Exhibit 99.1
FOR IMMEDIATE RELEASE
POOL CORPORATION REPORTS 2011 RESULTS
AND PROVIDES 2012 EARNINGS GUIDANCE
Highlights for the year include:
| · | Sales growth of 11%, including 10% from base business |
| · | 24% increase in operating income |
| · | 28% increase in diluted EPS to $1.47 |
| · | 2012 diluted EPS guidance of $1.69 to $1.79 |
______________________
COVINGTON, LA. (February 16, 2012) – Pool Corporation (NASDAQ/GSM:POOL) today announced fourth quarter and full year 2011 results.
“Exceptional is the word that best describes our 2011 results. Double digit sales growth and 28% EPS growth in a year characterized by a stabilized but still challenging economic environment are a testament to outstanding execution at all levels of our organization,” commented Manuel Perez de la Mesa, President and CEO.
Net sales for the year ended December 31, 2011 increased 11% to $1.79 billion, compared to $1.61 billion in 2010. Base business sales increased 10%, including 10% growth on the swimming pool side of the business and 8% growth on the irrigation side. Base business sales growth was due primarily to market share gains, but also reflected demand growth, the impact of inflationary product cost increases and approximately 1% growth from favorable currency fluctuations. Demand growth was evidenced by higher replacement activity attributable to the aging installed base of swimming pools and a modest improvement in consumer discretionary expenditures compared to the restrained levels experienced in 2010.
Gross profit for the year ended December 31, 2011 increased 13% to $531.6 million from $471.3 million in 2010. Gross profit as a percentage of net sales (gross margin) increased 40 basis points to 29.6% for 2011. This increase reflects continued improvements in sales, pricing and purchasing discipline and a 10 basis point contribution from higher freight out income, which compensated for higher delivery costs included in selling and administrative expenses.
Selling and administrative expenses (operating expenses) for 2011 increased 10% to $406.5 million from $370.0 million in 2010. Base business operating expenses were up 8% year over year, including increases of 4% from higher employee incentive expenses, 1% from higher delivery costs and 1% combined due to bad debt expense and the impact from currency fluctuations. The growth in annual incentive costs for 2011 included the continued catch-up to more normalized levels of incentive costs following sharp declines during the 2007-2009 recession. We anticipate base business operating expense increases will be more modest in the future.
Operating income for the year improved 24% to $125.1 million from $101.2 million in 2010. Operating income as a percentage of net sales (operating margin) increased to 7.0% in 2011 compared to 6.3% in 2010. Net interest expense increased $1.3 million due to the impact of foreign currency transaction gains and losses, with losses of $0.6 million recognized in 2011 compared to gains of $1.5 million recognized in 2010. Interest expense related to borrowings declined approximately $0.7 million in 2011 due to a lower weighted average effective interest rate on 6% higher average debt compared to 2010.
Net income increased 25% to $72.0 million in 2011 compared to $57.6 million in 2010, while earnings per share was up 28% to $1.47 per diluted share compared to $1.15 per diluted share in 2010. Adjusted EBITDA (as defined in the addendum to this release) was $145.2 million in 2011 compared to $121.4 million in 2010.
On the balance sheet, total net receivables increased 9% compared to December 31, 2010 due primarily to an increase in current trade receivables as a result of December base business sales growth, higher vendor receivables and the impact from the reduction in the allowance for doubtful accounts. Inventory levels grew 11% to $386.9 million at December 31, 2011 compared to $347.4 million at December 31, 2010. Excluding inventory of approximately $5.5 million from recent acquisitions, inventories increased 10% year over year, which is consistent with the increase in base business sales. Total debt outstanding at December 31, 2011 was $247.3 million, up $48.6 million from the balance at December 31, 2010.
Cash provided by operations was $75.1 million in 2011, or $3.1 million more than net income of $72.0 million. Compared to 2010, cash provided by operations was down $18.9 million due primarily to a drawdown of inventories in 2010.
Net sales for the seasonally slow fourth quarter increased 12% to $270.4 million compared to the fourth quarter of 2010. Base business sales improved 10% in the quarter compared to the same period in 2010. Gross margin decreased 60 basis points to 29.9% in the fourth quarter of 2011. The fourth quarter 2010 gross margin of 30.5% included a favorable impact from certain non-recurring vendor incentives.
Operating loss for the fourth quarter of 2011 was $14.3 million compared to a loss of $16.8 million in the same period last year. Net interest expense increased $0.9 million reflecting $0.5 million of foreign currency transaction losses and higher interest expense due to an increase in average debt levels. Loss per diluted share for the fourth quarter of 2011 was $0.21 on a net loss of $10.1 million, compared to a loss of $0.24 per diluted share on a net loss of $11.8 million in the comparable 2010 period.
“We anticipate leveraging our momentum from 2011 and are confidently looking ahead to the 2012 season. We expect to gain additional market share with our expanding product base and believe we have positioned ourselves for even greater progress by making continued investments that promote the industry, help grow our customers’ businesses and enable us to operate more effectively. For fiscal 2012, we expect earnings per diluted share will be approximately $1.69 to $1.79. This range reflects our expectation for sales growth in the mid- to upper-single digits, including the impact from acquisitions and the opening of new locations in 2012,” said Perez de la Mesa.
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 298 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.
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 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 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
CONTACT:
craig.hubbard@poolcorp.com
POOL CORPORATION
Consolidated Statements of Income
(In thousands, except per share data)
| | Three Months Ended | | Year Ended | |
| | December 31, | | December 31, | |
| | 2011 | | 2010 | | 2011 | | 2010 (1) | |
| | | | | | | | | | | | |
| Net sales | $ | 270,422 | | $ | 241,426 | | $ | 1,793,318 | | $ | 1,613,746 | |
| Cost of sales | | 189,587 | | | 167,859 | | | 1,261,728 | | | 1,142,484 | |
| Gross profit | | 80,835 | | | 73,567 | | | 531,590 | | | 471,262 | |
| Percent | | 29.9 | % | | 30.5 | % | | 29.6 | % | | 29.2 | % |
| | | | | | | | | | | | | |
| Selling and administrative expenses | | 95,178 | | | 90,350 | | | 406,523 | | | 370,017 | |
| Operating income (loss) | | (14,343 | ) | | (16,783 | ) | | 125,067 | | | 101,245 | |
| Percent | | (5.3 | )% | | (7.0 | )% | | 7.0 | % | | 6.3 | % |
| | | | | | | | | | | | | |
Interest expense, net (2) | | 2,854 | | | 1,961 | | | 7,964 | | | 6,619 | |
| Income (loss) before income taxes and equity earnings (losses) | | (17,197 | ) | | (18,744 | ) | | 117,103 | | | 94,626 | |
| Provision for income taxes | | (7,058 | ) | | (6,951 | ) | | 45,319 | | | 37,093 | |
| Equity earnings (losses) in unconsolidated investments | | 24 | | | (12 | ) | | 209 | | | 105 | |
| Net income (loss) | $ | (10,115 | ) | $ | (11,805 | ) | $ | 71,993 | | $ | 57,638 | |
| | | | | | | | | | | | | |
| Earnings (loss) per share: | | | | | | | | | | | | |
| Basic | $ | (0.21 | ) | $ | (0.24 | ) | $ | 1.49 | | $ | 1.17 | |
| Diluted | $ | (0.21 | ) | $ | (0.24 | ) | $ | 1.47 | | $ | 1.15 | |
| Weighted average shares outstanding: | | | | | | | | | | | | |
| Basic | | 47,568 | | | 49,548 | | | 48,158 | | | 49,469 | |
| Diluted | | 47,568 | | | 49,548 | | | 48,987 | | | 50,161 | |
| | | | | | | | | | | | | |
| Cash dividends declared per common share | $ | 0.14 | | $ | 0.13 | | $ | 0.55 | | $ | 0.52 | |
_________________
| (1) | Derived from audited financial statements. |
(2) | Interest expense, net includes realized foreign currency transaction losses of $0.5 million for the quarter and $0.6 million for the year ended December 31, 2011, and foreign currency gains of $1.5 million for the year ended December 31, 2010. |
POOL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
| | December 31, | | December 31, | | | Change | |
| | | 2011 | | | 2010 (1) | | | $ | | | % | |
| | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | |
| | Cash and cash equivalents | $ | 17,487 | | $ | 9,721 | | $ | 7,766 | | | 80 | % |
| | Receivables, net (2) | | 110,555 | | | 101,543 | | | 9,012 | | | 9 | |
| | Product inventories, net (3) | | 386,924 | | | 347,439 | | | 39,485 | | | 11 | |
| | Prepaid expenses and other current assets | | 11,298 | | | 7,678 | | | 3,620 | | | 47 | |
| | Deferred income taxes | | 11,737 | | | 10,211 | | | 1,526 | | | 15 | |
| Total current assets | | 538,001 | | | 476,592 | | | 61,409 | | | 13 | |
| | | | | | | | | | | | | |
| Property and equipment, net | | 41,394 | | | 30,685 | | | 10,709 | | | 35 | |
| Goodwill | | 177,103 | | | 178,516 | | | (1,413 | ) | | (1 | ) |
| Other intangible assets, net | | 11,738 | | | 12,965 | | | (1,227 | ) | | (9 | ) |
| Equity interest investments | | 980 | | | 966 | | | 14 | | | 1 | |
| Other assets, net | | 29,406 | | | 28,821 | | | 585 | | | 2 | |
| Total assets | $ | 798,622 | | $ | 728,545 | | $ | 70,077 | | | 10 | % |
| | | | | | | | | | | | | |
| Liabilities and stockholders’ equity | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | |
| | Accounts payable | $ | 177,437 | | $ | 169,700 | | $ | 7,737 | | | 5 | % |
| | Accrued expenses and other current liabilities | | 53,398 | | | 41,704 | | | 11,694 | | | 28 | |
| | Current portion of long-term debt and other long-term liabilities | | 22 | | | 134 | | | (112 | ) | | (84 | ) |
| Total current liabilities | | 230,857 | | | 211,538 | | | 19,319 | | | 9 | |
| | | | | | | | | | | | | |
| Deferred income taxes | | 32,993 | | | 25,593 | | | 7,400 | | | 29 | |
| Long-term debt | | 247,300 | | | 198,700 | | | 48,600 | | | 24 | |
| Other long-term liabilities | | 7,726 | | | 7,532 | | | 194 | | | 3 | |
| Total liabilities | | 518,876 | | | 443,363 | | | 75,513 | | | 17 | |
| Total stockholders’ equity | | 279,746 | | | 285,182 | | | (5,436 | ) | | (2 | ) |
| Total liabilities and stockholders’ equity | $ | 798,622 | | $ | 728,545 | | $ | 70,077 | | | 10 | % |
__________________
| (1) | Derived from audited financial statements. |
| (2) | The allowance for doubtful accounts was $5.9 million at December 31, 2011 and $7.1 million at December 31, 2010. |
| (3) | The inventory reserve was $7.1 million at December 31, 2011 and December 31, 2010. |
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
| | | Year Ended | | | | |
| | | December 31, | | | | |
| | | 2011 | | | 2010 (1) | | | Change | |
| Operating activities | | | | | | | | | |
| Net income | $ | 71,993 | | $ | 57,638 | | $ | 14,355 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
| | Depreciation | | 9,746 | | | 8,980 | | | 766 | |
| | Amortization | | 1,559 | | | 2,348 | | | (789 | ) |
| | Share-based compensation | | 8,233 | | | 7,790 | | | 443 | |
| | Excess tax benefits from share-based compensation | | (3,118 | ) | | (1,877 | ) | | (1,241 | ) |
| | Equity earnings in unconsolidated investments | | (209 | ) | | (105 | ) | | (104 | ) |
| | Losses (gains) on foreign currency transactions | | 592 | | | (1,498 | ) | | 2,090 | |
| | Goodwill impairment | | 1,550 | | | – | | | 1,550 | |
| | Other | | 1,850 | | | (2,781 | ) | | 4,631 | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | | | | | | | | | |
| | Receivables | | (5,887 | ) | | 4,832 | | | (10,719 | ) |
| | Product inventories | | (35,339 | ) | | 15,951 | | | (51,290 | ) |
| | Accounts payable | | 6,402 | | | (14,417 | ) | | 20,819 | |
| | | Other current assets and liabilities | | 17,731 | | | 17,098 | | | 633 | |
| Net cash provided by operating activities | | 75,103 | | | 93,959 | | | (18,856 | ) |
| | | | | | | | | | |
| Investing activities | | | | | | | | | |
| Acquisition of businesses, net of cash acquired | | (5,934 | ) | | (6,173 | ) | | 239 | |
| Purchase of property and equipment, net of sale proceeds | | (19,454 | ) | | (8,078 | ) | | (11,376 | ) |
| Other investments | | (190 | ) | | – | | | (190 | ) |
| Net cash used in investing activities | | (25,578 | ) | | (14,251 | ) | | (11,327 | ) |
| | | | | | | | | | |
| Financing activities | | | | | | | | | |
| Proceeds from revolving line of credit | | 749,349 | | | 453,039 | | | 296,310 | |
| Payments on revolving line of credit | | (700,749 | ) | | (457,568 | ) | | (243,181 | ) |
| Payments on long-term debt and other long-term liabilities | | (149 | ) | | (48,225 | ) | | 48,076 | |
| Payments of deferred acquisition consideration | | (500 | ) | | (1,000 | ) | | 500 | |
| Payments of deferred financing costs | | (1,674 | ) | | (145 | ) | | (1,529 | ) |
| Excess tax benefits from share-based compensation | | 3,118 | | | 1,877 | | | 1,241 | |
| Proceeds from stock issued under share-based compensation plans | | 13,085 | | | 6,293 | | | 6,792 | |
| Payments of cash dividends | | (26,470 | ) | | (25,746 | ) | | (724 | ) |
| Purchases of treasury stock | | (76,564 | ) | | (13,683 | ) | | (62,881 | ) |
| Net cash used in financing activities | | (40,554 | ) | | (85,158 | ) | | 44,604 | |
| Effect of exchange rate changes on cash and cash equivalents | | (1,205 | ) | | (672 | ) | | (533 | ) |
| Change in cash and cash equivalents | | 7,766 | | | (6,122 | ) | | 13,888 | |
| Cash and cash equivalents at beginning of period | | 9,721 | | | 15,843 | | | (6,122 | ) |
| Cash and cash equivalents at end of period | $ | 17,487 | | $ | 9,721 | | $ | 7,766 | |
__________________
| (1) | Derived from audited financial statements. |
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):
| (Unaudited) | | Base Business | Excluded | | Total |
| (in thousands) | | Three Months Ended | Three Months Ended | | Three Months Ended |
| | | December 31, | December 31, | | December 31, |
| | | 2011 | | 2010 | | 2011 | | 2010 | | | 2011 | | 2010 | |
| Net sales | $ | 265,075 | $ | 240,987 | $ | 5,347 | $ | 439 | | $ | 270,422 | $ | 241,426 | |
| | | | | | | | | | | | | | | |
| Gross profit | | 79,230 | | 73,462 | | 1,605 | | 105 | | | 80,835 | | 73,567 | |
| Gross margin | | 29.9 | % | 30.5 | % | 30.0 | % | 23.9 | % | | 29.9 | % | 30.5 | % |
| | | | | | | | | | | | | | | |
| Operating expenses | | 92,844 | | 90,140 | | 2,334 | | 210 | | | 95,178 | | 90,350 | |
| Expenses as a % of net sales | | 35.0 | % | 37.4 | % | 43.7 | % | 47.8 | % | | 35.2 | % | 37.4 | % |
| | | | | | | | | | | | | | | |
| Operating loss | | (13,614 | ) | (16,678 | ) | (729 | ) | (105 | ) | | (14,343 | ) | (16,783 | ) |
| Operating margin | | (5.1 | )% | (6.9 | )% | (13.6 | )% | (23.9 | )% | | (5.3 | )% | (7.0 | )% |
| (Unaudited) | | Base Business | Excluded | | Total |
| (in thousands) | | Year Ended | Year Ended | | Year Ended |
| | | December 31, | December 31, | | December 31, |
| | | 2011 | | 2010 | | 2011 | | 2010 | | | 2011 | | 2010 | |
| Net sales | $ | 1,766,651 | $ | 1,607,892 | $ | 26,667 | $ | 5,854 | | $ | 1,793,318 | $ | 1,613,746 | |
| | | | | | | | | | | | | | | |
| Gross profit | | 523,778 | | 469,515 | | 7,812 | | 1,747 | | | 531,590 | | 471,262 | |
| Gross margin | | 29.6 | % | 29.2 | % | 29.3 | % | 29.8 | % | | 29.6 | % | 29.2 | % |
| | | | | | | | | | | | | | | |
| Operating expenses | | 397,822 | | 368,603 | | 8,701 | | 1,414 | | | 406,523 | | 370,017 | |
| Expenses as a % of net sales | | 22.5 | % | 22.9 | % | 32.6 | % | 24.2 | % | | 22.7 | % | 22.9 | % |
| | | | | | | | | | | | | | | |
| Operating income (loss) | | 125,956 | | 100,912 | | (889 | ) | 333 | | | 125,067 | | 101,245 | |
| Operating margin | | 7.1 | % | 6.3 | % | (3.3 | )% | 5.7 | % | | 7.0 | % | 6.3 | % |
We have excluded the following acquisitions from base business for the periods identified:
Acquired | | Acquisition Date | | Net Sales Centers Acquired | | Periods Excluded |
| G.L. Cornell Company | | December 2011 | | 1 | | December 2011 |
| Poolway Schwimmbadtechnik GmbH | | November 2011 | | 1 | | November–December 2011 |
| The Kilpatrick Company, Inc. | | May 2011 | | 4 | | May–December 2011 |
| Turf Equipment Supply Co. | | December 2010 | | 3 | | January–December 2011 and December 2010 |
| Pool Boat and Leisure, S.A. | | December 2010 | | 1 | | January–December 2011 and December 2010 |
| Les Produits de Piscine Metrinox Inc. | | April 2010 | | 2 | | January–June 2011 and April–June 2010 |
As of December 31, 2011, the base business results also excluded one new market sales center that opened in the second quarter of 2011 and one existing sales center that was consolidated into an acquired sales center in May 2011.
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 during 2011:
| December 31, 2010 | 291 | |
| Acquired | 6 | |
New locations (1) | 4 | |
| Consolidated | (3 | ) |
| December 31, 2011 | 298 | |
| (1) | Includes two new sales centers in Florida, one new sales center in Puerto Rico and one sales center in Oregon that reopened (a previous SCP network location that closed in December 2007 and has operated within a Horizon network sales center since then). |
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. 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) | | Year Ended December 31, | |
| (in thousands) | | 2011 | | 2010 | |
| Net income | $ | 71,993 | $ | 57,638 | |
| | Add: | | | | | |
| | Interest expense (1) | | 7,372 | | 8,117 | |
| | Provision for income taxes | | 45,319 | | 37,093 | |
| | Share-based compensation | | 8,233 | | 7,790 | |
| | Goodwill impairment | | 1,550 | | – | |
| | Equity earnings in unconsolidated investments | | (209 | ) | (105 | ) |
| | Depreciation | | 9,746 | | 8,980 | |
| | Amortization (2) | | 1,234 | | 1,856 | |
| Adjusted EBITDA | $ | 145,238 | $ | 121,369 | |
| (1) | Shown net of interest income and includes amortization of deferred financing costs as discussed below. |
| (2) | Excludes amortization of deferred financing costs of $325 for 2011 and $492 for 2010. This non-cash expense is included in Interest expense, net on the Consolidated Statements of Income. |
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) | | Year Ended December 31, | |
| (in thousands) | | 2011 | | 2010 | |
| Adjusted EBITDA | $ | 145,238 | $ | 121,369 | |
| | Add: | | | | | |
| | Interest expense, net of interest income | | (7,047 | ) | (7,625 | ) |
| | Provision for income taxes | | (45,319 | ) | (37,093 | ) |
| | Losses (gains) on foreign currency transactions | | 592 | | (1,498 | ) |
| | Excess tax benefits on share-based compensation | | (3,118 | ) | (1,877 | ) |
| | Other | | 1,850 | | (2,781 | ) |
| | Change in operating assets and liabilities | | (17,093 | ) | 23,464 | |
| Net cash provided by operating activities | $ | 75,103 | $ | 93,959 | |
