UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 28, 2009

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 0-18741

LESLIE’S POOLMART, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4620298

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3925 E. Broadway Road

Phoenix, Arizona 85040

(Address of principal executive offices)

Registrant’s telephone number, including area code: (602) 366-3999

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller business reporting company. See definition of “accelerated filer”, “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ¨		Accelerated Filer ¨		Non-Accelerated Filer x		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ¨ No x

The number of shares of common stock outstanding as of May 11, 2009 was 100.

LESLIE’S POOLMART, INC.

AND SUBSIDIARIES

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

FORM 10-Q

For the Quarterly Period Ended March 28, 2009

INDEX


		Page
Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets as of March 28, 2009 (unaudited) and September 27, 2008		3

Consolidated Statements of Operations for the 13 weeks and 26 weeks ended March 28, 2009 (unaudited) and March 29, 2008 (unaudited)		4

Consolidated Statements of Cash Flows for the 26 weeks ended March 28, 2009 (unaudited) and March 29, 2008 (unaudited)		5

Notes to Consolidated Financial Statements (unaudited)		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

Item 3. Quantitative and Qualitative Disclosures about Market Risk		12

Item 4. Controls and Procedures		12

Part II. Other Information

Item 1. Legal Proceedings		13

Item 1A. Risk Factors		13

Item 2. Unregistered Sales of Securities and Use of Proceeds		13

Item 5. Other Information		13

Item 6. Exhibits		13

Signatures		13

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Consolidated Balance Sheets

(Amounts in thousands, except share information)


	March 28, 2009			September 27, 2008
	(unaudited)
*ASSETS*
Current assets:
Cash and cash equivalents	$	4,938		$	45,648
Short term investments		—			19,899
Accounts and other receivables, net		11,811			11,796
Inventories, net		104,432			86,584
Prepaid expenses and other current assets		3,581			2,773
Deferred tax assets		14,164			4,554

Total current assets		138,926			171,254
Property, plant and equipment, net		41,578			42,074
Intangible assets		8,104			8,117
Deferred financing costs, net		4,023			4,613
Deferred tax assets		6,513			6,593
Other assets		356			342

Total assets	$	199,500		$	232,993

*LIABILITIES AND STOCKHOLDER’S DEFICIT*
Current liabilities:
Accounts payable	$	44,396		$	42,117
Accrued expenses		30,056			36,981
Income taxes payable		—			7,697

Total current liabilities		74,452			86,795
Other long term liabilities		5,666			7,556
Senior notes, net		163,160			167,000

Total liabilities		243,278			261,351

Commitments and contingencies
Stockholder’s deficit:
Common stock, $0.001 par value, authorized 100 shares, issued and outstanding 100 shares at March 28, 2009 and at September 27, 2008		—			—
Capital deficit		(91,827	)		(91,907	)
Retained earnings		48,049			63,549

Total stockholder’s deficit		(43,778	)		(28,358	)

Total liabilities and stockholder’s deficit	$	199,500		$	232,993

See accompanying notes to consolidated financial statements.

Leslie’s Poolmart, Inc.

Consolidated Statements of Operations (unaudited)

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

(Amounts in thousands)


	13 Weeks Ended						26 Weeks Ended
	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
Sales	$	57,008		$	56,656		$	117,271		$	114,962
Cost of merchandise sold and services sold, including warehousing and transportation expenses		24,665			25,478			54,307			55,317

Gross profit		32,343			31,178			62,964			59,645
Selling, general and administrative expenses		39,079			38,357			77,459			74,779
Loss on disposition of fixed assets		139			—			190			10

Operating loss		(6,875	)		(7,179	)		(14,685	)		(15,144	)
Other expenses (income):
Interest expense		3,546			3,638			7,000			7,271
Interest income		(7	)		(81	)		(222	)		(783	)
Gain on debt extinguishment		—			(94	)		(359	)		(94	)

Total other expense		3,539			3,463			6,419			6,394

Loss before income taxes		(10,414	)		(10,642	)		(21,104	)		(21,538	)
Income tax benefit		(4,085	)		(4,269	)		(9,504	)		(8,293	)

Net loss	$	(6,329	)	$	(6,373	)	$	(11,600	)	$	(13,245	)

See accompanying notes to consolidated financial statements.

Leslie’s Poolmart, Inc.

Consolidated Statements of Cash Flows (unaudited)

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

(Amounts in thousands)


	26 Weeks Ended
	March 28, 2009			March 29, 2008
Operating activities:
Net loss	$	(11,600	)	$	(13,245	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,359			6,755
Stock compensation		80			33
Amortization of loan fees and discounts		680			618
Provision for doubtful accounts		64			29
Loss on disposition of assets		190			10
Gain on extinguishment of debt		(359	)		(94	)
Deferred income taxes		(9,530	)		(6,912	)
Changes in operating assets and liabilities:
Accounts and other receivables		(79	)		(2,103	)
Inventories		(17,848	)		(30,149	)
Prepaid expenses and other current assets		(808	)		(1,288	)
Other assets		(14	)		4
Accounts payable and accrued expenses		(6,536	)		24,462
Income taxes payable		(7,697	)		(9,283	)

Net cash used in operating activities		(47,098	)		(31,163	)


Investing activities:
Sale of short term investments		19,899			—
Purchase of property, equipment and intangibles		(6,048	)		(5,817	)
Proceeds from disposition of property		8			—

Net cash provided by/(used in) investing activities		13,859			(5,817	)

Financing activities:
Revolving commitment borrowing		4,988			—
Revolving commitment payments		(4,988	)		—
Payment of dividend		(3,900	)		(7,500	)
Repurchase of long-term debt		(3,571	)		(1,938	)

Net cash used in financing activities		(7,471	)		(9,438	)


Net decrease in cash and cash equivalents		(40,710	)		(46,418	)
Cash and cash equivalents at beginning of period		45,648			59,781


Cash and cash equivalents at end of period	$	4,938		$	13,363

See accompanying notes to consolidated financial statements.

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Notes to Consolidated Financial Statements (unaudited)

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles applicable to interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 26-week period ended March 28, 2009 are not necessarily indicative of the results that may be expected for the 53-week year ending October 3, 2009.

The balance sheet at September 27, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, refer to the Consolidated Financial Statements and Notes thereto included in Leslie’s Poolmart, Inc.’s Annual Report on Form 10-K for the year ended September 27, 2008.

(2) Organization and Operation

Leslie’s Poolmart, Inc., which is sometimes referred to as the “Company” or “Leslie’s” in this report, is a specialty retailer of swimming pool supplies and related products. The Company markets its products under the trade name Leslie’s Swimming Pool Supplies through 617 stores in 35 states, a nationwide mail order catalog, and web store. The Company also operates five distribution facilities and repackages certain bulk chemical products for retail sale. The Company’s business is highly seasonal as the majority of its sales and all of its operating profits are generated in the third and fourth fiscal quarters.

The Company became a wholly-owned subsidiary of Leslie’s Holdings, Inc (“Holdings”) during February 2007, pursuant to a tax-free reorganization in which the Company’s shareholders became shareholders of Holdings in the same proportions (the “2007 Reorganization”). As a result of the 2007 Reorganization, each share of outstanding common stock of the Company was converted into one share of common stock of Holdings, and each share of outstanding 10% senior redeemable exchangeable cumulative preferred stock of the Company was effectively assumed by Holdings and extinguished, with it being accounted for as contributed capital to the Company.

(3) Stock-based Compensation

The Company accounts for stock-based compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123R “Share-Based Payment” (“SFAS 123R”). Awards granted are valued at fair value in accordance with the provisions of SFAS 123R and recognized on a straight line basis over the service periods of each award. Compensation cost for the unvested portion of awards outstanding is recognized as the requisite service is rendered.

In March of 2009, the board of directors of Holdings approved grants of options to purchase 15,000 shares of Holdings common stock. These options vest over a five year period at a rate of 20% annually on each anniversary of the date of grant. At March 28, 2009, 819,000 options were outstanding and 73,300 of the options were vested or exercisable. No options were exercised and 9,000 options were cancelled during the 26-week period ended March 28, 2009.

Share-based compensation expense recognized in accordance with SFAS 123R during the 13-week and 26-week periods ended March 28, 2009 was approximately $0.05 million and $0.1 million. As of March 28, 2009, total unrecognized compensation cost related to stock-based options and awards was $0.8 million and the related weighted-average period over which it is expected to be recognized is approximately 4.0 years. The weighted average fair value of stock option awards granted was $1.13 and the key assumptions used in the Black-Scholes valuation model to calculate the fair value are as follows: a risk free interest rate of 3.01%; an expected life of the options of 5 years; an expected stock price volatility of 46.2% and an expected dividend yield of 0%. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of

highly subjective assumptions, including the expected stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company. The Company calculated expected volatility based on historical volatility.

(4) Taxation of the Company and Holdings

The Company and its subsidiaries will be included in the consolidated Federal income tax return and certain state income tax returns of Holdings. The Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities during the current and preceding periods pursuant to the provisions of SFAS No. 109 “Accounting for Income Taxes” (“SFAS 109”), as if the Company were a separate taxpayer rather than a member of Holding’s consolidated income tax return group. This policy requires us to pay our tax liabilities to Holdings in cash, based upon separate return taxable income.

(5) Income Taxes

Income tax benefit was $9.5 million and $8.3 million for the 26-week periods ended March 28, 2009 and March 29, 2008, respectively. The Company’s consolidated effective tax rate for the 26-week period ended March 28, 2009 was 45.0% due to the $1.2 million benefit recorded as a result of a reduction in estimated taxes payable based upon information received during this year which indicated the amount would not be payable.

The gross amount of unrecognized tax benefits at March 28, 2009 was $0.2 million. The gross amount of unrecognized tax benefits as a result of tax positions taken during prior years decreased by $1.2 million during the 26-weeks ended March 28, 2009. The total amount of the unrecognized tax benefits that, if recognized, would affect the effective rate is $14,000 as of March 28, 2009. The Company had approximately $30,000 and $210,000 for payment of accrued interest and penalties at March 28, 2009 and September 27, 2008, respectively.

As of September 27, 2008, all of the federal income tax returns filed since 2006 are still subject to adjustment upon audit. The Company also files income tax returns in many states, and these returns remain open for adjustments to its federal income tax returns. In addition, certain state income tax returns filed within the past four years are still open for state specific adjustments.

(6) Inventories

Inventories consist of the following:


(Dollar amounts in thousands)	March 28, 2009		September 27, 2008
Raw materials and supplies	$	10,658	$	4,579
Finished goods		93,774		82,005

Total inventories	$	104,432	$	86,584

(7) Debt Retirement

During the 13-week period ended December 27, 2008, the Company purchased and retired $3.9 million of its 7 ³/4 % Senior Notes due 2013 and recognized a gain on extinguishment of debt of $ 0.4 million.

(8) Recently Issued Accounting Pronouncements

In December 2007, FASB issued SFAS No. 141 (revised), “Business Combinations” (“SFAS 141R”). SFAS 141R relates to business combinations and requires the acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company must adopt this standard for its 2010 fiscal year.

September 28, 2008; however, in February 2008, the FASB issued FASB Staff Position (“FSP”) No. SFAS 157-2 (“FSP 157-2”), which delayed the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, for one year. The adoption of SFAS 157 effective September 28, 2008 with respect to the Company’s financial assets and liabilities did not have a material impact on its consolidated financial statements. The Company intends to adopt the provisions of SFAS 157 with respect to its non-financial assets and non-financial liabilities effective October 4, 2009 pursuant to the requirements of FSP 157-2, and is in the process of determining the related impact on the Company’s consolidated financial statements. Therefore, we have adopted the provisions of SFAS 157 with respect to our financial assets and liabilities only. As defined in SFAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also establishes a fair value hierarchy that ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Fair values determined by quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2: Fair values utilize inputs other than quoted prices that are observable for the asset or liability, and may include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability.

Level 3: Unobservable inputs that are not corroborated by market data and may reflect the reporting entity’s own assumptions market participants would use in pricing the asset or liability.

As of March 28, 2009, there are no assets or liabilities, subject to SFAS 157, which are carried at fair value.

In February 2007, FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115” (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. If elected, SFAS 159 is effective beginning September 28, 2008. Under SFAS 159, a company may elect to use fair value to measure eligible items at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Eligible items include, but are not limited to, accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, issued debt and firm commitments. The Company elected not to measure any additional financial instruments or other items at fair value as of September 28, 2008 in accordance with SFAS 159.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this document (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to domestic economic conditions, activities of competitors, seasonal effects, changes in federal or state tax laws and of the administration of such laws and the general condition of the economy.

This discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with its unaudited consolidated financial statements and disclosures included elsewhere in this report and Management’s Discussion and Analysis of Financial Condition and Results of Operations included as part of the Company’s Annual Report on Form 10-K for the year ended September 27, 2008.

General

Leslie’s Poolmart, Inc. (the “Company” or “Leslie’s”) is the leading specialty retailer of swimming pool supplies and related products in the United States. The Company markets its products through 617 Company-owned stores in 35 states; a nationwide mail order catalog; and the Internet. Leslie’s is vertically integrated, operating a chemical repackaging facility in Ontario, California and a specialty chemical repackaging facility in Hebron, Kentucky. The Company supplies its retail stores from distribution facilities located in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; Hebron, Kentucky; and Orlando, Florida.

The Company was incorporated as a Delaware corporation in 1997 and became a wholly-owned subsidiary of Leslie’s Holdings Inc. in February 2007 through a reorganization. The Company’s principal executive offices are located at 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040, and the telephone number at that address is (602) 366-3999. Leslie’s corporate website address is www.lesliespool.com.

Seasonality and Quarterly Fluctuations

The Company’s business exhibits substantial seasonality, which the Company believes is typical of the swimming pool supply industry. In general, sales and net income are highest during the quarters that end in June and September which represent the peak months of swimming pool use. Sales are substantially lower during the quarters that end in December and March when the Company typically incurs net losses. The principal external factor affecting the Company’s business is weather. Hot weather and the higher frequency of pool usage in such weather create a need for more pool chemicals and supplies. Unseasonably early or late warming trends can increase or decrease the length of the pool season. In addition, unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season will tend to decrease swimming pool use. The likelihood that unusual weather patterns will severely impact the Company’s results is lessened by the geographical diversification of the Company’s store locations.

The Company also expects that its quarterly results of operations will fluctuate depending on the timing and amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores. The Company attempts to open its new stores primarily in the quarter ending March in order to position itself for the following peak season.

Results of Operations

Net Sales. Net sales for the 13 weeks ended March 28, 2009 were $57.0 million compared to $56.7 million for the 13 weeks ended March 29, 2008. The 0.6 % increase was primarily due to sales generated from new store openings. During the quarter, the Company opened 17 new stores and closed one store. Net sales for the 26 weeks ended March 28, 2009 were $117.3 million compared to $115.0 million for the 26 weeks ended March 29, 2008. The 2.0% increase was primarily due to the additional new stores which were operated during the 26-week period ended March 28, 2009.

Comparable store sales for the 13 weeks ended March 28, 2009 decreased 0.6% as compared to the 13 weeks ended March 29, 2008. The comparable store sales decrease was primarily due to unfavorable weather conditions in most of the Company’s markets and delays in the opening of swimming pools.

Comparable store sales for the 26 weeks ended March 28, 2009 increased 0.3% as compared to the 26 weeks ended March 29, 2008. The Company considers a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a recognized measure of financial performance under accounting principles generally accepted in the United States (“GAAP”). Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

Gross Profit. Gross profit for the 13 weeks ended March 28, 2009 was $32.3 million compared to $31.2 million for the 13 weeks ended March 29, 2008. As a percentage of sales, gross profit was 56.7% for the second quarter of fiscal 2009 compared to 55.0% for the second quarter of fiscal 2008. For the 26 weeks ended March 28, 2009, gross profit was $63.0 million compared to $59.6 million for the 26 weeks ended March 29, 2008. As a percentage of sales, gross profit for the 26 weeks ended March 28, 2009 was 53.7% compared to 51.9% for the 26 weeks ended March 29, 2008. Gross profit dollars improved primarily due to the recognition of vendor promotional rebates during the quarter and improved efficiencies in manufacturing.

Operating and Administrative Expense. Operating and administrative expense for the 13 weeks ended March 28, 2009, was $39.1 million compared to $38.4 million for the 13 weeks ended March 29, 2008. Operating expense dollars increased during the second quarter of 2009 due primarily to increases in occupancy and other related costs associated with the increased store count, as compared to the second quarter of 2008. For the 26 weeks ended March 28, 2009, operating expenses were $77.5 million, as compared to $74.8 million in the prior year with the increases primarily related to expenses related to the increased store count.

Operating loss. Operating loss for the 13 weeks ended March 28, 2009 decreased from $7.2 million during the 13 weeks ended March 29, 2008 to $6.9 million for the 13 weeks ended March 28, 2009. The operating loss for the 26 weeks ended March 29, 2008 improved by $0.4 million, from a loss of $15.1 million during the 26 weeks ended March 29, 2008 to an operating loss of $14.7 million for the 26 weeks ended March 28, 2009.

Other Income and Expense. Net interest expense was $3.5 million for the 13 weeks ended March 28, 2009 compared to $3.6 million for the 13 weeks ended March 29, 2008. The decrease in interest expense was due to the decrease in average debt balances. For the 26 weeks ended March 29, 2008, the net interest expense was $6.8 million versus $6.5 million in the prior year, primarily due to lower interest income earned during the first fiscal quarter of 2009.

Income Taxes. The Company’s income tax benefit for the 13 weeks ended March 28, 2009 was $4.1 million, or an effective rate of 39.2%, as compared to a $4.3 million benefit, or an effective rate of 40.1% for the 13 weeks ended March 29, 2008. For the 26 weeks ended March 28, 2009, the income tax benefit was $9.5 million, or an effective rate of 45.0% versus $8.3 million, or an effective rate of 38.5% in the prior year. The increase in the effective rate is attributed to the $1.2 million benefit for a reduction in estimated taxes payable based upon information received during the year which indicated that the amount would not be payable.

Adjusted EBITDA. The Adjusted EBITDA loss for the 13 weeks ended March 28, 2009 was $3.6 million compared to an Adjusted EBITDA loss of $3.7 million for the 13 weeks ended March 29, 2008. For the 26 weeks ended March 28, 2009, Adjusted EBITDA loss was $8.1 million compared to an Adjusted EBITDA loss of $8.3 million for the 26 weeks ended March 29, 2008, or an improvement of $0.2 million. The improvement in Adjusted EBITDA was primarily due to the expanded gross profit achieved during the period, which more than offset higher occupancy and other expenses related to the additional store count.

Adjusted EBITDA is determined as follows (1):


	13 Weeks Ended						26 Weeks Ended
*Amounts in thousands*	March 28, 2009			March 29, 2008			March 28, 2009			March 29, 2008
Net loss as reported	$	(6,329	)	$	(6,373	)	$	(11,600	)	$	(13,245	)
Depreciation and amortization		3,090			3,497			6,359			6,755
Interest expense, net		3,539			3,557			6,778			6,488
Loss on disposition of assets		139			—			190			10
Income tax benefit		(4,085	)		(4,269	)		(9,504	)		(8,293	)
Unusual item		47			(74	)		(278	)		(61	)

Adjusted EBITDA	$	(3,599	)	$	(3,662	)	$	(8,055	)	$	(8,346	)

(1)

Adjusted EBITDA is defined as earnings before interest (including amortization of debt costs), taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, and unusual charges. Adjusted EBITDA is not a recognized measure of financial performance under GAAP, but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data all of which are prepared in accordance with GAAP. The Company has presented Adjusted EBITDA solely as supplemental disclosure because the Company believes it allows for a more complete analysis of results of operations and may present a better measure of liquidity for those charges that are not anticipated to be incurred in the future. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.

Financial Condition, Liquidity and Capital Resources

Changes in Financial Condition.

During the 26 weeks between September 27, 2008 and March 28, 2009, total current assets decreased by $32.3 million, primarily due to lower cash positions related to working capital changes. Inventories increased by $17.8 million during the

period, reflecting the effects of inventory purchased during the first fiscal quarter of 2009 as the Company accelerated its purchases of certain products for the upcoming peak-selling season and to take advantage of available discounting.

During the same period, current liabilities decreased by $12.3 million due to the decrease in income taxes payable of $7.7 million as a result of income tax payments made during the period and a reduction in accrued expenses of $6.9 million which was primarily due to payments of payroll liabilities.

Liquidity and Capital Resources.

Net cash used in operating activities was $47.1 million for the 26 weeks ended March 28, 2009 compared to net cash used in operating activities of $31.2 million for the same 26 week period in the prior year, primarily due to increased purchases of certain products for the upcoming peak-selling season.

Capital expenditures for the 26 weeks ended March 28, 2009 were $6.0 million. The Company expects to incur capital expenditures between $13.0 and $14.0 million in fiscal 2009, primarily for the purpose of opening new stores. It is anticipated that the balance of 2009 capital expenditures will be funded out of cash provided by operations.

Cash used in financing activities for the 26 weeks ended March 28, 2009 was $7.5 million compared to $ 9.4 million cash used in financing activities in the prior year.

The Company believes its internally generated funds, as well as its borrowing capacity, are adequate to meet its working capital needs, maturing obligations and capital expenditure requirements, including those relating to the opening of new stores, for the next twelve months.

The Company was in compliance with all debt covenants as of March 28, 2009.

Recently Issued Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised), “Business Combinations”. SFAS No. 141 (revised) relates to business combinations and requires the acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company must adopt this standard for its 2010 fiscal year.

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS 157 is generally effective for years beginning after December 15, 2007. SFAS 157 was effective for the Company on September 28, 2008; however, in February 2008, the FASB issued FASB Staff Position (“FSP”) No. SFAS 157-2 (“FSP 157-2”), which delayed the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, for one year. The adoption of SFAS 157 effective September 28, 2008 with respect to the Company’s financial assets and liabilities did not have a material impact on its consolidated financial statements. The Company intends to adopt the provisions of SFAS 157 with respect to its non-financial assets and non-financial liabilities effective October 4, 2009 pursuant to the requirements of FSP 157-2, and is in the process of determining the related impact on the Company’s consolidated financial statements.

In February 2007, FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. If elected, SFAS 159 is effective beginning September 28, 2008. Under SFAS 159, a company may elect to use fair value to measure eligible items at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Eligible items include, but are not limited to, accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, issued debt and firm commitments. The Company elected not to measure any additional financial instruments or other items at fair value as of September 28, 2008 in accordance with SFAS 159.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s Amended Loan and Security Agreement carries interest rate risk as described in the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2008. Amounts borrowed under this Agreement bear interest at either LIBOR plus 1.75%, or at the Company’s choice, the lender’s reference rate. Should the lenders’ base rate change, the Company’s interest expense will increase or decrease accordingly. As of March 28, 2009, the Company had no borrowings outstanding under this facility.

Item 4.

Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded as of the Evaluation Date that the Company’s disclosure controls and procedures were effective such that the material information relating to Leslie’s, including the Company’s consolidated subsidiaries, required to be disclosed in the Company’s Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and was made known to the Company’s principal executive officer and principal accounting officer during the period when this report was being prepared to allow timely decisions regarding required disclosure.

In addition, there were no changes in the Company’s internal control over financial reporting during the quarter ended March 28, 2009 or in other factors that have materially affected, or are likely to materially affect the Company’s internal control over financial reporting. The Company has not identified any significant deficiencies or material weaknesses in the Company’s internal control over financial reporting, and therefore there were no corrective actions taken.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is routinely involved in legal proceedings involving claims related to the ordinary course of its business. The Company is currently not party to any legal proceedings that it considers to be material.

Item 1A.

Risk Factors

Certain factors exist which may affect Leslie’s business and could cause actual results to differ materially from those expressed in any forward-looking statements. The Company has not experienced any material changes from those risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2008.

Item 2.

Unregistered Sales of Securities and Use of Proceeds

None.

Item 5.

Other Information

None.

Item 6.

Exhibits


Exhibit Number		Description

31.1		Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


LESLIE’S POOLMART, INC.

By:		/s/ Lawrence H. Hayward
		Lawrence H. Hayward Chief Executive Officer Date: May 11, 2009

By:		/s/Steven L. Ortega
		Steven L. Ortega Chief Financial Officer Date: May 11, 2009

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LESLIES POOLMART INC 10-Q