POOL

Business Context and Reporting Period

Company: SCP Pool Corporation (POOL CORP)
Filing Type: Form 8-K (Current Report)
Date of Report: November 2, 2004
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation.

Key Financial Metrics and Debt Structure

The filing details the establishment of a new unsecured syndicated senior credit facility ("New Facility") replacing a previous facility set to expire on November 27, 2004.

• Facility Size: $120 million five-year revolving credit facility.
• Expansion Option: Commitments may be increased by up to $40 million at the Company's request, subject to conditions.
• Interest Rates:
  • Base Rate: Greater of Prime Rate or Overnight Federal Funds Rate + 0.50%.
  • LIBOR: LIBOR plus a spread ranging from 0.600% to 1.25% (based on leverage ratio).
• Fees:
  • Annual Facility Fee: 0.150% to 0.250% (based on leverage ratio).
  • Letter of Credit Issuance Fee: 0.125% of face amount.
  • Letter of Credit Commission: 0.150% to 0.250% of face amount.
• Guarantees: Obligations are guaranteed by all existing and future direct and indirect subsidiaries.

Material Changes Versus Prior Period

The New Facility replaces the Company's previous senior secured credit facility dated November 27, 2001, which was provided by BankOne, NA. The new agreement is unsecured and involves a syndicate of lenders including Wachovia Bank, JPMorgan Chase Bank, Hibernia National Bank, Wells Fargo Bank, and Regions Bank.

Covenants, Risks, and Management Commentary

Financial Covenants:

• Maximum average total leverage ratio (Average total funded debt + average accounts receivable securitization / EBITDA).
• Minimum fixed charge coverage ratio (EBITR / cash interest expense + rental expense).

Restrictive Covenants: The agreement restricts the Company's ability to dispose of assets, incur additional indebtedness, pay dividends (outside current policy), make capital expenditures, create liens, make acquisitions, or engage in mergers/consolidations without compliance with specific terms. Events of Default: Include nonpayment, covenant violations, bankruptcy, cross-defaults, change of control, and material judgments. Upon default, lenders may terminate obligations and demand immediate repayment.

Investor Verification Checklist

• Verify the specific leverage ratio thresholds required to maintain the lowest interest rate spreads (0.600% LIBOR spread vs. 1.25%).
• Confirm the Company's current compliance status with the new maximum average total leverage ratio and minimum fixed charge coverage ratio.
• Review the full text of the Credit Agreement (Exhibit 10.1) for detailed definitions of EBITDA and EBITR used in covenants.
• Assess the impact of the unsecured nature of the new facility compared to the previous secured facility on the Company's overall risk profile.
• Monitor the utilization of the $40 million accordion feature for potential future debt expansion.