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Pool's CEO Discusses Q2 2011 Results - Earnings Call Transcript

Our second quarter base business sales were modestly better than expected, increasing by 8.1%, including 1% from favorable year-on-year exchange rates. It's important to note that we had $12 million of sales excluded from base business in the quarter, as these sales came from acquisitions and new locations, which sales generated essentially no profit in the quarter as we're still in the early phases of investment in these markets. Year-to-date, our base business sales were up 10.1% with $15 million in sales excluded from our base business calculation.

In comparing sales performance, our Blue business sales were up 8.4% in the quarter and 10.3% year-to-date, while our Green business was up 4.4% in the quarter and 7.4% year-to-date. As mentioned in my comments last quarter, we had easy comps in the first quarter, but the comps get more difficult as we progress during the year with more modest year-on-year growth comparison perspective.

Within the Blue business by major market, Texas continued to lead the way with 12.5% sales growth in the quarter, followed by Arizona at 11.5%, California at 7.8% and Florida at 4.4%. All other Blue markets were collectively up 8.1%, including the benefits of favorable exchange rates.

The principal drivers for our sales increase are market share gains in the aging of the install base, stimulating replacement and remodel activity, while the overall increase of the install base inflation had a very modest change in consumer discretionary behavior, also being positive contributing factors.

Our 2 principal organic market share growth drivers for the next several years are with building materials in the replacement and remodel customer segment, and the retail customer segment. Year-to-date, our gross profit dollars are up 14% to $21.1 million in the Building Materials segment and up 12% to $73.1 million in the Retail segment, far ahead of the markets low to mid single-digit growth this year. For the balance of 2011, we believe that mid single-digit sales growth is reasonable given the progressively tougher comps with modestly higher inflation offset by less favorable exchange rates.

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