EX-99.1 2 q412earningsrelease.htm POOL Q4 2012 EARNINGS RELEASE Q412EarningsRelease



Exhibit 99.1

FOR IMMEDIATE RELEASE


POOL CORPORATION REPORTS RECORD 2012 RESULTS
AND PROVIDES 2013 EARNINGS GUIDANCE

Highlights include:

•
Sales growth of 9% to a record $1.95 billion
•
2012 diluted EPS of $1.71; adjusted diluted EPS up 23% to a record $1.85
•
2013 diluted EPS guidance of $2.13 to $2.23
______________________

COVINGTON, LA. (February 14, 2013) – Pool Corporation (NASDAQ/GSM:POOL) today announced fourth quarter and full year 2012 results.

“Solid performance in 2012 produced record results, surpassing our objectives. We turned challenges into opportunities, and opportunities into success. Our market share gains reflect our continued efforts to provide added value to our customers by helping them succeed utilizing our tools, programs and resources for their businesses and markets. At 23% adjusted EPS growth for 2012, this is our third consecutive year of greater than 20% EPS growth,” commented Manuel Perez de la Mesa, President and CEO.

Net sales for the year ended December 31, 2012 increased 9% to a record high of $1.95 billion, compared to $1.79 billion in 2011. Base business sales increased 7%, including 7% growth on the swimming pool side of the business and 10% growth on the irrigation side. Base business sales growth was driven by market share gains, continued improvement in consumer discretionary expenditures and some price inflation, partially offset by unfavorable currency fluctuations of approximately 1%.

Gross profit for the year ended December 31, 2012 increased 7% to $567.4 million from $531.6 million in 2011. Gross profit as a percentage of net sales (gross margin) decreased 60 basis points to 29.0% for 2012. This decrease reflects product and customer mix changes and continued competitive pricing pressures. Gross margin in 2012 was also comparatively lower than 2011 gross margin due to the benefits realized in 2011 from opportunistic inventory purchases.

Selling and administrative expenses (operating expenses) for 2012 increased 3% to $415.6 million from $405.0 million in 2011. Base business operating expenses were essentially flat year over year, as decreases in employee incentive costs, lower bad debt expense and the impact of currency fluctuations were offset by higher professional fees and increases in wages and employee insurance.

During the third quarter of 2012, the company recorded a non-cash goodwill impairment charge of $6.9 million, equal to the total goodwill carrying amount of its United Kingdom reporting unit, which had an impact of $0.14 per diluted share. During the fourth quarter of 2011, the company recorded a non-cash goodwill impairment charge of $1.6 million resulting from its annual goodwill impairment analysis, which had an impact of $0.03 per diluted share. Adjusted operating income, adjusted net income and adjusted diluted EPS for all periods exclude goodwill impairment and are provided in this release because the company believes these amounts are useful to investors in assessing year-over-year operating performance.

Operating income for the year improved 16% to $144.9 million from $125.1 million in 2011. Adjusted operating income for 2012 increased 20% to $151.8 million compared to adjusted operating income for 2011 of $126.7 million. Adjusted operating income as a percentage of net sales (operating margin) increased to 7.8% in 2012 compared to 7.1% in 2011.


Net interest expense decreased $1.5 million primarily due to the impacts of changes in estimated interest expense related to uncertain tax positions and foreign currency transaction gains and losses.

Net income increased 14% to $82.0 million in 2012 compared to $72.0 million in 2011. Earnings per share was up 16% to $1.71 per diluted share compared to $1.47 per diluted share in 2011. Adjusted net income for 2012 increased 21% to $88.9 million, while adjusted diluted EPS increased 23% to a record $1.85. Adjusted EBITDA (as defined in the addendum to this release) increased 19% to $172.9 million in 2012 compared to $145.2 million in 2011, or 8.8% of net sales in 2012 compared to 8.1% of net sales in 2011.

On the balance sheet, total net receivables increased 4% compared to December 31, 2011 due primarily to an increase in current trade receivables as a result of December base business sales growth and higher vendor receivables. Inventory levels grew 3% to $400.3 million at December 31, 2012 compared to $386.9 million at December 31, 2011, including approximately $4.0 million in inventory from recent acquisitions. Total debt outstanding at December 31, 2012 was $230.9 million, down $16.4 million from the balance at December 31, 2011.

Cash provided by operations was $119.1 million in 2012, or $30.2 million more than adjusted net income. Compared to 2011, cash provided by operations was up $44.0 million due primarily to the increase in net income and improved working capital management.

Net sales for the seasonally slow fourth quarter increased 13% to $306.8 million compared to the fourth quarter of 2011. Base business sales improved 12% in the quarter compared to the same period in 2011. Gross margin declined 90 basis points to 29.0% in the fourth quarter of 2012.

Operating loss for the fourth quarter of 2012 was $10.3 million compared to a loss of $14.3 million in the same period last year. Net interest expense decreased $1.7 million due to the impact of the change in foreign currency transaction gains and losses, with recognized gains of $0.4 million during the fourth quarter of 2012 versus losses of $0.5 million during the same period in 2011, and lower interest expense on borrowings. Loss per diluted share for the fourth quarter of 2012 was $0.17 on a net loss of $8.0 million, compared to a loss of $0.21 per diluted share on a net loss of $10.1 million in the comparable 2011 period.

“Our 2012 results speak volumes about the talent and commitment that exist throughout our company. We are excited about closing the year strong and creating significant momentum heading into 2013, which marks our 20th year as the value added distribution company we are today. For fiscal 2013, we expect earnings per diluted share will be approximately $2.13 to $2.23. This range reflects our expectations for sales growth in the mid-single digits and 15% to 20% growth from adjusted 2012 diluted EPS,” said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 312 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
(In thousands, except per share data)

 
Three Months Ended
 
Year Ended
 
 
December 31,
 
December 31,
 
 
2012
 
2011
 
2012
 
2011 (1)
 
 
 
 
 
 
 
 
 
 
Net sales
$
306,818

 
$
270,422

 
$
1,953,974

 
$
1,793,318

 
Cost of sales
217,880

 
189,587

 
1,386,567

 
1,261,728

 
Gross profit
88,938

 
80,835

 
567,407

 
531,590

 
Percent
29.0

%
29.9

%
29.0

%
29.6

%
 
 
 
 
 
 
 
 
 
Selling and administrative expenses
99,235

 
93,628

 
415,592

 
404,973

 
Goodwill impairment
—

 
1,550

 
6,946

 
1,550

 
Operating income (loss)
(10,297
)
 
(14,343
)
 
144,869

 
125,067

 
Percent
(3.4
)
%
(5.3
)
%
7.4

%
7.0

%
 
 
 
 
 
 
 
 
 
Interest expense, net (2)
1,105

 
2,854

 
6,469

 
7,964

 
Income (loss) before income taxes and equity earnings
(11,402
)
 
(17,197
)
 
138,400

 
117,103

 
Provision for income taxes
(3,276
)
 
(7,058
)
 
56,744

 
45,319

 
Equity earnings in unconsolidated investments
129

 
24

 
316

 
209

 
Net income (loss)
$
(7,997
)
 
$
(10,115
)
 
$
81,972

 
$
71,993

 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
Basic
$
(0.17
)
 
$
(0.21
)
 
$
1.75

 
$
1.49

 
Diluted
$
(0.17
)
 
$
(0.21
)
 
$
1.71

 
$
1.47

 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
46,522

 
47,568

 
46,937

 
48,158

 
Diluted
46,522

 
47,568

 
48,058

 
48,987

 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.16

 
$
0.14

 
$
0.62

 
$
0.55

 
_________________

(1) 
Derived from audited financial statements.

(2) 
Interest expense, net includes realized foreign currency transaction gains of $0.4 million for the quarter and $0.1 million for the year ended December 31, 2012, and foreign currency transaction losses of $0.5 million for the quarter and $0.6 million for the year ended December 31, 2011.


3

POOL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)

 
 
December 31,
 
December 31,
 
Change
 
 
2012
 
2011 (1)
 
$
 
%
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
12,463

 
$
17,487

 
$
(5,024
)
 
(29
)%
 
Receivables, net (2)
113,859

 
109,273

 
4,586

 
4

 
Product inventories, net (3)
400,308

 
386,924

 
13,384

 
3

 
Prepaid expenses and other current assets
11,280

 
11,298

 
(18
)
 
—

 
Deferred income taxes
5,186

 
7,084

 
(1,898
)
 
(27
)
Total current assets
543,096

 
532,066

 
11,030

 
2

 
 
 
 
 
 
 
 
 
Property and equipment, net
46,566

 
41,394

 
5,172

 
12

Goodwill
169,983

 
177,103

 
(7,120
)
 
(4
)
Other intangible assets, net
11,053

 
11,738

 
(685
)
 
(6
)
Equity interest investments
1,160

 
980

 
180

 
18

Other assets, net
8,718

 
7,621

 
1,097

 
14

Total assets
$
780,576

 
$
770,902

 
$
9,674

 
1
 %
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
$
199,787

 
$
177,437

 
$
22,350

 
13
 %
 
Accrued expenses and other current liabilities
48,186

 
49,140

 
(954
)
 
(2
)
 
Current portion of long-term debt and other long-term liabilities
23

 
22

 
1

 
5

Total current liabilities
247,996

 
226,599

 
21,397

 
9

 
 
 
 
 
 
 
 
 
Deferred income taxes
13,453

 
9,531

 
3,922

 
41

Long-term debt
230,882

 
247,300

 
(16,418
)
 
(7
)
Other long-term liabilities
6,622

 
7,726

 
(1,104
)
 
(14
)
Total liabilities
498,953

 
491,156

 
7,797

 
2

Total stockholders’ equity
281,623

 
279,746

 
1,877

 
1

Total liabilities and stockholders’ equity
$
780,576

 
$
770,902

 
$
9,674

 
1
 %
__________________

(1) 
Derived from audited financial statements.
(2) 
The allowance for doubtful accounts was $5.5 million at December 31, 2012 and $5.9 million at December 31, 2011.
(3) 
The inventory reserve was $7.5 million at December 31, 2012 and $7.1 million at December 31, 2011.


4

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)

 
Year Ended
 
 
 
December 31,
 
 
 
2012
 
2011 (1)
 
Change
Operating activities
 
 
 
 
 
Net income
$
81,972

 
$
71,993

 
$
9,979

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation
11,592

 
9,746

 
1,846

 
Amortization
1,284

 
1,559

 
(275
)
 
Share-based compensation
8,465

 
8,233

 
232

 
Excess tax benefits from share-based compensation
(4,487
)
 
(3,118
)
 
(1,369
)
 
Equity earnings in unconsolidated investments
(316
)
 
(209
)
 
(107
)
 
(Gains) losses on foreign currency transactions
(111
)
 
592

 
(703
)
 
Goodwill impairment
6,946

 
1,550

 
5,396

 
Other
3,375

 
1,850

 
1,525

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
Receivables
(3,396
)

(5,887
)
 
2,491

 
Product inventories
(9,232
)

(35,339
)
 
26,107

 
Prepaid expenses and other assets
(1,159
)
 
(2,951
)
 
1,792

 
Accounts payable
20,253

 
6,402

 
13,851

 
Accrued expenses and other current liabilities
3,892

 
20,682

 
(16,790
)
Net cash provided by operating activities
119,078

 
75,103

 
43,975

 
 
 
 
 
 
Investing activities
 
 
 
 
 
Acquisition of businesses, net of cash acquired
(4,699
)

(5,934
)
 
1,235

Purchase of property and equipment, net of sale proceeds
(16,271
)

(19,454
)
 
3,183

Other investments
(238
)

(190
)
 
(48
)
Net cash used in investing activities
(21,208
)

(25,578
)
 
4,370

 
 
 
 
 
 
Financing activities
 
 
 
 
 
Proceeds from revolving line of credit
607,923

 
749,349

 
(141,426
)
Payments on revolving line of credit
(524,341
)

(700,749
)
 
176,408

Payments on long-term debt and other long-term liabilities
(100,022
)

(149
)
 
(99,873
)
Payments of deferred acquisition consideration
—


(500
)
 
500

Payments of deferred financing costs
—


(1,674
)
 
1,674

Excess tax benefits from share-based compensation
4,487

 
3,118

 
1,369

Proceeds from stock issued under share-based compensation plans
20,205

 
13,085

 
7,120

Payments of cash dividends
(29,135
)

(26,470
)
 
(2,665
)
Purchases of treasury stock
(81,761
)

(76,564
)
 
(5,197
)
Net cash used in financing activities
(102,644
)

(40,554
)
 
(62,090
)
Effect of exchange rate changes on cash and cash equivalents
(250
)

(1,205
)
 
955

Change in cash and cash equivalents
(5,024
)
 
7,766

 
(12,790
)
Cash and cash equivalents at beginning of period
17,487

 
9,721

 
7,766

Cash and cash equivalents at end of period
$
12,463

 
$
17,487

 
$
(5,024
)
_________________

(1) 
Derived from audited financial statements.


5

ADDENDUM

Base Business

The following table breaks 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
 
December 31,
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net sales
$
301,370

 
$
270,108

 
$
5,448

 
$
314

 
$
306,818

 
$
270,422

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
87,943

 
80,712

 
995

 
123

 
88,938

 
80,835

Gross margin
29.2
 %
 
29.9
 %
 
18.3
 %
 
39.2
 %
 
29.0
 %
 
29.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
96,700

 
93,307

 
2,535

 
321

 
99,235

 
93,628

Expenses as a % of net sales
32.1
 %
 
34.5
 %
 
46.5
 %
 
102.2
 %
 
32.3
 %
 
34.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
—

 
1,550

 
—

 
—

 
—

 
1,550

 
 
 
 
 
 
 
 
 
 
 
 
Operating loss
(8,757
)
 
(14,145
)
 
(1,540
)
 
(198
)
 
(10,297
)
 
(14,343
)
Operating margin
(2.9
)%
 
(5.2
)%
 
(28.3
)%
 
(63.1
)%
 
(3.4
)%
 
(5.3
)%

(Unaudited)
Base Business
 
Excluded
 
Total
(in thousands)
Year Ended
 
Year Ended
 
Year Ended
 
December 31,
 
December 31,
 
December 31,
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net sales
$
1,910,333

 
$
1,787,800

 
$
43,641

 
$
5,518

 
$
1,953,974

 
$
1,793,318

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
555,493

 
530,002

 
11,914

 
1,588

 
567,407

 
531,590

Gross margin
29.1
%
 
29.6
%
 
27.3
 %
 
28.8
 %
 
29.0
%
 
29.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
401,897

 
402,709

 
13,695

 
2,264

 
415,592

 
404,973

Expenses as a % of net sales
21.0
%
 
22.5
%
 
31.4
 %
 
41.0
 %
 
21.3
%
 
22.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairment
6,946

 
1,550

 
—

 
—

 
6,946

 
1,550

 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
146,650

 
125,743

 
(1,781
)
 
(676
)
 
144,869

 
125,067

Operating margin
7.7
%
 
7.0
%
 
(4.1
)%
 
(12.3
)%
 
7.4
%
 
7.0
%


6

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–December 2012
Ideal Distributors Ltd.
 
February 2012
 
4
 
February–December 2012
G.L. Cornell Company
 
December 2011
 
1
 
January–December 2012 and December 2011
Poolway Schwimmbadtechnik GmbH
 
November 2011
 
1
 
January–December 2012 and November–December 2011
The Kilpatrick Company, Inc.
 
May 2011
 
4
 
January–July 2012 and May–July 2011
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 sales centers that are acquired, closed or opened in new markets from base business results for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers. There were four sales centers opened in new markets that were excluded from base business as of December 31, 2012.

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.

The table below summarizes the changes in our sales centers during 2012:

December 31, 2011
298
Acquired
5
New locations
9
December 31, 2012
312




7

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 to Adjusted EBITDA.

(Unaudited)
Year Ended December 31,
(in thousands)
2012
 
2011
 
 
 
 
Net income
$
81,972

 
$
71,993

 
Add:
 
 
 
 
Interest expense (1)
6,580

 
7,372

 
Provision for income taxes
56,744

 
45,319

 
Share-based compensation
8,465

 
8,233

 
Goodwill impairment
6,946

 
1,550

 
Equity earnings in unconsolidated investments
(316
)
 
(209
)
 
Depreciation
11,592

 
9,746

 
Amortization (2)
896

 
1,234

Adjusted EBITDA
$
172,879

 
$
145,238


(1) Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) Excludes amortization of deferred financing costs of $388 for 2012 and $325 for 2011. This non-cash expense is included in Interest expense, net on the Consolidated Statements of Income.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited)
Year Ended December 31,
(in thousands)
2012
 
2011
 
 
 
 
Adjusted EBITDA
$
172,879

 
$
145,238

 
Add:
 
 
 
 
Interest expense, net of interest income
(6,192
)
 
(7,047
)
 
Provision for income taxes
(56,744
)
 
(45,319
)
 
(Gains) losses on foreign currency transactions
(111
)
 
592

 
Excess tax benefits from share-based compensation
(4,487
)
 
(3,118
)
 
Other
3,375

 
1,850

 
Change in operating assets and liabilities
10,358

 
(17,093
)
Net cash provided by operating activities
$
119,078

 
$
75,103




8