POOL CORP - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended September 30, 2009
or
|
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from ____________ to ____________
|
Commission
File Number: 0-26640
![](https://www.sec.gov/Archives/edgar/data/0000945841/000094584109000058/newpoolcorp.jpg)
POOL
CORPORATION
|
||
(Exact
name of Registrant as specified in its charter)
|
||
Delaware
|
36-3943363
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
109
Northpark Boulevard,
Covington,
Louisiana
|
70433-5001
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
985-892-5521
|
||
(Registrant's
telephone number, including area code)
|
||
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES x NO ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). YES ¨ NO ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer x Accelerated
filer ¨
Non-accelerated
filer ¨ (Do not check if a
smaller reporting
company) Smaller
reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES ¨ NO x
At
October 23, 2009, there were 48,956,905 outstanding shares of the registrant's
common stock, $.001 par value per share.
POOL
CORPORATION
Form
10-Q
For
the Quarter Ended September 30, 2009
INDEX
PART
I. FINANCIAL INFORMATION
|
|||
Item
1. Financial Statements (Unaudited)
|
|||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
8
|
|||
20
|
|||
20
|
|||
PART
II. OTHER INFORMATION
|
|||
21
|
|||
25
|
|||
25
|
|||
26
|
|||
27
|
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
Consolidated
Statements of Income
(Unaudited)
(In
thousands, except per share data)
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
September
30,
|
September
30,
|
|||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||
Net
sales
|
$
|
430,054
|
$
|
493,530
|
$
|
1,308,762
|
$
|
1,524,717
|
||||
Cost
of sales
|
306,660
|
351,730
|
926,107
|
1,084,811
|
||||||||
Gross
profit
|
123,394
|
141,800
|
382,655
|
439,906
|
||||||||
Selling
and administrative expenses
|
91,252
|
103,183
|
272,439
|
309,102
|
||||||||
Operating
income
|
32,142
|
38,617
|
110,216
|
130,804
|
||||||||
Interest
expense, net
|
2,504
|
4,589
|
8,981
|
14,700
|
||||||||
Income
before income taxes and equity earnings (loss)
|
29,638
|
34,028
|
101,235
|
116,104
|
||||||||
Provision
for income taxes
|
11,648
|
13,675
|
39,786
|
45,397
|
||||||||
Equity
earnings (loss) in unconsolidated investments, net
|
(27,312
|
)
|
1,707
|
(28,641
|
)
|
1,044
|
||||||
Net
income (loss)
|
$
|
(9,322
|
)
|
$
|
22,060
|
$
|
32,808
|
$
|
71,751
|
|||
Earnings
(loss) per share:
|
||||||||||||
Basic
|
$
|
(0.19
|
)
|
$
|
0.46
|
$
|
0.68
|
$
|
1.50
|
|||
Diluted
|
$
|
(0.19
|
)
|
$
|
0.45
|
$
|
0.67
|
$
|
1.47
|
|||
Weighted
average shares outstanding:
|
||||||||||||
Basic
|
48,799
|
47,925
|
(1)
|
48,543
|
47,799
|
(1)
|
||||||
Diluted
|
48,799
|
49,104
|
(1)
|
48,863
|
48,785
|
(1)
|
||||||
Cash
dividends declared per common share
|
$
|
0.13
|
$
|
0.13
|
$
|
0.39
|
$
|
0.38
|
(1) As adjusted – see Note 2.
The
accompanying Notes are an integral part of the Consolidated Financial
Statements.
1
Consolidated
Balance Sheets
(In
thousands, except share data)
September
30,
|
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
2008 (2)
|
|||||||
(Unaudited)
|
(Unaudited)
|
||||||||
Assets
|
|||||||||
Current
assets:
|
|||||||||
Cash
and cash equivalents
|
$
|
30,442
|
$
|
25,278
|
$
|
15,762
|
|||
Receivables,
net
|
149,733
|
45,426
|
16,311
|
||||||
Receivables
pledged under receivables facility
|
-
|
133,501
|
99,273
|
||||||
Product
inventories, net
|
318,177
|
345,944
|
405,914
|
||||||
Prepaid
expenses and other current assets
|
6,622
|
7,915
|
7,676
|
||||||
Deferred
income taxes
|
11,904
|
9,139
|
11,908
|
||||||
Total
current assets
|
516,878
|
567,203
|
556,844
|
||||||
Property
and equipment, net
|
32,158
|
32,895
|
33,048
|
||||||
Goodwill
|
170,291
|
167,376
|
169,569
|
||||||
Other
intangible assets, net
|
12,058
|
13,519
|
13,339
|
||||||
Equity
interest investments
|
978
|
35,592
|
31,157
|
||||||
Other
assets, net
|
28,596
|
25,299
|
26,949
|
||||||
Total
assets
|
$
|
760,959
|
$
|
841,884
|
$
|
830,906
|
|||
Liabilities
and stockholders’ equity
|
|||||||||
Current
liabilities:
|
|||||||||
Accounts
payable
|
$
|
137,761
|
$
|
128,329
|
$
|
173,688
|
|||
Accrued
expenses and other current liabilities
|
54,016
|
80,636
|
61,701
|
||||||
Short-term
financing
|
-
|
58,392
|
20,792
|
||||||
Current
portion of long-term debt and other long-term liabilities
|
37,669
|
5,369
|
6,111
|
||||||
Total
current liabilities
|
229,446
|
272,726
|
262,292
|
||||||
Deferred
income taxes
|
19,391
|
18,608
|
20,032
|
||||||
Long-term
debt
|
235,800
|
274,100
|
301,000
|
||||||
Other
long-term liabilities
|
6,514
|
6,225
|
5,848
|
||||||
Total
liabilities
|
491,151
|
571,659
|
589,172
|
||||||
Stockholders’
equity:
|
|||||||||
Common
stock, $.001 par value; 100,000,000 shares
|
|||||||||
authorized; 48,941,324,
47,931,394 and
|
|||||||||
48,218,872
shares issued and outstanding at
|
|||||||||
September
30, 2009, September 30, 2008 and
|
|||||||||
December
31, 2008, respectively
|
49
|
47
|
48
|
||||||
Additional
paid-in capital
|
200,492
|
183,677
|
189,665
|
||||||
Retained
earnings
|
67,099
|
79,920
|
54,407
|
||||||
Accumulated
other comprehensive income (loss)
|
2,168
|
6,581
|
(2,386
|
)
|
|||||
Total
stockholders’ equity
|
269,808
|
270,225
|
241,734
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
760,959
|
$
|
841,884
|
$
|
830,906
|
(2) Derived from audited financial statements.
The
accompanying Notes are an integral part of the Consolidated Financial
Statements.
2
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
(In
thousands)
Nine
Months Ended
|
|||||||
September
30,
|
|||||||
2009
|
2008
|
||||||
Operating
activities
|
|||||||
Net
income
|
$
|
32,808
|
$
|
71,751
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
|
6,764
|
7,182
|
|||||
Amortization
|
1,872
|
3,196
|
|||||
Share-based
compensation
|
4,708
|
5,493
|
|||||
Excess
tax benefits from share-based compensation
|
(2,194
|
)
|
(2,452
|
)
|
|||
Equity
(earnings) loss in unconsolidated investments
|
30,064
|
(1,635
|
)
|
||||
Goodwill
impairment
|
310
|
-
|
|||||
Other
|
(5,471
|
)
|
1,393
|
||||
Changes
in operating assets and liabilities, net of effects of
acquisitions:
|
|||||||
Receivables
|
(31,509
|
)
|
(33,908
|
)
|
|||
Product
inventories
|
87,183
|
47,545
|
|||||
Accounts
payable
|
(35,927
|
)
|
(67,940
|
)
|
|||
Other
current assets and liabilities
|
(1,533
|
)
|
45,910
|
||||
Net
cash provided by operating activities
|
87,075
|
76,535
|
|||||
Investing
activities
|
|||||||
Acquisition
of businesses, net of cash acquired
|
(381
|
)
|
(32,891
|
)
|
|||
Divestiture
of business
|
-
|
1,165
|
|||||
Purchase
of property and equipment, net of sale proceeds
|
(6,170
|
)
|
(4,999
|
)
|
|||
Net
cash used in investing activities
|
(6,551
|
)
|
(36,725
|
)
|
|||
Financing
activities
|
|||||||
Proceeds
from revolving line of credit
|
339,037
|
276,826
|
|||||
Payments
on revolving line of credit
|
(368,237
|
)
|
(277,751
|
)
|
|||
Proceeds
from asset-backed financing
|
57,000
|
73,335
|
|||||
Payments
on asset-backed financing
|
(77,792
|
)
|
(83,270
|
)
|
|||
Payments
on long-term debt and other long-term liabilities
|
(4,618
|
)
|
(2,385
|
)
|
|||
Payments
of deferred financing costs
|
(305
|
)
|
(22
|
)
|
|||
Payments
of capital lease obligations
|
-
|
(251
|
)
|
||||
Excess
tax benefits from share-based compensation
|
2,194
|
2,452
|
|||||
Proceeds from issuance of common stock under share-based compensation
plans
|
3,926
|
3,736
|
|||||
Payments
of cash dividends
|
(18,945
|
)
|
(18,187
|
)
|
|||
Purchases
of treasury stock
|
(1,171
|
)
|
(3,244
|
)
|
|||
Net
cash used in financing activities
|
(68,911
|
)
|
(28,761
|
)
|
|||
Effect
of exchange rate changes on cash
|
3,067
|
(1,596
|
)
|
||||
Change
in cash and cash equivalents
|
14,680
|
9,453
|
|||||
Cash
and cash equivalents at beginning of period
|
15,762
|
15,825
|
|||||
Cash
and cash equivalents at end of period
|
$
|
30,442
|
$
|
25,278
|
The
accompanying Notes are an integral part of the Consolidated Financial
Statements.
3
Pool
Corporation (the Company, which may be
referred to as POOL,
we, us or our) prepared the unaudited
interim Consolidated Financial Statements following U.S. generally accepted
accounting principles (GAAP) and the requirements of the Securities and Exchange
Commission (SEC) for interim financial information. As permitted under those
rules, certain footnotes and other financial information required by GAAP for
complete financial statements have been condensed or omitted. The
Consolidated Financial Statements include all normal and recurring adjustments
that are necessary for a fair presentation of our financial position and
operating results including the elimination of all significant intercompany
accounts and transactions among our wholly owned subsidiaries.
A
description of our significant accounting policies is included in our 2008
Annual Report on Form 10-K. The Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and accompanying
notes in our Annual Report. The results for the three and nine month
periods ended September 30, 2009 are not necessarily indicative of the
results to be expected for the twelve months ending
December 31, 2009.
We have
evaluated subsequent events through October 30, 2009, which is the date these
financial statements were available to be issued.
Equity
Method Investments
As
discussed in Note 1 to the Consolidated Financial Statements in our 2008 Annual
Report on Form 10-K, we account for our 38% investment in Latham Acquisition
Corporation (LAC) using the equity method of accounting. We recorded
an $0.8 million equity loss related to our share of LAC’s net loss from
ongoing operations for July and August 2009. As of
September 1, 2009, LAC performed an interim goodwill and other
intangible asset impairment test and recorded a non-cash impairment charge in
accordance with GAAP. Since our pro rata share of this impairment
charge exceeded our equity investment balance, we recognized a $26.5 million
equity loss equal to our equity investment balance as of
September 1, 2009. As a result of LAC’s impairment charge,
the recorded value of our investment in LAC is now zero and we do not expect to
record additional equity earnings or losses from LAC for the foreseeable
future. We have not recognized any tax benefits related to the
write-down of our equity investment in LAC.
Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162 (SFAS 168). The
Accounting Standards Codification (ASC) is now the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. This ASC topic supersedes all existing non-SEC accounting and
reporting standards. All other non-SEC accounting literature excluded from the
ASC will become non-authoritative. SFAS 168, as codified by ASC 105,
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The adoption of SFAS 168
impacted our financial statement disclosures, but did not affect our
consolidated financial position or results of operations.
Note
2 – Earnings (Loss) Per Share
We
calculate basic earnings (loss) per share (EPS) by dividing net income (loss) by
the weighted average number of common shares outstanding. Diluted EPS
includes the dilutive effects of stock option awards.
4
On
January 1, 2009, we adopted FASB Staff Position (FSP) Emerging Issues
Task Force (EITF) 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
as codified by ASC 260-10-45-61A. This ASC topic states that
unvested share-based payment awards that contain non-forfeitable rights to
dividends (such as our unvested restricted stock awards) are participating
securities and should be included in the computation of both basic and diluted
earnings per share. According to the provisions of this ASC topic, we
now include outstanding unvested restricted stock awards of our common stock in
the basic weighted average share calculation and have adjusted prior period
basic and diluted weighted average common shares outstanding to reflect the
retrospective adoption of this standard. The adoption of this ASC
topic did not change our basic or diluted earnings per share for the three or
nine months ended September 30, 2008.
The table
below presents the reconciliation of basic and diluted weighted average number
of shares outstanding and the related EPS calculation (in thousands,
except EPS):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||
Net
income (loss)
|
$
|
(9,322
|
)
|
$
|
22,060
|
$
|
32,808
|
$
|
71,751
|
|||||
Weighted
average shares outstanding:
|
||||||||||||||
Basic
|
48,799
|
47,925
|
(1)
|
48,543
|
47,799
|
(1)
|
||||||||
Effect
of dilutive securities:
|
||||||||||||||
Stock
options
|
-
|
1,176
|
317
|
983
|
||||||||||
Employee
stock purchase plan
|
-
|
3
|
3
|
3
|
||||||||||
Diluted
|
48,799
|
49,104
|
(1)
|
48,863
|
48,785
|
(1)
|
||||||||
Basic
earnings (loss) per share
|
$
|
(0.19
|
)
|
$
|
0.46
|
$
|
0.68
|
$
|
1.50
|
|||||
Diluted
earnings (loss) per share
|
$
|
(0.19
|
)
|
$
|
0.45
|
$
|
0.67
|
$
|
1.47
|
(1) As adjusted for adoption of FSP EITF 03-6-1 (ASC
260-10-45-61A).
The
weighted average diluted shares outstanding for the nine months ended
September 30, 2009 exclude stock options to purchase 3,362,270
shares. Since these options have exercise prices that are higher than
the average market price of our common stock, including them in the calculation
would have an anti-dilutive effect on earnings per share. In 2008,
the weighted average diluted shares outstanding for the three and nine months
ended September 30, 2008 excluded stock options to purchase
1,530,442 shares and 2,150,386 shares, respectively, for the same
reason.
Since we
reported a net loss for third quarter of 2009, there is no difference between
the basic and diluted weighted average shares outstanding for this
period. Potentially dilutive shares are excluded from the computation
if their effect is anti-dilutive, meaning that the loss per share would
decrease. For informational purposes, the table below presents the
amounts we have excluded from the computation of diluted weighted average shares
outstanding (in thousands):
Three
Months Ended
September 30, 2009 |
|||||||
Weighted
average shares outstanding:
|
|||||||
Basic
|
48,799
|
||||||
Effect
of dilutive securities:
|
|||||||
Stock
options
|
828
|
||||||
Employee
stock purchase plan
|
3
|
||||||
Diluted
|
49,630
|
The
weighted average diluted shares outstanding in this computation also exclude
stock options to purchase 1,451,716 shares at September 30, 2009,
which are considered anti-dilutive because the exercise prices for these options
are higher than the average market price of our common stock.
5
Note
3 – Debt
In May 2009, we
amended the Receivables Purchase Agreement under our accounts receivable
securitization facility (the Receivables Facility) to extend the
termination date to August 19, 2009, to increase the required reserves
used in calculating the available funding amount and to loosen the delinquency
and default trigger ratios. As part of this amendment, the
Receivables Facility had a reduced borrowing capacity of up to
$25.0 million. On August 19, 2009, the Receivables
Facility terminated and was not replaced since we believe that our existing
credit facilities have adequate capacity to meet our anticipated liquidity needs
in the near term.
Please
refer to Note 5 – Fair Value Measurements and Interest Rate Swaps for discussion
of our interest rate swap agreements.
Note
4 – Comprehensive Income (Loss)
Comprehensive
income (loss) includes net income (loss), foreign currency translation
adjustments and the unrealized gain or loss on interest rate
swaps. The table below presents comprehensive income (loss) for the
three and nine months ended September 30, 2009 and 2008 (in
thousands):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||
Comprehensive
income (loss)
|
$
|
(7,813
|
)
|
$
|
20,441
|
$
|
37,362
|
$
|
70,628
|
|||||
The table
below presents the components of Accumulated other comprehensive income (loss)
for the nine month period ended September 30, 2009 (in
thousands):
|
Foreign
Currency Translation
|
Unrealized
Gain (Loss) on Interest Rate Swaps (1)
|
Total
|
||||||
Balance
at December 31, 2008
|
$
|
2,821
|
$
|
(5,207
|
)
|
$
|
(2,386
|
)
|
|
Net
change
|
3,067
|
1,487
|
4,554
|
||||||
Balance
at September 30, 2009
|
$
|
5,888
|
$
|
(3,720
|
)
|
$
|
2,168
|
(1) Amounts are shown net of tax.
Note
5 – Fair Value Measurements and Interest Rate Swaps
FASB
SFAS 157, Fair Value
Measurements, as codified by ASC 820, provides a framework for measuring
fair value and establishes a fair value hierarchy that prioritizes the inputs
used to measure fair value, giving the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1 inputs),
the next priority to observable market based inputs or unobservable inputs that
are corroborated by market data (Level 2 inputs) and the lowest priority to
unobservable inputs (Level 3 inputs).
6
In
measuring the fair value of our assets and liabilities, we use significant other
observable market data or assumptions (Level 2 inputs) that we believe market
participants would use in pricing an asset or liability, including assumptions
about risk when appropriate. Our assets and liabilities that are
measured at fair value on a recurring basis include the unrealized gain or loss
on our interest rate swaps.
We have
two interest rate swap agreements currently in effect that reduce our exposure
to fluctuations in interest rates on our Floating Rate Senior Notes (the Notes)
and our variable rate Term Loan under our unsecured syndicated senior credit
facility (the Credit Facility). We have an interest rate swap
agreement that converts the variable interest rate on the Notes to a fixed rate
of 5.088% on the initial notional amount of $100.0 million, which will decrease
to a notional amount of $50.0 million in February 2010. This
swap agreement terminates on February 12, 2012. Our other
interest rate swap agreement converts the variable interest rate on the Term
Loan to a fixed rate of 2.4% on the initial notional amount, which decreases as
payments are made on the Term Loan until maturity on
December 20, 2010.
In
April 2009, we entered into a new interest rate swap agreement with an
effective date of January 27, 2010. The purpose of the swap is to
reduce our exposure to fluctuations in interest rates on our $240.0 million
five-year revolving credit facility (the Revolver), which is part of the Credit
Facility. This swap agreement will convert the Revolver’s variable
interest rate to a fixed rate of 1.725% on a notional amount of
$50.0 million beginning on the January 27, 2010 effective date,
and the agreement terminates on January 27, 2012.
We record
any differences paid or received on our interest rate swaps as adjustments to
interest expense over the life of the swaps. We have designated these swaps as
cash flow hedges and we record the changes in the fair value of the swaps to
Accumulated other comprehensive income (loss). Since inception, we
have not recognized any gains or losses on these swaps through income and there
has been no effect on income from hedge ineffectiveness. The table
below presents the fair value of our swap agreements as of September
30, 2009 (in thousands):
Balance Sheet Line Item
|
Unrealized
Losses
|
|||
Accrued
expenses and other current liabilities
|
$
|
(6,031
|
)
|
Failure
of our swap counterparties would result in the loss of any potential benefit to
us under our swap agreements. In this case, we would still be
obligated to pay the variable interest payments underlying our debt
agreements. Additionally, failure of our swap counterparties would
not eliminate our obligation to continue to make payments under our existing
swap agreements if we continue to be in a net pay position.
As
discussed in Note 1 to the Consolidated Financial Statements in our 2008 Annual
Report on Form 10-K, the carrying amount of long-term debt approximates fair
value as it bears interest at variable rates.
Note
6 – Subsequent Event
On
October 16, 2009, we acquired the distribution assets of General Pool &
Spa Supply, Inc. (GPS), a leading regional swimming pool and spa
products distributor. GPS operates 10 distribution sales centers
and is based in Northern California. We funded this transaction
through the utilization of our existing revolving credit facility.
7
You
should read the following discussion in conjunction with Management's Discussion
and Analysis included in our 2008 Annual Report on Form 10-K. For a
discussion of our base business calculations, see page 11 under the RESULTS OF
OPERATIONS section.
OVERVIEW
Financial
Results
As the
2009 swimming pool season comes to a close, we are pleased with our results in
this very challenging environment and are encouraged by more evidence that the
adverse economic factors impacting our industry are beginning to
subside. Specifically, the overall rate of sales decline is
moderating and our sales in some leading markets such as Florida are up quarter
over quarter. We have also made further progress on our gross margin,
expense, and working capital management initiatives, resulting in strong cash
flow generation.
Net sales
decreased 13% compared to the third quarter of 2008 due primarily to the
continued impact of lower pool and irrigation construction activity and deferred
discretionary replacement activity. Unfavorable weather in the
Central and Northern U.S. markets also negatively impacted our third quarter
2009 sales. These reductions were partially offset by an increase in
certain maintenance and repair product sales.
Gross
profit as a percentage of net sales (gross margin) remained flat at 28.7% for
the third quarter of 2009 as favorable shifts in product mix and continued
improvements in margin management practices helped offset negative pressures
from the fiercely competitive pricing environment.
Selling
and administrative expenses (operating expenses) decreased 12% in the third
quarter of 2009 compared to the same period in 2008. This decrease
reflects the impact of cost control initiatives, including lower payroll
related, variable and discretionary expenses, and reduced delivery
costs.
Operating
income declined 17% compared to the third quarter of 2008, while operating
income as a percentage of net sales (operating margin) decreased 30 basis points
to 7.5% for the current quarter. Average debt levels decreased by
$103.3 million quarter over quarter, driving a 45% reduction in interest
expense.
We own a
38% equity interest investment in Latham Acquisition Corporation
(LAC). In the third quarter of 2009, our total equity loss of
$27.3 million included $0.8 million related to our share of LAC’s net
loss from ongoing operations for July and August 2009, which is a decrease of
$2.5 million compared to equity earnings of $1.7 million recognized in
the third quarter of 2008. On September 1, 2009, LAC recorded a non-cash
goodwill and other intangible asset impairment charge in accordance with
generally accepted accounting principles (GAAP). Since our pro rata share
of this impairment charge exceeded our equity investment balance, we also
recognized a $26.5 million equity loss equal to our equity investment balance as
of September 1, 2009.
Our loss
per share for the third quarter of 2009 was $0.19 per diluted share on a net
loss of $9.3 million, compared to earnings per share of $0.45 per diluted
share on net income of $22.1 million for the third quarter of
2008. The $0.64 decrease in diluted earnings per share includes a
decline of $0.59 per diluted share related to the results from our equity
investment in LAC, which reflects an impact of $0.54 per diluted share from
LAC’s impairment charge in the reported equity loss for the three months ended
September 30, 2009.
Financial
Position and Liquidity
Total net
receivables decreased 16% to $149.7 million at September 30, 2009
from $178.9 million at September 30, 2008 due primarily to the
decrease in sales and a shift toward more cash sales as a result of our tighter
credit policies. Our allowance for doubtful accounts balance was
approximately $12.2 million at September 30, 2009, an increase of
$1.6 million over September 30, 2008. We increased the
allowance for doubtful accounts in the fourth quarter of 2008 to reflect an
increase in our total past due receivable balances year over year. At
September 30, 2009, the allowance for doubtful accounts decreased
approximately $1.5 million from December 31, 2008, primarily due
to write-offs of certain accounts that were fully reserved and some improvement
in our past due receivable balances year over year. Days sales
outstanding (DSO) decreased between periods to 35.5 days at
September 30, 2009 compared to 36.4 days at
September 30, 2008.
8
Our
inventory levels decreased 8% to $318.2 million as of
September 30, 2009 compared to $345.9 million as of
September 30, 2008. This decrease reflects our focus on
optimizing inventory levels across all product classes, but the magnitude of the
impact from our inventory initiatives was mitigated as of
September 30, 2009 due to more than $50.0 million of strategic
forward inventory purchases received near the end of the third quarter of
2009. Our inventory turns, as calculated on a trailing twelve month
basis, have decreased to 3.0 times as of September 30, 2009 compared
to 3.3 times as of September 30, 2008.
Total
debt outstanding decreased to $273.3 million at September 30, 2009
compared to $337.7 million at September 30, 2008. This
decrease is a result of our improved cash generation, which frees up additional
debt capacity and lowers our borrowing costs.
Current
Trends
Continuing
adverse economic trends have significantly impacted our
industry. These trends include a slowdown in the domestic housing
market, with lower housing turnover, sharp drops in new home construction, home
value deflation in many markets and a significant tightening of consumer and
commercial credit. Additionally, general economic conditions are
weak, including increasing unemployment and declining Gross Domestic Product
(GDP). Some of the factors that help mitigate the impact of these
negative trends on our business include the following:
·
|
the
majority of our business is driven by the ongoing maintenance and repair
of existing pools and landscaped areas, with approximately 10% of our
sales and gross profits tied to new pool or irrigation construction in
2009 (as our sales related to new construction activity have declined, the
proportion of our net sales represented by maintenance, repair and
replacement (MRR) products has increased to approximately 90%);
and
|
·
|
we
believe our service-oriented model, and the investments in our business we
are able to make given our financial strength, helps us gain market
share.
|
Despite
these mitigating factors, the negative trends noted above have significantly
impacted a number of our key markets, including California, Florida and Arizona,
with a more recent adverse impact in Texas and other states. We estimate that
these trends resulted in the following decreases in new pool construction in the
United States since peaking in 2005 at approximately 210,000 new
units:
2008
|
2007
|
2006
|
||||
Units
|
(60,000
|
)
|
(50,000
|
)
|
(10,000
|
)
|
%
|
(40
|
)%
|
(25
|
)%
|
(5
|
)%
|
We
believe these decreases represent the first three year decline in new pool
construction in our industry history. These trends have continued in
2009 and we estimate they will result in a further decrease in new pool
construction of approximately 45,000 units, or 50%. Since these
trends worsened from 2007 through the third quarter of 2009, they had a more
pronounced impact on our results for the year ended 2008 and the first nine
months of 2009. However, as evidenced by our third quarter sales in
Florida being up 1% quarter over quarter, we believe these trends have begun to
level off in certain major pool markets first impacted by the housing market
downturn.
Outlook
Based on
the challenging market environment, we expect sales in the fourth quarter of
2009 will be down compared to the same period in 2008. However, we
anticipate that fourth quarter sales will decline at a lower rate than the third
quarter of 2009 based on easier sales comparisons and improving trends in major
pool markets. We expect fourth quarter 2009 gross margins will drop
off modestly given tougher comparisons to the fourth quarter of
2008. While we continue to drive targeted expense reductions, the
rate of these decreases should continue to moderate in the fourth quarter of
2009 as we lap more of the impact of cost measures implemented in
2008. Altogether, we anticipate our full year 2009 earnings will be
in the range of $0.41 to $0.46 per diluted share, including the $0.54 per
diluted share impact of LAC’s impairment charge included in the reported third
quarter 2009 equity loss.
9
We expect
the improvement in cash provided by operations for the nine months ended
September 30, 2009 will increase in the fourth quarter of 2009 due to the
timing of payments on certain third quarter 2009 forward inventory
purchases. Overall, we expect cash provided by operations will exceed
$100.0 million for fiscal 2009.
The
forward-looking statements in this Outlook section are subject to significant
risks and uncertainties, 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 Part II - Item 1A “Risk Factors” and our “Cautionary Statement for
Purpose of the ‘Safe Harbor’ Provisions of the Private Securities Litigation
Reform Act of 1995”.
RESULTS
OF OPERATIONS
As of
September 30, 2009, we conducted operations through 283 sales centers in North
America and Europe.
The
following table presents information derived from the Consolidated Statements of
Income expressed as a percentage of net sales.
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
September
30,
|
September
30,
|
|||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||
Cost
of sales
|
71.3
|
71.3
|
70.8
|
71.1
|
||||||||
Gross
profit
|
28.7
|
28.7
|
29.2
|
28.9
|
||||||||
Operating
expenses
|
21.2
|
20.9
|
20.8
|
20.3
|
||||||||
Operating
income
|
7.5
|
7.8
|
8.4
|
8.6
|
||||||||
Interest
expense, net
|
0.6
|
0.9
|
0.7
|
1.0
|
||||||||
Income
before income taxes and equity earnings (loss)
|
6.9
|
%
|
6.9
|
%
|
7.7
|
%
|
7.6
|
%
|
Our
discussion of consolidated operating results includes the operating results from
acquisitions in 2008 and 2007. We accounted for these acquisitions
using the purchase method of accounting, and we have included the results of
operations in our consolidated results since the respective acquisition
dates.
10
Three
Months Ended September 30, 2009 Compared to Three Months Ended September
30, 2008
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,
|
||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||
Net
sales
|
$
|
427,122
|
$
|
491,959
|
$
|
2,932
|
$
|
1,571
|
$
|
430,054
|
$
|
493,530
|
||
Gross
profit
|
122,724
|
141,265
|
670
|
535
|
123,394
|
141,800
|
||||||||
Gross
margin
|
28.7
|
%
|
28.7
|
%
|
22.9
|
%
|
34.1
|
%
|
28.7
|
%
|
28.7
|
%
|
||
Operating
expenses
|
90,399
|
102,436
|
853
|
747
|
91,252
|
103,183
|
||||||||
Expenses
as a % of net sales
|
21.2
|
%
|
20.8
|
%
|
29.1
|
%
|
47.5
|
%
|
21.2
|
%
|
20.9
|
%
|
||
Operating
income (loss)
|
32,325
|
38,829
|
(183
|
)
|
(212
|
)
|
32,142
|
38,617
|
||||||
Operating
margin
|
7.6
|
%
|
7.9
|
%
|
(6.2
|
)%
|
(13.5
|
)%
|
7.5
|
%
|
7.8
|
%
|
We have
excluded the following acquisitions from base business for the periods
identified, including the periods covered in the base business table on page 14
under the heading “Nine Months Ended September 30, 2009 Compared to
Nine Months Ended September 30, 2008”:
Acquired
|
Acquisition
Date
|
Net
Sales
Centers Acquired
|
Period
Excluded
|
|||
Proplas
Plasticos, S.L. (Proplas)
|
November
2008
|
0
|
January
2009 – September 2009
|
|||
National
Pool Tile (NPT) (1)
|
March
2008
|
8
|
January
– May 2009 and March – May 2008
|
|||
Canswim
Pools
|
March
2008
|
1
|
January
– May 2009 and March – May 2008
|
(1)
We acquired 15 NPT sales centers and have consolidated 7 of these with existing
sales centers, including 4 in March 2008, 2 in the
second quarter of 2008 and 1 in April 2009.
second quarter of 2008 and 1 in April 2009.
We
exclude the following sales centers from base business results for a period of
15 months:
·
|
acquired
sales centers (see table above);
|
·
|
existing
sales centers consolidated with acquired sales
centers;
|
·
|
closed
sales centers;
|
·
|
consolidated
sales centers in cases where we do not expect to maintain the majority of
the existing business; and
|
·
|
sales
centers opened in new markets.
|
As of
September 30, 2009, four closed sales centers and one existing sales
center that was consolidated with the acquired Proplas sales center were
excluded from base business.
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.
11
The table
below summarizes the changes in our sales centers during the quarter ended
September 30, 2009:
June
30, 2009
|
287
|
|
Consolidation
of sales centers
|
(3
|
) |
Closing
of sales centers
|
(1
|
) |
September
30, 2009
|
283
|
Net
Sales
Three
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Net
sales
|
$
|
430.1
|
$
|
493.5
|
$
|
(63.4
|
)
|
(13
|
)%
|
The
decrease in net sales is primarily due to the current adverse economic trends,
which have led to further declines in new pool and irrigation construction
activity and deferred discretionary replacement purchases by
consumers. Base business sales for the third quarter of 2009 also
declined 13% compared to the third quarter of 2008. This includes a
10% decline on the swimming pool side of the business and a 38% decline on the
irrigation side of the business, which is more heavily weighted toward new
construction and discretionary product sales. Much colder than average
temperatures in the third quarter of 2009 adversely impacted sales across the
Central and Northern markets by shortening the summer
season. Unfavorable currency fluctuations also resulted in a decrease
in sales of approximately 1%.
The
overall decrease in net sales was partially offset by the
following:
·
|
estimated
inflationary price increases of approximately 4% overall that we passed
through the supply chain; and
|
·
|
increased
sales of certain maintenance and parts products, including a 6% increase
in chemical sales due to price inflation and market share
growth.
|
Gross
Profit
Three
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Gross
profit
|
$
|
123.4
|
$
|
141.8
|
$
|
(18.4
|
)
|
(13
|
)%
|
|||
Gross
margin
|
28.7
|
%
|
28.7
|
%
|
Gross
margin was flat at 28.7% compared to the third quarter of
2008. Favorable impacts that helped offset negative pressures due to
the tough competitive pricing environment included the following:
·
|
a
shift in sales mix to products in the higher margin maintenance and repair
market;
|
·
|
increased
sales of preferred vendor and Pool Corporation private label products;
and
|
·
|
improved
pricing and purchasing discipline.
|
12
Operating
Expenses
Three
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Operating
expenses
|
$
|
91.3
|
$
|
103.2
|
$
|
(11.9
|
)
|
(12
|
)%
|
|||
Operating
margin
|
21.2
|
%
|
20.9
|
%
|
The 12%
decrease in operating expenses compared to the third quarter of 2008 reflects
the impact of our cost control initiatives including lower payroll related,
variable and discretionary expenses. Salary expenses declined 9%,
reflecting a 10% reduction in headcount compared to
September 30, 2008. Delivery costs decreased 27% quarter
over quarter, including $1.0 million in lower vehicle operating expenses
(including lower fuel costs and fewer delivery vehicles) and $0.6 million in
reduced vehicle rental expenses. Total operating expenses as a
percentage of net sales increased between periods due to the decrease in net
sales.
Interest
Expense
Interest
expense decreased 45% between periods due to the impact of much lower debt
levels combined with a lower weighted average effective interest rate for the
period. Average debt outstanding was 27% lower in the third quarter of
2009 and the weighted average effective interest rate decreased to 3.6% in the
third quarter of 2009 from 4.7% in the same period in 2008.
Income
Taxes
The
decrease in income taxes is due to the decrease in income before income taxes
and equity earnings (loss). Our effective income tax rate was 39.30% for
the three months ended September 30, 2009 and 40.19% for the three
months ended September 30, 2008.
Net
Income (Loss) and Earnings (Loss) Per Share
Net loss
for the third quarter of 2009 was $9.3 million resulting in loss per share of
$0.19 per diluted share, compared to net income of $22.1 million and earnings
per share of $0.45 per diluted share in the third quarter of
2008. The $0.64 decrease in diluted earnings per share includes the
$0.54 per diluted share impact of LAC’s impairment charge included in the
reported equity loss for the three months ended
September 30, 2009.
13
Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
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)
|
Nine
Months Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||
September
30,
|
September
30,
|
September
30,
|
||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||
Net
sales
|
$
|
1,257,864
|
$
|
1,479,786
|
$
|
50,898
|
$
|
44,931
|
$
|
1,308,762
|
$
|
1,524,717
|
||
Gross
profit
|
368,668
|
426,130
|
13,987
|
13,776
|
382,655
|
439,906
|
||||||||
Gross
margin
|
29.3
|
%
|
28.8
|
%
|
27.5
|
%
|
30.7
|
%
|
29.2
|
%
|
28.9
|
%
|
||
Operating
expenses
|
259,724
|
295,824
|
12,715
|
13,278
|
272,439
|
309,102
|
||||||||
Expenses
as a % of net sales
|
20.6
|
%
|
20.0
|
%
|
25.0
|
%
|
29.6
|
%
|
20.8
|
%
|
20.3
|
%
|
||
Operating
income
|
108,944
|
130,306
|
1,272
|
498
|
110,216
|
130,804
|
||||||||
Operating
margin
|
8.7
|
%
|
8.8
|
%
|
2.5
|
%
|
1.1
|
%
|
8.4
|
%
|
8.6
|
%
|
For an
explanation of how we calculate base business, please refer to the discussion of
base business on page 11 under the heading “Three Months Ended September
30, 2009 Compared to Three Months Ended September 30, 2008”.
Since we
divested our pool liner manufacturing operation in France at the beginning of
April 2008, we have excluded these operations from base business for the
comparative three month period ended March 31, 2008.
Net
Sales
Nine
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Net
sales
|
$
|
1,308.8
|
$
|
1,524.7
|
$
|
(215.9
|
)
|
(14
|
)%
|
The new
pool and irrigation construction markets continue to face unprecedented adverse
conditions created by the combination of significant declines in the real estate
and mortgage-backed financing markets. Coupled with the current
severely depressed economic environment, these external factors have placed
considerable pressure on our top line results. As a result, our sales were
negatively impacted as construction activities remained depressed and consumers
continued to defer discretionary replacement purchases. Unfavorable
weather and currency fluctuations also had an adverse impact on sales for the
first nine months of 2009.
Base
business sales for the first nine months of 2009 decreased 15% compared to the
first nine months of 2008. This includes a 12% decline on the
swimming pool side of the business and a 37% decline on the irrigation side of
the business, which is more heavily weighted toward new construction and
discretionary product sales.
The overall decrease in net sales was
partially offset by the following:
·
|
estimated
inflationary price increases of approximately 3% to 4% that we passed
through the supply chain;
|
·
|
higher
sales of certain maintenance and repair products, including a 7% increase
in chemical sales;
|
·
|
over
$17.0 million of increased sales for new drains and related safety
products as a result of the Virginia Graeme Baker Pool and Spa Safety Act
(VGB Act), which became effective in December 2008 and imposes
mandatory federal requirements on the manufacture, distribution and/or
sale of suction entrapment avoidance devices such as safety drain covers,
public pool drain covers and public pool drain systems;
and
|
·
|
approximately
$7.0 million in first quarter sales related to our 2008
acquisitions.
|
14
Gross
Profit
Nine
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Gross
profit
|
$
|
382.7
|
$
|
439.9
|
$
|
(57.2
|
)
|
(13
|
)%
|
|||
Gross
margin
|
29.2
|
%
|
28.9
|
%
|
Despite
the tough competitive pricing environment, gross margin improved 30 basis points
compared to the first nine months of 2008. The increase in gross
margin is attributable to a shift in sales mix to products in the higher margin
maintenance and repair market and specific margin improvement
initiatives. Favorable impacts compared to the same period in 2008
included the following (listed in order of estimated magnitude):
·
|
increased
sales of preferred vendor and Pool Corporation private label products;
and
|
·
|
benefits
recognized in the first half of 2009 resulting from pre-price increase
inventory purchases made in the second half of
2008.
|
Operating
Expenses
Nine
Months Ended
September
30,
|
||||||||||||
(in
millions)
|
2009
|
2008
|
Change
|
|||||||||
Operating
expenses
|
$
|
272.4
|
$
|
309.1
|
$
|
(36.7
|
)
|
(12
|
)%
|
|||
Operating
margin
|
20.8
|
%
|
20.3
|
%
|
The
decrease in operating expenses reflects a 12% decline in base business operating
expenses due primarily to the impact of our cost control initiatives including
lower payroll related, variable and discretionary expenses. Total
headcount as of September 30, 2009 decreased 10% compared to
September 30, 2008, driving an 11% decline in total labor and related
costs. Total delivery expenses declined 27%, reflecting lower
delivery volumes and decreases in both vehicle operating expenses (including
lower fuel costs) and vehicle rental expenses.
The
decrease in operating expenses was partially offset by the impact of our
acquired sales centers, which had approximately $2.0 million in operating
expenses during the first quarter of 2009. Total operating
expenses as a percentage of net sales increased between periods due to the
decrease in net sales.
Interest
Expense
Interest
expense decreased 39% between periods due to the decrease in our weighted
average effective interest rate for the period and a 15% lower average
outstanding debt balance. The weighted average effective interest rate
decreased to 3.3% in the first nine months of 2009 from 4.7% in the same period
in 2008.
Income
Taxes
The
decrease in income taxes is due to the decrease in income before income taxes
and equity earnings (loss). Our effective income tax rate was 39.30%
for the nine months ended September 30, 2009 and 39.10% for the nine
months ended September 30, 2008.
Net
Income and Earnings Per Share
Net
income decreased to $32.8 million in the first nine months of 2009 compared to
$71.8 million for the first nine months of 2008. Earnings per share
for the first nine months of 2009 decreased to $0.67 per diluted share compared
to $1.47 in the first nine months of 2008. The $0.80 decrease in
diluted earnings per share includes the $0.54 per diluted share impact of LAC’s
impairment charge included in the reported equity loss for the nine months ended
September 30, 2009.
15
Seasonality
and Quarterly Fluctuations
Our
business is highly seasonal. In general, sales and operating income
are highest during the second and third quarters, which represent the peak
months of both swimming pool use and installation and landscape installations
and maintenance. Sales are substantially lower during the first and
fourth quarters, when we may incur net losses.
We
typically experience a build-up of product inventories and accounts payable
during the winter months in anticipation of the peak selling
season. Excluding borrowings to finance acquisitions and share
repurchases, our peak borrowing usually occurs during the second quarter,
primarily because extended payment terms offered by our suppliers typically are
payable in April, May and June, while our peak accounts receivable collections
typically occur in June, July and August. Our debt levels peaked a
little earlier in 2009 based on early payments we made in the first six months
of 2009 to take advantage of pre-price increase inventory purchases and early
payment discounts offered by certain vendors.
The
following table presents certain unaudited quarterly data for the first, second
and third quarters of 2009, the four quarters of 2008 and the fourth quarter of
2007. We have included income statement and balance sheet data for
the most recent eight quarters to allow for a meaningful comparison of the
seasonal fluctuations in these amounts. In our opinion, this
information reflects all normal and recurring adjustments considered necessary
for a fair presentation of this data. Due to the seasonal nature of
our industry, the results of any one or more quarters are not necessarily an
accurate indication of results for an entire fiscal year or of continuing
trends.
(Unaudited)
|
QUARTERS
|
||||||||||||||||
(in
thousands)
|
2009
|
2008
|
2007
|
||||||||||||||
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
||||||||||
Statement
of Income Data
|
|||||||||||||||||
Net
sales
|
$
|
430,054
|
$
|
602,082
|
$
|
276,626
|
$
|
258,966
|
$
|
493,530
|
$
|
692,972
|
$
|
338,215
|
$
|
300,755
|
|
Gross
profit
|
123,394
|
178,068
|
81,193
|
75,322
|
141,800
|
202,752
|
95,354
|
79,436
|
|||||||||
Operating
income (loss)
|
32,142
|
81,720
|
(3,646
|
)
|
(15,328
|
)
|
38,617
|
89,990
|
2,197
|
(12,796
|
)
|
||||||
Net
income (loss)
|
(9,322
|
) (1)
|
48,366
|
(6,236
|
)
|
(14,795
|
)
|
22,060
|
52,875
|
(3,184
|
)
|
(11,589
|
)
|
||||
Balance
Sheet Data
|
|||||||||||||||||
Total
receivables, net
|
$
|
149,733
|
$
|
233,288
|
$
|
160,318
|
$
|
115,584
|
$
|
178,927
|
$
|
278,654
|
$
|
206,187
|
$
|
141,117
|
|
Product
inventories, net
|
318,177
|
325,198
|
397,863
|
405,914
|
345,944
|
385,258
|
476,758
|
379,663
|
|||||||||
Accounts
payable
|
137,761
|
194,004
|
201,300
|
173,688
|
128,329
|
193,663
|
333,104
|
194,178
|
|||||||||
Total
debt
|
273,300
|
334,015
|
381,221
|
327,792
|
337,742
|
441,992
|
396,110
|
350,852
|
(1)
|
Includes
a $26.5 million equity loss recognized for our pro rata share of
LAC’s impairment charge up to the recorded value of our equity investment
in LAC as of
September 1, 2009.
|
We expect
that our quarterly results of operations will continue to fluctuate depending on
the timing and amount of revenue contributed by new and acquired sales
centers. Based on our peak summer selling season, we generally open
new sales centers and close or consolidate sales centers, when warranted, either
in the first quarter before the peak selling season begins or in the fourth
quarter after the peak selling season ends.
16
Weather
is one of the principal external factors affecting our business. The
table below presents some of the possible effects resulting from various weather
conditions.
Weather
|
Possible
Effects
|
|
Hot
and dry
|
•
|
Increased
purchases of chemicals and supplies
|
for
existing swimming pools
|
||
•
|
Increased
purchases of above-ground pools and
|
|
irrigation
products
|
||
Unseasonably
cool weather or extraordinary
amounts of rain
|
•
|
Fewer
pool and landscape installations
|
•
|
Decreased
purchases of chemicals and supplies
|
|
•
|
Decreased
purchases of impulse items such as
|
|
above-ground
pools and accessories
|
||
Unseasonably
early warming trends in spring/late cooling trends in fall
|
•
|
A
longer pool and landscape season, thus increasing our
sales
|
(primarily
in the northern half of the US)
|
||
Unseasonably
late warming trends in spring/early cooling trends in fall
|
•
|
A
shorter pool and landscape season, thus decreasing our
sales
|
(primarily
in the northern half of the US)
|
Overall,
our third quarter 2009 sales were negatively impacted by unfavorable weather
conditions, including much colder than normal temperatures that shortened the
pool season in most Central and Northern markets and higher than normal rainfall
in the South Central United States. Consistent with the third quarter of
2008, weather conditions were favorable in the Western U.S. and Florida due to
warmer than average temperatures.
LIQUIDITY
AND CAPITAL RESOURCES
Liquidity
is defined as the ability to generate adequate amounts of cash to meet
short-term and long-term cash needs. We assess our liquidity in terms of our
ability to generate cash to fund our operating activities, taking into
consideration the seasonal nature of our business. Significant factors which
could affect our liquidity include the following:
·
|
cash
flows generated from operating
activities;
|
·
|
the
adequacy of available bank lines of
credit;
|
·
|
acquisitions;
|
·
|
dividend
payments;
|
·
|
capital
expenditures;
|
·
|
the
timing and extent of share repurchases;
and
|
·
|
the
ability to attract long-term capital with satisfactory
terms.
|
Our
primary capital needs are seasonal working capital requirements and other
general corporate purposes, including acquisitions, dividend payments and share
repurchases. Our primary sources of working capital are cash from operations
supplemented by bank borrowings, which combined with seller financing have
historically been sufficient to support our growth and finance acquisitions. The
same principle applies to funds used for capital expenditures and share
repurchases.
17
We
prioritize our use of cash based on investing in our business, maintaining a
prudent debt structure and returning money to our shareholders. Our specific
priorities for the use of cash are as follows:
·
|
maintenance
and new sales center capital expenditures, which have averaged
approximately 0.5% to 0.75% of net sales historically, but dropped to 0.4%
of net sales in 2008 due to lower capacity
expansion;
|
·
|
strategic
acquisitions executed
opportunistically;
|
·
|
payment
of cash dividends as and when declared by the Board;
and
|
·
|
repayment
of debt.
|
While we
still have our Board authorized share repurchase program in place with
$53.0 million of the current authorized amount remaining available as of
October 23, 2009, this is not a current priority for the use of
cash.
Sources
and Uses of Cash
The
following table summarizes our cash flows (in thousands):
Nine
Months Ended
September 30,
|
|||||||
2009
|
2008
|
||||||
Operating
activities
|
$
|
87,075
|
$
|
76,535
|
|||
Investing
activities
|
(6,551
|
)
|
(36,725
|
)
|
|||
Financing
activities
|
(68,911
|
)
|
(28,761
|
)
|
Cash flow
provided by operations in the first nine months of 2009 reflects an increase of
$10.5 million compared to the same period in 2008 due to favorable impacts from
changes in working capital balances. In 2008, we deferred our third
and fourth quarter federal income tax payments until January 2009. As such, this
improvement in cash provided by operations is after the $46.0 million
combined amount of the 2008 third and fourth quarter and 2009 third quarter
estimated federal income tax payments. During the first nine months of
2008, the higher cash used in investing activities reflects our March 2008
acquisitions. Cash used in financing activities for the first nine
months of 2009 includes increased net payments on debt of approximately
$41.0 million compared to the same period in 2008.
Future
Sources and Uses of Cash
Our
unsecured syndicated senior credit facility (the Credit Facility) provides for
$300.0 million in borrowing capacity including a $240.0 million
five-year revolving credit facility (the Revolver) and a term loan (the Term
Loan), with an original principal amount of $60.0 million.
At
September 30, 2009, there was $123.8 million outstanding and $115.4
million available for borrowing under the Revolver. The Revolver
matures on December 20, 2012. The weighted average
effective interest rate on the Revolver was approximately 1.8% for the nine
months ended September 30, 2009. In April 2009, we
entered into an interest rate swap agreement to reduce our future exposure to
fluctuations in interest rates on the Revolver. This swap
agreement will convert the Revolver’s variable interest rate to a fixed rate of
1.725% on a notional amount of $50.0 million. The swap has an
effective date of January 27, 2010 and will terminate on January 27,
2012.
At
September 30, 2009, there was $49.5 million outstanding under the Term Loan
of which $37.5 million is classified as current. The Term Loan
has remaining principal payments of $1.5 million in the fourth quarter of 2009
and $12.0 million per quarter in 2010. Our current interest rate
swap agreement reduces our exposure to fluctuations in interest rates for the
remaining outstanding period of the Term Loan by converting our variable rate to
a fixed rate basis. This swap will terminate when the Term Loan
matures on December 20, 2010. The weighted average
effective interest rate on the Term Loan was approximately 3.2% for the nine
months ended September 30, 2009.
18
The
Credit Facility includes sublimits for the issuance of swingline loans and
standby letters of credit. Pursuant to an accordion feature, the
aggregate maximum principal amount of the commitments under the Revolver may be
increased at our request and with agreement by the lenders, by up to
$75.0 million, to a total of $315.0 million.
On
February 12, 2007, we issued and sold $100.0 million aggregate
principal amount of Floating Rate Senior Notes (the Notes) in a private
placement offering pursuant to a Note Purchase Agreement. The Notes are due
February 12, 2012 and accrue interest on the unpaid principal balance
at a floating rate equal to a spread of 0.600% over the three-month LIBOR, as
adjusted from time to time. In February 2007, we entered into an interest
rate swap agreement to reduce our exposure to fluctuations in interest rates on
the Notes. The swap agreement converts the Notes’ variable interest rate to a
fixed rate of 5.088% on the initial notional amount of $100.0 million,
which will decrease to a notional amount of $50.0 million in February
2010.
Financial
covenants on our Credit Facility and Notes are closely aligned and include a
minimum fixed charge coverage ratio and maintenance of a maximum total leverage
ratio, which are our most restrictive financial covenants. As of
September 30, 2009, the calculations of these two covenants are
detailed below:
·
|
Maximum Average Total Leverage
Ratio. On the last day of each fiscal quarter, our average total
leverage ratio must be less than or equal to 3.25 to
1.00. Average Total Leverage ratio is the ratio of the trailing
twelve months (TTM) Average Total Funded Indebtedness plus the TTM
Average Accounts Securitization Proceeds divided by the TTM EBITDA (as
those terms are defined in our amended Credit Facility). As of
September 30, 2009, our average total leverage ratio equaled
2.93 (compared to 2.97 as of June 30, 2009) and the TTM average
total debt amount used in this calculation was
$330.6 million.
|
·
|
Minimum Fixed Charge
Ratio. On the last day of each fiscal quarter, our fixed charge
ratio must be greater than 2.25 to 1.00. Fixed Charge Ratio is
the ratio of the TTM EBITDAR (as defined in our amended Credit Facility)
divided by TTM Interest Expense (as defined in our amended Credit
Facility) paid or payable in cash plus TTM Rental Expense (as defined in
our amended Credit Facility). As of
September 30, 2009, our fixed charge ratio equaled 2.42
(compared to 2.43 as of June 30, 2009) and TTM Rental Expense
was $57.8 million.
|
The
Credit Facility also limits the declaration and payment of dividends on our
common stock to no more than 50% of the preceding year’s net income, provided no
default or event of default has occurred and is continuing and the dividends are
declared and paid in a manner consistent with our past
practice. Failure to comply with these financial covenants, scheduled
interest payments, scheduled principal repayments, or any other terms of our
amended credit facilities could result in the acceleration of the maturities of
our outstanding debt. As of September 30, 2009, we were in
compliance with all covenants and financial ratio requirements and believe we
will remain in compliance throughout the rest of the year.
For
additional information regarding our debt arrangements, see Note 5 of “Notes to
Consolidated Financial Statements,” included in Item 8 of our 2008
Form 10-K.
We
believe we have adequate availability of capital to fund present operations and
the current capacity to finance any working capital needs that may
arise. We continually evaluate potential acquisitions and hold
discussions with acquisition candidates. If suitable acquisition opportunities
arise that would require financing, we believe that we have the ability to
finance any such transactions.
As of
October 23, 2009, $53.0 million of the current Board authorized amount
under our share repurchase program remained available. While share repurchases
are not a current priority, we may continue to repurchase shares on the open
market from time to time depending on market conditions. We may use cash flows
from operations to fund these purchases or we may incur additional
debt.
19
CRITICAL
ACCOUNTING ESTIMATES
We
prepare our Consolidated Financial Statements in accordance with accounting
principles generally accepted in the United States (GAAP), which requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Management identifies critical accounting
estimates as:
·
|
those
that require the use of assumptions about matters that are inherently and
highly uncertain at the time the estimates are made;
and
|
·
|
those
for which changes in the estimate or assumptions, or the use of different
estimates and assumptions, could have a material impact on our
consolidated results of operations or financial
condition.
|
Management
has discussed the development, selection and disclosure of our critical
accounting estimates with the Audit Committee of our Board of
Directors. For a description of our critical accounting estimates
that require us to make the most difficult, subjective or complex judgments,
please see our Annual Report on Form 10-K for the year ended
December 31, 2008. We have not changed these policies from
those previously disclosed.
Interest
Rate Risk
There
have been no material changes from what we reported in our Form 10-K for the
year ended December 31, 2008 that affect fiscal 2009.
In
April 2009, we entered into a new interest rate swap agreement with an
effective date of January 27, 2010. The purpose of the swap is to
reduce our exposure to fluctuations in interest rates on the
Revolver. This swap agreement will convert the Revolver’s
variable interest rate to a fixed rate of 1.725% on a notional amount of
$50.0 million, and terminates on January 27, 2012.
Foreign
Exchange Risk
There
have been no material changes from what we reported in our Form 10-K for the
year ended December 31, 2008.
The term
“disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934 (the Act). The rules refer to
the controls and other procedures designed to ensure that information required
to be disclosed in reports that we file or submit under the Act is (1) recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms and (2) accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure. As of September 30, 2009, management, including
the CEO and CFO, performed an evaluation of the effectiveness of our disclosure
controls and procedures. Based on that evaluation, management,
including the CEO and CFO, concluded that as of September 30, 2009,
our disclosure controls and procedures were effective.
We
maintain a system of internal control over financial reporting that is designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United
States. Based on the most recent evaluation, we have concluded that
no change in our internal control over financial reporting occurred during the
last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
20
PART
II. OTHER INFORMATION
Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995
Our
disclosure and analysis in this report contains forward-looking information that
involves risks and uncertainties. Our forward-looking statements express our
current expectations or forecasts of possible future results or events,
including projections of future performance, statements of management’s plans
and objectives, future contracts, and forecasts of trends and other matters.
Forward-looking statements speak only as of the date of this filing, and we
undertake no obligation to update or revise such statements to reflect new
circumstances or unanticipated events as they occur. You can identify these
statements by the fact that they do not relate strictly to historic or current
facts and often use words such as “anticipate”, “estimate”, “expect”, “believe,”
“will likely result,” “outlook,” “project” and other words and expressions of
similar meaning. No assurance can be given that the results in any
forward-looking statements will be achieved and actual results could be affected
by one or more factors, which could cause them to differ materially. For these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform
Act.
Risk
Factors
Certain
factors that may affect our business and could cause actual results to differ
materially from those expressed in any forward-looking statements include the
following:
The
demand for our swimming pool and related outdoor lifestyle products has been and
may continue to be adversely affected by unfavorable economic
conditions.
In
economic downturns, the demand for swimming pool or leisure related products may
decline as discretionary consumer spending, the growth rate of pool eligible
households and swimming pool construction decline. Although maintenance
products and repair and replacement equipment that must be purchased by pool
owners to maintain existing swimming pools currently account for more than 80%
of our net sales and gross profits, the growth of this portion of our business
depends on the expansion of the installed pool base and could also be adversely
affected by decreases in construction activities similar to the trends between
2007 and the first nine months of 2009. A weakening economy may also cause
deferrals of discretionary replacement and refurbish activity. In
addition, even in generally favorable economic conditions, severe and/or
prolonged downturns in the housing market could have a material adverse impact
on our financial performance. Such downturns expose us to certain
additional risks, including but not limited to the risk of customer closures or
bankruptcies, which could shrink our potential customer base and inhibit our
ability to collect on those customers’ receivables.
We
believe that homeowners’ access to consumer credit, particularly as facilitated
by mortgage-backed financing markets, is a critical enabling factor in the
purchase of new pool and irrigation systems. The recent unfavorable
economic conditions and downturn in the housing market have resulted in
significant tightening of credit markets, which has limited the ability of
consumers to access financing for new swimming pool and irrigation
systems. If these trends continue or worsen, many consumers will
likely not be able to obtain financing for pool and irrigation projects, which
could negatively impact our sales of construction related products.
We
are susceptible to adverse weather conditions.
Weather
is one of the principal external factors affecting our business. For example,
unseasonably late warming trends in the spring or early cooling trends in the
fall can shorten the length of the pool season. Also, unseasonably cool weather
or extraordinary rainfall during the peak season can decrease swimming pool use,
installation and maintenance, as well as landscape installations and
maintenance. These weather conditions adversely affect sales of our products.
For a discussion regarding seasonality and weather, see Part 1,
Item 2, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Seasonality and Quarterly Fluctuations,” of this
Form 10-Q.
21
Our
distribution business is highly dependent on our ability to maintain favorable
relationships with suppliers.
As a
distribution company, maintaining favorable relationships with our suppliers is
critical to the success of our business. We believe that we add considerable
value to the swimming pool supply chain and landscape supply chain by purchasing
products from a large number of manufacturers and distributing the products to a
highly fragmented customer base on conditions that are more favorable than these
customers could obtain on their own. We believe that we currently enjoy good
relationships with our suppliers, who generally offer us competitive pricing,
return policies and promotional allowances. However, our inability to maintain
favorable relationships with our suppliers could have an adverse effect on our
business.
Our
largest suppliers are Pentair Corporation, Hayward Pool Products, Inc. and
Zodiac Pool Systems, Inc., which accounted for approximately 15%, 10% and 9%,
respectively, of the costs of products we sold in 2008. A decision by several
suppliers, acting in concert, to sell their products directly to retail
customers and other end users of their products, bypassing distribution
companies like ours, would have an adverse effect on our business. Additionally,
the loss of a single significant supplier due to financial failure or a decision
to sell exclusively to other distributors, retail customers or end user
consumers could also adversely affect our business. We dedicate significant
resources to promote the benefits and affordability of pool ownership, which we
believe greatly benefits our swimming pool customers and suppliers.
We
face intense competition both from within our industry and from other leisure
product alternatives.
We face
competition from both inside and outside of our industry. Within our industry,
we compete against various regional and local distributors and, to a lesser
extent, mass market retailers and large pool or landscape supply retailers.
Outside of our industry, we compete with sellers of other leisure product
alternatives, such as boats and motor homes, and with other companies who rely
on discretionary homeowner expenditures, such as home remodelers. New
competitors may emerge as there are low barriers to entry in our industry. Some
geographic markets that we serve, particularly our four largest, higher density
markets in California, Florida, Texas and Arizona, representing approximately
55% of our net sales in 2008, also tend to be more competitive than
others.
More
aggressive competition by mass merchants and large pool or landscape supply
retailers could adversely affect our sales.
Mass market
retailers today carry a limited range of, and devote a limited amount of
shelf space to, merchandise and products targeted to our industry. Historically,
mass market retailers have generally expanded by adding new stores and
product breadth, but their product offering of pool and landscape related
products has remained relatively constant. Should mass market
retailers increase their focus on the pool or professional landscape industries,
or increase the breadth of their pool and landscape related product offerings,
they may become a more significant competitor for direct and
end-use customers which could have an adverse impact on our business. We
may face additional competitive pressures if large pool or landscape supply
retailers look to expand their customer base to compete more directly within the
distribution channel.
We
depend on key personnel.
We
consider our employees to be the foundation for our growth and success. As such,
our future success depends in large part on our ability to attract, retain and
motivate qualified personnel, including our executive officers and key
management personnel. If we are unable to attract and retain key personnel, our
operating results could be adversely affected.
22
Past
growth may not be indicative of future growth.
We have
experienced substantial sales growth through acquisitions, market share gains
and new sales center openings that have increased our size, scope and geographic
distribution. During the past five years, we have opened 27 new sales centers
(net of subsequent closings and consolidations of new sales centers) and have
completed 9 acquisitions. These acquisitions have added 69 sales centers, net of
sales center closings and consolidations within one year of acquisition, and 3
centralized shipping locations to our distribution networks. We have also closed
seven existing sales centers since the beginning of 2007. While we
contemplate continued growth through acquisitions and internal expansion, no
assurance can be made as to our ability to:
·
|
penetrate
new markets;
|
·
|
identify
appropriate acquisition candidates;
|
·
|
complete
acquisitions on satisfactory terms and successfully integrate acquired
businesses;
|
·
|
obtain
financing;
|
·
|
generate
sufficient cash flows to support expansion plans and general operating
activities;
|
·
|
maintain
favorable supplier arrangements and relationships;
and
|
·
|
identify
and divest assets which do not continue to create value consistent with
our objectives.
|
If we do
not manage these potential difficulties successfully, our operating results
could be adversely affected.
The
growth of our business depends on effective marketing programs.
The
growth of our business depends on the expansion of the installed pool base.
Thus, an important part of our strategy is to promote the growth of the pool
industry through our extensive advertising and promotional programs that attempt
to raise consumer awareness regarding the benefits and affordability of pool
ownership, the ease of pool maintenance and the many ways in which a pool may be
enjoyed beyond swimming. These programs include media advertising, website
development such as www.swimmingpool.com™
and public relations campaigns. We believe these programs benefit the entire
supply chain from our suppliers to our customers.
We also
promote the growth of our customers’ businesses through comprehensive support
programs that offer promotional tools and marketing support to help generate
increased sales for our customers. Our programs include such features as
personalized websites, brochures, marketing campaigns and business development
training. We also provide certain retail store customers with assistance in site
selection, store layout and design and business management system
implementation. Our inability to sufficiently develop effective advertising,
marketing and promotional programs to succeed in a weakened economic environment
and an increasingly competitive marketplace, in which we (and our entire supply
chain) also compete with other luxury product alternatives, could have a
material adverse effect on our business.
Our
business is highly seasonal.
In 2008,
approximately 67% of our net sales and over 100% of our operating income were
generated in the second and third quarters of the year, which represent the peak
months of swimming pool use, installation, remodeling and repair. Our sales are
substantially lower during the first and fourth quarters of the year, when we
may incur net losses.
The
nature of our business subjects us to compliance with Environmental, Health,
Transportation and Safety Regulations.
We are
subject to regulation under federal, state and local environmental, health,
transportation and safety requirements, which govern such things as packaging,
labeling, handling, transportation, storage and sale of chemicals and
fertilizers. For example, we sell algaecides and pest control products that are
regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide
Act and various state pesticide laws. These laws are primarily related to
labeling, annual registration and licensing.
23
Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil and criminal penalties or the imposition of injunctive
relief. Moreover, compliance with such laws and regulations in the future could
prove to be costly, and there can be no assurance that we will not incur such
costs in material amounts. These laws and regulations have changed substantially
and rapidly over the last 20 years and we anticipate that there will be
continuing changes. The clear trend in environmental, health, transportation and
safety regulation is to place more restrictions and limitations on activities
that impact the environment, such as the use and handling of chemical
substances. Increasingly, strict restrictions and limitations have resulted in
higher operating costs for us and it is possible that the costs of compliance
with such laws and regulations will continue to increase. We will attempt to
anticipate future regulatory requirements that might be imposed and we will plan
accordingly to remain in compliance with changing regulations and to minimize
the costs of such compliance.
We
store chemicals, fertilizers and other combustible materials that involve fire,
safety and casualty risks.
We store
chemicals and fertilizers, including certain combustible, oxidizing compounds,
at our sales centers. A fire, explosion or flood affecting one of our facilities
could give rise to fire, safety and casualty losses and related liability
claims. We maintain what we believe is prudent insurance protection. However, we
cannot guarantee that our insurance coverage will be adequate to cover future
claims that may arise or that we will be able to maintain adequate insurance in
the future at rates we consider reasonable. Successful claims for which we are
not fully insured may adversely affect our working capital and profitability. In
addition, changes in the insurance industry have generally led to higher
insurance costs and decreased availability of coverage.
We
conduct business internationally, which exposes us to additional
risks.
Our
international operations expose us to certain additional risks,
including:
·
|
difficulty
in staffing international subsidiary
operations;
|
·
|
different
political and regulatory
conditions;
|
·
|
currency
fluctuations;
|
·
|
adverse
tax consequences; and
|
·
|
dependence
on other economies.
|
We source
certain products we sell, including our private label products, from Asia and
other international sources. There is a greater risk that we may not be able to
access products in a timely and efficient manner, and we may also be subject to
certain trade restrictions that prevent us from obtaining products. Fluctuations
in other factors relating to international trade, such as tariffs, currency
exchange rates, transportation costs and inflation are additional risks for our
international operations.
A
terrorist attack or the threat of a terrorist attack could have a material
adverse effect on our business.
Discretionary
spending on leisure product offerings such as ours is generally adversely
affected during times of economic or political uncertainty. The potential for
terrorist attacks, the national and international responses to terrorist
attacks, and other acts of war or hostility could create these types of
uncertainties and negatively impact our business for the short or long-term in
ways that cannot presently be predicted.
24
The table
below summarizes the repurchases of our common stock in the third quarter of
2009:
Maximum
approximate
|
||||||||||
Total
number of shares
|
dollar
value of shares
|
|||||||||
Total
number of
|
Average
price
|
purchased
as part of
|
that
may yet be
|
|||||||
Period
|
shares
purchased(1)
|
paid
per share
|
publicly
announced plan(2)
|
purchased
under the plan(3)
|
||||||
July
1-31, 2009
|
—
|
$
|
—
|
—
|
$
|
52,987,067
|
||||
August
1-31, 2009
|
45,243
|
$
|
24.57
|
—
|
$
|
52,987,067
|
||||
September
1-30, 2009
|
—
|
$
|
—
|
—
|
$
|
52,987,067
|
||||
Total
|
45,243
|
$
|
24.57
|
—
|
(1)
|
Consists
of shares of our common stock surrendered to us by employees in order to
satisfy tax withholding obligations in connection with certain exercises
of employee stock options and/or the exercise price of such options
granted under our share-based compensation
plans.
|
(2)
|
In
July 2002, our Board authorized $50.0 million for the repurchase of
shares of our common stock in the open market. In August 2004, November
2005 and August 2006, our Board increased the authorization for the
repurchase of shares of our common stock in the open market to a total of
$50.0 million from the amounts remaining at each of those dates. In
November 2006 and August 2007, our Board increased the authorization for
the repurchase of shares of our common stock in the open market to $100.0
million from the amounts remaining at each of those
dates.
|
(3)
|
As
of October 23, 2009, $53.0 million of the authorized amount
remained available under our share repurchase
program.
|
Exhibits
filed as part of this report are listed in the Index to Exhibits appearing on
page 27.
25
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on October 30, 2009.
POOL
CORPORATION
|
||
By:
|
/s/ Mark W. Joslin | |
Mark
W. Joslin
Vice
President and Chief Financial Officer, and duly authorized signatory on
behalf of the Registrant
|
26
Incorporated
by Reference
|
|||||||||||
No.
|
Description
|
Filed
with this Form 10-Q
|
Form
|
File
No.
|
Date
Filed
|
||||||
3.1
|
Restated
Certificate of Incorporation of the Company.
|
10-Q
|
000-26640
|
08/09/2006
|
|||||||
3.2
|
Restated
Composite Bylaws of the Company.
|
10-Q
|
000-26640
|
08/09/2006
|
|||||||
4.1
|
Form
of certificate representing shares of common stock of the
Company.
|
8-K
|
000-26640
|
05/19/2006
|
|||||||
Certification
by Mark W. Joslin pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
||||||||||
Certification
by Manuel J. Perez de la Mesa pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
X
|
||||||||||
Certification
by Manuel J. Perez de la Mesa and Mark W. Joslin pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
X
|
27