EX-99.1 2 poolq108er.htm POOL Q1 2008 ER poolq108er.htm
 
Exhibit 99.1
 
FOR IMMEDIATE RELEASE
 


POOL CORPORATION REPORTS FIRST QUARTER RESULTS
AND PROVIDES 2008 EARNINGS GUIDANCE
 


COVINGTON, LA. (April 24, 2008) – Pool Corporation (the “Company” or “POOL”) (NASDAQ/GSM: POOL) today reported its results for the first quarter of 2008.

“While it is still relatively early in the 2008 season, we are encouraged by our results given the challenging market conditions in our industry. We improved gross margins despite the tough competitive pricing environment and realized further progress in managing expenses through cost control measures.  The new pool and irrigation construction markets are facing unprecedented conditions created by the combination of significant declines in the real estate and mortgage-backed financing markets.  As a result, our sales were negatively impacted with a more pronounced effect on our irrigation business and complementary product sales.  Inclement weather also had an adverse effect on our results for the quarter,” commented Manuel Perez de la Mesa, President and CEO.

Net sales for the seasonally slow first quarter decreased $35.5 million, or 9%, to $338.2 million, compared to $373.7 million in the first quarter of 2007.  Base business sales declined approximately 11% (compared to 4% growth in the first quarter of 2007) on soft demand for pool and irrigation construction products.  Complementary product sales continue to be negatively impacted by the decline in new pool construction and decreased 16% compared to the first quarter of 2007.

Gross profit for the quarter ended March 31, 2008 decreased $8.1 million, or 8%, to $95.4 million from $103.5 million in the first quarter of 2007.  Gross profit as a percentage of net sales (gross margin) improved 50 basis points to 28.2% in the first quarter of 2008 from 27.7% in the first quarter of 2007.

Selling and administrative expenses (operating expenses) decreased $1.7 million, or 2%, to $93.2 million in the first quarter of 2008 from $94.9 million in the first quarter of 2007.  This decrease is primarily attributable to the impact of cost control initiatives.  Total operating expenses as a percentage of net sales increased to 27.5% in the first quarter of 2008 from 25.4% in the same period in 2007 due to the lower top line results.

Operating income was $2.2 million in the first quarter of 2008 compared to $8.6 million in the same period in 2007.  Operating income as a percentage of net sales (operating margin) decreased to 0.6% from 2.3% in the first quarter of 2007.  Interest expense increased 11% during the quarter due to higher average debt levels, which were partially offset by a lower weighted average effective interest rate compared to the first quarter of 2007.  Loss per share for the first quarter of 2008 was $0.07 per diluted share on a net loss of $3.2 million, compared to earnings of $0.03 per diluted share on net income of $1.4 million in the same period in 2007.  EBITDA (as defined in the addendum) was $5.4 million in the first quarter of 2008 compared to $11.5 million in the first quarter of 2007.

On the balance sheet, total net receivables decreased 11% compared to March 31, 2007 due to lower first quarter 2008 sales.  Our inventory levels increased 15% to $476.8 million at March 31, 2008.  This increase reflects higher inventory levels attributable to the decline in first quarter sales and $17.1 million of acquired inventory, primarily related to National Pool Tile.

The seasonal use of cash in operations increased $2.1 million to $15.4 million in the first quarter of 2008 compared to $13.3 million in the same period of 2007.

“Based on results to date and the current external environment, we project full year 2008 earnings per share will be in the range of $1.20 to $1.50 per diluted share,” continued Perez de la Mesa.


 
At March 31, 2008, 272 sales centers were included in the base business calculations and 19 sales centers were excluded.

Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products.  Currently, POOL operates 291 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, 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 filed with the Securities and Exchange Commission.

 
CONTACT:
 
Craig K. Hubbard
985.801.5117
craig.hubbard@poolcorp.com

 
2

 
 
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
 
Three Months Ended
 
 
March 31,
 
   
2008
   
2007
 
             
Net sales
$
338,215
 
$
373,706
 
Cost of sales
 
242,861
   
270,221
 
Gross profit
 
95,354
   
103,485
 
Percent
 
28.2
%
 
27.7
%
Selling and administrative expenses
 
93,157
   
94,853
 
Operating income
 
2,197
   
8,632
 
Percent
 
0.6
%
 
2.3
%
             
Interest expense, net
 
5,024
   
4,519
 
Income (loss) before income taxes and equity losses
 
(2,827
)
 
4,113
 
Provision (benefit) for income taxes
 
(1,089
)
 
1,588
 
Equity losses in unconsolidated investments, net
 
(1,446
)
 
(1,171
)
Net income (loss)
$
(3,184
)
$
1,354
 
Earnings (loss) per share:
           
Basic
$
(0.07
)
$
0.03
 
Diluted
$
(0.07
)
$
0.03
 
Weighted average shares outstanding:
           
Basic
 
47,538
   
50,201
 
Diluted
 
47,538
   
52,462
 
             
Cash dividends declared per common share
$
0.12
 
$
0.105
 
 
 
3

 
 
POOL CORPORATION
Condensed Consolidated Balance Sheets
 (Unaudited)
(In thousands)
 
     
March 31,
   
March 31,
   
Change
 
     
2008
   
2007
   
$
   
%
 
                           
Assets
                       
Current assets:
                       
 
Cash and cash equivalents
$
6,476
 
$
30,555
 
$
(24,079
 )
 
(79
)%
 
Receivables, net
 
42,266
   
51,104
   
(8,838
 )
 
(17
)
 
Receivables pledged under receivables facility
 
163,921
   
179,930
   
(16,009
 )
 
(9
)
 
Product inventories, net
 
476,758
   
413,161
   
63,597
   
15
 
 
Prepaid expenses and other current assets
 
10,241
   
9,383
   
858
   
9
 
 
Deferred income taxes
 
9,139
   
7,676
   
1,463
   
19
 
Total current assets
 
708,801
   
691,809
   
16,992
   
2
 
                           
Property and equipment, net
 
34,957
   
34,551
   
406
   
1
 
Goodwill
 
167,398
   
155,231
   
12,167
   
8
 
Other intangible assets, net
 
15,465
   
17,763
   
(2,298
 )
 
(13
)
Equity interest investments
 
31,551
   
30,522
   
1,029
   
3
 
Other assets, net
 
24,774
   
17,753
   
7,021
   
40
 
Total assets
$
982,946
 
$
947,629
 
$
35,317
   
4
%
                           
Liabilities and stockholders’ equity
                       
Current liabilities:
                       
 
Accounts payable
$
333,104
 
$
325,448
 
$
7,656
   
2
%
 
Accrued and other current liabilities
 
30,704
   
24,515
   
6,189
   
25
 
 
Short-term financing
 
66,812
   
102,300
   
(35,488
 )
 
(35
)
 
Current portion of long-term debt and other long-term liabilities
 
3,152
   
4,350
   
(1,198
 )
 
(28
)
Total current liabilities
 
433,772
   
456,613
   
(22,841
 )
 
(5
)
                           
Deferred income taxes
 
15,305
   
13,867
   
1,438
   
10
 
Long-term debt
 
326,298
   
253,222
   
73,076
   
29
 
Other long-term liabilities
 
6,221
   
5,639
   
582
   
10
 
Total liabilities
 
781,596
   
729,341
   
52,255
   
7
 
Total stockholders’ equity
 
201,350
   
218,288
   
(16,938
 )
 
(8
)
Total liabilities and stockholders’ equity
$
982,946
 
$
947,629
 
$
35,317
   
4
%
                                __________________
 
1. 
Total receivables at March 31, 2008 include $6.3 million of acquired receivables, which include National Pool Tile.  The allowance for doubtful
accounts was $9.4 million at March 31, 2008 and $4.8 million at March 31, 2007.

2. 
Total product inventories at March 31, 2008 include $17.1 million of acquired inventories, which include National Pool Tile.  The inventory
reserve was $6.9 million at March 31, 2008 and $4.4 million at March 31, 2007.
 
 
4

 

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
 
Three Months Ended
March 31, 
       
           2008                 2007       Change     
Operating activities                
Net income (loss) (3,184 )                   $ 1,354
$
(4,538  
Adjustments to reconcile net income (loss)to net cash used in operating activities:                
   Depreciation   2,387   2,184   203    
   Amortization   1,064   1,220   (156  
   Share-based compensation   2,270   1,543   727    
   Excess tax benefits from share-based compensation   (1,540 ) (2,834 ) 1,294    
   Equity losses in unconsolidated investments   2,446   1,987   459    
   Other   (2,612 ) (1,920 ) (692 )  
Changes in operating assets and liabilities, net of effects of acquisitions:
               
   Receivables   (60,100 ) (76,398  ) 16,298    
   Product inventories   (80,964 ) (80,453 ) (511  )  
   Accounts payable   136,197   147,859   (11,662  )  
   Other current assets and liabilities  
(11,404
)
(7,849
)
(3,555
)
 
Net cash used in operating activities  
(15,440
)
(13,307
)
(2,133
)
 
                     
Investing activities              
Acquisition of businesses, net of cash acquired  
(32,742
)
(842
)
(31,900
)
 
Purchase of property and equipment, net of sale proceeds  
(1,835
)
(3,073
)
1,238
   
Proceeds from sale of investment  
­
 
75
 
(75
)
 
Net cash used in investing activities  
(34,577
)
(3,840
)
(30,737
)
 
                 
Financing activities                
Proceeds from revolving line of credit  
74,948
 
87,716
 
(12,768
)
 
Payments on revolving line of credit  
(27,425
)
(121,900
)
94,475
   
Proceeds from asset-backed financing  
12,655
 
39,779
 
(27,124
)
 
Payments on asset-backed financing  
(14,170
)
(11,765
)
(2,405
)
 
Proceeds from long-term debt  
 
100,000
 
(100,000
)
 
Payments on long-term debt and other long-term liabilities  
(785
)
(773
)
(12
)
 
Payments of capital lease obligations  
(251
)
(257
)
6
   
Payments of deferred financing costs  
(22
)
(377
)
355
   
Excess tax benefits from share-based compensation  
1,540
 
2,834
 
(1,294
)
 
Issuance of common stock under stock option plans  
1,861
 
2,921
 
(1,060
)
 
Payments of cash dividends  
(5,734
)
(5,248
)
(486
)
 
Purchases of treasury stock  
(1,263
)
(61,788
)
60,525
   
Net cash provided by financing activities  
41,354
 
31,142
 
10,212
   
Effect of exchange rate changes on cash  
(686
)
(174
)
(512
)
 
Change in cash and cash equivalents  
(9,349
)
13,821
 
(23,170
)
 
Cash and cash equivalents at beginning of period  
15,825
 
16,734
 
(909
)
 
Cash and cash equivalents at end of period
$
6,476
$
30,555
$
(24,079
)
 
 
 
5

 

Addendum

(Unaudited)
 
Base Business
Excluded
Total
(In thousands)
 
Three Months
Three Months
Three Months
   
Ended
Ended
Ended
   
March 31,
March 31,
March 31,
   
2008
   
2007
   
2008
   
2007
   
2008
   
2007
 
Net sales
$
332,346
 
$
371,812
 
$
5,869
 
$
1,894
 
$
338,215
 
$
373,706
 
                                     
Gross profit
 
93,547
   
103,035
   
1,807
   
450
   
95,354
   
103,485
 
Gross margin
 
28.1
%
 
27.7
%
 
30.8
%
 
23.8
%
 
28.2
%
 
27.7
%
                                     
Selling and administrative expenses
 
90,873
   
93,671
   
2,284
   
1,182
   
93,157
   
94,853
 
Expenses as a % of net sales
 
27.3
%
 
25.2
%
 
38.9
%
 
62.4
%
 
27.5
%
 
25.4
%
                                     
Operating income (loss)
 
2,674
   
9,364
   
(477
)
 
(732
)
 
2,197
   
8,632
 
Operating income (loss) margin
 
0.8
%
 
2.5
%
 
(8.1
)%
 
(38.7
)%
 
0.6
%
 
2.3
%

We exclude the following sales centers from our base business results for a period of 15 months (parenthetical numbers for each category indicate the number of sales centers excluded as of March 31, 2008):

·  
acquired sales centers (13 -­ see table below);
·  
new sales centers opened in new markets (2);
·  
closed sales centers (3); and
·  
consolidated sales centers in cases where we do not expect to maintain the majority of the existing business (1).

We generally allocate 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 and new market sales centers in the base business calculation including the comparative prior year period.

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

 
 
Acquired
 
 
Acquisition
Date
 
Net
Sales Centers Acquired
 
 
Period
Excluded
National Pool Tile (NPT)
 
March 2008
 
11
 
March 2008
Canswim Pools
 
March 2008
 
1
 
March 2008
Tor-Lyn, Limited
 
February 2007
 
1
 
February – March 2007 and
    January – March 2008

The table below summarizes the changes in our sales centers during the quarter ended March 31, 2008:

December 31, 2007
281
 
     Acquired, net of consolidations (1)
 12
 
     Consolidated
  (1
 )
     Closed
  (1
 )
March 31, 2008
291
 

(1)  We consolidated 4 of the 15 acquired NPT sales centers with existing sales centers at the end of March 2008.
 
 
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We define EBITDA as net income or net loss plus interest expense, income taxes, share-based compensation, depreciation and amortization.  We consider EBITDA an important indicator of the operational strength and performance of our business, including the ability to provide cash flows to fund growth, service debt and pay dividends.  EBITDA eliminates the non-cash expenses related to share-based compensation, depreciation of tangible assets and amortization of intangible assets.  We believe EBITDA should be considered in addition to, not as a substitute for, operating income, net income or loss and other measures of financial performance reported in accordance with accounting principles generally accepted in the United States (GAAP).

The table below presents a reconciliation of net income (loss) to EBITDA.

(Unaudited)
 
Three Months Ended
 
(In thousands)
 
March 31,
 
     
2008
   
2007
 
Net income (loss)
$
(3,184
)
$
1,354
 
 
Add:
           
 
     Interest expense, net
 
5,024
   
4,519
 
 
     Provision (benefit) for income taxes
 
(1,089
)
 
1,588
 
 
     Income tax benefit on equity losses
 
(1,002
)
 
(816
)
 
     Share-based compensation
 
2,270
   
1,543
 
 
     Depreciation
 
2,387
   
2,184
 
 
     Amortization (1)
 
953
   
1,170
 
EBITDA
$
5,359
 
$
11,542
 

                  (1)  Excludes amortization included in interest expense, net

 
7