Good morning, and welcome to the Pool Corp. First Quarter 2012 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mark Joslin, Vice President and Chief Financial Officer. Please go ahead.

Thank you, Valerie. Good morning, everyone, and welcome to our first quarter 2012 conference call. I would once again like remind our listeners that our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for 2012 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'll turn the call over to our President and CEO, Manny Perez De La Mesa. Manny?

Thank you, Mark, and good morning to everyone. Well, the unusually mild winter prompted many Pool owners to open their pools earlier than normal in seasonal markets or increased pool use in year-round markets, both of which contributed to our sales growth in the quarter. Some of the sales increase is a shift from the second quarter, but part of it is a benefit for the quarter and 2012, driving our EPS range increase for the year. As evidenced by the major market increases referenced later, the weather benefit was primarily in the eastern half of North America, with Western markets weather much closer to normal in the quarter. Besides weather, market share gains and modest market growth also contributed to our sales increase. In terms of Base business sales, our Blue business sales were up 13.6% while our Green business sales were up a more modest 2.2%. This difference is due to both the impact of weather and the Green business being much more heavily weighted to new construction instead of an installed base. The East versus West contrast becomes apparent as California, Texas and Arizona Blue sales were up 7% in aggregate, while Florida and all other Blue markets were up 18.1%. I believe that 7% is more reflective of our expectations for the balance of 2012, with roughly half of that growth coming from share increases and the other half from market expansion and inflation. Our sales growth in our strategic priority customer segment retail was over 10%, aided by stable weather, as well as market share gains. Our strategic priority product category, building materials, had over 25% sales growth in the quarter, which was primarily driven by market share gains together with some market recovery in remodeling activity. Since many of you asked about our European…

Thank you, Manny. I have a number of things to cover this morning starting with margins. As you can see from our results, our gross margins were down 32 basis points year-over-year, primarily because of the difficult comp we had from a year ago. To retrace history for a moment, we entered 2011 with greater early-buy inventory purchases made in advance of year-end vendor price increases, which helped us grow our margins early in the year. For the first quarter of 2011, we recorded an increase in our gross margins of 94 basis points over 2010 first quarter. We also made some in-season pre-price increase purchases last year, and therefore, made more modest early-buy purchases going into the 2012 season. Going forward, our expectations are for neutral to slightly positive year-over-year gross margin gains for the remainder of the year, as the effect of last year's gains subside and our normal margin management practices are more evident, although we face a bit of challenge here given our 40 basis point improvement for the year last year compared to 2010. Moving down to P&L to SG&A expenses. You can see that, in total, our expenses were up $7.7 million or 8.5% for the quarter. Base business expenses, which exclude acquired businesses, were up $4.3 million or 4.8%. You may recall that the guidance I gave on expenses for the year on our last call was that we expected modest expense growth overall, with higher growth during the first and fourth quarters due to the timing of incentive accruals. I would footnote that statement with a caveat that if our revenue growth is greater than expected as is the case this quarter, we'd logically expect expenses to be modestly higher. All in all, our first quarter Base business expense growth was in…

[Operator Instructions] Our first question comes from Leah Villalobos of Longbow Research.

I was wondering on the 5 centers that you acquired during the quarter, if you would be able to provide the last 12 months of revenue for those?

Let me see, the first one was Ideal in Western Canada and then the other one was operation in Barry, just north of Toronto in Ontario. The total revenues for those would be about USD $8 million.

Okay. Great. And then just -- is there any way in the first quarter -- I mean, I know that weather was a nice factor in the eastern part of the U.S., is there any way to quantify how much of an impact weather was during the quarter?

It is very tough to quantify, Leah. Our best guess, and I'll phrase it as such given the nature of the products and everything else, is probably about $10 million to $15 million shifted from April to March.

So that -- would that just be the shift or would that also be -- include the increase you would see kind of in maintenance? Just...

No. No. That would be the shift. The rest is sustainable. So to the extent that pool owners use their pools more or the fact that they open it earlier and consume more chemicals, for example, that would be a permanent gain.

Okay. That's helpful. And then you had called out the building materials product category specifically, are there other categories where you're seeing significant share gains or is that just sort of more broad-based in the balance of the business?

It is more broad based. If you look at our -- whether it be product categories like chemicals, equipment, parts, et cetera. In all those areas, we realized share gains but the order of magnitude, percentage-wise, is not as significant as we've been able to realize not just in the first quarter of 2012 but over the course of the past several years in the case of building materials.

The next question comes from David Mandell of William Blair.

The Base business operating leverage was out pretty strong in this quarter, is that something we could expect for the rest of the year?

Not 13%. Base business growth are -- the guidance that we provided for the year, a couple of months ago, we -- is more mid to high single-digit. I mentioned that as being 5% to 8%. And I think that, that's a reasonable expectation for the balance of 2012, with about half of that being the market growth, which includes both units and inflation and the other half being share gains. So that's a more reasonable expectation. Certainly, we expect that the weather to be normal for the balance of the year, and that's really factored into that, and weather is not a significant a factor in the heart of the season as it is in the shoulders.

And you would expect the operating expenses to grow at a slower rate than the mid- to high-single digits or --

Oh, definitely. As mark communicated in February in the call, with 5% to 8% type top line growth, our expense growth would be more like 2% to 4%.

Yes. And in terms of operating leverage, I mean our expectation for the year is roughly 20% on base business, yes.

And the next question comes from Luke Junk of Robert W. Baird. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: Manny, my first question would be, as we look to the -- this early start to the pool season here, I know you referenced clearly some benefits from increased consumption of consumables, as folks either open their pools earlier or just use them more in year-round markets. Do you get a sense that there is any benefit to the capital spending in terms of people investing with the early stretch of this season or is that just too hard to parse out?

No. There is some of that activity. Some -- There is some replacement activity that would have naturally taken place, let's say in April, that took place in March. There is a little bit more new pool construction that would've taken place in March, I mean in April that this year took place in March. So there's a little bit of movement there and I answered Leah, our guess is -- that was about $10 million to $15 million that shifted and that would be in the nature of replacement, remodeling new activity that shifted from April to March. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: And then within that $10 million to $15 million that shifted, Manny, do you have an estimate for the year-over-year growth, and the maintenance type thing versus the more discretionary this quarter?

Well. Yes, If you look at, for example, the retail sector, which is for the over 70% of the pool owners that maintain their own pools and they go to our retail store to get their basic supplies, our sales in that retail space to retail customers was 10% year-on-year. So therefore -- and we don't think that's higher than normal because the install base is up only 1% roughly from year-to-year. Inflation in those product categories are virtually nil year-on-year. So therefore, while we certainly gained share, I don't think we gained 9% share. So that's, I think, a reflection of the fact that you had better weather.

And given the 13% base business growth, the discretionary items were growing faster, right, overall, so in the mid- to upper-teens, you'd stay on the discretionary side. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: Okay, That's very helpful color. Second would be, within the positive trends that you saw in the first quarter here and your guys continued view that we're in this gradual recovery in terms of discretionary spending. A lot of folks that we're talking to in the industry, I would say, share that view. And along those lines, it seems like we're maybe seeing a little bit of uptick in acquisition activity. Can you maybe talk about how the sellers that you're talking to are feeling about their willingness to sell today versus the current market backdrop versus 1 year or 2 years ago? Can we expect to see continued acquisitions here?

Well, we look at that on a market by market. Every market is unique and has its own characteristics. So in market where we have already a very strong position, acquisitions are not as attractive for us. Whereas in markets where we have very limited participation or no participation, those are certainly more attractive and we contract that with opening our own locations as we've opened up over 100 locations over the past 14 years that I've been here. So in essence, we look at both alternatives. Certainly, in this environment, given the market still being depressed, there is a sense of their being enough or in the case of the Green business, certainly, too much distribution. And that shake out is still happening. So to that end, acquisitions are probably in a lower cost of entry than a new opening in this environment. And following that train of thought, that's why you will see from us more acquisitions internationally and more acquisitions from the Green side because that's where we're still in more of a development mode where we are not nor nowhere near completing building our networks. On the domestic Blue business side of the equation, there are a couple of pockets where we have weak presence, but we have over the course of the past 19 years, through both opening of new locations and acquisitions, largely built out that work -- network. Again there's still some pockets but we have largely built up that network on the domestic Blue side. Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's helpful. Mark, just one clarifying question in the guidance. I know you mentioned the tax benefit both in the quarter and through the remainder of the year, I assume that's embedded in the guidance that you gave?

It sure is. As is the 2-day adjustment of the third quarter, that's all rolled into our new guidance range.

And the next question comes from David Mann of Johnson Rice. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Couple questions. A clarification on the earlier comment about the sales shift of revenue from Q2 to Q1, you talked about that yet you did not change your Q2 guidance, it doesn't sound like, so can you just elaborate or reconcile that?

Well, we don't provide quarterly guidance, David. So we are basically saying that when you look at the rest of the year, it's pretty much in line with what we were expecting earlier. We were aware of the 2 days drop off and we were aware of tax and things of that nature so I think that would kind of offset one another. So in essence, our expectations are pretty much normalized. Also $10 million to $15 million, let's just call it $0.02 or $0.03 impact, the second quarter is a big quarter so I'd say that's in the -- that's buried in the range of expectations. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Got you. That's helpful. In terms of the quarter-to-date trend in April, and just sort of what you're seeing in weather there, can you just comment a little bit on that?

Weather is a lot less of a factor in April, that's -- and certainly in the first quarter. And it's pretty much along the lines of our expectations of 5% to 8%. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay. Great. In terms of the Base business performance in the first quarter, the contribution on the EBIT line with the flow-through was less than 20%. Can you just talk about, was there an increase bonus accruals there or something else going on?

Well, the leverage is different every -- in the different quarters, but I think the -- when you look at it from a year standpoint, I think the 20% is a valid number. And again, it won't be 20% every single quarter, it could be 22% in the second quarter and it could be 16% in the first quarter.

And David, just on the bonus question, I think I went through that, and I'll give a little detail maybe on the year-end call. But we don't do that on a straight-line basis, it's really more accrued based on profitability, which obviously, the second and third quarter, the big quarters from a profitability standpoint. And so it has more impact in the first and fourth quarters. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay, That's helpful. And then, Manny, when -- in your prepared comments, and I think answering your earlier question, you talked about the modest recovery and refurbishment and sort of rehab, more major rehab of pools, and can you give a sense, do you feel like there has been any level of acceleration, perhaps with a little more positive housing psychology out there that you're seeing relative to let's say the back half of last year?

Nothing significant. I mean, it's still very early but -- I'd say by far, by far the biggest impact or the biggest reason for our being up over 25% in building materials sales in the quarter year-on-year is market share growth, by far. And I think that the recovery of remodeling, replacement activity to normalize behavior, it is happening, it started happening a bit last year I think it will continue through this year, but it could be very well as we've indicated in our own models, 2018 before it's normalized. So I think it's that pace, I don't think that materially changed from last year. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: Okay. In terms of the markets that you bunched together, California, Texas and Arizona, is there anything going on, different -- obviously 7% pales a little bit to the 18% you talked about in Florida now there, but still a very nice number especially for California, I think where you've been hopeful that, that would pick up in pace, any comments you can make about the trend in California and/or Texas?

I think it's -- those markets were not affected by the weather, the weather that we speak of, so they were more normal. And I think that 7% is really kind of like in the middle of our expectations for the year. So I think that's -- that normalized activity whereas Florida and really, it's not just Florida, it's the whole southeast and going up to the northeast and midwest, the whole west of the market area being up 18%, I think it's really, you can see the contrast and what the impact of weather was. David M. Mann - Johnson Rice & Company, L.L.C., Research Division: I guess what I was getting at is are you seeing anything in California that's more encouraging to you given that's kind of been a lagger in recent years?

I would say, yes, but it's -- I'm still cautious because it's still early in the season. I think the California economy is not going anywhere near as Arizona or Texas. So when you group the 3 together, I think that it's coming along fine but I think California is still going to be a lagger because of the other situation they have with employment loss in the marketplace.

[Operator Instructions] The next question comes from Anthony Lebiedzinski of Sidoti & Company. Anthony C. Lebiedzinski - Sidoti & Company, LLC: I just wanted to follow up on a previous comment. I think Manny, you had said that you expect to see more acquisitions internationally. Is that just on the Blue side of the business or would you be open to actually doing something on the Green side of your business?

We are certainly open to the Green side of the business although the focus on the Green side is domestically. And when I say more, I would say not more in the absolute sense, it's that, that's where our activity will be. It will be any acquisitions that we do, it will be heavily weighted towards international and Green. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Okay. And also what is your -- what's embedded in your guidance for the Green business from both the top and bottom line perspective for 2012.

Similar in terms of top line, similar to the Blue business, 5% to 8% for the year in terms of top line growth. And certainly bottom line improvement with a flow-through of about 20% of sales increase, Base business sales increase. Anthony C. Lebiedzinski - Sidoti & Company, LLC: Got it. Okay. And also has your outlook on construction activity changed from your previous call?

No, we're still thinking that new construction activity on the pool side is still extremely depressed. We believe it will be up modestly this year, modestly maybe 5,000 to 7,000 more pools being built this year than last year. But it's still a fraction of what it was at peak and probably 40% of normal. Anthony C. Lebiedzinski - Sidoti & Company, LLC: And what is your outlook for pricing for this year?

Pricing is overall, probably, looking at inflation, still 1% to 2%. The equipment manufacturers increased their prices last year, but the effective increase was at [indiscernible] at the end of the year, so that those price decrease [ph] are really began to be felt at latter part of the year -- of last year and through this year. But on chemicals, that hasn't changed to speak off, if anything, some markets, and that's not really at many factories [ph] , it's just some competitor just selling some products at a lower margin. But bottom line is chemicals, there's really no price increase there, as you know that's our biggest product category, so overall, I think 1% to 2% is still reasonable.

And the next question comes from Keith Hughes of SunTrust.

Two questions. One, to build on the renovation discussion, is there going to be any kind of leading indicator for you when this business starts to come back, whether it's permits or kind forward order rates that are filed by contractors? Or is it just going to show up one day in terms of some orders at the desk?

In the replacement remodeling activity, I would say if you're going to look at a leading indicator, I would look at consumer confidence and I would look at employment or reduced levels of unemployment.

This is not -- how about the internal metrics?

Oh, internal metrics, we have certain products -- categories that are, that jump, that are more discretionary in nature and we see that happening. But there's no backlog per se, our customers order for the day, or usually, at most for the next day. So -- which is the value we provided to the distributor. So therefore, there is no other forward indicator that we can think about.

Okay. And second question, is there a renovation opportunity in the Green business as well?

Yes, but far more modest. That will be along the lines of somebody redoing their landscape lighting or things of that nature, but proportionately it's a lot less significant. There, the heavy play, is when you put in the irrigation system and you do the -- do it for the first time where you not only put in the sprinklers, but you also put in all the pipe, and you put in the landscape lighting and you do all those things, and that's a big major bulk up front. After that, it's a very low level of maintenance costs with perhaps, if you again update your landscape lighting, but that's a more modest part of the total.

[Operator Instructions] This concludes our question-and-answer session, I would like to turn the conference back over to Manny Perez De La Mesa for any closing remarks.

Thank you, Valerie, and thank you all again for listening to our first quarter results conference call. Please mark your calendars, our next call will be on Thursday, July 19, when we will discuss our second quarter results. Thank you again and have a good day.

The conference has now concluded. Thank you for attending today's presentation, you may now disconnect.