Highlights include:
- Sales growth of 6% to a record $2.08 billion
- Record 2013 diluted EPS of $2.05
- 2014 diluted EPS guidance of $2.35 to $2.45
COVINGTON, La., Feb. 13, 2014 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today announced fourth quarter and full year 2013 results.
"In 2013, we surpassed $2.0 billion in sales, a fitting accomplishment for our milestone 20th year. We achieved record results, including diluted earnings per share of $2.05, despite persistent and challenging external factors. In our business, how we distribute products is as important as what products we distribute. Our success reflects the totality of having the right products, available at the right time, coupled with exceptional service, complemented by innovative programs and tools resulting in the value-add we provide to the marketplace," commented Manuel Perez de la Mesa, President and CEO.
Net sales for the year ended December 31, 2013 increased 6% to a record high of $2.08 billion, compared to $1.95 billion in 2012. Base business sales increased 6%, including a 6% increase from swimming pool product sales and an 11% increase from irrigation product sales. Base business sales growth reflects market growth, market share gains and the ongoing recovery of discretionary product sales, partially offset by weather driven declines in non-discretionary product sales, primarily in our seasonal markets. For 2013, net sales growth of 11% in our largest, year-round markets tracked well above the 2% growth in our seasonal markets, although this difference lessened as weather comparisons normalized later in the year.
Gross profit for the year ended December 31, 2013 reached a record $591.3 million, a 4% increase over gross profit of $567.4 million in 2012. Gross profit as a percentage of net sales (gross margin) decreased 60 basis points to 28.4% for 2013. Product, customer and geographic mix changes adversely impacted gross margin in 2013. Product mix changes reflect a shift in consumer spending to certain lower margin, discretionary products such as variable speed pumps, high efficiency heaters, LED lighting products, irrigation systems and landscape equipment, relative to higher margin, non-discretionary products generally associated with basic pool maintenance and repair activity. Additionally, due to the later start to the 2013 season, we experienced higher sales growth rates in our lower margin, year-round markets than in our higher margin, seasonal markets, which negatively impacted gross margins.
Selling and administrative expenses (operating expenses) for 2013 increased 2% to $425.8 million from $415.6 million in 2012. Base business operating expenses increased 2% over 2012, as salary and other variable expense increases were partially offset by decreases in performance-based compensation.
In the third quarter of 2012, we performed an interim goodwill impairment analysis for our United Kingdom reporting unit and recorded a non-cash goodwill impairment charge equal to the total goodwill carrying amount of $6.9 million, which had a $0.14 negative impact on diluted EPS for the year ended December 31, 2012. Adjusted operating income, adjusted net income and adjusted diluted EPS for all 2012 periods exclude goodwill impairment and are provided in this release because we believe these amounts are useful to investors in assessing year-over-year operating performance.
Operating income for the year improved 14% to $165.5 million from $144.9 million in 2012 and increased 9% compared to adjusted operating income for 2012 of $151.8 million. Operating income as a percentage of net sales (operating margin) increased to 8.0% in 2013 compared to 7.4% in 2012. Adjusted operating margin was 7.8% in 2012.
Net income increased 19% to a record $97.3 million in 2013 compared to $82.0 million in 2012 and increased 9% over adjusted net income of $88.9 million in 2012. Earnings per share was up 20% to a record $2.05 per diluted share compared to $1.71 per diluted share in 2012, while diluted EPS increased 11% from adjusted diluted EPS in 2012. Adjusted EBITDA (as defined in the addendum to this release) increased 9% to $187.6 million in 2013 compared to $172.9 million in 2012, or 9.0% of net sales in 2013 compared to 8.8% of net sales in 2012.
On the balance sheet, total net receivables increased 10% compared to December 31, 2012 consistent with overall fourth quarter sales growth. Inventory levels grew 7% to $429.2 million at December 31, 2013 compared to $400.3 million at December 31, 2012. Total debt outstanding at December 31, 2013 was $246.4 million, an increase of $15.5 million from the balance at December 31, 2012.
Cash provided by operations was $105.1 million in 2013, or $7.8 million more than net income. Compared to 2012, cash provided by operations was down $14.0 million due primarily to normal seasonal timing differences in working capital.
Net sales for the seasonally slow fourth quarter increased 11% to $340.8 million compared to the fourth quarter of 2012. Base business sales improved 11% in the fourth quarter compared to the same period in 2012. Gross margin declined 90 basis points to 28.1% in the fourth quarter of 2013 due primarily to a more favorable impact on fourth quarter 2012 gross margins from certain vendor incentives. Operating loss for the fourth quarter of 2013 was $6.8 million compared to a loss of $10.3 million in the same period last year. Loss per diluted share for the fourth quarter of 2013 was $0.11 on a net loss of $5.0 million, compared to a loss of $0.17 per diluted share on a net loss of $8.0 million in the comparable 2012 period.
"We are pleased with the solid results realized in 2013. Our employees have proven what is possible despite challenging external factors. Our team's ongoing desire to improve upon past successes propels us into the coming year. For fiscal 2014, we project earnings per diluted share of approximately $2.35 to $2.45. This range reflects our expectations for sales growth in the mid to upper single digits and 15% to 20% growth over 2013 diluted EPS. We strive to earn our customers' business each and every day, in each individual market, by offering the broadest knowledge base and product selections, with a level of service unequaled in the industry. We are excited about 2014 and the many opportunities we have to continue to grow our business," 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, Europe and South America, 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," "should" 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.
| POOL CORPORATION | ||||
| Consolidated Statements of Income | ||||
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(In thousands, except per share data) |
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| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2013 | 2012 | 2013 | 2012 (1) | |
| Net sales | $ 340,789 | $ 306,818 | $ 2,079,700 | $ 1,953,974 |
| Cost of sales | 244,996 | 217,880 | 1,488,423 | 1,386,567 |
| Gross profit | 95,793 | 88,938 | 591,277 | 567,407 |
| Percent | 28.1% | 29.0% | 28.4% | 29.0% |
| Selling and administrative expenses | 102,607 | 99,235 | 425,791 | 415,592 |
| Goodwill impairment | — | — | — | 6,946 |
| Operating income (loss) | (6,814) | (10,297) | 165,486 | 144,869 |
| Percent | (2.0)% | (3.4)% | 8.0% | 7.4% |
| Interest expense, net | 1,509 | 1,105 | 6,748 | 6,469 |
| Income (loss) before income taxes and equity earnings | (8,323) | (11,402) | 158,738 | 138,400 |
| Provision for income taxes | (3,218) | (3,276) | 61,590 | 56,744 |
| Equity earnings in unconsolidated investments | 130 | 129 | 182 | 316 |
| Net income (loss) | $ (4,975) | $ (7,997) | $ 97,330 | $ 81,972 |
| Earnings (loss) per share: | ||||
| Basic | $ (0.11) | $ (0.17) | $ 2.10 | $ 1.75 |
| Diluted | $ (0.11) | $ (0.17) | $ 2.05 | $ 1.71 |
| Weighted average shares outstanding: | ||||
| Basic | 45,708 | 46,522 | 46,282 | 46,937 |
| Diluted | 45,708 | 46,522 | 47,530 | 48,058 |
| Cash dividends declared per common share | $ 0.19 | $ 0.16 | $ 0.73 | $ 0.62 |
|
(1) Derived from audited financial statements. |
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| POOL CORPORATION | ||||
| Condensed Consolidated Balance Sheets | ||||
|
(In thousands) |
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| December 31, | December 31, | Change | ||
| 2013 | 2012 (1) | $ | % | |
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 8,006 | $ 12,463 | $ (4,457) | (36)% |
| Receivables, net (2) | 45,138 | 113,859 | (68,721) | (60) |
| Receivables pledged under receivables facility | 80,149 | — | 80,149 | 100 |
| Product inventories, net (3) | 429,197 | 400,308 | 28,889 | 7 |
| Prepaid expenses and other current assets | 9,802 | 11,280 | (1,478) | (13) |
| Deferred income taxes | 5,457 | 5,186 | 271 | 5 |
| Total current assets | 577,749 | 543,096 | 34,653 | 6 |
| Property and equipment, net | 52,328 | 46,566 | 5,762 | 12 |
| Goodwill | 171,974 | 169,983 | 1,991 | 1 |
| Other intangible assets, net | 10,196 | 11,053 | (857) | (8) |
| Equity interest investments | 1,243 | 1,160 | 83 | 7 |
| Other assets, net | 10,271 | 8,718 | 1,553 | 18 |
| Total assets | $ 823,761 | $ 780,576 | $ 43,185 | 6% |
| Liabilities and stockholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ 214,596 | $ 199,787 | $ 14,809 | 7% |
| Accrued expenses and other current liabilities | 49,301 | 48,186 | 1,115 | 2 |
| Current portion of long-term debt and other long-term liabilities | 9 | 23 | (14) | (61) |
| Total current liabilities | 263,906 | 247,996 | 15,910 | 6 |
| Deferred income taxes | 19,108 | 13,453 | 5,655 | 42 |
| Long-term debt | 246,418 | 230,882 | 15,536 | 7 |
| Other long-term liabilities | 8,147 | 6,622 | 1,525 | 23 |
| Total liabilities | 537,579 | 498,953 | 38,626 | 8 |
| Total stockholders' equity | 286,182 | 281,623 | 4,559 | 2 |
| Total liabilities and stockholders' equity | $ 823,761 | $ 780,576 | $ 43,185 | 6% |
| (1) Derived from audited financial statements. | ||||
| (2) The allowance for doubtful accounts was $4.5 million at December 31, 2013 and $5.5 million at December 31, 2012. | ||||
| (3) The inventory reserve was $7.1 million at December 31, 2013 and $7.5 million at December 31, 2012. | ||||
| POOL CORPORATION | |||
| Condensed Consolidated Statements of Cash Flows | |||
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(In thousands) |
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| Year Ended | |||
| December 31, | |||
| 2013 | 2012 (1) | Change | |
| Operating activities | |||
| Net income | $ 97,330 | $ 81,972 | $ 15,358 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation | 13,359 | 11,592 | 1,767 |
| Amortization | 1,237 | 1,284 | (47) |
| Share-based compensation | 8,150 | 8,465 | (315) |
| Excess tax benefits from share-based compensation | (4,611) | (4,487) | (124) |
| Equity earnings in unconsolidated investments | (182) | (316) | 134 |
| (Gains) losses on foreign currency transactions | 220 | (111) | 331 |
| Goodwill impairment | — | 6,946 | (6,946) |
| Other | (434) | 3,375 | (3,809) |
| Changes in operating assets and liabilities, net of effects of acquisitions: | |||
| Receivables | (10,085) | (3,396) | (6,689) |
| Product inventories | (27,291) | (9,232) | (18,059) |
| Prepaid expenses and other assets | 504 | (1,159) | 1,663 |
| Accounts payable | 14,007 | 20,253 | (6,246) |
| Accrued expenses and other current liabilities | 12,884 | 3,892 | 8,992 |
| Net cash provided by operating activities | 105,088 | 119,078 | (13,990) |
| Investing activities | |||
| Acquisition of businesses, net of cash acquired | (1,244) | (4,699) | 3,455 |
| Purchase of property and equipment, net of sale proceeds | (18,742) | (16,271) | (2,471) |
| Other investments | 125 | (238) | 363 |
| Net cash used in investing activities | (19,861) | (21,208) | 1,347 |
| Financing activities | |||
| Proceeds from revolving line of credit | 678,936 | 607,923 | 71,013 |
| Payments on revolving line of credit | (715,400) | (524,341) | (191,059) |
| Proceeds from asset-backed financing | 70,000 | — | 70,000 |
| Payments on asset-backed financing | (18,000) | — | (18,000) |
| Payments on long-term debt and other long-term liabilities | (10) | (100,022) | 100,012 |
| Payments of deferred financing costs | (1,044) | — | (1,044) |
| Excess tax benefits from share-based compensation | 4,611 | 4,487 | 124 |
| Proceeds from stock issued under share-based compensation plans | 21,409 | 20,205 | 1,204 |
| Payments of cash dividends | (33,808) | (29,135) | (4,673) |
| Purchases of treasury stock | (96,179) | (81,761) | (14,418) |
| Net cash used in financing activities | (89,485) | (102,644) | 13,159 |
| Effect of exchange rate changes on cash and cash equivalents | (199) | (250) | 51 |
| Change in cash and cash equivalents | (4,457) | (5,024) | 567 |
| Cash and cash equivalents at beginning of period | 12,463 | 17,487 | (5,024) |
| Cash and cash equivalents at end of period | $ 8,006 | $ 12,463 | $ (4,457) |
|
(1) Derived from audited financial statements. |
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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, | ||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Net sales | $ 339,708 | $ 306,818 | $ 1,081 | $ — | $ 340,789 | $ 306,818 |
| Gross profit | 95,633 | 88,938 | 160 | — | 95,793 | 88,938 |
| Gross margin | 28.2% | 29.0% | 14.8% | —% | 28.1% | 29.0% |
| Operating expenses | 102,110 | 99,235 | 497 | — | 102,607 | 99,235 |
| Expenses as a % of net sales | 30.1% | 32.3% | 46.0% | —% | 30.1% | 32.3% |
| Operating loss | (6,477) | (10,297) | (337) | — | (6,814) | (10,297) |
| Operating margin | (1.9)% | (3.4)% | (31.2)% | —% | (2.0)% | (3.4)% |
| (Unaudited) | Base Business | Excluded | Total | |||
| (in thousands) | Year Ended | Year Ended | Year Ended | |||
| December 31, | December 31, | December 31, | ||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Net sales | $ 2,067,579 | $ 1,949,035 | $ 12,121 | $ 4,939 | $ 2,079,700 | $ 1,953,974 |
| Gross profit | 588,095 | 565,932 | 3,182 | 1,475 | 591,277 | 567,407 |
| Gross margin | 28.4% | 29.0% | 26.3% | 29.9% | 28.4% | 29.0% |
| Operating expenses | 421,527 | 413,626 | 4,264 | 1,966 | 425,791 | 415,592 |
| Expenses as a % of net sales | 20.4% | 21.2% | 35.2% | 39.8% | 20.5% | 21.3% |
| Goodwill impairment | — | 6,946 | — | — | — | 6,946 |
| Operating income (loss) | 166,568 | 145,360 | (1,082) | (491) | 165,486 | 144,869 |
| Operating margin | 8.1% | 7.5% | (8.9)% | (9.9)% | 8.0% | 7.4% |
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 - December 2013 | ||
| Swimming Pool Supply Center, Inc. | March 2013 | 1 | March - December 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 December 31, 2013, we excluded one sales center opened in a new market 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 during 2013:
| December 31, 2012 | 312 |
| Acquired | 2 |
| New locations | 10 |
| Consolidated locations | (3) |
| December 31, 2013 | 321 |
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) | 2013 | 2012 | ||
| Net income | $ 97,330 | $ 81,972 | ||
| Add: | ||||
| Interest expense (1) | 6,528 | 6,580 | ||
| Provision for income taxes | 61,590 | 56,744 | ||
| Share-based compensation | 8,150 | 8,465 | ||
| Goodwill impairment | — | 6,946 | ||
| Equity earnings in unconsolidated investments | (182) | (316) | ||
| Depreciation | 13,359 | 11,592 | ||
| Amortization (2) | 825 | 896 | ||
| Adjusted EBITDA | $ 187,600 | $ 172,879 | ||
| (1) Shown net of interest income and includes amortization of deferred financing costs as discussed below. | ||||
| (2) Excludes amortization of deferred financing costs of $412 for 2013 and $388 for 2012. 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) | 2013 | 2012 |
| Adjusted EBITDA | $ 187,600 | $ 172,879 |
| Add: | ||
| Interest expense, net of interest income | (6,116) | (6,192) |
| Provision for income taxes | (61,590) | (56,744) |
| (Gains) losses on foreign currency transactions | 220 | (111) |
| Excess tax benefits from share-based compensation | (4,611) | (4,487) |
| Other | (434) | 3,375 |
| Change in operating assets and liabilities | (9,981) | 10,358 |
| Net cash provided by operating activities | $ 105,088 | $ 119,078 |