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SCP Pool is investing to
grow the young swimming pool industry
Services
Wholesale
(POOL-NASDAQ)
SCP Pool Corporation
109 Northpark Blvd.
Covington, LA 70433
Phone: 985-892-5521
Manuel J. Perez de la Mesa
President, CEO and Director
Interview conducted by:
Walter Banks, Publisher
CEOCFOinterviews.com
June 30, 2005
BIO:
Manuel J. Perez de la Mesa
President, CEO and Director
Mr. Perez de la Mesa has been Chief Executive Officer of the Company since May 2001 and
has also been the President of the Company since February 1999. Mr. Perez de la Mesa
served as Chief Operating Officer of the Company from February 1999 to May 2001. Prior to
joining the Company, Mr. Perez de la Mesa served as Vice President, Distribution
Operations for Watsco, Inc., a HVAC/R distribution company, from 1996 to January 1999.
Company Profile:
SCP Pool Corporation is the world’s largest wholesale distributor of swimming pool
supplies and related equipment. Incorporated in 1993, SCP has grown from a single location
in Metairie, Louisiana to over 200 service center locations in North America and Europe.
The Company has over 2,500 employees supporting the distribution of more than 91,000
national brand and private label products to nearly 48,000 customers. SCP offers its
customers a comprehensive selection of pool equipment, chemicals, replacement parts and
complementary items.
SCP’s customer base is comprised of three primary sectors: the Builder, the Service
Professional, and the Specialty Retailer - all providing goods and services to the
potential and existing swimming pool owner. As the leading wholesale distributor in the
swimming pool industry, the Company’s strategies are to promote the growth of the
swimming pool industry, promote the growth of its customers’ businesses and
continuously strive to operate more effectively. By executing these strategies, SCP
endeavors to realize its mission of providing exceptional value to its customers and
suppliers, exceptional return to its shareholders and exceptional opportunities for its
employees.
CEOCFO: Mr. Perez de la Mesa, will you tell us how long you
have been with the company and the changes that have taken placed since you have been
there?
Mr. Perez de la Mesa: “This is my seventh year with the
company. During the course of that time, we have grown from approximately $450 million in
sales and $25 million in operating profits to last year reporting roughly three times 1998
sales at over $1.3 billion and operating profits approximately five times as much as they
were back in 1998.”
CEOCFO: Has your
worldwide growth been under your leadership?
Mr. Perez de la Mesa: “It started before I got here. The
genesis of the company goes back to the end of 1993 when a private equity firm acquired
what was then a regional distributor with sixteen locations doing just over $60 million in
sales. The company set out on the course to expand its network. Over the course of
1994-1998, through a combination of acquisitions and the opening of new locations, coupled
with strong organic growth, the Company expanded from $60 million to $450 million in sales
with the network expanding from sixteen locations to one hundred locations. Since then, we
have continued that path in terms of network expansion as well as strong organic growth.
We have complemented that by progressively adding more value in the supply chain,
specifically by working to grow our customers’ and suppliers’ businesses.”
CEOCFO: Is your growth
strategy based on the acquisitions of distributors?
Mr. Perez de la Mesa: “The growth strategy stems from
our being in a very young industry, where the penetration rate in the U.S. is only 12% of
its potential and that includes both in-ground and above-ground pools. Realizing that we
are in a young industry and realizing that distribution is in a unique position to add
value in the supply chain, we have continuously invested to expand the breadth of our
network as well as the breadth and depth of the value-added services that we can provide
in the channel. Overall, our three strategies are to promote the growth of this very young
industry and to continue to strive to operate more effectively and work hand-in-hand with
our customer base and supply base to progressively grow their businesses.”
CEOCFO: Are you still at
91,000 for your distributor base?
Mr. Perez de la Mesa: “We have 203 locations from which
we deliver and stock over 90,000 different SKUs. That is trying to fulfill the objective
of becoming a complete one-stop solution to for our customers as well as being a
value-added distributor for our suppliers. We have a long way to go. We have significant
potential for growth as an industry and we, given our position in the industry, are in a
unique position to add more value and to enhance our contribution to the industry and our
customers’ growth.”
CEOCFO: On what do you
base the market penetration, is it number of homes that we have in America that can fit a
pool?
Mr. Perez de la Mesa: “There are almost 70 million homes
in the U.S. that have the economic capacity and yard space for a pool. Only 12% of those
homes currently have one. We invest in programs to raise awareness with consumers. We also
invest in educating on the merits and benefits of pool ownership. We do that through our
website, which helps consumers navigate and becoming very educated on pools and products
that can be added to enhance the aesthetic value.”
CEOCFO: On that website,
do you supply information on builders?
Mr. Perez de la Mesa: “Once consumers are at the
website, they can connect with builders based on their zip code.”
CEOCFO: Where do you
stand with the competition?
Mr. Perez de la Mesa: “We are the only distribution
company that has this level of network, tools or resources. We are uniquely positioned
within the industry. We have good competition from local and distributors that provide
more traditional distribution services. We also compete indirectly with some manufacturers
that sell direct to dealers. We compete indirectly with the mass merchants. Mass merchants
compete with our retail customers and we compete with them in that anyone who competes
with our customers, competes with us.”
CEOCFO: Why do people
choose POOL?
Mr. Perez de la Mesa: “Our customers choose us because
of the convenience of the network. Time is money and it is important to have readily
available products as well as a full fleet of delivery vehicles to our customers and their
destinations. We also have provided full services beyond just the convenience of location
and delivery. We also have people that go out of their way to provide a value to our
customers, whether it be technical support or other services; we have an extremely
dedicated employee base that does that.”
CEOCFO: Will future
growth come from penetration into current market areas or expansion?
Mr. Perez de la Mesa: “Our sales growth has been a
combination of acquisitions as well as internal growth. If you look at the bottom-line,
most of that growth has come from internal growth where our locations continuously
increase their value and doing that progressively more effectively.”
CEOCFO: Do you open your
own locations or is it through acquisitions?
Mr. Perez de la Mesa: “We do both. About two-thirds of
our locations came from acquisitions, and about one-third from our opening of new
locations. We look at both of those alternatives in each market. In cases where an
acquisition is viewed as being the best alternative, we pursue that one first and vice
versa.”
CEOCFO: When you are
looking into making an acquisition, do you take into consideration the current employees
or do you go in with the idea of changing the whole thing over?
Mr. Perez de la Mesa: “This is an industry, like many
industries, that suffers from a scarcity of talent. We attempt to work with the existing
management team and employee base and provide them the tools and resources to help them
grow.”
CEOCFO: Are the many
countries of which you are not active, where you would like to be?
Mr. Perez de la Mesa: “There are many countries. We
currently operate in the U.S., Canada, Mexico, France, Spain, Portugal and the U.K. There
are over 160-180 countries where we could operate. There has to be a large enough pool
market to make that worthwhile. The U.S. represents approximately two-thirds of the world
market so much our focus remains domestic.”
CEOCFO: Do you have the
funds available for continued growth?
Mr. Perez de la Mesa: “Through the management of our
business, we have the opportunity to ascertain very quickly to what extent we are running
the operation and what we need to do. We have all of the disciplines in place that result
in very strong cash flow generation. From 1994-2004, our cash flow from operations was in
excess of our net income, which is unusual for most companies.”
CEOCFO: Do you have
float available and how do you approach investor relations; is it an outside firm or
in-house?
Mr. Perez de la Mesa: “We do all the investor relations
work in-house. Our market cap is approximately $1.8 billion dollars. Our trading volume is
in the neighborhood of 300,000 shares or approximately $10-$12 million of value traded
everyday. We are not focusing on short-term trading activities but more on business
fundamentals. That is how we manage our business and we try to cultivate an investor base
that mirrors that and to a large degree, that is the case. Most of our investor base
consists of buy-and-hold type investors.”
CEOCFO: In closing, will
you tell us why potential investors should consider POOL?
Mr. Perez de la Mesa: “The company is the leader and most significant
participant in the young swimming pool industry. Most of the revenues in the industry are
derived from the maintenance and remodeling of existing pools. That results in a very
predictable, recurring revenue stream year-in-and-year-out. The pool industry is also
heavily weighted towards southern markets that continue to grow at an accelerated rate
that is also complemented by very positive economic and demographic dynamics wherein you
have an aging population with a tremendous build-up of discretionary funds, which would be
used for swimming pools. With all that background, we have continued to provide
progressively more value in the supply chain, which is fragmented on the customer side as
well as the supply side. This combination provides exceptional return to shareholders as
well as exceptional value to our customers and suppliers.”
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