EX-99.1 2 poolq109er.htm POOL Q1 2009 ER poolq109er.htm
 
 

Exhibit 99.1
 
FOR IMMEDIATE RELEASE

 
POOL CORPORATION REPORTS FIRST QUARTER RESULTS
 

COVINGTON, LA. (April 23, 2009) – Pool Corporation (the “Company” or “POOL”) (NASDAQ/GSM: POOL) today reported its results for the first quarter of 2009.

“In a very difficult external environment, we continue to focus on the aspects of our business that are directly within our control.  We have improved our pricing and purchasing discipline to increase gross margins, adjusted expenses commensurate with sales expectations and rebalanced inventories while ensuring excellent customer service,” commented Manuel Perez de la Mesa, President and CEO.

Net sales for the seasonally slow first quarter decreased 18% to $276.6 million, compared to $338.2 million in the first quarter of 2008.  Base business sales declined 21% reflecting continued soft demand for pool and irrigation construction products, lower customer early buy purchases and deferred discretionary replacement product sales.

Gross profit for the quarter ended March 31, 2009 decreased $14.2 million, or 15%, to $81.2 million from $95.4 million in the first quarter of 2008.  Gross profit as a percentage of net sales (gross margin) improved 120 basis points to 29.4% in the first quarter of 2009 from 28.2% in the first quarter of 2008.  The increase in gross margin is primarily attributable to improved pricing management, the benefit resulting from pre-price increase inventory purchases in the second half of 2008 and favorable sales mix changes.

Selling and administrative expenses (operating expenses) decreased 9% to $84.8 million in the first quarter of 2009 from $93.2 million in the first quarter of 2008.  Base business operating expenses decreased 11% compared to the first quarter of 2008 due primarily to the impact of cost control initiatives on payroll related and variable expenses.

Operating loss was $3.6 million in the first quarter of 2009 compared to operating income of $2.2 million in the same period in 2008.  Interest expense decreased 34% compared to the first quarter of 2008 due to a lower weighted average effective interest rate between periods.  Loss per share for the first quarter of 2009 was $0.13 per diluted share on a net loss of $6.2 million, compared to a loss of $0.07 per diluted share on a net loss of $3.2 million in the same period in 2008.  Adjusted EBITDA (as defined in the addendum) was a loss of $3.0 million in the first quarter of 2009 compared to earnings of $5.4 million in the first quarter of 2008.

On the balance sheet, total net receivables decreased 22% compared to March 31, 2008 due primarily to lower first quarter 2009 sales and a shift toward more cash sales resulting from tighter credit terms.  Inventory levels decreased 17% to $397.9 million at March 31, 2009, reflecting the success of our inventory rebalancing process.

The seasonal use of cash in operations increased to $46.0 million in the first quarter of 2009 compared to $15.4 million in the same period of 2008.  The 2009 amount was negatively impacted by a $30.0 million tax payment made in January 2009 for estimated third and fourth quarter 2008 federal income taxes, which were deferred by the IRS as allowed for taxpayers in areas affected by Hurricane Gustav.

“The declines in the housing market, consumer credit and general economic conditions combine to make 2009 an extremely challenging year.  Since maintenance and repair product sales are more seasonally weighted to our most important second and third quarters, we expect this impact will partially mitigate much lower new construction and deferred replacement product sales.  We believe that Street earnings consensus of $0.95 per diluted share for fiscal 2009 is reasonable.  In addition, we believe that cash flow provided by operations will exceed net income for 2009,” continued 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.

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 2008 Annual Report on 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 (Loss)
(Unaudited)
(In thousands, except per share data)
 
 
Three Months Ended
  
 
March 31,
  
   
2009
    
2008
  
             
Net sales
$
276,626
  
$
338,215
  
Cost of sales
  
195,433
    
242,861
  
Gross profit
  
81,193
    
95,354
  
Percent
  
29.4
%
  
28.2
%
 
            
Selling and administrative expenses
  
84,839
    
93,157
  
Operating income (loss)
  
(3,646
)
  
2,197
  
Percent
  
(1.3
)%
  
0.6
%
             
Interest expense, net
  
3,327
    
5,024
  
Loss before income tax benefit and equity loss
  
(6,973
)
  
(2,827
)
Income tax benefit
  
(2,740
)
  
(1,089
)
Equity loss in unconsolidated investments, net
  
(2,003
)
  
(1,446
)
Net loss
$
(6,236
)
$
(3,184
)
             
Loss per share:
            
Basic
$
(0.13
)
$
(0.07
)
Diluted
$
(0.13
)
$
(0.07
)
Weighted average shares outstanding:
            
Basic
  
48,218
    
47,538
  
Diluted
  
48,218
    
47,538
  
             
Cash dividends declared per common share
$
0.13
  
$
0.12
  
 

 
 
 
3
 
 

POOL CORPORATION
Condensed Consolidated Balance Sheets
 (Unaudited)
(In thousands)
 
     
March 31,
    
March 31,
    
Change
  
     
2009
    
2008
    
$
    
%
  
                           
Assets
                        
Current assets:
                        
 
Cash and cash equivalents
$
13,103
  
$
6,476
  
$
6,627
    
> 100
%
 
Receivables, net
  
20,373
    
42,266
    
(21,893
)
  
(52
)
 
Receivables pledged under receivables facility
  
139,945
    
163,921
    
(23,976
)
  
(15
)
 
Product inventories, net
  
397,863
    
476,758
    
(78,895
)
  
(17
)
 
Prepaid expenses and other current assets
  
7,973
    
10,241
    
(2,268
)
  
(22
)
 
Deferred income taxes
  
11,908
    
9,139
    
2,769
    
30
  
Total current assets
  
591,165
    
708,801
    
(117,636
)
  
(17
)
                           
Property and equipment, net
  
34,677
    
34,957
    
(280
)
  
(1
)
Goodwill
  
169,936
    
167,398
    
2,538
    
2
  
Other intangible assets, net
  
13,035
    
15,465
    
(2,430
)
  
(16
)
Equity interest investments
  
27,804
    
31,551
    
(3,747
)
  
(12
)
Other assets, net
  
27,158
    
24,774
    
2,384
    
10
  
Total assets
$
863,775
  
$
982,946
  
$
(119,171
)
  
(12
)%
                           
Liabilities and stockholders’ equity
                        
Current liabilities:
                        
 
Accounts payable
$
201,300
  
$
333,104
  
$
(131,804
)
  
(40
)%
 
Accrued expenses and other current liabilities
  
24,911
    
30,704
    
(5,793
)
  
(19
)
 
Short-term financing
  
8,000
    
66,812
    
(58,812
)
  
(88
)
 
Current portion of long-term debt and other long-term liabilities
  
16,613
    
3,152
    
13,461
    
> 100
  
Total current liabilities
  
250,824
    
433,772
    
(182,948
)
  
(42
)
                           
Deferred income taxes
  
19,014
    
15,305
    
3,709
    
24
  
Long-term debt
  
356,721
    
326,298
    
30,423
    
9
  
Other long-term liabilities
  
5,736
    
6,221
    
(485
)
  
(8
)
Total liabilities
  
632,295
    
781,596
    
(149,301
)
  
(19
)
Total stockholders’ equity
  
231,480
    
201,350
    
30,130
    
15
  
Total liabilities and stockholders’ equity
$
863,775
  
$
982,946
  
$
(119,171
)
  
(12
)%
                                ________________
    
1.  
The allowance for doubtful accounts was $13.4 million at March 31, 2009 and $9.4 million at March 31, 2008.

2.  
The inventory reserve was $7.6 million at March 31, 2009 and $6.9 million at March 31, 2008.
 

 

 
4
 
 

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
   
Three Months Ended
March 31,
        
   
  2009
    
   2008
      
 Change
  
Operating activities
                    
Net loss
$
(6,236
)
   $
(3,184
)
 
$
(3,052
)
Adjustments to reconcile net loss to net cash used in operating activities:
                    
 
Depreciation
  
2,209
    
2,387
      
(178
)
 
Amortization
  
662
    
1,064
      
(402
)
 
Share-based compensation
  
1,321
    
2,270
      
(949
)
 
Excess tax benefits from share-based compensation
  
(275
)
  
(1,540
)
 
  
1,265
  
 
Equity loss in unconsolidated investments
  
3,353
    
2,446
      
907
  
 
Other
  
(2,458
)
  
(2,612
)
 
  
154
  
Changes in operating assets and liabilities, net of effects of acquisitions:
                    
 
Receivables
  
(44,221
)
  
(60,100
 )
 
  
15,879
  
 
Product inventories
  
7,510
    
(80,964
)
 
  
88,474
  
 
Accounts payable
  
27,600
    
136,197
      
(108,597
)
  Other current assets and liabilities     (35,432
)
  
(11,404
)
 
  
(24,028
)
 
Net cash used in operating activities
  
  (45,967
)
  
(15,440
)
 
  
(30,527
)
                       
  Investing activities                    
 
Acquisition of businesses, net of cash acquired
  
  —
    
(32,742
)
 
  
32,742
  
 
Purchase of property and equipment, net of sale proceeds
  
  (3,881
)
  
(1,835
)
 
  
(2,046
)
 
Net cash used in investing activities
  
  (3,881
)
  
(34,577
 )
 
  
30,696
  
                       
 
Financing activities
                    
 
Proceeds from revolving line of credit
  
  87,121
    
74,948
      
12,173
  
 
Payments on revolving line of credit
  
  (19,400
)
  
(27,425
 )
 
  
8,025
  
 
Proceeds from asset-backed financing
  
  13,000
    
12,655
      
345
  
 
Payments on asset-backed financing
  
  (25,792
)
  
(14,170
 )
 
  
(11,622
)
 
Proceeds from long-term debt
  
  —
    
—
      
—
  
 
Payments on long-term debt and other long-term liabilities
  
  (1,536
)
  
(785
 )
 
  
(751
)
 
Payments of capital lease obligations
  
  —
    
(251
 )
 
  
251
  
 
Payments of deferred financing costs
  
  (188
)
  
(22
 )
 
  
(166
)
 
Excess tax benefits from share-based compensation
  
  275
    
1,540
      
(1,265
)
 
Proceeds from issuance of common stock under share-based compensation plans
  
  1,000
    
1,861
      
(861
)
 
Payments of cash dividends
  
  (6,279
)
  
(5,734
 )
 
  
(545
)
 
Purchases of treasury stock
     (59
)
  
(1,263
 )
 
  
1,204
  
 
Net cash provided by financing activities
  
  48,142
    
41,354
      
6,788
  
 
Effect of exchange rate changes on cash
     (953
)
  
(686
 )
 
  
(267
)
 
Change in cash and cash equivalents
  
  (2,659
)
  
(9,349
 )
 
  
6,690
  
 
Cash and cash equivalents at beginning of period
     15,762    
15,825
      
(63
)
 
Cash and cash equivalents at end of period
$
   13,103  
$
6,476
    
$
6,627
  



 
5
 
 


Addendum

(Unaudited)
  
Base Business
Excluded
Total
(In thousands)
  
Three Months
Three Months
Three Months
   
Ended
Ended
Ended
   
March 31,
March 31,
March 31,
   
2009
    
2008
    
2009
    
2008
    
2009
    
2008
  
Net sales
$
253,928
  
$
321,281
  
$
22,698
  
$
16,934
  
$
276,626
  
$
338,215
  
                                     
Gross profit
  
74,909
    
90,483
    
6,284
    
4,871
    
81,193
    
95,354
  
Gross margin
  
29.5
%
  
28.2
%
  
27.7
%
  
28.8
%
  
29.4
%
  
28.2
%
                                     
Operating expenses
  
77,847
    
87,475
    
6,992
    
5,682
    
84,839
    
93,157
  
Expenses as a % of net sales
  
30.7
%
  
27.2
%
  
30.8
%
  
33.6
%
  
30.7
%
  
27.5
%
                                     
Operating income (loss)
  
(2,938
)
  
3,008
    
(708
)
  
(811
)
  
(3,646
)
  
2,197
  
Operating margin
  
(1.2
)%
  
0.9
%
  
(3.1
)%
  
(4.8
)%
  
(1.3
)%
  
0.6
%

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, 2009):

·  
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 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.

Since we divested our pool liner manufacturing operation in France in April 2008, we have excluded these operations from base business for the comparative three month period ended March 31, 2008.

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

 
 
Acquired
  
 
Acquisition
Date
  
Net
Sales Centers Acquired
  
 
Period
Excluded
Proplas Plasticos, S.L.
  
November 2008
  
0
  
January 2009 – March 2009
National Pool Tile (NPT)
  
March 2008
  
9
  
January 2009 – March 2009 and March 2008
Canswim Pools
  
March 2008
  
1
  
January 2009 – March 2009 and March 2008

The number of total sales centers did not change during the quarter ended March 31, 2009.
 

 
6
 
 

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 loss to Adjusted EBITDA.

(Unaudited)
  
Three Months Ended
  
(In thousands)
  
March 31,
  
     
2009
    
2008
  
Net loss
$
(6,236
)
$
(3,184
)
 
Add:
            
 
   Interest expense, net
  
3,327
    
5,024
  
 
   Income tax benefit
  
(2,740
)
  
(1,089
)
 
   Income tax benefit on equity loss
  
(1,350
)
  
(1,002
)
 
   Share-based compensation
  
1,321
    
2,270
  
 
   Depreciation
  
2,209
    
2,387
  
 
   Amortization (1)
  
453
    
953
  
Adjusted EBITDA
$
(3,016
)
$ 
5,359
 
               
(1) Excludes amortization included in interest expense, net

The table below presents a reconciliation of Adjusted EBITDA to cash used in operating activities.  Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited)
  
Three Months Ended
  
(In thousands)
  
March 31,
  
     
2009
    
2008
  
Adjusted EBITDA
$
(3,016
)
$
5,359
  
 
Add:
            
 
Interest expense, net (1)
  
(3,118
)
  
(4,913
)
 
Income tax benefit
  
2,740
    
1,089
  
 
Income tax benefit on equity loss
  
1,350
    
1,002
  
 
Excess tax benefits on share-based compensation
  
(275
)
  
(1,540
)
 
Equity loss in unconsolidated investments
  
3,353
    
2,446
  
 
Other
  
(2,458
)
  
(2,612
)
 
Change in operating assets and liabilities
  
(44,543
)
  
(16,271
)
Net cash used in operating activities
$
(45,967
)
$
 (15,440
)

(1)
Excludes amortization of deferred financing costs of $209 for 2009 and $110 for 2008.  This non-cash expense is included in interest expense, net on the Consolidated Statements of Income (Loss).



 
7