
—
    
1,350
  
 
Excess tax benefits on share-based compensation
  
(795
)
  
(275
)
 
Other
  
(2,329
)
  
(2,458
)
 
Change in operating assets and liabilities
  
(20,605
)
  
(44,543
)
Net cash used in operating activities
$
(25,284
)
 $
(45,967
)
 
                  (1)  Excludes amortization of deferred financing costs of $101 for 2010 and $209 for 2009. This is a non-cash expense
  included in interest expense, net on the Consolidated Statements of Income (Loss).


 
7