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Pool Corporation Reports First Quarter Results and Affirms 2014 Earnings Guidance Range

COVINGTON, La., April 17, 2014 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today reported results for the first quarter of 2014.

"As we focus on the emerging 2014 season, we believe our first quarter results are a solid starting point. From an operational perspective, the first quarter offers us an opportunity to further every aspect of our business. We have expanded into new areas and have enhanced our product offerings to extend our reach and our ability to better serve our customers," said Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended March 31, 2014 increased 10% to a record $406.3 million compared to $370.4 million in the first quarter of 2013, with base business sales up 9% for the period. Increased replacement and remodel activity led our base business growth, as evidenced by double-digit sales growth in building materials and equipment, primarily in our largest year-round markets. Approximately 2% of our sales growth reflected a change in the timing of customer early buy purchases, which effectively shifted sales into the first quarter of 2014 that have historically occurred in the second quarter. This change enables our customers to better position themselves to meet demand during the 2014 season, but alters the year over year comparability of our first and second quarter results.

Gross profit for the first quarter of 2014 increased 9% to a record $114.1 million from $104.8 million in the same period of 2013. Gross profit as a percentage of net sales (gross margin) declined 20 basis points to 28.1% in the first quarter of 2014. The shift in customer early buy purchases negatively impacted first quarter gross margin. Excluding this impact, gross margin was essentially flat compared to the first quarter of last year.

Selling and administrative expenses (operating expenses) increased 8% to $105.5 million in the first quarter of 2014 compared to the first quarter of 2013, with base business operating expenses up 7% for the period. This increase primarily reflects incremental costs to support our first quarter net sales growth, inflationary cost increases, higher outside professional fees and increased costs due to the expansion in 2014 of our annual retail marketing event. These increases had a proportionately larger impact on our results given the seasonality of our first quarter sales.

Operating income for the quarter increased 25% to $8.6 million compared to the same period in 2013. Operating income as a percentage of net sales (operating margin) was 2.1% for the first quarter of 2014 compared to 1.9% in the first quarter of 2013.

Net income increased 22% to $4.2 million in the first quarter of 2014, compared to $3.4 million for the first quarter of 2013. Earnings per share was up $0.02 to $0.09 per diluted share for the three months ended March 31, 2014 versus $0.07 per diluted share for the comparable period in 2013.

On the balance sheet, total net receivables and net inventory levels increased 12% and 7% compared to March 31, 2013. Total debt outstanding at March 31, 2014 was $324.2 million, up 16% compared to March 31, 2013.

Cash used in operations was $37.3 million for the first three months of 2014 compared to $40.0 million for the first three months of 2013. Adjusted EBITDA (as defined in the addendum to this release) was $14.3 million for the first quarter of 2014 compared to $12.1 million for the first quarter of 2013.

"We are now fully engaged in 2014, with our team dedicated to exceeding customers' expectations every day to earn their business. We affirm our 2014 annual earnings guidance of $2.35 to $2.45 per diluted share. All in all, we believe we have the tools, the programs, the inventory, the support and especially, the people to uniquely provide more value than anyone in the industry," said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 325 sales centers in North America, Europe and South America, 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," "should" 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 2013 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 Ended
 March 31,
 20142013
     
Net sales $ 406,344  $ 370,362
Cost of sales292,244 265,601
Gross profit114,100 104,761
Percent28.1% 28.3%
     
Selling and administrative expenses105,454 97,829
Operating income8,646 6,932
Percent2.1% 1.9%
     
Interest expense, net1,933 1,614
Income before income taxes and equity earnings6,713 5,318
Provision for income taxes2,604 1,896
Equity earnings in unconsolidated investments79 18
Net income $ 4,188  $ 3,440
     
Earnings per share:    
Basic $ 0.09  $ 0.07
Diluted $ 0.09  $ 0.07
Weighted average shares outstanding:    
Basic45,178 46,385
Diluted46,375 47,580
     
Cash dividends declared per common share $ 0.19  $ 0.16
 
 
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
         
 March 31,March 31,Change
 20142013$%
         
Assets        
Current assets:        
Cash and cash equivalents $ 7,257  $ 12,873  $ (5,616) (44)%
Receivables, net47,694 188,294 (140,600) (75)
Receivables pledged under receivables facility163,413 - 163,413 100
Product inventories, net527,304 494,321 32,983 7
Prepaid expenses and other current assets9,944 13,029 (3,085) (24)
Deferred income taxes5,427 5,153 274 5
Total current assets761,039 713,670 47,369 7
         
Property and equipment, net55,212 48,755 6,457 13
Goodwill173,554 169,983 3,571 2
Other intangible assets, net10,991 10,793 198 2
Equity interest investments1,272 1,179 93 8
Other assets, net11,132 9,360 1,772 19
Total assets $ 1,013,200  $ 953,740  $ 59,460 6%
         
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable $ 370,002  $ 338,026  $ 31,976 9%
Accrued expenses and other current liabilities28,069 30,413 (2,344) (8)
Current portion of long-term debt and other long-term liabilities4 21 (17) (81)
Total current liabilities398,075 368,460 29,615 8
         
Deferred income taxes19,747 14,207 5,540 39
Long-term debt324,226 278,542 45,684 16
Other long-term liabilities9,474 7,549 1,925 26
Total liabilities751,522 668,758 82,764 12
Total stockholders' equity261,678 284,982 (23,304) (8)
Total liabilities and stockholders' equity $ 1,013,200  $ 953,740  $ 59,460 6%
         
 
1.  The allowance for doubtful accounts was $4.8 million at March 31, 2014 and $5.4 million at March 31, 2013.
2.  The inventory reserve was $7.8 million at March 31, 2014 and $8.5 million at March 31, 2013. 
 
 
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
       
 Three Months Ended  
 March 31,  
 20142013Change
Operating activities      
Net income$ 4,188 $ 3,440 $ 748
       
Adjustments to reconcile net income to net cash used in operating activities:      
Depreciation3,434 3,073 361
Amortization328 321 7
Share-based compensation2,058 1,905 153
Excess tax benefits from share-based compensation(1,487) (1,703) 216
Equity earnings in unconsolidated investments(79) (18) (61)
Other335 (38) 373
Changes in operating assets and liabilities, net of effects of acquisitions:      
Receivables(85,018) (74,283) (10,735)
Product inventories(97,032) (94,786) (2,246)
Prepaid expenses and other assets(1,197) (2,461) 1,264
Accounts payable154,675 137,896 16,779
Accrued expenses and other current liabilities(17,550) (13,332) (4,218)
Net cash used in operating activities(37,345) (39,986) 2,641
       
Investing activities      
Acquisition of businesses, net of cash acquired(4,512) (325) (4,187)
Purchase of property and equipment, net of sale proceeds(5,870) (4,882) (988)
Other investments, net49 9 40
Net cash used in investing activities(10,333) (5,198) (5,135)
       
Financing activities      
Proceeds from revolving line of credit184,988 149,760 35,228
Payments on revolving line of credit(163,549) (102,100) (61,449)
Proceeds from asset-backed financing66,569- 66,569
Payments on asset-backed financing(10,200)- (10,200)
Payments on long-term debt and other long-term liabilities- (5) 5
Excess tax benefits from share-based compensation1,487 1,703 (216)
Proceeds from stock issued under share-based compensation plans5,231 6,438 (1,207)
Payments of cash dividends(8,569) (7,434) (1,135)
Purchases of treasury stock(28,168) (3,829) (24,339)
Net cash provided by financing activities47,789 44,533 3,256
Effect of exchange rate changes on cash and cash equivalents(860) 1,061 (1,921)
Change in cash and cash equivalents(749) 410 (1,159)
Cash and cash equivalents at beginning of period8,006 12,463 (4,457)
Cash and cash equivalents at end of period$ 7,257 $ 12,873 $ (5,616)

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
 March 31,March 31,March 31,
 201420132014201320142013
Net sales$ 404,618 $ 370,244$ 1,726 $ 118$ 406,344 $ 370,362
             
Gross profit113,547 104,720553 41114,100 104,761
Gross margin28.1% 28.3%32.0% 34.7%28.1% 28.3%
             
Operating expenses104,583 97,751871 78105,454 97,829
Expenses as a % of net sales25.8% 26.4%50.5% 66.1%26.0% 26.4%
             
Operating income (loss)8,964 6,969(318) (37)8,646 6,932
Operating margin2.2% 1.9%(18.4)% (31.4)%2.1% 1.9%

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

 
 
Acquired (1)
 
Acquisition
Date
Net
Sales Centers
Acquired
 
Periods
Excluded
DFW Stone Supply, LLC March 2014 2 March 2014
Atlantic Chemical & Aquatics Inc. February 2014 2 February - March 2014
B. Shapiro Supply, LLC May 2013 1 January - March 2014
Swimming Pool Supply Center, Inc. March 2013 1 January - March 2014 and March 2013
 
(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 March 31, 2014, we excluded one sales center opened in a new market 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 three months of 2014: 

December 31, 2013 321
Acquired 4
New locations 1
Consolidated locations (1)
March 31, 2014 325

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 Ended
(In thousands)March 31,
 20142013
Net income$ 4,188 $ 3,440
Add:    
Interest expense (1)1,933 1,614
Provision for income taxes2,604 1,896
Share-based compensation2,058 1,905
Equity earnings in unconsolidated investments(79) (18)
Depreciation3,434 3,073
Amortization (2)195 225
Adjusted EBITDA$ 14,333 $ 12,135
 
(1) Shown net of interest income and includes amortization of deferred financing costs as discussed below.
(2) Excludes amortization of deferred financing costs of $133 and $96 for the three months ended March 31, 2014 and March 31, 2013, respectively.

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

(Unaudited)Three Months Ended
(In thousands)March 31,
 20142013
Adjusted EBITDA$ 14,333 $ 12,135
Add:    
Interest expense, net of interest income(1,800) (1,518)
Provision for income taxes(2,604) (1,896)
Excess tax benefits from share-based compensation(1,487) (1,703)
Other335 (38)
Change in operating assets and liabilities(46,122) (46,966)
Net cash used in operating activities$ (37,345) $ (39,986)
CONTACT: Craig K. Hubbard
         985.801.5117
         craig.hubbard@poolcorp.com

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Apr 17, 2014
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.