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TheStreet Open House

Pool Corporation Reports Record 2012 Results And Provides 2013 Earnings Guidance

Cash provided by operations was $119.1 million in 2012, or $30.2 million more than adjusted net income. Compared to 2011, cash provided by operations was up $44.0 million due primarily to the increase in net income and improved working capital management.

Net sales for the seasonally slow fourth quarter increased 13% to $306.8 million compared to the fourth quarter of 2011. Base business sales improved 12% in the quarter compared to the same period in 2011. Gross margin declined 90 basis points to 29.0% in the fourth quarter of 2012. 

Operating loss for the fourth quarter of 2012 was $10.3 million compared to a loss of $14.3 million in the same period last year. Net interest expense decreased $1.7 million due to the impact of the change in foreign currency transaction gains and losses, with recognized gains of $0.4 million during the fourth quarter of 2012 versus losses of $0.5 million during the same period in 2011, and lower interest expense on borrowings. Loss per diluted share for the fourth quarter of 2012 was $0.17 on a net loss of $8.0 million, compared to a loss of $0.21 per diluted share on a net loss of $10.1 million in the comparable 2011 period. 

"Our 2012 results speak volumes about the talent and commitment that exist throughout our company. We are excited about closing the year strong and creating significant momentum heading into 2013, which marks our 20th year as the value added distribution company we are today. For fiscal 2013, we expect earnings per diluted share will be approximately $2.13 to $2.23. This range reflects our expectations for sales growth in the mid-single digits and 15% to 20% growth from adjusted 2012 diluted EPS," 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
 (In thousands, except per share data)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011 (1)
         
Net sales $306,818 $270,422 $1,953,974 $1,793,318
Cost of sales 217,880 189,587 1,386,567 1,261,728
Gross profit 88,938 80,835 567,407 531,590
Percent 29.0% 29.9% 29.0% 29.6%
         
Selling and administrative expenses 99,235 93,628 415,592 404,973
Goodwill impairment 1,550 6,946 1,550
Operating income (loss) (10,297) (14,343) 144,869 125,067
Percent (3.4)% (5.3)% 7.4% 7.0%
         
Interest expense, net (2) 1,105 2,854 6,469 7,964
Income (loss) before income taxes and equity earnings (11,402) (17,197) 138,400 117,103
Provision for income taxes (3,276) (7,058) 56,744 45,319
Equity earnings in unconsolidated investments 129 24 316 209
Net income (loss) $(7,997) $(10,115) $81,972 $71,993
         
Earnings (loss) per share:        
Basic $(0.17) $(0.21) $1.75 $1.49
Diluted $(0.17) $(0.21) $1.71 $1.47
Weighted average shares outstanding:        
Basic 46,522 47,568 46,937 48,158
Diluted 46,522 47,568 48,058 48,987
         
Cash dividends declared per common share $0.16 $0.14 $0.62 $0.55
_________________        
         
(1)   Derived from audited financial statements.
         
(2)   Interest expense, net includes realized foreign currency transaction gains of $0.4 million for the quarter and $0.1 million for the year ended December 31, 2012, and foreign currency transaction losses of $0.5 million for the quarter and $0.6 million for the year ended December 31, 2011. 
 
POOL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
         
  December 31, December 31, Change  
  2012 2011 (1) $ %
         
Assets        
Current assets:        
Cash and cash equivalents $12,463 $17,487 $(5,024) (29)%
Receivables, net (2) 113,859 109,273 4,586 4
Product inventories, net (3) 400,308 386,924 13,384 3
Prepaid expenses and other current assets 11,280 11,298 (18)
Deferred income taxes 5,186 7,084 (1,898) (27)
Total current assets 543,096 532,066 11,030 2
         
Property and equipment, net 46,566 41,394 5,172 12
Goodwill 169,983 177,103 (7,120) (4)
Other intangible assets, net 11,053 11,738 (685) (6)
Equity interest investments 1,160 980 180 18
Other assets, net 8,718 7,621 1,097 14
Total assets $780,576 $770,902 $9,674 1%
         
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable $199,787 $177,437 $22,350 13%
Accrued expenses and other current liabilities 48,186 49,140 (954) (2)
Current portion of long-term debt and other long-term liabilities 23 22 1 5
Total current liabilities 247,996 226,599 21,397 9
         
Deferred income taxes 13,453 9,531 3,922 41
Long-term debt 230,882 247,300 (16,418) (7)
Other long-term liabilities 6,622 7,726 (1,104) (14)
Total liabilities 498,953 491,156 7,797 2
Total stockholders' equity 281,623 279,746 1,877 1
Total liabilities and stockholders' equity $780,576 $770,902 $9,674 1%
 _________________        
 
(1)   Derived from audited financial statements.
(2)   The allowance for doubtful accounts was $5.5 million at December 31, 2012 and $5.9 million at December 31, 2011.
(3)   The inventory reserve was $7.5 million at December 31, 2012 and $7.1 million at December 31, 2011.
 
POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
 (In thousands)
       
  Year Ended December 31,  
  2012 2011 (1) Change
Operating activities      
Net income $81,972 $71,993 $9,979
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 11,592 9,746 1,846
Amortization 1,284 1,559 (275)
Share-based compensation 8,465 8,233 232
Excess tax benefits from share-based compensation (4,487) (3,118) (1,369)
Equity earnings in unconsolidated investments (316) (209) (107)
(Gains) losses on foreign currency transactions (111) 592 (703)
Goodwill impairment 6,946 1,550 5,396
Other 3,375 1,850 1,525
Changes in operating assets and liabilities, net of effects of acquisitions:  
Receivables (3,396) (5,887) 2,491
Product inventories (9,232) (35,339) 26,107
Prepaid expenses and other assets (1,159) (2,951) 1,792
Accounts payable 20,253 6,402 13,851
Accrued expenses and other current liabilities 3,892 20,682 (16,790)
Net cash provided by operating activities 119,078 75,103 43,975
       
Investing activities      
Acquisition of businesses, net of cash acquired (4,699) (5,934) 1,235
Purchase of property and equipment, net of sale proceeds (16,271) (19,454) 3,183
Other investments (238) (190) (48)
Net cash used in investing activities (21,208) (25,578) 4,370
       
Financing activities      
Proceeds from revolving line of credit 607,923 749,349 (141,426)
Payments on revolving line of credit (524,341) (700,749) 176,408
Payments on long-term debt and other long-term liabilities (100,022) (149) (99,873)
Payments of deferred acquisition consideration (500) 500
Payments of deferred financing costs (1,674) 1,674
Excess tax benefits from share-based compensation 4,487 3,118 1,369
Proceeds from stock issued under share-based compensation plans 20,205 13,085 7,120
Payments of cash dividends (29,135) (26,470) (2,665)
Purchases of treasury stock (81,761) (76,564) (5,197)
Net cash used in financing activities (102,644) (40,554) (62,090)
Effect of exchange rate changes on cash and cash equivalents (250) (1,205) 955
Change in cash and cash equivalents (5,024) 7,766 (12,790)
Cash and cash equivalents at beginning of period 17,487 9,721 7,766
Cash and cash equivalents at end of period $12,463 $17,487 $(5,024)
 _________________      
       
(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 December 31, Three Months Ended December 31, Three Months Ended December 31,
  2012 2011 2012 2011 2012 2011
Net sales $301,370 $270,108 $5,448 $314 $306,818 $270,422
             
Gross profit 87,943 80,712 995 123 88,938 80,835
Gross margin 29.2% 29.9% 18.3% 39.2% 29.0% 29.9%
             
Operating expenses 96,700 93,307 2,535 321 99,235 93,628
Expenses as a % of net sales 32.1% 34.5% 46.5% 102.2% 32.3% 34.6%
             
Goodwill impairment 1,550 1,550
             
Operating loss (8,757) (14,145) (1,540) (198) (10,297) (14,343)
Operating margin (2.9)% (5.2)% (28.3)% (63.1)% (3.4)% (5.3)%
             
             
 (Unaudited) Base Business Excluded Total
(in thousands) Year Ended December 31, Year Ended December 31, Year Ended December 31,
  2012 2011 2012 2011 2012 2011
Net sales $1,910,333 $1,787,800 $43,641 $5,518 $1,953,974 $1,793,318
             
Gross profit 555,493 530,002 11,914 1,588 567,407 531,590
Gross margin 29.1% 29.6% 27.3% 28.8% 29.0% 29.6%
             
Operating expenses 401,897 402,709 13,695 2,264 415,592 404,973
Expenses as a % of net sales 21.0% 22.5% 31.4% 41.0% 21.3% 22.6%
             
Goodwill impairment 6,946 1,550 6,946 1,550
             
Operating income (loss) 146,650 125,743 (1,781) (676) 144,869 125,067
Operating margin 7.7% 7.0% (4.1)% (12.3)% 7.4% 7.0%
             

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–December 2012
Ideal Distributors Ltd. February 2012 4 February–December 2012
G.L. Cornell Company December 2011 1 January–December 2012 and December 2011
Poolway Schwimmbadtechnik GmbH November 2011 1 January–December 2012 and November–December 2011
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 sales centers that are acquired, closed or opened in new markets from base business results for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers. There were four sales centers opened in new markets that were excluded from base business as of December 31, 2012.

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