COVINGTON, La., Oct. 23, 2008 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today reported results for the third quarter of 2008.
"Our ongoing efforts to improve profitability and control expenses are evident in our results. We are also pleased with our momentum in increasing our market share, as our focus on operating in a disciplined manner and continually providing exceptional value to both our customers and our suppliers has helped counter the effects of the unprecedented external market environment," commented Manuel Perez de la Mesa, President and CEO.
Net sales for the quarter ended September 30, 2008 decreased 6% to $493.5 million, compared to $527.4 million in the third quarter of 2007. Base business sales declined 8% due to the continued drop-off in new pool and irrigation construction activity and unfavorable weather. 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 were down approximately 12% compared to a 5% decrease in the same period in 2007.
Gross profit for the third quarter of 2008 increased $2.0 million, or 1%, to $141.8 million from $139.8 million in the comparable 2007 period. Gross profit as a percentage of net sales (gross margin) improved to 28.7% in the third quarter of 2008 from 26.5% for the third 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, an increase in sales of Pool Corporation brands and benefits from inflationary price increases.
Operating expenses increased $2.9 million, or 3%, to $103.2 million in the third quarter of 2008 from $100.3 million in the third quarter of 2007. This increase was due to operating expenses related to acquired businesses. Base business operating expenses decreased 1% quarter over quarter.
Operating income decreased $0.9 million, or 2%, to $38.6 million from $39.5 million. Operating income as a percentage of net sales (operating margin) was up slightly to 7.8% for the current quarter, compared to 7.5% for the third quarter of 2007. Interest expense decreased 28% during the quarter due to a lower weighted average effective interest rate and lower average debt levels compared to the third quarter of 2007. Earnings per share for the third quarter of 2008 increased to $0.45 per diluted share on net income of $22.1 million, compared to $0.43 per diluted share on net income of $21.8 million for the third quarter of 2007.
Net sales for the nine months ended September 30, 2008 decreased 6% to $1,524.7 million, compared to $1,627.6 million in the comparable 2007 period. Base business sales declined 8% for the first nine months of 2008. Year to date, complementary product sales were down approximately 13% due to the decline in new pool and irrigation construction activity. Gross margin increased 120 basis points to 28.9% in the first nine months of 2008 from 27.7% for the same period last year.
Operating income for the first nine months of 2008 decreased 11% to $130.8 million compared to $146.6 million in the same period last year. Operating margin was 8.6% for the first nine months of 2008 compared to 9.0% for the first nine months of 2007. Earnings per share for the first nine months of 2008 decreased to $1.47 per diluted share on net income of $71.8 million, compared to $1.58 per diluted share on net income of $81.0 million in the comparable 2007 period.
"Given the weak external market environment and our prudent credit management practices, we are updating our annual earnings guidance and project fourth quarter earnings per diluted share to be similar to fourth quarter 2007," said Perez de la Mesa.
On the balance sheet, total net receivables decreased 11% compared to September 30, 2007 due to lower sales and focused collection efforts. Inventory levels increased 9% to $345.9 million at September 30, 2008. Excluding acquired inventories of approximately $17.9 million, inventories increased approximately 3% year over year.
Cash provided by operations increased $43.0 million to $76.5 million in the first nine months of 2008 due to the deferral of a $28.0 million third quarter 2008 estimated federal tax payment as allowed by the Internal Revenue Service for taxpayers affected by Hurricane Gustav and favorable impacts from changes in working capital balances that more than offset the reduction in net income. Adjusted EBITDA (as defined in the addendum to this release) was $46.0 million in the third quarter of 2008 compared to $47.0 million in the third quarter of 2007 and $148.0 million for the nine months ended September 30, 2008 compared to $164.6 million for the nine months ended September 30, 2007.
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 288 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.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, 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 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------------
2008 2007 2008 2007
--------- --------- ---------- ----------
Net sales $ 493,530 $ 527,434 $1,524,717 $1,627,612
Cost of sales 351,730 387,631 1,084,811 1,176,402
--------- --------- ---------- ----------
Gross profit 141,800 139,803 439,906 451,210
Percent 28.7% 26.5% 28.9% 27.7%
Selling and
administrative
expenses 103,183 100,298 309,102 304,640
--------- --------- ---------- ----------
Operating income 38,617 39,505 130,804 146,570
Percent 7.8% 7.5% 8.6% 9.0%
Interest expense,
net 4,589 6,349 14,700 16,765
--------- --------- ---------- ----------
Income before
income taxes and
equity earnings 34,028 33,156 116,104 129,805
Provision for
income taxes 13,675 12,802 45,397 50,118
Equity earnings in
unconsolidated
investments, net 1,707 1,481 1,044 1,296
--------- --------- ---------- ----------
Net income $ 22,060 $ 21,835 $ 71,751 $ 80,983
========= ========= ========== ==========
Earnings per
share:
Basic $ 0.46 $ 0.45 $ 1.50 $ 1.64
========= ========= ========== ==========
Diluted $ 0.45 $ 0.43 $ 1.47 $ 1.58
========= ========= ========== ==========
Weighted average
shares
outstanding:
Basic 47,824 48,623 47,694 49,372
========= ========= ========== ==========
Diluted 49,060 50,490 48,735 51,347
========= ========= ========== ==========
Cash dividends
declared per
common share $ 0.13 $ 0.12 $ 0.38 $ 0.345
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
Sept. 30, Sept. 30, Change
2008 2007 $ %
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 25,278 $ 50,265 $(24,987) (50)%
Receivables, net 45,426 58,023 (12,597) (22)
Receivables pledged under
receivables facility 133,501 142,511 (9,010) (6)
Product inventories, net 345,944 317,110 28,834 9
Prepaid expenses and other
current assets 7,915 9,004 (1,089) (12)
Deferred income taxes 9,139 7,652 1,487 19
--------------------------------------------------------------
Total current assets 567,203 584,565 (17,362) (3)
Property and equipment,
net 32,895 35,518 (2,623) (7)
Goodwill 167,376 155,247 12,129 8
Other intangible assets,
net 13,519 15,459 (1,940) (13)
Equity interest
investments 35,592 34,561 1,031 3
Other assets, net 25,299 19,073 6,226 33
--------------------------------------------------------------
Total assets $841,884 $844,423 $ (2,539) (0)%
--------------------------------------------------------------
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable $128,329 $127,889 $ 440 0%
Accrued and other
current
liabilities 80,636 53,557 27,079 51
Short-term financing 58,392 110,715 (52,323) (47)
Current portion of
long-term debt and
other long-term
liabilities 5,369 3,350 2,019 60
--------------------------------------------------------------
Total current liabilities 272,726 295,511 (22,785) (8)
Deferred income taxes 18,608 15,185 3,423 23
Long-term debt 274,100 292,750 (18,650) (6)
Other long-term
liabilities 6,225 6,152 73 1
--------------------------------------------------------------
Total liabilities 571,659 609,598 (37,939) (6)
--------------------------------------------------------------
Total stockholders' equity 270,225 234,825 35,400 15
--------------------------------------------------------------
Total liabilities and
stockholders' equity $841,884 $844,423 $ (2,539) (0)%
--------------------------------------------------------------
------------------
1. Total receivables at September 30, 2008 include approximately
$4.2 million of acquired receivables, primarily from the
acquisition of National Pool Tile (NPT). The allowance for
doubtful accounts was $10.6 million at September 30, 2008 and
$8.7 million at September 30, 2007, with $0.6 million of the
September 30, 2008 balance related to the acquisition of NPT.
2. Total product inventories at September 30, 2008 include
approximately $17.9 million of acquired inventories, primarily
from the acquisition of NPT. The inventory reserve was $8.7
million at September 30, 2008 and $5.4 million at September 30,
2007, with $1.2 million of the September 30, 2008 balance
related to the acquisition of NPT.
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2008 2007 Change
--------------------------------------------------------------------
Operating activities
Net income $ 71,751 $ 80,983 $ (9,232)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 7,182 6,868 314
Amortization 3,196 3,665 (469)
Share-based compensation 5,493 5,564 (71)
Excess tax benefits from share-
based compensation (2,452) (8,345) 5,893
Equity earnings in unconsolidated
investments (1,635) (2,087) 452
Other 1,393 3,476 (2,083)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Receivables (33,908) (49,373) 15,465
Product inventories 47,545 14,580 32,965
Accounts payable (67,940) (49,743) (18,197)
Other current assets and
liabilities 45,910 27,927 17,983
--------------------------------------------------------------------
Net cash provided by operating
activities 76,535 33,515 43,020
Investing activities
Acquisition of businesses, net of
cash acquired (32,891) (2,087) (30,804)
Divestiture of business 1,165 -- 1,165
Purchase of property and equipment,
net of sale proceeds (4,999) (9,407) 4,408
Proceeds from sale of investment -- 75 (75)
--------------------------------------------------------------------
Net cash used in investing activities (36,725) (11,419) (25,306)
Financing activities
Proceeds from revolving line of credit 276,826 306,771 (29,945)
Payments on revolving line of credit (277,751) (299,928) 22,177
Proceeds from asset-backed financing 73,335 87,479 (14,144)
Payments on asset-backed financing (83,270) (51,050) (32,220)
Proceeds from long-term debt -- 100,000 (100,000)
Payments on long-term debt and other
long-term liabilities (2,385) (3,320) 935
Payments of capital lease obligations (251) (257) 6
Payments of deferred financing costs (22) (397) 375
Excess tax benefits from share-based
compensation 2,452 8,345 (5,893)
Proceeds from issuance of common
stock under share-based compensation
plans 3,736 7,154 (3,418)
Payments of cash dividends (18,187) (17,033) (1,154)
Purchases of treasury stock (3,244) (128,777) 125,533
--------------------------------------------------------------------
Net cash (used in) provided by
financing activities (28,761) 8,987 (37,748)
Effect of exchange rate changes on
cash (1,596) 2,448 (4,044)
--------------------------------------------------------------------
Change in cash and cash equivalents 9,453 33,531 (24,078)
Cash and cash equivalents at beginning
of period 15,825 16,734 (909)
--------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 25,278 $ 50,265 $(24,987)
--------------------------------------------------------------------
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
September 30, September 30,
2008 2007 2008 2007
--------------------------------------------------------------------
Net sales $ 467,878 $ 509,766 $25,652 $17,668
Gross profit 133,771 135,580 8,029 4,223
Gross margin 28.6% 26.6% 31.3% 23.9%
Selling and
administrative
expenses 95,024 96,056 8,159 4,242
Expenses as
a % of
net sales 20.3% 18.8% 31.8% 24.0%
Operating
income (loss) 38,747 39,524 (130) (19)
Operating margin 8.3% 7.8% (0.5)% (0.1)%
--------------------------------------------------------------------
------------------------------------------
(Unaudited) Total
(In thousands) Three Months Ended
September 30,
2008 2007
------------------------------------------
Net sales $ 493,530 $ 527,434
Gross profit 141,800 139,803
Gross margin 28.7% 26.5%
Selling and
administrative
expenses 103,183 100,298
Expenses as
a % of
net sales 20.9% 19.0%
Operating
income (loss) 38,617 39,505
Operating margin 7.8% 7.5%
------------------------------------------
--------------------------------------------------------------------
(Unaudited) Base Business Excluded
(In thousands) Nine Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
--------------------------------------------------------------------
Net sales $1,456,763 $1,584,377 $67,954 $43,235
Gross profit 418,414 440,338 21,492 10,872
Gross margin 28.7% 27.8% 31.6% 25.1%
Selling and
administrative
expenses 289,165 294,146 19,937 10,494
Expenses as
a % of
net sales 19.8% 18.6% 29.3% 24.3%
Operating income 129,249 146,192 1,555 378
Operating margin 8.9% 9.2% 2.3% 0.9%
--------------------------------------------------------------------
------------------------------------------
(Unaudited) Total
(In thousands) Nine Months Ended
September 30,
2008 2007
------------------------------------------
Net sales $1,524,717 $1,627,612
Gross profit 439,906 451,210
Gross margin 28.9% 27.7%
Selling and
administrative
expenses 309,102 304,640
Expenses as
a % of
net sales 20.3% 18.7%
Operating income 130,804 146,570
Operating margin 8.6% 9.0%
------------------------------------------
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 September 30,
2008):
o acquired sales centers (10, net of consolidations see table
below);
o existing sales centers consolidated with acquired sales centers
(6);
o closed sales centers (3);
o consolidated sales centers in cases where we do not expect to
maintain the majority of the existing business (1); and
o 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 September 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 these results from
base business for the second and third quarters of 2007.
We have excluded the following acquisitions from base business for
the periods identified:
Net
Sales
Acquisition Centers
Acquired Date Acquired Period Excluded
------------- ------------- --------- -----------------------
National Pool
Tile (NPT)(1) March 2008 9 March - September 2008
Canswim
Pools March 2008 1 March - September 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 nine months 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 and September 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 Nine Months Ended
(In thousands) September 30, September 30,
2008 2007 2008 2007
--------------------------------------------------------------------
Net income $ 22,060 $ 21,835 $ 71,751 $ 80,983
Add:
Interest
expense, net 4,589 6,349 14,700 16,765
Provision for
income taxes 13,675 12,802 45,397 50,118
Income tax
expense on
equity earnings 1,086 959 591 791
Share-based
compensation 1,224 1,619 5,493 5,564
Depreciation 2,378 2,352 7,182 6,868
Amortization(1) 975 1,114 2,924 3,497
--------------------------------------------------------------------
Adjusted EBITDA $ 45,987 $ 47,030 $ 148,038 $ 164,586
--------------------------------------------------------------------
(1) Excludes amortization included in interest expense, net
The table below presents a reconciliation of Adjusted EBITDA to cash
provided by operating activities. Please see page 5 for our Condensed
Consolidated Statements of Cash Flows.
--------------------------------------------------------------------
(Unaudited) Three Months Ended Nine Months Ended
(In thousands) September 30, September 30,
2008 2007 2008 2007
--------------------------------------------------------------------
Adjusted EBITDA $ 45,987 $ 47,030 $ 148,038 $ 164,586
Add:
Interest expense,
net(1) (4,517) (6,291) (14,428) (16,597)
Provision for
income taxes (13,675) (12,802) (45,397) (50,118)
Income tax expense
on equity earnings (1,086) (959) (591) (791)
Excess tax benefits
on share-based
compensation (800) (1,946) (2,452) (8,345)
Equity earnings in
unconsolidated
investments (2,793) (2,440) (1,635) (2,087)
Other 2,894 2,839 1,393 3,476
Change in
operating
assets and
liabilities 85,687 62,159 (8,393) (56,609)
--------------------------------------------------------------------
Net cash provided
by operating
activities $ 111,697 $ 87,590 $ 76,535 $ 33,515
--------------------------------------------------------------------
(1) Excludes amortization of deferred financing costs of $72 and $58
for the three months ended September 30, 2008 and September 30,
2007, respectively, and $272 and $168 for the nine months ended
September 30, 2008 and September 30, 2007, respectively. This
non-cash expense is included in interest expense, net on the
Consolidated Statements of Income.