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., Feb. 14, 2013 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq: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.
The Pool Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4853
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.
| POOL CORPORATION | ||||
| Consolidated Statements of Income | ||||
| (In thousands, except per share data) | ||||
|
Three Months Ended December 31, |
Year Ended 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. | ||||
| 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. | ||||
| 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. | |||
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 December 31, |
Three Months Ended December 31, |
Three Months Ended 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 December 31, |
Year Ended December 31, |
Year Ended 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% |
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
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 |