Highlights include:
Record annual cash flow from operations of $113.3 million
Decrease in total debt of $79.1 million
2010 EPS guidance of $1.00 to $1.15
COVINGTON, LA. (February 18, 2010) – Pool Corporation (NASDAQ/GSM:POOL) today announced fourth quarter and full year 2009 results.
"The Company's 2009 results reflect our ability to capitalize on our financial and operational strengths and provide evidence of our resiliency given the most difficult external market environment ever faced by our industry. We achieved many of our 2009 objectives by focusing on disciplined pricing and purchasing strategies (driving record gross margin), rebalancing inventories and improving working capital management (leading to record cash flow from operations) and controlling costs relative to our current sales levels. We believe that we realized continued market share gains, which we attribute to our high service levels coupled with industry leading programs and initiatives that include the expansion of category offerings in tile and replacement parts. These improvements, along with recent trends indicating increased stability in many external factors that have adversely impacted new construction and replacement activity over the past several years, provide us with confidence heading into 2010," said Manuel Perez de la Mesa, President and CEO.
Net sales for the year ended December 31, 2009 decreased 14% to $1.54 billion, compared to $1.78 billion in 2008. Base business sales declined 15%, reflecting the prolonged impact of lower pool and irrigation construction activity, greater deferred discretionary replacement activity and unfavorable weather and currency fluctuations. These reductions were partially offset by an increase in certain maintenance and repair product sales, inflationary price increases passed through the supply chain and sales from regulatory changes.
Gross profit for the year ended December 31, 2009 decreased 13% to $449.7 million from $515.2 million in 2008. Gross profit as a percentage of net sales (gross margin) increased 30 basis points to 29.2% in 2009 despite negative pressures from the competitive pricing environment.
Selling and administrative expenses (operating expenses) for 2009 decreased 10% to $361.3 million from $399.8 million in 2008. This decrease reflects the impact of cost control initiatives, including lower payroll related, variable and discretionary expenses, and reduced delivery and vehicle operating costs. Included in these results were $1.4 million of non-cash charges in the second half of 2009 related to the closure and consolidation of certain sales centers between September and December 2009.
Operating income for the year declined 23% to $88.4 million from $115.5 million in the comparable 2008 period. Operating income as a percentage of net sales (operating margin) decreased to 5.7% in 2009, compared to 6.4% in 2008. Adjusted EBITDA (as defined in the addendum to this release) was $107.9 million in 2009 compared to $135.7 million in 2008. Interest expense, net declined $9.2 million compared to 2008 due primarily to a 41% decrease in interest expense, which reflects lower average borrowings and a lower weighted average effective interest rate, and $1.8 million of foreign currency transaction gains.
As the Company reported in its third quarter results, it recognized a $26.5 million equity loss related to its pro rata share of Latham Acquisition Corporation's (LAC) non-cash goodwill and other intangible asset impairment charge. Since the Company's pro rata share exceeded the $26.5 million recorded value of the investment in LAC as of September 1, 2009, the recognized loss reflected the full write-off of the investment. Prior to this, the Company had recognized an equity loss of $2.2 million related to its share of LAC's loss from ongoing operations for the eight months ended August 2009. In total, the Company recognized an equity loss of $28.7 million for LAC in 2009. This compares to an equity loss of $1.7 million recognized in fiscal 2008. LAC filed for bankruptcy in December 2009 and its Plan of Reorganization was approved by the United States Bankruptcy Court for the District of Delaware in January 2010, allowing it to emerge from bankruptcy. As of the date of the approval, the Company no longer has an equity interest in LAC and will not recognize any impact related to LAC's future earnings or losses. POOL Reports 2009 Results Page 2 February 18, 2010
Earnings per share for 2009 was $0.39 per diluted share on net income of $19.2 million for the year, compared to earnings per share of $1.17 per diluted share on net income of $57.0 million in 2008. Excluding the impact of LAC's non-cash impairment charge and the non-cash charges related to facility closings, adjusted earnings per diluted share for 2009 was $0.95 on adjusted net income of $46.5 million. (See the reconciliation of non-GAAP to GAAP measures in the addendum to this release).
On the balance sheet, total net receivables decreased 17% compared to December 31, 2008 due primarily to lower fourth quarter sales and a shift toward more cash sales resulting from tighter credit terms. Inventory levels were $355.5 million at December 31, 2009 compared to $405.9 million at December 31, 2008. Excluding approximately $8.0 million of inventory related to the October 2009 acquisition of General Pool and Spa Supply, inventories decreased 14% year over year due to successful inventory rebalancing efforts. Total debt outstanding at December 31, 2009 was $248.7 million, down from $327.8 million at December 31, 2008.
Cash provided by operations increased $20.0 million to $113.3 million in 2009 compared to 2008. In January 2009, the Company paid $30.0 million for its deferred third and fourth quarter 2008 federal income tax payments. The Company also paid $26.0 million in 2009 for its third and fourth quarter 2009 estimated taxes. Cash from operations improved $76.0 million in 2009 excluding this $56.0 million combined impact of timing differences related to 2008 and 2009 estimated federal income tax payments. This improvement is due to focused management of working capital.
Net sales for the seasonally slow fourth quarter decreased 11% to $231.0 million from $259.0 million in the comparable 2008 period. Base business sales declined 13% in the quarter compared to the same period in 2008. Gross margin decreased 10 basis points to 29.0% in the fourth quarter of 2009 from 29.1% for the same period last year.
Operating loss for the fourth quarter of 2009 was $21.8 million compared to $15.3 million in the same period of the previous year. Interest expense, net declined $3.5 million due primarily to a 43.0% decrease in interest expense and $1.5 million of foreign currency transaction gains.
Loss per diluted share for the fourth quarter of 2009 was $0.28 on a net loss of $13.6 million, compared to a loss of $0.31 per diluted share on a net loss of $14.8 million in the comparable 2008 period. Excluding the impact of the non-cash charges, the adjusted fourth quarter loss per share was $0.27 per diluted share.
"Looking ahead, we are encouraged by indications that the downward economic trends of the past several years are moderating and that sales levels should once again benefit from long-term industry growth dynamics. We believe there is potential for significant sales recovery over the next several years, driven in part by pent-up demand for replacement and retrofit activity that has been deferred due to recent market conditions. We also anticipate that new pool and irrigation construction activities will gradually begin to return to more normalized levels, even though it may be 2011 before we see growth in this segment of the market. Based on current trends including the unfavorable weather conditions during the first six weeks of 2010, we project 2010 earnings of $1.00 to $1.15 per diluted share. This range includes our expectation for a higher seasonal loss per diluted share in the first quarter of 2010 compared to the same period in 2009, with gradually improving year on year comparisons as 2010 progresses. Our experienced and dedicated team is ready to leverage our unique industry position that we have established over the years to grow earnings once again," said Perez de la Mesa.
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates over 280 sales centers in North America and Europe, through which it distributes more than 100,000 national brand and private label products to roughly 70,000 wholesale customers. For more information about POOL, please visit www.poolcorp.com. POOL Reports 2009 Results Page 3 February 18, 2010
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 changes in the economy and the housing market, the sensitivity of our business to weather conditions, our ability to maintain favorable relationships with suppliers and manufacturers, competition from other leisure product alternatives and mass merchants and other risks detailed in POOL's Form 10-Q for the quarter ended September 30, 2009 filed with the Securities and Exchange Commission.
CONTACT:
Craig K. Hubbard
985.801.5117
craig.hubbard@poolcorp.com
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