EX-99.1 2 pool-q22013xer.htm POOL Q2 2013 EARNINGS RELEASE POOL-Q2 2013-ER

    
Exhibit 99.1

FOR IMMEDIATE RELEASE



POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS

______________________

COVINGTON, LA. (July 18, 2013) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the second quarter of 2013.

“Our second quarter results were bolstered by strong performances in our largest, year-round markets and growth in pool refurbishment and replacement activities. Most seasonal markets lagged given the late start to this year's season as noted in our June 18th press release. In contrast, the early start to last year's season amplified the impact of the delayed start in our seasonal markets and the consequential business lost from later pool openings,” said Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended June 30, 2013 increased 4% to a record $790.4 million, compared to $757.2 million in the second quarter of 2012, with base business sales also up 4% for the period. The impact of weather on our second quarter results is evidenced by sales growth of approximately 9% on average in our largest, year-round markets while sales in our more seasonal markets remained flat overall. Irrigation sales were up 10% due to increased construction and renovation activity, spurred by modest improvements in the housing market.

Gross profit for the second quarter of 2013 increased 3% to $228.2 million from $222.4 million in the same period of 2012. Gross profit as a percentage of net sales (gross margin) declined 50 basis points to 28.9% in the second quarter of 2013. This decrease is attributable to changes in product mix, customer mix and geographic mix. We experienced double-digit sales growth during the quarter for certain discretionary lower margin product lines such as heaters and lighting products. Alternately, our sales of some higher margin, non-discretionary product lines declined during the quarter, as did sales growth in certain historically higher margin geographic regions as a result of the late start to the 2013 season.

Selling and administrative expenses (operating expenses) increased 2% to $116.2 million in the second quarter of 2013 compared to the same period in 2012. Base business operating expenses increased only 1% compared to the second quarter of 2012.

Operating income for the quarter increased 4% to $112.0 million compared to the same period in 2012. Operating income as a percentage of net sales (operating margin) was 14.2% for the second quarter of 2013 compared to 14.3% in the same period in 2012.

Net income increased 2% to $66.5 million in the second quarter of 2013, compared to $64.9 million for the second quarter of 2012. Earnings per share was up $0.05 to a record $1.39 per diluted share for the three months ended June 30, 2013 versus $1.34 per diluted share for the same period in 2012.

Net sales for the six months ended June 30, 2013 increased 4% to a record $1,160.8 million from $1,119.1 million in the comparable 2012 period. This growth included a 3% improvement in base business sales. Gross margin decreased 50 basis points to 28.7% in the first half of 2013 from 29.2% for the same period last year.

Operating expenses were up 1% compared to the first half of 2012, while base business operating expenses remained flat. Operating income for the first six months of 2013 increased 4% to $118.9 million compared to $114.2 million in the same period last year.




Earnings per share for the first six months of 2013 increased 4% to a record $1.47 per diluted share on net income of $70.0 million, compared to $1.42 per diluted share on net income of $68.6 million in the comparable 2012 period.

On the balance sheet, total net receivables and inventory levels increased 4% and 6%, respectively, relatively in line with sales growth. Total debt outstanding at June 30, 2013 was $300.4 million, down 3% compared to June 30, 2012.

Cash used in operations was $33.0 million for the first six months of 2013 compared to cash provided by operations of $33.5 million for the first six months of 2012. This change is largely attributable to the shift in the timing of the inventory purchase and payment cycle compared to the prior year, which should largely self-correct as the year progresses. Adjusted EBITDA (as defined in the addendum to this release) was $117.7 million for the second quarter of 2013 compared to $113.5 million for the second quarter of 2012, and $129.8 million for the six months ended June 30, 2013 compared to $124.5 million for the six months ended June 30, 2012.

“We maintain our recently announced earnings guidance range of $2.03 to $2.13 per diluted share. We are unwavering in our expectations for medium and long term earnings growth and intend to stay focused on the opportunities, the dynamics and the development of our industry. We have a driven team of professionals who are 100% committed to delivering exceptional service and doing their utmost to make success a reality as we embark on the second half of the year,” said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 321 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 2012 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
(Unaudited)
(In thousands, except per share data)

 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
790,392

 
$
757,175

 
$
1,160,754

 
$
1,119,129

 
Cost of sales
 
562,226

 
 
534,770

 
 
827,827

 
 
792,161

 
Gross profit
 
228,166

 
 
222,405

 
 
332,927

 
 
326,968

 
Percent
 
28.9

%
 
29.4

%
 
28.7

%
 
29.2

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling and administrative expenses
 
116,173

 
 
114,271

 
 
214,002

 
 
212,813

 
Operating income
 
111,993

 
 
108,134

 
 
118,925

 
 
114,155

 
Percent
 
14.2

%
 
14.3

%
 
10.2

%
 
10.2

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
2,081

 
 
2,200

 
 
3,695

 
 
3,677

 
Income before income taxes and equity earnings
 
109,912

 
 
105,934

 
 
115,230

 
 
110,478

 
Provision for income taxes
 
43,416

 
 
41,018

 
 
45,312

 
 
42,055

 
Equity earnings in unconsolidated investments
 
37

 
 
27

 
 
55

 
 
171

 
Net income
$
66,533

 
$
64,943

 
$
69,973

 
$
68,594

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.43

 
$
1.38

 
$
1.50

 
$
1.45

 
Diluted
$
1.39

 
$
1.34

 
$
1.47

 
$
1.42

 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
46,659

 
 
47,142

 
 
46,523

 
 
47,330

 
Diluted
 
47,882

 
 
48,288

 
 
47,758

 
 
48,430

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.19

 
$
0.16

 
$
0.35

 
$
0.30

 




3


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

 
 
 
June 30,
 
 
June 30,
 
 
Change
 
 
 
 
2013
 
 
2012
 
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
26,936

 
$
50,311

 
$
(23,375
)
 
(46
)
%
 
Receivables, net
 
281,064

 
 
269,060

 
 
12,004

 
4

 
 
Product inventories, net
 
424,679

 
 
402,266

 
 
22,413

 
6

 
 
Prepaid expenses and other current assets
 
10,219

 
 
8,437

 
 
1,782

 
21

 
 
Deferred income taxes
 
5,103

 
 
7,098

 
 
(1,995
)
 
(28
)
 
Total current assets
 
748,001

 
 
737,172

 
 
10,829

 
1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
51,110

 
 
45,409

 
 
5,701

 
13

 
Goodwill
 
169,983

 
 
177,103

 
 
(7,120
)
 
(4
)
 
Other intangible assets, net
 
10,592

 
 
11,497

 
 
(905
)
 
(8
)
 
Equity interest investments
 
1,190

 
 
1,089

 
 
101

 
9

 
Other assets, net
 
9,133

 
 
7,857

 
 
1,276

 
16

 
Total assets
$
990,009

 
$
980,127

 
$
9,882

 
1

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
239,976

 
$
267,990

 
$
(28,014
)
 
(10
)
%
 
Accrued expenses and other current liabilities
 
79,844

 
 
83,609

 
 
(3,765
)
 
(5
)
 
 
Current portion of long-term debt and other long-term liabilities
 
20

 
 
22

 
 
(2
)
 
(9
)
 
Total current liabilities
 
319,840

 
 
351,621

 
 
(31,781
)
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
15,263

 
 
9,257

 
 
6,006

 
65

 
Long-term debt
 
300,426

 
 
309,813

 
 
(9,387
)
 
(3
)
 
Other long-term liabilities
 
7,871

 
 
7,058

 
 
813

 
12

 
Total liabilities
 
643,400

 
 
677,749

 
 
(34,349
)
 
(5
)
 
Total stockholders’ equity
 
346,609

 
 
302,378

 
 
44,231

 
15

 
Total liabilities and stockholders’ equity
$
990,009

 
$
980,127

 
$
9,882

 
1

%
__________________

1.
The allowance for doubtful accounts was $4.4 million at June 30, 2013 and $5.0 million at June 30, 2012.
2.
The inventory reserve was $8.5 million at June 30, 2013 and $9.6 million at June 30, 2012.




4


POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Six Months Ended
 
 
 
 
 
 
June 30,
 
 
 
 
 
 
2013
 
 
2012
 
 
Change
 
Operating activities
 
 
 
 
 
 
 
 
 
Net income
$
69,973

 
$
68,594

 
$
1,379

 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
 
 
Depreciation
 
6,338

 
 
5,559

 
 
779

 
 
Amortization
 
622

 
 
638

 
 
(16
)
 
 
Share-based compensation
 
4,111

 
 
4,306

 
 
(195
)
 
 
Excess tax benefits from share-based compensation
 
(3,187
)
 
 
(1,609
)
 
 
(1,578
)
 
 
Equity earnings in unconsolidated investments
 
(55
)
 
 
(171
)
 
 
116

 
 
Other
 
(1,633
)
 
 
1,248

 
 
(2,881
)
 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
 
 
 
Receivables
 
(165,713
)
 
 
(157,829
)
 
 
(7,884
)
 
 
Product inventories
 
(24,134
)
 
 
(13,289
)
 
 
(10,845
)
 
 
Prepaid expenses and other assets
 
459

 
 
2,612

 
 
(2,153
)
 
 
Accounts payable
 
39,458

 
 
88,946

 
 
(49,488
)
 
 
Accrued expenses and other current liabilities
 
40,783

 
 
34,516

 
 
6,267

 
Net cash (used in) provided by operating activities
 
(32,978
)
 
 
33,521

 
 
(66,499
)
 
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
 
Acquisition of businesses, net of cash acquired
 
(1,188
)
 
 
(4,429
)
 
 
3,241

 
Purchase of property and equipment, net of sale proceeds
 
(10,500
)
 
 
(9,520
)
 
 
(980
)
 
Other investments
 
29

 
 
(166
)
 
 
195

 
Net cash used in investing activities
 
(11,659
)
 
 
(14,115
)
 
 
2,456

 
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
 
Proceeds from revolving line of credit
 
399,472

 
 
345,631

 
 
53,841

 
Payments on revolving line of credit
 
(329,928
)
 
 
(183,118
)
 
 
(146,810
)
 
Payments on long-term debt and other long-term liabilities
 
(10
)
 
 
(100,012
)
 
 
100,002

 
Excess tax benefits from share-based compensation
 
3,187

 
 
1,609

 
 
1,578

 
Proceeds from stock issued under share-based compensation plans
 
13,489

 
 
7,879

 
 
5,610

 
Payments of cash dividends
 
(16,308
)
 
 
(14,223
)
 
 
(2,085
)
 
Purchases of treasury stock
 
(10,437
)
 
 
(43,866
)
 
 
33,429

 
Net cash provided by financing activities
 
59,465

 
 
13,900

 
 
45,565

 
Effect of exchange rate changes on cash and cash equivalents
 
(355
)
 
 
(482
)
 
 
127

 
Change in cash and cash equivalents
 
14,473

 
 
32,824

 
 
(18,351
)
 
Cash and cash equivalents at beginning of period
 
12,463

 
 
17,487

 
 
(5,024
)
 
Cash and cash equivalents at end of period
$
26,936

 
$
50,311

 
$
(23,375
)
 




5


ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):

(Unaudited)
Base Business
Excluded
Total
(in thousands)
Three Months Ended
Three Months Ended
Three Months Ended
 
June 30,
June 30,
June 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net sales
$
785,357

 
$
755,284

 
$
5,035

 
$
1,891

 
$
790,392

 
$
757,175

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
226,810

 
221,798

 
1,356

 
607

 
228,166

 
222,405

Gross margin
28.9
%
 
29.4
%
 
26.9
%
 
32.1
%
 
28.9
%
 
29.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
115,002

 
113,707

 
1,171

 
564

 
116,173

 
114,271

Expenses as a % of net sales
14.6
%
 
15.1
%
 
23.3
%
 
29.8
%
 
14.7
%
 
15.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
111,808

 
108,091

 
185

 
43

 
111,993

 
108,134

Operating margin
14.2
%
 
14.3
%
 
3.7
%
 
2.3
%
 
14.2
%
 
14.3
%

(Unaudited)
Base Business
Excluded
Total
(in thousands)
Six Months Ended
Six Months Ended
Six Months Ended
 
June 30,
June 30,
June 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net sales
$
1,151,800

 
$
1,114,239

 
$
8,954

 
$
4,890

 
$
1,160,754

 
$
1,119,129

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
330,451

 
325,509

 
2,476

 
1,459

 
332,927

 
326,968

Gross margin
28.7
%
 
29.2
%
 
27.7
 %
 
29.8
 %
 
28.7
%
 
29.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
210,888

 
210,927

 
3,114

 
1,886

 
214,002

 
212,813

Expenses as a % of net sales
18.3
%
 
18.9
%
 
34.8
 %
 
38.6
 %
 
18.4
%
 
19.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
119,563

 
114,582

 
(638
)
 
(427
)
 
118,925

 
114,155

Operating margin
10.4
%
 
10.3
%
 
(7.1
)%
 
(8.7
)%
 
10.2
%
 
10.2
%


6


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


Acquired (1)
 

Acquisition
Date
 
Net
Sales Centers
Acquired
 

Periods
Excluded
B. Shapiro Supply, LLC
 
May 2013
 
1
 
May - June 2013
Swimming Pool Supply Center, Inc.
 
March 2013
 
1
 
March - June 2013
CCR Distribution
 
March 2012
 
1
 
January - May 2013 and
March - May 2012
Ideal Distributors Ltd.
 
February 2012
 
4
 
January - April 2013 and
February - April 2012
G.L. Cornell Company
 
December 2011
 
1
 
January - February 2013 and
January - February 2012
Poolway Schwimmbadtechnik GmbH
 
November 2011
 
1
 
January - February 2013 and
January - February 2012

(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. As of June 30, 2013, we excluded three sales centers opened in new markets from base business.

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 in the first six months of 2013:

December 31, 2012
312
 
Acquired
2
 
New locations
7
 
June 30, 2013
321
 




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 loss 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)
 
Three Months Ended
 
 
Six Months Ended
(In thousands)
 
June 30,
 
 
June 30,
 
 
 
2013
 
 
2012
 
 
2013
 
 
2012
Net income
$
66,533

 
$
64,943

 
$
69,973

 
$
68,594

 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense (1)
 
2,081

 
 
2,200

 
 
3,695

 
 
3,677

 
Provision for income taxes
 
43,416

 
 
41,018

 
 
45,312

 
 
42,055

 
Share-based compensation
 
2,206

 
 
2,205

 
 
4,111

 
 
4,306

 
Equity earnings in unconsolidated investments
 
(37
)
 
 
(27
)
 
 
(55
)
 
 
(171
)
 
Depreciation
 
3,265

 
 
2,895

 
 
6,338

 
 
5,559

 
Amortization (2)
 
204

 
 
222

 
 
429

 
 
443

Adjusted EBITDA
$
117,668

 
$
113,456

 
$
129,803

 
$
124,463

    
(1) 
Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) 
Excludes amortization of deferred financing costs of $97 and $96 for the three months ended June 30, 2013 and June 30, 2012, respectively, and $193 and $195 for the six months ended June 30, 2013 and June 30, 2012, respectively.

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

(Unaudited)
 
Three Months Ended
 
 
Six Months Ended
(In thousands)
 
June 30,
 
 
June 30,
 
 
 
2013
 
 
2012
 
 
2013
 
 
2012
Adjusted EBITDA
$
117,668

 
$
113,456

 
$
129,803

 
$
124,463

 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net of interest income
 
(1,984
)
 
 
(2,104
)
 
 
(3,502
)
 
 
(3,482
)
 
Provision for income taxes
 
(43,416
)
 
 
(41,018
)
 
 
(45,312
)
 
 
(42,055
)
 
Excess tax benefits from share-based compensation
 
(1,484
)
 
 
(471
)
 
 
(3,187
)
 
 
(1,609
)
 
Other
 
(1,595
)
 
 
307

 
 
(1,633
)
 
 
1,248

 
Change in operating assets and liabilities
 
(62,181
)
 
 
(2,622
)
 
 
(109,147
)
 
 
(45,044
)
Net cash provided by (used in) operating activities
$
7,008

 
$
67,548

 
$
(32,978
)
 
$
33,521


8