UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO.: 0-26640
SCP POOL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE | 36-3943363 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
109 Northpark Boulevard, Covington, Louisiana |
70433-5001 | |
(Address of principal executive offices) | (Zip Code) |
985-892-5521
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) YES x NO ¨
At April 22, 2005, there were 52,505,849 outstanding shares of the registrants common stock, $.001 par value per share.
Form 10-Q
For the Quarter Ended March 31, 2005
INDEX
SCP POOL CORPORATION
(In thousands, except share data) |
(Unaudited)
March 31,
|
(Unaudited)
March 31,
|
(Note)
December 31,
|
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Assets |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 14,565 | $ | 2,859 | $ | 21,762 | ||||||
Receivables, net |
33,646 | 30,406 | 33,887 | |||||||||
Receivables pledged under receivables facility |
130,861 | 116,691 | 63,702 | |||||||||
Product inventories, net |
281,267 | 241,903 | 195,787 | |||||||||
Prepaid expenses |
3,841 | 7,111 | 6,057 | |||||||||
Deferred income taxes |
2,570 | 1,864 | 2,340 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Total current assets |
$ | 466,750 | $ | 400,834 | $ | 323,535 | ||||||
Property and equipment, net |
20,087 | 25,536 | 18,595 | |||||||||
Goodwill |
104,687 | 112,447 | 104,684 | |||||||||
Other intangible assets, net |
11,723 | 13,609 | 12,620 | |||||||||
Equity interest investment |
17,134 | | 18,616 | |||||||||
Other assets, net |
2,983 | 1,798 | 2,816 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Total assets |
$ | 623,364 | $ | 554,224 | $ | 480,866 | ||||||
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|
||||
Liabilities and stockholders equity |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
219,290 | 166,305 | 113,114 | |||||||||
Accrued and other current liabilities |
23,038 | 25,492 | 38,287 | |||||||||
Short-term financing |
57,665 | 49,998 | 42,595 | |||||||||
Current portion of other long-term liabilities |
1,350 | 94,245 | 1,350 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Total current liabilities |
$ | 301,343 | $ | 336,040 | $ | 195,346 | ||||||
Deferred income taxes |
11,624 | 10,570 | 11,625 | |||||||||
Long-term debt, less current portion |
82,914 | 3,472 | 50,420 | |||||||||
Other long-term liabilities |
3,116 | 4,466 | 3,140 | |||||||||
Stockholders equity |
||||||||||||
Common stock, $.001 par value; 100,000,000 shares authorized; 52,482,002, 53,352,908 and 52,186,711 shares issued and outstanding at 3/31/05, 3/31/04, and 12/31/04, respectively |
52 | 53 | 52 | |||||||||
Additional paid-in capital |
82,646 | 70,678 | 76,729 | |||||||||
Retained earnings |
139,880 | 128,572 | 141,772 | |||||||||
Treasury stock |
(45 | ) | | | ||||||||
Unearned compensation |
(988 | ) | (1,220 | ) | (1,092 | ) | ||||||
Accumulated other comprehensive income |
2,822 | 1,593 | 2,874 | |||||||||
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|
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Total stockholders equity |
$ | 224,367 | $ | 199,676 | $ | 220,335 | ||||||
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||||
Total liabilities and stockholders equity |
$ | 623,364 | $ | 554,224 | $ | 480,866 | ||||||
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Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.
The accompanying Notes are an integral part of the Consolidated Financial Statements.
1
Consolidated Statements of Income
(Unaudited)
|
Three Months Ended
March 31, |
||||||
(In thousands, except per share data) |
2005
|
2004
|
|||||
Net sales |
$ | 265,161 | $ | 234,648 | |||
Cost of sales |
193,210 | 169,616 | |||||
|
|
|
|
|
|||
Gross profit |
71,951 | 65,032 | |||||
Selling and administrative expenses |
60,650 | 57,360 | |||||
|
|
|
|
|
|||
Operating income |
11,301 | 7,672 | |||||
Interest expense |
1,080 | 983 | |||||
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|
|
|
|
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Income before income taxes and equity loss |
10,221 | 6,689 | |||||
Provision for income taxes |
3,986 | 2,609 | |||||
Equity loss in unconsolidated investment |
(1,482 | ) | | ||||
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|
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|
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Net income |
$ | 4,753 | $ | 4,080 | |||
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Earnings per share |
|||||||
Basic |
$ | 0.09 | $ | 0.08 | |||
Diluted |
$ | 0.09 | $ | 0.07 | |||
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Weighted average shares outstanding |
|||||||
Basic |
52,273 | 53,264 | |||||
Diluted |
55,494 | 56,389 | |||||
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Cash dividends declared per common share |
$ | 0.07 | $ | | |||
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The accompanying Notes are an integral part of the Consolidated Financial Statements.
2
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
Three Months Ended March 31, |
|||||||
(In thousands) |
2005
|
2004
|
||||||
Operating activities |
||||||||
Net income |
$ | 4,753 | $ | 4,080 | ||||
Adjustments to reconcile net income to net cash used in operating activities |
||||||||
Depreciation |
1,216 | 1,578 | ||||||
Amortization |
1,013 | 1,125 | ||||||
Equity loss in unconsolidated investment |
1,482 | | ||||||
Other |
(110 | ) | (1,022 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions |
||||||||
Receivables |
(66,706 | ) | (63,116 | ) | ||||
Product inventories |
(85,750 | ) | (47,922 | ) | ||||
Accounts payable |
106,176 | 47,993 | ||||||
Other current assets and liabilities |
(13,213 | ) | (12,574 | ) | ||||
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Net cash used in operating activities |
(51,139 | ) | (69,858 | ) | ||||
Investing activities |
||||||||
Acquisition of businesses, net of cash acquired |
(2 | ) | (307 | ) | ||||
Purchase of property and equipment, net of sale proceeds |
(2,772 | ) | (2,493 | ) | ||||
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Net cash used in investing activities |
(2,774 | ) | (2,800 | ) | ||||
Financing activities |
||||||||
Proceeds from revolving line of credit |
77,378 | 84,035 | ||||||
Payments on revolving line of credit |
(44,884 | ) | (30,040 | ) | ||||
Proceeds from asset-backed financing |
19,835 | 16,520 | ||||||
Payments on asset-backed financing |
(4,765 | ) | (8,940 | ) | ||||
Payments on other long-term debt |
(23 | ) | (158 | ) | ||||
Issuance of common stock under stock option plans |
5,917 | 1,806 | ||||||
Payment of cash dividends |
(3,672 | ) | | |||||
Purchase of treasury stock |
(3,024 | ) | (1,874 | ) | ||||
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Net cash provided by financing activities |
46,762 | 61,349 | ||||||
Effect of exchange rate changes on cash |
(46 | ) | 1,356 | |||||
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Change in cash and cash equivalents |
(7,197 | ) | (9,953 | ) | ||||
Cash and cash equivalents at beginning of period |
21,762 | 12,812 | ||||||
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Cash and cash equivalents at end of period |
$ | 14,565 | $ | 2,859 | ||||
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The accompanying Notes are integral part of the Consolidated Financial Statements.
3
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
SCP Pool Corporation (the Company , which may be referred to as we, us or our ) prepared the consolidated financial statements following accounting principles generally accepted in the United States (GAAP) for interim financial information and the requirements of the Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In managements opinion, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The results for the three month period ended March 31, 2005 are not necessarily indicative of the results to be expected for the twelve months ending December 31, 2005.
We reclassified certain deferred tax amounts in our Consolidated Balance Sheet for the period ended March 31, 2004 to conform to the 2005 presentation. This reclassification had no effect on net income or earnings per share as previously reported.
You should also read the financial statements and notes included in our 2004 Annual Report on Form 10-K. The accounting policies used in preparing these financial statements are the same as those described in our Annual Report.
2. Earnings Per Share
We calculate basic earnings per share (EPS) by dividing net income by the weighted average number of common shares outstanding. Diluted EPS includes the dilutive effects of stock and option awards.
All share and per share data and the related capital amounts for the period ended March 31, 2004 reflect the effects of a three-for-two stock split of our common stock, which was paid in the form of a stock dividend on September 10, 2004.
3. Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting stockholders equity that, under GAAP, are excluded from net income. In our case, these consist of foreign currency translation gains and losses and unrealized gains and losses on cash flow hedges, net of related income tax effects.
Comprehensive income was $4.7 million for the quarter ended March 31, 2005 and $4.4 million for the quarter ended March 31, 2004.
4. Equity Investment
As discussed in Note 3 in our Annual Report on Form 10-K, in December 2004 we acquired certain assets of Latham International LPs Canadian subsidiary, Pool Tech Distribution Inc. (Pool Tech or the Pool Tech Acquisition) and a 42% interest in Latham Acquisition Corporation (LAC) (collectively referred to as the 2004 Acquisitions). We funded the 2004 Acquisitions primarily through the exchange of manufacturing assets held by our subsidiaries in Ontario, Canada and Fort Wayne, Indiana and cash consideration. We have not yet finalized our allocation of the fair value received in connection with the 2004 Acquisitions, and we expect to complete certain working capital adjustments in the second quarter of 2005, as required by the transaction agreements.
We account for our 42% interest in LAC using the equity method of accounting. Accordingly, we report our share of income or loss based on our ownership interest in LAC.
4
SCP POOL CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
5. Stock-Based Compensation
We account for our employee stock options under the intrinsic value method described by Accounting Principles Bulletin 25, Accounting for Stock Issued to Employees . Accordingly, we do not record compensation expense for options issued with an exercise price equal to the stocks market price on the grant date. If we had accounted for our stock-based compensation using the fair value method described in Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-Based Compensation , our net income and earnings per share would have been reduced to the pro-forma amounts below (in thousands, except per share data):
Three Months Ended March 31, |
||||||||
2005
|
2004
|
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Reported net income |
$ | 4,753 | $ | 4,080 | ||||
Add: Stock-based employee compensation expense included in reported net income, net of the tax effect |
208 | 74 | ||||||
Deduct: Stock-based employee compensation expense determined under the fair value method for all awards, net of the tax effect |
(859 | ) | (884 | ) | ||||
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Pro-forma net income |
$ | 4,102 | $ | 3,270 | ||||
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Basic earnings per share |
||||||||
As reported |
$ | 0.09 | $ | 0.08 | ||||
Pro-forma |
$ | 0.08 | $ | 0.06 | ||||
Diluted earnings per share |
||||||||
As reported |
$ | 0.09 | $ | 0.07 | ||||
Pro-forma |
$ | 0.07 | $ | 0.06 | ||||
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On April 15, 2005, the SEC adopted an amendment to Regulation S-X that delays the date by which we must adopt SFAS 123(R), Share-Based Payment . Under these new rules, we are required to adopt SFAS 123(R) on January 1, 2006, although earlier adoption is permitted.
We are in the process of reviewing the provisions of SFAS 123(R), and currently we have made no definitive decisions regarding date of adoption, transition methods or option valuation methods.
5
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with Managements Discussion and Analysis included in our 2004 Annual Report on Form 10-K.
Despite colder than normal temperatures in the north and high rainfall on the west coast, net sales grew 13% to $265.2 million in the first quarter of 2005 compared to $234.6 million in the first quarter of 2004.
Our sales gains are a result of the combined growth in delivery volume and product pricing. Our volume gains reflect our success in meeting our customers needs by providing value-added products and programs, including the continued drive into newer product areas and growth in the installed base of pools. Management believes that supplier price increases, which we were able to pass through to customers, contributed to the sales growth.
New product initiatives are primarily centered around our Complementary Products category, for which sales grew 27% over the same period last year. These products, which our customers historically purchased from other suppliers, carry gross margins comparable to our traditional product categories, and are expected to grow at a faster rate than overall sales growth to comprise approximately 10% of total revenues in 2005.
Our operating income increased 47% to $11.3 million in the first quarter of 2005 from the same period last year due primarily to the growth in sales and to our ability to leverage our existing distribution infrastructure and to other ongoing improvements in our operations. These included improvements in initiatives related to product sourcing, procurement and logistics and working capital management. We expect to make continued operational improvements in the future.
Net income increased 16% from the first quarter of 2004 and included an expected seasonal loss of $1.5 million from our equity investment in LAC. LACs business is highly seasonal with the first and fourth quarters being the slowest parts of the year and the second and third quarters being the busiest. For the year, we expect a positive contribution to our earnings from LAC.
For the full year of 2005, we anticipate earnings per share growth of 15% to 18% over 2004.
In the first quarter of 2005, as more fully described in the Liquidity and Capital Resources section below, we renewed our accounts receivables securitization facility for an additional one year term.
Our business is subject to significant risks, including weather, competition, general economic conditions and other risks detailed below in our Cautionary Statement for Purpose of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
6
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
We currently conduct operations through 203 service centers in North America and Europe.
The following table presents information derived from the Consolidated Statements of Income expressed as a percentage of net sales.
Three Months Ended March 31, |
||||||
2005
|
2004
|
|||||
Net sales |
100.0 | % | 100.0 | % | ||
Cost of sales |
72.9 | 72.3 | ||||
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Gross profit |
27.1 | 27.7 | ||||
Selling and administrative expenses |
22.9 | 24.4 | ||||
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Operating income |
4.3 | 3.3 | ||||
Interest expense |
0.4 | 0.4 | ||||
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Income before income taxes and equity loss |
3.9 | 2.9 | ||||
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Note: Due to rounding, percentages may not add to total income before income taxes and equity loss.
Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004
Net Sales
Three Months Ended March 31, |
||||||||||||
(in millions) |
2005
|
2004
|
Change
|
|||||||||
Net sales |
$ | 265.2 | $ | 234.6 | $ | 30.6 | 13 | % |
Base business sales growth was 13% in the first quarter of 2005. Net sales increased primarily due to the following:
| a larger installed base of swimming pools resulting in increased sales of non-discretionary products; |
| price increases, which were passed through the supply chain; |
| the continued successful execution of our sales, marketing and service programs; and |
| 27% growth in Complementary Product sales. |
Gross Profit
Three Months Ended March 31, |
|||||||||||||||
(in millions) |
2005
|
2004
|
Change
|
||||||||||||
Gross profit |
$ | 72.0 | $ | 65.0 | $ | 7.0 | 11 | % | |||||||
Gross profit as a percent of net sales |
27.1 | % | 27.7 | % | (0.6 | )% |
The decrease in gross profit as a percent of net sales (gross margin) is attributable to the disposition of our North American manufacturing assets in December 2004 and market and product mix changes coupled with some margin erosion on the pass through of supplier price increases.
7
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations (continued)
Operating Expenses
Three Months Ended March 31, |
|||||||||||||||
(in millions) |
2005
|
2004
|
Change
|
||||||||||||
Operating expenses |
$ | 60.7 | $ | 57.4 | $ | 3.3 | 6 | % | |||||||
Operating expenses as a percent of net sales |
22.9 | % | 24.4 | % | (1.5 | )% |
Operating expenses as a percentage of net sales decreased 150 basis points from the first quarter of 2004 as we were able to leverage much of our existing distribution infrastructure and personnel base to support our sales growth.
Interest Expense
Interest expense increased $0.1 million between periods as the effective interest rate increased to 3.7% in 2005 from 2.5% in 2004 and average debt outstanding was higher in the first quarter of 2005 compared to the first quarter of 2004. The increase in the interest rate and higher average debt outstanding was partially offset by a $0.2 million decrease in the amortization of financing fees.
Income Taxes
The increase in income taxes is due to the $3.5 million increase in income before income taxes and equity loss. Our effective income tax rate remained unchanged at 39% from March 31, 2004 to March 31, 2005.
Net Income and Earnings Per Share
Three Months Ended March 31, |
||||||||||||
(in millions) |
2005
|
2004
|
Change
|
|||||||||
Net income |
$ | 4.8 | $ | 4.1 | $ | 0.7 | 16 | % |
In the first quarter of 2005, our equity interest in LAC generated a seasonal net loss of $1.5 million. We expect seasonal improvements in LACs business in the second and third quarters, followed by a seasonal slowdown in the fourth quarter.
Earnings per share for the first quarter of 2005 increased to $0.09 per diluted share compared to $0.07 in the first quarter of 2004. We expect earnings per share growth of 15%-18% for the year ending December 31, 2005.
8
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Seasonality and Quarterly Fluctuations
Our business is highly seasonal, and weather is the principal external factor affecting our business. The table below presents some of the possible effects resulting from various weather conditions.
Weather |
Possible Effects |
|||
Hot and dry | | Increased purchases of chemicals and supplies for existing swimming pools | ||
| Increased purchases of above-ground pools | |||
Unseasonably cool weather or extraordinary amounts of rain |
| Fewer pool installations | ||
|
Decreased purchases of chemicals and supplies |
|||
|
Decreased purchases of impulse items such as above-ground pools and accessories |
|||
Unseasonably early warming trends | | A longer pool season, thus increasing our sales | ||
(primarily in the northern half of the US) | ||||
Unseasonably late warming trends | | A shorter pool season, thus decreasing our sales | ||
(primarily in the northern half of the US) |
In general, sales and operating 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 we may incur net losses.
We typically experience a build-up of product inventories and accounts payable during the winter months in anticipation of the peak selling season. Excluding borrowings to finance acquisitions and share repurchases, our peak borrowing usually occurs during the second quarter, primarily because extended payment terms offered by our suppliers typically are payable in April, May and June, while our peak accounts receivable collections typically occur in June, July and August.
We expect that our quarterly results of operations will continue to fluctuate depending on the timing and amount of revenue contributed by new and acquired service centers. We attempt to open new service centers at the end of the fourth quarter or the first quarter of the subsequent year to take advantage of preseason sales programs and the following peak selling season.
9
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Seasonality and Quarterly Fluctuations (continued)
The following table presents certain unaudited quarterly data for the first quarter of 2005 and the four quarters of 2004. In our opinion, this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. Due to the seasonal nature of the swimming pool industry, the results of any one or more quarters are not necessarily an accurate indication of results for an entire fiscal year or of continuing trends.
(Unaudited) |
QUARTER
|
||||||||||||||||||
2005
|
2004
|
||||||||||||||||||
First
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||||
Net sales |
$ | 265,161 | $ | 234,648 | $ | 504,177 | $ | 362,091 | $ | 209,937 | |||||||||
Gross profit |
71,951 | 65,032 | 145,215 | 104,183 | 56,404 | ||||||||||||||
Operating income (loss) |
11,301 | 7,672 | 72,589 | 36,949 | (3,616 | ) | |||||||||||||
Net sales as a % of annual net sales |
N/A | 18 | % | 38 | % | 28 | % | 16 | % | ||||||||||
Gross profit as a % of annual gross profit |
N/A | 18 | % | 39 | % | 28 | % | 15 | % | ||||||||||
Operating income (loss) as a % of annual operating income |
N/A | 7 | % | 64 | % | 32 | % | (3 | )% |
Liquidity and Capital Resources
Liquidity is defined as the ability to generate adequate amounts of cash to meet current cash needs. We assess our liquidity in terms of our ability to generate cash to fund our operating activities, taking into consideration the seasonal nature of our business. Significant factors which could affect our liquidity include the following:
| cash flows generated from operating activities; |
| the adequacy of available bank lines of credit; |
| acquisitions; |
| the timing and extent of share repurchases; |
| capital expenditures; |
| dividend payments; and |
| the ability to attract long-term capital with satisfactory terms. |
Our primary capital needs are seasonal working capital obligations and other general corporate purposes, including acquisitions, share repurchases and dividend payments. Our primary sources of working capital are cash from operations supplemented by bank borrowings. Borrowings, together with cash from operations, historically have been sufficient to support our growth and finance acquisitions. Our priorities for the use of cash are as follows:
| maintenance and new service center capital expenditures estimated at 0.5% to 0.75% of net sales; |
| strategic acquisitions executed opportunistically; |
| payment of cash dividends as and when declared by the Board; |
| repurchase of common stock at Board-defined parameters; and |
| repayment of debt. |
Our unsecured syndicated senior credit facility (the Credit Facility), which matures on November 2, 2009, provides for a $120.0 million five-year revolving credit facility, which includes sublimits for the issuance of swingline loans and standby letters of credit. The aggregate maximum principal amount of the commitments under the Credit Facility may be increased from time to time by a total amount up to $40.0 million.
10
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
During the three months ended March 31, 2005, we received net proceeds of $32.5 million from the Credit Facility. At March 31, 2005, there was $82.9 million outstanding and $34.9 million available for borrowing under the Credit Facility. The average effective interest rate of the Credit Facility was approximately 3.9% for the quarter ended March 31, 2005.
Our obligations under the Credit Facility are guaranteed by all of our existing and future direct and indirect subsidiaries. Borrowings and standby letters of credit under the Credit Facility bear interest, at our option, at either of the following:
a. | a base rate, which is the greater of (i) the Wachovia Bank, National Association prime rate or (ii) the overnight Federal Funds Rate plus 0.50%; or |
b. | the London Interbank Offered Rate (LIBOR) plus a spread ranging from 0.600% to 1.25%, with such spread in each case depending on our leverage ratio. |
We are also required to pay (a) an annual facility fee of 0.150% to 0.250%, with such spread in each case depending on our leverage ratio, (b) an annual commercial letter of credit issuance fee of 0.125% multiplied by the face amount of each letter of credit and (c) a letter of credit commission of 0.150% to 0.250% multiplied by face amount of each letter of credit, with such spread in each case depending on our leverage ratio.
The Credit Facility contains customary terms and provisions (including representations, covenants and conditions) and events of default. If an event of default occurs and is continuing under the Credit Facility, the lenders may terminate their obligations thereunder and may require us to repay all amounts thereunder. As of March 31, 2005, we were in compliance with all covenants and financial ratio requirements.
In the first quarter of 2005, we renewed our accounts receivable securitization facility (the Receivables Facility), which has a seasonal borrowing capacity up to $100.0 million, through March 2006 with substantially similar terms as the previous facility. The Receivables Facility provides for the true sale of certain of our receivables as they are created to a wholly-owned, bankruptcy-remote subsidiary. This subsidiary grants an undivided security interest in the receivables to an unrelated commercial paper conduit. Because of the structure of the bankruptcy-remote subsidiary and our ability to control its activities, we include the transferred receivables and related debt in our consolidated balance sheet. We employed this arrangement because it provides us with a lower cost form of financing. At March 31, 2005, there was $57.7 million outstanding under the Receivables Facility at an average effective interest rate of 3.4%.
The seasonal use of cash in operations decreased $18.8 million to $51.1 million for the three months ended March 31, 2005 compared to $69.9 million for the same period last year. This change is primarily due to the increase in inventory and accounts receivable in the first quarter of 2005, which was more than offset by deferral of payment on purchases.
We believe we have adequate availability of capital to fund present operations and anticipated growth, including expansion in existing and targeted market areas. We continually evaluate potential acquisitions and hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a solid base for obtaining additional financing resources at competitive rates and terms. Additionally, we may issue common or preferred stock to raise funds.
Accounts Receivable and the Allowance for Doubtful Accounts
Due to the seasonal nature of our business, accounts receivable increased $66.9 million to $164.5 million at March 31, 2005 from $97.6 million at December 31, 2004. Accounts receivable increased $17.4 million, or 12%, from $147.1 million at March 31, 2004. This increase from the first quarter of 2004 to the first quarter of 2005 is consistent with the 13% increase in net sales between periods.
11
SCP POOL CORPORATION
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
The allowance for doubtful accounts decreased to $2.9 million at March 31, 2005 from $3.1 million at December 31, 2004, which is consistent with the seasonal nature of our business.
The allowance for doubtful accounts decreased to $2.9 million at March 31, 2005 from $3.7 million at March 31, 2004. The allowance represented 53% and 65% of the accounts receivable greater than 60 days past due in March 2005 and March 2004, respectively, as we have continued to enhance our collection management practices and improved average collection days.
Product Inventories and the Reserve for Shrink and Obsolescence
Due to the seasonal nature of our business, product inventories increased $85.5 million to $281.3 million at March 31, 2005 from $195.8 million at December 31, 2004. Inventory increased $39.4 million, or 16%, compared to $241.9 million at March 31, 2004.
Consistent with the increase in inventory, our inventory reserve increased to $3.4 million at March 31, 2005 compared to $3.1 million at December 31, 2004 and $3.0 million at March 31, 2004.
Share Repurchase Program
In the first quarter of 2005, we repurchased approximately 0.1 million shares of our common stock at an average price of $32.59 per share. These shares represent shares of common stock withheld upon the exercise of certain options outstanding under the Companys 1995 and 1998 Stock Option Plans and having a value equal to the amount of tax required to be withheld with respect to such options and/or the exercise price of such options. On April 22, 2005, $27.4 million of the amount authorized by our Board of Directors for future share repurchases remained available. We intend to continue to repurchase shares on the open market from time to time, depending on market conditions.
12
SCP POOL CORPORATION
Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
Our disclosure and analysis in this report contains forward-looking information that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of managements plans and objectives, future contracts, and forecasts of trends and other matters. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as anticipate, estimate, expect, believe, will likely result, outlook, project and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.
Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following:
We are susceptible to adverse weather conditions.
Weather is the principal external factor affecting our business. For example, 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, which adversely affects sales of our products.
Our business is highly seasonal.
In 2004, approximately 66% of our 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 96% of our operating income was generated in the same period. Our sales are substantially lower during the first and fourth quarters of the year, when we may incur net losses.
We face intense competition both from other leisure product alternatives and from within the pool industry.
We face competition from both outside our industry with sellers of other leisure product alternatives, such as boats and motor homes, and from within our industry with various regional and local distributors and, to a lesser extent, mass market retailers and large pool supply retailers. New competitors may emerge as there are low barriers to entry in our industry. Some geographic markets that we serve, particularly our largest, higher density markets in California, Florida, Texas and Arizona, representing approximately 51% of our net sales in 2004, also tend to be more competitive than others.
More aggressive competition by mass merchants could adversely affect our sales.
Mass market retailers today carry a limited range of, and devote a limited amount of shelf space to, merchandise and products targeted to the pool industry. Historically, mass market retailers have generally expanded by adding new stores and product breadth, but their product offering of pool related products has remained relatively constant. Should mass market retailers increase their focus on the pool industry or increase the breadth of their pool related product offerings and become a more significant competitor for direct and end-use customers, this could have an adverse impact on our business.
13
SCP POOL CORPORATION
Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
The demand for our swimming pool and leisure related products may be adversely affected by economic downturns.
In economic downturns, the demand for swimming pool or leisure related products may decline as discretionary consumer spending, the increase in pool eligible households and swimming pool construction decline. Although maintenance products and repair and replacement equipment that must be purchased by pool owners to maintain existing swimming pools account for more than 60% of our gross profits, the growth of our business depends on the expansion of the installed pool base, which may be viewed by most consumers as a discretionary expenditure that may be adversely affected by economic downturns.
The nature of our business subjects us to compliance with Environmental, Health, Transportation and Safety Regulations.
We are subject to regulation under federal, state and local environmental, health, transportation and safety requirements, which govern such things as packaging, labeling, handling, transportation, storage and sale of pool chemicals and other products. For example, we sell algaecides that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and state pesticide laws, which primarily relate to labeling and annual registration.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties or the imposition of injunctive relief. Moreover, compliance with such laws and regulations in the future could prove to be costly, and there can be no assurance that we will not incur such costs in material amounts. These laws and regulations have changed substantially and rapidly over the last 20 years, and we anticipate that there will be continuing changes. The clear trend in environmental, health, transportation and safety regulation is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of chemical substances. Increasingly, strict restrictions and limitations have resulted in increased operating costs for us, and it is possible that the costs of compliance with such laws and regulations will continue to increase. We will attempt to anticipate future regulatory requirements that might be imposed and to plan accordingly in order to remain in compliance with changing regulations and to minimize the costs of such compliance.
We store chemicals and other combustible materials that involve fire, safety and casualty risks.
We store chemicals, including certain combustible, oxidizing compounds, at our service centers. A fire, explosion or flood affecting one of our facilities could give rise to fire, safety and casualty losses and related liability claims. We maintain what we believe is prudent insurance protection. However, we cannot guarantee that we will be able to maintain adequate insurance in the future at rates we consider reasonable or that our insurance coverage will be adequate to cover future claims that may arise. Successful claims for which we are not fully insured may adversely affect our working capital and profitability. In addition, changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage.
14
SCP POOL CORPORATION
Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
We may not be able to sustain our pace of growth.
We have experienced substantial sales growth in recent years through acquisitions and the opening of new locations that have increased our size, scope and geographic distribution. Since 2000, we have opened 28 new service centers and have completed 12 acquisitions, consisting of 74 service centers (net of service center closings and consolidations). While we contemplate continued growth through acquisitions and internal expansion, no assurance can be made as to our ability to:
| penetrate new markets; |
| identify appropriate acquisition candidates; |
| complete acquisitions on satisfactory terms and successfully integrate acquired businesses; |
| obtain financing; |
| generate sufficient cash flows to support expansion plans and general operating activities; |
| maintain favorable supplier arrangements and relationships; and |
| identify and divest assets which do not continue to create value consistent with our objectives. |
If we do not manage these potential difficulties successfully, our operating results could be adversely affected.
We depend on key personnel.
Our future success depends to an extent upon the continued service of Manuel Perez de la Mesa, our Chief Executive Officer, and to a lesser degree, our other executive officers and key management personnel, and on our ability to continue to attract, retain and motivate qualified personnel. The loss of Mr. Perez de la Mesa in particular could have a material adverse effect on our business. Mr. Perez de la Mesa is not nearing retirement age, and we have no indication that he intends to retire in the near future. We do not currently maintain key man insurance on Mr. Perez de la Mesa.
Our distribution business is highly dependent on our ability to maintain favorable relationships with suppliers and manufacturers.
As a distribution company, maintaining favorable relationships with our suppliers is critical to the success of our business. We believe that we add considerable value to the swimming pool supply chain by purchasing products from a large number of manufacturers and distributing the products to a highly fragmented customer base on conditions that are more favorable than these customers could obtain on their own. We believe that we currently enjoy good relationships with our suppliers, who generally offer us competitive pricing, return policies and promotional allowances. However, our inability to maintain favorable relationships with our suppliers could have an adverse effect on our business.
Our largest suppliers are Pentair Corporation, Hayward Pool Products, Inc. and Waterpik Technologies, Inc., which accounted for approximately 16%, 9% and 7%, respectively, of the costs of products we sold in 2004. While we do not believe that the loss of any single supplier would adversely affect our business, a decision by several suppliers, acting in concert, to sell their products directly to retail customers and other end-users of their products, bypassing distribution companies like ours, would have an adverse effect on our business. We dedicate significant resources promoting the benefits and affordability of pool ownership, which we believe greatly benefits our customers and suppliers.
15
SCP POOL CORPORATION
Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
The growth of our business depends on effective marketing programs.
The growth of our business depends on the expansion of the installed pool base. Thus, an important part of our strategy is to promote the growth of the pool industry through our extensive advertising and promotional programs that attempt to raise consumer awareness regarding the benefits and affordability of pool ownership, the ease of pool maintenance and the many ways in which a pool may be enjoyed beyond swimming. These programs include media advertising, website development such as www.swimmingpool.com and public relations campaigns. We believe these programs benefit the entire supply chain from our suppliers to our customers.
We also promote the growth of our customers businesses through comprehensive support programs that offer promotional tools and marketing support to help generate increased sales for our customers. Our programs include such things as personalized websites, brochures, marketing campaigns and business development training. We also provide certain retail store customers with assistance in site selection, store layout and design and business management system implementation. Our inability to sufficiently develop effective advertising, marketing and promotional programs to succeed in an weakened economic environment and an increasingly competitive marketplace, in which we (and our entire supply chain) also compete with other luxury product alternatives, could have a material adverse effect on our business.
A terrorist attack or the threat of a terrorist attack could have a material adverse effect on our business.
The terrorist attacks that took place on September 11, 2001, in the U.S. were unprecedented events that have created many economic and political uncertainties, some of which may materially impact our business. Discretionary spending on leisure products such as ours is generally adversely affected during times of economic uncertainty. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility have created many economic and political uncertainties, which could adversely affect our business for the short or long-term in ways that cannot presently be predicted.
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SCP POOL CORPORATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes from what we reported in our Form 10-K for the year ended December 31, 2004.
There have been no material changes from what we reported in our Form 10-K for the year ended December 31, 2004.
Item 4. Controls and Procedures
The term disclosure controls and procedures is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Act). The rules refer to the controls and other procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified. As of March 31, 2005, management, including the CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the CEO and CFO, concluded that as of March 31, 2005, our disclosure controls and procedures were effective at ensuring that material information related to us or our consolidated subsidiaries is made known to them and is disclosed on a timely basis in our reports filed under the Act.
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Based on the most recent evaluation, we have concluded that no significant changes in our internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below summarizes the repurchases of our common stock in the first quarter of 2005.
Issuer Purchases of Equity Securities
Period |
Total number of
shares purchased (2) |
Average price
paid per share |
Total number of shares
purchased as part of publicly announced plan (1) |
Maximum approximate
purchased under the plan |
||||||
February 1-28, 2005 |
57,263 | $ | 31.75 | | $ | 27,402,231 | ||||
March 1-31, 2005 |
35,543 | $ | 33.93 | | $ | 27,402,231 |
(1) | In July 2002, our Board of Directors authorized $50.0 million for the repurchase of shares of our common stock in the open market. In August 2004, when approximately $17.6 million of the amount authorized remained available for share repurchases, our Board of Directors increased the authorization for the repurchase of shares of our common stock in the open market to a total of $50.0 million, of which approximately $27.4 million remained available as of April 22, 2005. |
(2) | These shares represent shares of common stock withheld upon the exercise of certain options outstanding under the Companys 1995 and 1998 Stock Option Plans and having a value equal to the amount of tax required to be withheld with respect to such options and/or the exercise price of such options. |
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SCP POOL CORPORATION
Exhibits required by Item 601 of Regulation S-K
Exhibit
Number |
Document Description |
|
3.1 | Composite Certificate of Incorporation of the Company. (1) | |
3.2 | Composite Bylaws of the Company. (2) | |
4.1 | Form of certificate representing shares of common stock of the Company. (3) | |
10.1 | Nonqualified Deferred Compensation Plan Basic Plan Document. | |
10.2 | Nonqualified Deferred Compensation Plan Adoption Agreement by and among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress Inc. | |
10.3 | Trust Agreement by and among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress Inc. and T. Rowe Price Trust Company. | |
31.1 | Certification by Mark W. Joslin pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification by Manuel J. Perez de la Mesa pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification by Manuel J. Perez de la Mesa and Mark W. Joslin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Items 1, 3, 4 and 5 are not applicable and have been omitted.
1. | Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2004. |
2. | Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended March 31, 2003. |
3. | Incorporated by reference to our Registration Statement No. 33-92738. |
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Signature Page
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 29, 2005.
SCP POOL CORPORATION | ||
BY: |
/s/ Mark W. Joslin |
|
Mark W. Joslin, Vice President and Chief Financial Officer, and duly authorized signatory on behalf of the Registrant |
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Index to Exhibits
3.1 | Composite Certificate of Incorporation of the Company. (1) | |
3.2 | Composite Bylaws of the Company. (2) | |
4.1 | Form of certificate representing shares of common stock of the Company. (3) | |
10.1 | Nonqualified Deferred Compensation Plan Basic Plan Document. | |
10.2 | Nonqualified Deferred Compensation Plan Adoption Agreement by and among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress Inc. | |
10.3 | Trust Agreement by and among SCP Distributors, L.L.C., Superior Pool Products, L.L.C. and Cypress Inc. and T. Rowe Price Trust Company. | |
31.1 | Certification by Mark W. Joslin pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification by Manuel J. Perez de la Mesa pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification by Manuel J. Perez de la Mesa and Mark W. Joslin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
1. | Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended June 30, 2004. |
2. | Incorporated by reference to our Quarterly Report on Form 10-Q for the period ended March 31, 2003. |
3. | Incorporated by reference to our Registration Statement No. 33-92738. |
20
Exhibit 10.1
NONQUALIFIED
DEFERRED COMPENSATION PLAN
BASIC PLAN DOCUMENT
NONQUALIFIED
DEFERRED COMPENSATION PLAN
By execution of the Adoption Agreement associated with this Basic Plan Document, the Employer establishes this Nonqualified Deferred Compensation Plan (Plan) for the benefit of certain Eligible Employees as designated in resolutions of its Board of Directors or in the minutes of the Compensation Committee . The purpose of the Plan is to provide additional compensation to Participants upon Separation from Service or at a specified future date. The Employer will pay benefits under the Plan only in accordance with the terms and conditions set forth in the Plan.
It is the intent of the parties to operate in good faith compliance with the Section 409A and related IRS and Treasury guidance. Revisions to comply with Section 409A and expected future guidance regarding Section 409A must be made no later than December 31, 2005.
I. DEFINITIONS
1.01 Account means the account established by the Employer under the Plan for each Participant.
1.02 Accrued Benefit means the total dollar amount credited to a Participants Account.
1.03 Adoption Agreement means the document executed by the Employer to establish the Plan and includes all Exhibits and other documents referenced therein.
1.04 Basic Plan Document means this Nonqualified Deferred Compensation Plan document.
1.05 Change in Control Events mean a change in the ownership of the SCP Pool Corporation, a change in effective control of SCP Pool Corporation, or a change in the ownership of a substantial portion of the assets of SCP Pool Corporation each as defined in accordance with Internal Revenue Service and Treasury guidance issued pursuant to Code §409A and in accordance with the attached Appendix.
1.06 Code means the Internal Revenue Code of 1986, as amended.
1.07 Compensation means gross W-2 compensation. W-2 Compensation means wages for federal income tax withholding purposes, as defined under Code §3401(a), plus all other payments to an Employee in the course of the Employers trade or business, for which the Employer must furnish the Employee a written statement under Code §§6041, 6051 and 6052, disregarding any rules limiting the remuneration included as wages under this definition based on the nature or location of the employment or service performed. Gross W-2 compensation means W-2 compensation plus all amounts excludible from a Participants gross income under Code §§125, 402(e)(3), 402(h), and 408(p) contributed by the Employer, at the Participants election, to a 401(k) arrangement, a Simplified Employee Pension, a SIMPLE plan, or a cafeteria plan. The Employer, in the Adoption Agreement, may modify the definition of Compensation or may specify a different definition of Compensation.
1.08 Death Beneficiary means the recipient of any proceeds under the Plan in conjunction with the death of a Participant and shall be the person or persons, including a trust, designated by the Participant on a form provided by the Committee, or (ii) in the absence of a designated Death Beneficiary, paid in accordance with the terms of Section 4.10.
1.09 Disability means the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participants Employer.
1.10 Effective Date of the Plan is the date specified in the Adoption Agreement.
1.11 Elective Deferral means Compensation elected by a Participant to be deferred into the Participants Account under the Plan.
1.12 Eligible Employee means an Employee who is determined by the Employer to be part of a select group of management or highly compensated employees.
1.13 Employee means an Employee of the Employer.
1.14 Employer means the Employer who executes an Adoption Agreement establishing the Plan and such other participating employers that also adopt the Plan in accordance with rules prescribed herein.
1.15 Employer Contribution means amounts contributed by the Employer or credited by the Employer to an Account under the Plan.
1.16 ERISA means the Employee Retirement Income Security Act of 1974, as amended.
1.17 Key Employee means an Eligible Employee as defined in Code Section 416(i) without regarding to paragraph (5) thereof of a corporation any stock in which is publicly traded on an established securities market or otherwise. In general, a Key Employee means an employee who, at any time during the Plan Year, is (i) an officer of the employer having an annual compensation greater than $130,000, (ii) a 5-percent owner of the Employer, or (iii) a 1-percent owner of the Employer having an annual compensation from the Employer of more than $150,000. The applicable terms are defined in Code Section 416(i).
1.18 Participant means an Eligible Employee selected by the Board of Directors or Plan Administrator to participate in the Plan as described in Section 2.01.
1.19 Performance-Based Bonus Compensation means compensation based on services performed over a period of at least twelve (12) months, and until further guidance is issued, requirements for compensation to qualify include (i) that the amount and payment of the compensation is contingent on the satisfaction of organizational or performance criteria, and (ii) the performance criteria are not substantially certain to be met at the time a deferral election is permitted.
2
Subjective criteria are permissible provided they are related to individual performance or performance of a group that includes the participant service provider (i.e., Eligible Employee) or a business unit for which the service provider provides services (which may include the entire organization), and assessment of whether the subjective criteria have been met is not made by the service provider (or a family member). Neither shareholder nor compensation committee approval is required. Significantly, bonus compensation is not considered performance-based compensation if it is based solely on the value of, or appreciation in the value of, the service recipient or its stock.
1.20 Plan means POOLCORP Deferred Compensation Plan.
1.21 Plan Administrator means the Compensation Committee of SCP Pool Corporation.
1.22 SCP Pool Corporation means the holding company of the participating Employers.
1.23 Separation from Service means, until further guidance is issued, termination of service with the Service Recipient.
1.24 Service Recipient means the Employer, and any other person for whom the services are performed, and all persons with whom such Employer or person would be considered a single employer under Code Section 414(b) (employees of controlled group of corporations), and all persons with whom such person would be considered a single employer under Code Section 414(c) (employees of partnerships, proprietorships, etc., which are under common control.
1.25 Taxable Year means the 12 consecutive month period ending each December 31.
1.26 Trust means the trust described in Section 5.01 of the Basic Plan Document and created under Section 5.01 of the Adoption Agreement.
1.27 Valuation Date means the last day of each Taxable Year and such other dates as the Employer may determine.
II. PARTICIPATION
2.01 Eligibility . The Employer will designate from time to time in resolutions of its Board of Directors or in the minutes of the Compensation Committee those Employees who are in a select group and eligible to participate in the Plan. Each individual in such select group must have received or, pursuant to a salary increase or bonus, expect to receive in the current year total compensation equal to or in excess of the definition of highly compensated employee under Code Section 414(q)(r)(B) and each individual must be eligible for a Company bonus. However, if the Plan Administrator should determine that the foregoing eligibility provision is such that the Plan would not be deemed maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, i.e., a top-hat plan for purposes of ERISA, the Plan Administrator shall narrow the eligibility to the extent necessary in the Plan Administrators judgment in order to maintain the Plans status as a top-hat plan. If an Employee fails to meet either requirement in the immediately preceding year such Employee will cease to be eligible to participate in the Plan.
3
2.02 Possible Nonuniformity . The Employer will specify in the Adoption Agreement such Plan terms and conditions as apply to all Participants on a uniform basis or as may apply to a given Participant. The Employer need not provide the same Plan benefits or apply the same Plan terms and conditions to all Employees who become Participants in the Plan, even as to Employees who are of similar pay, title, and other status with the Employer.
2.03 Elective Deferrals . The Employer will specify in the Adoption Agreement:
(i) whether Participants may elect to make Elective Deferrals to their Accounts under the Plan; and
(ii) any other limitations or conditions applicable to Elective Deferrals.
A Participant must make his/her Elective Deferral election on a form the Employer provides for that purpose. A Participant may make an election to defer compensation for services performed during a Taxable Year only if the Participant delivers his/her election no later than the close of the preceding Taxable Year or at such other time as provided in Treasury Regulations. However, in the case of the first year in which a Participant becomes eligible to participate in this Plan, such election may be made with respect to services to be performed subsequent to the election within 30 days after the date the Participant becomes eligible to participate in the Plan. If the Eligible Employee does not file an application prior to the applicable date, the Eligible Employee shall again be eligible to participate as of the first day of the next Taxable Year subsequent to his or her eligibility upon filing of an application prior to the close of the preceding Taxable Year or at such other time as provided in Treasury Regulations. Notwithstanding, if elected in the Adoption Agreement, in the case of compensation that qualifies as Performance-Based Bonus Compensation, the Employer may delay the deadline of the deferral election, provided the Participant delivers his/her election no later than six months before the end of the service period.
A Participants Elective Deferral election shall be effective only for the Taxable Year for which the Participant makes the election. For Plan Years after 2005, an Elective Deferral cannot be changed or cancelled after the effective date of enrollment for that year. However, the following special rules apply for the Plan Year 2005 only. A Participant may reduce or cancel his Elective Deferral for the year 2005 at any time during the year. Any change in the Elective Deferral shall apply only to Compensation earned after the pay period in which the modification is received by the Employer. Cessation of Deferrals does not entitle the Participant to benefits. Benefits are paid only as provided in Article IV of this Plan.
2.04 Employer Contributions . The Employer will specify in the Adoption Agreement whether the Employer will contribute to or credit the Account of any Participant under the Plan, and the terms and conditions applicable to Employer Contributions. As specified in the Adoption Agreement, the Employer may make Employer Contributions in the form of matching contributions with respect to Participant Elective Deferrals. Except as otherwise provided in the Plan, the Employer will administer all Employer Contributions under the Plan in the same manner as Elective Deferrals made by Participants. If the Employer establishes the Trust, the Employer shall make any contributions to the Trust required by the Trust terms.
4
2.05 Employer Contribution Allocation Conditions . The Employer will specify in the Adoption Agreement any employment or other conditions applicable to the allocation of Employer Contributions for a Taxable Year.
III. VESTING AND FORFEITURE
3.01 Application . The Employer will specify in the Adoption Agreement any vesting requirements and forfeiture conditions applicable to Participant Accounts under the Plan.
3.02 Accounting . The Employer will maintain a separate accounting of each Participants Accrued Benefit attributable to Employer Contributions and Elective Deferrals, including interest, earnings, gains and losses as applicable under Section 5.02, as required for proper application of the Plans vesting and forfeiture provisions.
3.03 Year of Service . Is defined in the Adoption Agreement.
3.04 Application of Forfeitures . Unless otherwise specified in the Adoption Agreement, the Employer will retain any Participant forfeiture under the Plan and will not apply any Participant forfeiture to increase benefits for other Participants under the Plan.
IV. BENEFIT PAYMENTS
4.01 Separation from Service . Except as otherwise permitted in this Article, the Plan will pay to the Participant the vested Accrued Benefit held in the Participants Account following the Participants Separation from Service. Payment will commence at the time and in the form and method specified under Section 4.02. In the case of a Key Employee, except as otherwise permitted in this Article, distribution of such Participants vested Accrued Benefit may not be made before the date which is six (6) months after the date of Separation from Service. In the event of a Participants death, the Plan will pay to the Participants Death Beneficiary the Participants vested Accrued Benefit or any remaining amount thereof if benefits to the Participant had already commenced.
4.02 Participant Election of Timing and Form of Payment . A Participants vested Accrued Benefit is payable in the form of cash. A Participant may elect the timing and method of payment as described in this Section 4.02. At the time of the Participants initial participation in the Plan, the Participant must elect a time for commencement and method of payment selected in the Adoption Agreement. A Participants election as to timing and method of payment is irrevocable except as otherwise provided in the Adoption Agreement. Participants Accrued Benefit shall be paid in the form of a lump sum or in the form of annual installments, as the Participant elects. If a Participant fails to timely elect a payment method, the Employer will pay the Participants vested Accrued Benefit in a single lump sum payment upon Separation from Service.
Until the Plan completely distributes a Participants vested Accrued Benefit, the Plan will continue to credit the Participants Account with interest, investment earnings or gain, and will charge the Participants Account for loss, in accordance with Section 5.02.
4.03 Reelection of Timing and Form of Benefit . If permitted in the Adoption Agreement, a Participant may execute a new form, provided by the Employer, to select a new date for payment of
5
the vested Accrued Benefit and the form in which payment will be made. A Participant may execute a new form at any time, but any new election shall not be effective unless the Participant (a) has a Separation from Service of at least 12 months after the Employer receives the new election form, (b) the first payment under the new election is deferred for a period of at least five (5) years from the date such payment would otherwise have been made, and (c) the new election is made no less than 12 months prior to the date of the first scheduled payment under the previous election.
4.04 Unforeseeable Emergency . The Employer will specify in the Adoption Agreement whether the Employer will pay to a Participant all or any part of the Participants vested Accrued Benefit on account of an unforeseeable emergency. An unforeseeable emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participants spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participants property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The amounts distributed with respect to an Unforeseeable Emergency may not exceed the amounts necessary to satisfy such emergency, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved:
(i) | through reimbursement or compensation by insurance or otherwise; or |
(ii) | by liquidation of the Participants assets, to the extent that liquidation of such assets would not itself cause severe financial hardship. |
4.05 Change in Control Events . If elected in the Adoption Agreement, in the event of a Change in Control Event, all vested Accrued Benefits shall thereupon automatically be accelerated and payable in full. To qualify as a Change in Control Event, the occurrence of the event must be objectively determinable and any requirement that the Plan Administrator certify the occurrence of a Change in Control Event must be strictly ministerial and not involve any discretionary authority .
To constitute a Change in Control Event as to the Participant, the Change in Control Event must relate to (i) the corporation for whom the Participant is performing services at the time of the Change in Control Event, (ii) the corporation that is liable for the payment of the deferred compensation (or all corporations liable for the payment if more than one corporation is liable), or (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (i) or (ii).
4.06 Alternate Payee. If elected in the Adoption Agreement, the Plan may accelerate the time and schedule of payment of Participants vested Accrued Benefit to an individual other than the Participant as may be necessary to fulfill a domestic relations order (as defined in Code Section 414(p)(1)(B)).
4.07 De Minimus Amounts . If elected in the Adoption Agreement, a Participant is eligible for a distribution and his/her vested Accrued Benefit is less than $10,000 such payment will be made on or before the later of (i) December 31 of the calendar year in which occurs the Participants Separation from Service from the Service Recipient or (ii) the date 2 ½ months after the Participants Separation from Service from the Service Recipient.
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4.08 Payment of Employment Taxes . If elected in the Adoption Agreement, the Plan may permit the acceleration of the time or schedule of a payment to pay the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101 and 3121(v)(2) on compensation deferred under the plan (the FICA Amount). Additionally, the Plan may permit the acceleration of time or schedule of a payment to pay the income tax at source on wages imposed under Code Section 3401 on the FICA Amount, and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes. However, the total payment under this acceleration provision must not exceed the aggregate of the FICA Amount, and the income tax withholding relating to such FICA amount.
4.09 Withholding . The Employer will withhold from any payment made under the Plan all applicable taxes, and any and all other amounts required to be withheld under federal, state or local law.
4.10 Beneficiary Designation . A Participant may designate a Beneficiary (including one or more primary and contingent Beneficiaries) to receive payment of any vested Accrued Benefit remaining in the Participants Account at death. The Employer will provide each Participant with a form for this purpose and no designation will be effective unless made on that form and delivered to the Employer. A Participant may modify or revoke an existing designation of Beneficiary by executing and delivering a new designation to the Employer. In the absence of a properly designated Beneficiary, the Employer will pay the deceased Participants vested Accrued Benefit to the Participants surviving spouse; if none, to the children; and if none, to the Participants estate. If a Beneficiary is a minor or otherwise reasonably determined by the Employer to be legally incompetent, the Employer may pay the Participants vested Accrued Benefit to a guardian, trustee or other proper legal representative of the Beneficiary. Payment by the Employer of the deceased Participants vested Accrued Benefit to the Beneficiary or proper legal representative of the Beneficiary completely discharges the Employer and Plan of all further obligations under the Plan.
V. TRUST ELECTION AND INVESTMENTS
5.01 Trust Election . The Employer intends this Plan to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly compensated employees within the meaning of ERISA and the Code and intends this Plan to be exempt from Parts 2, 3 and 4 of Title I of ERISA. No Participant, Beneficiary or successor thereto has any legal or equitable right, interest or claim to any property or assets of the Employer, including assets held in any Account under the Plan. As such, no Participant or Beneficiary is entitled to distribution of any asset held under the Participants Account except for cash payment of the Participants vested Accrued Benefit in accordance with the terms of the Plan. The Employers obligation to pay Plan benefits is an unsecured promise to pay. Except as provided in the Adoption Agreement, this Plan does not create a trust for the benefit of any Participant. If the Employer elects to create the Trust described in the Adoption Agreement, all of the provisions of the Basic Plan Document continue to apply, including those of this Section 5.01. Except as may be required under the Trust established by the Employer: (i) the Employer may elect not to make actual contributions to the Plan if the Employer elects merely to make Employer Contributions to a Participants Account as an accounting entry; and (ii) the Employer also may elect not to invest any Plan contributions. If the Employer elects to invest any Plan contributions, such investments may be held for the Employers benefit in providing for the Employers obligations under the Plan or for such other purposes as the
7
Employer may determine. Any assets held in Plan Accounts remain subject to claims of the Employers general creditors and no Participant or Beneficiary has any priority to Plan assets over any general unsecured creditor of the Employer.
5.02 Interest or Investments . The Employer or Plan Administrator shall provide to each Participant a list of investments from which a Participant may choose as a deemed investment for such Participants Accrued Benefit. A Participants Accrued Benefit shall be deemed invested in the investment selected by such Participant (provided that if no investment is selected, the Participants Accrued Benefit shall be deemed invested as directed by the Employer or Plan Administrator). The Accrued Benefit shall be adjusted as of each Valuation Date to effect increases or decreases in the value of such deemed investments. A Participant shall have the right to change the deemed investment of his Accrued Benefit and the allocation of future contributions by notice to the Plan Administrator in such form as required by the Plan Administrator. Such changes in deemed investments shall be made on the Valuation Date next following the date upon which said change was requested, or as soon thereafter as may be administratively practicable. To the greatest extent practicable, the same valuation and accounting methods shall be used as are used to recalculate the Participants account balances under the SCP Pool Corporation 401(k) Plan. A Participant shall have no right to compel investment of any amounts credited to his Accrued Benefit.
VI. PLAN ADMINISTRATION
6.01 Power and Responsibilities of the Plan Administrator . The Plan Administrator has the full power and the full responsibility to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA. The Plan Administrators powers and responsibilities include, but are not limited to, the following:
(i) | To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; |
(ii) | To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan; |
(iii) | To administer the review procedures specified in Section 6.02; |
(iv) | To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA; |
(v) | To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan; |
(vi) | By written instrument, to allocate and delegate its responsibilities under the Plan. The Employer hereby delegates to the Administrator the following powers and responsibilities: |
(A) | To decide all questions concerning the eligibility of any person to participate in the Plan; |
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(B) | To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan; |
(C) | To authorize the payment of benefits; |
(D) | To determine the person or persons to whom such benefits will be paid subject to review of claims under Section 6.02; and |
(E) | To administer the claims procedures specified in Section 6.02. |
6.02 Claims and Review Procedures .
(i) | Claims Procedures . If any person believes he or she is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Plan Administrator. If any such claim is wholly or partially denied, the Plan Administrator will notify such person of its decision in writing. Such notification will contain (A) specific reasons for the denial, (B) specific reference to pertinent Plan provisions, (C) a description of any additional material or information necessary for such person to perfect such claim an explanation of why such material or information is necessary, and (D) information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within 90 days after the claim is received by the Plan Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). |
6.03 Plan Administrative Costs . All reasonable costs and expenses (including legal, accounting, employee communication fees and investment changes) incurred by the Plan Administrator and the Trustee in administering the Plan and Trust shall, unless allocable to the accounts of particular Participants, be charged against the accounts of all Participants on a pro rata basis or in such other reasonable manner as may be directed by the Plan Administrator. Notwithstanding the foregoing, each Employer may, in it sole discretion, elect to pay all such reasonable costs and expenses.
VII. PARTICIPATING EMPLOYERS
7.01 Adoption of the Plan . As of the Effective Date, each entity listed on the Adoption Agreement is an Employer. In addition, this Plan may be adopted by additional employers provided that any such adoption is with the approval of the Plan Administrator. Any adoption of this Plan by an additional Employer shall be pursuant to such authority as is required by such Employers governing body, a copy of which shall be filed with the Plan Administrator.
VIII. MISCELLANEOUS
8.01 No Assignment . No Participant or Beneficiary has the right to anticipate, alienate, assign, pledge, encumber, sell, transfer, mortgage or otherwise in any manner convey in advance of
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actual receipt, the Participants Accrued Benefit. Prior to actual payment, a Participants Accrued Benefit is not subject to the debts, judgments or other obligations of the Participant or Beneficiary and is not subject to attachment, seizure, garnishment or other process applicable to the Participant or Beneficiary.
8.02 Not Employment Contract . This Plan is not a contract for employment between the Employer and any Employee who is a Participant. This Plan does not entitle any Participant to continued employment with the Employer and benefits under the Plan are limited to cash payment of a Participants vested Accrued Benefit in accordance with the terms of the Plan.
8.03 Amendment of Plan . Each Employer has the authority to amend the Plan, even to cease an Employees Elective Deferral, but cannot amend the Plan so as to reduce the amount of a Participants Accrued Benefit (but this restriction does not prevent amending the Plan so as to change the way that earnings and losses on Account balances are determined in the future). The Plan cannot be amended to accelerate the payment of a benefit unless the amendment is not a violation of Code Section 409A. No amendment (otherwise limited under the previous sentence) shall be made that would accelerate the inclusion of a Participants Accrued Benefit in the Participants taxable income unless the Employer intentionally effects such a result. An acceleration of payment that is not authorized in Article IV will result in the taxation of the vested amount of the deferral, as if it had been included in taxable income in the first year of deferral, plus interest. Also, an additional penalty tax of 20% of the vested deferral is imposed.
8.04 Severability . If any provision of the Plan is determined by a proper authority to be invalid, the remaining portions of the Plan will continue in effect and be interpreted consistent with the elimination of the invalid provision.
8.05 Notice and Elections . Any notice given or election made under the Plan must be in writing and delivered or mailed by certified mail, to the Employer or to the Participant or Beneficiary as appropriate. The Employer will prescribe the form of any Plan notice or election to be given or made by Participants. Any notice or election will be deemed given as of the date of delivery, or if given by certified mail, as of 3 business days after mailing.
8.06 Administration . The Plan Administrator will administer and interpret the Plan, including making determination of the vested Accrued Benefit due any Participant or Beneficiary under the Plan. As a condition of receiving any Plan benefit to which a Participant or Beneficiary otherwise may be entitled, a Participant or Beneficiary will provide such information and perform such other acts as the Plan Administrator reasonably may request. The Plan Administrator may retain agents to assist in the administration of the Plan and may delegate to agents such duties as it sees fit. The decision of the Plan Administrator or its designee concerning the administration of the Plan is final and binding upon all persons having any interest in the Plan. The Plan Administrator will indemnify, defend and hold harmless any Employee designated by the Plan Administrator to assist in the administration of the Plan from any and all loss, damage, claims, expense or liability with respect to this Plan (claims) except claims arising from the intentional acts or gross negligence of the Employee.
8.07 Account Statements . The Employer from time to time, but at least annually, will provide each Participant with a statement of the Participants vested Accrued Benefit as of the annual Valuation Date. The Employer also will provide Account statements to any Beneficiary of a deceased Participant with a vested Accrued Benefit remaining in the Plan.
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APPENDIX
Change in Control Events
Note: The references to Employer in this Appendix are to SCP Pool Corporation.
I. | Change in the ownership of the Employer |
(a) | For purposes of the Plan, a change in the ownership of an Employer occurs on the date that any one person, or more than one person acting as a group (as defined in paragraph I.(b) of this Appendix), acquires ownership of stock of the Employer that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such Employer. However, if any one person or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of an Employer, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Employer (or to cause a change in the effective control of the corporation (within the meaning of Part II of this Appendix). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section. This Part I applies only when there is a transfer of stock of an Employer (or issuance of stock of an Employer) and stock in such Employer remains outstanding after the transaction (see Part III of this Appendix for rules regarding the transfer of assets of a corporation). |
(b) | Persons acting as a group. For purposes of paragraph II.(a), persons will not be considered to be acting as a group solely because they purchase or own stock of the same Employer at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Employer. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. See Treas. Reg. § 1.280G-1, Q&A 27(d), Example 4. |
II. | Change in the effective control of an Employer |
(a) |
Notwithstanding that an Employer has not undergone a change in ownership under Part I of this Appendix, a change in the effective control of an Employer occurs on the date that either (i) Any one person, or more than one person acting as a group (as determined under paragraph II.(a)(iv)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Employer possessing 35 percent or more of the total voting power of the stock of such Employer; or (ii) a majority of members of the Employers board of directors is replaced during any 12-month period by directors |
whose appointment or election is not endorsed by a majority of the members of the Employers board of directors prior to the date of the appointment or election, provided that for purposes of this paragraph (ii) the term Employer refers solely to the relevant corporation identified in Part I, paragraph I.(b) for which no other corporation is a majority shareholder for purposes of that paragraph (for example, if Corporation A is a publicly held corporation with no majority shareholder, and Corporation A is the majority shareholder of Corporation B, which is the majority shareholder of Corporation C, the term corporation for purposes of this paragraph II.(a)(ii) would refer solely to Corporation A). In the absence of an event described in paragraph (i) or (ii), a change in the effective control of an Employer will not have occurred.
(b) | Multiple Change in Control Events. A change in effective control also may occur in any transaction in which either of the two corporations involved in the transaction has a Change in Control Event under Part I or Part III of this Appendix. Thus, for example, assume Corporation P transfers more than 40 percent of the total gross fair market value of its assets to Corporation O in exchange for 35 percent of Os stock. P has undergone a change in ownership of a substantial portion of its assets under Part III of this Appendix and O has a change in effective control under this Part II. |
(c) | Acquisition of additional control. If any one person, or more than one person acting as a group, is considered to effectively control an Employer (within the meaning of this Part II), the acquisition of additional control of the Employer by the same person or persons is not considered to cause a change in the effective control of the Employer (or to cause a change in the ownership of the Employer within the meaning of Part I). |
(d) | Persons acting as a group. Persons will not be considered to be acting as a group solely because they purchase or own stock of the same Employer at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Employer. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
III. | Change in the ownership of a substantial portion of an Employers assets |
(a) |
A change in the ownership of a substantial portion of an Employers assets occurs on the date that any one person, or more than one person acting as a group (as determined in paragraph III.(c)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Employer that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the |
2
Employer immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Employer, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(b) | Transfers to a related person. There is no Change in Control Event under this Part III when there is a transfer to an entity that is controlled by the shareholders of the transferring Employer immediately after the transfer, as provided in this paragraph III.(b). A transfer of assets by an Employer is not treated as a change in the ownership of such assets if the assets are transferred to (i) A shareholder of the Employer (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) An entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Employer; (iii) A person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Employer; or (iv) An entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph III.(b)(iii). For purposes of this paragraph III.(b) and except as otherwise provided, a persons status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the transferor corporation has no ownership interest before the transaction, but which is a majority-owned subsidiary of the transferor corporation after the transaction is not treated as a change in the ownership of the assets of the transferor corporation. |
(c) | Persons acting as a group. Persons will not be considered to be acting as a group solely because they purchase assets of the same Employer at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Employer. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
IV. | Attribution of Stock Ownership. |
For purposes of the Change in Control Events under this Appendix, Code Section 318(a) applies to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treas. Reg. §§ 1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option. In addition, mutual and cooperative corporations are treated as having stock for purposes of paragraph III.(c).
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Exhibit 10.2
POOLCORP
DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
EFFECTIVE MARCH 1, 2005
NONQUALIFIED DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
The undersigned SCP Distributors L.L.C., Superior Pool Products L.L.C. and Cypress Inc. (Employer) by execution of this Adoption Agreement hereby establishes this Nonqualified Deferred Compensation Plan (Plan) consisting of the Basic Plan Document, this Adoption Agreement and all other Exhibits and documents to which they refer. The Employer makes the following elections concerning this Plan. All capitalized terms used in the Adoption Agreement have the same meaning given in the Basic Plan Document.
ARTICLE I
DEFINITIONS
1.01 | Compensation . (Section 1.07 of Plan) The Employer makes the following modifications to the gross W-2 definition of Compensation: (choose at least one if modifying Section 1.07): |
¨ | (a) | No Modifications . | ||
¨ | (b) | Net Compensation . Exclude all elective deferrals to other plans of the Employer described in Section 1.07. | ||
¨ | (c) | Regular Salary Only . Exclude bonuses, commission and all other Compensation except regular salary. | ||
¨ | (d) | Bonus and Similar Amounts Only . Exclude all Compensation other than bonus, commission and all similar amounts. | ||
x | (e) | (Specify) : exclude non-code Section 125 fringe benefits (cash or non-cash), expense reimbursements, moving expenses, amounts realized from exercise of stock options. |
1.02 | Effective Date . (Section 1.10 of the Plan.) The effective date of the Plan is: March 1, 2005 |
1.03 | Plan . (Section 1.20 of Plan). The name of the Plan as adopted by the Employer is: POOLCORP Deferred Compensation Plan |
ARTICLE II
PARTICIPATION
2.01 | Possible Nonuniformity . (Section 2.02 of the Plan.) The nonuniformity provisions of the plan are ( choose one ): |
x | (a) | Not Applicable . The elections made in the Adoption Agreement apply uniformly to all Participants. |
¨ | (b) | Applicable . The Employer elects under this Section 2.01 to create a separate Exhibit A for one or more Participants, specifying such Plan terms and conditions as are applicable to a given Participant. The provisions of Exhibit A which are inconsistent with elections made in the Adoption Agreement control as to the Participants specified in Exhibit A. The elections made in the Adoption Agreement control as to all Participants not specified in Exhibit A. |
2.02 | Elective Deferrals . (Section 2.03 of the Plan.) Elective Deferrals by Participants are (choose one) : |
x | (a) | Permitted by all Participants. | ||
¨ | (b) | Permitted as specified in Exhibit A. | ||
¨ | (c) | Not permitted by any Participant. |
Note: | The following special rules apply for the year 2005 only. A Participant may reduce or cancel his Elective Deferral for the year 2005 at any time during the year. Any change in the Elective Deferral shall apply only to Compensation earned after the pay period in which the modification is received by the Employer. Cessation of deferrals does not entitle a Participant to benefits. Benefits are paid only as provided in Article V of this Agreement and the Plan. For Plan Years after 2005, an Elective Deferral cannot be changed or cancelled after the effective date of enrollment for that year. |
Limitation on amount . A Participants Elective Deferrals for a Taxable Year are subject to the following limitation(s) (choose one or more) :
¨ | (a) | Maximum deferral amount : . | ||
¨ | (b) | Minimum deferral amount : . | ||
x | (c) | No limitation . | ||
¨ | (d) | Limited as specified in Exhibit A . | ||
¨ | (e) | (Specify limitations) : . |
2.03 | Timing of Deferral Election . A Participant must provide the Elective Deferral election to the Employer (choose one) : |
x | (a) | Within a reasonable time period before the beginning of the Taxable Year for which the Elective Deferral election is to be effective. | ||
¨ | (b) | No later than days before the beginning of the Taxable Year for which the Elective Deferral election is to be effective. |
Note: | See Section 2.03 of the Plan for the timing election applicable to the newly eligible Employee. |
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2.04 | Timing of Performance-Based Bonus Compensation. (Bonus Section 1.19 of the Plan.) A Participant must provide the Elective Deferral election relating to Performance-Based Bonus Compensation to the Employer (choose one) : |
¨ | (a) | Within a reasonable time period before the beginning of the Taxable Year for which the Elective Deferral election is to be effective. | ||
x | (b) | No later than six (6) months before the end of the Performance-Based Compensation service period. |
Note: | The timing of deferrals on Bonus Compensation that does not meet the definition of Performance-Based Bonus Compensation is stated in Section 2.03. |
2.05 | Employer Contributions . (Section 2.05 of the Plan.) The Employer will make the following Employer Contributions to the Plan (choose one or more) : |
¨ | (a) |
Specified Amount.
During each Taxable Year the Employer will contribute an amount for each Participant equal to
(choose one) : |
||||
¨ | (i) | % of the Participants Compensation. | ||||
¨ | (ii) | $ . | ||||
¨ | (iii) | (Specify) : . | ||||
x | (b) |
Discretionary Match.
For Plan Year 2005 and prospectively until revised in a resolution by the Board of Directors of
SCP Pool Corporation, the POOLCORP Deferred Compensation Plan will permit a Company matching contribution of 50% of a participants deferrals of up to 8% of the lesser of (i) such participants base compensation and bonus or (ii) the Internal Revenue Code Section 401(a)(17) dollar limit for the applicable year, which for 2005, is $210,000. The total Employer matching contribution provided to a participant under the 401(k) Plan and the POOLCORP Deferred Compensation Plan for any one year, however, shall not exceed 4% of a participants base compensation and bonus. The Employer matching contribution amount can be changed prospectively at any time by resolution. |
||||
¨ | (c) | Fixed Match (choose one or more) : | ||||
¨ | (i) | An amount equal to % of each Participants Elective Deferrals for each Taxable Year. |
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¨ | (ii) | An amount equal to the following percentages for each specified level of a Participants Elective Deferrals for each Taxable Year: |
Elective Deferrals |
Matching Percentage
|
|
____________________ |
% | |
____________________ |
% | |
____________________ |
% |
¨ | (iii) | The Employer in making matching contributions will disregard a Participants Elective Deferrals exceeding ( specify percentage or dollar amount of Compensation ) for the Taxable Year. | ||
¨ | (iv) | (Specify): . |
¨ | (d) | Specified Amount . The amount specified in Exhibit A for that Participant. | ||
x | (e) | Discretionary Amount . Such amounts, if any, and for such Participants, as the Employer determines from time to time. For Plan Year 2005 and prospectively until revised in a resolution by SCP Pool Corporation Board of Directors, the Employer will make an employer contribution equal to any matching contribution that is forfeited in the 401(k) Plan as a result of the non-discrimination rules applicable to the prior year provided the participant is employed on June 15 of the current year. | ||
¨ | (f) | No Employer Contributions. |
2.06 | Allocation Conditions . (Section 2.05 of the Plan.) To receive an allocation of Employer Contributions, a Participant must satisfy the following conditions during the Taxable Year: |
¨ | (a) | Year of Continuous Employment. The Participant must remain in continuous employment with the Employer for the entire Taxable Year. | ||
¨ | (b) | Specified conditions. The Participant must satisfy the conditions specified in Exhibit A. | ||
¨ | (c) | No Allocation Conditions. | ||
x | (d) | (Specify) : Allocation condition for the discretionary employer contribution is stated in Section 2.05(e). |
ARTICLE III
VESTING AND FORFEITURE
3.01 | Vesting. (Article III of the Plan.) The following vesting schedule applies to a Participants Accrued Benefit ( choose one or more ): |
¨ | (a) | Immediate Vesting. 100 % vested at all times with respect to the entire Accrued Benefit. |
4
x |
(b) | Immediate Vesting (Elective Deferrals)/Vesting Schedule (Employer Contributions). 100% vested at all times with respect to the portion of the Accrued Benefit attributable to the Participants Elective Deferrals. The portion of the Participants Accrued Benefit attributable to Employer Contributions is subject to the following vesting schedule: |
Years of Service |
Vesting %
|
|
Less than 2 |
0% | |
2 |
20% | |
3 |
40% | |
4 |
60% | |
5 |
80% | |
6 or more |
100% |
¨ |
(c | ) | Vesting Schedule - Entire Accrued Benefit. The Participants entire Accrued Benefit is subject to the following vesting schedule: |
Years of Service |
Vesting %
|
|
Less than |
0% | |
% | ||
% | ||
% | ||
% | ||
or more |
100% |
x | (d) | Immediate Vesting: Participants Death or Disability. A Participants entire Accrued Benefit is 100% vested without regard to Years of Service if the Participants termination of employment with the Employer occurs on account of (choose one or both) : | ||||
x | (i) | Death. | ||||
x | (ii) | Disability. | ||||
¨ | (e) | Specified Vesting. Vesting occurs in accordance with the provisions of Exhibit A to this Adoption Agreement. | ||||
¨ | (f) | (Specify) : . | ||||
x | (g) | Recognition of Service with Predecessor Employer. | ||||
¨ | (i) | No service with a predecessor employer shall be recognized. |
5
x | (ii) | If predecessor employer service credit is provided in the SCP Pool Corporation 401(k) Plan for vesting purposes, such credit is also recognized for vesting purposes in this Plan. |
¨ | (h) | Forfeiture Provision. Even if a Participant is otherwise 100% vested, forfeiture of his/her entire Accrued Benefit will occur upon: | ||||
¨ | (i) | The Participants breach or violation (as determined by the Employer) of any employment, non-competition, trade secrets, non-solicitation, nondisclosure or other similar agreement between the Participant and the Employer. | ||||
¨ | (ii) | The occurrence of any event specified in Exhibit A. | ||||
¨ | (iii) | (Specify) : , |
3.02 | Year of Service. (Section 3.03 of the Plan.) One year of service for vesting under the Plan means (choose one) : |
¨ | (a) | Taxable Year. A Taxable Year of continuous service with the Employer. | ||
x | (b) | ( Specify ): a Plan Year (1/1 12/31) during which the Employee completes at least 1,000 hours of service. |
3.03 | Application of Forfeitures. (Section 3.04 of the Plan.) With respect to the forfeitures, the Employer will (choose one) : |
x | (a) | Retain all forfeitures. | ||||
¨ | (b) | Allocation of Forfeitures. Allocate forfeitures to the Accounts of the remaining Participants in the year of forfeiture, in accordance with one of the following methods: | ||||
¨ | (i) | In the same ratio each Participants Compensation for the Taxable Year bears to the total Compensation of all Participants for the Taxable Year. | ||||
¨ | (ii) | In the same ratio each Participants Account balance at the beginning of the Taxable Year bears to the total Account balances of all Participants for the Taxable Year. | ||||
¨ | (iii) | (Specify) : . |
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ARTICLE IV
BENEFIT PAYMENTS
4.01 | Form of Benefit. (Section 4.02 of the Plan.) The Participants will be allowed to select the following form of benefit: |
x | Lump Sum | |||
x | Installments over a selected period of up to 10 years on the following frequency of payment: | |||
x | monthly | |||
x | quarterly | |||
x | semiannually | |||
x | annually |
4.02 | Benefit Payment Date . (Section 4.02 of the Plan.) The Participants will be allowed to select the following distribution date: |
x | Separation from Service (Key Employee may not receive a distribution earlier than six months following Separation from Service) | |
¨ | Age 65 | |
x | As of a scheduled future date | |
¨ | As of January 2 of a future Plan Year stated in the form provided by the Employer |
4.03 | Election. (Section 4.02 of the Plan.) A Participants election as to timing and method of payment of his/her vested Accrued Benefit is ( choose one ): |
¨ | (a) | Irrevocable. | ||
x | (b) | Revocable. |
Note: | A Participant may execute a new form at any time, but any new election shall not be effective unless the Participant (a) terminates employment at least 12 months after the Employer receives the new election form, (b) the first payment under the new election is deferred for a period of at least five (5) years from the date such payment would otherwise have been made, and (c) the new election is made no less than 12 months prior to the date of the first scheduled payment under the previous election. |
7
4.04 | Unforeseeable Emergency . (Section 4.04 of the Plan.) In the event of an unforeseeable emergency as defined in the Plan, a Participant (choose one) : |
x | (a) | Distribution Permitted. May obtain a distribution of all or any part his/her vested Accrued Benefit. | ||
¨ | (b) | Distribution Not Permitted. May not obtain a distribution of any or all of his/her vested Accrued Benefit. | ||
¨ | (c) | (Specify) : . |
4.05 | Change in Control Events . (Section 4.05 of the Plan.) In the event of one or more of the following Change in Control Events, distribution will be made of all of the Participants vested Accrued Benefit: |
¨ | a change in the ownership of the SCP Pool Corporation | |
¨ | a change in effective control of SCP Pool Corporation | |
¨ | a change in the ownership of a substantial portion of the assets of SCP Pool Corporation | |
x | all of the above |
4.06 | Accelerated Distribution Events . (Sections 4.06, 4.07 and 4.08 of the Plan.) In the event of one or more of the following, a Participant shall receive all of his vested Accrued Benefit: |
x | Disability (as defined in the Plan) | |
x | Alternate Payee, other than the Participant, as necessary to fulfill a qualified domestic relations order | |
x | De Minimus Amounts. The Participants vested Accrued Benefit must be less than $10,000 (insert an amount no greater than $10,000). See Section 4.07 of the Plan for required timing of payment. | |
x | Payment of Employment Taxes. |
ARTICLE V
TRUST ELECTION AND INVESTMENTS
5.01 | Trust Election. (Section 5.01 of the Plan.) The Employer makes the following elections regarding the maintenance of Participant Accounts under the Plan (choose one) : |
¨ | (a) | No Trust . The Employer does not create the Trust described in Section 5.01. |
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x | (b) | Rabbi Trust. The Employer will establish the Trust or Trusts described in Section 5.01. |
5.02 | Interest or Investments earnings. (Section 5.02 of the Plan.) The Employer will credit each Participants Account with (choose one or more) : |
¨ | (a) | Interest. Interest at the rate of % per annum compounded and applied to (choose one) : | ||||
¨ | (i) | The Participants entire Account. | ||||
¨ | (ii) | The Participants Account attributable to his/her Elective Deferrals with the balance of the Account being subject to actual investment as specified in Section 5.02(b). | ||||
¨ | (iii) | The Participants Account attributable to his/her Employer contributions with the balance of the Account being subject to actual investment as specified in Section 5.02(b). | ||||
x | (b) | Investment earnings. Net investment earnings, gain and loss incurred (choose one) : | ||||
¨ | (i) | In accordance with applicable provisions of the Trust. | ||||
¨ | (ii) | As a result of investment of the Account by the Employer. | ||||
x | (iii) | As a result of the deemed investment by the Participant of his/her own Account, but limited as follows (specify) : mutual funds selected by the Employer or Plan Administrator. | ||||
¨ | (c) | Specified Adjustments. Interest or actual investment earnings, gain or loss as specified on Exhibit A. |
9
Execution Page
The Employer hereby agrees to the provisions of this Plan, and in witness of its agreement, the Employer, by its duly authorized officers, has executed this Adoption Agreement.
Name of Employer: | SCP Distributors LLC | |
EIN: |
36-3926337 |
|
Signed: |
/s/ Manuel J. Perez de la Mesa |
|
President/Chief Executive Officer |
||
(Name/Title) | ||
Date: |
3/1/05 |
The Employer hereby agrees to the provisions of this Plan, and in witness of its agreement, the Employer, by its duly authorized officers, has executed this Adoption Agreement.
Name of Employer: | Superior Pool Products LLC | |
EIN: |
33-0913896 |
|
Signed: |
/s/ Manuel J. Perez de la Mesa |
|
President/Chief Executive Officer |
||
(Name/Title) | ||
Date: |
3/1/05 |
The Employer hereby agrees to the provisions of this Plan, and in witness of its agreement, the Employer, by its duly authorized officers, has executed this Adoption Agreement.
Name of Employer: | Cypress Inc. | |
EIN: |
20-0451670 |
|
Signed: |
/s/ Ernest Vierra |
|
President |
||
(Name/Title) | ||
Date: |
3/1/05 |
10
Exhibit 10.3
TRUST AGREEMENT
THIS TRUST AGREEMENT is made by and among SCP Distributors, L.L.C., a Delaware corporation, Superior Pool Products, L.L.C., a Delaware corporation, and Cypress, Inc., a Nevada corporation (each Employer and collectively Employers ), and T. ROWE PRICE TRUST COMPANY, a Maryland limited purpose trust company (the Trustee ).
W I T N E S S E T H T H A T:
WHEREAS, the Employers have adopted the POOLCORP DEFERRED COMPENSATION PLAN (the Plan ) to provide deferred compensation benefits for a select group of its management or highly compensated employees;
WHEREAS, the Employers have incurred or expect to incur liability under the terms of the Plan with respect to the participants of such Plan and their beneficiaries (collectively referred to as Trust Beneficiaries );
WHEREAS, the Employers wish to establish a trust ( Trust ) and to contribute to the Trust assets that shall be held therein, subject to the claims of each Employers creditors in the event of the Employers Insolvency, as herein defined, until paid to Trust beneficiaries in such manner and at such time as specified in the Plan;
WHEREAS, it is the intention of the Employers to make contributions to a Trust to provide it with a source of funds to assist it in meeting some or all of its liabilities under the Plan;
NOW THEREFORE, in consideration of the mutual covenants herein contained, the Employers and the Trustee declare and agree as follows:
SECTION 1. Establishment of the Trust .
1.1 The Trustee shall accept such sums of money and other property acceptable to the Trustee as from time to time shall be paid or delivered to the Trustee. All such money and other property, all investments and reinvestments made therewith or proceeds thereof and all earnings and profits thereon, less all payments and charges as authorized herein, are hereinafter referred to as the ( Trust Fund ). The Trust Fund shall be held, administered and disposed of by the Trustee in accordance with the provisions of this Trust Agreement.
1.2 It is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ). This Trust is not intended to be subject to Part 4 of Title I of ERISA. The Employers represent that this Trust is not intended to be and is not subject to Part 4 of Title I of ERISA .
1.3 This Trust is intended to be a grantor trust, of which the Employers are the grantors, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the Code ), and shall be construed accordingly.
1.4 The principal of the Trust Fund, and any earnings thereon, shall be held separate and apart from other funds of the Employers and shall be used exclusively for the uses and purposes of Trust Beneficiaries and general creditors as herein set forth. Trust Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust Fund. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Trust Beneficiaries against the Employers. Any assets held in the Trust Fund will be subject to the claims of the Trust Beneficiaries.
1.5 Each Employer shall be the grantor and owner for income tax purposes of that portion of the Trust attributable to amounts funded by such Employer. The Plan Administrator shall direct the Trustee as to how to allocate Trust assets to each particular Employer. Such amounts with respect to a particular Employer, including earnings, are hereinafter referred to as an Employer Trust Fund . An Employer Trust Fund will be subject to the claims of such Employers general creditors under federal and state law in the event of Insolvency, as defined in Section 8.2 herein, of such Employer. The Trustee shall separately account for each Employer Trust Fund.
1.6 The Employers represent that the Compensation Committee of SCP Pool Corporation is the administrator of the Plan ( Plan Administrator ), which Plan Administrator possesses discretionary authority and control over the management of the Plan.
SECTION 2. Acceptance by the Trustee .
The Trustee accepts the Trust established under this Trust Agreement on the terms and subject to the provisions set forth herein, and it agrees to discharge and perform fully and faithfully all of the duties and obligations imposed upon it under this Trust Agreement.
SECTION 3. Limitation on Use of Funds .
The Trust established hereby shall be irrevocable and the Employers shall have no right or power to direct Trustee to return to such Employer or to divert to others any assets of the Trust Fund before all payment of benefits have been made to Trust Beneficiaries pursuant to the terms of the Plan[s]; provided, however, that (i) nothing in this Section 3 shall be deemed to limit or otherwise prevent the payment from the Trust Fund of expenses and other charges as provided in Sections 5.1(h), 10.1 and 10.2 of this Trust Agreement or the application of the Trust Fund as provided in Section 14 of this Trust Agreement and (ii) the Trust Fund shall at all times be subject to the claims of the general creditors of each Employer as set forth in Section 8 of this Trust Agreement. The Trustee shall have no duty to determine whether all benefit payments have been made to Trust Beneficiaries and may rely on such Employers notification regarding such payment.
SECTION 4. Duties and Powers of the Trustee with Respect to Investments .
4.1 The Trustee shall invest and reinvest the principal and income of the Trust Fund and keep the Trust Fund invested, without distinction between principal and income, solely as directed by the Plan Administrator, in publicly traded common and preferred stocks, publicly traded bonds and other evidences of indebtedness, governmental obligations, savings and time
2
deposits, certificates of deposit, cash, guaranteed investment contracts, bank investment contracts, synthetic investment contracts, individual or group annuity contracts, regulated investment companies registered under the Investment Company Act of 1940 (including any investment company which has an investment management or other agreement with an affiliate of the Trustee). The Employers investment direction to the Trustee may represent the aggregate of deemed investment elections of Trust Beneficiaries with respect to amounts allocated to each Trust Beneficiarys account under the Plan. The Trustee shall have no duty to question any action or direction of the Plan Administrator or any failure to give directions, or to make any suggestion to the Plan Administrator as to the investment or reinvestment of, or the disposition of, such assets.
4.2 Notwithstanding any provisions of this Trust Agreement to the contrary, the Plan Administrator shall not direct the Trustee to invest any portion of the Trust Fund in any security or other obligation issued by such Employer, other than a de minimis amount held in a common investment vehicle in which the Trustee invests.
4.3 During the term of this Trust, all income received in the Trust Fund, net of expenses and taxes, shall be accumulated and reinvested.
SECTION 5. Additional Powers and Duties of the Trustee .
5.1 Subject to the provisions of Section 4, the Trustee shall have the following powers and authority with respect to property constituting a part of the Trust Fund:
(a) To receive and hold all contributions paid to it by each Employer; provided, however, that the Trustee shall have no duty to require any contributions to be made, or to determine that any of the contributions received comply with the conditions and limitations of the Plan.
(b) At the direction of the Plan Administrator, to sell, exchange or transfer any property at public or private sale for cash or on credit and grant options for the purchase or exchange thereof, including call options for property held in the Trust Fund and put options for the purchase of property.
(c) To participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to any such property, and at the direction of the Plan Administrator, to consent to or oppose any such plan or any action thereunder, or any contract, lease, mortgage, purchase, sale or other action by any corporation or other entity.
(d) To deposit any such property with any protective, reorganization or similar committee and to pay part of the expenses and compensation of any such committee and any assessments levied with respect to any property so deposited.
(e) At the direction of the Plan Administrator, to exercise any conversion privilege or subscription right available in connection with any such property; to oppose or to consent to the reorganization, consolidation, merger or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association any of the securities of which may at any time be held
3
in the Trust Fund and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions, which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire.
(f) Subject to its proper indemnification as provided in Section 18, to commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; to settle, compromise or submit to arbitration, any claims, debts or damages, due or owing to or from the Trust.
(g) At the direction of the Employer or the Plan Administrator, to exercise any right, including the right to vote or tender, appurtenant to any securities or other such property.
(h) To engage any legal counsel, including counsel to an Employer or counsel to the Trustee, or any other suitable agents, to consult with such counsel or agents with respect to the construction of this Trust Agreement, the duties of the Trustee hereunder, the transactions contemplated by this Trust Agreement or any act which the Trustee proposes to take or omit, to rely upon the advice of such counsel or agents and to pay its reasonable fees, expenses and compensation out of the Trust Fund, if not paid by such Employer.
(i) To register any securities held by it in its own name or in the name of any custodian of such property or of its nominee, including the nominee of any system for the central handling of securities, with or without the addition of words indicating that such securities are held in a fiduciary capacity, to deposit or arrange for the deposit of any such securities with such a system and to hold any securities in bearer form.
(j) To make, execute and deliver, as Trustee, any and all deeds, leases, notes, bonds, guarantees, mortgages, conveyances, contracts, waivers, releases or other instruments in writing necessary or proper for the accomplishment of any of the foregoing powers.
(k) At the direction of an Employer or Plan Administrator, to transfer assets of the Trust Fund to a successor trustee as provided in Section 12.4.
Each and all of the foregoing powers may be exercised without a court order or approval.
SECTION 6. Payments to Trust Beneficiary .
6.1 The Plan Administrator shall provide the Trustee with payment instructions that indicate the amounts payable to each Trust Beneficiary, the form in which such amounts are to be paid (as provided for under the Plan) and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments out of the Trust Fund to Trust Beneficiaries in accordance with such payment instructions. Pursuant to instructions by the Plan Administrator, the Trustee shall withhold federal and state income taxes from each payment made under this Trust Agreement at the rate(s) designated by the Plan Administrator and shall report and pay such amounts to the appropriate federal and state taxing authorities. The Trustee shall rely on Employer instructions and shall have no duty to inquire into the accuracy of such instructions.
4
6.2 If any check for a benefit directed to be made from the Trust has been mailed by the Trustee, by regular United States mail, to the last known address of the Trust Beneficiary and is returned unclaimed, or if a benefit payment check is not cashed by the Trust Beneficiary, the Trustee shall notify the Plan Administrator and the Plan Administrator shall be responsible for locating such Trust Beneficiary and for instructing the Trustee on the action to take with respect to the payment of such Trust Beneficiarys benefits.
6.3 The entitlement of a Trust Beneficiary to benefits under the Plan shall be determined by the Plan Administrator (which may not be the Trustee) and any claim for benefits shall be considered and reviewed under the claims procedures set forth in the Plan. The Trustee shall follow the instructions of the Plan Administrator and shall have no duty or right to inquire into the Plan Administrators decision with respect to the payment of benefits and shall be fully indemnified therefore by the Trust Beneficiarys Employer.
6.4 An Employer may make payment of benefits directly to Trust Beneficiaries as they become due under the terms of the Plan. Each Employer shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Trust Beneficiaries. In addition, if the Trust Fund is not sufficient to make payments of benefits in accordance with the terms of the Plan, the respective Employer shall make the balance of each such payment as it falls due. The Trustee shall notify the Employer where the Trust Fund is not sufficient to make the requested benefit payments.
6.5 Such Employer shall remain primarily liable to pay benefits under the Plan with respect to its Trust Beneficiaries. However, each Employers liability under the Plan shall be reduced or offset to the extent benefit payments are made from the Trust Fund to such Trust Beneficiaries.
SECTION 7. Funding of the Trust .
7.1 Funding of the Trust Fund by any Employer is not mandatory.
7.2 The Employers, in their sole discretion, may at any time or from time to time make additional deposits of cash or other property acceptable to the Trustee to the Trust Fund to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Neither the Trustee nor any Trust Beneficiary shall have any right to compel such additional deposits.
SECTION 8. Trustee Responsibility Regarding Payments
to Trust Beneficiaries When the Employer is Insolvent .
8.1 Upon receipt of notification issued in accordance with Section 8.2(a) hereof, the Trustee shall cease payment of benefits to Trust Beneficiaries from an Employers Trust Fund if such Employer is Insolvent. An Employer shall be considered Insolvent for purposes of this Trust Agreement if: (i) the Board of Directors or the Chief Executive Officer of such Employer provides written certification to the Trustee that the Employer is unable to pay its debts as they become due, or (ii) the Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.
5
8.2 At all times during the continuance of this Trust, as provided in Section 1.4 hereof, the principal and income of the Trust Fund shall be subject to the claims of general creditors of such Employer in the event of such Employers Insolvency as set forth below:
(a) The Board of Directors and the Chief Executive Officer of an Employer shall have the duty to inform the Trustee in writing if such Employer becomes Insolvent. If a person claiming to be a creditor of an Employer alleges in writing to the Trustee that such Employer has become Insolvent, the Trustee shall determine solely through written certification of the Employer whether such Employer is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to such Employers Trust Beneficiaries.
(b) Unless the Trustee has received written notice from an Employer or a person claiming to be creditor of such Employer alleging that such Employer is Insolvent, the Trustee shall have no duty to inquire whether an Employer is Insolvent. The Trustee may in all events rely on such certification concerning an Employers solvency as may be furnished to the Trustee by an Employer in accordance with Section 8.2(a) hereof.
(c) If at any time the Trustee has received written notice of Insolvency from the Board of Directors or the Chief Executive Officer of an Employer, the Trustee shall discontinue payments of benefits under the Plan to such Employers Trust Beneficiaries and shall hold the assets of the Trust Fund for the benefit of such Employers general creditors. The Trustee shall deliver the assets of the Trust Fund to satisfy the claims of such Employers general creditors as directed by final order of a court of competent jurisdiction. Nothing in this Trust Agreement shall in any way diminish any rights of Trust Beneficiaries to pursue their rights as general creditors of such Employer with respect to benefits due under the Plan or otherwise.
(d) The Trustee shall resume the payment of benefits to Trust Beneficiaries in accordance with this Trust Agreement only after the Board of Directors or Chief Executive Officer of such Employer has notified the Trustee in writing that such Employer is not Insolvent (or is no longer Insolvent).
(e) In no event shall the Employer Trust Fund of one Employer be available to the creditors of any other Employer and to that extent each Employer Trust Fund shall be held subject to the maximum restraint on involuntary alienation permitted by the applicable state Trust Code.
8.3 Provided there are sufficient assets in an Employers Trust Fund, if the Trustee discontinues the payment of benefits from the Trust Fund pursuant to Section 8.2 hereof and subsequently resumes such payments, the first payment to each Trust Beneficiary following such discontinuance shall, provided that there are sufficient assets in the Trust Fund, include the aggregate amount of all payments which would have been made to such Trust Beneficiary in accordance with the relevant provisions of the Plan during the period of such discontinuance, less the aggregate amount of any payments made to such Trust Beneficiary by such Employer during any such period of discontinuance.
6
SECTION 9. Third Parties .
A third party dealing with the Trustee shall not be required to make inquiry as to the authority of the Trustee to take any action nor be under any obligation to see to the proper application by the Trustee of the proceeds of sale of any property sold by the Trustee or to inquire into the validity or propriety of any act of the Trustee.
SECTION 10. Taxes, Expenses and Trustee Fees .
10.1 Each Employer shall from time to time pay taxes of any and all kinds whatsoever which at any time are lawfully levied or assessed upon or become payable in respect of the Trust Fund, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes levied or assessed upon the Trust Fund are not paid by the Employers, the Trustee shall pay such taxes out of the Trust Fund. The Trustee shall if requested by an Employer, or may, in its discretion, contest the validity of taxes in any manner deemed appropriate by the Employer or its counsel, but at such Employers expense, and only if it has received an indemnity bond or other security satisfactory to it to pay any such expenses. In the alternative, such Employer may itself contest the validity of any such taxes. The Trustee will withhold federal and state income taxes from any payments made to a Trust Beneficiary in accordance with Section 6.1 of this Agreement.
10.2 The Employers shall pay the Trustee a fee of $2,000.00 annually as compensation for its services hereunder. The Trustee fee may be changed by the Trustee upon 90 days prior written notice to the Plan Administrator. Such Employer also shall pay the administrative expenses and other expenses incurred by the Trustee in the performance of its duties under this Trust Agreement, including but not limited to brokerage commissions, fees of counsel engaged by the Trustee pursuant to Section 5.1(h) hereof and fees for preparation of annual trust tax returns. Such fees and expenses shall be charged against and paid from the Trust Fund, to the extent each Employer does not pay such fees and expenses.
SECTION 11. Administration and Records .
11.1 The Trustee shall keep or cause to be kept accurate and detailed accounts of any investments, receipts, disbursements and other transactions under the Trust and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by the Plan Administrator. All such accounts, books and records shall be preserved (in original form, or on microfilm, magnetic tape or any other similar process) for such period as the Trustee may determine, but the Trustee may only destroy such accounts, books and records after first notifying the Plan Administrator in writing of its intention to do so and transferring to Plan Administrator any of such accounts, books and records requested.
11.2 Within ninety (90) days after the close of each Plan Year (as such term is defined in the Plan), and within ninety (90) days after the removal or resignation of the Trustee or the termination of the Trust, the Trustee shall file with the Plan Administrator a written account setting forth all investments, receipts, disbursements and other transactions effected by it during the preceding Plan Year, or during the period from the close of the preceding Plan Year to the date of such removal, resignation or termination, including a description of all investments and
7
securities purchased and sold with the cost or net proceeds of such purchases or sales and showing all cash, securities and other property held at the end of such Plan Year or other period. Upon the expiration of ninety (90) days from the date of filing such annual or other account, the Trustee shall to the maximum extent permitted by applicable law be forever released and discharged from all liability and accountability with respect to the propriety of its acts and transactions shown in such account except with respect to any such acts or transactions as to which the Plan Administrator shall within such ninety (90) day period file with the Trustee written objections.
11.3 The Trustee shall upon the Plan Administrators reasonable request permit an independent public accountant selected by the Plan Administrator to have access during ordinary business hours to such records as may be necessary to audit the Trustees accounts for the Trust.
11.4 As of each valuation date set forth in the Plan and at such other times as is necessary or as the Trustee and Plan Administrator agree, the fair market value of the assets held in the Trust Fund shall be determined. The valuation shall be based, without independent investigation, upon valuations provided by investment managers, trustees of common trust funds, sponsors of mutual funds and records of securities exchanges. Notwithstanding the foregoing, the Trustee shall not be responsible for providing the value of any bank investment contracts, structured or synthetic investment contracts or insurance contracts, or for any asset which is not liquid or not publicly traded, the value of which shall be provided by the Plan Administrator. The Trustee may obtain the opinions of qualified appraisers, as necessary in the discretion of the Trustee, to determine the fair market value of any security or other obligation issued by an Employer, the fees of which appraiser shall, unless paid by such Employer, be paid from the Trust Fund.
11.5 Nothing contained in this Trust Agreement shall be construed as depriving the Trustee or an Employer of the right to have a judicial settlement of the Trustees accounts.
11.6 In the event of the removal or resignation of the Trustee, the Trustee shall deliver to the successor trustee all records which shall be required by the successor trustee to enable it to carry out the provisions of this Trust Agreement.
11.7 The Trustee shall prepare and file such tax reports and other returns as each Employer and each Trustee may from time to time agree to in writing.
SECTION 12. Removal or Resignation of the Trustee and Designation of Successor Trustee .
12.1 At any time the Plan Administrator may remove the Trustee with or without cause, upon at least sixty (60) days advance written notice to the Trustee.
12.2 The Trustee may resign at any time upon at least sixty (60) days advance written notice to each Employer.
12.3 In the event of such removal or resignation, the Trustee shall duly file with the Plan Administrator and each Employer a written account as provided in Section 11.2 of this Trust Agreement for the period since the last previous annual accounting, listing the investments
8
of the Trust and any uninvested cash balance thereof, and setting forth all receipts, disbursements, distributions and other transactions respecting the Trust not included in any previous account, and if written objections to such account are not filed as provided in Section 11.2, the Trustee shall to the maximum extent permitted by applicable law be forever released and discharged from all liability and accountability with respect to the propriety of its acts and transactions shown in such account.
12.4 Prior to the effective date of the removal or resignation of the Trustee, the Plan Administrator shall designate a successor trustee qualified to act hereunder. In the event that the Plan Administrator fails to designate a successor trustee as of the effective date of the Trustees resignation or removal, the Trustee shall have the right to apply to a court of competent jurisdiction for the appointment of a successor. All of the Trustees expenses in such court proceeding, including attorneys fees, shall, if not paid by the Employers, be allowed as administrative expenses of the Trust. Each such successor trustee, during such period as it shall act as such, shall have the powers and duties herein conferred upon the Trustee, and the word Trustee wherever used herein, except where the context otherwise requires, shall be deemed to include any successor trustee. Upon designation of a successor trustee and delivery to the resigned or removed Trustee of written acceptance by the successor trustee of such designation, such resigned or removed Trustee shall promptly assign, transfer, deliver and pay over to such Trustee, in conformity with the requirements of applicable law, the funds and properties in its control or possession then constituting the Trust Fund.
SECTION 13. Enforcement of Trust Agreement and Legal Proceedings .
Each Employer shall have the right to enforce any provision of this Trust Agreement, and any Trust Beneficiary shall have the right as a beneficiary of the Trust to enforce any provision of this Trust Agreement that affects the right, title and interest of such Trust Beneficiary in the Trust. In any action or proceedings affecting the Trust, the only necessary parties shall be the Employers, the Trustee and the Trust Beneficiaries and, except as otherwise required by applicable law, no other person shall be entitled to any notice or service of process. Any judgment entered in such an action or proceedings shall, to the maximum extent permitted by applicable law, be binding and conclusive on all persons having or claiming to have any interest in the Trust.
SECTION 14. Termination and Suspension .
The Trust shall terminate when all payments, which have or may become payable pursuant to the terms of the Trust, have been made or the Trust Fund has been exhausted, and all remaining assets shall then be paid by the Trustee to each Employer.
SECTION 15. Amendments .
15.1 Each Employer and the Trustee may from time to time by written instrument, amend any or all of the provisions of this Trust Agreement. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan(s) or shall make the Trust revocable after it has become irrevocable in accordance with Section 3 hereof.
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15.2 Each Employer shall furnish the Trustee with a copy of all amendments to the Plan prior to their adoption.
SECTION 16. Nonalienation .
Except insofar as applicable law may otherwise require and subject to Sections 1, 3 and 8 of this Trust Agreement: (i) no amount payable to or in respect of any Trust Beneficiary at any time under the Trust shall be subject to any manner of alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void; and (ii) the Trust Fund shall in no manner be liable for or subject to the debts or liabilities of any Trust Beneficiary.
SECTION 17. Communications .
17.1 Communications to the Employers shall be addressed to the Plan Administrator at 109 Northpark Blvd., Covington, LA 70433-5001; provided, however, that upon the Plan Administrators written request, such communications shall be sent to such other address as the Plan Administrator may specify.
17.2 Communications to the Trustee shall be addressed to T. Rowe Price Trust Company at 100 East Pratt Street, Baltimore, Maryland 21202; Attention Legal Department; provided, however, that upon the Trustees written request, such communications shall be sent to such other address as the Trustee may specify.
17.3 No communication shall be binding on the Trustee until it is received by the Trustee, and no communication shall be binding on the Employers until it is received by the Employers or the Plan Administrator.
17.4 Any action of an Employer or the Plan Administrator pursuant to this Trust Agreement, including all orders, requests, directions, instructions, approvals and objections of an Employer or the Plan Administrator to the Trustee, shall be in writing or by such electronic transmission as agreed upon by such Employer or Plan Administrator and the Trustee, signed on behalf of such Employer or Plan Administrator by any duly authorized officer of such Employer or by a member of the Committee that represents the Plan Administrator. Any communication by a Trust Beneficiary with the Trustee must be in writing in order to have effect. The Trustee may rely on, and will be fully protected with respect to, any such action taken or omitted in reliance on any information, order, request, direction, instruction, approval, objection, or list delivered to the Trustee by an Employer.
SECTION 18. Indemnification .
The Employers shall indemnify and hold harmless the Trustee (including its affiliates, representatives, agents and employees) from and against any liability, cost or other expense, including, but not limited to, the payment of attorneys fees that the Trustee incurs in prosecuting or defending against any claim or litigation in connection with the Trust or that the Trustee otherwise incurs in connection with this Trust Agreement or the Plan, unless such liability, cost or other expense arises from the Trustees own willful misconduct or gross negligence.
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SECTION 19. Miscellaneous Provisions .
19.1 Successors and Assigns . This Trust Agreement shall be binding upon and inure to the benefit of each Employer and the Trustee and their respective successors and assigns.
19.2 No Assumption/Limitation of Duties . The Trustee assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of an Employer. The duties of the Trustee with respect to the Plan and this Trust are limited to those as set forth under the terms of this Trust Agreement.
19.3 Headings . Titles to the Sections as well as all headings and subheadings of this Trust Agreement are included for convenience only and shall not control the meaning or interpretation of any provision of this Trust Agreement.
19.4 Conflict with Plan . In the event of any conflict between the provisions of the Plan document and this Trust Agreement, the provisions of this Trust Agreement shall prevail.
19.5 Construction . Whenever used in this Trust Agreement, unless the context indicates otherwise, the singular shall include the plural, the plural shall include the singular, and the male gender shall include the female gender.
19.6 Severability . If any provision of this Trust Agreement is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision, and this Agreement shall be construed and enforced as if such provision had not been included.
19.7 Law to Govern . This Trust Agreement and the Trust established hereunder shall be governed by and construed, enforced and administered in accordance with the laws of the State of Maryland and the Trustee shall be liable to account only in the courts of the State of Maryland.
19.8 Counterparts . This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed to be the original and all of which together shall constitute one and the same instrument.
19.9 Effective Date . This Agreement shall be effective as of the date of transfer to T. Rowe Trust Company of the assets which are to be held in trust pursuant to this Agreement but in any event no earlier than March 1, 2005.
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19.10 Signature Authority and Conformity with the Plan . The person executing this Trust Agreement on behalf of the Employer certifies that he or she is duly authorized by the Employer consistent with the terms of the Plan to do so. The Employer represents that copies of all Plan documents as in effect on the date of this Trust Agreement have been delivered to the Trustee.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed by the parties hereto.
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EXHIBIT 31.1
I, Mark W. Joslin, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of SCP Pool Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 29, 2005 |
/s/ Mark W. Joslin |
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Vice President and Chief Financial Officer |
EXHIBIT 31.2
I, Manuel J. Perez de la Mesa, certify that:
1. I have reviewed this quarterly report on Form 10-Q of SCP Pool Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 29, 2005 |
/s/ Manuel J. Perez de la Mesa |
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President and Chief Executive Officer |
EXHIBIT 32.1
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q of SCP Pool Corporation (the Company) for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the Report), Manuel J. Perez de la Mesa, as Chief Executive Officer of the Company, and Mark W. Joslin, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: April 29, 2005
/s/ Manuel J. Perez de la Mesa |
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Manuel J. Perez de la Mesa President and Chief Executive Officer |
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/s/ Mark W. Joslin |
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Mark W. Joslin Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.