SEC Info - Pool Corp - ‘424B1’ on 12/15/97

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Pool Corp – ‘424B1’ on 12/15/97

As of: Monday, 12/15/97 · Accession #: 950131-97-7263 · File #: 333-40245

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/15/97  Pool Corp                         424B1                  1:243K                                   Donnelley R R & S… 03/FA

Prospectus — Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                            77    439K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Acquisitions, The Additional Information Balance Sheets Business Capitalization Certain Relationships and Related Transactions Common Stock Company, The Competition Competitive Strengths Consolidated Balance Sheets Description of Capital Stock Dividend Policy Experts Goodwill Growth Strategy Index to Financial Statements Industry and Cyclical Factors Johnson Rice & Company L.L.C Legal Matters Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Morgan Keegan & Company, Inc Net income Notes to Consolidated Financial Statements Notes to Financial Statements Offering, The Other assets Preferred Stock Price Range of Common Stock Principal and Selling Stockholders Private Brands Products Property and equipment Prospectus Summary Purchasing and Suppliers Receivables Registration Agreement Risk Factors Seasonality and Quarterly Fluctuations Seasonality and Weather Selected Consolidated Financial Data Shares Eligible for Future Sale Shares Eligible for Future Sale; Registration Rights Statements of Operations and Retained Earnings (Deficit) Stockholder Notes SUPPLEMENTARY NET INCOME PER SHARE Primary The 1997 Acquisition The Acquisitions The Company The Offering Unaudited Pro Forma Condensed Consolidated Financial Data Underwriting Use of Proceeds 1995 Stock Option Plan 1997 Acquisition, The
1	1st Page - Filing Submission
"	Common Stock
"	Morgan Keegan & Company, Inc
"	Johnson Rice & Company L.L.C
3	Prospectus Summary
"	The Company
5	The Offering
8	The Acquisitions
9	The 1997 Acquisition
10	Risk Factors
"	Seasonality and Weather
"	Competition
11	Industry and Cyclical Factors
12	Shares Eligible for Future Sale; Registration Rights
13	Use of Proceeds
"	Dividend Policy
"	Price Range of Common Stock
14	Capitalization
15	Selected Consolidated Financial Data
17	Unaudited Pro Forma Condensed Consolidated Financial Data
21	Management's Discussion and Analysis of Financial Condition and Results of Operations
24	Seasonality and Quarterly Fluctuations
25	Liquidity and Capital Resources
27	Business
28	Competitive Strengths
29	Growth Strategy
31	Products
"	Private Brands
32	Purchasing and Suppliers
35	Management
39	1995 Stock Option Plan
"	Certain Relationships and Related Transactions
"	Stockholder Notes
40	Registration Agreement
43	Principal and Selling Stockholders
44	Description of Capital Stock
"	Preferred Stock
45	Shares Eligible for Future Sale
47	Underwriting
48	Legal Matters
"	Experts
"	Additional Information
49	Index to Financial Statements
51	Consolidated Balance Sheets
55	Notes to Consolidated Financial Statements
57	Property and equipment
"	Goodwill
"	Other assets
58	Receivables
61	Net income
62	SUPPLEMENTARY NET INCOME PER SHARE Primary
67	Balance Sheets
68	Statements of Operations and Retained Earnings (Deficit)
70	Notes to Financial Statements

424B1 1st Page of 77 TOC ↑Top Previous Next ↓Bottom Just 1st
Filed Pursuant to Rule 424b1
Registration No. 333-40245

2,400,000 SHARES

LOGO
LOGO

SCP POOL CORPORATION

COMMON STOCK

----------------

Of the 2,400,000 shares of Common Stock being offered hereby, 1,350,000
shares are being offered by SCP Pool Corporation (the "Company") and 1,050,000
shares are being offered by certain stockholders (the "Selling Stockholders").
See "Principal and Selling Stockholders." The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders.

The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "POOL." On December 11, 1997 the last reported sale price of the Common
Stock on that market was $18.00 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDERS(2)
----------------------------------------------------------------------------------------------

Per Share........................ $18.00 $0.90 $17.10 $17.10
----------------------------------------------------------------------------------------------
Total(3)......................... $43,200,000 $2,160,000 $23,085,000 $17,955,000
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(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $450,000.
(3) One of the Selling Stockholders has granted the Underwriters a 30-day
option to purchase up to 360,000 additional shares of Common Stock solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Selling Stockholders will be $49,680,000, $2,484,000 and $24,111,000,
respectively. See "Underwriting."

----------------

The Common Stock is offered severally by the Underwriters named herein,
subject to prior sale, when, as and if received and accepted by them, and
subject to their right to reject orders in whole or in part, and to certain
other conditions. It is expected that delivery of the certificates
representing the Common Stock will be made on or about December 17, 1997.

MORGAN KEEGAN & COMPANY, INC.

THE ROBINSON-HUMPHREY COMPANY

JOHNSON RICE & COMPANY L.L.C.

December 12, 1997.

424B1 2nd Page of 77 TOC 1st Previous Next ↓Bottom Just 2nd
[DRAWING OF IN-GROUND SWIMMING POOL WITH NUMBERED CROSS REFERENCES TO
PARTS, EQUIPMENT AND MAINTENANCE PRODUCTS TEXT: "EVERYTHING BUT THE WATER"
THE COMPANY SUPPLIES A FULL ARRAY OF POOL EQUIPMENT IN ADDITION TO POOL
MAINTENANCE PRODUCTS SUCH AS CHEMICALS AND REPLACEMENT PARTS. 1. FILTER,
2. PUMP AND MOTOR, 3. POOL HEATER, 4. CENTRAL STEP HANDRAIL, 5. STEP, 6.
INLET FITTINGS, 7. LINER, 8. AUTOMATIC POOL CLEANER, 9. SAFETY FLOAT LINE,
10. SLIDE, 11. POOL LADDER, 12. DIVING BOARD, 13. UNDERWATER LIGHT, 14.
MAIN DRAIN, 15. LADDER MOUNTS, 16. POOL WATER BRACES, 17. PVC PIPE, 18.
SKIMMER, 19. WALL PANELS, 20. CEMENT DECK BRACES.]

[UNITED STATES MAP SHOWING THE LOCATIONS OF THE COMPANY'S SERVICE CENTERS
TEXT: SCP'S SERVICE CENTER LOCATIONS.

[SQUARE] AS OF THE IPO IN OCTOBER 1995

[CIRCLE] ACQUIRED OR OPENED SINCE OCTOBER 1995

[TRIANGLE] PROPOSED ACQUISITION]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

424B1 3rd Page of 77 TOC 1st Previous Next ↓Bottom Just 3rd
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements and the related Notes thereto appearing elsewhere in this
Prospectus. Unless the context otherwise requires, references in this
Prospectus to the "Company" or "SCP Pool" shall mean SCP Pool Corporation and
its predecessor, together with SCP Pool Corporation's direct and indirect
subsidiaries. Unless otherwise indicated, all information contained in this
Prospectus (i) has been adjusted to give effect to the three-for-two stock
split effected in September 1997, and (ii) assumes no exercise of the
Underwriters' over-allotment option.

THE COMPANY

SCP Pool Corporation is the nation's leading independent distributor of
swimming pool supplies and related products. The Company distributes a broad
range of products to three types of customers: (i) swimming pool remodelers and
builders, which refurbish, retrofit and overhaul existing pools and install new
pools; (ii) independent retail stores, which sell swimming pool products to
consumers; and (iii) swimming pool repair and service companies, which perform
periodic maintenance and repair services, primarily for residential and small
commercial swimming pools. The Company distributes more than 34,000 national
brand and private label products to approximately 20,000 customers. These
products include non-discretionary pool maintenance products, such as chemicals
and replacement parts, packaged pools (kits to build swimming pools which
include walls, liner, bracing and other materials) and pool equipment, such as
cleaners, filters, heaters, pumps and lights.

SCP Pool has managed its growth through a combination of service center
acquisitions, service center additions in new and existing markets, and
continued growth at existing service centers. From January 1, 1990 to September
30, 1997, the Company grew from 8 service centers in 6 states to 74 service
centers in 24 states. Forty-three of the sixty-six service centers added from
January 1, 1990 to September 30, 1997 were through acquisitions, making SCP the
leader in consolidating the pool supply industry. The Company's most
significant acquisition to date occurred in September 1996, when the Company
acquired certain assets (primarily inventory, property and equipment) of The B-
L Network, Inc. ("BLN"), a wholesaler of swimming pool supplies with 39 service
centers in 12 states for an aggregate purchase price of approximately $34.2
million (the "BLN Acquisition"). In November 1997, the Company entered into a
purchase agreement to acquire substantially all of the assets of Bicknell
Huston Distributors, Inc. ("Bicknell"), which distributes swimming pool
supplies and related products through its eleven service centers in six
northeastern states, for a purchase price of approximately $21.0 million (the
"1997 Acquisition"). Following the 1997 Acquisition, which the Company expects
to be completed in late December 1997, the Company will have 85 service centers
in 30 states. There can be no assurances, however, that the 1997 Acquisition
will be completed. Twenty-three of the sixty-six service centers added since
January 1, 1990 were new locations opened by the Company. As a result of
acquisitions and service center openings, the Company has significantly
increased its geographic scope.

SCP Pool estimates that swimming pool supply industry sales in the United
States totalled approximately $2.7 billion in 1996, of which approximately $1.6
billion in sales were made by pool supply distributors, and $1.1 billion in
sales were made by mass merchandisers and large specialty retail chains. The
distribution segment of the industry is fragmented, and is comprised of six
large wholesale swimming pool supply distributors (estimated by management to
be approximately 40% of the market) and a large number of smaller local or
regional companies. These smaller companies generally lack the purchasing
power, management control systems and other resources of large distributors
such as the Company, which has resulted in a trend toward industry
consolidation. The Company believes that this industry consolidation affords it
further opportunities for growth in new and existing markets through
acquisitions of other swimming pool supply distributors.

424B1 4th Page of 77 TOC 1st Previous Next ↓Bottom Just 4th
in 1996 and to $18.4 million for the nine months ended September 30, 1997. The
Company expects to continue its growth strategy by making strategic
acquisitions, opening service centers in new locations, and increasing sales at
existing service centers. SCP Pool has completed seven acquisitions since
January 1994 and expects to complete the 1997 Acquisition in late December
1997, although there can be no assurances the 1997 Acquisition will occur at
that time or at all. Management believes that the 1997 Acquisition, if and when
completed, will further establish the Company as the leading national
independent distributor of swimming pool products and supplies, and increase
the geographic scope and diversity of the Company's business. SCP Pool has
complemented these acquisitions with increasing sales at existing service
centers. Comparable service center sales increased 12%, 15%, 16%, 19% and 11%
in 1993, 1994, 1995, 1996 and the nine months ended September 30, 1997,
respectively.

The Company believes that its sales and earnings growth have been and will
continue to be driven by its primary competitive strengths, which include the
following:

. Leading Market Position. The Company believes that its market position as
the nation's leading distributor of swimming pool supplies provides it
with significant name recognition, lower prices due to volume purchasing
discounts, access to distribution rights for name-brand products and
other operating efficiencies. In addition, SCP Pool offers its customers
one of the broadest available selections of products.

. Experienced Management Team. The Company believes that its key personnel,
including service center managers, are among the most experienced in the
swimming pool supply industry. Executive officers and service center
managers have an average of 28 and 16 years of pool industry experience,
respectively. The experience and tenure of SCP Pool's personnel and their
long standing relationships with their customers have been instrumental
to the growth of the Company.

. Experience in Completing and Integrating Acquisitions. SCP Pool has
completed seven acquisitions since 1994, and 43 of the Company's 74
service centers were added pursuant to such acquisitions. Management
believes that the Company's experience in integrating the acquired
businesses provides a competitive advantage in the evaluation and
integration of future acquisitions.

. Entrepreneurial Business Environment. Service center managers are
responsible for day-to-day operations and profitability of their service
center and have sales responsibility within their geographic area. The
Company believes that its entrepreneurial business environment has (i)
contributed to growth in sales and profitability, (ii) enabled the
Company to be highly responsive to customer requirements and preferences,
actions by competitors and changes in local market conditions and (iii)
assisted the Company's efforts to attract and retain qualified employees.

. Advanced Information Systems. The Company has made a significant
investment in its information systems, which it believes are among the
most advanced in the swimming pool distribution industry. The Company
recently upgraded those systems to achieve additional cost reductions,
operating efficiencies, improved inventory management and a higher level
of customer service as well as to provide capacity for future growth.

. Superior Customer Service. The Company attempts to enhance customer
service by providing product marketing support, exclusive territorial
rights, purchase and technical follow-up support and local delivery
service.

424B1 5th Page of 77 TOC 1st Previous Next ↓Bottom Just 5th
THE OFFERING

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Common Stock offered by the Company.. 1,350,000 shares
Common Stock offered by Selling 1,050,000 shares
Stockholders(1).....................
Total Common Stock offered........... 2,400,000 shares
------

Common Stock to be outstanding after 7,740,060 shares(2)
the Offering........................
Use of Proceeds to the Company....... The net proceeds to the Company of the
Offering will be used to finance the 1997
Acquisition and repay existing
indebtedness.
Nasdaq National Market Symbol........ POOL

--------
(1) See "Principal and Selling Stockholders."
(2) Does not include the 248,035 shares issuable upon exercise of outstanding
options issued pursuant to the Company's 1995 Stock Option Plan, the 45,000
shares issuable upon exercise of outstanding options issued pursuant to the
Company's 1996 Non-Employee Director Equity Incentive Plan, the 606,965
additional shares reserved for issuance under such plans or the 98,214
shares issuable upon conversion of the Company's convertible subordinated
promissory notes. See "Management--1995 Stock Option Plan" and "Certain
Relationships and Related Transactions--Stockholder Notes."

The Company's principal executive offices are located at 109 Northpark
Boulevard, Covington, Louisiana 70433-5001 and its telephone number is (504)
892-5521.

424B1 6th Page of 77 TOC 1st Previous Next ↓Bottom Just 6th
SUMMARY CONSOLIDATED FINANCIAL DATA

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THE PREDECESSOR THE COMPANY
---------------- --------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

STATEMENT OF INCOME
DATA:
Net sales.............. $54,101 $67,282 $101,977 $161,095 $235,844 $189,356 $286,847
Gross profit........... 13,352 16,421 24,489 37,121 52,030 42,846 63,579
Operating income....... 4,364 5,696 6,678 9,522 10,487 14,762 18,448
Net income(1).......... 1,107 1,579(2) 4,533 7,860 9,262
Net income per
share(1).............. .53 .53 .72 1.24 1.46
PRO FORMA STATEMENT OF
INCOME DATA(3):
Pro forma net income... $ 5,022 $ 10,867
Pro forma net income
per share(4).......... .64 1.39
Fully diluted shares
outstanding........... 7,812 7,825
OPERATING DATA:
Number of service
centers:
Starting sites....... 14 17 18 26 44 44 69
Sites acquired..... 0 0 8 14 39 39 0
Sites opened....... 3 1 3 4 2 0 5
Sites consolidated. 0 0 3 0 16 16 0
Sites closed....... 0 0 0 0 0 0 0
Ending sites......... 17 18 26 44 69 67 74
Comparable service
center sales
increases(5).......... 14% 12% 15% 16% 19% 18% 11%

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SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED(6)
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BALANCE SHEET DATA:
Working capital....................................... $ 52,203 $ 68,153
Total assets.......................................... 123,663 147,423
Total debt, including current portion................. 50,839 49,403
Stockholders' equity.................................. 46,192 68,828

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(1) The Predecessor elected to be treated as an S corporation for income tax
purposes, and accordingly did not pay federal and state (except in certain
states) income taxes during such period. The Company is, and has been since
its formation, a C corporation.
(2) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000 or $0.25 per share, in connection with the write-off of loan
financing fees and a prepayment premium associated with the application of
the proceeds of the Company's initial public offering to reduce
indebtedness. Income before extraordinary loss and income per share before
extraordinary loss were $2,329,000 and $0.78, respectively.
(3) Gives effect (i) for the year ended December 31, 1996 to the acquisition of
certain assets of BLN, the sale of 1,350,000 shares of Common Stock offered
by the Company hereby and the application of the estimated net proceeds
therefrom, and the 1997 Acquisition as if each had occurred on January 1,
1996 and (ii) for the nine months ended September 30, 1997 to the sale of
1,350,000 shares of Common Stock offered by the Company hereby and the
application of the estimated net proceeds therefrom and the 1997
Acquisition as if each had occurred on January 1, 1997. Such data have been
derived from the unaudited pro forma statements of income included
elsewhere in this Prospectus. See "Unaudited Pro Forma Condensed Financial
Data."
(4) Calculated using pro forma net income, adjusted for the assumed reduction
in interest expense, net of tax, related to the Company's Convertible
Subordinated Notes. See Note 5 of Notes to the Company's Consolidated
Financial Statements.
(5) Comparable service center sales have been calculated using sales of service
centers that were open for more than 15 months. Comparable service center
sales for 1994 and 1996, respectively, exclude net sales at the 3 service
centers consolidated following the Aqua Fab Acquisition (as defined below)
in 1994 and the 16 service centers consolidated following the BLN
Acquisition (as defined below) in 1996. The numbers of service centers used
in calculating such figures were 13, 15, 18, 25, 38, 38 and 26, for 1992,
1993, 1994, 1995, 1996 and the nine months ended September 30, 1996 and
1997, respectively.
(6) Adjusted to give effect to the sale of 1,350,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds thereof to finance the 1997 Acquisition and reduce indebtedness as
if such application had occurred on September 30, 1997. If the 1997
Acquisition is not consummated: (i) the net proceeds of the Offering will
be used to reduce indebtedness; and (ii) working capital, total assets,
total debt and stockholders' equity, each as of September 30, 1997 and as
adjusted to give effect to the Offering and such use of proceeds as if such
application had occurred on September 30, 1997 would be $52,203, $123,663,
$28,203 and $68,828, respectively. See "Use of Proceeds."

424B1 7th Page of 77 TOC 1st Previous Next ↓Bottom Just 7th
Certain statements in this Prospectus Summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus, such as
statements regarding the Company's strategies, plans, objectives, expectations
and intentions, 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.

424B1 8th Page of 77 TOC 1st Previous Next ↓Bottom Just 8th
THE ACQUISITIONS

The Company is a successor to a business founded in 1980 by the Company's
current President and Chief Executive Officer, Frank J. St. Romain. The
Company and its wholly owned subsidiary, South Central Pool Supply, Inc. ("SCP
Supply"), were organized by Code, Hennessy & Simmons Limited Partnership
("CHS") and members of the management of the Predecessor for the purpose of
acquiring substantially all of the assets and business of Lake Villa
Corporation (formerly known as South Central Pool Supply, Inc.), a Louisiana
corporation (the "Predecessor"). On December 31, 1993, SCP Supply acquired
substantially all of the assets and business of the Predecessor (the "SCP
Acquisition").

The Company continues to pursue an aggressive growth strategy. Consistent
with this strategy, the Company has completed seven acquisitions since January
1994 (together with the SCP Acquisition, the "Acquisitions"):

. In January 1994, the Company substantially increased its operations by
acquiring certain assets of Aqua Fab Industries, Inc. ("Aqua Fab"),
including eight service centers (three of which the Company subsequently
closed and consolidated into existing service centers) in the midwest and
southeast regions of the United States (the "Aqua Fab Acquisition").

. In February 1995, the Company acquired all of the outstanding capital
stock of Orcal Pool Supplies, Inc. ("Orcal") (the "Orcal Acquisition").
Management believes that the Orcal Acquisition, in which the Company
acquired nine fully operational service centers located throughout
California, was a cost-effective means of entering one of the largest
pool supply markets in the United States.

. In March 1995, the Company acquired certain assets of Aqua Chemical Sales
and Delivery, Inc., primarily inventory and a service center in Illinois.

. In October 1995, the Company acquired certain assets of Crest
Distribution, a division of Aman Enterprises, Inc., primarily inventory
and one service center in each of Oregon and Washington.

. In November 1995, the Company acquired the capital stock of Steven
Portnoff Corporation, which operated a service center in Scottsdale,
Arizona.

. In December 1995, the Company acquired certain assets of Pool Mart of
Nevada, Inc., an affiliate of Steven Portnoff Corporation, primarily
inventory and a service center in Las Vegas, Nevada.

. The Company's most significant acquisition to date occurred in September
1996, when the Company acquired certain assets (primarily inventory,
property and equipment) of BLN, a wholesaler of swimming pool supplies
with 39 service centers in 12 states for an aggregate purchase price of
approximately $34.2 million. The Company subsequently consolidated 16 of
the BLN service centers into existing service centers. At the time of the
BLN Acquisition, BLN was the second largest pool supply distributor in
the United States, according to management estimates. The purchase price
was financed primarily through the issuance of promissory notes payable
to BLN, a portion of which have since been repaid. In connection with the
BLN Acquisition, the Company sold the chemical manufacturing and
repackaging assets of Alliance Packaging, Inc. ("Alliance Packaging"),
one of its subsidiaries, to Bio-Lab, Inc. ("Bio-Lab"), the parent of BLN,
for approximately $5.4 million (the "Alliance Sale"). In addition, the
Company and Bio-Lab entered into two five-year supply agreements pursuant
to which Bio-Lab agreed to supply the Company with certain chemical
products previously supplied to it by Alliance Packaging and with certain
chemical products previously supplied to BLN by Bio-Lab (the "Bio-Lab
Supply Agreements").

424B1 9th Page of 77 TOC 1st Previous Next ↓Bottom Just 9th
THE 1997 ACQUISITION

In November 1997, the Company entered into a purchase agreement to acquire
substantially all of the assets of Bicknell for an aggregate purchase price of
approximately $21.0 million, subject to a purchase price adjustment based on
the working capital of Bicknell at the time of the closing. Bicknell
distributes swimming pool supplies and related products through its eleven
service centers in six northeastern states. In 1996, Bicknell had net sales of
$58.7 million. The Company expects the 1997 Acquisition to be consummated in
late December 1997, but no assurances can be made that the 1997 Acquisition
will occur at that time or at all.

Management believes that the 1997 Acquisition, if and when completed, will
further establish the Company as the leading national independent distributor
of swimming pool products and supplies, and increase the geographic scope and
diversity of the Company's business. If the 1997 Acquisition is completed in
December 1997, the Company will have 85 service centers in 30 states at that
time. As a result of the seasonal nature of the Company's business, the 1997
Acquisition is expected to have a negative effect on operating income in the
first quarter of 1998, and is not expected to benefit the Company's operating
income until at least the second quarter of 1998.

In connection with the 1997 Acquisition, the Company will enter into a
supply agreement with Pacific Industries, Inc. ("Pacific"), the sole
stockholder of Bicknell (the "Supply Agreement"). Under the terms of the
Supply Agreement, Pacific will supply the Company with polymer panels, braces,
steps, liners and other products used in the construction of in-ground pools.
The Supply Agreement will have a term of eight years, subject to renewal
options.

424B1 10th Page of 77 TOC 1st Previous Next ↓Bottom Just 10th
RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following information
relating to the Company and the Common Stock before making an investment in
the Common Stock offered hereby.

ACQUISITIONS AND INTEGRATION OF ADDITIONAL BUSINESSES

A significant portion of the Company's recent growth has been achieved
through acquisitions of other swimming pool supply distributors, and the
Company's growth strategy includes additional acquisitions. The Company
continuously seeks out appropriate acquisition candidates and is frequently
engaged in discussions regarding potential acquisitions. The Company recently
entered into an agreement to acquire eleven additional service centers in the
northeastern United States for an aggregate consideration of approximately
$21.0 million. There can be no assurance that such acquisition will be
consummated, or that in the future the Company will be able to identify and
acquire appropriate businesses or obtain financing for such acquisitions on
satisfactory terms. Future acquisitions may be financed through the issuance
of Common Stock, which may be dilutive to the Company's stockholders, or
through the incurrence of additional indebtedness. Furthermore, there can be
no assurance that competition for acquisition candidates will not escalate,
thereby increasing the costs of making acquisitions. The process of
integrating acquired businesses into the Company's operations may result in
unforeseen difficulties and may require a disproportionate amount of resources
and management's attention, and there can be no assurance that the Company
will be able to successfully integrate acquired businesses into its
operations. The businesses acquired by the Company typically have lower gross
margins than the Company, which affects the Company's results of operations
for the period in which any such acquisition occurs and subsequent periods
until the acquired business is fully integrated. See "Business--Growth
Strategy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

SEASONALITY AND WEATHER

The Company's business is highly seasonal. In 1996, approximately 63% of the
Company's net sales were generated in the second and third quarters of the
year, which represent the peak months of swimming pool use, installation,
remodeling and repair, and 134% of the Company's operating income was
generated in such period. Sales are substantially lower during the first and
fourth quarters of the year, when the Company typically incurs net losses. The
principal external factor affecting the Company's business is weather.
Unseasonably late warming trends can decrease the length of the pool season
and unseasonably cool weather or extraordinary rainfall during the peak season
can decrease swimming pool use, installation and maintenance, each of which
adversely affects the Company's sales and operating profit. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Seasonality and Quarterly Fluctuations."

COMPETITION

The Company faces intense competition from many regional and local
distributors, from several companies that distribute swimming pool supplies on
a national basis and, to a lesser extent, from mass market retailers and large
pool supply retailers. The Company believes that there are five swimming pool
supply distributors that compete with the Company on a national or regional
basis: Pool Water Products, Superior Pool Products Co. (a subsidiary of Olin
Corporation), Fort Wayne Pools, Hughes Supply and Benson Pump Co. Barriers to
entry in the swimming pool supply industry are relatively low. Certain of the
Company's competitors have substantially greater capital resources than the
Company.

The Company competes with other distributors for rights to distribute brand-
name products. In the event that a significant supplier of brand-name products
declined to sell or discontinued sales to the Company, the Company's business
could be materially and adversely affected. 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

424B1 11th Page of 77 TOC 1st Previous Next ↓Bottom Just 11th
selling prices to maintain or increase market share, and such measures could
adversely affect the Company's gross margins and operating results. See
"Business--Competition."

DEPENDENCE ON KEY PERSONNEL

The Company's success is largely dependent on the skills, experience and
efforts of its senior management and certain other key personnel. The loss of
services of one or more of the Company's key personnel could have a material
adverse effect upon the Company's business and development. See "Management"
and "Business--Competitive Strengths." The Company does not maintain key man
life insurance.

LEVERAGE

The Company is highly leveraged as a result of the debt incurred to finance
the Acquisitions, and in the event that the Company borrows additional amounts
for future acquisitions, the amount of such leverage will increase. As of
September 30, 1997, the Company's long-term debt was $43.6 million, or 49% of
the Company's total capitalization, and after giving effect to the Offering
and the application of the net proceeds to the Company therefrom to finance
the 1997 Acquisition and reduce indebtedness as if such application has
occurred on September 30, 1997, the Company's long-term debt would have been
$42.2 million, or 38.0% of the Company's total capitalization.

The degree to which the Company is leveraged could have important
consequences, including the following: (i) the Company's ability to obtain
additional financing for working capital, acquisitions or other purposes in
the future may be limited; (ii) a substantial portion of the Company's cash
flow from operations will be dedicated to the payment of the principal of and
interest on its indebtedness, thereby reducing funds available for operations;
(iii) certain of the Company's borrowings will be at variable rates of
interest, which could cause the Company to be vulnerable to increases in
interest rates; and (iv) the Company may be more vulnerable to economic
downturns and be limited in its ability to withstand competitive pressures.
The Company's ability to make scheduled payments of the principal of or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control. There can be
no assurance that the Company will be able to generate sufficient cash flow to
cover required interest and principal payments. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

INDUSTRY AND CYCLICAL FACTORS

Demand for swimming pool products is somewhat dependent upon overall
economic conditions. In economic downturns, new housing construction and
swimming pool construction generally decline. A downturn in the economy in one
or more markets served by the Company could have a material adverse effect on
the Company's results of operations. The financial results of the Company to
date are not necessarily indicative of activities or financial results to be
realized by the Company in the future.

The Company's principal chemical raw materials are granular chlorine
compounds, which are commodity materials. The prices of granular chlorine
compounds are a function of, among other things, manufacturing capacity and
demand. The Company has generally passed through chlorine price increases to
its customers. There can be no assurance that the price of granular chlorine
compounds will not increase in the future or that the Company will be able to
pass on any such increase to its customers. The Company purchases granular
chlorine compounds primarily from two suppliers. The Company believes that
reliable alternate sources of supply are available for all of its raw
materials and finished goods, including chlorine products. There can be no
assurance, however, that the Company will continue to have access to reliable
sources of supply.

424B1 12th Page of 77 TOC 1st Previous Next ↓Bottom Just 12th
ENVIRONMENTAL, HEALTH AND SAFETY REGULATION

The Company's business is subject to regulation under federal, state, and
local environmental and health and safety requirements, including the
Emergency Planning and Community Right-to-Know Act, the Hazardous Materials
Transportation Act and the Occupational Safety and Health Act. Most of these
requirements govern the packaging, labeling, handling, transportation, storage
and sale of pool chemicals by the Company. In addition, the algicides sold by
the Company are regulated as pesticides under the Federal Insecticide,
Fungicide and Rodenticide Act and state pesticide laws, which primarily relate
to labeling and annual registration. There can be no assurance that the
Company will not be determined to be out of compliance with, or liable under,
such requirements. Such an instance of noncompliance or liability could have a
material adverse effect on the Company's operating results. In addition, such
requirements are frequently changing, and, depending upon the nature of any
such change, could require material capital expenditures by the Company in the
future.

The demand for the pool chemicals sold by the Company may also be affected
by changes in consumer attitudes toward pool chemical products for
environmental or safety reasons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

FIRE, SAFETY AND CASUALTY ISSUES

The Company stores chemicals at its 74 service centers. Certain chemicals
the Company stores are combustible oxidizing compounds and the storage of such
chemicals is strictly regulated by local fire codes. A fire, explosion or
flood affecting one of the Company's facilities could give rise to liability
claims against the Company.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

There will be 7,740,060 shares of Common Stock outstanding upon completion
of the Offering. Of these shares, the 3,337,500 shares sold in the Company's
initial public offering and the 2,400,000 shares offered in the Offering will
be eligible for sale in the public market without restriction upon completion
of the Offering. Therefore, up to 2,002,560 shares of Common Stock may be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act") and, to the extent
they are restricted securities, they may not be sold without registration
under the Securities Act or pursuant to an exemption therefrom. As of the date
hereof, up to 2,002,560 shares of Common Stock may be sold pursuant to Rule
144. The Company and certain of its officers, directors and stockholders have
agreed, in connection with this Offering, not to sell or otherwise dispose of
any shares of Common Stock owned by them in the public market for a period of
90 days after the completion of the Offering without the prior consent of the
Underwriters. Commencing approximately 90 days after the completion of the
Offering, such shares will be eligible for sale in the public market. The
market price of the Company's Common Stock could be adversely affected by the
availability for sale of the restricted securities. See "Description of
Capital Stock" and "Shares Eligible for Future Sale."

In connection with the SCP Acquisition, the Company entered into a
Registration Agreement (the "Registration Agreement") which provides certain
demand and piggy-back registration rights on customary terms and conditions to
certain of the Company's stockholders. Up to approximately 1,750,000 shares of
Common Stock will be covered by such registration rights following the
Offering. Such registration rights are subject to certain notice requirements,
timing restrictions and volume limitations which may be imposed by the
Representatives. See "Shares Eligible for Future Sale--Registration
Agreement."

VOLATILITY OF MARKET PRICE FOR COMMON STOCK

From time to time after the Offering there may be significant volatility in
the market price of the Common Stock. Quarterly operating results of the
Company or of other companies participating in the swimming pool supply
industry, changes in conditions in the economy, the financial markets or the
swimming pool supply industry, natural disasters or other developments
affecting the Company or its competitors could cause the market price of the
Common Stock to fluctuate substantially. See "--Seasonality and Weather" and
"--Industry and Cyclical Factors."

424B1 13th Page of 77 TOC 1st Previous Next ↓Bottom Just 13th
USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting estimated
expenses of $450,000 will be approximately $22.6 million. Approximately $21.2
million of the net proceeds to the Company from the Offering will be used to
finance the 1997 Acquisition. See "The 1997 Acquisition." The remaining $1.4
million will be used to reduce indebtedness under the Company's senior bank
credit facility. If the 1997 Acquisition is not consummated, the entire amount
of the net proceeds to the Company will be used to reduce indebtedness under
the Company's senior bank credit facility and for general corporate purposes.

The Company entered into a Credit Agreement, dated as of December 31, 1993,
as amended from time to time, by and among SCP Supply, The First National Bank
of Chicago, as agent, and various lenders from time to time party thereto (the
"Senior Loan Facility"). 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 0.0% to 1.0% or (ii) LIBOR plus a margin ranging from 1.25% to
2.50%, in each case depending on the Company's leverage ratio.

The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders.

DIVIDEND POLICY

The Company currently intends to retain its earnings for use in its business
and therefore does not anticipate paying any cash dividends in the foreseeable
future. The Senior Loan Facility restricts the Company's ability to pay
dividends. Any future determination to pay cash dividends will be made by the
Board of Directors in light of the Company's earnings, financial position,
capital requirements, credit agreements and such other factors as the Board of
Directors deems relevant at such time. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Note 3 of the Notes to the Company's Consolidated
Financial Statements.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock began trading on the Nasdaq National Market under
the symbol "POOL" in October 1995. The following table sets forth, for the
periods indicated, the range of high and low bid prices for the Common Stock
as reported by the Nasdaq National Market, as adjusted to reflect a three-for-
two stock split in September 1997. These prices do not include retail mark-
ups, markdowns or commissions.

[Download Table]

HIGH LOW
------- -------

1995
Fourth Quarter......................................... $ 7.500 $ 6.500
1996
First Quarter.......................................... 10.167 6.667
Second Quarter......................................... 13.333 9.333
Third Quarter.......................................... 14.333 11.500
Fourth Quarter......................................... 13.833 12.000
1997
First Quarter.......................................... 16.000 13.172
Second Quarter......................................... 16.672 13.000
Third Quarter.......................................... 17.328 13.672
Fourth Quarter (through December 11, 1997)............. 24.000 16.500

On December 11, 1997, the last reported sale price for the Common Stock as
reported on the Nasdaq National Market was $18.00 per share. As of December
11, 1997, there were approximately 51 holders of record of Common Stock.

424B1 14th Page of 77 TOC 1st Previous Next ↓Bottom Just 14th
CAPITALIZATION

The following table sets forth the current indebtedness and capitalization
of the Company as of September 30, 1997 and as adjusted to reflect the sale by
the Company of 1,350,000 shares of Common Stock offered hereby and the
application of the net proceeds to the Company therefrom. See "Use of
Proceeds." The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the Company's Consolidated Financial Statements and related Notes thereto
included elsewhere in this Prospectus.

[Download Table]

SEPTEMBER 30, 1997
-------------------------------
AS ADJUSTED
FOR THE
AS ADJUSTED OFFERING
FOR THE AND 1997
ACTUAL OFFERING ACQUISITION
------- ----------- -----------
(IN THOUSANDS)

Current portion of long-term debt:
Term loan................................. $ 4,500 $ 4,500 $ 4,500
Promissory notes to BLN................... 1,859 1,859 1,859
8% Subordinated Notes..................... 884 884 884
------- ------- --------
Total current portion................... $ 7,243 $ 7,243 $ 7,243
======= ======= ========
Long-term debt:
Revolving loan............................ $25,500 $ 2,864 $ 24,064
Term loan................................. 18,000 18,000 18,000
Promissory notes to BLN................... -- -- --
8% Subordinated Notes..................... -- -- --
Convertible subordinated promissory notes. 96 96 96
------- ------- --------
Total long-term debt, less current
portion................................ 43,596 20,960 42,160
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 100,000 shares; no shares
issued and outstanding................... -- -- --
Common stock, $0.001 par value. Authorized
10,000,000 shares; 6,390,060 shares
issued and outstanding; 7,740,060 shares
issued and outstanding as adjusted for
the Offering............................. 6 8 8
Additional paid-in capital................ 29,705 52,339 52,339
Retained earnings......................... 16,481 16,481 16,481
------- ------- --------
Total stockholders' equity.............. 46,192 68,828 68,828
------- ------- --------
Total capitalization.................... $89,788 $89,788 $110,988
======= ======= ========

424B1 15th Page of 77 TOC 1st Previous Next ↓Bottom Just 15th
SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected financial data and operating
information of the Company. The selected consolidated statement of earnings
and balance sheet data set forth below as of December 31, 1994, 1995 and 1996
and for the years then ended are derived from the financial statements of the
Company which have been audited by Ernst & Young LLP, independent auditors.
The selected consolidated statement of earnings and balance sheet data as of
December 31, 1992 and 1993 and for the years then ended are derived from the
audited financial statements of the Predecessor. The selected consolidated
financial data as of September 30, 1996 an 1997 and for the nine month periods
then ended are derived from the unaudited financial statements of the Company
for such periods. In the opinion of management, the unaudited financial
statements of the Company reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations for these periods. Results for interim
periods are not necessarily indicative of results for a full year. The
Company's business is highly seasonal, with sales and net income generally
highest during the second and third quarters. Sales are substantially lower
during the first and fourth quarters, when the Company typically incurs net
losses. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Seasonality and Quarterly Fluctuations." This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements of the Company and related Notes thereto
included elsewhere in this Prospectus.

[Enlarge/Download Table]

STATEMENT OF INCOME
DATA:
Net sales.............. $54,101 $67,282 $101,977 $161,095 $235,844 $189,356 $286,847
Cost of sales.......... 40,749 50,861 77,488 123,974 183,814 146,510 223,268
------- ------- -------- -------- -------- -------- --------
Gross profit......... 13,352 16,421 24,489 37,121 52,030 42,846 63,579
Warehouse expense...... 1,808 2,107 3,610 6,957 9,611 7,114 11,067
Selling and
administrative
expenses.............. 7,180 8,618 13,518 19,907 31,139 20,394 33,416
Goodwill amortization.. -- -- 683 735 793 576 648
------- ------- -------- -------- -------- -------- --------
Operating income..... 4,364 5,696 6,678 9,522 10,487 14,762 18,448
Other income
(expense):
Interest expense..... (206) (100) (4,171) (5,113) (3,176) (2,052) (3,605)
Amortization expense. -- -- (498) (610) (698) (398) (534)
Management fees paid
to majority
stockholder......... -- -- (250) (208) -- -- --
Miscellaneous income. 81 121 118 228 823 577 629
------- ------- -------- -------- -------- -------- --------
(125) 21 (4,801) (5,703) (3,051) (1,873) (3,510)
------- ------- -------- -------- -------- -------- --------
Income before income
taxes and
extraordinary
loss(1)(2).......... 4,239 5,717 1,877 3,819 7,436 12,889 14,938
Provision for income
taxes(1).............. 85 -- 770 1,490 2,903 5,029 5,676
------- ------- -------- -------- -------- -------- --------
Income before
extraordinary
loss(1)............. $ 4,154 $ 5,717 $ 1,107 $ 2,329 $ 4,533 $ 7,860 $ 9,262
======= ======= ======== ======== ======== ======== ========
Net income(1).......... 4,154 5,717 1,107 1,579(2) 4,533 7,860 9,262
Income per share
before extraordinary
loss(1)............... .53 .78 .72 1.24 1.46
Net income per
share(1).............. .53 .53(2) .72 1.24 1.46
PRO FORMA STATEMENT OF
INCOME DATA(3):
Pro forma net income
before extraordinary
loss.................. $ 5,022 $ 10,867
Pro forma net income... 5,022 10,867
Pro forma net income
per share before
extraordinary loss.... .64 1.39
Pro forma net income
per share(4).......... .64 1.39
Fully diluted shares
outstanding........... 7,812 7,825
OPERATING DATA:
Number of service
centers:
Starting sites....... 14 17 18 26 44 44 69
Sites acquired..... 0 0 8 14 39 39 0
Sites opened....... 3 1 3 4 2 0 5
Sites consolidated. 0 0 3 0 16 16 0
Sites closed....... 0 0 0 0 0 0 0
Ending sites......... 17 18 26 44 69 67 74
Comparable service
center sales
increase(5)........... 14% 12% 15% 16% 19% 18% 11%
BALANCE SHEET DATA:
Working capital........ $ 4,729 $ 5,817 $ 8,493 $ 21,187 $ 34,602 $ 24,741 $ 52,203
Total assets........... 9,911 11,306 50,675 75,397 113,245 119,881 123,663
Total debt, including
current portion....... 172 124 38,025 26,476 51,277 58,986 50,839
Stockholders' equity... 5,623 6,767 3,037 32,277 36,810 40,137 46,192

424B1 16th Page of 77 TOC 1st Previous Next ↓Bottom Just 16th
--------
(1) The Predecessor elected to be treated as an S corporation for income tax
purposes, and accordingly did not pay federal and state (except in certain
states) income taxes during such period. The Company is, and has been
since its formation, a C corporation.
(2) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000 or $0.25 per share, in connection with the write-off of loan
financing fees and a prepayment premium associated with the application of
the proceeds of the Company's initial public offering to reduce
indebtedness.
(3) Gives effect (i) for the year ended December 31, 1996 to the acquisition
of certain assets of BLN, the sale of 1,350,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds therefrom, and the 1997 Acquisition as if each had occurred on
January 1, 1996 and (ii) for the nine months ended September 30, 1997 to
the sale of 1,350,000 shares of net proceeds therefrom and the 1997
Acquisition as if each had occurred on January 1, 1997. Such data have
been derived from the unaudited pro forma statements of income included
elsewhere in this Prospectus. See "Pro Forma Financial Data."
(4) Calculated using pro forma net income, adjusted for the assumed reduction
in interest expense, net of tax, related to the Company's Convertible
Subordinated Notes. See Note 5 of Notes to the Company's Consolidated
Financial Statements.
(5) Comparable service center sales have been calculated using sales of
service centers that were open for more than fifteen months. Comparable
service center sales for 1994 and 1996, respectively, exclude net sales at
the 3 service centers consolidated following the Aqua Fab Acquisition in
1994 and the 16 service centers consolidated following the BLN Acquisition
in 1996. The numbers of service centers used in calculating such figures
were 13, 15, 18, 25, 38, 38 and 26, for 1992, 1993, 1994, 1995, 1996 and
the nine months ended September 30, 1996 and 1997, respectively.

424B1 17th Page of 77 TOC 1st Previous Next ↓Bottom Just 17th
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The following sets forth unaudited pro forma condensed consolidated
financial information for the Company. The unaudited pro forma condensed
consolidated statement of income for the year ended December 31, 1996 gives
effect to (i) the acquisition of certain assets of BLN, (ii) the sale of
1,350,000 shares of Common Stock offered by the Company hereby and the
application of the estimated net proceeds therefrom, and (iii) the 1997
Acquisition as if each had occurred on January 1, 1996. The unaudited pro
forma condensed consolidated statement of income for the nine months ended
September 30, 1997 gives effect to (i) the sale of 1,350,000 shares of Common
Stock offered by the Company hereby and the application of the estimated net
proceeds therefrom and (ii) the 1997 Acquisition as if each had occurred on
January 1, 1997. The unaudited pro forma condensed consolidated balance sheet
as of September 30, 1997 has been prepared as if the Offering and the 1997
Acquisition had occurred on September 30, 1997. There can be no assurances
that the 1997 Acquisition will be consummated.

The unaudited consolidated pro forma condensed consolidated financial
information does not purport to present the actual financial position or
results of operations of the Company had the transactions and events assumed
therein in fact occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
The unaudited pro forma condensed consolidated financial information is based
on certain assumptions and adjustments described in the notes thereto and
should be read in conjunction therewith. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and with the
Consolidated Financial Statements and the Notes thereto of the Company
included elsewhere in this Prospectus.

424B1 18th Page of 77 TOC 1st Previous Next ↓Bottom Just 18th
SCP POOL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

[Enlarge/Download Table]

PRO FORMA AS
PRO FORMA ADJUSTED FOR
AS ADJUSTED ADJUSTMENTS THE OFFERING
HISTORICAL ADJUSTMENTS ADJUSTMENTS FOR THE FOR THE AND THE BLN
------------------ FOR THE BLN FOR OFFERING HISTORICAL 1997 AND 1997
COMPANY BLN ACQUISITION OFFERING AND BLN BICKNELL ACQUISITION ACQUISITIONS
-------- -------- ----------- ----------- ----------- ---------- ----------- ------------

Net sales............... $235,844 $128,858 $ -- $ -- $364,702 $58,744 $ -- $423,446
Cost of sales........... 183,814 106,500 -- (1) -- 290,314 44,518 -- (7) 334,832
-------- -------- ------- ------ -------- ------- ------- --------
Gross profit........... 52,030 22,358 -- -- 74,388 14,226 -- 88,614
Operating expenses...... 41,543 22,673 77(2) -- 64,293 11,430 131(8) 75,854
-------- -------- ------- ------ -------- ------- ------- --------
Operating income
(loss)................ 10,487 (315) (77) -- 10,095 2,796 (131) 12,760
Other income (expense)
Interest expense....... (3,176) (1,024) (1,433)(3) 1,981(9) (2,628) -- (1,838)(10) (4,466)
1,024(4)
Other income (expense). 125 (466) (65)(5) -- (406) 344 -- (62)
-------- -------- ------- ------ -------- ------- ------- --------
Income (loss) before
income taxes........... 7,436 (1,805) (551) 1,981 7,061 3,140 (1,969) 8,232
Provision (benefit) for
income taxes........... 2,903 (240) (681)(6) 773(6) 2,755 -- 455(6) 3,210
-------- -------- ------- ------ -------- ------- ------- --------
Net income (loss)....... $ 4,533 $ (1,565) $ 130 $1,208 $ 4,306 $ 3,140 $(2,424) $ 5,022
======== ======== ======= ====== ======== ======= ======= ========
Net income per share of
common stock:
Primary................ $ .72 $ .65
Fully diluted.......... $ .70 $ .64
Weighted average shares
outstanding:
Primary................ 6,334 7,684
Fully diluted.......... 6,462 7,812

See notes to Unaudited Pro Forma Condensed Consolidated Financial Data

424B1 19th Page of 77 TOC 1st Previous Next ↓Bottom Just 19th
SCP POOL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

[Enlarge/Download Table]

ADJUSTMENTS PRO FORMA AS
ADJUSTMENTS PRO FORMA AS FOR THE ADJUSTED FOR THE
HISTORICAL FOR ADJUSTED FOR HISTORICAL 1997 OFFERING AND THE
COMPANY OFFERING THE OFFERING BICKNELL ACQUISITION 1997 ACQUISITION
---------- ----------- ------------ ---------- ----------- ----------------

Net sales............... $286,847 $ -- $286,847 $51,197 $ -- $338,044
Cost of sales........... 223,268 -- 223,268 39,778 -- (7) 263,046
-------- ----- -------- ------- ------- --------
Gross profit........... 63,579 -- 63,579 11,419 -- 74,998
Operating expenses...... 45,131 -- 45,131 8,980 98 (8) 54,209
-------- ----- -------- ------- ------- --------
Operating income....... 18,448 -- 18,448 2,439 (98) 20,789
Other income (expense)..
Interest expense....... (3,605) 1,486(9) (2,119) -- (1,379)(10) (3,498)
Other income (expense). 95 95 142 -- 237
-------- ----- -------- ------- ------- --------
Income (loss) before
income taxes........... 14,938 1,486 16,424 2,581 (1,477) 17,528
Provision (benefit) for
income taxes........... 5,676 565(11) 6,241 -- 420 (11) 6,661
-------- ----- -------- ------- ------- --------
Net income (loss)....... $ 9,262 $ 921 $ 10,183 $ 2,581 $(1,897) $ 10,867
======== ===== ======== ======= ======= ========
Net income per share of
common stock:
Primary................ $ 1.46 $ 1.41
Fully diluted.......... $ 1.43 $ 1.39
Weighted average shares
outstanding:
Primary................ 6,358 7,708
Fully diluted.......... 6,475 7,825

SCP POOL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)

[Enlarge/Download Table]

ADJUSTMENTS PRO FORMA AS
PRO FORMA AS FOR THE ADJUSTED FOR THE
HISTORICAL ADJUSTMENTS ADJUSTED FOR 1997 OFFERING AND THE
COMPANY FOR OFFERING THE OFFERING ACQUISITION 1997 ACQUISITION
---------- ------------ ------------ ----------- ----------------

Receivables............. $ 36,889 $ -- $ 36,889 $ 8,197 (13) $ 45,086
Inventory............... 43,079 -- 43,079 10,313 (13) 53,392
Other current assets.... 3,766 -- 3,766 -- 3,766
-------- -------- -------- ------- --------
Current assets.......... 83,734 -- 83,734 18,510 102,244
Property and equipment.. 4,746 -- 4,746 -- 4,746
Goodwill................ 32,844 -- 32,844 5,250 (13) 38,094
Other assets............ 2,339 -- 2,339 -- 2,339
-------- -------- -------- ------- --------
$123,663 $ -- $123,663 $23,760 $147,423
======== ======== ======== ======= ========
Current liabilities..... $ 31,531 $ -- $ 31,531 $ 2,560 (13) $ 34,091
Deferred income taxes... 2,344 -- 2,344 -- 2,344
Long-term debt.......... 43,596 (22,636)(12) 20,960 21,200 (13) 42,160
Stockholders equity..... 46,192 22,636 (12) 68,828 -- 68,828
-------- -------- -------- ------- --------
$123,663 $ -- $123,663 $23,760 $147,423
======== ======== ======== ======= ========

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data

424B1 20th Page of 77 TOC 1st Previous Next ↓Bottom Just 20th
SCP POOL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

(1) Does not reflect the anticipated savings in purchasing costs at BLN during
the period 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. There can be no assurance that the
Company will be able to realize such anticipated savings.
(2) Reflects additional amortization of $77,000 related to approximately $4.7
million of goodwill related to the BLN Acquisition, assuming a useful life
of 40 years, offset by the elimination of the amortization of goodwill
related to acquisitions made by BLN.
(3) Reflects additional interest expense resulting from the additional
indebtedness incurred in connection with the BLN Acquisition based on
interest at 6% per annum.
(4) Reflects the elimination of interest expense incurred by BLN on
indebtedness to its Parent, which is not being assumed in the acquisition.
(5) Reflects additional amortization of $65,000 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.
(6) Adjusts the provision for income taxes of the pro forma consolidated group
to the Company's historical effective tax rate of 39% during the period
presented.
(7) Does not reflect the anticipated savings in purchasing costs at Bicknell
during the periods presented. Based upon a review of the prices paid by
Bicknell for its products, the Company expects that because of its size
and purchasing power it will be able to reduce the cost of Bicknell'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. There can be no
assurance that the Company will be able to realize such anticipated
savings.
(8) Reflects additional amortization related to approximately $5.3 million of
goodwill related to the 1997 Acquisition, assuming a useful life of 40
years.
(9) Reflects reduction in interest expense resulting from the application of
the net proceeds of the Offering to reduce indebtedness of the Company.
See "Use of Proceeds."
(10) Reflects the additional interest expense resulting from the additional
indebtedness incurred in connection with the 1997 Acquisition based on
interest at 8.75% per annum.
(11) Adjusts the provision for income taxes of the pro forma consolidated
group to the Company's historical effective tax rate of 38% during the
period presented.
(12) Reflects the issuance of 1,350,000 Shares of Common Stock and the
application of the net proceeds of the Offering as discussed in "Use of
Proceeds."
(13) Reflects the effects of the allocation of the purchase price of the 1997
Acquisition to the assets acquired and liabilities assumed and the
related funding for the 1997 Acquisition.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read
in conjunction with, the Company's Consolidated Financial Statements and
related Notes thereto included elsewhere in this Prospectus.

GENERAL

SCP Pool 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 through strategic
acquisitions, by opening new service centers and by increasing sales to new
and existing customers at existing service centers. From January 1, 1990 to
September 30, 1997, the Company expanded from 8 service centers in 6 states to
74 service centers in 24 states, primarily through acquisitions. See "The
Acquisitions."

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. Losses from
customer receivables have historically been less than 0.25%.

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, when the Company may incur net losses.

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 the cost of
products purchased from manufacturers and sold during the year, 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.

SCP Pool 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 connection with the initial public offering, 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 have
been paid with respect thereto after such time.

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ACQUISITION ACCOUNTING AND BASIS OF COMPARISONS

Accounting for the Acquisitions has resulted in material differences in the
basis of accounting between the Predecessor and the Company. The Company's
results of operations since December 31, 1993 have been affected by an
increase in interest expense and amortization of goodwill and other intangible
assets. The increase in interest expense is primarily a result of the
additional indebtedness incurred by the Company in connection with the
Acquisitions and the capitalization of certain related financing costs. The
amortization of goodwill and other intangible assets results primarily from
the purchase accounting method used in connection with the Acquisitions and
the associated non-competition agreements.

RESULTS OF OPERATIONS

The following discussions compare the results of operations of the Company
for the nine months ended September 30, 1997 to the results of operations of
the Company for the nine months ended September 30, 1996, the results of
operations of the Company for the years ended December 31, 1994, 1995 and
1996.

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 the period presented.

[Download Table]

NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER
DECEMBER 31, 30,
------------------- ------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----

Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 76.0 77.0 77.9 77.4 77.8
----- ----- ----- ----- -----
Gross profit.............................. 24.0 23.0 22.1 22.6 22.2
Warehouse expense........................... 3.5 4.3 4.1 3.7 3.9
Selling and administrative expenses......... 13.3 12.4 13.2 10.8 11.7
Goodwill amortization....................... 0.7 0.4 0.3 0.3 0.2
----- ----- ----- ----- -----
Operating income.......................... 6.5 5.9 4.5 7.8 6.4
Interest expense............................ (4.1) (3.2) (1.3) (1.1) (1.2)
Amortization expense........................ (0.5) (0.4) (0.3) (0.2) (0.2)
Other income (expense)...................... (0.1) -- 0.3 0.3 0.2
----- ----- ----- ----- -----
Income before income taxes and extraordinary
loss....................................... 1.8% 2.3% 3.2% 6.8% 5.2%
===== ===== ===== ===== =====
Number of service centers:
Beginning of period....................... 18 26 44 44 69
Acquisitions.............................. 8 14 39 39 0
Openings.................................. 3 4 2 0 5
Consolidations............................ 3 0 16 16 0
Closures.................................. 0 0 0 0 0
----- ----- ----- ----- -----
Balance at end of period.................. 26 44 69 67 74
===== ===== ===== ===== =====

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996

Net sales increased by $97.4 million, or 51.5%, to $286.8 million in the
nine months ended September 30, 1997 from $189.4 million in the comparable
1996 period. This increase was primarily due to sales at service centers
acquired from BLN, sales at newly opened service centers and increased sales
at existing service centers. Service centers acquired from BLN in September
1996 contributed $84.1 million to the increase, sales at newly opened service
centers accounted for $10.1 million of the total increase and an increase of
approximately 10.6% in sales at service centers open at least 15 months
contributed $8.6 million to the increase. These increases were partially
offset by the loss of revenue from Alliance Packaging, which was sold in
October 1996.

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Gross profit increased by $20.8 million, or 48.4%, to $63.6 million in the
nine months ended September 30, 1997 from $42.8 million in the comparable 1996
period. Gross profit as a percentage of net sales decreased 0.4% to 22.2% in
the 1997 period compared to 22.6% in the 1996 period primarily due to the
increase in the number of service centers in the more competitive markets of
California and Florida. Service centers in California and Florida generated
gross profit margins of 19.3% and 18.3%, respectively, in the nine months
ended September 30, 1997, compared to 18.5% and 17.2% in the nine months ended
September 30, 1996.

Operating expenses increased by $17.0 million, or 60.7%, to $45.1 million in
the nine months ended September 30, 1997 from $28.1 million in the comparable
1996 period. This increase is primarily reflective of salaries, occupancy
expense and other costs associated with new service centers, and, to a lesser
extent, payroll and other operating costs required to support the increased
sales volume at existing service centers. Because of unseasonably cool
temperatures and continuing wet and rainy weather in much of the United
States, primarily during the three-month period ended June 30, 1997, the
increases in revenue over the comparable 1996 period were not proportionate
with these increased costs. Therefore, operating expenses as a percentage of
sales increased to 15.7% in the 1997 period compared to 14.8% in the 1996
period.

Interest and other expenses increased to $3.5 million in the nine months
ended September 30, 1997 from $1.9 million in the comparable 1996 period. The
increase was primarily attributable to the increase in the Company's debt as a
result of the acquisition of BLN in September 1996 and to the financing of
seasonal inventory levels for a larger number of branches than in the
comparable 1996 period.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net sales increased by $74.7 million, or 46.4%, to $235.8 million in 1996
from $161.1 million in 1995. An increase in sales at service centers opened at
least 15 months of approximately 19.0% accounted for $26.8 million
of the increase. Service centers acquired from BLN accounted for $21.2 million
of the increase, with the remaining increase resulting from sales at service
centers acquired in 1995.

Gross profit increased by $14.9 million, or 40.2%, to $52.0 million in 1996
from $37.1 million in 1995. Gross profit as a percentage of net sales,
however, declined 0.9% to 22.1% in 1996 from 23.0% in 1995. A majority of the
decline in gross profit margin was attributed to lower margins realized at the
service centers in California and Florida due to the more competitive nature
of those markets. The Company significantly expanded its presence in Florida
through the BLN Acquisition. Service centers in California and Florida
generated gross profit margins of 17.2% and 17.6%, respectively, compared to
24.3% for service centers outside these areas. The number of service centers
located in California and Florida increased from 2 on January 1, 1995 to 25 on
December 31, 1996.

Operating expenses increased by $13.9 million, or 50.5%, to $41.5 million in
1996 from $27.6 million in 1995. This increase is reflective of (i) salaries,
occupancy expense and other costs associated with the acquired service
centers, and (ii) payroll and other operating costs required to support the
increased sales volume at existing service centers. Operating expenses as a
percentage of sales increased to 17.6% in 1996 compared to 17.1% in 1995. This
increase was primarily attributable to an increase in bonuses as a percentage
of sales.

Interest and other expenses decreased to $3.1 million in 1996 from $5.7
million in 1995. 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, which resulted in a decrease in interest expense in
1996.

The provision for income taxes was $2.9 million in 1996 compared to $1.5
million in 1995. The increase is consistent with the increase in income before
income taxes.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net sales increased by $59.1 million, or 57.9%, to $161.1 million in 1995
from $102.0 million in 1994. An increase in sales at service centers opened at
least 15 months of approximately 15.7% accounted for $14.9 million of the
increase. Service centers acquired in connection with the 1995 acquisitions
accounted for $31.0 million of

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the increase in net sales, and an increase in sales at new service centers
accounted for $9.4 million of the total increase.

Gross profit increased by $12.6 million, or 51.4%, to $37.1 million in 1995
from $24.5 million in 1994. Gross profit as a percentage of net sales,
however, declined 1.0% to 23.0% in the 1995 period from 24.0% in the 1994
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, all of which were located in California, which generated gross
profit margins of approximately 19.1% versus 23.8% for all other service
centers. The Orcal Acquisition was completed in February 1995, which made it
difficult for the Company to fully implement its information systems and train
existing employees in time to meet the peak swimming pool supply selling
season. In addition, the Orcal service centers were stocked with inventory
purchased under the prior owner's less attractive purchasing terms. As a
result, the Company was unable to realize its purchasing economies. Increased
competition in certain geographic markets and higher product costs,
particularly for chemicals and packaged pools, also negatively impacted the
gross profit margin during the 1995 period.

Operating expenses increased by $9.8 million, or 55.1%, to $27.6 million in
1995 from $17.8 million in 1994, but declined as a percentage of sales to
17.1% in 1995 from 17.5% in 1994. The dollar 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 connection with the Orcal Acquisition. The decrease as a
percentage of sales was primarily attributable to the operating leverage
achieved by spreading the Company's fixed expenses over a larger revenue base.

Interest and other expenses increased to $5.7 million in 1995 from $4.8
million in 1994. The increase was primarily attributable to higher interest
rates and to increased interest expense related to the debt incurred in
connection with the various acquisitions.

The provision for income taxes was $1.5 million in 1995 and $770,000 in
1994. The increase is consistent with the increase in income before income
taxes.

SEASONALITY AND QUARTERLY FLUCTUATIONS

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.

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SCP Pool 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 service centers
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,
1996 and the first three quarters of 1997 which, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments) considered
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.

[Enlarge/Download Table]

THE COMPANY
--------------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------- ---------------------------------- ------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST 2ND 3RD
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)

Net sales............... $25,846 $66,667 $47,229 $21,353 $41,145 $85,867 $62,344 $46,488 $63,565 $124,790 $98,492
Gross profit............ 5,954 14,799 10,399 5,969 9,273 20,042 13,531 9,184 13,960 28,159 21,460
Operating income (loss). 653 7,447 3,236 (1,814) 743 9,843 4,176 (4,275) 104 11,496 6,847
Net sales as a
percentage of annual
net sales.............. 16% 42% 29% 13% 18% 36% 26% 20% N/A N/A N/A
Gross profit as a
percentage of annual
gross profit........... 16% 40% 28% 16% 18% 38% 26% 18% N/A N/A N/A
Operating income as a
percentage of annual
operating income....... 7% 78% 34% (19%) 7% 94% 40% (41%) N/A N/A N/A

LIQUIDITY AND CAPITAL RESOURCES

Currently, the Company's primary sources of working capital are cash flow
from operations and borrowings under the Senior Loan Facility. As of September
30, 1997, the Senior Loan Facility consisted of a term loan and a revolving
line of credit. The Company's borrowings under its credit facility, together
with cash flow from operations and seller financing have historically been
sufficient to support the Company's growth and to finance acquisitions.
Considering the Company's borrowing base (i) as of September 30, 1997, and (ii)
after giving effect to the Offering and the 1997 Acquisition as if they had
occurred on September 30, 1997, the Company would have approximately $15.3
million and $27.9 million, respectively, available for borrowing under 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 0.0% to 1.0%,
or (ii) LIBOR plus a margin ranging from 1.25% to 2.50%, in each case depending
on the Company's leverage ratio. Substantially all of the assets of the Company
(other than inventory acquired from BLN, which secures the Company's
obligations to BLN), including the capital stock of SCP Supply, 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 September 30, 1997, the Company was in compliance with all such covenants
and financial ratio requirements. The Senior Loan Facility expires on September
26, 2002. The Company is in negotiations to amend and restate the Senior Loan
Facility to increase the maximum amount available from $80.0 million to $85.0
million (or, if the Offering is not consummated, $100.0 million). There can be
no assurances that such amendment will be completed.

In connection with the BLN Acquisition, the seller of BLN provided $31.8
million of financing to the Company. This financing, which bears interest at
6%, is due in varying monthly installments through September 1998.
Approximately $30.0 million of this financing was repaid through September 30,
1997, of which $5.4 million was paid from proceeds received in connection with
the Alliance Sale.

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During the nine months ended September 30, 1997, the Company borrowed $59.0
million to meet seasonal working capital requirements and made payments of
$45.5 million under its revolving credit facility. In September 1996, the
Company converted approximately $15.6 million due under its revolving credit
facility to the term loan portion of the Senior Loan Facility.

Excluding acquisitions, the Company made capital expenditures of $732,000,
$866,000 and $788,000 in the nine months ended September 30, 1997, and the
years ended December 31, 1995 and 1996, respectively.

The Company believes that its cash flow from operations and the credit
available under its line of credit as proposed to be amended will be
sufficient to finance its operations for at least the next twelve months.

The Company intends to continue to explore acquisition opportunities. To
date, the Company's acquisitions have been financed primarily by borrowings
under the Senior Loan Facility and seller notes. The Company expects to use
the net proceeds to it from the Offering to finance the 1997 Acquisition and
to reduce indebtedness under the Senior Loan Facility or, if the 1997
Acquisition is not completed, to reduce such indebtedness and for general
corporate purposes. 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). There can be no assurance that additional capital, if
and when required, will be available on terms acceptable to the Company, or at
all.

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

Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and under the captions "Prospectus
Summary," "Risk Factors," "Business" and elsewhere in this Prospectus, such as
statements regarding the Company's strategies, plans, objectives, expectations
and intentions, 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.

424B1 27th Page of 77 TOC 1st Previous Next ↓Bottom Just 27th
BUSINESS

GENERAL

SCP Pool is the nation's leading independent distributor of swimming pool
supplies and related products. The Company distributes a broad range of
products to three types of customers: (i) swimming pool remodelers and
builders, which refurbish, retrofit and overhaul existing pools and install
new pools; (ii) independent retail stores, which sell swimming pool products
to consumers; and (iii) swimming pool repair and service companies, which
perform periodic maintenance and repair services, primarily for residential
and small commercial swimming pools. The Company distributes more than 34,000
national brand and private label products to approximately 20,000 customers.
These products include non-discretionary pool maintenance products, such as
chemicals and replacement parts, packaged pools (kits to build swimming pools
which include walls, liner, bracing and other materials) and pool equipment,
such as cleaners, filters, heaters, pumps and lights.

The Company is a successor to a business founded in 1980 by the Company's
current President and Chief Executive Officer, Frank J. St. Romain. The
Company and its wholly owned subsidiary, SCP Supply, were organized by CHS and
members of the management of the Predecessor for the purpose of acquiring
substantially all of the assets and business of the Predecessor. CHS had no
relationship with the Predecessor prior to such acquisition. On December 31,
1993, SCP Supply acquired substantially all of the assets and business of the
Predecessor in the SCP Acquisition.

SCP Pool has managed its growth through a combination of service center
acquisitions, service center additions in new and existing markets, and
continued growth at existing service centers. From January 1, 1990 to
September 30, 1997, the Company grew from 8 service centers in 6 states to 74
service centers in 24 states. Forty-three of the sixty-six service centers
added from January 1, 1990 to September 30, 1997 were added through
acquisitions, making SCP the leader in consolidating the pool supply industry.
The Company's most significant acquisition to date occurred in September 1996,
when the Company acquired certain assets (primarily inventory, property and
equipment) of BLN, a wholesaler of swimming pool supplies with 39 service
centers in 12 states for an aggregate purchase price of approximately $34.2
million. In November 1997, the Company entered into a purchase agreement to
acquire substantially all of the assets of Bicknell, which distributes
swimming pool supplies and related products through its eleven service centers
in six northeastern states, for a purchase price of approximately $21.0
million. Following the 1997 Acquisition, which the Company expects to be
completed in late December 1997, the Company will have 85 service centers in
30 states. There can be no assurances, however, that the 1997 Acquisition will
be completed. Twenty-three of the sixty-six service centers added since
January 1, 1990 were new locations opened by the Company. As a result of
acquisitions and service center openings, the Company has significantly
increased its geographic scope and diversity.

The Company continues to pursue an aggressive growth strategy. Over the past
seven years, the Company's net sales have grown from $32.1 million in 1990 to
$235.8 million in 1996 and $286.8 million for the nine months ended September
30, 1997. Operating income has increased from $2.1 million in 1990 to $10.5
million in 1996 and $18.4 million for the nine months ended September 30,
1997. The Company expects to continue its growth strategy by making strategic
acquisitions, opening service centers in new locations, and increasing sales
at existing service centers. SCP Pool has completed seven acquisitions since
January 1994 and expects to complete the 1997 Acquisition in late December
1997, although there can be no assurances the 1997 Acquisition will occur at
that time or at all. Management believes that the 1997 Acquisition, if and
when completed, will further establish the Company as the leading national
independent distributor of swimming pool products and supplies, and increase
the geographic scope and diversity of the Company's business. SCP Pool has
complemented these acquisitions with increasing sales at existing service
centers. Comparable service center sales increased 12%, 15%, 16%, 19% and 11%
in 1993, 1994, 1995, 1996 and the nine months ended September 30, 1997,
respectively.

INDUSTRY OVERVIEW

The swimming pool supply industry can be divided into four categories by
pool type: residential in-ground swimming pools, above-ground swimming pools,
commercial swimming pools and spas or hot tubs. The

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Company's strategy has been to focus on distributing products to the
residential in-ground and above-ground and small commercial pool markets.

Management believes approximately 60% of total pool industry revenues are
based upon numerous ongoing maintenance and repair requirements associated
with pool ownership. The maintenance of proper chemical balance and the
related maintenance and repair of swimming pool equipment, such as pumps,
heaters, filters and cleaners, create a non-discretionary demand for pool
chemicals and other swimming pool supplies and services. The balance of pool
supply industry revenues is derived from sales of the parts and equipment
required for pool remodeling, overhaul and repair and from the sales and
installation of new swimming pools. Although the installation of new pools
and, to a lesser extent, the remodeling and overhaul of existing pools are
affected by general economic conditions, particularly new housing
construction, management believes that most continuing repair requirements are
not as sensitive to these changes in economic conditions.

The pool supply distribution industry is fragmented, with the majority of
sales spread among over 170 companies. The six largest distributors operate on
a national or regional basis, while the remaining distributors tend to be
family owned operations with one to three distribution sites, typically
serving a highly localized customer base with a limited geographic focus.

During the last ten years, the industry has experienced consolidation as
certain larger distributors have acquired smaller local and regional
distributors and have used their superior competitive position to increase
market share. Such consolidation has permitted the larger pool supply
distributors to benefit from various economies of scale resulting from
increased net purchasing power and the elimination of redundant management and
other overhead expenses. Larger distributors also have been able to take
advantage of more sophisticated management techniques and the development of
management information systems specifically designed to enhance customer
service and increase operating efficiency. Management anticipates further
consolidation in the industry as local and regional distributors confront
competitive challenges from larger distributors.

The Company believes that the swimming pool industry as a whole will benefit
from certain forecasted demographic and economic trends, which include the
increasing affluence of the "baby boomer" segment of the population and an
overall increase in spending on home-related products by these consumers.

COMPETITIVE STRENGTHS

SCP Pool believes that the following characteristics enable it to compete
effectively.

Leading Market Position. The Company derives significant benefits from its
position as the nation's leading distributor of swimming pool supplies. The
Company believes that its market position provides it with significant name
recognition, volume purchasing discounts, access to distribution rights for
name-brand products and other operating efficiencies. The Company is an
attractive distribution channel to manufacturers and suppliers because it can
provide them broad product exposure through its 74 geographically dispersed
service centers, making it a logical choice for new product introductions.
Since the Company's initial public offering in October 1995, SCP Pool has
increased the number of products it sells from over 25,000 to over 34,000 and
has increased the number of customers from over 10,000 to approximately
20,000. The size and diversity of its customer base reduce the Company's
dependence on any individual customer or geographic market for growth and
profitability. In addition, the Company's geographic diversification mitigates
the effects of regional economic changes and adverse regional weather
patterns.

Experienced Senior Management and Service Center Managers. The Company
believes that its key personnel, including its service center managers, are
among the most experienced in the swimming pool supply industry. The Company's
executive officers have an average of 28 years of pool industry experience,
and the Company's service center managers have an average of 16 years of
experience in the pool industry. The Company believes that the expertise of
its senior management has contributed significantly to the Company's

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growth, both through strategic acquisitions and expansion into new markets. In
addition, the sales and customer service experience of the Company's service
center managers has enabled it to compete successfully in local and regional
markets.

Experience in Completing and Integrating Acquisitions. SCP Pool has
completed seven acquisitions since 1994, and 43 of the Company's 74 service
centers were added pursuant to such acquisitions. Management believes that the
Company's experience in integrating the acquired businesses provides a
competitive advantage in the evaluation and integration of future
acquisitions.

Entrepreneurial Business Environment. Since the Company was founded with a
single service center in 1980, it has maintained an entrepreneurial business
environment, in which each service center has an on-site manager who is
responsible for the day-to-day operations of his service center, including
sales, inventory management, customer service, collections and management of a
staff of 3 to 26 employees. Service center managers also have sales
responsibility within their geographic areas. Service center managers
participate in an incentive program through which they may earn a bonus of up
to 50% to 100% of his base salary, based upon the size, profitability and
return on assets of the service center. As a result, service centers are
operated in an entrepreneurial style yet have access to the Company's volume
purchasing discounts and operating efficiencies and are linked to the
Company's advanced information systems. Management believes that the Company's
entrepreneurial environment contributes to the Company's high levels of
customer service, with service center managers responsible for customer
relationships and branch operations. The Company believes that its
entrepreneurial business environment has (i) contributed to growth in sales
and profitability, (ii) enabled the Company to be highly responsive to
customer requirements and preferences, actions by competitors and changes in
local market conditions and (iii) assisted the Company's efforts to attract
and retain employees.

Advanced Information Systems. The Company has made a significant investment
in its information systems, which it believes are among the most advanced in
the swimming pool supply industry. The Company recently upgraded those systems
to achieve additional cost reductions, operating efficiencies, improved
inventory management and a higher level of customer service and to provide
capacity for future growth. The ordering, shipment, storage and delivery of
the Company's products are managed through a centralized information system
that allows the Company's service centers and corporate headquarters to access
information on a "real time" basis regarding inventory, product availability,
customers, sales, financial reports and other significant operating data and
permit management to monitor closely the sales and profitability of each
service center. Moreover, the Company's information systems ensure consistency
of product, sales and financial information on a timely basis.

Superior Customer Service. The Company believes its high level of customer
service and support differentiates it from its competitors. The Company
provides targeted marketing support to its customers, including supplying
retailers and pool builders with a 728 page pool reference catalog featuring
the products distributed by the Company, which management believes is the most
comprehensive in the industry. In addition, the Company grants exclusive
territorial rights to certain large retailers and pool builders. The Company
encourages its customers to use it as a resource for questions regarding
equipment, replacement parts and supplies. The Company employs two dedicated
product specialists to assist service center managers on technical matters and
to assist in making sales to customers. While a significant portion of its
business is walk-in, the majority of the Company's service centers offer local
delivery. Each of the Company's service centers offers a broad range of
products and can source out-of-stock items from other service centers or
directly from manufacturers. The Company believes that its entrepreneurial
business environment, experienced service center managers and advanced
information systems contribute to its high levels of customer service.

GROWTH STRATEGY

SCP Pool believes that its competitive strengths, coupled with a focus on
the following growth strategies, enhance its ability to expand its sales to
new and existing customers.

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Identify and Complete Strategic Acquisitions. The Company intends to
continue to make strategic acquisitions to further penetrate existing markets
and to expand into new geographic markets. The Company continuously seeks out
appropriate acquisition candidates and is frequently engaged in discussions
regarding potential acquisitions. The Company completed one acquisition in
1994, five acquisitions in 1995 and one acquisition in 1996. On November 13,
1997, the Company entered into an agreement to purchase substantially all of
the assets of Bicknell. See "The 1997 Acquisition." The Company believes that
numerous other acquisition opportunities exist due to the presence in the
market of small, privately owned, local or regional pool supply distributors.
The Company believes that it can reduce the operating expenses and enhance the
sales and profit margins of acquired businesses by providing such businesses
with access to its information systems, purchasing power and broad product
line. The Company further believes that its entrepreneurial business
environment and advanced information systems will facilitate the successful
integration of acquired operations.

Open Service Centers in New and Existing Locations. The Company intends to
open service centers in locations which are not currently served by, or are
underserved by, the Company. In each of the last five years, the Company has
opened between one and five service centers in new locations. Prior to opening
a new service center, the Company analyzes the size of and existing
competition in the proposed market and recruits an experienced manager with
the necessary entrepreneurial skills and knowledge of the proposed market. The
Company intends to continue to expand in smaller markets, and to fill in
existing markets. Each new service center requires approximately $75,000 of
capital expenditures for leasehold improvements and office and warehouse
equipment and a minimum of $250,000 of inventory. The Company also intends to
open satellite service centers that are smaller than the Company's typical
service center, stock fewer inventory items and have fewer employees and a
lower cost structure, yet have access to the Company's full inventory through
its information systems. The Company continually evaluates new locations and
believes that there will continue to be opportunities to expand by opening new
service centers.

Increase Sales at Existing Service Centers. The Company intends to
capitalize on opportunities to expand sales at its existing service centers.
Comparable service center sales increased 12%, 15%, 16%, 19% and 11% in 1993,
1994, 1995, 1996 and the nine months ended September 30, 1997, respectively.
The Company believes that it can increase its market share by expanding its
private label marketing programs for chemicals and in-ground vinyl pools with
swimming pool remodelers and builders and repair and service companies and by
further developing its joint marketing programs with its customers. The
Company also plans to increase the breadth of its replacement parts product
offering and periodically to add to its outside sales force. The Company
believes that cost pressures will continue to create incentives for its
customers to deal increasingly with fewer distributors that, like the Company,
can provide a broad mix of products at competitive prices.

THE 1997 ACQUISITION

In November 1997, the Company entered into a purchase agreement to purchase
substantially all of the assets of Bicknell for an aggregate purchase price of
$21.0 million, subject to a purchase price adjustment based on the working
capital of Bicknell at the time of the closing. Bicknell distributes swimming
pool supplies and related products through its eleven service centers in six
northeastern states. In 1996, Bicknell had net sales of $58.7 million. The
Company expects the 1997 Acquisition to be consummated in late December 1997,
but no assurances can be made that the 1997 Acquisition will occur at that
time or at all.

In connection with the 1997 Acquisition, the Company will enter into a
supply agreement with Pacific, the sole stockholder of Bicknell. Under the
terms of the Supply Agreement, Pacific will supply the Company with polymer
panels, braces, steps, liners and other products used in the construction of
in-ground pools. The Supply Agreement will have a term of eight years, subject
to renewal options.

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PRODUCTS

The Company offers a comprehensive selection of more than 34,000 national
brand and private label products to approximately 20,000 customers. These
products include non-discretionary pool maintenance products, such as
chemicals and replacement parts, packaged pools (kits to build swimming pools
which include walls, liner, bracing, and other materials) and pool equipment,
such as cleaners, filters, heaters, pumps and lights. The Company's service
centers offer a broad range of products, and each service center can access
out-of-stock items from other service centers.

National Brands. The Company supplies a substantial majority of the national
brand products offered by swimming pool equipment manufacturers. Sales of
national brands accounted for a majority of the Company's 1996 net sales.
Management believes that national brands are attractive to many of the
Company's customers who seek consistent product quality throughout their
operations, particularly for heaters, pumps, filters and cleaners. The Company
believes that it has good relationships with all of its major suppliers of
national brands, many of which provide important sales and marketing support
to the Company.

Private Brands. Approximately one-half of the Company's chemical products,
which include chlorine, algicides, water clarifiers and Ph adjusters, are sold
under the Company's private brands. These brands include Regal(R) for small
retail and professional customers, Clear Choice(R) for larger retail customers
and EZ-Clor(R) for pool remodelers and builders, pool service and repair
companies and larger retail customers. Most of these chemical products are
converted from bulk to retail form by Bio-Lab and sold to the Company under
the Bio-Lab Supply Agreements. See "--Purchasing and Suppliers." The Company
sells packaged in-ground vinyl pools (which consist of prefabricated in-ground
pool structures with a vinyl liner) under the Company's Weatherking(R),
Heldor(R), Signature Pools(TM) and Regatta Pools(TM) brands. The Company also
sells a private label line of above-ground pool kits under the name Dream
Line(TM) and pool covers under the Cool Covers(TM) brand name.

MARKETING

The Company's principal marketing activities are conducted by a dedicated
sales force of 58 employees and by its service center managers. The Company's
dedicated sales force has responsibility for developing and maintaining
customer relationships. These salespersons and service center managers make
calls on customers, distribute the Company's product catalog and parts manual
and provide promotional literature in the display areas of the service center.
The Company's commission program is designed to reward account profitability
and promote sales growth. Under the Company's incentive program, salespersons
may earn bonuses of up to 50% of their annual salaries, based on attainment of
certain sales and profitability targets.

CUSTOMERS

The Company sells its products to approximately 20,000 customers, primarily
swimming pool remodelers and builders, retail swimming pool stores and
swimming pool repair and service companies. No customer accounted for more
than 3% of the Company's sales during 1996. The Company estimates that in
1996, sales to swimming pool remodelers and builders accounted for
approximately 40% of its sales, while sales to retail pool stores accounted
for approximately 30% of sales, and sales to repair and service companies
accounted for the remainder. Swimming pool remodelers and builders purchase
products to refurbish, retrofit or overhaul existing pools and to build new
pools. Customers that operate retail pool stores tend to have a single outlet
and typically purchase a relatively broad range of products from the Company,
including chemicals, maintenance supplies, repair parts and other related
products. Repair and service companies tend to provide on-site repair and
cleaning services for residential pools. These customers tend to be very small
and typically purchase chemical products, maintenance supplies and repair
parts. A substantial portion of the Company's sales are derived from "walk-in"
business, in which a customer selects the products at the service center and
transports the purchased products from the service center immediately
following the purchase. The Company also offers local delivery service in many
of the markets it serves.

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The Company encourages its customers to use it as a resource for questions
regarding equipment, replacement parts and supplies. Each of the Company's
service centers typically sponsors local events to help build customer support
and loyalty. The Company also participates in industry trade shows and
conferences, advertises in trade journals and periodically distributes
newsletters and other promotional materials to its customers.

The Company maintains a credit policy for qualified customers. Credit
policies and terms are established at the corporate level, and each service
center manager is responsible for overseeing and collecting from local
accounts. During each of the last three years, the Company's bad debt expense
was less than 0.25% of net sales.

PURCHASING AND SUPPLIERS

The Company believes it has a good relationship with its suppliers and, as a
result, is offered volume discounts, rebates, favorable return policies and
promotional allowances. The Company works closely with many of its suppliers
to develop joint marketing plans. In addition, it is common in the swimming
pool supply industry for manufacturers to offer extended dating terms on their
products to qualifying purchasers, such as the Company. Such terms are
typically available to the Company for pre-season or early season purchases.

Prior to October 31, 1996, a substantial portion of the Company's chemical
products were supplied by its subsidiary, Alliance Packaging. On October 31,
1996, Alliance Packaging sold certain of its assets to Bio-Lab and Bio-Lab and
the Company entered into the Bio-Lab Supply Agreements. Under the Bio-Lab
Supply Agreements, Bio-Lab supplies the Company with certain chemical products
previously supplied to it by Alliance Packaging and with certain chemical
products previously supplied to BLN by Bio-Lab. In addition, in connection
with the 1997 Acquisition, the Company will enter into the Supply Agreement
with Pacific, the sole stockholder of Bicknell. Under the terms of the Supply
Agreement, Pacific will supply the Company with polymer panels, braces, steps,
liners and other products used in the construction of in-ground pools. The
Supply Agreement will have a term of eight years, subject to renewal options.

The principal chemical raw materials used in the products sold by the
Company are granular chlorine compounds, which are commodity materials. The
prices of granular chlorine compounds are a function of, among other things,
manufacturing capacity and demand. Although price increases in granular
chlorine compounds generally result in higher costs of supplies to the
Company, the Company generally has passed through such increased costs to its
customers. There can be no assurance that the price of granular chlorine
compounds will not increase in the future or that the Company will be able to
pass on any such increase to its customers. The Company believes that reliable
alternate sources of supply are available for all of its products, including
chlorine products.

The Company regularly evaluates supplier relationships and considers
alternate sourcing as appropriate to assure competitive costs and quality
standards. One non-affiliated supplier, Pac-Fab, Inc., supplied approximately
11% of the Company's material purchases in 1996. The Company currently has
long-term contracts with two of its largest suppliers including Bio-Lab, but
does not have a contract with Pac-Fab, Inc. The Company believes that it has
good relationships with all of its suppliers.

Decisions relating to pricing, suppliers and product selection are
centralized at the Company's headquarters, with significant input from each of
the Company's service center managers. Decisions relating to purchases and
inventory management are made independently by each of the Company's service
center managers using the data provided by the Company's information systems.

PROPERTIES

As of September 30, 1997, the Company conducted its operations through 74
service centers located in 24 states. Service centers are located near
customer concentrations, typically in industrial, commercial or mixed-use
zones. The Company's executive offices are located in approximately 22,000
square feet of leased space in

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Covington, Louisiana. If the 1997 Acquisition is completed in December 1997,
the Company will have 85 service centers in 30 states at that time.

The Company's service centers range in size from approximately 7,200 square
feet to 40,000 square feet and consist of warehouse, counter, display and
office space. The Company owns service centers in Phoenix, Arizona and Fresno,
California. All of the Company's other properties are leased for terms which
expire between 1997 and 2009, and many of such leases may be extended. In
certain instances, the Company's service centers are leased from the former
owners of businesses acquired by the Company. The Company believes that no
single lease is material to its operations, and that alternate sites are
presently available at market rates. See "Certain Relationships and Related
Transactions" and Note 7 to the Company's Consolidated Financial Statements.

COMPETITION

The Company faces intense competition from many regional and local
distributors in its markets, from several companies that distribute swimming
pool supplies on a national basis and, to a lesser extent, from mass market
retailers and large pool supply retailers. The Company believes that there are
five swimming pool supply distributors which compete with the Company on a
national or regional basis: Pool Water Products, Superior Pool Products, Inc.
(a subsidiary of Olin Corporation), Fort Wayne Pools, Hughes Supply and Benson
Pump Co. Barriers to entry in the swimming pool supply industry are relatively
low. Certain of the Company's competitors have substantially greater capital
resources than the Company.

The Company competes with other distributors for rights to distribute brand-
name products, and the loss of, or inability to obtain such rights could have
a material adverse effect on the Company. Management believes that the
competition for such distribution rights results in a competitive advantage to
larger distributors, such as the Company, and a disadvantage to small
distributors.

The Company believes that the principal competitive factors in pool supply
distribution are the quality and level of customer service, product pricing,
breadth and quality of products offered and consistency and stability of
business relationships with customers. The Company believes it competes
favorably with respect to each of these factors. 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.

ENVIRONMENTAL, HEALTH AND SAFETY REGULATION

The Company's business is subject to regulation under federal, state, and
local environmental and health and safety requirements, including the
Emergency Planning and Community Right-to-Know Act, the Hazardous Materials
Transportation Act and the Occupational Safety and Health Act. Most of these
requirements govern the packaging, labeling, handling, transportation, storage
and sale of pool chemicals by the Company. In addition, the algicides sold by
the Company are regulated as pesticides under the Federal Insecticide,
Fungicide and Rodenticide Act and state pesticide laws, which primarily relate
to labeling and annual registration. While the Company expends considerable
resources to operate in substantial compliance with environmental, health and
safety requirements, there can be no assurance that it will not be determined
to be out of compliance with, or liable under, such requirements. Such an
instance of noncompliance or liability could have a material adverse effect on
the Company and its operating results. In addition, such requirements are
frequently changing, and, depending upon the nature of any such changes, could
require material capital expenditures by the Company in the future.

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FIRE, SAFETY AND CASUALTY ISSUES

The Company stores chemicals at each of its 74 service centers. Certain
chemicals the Company stores are combustible oxidizing compounds and the
storage of such chemicals is strictly regulated by local fire codes. The
Company maintains strict policies and procedures regarding chemical handling
and fire and safety regulations, and has never incurred any material liability
related to its handling of chemicals. A fire, explosion or flood affecting one
of the Company's facilities, however, could give rise to liability claims
against the Company.

EMPLOYEES

At September 30, 1997, the Company employed 803 persons on a full-time basis,
of whom 164 engaged in management, administration and accounting, and credit
and collections, 58 engaged in outside sales, 73 engaged in service center
management and 508 engaged in warehouse, production and distribution
operations. Of these employees, 76 are employed at the Company's corporate
headquarters in Covington, Louisiana. No employees are covered by collective
bargaining agreements. The Company believes it has good relations with its
employees. In connection with the peak summer selling season, the Company
typically employs additional warehouse, production and distribution personnel
during the months from May through August.

TRADEMARKS

The Company maintains registered trademarks in the United States, primarily
for its private label products, and intends to maintain the trademark
registrations which it deems important to its business operations. See "--
Products--Private Brands."

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation and proceedings
arising in the ordinary course of its business. Although the outcome of
litigation and claims are uncertain, the Company believes there are no pending
material legal proceedings to which the Company is a party or to which the
property of the Company is subject.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the Company's
executive officers and directors.

[Download Table]

NAME AGE POSITION
---- --- --------

Wilson B. Sexton........ 60 Chairman and Director
Frank J. St. Romain..... 61 President, Chief Executive Officer and Director
Craig K. Hubbard........ 45 Chief Financial Officer, Treasurer and Secretary
Richard P. Polizzotto... 56 Vice President-Operations
A. David Cook........... 42 Vice President-Sales and Development
John M. Murphy.......... 36 Vice President-Marketing
Andrew W. Code.......... 39 Director
Peter M. Gotsch......... 33 Director
Dominick DeMichele...... 45 Director
Robert C. Sledd......... 44 Director

Mr. Sexton has served as Chairman and a director of the Company and SCP
Supply since December 1993, and served as a consultant to the Predecessor from
1988 to December 1993. Mr. Sexton held a number of positions at Airwick
Industries, Inc. from 1974 to 1980, including President of the Airwick Pool
Products division and Vice President of Airwick Industries, Inc. From 1958 to
1974, Mr. Sexton was employed by Seablue Corporation, a swimming pool
equipment and supplies manufacturer, where he served as President from 1972 to
1974.

Mr. St. Romain has served as President, Chief Executive Officer and a
director of the Company and SCP Supply since December 1993 and held the same
positions with the Predecessor since its founding in 1980. Prior to 1980, Mr.
St. Romain had 21 years experience in the pool business and had a number of
positions with Seablue Corporation and Airwick Pool Products.

Mr. Hubbard has served as Chief Financial Officer, Treasurer and Secretary
of the Company and SCP Supply since February 1997. From December 1993 until
February 1997, he served as controller of SCP Supply, and held the same
position with the Predecessor since September 1991. From 1985 until 1991, he
served as controller of Alerion Bank.

Mr. Polizzotto has served as Vice President-Operations of the Company since
May 1995, and has served as Vice President of SCP Supply since December 1993.
He served as Vice President of Operations of the Predecessor from June 1992
until December 1993. From 1986 until 1992, he served as Vice President of KSG
Industries, Inc., an auto parts distributor. Prior to 1986, Mr. Polizzotto
held a number of positions with Airwick Industries, Inc. and Airwick Pool
Products, and served as President of Heldor Industries, Inc., a pool supply
distributor.

Mr. Cook has served as Vice President-Sales and Development of the Company
since February 1997. From December 1993 until February 1997, he served as the
Director of National Sales Development of SCP Supply, and held the same
position with the Predecessor since August 1993. He served as a regional
manager of the Predecessor from May 1992 until August 1993. From 1988 until
May 1992, he served as a branch manager of the Predecessor.

Mr. Murphy has served as Vice President-Marketing of the Company since
February 1997. From December 1993 until February 1997, he served as the
Director of Marketing of SCP Supply, and held the same position with the
Predecessor since 1988.

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Mr. Code has served as a director of the Company since December 1993, and
served as a Vice President of the Company and SCP Supply from December 1993 to
May 1995. Mr. Code has, since August 1988, been a general partner of CHS
Management Limited Partnership ("CHS Management"), the general partner of
Code, Hennessy & Simmons Limited Partnership ("CHS"). Mr. Code was a Vice
President of Citicorp, a commercial bank, from 1986 until August 1988.

Mr. Gotsch has served as a director of the Company since December 1993 and
served as a Vice President of the Company and SCP Supply from December 1993 to
May 1995. Mr. Gotsch has been a Managing Director of Code, Hennessy & Simmons,
Inc., an affiliate of CHS, since January 1996, was a Vice President of CHS
Management from June 1994 to December 1995 and was an Associate of CHS
Management from July 1989 to June 1994. From 1987 to July 1989, he was a
Corporate Banking Officer at The First National Bank of Chicago, N.A., a
commercial bank.

Mr. DeMichele has served as a director of the Company since January 1996.
Mr. DeMichele has served as Chief Executive Officer of Cookson Specialty
Molding Sector (a division of Cookson Group plc.) since February 1994, and
served as President of Loudon Plastics, Inc. ("Loudon") and Pacific
Industries, Inc. ("Pacific") (divisions of Cookson Group plc.) from 1991 to
1995. Mr. DeMichele is a director of Loudon, Pacific, South Pacific Vinyl,
Inc. and Bicknell Huston Distributors, Inc., all of which are divisions of
Cookson Group plc.

Mr. Sledd has served as a director of the Company since March 1996. Mr.
Sledd has served as Chairman of the Board of Directors of Performance Food
Group Company ("PFG"), a food distributor, since February 1995, and has served
as a director and as Chief Executive Officer of PFG since 1987. Mr. Sledd
served as President of PFG from 1987 to February 1995. He served as President
and Chief Executive Officer of Taylor & Sledd Industries, Inc., a predecessor
of PFG from 1984 to 1987.

In connection with the SCP Acquisition, Messrs. Sexton, St. Romain, and
Polizzotto, along with the Predecessor's other shareholders, entered into
noncompetition agreements pursuant to which they agreed not to engage in a
business substantially similar to that of the Company for a period of five
years from the date of the SCP Acquisition.

The Audit Committee of the Board of Directors is composed of three directors
(Messrs. Gotsch, DeMichele and Sledd). The Audit Committee makes
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the independence of such auditors, approves the
scope of the annual audit activities of the independent auditors, and reviews
such audit results.

The Compensation Committee is composed of three directors (Messrs. Code,
Gotsch and Sledd). The Compensation Committee makes recommendations to the
Board regarding the compensation of officers of the Company, awards under the
Company's compensation and benefit plans and compensation policies and
practices.

The Company does not have a nominating committee.

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to the Company's chief
executive officer and three other most highly compensated executive officers
during the year ended December 31, 1996.

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SUMMARY COMPENSATION TABLE

[Download Table]

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING
OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------

Wilson B. Sexton............. 1996 $192,938 $192,938 22,500 $ 12,799(1)
Chairman 1995 183,750 183,750 -- 14,210(2)
1994 175,000 164,500 -- 3,172(3)
Frank J. St. Romain.......... 1996 192,938 192,938 22,500 12,799(4)
President and Chief 1995 183,750 183,750 -- 15,802(5)
Executive Officer 1994 175,000 164,500 -- 16,542(6)
Maurice D. Van Dyke (7)...... 1996 110,250 25,000 -- 11,855(8)
Chief Financial Officer, 1995 105,000 25,000 -- 14,468(9)
Treasurer and Secretary 1994 100,000 25,000 -- 12,377(10)
Richard P. Polizzotto........ 1996 112,000 20,000 4,875 10,582(11)
Vice President 1995 112,000 30,000 6,121 15,041(12)
1994 90,586 30,000 -- 16,498(13)

--------
(1) Reflects a $1,335 life insurance premium and $11,464 contributed under the
Company's 401(k) plan.
(2) Reflects a $2,811 life insurance premium and $11,399 contributed under the
Company's 401(k) plan.
(3) Reflects a life insurance premium.
(4) Reflects a $1,335 life insurance premium and $11,464 contributed under the
Company's 401(k) plan.
(5) Reflects a $4,403 life insurance premium and $11,399 contributed under the
Company's 401(k) plan.
(6) Reflects a $3,847 life insurance premium and $12,695 contributed under the
Company's 401(k) plan.
(7) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(8) Reflects a $1,335 life insurance premium and $10,520 contributed under the
Company's 401(k) plan.
(9) Reflects a $4,403 life insurance premium and $10,065 contributed under the
Company's 401(k) plan.
(10) Reflects a $4,170 life insurance premium and $8,207 contributed under the
Company's 401(k) plan.
(11) Reflects a $1,335 life insurance policy premium and $9,247 contributed
under the Company's 401(k) plan.
(12) Reflects a $6,084 life insurance premium and $8,957 contributed under the
Company's 401(k) plan.
(13) Includes a $5,755 life insurance premium and $10,743 contributed under
the Company's 401(k) plan.

The following table sets forth, for the executive officers of the Company,
information regarding stock options granted or exercised during, or held at
the end of, 1996.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

[Enlarge/Download Table]

INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------ ------------ -------- ---------- ------- --------

Wilson B. Sexton(2)(3).. 22,500 24% $7.50 12/31/03 $79,772 $190,721
Frank J. St.
Romain(2)(3)........... 22,500 24 7.50 12/31/03 79,772 190,721
Maurice D. Van Dyke(4).. -0- -0- -0- -- -0- -0-
Richard
Polizzotto(3)(5)....... 4,875 5 7.50 12/31/03 17,284 41,323

--------
(1) Amounts reflect assumed rates of appreciation from the fair market value
on the date of grant as set forth in the Securities and Exchange
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises depend on future performance of the Common
Stock and overall stock market conditions. No assurance can be made that
the amounts reflected in these columns will be achieved.

424B1 38th Page of 77 TOC 1st Previous Next ↓Bottom Just 38th
(2) Options were granted and become immediately exercisable on January 24,
1996 pursuant to the SCP Pool Corporation 1995 Stock Option Plan.
(3) In order to prevent dilution or enlargement of rights under the options,
in the event of a reorganization, recapitalization, stock split or
combination or other change in the shares of the Company's Common Stock,
the number and type of shares available upon exercise and the exercise
price will be adjusted accordingly. The Compensation Committee may,
subject to certain restrictions, accelerate or defer the date on which an
option becomes exercisable.
(4) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(5) Options become exercisable on January 24, 1998 and were granted on January
24, 1996 pursuant to the SCP Pool Corporation 1995 Stock Option Plan. In
the event of a sale of the capital stock of the Company with the voting
power to elect a majority of the directors or a sale of more than 50% of
the Company's total assets (on a consolidated basis), all options become
fully vested and exercisable.

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

[Enlarge/Download Table]

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
YEAR END (#) AT FISCAL YEAR END
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
---- --------------- -------------- ---------------------- ------------------------

Wilson B. Sexton........ -0- -0- 22,500/0(1) $142,500/0(1)
Frank J. St. Romain..... -0- -0- 22,500/0(1) 142,500/0(1)
Maurice D. Van Dyke(2).. -0- -0- 0/0 0/0
Richard Polizzotto...... -0- -0- 0/10,996(3) 0/94,539(3)

--------
(1) As of the end of the fiscal year, all of the options held by Mr. Sexton
and Mr. St. Romain were exercisable, and none had been exercised.
(2) Mr. Van Dyke retired from the Company and SCP Supply in February 1997.
(3) As of the end of the fiscal year, none of the options held by Mr.
Polizzotto were exercisable, and none had been exercised.

DIRECTOR COMPENSATION

Non-employee directors of the Company receive (i) an annual retainer of
$6,000, (ii) $1,000 per board meeting attended, (iii) $500 per committee
meeting attended and (iv) $250 per ad-hoc meeting attended. In addition, non-
employee directors of the Company receive a consulting fee of $100 per hour
for tasks performed outside the scope of their service as directors. Directors
who are employees of the Company or its subsidiaries are not entitled to
receive any fees for serving as directors, except that all directors are
reimbursed for out-of-pocket expenses related to their service as directors.

Under the 1996 Non-Employee Director Equity Incentive Plan (the "Directors
Plan"), each non-employee director was granted an option to purchase 3,750
shares of Common Stock upon the establishment of the Directors Plan. In
addition, each non-employee director was granted an option to purchase 3,750
shares of common stock immediately following the May 1996 annual meeting of
the Company's stockholders and will be granted options to purchase an
additional 3,750 shares immediately following each subsequent annual meeting
of the Company's stockholders. Options granted pursuant to the Directors Plan
become exercisable one year after grant, subject to certain exceptions. The
option price per share of Common Stock under the Directors Plan is equal to
100% of the fair market value of the Common Stock at the date of grant. Each
option granted under the Directors Plan is exercisable for ten years after the
date of grant. The maximum number of shares of Common Stock that may be
granted under the Directors Plan is limited to an aggregate of 300,000 (as
adjusted for any change in the Common Stock). Non-employee Directors may elect
to receive shares of Common Stock under the Directors Plan in lieu of the cash
compensation otherwise payable.

424B1 39th Page of 77 TOC 1st Previous Next ↓Bottom Just 39th
EMPLOYMENT AGREEMENTS

In connection with the SCP Acquisition, SCP Supply entered into oral
employment agreements with Wilson B. Sexton and Frank J. St. Romain. The
agreements currently provide, in part, that SCP Supply will pay Messrs. Sexton
and St. Romain an annual base salary of $204,768 and an annual bonus of up to
100% of base salary to be paid in cash and up to 100% of base salary to be
paid in stock. Pursuant to such agreements, Messrs. Sexton and St. Romain are
entitled to be included in SCP Supply's medical program until Medicare
coverage begins (or, if earlier, until terminated for cause or until voluntary
termination of employment prior to 1999), and each will receive an automobile
allowance of $600 per month.

In connection with the acquisition of all of the outstanding stock of Orcal
Pool Supplies, Inc. ("Orcal Acquisition") in March 1995, the Company and SCP
Supply entered into a written Management Agreement with Ronald Hetzner (the
former owner of Orcal), pursuant to which Mr. Hetzner is employed by SCP
Supply as President of Orcal Pool Supplies, a division of SCP Supply. The
Agreement provides that SCP Supply will pay Mr. Hetzner an annual salary of
$100,000. The agreement runs for a period of three years, unless terminated
earlier by the resignation, death, permanent disability or incapacity of Mr.
Hetzner, or by the Company (with or without cause). If terminated without
cause, Mr. Hetzner is entitled to receive his salary until the end of the
three-year employment term. Mr. Hetzner served as a director of the Company
from March 1995 until June 1995.

1995 STOCK OPTION PLAN

In February 1995, the Board of Directors adopted the SCP Pool Corporation
1995 Stock Option Plan and in March 1996, the Board of Directors amended such
plan (as so amended, the "1995 Plan"). The 1995 Plan is administered by the
Compensation Committee of the Board of Directors (or if no such committee
exists, the Board of Directors), which may, at its discretion, grant incentive
stock options and non-qualified stock options to those executive officers or
other key employees of the Company or its subsidiaries selected by the Board
or the Compensation Committee. The maximum aggregate number of shares of
Common Stock with respect to which options may be granted pursuant to the 1995
Plan is 600,000 (as adjusted for any change in the Common Stock). Granted
options have an exercise price of not less than the fair market value of the
stock on the date of grant.

Pursuant to the 1995 Plan, in February 1997 the Company awarded non-
qualified stock options for an aggregate of 99,750 shares of Common Stock to
34 key employees of the Company. Such options expire on December 31, 2003,
become exercisable on the second anniversary of the grant date, and have an
exercise price of approximately $13.17 per share of Common Stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NONCOMPETITION AGREEMENTS

In connection with the SCP Acquisition, Messrs. Sexton, St. Romain, Van
Dyke, Polizzotto, Cook and Murphy along with the Predecessor's other
shareholders, entered into noncompetition agreements pursuant to which they
agreed not to engage in a business substantially similar to that of the
Company for a period of five years from the date of the SCP Acquisition.

STOCKHOLDER NOTES

Six of the Company's current stockholders (all of whom were stockholders of
the Predecessor) are holders of the Company's Convertible Subordinated
Promissory Notes due December 31, 2002 (the "Convertible Notes") in the
aggregate principal amount of $96,250. They received such notes pursuant to
the liquidation of the Predecessor following the SCP Acquisition. Such notes
were originally issued by the Company to the Predecessor as consideration
pursuant to the SCP Acquisition. In addition, Mr. Hetzner is the holder of the
Company's Junior Subordinated Promissory Notes due April 10, 1998 (the
"Hetzner Notes"), in the original

424B1 40th Page of 77 TOC 1st Previous Next ↓Bottom Just 40th
principal amount of $2,650,000, which he received in connection with the Orcal
Acquisition. As of September 30, 1997, the Company has repaid $1,766,000 of
the principal amount of the Hetzner Notes.

The Convertible Notes bear interest at a rate of 10% per annum and mature on
December 31, 2002. The Convertible Notes are subordinated to the Second
Amended and Restated Credit Agreement, dated as of September 26, 1996, by and
among SCP Supply, The First National Bank of Chicago, as agent, and various
lenders from time to time party thereto (the "Senior Loan Facility") and
certain other indebtedness. The Convertible Notes are convertible into the
number of shares of Common Stock determined by dividing the principal amount
of the note by approximately $0.98, as adjusted for the subdivision or
combination of such shares and for the issuance of any Common Stock (or
securities converted into or exchangeable for shares of Common Stock) at a
price per share less than the conversion price for the Convertible Notes.

The Hetzner Notes bear interest at a rate of 8% per annum and are payable in
three equal annual installments, with the final installment payable on April
10, 1998. The Hetzner Notes are subordinated to the Senior Loan Facility and
certain other indebtedness.

TRANSACTIONS WITH CHS

In connection with the Orcal Acquisition, CHS executed guaranties in favor
of Mr. Hetzner pursuant to which CHS agreed to guarantee payment by the
Company of the Hetzner Notes.

The Company has in the past and may in the future pay to CHS certain
customary investment banking and financial advisory fees for services rendered
by CHS to the Company in connection with acquisitions undertaken by the
Company. In connection with the 1997 Acquisition, the Company expects to pay
$150,000 to an affiliate of CHS for investment banking services.

REGISTRATION AGREEMENT

In connection with the SCP Acquisition in December 1993, the stockholders of
the Company at such time (the "Original Stockholders") entered into a
Registration Agreement with the Company (the "Registration Agreement"). The
Registration Agreement provides for certain demand registration rights to CHS,
certain employees of CHS and its affiliates and an additional investor
(collectively, the "Investor Stockholders"), and to subsequent holders of the
Common Stock acquired by such stockholders in connection with the SCP
Acquisition. The demand registration rights began from and after the effective
date of the first registration statement filed by the Company in connection
with the public offering of its securities. The holders of a majority of the
registrable securities held by the Investor Stockholders (and their permitted
transferees) are entitled to request four long-form registrations in which the
Company pays all registration expenses and an unlimited number of short-form
registrations in which the Company pays all registration expenses. Such
holders are also entitled to request an unlimited number of long-form
registrations in which holders of registrable securities pay their pro rata
share of registration expenses. The Company is entitled to postpone a demand
registration for up to six months under certain circumstances, and is not
required to effect a demand registration within six months of a previous
registration in which holders of registrable securities participated without
reduction of the number of their included shares.

The Registration Agreement also provides that, subject to certain
limitations, the Original Stockholders (and their permitted transferees) may
request inclusion of their shares in a registration of securities by the
Company (other than pursuant to the initial public offering of Common Stock or
a demand registration). Expenses incurred in connection with the exercise of
such piggyback registration rights are borne by the Company.

STOCKHOLDER LEASE AGREEMENTS

In November 1993, the Company entered into a lease agreement (the "Northpark
Lease") with Northpark Alliance, LLC, a limited liability company
("Northpark"), the members of which are Messrs. Van Dyke, Sexton,

424B1 41st Page of 77 TOC 1st Previous Next ↓Bottom Just 41st
and Polizzotto and the St. Romain Children's Trust (a trust established for
the benefit of the children of Mr. St. Romain for which Mr. Van Dyke serves as
Trustee), with respect to a facility at 128 Northpark Boulevard, Covington,
Louisiana. The Company used this facility as its corporate headquarters until
space constraints forced it to relocate to another Covington, Louisiana
facility in October 1996. The Northpark Lease had a term of 15 years,
commencing on June 10, 1994, and monthly rental rates ranging from $6,511 to
$7,698. The Company believes that such lease reflected a fair market rate as
of the date thereof. The Company was obligated to make lease payments under
the Northpark Lease until Northpark sold the facility in October 1997.

In November 1991, the Company entered into a lease agreement (the "Trust
Lease") with the St. Romain Children's Trust with respect to a service center
(the "Trust Facility") in Baton Rouge, Louisiana. The Trust Lease has a term
of nine years and one month, commencing on December 1, 1991, and monthly
rental rates ranging from $5,053 to $5,360. In March 1997, space constraints
forced the Company to relocate its Baton Rouge service center from the Trust
Facility to another Baton Rouge facility which it rents pursuant to a lease
agreement (the "St. Romain Lease") with Kenneth St. Romain, the regional
manager of the Baton Rouge service center and the son of Frank J. St. Romain,
President and Chief Executive Officer of the Company. The St. Romain Lease has
a term of 5 years, commencing on March 1, 1997, and provides for rental
payments of $9,655 per month. The Company is still obligated to make payments
under the Trust Lease, although in November 1997 the St. Romain Children's
Trust subleased the Trust Facility for a term equal to the balance of the
Trust Lease term at a rental which is over 70% of the rate payable under the
Trust Lease. The Company believes that both the Trust Lease and the St. Romain
Lease reflect a fair market rate as of the respective dates thereof.

In connection with the Orcal Acquisition, SCP Supply entered into eight
lease agreements with Mr. Hetzner and his affiliates (the "Hetzner Leases"),
pursuant to which SCP Supply rents service center facilities in California
which are owned by Mr. Hetzner and his affiliates. The Hetzner Leases have
initial terms of five years, commencing on February 28, 1995, and monthly
rental rates ranging from approximately $3,600 to $8,748. The aggregate
monthly rental payment under the Hetzner Leases is approximately $46,260. SCP
Supply has an option to renew each such lease for five years at fair market
rental rate.

DUAL CHEMICAL FEEDER AGREEMENTS

Pursuant to an agreement dated as of March 31, 1992, by and among Mr. Sexton
and Wexco Incorporated, a Pennsylvania corporation ("Wexco"), Mr. Sexton
assigned all of his rights in a patented device for the delivery of multiple
chemicals into a swimming pool (the "Dual Chemical Feeder") to Wexco in return
for a promise to pay certain royalties. In connection with the acquisition by
the subsidiary Alliance Packaging, Inc. of the chemical manufacturing and
repackaging assets of York Chemical Corporation and Wexco (the "York
Acquisition") in January 1995, the Company purchased all of Wexco's rights and
obligations with respect to the Dual Chemical Feeder, including Wexco's
obligation to make royalty payments to Mr. Sexton. The aggregate royalties
paid to Mr. Sexton in 1996 did not exceed $60,000, and the Company does not
expect that the aggregate royalties payable in 1997 will exceed $60,000.

PLEDGE AGREEMENT

In connection with the SCP Acquisition, the Company loaned Mr. Murphy
$125,000 to purchase certain securities (the "Purchased Securities") of the
Company. Mr. Murphy pledged the Purchased Securities to the Company to secure
the repayment of such loan. As of March 1, 1997, Mr. Murphy had repaid such
loan and the Company released the pledge on the Purchased Securities.

TRANSACTIONS WITH THE COOKSON SPECIALTY MOLDING SECTOR

Mr. DeMichele, a director of the Company, is the Chief Executive Officer of
the Molding Sector, a division of Cookson Group plc. Mr. DeMichele is also a
director of Pacific. Pacific is the sole stockholder of Bicknell, the subject
of the 1997 Acquisition. The Company and Pacific will enter into the Supply
Agreement as a part of the 1997 Acquisition. See "The 1997 Acquisition." The
Company believes the 1997 Acquisition and the Supply

424B1 42nd Page of 77 TOC 1st Previous Next ↓Bottom Just 42nd
Agreement reflect, respectively, the fair market value for the assets of
Bicknell and the products and services to be provided pursuant to the Supply
Agreement.

In connection with the purchase of products or services not related to the
1997 Acquisition, Pacific received approximately $7,880,000 in payments from
the Company in 1996 and expects to receive over $10,000,000 in payments from
the Company in 1997. The Company believes that the payments made to Pacific
reflect the fair market value for the products and services provided.

CERTAIN RELATIONSHIPS

Kenneth St. Romain is a regional manager for the Company in the Baton Rouge
and New Orleans, Louisiana area. In 1996, Mr. St. Romain received
approximately $137,000 in salary and bonus, and the Company expects that his
salary and bonus for 1997 will not exceed the amount paid in 1996. Kenneth St.
Romain is the son of Frank J. St. Romain, President and Chief Executive
Officer of the Company. Alan Henseler is a regional manager for the Company in
the Alabama and northwestern Florida area. In 1996, Mr. Henseler received
approximately $95,000 in salary and bonus, and the Company expects that his
salary and bonus for 1997 will equal or exceed the amount paid in 1996. Mr.
Henseler is the son-in-law of Frank J. St. Romain, President and Chief
Executive Officer of the Company. The compensation formula pursuant to which
Messrs. St. Romain and Henseler are paid is identical to that by which the
Company's other regional managers are paid, and includes a fixed salary and a
bonus based on profitability and return on assets of the service centers for
which such managers are responsible. The actual amount of compensation paid to
each regional manager varies as a result of the application of the bonus
formula as well as such manager's seniority and other objective factors.

424B1 43rd Page of 77 TOC 1st Previous Next ↓Bottom Just 43rd
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 14, 1997, and
immediately following the Offering by (i) each person who is known by the
Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director and named executive officer of the Company, (iii) all directors
and executive officers of the Company as a group and (iv) each Selling
Stockholder. Except as otherwise indicated below, each of the persons named in
the table has sole voting and investment power with respect to the securities
beneficially owned by it or him as set forth opposite its or his name.

[Download Table]

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR SHARES TO OWNED AFTER
TO OFFERING BE SOLD OFFERING
-------------------- IN --------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENT(2) OFFERING NUMBER(1) PERCENT(2)
------------------------ --------- ---------- --------- --------- ----------

Code, Hennessy & Simmons
Limited Partnership(3).... 2,266,399 35.5% 992,813 1,273,586 16.5%
Andrew W. Code(4)(5)....... 2,289,799 35.8 992,813 1,296,986 16.7
Daniel J. Hennessy(4)(6)... 2,268,349 35.5 992,813 1,275,536 16.5
Brian P. Simmons(4)(7)..... 2,303,899 36.1 992,813 1,311,086 16.9
Wilson B. Sexton(8)........ 229,735 3.6 40,000 189,735 2.4
Frank J. St. Romain(9)..... 113,749 1.8 17,187 96,562 1.2
Craig K. Hubbard(10)....... 6,151 * -- 6,151 *
Maurice D. Van Dyke(11).... 201,000 3.1 -- 201,000 2.6
Richard P. Polizzotto(12).. 47,332 * -- 47,332 *
A. David Cook.............. 3,000 * -- 3,000 *
John M. Murphy(13)......... 34,908 * -- 34,908 *
Peter M. Gotsch(14)........ 10,225 * -- 10,225 *
Dominick DeMichele(15)..... 15,000 * -- 15,000 *
Robert C. Sledd(16)........ 8,250 * -- 8,250 *
All executive officers and
directors
as a group (10 persons)... 2,758,149 42.0 1,050,000 1,708,149 21.6

--------
*Less than 1%
(1) Includes shares of Common Stock subject to options which are exercisable
within 60 days of November 14, 1997 and shares of Common Stock issuable
upon conversion of the Company's Convertible Subordinated Promissory Notes
due December 31, 2002 (the "Convertible Notes")
(2) Shares of Common Stock subject to options which are exercisable within 60
days of November 14, 1997 and shares of Common Stock issuable upon
conversion of the Convertible Notes are considered outstanding for the
purpose of determining the percent of the class held by the holder of such
options or notes, but not for the purpose of computing the percentage held
by others.
(3) The business address of CHS is 10 South Wacker Drive, Suite 3175, Chicago,
Illinois 60606.
(4) 2,266,399 of such shares are held of record by CHS. Messrs. Code, Hennessy
and Simmons are general partners of the general partner of CHS and share
investment and voting power with respect to the securities owned by CHS.
Each of Messrs. Code, Hennessy and Simmons disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein. The
business address of each such person is c/o CHS, 10 South Wacker Drive,
Suite 3175, Chicago, Illinois 60606.
(5) 15,000 of such shares are held directly by a charitable foundation of
which Mr. Code is a director, president, and the sole member, and as a
result, may be deemed to have voting and dispositive power with respect to
such shares, although neither Mr. Code nor any members of his immediate
family have any pecuniary interest in such shares. 900 of such shares are
held by Mr. Code as custodian for his minor children under the Uniform
Gifts to Minors Act. Also includes options to purchase 7,500 shares issued
to Mr. Code pursuant to the Company's 1996 Non-Employee Director Equity
Incentive Plan (the "Directors Plan").

424B1 44th Page of 77 TOC 1st Previous Next ↓Bottom Just 44th
(6) 1,500 of such shares are held by minor children of Mr. Hennessy, and Mr.
Hennessy disclaims beneficial ownership of such shares. 450 of such shares
are held by Mr. Hennessy and his spouse as joint tenants.
(7) 37,500 of such shares are held by Mr. Simmons and his spouse as joint
tenants.
(8) Includes 31,246 shares issuable upon conversion of the Convertible Note
held of record by Mr. Sexton and options to purchase 45,000 shares issued
to Mr. Sexton pursuant to the Company's 1995 Stock Option Plan (the
"Plan").
(9) Includes options to purchase 45,000 shares issued to Mr. St. Romain
pursuant to the Plan.
(10)Includes options to purchase 5,101 shares issued to Mr. Hubbard pursuant
to the Plan.
(11) Includes 63,261 shares held directly by Mr. Van Dyke, 12,753 shares
issuable upon conversion of the Convertible Note held of record by Mr.
Van Dyke and 124,986 shares (including 31,246 shares issuable upon
conversion of a Convertible Note) held of record by the St. Romain
Children's Trust, of which Mr. Van Dyke is the Trustee. As the Trustee,
Mr. Van Dyke has investment and voting power with respect to the shares
held by the trust. The business address of Mr. Van Dyke is 109 Northpark
Boulevard, Covington, Louisiana 70433. Mr. Van Dyke retired from the
Company and SCP Supply in February 1997.
(12) Includes 8,928 shares issuable upon conversion of the Convertible Note
held of record by Mr. Polizzotto and options to purchase 6,121 shares
issued to Mr. Polizzotto pursuant to the Plan.
(13)Includes 8,928 shares issuable upon conversion of the Convertible Note
held of record by Mr. Murphy.
(14) Includes options to purchase 7,500 shares issued to Mr. Gotsch pursuant
to the Directors Plan. Mr. Gotsch is a Managing Director of an affiliate
of CHS but does not share investment or voting discretion with respect to
the securities held by CHS.
(15) Includes options to purchase 7,500 shares issued to Mr. DeMichele
pursuant to the Directors Plan.
(16)Includes options to purchase 7,500 shares issued to Mr. Sledd pursuant to
the Directors Plan.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 10,000,000 shares of Common Stock, $0.001
par value (the "Common Stock") and 100,000 shares of Preferred Stock, $.01 par
value (the "Preferred Stock"). Upon completion of the Offering, 7,740,060
shares of Common Stock will be issued and outstanding and no shares of
Preferred Stock will be issued and outstanding. The following summary of
certain provisions of the Company's capital stock describes all material
provisions of, but does not purport to be complete, and is subject to, and
qualified in its entirety by, the Restated Certificate of Incorporation and
the Bylaws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.

COMMON STOCK

Subject to the prior rights of the holders of any Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board of Directors may from time to time determine. See
"Dividend Policy." Following consummation of the Offering, the shares of
Common Stock will not be redeemable, and the holders thereof will have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding-up of the Company, the holders of
Common Stock are entitled to receive pro rata the assets of the Company which
are legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding. Each outstanding share of Common Stock is entitled to vote
on all matters submitted to a vote of stockholders.

PREFERRED STOCK

The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of up to
100,000 shares of Preferred Stock in series and may, at the time of issuance,

424B1 45th Page of 77 TOC 1st Previous Next ↓Bottom Just 45th
determine the rights, preferences and limitations of each series. Satisfaction
of any dividend preferences of outstanding shares of Preferred Stock would
reduce the amount of funds available for the payment of dividends on shares of
Common Stock. Holders of shares of Preferred Stock may be entitled to receive
a preference payment in the event of any liquidation, dissolution or winding-
up of the Company before any payment is made to the holders of shares of
Common Stock. Under certain circumstances, the issuance of shares of Preferred
Stock may render more difficult or tend to discourage a merger, tender offer
or proxy contest, the assumption of control by a holder of a large block of
the Company's securities or the removal of incumbent management. The Board of
Directors of the Company, without stockholder approval, may issue shares of
Preferred Stock with voting and conversion rights which could adversely affect
the holders of shares of Common Stock.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company has elected not to be governed by the provisions of Section 203
of the Delaware General Corporation Law. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the stockholder. An "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the Certificate of Incorporation provides that the Company shall indemnify
directors and officers of the Company to the fullest extent permitted by such
law.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is First Chicago Trust
Company of New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company expects to have 7,740,060
shares of Common Stock outstanding (assuming the Underwriters' over-allotment
option is not exercised). Of these shares, the 3,337,500 shares sold in the
Company's initial public offering and the 2,400,000 shares of Common Stock
sold in the Offering will be tradeable without restriction under the
Securities Act, except for any such shares which may be acquired by an
"affiliate" of the Company (an "Affiliate"), as that term is defined in Rule
144 under the Securities Act ("Rule 144"), which shares will be subject to the
resale limitations of Rule 144.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" (as that phrase is
defined in Rule 144) were acquired from the Company and the date they were
acquired from an Affiliate, then the holder of such restricted securities
(including an Affiliate) is entitled to sell a number of shares within any
three-month period that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock (approximately 77,400 shares
immediately after this Offering) or the average weekly reported volume of
trading of the Common Stock on the Nasdaq National Market during the four
calendar weeks preceding such sale. The holder may only sell such shares
through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year period. Up to 2,002,560 shares
of Common Stock are eligible for sale in the public market under Rule 144,

424B1 46th Page of 77 TOC 1st Previous Next ↓Bottom Just 46th
subject to the volume limitations and other requirements described above,
without consideration of the contractual restrictions described below.

Under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted shares were acquired from the Company and the
date they were acquired from an Affiliate, as applicable, a holder of such
restricted shares who is not an Affiliate at the time of the sale and has not
been an Affiliate for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above. Up to 1,142,560 shares of
Common Stock are eligible for sale without restriction under Rule 144(k).

Notwithstanding the foregoing, the Company, and certain of its directors,
executive officers and stockholders have agreed that for a period of 90 days
after the date of the Offering they will not, without the prior written
consent of the Representatives, offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock except pursuant to the
Underwriting Agreement.

The Company can make no predictions as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of
the Common Stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices. See "Risk Factors--
Shares Eligible for Future Sale; Registration Rights."

REGISTRATION AGREEMENT

In connection with the SCP Acquisition in December 1993, the Company entered
into a Registration Agreement with its stockholders. See "Certain
Relationships and Related Transactions--Registration Agreement."

424B1 47th Page of 77 TOC 1st Previous Next ↓Bottom Just 47th
UNDERWRITING

Morgan Keegan & Company, Inc., The Robinson-Humphrey Company, LLC and
Johnson Rice & Company L.L.C. (the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") to purchase from the Company and the Selling
Stockholders the number of shares of Common Stock indicated below opposite
their respective names at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus.

[Download Table]

NAME
OF NUMBER OF
UNDERWRITER SHARES
----------- ---------

Morgan Keegan & Company, Inc................................... 800,000
The Robinson-Humphrey Company, LLC............................. 800,000
Johnson Rice & Company L.L.C................................... 800,000
---------
Total...................................................... 2,400,000
=========

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any of such shares
are purchased. The Company and the Selling Stockholders have been advised by
the Underwriters that the Underwriters propose to offer the shares of Common
Stock to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not
in excess of $0.52 per share of Common Stock. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $0.10 per share to other
dealers. The public offering price and the concessions and discount to dealers
may be changed by the Underwriters after the public offering.

One of the Selling Stockholders has granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional 360,000 shares of Common Stock at the public offering price, less
underwriting discounts and commissions, as shown on the cover page of this
Prospectus. The Underwriters may exercise such option solely for the purpose
of covering over-allotments incurred in the sale of the shares of Common Stock
offered hereby.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or to contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.

The Company and certain of its executive officers, directors and
stockholders have agreed, for a period of 90 days from the date of this
Prospectus, not to offer, sell, offer to sell, contract to sell, grant any
option to purchase, or otherwise dispose of, directly or indirectly, any
shares of Common Stock, or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock, in the public market, without the
prior written consent of the Underwriters.

The Underwriters have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves syndicate sales
in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids for and purchases of Common Stock so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve the purchase of Common Stock in the open market in order
to cover a syndicate short position. Penalty bids permit the Underwriters to
reclaim a selling concession from a syndicate member when the shares of Common
Stock originally sold by such syndicate member are purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions, and
penalty bids may cause the price of the Common Stock to be higher than it
would otherwise be in the absence of such transactions. These transactions may
be effected on the Nasdaq National Market, or otherwise, and, if commenced,
may be discontinued at any time.

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In connection with this Offering, the Underwriters and certain selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act during the one
business day period before commencement of offers of sales of the Common
Stock. The passive market making transactions must comply with applicable
volume and price limits and be identified as such. In general, a passive
market maker may display its bid at a price not in excess of the highest
independent bid for the security; however, if all independent bids are lowered
below the passive market maker's bid such bid must then be lowered when
certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kirkland & Ellis, Chicago, Illinois. Kevin R. Evanich,
a partner of Kirkland & Ellis, beneficially owns shares of the Company's
Common Stock. Certain legal matters will be passed upon for the Underwriters
by Alston & Bird LLP, Atlanta, Georgia.

EXPERTS

The consolidated financial statements of SCP Pool Corporation at December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

The financial statements of The B-L Network, Inc. at December 31, 1995 and
September 25, 1996, and for each of the two years in the period ended December
31, 1995 and for the period ended September 25, 1996, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 pursuant to the Securities
Act with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
items of which are omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document filed with the Registration Statement as
exhibits are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
document filed as an exhibit to the Registration Statement. For further
information about the Company and the securities offered hereby, reference is
made to the Registration Statement and to the consolidated financial
statements, schedules and exhibits filed as a part thereof.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy or information statements, and other
information with the Commission. The Registration Statement, the exhibits and
schedules forming a part thereof and the reports, proxy or information
statements, and other information filed by the Company with the Commission in
accordance with the Exchange Act may be inspected without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511.
Copies of such materials or any part thereof may also be obtained from the
public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains an Internet web site at http://www.sec.gov containing registration
statements, reports, proxy and information statements and other information
that registrants, such as the Company, file electronically with the
Commission.

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INDEX TO FINANCIAL STATEMENTS

[Download Table]

CONSOLIDATED FINANCIAL STATEMENTS OF SCP POOL CORPORATION
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets--December 31, 1995 and 1996 and September 30,
1997 (Unaudited)......................................................... F-3
Consolidated Statements of Income--Years Ended December 31, 1994, 1995 and
1996 and Nine Months Ended September 30, 1996 (Unaudited) and 1997
(Unaudited).............................................................. F-4
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
1994, 1995 and 1996 and Nine Months Ended September 30, 1997 (Unaudited). F-5
Consolidated Statements of Cash Flows--Years Ended December 31, 1994, 1995
and 1996 and Nine Months Ended September 30, 1996 (Unaudited) and 1997
(Unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
FINANCIAL STATEMENTS OF THE B-L NETWORK, INC.
Report of Independent Auditors............................................ F-18
Balance Sheets--December 31, 1995 and September 25, 1996.................. F-19
Statements of Operations and Retained Earnings (Deficit)--Years Ended
December 31, 1994 and 1995 and Period Ended September 25, 1996........... F-20
Statements of Cash Flows--Years Ended December 31, 1994 and 1995
and Period Ended September 25, 1996...................................... F-21
Notes to Financial Statements............................................. F-22

F-1

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors
SCP Pool Corporation

We have audited the consolidated balance sheets of SCP Pool Corporation as
of December 31, 1995 and 1996, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SCP Pool Corporation at December 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

Ernst & Young LLP

New Orleans, Louisiana
February 14, 1997, except for Note 11, as
to which the date is September 29, 1997

F-2

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SCP POOL CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

[Download Table]

DECEMBER 31
---------------- SEPTEMBER 30
1995 1996 1997
------- -------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents...................... $ 2,043 $ 4,621 $ 1,928
Receivables.................................... 12,090 25,293 36,889
Inventory...................................... 25,230 42,112 43,079
Prepaid expenses............................... 363 632 735
Deferred income taxes.......................... 145 392 1,103
------- -------- --------
Total current assets......................... 39,871 73,050 83,734
Property and equipment, net...................... 3,470 4,413 4,746
Goodwill, net.................................... 29,725 33,009 32,844
Other assets, net................................ 2,331 2,773 2,339
------- -------- --------
Total assets................................. $75,397 $113,245 $123,663
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $12,726 $ 15,132 $ 13,359
Accrued and other current liabilities.......... 3,075 7,907 10,929
Current portion of long-term debt.............. 2,883 15,409 7,243
------- -------- --------
Total current liabilities.................... 18,684 38,448 31,531
Deferred income taxes............................ 843 2,119 2,344
Long-term debt, less current portion............. 23,593 35,868 43,596
Stockholder' equity:
Preferred stock, $.01 par value; 100,000 shares
authorized; no shares issued and outstanding.. -- -- --
Common stock, $.001 par value; 10,000,000
shares authorized; 6,334,214 shares issued and
outstanding at December 31, 1995 and 1996 and
6,390,060 shares issued and outstanding at
September 30, 1997............................ 6 6 6
Additional paid-in capital..................... 29,585 29,585 29,705
Retained earnings.............................. 2,686 7,219 16,481
------- -------- --------
Total stockholders' equity................... 32,277 36,810 46,192
------- -------- --------
Total liabilities and stockholders' equity... $75,397 $113,245 $123,663
======= ======== ========

See accompanying notes.

F-3

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SCP POOL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

[Download Table]

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)

Net sales.................... $101,977 $161,095 $235,844 $189,356 $286,847
Cost of sales................ 77,488 123,974 183,814 146,510 223,268
-------- -------- -------- -------- --------
Gross profit................. 24,489 37,121 52,030 42,846 63,579
Warehouse expense............ 3,610 6,957 9,611 7,114 11,067
Selling and administrative
expenses.................... 13,518 19,907 31,139 20,394 33,416
Goodwill amortization........ 683 735 793 576 648
-------- -------- -------- -------- --------
Operating income............. 6,678 9,522 10,487 14,762 18,448
Other income (expense):
Interest expense........... (4,171) (5,113) (3,176) (2,052) (3,605)
Amortization expense....... (498) (610) (698) (398) (534)
Management fees paid to
majority stockholder...... (250) (208) -- --
Miscellaneous income....... 118 228 823 577 629
-------- -------- -------- -------- --------
(4,801) (5,703) (3,051) (1,873) (3,510)
-------- -------- -------- -------- --------
Income before income taxes
and extraordinary loss...... 1,877 3,819 7,436 12,889 14,938
Provision for income taxes... 770 1,490 2,903 5,029 5,676
-------- -------- -------- -------- --------
Income before extraordinary
loss........................ 1,107 2,329 4,533 7,860 9,262
Extraordinary loss, net of
applicable income taxes of
$499........................ -- 750 -- -- --
-------- -------- -------- -------- --------
Net income................... $ 1,107 $ 1,579 $ 4,533 $ 7,860 $ 9,262
======== ======== ======== ======== ========
Income per share of common
stock:
Primary:
Income before
extraordinary loss...... $ .53 $ .78 $ .72 $ 1.24 $ 1.46
Extraordinary loss....... -- .25 -- -- --
-------- -------- -------- -------- --------
Net income............... $ .53 $ .53 $ .72 $ 1.24 $ 1.46
======== ======== ======== ======== ========
Fully diluted:
Income before
extraordinary loss...... $ .50 $ .75 $ .70 $ 1.22 $ 1.43
Extraordinary loss....... -- .24 -- -- --
-------- -------- -------- -------- --------
Net income............... $ .50 $ .51 $ .70 $ 1.22 $ 1.43
======== ======== ======== ======== ========
Weighted average shares
outstanding:
Primary.................... 2,102 2,972 6,334 6,334 6,358
======== ======== ======== ======== ========
Fully diluted.............. 2,229 3,099 6,462 6,462 6,475
======== ======== ======== ======== ========

See accompanying notes.

F-4

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SCP POOL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

[Enlarge/Download Table]

CLASS A CLASS B ADDITIONAL
COMMON STOCK COMMON STOCK COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- ------ -------- ------ ---------- -------- -------

Balance at January 1,
1994................... -- $ -- 1,275,361 $ 1 71,597 $ -- $ 1,929 $ -- $ 1,930
Net income............. -- -- -- -- -- -- -- 1,107 1,107
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1994................... -- -- 1,275,361 1 71,597 -- 1,929 1,107 3,037
Common stock issued.... -- -- 36,730 -- -- -- 300 -- 300
Recapitalization....... 3,104,109 3 (1,312,091) (1) (71,597) -- 7,198 -- 7,200
Initial public
offering.............. 3,080,105 3 -- -- -- -- 19,181 -- 19,184
Exercise of
overallotment option.. 150,000 -- -- -- -- -- 977 -- 977
Net income............. -- -- -- -- -- -- -- 1,579 1,579
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1995................... 6,334,214 6 -- -- -- -- 29,585 2,686 32,277
Net income............. -- -- -- -- -- -- -- 4,533 4,533
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at December 31,
1996................... 6,334,214 6 -- -- -- -- 29,585 7,219 36,810
Common stock issued
(unaudited)........... 55,846 -- -- -- -- -- 120 -- 120
Net income (unaudited). -- -- -- -- -- -- -- 9,262 9,262
---------- ----- ---------- ---- -------- ----- ------- ------- -------
Balance at September 30,
1997 (unaudited)....... 6,390,060 $ 6 -- $ -- -- $ -- $29,705 $16,481 $46,192
========== ===== ========== ==== ======== ===== ======= ======= =======

See accompanying notes.

F-5

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SCP POOL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

[Download Table]

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)

OPERATING ACTIVITIES
Net income.................. $ 1,107 $ 1,579 $ 4,533 $ 7,860 $ 9,262
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Write-off of loan
financing fees............ -- 1,249 -- -- --
Depreciation and
amortization.............. 1,566 2,069 2,503 1,801 1,868
Provision for doubtful
accounts receivable, net
of write-offs............. 369 506 388 650 766
Provision for inventory
obsolescence, net of
write-offs................ 482 678 (86) 431 793
Provision for deferred
income taxes.............. 344 935 1,029 31 (486)
Loss (gain) on sale of
property and equipment.... (5) 13 155 (76) (25)
Changes in operating
assets and liabilities,
net of effects of
acquisitions and
disposals:
Accounts receivable...... (2,198) (3,686) (12,571) (6,062) (12,363)
Inventory................ (5,590) (3,667) 4,877 (1,470) (2,250)
Prepaid expenses and
other assets............ (337) (790) 31 (312) (202)
Accounts payable......... 3,048 1,981 2,638 (4,365) (1,792)
Accrued and other current
liabilities............. 1,646 (88) 4,129 6,146 2,713
-------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities............ 432 779 7,626 4,634 (1,716)
INVESTING ACTIVITIES
Acquisition of businesses... (2,130) (11,108) (1,664) -- --
Purchase of property and
equipment.................. (372) (866) (788) (554) (732)
Proceeds from sale of
property and equipment..... 19 127 73 156 72
-------- -------- -------- -------- --------
Net cash used in investing
activities................. (2,483) (11,847) (2,379) (398) (660)
FINANCING ACTIVITIES
Net borrowings (repayments)
of revolving loan.......... 3,450 6,615 (1,000) (13,000) 13,500
Proceeds from long-term
debt....................... -- 7,200 -- 15,577 --
Payments on long-term debt.. (1,500) (21,799) (1,669) (2,757) (13,909)
Issuance of common stock.... -- 20,461 -- -- 92
Payment of debt prepayment
premium.................... -- (210) -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities... 1,950 12,267 (2,669) (180) (317)
-------- -------- -------- -------- --------
Change in cash and cash
equivalents................ (101) 1,199 2,578 4,056 (2,693)
Cash and cash equivalents at
beginning of period........ 945 844 2,043 2,043 4,621
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period.............. $ 844 $ 2,043 $ 4,621 $ 6,099 $ 1,928
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid (received) during
the period for:
Interest................... $ 3,285 $ 5,883 $ 3,279 $ 1,139 $ 3,450
======== ======== ======== ======== ========
Income taxes, net of
refunds................... $ 1,121 $ (33) $ (561) $ 10 $ 4,027
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
Long-term debt issued to
acquire businesses......... $ -- $ 2,650 $ 31,846 $ 32,691 $ --
======== ======== ======== ======== ========
Long-term debt reduced
through sale of Alliance... $ -- $ -- $ 4,376 $ -- $ --
======== ======== ======== ======== ========

See accompanying notes.

F-6

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Statements

The consolidated balance sheet as of September 30, 1997 and the related
consolidated statements of income and retained earnings and cash flows for the
nine months ended September 30, 1996 and 1997 and related notes (interim
financial information) have been prepared by SCP Pool Corporation and are
unaudited. In the opinion of management, the interim financial information
includes all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results of the interim periods.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the interim financial
information. The interim financial information should be read in conjunction
with SCP Pool Corporation's audited consolidated financial statements
appearing herein. The Company's business is highly seasonal. In general, sales
and net income are highest during the second and third quarter, which
represent the peak months of swimming pool use and installation. The results
for the nine months ended September 30, 1997 may not be indicative of
operating results for the year ending December 31, 1997.

Description of Business

SCP Pool Corporation and its wholly owned subsidiaries (collectively
referred to as the Company) maintain 69 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.

On September 26, 1996, the Company acquired certain assets, primarily
inventory and property and equipment, of The B-L Network, Inc. (BLN), a
wholesaler of swimming pool supplies with 39 service centers in 12 states.
$31.8 million of the aggregate purchase price was financed by BLN, with the
remaining $2.4 million representing liabilities assumed (see Note 6) and other
costs incurred by the Company. This acquisition has been accounted for using
the purchase method of accounting and the results of operations have been
included in the accompanying consolidated financial statements since the date
of acquisition. The cost of the acquisition has been allocated as follows, on
the basis of the fair value of the assets acquired (in thousands):

[Download Table]

Inventory......................................................... $25,674
Other current assets.............................................. 389
Property and equipment............................................ 2,705
Other assets...................................................... 1,136
Goodwill.......................................................... 4,309
-------
$34,213
=======

Unaudited pro forma results of operations of the Company for the years ended
December 31, 1995 and 1996, giving effect to the BLN acquisition as if it had
occurred as of January 1, 1995, are as follows (in thousands, except per share
data):

[Download Table]

1995 1996
-------- --------

Net sales.............................................. $301,983 $364,702
Gross profit........................................... $ 64,512 $ 74,388
Operating income....................................... $ 9,619 $ 10,095
Income before extraordinary loss....................... $ 1,198 $ 3,098
Net income............................................. $ 448 $ 3,098
Net income per share:
Primary.............................................. $ .15 $ .49
Fully diluted........................................ $ .15 $ .48

F-7

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The unaudited pro forma consolidated results of operations for the years
ended December 31, 1995 and 1996 include pro forma adjustments for the
incremental increase or decrease in amortization of goodwill and other
intangible assets, interest expense, and income taxes associated with the
acquisition. It does not reflect the anticipated savings in purchasing costs
at BLN during the periods presented, nor does it reflect cost savings from the
closure of certain BLN service centers.

In October 1996, the Company sold certain assets, including inventory and
fixed assets, of Alliance Packaging, Inc., a wholly owned subsidiary which
operates a manufacturing and repackaging facility in Dallas, Texas, to Bio-
Lab, Inc. (Bio-Lab), the parent company of BLN, for approximately $5.4 million
which approximated the book value of the assets sold.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.

Seasonality and Weather

The Company's business is highly seasonal. Sales are substantially lower
during the first and fourth quarters of the year, when the Company may incur
net losses. The principal external factor affecting the Company's business is
weather. Unseasonably early or late warming trends can increase or decrease
the length of the pool season and unseasonably cool weather or extraordinary
rainfall during the peak season can decrease swimming pool use, installation
and maintenance, each of which can adversely affect the Company's sales and
operating profit.

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.

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

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. Credit losses have been within management's expectations.

Inventories

Inventories consist primarily of goods purchased for resale and are carried
at the lower of cost, using the average cost method, or market. At December
31, 1995 and 1996, the reserve for inventory obsolescence was approximately
$1,800,000 and $1,714,000, respectively. The reserve for inventory
obsolescence at each service center is based upon a number of factors,
including the experience of the manager at the service center, the previous
operating performance of the service center, geographical location, product
offerings, and other factors. The Company believes that the reserve for
inventory obsolescence may periodically require adjustment as the factors
identified above change.

F-8

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment is stated at cost. The Company provides for
depreciation principally by the straight-line method over estimated useful
lives of three years for autos and trucks, five to ten years for leasehold
improvements, and ten years for furniture and fixtures and machinery and
equipment. Depreciation expense was approximately $385,000, $724,000 and
$1,012,000 in 1994, 1995 and 1996, respectively.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. At December 31, 1995 and 1996,
accumulated amortization was approximately $1,418,000 and $2,211,000,
respectively. The recoverability of goodwill is assessed periodically 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 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. In addition, the Company assesses
long-lived assets for impairment under FASB Statement No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
(FAS 121). Under those rules, goodwill associated with assets acquired in a
purchase business combination is included in impairment evaluations when
events or circumstances exist that indicate the carrying amounts of those
assets may not be recoverable.

Other Assets

Loan financing fees are being amortized over the term of the related debt.
The noncompete agreement and organization costs are being amortized over five
years.

Income Taxes

Deferred income taxes are determined by the liability method in accordance
with Statement of Financial Accounting Standards (FAS) No. 109, 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.

Impairment of Long-Lived Assets

In January 1996, the Company adopted FAS 121 which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts. FAS 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. The adoption had no effect on the Company's financial statements.

Stock Compensation Arrangements

The Company accounts for its stock compensation arrangements under the
provisions of APB 25, Accounting for Stock Issued to Employees.

F-9

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS

Additional information regarding certain balance sheet accounts is presented
below (in thousands):

[Download Table]

DECEMBER 31
--------------- SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)

Receivables:
Trade accounts, less allowance of $1,006
in 1995 and $1,394 in 1996............... $ 7,430 $21,578 $32,031
Recoverable income taxes.................. 552 -- --
Vendor rebates............................ 1,387 1,451 3,183
Insurance claims.......................... 1,793 -- --
Other..................................... 928 2,264 1,675
------- ------- -------
$12,090 $25,293 $36,889
======= ======= =======
Property and equipment:
Land...................................... $ -- $ 475 $ 429
Building.................................. -- 622 1,001
Autos and trucks.......................... 490 264 180
Machinery and equipment................... 2,176 1,411 1,504
Furniture and fixtures.................... 1,375 2,648 3,119
Leasehold improvements.................... 463 565 507
------- ------- -------
4,504 5,985 6,740
Less accumulated depreciation............. 1,034 1,572 1,994
------- ------- -------
$ 3,470 $ 4,413 $ 4,746
======= ======= =======
Other assets:
Loan financing fees....................... $ 1,725 $ 2,274 $ 2,365
Noncompete agreement...................... 500 500 500
Organization costs........................ 660 1,168 1,272
Other..................................... 310 347 232
------- ------- -------
3,195 4,289 4,369
Less accumulated amortization............. 864 1,516 2,030
------- ------- -------
$ 2,331 $ 2,773 $ 2,339
======= ======= =======
Accrued and other current liabilities:
Salaries, bonuses, and commissions........ $ 2,099 $ 3,586 $ 3,596
Income taxes payable...................... 116 1,883 4,018
Other..................................... 860 2,438 3,315
------- ------- -------
$ 3,075 $ 7,907 $10,929
======= ======= =======

F-10

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. DEBT

The components of the Company's debt were as follows (in thousands):

[Download Table]

DECEMBER 31
--------------- SEPTEMBER 30
1995 1996 1997
------- ------- ------------
(UNAUDITED)

Senior Revolving Note, variable rate (effective
interest rate of 9.25% at December 31, 1996),
due in 2002................................... $13,000 $12,000 $25,500
Senior Term Note, variable rate (effective
interest rate of 9.25% at December 31, 1996),
payable in quarterly installments of variable
amounts through 2002.......................... 10,701 24,000 22,500
Promissory Notes to BLN, interest rate of 6%,
payable in monthly installments of variable
amounts through 1998.......................... -- 13,384 1,859
8% Subordinated Notes, payable in annual
installments of $884,000 through 1998......... 2,650 1,768 884
10% Convertible Notes, due in 2002............. 125 125 96
------- ------- -------
26,476 51,277 50,839
Less current portion........................... 2,883 15,409 7,243
------- ------- -------
$23,593 $35,868 $43,596
======= ======= =======

Maturities of long-term debt for the five succeeding years are $15,409,000
in 1997, $6,743,000 in 1998, $5,000,000 in 1999, $5,000,000 in 2000, and
$5,000,000 in 2001.

The credit agreements include, among other things, covenants which require
the Company to maintain minimum levels of interest coverage and fixed charge
coverage and also restrict the Company's ability to pay dividends and make
capital expenditures. At December 31, 1996, the Company was in compliance with
all such covenants. Substantially all of the assets of the Company (other than
inventory acquired from BLN, which secures the Company's obligations to BLN)
are pledged as collateral for the Senior Revolving Note and the Senior Term
Note. Available credit under the Senior Revolving Note is $43 million, subject
to an accounts receivable and inventory borrowing base limit. At December 31,
1996, the unused available credit under the Senior Revolving Note was
approximately $10 million. The Company pays a quarterly commitment fee of .5%
per annum of the unused portion of available credit under the Senior Revolving
Note. In September 1996, the Company converted approximately $15.6 million due
under its Revolving Note to the Term Note.

The Convertible Notes may be converted at any time through December 31, 2002
into shares of the Company's common stock at a conversion price of $.98 per
share. At December 31, 1996, the conversion of these notes would result in the
issuance of 127,551 shares of the Company's common stock. Such shares have
been reserved by the Company.

The carrying amount of long-term debt approximates fair value. The fair
value of long-term debt was estimated using a discounted cash flow analysis
based on the Company's current incremental borrowing rates for similar types
of borrowing arrangements.

The net proceeds of the Company's initial public offering were used
primarily to reduce indebtedness and resulted in an extraordinary charge, net
of tax in 1995 of approximately $750,000 ($.25 per share) for the write-off of
loan financing fees and a prepayment premium associated with extinguishing
such indebtedness.

F-11

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. INCOME TAXES

Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):

[Download Table]

DECEMBER 31
-------------
1995 1996
------ ------

Deferred tax liabilities:
Goodwill................................................. $ 893 $2,094
Trade discounts on purchases............................. 264 45
Prepaid expenses......................................... 119 119
Other.................................................... 187 383
------ ------
Total deferred tax liabilities............................. 1,463 2,641
Deferred tax assets:
Inventory................................................ 322 134
Allowance for doubtful accounts.......................... 392 544
Other.................................................... 51 236
------ ------
Total deferred tax assets.................................. 765 914
------ ------
Net deferred tax liabilities............................... $ 698 $1,727
====== ======

Significant components of the provision for income taxes, before the income
tax effect of the extraordinary loss, were as follows (in thousands):

[Download Table]

DECEMBER 31
------------------
1994 1995 1996
---- ------ ------

Current:
Federal.............................................. $362 $ 484 $1,634
State................................................ 64 70 240
---- ------ ------
426 554 1,874
Deferred:
Federal.............................................. 292 816 898
State................................................ 52 120 131
---- ------ ------
344 936 1,029
---- ------ ------
Total.................................................. $770 $1,490 $2,903
==== ====== ======

The reconciliation of income tax computed at the federal statutory rates to
income tax expense, before the income tax effect of the extraordinary loss,
was (in thousands):

[Download Table]

DECEMBER 31
------------------
1994 1995 1996
---- ------ ------

Tax at statutory rates................................ $638 $1,298 $2,528
Other, primarily state income taxes................... 132 192 375
---- ------ ------
Total............................................... $770 $1,490 $2,903
==== ====== ======

5. ISSUANCE OF COMMON STOCK AND EARNINGS PER SHARE

The Company issued 3,080,105 shares of its common stock in an initial public
offering in October 1995. In connection with the public offering, the Company
granted an overallotment option to the underwriters. In November 1995, the
underwriters exercised a portion of this option, and an additional 150,000
shares of the Company's common stock were issued.

F-12

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A recapitalization occurred in connection with the public offering which
included (i) the conversion of all outstanding shares of the Company's Class B
common stock to Class A common stock, (ii) the exchange of $7,200,000 of
Junior Subordinated Notes for Class A common stock, (iii) reclassification of
the Company's Class A common stock to common stock, and (iv) a stock split in
the ratio of approximately 2.04-to-1.

Historical primary earnings per share is calculated by dividing net income
by the weighted average number of common shares outstanding during the year,
adjusted for the stock split. Historical fully diluted earnings per share is
calculated by dividing net income, as adjusted for the assumed reduction in
interest expense, net of tax, related to the Company's convertible notes by
the weighted average number of common shares outstanding during the year,
adjusted for the stock split and the shares contingently issuable upon the
exercise of the convertible notes payable.

The computation of net income, weighted average shares outstanding and
supplementary net income per share assuming the conversion of the Junior
Subordinated Notes at the initial public offering price for the years ended
December 31, 1995 and 1994 are calculated as follows as if the offering had
taken place on January 1, 1994 (in thousands, except per share data):

[Download Table]

YEAR ENDED
DECEMBER 31
-------------
1994 1995
------ ------

NET INCOME
Primary:
Historical net income before extraordinary loss............ $1,107 $2,329
Adjustment for interest expense, net of tax in Junior
Subordinated Notes........................................ 420 350
------ ------
Adjusted net income before extraordinary loss.............. 1,527 2,679
Extraordinary loss......................................... -- (750)
------ ------
Adjusted net income........................................ $1,527 $1,929
====== ======
Fully diluted:
Adjusted net income before extraordinary loss.............. $1,527 $2,679
Adjustment for interest expense, net of tax, on Convertible
Notes..................................................... 8 8
------ ------
Adjusted net income before extraordinary loss.............. 1,535 2,687
Extraordinary loss......................................... -- (750)
------ ------
Adjusted net income........................................ $1,535 $1,937
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary:
Historical weighted average shares of common stock,
adjusted for split........................................ 2,102 2,972
Adjustment for shares added as a result of conversion of
Junior Subordinated Notes................................. 1,029 806
------ ------
3,131 3,778
Fully diluted:
Adjustment for shares related to Convertible Notes......... 128 128
------ ------
3,259 3,906
====== ======

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

[Download Table]

YEAR ENDED
DECEMBER 31
------------
1994 1995
------ -----

SUPPLEMENTARY NET INCOME PER SHARE
Primary:
Before extraordinary loss.................................... $ .49 $ .71
Extraordinary loss........................................... -- (.20)
------ -----
Adjusted net income.......................................... $ .49 $ .51
====== =====
Fully diluted:
Before extraordinary loss.................................... $ .47 $ .69
Extraordinary loss........................................... -- (.19)
------ -----
Adjusted net income.......................................... $ .47 $ .50
====== =====

The computation of net income, weighted average shares outstanding and
supplementary net income per share for the year ended December 31, 1995,
assuming the Company's public offering and conversion of Junior Subordinated
Notes had taken place on January 1, 1995, are as follows (in thousands, except
per share data):

[Download Table]

NET INCOME
Primary:
Historical net income before extraordinary loss................ $2,329
Adjustments:
Interest expense from the recapitalization and the
application of net proceeds of the Offering................. 2,149
Management fee to majority stockholder....................... 208
Amortization of financing fees of indebtedness repaid........ 142
Income tax effect............................................ (975)
------
Adjusted net income............................................ 3,853
Fully diluted:
Adjustment for interest expense, net of tax, on Convertible
Notes......................................................... 8
------
Adjusted net income............................................ $3,861
======
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary:
Historical weighted average shares of common stock adjusted for
split......................................................... 2,972
Adjustment for shares added as a result of:
Conversion of Junior Subordinated Notes...................... 806
Initial public offering...................................... 2,410
Exercise of overallotment option............................. 146
------
6,334
Fully diluted:
Adjustment for shares related to Convertible Notes............. 128
------
6,462
======
SUPPLEMENTARY NET INCOME PER SHARE
Primary.......................................................... $ .61
======
Fully diluted.................................................... $ .60
======

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

The Company leases facilities for its service centers and corporate office
and vehicles under noncancelable operating leases that expire in various years
through 2009 but which have options to extend for various terms. Rental
expense under such operating leases was approximately $1,641,000 in 1994,
$3,174,000 and in 1995 $4,815,000 in 1996. The future minimum lease payments
as of December 31, 1996 related to noncancelable operating leases with initial
terms of one year or more are set forth below (in thousands):

[Download Table]

1997.............................................................. $ 5,479
1998.............................................................. 4,231
1999.............................................................. 3,413
2000.............................................................. 2,415
2001.............................................................. 1,371
Thereafter........................................................ 2,705
-------
$19,614
=======

In connection with the acquisition of BLN, the Company recorded liabilities
at the date of acquisition of approximately $1,200,000 for lease buyouts,
occupancy costs and employee termination costs related to the planned closing
of 16 BLN facilities. As of December 31, 1996, the Company has closed all of
the above-mentioned BLN facilities and has a remaining accrual of
approximately $700,000 to settle the remaining leases and pay any remaining
severance costs. While management believes this amount is adequate to finalize
the closure of these BLN facilities, the actual settlements may result in
additional adjustments to this accrual. Management expects all settlements to
be completed in 1997.

Contemporaneously with the Company's acquisition of BLN and its sale of
Alliance, the Company entered into vendor supply agreements with Bio-Lab.
Under the terms of one of these agreements, the Company is required to
purchase a certain percentage of its annual requirements for the products it
previously purchased through Alliance at prices defined in that supply
agreement. The supply agreements have an initial term which expires September
26, 2001, with an indefinite number of three-year renewal periods until
terminated by either party.

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.

7. RELATED PARTY TRANSACTIONS

The Company leases an office building from a limited liability company, the
members of which include certain officers and stockholders of the Company and
a trust, the beneficiaries of which are children of an officer and stockholder
of the Company. The lease is a noncancelable operating lease which expires in
2009. Rent expense for this lease was approximately $44,000 in 1994, and
$78,000 in 1995, $83,000 in 1996.

The Company also leases its Baton Rouge service center facility from a
trust, the beneficiaries of which are children of an officer and stockholder
of the Company. This lease is a noncancelable operating lease which expires in
2000. Rent expense for this lease was approximately $61,000 in 1994, $62,000
in 1995 and $63,000 in 1996.

In connection with a 1995 acquisition, the Company entered into eight leases
with the acquired company's previous stockholder for warehouse facilities in
California. The lease agreements have initial terms of five years,

F-15

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

commencing on February 28, 1995, and monthly rental rates ranging from
approximately $4,000 to $9,000. The aggregate monthly rental for all eight
leases is approximately $46,000. At the end of the lease term, the Company has
the option to renew each lease for an additional five years at the then fair
market rental rate. Rental expense under these leases was approximately
$438,000 in 1995 and $775,000 in 1996. In addition, in 1995 the Company paid
$884,000 of the acquired company's past due payables to an affiliate of the
previous stockholder.

8. EMPLOYEE BENEFIT PLANS

The Companys employee's participate in a Company-sponsored savings and
retirement plan which provides for discretionary Company contributions under a
profit-sharing provision. Employees who are eligible to participate in the
savings plan are able to contribute a percentage of their base compensation
not to exceed 10%, subject to a dollar limit. The Company contributes an
amount equal to 25% of employee contributions up to 6% of their base
compensation. Employee contributions are invested in certain equity and fixed
income securities based on employee elections. Matching contributions and
profit-sharing contributions made by the Company were, $53,000 and $275,000 in
1994, $77,000 and $485,000 in 1995 and $113,000 and $650,000 in 1996.

9. STOCK OPTION PLANS

In February 1995, the Company's board of directors adopted the 1995 Stock
Option Plan under which the board of directors is authorized to grant, at its
discretion, to employees, agents, consultants or independent contractors of
the Company, options to purchase shares of common stock. The number of shares
granted under this plan is limited to an aggregate amount of 600,000. Granted
options have an exercise price of not less than the fair market value of the
stock on the date of grant. Options generally are exercisable two years after
the date of grant and expire ten years after the date of grant.

In April 1996, the Company's board of directors adopted the SCP Pool
Corporation Non-Employee Directors Equity Incentive Plan, under which the
Company grants to each non-employee director options to purchase shares of the
Company's common stock. The number of shares granted under this plan is
limited to an aggregate amount of 300,000. The options will have an excerise
price of not less than the fair market value of the stock on the date of
grant, and generally are exercisable one year after the date of grant and
expire ten years after the date of grant.

FASB Statement No. 123, Accounting for Stock-Based Compensation, requires
the Company to disclose pro forma information regarding net income and
earnings per share as if the Company had accounted for its employee stock
options under the fair value method. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1995 and 1996, respectively:
risk-free interest rates of 6.68% and 5.9%; a dividend yield of 0% for both
years; volatility factors of the expected market price of the Company's common
stock of .32 for both years; and a weighted-average expected life of the
option of 2.5 and 3.4 years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

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SCP POOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. Had the
Company's stock based compensation plan been determined based on the fair
value at the grant dates, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below (in
thousands, except per share data):

[Download Table]

1995 1996
------ ------

Pro forma net income....................................... $1,568 $4,392
Pro forma earnings per share:
Primary.................................................. $ .53 $ .69
Fully diluted............................................ $ .51 $ .68

A summary of the Company's stock option activity and related information for
the plans described above are as follows:

[Download Table]

WEIGHTED
COMMON AVERAGE
STOCK EXERCISE
SHARES PRICE
------- --------

Outstanding at December 31, 1994......................... -- $ --
Granted................................................ 46,926 3.43
------- -----
Outstanding at December 31, 1995......................... 46,926 3.43
Granted................................................ 121,875 8.13
------- -----
Outstanding at December 31, 1996......................... 168,801 $6.82
======= =====

In 1995 and 1996, the weighted average fair value of options granted were
$.92 and $2.41, respectively.

In February 1995, the Company granted options for 46,926 shares with an
exercise price of $3.43. At December 31, 1996, none of these options were
exercisable and their remaining contractual life was 8.2 years. In 1996, the
Company granted options for 121,875 shares, with exercise prices ranging from
$7.50 to $11.33, which had a weighted average remaining contractual life of
9.1 years at December 31, 1996. At December 31, 1996, 45,000 of the 1996
granted options were exercisable at an exercise price of $7.50.

10. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a tabulation of the Company's unaudited quarterly results
of operations for the year ended December 31, 1996 (in thousands, except per
share data):

[Download Table]

QUARTER ENDED
----------------------------------------------------------
3/96 6/96 9/96 12/96 3/97 6/97 9/97
------- ------- ------- ------- ------- -------- -------

Net sales............... $41,145 $85,867 $62,344 $46,488 $63,565 $124,970 $98,492
Gross profit............ 9,273 20,042 13,531 9,184 13,960 28,159 21,460
Net income (loss)....... 78 5,615 2,168 (3,328) (603) 6,394 3,471
Net income (loss) per
share:
Primary............... $ .01 $ .89 $ .34 $ (.53) $ (.10) $ 1.01 $ .54
Fully diluted......... .01 .87 .34 (.51) (.09) .99 .53

11. STOCK SPLIT

On September 4, 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
distribution on September 29, 1997 to the stockholders of record at the close
of business on September 15, 1997. Accordingly, all shares, per-share data and
related capital amounts for all periods presented reflect the effects of this
split.

F-17

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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 December 31, 1995 and September 25, 1996 and the related
statements of income and retained earnings (deficit) and cash flows for each
of the two years in the period ended December 31, 1995 and for the period
ended September 25, 1996. 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.

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
December 31, 1995 and September 25, 1996, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1995 and for the period ended September 25, 1996, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Atlanta, Georgia
December 20, 1996, except for
Note 8, as to which the date is October 21, 1997

F-18

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THE B-L NETWORK, INC.

BALANCE SHEETS

[Download Table]

DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------
(IN THOUSANDS)

ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,454 $ --
Receivables, net.................................. 12,534 17,074
Inventory, net.................................... 26,546 27,267
Prepaid expenses.................................. 495 471
------- -------
Total current assets............................ 41,029 44,812
Property and equipment, net......................... 3,192 2,960
Other assets, net................................... 1,087 1,011
------- -------
Total assets.................................... $45,308 $48,783
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable............................ $ 7,282 $ 4,375
Accrued and other current liabilities............. 1,488 3,019
------- -------
Total current liabilities....................... 8,770 7,394
Due to Parent....................................... 9,418 15,834
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)....................... 614 (951)
------- -------
Total stockholder's equity...................... 27,120 25,555
------- -------
Total liabilities and stockholder's equity...... $45,308 $48,783
======= =======

See accompanying notes.

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THE B-L NETWORK, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)

[Download Table]

YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------------ SEPTEMBER 25,
1994 1995 1996
-------- -------- -------------
(IN THOUSANDS)

Net sales.................................... $134,739 $140,888 $128,858
Cost of sales................................ 109,788 113,497 106,500
-------- -------- --------
Gross profit................................. 24,951 27,391 22,358
Warehouse, selling and administrative
expenses.................................... 24,780 27,195 22,673
-------- -------- --------
Operating income (loss)...................... 171 196 (315)
Other income (expense):
Interest expense........................... (121) (662) (1,024)
Miscellaneous income (expense)............. (88) 46 (466)
-------- -------- --------
(209) (616) (1,490)
-------- -------- --------
Loss before income taxes..................... (38) (420) (1,805)
Provision (benefit) for income taxes......... 82 (45) (240)
-------- -------- --------
Net loss..................................... (120) (375) (1,565)
Retained earnings at beginning of period..... 1,109 989 614
-------- -------- --------
Retained earnings (deficit) at end of period. $ 989 $ 614 $ (951)
======== ======== ========

See accompanying notes.

F-20

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THE B-L NETWORK, INC.

STATEMENTS OF CASH FLOWS

[Download Table]

YEAR ENDED
DECEMBER 31, PERIOD ENDED
---------------- SEPTEMBER 25,
1994 1995 1996
------- ------- -------------
(IN THOUSANDS)

OPERATING ACTIVITIES
Net loss...................................... $ (120) $ (375) $(1,565)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 631 684 627
Provision for doubtful accounts receivable.. 5 211 494
Provision for inventory obsolescence........ 177 2 26
Loss (gain) on sale of property and
equipment.................................. -- 15 (4)
Changes in operating assets and liabilities:
Receivables............................... (3,476) (908) (5,008)
Inventory................................. (3,671) 124 (747)
Prepaid expenses and other assets......... (224) 186 (17)
Accounts payable.......................... 1,571 (870) (2,935)
Accrued and other current liabilities..... 383 (350) 1,531
------- ------- -------
Net cash used in operating activities... (4,724) (1,281) (7,598)
INVESTING ACTIVITIES
Acquisition of businesses..................... (1,286) -- --
Purchase of property and equipment............ (646) (794) (282)
Proceeds from sale of property and equipment.. -- 17 9
------- ------- -------
Net cash used in investing activities......... (1,932) (777) (273)
FINANCING ACTIVITIES
Net borrowings from parent.................... 7,447 1,776 6,417
------- ------- -------
Net cash provided by financing activities..... 7,447 1,776 6,417
------- ------- -------
Net increase (decrease) in cash............... 791 (282) (1,454)
Cash at beginning of period................... 945 1,736 1,454
------- ------- -------
Cash at end of period......................... $ 1,736 $ 1,454 $ --
======= ======= =======

See accompanying notes.

F-21

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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.

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 December 31, 1995 and September 25, 1996, the reserve
for inventory obsolescence was approximately $1,382,000 and $1,408,000,
respectively.

F-22

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THE B-L NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 $454,000, $555,000,
and $493,000 for the years ended December 31, 1994 and 1995, and for the
period ended September 25, 1996, 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 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 $545,000, $868,000 and
$342,000 for the years ended December 31, 1994 and 1995 and for the period
ended September 25, 1996, respectively.

Use of 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.

F-23

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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):

[Download Table]

DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------

Receivables:
Trade accounts............................... $12,575 $18,366
Other........................................ 757 --
------- -------
13,332 18,366
Less allowance for doubtful accounts......... (798) (1,292)
------- -------
$12,534 $17,074
======= =======
Property and equipment:
Land and buildings........................... $ 1,337 $ 1,337
Machinery and equipment...................... 3,765 3,713
Leasehold improvements....................... 203 203
Construction in progress..................... 312 594
------- -------
5,617 5,847
Less accumulated depreciation................ (2,425) (2,887)
------- -------
$ 3,192 $ 2,960
======= =======
Other assets:
Goodwill..................................... $ 742 $ 742
Non-compete agreements....................... 700 700
Other........................................ 85 126
------- -------
1,527 1,568
Less accumulated amortization................ (440) (557)
------- -------
$ 1,087 $ 1,011
======= =======
Accrued and other current liabilities:
Salaries and bonuses......................... $ 464 $ 624
Accrued rebates.............................. 458 362
Unremitted sales tax......................... 148 220
Deferred revenue............................. 367 488
Freight...................................... 51 323
Accrued litigation........................... -- 598
Other........................................ -- 404
------- -------
$ 1,488 $ 3,019
======= =======

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.

F-24

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THE B-L NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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.

4. INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):

[Download Table]

DECEMBER 31, SEPTEMBER 25,
1995 1996
------------ -------------

Deferred tax assets:
Current:
Inventory capitalization................... $ 194 $ 199
Inventory reserve.......................... 525 535
Allowance for doubtful accounts............ 283 464
Litigation reserve......................... -- 227
Other...................................... 81 --
------ -------
Total current deferred tax assets........ 1,083 1,425
Noncurrent:
Intangible assets.......................... 96 120
------ -------
Total deferred tax assets................ 1,179 1,545
Deferred tax liabilities:
Noncurrent:
Depreciation............................... (148) (117)
Goodwill................................... (117) (113)
------ -------
Total deferred tax liabilities........... (265) (230)
------ -------
Net deferred tax assets........................ 914 1,315
Valuation allowance............................ (914) (1,315)
------ -------
Net deferred tax assets........................ $ -- $ --
====== =======

The net change in the total valuation allowance for the year ended December
31, 1995 and for the period ended September 25, 1996 was an increase of
approximately $50,000 and $401,000, respectively.

Significant components of the income tax provision (benefit) are as follows
(in thousands):

[Download Table]

YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------- SEPTEMBER 25,
1994 1995 1996
------ ------ -------------

Current:
Federal...................................... $ 69 $ (38) $(202)
State........................................ 13 (7) (38)
----- ------ -----
Total.................................... $ 82 $(45) $(240)
===== ====== =====

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THE B-L NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Reconciliations of the income tax provision (benefit) to the statutory
federal income tax rate are as follows (in thousands):

[Download Table]

YEAR ENDED
DECEMBER 31, PERIOD ENDED
------------- SEPTEMBER 25,
1994 1995 1996
------ ------ -------------

Tax at statutory rates...................... $ (13) $(143) $(614)
State income taxes, net of federal tax
benefit.................................... (2) (17) (71)
Deferred tax asset valuation................ 43 50 401
Other, net.................................. 54 65 44
----- ------ -----
Total................................... $ 82 $ (45) $(240)
===== ====== =====

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.

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 $2,414,000 and
$2,645,000 for the years ended December 31, 1994 and 1995 and $1,945,000 for
the period ended September 25, 1996, 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).

[Download Table]

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

F-26

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THE B-L NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

effect. Interest expense in the statement of operations 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
$14,382,000, $16,868,000 and $15,434,000 for the years ended December 31, 1994
and 1995, and for the period ended September 25, 1996, 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 years ended
December 31, 1994 and 1995 and for the period ended September 25, 1996 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).

F-27

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[PHOTOGRAPHS OF AN ABOVE-GROUND POOL AND TWO IN-GROUND POOLS]

Text: SCP Pool offers its customers a broad selection of products for both
above-ground and in-ground pools. These products include chemicals, packaged
pool kits providing walls, liner and bracing, and other pool equipment such as
cleaners, filters and pumps.

SCP Pool distributes over 34,000 national brand and private label products
to over 20,000 customers. Each of SCP Pool's 74 service centers are computer
linked with advanced information systems to enable its employees to provide
their customers with fast, efficient service.

424B1 Last Page of 77 TOC 1st Previous Next ↓Bottom Just 77th
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGIS-
TERED SECURITIES TO WHICH IT RELATES, OR AN OFFER TO BUY, OR SOLICITATION OF,
ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAW-
FUL.

---------------

TABLE OF CONTENTS

[Download Table]

PAGE
----

Prospectus Summary........................................................ 3
The Acquisitions.......................................................... 8
The 1997 Acquisition...................................................... 9
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Price Range of Common Stock............................................... 13
Capitalization............................................................ 14
Selected Consolidated Financial Data...................................... 15
Unaudited Pro Forma Condensed Consolidated Financial Data................. 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 27
Management................................................................ 35
Certain Relationships and Related Transactions............................ 39
Principal and Selling Stockholders........................................ 43
Description of Capital Stock.............................................. 44
Shares Eligible for Future Sale........................................... 45
Underwriting.............................................................. 47
Legal Matters............................................................. 48
Experts................................................................... 48
Additional Information.................................................... 48
Index to Financial Statements............................................. F-1

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2,400,000 SHARES

LOGO
LOGO

SCP POOL CORPORATION

COMMON STOCK

---------------

PROSPECTUS

---------------

MORGAN KEEGAN & COMPANY, INC.

THE ROBINSON-HUMPHREY COMPANY

JOHNSON RICE & COMPANY L.L.C.

DECEMBER 12, 1997

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B1’ Filing	Date	First	Last	Other Filings

	12/31/03	39		10-K, 4, 5, 8-K
	12/31/02	39	59	10-K, 5/A, 8-K, DEF 14A
	9/26/02	25
	9/26/01	63
	4/10/98	39	40
	1/24/98	38
	12/31/97	55		10-K
	12/17/97	1
Filed on:	12/15/97
	12/12/97	1	77	S-1/A
	12/11/97	1	13
	11/14/97	43		S-1
	11/13/97	30		10-Q, 8-K/A
	10/21/97	66	75
	9/30/97	3	55	10-Q
	9/29/97	50	65
	9/15/97	65
	9/4/97	65
	6/30/97	23		10-Q
	3/1/97	41
	2/14/97	50
	1/1/97	6	17
	12/31/96	6	74	10-K
	12/20/96	66
	10/31/96	32
	9/30/96	6	70	10-Q, 10-Q/A
	9/26/96	40	74	8-K, 8-K/A
	9/25/96	48	75
	1/24/96	38
	1/1/96	6	17
	12/31/95	15	75
	2/28/95	41	64
	1/1/95	23	62
	12/31/94	15	75
	11/4/94	73
	8/1/94	72
	6/10/94	41
	1/1/94	53	61
	12/31/93	8	27
	12/31/92	15
	3/31/92	41
				List all Filings

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Filing Submission 0000950131-97-007263 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Pool Corp – ‘424B1’ on 12/15/97

As of: Monday, 12/15/97 · Accession #: 950131-97-7263 · File #: 333-40245

Prospectus — Rule 424(b)(1)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(1)
Filing Table of Contents