Highlights for the quarter include:
Sales growth of 8%, including 5% from base business
9% increase in operating income
Diluted EPS of $1.05
COVINGTON, LA. (July 22, 2010) – Pool Corporation (NASDAQ/GSM:POOL) today reported results for the second quarter of 2010.
"As anticipated, 2010 is proving to be a pivotal transition year for our industry and our business. We believe our second quarter results provide strong evidence that the downturn in pool construction and pool refurbishment activities over the past several years has subsided. Base business sales growth for the quarter includes increases in almost every major product category and most markets, with growth in certain discretionary products reflecting a modest recovery in refurbishment and replacement activity. This momentum, combined with the efforts of our fully engaged teams to maximize sales and profitability, control expenses and maintain efficient use of working capital, has resulted in our improved financial performance," said Manuel Perez de la Mesa, President and CEO.
Net sales for the quarter ended June 30, 2010 increased 8% to $647.5 million, compared to $602.1 million in the second quarter of 2009. Base business sales were up 5% due to higher discretionary purchases as a result of improved market trends, expanded product offerings including replacement parts and the benefit of favorable weather conditions compared to the second quarter of 2009 except in the Western U.S. This increase was realized despite approximately $17.0 million of one time sales in the first half of 2009, including approximately $8.0 million in the second quarter of 2009, driven by regulatory changes governing pool and spa safety, as well as continued but moderating weakness in irrigation construction markets.
Gross profit for the second quarter of 2010 increased 7% to $190.5 million from $178.1 million in the comparable 2009 period. Gross profit as a percentage of net sales (gross margin) declined 20 basis points to 29.4% in the second quarter of 2010 due primarily to the ongoing competitive pricing environment and some favorable impact to gross margin in the second quarter of 2009 related to inventory purchases ahead of vendor price increases in the second half of 2008.
Selling and administrative expenses (operating expenses) increased 6% to $101.7 million in the second quarter of 2010 from $96.4 million in the second quarter of 2009 due primarily to the impact from recent acquisitions. Base business operating expenses were up 2% compared to the second quarter of 2009 due to a $4.7 million increase in incentive costs, while non-incentive related expenses were down 3% including a $1.3 million decline in bad debt expense.
Operating income increased 9% to $88.9 million from $81.7 million in the comparable 2009 period. Operating income as a percentage of net sales (operating margin) was essentially flat at 13.7% for the second quarter of 2010 compared to 13.6% for the same period in 2009. Interest expense declined $1.2 million or 39% compared to the second quarter of 2009 due primarily to an $86.4 million decrease in average debt outstanding. The Company no longer has an equity interest in Latham Acquisition Corporation (LAC), which added $0.7 million in equity earnings to the second quarter of 2009.
Net income increased 9% to $52.8 million in the second quarter of 2010 compared to $48.4 million in the second quarter of 2009. Earnings per share for the second quarter of 2010 was $1.05 per diluted share compared to $0.99 per diluted share for the same period in 2009.
Net sales for the six months ended June 30, 2010 increased 4% to $917.3 million from $878.7 million in the comparable 2009 period. Base business sales improved 2% in the first six months of 2010 compared to the same period in 2009. Gross margin decreased 40 basis points to 29.1% in the first half of 2010 from 29.5% for the same period last year.
Operating income for the first six months of 2010 increased 4% to $81.0 million compared to $78.1 million in the same period last year. Interest expense declined $2.2 million in the first six months of 2010 compared to the same period in 2009. In the first half of 2009, equity losses in unconsolidated investments, net included $1.4 million related to the Company's former equity investment in LAC.
Earnings per share for the first six months of 2010 increased to $0.93 per diluted share on net income of $46.7 million, compared to $0.87 per diluted share on net income of $42.1 million in the comparable 2009 period.
On the balance sheet, total net receivables increased 2% compared to June 30, 2009. Excluding recent acquisitions, total net receivables declined 1% despite the increase in sales. This decline reflects significant improvements in customer collections. Inventory levels increased 2% to $331.5 million at June 30, 2010 compared to levels at June 30, 2009, but decreased 2% excluding recent acquisitions. Total debt outstanding at June 30, 2010 was $266.1 million, down $67.9 million compared to June 30, 2009.
Our continued focus on working capital management helped generate cash provided by operations of $28.7 million in the first six months of 2010. This performance was down just slightly from our record level of cash provided by operations in the first six months of 2009, which benefitted from a 16% reduction in inventory levels as of June 30, 2009 compared to June 30, 2008. Adjusted EBITDA (as defined in the addendum to this release) was $93.8 million in the second quarter of 2010 compared to $86.0 million in the second quarter of 2009, and was $90.4 million for the six months ended June 30, 2010 compared to $86.4 million for the six months ended June 30, 2009.
"Based on our year to date results through the seasonally critical second quarter and present indications for the remainder of 2010, we are increasing the bottom end of our initial projected earnings guidance range. Our narrowed full year 2010 earnings guidance is a projected range of $1.10 to $1.15 per diluted share from previous guidance of $1.00 to $1.15 per diluted share," said Perez de la Mesa. "The challenges of the past few years have given us an opportunity to focus on our strengths as a company, and we intend to fully leverage these strengths to take advantage of the recovery in our industry."
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 290 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.
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 POOL's Form 10-Q for the quarter ended March 31, 2010 filed with the Securities and Exchange Commission.
CONTACT:
Craig K. Hubbard
985.801.5117
craig.hubbard@poolcorp.com
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