Pool Corporation Reports Second Quarter Results and Updates 2008 Earnings Projection

Covington, Louisiana, UNITED STATES


COVINGTON, La., July 24, 2008 (PRIME NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today reported results for the second quarter of 2008.

"Our second quarter results reflect continued strong performance in every facet of our business execution," said Manuel Perez de la Mesa, President and CEO. "While sales remain pressured by the unprecedented adverse market conditions impacting our industry, we have improved margin management, controlled expenses and realized market share gains while strengthening our business foundation for the future."

Net sales for the quarter ended June 30, 2008 decreased $33.5 million, or 5%, to $693.0 million, compared to $726.5 million in the second quarter of 2007. Base business sales declined 7% due to reduced new pool and irrigation construction activity. This reduction was partially offset by sales from acquired businesses and an increase in maintenance, repair and replacement product sales. During the quarter, complementary product sales, which are heavily weighted towards new pool construction, were down approximately 12% compared to a 9% increase in the same period in 2007.

Gross profit for the second quarter of 2008 decreased $5.1 million, or 2%, to $202.8 million from $207.9 million in the comparable 2007 period. Gross profit as a percentage of net sales (gross margin) improved to 29.3% in the second quarter of 2008 from 28.6% for the second quarter of 2007. The increase in gross margin is attributable to improved pricing management, a favorable shift in sales mix to products in the higher margin maintenance market and an increase in sales of private label products. This increase in gross margin was partially offset by lower estimated vendor incentives earned compared to the second quarter of 2007 due to lower purchase volumes.

Operating expenses increased $3.3 million, or 3%, to $112.8 million in the second quarter of 2008 from $109.5 million in the second quarter of 2007. This increase was primarily due to operating expenses related to the NPT acquisition. Base business operating expenses decreased 1% quarter over quarter.

Operating income decreased $8.4 million, or 9%, to $90.0 million from $98.4 million. Operating income as a percentage of net sales (operating margin) was 13.0% for the current quarter, down from 13.5% for the second quarter of 2007. Interest expense decreased 14% during the quarter due to a lower weighted average effective interest rate, which was partially offset by higher average debt levels compared to the second quarter of 2007. Earnings per share for the second quarter of 2008 was $1.09 per diluted share on net income of $52.9 million, compared to $1.12 per diluted share on net income of $57.8 million for the second quarter of 2007.

Net sales for the six months ended June 30, 2008 decreased $69.0 million, or 6%, to $1,031.2 million, compared to $1,100.2 million in the comparable 2007 period. Base business sales declined 8% for the first six months of 2008. Complementary product sales for the first half of 2008 were down approximately 13% due to the continued decline in new pool and irrigation construction activity. Gross margin increased 60 basis points to 28.9% in the first half of 2008 from 28.3% for the same period last year.

Operating income for the first six months of 2008 decreased 14% to $92.2 million compared to $107.1 million in the same period last year. Operating margin was 8.9% for the first half of 2008 compared to 9.7% for the first half of 2007. Earnings per share for the first six months of 2008 decreased 11% to $1.02 per diluted share on net income of $49.7 million, compared to $1.14 per diluted share on net income of $59.1 million in the comparable 2007 period.

"Based on results to date and the current external environment, we are narrowing our full year 2008 earnings guidance to a projected range of $1.26 to $1.36 per diluted share compared to our initial projected range of $1.20 to $1.50 per diluted share," said Perez de la Mesa. "In the second half of 2008, we have more modest comparisons and anticipate continued improvement in every facet of our business execution."

On the balance sheet, total net receivables decreased 8% compared to June 30, 2007 due to lower sales. Inventory levels decreased 1% to $385.3 million at June 30, 2008. Excluding acquired inventories of approximately $15.7 million, inventories decreased 5% year over year.

The use of cash in operations decreased $18.9 million to $35.2 million in the first six months of 2008. The decrease in cash used in operations is primarily the result of favorable impacts from changes in working capital balances, which offset the reduction in net income. Adjusted EBITDA (as defined in the addendum to this release) was $96.7 million in the second quarter of 2008 compared to $106.0 million in the second quarter of 2007 and $102.1 million for the six months ended June 30, 2008 compared to $117.6 million for the six months ended June 30, 2007.

Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 290 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.

The Pool Corporation logo is available at http://www.primenewswire.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, our ability to maintain favorable relationships with suppliers and manufacturers, competition from other leisure product alternatives and mass merchants, changes in the economy and the housing market and other risks detailed in POOL's 2007 Form 10-K and Form 10-Q for the quarter ended March 31, 2008 filed with the Securities and Exchange Commission.


                           POOL CORPORATION
                   Consolidated Statements of Income
                              (Unaudited)
                 (In thousands, except per share data)

                       Three Months Ended        Six Months Ended
                            June 30,                  June 30,
                      ---------------------  -------------------------
                        2008        2007        2008           2007
                      ---------   ---------  -----------   -----------

 Net sales            $ 692,972   $ 726,472  $ 1,031,187   $ 1,100,178
 Cost of sales          490,220     518,550      733,081       788,771
                      ---------   ---------  -----------   -----------
    Gross profit        202,752     207,922      298,106       311,407
    Percent                29.3%       28.6%        28.9%         28.3%
 Selling and
  administrative
  expenses              112,762     109,489      205,919       204,342
                      ---------   ---------  -----------   -----------
    Operating
     income              89,990      98,433       92,187       107,065
    Percent                13.0%       13.5%         8.9%          9.7%

 Interest
  expense, net            5,087       5,897       10,111        10,416
                      ---------   ---------  -----------   -----------
 Income before
  income taxes
  and equity
  earnings
  (losses)               84,903      92,536       82,076        96,649
 Provision for
  income taxes           32,811      35,728       31,722        37,316
 Equity earnings
  (losses) in
  unconsolidated
  investments,
  net                       783         986         (663)         (185)
                      ---------   ---------  -----------   -----------
 Net income           $  52,875   $  57,794  $    49,691   $    59,148
                      =========   =========  ===========   ===========

 Earnings per share:
    Basic             $    1.11   $    1.17  $      1.04   $      1.19
                      =========   =========  ===========   ===========
    Diluted           $    1.09   $    1.12  $      1.02   $      1.14
                      =========   =========  ===========   ===========
 Weighted average
  shares
  outstanding:
    Basic                47,718      49,326       47,628        49,753
                      =========   =========  ===========   ===========
    Diluted              48,716      51,504       48,499        51,974
                      =========   =========  ===========   ===========

 Cash dividends
  declared per
  common share        $    0.13   $    0.12  $      0.25   $     0.225


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

                        June 30,     June 30,          Change
                          2008         2007         $           %
 ---------------------------------------------------------------------

 Assets
 Current assets:
   Cash and cash
    equivalents        $  26,453   $    47,171   $ (20,718)     (44)%
   Receivables, net       75,563        90,892     (15,329)     (17)
   Receivables
    pledged under
    receivables
    facility             203,091       210,373      (7,282)      (3)
   Product
    inventories, net     385,258       388,364      (3,106)      (1)
   Prepaid expenses
    and other
    current assets        11,376        10,705         671        6
   Deferred income
    taxes                  9,139         7,676       1,463       19
 -----------------------------------------------------------
 Total current
  assets                 710,880       755,181     (44,301)      (6)

 Property and
  equipment, net          33,892        36,628      (2,736)      (7)
 Goodwill                167,352       155,231      12,121        8
 Other intangible
  assets, net             14,480        16,561      (2,081)     (13)
 Equity interest
  investments             32,839        32,156         683        2
 Other assets, net        25,612        19,065       6,547       34
 -----------------------------------------------------------
 Total assets          $ 985,055   $ 1,014,822   $ (29,767)      (3)%
 -----------------------------------------------------------

 Liabilities and
  stockholders' equity
 Current liabilities:
   Accounts payable    $ 193,663   $   229,691   $ (36,028)     (16)%
   Accrued and
    other current
    liabilities           70,755        62,071       8,684       14
   Short-term
    financing            121,492       150,000     (28,508)     (19)
   Current portion
    of long-term
    debt and other
    long-term
    liabilities            4,633         4,350         283        7
 -----------------------------------------------------------
 Total current
  liabilities            390,543       446,112     (55,569)     (12)

 Deferred income
  taxes                   17,527        15,212       2,315       15
 Long-term debt          316,000       272,599      43,401       16
 Other long-term
  liabilities              6,455         6,519         (64)      (1)
 -----------------------------------------------------------
 Total liabilities       730,525       740,442      (9,917)      (1)%
 -----------------------------------------------------------
 Total stockholders'
  equity                 254,530       274,380     (19,850)      (7)
 -----------------------------------------------------------

 Total liabilities
  and stockholders'
  equity               $ 985,055   $ 1,014,822   $ (29,767)      (3)%
 ===========================================================

 1. Total receivables at June 30, 2008 include approximately $6.7
    million of acquired receivables, primarily from our acquisition
    of National Pool Tile (NPT).  The allowance for doubtful
    accounts was $9.7 million at June 30, 2008 and $6.4 million
    at June 30, 2007, with $1.1 million of the June 30, 2008 balance
    related to the acquisition of NPT.

 2. Total product inventories at June 30, 2008 include approximately
    $15.7 million of acquired inventories, primarily from our
    acquisition of NPT.  The inventory reserve was $7.9 million
    June 30, 2008 and $5.0 million at June 30, 2007, with $1.2
    million of the June 30, 2008 balance related to the acquisition
    of NPT.


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


                                   Six Months Ended
                                        June 30,
                                  2008          2007         Change
 ---------------------------------------------------------------------
 Operating activities
 Net income                     $  49,691     $  59,148    $   (9,457)
 Adjustments to reconcile
  net income to net cash used
  in operating activities:
   Depreciation                     4,804         4,516           288
   Amortization                     2,149         2,493          (344)
   Share-based compensation         4,269         3,945           324
   Excess tax benefits from
    share-based compensation       (1,652)       (6,399)        4,747
   Equity losses in
    unconsolidated investments      1,158           353           805
   Other                           (1,501)          637        (2,138)
 Changes in operating assets
  and liabilities, net of
  effects of acquisitions:
   Receivables                   (132,735)     (147,733)       14,998
   Product inventories              8,995       (56,282)       65,277
   Accounts payable                (2,606)       52,102       (54,708)
   Other current assets
    and liabilities                32,266        33,145          (879)
 ---------------------------------------------------------------------
  Net cash used in
   operating activities           (35,162)      (54,075)       18,913

  Investing activities
  Acquisition of businesses,
   net of cash acquired           (32,840)       (2,087)      (30,753)
  Divestiture of business             724            --           724
  Purchase of property
   and equipment, net of
   sale proceeds                   (3,611)       (7,606)        3,995
  Proceeds from sale of
   investment                          --            75           (75)
 ---------------------------------------------------------------------
  Net cash used in
   investing activities           (35,727)       (9,618)      (26,109)

  Financing activities
  Proceeds from revolving
   line of credit                 190,100       215,271       (25,171)
  Payments on revolving
   line of credit                (150,625)     (229,329)       78,704
  Proceeds from
   asset-backed financing          73,335        87,479       (14,144)
  Payments on
   asset-backed financing         (20,170)      (11,765)       (8,405)
  Proceeds from
   long-term debt                      --       100,000      (100,000)
  Payments on long-term
   debt and other
   long-term liabilities           (1,591)       (1,547)          (44)
  Payments of capital
   lease obligations                 (251)         (257)            6
  Payments of deferred
   financing costs                    (22)         (397)          375
  Excess tax benefits
   from share-based
   compensation                     1,652         6,399        (4,747)
  Issuance of common
   stock under stock
   option plans                     2,289         5,414        (3,125)
  Payments of cash
   dividends                      (11,951)      (11,185)         (766)
  Purchases of treasury
   stock                           (1,263)      (67,998)       66,735
 ---------------------------------------------------------------------
  Net cash provided by
   financing activities            81,503        92,085       (10,582)
  Effect of exchange
   rate changes on cash                14         2,045        (2,031)
 ---------------------------------------------------------------------
  Change in cash and
   cash equivalents                10,628        30,437       (19,809)
  Cash and cash
   equivalents at
   beginning of period             15,825        16,734          (909)
 ---------------------------------------------------------------------
 Cash and cash
   equivalents at end
   of period                    $  26,453     $  47,171    $  (20,718)
 ---------------------------------------------------------------------

Addendum

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
 (In thousands)     Three Months Ended           Three Months Ended
                         June 30,                     June 30,
                   2008          2007            2008         2007
 ---------------------------------------------------------------------
 Net sales      $   656,806   $   702,785     $   36,166   $    23,687

 Gross profit       191,219       201,768         11,533         6,154
 Gross margin          29.1%         28.7%          31.9%         26.0%

 Selling and
  administrative
  expenses          103,628       104,725          9,134         4,764
 Expenses as
  a % of net
  sales                15.8%         14.9%          25.3%         20.1%

 Operating
  income             87,591        97,043          2,399         1,390
 Operating
  margin               13.3%         13.8%           6.6%          5.9%
 ---------------------------------------------------------------------

 ---------------------------------------------------------------------
 (Unaudited)                                           Total
 (In thousands)                                  Three Months Ended
                                                     June 30,
                                                 2008         2007
 ---------------------------------------------------------------------
 Net sales                                    $  692,972   $   726,472

 Gross profit                                    202,752       207,922
 Gross margin                                       29.3%         28.6%

 Selling and administrative expenses             112,762       109,489
 Expenses as a % of net sales                       16.3%         15.1%

 Operating income                                 89,990        98,433
 Operating margin                                   13.0%         13.5%
 ---------------------------------------------------------------------


 ---------------------------------------------------------------------
 (Unaudited)          Base Business                   Excluded
 (In thousands)      Six Months Ended             Six Months Ended
                         June 30,                    June 30,
                   2008          2007            2008         2007
 ---------------------------------------------------------------------
 Net sales      $   989,307   $ 1,074,606     $   41,880   $    25,572

 Gross profit       284,771       304,787         13,335         6,620
 Gross margin         28.8%          28.4%          31.8%         25.9%

 Selling and
  administrative
  expenses          194,229       198,104         11,690         6,238
 Expenses as
  a % of net
  sales                19.6%         18.4%          27.9%         24.4%

 Operating
  income             90,542       106,683          1,645           382
 Operating
  margin                9.2%          9.9%           3.9%          1.5%
 ---------------------------------------------------------------------

 ---------------------------------------------------------------------
 (Unaudited)                                           Total
 (In thousands)                                   Six Months Ended
                                                     June 30,
                                                 2008         2007
 ---------------------------------------------------------------------
 Net sales                                    $1,031,187   $ 1,100,178

 Gross profit                                    298,106       311,407
 Gross margin                                       28.9%         28.3%

 Selling and administrative expenses             205,919       204,342
 Expenses as a % of net sales                       20.0%         18.6%

 Operating income                                 92,187       107,065
 Operating margin                                    8.9%          9.7%
 ---------------------------------------------------------------------

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 June 30, 2008):


 * acquired sales centers (10, net of consolidations - see table
   below);
 * existing sales centers consolidated with acquired sales centers
   (6);
 * closed sales centers (3);
 * consolidated sales centers in cases where we do not expect to
   maintain the majority of the existing business (1); and
 * sales centers opened in new markets (0).

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.

In addition to the 20 sales centers excluded from base business as of June 30, 2008, there were 2 new market sales centers excluded until they became base business sales centers in June 2008. We also divested our pool liner fabrication operation in France as of April 2008, and therefore we have excluded the results from base business for the three month period ended June 30, 2007.

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


                                   Net
                Acquisition    Sales Centers           Period
 Acquired          Date           Acquired            Excluded
 -----------   --------------  --------------   -------------------
 National 
  Pool Tile 
  (NPT) (1)     March 2008          9            March - June 2008
 Canswim 
  Pools         March 2008          1            March - June 2008
 Tor-Lyn, 
  Limited       February 2007       1            February - April 
                                                  2007 and January - 
                                                  April 2008


 The table below summarizes the changes in our sales centers in the
 first half of 2008:

     December 31, 2007                            281
      Acquired, net of consolidations (1)          12
      Consolidated                                 (1)
      Closed                                       (1)
                                                ------
     March 31, 2008                               291
      New locations                                 1
      Consolidation of acquired locations (1)      (2)
                                                ------
     June 30, 2008                                290
                                                ======

(1) We acquired 15 NPT sales centers and have consolidated 6 of
     these with existing sales centers, including 4 in March 2008
     and 2 in the second quarter of 2008.
 

We define Adjusted EBITDA as net income or net loss plus interest expense, income taxes, depreciation, amortization and share-based compensation. 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, 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,
                        2008          2007         2008          2007
 ---------------------------------------------------------------------
 Net income          $ 52,875      $ 57,794     $ 49,691      $ 59,148
   Add:
   Interest expense,
    net                 5,087         5,897       10,111        10,416
   Provision for
    income taxes       32,811        35,728       31,722        37,316
   Income tax
    expense (benefit)
    on equity
    (earnings) losses     507           648         (495)         (168)
   Share-based
    compensation        1,999         2,402        4,269         3,945
   Depreciation         2,417         2,332        4,804         4,516
   Amortization (1)       996         1,213        1,949         2,383
 ---------------------------------------------------------------------
 Adjusted EBITDA      $96,692      $106,014     $102,051      $117,556
 ---------------------------------------------------------------------

 (1)  Excludes amortization included in interest expense, net

 The table below presents a reconciliation of Adjusted EBITDA to cash
 used in operating activities.

 ---------------------------------------------------------------------
 (Unaudited)            Three Months Ended        Six Months Ended
 (In thousands)              June 30,                 June 30,
                        2008         2007        2008          2007
 ---------------------------------------------------------------------
 Adjusted EBITDA     $ 96,692      $106,014     $102,051      $117,556
  Add:
   Interest expense,
    net(1)             (4,998)       (5,837)      (9,911)      (10,306)
   Provision for
    income taxes      (32,811)      (35,728)     (31,722)      (37,316)
   Income tax
    (expense)
    benefit on
    equity
    (earnings)
    losses               (507)         (648)         495           168
   Excess tax
    benefits on
    share-based
    compensation         (112)       (3,565)      (1,652)       (6,399)
   Equity (earnings)
    losses in
    unconsolidated
    investments, net   (1,288)       (1,634)       1,158           353
   Other                1,111         2,557       (1,501)          637
   Change in
    operating assets
    and liabilities   (77,809)     (101,927)     (94,080)     (118,768)
 ---------------------------------------------------------------------
 Net cash used in
  operating
  activities         $(19,722)     $(40,768)    $(35,162)     $(54,075)
 ---------------------------------------------------------------------

 (1) Excludes amortization of deferred financing costs of $89
     and $60 for the three months ended June 30, 2008 and June 30,
     2007, respectively, and $200 and $110 for the six months
     ended June 30, 2008 and June 30, 2007, respectively. This
     non-cash expense is included in interest expense, net on the
     Consolidated Statements of Income.


        

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