<PAGE>
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 MARCH 31, 1996, OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
____________.
COMMISSION FILE NO.: 0-26640
-------
SCP 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.)
128 Northpark Boulevard, Covington, Louisiana 70433-5070
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
504-892-5521
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(former name, former address and former fiscal year,
if changed since last report)
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
--- ---
At April 30, 1996, there were 4,222,809 outstanding shares of the Registrant's
Common Stock, $.001 par value per share.
<PAGE>
SCP POOL CORPORATION
TABLE OF CONTENTS
<TABLE>
Part I. Financial Information Page
----
<C> <S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1996
(Unaudited) and December 31, 1995...................... 1
Consolidated Statements of Income -- Three Months
Ended March 31, 1996 and 1995 (Unaudited).............. 2
Consolidated Statements of Cash Flows -- Three Months
Ended March 31, 1996 and 1995 (Unaudited).............. 3
Notes to Consolidated Financial Statements (Unaudited)--
March 31, 1996......................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 7
Part II. Other Information
Items 1.-6. ........................................................ 15
</TABLE>
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,418 $ 2,043
Receivables 26,803 12,090
Inventory, primarily goods
purchased for resale 45,168 25,230
Prepaid expenses 576 363
Deferred income taxes 152 145
-------------------------
Total current assets 77,117 39,871
Property and equipment, net 3,560 3,470
Goodwill, net 29,533 29,725
Other assets, net 2,232 2,331
-------------------------
Total assets $112,442 $75,397
=========================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 42,722 $12,726
Accrued and other current
liabilities 4,883 3,075
Current portion of long-term
debt 3,509 2,883
-------------------------
Total current liabilities 51,114 18,684
Deferred income taxes 881 843
Long-term debt, less current
portion 28,092 23,593
Stockholders' equity:
Preferred stock, $.01 par
value; 100,000 shares
authorized -- --
Common stock, $.001 par
value; 10,000,000 shares
authorized; 4,222,809 shares
issued and outstanding in
1996 and 1995 4 4
Additional paid-in capital 29,587 29,587
Retained earnings 2,764 2,686
-------------------------
Total stockholders' equity 32,355 32,277
-------------------------
Total liabilities and
stockholders' equity $112,442 $75,397
=========================
Note: The balance sheet at December
31, 1995 has been derived from the
audited financial statements at
that date but does not include all
of the information and footnotes
required by generally accepted
accounting principles for complete
financial statements.
</TABLE>
See accompanying notes.
1
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------------------
<S> <C> <C>
(Unaudited)
Net sales $41,145 $25,846
Cost of sales 31,872 19,892
-------------------
Gross profit 9,273 5,954
Warehouse expense 1,971 1,163
Selling and administrative expenses 6,367 3,960
Goodwill amortization 192 178
-------------------
Operating income 743 653
Other income (expense):
Interest expense (588) (1,116)
Amortization expense (132) (141)
Management fees paid to majority -- (63)
stockholder
Miscellaneous income 106 22
-------------------
(614) (1,298)
-------------------
Income (loss) before income taxes 129 (645)
Provision (benefit) for income taxes 51 (240)
-------------------
Net income (loss) $ 78 $ (405)
===================
Net income (loss) per share of
common stock:
Primary $.02 $(.29)
===================
Fully diluted $.02 $(.29)
===================
Average shares outstanding:
Primary 4,223 1,384
===================
Fully diluted 4,308 1,384
===================
</TABLE>
See accompanying notes.
2
<PAGE>
SCP POOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 78 $ (405)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities (2,552) (8,744)
------------------
Net cash used in operating activities (2,474) (9,149)
INVESTING ACTIVITIES
Acquisition of businesses -- (5,931)
Purchase of property and equipment (302) (169)
Proceeds from sale of property and
equipment 26 4
------------------
Net cash used in investing activities (276) (6,096)
FINANCING ACTIVITIES
Proceeds on long-term debt -- 7,200
Net borrowings of revolving loan 5,500 9,825
Payments on long-term debt (375) (385)
Issuance of common stock -- 300
------------------
Net cash provided by financing
activities 5,125 16,940
------------------
Change in cash and cash equivalents 2,375 1,695
Cash and cash equivalents at beginning
of period 2,043 844
------------------
Cash and cash equivalents at end
of period $ 4,418 $ 2,539
==================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 529 $ 1,064
==================
Income taxes, net of refunds $ -- $ --
==================
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND FINANCING
ACTIVITIES
Long-term debt issued to acquire
businesses $ -- $ 2,650
==================
</TABLE>
See accompanying notes.
3
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--
MARCH 31, 1996
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of
management, the accompanying unaudited interim financial statements include all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the results of the interim periods.
The Company's business is highly seasonal. In general, sales and net income are
highest during the second and third quarters, which represent the peak months of
swimming pool use and installation. Operating results for the three-month period
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information, refer
to the consolidated financial statements for the year ended December 31, 1995
and footnotes thereto included in the annual report on Form 10-K filed by the
Company with the Securities and Exchange Commission.
During the three-month period ended March 31, 1996, the Company adopted FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. The adoption of the Statement had no effect
on the Company's financial statements.
2. DESCRIPTION OF BUSINESS
As of April 30, 1996, SCP Pool Corporation and its wholly owned subsidiaries
(collectively referred to as the Company) maintain 44 service centers in 22
states located throughout the United States, except in the Northeast, from which
they sell swimming pool equipment and supplies to pool builders, retail stores,
and service firms. The Company also owns and operates a manufacturing and
repackaging facility in Dallas, Texas, which produces a substantial portion of
the Company's chemical products and also sells to other wholesale distributors
and large retailers.
4
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--
(CONTINUED)
3. EARNINGS PER SHARE
Primary income (loss) per common share equals net income (loss) divided by the
weighted average number of common shares outstanding during the period. For
1996, fully diluted income per common share equals net income plus the after tax
interest incurred on the Company's convertible notes, divided by common shares
outstanding after giving effect to shares assumed to be issued on conversion of
those notes. For 1995, the effects of the convertible notes are antidilutive
and, therefore, are not included in the fully diluted income per share
calculation. For both 1996 and 1995, the effect of stock options outstanding are
immaterial.
The Company completed its initial public offering of its common stock in October
1995. A recapitalization occurred in connection with this public offering which
included the exchange of $7,200,000 of Junior Subordinated Notes for shares of
common stock.
5
<PAGE>
SCP POOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--
(CONTINUED)
3. EARNINGS PER SHARE (CONTINUED)
The computation of net income, weighted average shares outstanding and net
income per share, assuming the Company's initial public offering (the
"Offering") and recapitalization had taken place at the beginning of 1995, are
as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1995
------------
<S> <C>
NET INCOME
Primary:
Historical net loss $ (405)
Adjustments:
Interest expense resulting from recapitalization and the
application of net proceeds of the Offering 627
Management fee paid to majority 63
stockholder
Amortization of financing fees of 43
indebtedness repaid
Income tax effect (286)
------------
Adjusted net income 42
Fully diluted:
Adjustment for interest expense, net of tax, on
Convertible Notes 2
------------
Adjusted net income $ 44
============
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary:
Historical weighted average shares of common stock 1,384
Adjustment for shares added as a result of:
Conversion of Junior Subordinated Notes 686
Initial public offering 2,053
Exercise of overallotment option 100
------------
4,223
Fully diluted:
Adjustment for shares related to Convertible Notes 85
------------
4,308
============
SUPPLEMENTARY NET INCOME PER SHARE
Primary $.01
============
Fully diluted $.01
============
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was formed in December 1993 to acquire substantially all of the
assets and assume certain liabilities of its predecessor. From its inception in
1980 through the end of 1993, the Predecessor steadily increased its sales by
opening new service center locations and by increasing sales to new and existing
customers. Since the Company's acquisition of the Predecessor in December 1993
(the "SCP Acquisition"), the Company has grown by opening new service centers
and increasing sales to new and existing customers, and through strategic
acquisitions. From January 1, 1990 to March 31, 1996, the Company expanded from
8 service centers in 6 states to 44 service centers in 22 states.
The Company's acquisitions since the SCP Acquisition include: (i) the
acquisition of certain assets of Aqua Fab Industries, Inc. in January 1994 (the
"Aqua Fab Acquisition"), including eight service centers in the southeast and
midwest regions of the United States, three of which the Company subsequently
closed and consolidated into existing service centers; (ii) the acquisition by
Alliance Packaging, Inc., an indirect wholly owned subsidiary of the Company, of
the chemical manufacturing and repacking assets of York Chemical Corporation and
Wexco Incorporated in January 1995 (the "York Acquisition"); (iii) the
acquisition of all of the outstanding capital stock of Orcal Pool Supplies, Inc.
in February 1995, in which the Company acquired nine service centers located in
California (the "Orcal Acquisition"); (iv) the acquisition of certain assets of
Aqua Chemical Sales and Delivery, Inc. in March 1995, primarily inventory and
one service center located in Illinois (the "Aqua Acquisition"); (v) the
acquisition of certain assets of Crest Distribution (a division of Aman
Enterprises, Inc.) in October 1995, primarily inventory and one service center
in each of Oregon and Washington; and (vi) the acquisition of all of the
outstanding capital stock of Steven Portnoff Corporation in November 1995, in
which the Company acquired one service center in Arizona, and the acquisition of
certain assets and the assumption of certain liabilities of Pool Mart of Nevada,
Inc. in December 1995, in which the Company acquired one service center in
Nevada (collectively referred to as the "Allied Acquisition").
The Company derives its revenues primarily from the sale of swimming pool
supplies and related products, including chemicals, cleaners, packaged pools and
liners, filters, heaters, pumps, lights, repair parts and other equipment
required to build, maintain, install and overhaul residential and small
commercial swimming pools. The Company sells its products primarily to swimming
pool remodelers and builders, independent swimming pool retailers and swimming
pool repair and service companies. These customers tend to be small, family
owned businesses with relatively limited capital resources. The Company
maintains a strict credit policy. Losses from customer receivables have
historically been within management's expectations.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
GENERAL (CONTINUED)
The Company's business is highly seasonal. In general, sales and net income are
highest during the second and third quarters, which represent the peak months of
swimming pool use and installation. Sales are substantially lower during the
first and fourth quarters.
The swimming pool supply industry is affected by various factors, including
general economic conditions, the level of new housing construction, weather and
consumer attitudes towards pool chemical products for environmental or safety
reasons. Although management believes that the Company's geographic diversity
could mitigate the effect of a regional economic downturn and that the
continuing maintenance and repair needs for existing swimming pools could
mitigate the effect of a general economic downturn, there can be no assurance
that the Company's results of operations and expansion plans would not be
materially adversely affected by any of such downturns.
The principal components of the Company's expenses include cost of goods sold,
which represents the amount paid to manufacturers for products, and operating
expenses, which are primarily related to labor, occupancy, commissions and
marketing. Some geographic markets serviced by the Company, particularly
California, Texas and Florida, tend to be more competitive than others. In
response to competitive pressures from any of its current or future competitors,
the Company may be required to lower selling prices in order to maintain or
increase market share, and such measures could adversely affect the Company's
gross margins and operating results.
The Company completed an initial public offering of its common stock in October
1995. The net proceeds of the offering were used primarily to reduce
indebtedness and resulted in an extraordinary charge, net of tax, in the
Company's results of operations in the fourth quarter of 1995 of approximately
$750,000 to account for the write-off of deferred financing costs and the
payment of a prepayment premium associated with extinguishing such indebtedness.
In addition, the management agreement between the Company and its principal
stockholder was terminated as of the consummation of the offering and, as a
result, no management fees will be payable with respect thereto after such time.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The following table shows, for the periods indicated, information derived from
the consolidated statements of operations of the Company expressed as a
percentage of net sales for such year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
1996 1995
--------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 77.5 77.0
--------------
Gross profit 22.5 23.0
Warehouse expense 4.8 4.5
Selling and administrative expenses 15.5 15.3
Goodwill amortization 0.5 0.7
--------------
Operating income 1.7 2.5
Other income (expense):
Interest expense (1.4) (4.3)
Amortization expense (0.3) (0.5)
Miscellaneous 0.3 (0.1)
--------------
Income (loss) before income taxes 0.3% (2.4)%
==============
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The following discussions compare the results of operations of the Company for
the three-month periods ended March 31, 1996 and 1995.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Net sales increased by $15.3 million, or 59.2%, to $41.1 million in the three
months ended March 31, 1996 from $25.8 million in the comparable 1995 period. An
increase in comparable service center sales of approximately 16.0% accounted for
$3.4 million of the increase. Service centers acquired in 1995 accounted for
$8.2 million (of which $4.1 million related to centers acquired in the Orcal
Acquisition) of the increase in net sales, and an increase in sales at new
service centers accounted for $1.6 million of the total increase. The remaining
increase is primarily due to an increase in net sales to third parties by
Alliance Packaging, Inc.
Gross profit increased by $3.3 million, or 55.7%, to $9.3 million in the three
months ended March 31, 1996 from $6.0 million in the comparable 1995 period.
Gross profit as a percentage of net sales, however, declined 0.5% to 22.5% in
the 1996 period from 23.0% in the 1995 period. A majority of the decrease in
gross profit margin was attributable to lower margins realized at the service
centers acquired in the Orcal Acquisition, which generated gross profit margins
of approximately 19.5% versus 23.9% for all other service centers. Because of
competition in the California market and higher product costs, particularly for
chemicals and packaged pools, gross profit margins were negatively impacted
during the three months ended March 31, 1996. In the future, this competition
and higher product costs may continue to result in lower gross profit margins in
the California market, as compared to other markets in which the Company
operates.
Operating expenses increased by $3.2 million, or 60.3%, to $8.5 million in the
three months ended March 31, 1996 from $5.3 million in the comparable 1995
period. Operating expenses as a percentage of sales increased by 0.3% to 20.8%
in the 1996 period from 20.5% in the 1995 period. The increase was primarily
attributable to salaries, higher occupancy expenses in California, commissions
and other costs associated with increased employment at the service centers
acquired in 1995.
Interest and other expenses decreased to $0.6 million in the three months ended
March 31, 1996 from $1.3 million in the comparable 1995 period. The decrease was
primarily attributable to the reduction in the Company's debt with the proceeds
from the Company's initial public offering in October 1995.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's business is highly seasonal. In general, sales and net income are
highest during the second and third quarters, which represent the peak months of
swimming pool use and installation. Sales are substantially lower during the
first and fourth quarters.
The Company experiences a build-up of inventory and accounts payable during the
first and second quarters of the year in anticipation of the peak swimming pool
supply selling season. The Company's peak borrowing occurs during the second
quarter, primarily because dated accounts payable offered by the Company's
suppliers typically are payable in April, May and June, while the Company's peak
accounts receivable collections typically occur in June, July and August.
The principal external factor affecting the Company's business is weather. Hot
weather can increase purchases of chemicals and supplies and pool installations.
Unseasonably cool weather or extraordinary amounts of rainfall during the peak
sales season can decrease purchases of chemicals and supplies and pool
installations. In addition, unseasonably early or late warming trends can
increase or decrease the length of the pool season and, therefore, the Company's
sales.
To encourage preseason orders, the Company, like many other swimming pool supply
distributors, utilizes preseason sales programs which provide for extended
dating terms and other incentives to its customers. Some of the Company's
suppliers also offer extended dating terms on certain products to the Company
for preseason or early season purchases. In offering extended dating terms to
its customers and accepting extended dating terms from its suppliers, the
Company effectively finances a portion of its receivables with extended
payables.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEASONALITY AND QUARTERLY FLUCTUATIONS (CONTINUED)
The Company expects that its quarterly results of operations will fluctuate
depending on the timing and amount of revenue contributed by new service centers
and acquisitions. The Company attempts to open its new stores at the end of the
fourth quarter or the beginning of the first quarter to take advantage of
preseason sales programs and the peak season.
The following table sets forth certain unaudited quarterly data for 1995 and the
first quarter for 1996 which, in the opinion of management, reflect all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of such data. Results of any one or more quarters are not
necessarily indicative of results for an entire fiscal year or of continuing
trends.
<TABLE>
<CAPTION>
1995 1996
---------------------------------------- -------
1ST 2ND 3RD 4TH 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net sales $25,846 $66,667 $47,229 $21,353 $41,145
Gross profit 5,954 14,799 10,399 5,969 9,273
Operating income (loss) 653 7,447 3,236 (1,814) 743
Net sales as a percentage of
annual net sales 16% 42% 29% 13% N/A
Gross profit as a percentage of annual
gross profit 16% 40% 28% 16% N/A
Operating income (loss) as a percentage
of annual operating income 7% 78% 34% (19)% N/A
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred approximately $36.1 million of debt in connection with the
SCP Acquisition. Since the SCP Acquisition, the Company has financed its
business activities and subsequent acquisitions through borrowings under the
Credit Agreement, dated as of December 31, 1993, as amended, by and among South
Central Pool Supply, Inc. (the Company's wholly owned subsidiary), The First
National Bank of Chicago, as agent, and various lenders from time to time party
thereto (the "Senior Loan Facility"), augmented by internally generated cash
flow, operating leases and normal trade credit terms. During 1995, the Company
borrowed approximately $11.1 million to finance acquisitions. In addition,
indebtedness increased by approximately $6.6 million to
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
meet seasonal working capital requirements. These additional borrowings were
offset by approximately $6.5 million of repayments in connection with the
Initial Public Offering in October 1995.
During the three months ended March 31, 1996, the Company borrowed $5.5 million
to meet seasonal working capital requirements and made scheduled payments of
$375,000 required under its Senior Loan Facility. During the three months ended
March 31, 1995, the Company borrowed approximately $8.6 million, of which $2.7
million was financed by the seller of Orcal, to finance the York, Orcal and Aqua
acquisitions. Additionally, indebtedness increased by $11.1 million to meet
seasonal working capital requirements. The increase from December 31, 1995 to
March 31, 1996 in the amount of the Company's inventory and accounts payable
is a result of the Company's anticipation of the peak swimming pool supply
selling season. The increase in receivables is primarily due to seasonal sales.
Excluding acquisitions, the Company made capital expenditures of $169,000 and
$205,000 in the three months ended March 31, 1995 and 1996, respectively.
Currently, the Company's primary sources of working capital are cash flow from
operations and borrowings under the Senior Loan Facility, which as of March 31,
1996, consisted of a term loan and a revolving credit facility. These sources
have been sufficient to support the Company's growth and to finance
acquisitions. Considering the Company's borrowing base as of March 31, 1996, the
Company had approximately $6.5 million available for borrowing under the
revolving loan portion of the Senior Loan Facility, the only additional credit
source currently available to the Company.
Borrowings under the Senior Loan Facility may, at the Company's option, bear
interest at either (i) the agent's corporate base rate or the federal funds rate
plus 0.5%, whichever is higher, plus a margin ranging from 0.00% to 0.25% or
(ii) LIBOR plus a margin ranging from 1.25% to 1.75%, in each case depending on
the Company's leverage ratio. Substantially all of the assets of the Company,
including the capital stock of Alliance Packaging, secure the Company's
obligations under the Senior Loan Facility. The Senior Loan Facility has
numerous restrictive covenants which require the Company to maintain minimum
levels of interest coverage and fixed charge coverage and which also restrict
the Company's ability to pay dividends and make capital expenditures. As of
March 31, 1996, the Company was in compliance with all such covenants and
financial ratio requirements. The Senior Loan Facility expires December 31,
1999.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
To finance future acquisitions, the Company expects to utilize its ability to
borrow additional funds. Depending on market conditions, the Company may also
incur additional indebtedness or issue common or preferred stock (which may be
issued to third parties or to sellers of acquired businesses).
INFLATION
The Company does not believe that inflation has had a significant impact on its
results of operations for the periods presented.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including but not limited to factors related to (i) the
Company's ability to identify appropriate acquisition candidates, complete
acquisitions on satisfactory terms, or successfully integrate acquired
businesses; (ii) the sensitivity of the swimming pool supply business to cool or
rainy weather; (iii) the intense competition and low barriers to entry in the
swimming pool supply industry; (iv) the Company's ability to obtain financing on
satisfactory terms and the degree to which the Company is leveraged; (v) the
sensitivity of the swimming pool supply business to general economic conditions;
(vi) the Company's ability to remain in compliance with the numerous
environmental, health and safety requirements to which it is subject; (vii) the
risk of fire, safety and casualty losses and related liabilities claims inherent
in the storage and repackaging of chemicals sold by the Company; and (viii) the
other factors discussed in the Company's filings with the Securities and
Exchange Commission. Such factors could affect the Company's actual results and
could cause such results to differ materially from the Company's expectations
described above.
14
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Company currently is not involved in any material legal
proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the three
months ended March 31, 1996.
15
<PAGE>
SIGNATURE
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.
SCP POOL CORPORATION
--------------------------------------
DATE: May 7, 1996 BY: /s/ Maurice Van Dyke
----------------------- --------------------------------------
Maurice Van Dyke, Chief Financial Officer,
Treasurer and Secretary and duly authorized
signatory on behalf of the Registrant
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,418
<SECURITIES> 0
<RECEIVABLES> 28,008
<ALLOWANCES> (1,205)
<INVENTORY> 45,168
<CURRENT-ASSETS> 77,117
<PP&E> 4,759
<DEPRECIATION> (1,199)
<TOTAL-ASSETS> 112,442
<CURRENT-LIABILITIES> 51,114
<BONDS> 31,601
0
0
<COMMON> 4
<OTHER-SE> 32,351
<TOTAL-LIABILITY-AND-EQUITY> 112,442
<SALES> 41,145
<TOTAL-REVENUES> 41,145
<CGS> 31,872
<TOTAL-COSTS> 40,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 199
<INTEREST-EXPENSE> 720
<INCOME-PRETAX> 129
<INCOME-TAX> 51
<INCOME-CONTINUING> 78
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
