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Pool's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Within the blue business' major markets, Texas and Arizona have the strongest sales growth at 16% and 19%, respectively, while Florida came in at 9% growth and California realized 5% growth. All other markets were up 8% collectively.

Overall, weather was neutral in the quarter versus both last year and the long-term norm, with the benefits in the Southwest offset by worse-than-normal weather in the West.

Year-to-date, our green base business sales increased 7.9% while our blue base business increased 10%, yielding the combined 9.9% increase for the year-to-date. Acquisitions and new locations contributed $21 million of sales, but did not contribute any operating income as these are investments for the future.

Our 2 principal organic sales growth focus areas are the retail customer segment which increased 11% year-to-date and the building materials product segment which increased 17% year-to-date. Together, these focus growth areas accounted for approximately 45% of our sales margin dollar growth year-to-date.

We expect to finish 2011 with mid to high single-digit sales growth in the fourth quarter but on lower gross margin as we realized certain nonrecurring vendor incentives in last year's fourth quarter.

Talking about gross margins, 12 bps of our 61 bps increase in the quarter is due to our recovery of higher freight expense, with the balance primarily due to improved sales and purchasing execution.

As mentioned last quarter, some vendors have unusual in-season price increases that we bought into. But given the timing and competitive behavior, we were not able to realize significant benefit from those buy-ins. The additional buy-in amounts from the second quarter have largely since been sold through while some other vendors have increased prices in the last -- past 30 to 60 days which we've also bought into.

Overall, our working capital is very sound, with DSOs down and over 90% of the year-on-year inventory increase being the fastest velocity classes. Our management here should result in operating cash flow approximating net income for the year.

Now I'll turn the call over to Mark for his financial commentary.

Read the rest of this transcript for free on seekingalpha.com

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