Scp Pool Corporation Business Information, Profile, and History

Company Perspectives:

SCP Pool Corporation's mission is to provide exceptional value to its customers and suppliers, in order to provide exceptional return to its shareholders, while providing exceptional opportunities to its employees. ... As the leading distributor in the industry, SCP Pool Corporation's strategies are to promote the growth of the industry and the growth of its customers' businesses and to continuously strive to operate more effectively.

History of Scp Pool Corporation

SCP Pool Corporation, headquartered in Covington, Louisiana, is the world's largest independent distributer of swimming pool supplies and kindred products, primarily marketed to swimming pool builders and remodelers. Through its wholly-owned subsidiary, South Central Pool Supply, Inc., it also provides supplies and services to retail stores and swimming pool repair and maintenance companies. The corporation, the leading consolidator in its industry, offers a full line of pool products, including non-discretionary pool-maintenance supplies, such as chemical replacement parts, packaged pools, and swimming pool building kits; and pool equipment, such as cleaners, filters, heaters, pumps, and lights. As of February 2001, the company was distributing over 52,000 national brand and private label products to over 28,000 customers from its 160 service centers located in 35 states, the United Kingdom, and France. In 2000, the company was ranked 79th on Fortune's list of Fastest-Growing Companies.

1980-92: Slow and Steady Growth of SCP Pool

SCP Pools was founded in 1980 by Louisiana native, Frank J. St. Romain. The company opened as a small pool supply and construction company, then called South Central Pool Supply. Its only service center was located in Metairie, a New Orleans suburb. The new company did not actually open for business until the pool season began in the early spring of 1981.

At the time he started the company, St. Romain had been working in the pool business for over 20 years. Part of that time he was in the employ of Seablue Corporation, a Dallas-based company. When a conglomerate bought out Seablue, St. Romain and two associates, Maurice Van Dyke and William R. 'Rusty' Sexton, left the company to pursue other options. The three men became partners in South Central and its chief executives, with St. Romain serving as CEO and president, Sexton as chairman of the board, and Van Dyke as CFO.

For its first dozen years, South Central grew at a deliberate, moderate rate. It opened only one new location every year or two as it slowly developed its network of service centers in the south central area of the United States. As SCP Pool's president, Manuel J. Perez de la Mesa would later note, the company's expansion took a 'modest form' because, being a private company, 'it had limited access to capital.' It was a rock solid company, though. It logged an annual growth in both revenues and profits since it first opened its door and, in fact, would continue to do so into the next century. According to Perez de la Mesa, 'virtually all the earnings and whatever could be borrowed was used to fund the growth.'

1993-94: New Parentage and Accelerated Expansion

However, its growth did not really start accelerating until after 1993, the year in which the company was purchased in a leveraged buyout by Code Hennessey & Simmons Limited Partnership (CH & S), a venture capital firm located in Chicago. It was CH & S's plan to use South Central Pool Supply as a platform company and, primarily through acquisitions, more aggressively expand its network. It began pursuing that strategy in January 1994, when it acquired certain assets of Aqua Fab Industries, Inc., including eight service centers in the Midwest and southeast sections of the country. Although SCP would subsequently close three of these units, consolidating them into existing service centers, the purchase substantially increased SCP's operations and initiated the company's dynamic growth. SCP's annual sales also began their mercurial rise in 1994, growing to $102 million, up from $67.2 million in 1993 and $54.1 million in 1992. Thereafter, the company would average an annual increase in sales of $81.1 million, taking its gross revenues in 2000 to $669.8 million.

1995-98: Going Public and Continued Expansion

In 1995, SCP Pool went public. The revenues raised by its initial public offering (IPO) were used to retire the company's debt and provide the borrowing capability to further accelerate growth, both through new acquisitions and the opening of new service center locations. In the same year, SCP started its buying spree in earnest. In February, it acquired all the outstanding capital stock of Orcal Pool Supplies, Inc., which added nine service centers to the company's growing count. It followed that with the March purchase of certain assets of Aqua Chemical Sales and Delivery, Inc., primarily its inventory and a single Illinois service center. Later in the year, in October, the company acquired certain assets of Crest Distribution, a division of Aman Enterprises, Inc. Included were two service centers, located in Oregon and Washington, and their inventories. Next, in November, SCP Pool purchased the capital stock of Steven Portnoff Corporation, which added a service center in Scottsdale, Arizona, to its count. Finally, in December, the company acquired certain assets of Pool Mart of Nevada, Inc., a Portnoff affiliate with a service center in Las Vegas.

The result of its aggressive acquisition strategy was that by 1996 SCP had 44 service centers in operation nationwide; and it had just begun. In that same year, the company entered an agreement with Great Lakes Chemical, swapping its chemical and packing affiliate, Alliance Packaging, for BLN, the distribution arm of Great Lakes' subsidiary Bio-Lab, located in Decatur, Georgia. Great Lakes indicated that the swap would allow Bio-Lab to concentrate on its primary business: the manufacturing and packaging of chemicals for swimming pools and spas. The arrangement brought 39 service centers into SCP's burgeoning network and greatly expanded its geographical presence, particularly in Florida.

In 1997, the success of SCP encouraged Code Hennessey & Simmons to sell off half its interest in the company, moving its venture capital elsewhere. SCP was doing well without it, partly because of its track record as a public company. In December 1997, it made a second public stock offering, issuing 1,350,000 shares of common stock for the primary purpose of raising funds for additional, already planned acquisitions. At the end of the year, the company purchased the swimming pool products businesses of Pacific Industries, Inc., a subsidiary of the large, international conglomerate, Cook Group plc. Pacific, which was part of the Specialty Mouldings sector of Cookson's Plastic Division, entered a long-term supply agreement with SCP, whereby it would make a sizable portion of SCP's polymer pool products, including panels, braces, steps, liners, and other items used in building in-ground, vinyl pools. In 1996, before SCP bought it, Pacific had revenues of $59 million, with a net profit of about $3 million. The acquisition price for SCP was about $21 million.

Expansion continued through 1998. In January, SCP acquired certain assets of Bicknell Huston Distributors, Inc., a swimming-pool supplies wholesaler with 11 service centers in six northeastern states. The aggregate price tag of about $21 million was financed by the SCP Pool stock offering at the close of 1997. In February 1998, SCP also bought certain assets of Valve Engineering Acquisition Company, a privately-owned swimming pool supplies distributor located in Glendale, California. The deal boosted the number of SCP's centers in that state to 14 and increased its greater Los Angeles market presence. At the time of the purchase, SCP had 85 service centers spread through 30 states and was distributing over 34,000 national brand and private products to around 23,000 customers. Among other achievements in 1998, SCP had broadened its geographical market range to Pennsylvania, New Jersey, New York, and New England, where, previously, it had lacked a presence. At the end of 1998, Code Hennessey & Simmons cut loose from SCP Pool altogether, distributing the remaining balance of its interest in the company to its fundholders.

1999 and Beyond

St. Romain retired early in 1999, when chairman Rusty Sexton succeeded him as CEO. Sexton also served briefly as interim president, the position to which Perez de la Mesa was almost immediately elected. At the time of his appointment, Perez de la Mesa, who also assumed the job of COO, was serving as vice-president of operations of Watsco, Inc., an independent, wholesale distributor of residential central air conditioners, heating systems, and industrial and commercial refrigeration products located in Coconut Grove, Florida. Prior to working for Watsco, he had held management positions with Fresh Del Monte Produce N.V., RJR Nabisco, and IBM.

The changes at the top did not slow SCP's expansion one iota. In 1999, it completed four more acquisitions. In January it purchased certain assets of Benson Pump Company and the capital stock of Pratts Plastics Limited. Benson, operating in 16 states, had maintained 20 service centers. SCP consolidated the operations of 15 of these into existing service centers and closed one of the remaining five. Pratts, a British company, had just one service center, located in Essex, England.

SCP's international expansion into Europe continued towards the end of the year, when it also purchased substantially all of the assets of Garden Leisure Products, a privately-owned distributor of pool supplies based in West Sussex, England, and the capital stock of Jean Albouy, S.A., a distributor of pool equipment and supplies located in Rodez, France. This last marked SCP's first foray into the French market. It was also the company's fourth acquisition in Europe since August 1998.

In 1999, the company also entered into a strategic partnership with Advanced Data Exchange, then called The EC Company. Advanced Data Exchange was a provider of Internet business to business transaction/exchange services 'for buyers and digital marketplaces who are or will conduct significant transaction volume with small and mid-market suppliers.' The partnering agreement electronically enabled SCP's mid-market supply chain, improving its inventory management; reducing its paper handling, procurement, and carrying costs; increasing its sales; and improving its communication with its suppliers.

SCP's aggressive growth continued in 2000 and into 2001. In August 2000, it acquired the assets of Superior Pool Products, Inc., a subsidiary of Arch Chemicals, Inc., a corporation headquartered in Norwalk, Connecticut. Like SCP, Superior was a distributor of swimming pool equipment, parts, and supplies. In 1999, through its distribution network, consisting of 19 service centers in California, Arizona, and Nevada, Superior had sales in excess of $80 million.

Next, in December 2000, SCP purchased the assets of Pool-Rite, Inc., a privately-owned distributor of pool equipment with two service centers in the greater Miami area. In 1999, its net sales were approximately $6 million. The company had also announced the opening of a new service center in Fort Lauderdale, Florida. The acquisition of the three service centers marked SCP's initial entrance into the expansive, South Florida 'Gold Coast' market, the second largest in the nation. These acquisitions helped increase SCP's sales for 2000 by $100 million, up to $669.8 million, an 18 percent increase over its 1999 revenue.

The expansion seemed almost non-stop at the century's end. In February 2001, SCP announced that it had agreed to purchase all the assets of the pool division of Orlando, Florida-headquartered Hughes Supply, Inc., including a network of 31 service centers in the eastern part of the country. The Hughes division, in operation since 1995, had revenues of about $120 million in 2000, which would add substantially to the surging revenues of SCP.

Its flurry of acquisitions at the beginning of the new century argued that SCP Pool was a company still very much on the move and one that remained determined to be so. Noting that the year 2000 was SCP's 20th consecutive year of increased sales and profit growth, company chairman W.B. Sexton remarked, 'We are very pleased with how SCP has evolved and the growth opportunity that exists for SCP and the swimming pool industry.' What kind of growth? Well, as Perez de la Mesa wrote in a March 1, 2001 letter addressed to SCP's fellow industry stakeholders, 'there are over 60 million households in the U.S. that have the backyard space and income to own a swimming pool that don't.' So far, he continued, 'that means that we, as an industry, have captured barely ten percent of our potential market.' Succinctly put, the market water seemed just right for jumping in, and SCP was doing just that--with a very big running start.

Principal Subsidiaries: South Central Pool Supply, Inc.

Principal Competitors: Arch Chemicals, Inc.; Fort Wayne Pools; Great Lakes Chemical Corporation.

Chronology

• Key Dates:

• 1980: Frank St. Romain founds South Central Pool Supply.
• 1993: Company is acquired by Code Hennessey & Simmons.
• 1995: SCP goes public.
• 1997: Code Hennessey sells half its interest in SCP; company buys the distribution business of Pacific Industries, Inc.
• 1998: Remaining Code Hennessey interest is distributed to fundholders; SCP acquires assets of Valve Engineering Acquisition Company.
• 1999: Founder St. Romain retires, Rusty Sexton becomes CEO, and Perez de la Mesa is named president and COO.
• 2001: Company announces intent to purchase the pool division of Hughes Supply Inc.