 | SCP Pool Corporation | |
Craig K. Hubbard
Chief Financial Officer
985.801.5117
craig.hubbard@scppool.com
FOR IMMEDIATE RELEASE
SCP POOL CORPORATION REPORTS RECORD FISCAL 2002 RESULTS
_________________
2002 EARNINGS PER SHARE INCREASE 22% TO $1.62
COVINGTON, La. (February 13, 2003) – SCP Pool Corporation (the “Company” or “SCP”) (Nasdaq/NM: POOL) today reported record net sales and net income for 2002.
Net sales for the year ended December 31, 2002 increased $129.0 million, or 15%, to $983.2 million, compared to $854.2 million in 2001. Base business growth of 10% contributed $84.5 million to the increase, while acquired service centers and service centers consolidated with acquired locations accounted for the remaining increase. Same store sales growth was also 10% in 2002.
Gross profit for the twelve months ended December 31, 2002 increased $34.6 million, or 16%, to $255.5 million from $220.9 million in 2001. This increase was primarily due to the increase in net sales. Gross profit margin increased 10 basis points to 26.0% for the year ended December 31, 2002 from 25.9% for the same period last year.
Operating expenses in 2002 increased $25.8 million, or 16%, to $182.8 million from $157.0 million in 2001. Excluding the impact of acquisitions and 2001 goodwill amortization, operating expenses as a percentage of net sales was unchanged at 17.9%.
Operating income for the year increased $8.8 million, or 14%, to $72.7 million, or 7.4% of net sales, compared to operating income of $63.9 million, or 7.5% of net sales, in the prior year. Excluding the impact of acquisitions and 2001 goodwill amortization, operating income increased $7.8 million, or 12%, to $73.5 million from $65.7 million and operating income as a percentage of net sales (operating margin) increased 10 basis points to 8.1% in 2002 from 8.0% in 2001.
Earnings per share for 2002 increased 22% to $1.62 per diluted share on net income of $41.3 million, compared to $1.33 per diluted share on net income of $35.4 million last year. Excluding the 2002 dilutive impact of the Fort Wayne acquisition and goodwill amortization in 2001, earnings per diluted share increased 19% to $1.64 per diluted share in 2002 from $1.38 in 2001.
Cash flow from operations in 2002 was $59.2 million compared to $26.8 million in 2001. The increase in cash flow from operations was primarily due to increased net earnings and reduced pre-payments of inventory purchases with extended terms.
“We completed another solid year of performance with notable improvements in many facets of our sales and operational execution. In addition, we see opportunities for continued growth as we complete the integration of the Fort Wayne acquisition and continue to improve our execution. We remain comfortable with our estimated $1.95 in earnings per share for 2003,” commented Manuel Perez de la Mesa, President and CEO.
POOL Reports Record Year End Results
Page 2
February 13, 2003
Net sales for the quarter ended December 31, 2002 increased $27.4 million, or 21%, to $159.0 million from $131.6 million in the comparable quarter last year. Base business sales growth of 11% contributed $15.0 million to the increase, while acquired service centers and service centers consolidated with acquired locations accounted for the remaining increase. Same store sales grew 10% in the fourth quarter of 2002.
Gross profit for the three months ended December 31, 2002 increased $7.0 million, or 21%, to $40.3 million from $33.3 million in 2001. This increase was primarily due to the increase in net sales. Gross profit margin was unchanged between quarters at 25.3%.
Operating loss for the quarter increased to $4.5 million, or 2.8% of net sales, compared to an operating loss of $3.9 million, or 3.0% of net sales, in the prior year. Excluding the impact of acquisitions and 2001 goodwill amortization, the operating loss for the quarter decreased $0.9 million, to $1.5 million in 2002 from $2.4 million in 2001.
In the fourth quarters of 2002 and 2001, the Company reported a net loss of $0.15 per share. Excluding the 2002 dilutive impact of the Fort Wayne acquisition and goodwill amortization in 2001, the net loss per diluted share decreased to $0.11 in 2002 from $0.14 in 2001.
“The Board is pleased with SCP’s continued success despite the economic challenges of 2002. It once again demonstrates the resiliency of the swimming pool industry and SCP’s strong performance in this industry,” remarked W.B. Sexton, Chairman.
Beginning in the fourth quarter of 2002, we began calculating our “base business” growth, which is consistent with measures used by other distributors. At December 31, 2002, there were 161 service centers included in the calculation of base business sales. Of the excluded service centers, 11 were acquired within the last 15 months and 13 were existing service centers that were consolidated with acquired service centers. In addition to the 24 service centers excluded from the calculation of base business sales, the same store sales calculation also excluded seven new service centers open less than 15 months and eight locations affected by new service center openings in the immediate market areas within the last 15 months.
SCP Pool Corporation is the world’s largest distributor of swimming pool supplies and related products. As of February 13, 2003, the Company distributes more than 60,000 national brand and private label products to over 51,000 customers through 185 service centers in North America and Europe. For more information about SCP, please visit www.scppool.com.
This news release includes “forward-looking” statements that include risk and uncertainties. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of factors, including the sensitivity of the swimming pool supply business to weather conditions and other risks detailed in the Company’s latest Form 10-Q filed with the Securities and Exchange Commission.
POOL Reports Record Year End Results
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February 13, 2003
| Consolidated Statements of Income | |||||||||||
| (Unaudited) | Twelve Months | Three Months | |||||||||
| (In thousands, except per share data) | Ended | Ended | |||||
| December 31, | December 31, |
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||||||||||||||||
| Net sales | $ | 983,246 | $ | 854,234 | $ | 159,005 | $ | 131,600 | ||||||||||||||||||||||||
| Cost of sales | 727,714 | 633,360 | 118,739 | 98,347 | ||||||||||||||||||||||||||||
| Gross profit | 255,532 | 220,874 | 40,266 | 33,253 | ||||||||||||||||||||||||||||
| Percent | 26.0 | % | 25.9 | % | 25.3 | % | 25.3 | % | ||||||||||||||||||||||||
| Selling and operating expenses | ||||||||||||||||||||||||||||||||
| Selling and administrative expenses | 182,845 | 154,827 | 44,732 | 36,664 | ||||||||||||||||||||||||||||
| Goodwill amortization | — | 2,179 | — | 506 | ||||||||||||||||||||||||||||
| Total selling and operating expenses | 182,845 | 157,006 | 44,732 | 37,170 | ||||||||||||||||||||||||||||
| Operating income (loss) | 72,687 | 63,868 | (4,466 | ) | (3,917 | ) | ||||||||||||||||||||||||||
| Percent | 7.4 | % | 7.5 | % | (2.8 | )% | (3.0 | )% | ||||||||||||||||||||||||
| Interest expense | 4,977 | 5,283 | 1,116 | 1,335 | ||||||||||||||||||||||||||||
| Income (loss) before income taxes | ||||||||||||||||||||||||||||||||
| and extraordinary items | 67,710 | 58,585 | (5,582 | ) | (5,252 | ) | ||||||||||||||||||||||||||
| Provision for income taxes | 26,407 | 23,141 | (2,177 | ) | (1,436 | ) | ||||||||||||||||||||||||||
| Net income (loss) | 41,303 | 35,444 | (3,405 | ) | (3,816 | ) | ||||||||||||||||||||||||||
| Net income (loss) per share of common stock | ||||||||||||||||||||||||||||||||
| Basic | 1.70 | 1.39 | (0.15 | ) | (0.15 | ) | ||||||||||||||||||||||||||
| Diluted | 1.62 | 1.33 | (0.15 | ) | (0.15 | ) | ||||||||||||||||||||||||||
| Average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic | 24,231 | 25,425 | 23,319 | 24,949 | ||||||||||||||||||||||||||||
| Diluted | 25,525 | 26,725 | 24,650 | 26,262 | ||||||||||||||||||||||||||||
POOL Reports Record Year End Results
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February 13, 2003
| Condensed Consolidated Balance Sheets | |||||||||||
| (Unaudited) | |||||||||||
| (In thousands) | December 31, | ||||||||||
| 2002 | 2001(1) | |||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 5,132 | $ | 3,524 | ||||||||||||||||
| Receivables, net(2) (3) | 70,142 | 60,231 | ||||||||||||||||||
| Product inventories, net(2) (4) | 183,720 | 181,462 | ||||||||||||||||||
| Prepaid expenses | 2,372 | 2,517 | ||||||||||||||||||
| Deferred income taxes | 1,708 | 2,599 | ||||||||||||||||||
| Total current assets | 263,074 | 250,333 | ||||||||||||||||||
| Property and equipment, net | 20,921 | 15,844 | ||||||||||||||||||
| Goodwill, net | 107,739 | 73,582 | ||||||||||||||||||
| Intangible assets, net | 8,579 | 6,446 | ||||||||||||||||||
| Other assets, net | 1,781 | 2,385 | ||||||||||||||||||
| Total assets | 402,094 | 348,590 | ||||||||||||||||||
| Liabilities and stockholders’ equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | 93,307 | 95,588 | ||||||||||||||||||
| Accrued and other current liabilities | 24,708 | 17,798 | ||||||||||||||||||
| Current portion of long-term debt | 885 | 91 | ||||||||||||||||||
| Total current liabilities | 118,900 | 113,477 | ||||||||||||||||||
| Deferred income taxes | 12,536 | 5,541 | ||||||||||||||||||
| Long-term debt, less current portion | 125,175 | 85,000 | ||||||||||||||||||
| Other long-term liabilities | 3,542 | — | ||||||||||||||||||
| Total stockholders’ equity | 141,941 | 144,572 | ||||||||||||||||||
| Total liabilities and stockholders’ equity | 402,094 | 348,590 | ||||||||||||||||||
| 1. | The balance sheet at December 31, 2001 has been derived from the 2001 audited financial statements but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
| 2. | At December 31, 2002, the estimated accounts receivable and inventory balances from the acquired Fort Wayne operations were $5.9 million and $20.9 million, respectively. |
| 3. | The allowance for doubtful accounts (AFDA) was $3.3 million in 2002 and $2.8 million in 2001. The AFDA represented 5.7% and 6.1% of gross trade accounts receivable in 2002 and 2001, respectively, and 48% and 46% of the accounts receivable greater than 60 days past due in 2002 and 2001, respectively. |
| 4. | The inventory reserve was $3.1 million in 2002 and $3.9 million in 2001. The reserve is calculated by reserving 5% of slower moving inventory classes 4-13 with an additional 5% reserve provided for excess inventory in classes 4-12 and an additional 45% provided for excess inventory in class 13. Estimated slowest moving inventory class 13 decreased to $7.7 million in 2002 from $8.5 million in 2001. |
POOL Reports Record Year End Results
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February 13, 2003
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | Year Ended | |||||||
| December 31, | ||||||||
| 2002 | 2001 | ||||||||||||||||||||||||||||
| Operating activities | |||||||||||||||||||||||||||||
| Net income | $ | 41,303 | $ | 35,444 | |||||||||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by | |||||||||||||||||||||||||||||
| operating activities | 12,146 | 8,449 | |||||||||||||||||||||||||||
| Changes in operating assets and liabilities, net of effects | |||||||||||||||||||||||||||||
| of acquisitions | |||||||||||||||||||||||||||||
| Receivables | 6,086 | 5,678 | |||||||||||||||||||||||||||
| Product inventories | 16,635 | (34,912 | ) | ||||||||||||||||||||||||||
| Prepaid expenses and other assets | 1,312 | (3,601 | ) | ||||||||||||||||||||||||||
| Accounts payable | (18,306 | ) | 15,203 | ||||||||||||||||||||||||||
| Accrued expenses and other current liabilities | (17 | ) | 492 | ||||||||||||||||||||||||||
| Net cash provided by operating activities | 59,159 | 26,753 | |||||||||||||||||||||||||||
| Investing activities | |||||||||||||||||||||||||||||
| Acquisition of businesses, net of cash acquired | (45,350 | ) | (50,684 | ) | |||||||||||||||||||||||||
| Purchase of property and equipment | (6,430 | ) | (6,325 | ) | |||||||||||||||||||||||||
| Proceeds from sale of property and equipment | 14 | 52 | |||||||||||||||||||||||||||
| Net cash used in investing activities | (51,766 | ) | (56,957 | ) | |||||||||||||||||||||||||
| Financing activities | |||||||||||||||||||||||||||||
| Net borrowings from revolving loan | 40,175 | 52,350 | |||||||||||||||||||||||||||
| Payments on long-term debt | — | (8,250 | ) | ||||||||||||||||||||||||||
| Issuance of common stock | 1,111 | 3,125 | |||||||||||||||||||||||||||
| Purchase of treasury stock | (47,505 | ) | (16,958 | ) | |||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (6,219 | ) | 30,267 | ||||||||||||||||||||||||||
| Effect of exchange rate changes on cash | 434 | 30 | |||||||||||||||||||||||||||
| Change in cash and cash equivalents | 1,608 | 93 | |||||||||||||||||||||||||||
| Cash and cash equivalents at beginning of year | 3,524 | 3,431 | |||||||||||||||||||||||||||
| Cash and cash equivalents at end of year | 5,132 | 3,524 | |||||||||||||||||||||||||||
POOL Reports Record Year End Results
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February 13, 2003
Addendum
| (In thousands) | Base Business | |||||||
| Quarter | Year | |
| Ended | Ended | |
| December 31, | December 31, |
| 2002 | 2001* | 2002 | 2001* | ||||||||||||||||||||||||||
| Net sales | $ | 145,404 | $ | 130,418 | $ | 908,822 | $ | 824,340 | |||||||||||||||||||||
| Gross profit | 36,701 | 33,020 | 236,027 | 213,238 | |||||||||||||||||||||||||
| Gross margin | 25.2 | % | 25.3 | % | 26.0 | % | 25.9 | % | |||||||||||||||||||||
| Selling and operating expenses | 38,206 | 35,460 | 162,508 | 147,523 | |||||||||||||||||||||||||
| Expenses as a % of net sales | 26.3 | % | 27.2 | % | 17.9 | % | 17.9 | % | |||||||||||||||||||||
| Operating income (loss) | (1,505 | ) | (2,440 | ) | 73,519 | 65,715 | |||||||||||||||||||||||
| Operating margin | (1.0 | )% | (1.9 | )% | 8.1 | % | 8.0 | % | |||||||||||||||||||||
| (In thousands) | Acquisitions | |
| Quarter | Year | |
| Ended | Ended | |
| December 31, | December 31, |
| 2002 | 2001* | 2002 | 2001* | ||||||||||||||||||||||||||
| Net sales | $ | 13,601 | $ | 1,182 | $ | 74,424 | $ | 29,894 | |||||||||||||||||||||
| Gross profit | 3,565 | 233 | 19,505 | 7,636 | |||||||||||||||||||||||||
| Gross margin | 26.2 | % | 19.7 | % | 26.2 | % | 25.5 | % | |||||||||||||||||||||
| Selling and operating expenses | 6,526 | 1,204 | 20,337 | 7,304 | |||||||||||||||||||||||||
| Expenses as a % of net sales | 48.0 | % | 101.9 | % | 27.3 | % | 24.4 | % | |||||||||||||||||||||
| Operating income (loss) | (2,961 | ) | (971 | ) | (832 | ) | 332 | ||||||||||||||||||||||
| Operating margin | (21.8 | )% | (82.1 | )% | (1.1 | )% | 1.1 | % | |||||||||||||||||||||
*Excludes goodwill amortization
We calculate base business growth by excluding the following service centers from the calculation for 15 months:
- Service centers acquired within the past 15 months;
- Service centers consolidated with acquired service centers; and
- New service centers opened in purely new markets in the past 15 months.
The effect of acquisitions in the 2002 compared to 2001 tables above includes the operations of the following:
- Fort Wayne Pools - August 2002 through December 2002
- Service centers consolidated with Fort Wayne locations – December 2002 and December 2001
- Capital Pools (Canada) – October 2001 through December 2002
- Exporlinea (Portugal) – July through September of 2002 and July through September of 2001
- The pool division of Hughes Supply, Inc – January through April of 2002 and January through April of 2001
POOL Reports Record Year End Results
Page 7
February 13, 2003
| (In thousands) | Acquisitions and | |
| Base Business | New Markets | |
| Year Ended | Year Ended | |
| December 31, | December 31, | |
| 2001 | 2000 | 2001 | 2000 | ||||||||||||||||||||||||||
| Net sales | $ | 663,660 | $ | 646,561 | $ | 190,574 | $ | 25,712 | |||||||||||||||||||||
| Gross profit | 175,915 | 160,115 | 44,959 | 4,265 | |||||||||||||||||||||||||
| Gross margin | 26.5 | % | 24.8 | % | 23.6 | % | 16.6 | % | |||||||||||||||||||||
| Selling and operating expenses | 119,742 | 111,091 | 37,264 | 4,475 | |||||||||||||||||||||||||
| Expenses as a % of net sales | 18.0 | % | 17.2 | % | 19.6 | % | 17.4 | % | |||||||||||||||||||||
| Operating income | 56,174 | 49,024 | 7,694 | (210 | ) | ||||||||||||||||||||||||
| Operating margin | 8.5 | % | 7.6 | % | 4.0 | % | (0.8 | )% | |||||||||||||||||||||
The effect of acquisitions and new markets in the 2001 compared to 2000 tables includes the operations of the following:
- Jean Albouy, SA (France) – January through March of 2001 and January through March of 2000
- Kalamazoo, MI – January through March of 2001 and January through March of 2000
- Fort Lauderdale, FL – October 2000 through December 2001
- Superior Pool Products – August 2000 through October 2001
- The pool division of Hughes Supply, Inc. – January 2001 through December 2001
- Exporlinea (Portugal) – July 2001 through December 2001
- Capital Pools (Canada) – October 2001 through December 2001