Craig K. Hubbard
Treasurer
985.801.5117
craig.hubbard@poolcorp.com
FOR IMMEDIATE RELEASE
SCP POOL CORPORATION REPORTS RECORD FIRST QUARTER RESULTS
EARNINGS PER SHARE INCREASES TO $0.09
COVINGTON, La. (April 21, 2005) – SCP Pool Corporation (the “Company” or “POOL”) (Nasdaq/NM: POOL) today reported record sales and net income for the first quarter of 2005.
Earnings per share for the first quarter of 2005 increased to $0.09 per diluted share on net income of $4.8 million, compared to $0.07 per diluted share on net income of $4.1 million last year.
Net sales for the quarter ended March 31, 2005 increased $30.6 million, or 13%, to $265.2 million, compared to $234.6 million in the first quarter of 2004. Base business sales also increased 13% from the first quarter of 2004. Although northern markets experienced less than favorable weather throughout much of the first quarter, other markets compensated with strong sales growth. Contributing to this sales growth were price increases, which were passed through the supply chain, and the continued strong growth of complementary product sales, which increased by 27% over the first quarter of 2004.
Gross profit for the first quarter of 2005 increased $7.0 million, or 11%, to $72.0 million from $65.0 million in the comparable 2004 period. Gross profit as a percentage of net sales (gross margin) decreased 60 basis points to 27.1% from 27.7% in the first quarter of 2004. This decrease is attributable to the disposition of POOL’s North American manufacturing assets in December 2004 and market and product mix changes coupled with some margin erosion on the pass through of price increases.
Operating expenses increased $3.3 million, or 6%, to $60.7 million in the first quarter of 2005 from $57.4 million in the first quarter of 2004. Operating expenses as a percentage of net sales decreased to 22.9% in 2005 from 24.4% in 2004 as net sales increased at a rate faster than labor and other business support costs during the first quarter.
Operating profit increased $3.6 million, or 47%, to $11.3 million from $7.7 million. The Company’s equity investment in Latham Acquisition Corporation, which was consummated in December 2004 and included in first quarter 2005 net income, generated an expected seasonal first quarter net loss of $1.5 million.
The seasonal use of cash in operations decreased $18.8 million to $51.1 million in the first quarter of 2005 compared to $69.9 million in the same period in 2004. This change is primarily due to the increase in inventory and accounts receivable in the first quarter of 2005, which was more than offset by a deferral of payment on purchases.
POOL Reports Record First Quarter Results
Page 2
April 21, 2005
“While it is still very early in the year, we are pleased to be off to a strong start. Our ongoing improvements in execution continue to provide increasing value to both our customers and suppliers. Despite these strong results, we believe it premature to change our earnings growth estimate for 2005 of 15-18% growth in diluted earnings per share. We remain optimistic for 2005 and our long-term future in the young swimming pool industry,” commented Manuel Perez de la Mesa, President and CEO.
SCP Pool Corporation is the world’s largest wholesale distributor of swimming pool supplies and related products. As of April 21, 2005, POOL distributes more than 91,000 national brand and private label products to roughly 48,000 customers through 203 service centers in North America and Europe. For more information about POOL, please visit www.poolcorp.com.
This news release may include “forward-looking” statements that involve 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 POOL’s 2004 Form 10-K filed with the Securities and Exchange Commission.
POOL Reports Record First Quarter Results
Page 3
April 21, 2005
Consolidated Statements of Income | | | | | |
(Unaudited) | | | Three Months Ended | |
(In thousands, except per share data) | | March 31, | |
| | | 2005 | | 2004 | |
Net sales | $ | 265,161 | $ | 234,648 | |
Cost of sales | | 193,210 | | 169,616 | |
| Gross profit | | 71,951 | | 65,032 | |
| Percent | | 27.1 | % | 27.7 | % |
| | | | | | |
Selling and administrative expenses | | 60,650 | | 57,360 | |
| Operating income | | 11,301 | | 7,672 | |
| Percent | | 4.3 | % | 3.3 | % |
| | | | | | |
Interest expense | | 1,080 | | 983 | |
| | | | | | |
Income before income taxes and equity loss | | 10,221 | | 6,689 | |
Provision for income taxes | | 3,986 | | 2,609 | |
Equity loss in unconsolidated investment | | (1,482) | | — | |
Net income | $ | 4,753 | $ | 4,080 | |
Earnings per share | | | | | |
Basic | $ | 0.09 | $ | 0.08 | |
Diluted | $ | 0.09 | $ | 0.07 | |
Weighted average shares outstanding | | | | | |
Basic | | 52,273 | | 53,264 | |
Diluted | | 55,494 | | 56,389 | |
Cash dividends declared per common share | $ | 0.07 | $ | — | |
| | | | | | | |
POOL Reports Record First Quarter Results
Page 4
April 21, 2005
Condensed Consolidated Balance Sheets | | | | | |
(Unaudited) | | | | | | |
(In thousands) | | | March 31, |
| | 2005 | | 2004 | |
Assets | | | | | | |
Current assets | | | | | |
| Cash and cash equivalents | $ | 14,565 | $ | 2,859 | |
| Receivables, net | | 33,646 | | 30,406 | |
| Receivables pledged under receivables facility | | 130,861 | | 116,691 | |
| Product inventories, net | | 281,267 | | 241,903 | |
| Prepaid expenses | | 3,841 | | 7,111 | |
| Deferred income taxes | | 2,570 | | 1,864 | |
Total current assets | | 466,750 | | 400,834 | |
| | | | | | | |
Property and equipment, net | | 20,087 | | 25,536 | |
Goodwill | | 104,687 | | 112,447 | |
Other intangible assets, net | | 11,723 | | 13,609 | |
Equity interest investment | | 17,134 | | — | |
Other assets, net | | 2,983 | | 1,798 | |
Total assets | | $ | 623,364 | $ | 554,224 | |
Liabilities and stockholders' equity | | | | | |
Current liabilities | | | | | |
| Accounts payable | | 219,290 | | 166,305 | |
| Accrued and other current liabilities | | 23,038 | | 25,492 | |
| Short-term financing | | 57,665 | | 49,998 | |
| Current portion of long-term debt | | 1,350 | | 94,245 | |
Total current liabilities | | 301,343 | | 336,040 | |
| | | | | | | |
Deferred income taxes | | 11,624 | | 10,570 | |
Long-term debt, less current portion | | 82,914 | | 3,472 | |
Other long-term liabilities | | 3,116 | | 4,466 | |
| | | | | | | |
Total stockholders' equity | | 224,367 | | 199,676 | |
Total liabilities and stockholders' equity | $ | 623,364 | $ | 554,224 | |
| | | | | | | | | | | |
1. The allowance for doubtful accounts (AFDA) was $2.9 million at March 31, 2005 and $3.7 million at March 31, 2004. The AFDA represented 53% and 65% of the accounts receivable greater than 60 days past due in March 2005 and March 2004, respectively.
2. The inventory reserve was $3.4 million at March 31, 2005 and $3.0 million at March 31, 2004. The slowest moving class of inventory as a percentage of total inventory decreased slightly between periods.
POOL Reports Record First Quarter Results
Page 5
April 21, 2005
Condensed Consolidated Statements of Cash Flows | | | | | |
(Unaudited) | | | Three Months Ended March 31, |
(In thousands) | | | | | 2005 | | 2004 | |
Operating activities | | | | | |
Net income | | | $ | 4,753 | $ | 4,080 | |
Adjustments to reconcile net income | | | | |
| to net cash used in operating activities | | | | | |
| Depreciation | | 1,216 | | 1,578 | |
| Amortization | | 1,013 | | 1,125 | |
| Equity loss in unconsolidated investment | | 1,482 | | — | |
| Other | | (110) | | (1,022) | |
Changes in operating assets and liabilities, | | | | | |
| net of effects of acquisitions | | | | | |
| | Receivables | | (66,706) | | (63,116) | |
| | Product inventories | | (85,750) | | (47,922) | |
| | Accounts payable | | 106,176 | | 47,993 | |
| | Other current assets and liabilities | | (13,213) | | (12,574) | |
Net cash used in operating activities | | (51,139) | | (69,858) | |
| | | | | | | | | |
Investing activities | | | | | |
Acquisition of businesses | | (2) | | (307) | |
Purchase of property and equipment, net of sale proceeds | | (2,772) | | (2,493) | |
Net cash used in investing activities | | (2,774) | | (2,800) | |
| | | | | | | | | |
Financing activities | | | | | |
Proceeds from revolving line of credit | | 77,378 | | 84,035 | |
Payments on revolving line of credit | | (44,884) | | (30,040) | |
Proceeds from asset-backed financing | | 19,835 | | 16,520 | |
Payments on asset-backed financing | | (4,765) | | (8,940) | |
Payments on other long-term debt | | (23) | | (158) | |
Issuance of common stock under stock option plans | | 5,917 | | 1,806 | |
Payment of cash dividends | | (3,672) | | — | |
Purchase of treasury stock | | (3,024) | | (1,874) | |
Net cash provided by financing activities | | 46,762 | | 61,349 | |
Effect of exchange rate changes on cash | | (46) | | 1,356 | |
Change in cash and cash equivalents | | (7,197) | | (9,953) | |
Cash and cash equivalents at beginning of period | | 21,762 | | 12,812 | |
Cash and cash equivalents at end of period | $ | 14,565 | $ | 2,859 | |
| | | | | | | | | | |
