Pool Corporation Reports Fiscal 2010 Results

/ Source: GlobeNewswire

Highlights for the year include:

  • Sales growth of 5%, including 2% from base business
  • 14% increase in operating income
  • 2010 Diluted EPS of $1.15
  • 2011 Diluted EPS guidance of $1.27 to $1.35

COVINGTON, La., Feb. 17, 2011 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq:POOL) today announced fourth quarter and full year 2010 results.

"As expected, 2010 proved to be a transitional year. Our successful execution was the primary factor driving our increased sales and earnings. This performance, coupled with strong cash flow generation, enabled us to not only further de-leverage our balance sheet, but also to resume repurchasing shares and complete three acquisitions," commented Manuel Perez de la Mesa, President and CEO.

Net sales for the year ended December 31, 2010 increased 5% to $1.61 billion, compared to $1.54 billion in 2009. Base business sales increased 2% due to market share gains and some gradual improvement in external market trends that resulted in higher discretionary purchases by consumers. Base business sales growth for the year includes 3% growth on the swimming pool side of the business, with increases in many markets and most product categories. While sales on the irrigation side of the business decreased compared to 2009, sales declines moderated as 2010 progressed.  

Gross profit for the year ended December 31, 2010 increased 5% to $471.3 million from $449.7 million in 2009. Gross profit as a percentage of net sales (gross margin) remained flat year over year at 29.2% as improved pricing and purchasing discipline offset downward margin pressures due to the competitive pricing environment. 

Selling and administrative expenses (operating expenses) for 2010 increased 2% to $370.0 million from $361.3 million in 2009. This increase is primarily due to the impact of expenses related to recent acquisitions.  Base business operating expenses were essentially flat year over year with a $9.1 million increase in incentive costs offset by decreases in bad debt expense, facility lease costs and other expenses.  

Operating income for the year improved 14% to $101.2 million from $88.4 million in 2009. Operating income as a percentage of net sales (operating margin) increased to 6.3% in 2010 compared to 5.7% in 2009. Adjusted EBITDA (as defined in the addendum to this release) was $121.4 million in 2010 compared to $107.9 million in 2009. Interest expense, net declined $3.0 million compared to 2009 due primarily to a 23% decline in average debt outstanding.

The Company no longer has an equity interest in Latham Acquisition Corporation (LAC) and has not recognized any impact related to LAC's 2010 results. The Company recognized a total equity loss of $28.7 million in 2009 for LAC, including a $26.5 million equity loss related to its pro rata share of LAC's non-cash goodwill and other intangible asset impairment charge. 

Earnings per share for 2010 was $1.15 per diluted share on net income of $57.6 million for the year, compared to earnings per share of $0.39 per diluted share on net income of $19.2 million in 2009. Excluding the impact of LAC's non-cash impairment charge, adjusted earnings per diluted share for 2009 was $0.93 on adjusted net income of $45.7 million. Earnings per share for 2010 increased $0.22 per diluted share, or 24% compared to the adjusted 2009 amount. (See the reconciliation of non-GAAP to GAAP measures in the addendum to this release). 

On the balance sheet, total net receivables increased 5% compared to December 31, 2009 due to an increase in current trade receivables as a result of base business sales growth, higher vendor rebate receivables and the impact from the reduction in the allowance for doubtful accounts. This increase was partially offset by reductions in past due receivable balances due primarily to significant improvements in customer collections. Inventory levels declined 2% to $347.4 million at December 31, 2010 compared to $355.5 million at December 31, 2009. Excluding inventory from recent acquisitions, inventories decreased 4% year over year due to continued inventory rebalancing efforts. Total debt outstanding at December 31, 2010 was $198.7 million, down $50.0 million from the balance at December 31, 2009.

Cash provided by operations was $94.0 million in 2010, a decrease of $19.3 million compared to 2009 due primarily to a decline in cash generated from working capital improvements. In 2009, cash provided by operations benefited from a 17% year over year reduction in accounts receivable balances and a 12% year over year reduction in inventory levels as of December 31, 2009.  

Net sales for the seasonally slow fourth quarter increased 4% to $241.4 million compared to the fourth quarter of 2009. Base business sales improved 4% in the quarter compared to the same period in 2009. Gross margin increased 150 basis points to 30.5% in the fourth quarter of 2010 from 29.0% for the same period last year. This margin expansion reflects a benefit from continued improvements in pricing and purchasing discipline. Combined with fourth quarter purchasing strategies that included a favorable impact from a higher percentage of total purchases from preferred vendors, these improvements offset the lingering negative impact from intense price competition within the industry.

Operating loss for the fourth quarter of 2010 was $16.8 million compared to a loss of $21.8 million in the same period last year. While interest expense related to debt declined over 20% compared to the fourth quarter of 2009, the increase in Interest expense, net reflects a $1.5 million favorable impact from foreign currency transaction gains in the fourth quarter of 2009.  Loss per diluted share for the fourth quarter of 2010 was $0.24 on a net loss of $11.8 million, compared to a loss of $0.28 per diluted share on a net loss of $13.6 million in the comparable 2009 period.  

"The depth of our talent and resources positions us for strong growth in the future as the macroeconomic environment gradually recovers to more normalized levels.  Specific to 2011, we believe that the recovery impact will be modest in our industry given the lagging recovery of single family home values and the ongoing conservative nature of real estate based lending.  Despite these market constraints, we believe that our continued investment in growth initiatives and sound execution of our strategies will enable us to increase earnings to $1.27 to $1.35 per diluted share in 2011.  This range includes our expectation that sales growth will be in the low to mid-single digits and that positive leverage of our infrastructure will result in strong contribution margins," said Perez de la Mesa.

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 160,000 national brand and private label products to roughly 80,000 wholesale customers. For more information about POOL, please visit www.poolcorp.com.

The Pool Corporation logo is available at

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 changes in the economy and the housing market, 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 and other risks detailed in POOL's most recent Form 10-Q filed with the Securities and Exchange Commission.

 

 

ADDENDUM

Base Business

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

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

We exclude the following sales centers from base business results for a period of 15 months (parenthetical numbers for each category indicate the number of sales centers excluded as of December 31, 2010):

  • acquired sales centers (see table above);
  • existing sales centers consolidated with acquired sales centers (3);
  • closed sales centers (0);
  • consolidated sales centers in cases where we do not expect to maintain the majority of the existing business (0); and
  • sales centers opened in new markets (1).

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 2010: 

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share

The table below reconciles net income (loss) to adjusted net income (loss), and earnings (loss) per diluted share to adjusted earnings (loss) per diluted share. For comparability purposes, the adjusted 2009 amount excludes a one-time non-cash charge related to our former investment in LAC.

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 losses in unconsolidated investments, net of income taxes.  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. 

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. 

 

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