Pool (POOL) 8-K Pool Corporation Reports Record Third Quarter Results

Exhibit 99.1

FOR IMMEDIATE RELEASE

POOL CORPORATION REPORTS RECORD THIRD QUARTER RESULTS

AND UPDATES 2014 EARNINGS GUIDANCE

Highlights include:

• Record third quarter and year to date results

• Q3 base business sales growth of 5% and base business gross profit growth of 7%

• Q3 gross margin improvement of 50 basis points

• Q3 diluted EPS of $0.78, up 15% over Q3 2013

______________________

COVINGTON, LA. (October 16, 2014) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the third quarter of 2014.

“We are pleased to have finished the third quarter with record results. Our sales benefited from the continuing demand for discretionary products that create and enhance outdoor living areas. Building materials, tile and lighting showed double‑digit sales growth again this quarter. As we wrap up the 2014 season, our solid results reflect the depth of our product offerings backed by our knowledge and our ability to provide exceptional service - a critical factor for our customers,” said Manuel Perez de la Mesa, President and CEO.

Net sales for the quarter ended September 30, 2014 increased 6% to a record $615.5 million compared to $578.2 million in the third quarter of 2013, with base business sales up 5% for the period. Consistent with the first half of the year, replacement and remodel activity continued to drive sales growth in the third quarter.

Gross profit for the third quarter of 2014 increased 8% to a record $176.2 million from $162.6 million in the same period of 2013. Gross profit as a percentage of net sales (gross margin) improved 50 basis points to 28.6% in the third quarter of 2014, reflecting our initiatives to spur margin improvements.

Selling and administrative expenses (operating expenses) increased 8% to $117.8 million in the third quarter of 2014 compared to the third quarter of 2013, with base business operating expenses up 6% for the period. This increase includes higher performance-based incentive compensation expense in 2014 due to comparatively better results versus performance targets this year compared to last, greater employee insurance expense, increased freight costs and continued increases in infrastructure investments such as additional personnel and expenses related to equipment and technology to support sales growth.

Operating income for the quarter increased 10% to $58.5 million compared to the same period in 2013. Operating income as a percentage of net sales (operating margin) was 9.5% for the third quarter of 2014 compared to 9.2% in the third quarter of 2013.

Net income attributable to Pool Corporation increased 8% to a record $34.8 million in the third quarter of 2014, compared to $32.3 million for the third quarter of 2013. Earnings per share was up $0.10, or 15%, to a record $0.78 per diluted share for the three months ended September 30, 2014 versus $0.68 per diluted share for the comparable period in 2013.

Net sales for the nine months ended September 30, 2014 increased 8% to a record $1,870.1 million from $1,738.9 million in the comparable 2013 period, with much of this growth coming from improvement in base business sales. Gross margin increased 20 basis points to 28.7% in the first nine months of 2014 from 28.5% for the same period last year.

Operating expenses were up 8% compared to the first nine months of 2013, with base business operating expenses up 6%. Operating income for the first nine months of 2014 increased 10% to $189.6 million compared to $172.3 million in the same period last year.

Earnings per share for the first nine months of 2014 increased 15% to a record $2.47 per diluted share on net income attributable to Pool Corporation of $112.9 million, compared to $2.14 per diluted share on net income attributable to Pool Corporation of $102.3 million in the comparable 2013 period.

On the balance sheet, total net receivables, including pledged receivables, and net inventory levels increased 15% and 13%, respectively, compared to September 30, 2013. Total debt outstanding at September 30, 2014 was $393.7 million, up 51% compared to September 30, 2013.

Cash provided by operations was $37.2 million for the first nine months of 2014 compared to $53.8 million for the first nine months of 2013. Adjusted EBITDA (as defined in the addendum to this release) was $64.6 million and $58.9 million for the third quarter of 2014 and 2013, respectively, and $207.9 million and $188.7 million for the first nine months of 2014 and 2013, respectively.

“As we enter our seasonally slower fourth quarter, we remain on target with earlier projections and are tightening our 2014 earnings guidance to a range of $2.38 to $2.43 per diluted share from the $2.35 to $2.45 per diluted share guidance range provided at the onset of the year. We believe our success reflects the initiative and perseverance of our team, consistently raising the standards of performance in our industry,” said Perez de la Mesa.

POOLCORP is the largest wholesale distributor of swimming pool and related backyard products. Currently, POOLCORP operates 329 sales centers in North America, Europe, South America and Australia through which it distributes more than 160,000 national brand and private label products to more than 80,000 wholesale customers. For more information, 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,” “should” and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including the sensitivity of our business to weather conditions, changes in the economy and the housing market, our ability to maintain favorable relationships with suppliers and manufacturers, competition from other leisure product alternatives and mass merchants and other risks detailed in POOLCORP’s 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

CONTACT:

Craig K. Hubbard

985.801.5117

craig.hubbard@poolcorp.com

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POOL CORPORATION

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)

	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2014				2013				2014				2013
Net sales	$	615,536			$	578,157			$	1,870,120			$	1,738,911
Cost of sales		439,292				415,600				1,332,800				1,243,427
Gross profit		176,244				162,557				537,320				495,484
Percent		28.6		%		28.1		%		28.7		%		28.5	%
Selling and administrative expenses		117,787				109,182				347,718				323,184
Operating income		58,457				53,375				189,602				172,300
Percent		9.5		%		9.2		%		10.1		%		9.9	%
Interest expense, net		1,864				1,544				5,691				5,239
Income before income taxes and equity earnings (loss)		56,593				51,831				183,911				167,061
Provision for income taxes		21,711				19,496				71,111				64,808
Equity earnings (loss) in unconsolidated investments		76				(3	)			209				52
Net income		34,958				32,332				113,009				102,305
Less: net income attributable to noncontrolling interest		(122	)			—				(122	)			—
Net income attributable to Pool Corporation	$	34,836			$	32,332			$	112,887			$	102,305
Earnings per share:
Basic	$	0.80			$	0.70			$	2.53			$	2.20
Diluted	$	0.78			$	0.68			$	2.47			$	2.14
Weighted average shares outstanding:
Basic		43,756				46,380				44,563				46,475
Diluted		44,864				47,598				45,730				47,720
Cash dividends declared per common share	$	0.22			$	0.19			$	0.63			$	0.54

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POOL CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

			September 30,		September 30,		Change
			2014		2013		$		%
Assets
Current assets:
	Cash and cash equivalents	$	14,455	$	24,222	$	(9,767	)	(40	)	%
	Receivables, net		69,847		180,898		(111,051	)	(61	)
	Receivables pledged under receivables facility		137,318		—		137,318		100
	Product inventories, net		414,331		365,596		48,735		13
	Prepaid expenses and other current assets		10,561		9,474		1,087		11
	Deferred income taxes		5,378		3,742		1,636		44
Total current assets			651,890		583,932		67,958		12
Property and equipment, net			57,260		51,537		5,723		11
Goodwill			174,607		169,983		4,624		3
Other intangible assets, net			12,433		10,390		2,043		20
Equity interest investments			1,289		1,112		177		16
Other assets, net			11,757		9,920		1,837		19
Total assets		$	909,236	$	826,874	$	82,362		10		%
Liabilities, redeemable noncontrolling interest and stockholders’ equity
Current liabilities:
	Accounts payable	$	154,511	$	142,777	$	11,734		8		%
	Accrued expenses and other current liabilities		75,222		64,737		10,485		16
	Current portion of long-term debt and other long-term liabilities		2,618		15		2,603		>100
Total current liabilities			232,351		207,529		24,822		12
Deferred income taxes			19,934		15,463		4,471		29
Long-term debt			391,120		260,432		130,688		50
Other long-term liabilities			10,027		7,619		2,408		32
Total liabilities			653,432		491,043		162,389		33
Redeemable noncontrolling interest			3,144		—		3,144		100
Total stockholders’ equity			252,660		335,831		(83,171	)	(25	)
Total liabilities, redeemable noncontrolling interest and stockholders’ equity		$	909,236	$	826,874	$	82,362		10		%

__________________

1. The allowance for doubtful accounts was $4.3 million at September 30, 2014 and $4.5 million at September 30, 2013.

2. The inventory reserve was $8.3 million at September 30, 2014 and $8.7 million at September 30, 2013.

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POOL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

			Nine Months Ended
			September 30,
			2014			2013			Change
Operating activities
Net income		$	113,009		$	102,305		$	10,704
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation		10,749			9,716			1,033
	Amortization		1,075			922			153
	Share-based compensation		6,854			6,090			764
	Excess tax benefits from share-based compensation		(4,141	)		(4,367	)		226
	Equity earnings in unconsolidated investments		(209	)		(52	)		(157	)
	Other		(727	)		(194	)		(533	)
Changes in operating assets and liabilities, net of effects of acquisitions:
	Receivables		(79,891	)		(65,638	)		(14,253	)
	Product inventories		19,262			34,709			(15,447	)
	Prepaid expenses and other assets		(1,212	)		1,063			(2,275	)
	Accounts payable		(61,544	)		(57,641	)		(3,903	)
	Accrued expenses and other current liabilities		33,995			26,933			7,062
Net cash provided by operating activities			37,220			53,846			(16,626	)
Investing activities
Acquisition of businesses, net of cash acquired			(9,381	)		(1,244	)		(8,137	)
Purchase of property and equipment, net of sale proceeds			(14,687	)		(14,407	)		(280	)
Other investments, net			133			76			57
Net cash used in investing activities			(23,935	)		(15,575	)		(8,360	)
Financing activities
Proceeds from revolving line of credit			658,720			596,642			62,078
Payments on revolving line of credit			(542,018	)		(567,092	)		25,074
Proceeds from asset-backed financing			121,600			—			121,600
Payments on asset-backed financing			(93,600	)		—			(93,600	)
Proceeds from long-term debt and other long-term liabilities			1,621			—			1,621
Payments on long-term debt and other long-term liabilities			—			(10	)		10
Payments of deferred financing costs			(7	)		(754	)		747
Excess tax benefits from share-based compensation			4,141			4,367			(226	)
Proceeds from stock issued under share-based compensation plans			8,090			19,040			(10,950	)
Payments of cash dividends			(28,075	)		(25,120	)		(2,955	)
Purchases of treasury stock			(135,155	)		(53,027	)		(82,128	)
Net cash used in financing activities			(4,683	)		(25,954	)		21,271
Effect of exchange rate changes on cash and cash equivalents			(2,153	)		(558	)		(1,595	)
Change in cash and cash equivalents			6,449			11,759			(5,310	)
Cash and cash equivalents at beginning of period			8,006			12,463			(4,457	)
Cash and cash equivalents at end of period		$	14,455		$	24,222		$	(9,767	)

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ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded component (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,
	2014			2013			2014			2013			2014			2013
Net sales	$	607,469		$	577,731		$	8,067		$	426		$	615,536		$	578,157
Gross profit	173,461			162,440			2,783			117			176,244			162,557
Gross margin	28.6		%	28.1		%	34.5		%	27.5		%	28.6		%	28.1		%
Operating expenses	115,175			109,019			2,612			163			117,787			109,182
Expenses as a % of net sales	19.0		%	18.9		%	32.4		%	38.3		%	19.1		%	18.9		%
Operating income (loss)	58,286			53,421			171			(46		)	58,457			53,375
Operating margin	9.6		%	9.2		%	2.1		%	(10.8		)%	9.5		%	9.2		%

(Unaudited)	Base Business						Excluded						Total
(in thousands)	Nine Months Ended						Nine Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,
	2014			2013			2014			2013			2014			2013
Net sales	$	1,853,294		$	1,737,147		$	16,826		$	1,764		$	1,870,120		$	1,738,911
Gross profit	531,624			494,991			5,696			493			537,320			495,484
Gross margin	28.7		%	28.5		%	33.9		%	27.9		%	28.7		%	28.5		%
Operating expenses	342,532			322,546			5,186			638			347,718			323,184
Expenses as a % of net sales	18.5		%	18.6		%	30.8		%	36.2		%	18.6		%	18.6		%
Operating income (loss)	189,092			172,445			510			(145		)	189,602			172,300
Operating margin	10.2		%	9.9		%	3.0		%	(8.2		)%	10.1		%	9.9		%

We have excluded the following acquisitions from base business for the periods identified:

Acquired	Acquisition Date	Net Sales Centers Acquired	Periods Excluded
Pool Systems Pty. Ltd.	July 2014	3	August - September 2014
DFW Stone Supply, LLC (1)	March 2014	2	March - September 2014
Atlantic Chemical & Aquatics Inc. (1)	February 2014	2	February - September 2014
B. Shapiro Supply, LLC (1)	May 2013	1	January - July 2014 and May - July 2013
Swimming Pool Supply Center, Inc. (1)	March 2013	1	January - May 2014 and March - May 2013

⁽¹⁾    We acquired certain distribution assets of each of these companies.

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When calculating our base business results, we exclude sales centers that are acquired, closed or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

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.

The table below summarizes the changes in our sales centers in the first nine months of 2014:

December 31, 2013	321
Acquired locations	7
New locations	2
Consolidated locations	(1	)
September 30, 2014	329

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Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest expense, income taxes, depreciation, amortization, share‑based compensation, goodwill and other non‑cash impairments and equity earnings or loss in unconsolidated investments.  Adjusted EBITDA is not a measure of cash flow or liquidity as determined by generally accepted accounting principles (GAAP). We have included Adjusted EBITDA as a supplemental disclosure because we believe that it is widely used by our investors, industry analysts and others as a useful supplemental liquidity measure in conjunction with cash flows provided by or used in operating activities to help investors understand our ability to provide cash flows to fund growth, service debt and pay dividends as well as compare our cash flow generating capacity from year to year.

We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net income or loss attributable to Pool Corporation, cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP. Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

The table below presents a reconciliation of net income to Adjusted EBITDA.

(Unaudited)			Three Months Ended					Nine Months Ended
(In thousands)			September 30,					September 30,
			2014			2013		2014			2013
Net income		$	34,958		$	32,332	$	113,009		$	102,305
	Add:
	Interest expense (1)		1,864			1,544		5,691			5,239
	Provision for income taxes		21,711			19,496		71,111			64,808
	Share-based compensation		2,197			1,979		6,854			6,090
	Equity (earnings) loss in unconsolidated investments		(76	)		3		(209	)		(52	)
	Depreciation		3,728			3,378		10,749			9,716
	Amortization (2)		246			203		676			632
Adjusted EBITDA		$	64,628		$	58,935	$	207,881		$	188,738

⁽¹⁾  Shown net of interest income and includes amortization of deferred financing costs as discussed below.

⁽²⁾  Excludes amortization of deferred financing costs of $133 and $97 for the three months ended September 30, 2014 and September 30, 2013, respectively, and $399 and $290 for the nine months ended September 30, 2014 and September 30, 2013, respectively.

The table below presents a reconciliation of Adjusted EBITDA to net cash provided by operating activities. Please see page 5 for our Condensed Consolidated Statements of Cash Flows.

(Unaudited)			Three Months Ended						Nine Months Ended
(In thousands)			September 30,						September 30,
			2014			2013			2014			2013
Adjusted EBITDA		$	64,628		$	58,935		$	207,881		$	188,738
	Add:
	Interest expense, net of interest income		(1,731	)		(1,447	)		(5,292	)		(4,949	)
	Provision for income taxes		(21,711	)		(19,496	)		(71,111	)		(64,808	)
	Excess tax benefits from share-based compensation		(221	)		(1,180	)		(4,141	)		(4,367	)
	Other		(654	)		1,439			(727	)		(194	)
	Change in operating assets and liabilities		47,797			48,573			(89,390	)		(60,574	)
Net cash provided by operating activities		$	88,108		$	86,824		$	37,220		$	53,846

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