This enables the stable and growing maintenance in the peer segments of the market to be more apparent and visible in our results. We, however, are not out of the woods yet from an industry standpoint as external market factors like single-family home values, consumer confidence, employment, consumer financing and economic growth remain at depressed levels.It is indecent environment that we are realizing profit growth as our talented and dedicated team address the opportunities available to us. These opportunities are resulting in sales and market share growth through new service, product and program initiatives complimented by our commitment to the industry and our customers. In the second quarter, our Blue business sales were up 5.4%, while our Green business sales were down 7.5%. Within the Blue business, cooler temperatures than normal in the West resulted in California sales declining by 5%, while in Florida and Texas, we realized 7% and 9% sales growth, respectively as these markets had relatively normal weather in the quarter. We also realized 8% sales growth in the other markets with generally favorable conditions in a number of Northeast and mid-Atlantic markets, where we realized sales increases well into the double-digit percentage wise, offset partially by unfavorable conditions in the Pacific Northwest. For 2010, we anticipate that the industry will realize a modest recovery in replacement, refurbishment activity and flat to modest growth in new pool construction. The maintenance and repair segments represented by retail, service and maintenance customers will remain stable as they have throughout the past several years. Overall, we expect that our sales growth will be in the low-to-mid single digit percent for the balance of the year. Gross margins were slightly below last year's second quarter given the intensely competitive market conditions coupled with a lagging positive impact on 2009 gross margins from our pre-price increase inventory buys in the second half of 2008. In contrast with a few of our competitors that use price as their and only selling tool, we focus on customer service coupled with providing our customers unparallel business, support programs and resources, all of which serve to help our customers grow their sales and profitability.
Mark will give you a few more of the details on the expense side, but needless to say, these are in control and reflect the actions taken during the course of the past three years as we've extracted a combined $70 million of expense from our business. They have made this kind of expense reduction with very little change in our core infrastructure, while also simultaneously strengthening the depth and caliber of our organization, is a real testament to the talent and commitment of our team.As such that our only significant expense increase is our accrual for incentive compensation, is I believe very appropriate. Our cash generation continues very strong as we continue to improve on very facet of working capital management. This capital generation has enabled to realize significant debt and interest expense reductions in the past year. We anticipate the cash flow generation will exceed net income again this year as we are now in the major cash flow positive months of the year. Overall 2010 is proving to be the pivotal transition year that we anticipated. While we expect that external market conditions will not lead to a significant market recovery in the near-term, we do anticipate that we can grow diluted earnings per share by the mid-teens percent per year with only a modest recovery in replacement of refurbishment activity and new construction activity. Once external market conditions really improved from the presently depressed levels and return to more normalized levels and the industry begin a genuine recovery then on realizing 20% or greater diluted earnings growth becomes realistically attainable. With that I will turn the call over to Mark for his financial commentary. Read the rest of this transcript for free on seekingalpha.com