Pool Corporation Reports Fiscal 2008 Results

Covington, Louisiana, UNITED STATES


COVINGTON, La., Feb. 19, 2009 (GLOBE NEWSWIRE) -- Pool Corporation (the "Company" or "POOL") (Nasdaq:POOL) today announced fourth quarter and full year 2008 results.

"In these challenging times, we have focused on business improvement opportunities, maintaining tight control over costs and strengthening our commitment to programs and initiatives that will provide long-term value to customers, suppliers and shareholders. Our 2008 results demonstrate our progress toward achieving these objectives as evidenced by our gross margin expansion and our improved cost structure, which positions our business well for the continuing difficult external environment facing us in 2009," commented Manuel Perez de la Mesa, President and CEO.

"Building on the progress we have made, our 2009 objectives remain focused on strengthening our market leading positions, improving our gross margin and realizing our cost improvement initiatives. We will also rebalance our inventories following the opportunistic inventory purchases we made in the second half of 2008," continued Perez de la Mesa.

Net sales for the year ended December 31, 2008 decreased 8% to $1.78 billion, compared to $1.93 billion in 2007. Base business sales declined 9% year over year due to the continued decrease in new pool and irrigation construction activity, some deferred discretionary expenditures by consumers and unfavorable weather. This reduction was partially offset by sales from acquired businesses and an increase in maintenance and repair product sales. For the year, complementary product sales were down approximately 15% compared to a 3% decrease in the same period in 2007.

Gross profit for the year ended December 31, 2008 decreased $15.4 million, or 3%, to $515.2 million from $530.6 million in 2007. Gross profit as a percentage of net sales (gross margin) improved 140 basis points to 28.9% in 2008 from 27.5% in 2007. The increase in 2008 gross margin is attributable to improved pricing management, an increase in the sales of preferred vendor and Pool Corporation private label products and a favorable shift in product mix.

Selling and administrative expenses (operating expenses) for 2008 increased 1% to $399.8 million from $396.9 million in 2007. This increase was due to operating expenses related to acquired businesses. Base business operating expenses decreased 3% year over year, due primarily to the impact of cost control initiatives and lower incentive compensation.

Operating income for 2008 declined $18.3 million, or 14%, to $115.5 million from $133.8 million in 2007. Operating income as a percentage of net sales (operating margin) was 6.4% in 2008 compared to 6.9% in 2007. Base business operating income declined 13% to $117.8 million in 2008 from $134.9 million in 2007. Interest expense in 2008 decreased $3.2 million, or 15%, due primarily to a lower weighted average effective interest rate compared to 2007.

Earnings per share for 2008 was $1.18 per diluted share on net income of $57.0 million, compared to $1.37 per diluted share on net income of $69.4 million in 2007. Included in 2008 earnings per share is the adverse impact of a loss of approximately $0.04 per diluted share from our equity interest investment in Latham Acquisition Corporation (LAC). By comparison, in 2007, this investment contributed income of $0.02 per diluted share. Our first quarter 2008 acquisitions had a dilutive impact of $0.02 per diluted share in 2008.

On the balance sheet, total net receivables at December 31, 2008 were down 18% compared to December 31, 2007 due to lower sales, a decrease in vendor incentive receivables, an increase in the allowance for doubtful accounts and a shift toward more cash sales as a result of tighter credit terms. Our inventory levels increased $26.3 million, or 7%, over 2007 to $405.9 million at December 31, 2008. Excluding approximately $17.1 million of acquired inventories at December 31, 2008, inventories increased 2% year over year due to the slowdown in sales in the fourth quarter of 2008 and to purchases made ahead of vendor price increases.

Cash provided by operations was $93.3 million in 2008, compared to $71.6 million in 2007. The 2008 amount reflects a negative impact of approximately $36.0 million related to the net purchase and payment of inventory purchased ahead of vendor price increases, which was largely offset by the benefit related to the deferral of our $30.0 million third and fourth quarter 2008 estimated federal tax payments. Adjusted EBITDA (as defined in the addendum to this release) was $132.9 million in 2008 compared to $156.5 million in 2007.

In the fourth quarter of 2008, our seasonally slowest period of the year, net sales declined 14% to $259.0 million compared to $300.8 million in the comparable 2007 period. Gross margin increased 270 basis points to 29.1% in the fourth quarter of 2008 from 26.4% for the same period last year. This gross margin improvement includes the benefits of pre-price increase inventory purchases in addition to the favorable impacts described above for the increase in year to date gross margin. The seasonal operating loss for the fourth quarter was $15.3 million compared to an operating loss of $12.8 million in the same period last year. The seasonal base business operating loss increased 2% to $11.4 million in the fourth quarter of 2008 compared to $11.2 million in the same period of 2007.

The loss per share for the fourth quarter of 2008 was $0.31 per diluted share on a net loss of $14.8 million, compared to a loss of $0.24 per diluted share on a net loss of $11.6 million in the fourth quarter of 2007. Included in the fourth quarter loss per share is a loss of approximately $0.06 per diluted share from the increased seasonal equity loss from our equity interest investment in LAC. By comparison, the impact of this investment on fourth quarter 2007 was a loss of less than $0.01 per diluted share. Our first quarter 2008 acquisitions had a dilutive impact of $0.04 per diluted share in the fourth quarter of 2008.

"I am proud of how our team has responded to these extraordinary market conditions. Since December 2006, we have improved our gross margins and reduced our infrastructure costs, including an 8% decrease in headcount excluding acquisitions. We believe we have taken appropriate actions to position our business for the short-term, while improving our competitive position with the expectation of emerging stronger when the market returns to a normalized environment. Given the challenges in the external environment, we will not provide earnings per share guidance for 2009 until we gain more visibility into 2009 activity in our seasonal business," commented Perez de la Mesa.

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, 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 POOL's 2007 Annual Report on Form 10-K and 2008 Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.


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

                        Three Months Ended          Year Ended
                           December 31,             December 31,
                        -------------------   -----------------------
                          2008       2007        2008         2007
                        --------   --------   ----------   ----------

 Net sales              $258,966   $300,755   $1,783,683   $1,928,367
 Cost of sales           183,644    221,319    1,268,455    1,397,721
                        --------   --------   ----------   ----------
   Gross profit           75,322     79,436      515,228      530,646
   Percent                  29.1%      26.4%        28.9%        27.5%

 Selling and
  administrative
  expenses                90,650     92,232      399,752      396,872
                        --------   --------   ----------   ----------
   Operating income
    (loss)               (15,328)   (12,796)     115,476      133,774
   Percent                  (5.9)%     (4.3)%        6.4%         6.9%

 Interest expense, net     4,212      5,383       18,912       22,148
                        --------   --------   ----------   ----------
 Income (loss) before
  income taxes and
  equity earnings (loss) (19,540)   (18,179)      96,564      111,626
 Provision (benefit) for
  income taxes            (7,486)    (6,964)      37,911       43,154
 Equity earnings (loss)
  in unconsolidated
  investments, net        (2,741)      (374)      (1,697)         922
                        --------   --------   ----------   ----------
 Net income (loss)      $(14,795)  $(11,589)  $   56,956   $   69,394
                        ========   ========   ==========   ==========

 Earnings (loss)
  per share:
   Basic                $  (0.31)  $  (0.24)  $     1.19   $     1.42
                        ========   ========   ==========   ==========
   Diluted              $  (0.31)  $  (0.24)  $     1.18   $     1.37
                        ========   ========   ==========   ==========

 Weighted average
  shares outstanding:
   Basic                  47,947     47,448       47,758       48,887
                        ========   ========   ==========   ==========
   Diluted                47,947     47,448       48,444       50,802
                        ========   ========   ==========   ==========

 Cash dividends declared
  per common share      $   0.13   $   0.12   $     0.51   $    0.465




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

                           December 31,  December 31,       Change
                               2008          2007         $         %
 --------------------------------------------------------------------
 Assets
 Current assets:
   Cash and cash
    equivalents               $ 15,762      $ 15,825   $    (63)   --%
   Receivables, net             16,311        45,257    (28,946)  (64)
   Receivables pledged
    under receivables
    facility                    99,273        95,860      3,413     4
   Product inventories,
    net                        405,914       379,663     26,251     7
   Prepaid expenses and
    other current assets         7,676         8,265       (589)   (7)
   Deferred income taxes        11,908         9,139      2,769    30
 --------------------------------------------------------------
 Total current assets          556,844       554,009      2,835     1

 Property and equipment,
  net                           33,048        34,223     (1,175)   (3)
 Goodwill                      169,569       155,247     14,322     9
 Other intangible assets,
  net                           13,339        14,504     (1,165)   (8)
 Equity interest
  investments                   31,157        33,997     (2,840)   (8)
 Other assets, net              26,949        22,874      4,075    18
 --------------------------------------------------------------
 Total assets                 $830,906      $814,854   $ 16,052     2%
 --------------------------------------------------------------
 Liabilities and
  stockholders' equity
 Current liabilities:
   Accounts payable           $173,688      $194,178   $(20,490)  (11)%
   Accrued and other
    current liabilities         61,701        37,216     24,485    66
   Short-term financing         20,792        68,327    (47,535)  (70)
   Current portion of
    long-term debt and
    other long-term
    liabilities                  6,111         3,439      2,672    78
 --------------------------------------------------------------
 Total current
  liabilities                  262,292       303,160    (40,868)  (13)

 Deferred income taxes          20,032        17,714      2,318    13
 Long-term debt                301,000       279,525     21,475     8
 Other long-term
  liabilities                    5,848         5,664        184     3
 --------------------------------------------------------------
 Total liabilities             589,172       606,063    (16,891)   (3)
 --------------------------------------------------------------
 Total stockholders'
  equity                       241,734       208,791     32,943    16
 --------------------------------------------------------------
 Total liabilities and
  stockholders' equity        $830,906      $814,854   $ 16,052     2%
 --------------------------------------------------------------

 1. Total receivables at December 31, 2008 include approximately $3.1
    million of acquired receivables, primarily from the acquisition of
    National Pool Tile (NPT). The allowance for doubtful accounts was
    $13.7 million at December 31, 2008 and $9.9 million at December 31,
    2007.

 2. Total product inventories at December 31, 2008 include
    approximately $17.1 million of acquired inventories, primarily from
    the acquisition of NPT. The inventory reserve was $8.4 million at
    December 31, 2008 and $5.4 million at December 31, 2007, with $1.2
    million of the December 31, 2008 balance related to the acquisition
    of NPT.



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

                                           Year Ended
                                          December 31,
                                        2008       2007      Change
 -------------------------------------------------------------------
 Operating activities
 Net income                           $ 56,956   $ 69,394   $(12,438)
 Adjustments to reconcile net income
  to net cash provided by operating
  activities:
   Depreciation                          9,732      9,289        443
   Amortization                          3,722      4,694       (972)
   Share-based compensation              6,709      7,398       (689)
   Excess tax benefits from
    share-based compensation            (4,538)    (8,482)     3,944
   Equity (earnings) loss in
    unconsolidated investments           2,800     (1,523)     4,323
   Goodwill impairment                     440         --        440
   Other                                 4,463      1,926      2,537
 Changes in operating assets and
  liabilities, net of effects of
  acquisitions:
   Receivables                          26,350      8,822     17,528
   Product inventories                 (11,098)   (48,001)    36,903
   Accounts payable                    (24,916)    16,505    (41,421)
   Other current assets and
    liabilities                         22,662     11,622     11,040
 -------------------------------------------------------------------
 Net cash provided by operating
  activities                            93,282     71,644     21,638

 Investing activities
 Acquisition of businesses, net of
  cash acquired                        (35,466)    (2,087)   (33,379)
 Divestiture of business                 1,165         --      1,165
 Purchase of property and equipment,
  net of sale proceeds                  (7,003)   (10,626)     3,623
 Proceeds from sale of investment           --         75        (75)
 -------------------------------------------------------------------
 Net cash used in investing
  activities                           (41,304)   (12,638)   (28,666)

 Financing activities
 Proceeds from revolving line
  of credit                            370,948    477,246   (106,298)
 Payments on revolving line of
  credit                              (343,473)  (482,878)   139,405
 Proceeds from asset-backed financing   83,335     87,479     (4,144)
 Payments on asset-backed financing   (130,870)   (93,438)   (37,432)
 Proceeds from long-term debt               --    100,000   (100,000)
 Payments on long-term debt and
  other long-term liabilities           (3,171)    (4,321)     1,150
 Payments of capital lease
  obligations                             (251)      (257)         6
 Payments of deferred financing costs      (56)    (1,152)     1,096
 Excess tax benefits from
  share-based compensation               4,538      8,482     (3,944)
 Proceeds from issuance of common
  stock under share-based 
  compensation plans                     6,423      7,292       (869)
 Payments of cash dividends            (24,431)   (22,734)    (1,697)
 Purchases of treasury stock            (7,718)  (139,676)   131,958
 -------------------------------------------------------------------
 Net cash used in financing
  activities                           (44,726)   (63,957)    19,231
 Effect of exchange rate changes on
  cash                                  (7,315)     4,042    (11,357)
 -------------------------------------------------------------------
 Change in cash and cash equivalents       (63)      (909)       846
 Cash and cash equivalents at
  beginning of year                     15,825     16,734       (909)
 -------------------------------------------------------------------
 Cash and cash equivalents at end
  of year                             $ 15,762   $ 15,825   $    (63)
 -------------------------------------------------------------------

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
                      December 31,                December 31,
                   2008          2007          2008          2007
 --------------------------------------------------------------------
 Net sales      $  240,104    $  288,992    $   18,862    $   11,763

 Gross profit       70,038        76,807         5,284         2,629
 Gross margin         29.2%         26.6%         28.0%         22.3%

 Operating
  expenses          81,475        88,045         9,175         4,187
 Expenses as a
  % of net sales      33.9%         30.5%         48.6%         35.6%

 Operating
  income (loss)    (11,437)      (11,238)       (3,891)       (1,558)
 Operating margin     (4.8)%        (3.9)%       (20.6)%       (13.2)%
 --------------------------------------------------------------------

 --------------------------------------------------------------------
 (Unaudited)                                         Total
 (In thousands)                                Three Months Ended
                                                  December 31,
                                               2008          2007
 --------------------------------------------------------------------
 Net sales                                  $  258,966    $  300,755

 Gross profit                                   75,322        79,436
 Gross margin                                     29.1%         26.4%

 Operating expenses                             90,650        92,232
 Expenses as a % of net sales                     35.0%         30.7%

 Operating income (loss)                       (15,328)      (12,796)
 Operating margin                                 (5.9)%        (4.3)%
 --------------------------------------------------------------------



 --------------------------------------------------------------------
 (Unaudited)         Base Business                 Excluded
 (In thousands)       Year Ended                  Year Ended
                      December 31,                December 31,
                   2008          2007          2008          2007
 --------------------------------------------------------------------
 Net sales      $1,696,848    $1,873,359    $   86,835    $   55,008

 Gross profit      488,502       517,157        26,726        13,489
 Gross margin         28.8%         27.6%         30.8%         24.5%

 Operating
  expenses         370,658       382,230        29,094        14,642
 Expenses as a
  % of net sales      21.8%         20.4%         33.5%         26.6%

 Operating
  income (loss)    117,844       134,927        (2,368)       (1,153)
 Operating margin      6.9%          7.2%         (2.7)%        (2.1)%
 --------------------------------------------------------------------

 --------------------------------------------------------------------
 (Unaudited)                                         Total
 (In thousands)                                    Year Ended
                                                  December 31,
                                               2008          2007
 --------------------------------------------------------------------
 Net sales                                  $1,783,683    $1,928,367

 Gross profit                                  515,228       530,646
 Gross margin                                     28.9%         27.5%

 Operating expenses                            399,752       396,872
 Expenses as a % of net sales                     22.4%         20.6%

 Operating income (loss)                       115,476       133,774
 Operating margin                                  6.4%          6.9%
 --------------------------------------------------------------------

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 December 31, 2008):



 * acquired sales centers (10, net of consolidations -- see table
   below);
 * existing sales centers consolidated with acquired sales
   centers (7);
 * closed sales centers (4);
 * 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 22 sales centers excluded from base business as of December 31, 2008, there were 2 new market sales centers excluded until they became base business sales centers in June 2008. Since we divested our pool liner fabrication operation in France as of April 2008, we have also excluded these operations from base business for the second, third and fourth quarters of 2007.

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



                                     Net
                                    Sales
                   Acquisition     Centers            Period
 Acquired             Date         Acquired           Excluded
 ---------------   -------------   ---------  ------------------------
 Proplas
  Plasticos,                                   November and
  S.L. (1)         November 2008       0       December 2008
 National Pool
  Tile (NPT) (2)   March 2008          9       March - December 2008
 Canswim Pools     March 2008          1       March - December 2008
 Tor-Lyn, Limited  February 2007       1       February - April 2007
                                              and January - April 2008

The table below summarizes the changes in sales centers in 2008:



         December 31, 2007                               281
           Acquired, net of consolidations (1)(2)         10
           New locations                                   1
           Consolidated                                   (2)
           Closed                                         (2)
                                                         ----
         December 31, 2008                               288
                                                         ====

 (1) We acquired a single location in Spain and have consolidated it
     with our existing Madrid sales center operations.
 (2) 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, share-based compensation and goodwill impairment. 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
 (In thousands)                                    December 31,
                                               2008            2007
 --------------------------------------------------------------------
 Net income                                  $ 56,956        $ 69,394
   Add:
     Interest expense, net                     18,912          22,148
     Provision for income taxes                37,911          43,154
     Income tax expense (benefit) on
      equity earnings (loss)                   (1,103)            602
     Share-based compensation                   6,709           7,398
     Goodwill impairment                          440              --
     Depreciation                               9,732           9,289
     Amortization (1)                           3,356           4,468
 --------------------------------------------------------------------
 Adjusted EBITDA                             $132,913        $156,453
 --------------------------------------------------------------------

 (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)                                       Year Ended
 (In thousands)                                    December 31,
                                               2008            2007
 --------------------------------------------------------------------
 Adjusted EBITDA                             $132,913        $156,453
   Add:
     Interest expense, net (1)                (18,546)        (21,922)
     Provision for income taxes               (37,911)        (43,154)
     Income tax (expense) benefit on
      equity earnings (loss)                    1,103            (602)
     Excess tax benefits on share-based
      compensation                             (4,538)         (8,482)
     Equity (earnings) loss in
      unconsolidated investments                2,800          (1,523)
     Other                                      4,463           1,926
     Change in operating assets and
      liabilities                              12,998         (11,052)
 --------------------------------------------------------------------
 Net cash provided by operating activities   $ 93,282        $ 71,644
 --------------------------------------------------------------------

 (1) Excludes amortization of deferred financing costs of $366 for
     2008 and $226 for 2007. This non-cash expense is included in
     interest expense, net on the Consolidated Statements of Income.


        

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