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Pool Corporation Reports Record Second Quarter Results

COVINGTON, La., July 18, 2013 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today reported record results for the second quarter of 2013.

"Our second quarter results were bolstered by strong performances in our largest, year-round markets and growth in pool refurbishment and replacement activities. Most seasonal markets lagged given the late start to this year's season as noted in our June 18th press release. In contrast, the early start to last year's season amplified the impact of the delayed start in our seasonal markets and the consequential business lost from later pool openings," said Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended June 30, 2013 increased 4% to a record $790.4 million, compared to $757.2 million in the second quarter of 2012, with base business sales also up 4% for the period. The impact of weather on our second quarter results is evidenced by sales growth of approximately 9% on average in our largest, year-round markets while sales in our more seasonal markets remained flat overall. Irrigation sales were up 10% due to increased construction and renovation activity, spurred by modest improvements in the housing market.

Gross profit for the second quarter of 2013 increased 3% to $228.2 million from $222.4 million in the same period of 2012. Gross profit as a percentage of net sales (gross margin) declined 50 basis points to 28.9% in the second quarter of 2013. This decrease is attributable to changes in product mix, customer mix and geographic mix. We experienced double-digit sales growth during the quarter for certain discretionary lower margin product lines such as heaters and lighting products. Alternately, our sales of some higher margin, non-discretionary product lines declined during the quarter, as did sales growth in certain historically higher margin geographic regions as a result of the late start to the 2013 season.

Selling and administrative expenses (operating expenses) increased 2% to $116.2 million in the second quarter of 2013 compared to the same period in 2012. Base business operating expenses increased only 1% compared to the second quarter of 2012.

Operating income for the quarter increased 4% to $112.0 million compared to the same period in 2012. Operating income as a percentage of net sales (operating margin) was 14.2% for the second quarter of 2013 compared to 14.3% in the same period in 2012.

Net income increased 2% to $66.5 million in the second quarter of 2013, compared to $64.9 million for the second quarter of 2012. Earnings per share was up $0.05 to a record $1.39 per diluted share for the three months ended June 30, 2013 versus $1.34 per diluted share for the same period in 2012.

Net sales for the six months ended June 30, 2013 increased 4% to a record $1,160.8 million from $1,119.1 million in the comparable 2012 period. This growth included a 3% improvement in base business sales. Gross margin decreased 50 basis points to 28.7% in the first half of 2013 from 29.2% for the same period last year.

Operating expenses were up 1% compared to the first half of 2012, while base business operating expenses remained flat. Operating income for the first six months of 2013 increased 4% to $118.9 million compared to $114.2 million in the same period last year.

Earnings per share for the first six months of 2013 increased 4% to a record $1.47 per diluted share on net income of $70.0 million, compared to $1.42 per diluted share on net income of $68.6 million in the comparable 2012 period.

On the balance sheet, total net receivables and inventory levels increased 4% and 6%, respectively, relatively in line with sales growth. Total debt outstanding at June 30, 2013 was $300.4 million, down 3% compared to June 30, 2012.

Cash used in operations was $33.0 million for the first six months of 2013 compared to cash provided by operations of $33.5 million for the first six months of 2012. This change is largely attributable to the shift in the timing of the inventory purchase and payment cycle compared to the prior year, which should largely self-correct as the year progresses.   Adjusted EBITDA (as defined in the addendum to this release) was $117.7 million for the second quarter of 2013 compared to $113.5 million for the second quarter of 2012, and $129.8 million for the six months ended June 30, 2013 compared to $124.5 million for the six months ended June 30, 2012.

"We maintain our recently announced earnings guidance range of $2.03 to $2.13 per diluted share. We are unwavering in our expectations for medium and long term earnings growth and intend to stay focused on the opportunities, the dynamics and the development of our industry. We have a driven team of professionals who are 100% committed to delivering exceptional service and doing their utmost to make success a reality as we embark on the second half of the year," said Perez de la Mesa. 

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 321 sales centers in North America and Europe, through which it distributes more than 160,000 national brand and private label products to roughly 80,000 wholesale customers. For more information, 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 POOLCORP's 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 
POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
 
 Three Months EndedSix Months Ended
 June 30,June 30,
 2013201220132012
       
Net sales$ 790,392 $ 757,175$ 1,160,754 $ 1,119,129
Cost of sales562,226 534,770827,827 792,161
Gross profit228,166 222,405332,927 326,968
Percent28.9% 29.4%28.7% 29.2%
       
Selling and administrative expenses116,173 114,271214,002 212,813
Operating income111,993 108,134118,925 114,155
Percent14.2% 14.3%10.2% 10.2%
       
Interest expense, net2,081 2,2003,695 3,677
Income before income taxes and equity earnings109,912 105,934115,230 110,478
Provision for income taxes43,416 41,01845,312 42,055
Equity earnings in unconsolidated investments37 2755 171
Net income$ 66,533 $ 64,943$ 69,973 $ 68,594
       
Earnings per share:      
Basic$ 1.43 $ 1.38$ 1.50 $ 1.45
Diluted$ 1.39 $ 1.34$ 1.47 $ 1.42
Weighted average shares outstanding:      
Basic46,659 47,14246,523 47,330
Diluted47,882 48,28847,758 48,430
       
Cash dividends declared per common share$ 0.19 $ 0.16$ 0.35 $ 0.30
 
 
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
         
 June 30,June 30,Change
 20132012$%
         
Assets        
Current assets:        
Cash and cash equivalents$ 26,936 $ 50,311 $ (23,375) (46)%
Receivables, net281,064 269,060 12,004 4
Product inventories, net424,679 402,266 22,413 6
Prepaid expenses and other current assets10,219 8,437 1,782 21
Deferred income taxes5,103 7,098 (1,995) (28)
Total current assets748,001 737,172 10,829 1
         
Property and equipment, net51,110 45,409 5,701 13
Goodwill169,983 177,103 (7,120) (4)
Other intangible assets, net10,592 11,497 (905) (8)
Equity interest investments1,190 1,089 101 9
Other assets, net9,133 7,857 1,276 16
Total assets$ 990,009 $ 980,127 $ 9,882 1%
         
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable$ 239,976 $ 267,990 $ (28,014) (10)%
Accrued expenses and other current liabilities79,844 83,609 (3,765) (5)
Current portion of long-term debt and other long-term liabilities20 22 (2) (9)
Total current liabilities319,840 351,621 (31,781) (9)
         
Deferred income taxes15,263 9,257 6,006 65
Long-term debt300,426 309,813 (9,387) (3)
Other long-term liabilities7,871 7,058 813 12
Total liabilities643,400 677,749 (34,349) (5)
Total stockholders' equity346,609 302,378 44,231 15
Total liabilities and stockholders' equity$ 990,009 $ 980,127 $ 9,882 1%
         
1.  The allowance for doubtful accounts was $4.4 million at June 30, 2013 and $5.0 million at June 30, 2012.
2.  The inventory reserve was $8.5 million at June 30, 2013 and $9.6 million at June 30, 2012. 
 
 
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
       
       
 Six Months Ended  
 June 30,  
 20132012Change
Operating activities      
Net income$ 69,973 $ 68,594 $ 1,379
Adjustments to reconcile net income to net cash (used in) provided by operating activities:      
Depreciation6,338 5,559 779
Amortization622 638 (16)
Share-based compensation4,111 4,306 (195)
Excess tax benefits from share-based compensation(3,187) (1,609) (1,578)
Equity earnings in unconsolidated investments(55) (171) 116
Other(1,633) 1,248 (2,881)
Changes in operating assets and liabilities, net of effects of acquisitions:      
Receivables(165,713) (157,829) (7,884)
Product inventories(24,134) (13,289) (10,845)
Prepaid expenses and other assets459 2,612 (2,153)
Accounts payable39,458 88,946 (49,488)
Accrued expenses and other current liabilities40,783 34,516 6,267
Net cash (used in) provided by operating activities(32,978) 33,521 (66,499)
       
Investing activities      
Acquisition of businesses, net of cash acquired(1,188) (4,429) 3,241
Purchase of property and equipment, net of sale proceeds(10,500) (9,520) (980)
Other investments29 (166) 195
Net cash used in investing activities(11,659) (14,115) 2,456
       
Financing activities      
Proceeds from revolving line of credit399,472 345,631 53,841
Payments on revolving line of credit(329,928) (183,118) (146,810)
Payments on long-term debt and other long-term liabilities(10) (100,012) 100,002
Excess tax benefits from share-based compensation3,187 1,609 1,578
Proceeds from stock issued under share-based compensation plans13,489 7,879 5,610
Payments of cash dividends(16,308) (14,223) (2,085)
Purchases of treasury stock(10,437) (43,866) 33,429
Net cash provided by financing activities59,465 13,900 45,565
Effect of exchange rate changes on cash and cash equivalents(355) (482) 127
Change in cash and cash equivalents14,473 32,824 (18,351)
Cash and cash equivalents at beginning of period12,463 17,487 (5,024)
Cash and cash equivalents at end of period$ 26,936 $ 50,311 $ (23,375)

ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):

(Unaudited)Base BusinessExcludedTotal
(in thousands)Three Months EndedThree Months EndedThree Months Ended
 June 30,June 30,June 30,
 201320122013201220132012
Net sales$ 785,357 $ 755,284$ 5,035 $ 1,891$ 790,392 $ 757,175
             
Gross profit226,810 221,7981,356 607228,166 222,405
Gross margin28.9% 29.4%26.9% 32.1%28.9% 29.4%
             
Operating expenses115,002 113,7071,171 564116,173 114,271
Expenses as a % of net sales14.6% 15.1%23.3% 29.8%14.7% 15.1%
             
Operating income111,808 108,091185 43111,993 108,134
Operating margin14.2% 14.3%3.7% 2.3%14.2% 14.3%
             
             
(Unaudited)Base BusinessExcludedTotal
(in thousands)Six Months EndedSix Months EndedSix Months Ended
 June 30,June 30,June 30,
 201320122013201220132012
Net sales$ 1,151,800 $ 1,114,239$ 8,954 $ 4,890$ 1,160,754 $ 1,119,129
             
Gross profit330,451 325,5092,476 1,459332,927 326,968
Gross margin28.7% 29.2%27.7% 29.8%28.7% 29.2%
             
Operating expenses210,888 210,9273,114 1,886214,002 212,813
Expenses as a % of net sales18.3% 18.9%34.8% 38.6%18.4% 19.0%
             
Operating income (loss)119,563 114,582(638) (427)118,925 114,155
Operating margin10.4% 10.3%(7.1)% (8.7)%10.2% 10.2%

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

 
 
Acquired (1)
 
Acquisition
Date
Net
Sales Centers
Acquired
 
Periods
Excluded
B. Shapiro Supply, LLC May 2013 1 May - June 2013
Swimming Pool Supply Center, Inc. March 2013 1 March - June 2013
CCR Distribution March 2012 1 January - May 2013 and
      March - May 2012
Ideal Distributors Ltd. February 2012 4 January - April 2013 and
      February - April 2012
G.L. Cornell Company December 2011 1 January - February 2013 and
      January - February 2012
Poolway Schwimmbadtechnik GmbH November 2011 1 January - February 2013 and
      January - February 2012
 
(1) We acquired certain distribution assets of each of these companies.

We exclude sales centers that are acquired, closed or opened in new markets from base business results for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers. As of June 30, 2013, we excluded three sales centers opened in new markets from base business.

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.

The table below summarizes the changes in our sales centers in the first six months of 2013:

December 31, 2012 312
Acquired 2
New locations 7
June 30, 2013 321

Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest expense, income taxes, depreciation, amortization, share-based compensation, goodwill and other non-cash impairments and equity earnings or loss in unconsolidated investments. 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 EndedSix Months Ended
(In thousands)June 30,June 30,
 2013201220132012
Net income$ 66,533 $ 64,943$ 69,973 $ 68,594
Add:        
Interest expense (1)2,081 2,2003,695 3,677
Provision for income taxes43,416 41,01845,312 42,055
Share-based compensation2,206 2,2054,111 4,306
Equity earnings in unconsolidated investments(37) (27)(55) (171)
Depreciation3,265 2,8956,338 5,559
Amortization (2)204 222429 443
Adjusted EBITDA$ 117,668 $ 113,456$ 129,803 $ 124,463
         
(1)  Shown net of interest income and includes amortization of deferred financing costs as discussed below. 
(2)  Excludes amortization of deferred financing costs of $97 and $96 for the three months ended June 30, 2013 and June 30, 2012, respectively, and $193 and $195 for the six months ended June 30, 2013 and June 30, 2012, respectively.

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

(Unaudited)Three Months EndedSix Months Ended
(In thousands)June 30,June 30,
 2013201220132012
Adjusted EBITDA$ 117,668 $ 113,456$ 129,803 $ 124,463
Add:        
Interest expense, net of interest income(1,984) (2,104)(3,502) (3,482)
Provision for income taxes(43,416) (41,018)(45,312) (42,055)
Excess tax benefits from share-based compensation(1,484) (471)(3,187) (1,609)
Other(1,595) 307(1,633) 1,248
Change in operating assets and liabilities(62,181) (2,622)(109,147) (45,044)
Net cash provided by (used in) operating activities$ 7,008 $ 67,548$ (32,978) $ 33,521
CONTACT: Craig K. Hubbard
         985.801.5117
         craig.hubbard@poolcorp.com

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Jul 18, 2013
Disclaimer:
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
________________________________________

Matters discussed in this website contain forward-looking information that involves risks and uncertainties. Forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management's plans and objectives, future contracts, and forecasts of trends and other matters. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as "anticipate", "estimate", "expect", "believe," "will likely result," "outlook," "project" and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following:
  • the seasonality of our business and the sensitivity of the industry to weather conditions
  • intense competition and low barriers to entry in the industry
  • sensitivity of the industry to general economic and market conditions
  • our ability to:
    • penetrate new markets
    • identify appropriate acquisition candidates, complete acquisitions on satisfactory terms and successfully integrate acquired businesses
    • obtain short-term and long-term financing on satisfactory terms
    • generate sufficient cash flows to support expansion plans and general operating activities
    • maintain favorable supplier arrangements and relationships
    • identify and divest assets which do not continue to create value consistent with our objectives
  • changes in laws and regulations, including changes in accounting standards and taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations)
  • changes in environmental, health and safety regulations and our ability to comply with such regulations
  • the risk of fire, safety and casualty losses and related liability claims inherent in the storage of the chemicals that we sell
  • acts of war or terrorist incidents
  • changes in public and consumer taste
  • future litigation or governmental proceedings
  • labor disputes

The foregoing factors are not exhaustive and new factors may emerge which impact our business. It is impossible for us to predict all such factors. Therefore, forward-looking statements should not be relied upon as a prediction of actual future results. We cannot guarantee that any future event or result will be realized, although we believe we have been prudent in our plans and assumptions. Should additional risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from those anticipated. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of subsequent events, new information or otherwise.