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Pool Corporation Reports Record Results And Updates 2012 Earnings Guidance Range

Stocks in this article: POOL

"Based on results through September, we are revising our 2012 earnings guidance from our previous range of $1.75 to $1.82 per diluted share to a projected range of $1.80 to $1.83 per diluted share excluding the $0.14 goodwill impairment charge. We are confident in the long term growth opportunities available in our industry and are actively investing to realize those opportunities," said Perez de la Mesa. 

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 312 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, please visit www.poolcorp.com .

The Pool Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4853

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 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
 
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
         
Net sales  $ 528,027  $ 503,584  $ 1,647,156  $ 1,522,896
Cost of sales 376,526 355,678 1,168,687 1,072,141
Gross profit 151,501 147,906 478,469 450,755
Percent 28.7% 29.4% 29.0% 29.6%
         
Selling and administrative expenses 103,544 106,993 316,357 311,345
Goodwill impairment 6,946 6,946
Operating income 41,011 40,913 155,166 139,410
Percent 7.8% 8.1% 9.4% 9.2%
         
Interest expense, net 1,687 1,641 5,364 5,110
Income before income taxes and equity earnings 39,324 39,272 149,802 134,300
Provision for income taxes 17,965 15,126 60,020 52,377
Equity earnings in unconsolidated investments 16 23 187 185
Net income  $ 21,375  $ 24,169  $ 89,969  $ 82,108
         
Earnings per share:        
Basic  $ 0.46  $ 0.50  $ 1.91  $ 1.70
Diluted  $ 0.45  $ 0.50  $ 1.87  $ 1.67
Weighted average shares outstanding:        
Basic 46,574 47,987 47,076 48,357
Diluted 47,787 48,772 48,205 49,157
         
Cash dividends declared per common share  $ 0.16  $ 0.14  $ 0.46  $ 0.41
 
POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
  September 30, September 30, Change
  2012 2011 $ %
         
Assets        
Current assets:        
Cash and cash equivalents  $ 28,818  $ 20,656  $ 8,162 40%
Receivables, net 175,459 160,647 14,812 9
Product inventories, net 349,325 337,698 11,627 3
Prepaid expenses and other current assets 8,078 7,354 724 10
Deferred income taxes 11,561 10,145 1,416 14
Total current assets 573,241 536,500 36,741 7
         
Property and equipment, net 46,643 40,774 5,869 14
Goodwill 169,983 178,516 (8,533) (5)
Other intangible assets, net 11,270 11,953 (683) (6)
Equity interest investments 1,066 976 90 9
Other assets, net 29,180 29,493 (313) (1)
Total assets  $ 831,383  $ 798,212  $ 33,171 4%
         
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable  $ 163,543  $ 120,221  $ 43,322 36%
Accrued expenses and other current liabilities 102,805 70,718 32,087 45
Current portion of long-term debt and other long-term liabilities 23 22 1 5
Total current liabilities 266,371 190,961 75,410 39
         
Deferred income taxes 31,833 26,549 5,284 20
Long-term debt 214,328 268,700 (54,372) (20)
Other long-term liabilities 6,381 7,503 (1,122) (15)
Total liabilities 518,913 493,713 25,200 5
Total stockholders' equity 312,470 304,499 7,971 3
Total liabilities and stockholders' equity  $ 831,383  $ 798,212  $ 33,171 4%
__________________        
         
1.  The allowance for doubtful accounts was $4.8 million at September 30, 2012 and $5.2 million at September 30, 2011.
2.  The inventory reserve was $9.6 million at September 30, 2012 and $7.4 million at September 30, 2011. 
 
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
  Nine Months Ended  
  September 30,  
  2012 2011 Change
Operating activities      
Net income  $ 89,969  $ 82,108  $ 7,861
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 8,481 7,071 1,410
Amortization 962 1,243 (281)
Share-based compensation 6,236 6,143 93
Excess tax benefits from share-based compensation (2,534) (2,229) (305)
Equity earnings in unconsolidated investments (187) (185) (2)
Goodwill impairment 6,946 6,946
Other 278 (3,892) 4,170
Changes in operating assets and liabilities, net of effects of acquisitions:      
Receivables (63,015) (55,941) (7,074)
Product inventories 39,644 10,999 28,645
Prepaid expenses and other assets 2,607 677 1,930
Accounts payable (15,500) (49,542) 34,042
Accrued expenses and other current liabilities 50,643 35,522 15,121
Net cash provided by operating activities 124,530 31,974 92,556
       
Investing activities      
Acquisition of businesses, net of cash acquired (4,580) (2,961) (1,619)
Purchase of property and equipment, net of sale proceeds (13,717) (16,959) 3,242
Other investments (249) (177) (72)
Net cash used in investing activities (18,546) (20,097) 1,551
       
Financing activities      
Proceeds from revolving line of credit 482,669 446,649 36,020
Payments on revolving line of credit (415,641) (376,649) (38,992)
Payments on long-term debt and other long-term liabilities (100,017) (145) (99,872)
Payments of deferred acquisition consideration (500) 500
Excess tax benefits from share-based compensation 2,534 2,229 305
Proceeds from stock issued under share-based compensation plans 13,180 9,506 3,674
Payments of cash dividends (21,669) (19,798) (1,871)
Purchases of treasury stock (55,088) (62,842) 7,754
Net cash used in financing activities (94,032) (1,550) (92,482)
Effect of exchange rate changes on cash and cash equivalents (621) 608 (1,229)
Change in cash and cash equivalents 11,331 10,935 396
Cash and cash equivalents at beginning of period 17,487 9,721 7,766
Cash and cash equivalents at end of period  $ 28,818  $ 20,656  $ 8,162

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
  September 30, September 30, September 30,
  2012 2011 2012 2011 2012 2011
Net sales  $ 518,504  $ 502,301  $ 9,523  $ 1,283  $ 528,027  $ 503,584
             
Gross profit 148,738 147,541 2,763 365 151,501 147,906
Gross margin 28.7% 29.4% 29.0% 28.4% 28.7% 29.4%
             
Operating expenses 100,315 106,619 3,229 374 103,544 106,993
Expenses as a % of net sales 19.3% 21.2% 33.9% 29.2% 19.6% 21.2%
             
Goodwill impairment 6,946 6,946
             
Operating income (loss) 41,477 40,922 (466) (9) 41,011 40,913
Operating margin 8.0% 8.1% (4.9)% (0.7)% 7.8% 8.1%
 
 
(Unaudited) Base Business Excluded Total
(in thousands) Nine Months Ended Nine Months Ended Nine Months Ended
  September 30, September 30, September 30,
  2012 2011 2012 2011 2012 2011
Net sales  $ 1,608,947  $ 1,517,691  $ 38,209  $ 5,205  $ 1,647,156  $ 1,522,896
             
Gross profit 467,582 449,285 10,887 1,470 478,469 450,755
Gross margin 29.1% 29.6% 28.5% 28.2% 29.0% 29.6%
             
Operating expenses 305,354 309,438 11,003 1,907 316,357 311,345
Expenses as a % of net sales 19.0% 20.4% 28.8% 36.6% 19.2% 20.4%
             
Goodwill impairment 6,946 6,946
             
Operating income (loss) 155,282 139,847 (116) (437) 155,166 139,410
Operating margin 9.7% 9.2% (0.3)% (8.4)% 9.4% 9.2%

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

    Acquired (1)   Acquisition Date Net Sales Centers Acquired Periods Excluded
CCR Distribution March 2012 1 March–September 2012
Ideal Distributors Ltd. February 2012 4 February–September 2012
G.L. Cornell Company December 2011 1 January–September 2012
Poolway Schwimmbadtechnik GmbH November 2011 1 January–September 2012
The Kilpatrick Company, Inc. May 2011 4 January–July 2012 and May–July 2011
Turf Equipment Supply Co. December 2010 3 January–February 2012 and January–February 2011
Pool Boat and Leisure, S.A. December 2010 1 January–February 2012 and January–February 2011
       
(1) We acquired certain distribution assets of each of these companies.      

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 September 30, 2012):

  • acquired sales centers (see table above);
  • existing sales centers consolidated with acquired sales centers (0);
  • 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 (4).

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.

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