<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 26, 1996
SCP POOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-26640 36-3943363
-------------------- ------------------- ------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
109 Northpark Boulevard, Covington, Louisiana 70433-5001
- --------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 892-5521
---------------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The financial statements required by Item 7(a) relative to the acquisition
of the business of The B-L Network, Inc. described in Item 2 of Form 8-K of SCP
Pool Corporation dated September 26, 1996 are attached hereto as an exhibit and
incorporated herein by this reference.
(b) Pro forma financial information.
The pro forma unaudited financial information required by Item 7(b)
relative to the acquisition of the business of The B-L Network, Inc. described
in Item 2 of Form 8-K of SCP Pool Corporation dated September 26, 1996 is
attached hereto as an exhibit and incorporated herein by this reference.
(c) Exhibits
Exhibits required to be filed with this Amendment No. 1 to Current Report
on Form 8-K/A are included in the following exhibit index.
<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 hereunto duly authorized.
SCP POOL CORPORATION
Dated: November 12, 1997 By: /s/ Craig K. Hubbard
------------------------------------
Chief Financial Officer, Treasurer
and Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1 Financial statements required by Item 7(a)
2 Pro forma unaudited financial information required by Item 7(b)
</TABLE>
<PAGE>
EXHIBIT 1
Financial Statements
The B-L Network, Inc.
Period ended September 25, 1996 and
years ended December 31, 1995 and 1994
with Report of Independent Auditors
1
<PAGE>
Report of Independent Auditors
To the Board of Directors of
The B-L Network, Inc.
We have audited the accompanying balance sheets of The B-L Network, Inc. (the
Company) as of September 25, 1996 and December 31, 1995, and the related
statements of income and retained earnings (deficit) and cash flows for the
period ended September 25, 1996 and for each of the two years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The B-L Network, Inc. at
September 25, 1996 and December 31, 1995, and the results of its operations and
its cash flows for the period ended September 25, 1996 and for each of the two
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Atlanta, Georgia
December 20, 1996, except for Note 8, as
to which the date is October 21, 1997
2
<PAGE>
The B-L Network, Inc.
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 25, 1996 DECEMBER 31, 1995
--------------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ 1,454
Receivables, net 17,074 12,534
Inventory, net 27,267 26,546
Prepaid expenses 471 495
-------------------------------
Total current assets 44,812 41,029
Property and equipment, net 2,960 3,192
Other assets, net 1,011 1,087
-------------------------------
Total assets $ 48,783 $ 45,308
===============================
Liabilities and stockholder's equity
Current liabilities:
Trade accounts payable $ 4,375 $ 7,282
Accrued and other current liabilities 3,019 1,488
-------------------------------
Total current liabilities 7,394 8,770
Due to Parent 15,834 9,418
Stockholder's equity:
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding 1 1
Additional paid in capital 26,505 26,505
Retained earnings (deficit) (951) 614
-------------------------------
Total stockholder's equity 25,555 27,120
-------------------------------
Total liabilities and stockholder's equity $ 48,783 $ 45,308
===============================
</TABLE>
See accompanying notes.
3
<PAGE>
The B-L Network, Inc.
Statements of Operations and Retained Earnings (Deficit)
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 25, YEAR ENDED DECEMBER 31,
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net sales $ 128,858 $ 140,888 $ 134,739
Cost of sales 106,500 113,497 109,788
-----------------------------------------------------
Gross profit 22,358 27,391 24,951
Warehouse, selling and administrative
expenses 22,673 27,195 24,780
-----------------------------------------------------
Operating income (loss) (315) 196 171
Other income (expense):
Interest expense (1,024) (662) (121)
Miscellaneous income (expense) (466) 46 (88)
-----------------------------------------------------
(1,490) (616) (209)
-----------------------------------------------------
Loss before income taxes (1,805) (420) (38)
Provision (benefit) for income taxes (240) (45) 82
-----------------------------------------------------
Net loss (1,565) (375) (120)
Retained earnings at beginning of period 614 989 1,109
-----------------------------------------------------
Retained earnings (deficit) at end of
period $ (951) $ 614 $ 989
======================================================
</TABLE>
See accompanying notes.
4
<PAGE>
The B-L Network, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 25, YEAR ENDED DECEMBER 31,
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net loss $ (1,565) $ (375) $ (120)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 627 684 631
Provision for doubtful accounts
receivable 494 211 5
Provision for inventory obsolescence 26 2 177
Loss (gain) on sale of property and
equipment (4) 15 -
Changes in operating assets and
liabilities:
Receivables (5,008) (908) (3,476)
Inventory (747) 124 (3,671)
Prepaid expenses and other assets (17) 186 (224)
Accounts payable (2,935) (870) 1,571
Accrued and other current liabilities 1,531 (350) 383
-----------------------------------------
Net cash used in operating activities (7,598) (1,281) (4,724)
INVESTING ACTIVITIES
Acquisition of businesses - - (1,286)
Purchase of property and equipment (282) (794) (646)
Proceeds from sale of property and equipment 9 17 -
-----------------------------------------
Net cash used in investing activities (273) (777) (1,932)
FINANCING ACTIVITIES
Net borrowings from parent 6,417 1,776 7,447
-----------------------------------------
Net cash provided by financing activities 6,417 1,776 7,447
-----------------------------------------
Net increase (decrease) in cash (1,454) (282) 791
Cash at beginning of period 1,454 1,736 945
-----------------------------------------
Cash at end of period $ - $ 1,454 $ 1,736
=========================================
</TABLE>
See accompanying notes.
5
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements
September 25, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The B-L Network, Inc. (the Company), a wholly owned subsidiary of BioLab Inc.
(BioLab or Parent), is a wholesale distributor of swimming pool equipment and
supplies. The Company maintains 39 service centers in 12 states located
throughout the Southeastern, Central and Western United States and sells
primarily to pool builders, retail stores, and pool service companies within the
same geographic regions.
The Company's business is highly seasonal. In general, sales and net income are
substantially higher during the second and third quarters, which represent the
peak months of swimming pool use, installation and maintenance.
Effective September 26, 1996, BioLab sold all of the Company's inventory,
property and equipment and substantially all of the prepaid expenses and other
assets to SCP Pool Corporation (the Purchaser). The Purchaser issued Biolab a
promissory note for the sales price of approximately $32 million.
Net sales and gross profit related to operations of service centers formerly
owned by the Company for the five-day period September 26 through September 30,
1996 were approximately $1,207,000 and $227,000, respectively.
REVENUE RECOGNITION
Revenue is recognized at the time of shipment of products or the performance of
services.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable.
6
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of credit risk with respect to trade accounts receivable are
generally limited due to the large number of entities comprising the Company's
customer base. The Company performs periodic credit evaluations of its customers
and generally does not require collateral. Receivables are generally due within
30 days, except for winter sales under early-buy programs for which extended
terms are given.
The large number of financial institutions at which cash balances are maintained
limits the exposure to credit risk.
The carrying amounts reported in the balance sheet for cash, accounts receivable
and accounts payable approximate their fair value.
INVENTORIES
Inventories consist primarily of goods purchased for resale and are carried at
the lower of cost (using the first-in, first-out method) or market, net of
obsolescence reserve. At September 25, 1996 and December 31, 1995, the reserve
for inventory obsolescence was approximately $1,408,000 and $1,382,000,
respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for depreciation
principally by the straight-line method over estimated useful lives of 20 years
for buildings and 3 to 10 years for furniture and fixtures and machinery and
equipment. Leasehold improvements are depreciated over the term of the lease.
Depreciation expense was approximately $493,000, $555,000, and $454,000 for the
period ended September 25, 1996, and for the years ended December 31, 1995 and
1994, respectively.
OTHER ASSETS
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. The recoverability of goodwill is
assessed annually and takes into account whether the goodwill should be
completely or partially written off or the amortization period accelerated. In
evaluating the value and future benefits of goodwill, the
7
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recoverability from operating income is measured. Under this approach, the
carrying value of goodwill would be reduced if it is probable that management's
best estimate of future operating income before goodwill amortization will be
less than the carrying amount of goodwill over the remaining amortization
period.
Other assets also include noncompete agreements being amortized over the
contractual terms of five years.
INCOME TAXES
The liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse.
ADVERTISING COSTS
Advertising costs are generally charged to expense as the costs are incurred.
Advertising expense was approximately $342,000, $868,000 and $545,000 for the
period ended September 25, 1996 and for the years ended December 31, 1995 and
1994, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In 1996, the Company adopted Statement of Financial Accounting Standards 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 impact on the
Company's financial position or results of operations.
8
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented
below (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 25, 1996 DECEMBER 31, 1995
---------------------------------------
Receivables:
<S> <C> <C>
Trade accounts $ 18,366 $ 12,575
Other - 757
---------------------------------------
18,366 13,332
Less allowance for doubtful accounts (1,292) (798)
---------------------------------------
$ 17,074 $ 12,534
=======================================
Property and equipment:
Land and buildings $ 1,337 $ 1,337
Machinery and equipment 3,713 3,765
Leasehold improvements 203 203
Construction in progress 594 312
---------------------------------------
5,847 5,617
Less accumulated depreciation (2,887) (2,425)
---------------------------------------
$ 2,960 $ 3,192
=======================================
Other assets:
Goodwill $ 742 $ 742
Non-compete agreements 700 700
Other 126 85
---------------------------------------
1,568 1,527
Less accumulated amortization (557) (440)
---------------------------------------
$ 1,011 $ 1,087
=======================================
</TABLE>
9
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 25, DECEMBER 31,
1996 1995
--------------------------------------
Accrued and other current liabilities:
<S> <C> <C>
Salaries and bonuses $ 624 $ 464
Accrued rebates 362 458
Unremitted sales tax 220 148
Deferred revenue 488 367
Freight 323 51
Accrued litigation 598 -
Other 404 -
--------------------------------------
$3,019 $1,488
======================================
</TABLE>
3. ACQUISITIONS
On August 1, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Pioneer Pool Products, Inc., a distributor of
swimming pool equipment and supplies. The purchase price consisted of a cash
payment of approximately $1,165,000, of which $100,000 was allocated to a
covenant not to compete. In connection with this acquisition, the Company
acquired assets with a fair value of approximately $1,580,000 and assumed
liabilities of approximately $805,000. The Company recorded $290,000 of goodwill
from this acquisition.
On November 4, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Aquaquip, Inc., a distributor of swimming pool
equipment and supplies. The purchase price consisted of a cash payment of
approximately $121,000. In connection with this acquisition, the Company
acquired assets with a fair value of approximately $167,000 and assumed
liabilities of approximately $46,000. No goodwill was recorded.
The purchase method of accounting was used to record these acquisitions.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on estimated fair market values at the purchase dates.
Operations for the acquired companies have been included in the Company's
results of operations from the respective purchase dates.
10
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities are
as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 25, DECEMBER 31,
1996 1995
---------------------------------------
Deferred tax assets:
Current:
<S> <C> <C>
Inventory capitalization $ 199 $ 194
Inventory reserve 535 525
Allowance for doubtful accounts 464 283
Litigation reserve 227 -
Other - 81
---------------------------------------
Total current deferred tax assets 1,425 1,083
Noncurrent:
Intangible assets 120 96
---------------------------------------
Total deferred tax assets 1,545 1,179
Deferred tax liabilities:
Noncurrent:
Depreciation (117) (148)
Goodwill (113) (117)
---------------------------------------
Total deferred tax liabilities (230) (265)
---------------------------------------
Net deferred tax assets 1,315 914
Valuation allowance (1,315) (914)
---------------------------------------
Net deferred tax assets $ - $ -
=======================================
</TABLE>
The net change in the total valuation allowance for the period ended September
25, 1996 and for the year ended December 31, 1995 was an increase of
approximately $401,000 and $50,000, respectively.
11
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
Significant components of the income tax provision (benefit) are as follows (in
thousands):
PERIOD ENDED
SEPTEMBER 25, YEAR ENDED DECEMBER 31,
1996 1995 1994
------------------------------------------
Current:
Federal $(202) $ (38) $ 69
State (38) (7) 13
------------------------------------------
Total $(240) $(45) $ 82
==========================================
Reconciliations of the income tax provision (benefit) to the statutory federal
income tax rate are as follows (in thousands):
PERIOD ENDED
SEPTEMBER 25, YEAR ENDED DECEMBER 31,
1996 1995 1994
------------------------------------------
Tax at statutory rates $(614) $(143) $ (13)
State income taxes, net of
federal tax benefit (71) (17) (2)
Deferred tax asset valuation 401 50 43
Other, net 44 65 54
----------------------------------------
Total $(240) $ (45) $ 82
========================================
Income taxes are calculated on a separate return basis as if the Company had not
been included in a consolidated income tax return with the Parent. If the
Company had calculated income taxes based on the tax-sharing agreement between
the Company and the Parent, the resulting current and deferred income tax
amounts could be different than the amounts disclosed.
12
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
5. COMMITMENTS AND CONTINGENCIES
The Company leases certain service center facilities and vehicles under
noncancelable operating leases that expire in various years through 2002. Rental
expense under operating leases was approximately $1,945,000 for the period ended
September 25, 1996 and $2,645,000 and $2,414,000 for the years ended December
31, 1995 and 1994, respectively. The future minimum lease payments as of
September 25, 1996 related to noncancelable operating leases with initial terms
of one year or more are set forth below (in thousands).
September 26, 1996 to December 31, 1996 $ 758
1997 2,178
1998 1,390
1999 1,107
2000 688
2001 494
Thereafter 111
------
$6,726
======
In the normal course of business the Company becomes involved as a defendant or
plaintiff in various lawsuits. Although a successful claim for which the Company
is not fully insured could have a material effect on the Company's financial
condition, management is of the opinion that it maintains insurance at levels
generally consistent with industry standards to insure itself against the normal
risks of operations.
6. RELATED PARTY TRANSACTIONS
The amounts payable to the Parent included in the balance sheets represent net
balances as the result of various transactions between the Company and its
Parent. There are no terms of settlement associated with the account balances.
The balances are primarily the result of the Company's participation in the
Parent's central cash management program, wherein substantially all the
Company's cash receipts are remitted to the Parent and substantially all cash
disbursements are funded by the Parent. On a monthly basis, interest expense is
allocated to the Company by the Parent based on the Company's use of funds at
the Parent's average borrowing rate in effect. Interest expense in the statement
of operations
13
<PAGE>
The B-L Network, Inc.
Notes to Financial Statements (continued)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
and retained earnings (deficit) represents the total of these allocations. Other
transactions include intercompany purchases, the funding of acquisitions, costs
directly attributable to the Company incurred by the Parent, and miscellaneous
other administrative expenses incurred by the Parent on the Company's behalf.
The Company purchased inventory from the Parent of approximately $15,434,000,
$16,868,000 and $14,832,000 for the period ended September 25, 1996 and for the
years ended December 31, 1995 and 1994, respectively.
7. BENEFIT PLAN
The Company's employees participate in a Parent-sponsored savings and retirement
plan. Employees who are eligible to participate in the savings plan are able to
contribute a percentage of their base compensation not to exceed 15%, subject to
a dollar limit. Employee contributions are invested in equity and fixed income
securities based on employee elections. For the period ended September 25, 1996
and for the years ended December 31, 1995 and 1994, the Company made no
contributions to the plan.
8. SUBSEQUENT LITIGATION SETTLEMENT
As of October 21, 1997, the Company had settled or was in the process of
settling approximately $598,000 of litigation relating to various events that
had occurred prior to September 25, 1996. These amounts are reflected in the
September 25, 1996 financial statements as miscellaneous income (expense).
14
<PAGE>
EXHIBIT 2
SCP Pool Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Income
On September 26, 1996, SCP Pool Corporation (the Company), acquired certain
assets, primarily inventory and fixed assets, of The B-L Network, Inc. (BLN), a
wholly owned subsidiary of Great Lakes Chemical Corporation. $31.8 million of
the aggregate purchase price was financed by BLN, with the remaining $2.4
million representing liabilities assumed and other costs incurred by the
Company. This acquisition has been accounted for using the purchase method of
accounting. The following Unaudited Pro Forma Condensed Consolidated Statements
of Income for the nine months ended September 30, 1996 and the year ended
December 31, 1995 give effect to the purchase as if it had occurred at January
1, 1995.
The Unaudited Pro Forma Condensed Consolidated Statements of Income are
presented for information purposes only and are not necessarily indicative of
the results of operations which would have been achieved had the transaction
been completed at January 1, 1995, nor are they necessarily indicative of the
Company's future results of operations.
The Unaudited Pro Forma Condensed Consolidated Statements of Income should be
read in conjunction with the historical financial statements of the Company and
related notes thereto.
1
<PAGE>
SCP Pool Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Nine Months Ended September 30, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
THE B-L
SCP POOL NETWORK, PRO FORMA PRO FORMA
CORPORATION INC. (a) ADJUSTMENTS CONSOLIDATED
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 189,356 $ 128,858 $ - $ 318,214
Cost of sales 146,510 106,500 - (b) 253,010
----------------------------------------------------------------------
Gross profit 42,846 22,358 - 65,204
Operating expenses 28,084 22,673 77 (c) 50,834
----------------------------------------------------------------------
Operating income 14,762 (315) (77) 14,370
Other income (expense):
Interest expense (2,052) (1,024) (1,433)(d) (3,485)
1,024 (e)
Miscellaneous income (expense) 179 (466) (65)(f) (352)
----------------------------------------------------------------------
(1,873) (1,490) (474) (3,837)
----------------------------------------------------------------------
Income before income taxes 12,889 (1,805) (551) 10,533
Provision for income taxes 5,029 (240) (681)(g) 4,108
----------------------------------------------------------------------
Net income $ 7,860 $ (1,565) $ 130 $ 6,425
=====================================================================
Average shares outstanding:
Primary 6,334 6,334
Fully diluted 6,462 6,462
Net income per share of common stock:
Primary $1.24
Fully diluted $1.22
Pro forma net income per share of
common stock:
Primary $ 1.01
Fully diluted $ .99
</TABLE>
See notes to unaudited pro forma condensed consolidated statements of income.
2
<PAGE>
SCP Pool Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Year Ended December 31, 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
THE B-L
SCP POOL NETWORK, PRO FORMA PRO FORMA
CORPORATION INC. (a) ADJUSTMENTS CONSOLIDATED
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 161,095 $ 140,888 $ - $ 301,983
Cost of sales 123,974 113,497 - (b) 237,471
---------------------------------------------------------------------
Gross profit 37,121 27,391 - 64,512
Operating expenses 27,599 27,195 99 (c) 54,893
---------------------------------------------------------------------
Operating income 9,522 196 (99) 9,619
Other income (expense):
Interest expense (5,113) (662) (1,911)(d) (7,024)
662 (e)
Miscellaneous income (expense) (590) 46 (87)(f) (631)
---------------------------------------------------------------------
(5,703) (616) (1,336) (7,655)
---------------------------------------------------------------------
Income before income taxes and
extraordinary loss 3,819 (420) (1,435) 1,964
Provision for income taxes 1,490 (45) (679)(g) 766
---------------------------------------------------------------------
Income before extraordinary loss $ 2,329 $ (375) $ (756) $ 1,198
=====================================================================
Weighted average shares outstanding:
Primary 2,972 2,972
Fully diluted 3,099 3,099
Income before extraordinary loss per
share of common stock:
Primary $ .78
Fully diluted $ .75
Pro forma income before extraordinary
loss per share
of common stock:
Primary $ .40
Fully diluted $ .39
</TABLE>
See notes to unaudited pro forma condensed consolidated statements of income.
3
<PAGE>
SCP Pool Corporation
Notes to Unaudited Pro Forma
Condensed Consolidated Statements of Income
1. BASIS OF PRESENTATION
On September 26, 1996, SCP Pool Corporation (the Company), acquired certain
assets, primarily inventory and fixed assets, of The B-L Network, Inc. (BLN), a
wholly owned subsidiary of Great Lakes Chemical Corporation. $31.8 million of
the aggregate purchase price was financed by BLN, with the remaining $2.4
million representing liabilities assumed and other costs incurred by the
Company. This acquisition has been accounted for using the purchase method of
accounting. The following Unaudited Pro Forma Condensed Consolidated Statements
of Income for the nine months ended September 30, 1996 and the year ended
December 31, 1995 give effect to the purchase as if it had occurred at
January 1, 1995.
The Company believes that the assumptions used in preparing the unaudited pro
forma condensed combined financial statements provide a reasonable basis for
presenting all of the significant effects of the BLN Acquisition (other than any
synergies anticipated by the Company, and nonrecurring charges directly
attributable to the purchase and nonrecurring charges that will result from
combining operations), and that the pro forma adjustments give effect to those
assumptions in the Unaudited Pro Forma Condensed Consolidated Statements of
Income.
On August 26, 1997, the board of directors declared a three-for-two stock split
of the Company's common stock, which was paid in the form of a stock dividend on
September 29, 1997 to the stockholders of record at the close of business on
September 15, 1997. Accordingly, all shares and per-share data for all periods
presented reflect the effects of this split.
2. PRO FORMA ADJUSTMENTS
Pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated
Statements of Income are as follows:
(a) The Company acquired certain assets of BLN on September 26, 1996. The
information presented for BLN is the operating results for the
appropriate period prior to acquisition.
(b) Does not reflect the anticipated savings in purchasing costs at BLN
during the periods presented. Based upon a review of the prices paid
by BLN for its products, the Company expects that because of its size
and purchasing power it will be able to reduce the cost of BLN's
supplies and products. Because most of these purchases are not made
pursuant to long-term contracts, no adjustment has been included in
the pro forma statements of income for the periods presented.
4
<PAGE>
SCP Pool Corporation
Notes to Unaudited Pro Forma
Condensed Consolidated Statements of Income (Continued)
2. PRO FORMA ADJUSTMENTS (CONTINUED)
(c) Reflects additional amortization of $77,000 for the nine months ended
September 30, 1996 and $99,000 for the year ended December 31, 1995
related to approximately $4.7 million of goodwill related to the BLN
Acquisition, assuming a useful life of 40 years, and offset by the
elimination of the amortization of goodwill related to acquisitions
made by BLN.
(d) Reflects additional interest expense resulting from the additional
indebtedness incurred in connection with the BLN Acquisition based on
interest at 6% per annum.
(e) Reflects the elimination of interest expense incurred by BLN on
indebtedness to its Parent, which is excluded from the acquisition.
(f) Reflects additional amortization of $65,000 for the nine months ended
September 30, 1996 and $87,000 for the year ended December 31, 1995
related to approximately $1.1 million of organizational and financing
costs related to the BLN Acquisition, assuming a useful life of five
years, offset by the elimination of amortization recorded by BLN.
(g) Adjusts the provision for income taxes of the pro forma consolidated
group to the Company's historical effective tax rate of 39%.
5