Greetings, and welcome to the Pool Corporation first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce to your host, Mr. Mark Joslin, Pool Corporation's Chief Financial Officer. Thank you. Mr. Joslin, you may begin.

Thank you, Taanya. Good morning, everyone; and welcome to our first quarter 2010 conference call. As usual, I would like to remind our listeners that our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2010 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. Now, I will turn the call over to our President and CEO, Manny Perez de la Mesa. Manny?

Thank you, Mark. Good morning to all on the call. In investor meetings, the most pressing question that I get from those that know the company well is, whether I have seen the turn from the headwinds of the past four years? The answer now is that I believe we have. After a week first two plus months this year, where some felt markets were battered with much colder and wetter-than-normal, in mid-March, it seemed like the sun came out and our daily sales rates rebounded. By month end, we had recovered the ground lost in the first part of March to end with flat year-on-year sales for the month, excluding the benefit of one additional sales day. This momentum has carried over into April, where we are realizing our positive sales comp for the first time in several years. At this juncture, every indication is that we will have a positive sales comp in the second quarter and the balance of 2010. When looking at our business, the major headwinds of the last several years have been the 70% to 80% decline in new construction, and the deferral of discretionary remodel activity. We anticipate that new construction will be roughly flat, and there will be a modest recovery in replacement remodel activity in 2010. We expect to continue to grow market share in all segments, including the non-discretionary maintenance and repair segment, as we have realized historically. With respect to the first quarter, where we had a 4.6% year-on-year decrease in base business sales, our Blue business sales were down 2.8%, while our Green business was down almost 19%. There were no significant differences by market, within each of our Blue and Green business performance. In all cases, there was notable improvement in March, with the Blue business having…

Thank you, Manny. Manny has already provided you with color on the sales and margins, so I will start with operating expenses and move on from there. As I mentioned in our release, our base business operating expenses were down 3% or nearly $3 million in the quarter, as we continued to maintain our focus on expense control. Excluding the GPS acquisition, our headcount was down 5% year over year, due to a reduction in our largest cost category, probe-related costs. We have also benefited from lower facility lease costs, the result of renegotiated leases and some facility consolidations. Another area with favorable trends is our bad debt expense, which benefited from proved collection activity, as I will discuss further in a few minutes. Our objective this year on expenses is to continue to push targeted reductions, which along with leveraging the infrastructure we have in place should allow us to lower expenses as a percentage of sales throughout the remainder of the year. The rest of the P&L is pretty straightforward, so I will move on to the balance sheet, and begin with a discussion on accounts receivables. As I discussed in the last two quarters, we continue to see improved results here, as we have become more disciplined, and as our customers adjusted their businesses to market conditions. Our net receivables of $158 million declined 2% from last year, which is in line with sales. Our percentage of current receivables to total receivables improved by over six percentage points year over year, with our percentage of greater than 60-days past-due receivables to total receivables declining by over four percentage points. The reference here, looking at just our domestic Blue business, the percentage of current receivables to total receivables is 86% at the end of March, compared to 81%…

Thank you. We will now be conducting a question and answer session. (Operator Instructions). Our first question comes from Mark Rupe with Longbow Research. Please proceed with your question. Mark Rupe – Longbow Research: Good morning. It is great to hear that you have started to see a turn in the business. I was hoping you could talk a little bit more though about the pricing environment that you are seeing, you know, what kind of products you are seeing or what lines of products are most competitive, and the impact that it in the first quarter, and kind of the expectation of how that might impact the full year.

Sure. Two areas. First, probably if you look at products and product categories, the one that has been the most competitive is chemicals, particularly on the service sizes, which are sold in either 50-pound buckets or 25-pound buckets in those markets. In those cases, those are – some call it the mill (inaudible) of our industry, and therefore are the ones that are most heavily used or footfalled in order to create store bracket. So, those are the – that is individually chemicals with emphasis on a couple of SKUs are the most prevalent. There has also been cases where some competitors, in order to address some of their cash flow needs, have tried or have served to balance inventories or rebalance their inventories, better said, by basically dumping certain products that they are long on in order to buy products that they are short on, and that has also depressed the pricing of those product categories and that varies from market to market, competitor to competitor. Mark Rupe – Longbow Research: Okay, that is helpful. And then, sort of the impact that it had on gross margin this quarter, and if you could quantify this occasion for the full year?

Sure. When you look at the biggest belt up for the quarter, it is really driven by the fact that we did not get the benefit this year that we had last year in terms of the purchases made in late 2008, ahead of vendor price increases. So therefore, just to walk through the map there for a second; in 2008, manufacturers announced price increases. We bought long, given our financial wherewithal to do so. We bought long on those, in anticipation of those increases, and had that inventory in. We raised our prices in early 2009, as did the rest of the industry, while we still had products that were bought pre-price increase. So therefore, that garnered a gain and contributed fairly significantly to our improvement in the first quarter of 2009, where we realized a – I believe it was a 120 bps improvement in gross margin year-on-year. So therefore, this year, not having that same benefit, obviously, that was the main reason why we had our shortfall in the first quarter. As the year progressed in 2009, and we had to replenish our stock based on – with the products at the higher prices, our average cost split up and therefore, the improvement year-on-year in margin during 2009 eroded in every subsequent quarter, given that we didn't have that benefit any longer. So therefore, that is the main reason for the drag. The second reason is, you know, the reason that I mentioned earlier, which is more irrational behavior this year than in last year, certainly. And again, that is driven in part by occasional issues, where vendors use price as their only means to create attention to themselves, or alternatively, where they are trying to rebalance inventories and they don't have the wherewithal that we do,…

Sure. We have now had several months year-on-year, for example, as you mentioned, where Florida has been up in terms of new pool permits, and you know, the only token I can give you, it is on very, very low numbers, numbers that are 80% below what they were in 2005. And numbers that were – no, you would have to go back four years plus to attain those levels, but nonetheless, they are still on the positive side, they are still up modestly year-on-year. There are markets where it is modestly down, for example, Texas is, you know, on a three month trend, last three months, modestly down. Arizona is modestly up, Vegas is modestly down. So you have got to go market by market, but what it does appear on an aggregate basis is that the floor has been reached, and therefore, the expectation, as I mentioned in my opening comments, are that new construction on the pool side this year should be approximately flat year-on-year versus last year. If there is a bias, it would be that it would be modestly positive, but I would say at this juncture, it would be essentially flat. Mark Rupe – Longbow Research: Great. Thank you. Good luck.

Thank you.

Our next question comes from Kyle O'Meara, Robert W. Baird. Please proceed with your question. Kyle O'Meara – Robert W. Baird: Good morning. Could you just – I didn't think I heard you say this. Could you just talk about – quantify what the pricing impact was for the quarter and your expectation for the year?

Sure. You are talking about the – it would be less than half of the shortfall in the quarter, is due to the pricing environment. The main reason for the shortfall in the quarter is due to the year-on-year difference of not having the benefit that we had last year. So that is essentially flat – and then, you know, we expect that obviously – the first quarter benefit of 2009 that carried a little bit over into the second quarter of 2009, but was pretty much gone by the second quarter, that is going away, and therefore, that makes the comps easier as we go through the year. Kyle O'Meara – Robert W. Baird: So kind of pricing in terms of the headwind on the revenue side bottoming here and moderating as we move through the year against easy comparisons?

That is correct. And the point here is, we may not – depending on how competitors behave, particularly in the second quarter, we may not get back the shortfall of the first quarter by the end of the year. So therefore, when you are modeling for a year, we could very well be a little short on last year. Kyle O'Meara – Robert W. Baird: Okay. And then, just to clarify, you were talking about gross margin through the rest of the year. Is what you were saying – obviously the shortfall this quarter, with the inventory and pricing, were you still implying though that the gross margin we should see a year-over-year improvement in that margin as we go forward, or that there is a potential for that? Is that what you were saying?

Well, we have a number of initiatives which are in fact improving our margins in certain product segments and certain product categories. And that improvement is matched by these other, comparatively speaking, adverse factors. I mean, if the biggest adverse factor goes away, the other one is still there, and at the end of the day, I am not sure if, you know, the positive things we are doing on one side compensates fully for the other. Kyle O'Meara – Robert W. Baird: Okay, great. And then finally, just on the competitive environment, as we moved through the winter months here, did you see any evidence of some of your competing distributors dropping by the wayside or shuttering at all?

Surprisingly, they haven't yet. There have been certainly a number of cases where they reduce the number of locations, which makes sense, there have been cases where they have skimmed down product offerings or product lines if they have stock to sell, and that certainly makes sense. We have seen cases where they haven’t done either one of those two things and have had service issues, which has opened the doors for us, from a competitive standpoint, and that is obviously not good for them. So, you know, they had the benefit of working capital reductions over the last three years, whether it be the reduction of receivables with lower sales, or having need for less inventory, given lower sales, and those working capital benefits help offset or compensate for operating losses from a cash flow standpoint. As the market stabilizes in this year and then progressively onto 2010, 2011, and 2012, is when they are going to be frankly under the greatest amount of financial stress, from a cash flow standpoint, particularly given how tight the financial markets are still for business in terms of business borrowings. So therefore, that is the expectation, and again, they are under stress, but we haven't seen any fall out of note at this juncture. Kyle O'Meara – Robert W. Baird: All right, great. Thank you.

Our next question comes from Anthony Lebiedzinski with Sidoti & Co. Please proceed with your question. Anthony Lebiedzinski – Sidoti & Co.: Good morning. I wanted to follow up on the previous question about chemicals. You said that those you have seen the greatest margin pressures. Now, as we enter the peak pool season now and chemicals are at their greatest usage, wouldn't you say that the gross margin pressure would be actually more so?

Well, not really. The logic here is, in the off-season, when there is more idle time from an industry standpoint, in order to create traffic in the individual centers, whether it be us or the competition, you know, there are various things that are done to do that. And again, having limited alternatives, they use price and high-profile items to do that. Once you get into the season, the logical thing to do would be – no longer do we have a need to do that, because there is natural traffic. It is currently like a restaurant that is naturally busy on Friday, Saturday nights having specials during the weekdays to create some traffic. You know, on Friday and Saturday, when you are full, you don't need to do that. So that is the logic that is there with the irrational and for the pool industry in terms of not having to discount as much, or do anything extraordinary to create traffic, when traffic is naturally there in the heat of the summer. Anthony Lebiedzinski – Sidoti & Co.: Okay. And as far as the impact on sales from the regulatory changes from last year, can you remind us what that was last year in the first and second quarters, please?

Mark, do you have some of those numbers?

Yes. That is about $8 million each quarter, Anthony. Anthony Lebiedzinski – Sidoti & Co.: Got you.

In the first quarter and the second quarter?

And the second quarter, each, yes. Anthony Lebiedzinski – Sidoti & Co.: Okay. And In terms of your cost structure, you have cut some costs down now. As far as, you know, now the business coming back, where do you see costs coming back, you know, whether – I would imagine that you would be putting in more people in your sales centers. So can you just talk about how you see the cost structure now trending?

Sure. First of all, with positive sales comps, there is a sort of amount that we can handle without having to add weeks, add people. I think that the stress really gets into, you know, first, you are going to resources to do whatever you can, and there is a certain amount of capacity – not a lot, but a certain amount of capacity that can do with the resources. There is a seasonal nature to somewhat part of our workforce that come in and work in the peak months, and that is more accentuated in the Snow Belt markets. So, you know, that would involve either seasonal employees, as well as employee overtime. So, there will be some variation there, but again, it all depends on the order of magnitude of the positive comps. If the positive comps are relatively speaking, modest, right, then that would be very efficient for us. As it becomes more so than again overtime kicks in and temporary workers kick in, more so. Anthony Lebiedzinski – Sidoti & Co.: Okay, thank you.

Our next question comes from Kathryn Thompson with Thompson Research. Please proceed with your question. Kathryn Thompson – Thompson Research: Thank you so much. Just first focusing on a few topline questions. Can you attribute the moderating sales declines, or in some cases, improving sales to new construction or better maintenance trends? And how do you see that progressing throughout 2010?

The positive sales in the latter part of March, which got us to flat on a daily sales rate basis for the month of March, as well into April, is not due to construction. Construction is relatively flat. It would be due to two, in my mind, two primary components. One is the beginnings of the recovery in replacement remodel activity, which has been deferred, and that deferral was much more so in 2009. It was more modest in 2007 and 2008, and was much more significant in 2009, and some beginning of that recovery to normalized levels, and again, for all on the call, those are items that there is some level of discretion on the part of the consumer as to when they do that. They ultimately have to do that for their pools, and again, it is just a matter of when. Given the environment last year, consumers in general deferred what they could, and therefore, when we look back, the remodel replacement rates that was in the industry in 2009, we estimate that it was at least 30% below normalized levels. And again, I think that, together with market share gains, are what would be driving our positive comps in the latter part of March and into April. Kathryn Thompson – Thompson Research: So if you were to actually see new pool constructions, that is just gravy for overall trends?

Definitely. Kathryn Thompson – Thompson Research: And do you – what are your projections for new pool construction as a whole for 2010?

Yes, for this year, we expect new pool construction again to be essentially flat year-on-year. So there would be no positive contribution from that. There would be no headwind either, as we have had, plus there would be no positive contribution. So there would be – in terms of our having positive sales, again, I think it is in part the recovery of the remodel replace and market share gains. Kathryn Thompson – Thompson Research: Could you talk a little bit about – a little bit more granularity to your three biggest markets, Texas, California, and Florida? I know in your prepared comments, you talked a little bit about what you were seeing in them, Florida seeing positive, Texas and California, you had some color. But since the quarter end, could you talk a little bit about what types of trends you are seeing from those states and as you think about the year, what do you expect from those three key states?

Sure. If you look at how we did in the quarter, on the Blue side of our business – on the Blue side of our business, we were down 2.8% in sales for the quarter, and in fact, had positive sales comps in March. And again, in terms of overall buy market, no significant differences. In the case of what we are seeing in April, and again, it is three weeks, but we are seeing continuation of the positive trends in Florida and Texas. I am not attributing California recently, but it is still, the weather there has not been particularly favorable the last several weeks, with colder-than-normal temperatures. So they haven't really gotten out of the funk of the winter yet. So it is colder and wetter over there. So they have not, I will call it, recovered to the same degree as Florida and Texas that are now kind of in springtime. And therefore, you know, in the short term, last three or four weeks, haven't seen the same level of benefit, but we expect that as the weather recovers there to more normal levels than will be – have the same type of results there as we are witnessing in Texas and Florida. Kathryn Thompson – Thompson Research: Okay, moving over the cost side, it didn't have as much of the benefit this year from pre-buy activity and we have seen some commodity pricing, just across the board, rising. What are your expectations for commodity pricing trends, particularly with chemicals, because it is your most important? And how are you planning your business going forward this year with the possibility of rising commodity prices?

Okay. You are right. In certain product categories, we have seen raw material costs going up for our manufacturers, for our suppliers. We have not yet seen of note significant increases across the board. In the case of chemicals, at this juncture, I don't anticipate, from a supply standpoint, any increases for the pool season. In case of equipment, again, I don't anticipate any increases for the pool season. And, in terms of packaged pool products, I don't see any increase for the pool season. So therefore, you know, when I look at it overall, company-wide, essentially, we are looking at, you know, essentially, zero inflation for the year. There are some products, as you mentioned, that have gone up, and there are a few others that have gone down. And overall, we expect those to pretty much wash. Kathryn Thompson – Thompson Research: Okay. Finally, just some housekeeping guidance for interest expense in 2010 and D&A and CapEx guidance.

Essentially, D&A would be very similar to last year, and interest would be modestly lower, lower by – when it is all said and done by several million dollars versus last year, given the fact that our average debt is down, you know, roughly $100 million year-on-year. Kathryn Thompson – Thompson Research: And CapEx?

Our CapEx would be modestly lower than last year. Somewhere in the neighborhood of $5 million or so – $5 million to $6 million. Kathryn Thompson – Thompson Research: Okay, great. Thank you so much.

Our next question comes from Keith Hughes with SunTrust Robinson. Please proceed with your questions. Keith Hughes – SunTrust Robinson: Thank you. You gave some comments earlier on the strategic landscape. I was wondering if you could break that down, particularly on the Green business, how it compares to the Blue in terms of competitors? And are you still in the market to do acquisitions in that arena?

The answer to the last question is yes. In terms of the competitive dynamics, similar, in that industry. In fact, yes, I would say, very much the same. I was going to say that there is sometimes you get more irrational stuff that you can play fair, as one particular competitor is also going out with very long terms in order to secure business. But by and large, just to answer, are very similar with the more local competitors having some service issues and also using, you know, dumping products or just calling that irrationally low pricing, but there's also one competitor in that arena that is using extraordinary long terms as well as a way to carry some of the construction customers. Keith Hughes – SunTrust Robinson: So you haven't seen a wholesale departure of a lot of distribution in the Green zone?

No, not yet. We have had the same benefit, Keith, as on the Blue side with our working capital standpoint of the reductions in receivables and inventories. We are just compensated for their operating losses. And when you also look at it, they have figure out what they need to do and sometimes in these businesses, not having the systems and discipline in place, it is tough to really appreciate what the actions need to be taken, and by and large, similar to the pool side, we see competitive actions being taken, whether it be to address the receivables management or to address their inventory management or to address their cost position, we see that lagging us by a season to more than a season. Keith Hughes – SunTrust Robinson: Okay, thank you.

(Operator Instructions). Our next question comes from David Mann with Johnson Rice. Please proceed with your questions. David Mann – Johnson Rice: Yes. Thank you. Congratulations. I see a little bit of sunshine in the business.

Thank you. David Mann – Johnson Rice: Earlier, you were talking about April versus March for the Blue business. Can you clarify, did April accelerate from March in terms of sales trend?

The April positive is similar to what we saw the second half of March. David Mann – Johnson Rice: Okay, great. And then in terms of SG&A, I think on the last call you talked about the SG&A dollars being flat to down modestly from last year on a full-year basis. Is that something that you still ascribe to, with let us say modest positive comp?

Yes, if our positive comps are very modest, then the SG&A will be relatively flat. David Mann – Johnson Rice: Okay, great. On the Irrigation business, also your outlook for this year was I guess coming close to eliminating the operating loss from last year. Can you just give us an update on what you think about that?

We believe that to be reasonable. There are still, as I mentioned, heavier sales declines on the Green side of our business, and much heavier than the Blue side, as that lags by six months to a year. But we are seeing that both the negative comps decreasing, and also the cost reductions that we made take hold. David Mann – Johnson Rice: Okay, great. On the credit extension side of your business, with the improving bad debt trend, and also what seems to be a nice improving demand outlook, are you taking or looking at taking a different stance on credit extension?

Well, yes, that is an active process. But you are right. From a practical standpoint, we are very conscious and we work with customers in terms of providing trade credit, and logically, you know, the key there in that environment is, if we have no credit losses, that means we didn't take enough risk. If we have too many, that means we took much risk. And it is tough to find the right balance, but the fact that we are seeing a more positive industry environment, generally, means that we will take a little bit more, not risk – that is not a proper term, but we will be more, we would be cranking credit a little freer than perhaps what we are seeing at demise, but that is really, David, very customer specific. Because, if we see – in terms of the behavior of that individual customer. If we see that customer with the right behavior and the right attitude, in terms of how they run their business, as well as how they treat us from a supplier standpoint, you know, we take one position where they – and if they have a different, perhaps, philosophy on their business, and a different attitude towards us, and we take a more risk-averse perspective. David Mann – Johnson Rice: With what you are seeing in terms of the acceleration in sales over the last several weeks, are you taking a more aggressive position on that – on inventory on sort of that competitive in-stock position? And what do you think in terms of your competitors' inventory positions, are they constrained, so that if demand does accelerate, you know, does that further, you know, make that competitive advantage an even greater one?

Well, the first part of your question, from how we drive inventories, we have always continued to drive them and we haven't been affected by anything to drive to have progressively better and better customer service. For example, last year, we had a major initiative with parts, which proved to be very successful, and is proving to be more successful as we go to 2010, where we significantly expanded by somewhere between 300 and 800 SKUs the number of parts, stocks, in each one of our centers. We did that to provide better customer service on lower velocity items to our customers. We also have an initiative that we started last year and continues through this year of expanding the breadth of operating on the certain products that are tied of building materials, but which apply to new construction, but also even more so apply to existing pools, the remodeling of existing pools. And those initiatives to provide again better service have always continued. The reason that we had lower inventories, and we were able to lower inventories last year, was because of the fact that there was less demand. So we are constantly trying to serve and provide the ultimate service to our customers, and really to our entire group on the operations side, as well as sourcing and purchasing, to work in collaboration throughout the organization to provide better service at the point of sale, again, more efficiently. And given our financial strength, we can do that pretty much with nothing holding us back. It is a matter of just simple execution. On the competitive side, a number of our competitors do have limitations in that regard, and that, again, is an opportunity for us and opens doors for us every day. David Mann – Johnson Rice: Great, thank you. Good luck this summer.

Thank you, David.

There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.