COVINGTON, La., July 23, 2009 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today reported results for the second quarter of 2009.
"In what is arguably the most challenging market environment ever experienced by our industry, we are pleased that there are a number of positive developments to report," said Manuel Perez de la Mesa, President and CEO. "Our focus on optimizing gross margin, right-sizing expenses relative to sales levels and improving working capital management is evidenced by our higher operating margin and significantly better cash generation. Additionally, we believe our dedicated team, industry leading programs and market penetration initiatives have enabled us to gain market share in these difficult times."
Net sales for the quarter ended June 30, 2009 decreased 13% to $602.1 million, compared to $693.0 million in the second quarter of 2008. Base business sales also declined 13% due to reduced new pool and irrigation construction activity, deferred discretionary replacement activity and unfavorable weather and currency fluctuations. This reduction was partially offset by an increase in certain maintenance and repair product sales and sales related to regulatory changes governing pool and spa safety.
Gross profit for the second quarter of 2009 decreased 12% to $178.1 million from $202.8 million in the comparable 2008 period. Gross profit as a percentage of net sales (gross margin) improved to 29.6% in the second quarter of 2009 from 29.3% for the second quarter of 2008. The increase in gross margin is attributable to a favorable shift in sales mix, an increase in sales of POOLCORP branded products and specific margin improvement initiatives.
Selling and administrative expenses (operating expenses) decreased 15% to $96.4 million in the second quarter of 2009 from $112.8 million in the second quarter of 2008. Base business operating expenses decreased 14% compared to the second quarter of 2008 due to the impact of cost control initiatives on payroll related and variable expenses, including lower incentive compensation and reduced freight costs.
Operating income decreased 9% to $81.7 million from $90.0 million in the comparable 2008 period. Operating income as a percentage of net sales (operating margin) increased to 13.6% for the current quarter, compared to 13.0% for the second quarter of 2008. Average debt levels decreased by $76.1 million compared to the second quarter of 2008. Coupled with a lower weighted average effective interest rate, interest expense declined 38%. Earnings per share for the second quarter of 2009 was $0.99 per diluted share on net income of $48.4 million, compared to $1.08 per diluted share on net income of $52.9 million for the second quarter of 2008.
Net sales for the six months ended June 30, 2009 decreased 15% to $878.7 million from $1,031.2 million in the comparable 2008 period. Base business sales declined 16% in the first six months of 2009 compared to the same period in 2008. Gross margin increased 60 basis points to 29.5% in the first half of 2009 from 28.9% for the same period last year.
Operating income for the first six months of 2009 decreased 15% to $78.1 million compared to $92.2 million in the same period last year. Operating margin was 8.9% for both the first half of 2009 and the first half of 2008. Earnings per share for the first six months of 2009 decreased 15% to $0.87 per diluted share on net income of $42.1 million, compared to $1.02 per diluted share on net income of $49.7 million in the comparable 2008 period.
On the balance sheet, total net receivables decreased 16% compared to June 30, 2008 due primarily to lower sales and a shift toward more cash sales resulting from tighter credit terms. Inventory levels also decreased 16% to $325.2 million at June 30, 2009 compared to levels at June 30, 2008. Total debt outstanding at June 30, 2009 was $334.0 million, down $108.0 million compared to June 30, 2008.
Cash provided by operations was $35.6 million in the first six months of 2009 compared to a use of cash in operations of $35.2 million in the first six months of 2008. The increase in cash provided by operations is due to focused management of working capital balances, primarily the reduction of inventory levels. This improvement of $70.8 million is net of a $30.0 million deferred federal income tax payment made in January 2009. Adjusted EBITDA (as defined in the addendum to this release) was $87.2 million in the second quarter of 2009 compared to $96.7 million in the second quarter of 2008, and was $84.1 million for the six months ended June 30, 2009 compared to $102.1 million for the six months ended June 30, 2008.
"Given our results through the seasonally critical second quarter, we anticipate our full year 2009 earnings will be in the range of $1.00 to $1.05 per diluted share excluding any potential one-time charges," said Perez de la Mesa. "As we head into the second half of 2009, we expect better relative performance in the fourth quarter and are encouraged by current trends that indicate a softening of the impact of discretionary sales declines."
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 287 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.
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 Form 10-Q for the quarter ended March 31, 2009 filed with the Securities and Exchange Commission.
The Pool Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4853
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales $ 602,082 $ 692,972 $ 878,708 $1,031,187
Cost of sales 424,014 490,220 619,447 733,081
---------- ---------- ---------- ----------
Gross profit 178,068 202,752 259,261 298,106
Percent 29.6% 29.3% 29.5% 28.9%
Selling and
administrative
expenses 96,348 112,762 181,187 205,919
---------- ---------- ---------- ----------
Operating income 81,720 89,990 78,074 92,187
Percent 13.6% 13.0% 8.9% 8.9%
Interest
expense, net 3,150 5,087 6,477 10,111
---------- ---------- ---------- ----------
Income before
income taxes and
equity earnings
(losses) 78,570 84,903 71,597 82,076
Provision for
income taxes 30,878 32,811 28,138 31,722
Equity earnings
(losses) in
unconsolidated
investments, net 674 783 (1,329) (663)
---------- ---------- ---------- ----------
Net income $ 48,366 $ 52,875 $ 42,130 $ 49,691
========== ========== ========== ==========
Earnings per share:
Basic $ 1.00 $ 1.11 $ 0.87 $ 1.04
========== ========== ========== ==========
Diluted $ 0.99 $ 1.08(1) $ 0.87 $ 1.02
========== ========== ========== ==========
Weighted average
shares
outstanding:
Basic 48,536 47,823(1) 48,412 47,736(1)
========== ========== ========== ==========
Diluted 48,844 48,776(1) 48,654 48,562(1)
========== ========== ========== ==========
Cash dividends
declared per
common share $ 0.13 $ 0.13 $ 0.26 $ 0.25
(1) As adjusted for the adoption of FSP EITF 03-6-1
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
June 30, June 30, Change
2009 2008 $ %
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 41,727 $ 26,453 $ 15,274 58%
Receivables, net 50,981 75,563 (24,582) (33)
Receivables pledged under
receivables facility 182,307 203,091 (20,784) (10)
Product inventories, net 325,198 385,258 (60,060) (16)
Prepaid expenses and other
current assets 8,219 11,376 (3,157) (28)
Deferred income taxes 11,908 9,139 2,769 30
----------------------------------------------------------------
Total current assets 620,340 710,880 (90,540) (13)
Property and equipment, net 34,163 33,892 271 1
Goodwill 170,601 167,352 3,249 2
Other intangible assets, net 12,471 14,480 (2,009) (14)
Equity interest investments 28,886 32,839 (3,953) (12)
Other assets, net 28,438 25,612 2,826 11
----------------------------------------------------------------
Total assets $894,899 $985,055 $(90,156) (9)%
----------------------------------------------------------------
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable $194,004 $193,663 $ 341 --%
Accrued and other current
liabilities 61,355 70,755 (9,400) (13)
Short-term financing 25,000 121,492 (96,492) (79)
Current portion of long-term debt
and other long-term liabilities 27,114 4,633 22,481 >100
----------------------------------------------------------------
Total current liabilities 307,473 390,543 (83,070) (21)
Deferred income taxes 20,079 17,527 2,552 15
Long-term debt 282,015 316,000 (33,985) (11)
Other long-term liabilities 6,145 6,455 (310) (5)
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Total liabilities 615,712 730,525 (114,813) (16)%
----------------------------------------------------------------
Total stockholders' equity 279,187 254,530 24,657 10
----------------------------------------------------------------
Total liabilities and stockholders'
equity $894,899 $985,055 $(90,156) (9)%
---------------------------------------------------------------------
1. The allowance for doubtful accounts was $12.5 million at
June 30, 2009 and $9.7 million at June 30, 2008.
2. The inventory reserve was $7.3 million at June 30, 2009
and $7.9 million at June 30, 2008.
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
--------------------
2009 2008 Change
--------------------------------------------------------------------
Operating activities
Net income $ 42,130 $ 49,691 $ (7,561)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 4,492 4,804 (312)
Amortization 1,307 2,149 (842)
Share-based compensation 2,935 4,269 (1,334)
Excess tax benefits from
share-based compensation (607) (1,652) 1,045
Equity losses in
unconsolidated investments 2,230 1,158 1,072
Other (4,400) (1,501) (2,899)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Receivables (115,166) (132,735) 17,569
Product inventories 80,414 8,995 71,419
Accounts payable 20,316 (2,606) 22,922
Other current assets and
liabilities 1,960 32,266 (30,306)
--------------------------------------------------------------------
Net cash provided by (used in)
operating activities 35,611 (35,162) 70,773
Investing activities
Acquisition of businesses, net
of cash acquired (381) (32,840) 32,459
Divestiture of business -- 724 (724)
Purchase of property and equipment,
net of sale proceeds (5,866) (3,611) (2,255)
--------------------------------------------------------------------
Net cash used in investing
activities (6,247) (35,727) 29,480
Financing activities
Proceeds from revolving line
of credit 178,237 190,100 (11,863)
Payments on revolving line of credit (173,222) (150,625) (22,597)
Proceeds from asset-backed financing 42,000 73,335 (31,335)
Payments on asset-backed financing (37,792) (20,170) (17,622)
Payments on long-term debt and
other long-term liabilities (3,076) (1,591) (1,485)
Payments of capital lease
obligations -- (251) 251
Payments of deferred financing costs (305) (22) (283)
Excess tax benefits from share-based
compensation 607 1,652 (1,045)
Proceeds from issuance of common
stock under share-based
compensation plans 1,399 2,289 (890)
Payments of cash dividends (12,601) (11,951) (650)
Purchases of treasury stock (59) (1,263) 1,204
--------------------------------------------------------------------
Net cash provided by (used in)
financing activities (4,812) 81,503 (86,315)
Effect of exchange rate changes
on cash 1,413 14 1,399
--------------------------------------------------------------------
Change in cash and cash equivalents 25,965 10,628 15,337
Cash and cash equivalents at
beginning of period 15,762 15,825 (63)
--------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 41,727 $ 26,453 $ 15,274
--------------------------------------------------------------------
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 Total
(In Three Months Three Months Three Months
thousands) Ended Ended Ended
June 30, June 30, June 30,
2009 2008 2009 2008 2009 2008
----------------------------------------------------------------------
Net sales $576,870 $666,463 $ 25,212 $ 26,509 $602,082 $692,972
Gross
profit 171,119 194,388 6,949 8,364 178,068 202,752
Gross
margin 29.7% 29.2% 27.6% 31.6% 29.6% 29.3%
Selling and
adminis-
trative
expenses 91,181 105,810 5,167 6,952 96,348 112,762
Expenses
as a % of
net sales 15.8% 15.9% 20.5% 26.2% 16.0% 16.3%
Operating
income 79,938 88,578 1,782 1,412 81,720 89,990
Operating
margin 13.9% 13.3% 7.1% 5.3% 13.6% 13.0%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Unaudited) Base Business Excluded Total
(In Six Months Six Months Six Months
thousands) Ended Ended Ended
June 30, June 30, June 30,
2009 2008 2009 2008 2009 2008
-----------------------------------------------------------------------
Net
sales $830,755 $987,832 $47,953 $43,355 $878,708 $1,031,187
Gross
profit 246,060 284,926 13,201 13,180 259,261 298,106
Gross
margin 29.6% 28.8% 27.5% 30.4% 29.5% 28.9%
Selling
and admin-
istrative
expenses 169,358 193,402 11,829 12,517 181,187 205,919
Expenses
as a % of
net sales 20.4% 19.6% 24.7% 28.9% 20.6% 20.0%
Operating
income 76,702 91,524 1,372 663 78,074 92,187
Operating
margin 9.2% 9.3% 2.9% 1.5% 8.9% 8.9%
-----------------------------------------------------------------------
We have excluded the following acquisitions from base business for the periods identified:
Net
Sales
Acquisition Centers Period
Acquired Date Acquired Excluded
------------------ -------------- -------- ------------------------
Proplas Plasticos,
S.L. November 2008 0 January 2009 - June 2009
National Pool Tile January - May 2009
(NPT) (1) March 2008 8 and March - May 2008
Canswim Pools March 2008 1 January - May 2009
and March - May 2008
(1) We acquired 15 NPT sales centers and have consolidated 7 of
these with existing sales centers, including 4 in March 2008,
2 in the second quarter of 2008 and 1 in April 2009.
We exclude the following sales centers from base business results for a period of 15 months:
* acquired sales centers (see table above); * existing sales centers consolidated with acquired sales centers; * closed sales centers; * consolidated sales centers in cases where we do not expect to maintain the majority of the existing business; and * sales centers opened in new markets.
As of June 30, 2009, four closed sales centers and one existing sales center that was consolidated with an acquired sales center were excluded from base business.
The table below summarizes the changes in our sales centers in the first half of 2009:
December 31, 2008 288
Consolidation of acquired locations (1)
-----
June 30, 2009 287
=====
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.
Since we divested our pool liner manufacturing operation in France at the beginning of April 2008, we have excluded these operations from base business for the comparative three month period ended March 31, 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) Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
2009 2008 2009 2008
--------------------------------------------------------------------
Net income $48,366 $52,875 $42,130 $49,691
Add:
Interest expense, net 3,150 5,087 6,477 10,111
Provision for income
taxes 30,878 32,811 28,138 31,722
Income tax expense
(benefit) on equity
(earnings) losses 449 507 (901) (495)
Share-based compensation 1,614 1,999 2,935 4,269
Depreciation 2,283 2,417 4,492 4,804
Amortization (1) 424 996 877 1,949
--------------------------------------------------------------------
Adjusted EBITDA $ 87,164 $ 96,692 $ 84,148 $102,051
--------------------------------------------------------------------
(1) Excludes amortization included in interest expense, net
The table below presents a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities.
--------------------------------------------------------------------
(Unaudited) Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
2009 2008 2009 2008
--------------------------------------------------------------------
Adjusted EBITDA $ 87,164 $ 96,692 $ 84,148 $102,051
Add:
Interest expense, net (1) (2,929) (4,998) (6,047) (9,911)
Provision for income
taxes (30,878) (32,811) (28,138) (31,722)
Income tax (expense)
benefit on equity
(earnings) losses (449) (507) 901 495
Excess tax benefits on
share-based compensation (332) (112) (607) (1,652)
Equity (earnings) losses
in unconsolidated
investments (1,123) (1,288) 2,230 1,158
Other (1,942) 1,111 (4,400) (1,501)
Change in operating
assets and liabilities 32,067 (77,809) (12,476) (94,080)
--------------------------------------------------------------------
Net cash provided by
(used in) operating
activities $ 81,578 $(19,722) $ 35,611 $(35,162)
(1) Excludes amortization of deferred financing costs of $221 and
$89 for the three months ended June 30, 2009 and June 30, 2008,
respectively, and $430 and $200 for the six months ended
June 30, 2009 and June 30, 2008, respectively. This non-cash
expense is included in interest expense, net on the Consolidated
Statements of Income.