EXHIBIT 99.1
Craig K. Hubbard
Treasurer
985.801.5117
craig.hubbard@poolcorp.com
FOR IMMEDIATE RELEASE
SCP POOL CORPORATION REPORTS RECORD SECOND QUARTER RESULTS
EARNINGS PER SHARE INCREASES 21% TO $0.93
COVINGTON, La. (July 21, 2005) – SCP Pool Corporation (the “Company” or “POOL”) (Nasdaq/NM: POOL) today reported record sales and net income for the second quarter of 2005.
Earnings per share for the second quarter of 2005 increased 21% to $0.93 per diluted share on net income of $51.6 million, compared to $0.77 per diluted share on net income of $43.6 million last year.
Net sales for the quarter ended June 30, 2005 increased $59.8 million, or 12%, to $564.0 million, compared to $504.2 million in the second quarter of 2004. This sales growth builds on a 17% sales increase reported for the same period last year. Contributing to this sales growth was the continued growth in the installed base of pools, price increases which were passed through the supply chain, and the continued strong growth of complementary product sales, which increased 33% over the second quarter of 2004.
Gross profit for the second quarter of 2005 increased $17.5 million, or 12%, to $162.7 million from $145.2 million in the comparable 2004 period. This increase is primarily due to the increase in net sales. Gross profit as a percentage of net sales (gross margin) was 28.8% for both the second quarter of 2005 and the second quarter of 2004. Gross margin was unchanged as decreases attributed to the disposition of POOL’s North American manufacturing assets in December 2004 were offset by increases achieved primarily through our continued focus on supply chain management.
Operating expenses increased $7.3 million, or 10%, to $79.9 million in the second quarter of 2005 from $72.6 million in the second quarter of 2004. Operating expenses as a percentage of net sales decreased to 14.2% in 2005 from 14.4% in 2004 as net sales increased at a rate faster than labor and other business support costs during the second quarter.
Operating income increased $10.2 million, or 14%, to $82.8 million from $72.6 million. The Company’s equity investment in Latham Acquisition Corporation also contributed $1.9 million to net income in the second quarter.
“Our success in executing our strategies continues to drive our financial performance. We remain committed to promoting the growth of the young swimming pool industry and providing increased value to both our customers and suppliers. Based on our strong financial results through the first half of 2005, we now project 20% growth in diluted earnings per share for the full year,” commented Manuel Perez de la Mesa, President and CEO.
Net sales for the six months ended June 30, 2005 increased $90.3 million, or 12%, to $829.1 million, compared to $738.8 million in the comparable 2004 period. Complementary products sales increased 31% over the six months ended June 30, 2004. Gross margin decreased 20 basis points to 28.3% in the first six months of 2005 from 28.5% for the same period last year. Operating income for the first six months of 2005 increased 17% to $94.1 million, or 11.3% of net sales, compared to operating income of $80.3 million, or 10.9% of net sales in the same period last year. Earnings per share for the first six months of 2005 increased 19% to $1.01 per diluted share on net income of $56.4 million, compared to $0.85 per diluted share on net income of $47.7 million in the comparable 2004 period.
POOL Reports Record Second Quarter Results
Page 2
July 21, 2005
The use of cash in operations increased $10.4 million to $51.6 million in the first six months of 2005 compared to $41.2 million in the same period in 2004. This change is primarily due to an increase in accounts receivable, driven by strong sales in the month of June.
Wilson B. Sexton, Chairman, further commented “the Board is very pleased with the Company’s solid results and strongly supports management’s initiatives for continued growth with positive returns for the shareholders.”
SCP Pool Corporation is the world’s largest wholesale distributor of swimming pool supplies and related products. As of July 21, 2005, POOL distributes more than 91,000 national brand and private label products to roughly 48,000 customers through 204 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 Second Quarter Results
Page 3
July 21, 2005
Consolidated Statements of Income
(Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands, except per share data) | June 30, | June 30, | ||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||
Net Sales | $ | 563,978 | $ | 504,177 | $ | 829,139 | $ | 738,825 | ||||||||||||
Cost of sales | 401,297 | 358,962 | 594,507 | 528,578 | ||||||||||||||||
Gross profit | 162,681 | 145,215 | 234,632 | 210,247 | ||||||||||||||||
Percent | 28.8 | % | 28.8 | % | 28.3 | % | 28.5 | % | ||||||||||||
Selling and administrative expenses | 79,886 | 72,626 | 140,536 | 129,986 | ||||||||||||||||
Operating income | 82,795 | 72,589 | 94,096 | 80,261 | ||||||||||||||||
Percent | 14.7 | % | 14.4 | % | 11.3 | % | 10.9 | % | ||||||||||||
Interest expense | 1,905 | 1,122 | 2,985 | 2,105 | ||||||||||||||||
Income before income taxes and equity earnings | 80,890 | 71,467 | 91,111 | 78,156 | ||||||||||||||||
Provision for income taxes | 31,192 | 27,872 | 35,178 | 30,481 | ||||||||||||||||
Equity earnings in unconsolidated interests | 1,942 | — | 460 | — | ||||||||||||||||
Net income | $ | 51,640 | $ | 43,595 | $ | 56,393 | $ | 47,675 | ||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.98 | $ | 0.82 | $ | 1.08 | $ | 0.90 | ||||||||||||
Diluted | $ | 0.93 | $ | 0.77 | $ | 1.01 | $ | 0.85 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 52,491 | 53,063 | 52,383 | 53,164 | ||||||||||||||||
Diluted | 55,763 | 56,378 | 55,641 | 56,390 | ||||||||||||||||
Cash dividends declared per common share | $ | 0.09 | $ | 0.07 | $ | 0.16 | $ | 0.07 | ||||||||||||
POOL Reports Record Second Quarter Results
Page 4
July 21, 2005
Condensed Consolidated Balance Sheets
(Unaudited) | Six Months Ended June 30, | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | 2005 | 2004 | ||||||||||||||||||
Assets | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 36,652 | $ | 21,124 | ||||||||||||||||
Receivables, net | 59,540 | 51,006 | ||||||||||||||||||
Receivables pledged under securitization agreement | 172,196 | 146,677 | ||||||||||||||||||
Product inventories, net | 247,350 | 219,711 | ||||||||||||||||||
Prepaid expenses | 4,466 | 9,494 | ||||||||||||||||||
Deferred income taxes | 4,395 | 1,864 | ||||||||||||||||||
Total current assets | 524,599 | 449,876 | ||||||||||||||||||
Property and equipment, net | 21,761 | 25,499 | ||||||||||||||||||
Goodwill | 104,602 | 112,488 | ||||||||||||||||||
Intangible assets, net | 10,826 | 12,589 | ||||||||||||||||||
Equity investment interests | 20,197 | -- | ||||||||||||||||||
Other assets, net | 2,788 | 1,626 | ||||||||||||||||||
Total assets | $ | 684,773 | $ | 602,078 | ||||||||||||||||
Liabilities and stockholders' equity | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable | 165,872 | 144,029 | ||||||||||||||||||
Accrued and other current liabilities | 57,997 | 60,642 | ||||||||||||||||||
Short-term financing | 100,000 | 100,000 | ||||||||||||||||||
Current portion of long-term debt | 1,350 | 53,980 | ||||||||||||||||||
Total current liabilities | 325,219 | 358,651 | ||||||||||||||||||
Deferred income taxes | 13,123 | 10,570 | ||||||||||||||||||
Long-term debt | 70,191 | 3,344 | ||||||||||||||||||
Other long-term liabilities | 3,202 | 4,442 | ||||||||||||||||||
Total liabilities | 411,735 | 377,007 | ||||||||||||||||||
Total stockholders' equity | 273,038 | 225,071 | ||||||||||||||||||
Total liabilities and stockholders' equity | $ | 684,773 | $ | 602,078 | ||||||||||||||||
1. The allowance for doubtful accounts (AFDA) was $3.0 million at June 30, 2005 and $3.7 million at June 30, 2004. The total past due accounts receivable balance decreased 14% between periods.
2. The inventory reserve was $4.1 million at June 30, 2005 and $3.6 million at June 30, 2004, or 1.6% of inventory in both periods. The slowest moving class of inventory as a percentage of total inventory decreased slightly between periods.
POOL Reports Record Second Quarter Results
Page 5
July 21, 2005
Condensed Consolidated Statements of Cash Flows
(Unaudited) | Six Months Ended June 30, | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | 2005 | 2004 | ||||||||||||||||||
Operating activities | ||||||||||||||||||||
Net income | $ | 56,393 | $ | 47,675 | ||||||||||||||||
Adjustments to reconcile net income | ||||||||||||||||||||
to net cash used in operating activities | ||||||||||||||||||||
Depreciation | 2,444 | 3,041 | ||||||||||||||||||
Amortization | 2,026 | 2,269 | ||||||||||||||||||
Equity earnings in unconsolidated investments | (460 | ) | -- | |||||||||||||||||
Other | 246 | (487 | ) | |||||||||||||||||
Changes in operating assets and liabilities, | ||||||||||||||||||||
net of effects of acquisitions | ||||||||||||||||||||
Receivables | (134,018 | ) | (113,673 | ) | ||||||||||||||||
Product inventories | (52,530 | ) | (26,305 | ) | ||||||||||||||||
Accounts payable | 52,758 | 25,717 | ||||||||||||||||||
Other current assets and liabilities | 21,501 | 20,596 | ||||||||||||||||||
Net cash used in operating activities | (51,640 | ) | (41,167 | ) | ||||||||||||||||
Investing activities | ||||||||||||||||||||
Acquisition of businesses | (3 | ) | (348 | ) | ||||||||||||||||
Equity interest investment | (1,121 | ) | -- | |||||||||||||||||
Purchase of property and equipment, net of sale proceeds | (5,575 | ) | (3,919 | ) | ||||||||||||||||
Net cash used in investing activities | (6,699 | ) | (4,267 | ) | ||||||||||||||||
Financing activities | ||||||||||||||||||||
Proceeds from revolving line of credit | 147,238 | 169,640 | ||||||||||||||||||
Payments on revolving line of credit | (127,467 | ) | (155,910 | ) | ||||||||||||||||
Proceeds from asset-backed financing | 62,170 | 66,522 | ||||||||||||||||||
Payments on asset-backed financing | (4,765 | ) | (8,940 | ) | ||||||||||||||||
Payments on other long-term debt | (47 | ) | (310 | ) | ||||||||||||||||
Issuance of common stock under stock option plans | 8,060 | 3,713 | ||||||||||||||||||
Payment of cash dividends | (8,401 | ) | (3,528 | ) | ||||||||||||||||
Purchase of treasury stock | (3,072 | ) | (18,225 | ) | ||||||||||||||||
Net cash provided by financing activities | 73,716 | 52,962 | ||||||||||||||||||
Effect of exchange rate changes on cash | (487 | ) | 784 | |||||||||||||||||
Change in cash and cash equivalents | 14,890 | 8,312 | ||||||||||||||||||
Cash and cash equivalents at beginning of period | 21,762 | 12,812 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 36,652 | $ | 21,124 | ||||||||||||||||