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Covington, La -- Pool Corporation (the “Company” or “POOL”) (Nasdaq/GSM: POOL) today reported record net sales and net income for 2006.
Earnings per share for 2006 increased 20% to $1.74 per diluted share on net income of $95.0 million, compared to $1.45 per diluted share on net income of $80.5 million last year.
Net sales for the year ended December 31, 2006 increased $357.1 million, or 23%, to $1.91 billion, compared to $1.55 billion in 2005. The increase in net sales includes $204.7 million related to acquired sales centers and $152.4 million of base business sales growth. The 10% increase in base business sales is due to the continued growth in the installed base of swimming pools, POOL’s execution of its sales and service programs, inflationary price increases passed through the supply chain, 26% growth in complementary product sales and sales from new locations.
Gross profit for the year ended December 31, 2006 increased $107.5 million, or 25%, to $539.9 million from $432.4 million in 2005. This increase is primarily due to the increase in net sales. Gross profit as a percentage of net sales (gross margin) increased 40 basis points to 28.3% in 2006 from 27.9% in 2005. The gross margin improvement is primarily attributable to the benefits achieved through our supply chain management initiatives, including our pre-price increase inventory purchases in the fourth quarter of 2005 and second quarter of 2006.
Operating expenses in 2006 increased $75.5 million, or 25%, to $372.6 million from $297.1 million in 2005. Operating expenses as a percentage of net sales increased to 19.5% in 2006 from 19.1% in 2005 due to the higher expense ratios for acquired businesses and start-up costs and higher expense ratios for the 17 new sales centers opened in 2006.
Operating income increased $32.0 million, or 24%, to $167.4 million in 2006 from $135.4 million in 2005. Operating income as a percentage of net sales (operating margin) increased 10 basis points to 8.8% in 2006 from 8.7% in 2005. EBITDA (as defined in the addendum) increased 24% to $183.0 million in 2006 from $147.4 million in 2005.
Cash provided by operations was $69.0 million in 2006, compared to $39.5 million in 2005. The increase in 2006 cash provided by operations is primarily the result of the increase in net income.
In the fourth quarter of 2006, net sales increased $18.7 million, or 6%, to $318.5 million, compared to $299.8 million in the comparable 2005 period. This increase is due to the Wickham acquisition, growth in the Horizon business and a 1% increase in base business sales. Gross margin decreased 180 basis points to 26.0% in the fourth quarter of 2006 from 27.8% for the same period last year. This decrease is primarily attributable to a fourth quarter adjustment to the estimated amount of vendor incentives earned for the year based on our actual 2006 product purchases. Operating loss for the fourth quarter was $4.1 million compared to operating income of $2.3 million in the same period last year. Loss per share for the fourth quarter of 2006 was $0.10 per basic share on a net loss of $5.0 million, compared to a loss of $0.02 per basic share on a net loss of $0.9 million in the fourth quarter of 2005. Manuel Perez de la Mesa, President and CEO of Pool Corporation, projects a 15%-20% earnings growth in 2007.
POOL also announced today that it has completed the placement of $100.0 million aggregate principal amount of Floating Rate Senior Notes (the “Notes”) in a private placement offering, on February 12, 2007. The Notes are due on February 12, 2012. Net proceeds from the placement were used to pay down the Company’s revolving credit facility.
Additionally, POOL announced that its Board of Directors has declared its regular quarterly cash dividend of $0.105 per share. The dividend will be payable on March 19, 2007 to holders of record on March 5, 2007.
At December 31, 2006, 210 sales centers were included in the base business calculations, and 64 sales centers, including the Horizon and Wickham sales centers, were excluded because they were acquired or opened in new markets within the last 15 months.
Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOL operates 275 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.