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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended: September 29, 2007

or



| ̈ | 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



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LESLIES
POOLMART, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 95-4620298                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

3925 E. Broadway Road, Suite 100

Phoenix, Arizona 85040

(Address of principal executive offices)

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



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

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



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Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈No  x

Indicate by check mark if the registrant is not required to file
reports pursuant to section 13 or Section 15(d).    Yes  x    No ̈

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                         |  |                    |  |                        
|------------------------ |  | ------------------ |  | -----------------------
|Large Accelerated Filer ̈ |  | Accelerated Filer ̈ |  | Non-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act)    Yes ̈No  x

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

The Number of Shares of Common
Stock outstanding as of December 17, 2007 was 100.



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##### Table of Contents

TABLE OF CONTENTS

For the Fiscal Year Ended September 29, 2007



|         |  |                                                                                                               |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                               |  | Page
|         |  |                                                                                                              
|         |  | PART I                                                                                                        |  |     
|         |  |                                                                                                              
|Item 1.  |  | Business                                                                                                      |  | 2   
|         |  |                                                                                                              
|Item 1A. |  | Risk Factors                                                                                                  |  | 5   
|         |  |                                                                                                              
|Item 1B. |  | Unresolved Staff Comments                                                                                     |  | 7   
|         |  |                                                                                                              
|Item 2.  |  | Properties                                                                                                    |  | 7   
|         |  |                                                                                                              
|Item 3.  |  | Legal Proceedings                                                                                             |  | 8   
|         |  |                                                                                                              
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                           |  | 8   
|         |  |                                                                                                              
|         |  | PART II                                                                                                       |  |     
|         |  |                                                                                                              
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities |  | 9   
|         |  |                                                                                                              
|Item 6.  |  | Selected Financial Data                                                                                       |  | 10  
|         |  |                                                                                                              
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 13  
|         |  |                                                                                                              
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                    |  | 20  
|         |  |                                                                                                              
|Item 8.  |  | Financial Statements and Supplementary Data                                                                   |  | 21  
|         |  |                                                                                                              
|Item 9.  |  | Changes in and Disagreements with Accountants On Accounting and Financial Disclosure                          |  | 39  
|         |  |                                                                                                              
|Item 9A. |  | Controls and Procedures                                                                                       |  | 39  
|         |  |                                                                                                              
|Item 9B. |  | Other Information                                                                                             |  | 39  
|         |  |                                                                                                              
|         |  | PART III                                                                                                      |  |     
|         |  |                                                                                                              
|Item 10. |  | Directors and Executive Officers of the Registrant                                                            |  | 39  
|         |  |                                                                                                              
|Item 11. |  | Executive Compensation                                                                                        |  | 42  
|         |  |                                                                                                              
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                |  | 53  
|         |  |                                                                                                              
|Item 13. |  | Certain Relationships and Related Transactions                                                                |  | 54  
|         |  |                                                                                                              
|Item 14. |  | Principal Accountant Fees and Services                                                                        |  | 55  
|         |  |                                                                                                              
|         |  | PART IV                                                                                                       |  |     
|         |  |                                                                                                              
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                    |  | 56  



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##### Table of Contents

PART I

ITEM 1. BUSINESS

Leslies Poolmart, Inc. (Leslies or the Company) is
the leading national specialty retailer of swimming pool supplies and related products. These products primarily consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts,
and also include fun, safety and fitness-oriented recreational items. The Company currently markets its products under the trade name Leslies Swimming Pool Supplies through 577 company-owned retail stores in 35 states, mail order
catalogs sent to selected pool owners nationwide, and an internet web store.

The Company provides its customers a comprehensive selection
of high quality products, competitive every day low prices and superior customer service through knowledgeable and responsive sales personnel who offer a high level of technical assistance at convenient store locations. The typical Leslies
store is located in an area with high concentrations of swimming pools and approximates 3,800 square feet of space. The typical store is located either in a strip center or on a freestanding site in an area of heavy retail activity, and draws its
customers primarily from an approximately five-mile trade area. The Company maintains a proprietary mailing list of approximately 7.1 million addresses, including approximately 90% of the residential in-ground pools in the U.S. This highly
focused list of target customers is central to the Companys direct mail marketing efforts, which supports its retail stores, mail order operations and web store.

The Company is a wholly-owned subsidiary of Leslies Holdings, Inc. (Holdings) and was incorporated as a Delaware corporation in 1997. 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.

See Item 8, Financial Statements and Supplementary Data, for financial information.

Swimming Pool Supply Industry

We market our products and services in the estimated $5.0 billion U.S.
swimming pool and spa supply industry, which can be divided into four major segments: residential in-ground swimming pools, residential above-ground pools (usually 12 to 24 feet in diameter), commercial swimming pools and spas or hot tubs. According
to market research firm P.K. Data, the installed base of residential in-ground pools, above-ground pools and spas and hot tubs in the United States has grown from just under 9 million in 1993 to over 14.2 million in 2006, and is projected
to grow to over 18.2 million by 2011. Both historic and new pool unit growth is highly correlated to macroeconomic housing trends, as approximately 60% of all in-ground swimming pools are built as part of new home construction.

Regardless of the type or size of a swimming pool, there are numerous ongoing maintenance and repair requirements associated with pool ownership. In
order to keep a pool safe and sanitized, chemical treatment is required to maintain proper chemical balance, particularly in response to variables such as pool usage, precipitation and temperature. A swimming pool is chemically balanced when the
disinfectant, pH, alkalinity, hardness and dissolved solids are at the desired levels. The majority of swimming pool owners use chlorine to disinfect their pools. When the pool is chemically balanced, problems such as algae, mineral and salt
saturation, corrosive water, staining, eye irritation and strong chlorine smell are less likely to occur. A regular testing and maintenance routine will result in a stable and more easily maintained pool. However, regardless of how well appropriate
levels of chlorine are maintained, shocking is periodically required to break up the contaminants which invariably build up in the pool water. To accomplish this, the pool owner can either superchlorinate the pool or use a nonchlorinated
oxidizing compound. The maintenance of proper chemical balance and the related upkeep and repair of swimming pool equipment, such as pumps, heaters, and filters, as well as safety equipment, create a non-discretionary demand for pool chemicals and
other swimming pool supplies and services. Further, non-usage considerations such as a pools appearance and the overall look of a household and yard create an ongoing demand for these maintenance related supplies. In addition, pool usage
creates demand for discretionary items such as floats, games and accessories.

The Companys historical strategy has been to focus
primarily on the residential in-ground pool owner. In recent years, the Company has expanded its activities to more aggressively address the commercial, above-ground and spa markets as well. In the residential categories, the Company markets its
products primarily to the do-it-yourself market as opposed to those pool owners who hire pool servicers. Through its commercial business, products and services are offered to commercial property managers, non-residential pool installers,
as well as to pool service companies which maintain either residential or commercial pools.



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Seasonality

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 ended June and September that
represent the peak months of swimming pool use. Sales are substantially lower during the quarters ended 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.

Products

Leslies offers its customers a comprehensive selection of products necessary to satisfy their swimming pool supply needs. During 2007, the Company stocked approximately 1,400 items in each store, with more than 30,000 additional items
available through its other channels of distribution and special order processes. In 2007, approximately 725 items were displayed in the Companys residential mail order catalogs, approximately 2,300 items were offered through the
Companys web store and 1,200 items were in the commercial catalog, although special order procedures make nearly all Leslies products available to these customers as well. In fiscal year 2007, Leslies brand name products accounted
for 37% of the Companys total sales.

The Companys major product categories are pool chemicals; major equipment; cleaning and
testing equipment; safety equipment; pool covers, reels and liners; above-ground pools in a limited number of stores; and recreational items (which include swimming pool floats, games, lounges, masks, fins, snorkels and other impulse
purchase items).

Non-discretionary and regularly consumed products such as pool chemicals, major equipment and parts represented 84%
of total sales in fiscal year 2007. The Companys non-discretionary products typically have long shelf lives and are generally not prone to either obsolescence or shrinkage which could occur from changing technology or consumer buying patterns.

Channels of Distribution

Retail
Store Operations. At the end of fiscal year 2007, Leslies marketed its products through 577 retail stores in 35 states under the trade name Leslies Swimming Pool Supplies. California represents its single largest concentration
of stores with 128 stores, while 105 stores are located in Texas, and over 100 stores are in the northeast/mid-Atlantic states. Leslies retail stores are located in areas with high concentrations of swimming pools and typically are
approximately 3,800 square feet in size. In addition to the store manager, the typical Leslies store employs one assistant manager, who is generally a full-time employee. Additionally, Leslies makes frequent use of part-time and
temporary employees to support its full-time employees during peak seasons. During 2007, the Company had 6 regional vice presidents and 37 district managers. Each district manager was responsible for approximately 15 stores.

Mail Order Catalog and Internet Web Store. Leslies mail order catalogs provide an extension of its service philosophies and products to
those areas not currently served by a retail store and allow the scope of the Companys business to be truly nationwide. The Company also operates a web store (www.lesliespool.com) providing online customers with thousands of products available
for ordering and important information on pool cleaning, equipment, sanitation, and safety advice. The virtual store allows customers an opportunity to shop online and the ability to retrieve relevant information, 24 hours a day, seven days a week.
The Company believes that its mail order catalogs and Web Store build awareness of the Leslies name, provide it with buying and direct marketing efficiencies and, when coupled with information from its retail stores, are instrumental in
determining site selection for new stores.

Customer Service

Due to the complicated nature of pool chemistry and equipment maintenance and consistent with its philosophy of being a full service swimming pool supply retailer, Leslies offers a high level of technical
assistance to support its customers. The Company considers its training of store personnel to be an integral part of its service philosophy. Leslies extensive training program for all full-time and part-time store employees includes courses in
water chemistry, water testing, trouble shooting on equipment, equipment sizing and parts replacement.



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A significant number of Leslies stores are supported by the Leslies Service Department, which
offers poolside equipment installation and repair, leak detection and repair, and seasonal opening and closing services. The Service Department utilizes both Company employees and subcontractors to perform these services.

Marketing

The majority of the Companys
marketing is done on a direct mail basis through its proprietary mailing list of approximately 7.1 million addresses at which, primarily, residential pools are located. Leslies has found that its ability to mail directly to this highly
focused group is an effective and efficient way to conduct its marketing activities to both retail store and mail order customers. The Company constantly updates its address list through proprietary research techniques and in-store customer
sign-ups.

Addresses on the Companys proprietary list that are located within a specified service area of a retail store receive
circulars once or twice per month from late March or early April through September or, selectively, through October. As a regular part of Leslies promotional activities, each mailer highlights specific items which are intended to increase
store traffic, and reinforces to the customer the advantages of shopping at Leslies, which include everyday low pricing, knowledgeable employees, a high level of customer service, and a broad selection of high quality products. Addresses
outside the Companys store service areas, and recently active mail order customers within those service areas, receive the Companys mail order catalogs. The Company also markets through online channels using its proprietary database,
search engines and other online media. The Company utilizes local print media when it enters a new market, and does so regularly in connection with its above-ground pool sales markets. New store openings typically involve additional advertising in
the first two to three months of operation.

Purchasing

Leslies management believes that because it is one of the largest purchasers of swimming pool supplies for retail sales in the United States, the Company is able to obtain very favorable pricing on its purchases
from outside suppliers. Most raw materials and those products not repackaged by the Company are purchased directly from manufacturers. It is common in the swimming pool supply industry for certain manufacturers to offer extended dating terms on
certain products to quantity purchasers such as Leslies. These dating terms are typically available to the Company for pre-season or early season purchases.

The Companys principal chemical raw materials and granular chlorine compounds are purchased primarily from three suppliers. At the end of fiscal year 2006, the Company extended a multi-year product purchase
agreement with a major producer of one of the principal chlorine compounds, the chlorinated isocyanurates. The Company believes there are several other reliable suppliers of chlorine products in the marketplace today. Although the Company has one
sole source supplier for a nonchlorine shocking compound, the Company believes that termination of supply would not pose any significant problems because substitute chemicals and alternate shocking techniques are available. The Company believes that
reliable alternative sources of supply are available for all of its raw materials and finished products.

Vertical Integration

Leslies operates a plant in Ontario, California where it converts dry granular chlorine into tablet form and repackages a variety of bulk chemicals
into various sized containers suitable for retail sales. Leslies also formulates a variety of specialty liquids, including water clarifiers, tile cleaners, algaecides and stain preventives. The chemicals the Company processes have a relatively
long shelf life. Leslies believes that supplying its stores with chemicals from its own repackaging plant provides it with cost savings, as well as greater control over product availability and quality, as compared to non-integrated pool
supply retailers. It also offers the Company greater flexibility of product sourcing and vital information when negotiating with third-party repackagers and chemical providers. The Leslies branded product names appear on all products processed
at its repackaging plant, and on the majority of its chemical products. The Company believes it is among the largest processors of chlorine products for the swimming pool supply industry.

In connection with the operation of its four distribution centers outside of California, the Company has expanded its use of third-party chemical
repackagers and its purchase of products already in end-use configurations. These products are also generally packaged under the Leslies brand name. The Company continually evaluates the cost effectiveness of third-party sourcing versus
internal manufacturing in order to minimize its cost of goods. The Company also operates a packaging operation of specialty items at its Hebron, Kentucky distribution facility. In addition to chemicals, a variety of the Companys other products
are packaged under the Leslies brand name.



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Distribution

In 2007, the Company distributed its products to its retail stores and to its catalog customers through its leased distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; Hebron, Kentucky; and Orlando,
Florida.

The Company purchases the majority of the chemicals to be distributed from the Dallas, Swedesboro and Hebron distribution centers
from outside manufacturers rather than obtaining them through its repackaging facility in Southern California. During the height of its seasonal activities, each of the Companys retail stores inventory is generally replenished every 5 to
7 days.

The Company utilizes a variety of leased and owned equipment, supplemented by additional equipment leased during the busy season,
to transport its goods to stores.

Competition

Competition within the pool supply industry is highly fragmented and largely populated by local mom and pop stores and regional chains. Based on the number of stores, the Company estimates that the next largest specialty pool
supply retailer is less than one-third of its size. Mass merchant and home improvement chains participate in the category on a seasonal basis. While the ability of these merchants to accept low margins on the limited number of items they offer makes
them aggressive price competitors of the Company, they are not generally priced significantly below Leslies and do not offer the level of customer service or wide selection of swimming pool supplies available at Leslies.

Employees

As of September 29, 2007,
Leslies employed approximately 2,200 persons. During the height of the Companys seasonal activities in 2007, it employed approximately 3,300 persons, including seasonal and part-time store employees who generally are not employed during
the off season. The Company is not subject to any collective bargaining agreements and believes its overall relationship with its employees is good.

Trademarks

In the course of its business, Leslies employs various trademarks, trade names and service marks as well
as its logo in packaging and advertising its products. The Company has registered trademarks and trade names for several of its major products on the Principal Register of the United States Patent and Trademark Office. The Company distinguishes the
products produced in its chemical repackaging operation or by third party repackagers at its direction through the use of the Leslies brand name and logo and the trademarks and trade names of the individual items, none of which is patented,
licensed, or otherwise restricted to or by the Company. The Company believes the strength of its trademarks and trade names has been beneficial to its business and intends to continue to protect and promote its trademarks in appropriate
circumstances.

ITEM 1A. RISK FACTORS

Certain factors that may affect our business and could cause actual results to
differ materially from those expressed in any forward-looking statements include the following:

A small group of stockholders in the holding company are
able to exercise control over our business.

The Company is a wholly-owned subsidiary of Leslies Holdings, Inc.
(Holdings). The principle stockholders of Holdings are GCP California Fund, L.P. and additional affiliates of Leonard Green & Partners, L.P. Through their ownership or control of over 75% of the outstanding shares of the
Companys common stock, these stockholders have the power to elect a majority of the Leslies Board of Directors. Accordingly, those stockholders have the power to approve all amendments to the Companys certificate of incorporation
and bylaws and to effect fundamental corporate transactions such as mergers, asset sales and public offerings.

Our continued success depends on our
successful expansion in new and existing markets.

The Companys continued growth depends to a significant degree on its ability to
open new stores in existing and new markets and to operate these stores on a profitable basis. To a lesser extent, the Companys continued growth depends on increasing comparable store sales. The Company opened 40 net new stores in 2005, 27 net
new stores in 2006 and 36 net new stores in 2007. We cannot assure that we will be able to open new stores in a timely manner; hire, train and integrate



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employees; continue locating and obtaining favorable store sites; and adapt distribution, management information and other operating systems to the extent
necessary to grow in a successful and profitable manner. Further, we cannot assure that the Companys new stores will achieve historical levels of sales or profitability. Because the Companys new stores generally have lower operating
margins following their opening than mature stores, the opening of a large number of stores could have an adverse effect on total operating margins. Additionally, the Companys expansion plans could be adversely affected by a significant
downturn in the economy and resulting decrease in new home and swimming pool construction. We expect that the Companys quarterly results of operations will fluctuate depending on the timing and the amount of revenue contributed by new stores
and, to a lesser degree, the timing of costs associated with the opening of new stores.

Our business is highly seasonal and results of operations
fluctuate as a result of weather conditions.

Our business exhibits substantial seasonality which we believe is typical of the swimming
pool supply industry. In general, sales and earnings are highest during the quarters ending in June and September, which represent the peak months of swimming pool use. Typically, all of the Companys operating income is generated in these two
quarters which offsets the operating losses incurred in each of the other two quarters. Our business is significantly affected by weather patterns. For example, unseasonably late warming trends can decrease the length of the pool season, and
unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season may decrease swimming pool use, resulting in lower maintenance needs and decreased sales.

We may not be able to successfully compete with large volume mass merchants.

Most of the
Companys competition comes from local stores or regional chains which do not typically repackage products and which generally buy products in smaller quantities. The chain store competitors include a large franchise operator of approximately
170 retail outlets in the Florida market and a limited number of other retail chains of approximately 15 to 30 stores. We compete on selected principal products with large-volume mass merchants and home centers which offer a limited selection of
pool supplies as compared to us. Should mass merchants increase the breadth of their pool related product offerings, it would likely have an adverse effect on our business. There are no proprietary technologies or other significant barriers to
prevent other firms from entering the swimming pool supply retail market in the future. Competition could adversely impact the Companys sales and operating margins.

Our business may be adversely affected by an economic downturn.

Consumer demand for swimming pool
related products may decline if discretionary spending declines as a result of a downturn in the economy. While spending for maintenance, repairs and replacement by existing pool owners must occur to maintain existing swimming pools, a portion of
the Companys growth depends on the continued expansion of the installed swimming pool base, which may be considered a discretionary expenditure and could be negatively affected by a difficult economy.

Our business includes the packaging and storage of chemicals and an accident related to those chemicals could subject us to liability and increased costs.

We operate chemical repackaging facilities in Ontario, California and Hebron, Kentucky and we store chemicals in our retail stores and
in distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; Orlando, Florida; and Hebron, Kentucky. Because some of the chemicals we repackage and store are flammable or combustible compounds, we must comply with
various fire and safety ordinances. However, a release at a retail store or a fire at one of the Companys facilities could give rise to liability claims against us. In addition, if an incident involves a repackaging or distribution facility,
we might be required temporarily to use alternate sources of supply that could increase the Companys cost of sales. We believe that we maintain adequate insurance coverage. However, due to changes in the insurance industry that have led to
higher costs, we can not guarantee that we will be able to maintain adequate insurance at reasonable rates or that the Companys insurance coverage will be adequate to cover future claims that may arise.

Our business is subject to compliance with environmental, health, transportation and safety regulations.

We are subject to various regulations under federal, state and local environmental, health, transportation and safety requirements. These regulations
govern the storage and sale of pool chemicals, as well as packaging, labeling, handling, and transportation of those products. Failure to comply with these laws may result in the assessment of civil and criminal penalties. Compliance with such laws
in the future may be costly, as the trend in such regulations has been increasingly restrictive on activities that impact the environment.



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We are dependent on key personnel and the loss of their services could adversely affect us.

We believe that the Companys success is largely dependent upon the abilities and experience of its senior management team. The loss of services of
one or more of these senior executives could adversely affect the Companys results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of September 29, 2007, the Company operated 577 stores in 35 states. The
following table sets forth information concerning the Companys stores:



|               |  |                 
|-------------- |  | ----------------
|State          |  | Number of Stores
|Alabama        |  | 5               
|Arizona        |  | 61              
|Arkansas       |  | 1               
|California     |  | 128             
|Connecticut    |  | 9               
|Delaware       |  | 2               
|Florida        |  | 66              
|Georgia        |  | 22              
|Illinois       |  | 5               
|Indiana        |  | 7               
|Iowa           |  | 1               
|Kansas         |  | 2               
|Kentucky       |  | 4               
|Louisiana      |  | 8               
|Maryland       |  | 6               
|Massachusetts  |  | 7               
|Michigan       |  | 7               
|Mississippi    |  | 1               
|Missouri       |  | 8               
|Nebraska       |  | 1               
|Nevada         |  | 17              
|New Hampshire  |  | 2               
|New Jersey     |  | 21              
|New Mexico     |  | 2               
|New York       |  | 22              
|North Carolina |  | 4               
|Ohio           |  | 10              
|Oklahoma       |  | 7               
|Pennsylvania   |  | 18              
|Rhode Island   |  | 1               
|South Carolina |  | 3               
|Tennessee      |  | 6               
|Texas          |  | 105             
|Utah           |  | 1               
|Virginia       |  | 7               
|               |  |                 
|Total Stores   |  | 577             
|               |  |                 

Except for 25 owned stores, the Company has leases on the remaining retail stores with lease terms
expiring between 2007 and 2017. The Companys typical lease term is five years, and in many instances, the Company has renewal options at increased rents. Five leases provide for rent contingent on sales exceeding specific amounts. No other
leases require payment based on a percentage rent.



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The Companys corporate office is located in Phoenix, Arizona. The 52,000 square foot office space
is leased until June 2009, and has one five-year renewal option.

The Companys Southern California distribution center is located in
a 183,000 square foot facility in Ontario, California. The Ontario facility is leased, expiring in 2014 and the lease has one five-year renewal option.

The Companys distribution facility in Dallas, Texas contains 126,000 square feet of space. The lease of this facility was renewed in 2005 and is scheduled to expire in 2015, with one five-year option thereafter.
The 130,500 square foot distribution facility in Swedesboro, New Jersey is leased for a 10-year term, expiring in 2008. The lease includes options to renew for two five-year periods. The 146,000 square foot distribution center in Hebron, Kentucky is
leased for a 12-year term, expiring in 2010 and provides for three five-year renewal options. The 20,500 square foot distribution center in Orlando, Florida is leased for a 5-year term, expiring in 2009 and provides for two five-year renewal
options.

ITEM 3. 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 material legal proceedings. While the outcome of any litigation is inherently unpredictable, the Company does not believe that the ultimate resolution of any of these
matters will have a material adverse impact on the Companys financial condition, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.



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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company became a 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 converted into one share of 10% senior redeemable exchangeable cumulative preferred stock of Holdings with the same rights, privileges, and preferences,
including as to liquidation.

There is no public trading market for the Companys common stock. As of December 17, 2007, all
common stock was owned by Holdings.

We did not pay or declare dividends on our common stock during the 2006 or 2005 fiscal years. On
July 16, 2007, the Companys board of directors declared a cash dividend of $15.0 million on the Companys common stock, par value $0.001 per share, to Holdings as its sole common stockholder of record on that date, in an aggregate
amount. The cash dividend was paid on August 1, 2007. The payment of dividends is restricted, but not prohibited, by the agreements and instruments governing the Companys indebtedness. The Company contemplates that dividends may be
declared in future periods based upon the liquidity position of the Company.

Equity Compensation Plan Information:

In August 2005, Leslies board of directors adopted its 2005 Incentive Stock Option Plan (the 2005 Plan), and reserved 1,300,000 shares
of nonvoting common stock for issuance thereunder. As of the 2007 Reorganization, the 2005 Plan and related outstanding agreements were assumed by Holdings. Any future grants for options under the 2005 Plan will be for equity of Holdings and not the
Company.

During the second quarter of 2007, pursuant to the 2005 Plan, Holdings board of directors approved the acceleration of the
vesting of all outstanding stock options to purchase shares of common stock in Holdings. All of the options were exercised in February of 2007 after the 2007 Reorganization, and as of September 29, 2007 the Company had no outstanding equity
awards to its employees or non-employees either directly or through grants by Holdings that would be attributable to the Companys employees or non-employees.



9



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##### Table of Contents

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated financial data of the Company as of and for the fiscal years ended September 29,
2007, September 30, 2006, October 1, 2005, October 2, 2004, and September 27, 2003. The fiscal year ended October 2, 2004 consists of 53 weeks, and all other fiscal years presented consist of 52 weeks. This
financial data was derived from the audited historical consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements of the Company and Managements Discussion and Analysis
of Financial Condition and Results of Operations.



|                                                |  |                    |         |   |                    |   |          |                 |  |   |                 |   |  |                    |         |   |  |   |         |  
|----------------------------------------------- |  | ------------------ | ------- | - | ------------------ | - | -------- | --------------- |  | - | --------------- | - |  | ------------------ | ------- | - |  | - | ------- | -
|                                                |  | Fiscal Years Ended |        
|(Dollar Amounts in Thousands)                   |  | September 29, 2007 |         |   | September 30, 2006 |   |          | October 1, 2005 |  |   | October 2, 2004 |   |  | September 27, 2003 |        
|Operating Results:                              |  |                    |         |   |                    |   |          |                 |  |   |                 |   |  |                    |         |   |  |   |         |  
|Sales                                           |  | $                  | 468,882 |   |                    | $ | 440,565  |                 |  | $ | 388,506         |   |  | $                  | 356,041 |   |  | $ | 327,165 |  
|Gross Profit                                    |  |                    | 236,133 |   |                    |   | 218,183  |                 |  |   | 188,497         |   |  |                    | 172,113 |   |  |   | 155,946 |  
|Gross Margin                                    |  |                    | 50.4    | % |                    |   | 49.5     | %               |  |   | 48.5            | % |  |                    | 48.3    | % |  |   | 47.7    | %
|Loss on Disposition of Fixed Assets             |  |                    | 186     |   |                    |   | 600      |                 |  |   | 703             |   |  |                    | 440     |   |  |   | 497     |  
|Depreciation and Amortization                   |  |                    | 12,619  |   |                    |   | 11,789   |                 |  |   | 11,881          |   |  |                    | 11,281  |   |  |   | 10,186  |  
|Operating Income (1)                            |  |                    | 69,673  |   |                    |   | 56,800   |                 |  |   | 23,905          |   |  |                    | 33,792  |   |  |   | 27,159  |  
|Interest Expense, net                           |  |                    | 14,712  |   |                    |   | 19,397   |                 |  |   | 18,834          |   |  |                    | 7,172   |   |  |   | 9,566   |  
|Net Income/(Loss)(1)                            |  |                    | 32,226  |   |                    |   | 20,505   |                 |  |   | (4,422          | ) |  |                    | 16,246  |   |  |   | 10,343  |  
|Balance Sheet Data:                             |  |                    |         |   |                    |   |          |                 |  |   |                 |   |  |                    |         |   |  |   |         |  
|Working Capital                                 |  |                    | 66,657  |   |                    |   | 43,213   |                 |  |   | 23,657          |   |  |                    | 33,354  |   |  |   | 15,410  |  
|Total Assets                                    |  |                    | 199,639 |   |                    |   | 178,727  |                 |  |   | 142,405         |   |  |                    | 141,169 |   |  |   | 121,472 |  
|Long-term Debt (2)                              |  |                    | 169,080 |   |                    |   | 168,946  |                 |  |   | 175,954         |   |  |                    | 59,495  |   |  |   | 59,495  |  
|Redeemable Preferred Stock (2)                  |  |                    |        |   |                    |   | 41,000   |                 |  |   | 41,000          |   |  |                    | 46,316  |   |  |   | 45,915  |  
|Stockholders Deficit (2)                       |  |                    | (52,611 | ) |                    |   | (122,224 | )               |  |   | (142,557        | ) |  |                    | (39,091 | ) |  |   | (48,177 | )
|Selected Operating Data:                        |  |                    |         |   |                    |   |          |                 |  |   |                 |   |  |                    |         |   |  |   |         |  
|Capital Expenditures                            |  |                    | 13,122  |   |                    |   | 11,180   |                 |  |   | 12,305          |   |  |                    | 10,899  |   |  |   | 8,616   |  
|Recapitalization and Restructuring Charges(1,3) |  |                    |        |   |                    |   |         |                 |  |   | 26,869          |   |  |                    |        |   |  |   |        |  
|Adjusted EBITDA(1,3)                            |  |                    | 82,788  |   |                    |   | 69,189   |                 |  |   | 54,477          |   |  |                    | 45,513  |   |  |   | 37,842  |  
|Adjusted EBITDA Margin(1,2,4)                   |  |                    | 17.7    | % |                    |   | 15.7     | %               |  |   | 14.0            | % |  |                    | 12.8    | % |  |   | 11.6    | %
|Cash flow from Operating Activities             |  |                    | 46,321  |   |                    |   | 55,058   |                 |  |   | 26,747          |   |  |                    | 26,518  |   |  |   | 26,743  |  
|Cash flow used in Investing Activities          |  |                    | (12,626 | ) |                    |   | (10,950  | )               |  |   | (12,168         | ) |  |                    | (10,281 | ) |  |   | (8,607  | )
|Cash flow used in Financing Activities (1)      |  |                    | (12,918 | ) |                    |   | (7,276   | )               |  |   | (29,174         | ) |  |                    | (260    | ) |  |   | (32,112 | )
|Number of Employees                             |  |                    | 2,235   |   |                    |   | 2,201    |                 |  |   | 2,026           |   |  |                    | 1,892   |   |  |   | 2,006   |  
|Number of Stores                                |  |                    | 577     |   |                    |   | 541      |                 |  |   | 514             |   |  |                    | 474     |   |  |   | 437     |  
|                                                |  |                    |         |   |                   
|Comparable Store Sales Growth(5)                |  |                    | 3.1     | % |                    |   | 9.2      | %               |  |   | 6.4             | % |  |                    | 3.3     | % |  |   | 2.3     | %



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##### Table of Contents

---

|(1) | During 2005 and as part of the 2005 Recapitalization described in Note 1 to the
consolidated financial statements, the Company recognized $26.9 million in unusual charges for the following costs associated with the transaction:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                        |  |      |       
|--------------------------------------- |  | ---- | ------
|(in thousands)                          |  | 2005
|Unusual operating charges:              |  |      |       
|Stock and other compensation expense    |  | $    | 17,988
|                                        | 
|Other unusual operating charges:        |  |      |       
|Bond tender consideration and premium   |  |      | 3,246 
|Preferred stock premium                 |  |      | 470   
|Miscellaneous, legal and advisory fees  |  |      | 2,904 
|Unamortized discount on preferred stock |  |      | 571   
|Write-off debt issuance costs           |  |      | 1,690 
|                                        |  |      |       
|Total                                   |  |      | 8,881 
|Total unusual charges                   |  | $    | 26,869
|                                        |  |      |       



|(2) | In the first quarter of 2005 and as part of the 2005 Recapitalization, the Company
issued an aggregate of $170.0 million principal amount of its 7.75% Senior Notes due 2013. Further, $41.0 million of a new series of 10% senior redeemable exchangeable cumulative preferred stock was issued as part of the 2005 Recapitalization.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Adjusted EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, loss/(gain) on disposition of fixed assets, stock compensation expense, write-off of debt issuance costs and unusual charges. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles
(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 which are all prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure
because we believe it allows for a more complete analysis of results of operations. 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The calculation of Adjusted EBITDA is shown as follows:



|                                 |  |                    |        |                    |   |                 |  |   |                 |   |                    |   |        |  |   |       
|-------------------------------- |  | ------------------ | ------ | ------------------ | - | --------------- |  | - | --------------- | - | ------------------ | - | ------ |  | - | ------
|                                 |  | Fiscal Years Ended
|(Amounts in Thousands)           |  | September 9, 2007  |        | September 30, 2006 |   | October 1, 2005 |  |   | October 2, 2004 |   | September 27, 2003
|Net income/(loss)                |  | $                  | 32,226 |                    | $ | 20,505          |  | $ | (4,422          | ) |                    | $ | 16,246 |  | $ | 10,343
|Depreciation and amortization    |  |                    | 12,619 |                    |   | 11,789          |  |   | 11,881          |   |                    |   | 11,281 |  |   | 10,186
|Stock compensation expense       |  |                    | 139    |                    |   |                |  |   | 17,988          |   |                    |   |       |  |   |      
|Recapitalization expenses        |  |                    | 171    |                    |   |                |  |   | 7,191           |   |                    |   |       |  |   |      
|Interest expense, net            |  |                    | 14,712 |                    |   | 19,397          |  |   | 18,834          |   |                    |   | 7,172  |  |   | 9,566 
|Write-off of debt issuance costs |  |                    |       |                    |   |                |  |   | 1,690           |   |                    |   |       |  |   | 420   
|Loss on disposition of assets    |  |                    | 186    |                    |   | 600             |  |   | 703             |   |                    |   | 440    |  |   | 497   
|Income tax expense               |  |                    | 22,735 |                    |   | 16,898          |  |   | 612             |   |                    |   | 10,374 |  |   | 6,830 
|                                 |  |                    |        |                    |   |                 |  |   |                 |   |                    |   |        |  |   |       
|Adjusted EBITDA                  |  | $                  | 82,788 |                    | $ | 69,189          |  | $ | 54,477          |   |                    | $ | 45,513 |  | $ | 37,842
|                                 |  |                    |        |                    |   |                 |  |   |                 |   |                    |   |        |  |   |       

---

|(4) | Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of sales.
|--- | ---------------------------------------------------------------------------

|(5) | 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
measure of financial performance under 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

ITEM 7. 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
the Companys capital structure, weather conditions, domestic economic conditions, activities of competitors, seasonality, changes in federal or state tax laws and the administration of such laws.

EXECUTIVE SUMMARY

Leslies is the leading
national specialty retailer of swimming pool supplies and related products. The Company offers a broad range of products that consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories
and parts, and also include fun, safety and fitness-oriented recreational items. The Company markets its products through 577 company-owned retail stores in 35 states and through catalogs and other offerings made available to select residential and
commercial pool owners nationwide via mail order and Internet channels.

The typical Leslies store approximates 3,800 square feet of
space, is located either in a strip center or on a freestanding site in an area of heavy retail activity, and draws its customers primarily from an approximately five-mile trade area. Of the 577 stores, the Company operates 16 commercial service
center formats that average approximately 11,000 square feet of space and are located primarily in industrial type real estate space. These centers are designed to cater to the Companys existing non-residential commercial and service customers
and provide more customized service than is typically available at the other retail locations.

Results of Operations

The following table sets forth certain statements of income data expressed as a percentage of sales for the periods indicated.



|                                            |  |                    |   |  |                    |   |  |                 |   
|------------------------------------------- |  | ------------------ | - |  | ------------------ | - |  | --------------- | --
|                                            |  | Fiscal Years Ended |  
|                                            |  | September 29, 2007 |   |  | September 30, 2006 |   |  | October 1, 2005 |   
|Sales                                       |  | 100.0              | % |  | 100.0              | % |  | 100.0           | % 
|Cost of sales                               |  | 49.6               |   |  | 50.5               |   |  | 51.5            |   
|                                            |  |                    |   |  |                    |   |  |                 |   
|Gross margin                                |  | 50.4               |   |  | 49.5               |   |  | 48.5            |   
|Selling, general and administrative expense |  | 35.5               |   |  | 36.5               |   |  | 42.2            |   
|Loss on disposal of fixed assets            |  | 0.0                |   |  | 0.1                |   |  | 0.2             |   
|                                            |  |                    |   |  |                    |   |  |                 |   
|Operating income                            |  | 14.9               |   |  | 12.9               |   |  | 6.1             |   
|Other expense                               |  | 3.2                |   |  | 4.4                |   |  | 7.1             |   
|Income tax expense                          |  | 4.8                |   |  | 3.8                |   |  | 0.2             |   
|                                            |  |                    |   |  |                    |   |  |                 |   
|Net income/(loss)                           |  | 6.9                | % |  | 4.7                | % |  | (1.2            | )%
|                                            |  |                    |   |  |                    |   |  |                 |   



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##### Table of Contents

Fiscal year 2007 compared to fiscal year 2006:

For the 52 weeks ended September 29, 2007, sales increased 6.4% to $468.9 million from $440.6 million in the 52 weeks of 2006. Of the 6.4% increase
in sales, approximately 47% was attributable to an increase in comparable store sales and approximately 53% was due to the addition of 38 new store locations.

Comparable store sales increased 3.1% on a 52 week basis, as compared to the prior year. The comparable store sales increase was primarily attributable to favorable weather conditions in many of the Companys
markets. For definition purposes, a store is considered a comparable store 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.

Gross profit for the fiscal year ended September 29, 2007
improved to $236.1 million or 50.4% of sales, as compared to $218.2 million or 49.5% in 2006. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs and related distribution costs. Gross profit
dollars improved primarily due to the increase in sales and expanded margins on inventory that had been purchased earlier in the year in anticipation of market increases.

In 2007, total operating expenses were $166.5 million, versus $161.4 million during the 52 weeks of 2006, an increase of 3.1%. Operating expenses as a percentage of sales were 35.5% for the 52 weeks of fiscal year
2007 compared to 36.6% for the 52 weeks of fiscal year 2006. The increase in operating expense dollars during fiscal year 2007 was due primarily to increased expenses associated with the increase in store count, as compared to the prior year.

For the fiscal year ended September 29, 2007, the Company recognized losses on the disposition of fixed assets totaling approximately
$0.2 million as compared to $0.6 million in the prior year. These losses were primarily associated with the Companys decision to close or relocate stores that were unproductive or not meeting expectations. In fiscal year 2007 a $0.3 million
charge was recognized for impaired assets compared to $0.4 million in fiscal year 2006.

Adjusted EBITDA in 2007 increased 19.7% to $82.8
million from $69.2 million in fiscal year 2006. Approximately $4.4 million of the increase was the result of increased sales and expanded gross profit, with the remaining increase due to improved expense control and continued leveraging of fixed
expenses during the year.

Operating income for 2007 increased 22.7% to $69.7 million from $56.8 million in 2006 as a result of previously
noted sales and gross profit improvements.

Interest expense was $14.7 million in 2007, as compared to $19.4 million in 2006. The decrease
was primarily due to the decrease in average debt balances throughout the year and the elimination of interest on the Companys preferred stock, which was assumed by Holdings.

The Company recorded income tax expense of $22.7 million in 2007, or an effective tax rate of 41.4%, versus $16.9 million in the prior year, or an
effective tax rate of 45.2%. The effective rate decrease in 2007 was primarily due to nondeductibility of certain elements of the Companys interest expense that were present during fiscal 2006 but were eliminated during February 2007.

Fiscal year 2006 compared to fiscal year 2005:

For the 52 weeks ended September 30, 2006, sales increased 13.4% to $440.6 million from $388.5 million in the 52 weeks of 2005. Of the 13.4% increase in sales, approximately 10.0% was attributable to an increase in comparable store
sales and approximately 3.9% was due to the addition of 33 new store locations. These gains were offset by approximately 0.5% of a decrease due to the closing of six stores during the 52 weeks of 2006.

Comparable store sales increased 9.2% on a 52 week basis, as compared to the prior year. The comparable store sales increase was primarily attributable
to very favorable weather conditions in most of the Companys markets and price increases that were passed through the supply chain. For definition purposes, a store is considered a comparable store 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.

Gross profit for the fiscal year ended September 30, 2006 improved to $218.2 million or 49.5% of sales, as compared to $188.5 million or 48.5% in
2005. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs and related distribution costs. Gross profit dollars improved primarily due to the increase in sales and expanded margins on inventory that
had been purchased earlier in the year in anticipation of market increases.



14



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##### Table of Contents

In 2006, total operating expenses were $161.4 million, versus $164.6 million during the 52 weeks of 2005,
a decrease of 1.9%. Operating expenses as a percentage of sales were 36.6% for the 52 weeks of fiscal year 2006 compared to 42.4% for the 52 weeks of fiscal year 2005. The decrease in operating expenses during fiscal year 2006 was due primarily to a
$26.9 million charge for expenses related to the 2005 Recapitalization in fiscal year 2005 offset by $4.1 million for increased expenses associated with the increase in store count, as compared to the prior year.

In 2005, the Company incurred $26.9 million in stock compensation and 2005 Recapitalization expenses related to the January merger. Of the $26.9 million,
$16.9 million was paid out in connection with the stock options that were exercised as part of the 2005 Recapitalization. During 2005, the Company also recorded a charge of $10.0 million for other expenses related to the 2005 Recapitalization.

For the fiscal year ended September 30, 2006, the Company recognized losses on the disposition of fixed assets totaling approximately
$0.6 million as compared to $0.7 million in the prior year. Of these losses, $0.2 million in fiscal year 2006 and $0.4 million in fiscal year 2005 were primarily associated with the Companys decision to close or relocate stores that were
unproductive or not meeting expectations. In fiscal year 2006 a $0.4 million charge was recognized for impaired assets compared to $0.3 million in fiscal year 2005.

Adjusted EBITDA in 2006 increased 27.0% to $69.2 million from $54.5 million in fiscal year 2005. Approximately $7.3 million of the increase was the result of increased sales and expanded gross profit, with the
remaining increase due to improved expense control and continued leveraging of fixed expenses during the year.

Operating income for 2006
increased 137.6% to $56.8 million from $23.9 million in 2005 as a result of stock compensation expenses previously noted above and by the gross profit improvements.

Interest expense was $19.4 million in 2006, as compared to $18.8 million in 2005. The increase was primarily the result of the increase in average debt balances.

The Company recorded income tax expense of $16.9 million in 2006, or an effective tax rate of 45.2%, versus $0.6 million in the prior year, or an
effective tax rate of negative 16.1%. The effective rate increase in 2006 was primarily due to the non-deductibility of the preferred stock interest expense of $4.6 million.

Liquidity and Capital Resources

Overview

The following table highlights selected cash flow components for fiscal year 2007 and fiscal year 2006, and selected balance sheet components as of
September 29, 2007 and September 30, 2006.



|                                |  |                    |         |   |                    |   |         |               |  |   |                |   |  |       |   
|------------------------------- |  | ------------------ | ------- | - | ------------------ | - | ------- | ------------- |  | - | -------------- | - |  | ----- | --
|                                |  | Fiscal Years Ended |         |   |                    |   |         |               | 
|(Dollar amounts in thousands)   |  | September 29, 2007 |         |   | September 30, 2006 |   |         | Dollar Change |  |   | Percent Change |  
|Cash provided by (used in):     |  |                    |         |   |                    |   |         |               |  |   |                |   |  |       |   
|Operating activities            |  | $                  | 46,321  |   |                    | $ | 55,058  |               |  | $ | (8,737         | ) |  | (15.9 | )%
|Investing activities            |  |                    | (12,626 | ) |                    |   | (10,950 | )             |  |   | (1,676         | ) |  | 15.3  | % 
|Financing activities            |  |                    | (12,918 | ) |                    |   | (7,276  | )             |  |   | (5,642         | ) |  | 77.5  | % 
|                                |  |                    |         |   |                    |   |         |               |  |   |                |   |  |       |   
|Cash & cash equivalents         |  | $                  | 59,781  |   |                    | $ | 39,004  |               |  | $ | 20,777         |   |  | 53.3  | % 
|Working capital                 |  |                    | 66,657  |   |                    |   | 43,213  |               |  |   | 23,444         |   |  | 54.3  | % 
|Other long term liabilities     |  |                    | 6,031   |   |                    |   | 12,632  |               |  |   | (6,601         | ) |  | (52.3 | )%
|Senior notes and long term debt |  |                    | 169,080 |   |                    |   | 168,946 |               |  |   | 134            |   |  | 0.1   | % 
|                                |  |                    |         |   |                    |   |         |               |  |   |                |   |  |       |   



15



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##### Table of Contents

Working capital

Working capital as of September 29, 2007 and September 30, 2006 consisted of the following:



|                                          |  |                    |         |                    |   |               |  |   |                |   |  |       |   
|----------------------------------------- |  | ------------------ | ------- | ------------------ | - | ------------- |  | - | -------------- | - |  | ----- | --
|                                          |  | Fiscal Years Ended |         |                    |   |               |  |  
|(Dollar amounts in thousands)             |  | September 29, 2007 |         | September 30, 2006 |   | Dollar Change |  |   | Percent Change |  
|Cash and cash equivalents                 |  | $                  | 59,781  |                    | $ | 39,004        |  | $ | 20,777         |   |  | 53.3  | % 
|Accounts and other receivables            |  |                    | 8,790   |                    |   | 7,315         |  |   | 1,475          |   |  | 20.2  | % 
|Inventories                               |  |                    | 65,724  |                    |   | 64,544        |  |   | 1,180          |   |  | 1.8   | % 
|Prepaid expenses and other current assets |  |                    | 2,562   |                    |   | 2,522         |  |   | 40             |   |  | 1.6   | % 
|Deferred tax assets                       |  |                    | 6,939   |                    |   | 8,201         |  |   | (1,262         | ) |  | (15.4 | )%
|                                          |  |                    |         |                    |   |               |  |   |                |   |  |       |   
|Total current assets                      |  |                    | 143,796 |                    |   | 121,586       |  |   | 22,210         |   |  | 18.3  | % 
|Accounts payable                          |  |                    | 29,471  |                    |   | 31,473        |  |   | (2,002         | ) |  | (6.4  | )%
|Accrued expenses                          |  |                    | 38,385  |                    |   | 35,860        |  |   | 2,525          |   |  | 7.0   | % 
|Income taxes payable                      |  |                    | 9,283   |                    |   | 11,040        |  |   | (1,757         | ) |  | (15.9 | )%
|                                          |  |                    |         |                    |   |               |  |   |                |   |  |       |   
|Total current liabilities                 |  |                    | 77,139  |                    |   | 78,373        |  |   | (1,234         | ) |  | (1.6  | )%
|                                          |  |                    |         |                    |   |               |  |   |                |   |  |       |   
|Working capital                           |  | $                  | 66,657  |                    | $ | 43,213        |  | $ | 23,444         |   |  | 54.3  | % 
|                                          |  |                    |         |                    |   |               |  |   |                |   |  |       |   

From September 30, 2006 to September 29, 2007, total current assets increased $22.2
million from $121.6 million to $143.8 million. Approximately $20.8 million of the increase in current assets was the result of the increase in cash provided by operating activities.

From September 30, 2006 to September 29, 2007, total current liabilities decreased $1.2 million from $78.4 million to $77.1 million, primarily
due to the decrease in income taxes payable.

For the fiscal year ended September 29, 2007, cash provided by operating activities was
$46.3 million compared to cash provided by operating activities of $55.1 million in the prior year. The reduction was due primarily to fewer working capital reductions as compared to the prior year.

In 2007, cash used in investing activities was $12.6 million compared with cash used in investing activities of $11.0 million in the prior year,
primarily due to the Companys store growth plan.

Cash used in financing activities was $12.9 million in fiscal year 2007 compared
with cash used in financing activities of $7.3 million in 2006. The significant increase in financing activities was due to the formation of Holdings and the cash dividend, which was paid to Holdings in August 2007.

The Company had no borrowings under its secured loan agreement at September 29, 2007 and no borrowings at September 30, 2006. At
September 29, 2007 the Company had $75.0 million of borrowing capacity. Funds borrowed under this agreement are used primarily to fund working capital and other general corporate purposes.

From September 30, 2006 to September 29, 2007, other long term liabilities decreased by $6.6 million from $12.6 million to $6.0 million due to
the elimination of dividends payable on the Companys preferred stock which was assumed by Holdings.



16



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##### Table of Contents

During February of 2007, the Companys parent, Leslies Holdings, Inc. (Holdings)
consummated a privately placed financing transaction. The Company did not guarantee or pledge support for this financing, nor were any of the proceeds made available to the Company. Holdings issued $310 million in senior notes due in 2017 and $100
million of preferred equity. The interest rate on the senior notes is 10.5% cash or 11.5% PIK, at Holdings option. The notes are non-callable for two years and have other covenants and terms that are customary for high yield issues. The
preferred shares have a dividend rate of 11% and are exchangeable into debt under certain circumstances. The preferred shares have a mandatory redemption date of March 1, 2019. The Company does not expect that Holdings servicing of its
debt will affect the Companys liquidity.

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.

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 ended June and September, which represent the peak months of swimming pool use. Sales are substantially lower during the
quarters ended December and March when the Company will typically incur 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 greater
demand 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
decrease swimming pool use.

The Company expects 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 in March in order to position itself for the
following peak season.

Contractual Obligations and Commercial Commitments

The following table summarizes the Companys significant contractual obligations as of September 29, 2007, and the effect such obligations are
expected to have on the Companys liquidity and cash flows in future periods. This table excludes amounts already recorded on the Companys balance sheet as current liabilities at September 29, 2007 and certain other purchase
obligations as discussed below.



|                              |  |                        |         |                  |   |             |  |             |        |               |   |        |  |   |        
|----------------------------- |  | ---------------------- | ------- | ---------------- | - | ----------- |  | ----------- | ------ | ------------- | - | ------ |  | - | -------
|(in thousands)                |  | Payments Due By Period
|Contractual Obligations       |  | Total                  |         | Less than 1 Year |   | 1  3 years |  | 4  5 years |        | After 5 years
|Senior notes*                 |  | $                      | 240,182 |                  | $ | 13,175      |  | $           | 26,350 |               | $ | 26,350 |  | $ | 174,307
|Revolving Commitments*        |  |                        |        |                  |   |            |  |             |       |               |   |       |  |   |       
|Preferred stock*              |  |                        |        |                  |   |            |  |             |       |               |   |       |  |   |       
|Operating leases              |  |                        | 131,057 |                  |   | 38,879      |  |             | 57,499 |               |   | 27,451 |  |   | 7,228  
|                              |  |                        |         |                  |   |             |  |             |        |               |   |        |  |   |        
|Total contractual obligations |  | $                      | 371,239 |                  | $ | 52,054      |  | $           | 83,849 |               | $ | 53,801 |  | $ | 181,535
|                              |  |                        |         |                  |   |             |  |             |        |               |   |        |  |   |        

---

|* | Amounts include estimated interest and dividend payments
|- | --------------------------------------------------------



|                               |  |                                             |       |                  |   |             |  |             |   |               |   |   |  |   |  
|------------------------------ |  | ------------------------------------------- | ----- | ---------------- | - | ----------- |  | ----------- | - | ------------- | - | - |  | - | -
|(in thousands)                 |  | Amounts of Commitment Expiration Per Period
|Commercial Commitments         |  | Total Amounts Committed                     |       | Less than 1 Year |   | 1  3 years |  | 4  5 years |   | After 5 years
|Standby letters of credit      |  | $                                           | 4,700 |                  | $ | 4,700       |  | $           |  |               | $ |  |  | $ | 
|                               |  |                                             |       |                  |   |             |  |             |   |               |   |   |  |   |  
|Financial responsibility bonds |  | $                                           | 106   |                  | $ | 106         |  | $           |  |               | $ |  |  | $ | 
|                               |  |                                             |       |                  |   |             |  |             |   |               |   |   |  |   |  



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##### Table of Contents

Purchase orders for raw materials, finished goods and other goods and services are not included in the
above table. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. For the purpose of this table,
contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction. The Companys purchase orders are based on the Companys current manufacturing needs and are fulfilled by the Companys vendors with relatively short
timetables. We do not have significant agreements for the purchase of raw materials or finished goods specifying minimum quantities or set prices that exceed the Companys short-term expected requirements.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid
may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Critical Accounting
Policies and Estimates

The Companys consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States which requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses. On an ongoing basis, the Company evaluates its estimates, including those
related to inventory reserves, allowance for doubtful accounts, valuation allowance for the net deferred income tax asset, contingencies and litigation liabilities. The Company bases its estimates on historical experience, independent valuations,
and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical
accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue
Recognition

Revenue on retail sales is recognized upon purchase by the customer. Revenue on services, is recognized as services are
performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related discounts. The Company does not provide an estimated allowance for sales returns as they are deemed
to be immaterial.

Inventories

Inventories are stated at the lower of cost or market. The Company values inventory using the weighted average cost method. Included in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related
distribution costs. The Company establishes a reserve for inventory obsolescence and shrinkage, which is analyzed and reviewed periodically and may require adjustments based on physical inventory counts, the relationship and fluctuation of
historical product sales versus inventory on hand and changes in customer preferences. The reserve is intended to reflect the value of inventory in excess of expected realizable value.

Vendor Rebates

The Company accounts for vendor rebates in accordance with Emerging Issues Task Force
Issue 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. The Company recognizes consideration received from vendors at the time its obligations to purchase products or perform services
have been completed. These items are recorded as a reduction of inventory until we sell the product, at which time such rebates reduce cost of goods sold in the statement of operations.

Income Taxes

The Company records deferred tax assets or liabilities based on differences between
financial reporting and tax basis of assets and liabilities using currently enacted rates and laws that will be in effect when the Company expects the differences to reverse. Due to changing tax laws and state income tax rates, judgment is required
to estimate the effective tax rate expected to apply to tax differences which are expected to reverse in future periods. 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 109,
as if the Company were a separate taxpayer rather than a member of Holdings consolidated income tax return group.



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##### Table of Contents

Self Insurance

The Company retains self insurance risks for workers compensation, general liability, property and health insurance programs. The Company has limited its exposure by maintaining excess liability coverage. The Company
establishes self insurance reserves based on claims filed and estimates of claims incurred but not reported. The estimates are based upon information provided to the Company by the claims administrators and are periodically revised to reflect
changes in loss trends.

The Company expects that the quarterly results of operations will continue to fluctuate depending on the season,
weather conditions, and the timing and amount of revenue contributed by new stores. Due to the seasonal nature of the swimming pool industry, the results of any one or more quarters are not necessarily a good indication of results for an entire
year, or of continuing trends.

Quarterly Financial Data

Summarized Quarterly Financial Data (Unaudited)

(Dollar Amounts In Thousands)



|                                  |  |                |        |   |          |   |        |         |  |   |          |   |  |   |         |  
|--------------------------------- |  | -------------- | ------ | - | -------- | - | ------ | ------- |  | - | -------- | - |  | - | ------- | -
|                                  |  | 13 Weeks Ended |       
|2007                              |  | Dec. 30        |        |   | March 30 |   |        | June 30 |  |   | Sept. 29 |  
|Sales                             |  | $              | 52,695 |   |          | $ | 57,393 |         |  | $ | 204,816  |   |  | $ | 153,978 |  
|Gross profit                      |  |                | 25,453 |   |          |   | 29,806 |         |  |   | 104,534  |   |  |   | 76,340  |  
|Operating income/(loss)           |  |                | (8,509 | ) |          |   | (7,184 | )       |  |   | 54,697   |   |  |   | 30,669  |  
|Net income/(loss)                 |  |                | (7,257 | ) |          |   | (7,101 | )       |  |   | 30,122   |   |  |   | 16,462  |  
|Adjusted EBITDA(1)                |  |                | (5,370 | ) |          |   | (3,789 | )       |  |   | 57,571   |   |  |   | 34,376  |  
|Comparable store sales growth (2) |  |                | 3.5    | % |          |   | 14.1   | %       |  |   | 0.5      | % |  |   | 3.0     | %
|                                  |  |                |        |  
|2006                              |  | Dec. 31        |        |   | April 1  |   |        | July 1  |  |   | Sept. 30 |  
|Sales                             |  | $              | 48,145 |   |          | $ | 48,352 |         |  | $ | 198,114  |   |  | $ | 145,954 |  
|Gross profit                      |  |                | 22,754 |   |          |   | 25,473 |         |  |   | 98,436   |   |  |   | 71,520  |  
|Operating income/(loss)           |  |                | (9,198 | ) |          |   | (8,433 | )       |  |   | 48,929   |   |  |   | 25,502  |  
|Net income/(loss)                 |  |                | (8,842 | ) |          |   | (5,710 | )       |  |   | 23,065   |   |  |   | 11,992  |  
|Adjusted EBITDA(1)                |  |                | (6,160 | ) |          |   | (5,581 | )       |  |   | 51,999   |   |  |   | 28,931  |  
|Comparable store sales growth (2) |  |                | 12.0   | % |          |   | 1.0    | %       |  |   | 10.7     | % |  |   | 9.1     | %

---

|(1) | Adjusted EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, loss/(gain) on disposition of fixed assets, stock compensation expense, write-off of debt issuance costs and unusual charges. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles
(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
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more
complete analysis of results of operations. 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 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
measure of financial performance under 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent 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. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities. SFAS No. 159 permits
entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted. The
Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will
have on its consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income Taxes. FIN 48 is an interpretation of FASB Statement No. 109 Accounting for Income Taxes and must be adopted by the Company no later than September 28, 2008. FIN 48 prescribes a comprehensive
model for recognizing, measuring, presenting, and disclosing in the financial statements uncertain tax positions that the company has taken or expects to take in its tax returns. The Company has not evaluated the impact of adopting FIN 48.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys Amended Loan and
Security Agreement described in Note 6 to the consolidated financial statements as well as in Managements Discussion and Analysis, carries interest rate risk. 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 September 29, 2007, there was no borrowing under this
facility.



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##### Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                 |  |     
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                 |  | Page
|Report of Independent Registered Public Accounting Firm                                                                          |  | 22  
|                                                                                                                                 | 
|Consolidated Balance Sheets  September 29, 2007 and September 30, 2006                                                          |  | 23  
|                                                                                                                                 | 
|Consolidated Statements of Operations Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005             |  | 24  
|                                                                                                                                 | 
|Consolidated Statements of Stockholders Deficit  Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005 |  | 25  
|                                                                                                                                 | 
|Consolidated Statements of Cash Flows  Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005            |  | 26  
|                                                                                                                                 | 
|Notes to Consolidated Financial Statements                                                                                       |  | 27  



21



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Leslies Poolmart,
Inc.:

We have audited the accompanying consolidated balance sheets of Leslies Poolmart, Inc. as of September 29, 2007 and
September 30, 2006 and the related consolidated statements of operations, stockholders deficit and cash flows for each of the three years in the period ended September 29, 2007. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our
opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Leslies Poolmart, Inc. at September 29, 2007 and September 30, 2006 and the consolidated results of
its operations and its cash flows for each of the three years in the period ended September 29, 2007, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Phoenix, Arizona

December 13, 2007



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##### Table of Contents

Leslies Poolmart, Inc.

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

Consolidated Balance Sheets

(Dollar Amounts in Thousands, Except
Share Information)



|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ------------------ | - | -------- | -
|                                                                                                                                                                         |  | September 29, 2007 |         |   | September 30, 2006 |  
|ASSETS                                                                                                                                                                   |  |                    |         |   |                    |   |          |  
|Current assets:                                                                                                                                                          |  |                    |         |   |                    |   |          |  
|Cash and cash equivalents                                                                                                                                                |  | $                  | 59,781  |   |                    | $ | 39,004   |  
|Accounts and other receivables, net                                                                                                                                      |  |                    | 8,790   |   |                    |   | 7,315    |  
|Inventories, net                                                                                                                                                         |  |                    | 65,724  |   |                    |   | 64,544   |  
|Prepaid expenses and other current assets                                                                                                                                |  |                    | 2,562   |   |                    |   | 2,522    |  
|Deferred tax assets                                                                                                                                                      |  |                    | 6,939   |   |                    |   | 8,201    |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total current assets                                                                                                                                                     |  |                    | 143,796 |   |                    |   | 121,586  |  
|Property, plant and equipment, net                                                                                                                                       |  |                    | 37,933  |   |                    |   | 38,136   |  
|Intangible assets                                                                                                                                                        |  |                    | 8,096   |   |                    |   | 8,072    |  
|Deferred financing costs, net                                                                                                                                            |  |                    | 5,653   |   |                    |   | 6,168    |  
|Deferred tax assets                                                                                                                                                      |  |                    | 3,834   |   |                    |   | 4,445    |  
|Other assets                                                                                                                                                             |  |                    | 327     |   |                    |   | 320      |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total assets                                                                                                                                                             |  | $                  | 199,639 |   |                    | $ | 178,727  |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                    |  |                    |         |   |                    |   |          |  
|Current liabilities:                                                                                                                                                     |  |                    |         |   |                    |   |          |  
|Accounts payable                                                                                                                                                         |  | $                  | 29,471  |   |                    | $ | 31,473   |  
|Accrued expenses                                                                                                                                                         |  |                    | 38,385  |   |                    |   | 35,860   |  
|Income taxes payable                                                                                                                                                     |  |                    | 9,283   |   |                    |   | 11,040   |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total current liabilities                                                                                                                                                |  |                    | 77,139  |   |                    |   | 78,373   |  
|Other long term liabilities                                                                                                                                              |  |                    | 6,031   |   |                    |   | 12,632   |  
|Redeemable preferred stock, $0.001 par value, authorized 1,000,000 shares, issued and outstanding no shares at September 29, 2007 and
41,000 Series A September 30, 2006 |  |                    |        |   |                    |   | 41,000   |  
|Senior notes, net                                                                                                                                                        |  |                    | 169,080 |   |                    |   | 168,946  |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total liabilities                                                                                                                                                        |  |                    | 252,250 |   |                    |   | 300,951  |  
|Commitments and contingencies                                                                                                                                            |  |                    |         |   |                    |   |          |  
|Stockholders deficit:                                                                                                                                                   |  |                    |         |   |                    |   |          |  
|Common stock, $0.001 par value, authorized 50,000,000 shares, issued and outstanding 100 shares at September 29, 2007 and 40,045,000
shares at September 30, 2006        |  |                    |        |   |                    |   | 40       |  
|Capital deficit                                                                                                                                                          |  |                    | (91,984 | ) |                    |   | (144,081 | )
|Treasury stock, no shares at September 29, 2007 and 90,000 shares at cost at September 30, 2006                                                                          |  |                    |        |   |                    |   | (332     | )
|Retained earnings                                                                                                                                                        |  |                    | 39,373  |   |                    |   | 22,149   |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total stockholders deficit                                                                                                                                              |  |                    | (52,611 | ) |                    |   | (122,224 | )
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  
|Total liabilities and stockholders deficit                                                                                                                              |  | $                  | 199,639 |   |                    | $ | 178,727  |  
|                                                                                                                                                                         |  |                    |         |   |                    |   |          |  

See accompanying Notes which are an integral part of these consolidated financial statements.



23



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##### Table of Contents

Leslies Poolmart, Inc.

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

Consolidated Statements of Operations

(Dollar Amounts in
Thousands)



|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------------ | - | ------- | --------------- |  | - | ------- | -
|                                                                                                                                                                        |  | Fiscal Years Ended |        
|                                                                                                                                                                        |  | September 29, 2007 |         |   | September 30, 2006 |   |         | October 1, 2005 | 
|Sales                                                                                                                                                                   |  | $                  | 468,882 |   |                    | $ | 440,565 |                 |  | $ | 388,506 |  
|Cost of merchandise and services sold, including warehousing and transportation expenses, and related occupancy costs                                                   |  |                    | 232,749 |   |                    |   | 222,382 |                 |  |   | 200,009 |  
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Gross profit                                                                                                                                                            |  |                    | 236,133 |   |                    |   | 218,183 |                 |  |   | 188,497 |  
|Selling, general and administrative expenses                                                                                                                            |  |                    | 166,274 |   |                    |   | 160,783 |                 |  |   | 163,889 |  
|Loss on disposition of fixed assets                                                                                                                                     |  |                    | 186     |   |                    |   | 600     |                 |  |   | 703     |  
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Operating income                                                                                                                                                        |  |                    | 69,673  |   |                    |   | 56,800  |                 |  |   | 23,905  |  
|Other (income) expense:                                                                                                                                                 |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Interest expense                                                                                                                                                        |  |                    | 16,102  |   |                    |   | 20,087  |                 |  |   | 18,839  |  
|Interest income                                                                                                                                                         |  |                    | (1,390  | ) |                    |   | (690    | )               |  |   | (5      | )
|Recapitalization expense                                                                                                                                                |  |                    |        |   |                    |   |        |                 |  |   | 8,881   |  
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Total other expense                                                                                                                                                     |  |                    | 14,712  |   |                    |   | 19,397  |                 |  |   | 27,715  |  
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Income/(loss) before taxes                                                                                                                                              |  |                    | 54,961  |   |                    |   | 37,403  |                 |  |   | (3,810  | )
|Income tax expense                                                                                                                                                      |  |                    | 22,735  |   |                    |   | 16,898  |                 |  |   | 612     |  
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|Net income/(loss)                                                                                                                                                       |  | $                  | 32,226  |   |                    | $ | 20,505  |                 |  | $ | (4,422  | )
|                                                                                                                                                                        |  |                    |         |   |                    |   |         |                 |  |   |         |  
|                                                                                                                                                                       
|The following table presents details of the total stock-based compensation expense that is includedin the line item in the consolidated statements of operations
above: | 
|                                                                                                                                                                        | 
|                                                                                                                                                                        |  | Fiscal Years Ended |        
|                                                                                                                                                                        |  | September 29, 2007 |         |   | September 30, 2006 |   |         | October 1,2005  | 
|Selling, general and administrative expenses                                                                                                                            |  | $                  |        |   |                    | $ |        |                 |  | $ | 17,998  |  

See accompanying Notes which are an integral part of these consolidated financial statements.



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##### Table of Contents

Leslies Poolmart, Inc.

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

Consolidated Statements of Stockholders Deficit

(Dollar
Amounts in Thousands, Except Share Amounts)



|                                                          |  |                 |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |      |   |                                     |   |         |   |  |   |          |  
|--------------------------------------------------------- |  | --------------- | - |  | ------ | --- | - | ----------------------------- | - | ---- | -------------- |  | - | -------------- | - |  | ----------------- | ---- | - | ----------------------------------- | - | ------- | - |  | - | -------- | -
|                                                          |  | Common Stock    |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |     
|                                                          |  | Number ofShares |   |  | Amount |     |   | Stock Subscription Receivable |   |      | CapitalDeficit |  |   | Treasury Stock |   |  | Retained Earnings |      |   | Total StockholdersEquity/(Deficit) |  
|Balance, at October 2, 2004                               |  | 7,369,502       |   |  | $      | 7   |   |                               | $ | (450 | )              |  | $ | (44,714        | ) |  | $                 |     |   |                                     | $ | 6,066   |   |  | $ | (39,091  | )
|Stock option compensation                                 |  |                |   |  |        |    |   |                               |   |     |                |  |   | 16,070         |   |  |                   |     |   |                                     |   |        |   |  |   | 16,070   |  
|Equity transaction fees                                   |  |                |   |  |        |    |   |                               |   |     |                |  |   | (628           | ) |  |                   |     |   |                                     |   |        |   |  |   | (628     | )
|Warrants exercised                                        |  | 1,592,223       |   |  |        | 2   |   |                               |   |     |                |  |   | 14             |   |  |                   |     |   |                                     |   |        |   |  |   | 16       |  
|Purchase of common stock                                  |  | (10,598,964     | ) |  |        | (11 | ) |                               |   |     |                |  |   | (158,974       | ) |  |                   |     |   |                                     |   |        |   |  |   | (158,985 | )
|Repayment of stock subscription receivable                |  |                |   |  |        |    |   |                               |   | 450  |                |  |   |               |   |  |                   |     |   |                                     |   |        |   |  |   | 450      |  
|Issuance of common stock                                  |  | 41,637,239      |   |  |        | 42  |   |                               |   |     |                |  |   | 44,016         |   |  |                   |     |   |                                     |   |        |   |  |   | 44,058   |  
|Repurchase of treasury stock                              |  | (25,000         | ) |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   | (25  | ) |                                     |   |        |   |  |   | (25      | )
|Net loss                                                  |  |                |   |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   |     |   |                                     |   | (4,422  | ) |  |   | (4,422   | )
|                                                          |  |                 |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |      |   |                                     |   |         |   |  |   |          |  
|Balance, at October 1, 2005                               |  | 39,975,000      |   |  |        | 40  |   |                               |   |     |                |  |   | (144,216       | ) |  |                   | (25  | ) |                                     |   | 1,644   |   |  |   | (142,557 | )
|Issuance of common stock                                  |  | 135,000         |   |  |        |    |   |                               |   |     |                |  |   | 135            |   |  |                   |     |   |                                     |   |        |   |  |   | 135      |  
|Repurchase of treasury stock                              |  | (65,000         | ) |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   | (307 | ) |                                     |   |        |   |  |   | (307     | )
|Net income                                                |  |                |   |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   |     |   |                                     |   | 20,505  |   |  |   | 20,505   |  
|                                                          |  |                 |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |      |   |                                     |   |         |   |  |   |          |  
|Balance, at September 30, 2006                            |  | 40,045,000      |   |  |        | 40  |   |                               |   |     |                |  |   | (144,081       | ) |  |                   | (332 | ) |                                     |   | 22,149  |   |  |   | (122,224 | )
|Issuance of common stock                                  |  | 100             |   |  |        | 0   |   |                               |   |     |                |  |   |               |   |  |                   |     |   |                                     |   |        |   |  |   | 0        |  
|Converted common stock in Reorganization                  |  | (40,045,000     | ) |  |        | (40 | ) |                               |   |     |                |  |   | 40             |   |  |                   |     |   |                                     |   |        |   |  |   | 0        |  
|Contributed redeemable preferred stock in Reorganization  |  |                |   |  |        |    |   |                               |   |     |                |  |   | 50,305         |   |  |                   |     |   |                                     |   |        |   |  |   | 50,305   |  
|Excess tax benefit from stock-based compensation          |  |                |   |  |        |    |   |                               |   |     |                |  |   | 2,084          |   |  |                   |     |   |                                     |   |        |   |  |   | 2,084    |  
|Payment of dividend                                       |  |                |   |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   |     |   |                                     |   | (15,002 | ) |  |   | (15,002  | )
|Repurchase and converted treasury stock in Reorganization |  |                |   |  |        |    |   |                               |   |     |                |  |   | (332           | ) |  |                   | 332  |   |                                     |   |        |   |  |   | 0        |  
|Net income                                                |  |                |   |  |        |    |   |                               |   |     |                |  |   |               |   |  |                   |     |   |                                     |   | 32,226  |   |  |   | 32,226   |  
|                                                          |  |                 |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |      |   |                                     |   |         |   |  |   |          |  
|Balance, at September 29, 2007                            |  | 100             |   |  | $      | 0   |   |                               | $ |     |                |  | $ | (91,984        | ) |  | $                 |     |   |                                     | $ | 39,373  |   |  | $ | (52,611  | )
|                                                          |  |                 |   |  |        |     |   |                               |   |      |                |  |   |                |   |  |                   |      |   |                                     |   |         |   |  |   |          |  

See accompanying Notes which are an integral part of these consolidated financial statements.



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##### Table of Contents

Leslies Poolmart, Inc.

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

Consolidated Statements of Cash Flows

(Dollar Amounts in
Thousands)



|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------------ | - | ------- | --------------- |  | - | -------- | -
|                                                                                         |  | Fiscal Years Ended |        
|                                                                                         |  | September 29, 2007 |         |   | September 30, 2006 |   |         | October 1, 2005 | 
|OPERATING ACTIVITIES:                                                                    |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Net income/(loss)                                                                        |  | $                  | 32,226  |   |                    | $ | 20,505  |                 |  | $ | (4,422   | )
|Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Dividends and accretion on preferred stock                                               |  |                    | 1,886   |   |                    |   | 4,554   |                 |  |   | 5,341    |  
|Depreciation and amortization                                                            |  |                    | 12,619  |   |                    |   | 11,789  |                 |  |   | 11,881   |  
|Stock option compensation                                                                |  |                    |        |   |                    |   |        |                 |  |   | 16,070   |  
|Amortization of loan fees                                                                |  |                    | 515     |   |                    |   | 1,016   |                 |  |   | 2,573    |  
|Amortization of loan discounts                                                           |  |                    | 134     |   |                    |   | 96      |                 |  |   | 108      |  
|Provision for doubtful accounts                                                          |  |                    | 2       |   |                    |   | 109     |                 |  |   | 258      |  
|Deferred income taxes                                                                    |  |                    | 1,873   |   |                    |   | (2,540  | )               |  |   | 1,434    |  
|Loss on disposition of fixed assets                                                      |  |                    | 186     |   |                    |   | 600     |                 |  |   | 703      |  
|Changes in operating assets and liabilities:                                             |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Accounts and other receivables                                                           |  |                    | (1,477  | ) |                    |   | 4,267   |                 |  |   | (336     | )
|Inventories                                                                              |  |                    | (1,180  | ) |                    |   | (3,619  | )               |  |   | (6,863   | )
|Prepaid expenses and other current assets                                                |  |                    | (40     | ) |                    |   | (464    | )               |  |   | (654     | )
|Other assets                                                                             |  |                    | (7      | ) |                    |   | 192     |                 |  |   | (44      | )
|Accounts payable and accrued expenses                                                    |  |                    | 1,341   |   |                    |   | 15,252  |                 |  |   | 5,827    |  
|Income taxes payable                                                                     |  |                    | (1,757  | ) |                    |   | 3,301   |                 |  |   | (5,129   | )
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Net cash provided by operating activities                                                |  |                    | 46,321  |   |                    |   | 55,058  |                 |  |   | 26,747   |  
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|INVESTING ACTIVITIES:                                                                    |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Purchases of property, plant and equipment                                               |  |                    | (13,038 | ) |                    |   | (11,105 | )               |  |   | (12,196  | )
|Purchases of intangible assets                                                           |  |                    | (84     | ) |                    |   | (75     | )               |  |   | (109     | )
|Proceeds from disposition of fixed assets                                                |  |                    | 496     |   |                    |   | 230     |                 |  |   | 137      |  
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Net cash used in investing activities                                                    |  |                    | (12,626 | ) |                    |   | (10,950 | )               |  |   | (12,168  | )
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|FINANCING ACTIVITIES:                                                                    |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Net revolving commitment borrowing/(repayment)                                           |  |                    |        |   |                    |   | (7,104  | )               |  |   | 7,104    |  
|Excess tax benefit from stock-based compensation                                         |  |                    | 2,084   |   |                    |   |        |                 |  |   |         |  
|Payment of dividend                                                                      |  |                    | (15,002 | ) |                    |   |        |                 |  |   |         |  
|Preferred stock premium                                                                  |  |                    |        |   |                    |   |        |                 |  |   | 1,041    |  
|Proceeds from warrants and options exercised                                             |  |                    |        |   |                    |   |        |                 |  |   | 4,067    |  
|Purchase of common stock                                                                 |  |                    |        |   |                    |   |        |                 |  |   | (157,634 | )
|Proceeds from issuance of common stock, net of fees                                      |  |                    |        |   |                    |   | 135     |                 |  |   | 39,378   |  
|Payments of deferred financing costs                                                     |  |                    |        |   |                    |   |        |                 |  |   | (7,946   | )
|Payments of long-term debt                                                               |  |                    |        |   |                    |   |        |                 |  |   | (59,495  | )
|Proceeds from sale of bonds                                                              |  |                    |        |   |                    |   |        |                 |  |   | 168,742  |  
|Repurchase of treasury stock                                                             |  |                    |        |   |                    |   | (307    | )               |  |   | (25      | )
|Purchase of preferred stock                                                              |  |                    |        |   |                    |   |        |                 |  |   | (64,506  | )
|Proceeds from sale of preferred stock                                                    |  |                    |        |   |                    |   |        |                 |  |   | 40,100   |  
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|Net cash used in financing activities                                                    |  |                    | (12,918 | ) |                    |   | (7,276  | )               |  |   | (29,174  | )
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |                    | 20,777  |   |                    |   | 36,832  |                 |  |   | (14,595  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           |  |                    | 39,004  |   |                    |   | 2,172   |                 |  |   | 16,767   |  
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                 |  | $                  | 59,781  |   |                    | $ | 39,004  |                 |  | $ | 2,172    |  
|                                                                                         |  |                    |         |   |                    |   |         |                 |  |   |          |  

See accompanying Notes which are an integral part of these consolidated financial statements.



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##### Table of Contents

Leslies Poolmart, Inc.

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

Notes to Consolidated Financial Statements

1. Business and
Operations

Leslies Poolmart, Inc. (Leslies or the Company) is a specialty retailer of swimming pool
supplies and related products. As of September 29, 2007, the Company markets its products under the trade name Leslies Swimming Pool Supplies through 577 retail stores in 35 states and through mail order catalogs sent to select
swimming pool owners nationwide. The Company also 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 quarters
ending in June and September.

Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes
standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed SFAS 131 and determined that we have a single reportable segment.

Holding Company Formation

During the fiscal
year ended September 29, 2007 the Company consummated a reorganization, which the Company refers to collectively as the 2007 Reorganization. The Company became a 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 converted into one share of 10% senior
redeemable exchangeable cumulative preferred stock of Holdings with the same rights, privileges, and preferences, including as to liquidation. The conversion of the 10% senior redeemable exchangeable cumulative preferred stock of the Company for
similar stock of Holdings was accounted for as contributed capital to the Company, given that the assumption of the obligation by Holdings without recourse to the Company had the effect of extinguishing the rights of the preferred stockholders and
the resulting obligation.

2005 Recapitalization

During the fiscal year ended October 1, 2005 the Company consummated the following transactions, which the Company refers to collectively as the 2005 Recapitalization.

The Merger

LPM Acquisition LLC (LPM
Acquisition), a newly-formed entity controlled by GCP California Fund, L.P. (GCP), and affiliates of Leonard Green & Partners, L.P. (LGP), merged with and into Leslies on January 25, 2005, with
Leslies continuing as the surviving entity in the merger.

The Tender Offer and Consent Solicitation

On December 23, 2004, the Company commenced a tender offer and solicitation of consents, or
the Tender Offer, to purchase all of the $59.5 million outstanding principal amount of the Companys 103/8% Senior Notes due 2008, and to amend the indenture governing the 103/8% notes to eliminate most
of the covenants and certain events of default. On January 11, 2005, the Company entered into a supplemental indenture with The Bank of New York Trust Company, N.A., as the trustee, supplementing the indenture dated as of May 21, 2003 as
contemplated by the terms of the tender offer.

Note Offering

On January 25, 2005, the Company issued an aggregate of $170.0 million principal amount of the
Senior Notes. The net proceeds from the offering of the 73/4% notes, together with borrowings under an amended
credit facility, proceeds from the issuance of equity securities and cash on hand, were used to complete the Recapitalization and repurchase the outstanding 103/8% notes that were tendered in the Tender Offer. Subsequent to the initial private placement of the 73/4% notes, the notes were exchanged for new registered 73/4% Senior Notes, Series B, in June 2005, pursuant to an exchange
offer.



27



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##### Table of Contents

The Amended Credit Facility

On January 25, 2005, the Company amended its existing credit facility with Wells Fargo Retail Finance, LLC to provide for the extension by the lender of revolving loans and other financial accommodations in an
aggregate principal amount of $75.0 million. The Companys obligations under the amended credit facility are secured by a lien on substantially all of the Companys assets.

The 2005 Recapitalization and the 2007 Reorganization were accounted for as a series of equity transactions and there was no change in the accounting
basis for the Companys recorded assets and liabilities. Accordingly, no goodwill or other intangible assets were recorded related to the 2005 Recapitalization and the 2007 Reorganization.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include Leslies Poolmart, Inc., and
its wholly owned subsidiaries, LPM Manufacturing Inc., Sandys Pool Supply, Inc. and Blackwood & Simmons, Inc. All significant inter-company transactions and accounts have been eliminated.

Fiscal Periods

The Companys
fiscal year ends on the Saturday closest to September 30. The fiscal year ended on September 29, 2007, September 30, 2006 and October 1, 2005 included 52 weeks.

Cash and Cash Equivalents

The
Company considers all investments with a remaining maturity of three months or less when purchased to be cash equivalents.

Accounts and
Other Receivables, Net

As a result of hurricane damages in 2005 the Company had insurance recovery receivables in the amount of $0.4
million recorded at October 1, 2005. The Company applies FASB Interpretation No. 30 Accounting for Involuntary Conversions of Non-Monetary Assets to Monetary Assets to account for these transactions.

Accounts and other receivables include allowances for doubtful accounts of $0.6 million, $0.8 million and $0.9 million at September 29, 2007,
September 30, 2006, and October 1, 2005, respectively.

Allowance for doubtful accounts consists of the following:



|                              |  |                                |     |                        |     |            |      |   |                          |   |    
|----------------------------- |  | ------------------------------ | --- | ---------------------- | --- | ---------- | ---- | - | ------------------------ | - | ---
|(Dollar amounts in thousands) |  | Balance at beginning of
period |     | Additions              |     | Deductions |      |   | Balance at end of period
|                              |  | Charged to costs and expenses  |     | Write-off of bad debts |     |           
|Balance at October 1, 2005    |  | $                              | 928 |                        | 258 |            | (265 | ) |                          | $ | 921
|Balance at September 30, 2006 |  | $                              | 921 |                        | 109 |            | (254 | ) |                          | $ | 776
|Balance at September 29, 2007 |  | $                              | 776 |                        | 2   |            | (188 | ) |                          | $ | 590



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##### Table of Contents

Inventories, Net

Inventories are stated at the lower of cost or market. The Company values inventory using the weighted average method. The Company tests for obsolete inventory and records appropriate reserves.

Inventory reserves consist of the following:



|                              |  |                                |                               |           |                          |            |        |   |                          |   |      
|----------------------------- |  | ------------------------------ | ----------------------------- | --------- | ------------------------ | ---------- | ------ | - | ------------------------ | - | -----
|                              |  | Balance at beginning of period |                               | Additions |                          | Deductions |        |   | Balance at end of period
|(Dollar amounts in thousands) |  |                                | Charged to costs and expenses |           | Write-off of Inventories |            |       
|Balance at October 1, 2005    |  | $                              | 1,247                         |           | 2,927                    |            | (1,043 | ) |                          | $ | 3,131
|Balance at September 30, 2006 |  | $                              | 3,131                         |           | 279                      |            | (480   | ) |                          | $ | 2,930
|Balance at September 29, 2007 |  | $                              | 2,930                         |           | 561                      |            | (159   | ) |                          | $ | 3,332

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Costs of normal maintenance and repairs are charged to expense as incurred.

Major replacements or improvements of property, plant and equipment are capitalized. When items are sold or otherwise disposed of, the cost and related
accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is included in the statements of operations.

Depreciation and amortization are computed using the straight-line method (considering appropriate salvage values) and leasehold improvements are amortized over the life of the initial lease term. These charges are based on the following
estimated average useful lives:



|                                  |  |                                                                      
|--------------------------------- |  | ---------------------------------------------------------------------
|Buildings and improvements        |  | 5-39 years                                                           
|Vehicles, machinery and equipment |  | 3-10 years                                                           
|Office furniture and equipment    |  | 3-7 years                                                            
|Leasehold improvements            |  | 5-10 years, not to exceed the lease life, including expected renewals

Consistent with FASB Statement 144 Accounting for the Impairment of Disposal of Long-Lived
Assets the Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Intangibles

In accordance with the provisions of SFAS No. 141 Business Combinations and
SFAS No. 142 Goodwill and Other Intangible Assets, the Company applied the new rules on accounting for goodwill and other intangible assets deemed to have indefinite lives beginning on September 29, 2002. The Company also performed
the required impairment tests of goodwill and indefinite lived intangible assets and there was no impairment identified. The Company no longer amortizes its goodwill under SFAS No. 142, but does subject its goodwill to periodic assessments as
defined therein. Our intangible assets consist primarily of goodwill, which had a balance of $7.5 million at September 29, 2007. The Company recorded no amortization for the years ended September 29, 2007, September 30, 2006
and October 1, 2005.



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##### Table of Contents

Other intangibles are comprised of costs associated with acquiring the mailing addresses for the
Companys customer database, which is used for purposes of market research, new store location decisions, customer research and in the Companys ongoing advertising efforts. For the years ending September 29, 2007 and
September 30, 2006, the gross amount capitalized on the balance sheet for mailing addresses were $1.0 million and $1.0 million, respectively. These other intangibles are amortized over a 15 year period and the amounts of annual amortization for
other intangibles for the next five years are as follows:



|                              |  |   |   
|----------------------------- |  | - | --
|(Dollar amounts in thousands) |  |  
|2007                          |  | $ | 60
|2008                          |  |   | 60
|2009                          |  |   | 60
|2010                          |  |   | 60
|2011                          |  |   | 60

Deferred Financing Costs

In connection with issuing the Senior Notes due 2013 and entering into a credit agreement in 2005, the Company paid an aggregate of $7.9 million in
financing costs that are being deferred and amortized over the lives of the corresponding agreements. During fiscal year 2005, the Company wrote off the remaining deferred issuance costs related to the Senior Notes due 2008 and the credit agreement
in the amount of $1.5 million and $0.2 million, respectively. The deferred finance cost balance recorded at September 29, 2007 and September 30, 2006 was net of accumulated amortization of $2.3 million and $1.8 million, respectively.

Income Taxes

The
Company provides for deferred income taxes relating to temporary timing differences in the recognition of income and expense items for financial and tax reporting purposes. 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 109, as if the Company were a separate taxpayer rather than a member of Holdings consolidated income tax return group.

Sales

Revenue on retail sales is
recognized upon purchase by the customer. Revenue on services is recognized as services are performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related
discounts. The Company does not provide an estimated allowance for sales returns as they are immaterial.

Sales Taxes

Revenues are presented net of sales taxes. The obligation is included in accrued expenses until the taxes are remitted to the appropriate taxing
authorities.

Cost of Sales

Included
in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related distribution costs. The Company recognizes consideration received from vendors at the time the obligations to purchase products or perform
services have been completed. These items are recorded as a reduction in cost of goods sold in the statement of income. For the years ending September 29, 2007, September 30, 2006, and October 1, 2005, the Companys recorded
advertising expense was shown net of cooperative advertising of $0.7 million, $0.8 million and $0.4 million respectively.

Shipping and Handing
Costs

The Company records shipping and handling costs paid by customers as revenue. The actual costs for shipping and handling are
charged to cost of sales.



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##### Table of Contents

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the years ended September 29, 2007, September 30, 2006 and October 1, 2005, was approximately $8.7 million, $8.1 million, and $7.5 million,
respectively.

Stock Based Compensation

Leslies Holdings, Inc., and prior to the 2007 Reorganization, Leslies Poolmart, Inc., may grant stock options for a fixed number of shares to the Companys employees and directors with an exercise price equal to the fair
market value of the shares at the date of grant. As the Company is a nonpublic company under the provisions of SFAS No. 123R, we were required to adopt SFAS No. 123R using the prospective method which requires the Company to apply the
provisions of SFAS No. 123R prospectively to new awards and to awards modified, repurchased or cancelled after September 30, 2006. Awards granted after September 30, 2006 (of which there were none as of September 29, 2007) are
valued at fair value in accordance with the provisions of SFAS No. 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.

As of the 2007 Reorganization, the 2005 Plan and related agreements were assumed by Holdings. Any future
grants of options under the 2005 Plan will be for equity of Holdings and not the Company, but will be recorded as an expense by the Company. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings board of directors approved
the acceleration of the vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the
modification took effect. Accordingly, no compensation expense was recorded under SFAS No. 123R for 2007. All of the options were exercised in February of 2007 after the 2007 Reorganization.

Fair Value of Financial Instruments

The fair value of the $170.0 million Senior Notes due 2013 using quoted market prices as of September 29, 2007 is $161.5 million. The carrying amounts of other long-term debt approximate fair value because either the interest rate
fluctuates based on market rates or interest rates appear to approximate market rates for similar instruments. The fair value estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect these estimates.

Use of Estimates in the Preparation of Consolidated
Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses
during the reporting period. Actual results could differ from those estimates.

Reclassification of Accounts

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassification had no effect on net income as
previously reported.

Recent 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. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair
value. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted. The Company must adopt this standard for its 2009 fiscal year. The Company is currently
evaluating the impact that adopting this standard will have on its consolidated financial statements.



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In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or
permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This
Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company must adopt this standard for its 2009 fiscal year. The Company is currently
evaluating the impact that adopting this standard will have on its consolidated financial statements.

In June 2006, the FASB issued FASB
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of FASB Statement No. 109 Accounting for Income Taxes and must be adopted by the Company as a non-public filer
no later than December 15, 2007. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements uncertain tax positions that the company has taken or expects to take in its tax
returns. The Company is required to adopt FIN 48 during the first quarter of fiscal 2008 and has not fully evaluated the impact of adopting FIN 48 to determine the impact, if any, on its financial statements.

3. Inventories

Inventories consist of the following:



|                              |  |                    |        |   |                    |   |        |  
|----------------------------- |  | ------------------ | ------ | - | ------------------ | - | ------ | -
|(Dollar amounts in thousands) |  | September 29, 2007 |        |   | September 30, 2006 |  
|Raw materials and supplies    |  | $                  | 1,232  |   |                    | $ | 1,116  |  
|Finished goods                |  |                    | 67,824 |   |                    |   | 66,358 |  
|Reserve                       |  |                    | (3,332 | ) |                    |   | (2,930 | )
|                              |  |                    |        |   |                    |   |        |  
|Total Inventories             |  | $                  | 65,724 |   |                    | $ | 64,544 |  
|                              |  |                    |        |   |                    |   |        |  

4. Property, Plant and Equipment

Property, plant and equipment consists of the following:



|                                                |  |                    |         |   |                    |   |         |  
|----------------------------------------------- |  | ------------------ | ------- | - | ------------------ | - | ------- | -
|(Dollar amounts in thousands)                   |  | September 29, 2007 |         |   | September 30, 2006 |  
|Land                                            |  | $                  | 5,865   |   |                    | $ | 5,865   |  
|Buildings                                       |  |                    | 8,106   |   |                    |   | 7,902   |  
|Vehicles, machinery and equipment               |  |                    | 6,428   |   |                    |   | 5,703   |  
|Leasehold improvements                          |  |                    | 63,770  |   |                    |   | 57,807  |  
|Office furniture, equipment and other           |  |                    | 42,900  |   |                    |   | 39,340  |  
|Construction-in-process                         |  |                    | 1,142   |   |                    |   | 892     |  
|                                                |  |                    |         |   |                    |   |         |  
|                                                |  |                    | 128,211 |   |                    |   | 117,509 |  
|Less  accumulated deprecation and amortization |  |                    | (90,278 | ) |                    |   | (79,373 | )
|                                                |  |                    |         |   |                    |   |         |  
|Total Property, Plant and Equipment             |  | $                  | 37,933  |   |                    | $ | 38,136  |  
|                                                |  |                    |         |   |                    |   |         |  



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5. Other Current Liabilities

Other current liabilities consist of the following:



|                                      |  |                    |        |                    |   |       
|------------------------------------- |  | ------------------ | ------ | ------------------ | - | ------
|(Dollar amounts in thousands)         |  | September 29, 2007 |        | September 30, 2006
|Accrued payroll and employee benefits |  | $                  | 10,050 |                    | $ | 9,783 
|Self insurance reserves               |  |                    | 8,324  |                    |   | 8,742 
|All other current liabilities         |  |                    | 20,011 |                    |   | 17,335
|                                      |  |                    |        |                    |   |       
|Total Other Current Liabilities       |  | $                  | 38,385 |                    | $ | 35,860
|                                      |  |                    |        |                    |   |       

6. Loan and Security Agreement/Assets Subject to Lien

On January 25, 2005, the Company entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with the lenders
noted therein and Wells Fargo Retail Finance LLC as agent for the Lenders. The Loan Agreement provides for the extension by the lenders of revolving loans and other financial accommodations in an aggregate principal amount of $75.0 million. The
amended credit facility was and will be used to refinance the existing credit facility, to provide a portion of the financing required to consummate the 2005 Recapitalization, and for general corporate purposes. A portion of the amended credit
facility is available for letters of credit. The obligations under the amended credit facility are secured by a lien on substantially all of the Companys assets.

Borrowings under the amended credit facility bear interest at the lenders reference rate or at LIBOR plus the applicable LIBOR rate margin. The applicable LIBOR rate margin will be adjusted quarterly based on
the Companys EBITDA (as defined in the amended credit facility) for the 12 month period ended as of the end of the latest fiscal quarter. The applicable margin for the amended credit facility is initially 0% with respect to base rate loans and
1.75% with respect to eurodollar loans.

On the closing of the 2005
Recapitalization, the Company paid the lender an upfront fee as well as a commitment fee on the $30.0 million over-advance facility. In addition, the Company is obligated to pay the lender a commitment fee equal to 1/4 of 1% per annum of the unused portion of the $75.0 million commitment. The Company is also obligated to pay a commission on all outstanding letters of credit as well as
customary administrative, issuance, fronting, amendment, payment and negotiation fees.

The amended credit facility contains
customary representations and warranties, covenants and conditions to borrowing. There can be no assurance that the conditions to borrowing under the amended credit facility will be satisfied.

The amended credit facility requires the maintenance of certain quarterly financial and operating ratios and covenants, including minimum calculated
EBITDA levels, fixed charge coverage ratio, and senior leverage ratio.

The amended credit facility also contains customary events of
default, including default upon the nonpayment of principal, interest, fees or other amounts or the occurrence of a change of control.

To
the Companys knowledge, no event of default has occurred under the Loan Agreement.



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##### Table of Contents

7. Senior Notes

On January 25, 2005, the Company sold, through a private placement exempt from the registration requirements under the Securities Act of 1933, as amended, $170 million in aggregate principal amount of its 7.75%
Senior Notes due 2013 (the Notes). Interest-only payments on the Notes are payable semi-annually on February 1 and August 1 of each year, beginning with August 1, 2005. The Notes were sold in the United States only to
qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act. The Notes were not registered under the Securities Act and can not be offered or sold in
the United States absent registration or an applicable exemption from registration requirements. The Company used the net proceeds of this offering to finance the 2005 Recapitalization and to redeem $59.5 million of its 10.375% Senior Notes due
2008. In connection with the closing of the Private Placement, the Company entered into (i) an indenture, dated January 25, 2005 with The Bank of New York Trust Company, N.A., as the trustee, governing the terms and conditions of the Notes
(the Indenture) and (ii) a registration rights agreement, dated January 25, 2005 with the initial purchasers of the Notes in the Private Placement (the Registration Rights Agreement).

Under the Registration Rights Agreement, the Company agreed to use its best efforts to register notes having substantially identical terms as the Notes
with the Securities and Exchange Commission as part of an offer to exchange freely tradeable exchange notes for the Notes initially issued under the Indenture. The Company filed a registration statement for the exchange notes with the Commission on
April 22, 2005 and caused such registration statement for the 7.75% Senior Notes, Series B, due 2013, to be declared effective June 16, 2005.

The Indenture contains customary covenants, including those that will limit the Companys ability to grant liens on assets to secure debt, enter into certain sale and lease-back transactions, and merge or
consolidate with another company or sell substantially all assets. To the Companys knowledge, no event of default has occurred under the Indenture.

8. Leases

The Company leases certain store, office, distribution and manufacturing facilities under operating leases which
expire at various dates through 2015. Lease agreements generally provide for increases related to cost of living indices and require the Company to pay for property taxes, repairs and insurance. Future annual minimum lease payments at
September 29, 2007 are as follows:



|                              |  |   |        
|----------------------------- |  | - | -------
|(Dollar amounts in thousands) |  |  
|2008                          |  | $ | 38,879 
|2009                          |  |   | 32,927 
|2010                          |  |   | 24,573 
|2011                          |  |   | 16,808 
|2012                          |  |   | 10,644 
|Thereafter                    |  |   | 7,226  
|                              |  |   |        
|                              |  | $ | 131,057
|                              |  |   |        

Certain leases are renewable at the option of the Company for periods of one to ten years. Rent
expense charged against income totaled $35.9 million, $33.7 million, and $31.1 million in fiscal years 2007, 2006 and 2005 respectively. Only five leases provided for rent contingent on sales exceeding specific amounts.



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##### Table of Contents

9. Income Taxes

The provision/(benefit) for income taxes is comprised of the following:



|                              |  |             |        |             |   |        |             |  |   |      |  
|----------------------------- |  | ----------- | ------ | ----------- | - | ------ | ----------- |  | - | ---- | -
|(Dollar amounts in thousands) |  | Fiscal 2007 |        | Fiscal 2006 |   |        | Fiscal 2005 | 
|Federal:                      |  |             |        |             |   |        |             |  |   |      |  
|Current                       |  | $           | 16,899 |             | $ | 15,637 |             |  | $ | (531 | )
|Deferred                      |  |             | 1,517  |             |   | (2,123 | )           |  |   | 926  |  
|                              |  |             |        |             |   |        |             |  |   |      |  
|                              |  | $           | 18,416 |             | $ | 13,514 |             |  | $ | 395  |  
|                              |  |             |        |             |   |        |             |  |   |      |  
|State:                        |  |             |        |             |   |        |             |  |   |      |  
|Current                       |  | $           | 3,963  |             | $ | 3,916  |             |  | $ | (291 | )
|Deferred                      |  |             | 356    |             |   | (532   | )           |  |   | 508  |  
|                              |  |             |        |             |   |        |             |  |   |      |  
|                              |  |             | 4,319  |             |   | 3,384  |             |  |   | 217  |  
|                              |  |             |        |             |   |        |             |  |   |      |  
|Total                         |  | $           | 22,735 |             | $ | 16,898 |             |  | $ | 612  |  
|                              |  |             |        |             |   |        |             |  |   |      |  

A reconciliation of the provision for income taxes to the amount computed at the federal statutory
rate is as follows:



|                                     |  |             |        |   |             |   |        |             |  |   |        |  
|------------------------------------ |  | ----------- | ------ | - | ----------- | - | ------ | ----------- |  | - | ------ | -
|(Dollar amounts in thousands)        |  | Fiscal 2007 |        |   | Fiscal 2006 |   |        | Fiscal 2005 | 
|Federal income tax at statutory rate |  | $           | 19,236 |   |             | $ | 13,091 |             |  | $ | (1,333 | )
|Permanent differences                |  |             | 617    |   |             |   | 1,633  |             |  |   | 2,273  |  
|State taxes, net of federal benefit  |  |             | 2,898  |   |             |   | 2,200  |             |  |   | 141    |  
|Reduction in tax contingency reserve |  |             | (16    | ) |             |   | (26    | )           |  |   | (469   | )
|                                     |  |             |        |   |             |   |        |             |  |   |        |  
|                                     |  | $           | 22,735 |   |             | $ | 16,898 |             |  | $ | 612    |  
|                                     |  |             |        |   |             |   |        |             |  |   |        |  

The tax effect of temporary differences which give rise to significant portions of the deferred
tax asset and liability are summarized below.



|                              |  |                     |        |                          |   |                     |  |   |                         |   |  |   |      |  
|----------------------------- |  | ------------------- | ------ | ------------------------ | - | ------------------- |  | - | ----------------------- | - |  | - | ---- | -
|                              |  | Fiscal 2007         |        | Fiscal 2006              |  
|(Dollar amounts in thousands) |  | Deferred Tax Assets |        | Deferred Tax Liabilities |   | Deferred Tax Assets |  |   | Deferred TaxLiabilities |  
|Depreciation and amortization |  | $                   | 3,833  |                          | $ |                    |  | $ | 4,445                   |   |  | $ |     |  
|State income taxes            |  |                     | 210    |                          |   |                    |  |   |                        |   |  |   | (128 | )
|Inventory                     |  |                     | 1,869  |                          |   |                    |  |   | 1,853                   |   |  |   |     |  
|Reserves and other accruals   |  |                     | 2,325  |                          |   |                    |  |   | 3,207                   |   |  |   |     |  
|Deferred rent                 |  |                     | 1,824  |                          |   |                    |  |   | 2,474                   |   |  |   |     |  
|Compensation accruals         |  |                     | 712    |                          |   |                    |  |   | 773                     |   |  |   |     |  
|Net operating loss            |  |                     |       |                          |   |                    |  |   | 235                     |   |  |   |     |  
|Valuation allowance           |  |                     |       |                          |   |                    |  |   | (213                    | ) |  |   |     |  
|                              |  |                     |        |                          |   |                     |  |   |                         |   |  |   |      |  
|                              |  | $                   | 10,773 |                          | $ |                    |  | $ | 12,774                  |   |  | $ | (128 | )
|                              |  |                     |        |                          |   |                     |  |   |                         |   |  |   |      |  



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The company had federal net operating losses (NOL) of $0.6 million available to offset future tax
liabilities expiring in calendar tax year 2006. The losses were subject to Internal Revenue Code Section 382, which limits the annual utilization of NOLs after an ownership change. The Companys annual Section 382 limitation was
approximately $0.1 million. Approximately $0.5 million of these NOLs expired as worthless during fiscal 2007 and therefore no benefits have been recorded for these amounts. The company has recorded a valuation allowance amount of $0.0 million
and $0.2 million as of September 29, 2007 and September 30, 2006, respectively.

The Companys current income taxes payable
has been reduced by the tax benefit from employee stock incentive plans. These benefits totaled $2,084 and $0 for the years ended September 29, 2007 and September 30, 2006, respectively, and were reflected as an increase to the additional
paid-in capital in the Consolidated Statements of Shareholder Equity. The Company includes only the direct tax effects of the employee stock incentive plans in calculating this increase to additional paid-in capital.

10. Contingencies

The Company is a defendant in
lawsuits or potential claims encountered in the normal course of business; such matters are being vigorously defended. In the opinion of management, the resolutions of these matters will not have a material effect on the Companys financial
position or results of operations.

The Companys workers compensation insurance program, general liability insurance program
and employee group medical plan have self-insurance retention features of $0.3 million, $0.3 million and $0.1 million per incident, respectively. As of September 29, 2007 and September 30, 2006, the Company had standby letters of credit
outstanding in the amounts of $4.7 million and $4.3 million, respectively, for the purpose of securing such obligations under its workers compensation self insurance programs.

11. 401(k) Plan

The Company provides for the benefit of its employees a voluntary retirement plan
under Section 401(k) of the Internal Revenue Code. During 2007, the plan covered all eligible employees and provided for a matching contribution by the Company of 50% of each participants contribution up to 4% of the individuals
compensation as defined. The expenses related to this program were $0.6 million, $0.6 million and $0.4 million for fiscal years 2007, 2006 and 2005 respectively.

12. Equity Transactions

Preferred and Common Stock

The Company became a 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 converted into one share of 10% senior redeemable exchangeable cumulative preferred stock of Holdings with
the same rights, privileges, and preferences, including as to liquidation. The conversion of the 10% senior redeemable exchangeable cumulative preferred stock of the Company for similar stock of Holdings was accounted for as contributed capital to
the Company, given that the assumption of the obligation by Holdings without recourse to the Company had the effect of extinguishing the rights of the preferred stockholders and the resulting obligation.

13. Related Party Transactions

With the consummation
of the 2005 Recapitalization in January 2005, the Company entered into a Management Services Agreement with LGP. The Management Services Agreement provides that the Company will pay LGP an annual fee of $1.0 million for ongoing management,
consulting and financial services. In addition, the Management Services Agreement provides that LGP may provide the Company with financial advisory or investment banking services in connection with major financial transactions, and LGP will be paid
a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution dated January 25, 2005; provided that the agreement will automatically extend for one year
periods thereafter unless either the Company or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control, including the date that LGP affiliates hold 40% or less of the Companys shares and
(c) the consummation of a public offering of the Companys common stock in an aggregate offering amount of at least $50 million or as a result of which at least 15% of the Companys shares of common stock is publicly traded. In the
event of the Companys bankruptcy, liquidation, insolvency or winding-up, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under
the indenture governing the notes.



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##### Table of Contents

During the fiscal years ended September 29, 2007, September 30, 2006 and October 1, 2005,
the Company paid management fees to LGP in the amount of $1.0 million, $1.0 million and $0.8 million respectively, and the Company paid a structuring fee of $5.0 million to LGP for services rendered in support of the 2005 Recapitalization.

During February of 2007, the Companys parent, Leslies Holdings, Inc. (Holdings) consummated a privately placed
financing transaction. The Company does not guarantee or pledge support for this financing, nor were any of the proceeds made available to the Company, and therefore, the Companys financial statements do not reflect the debt and its related
costs. Holdings issued $310 million in senior notes due in 2017 and $100 million of preferred equity. The interest rate on the senior notes is 10.5% cash or 11.5% PIK, at Holdings option. The notes are non-callable for two years and have other
covenants and terms that are customary for high yield issues. The preferred shares have a dividend rate of 11% and are exchangeable into debt under certain circumstances. The preferred shares have a mandatory redemption date of March 1, 2019.
The Company is not required to service any obligations of Holdings and the sole source of funds that might be provided by the Company would be in the form of dividends to Holdings.

14. Stock Based Compensation Plans

In November 1998, the Leslies board of directors adopted
its 1998 Incentive Stock Option Plan (the 1998 Plan), and reserved 300,000 shares of nonvoting common stock for issuance thereunder. In January 2000, the Board approved an amendment to the Plan to increase the number of shares of
nonvoting common stock issuable thereunder to 500,000 shares in the aggregate.

All existing options were accelerated and terminated on
January 25, 2005 in connection with the 2005 Recapitalization and each optionholder received with respect to each option held an amount equal to the excess of $15.00 over the exercise price of such option. As a result, the Company recorded a
stock compensation charge of $16.1 million for the year ended September 30, 2006.

In August 2005, Leslies board of directors
adopted its 2005 Incentive Stock Option Plan (the 2005 Plan), and reserved 1,300,000 shares of nonvoting common stock for issuance thereunder. As of the 2007 Reorganization, the 2005 Plan and related agreements were assumed by Holdings.
Any future grants of options will be for equity of Holdings and not the Company with any related expense recognized by the Company. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings board of directors approved the
acceleration of the vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the modification
took effect. Accordingly, no compensation expense was recorded under SFAS No. 123R for 2007.

All outstanding options were exercised
in February of 2007 after the 2007 Reorganization, which gave rise to a tax benefit of approximately $2.1 million attributed to the Company. Given that the tax benefit meets the realization criteria of SFAS 123(R), the benefit has been recorded as a
credit to equity since the entire benefit exceeded the recorded expense of zero. The Company did not otherwise grant or modify any share-based compensation during the 52 weeks ended September 29, 2007. As of September 29, 2007 the Company
had no outstanding equity awards to its employees or non-employees either directly or through grants by Holdings that would be attributable to the Companys employees or non-employees and thereby accounted for as an expense of the Company.

In November of 2008, the board of directors of Holdings approved grants of options to a number of key individuals of the Company. These
options to purchase approximately 373,000 shares of Holdings common stock vest over a five year period at a rate of 20% annually on each anniversary of the date of grant.

Prior to the adoption of SFAS 123(R), the Company accounted for stock-based compensation plans under APB Opinion No. 25, under which no compensation expense has been recognized in the accompanying consolidated
financial statements for stock-based employee awards with an exercise price equal to or greater than the fair value of the common stock on the date of grant. For purposes of SFAS No. 123, Accounting for Stock-Based Compensation, the fair
value of each option granted has been estimated at the date of the grant using the Black-Scholes option pricing model using the following weighted-average assumptions used for grants for each of the fiscal years ended 2007, 2006 and 2005: risk free
interest rate of 4.0%, expected volatility of 0%, expected lives of 7 years and no expected dividend yield. Based on these assumptions, the weighted average fair value of the options granted is $0.00 in 2007, since no grants were awarded, $ 0.38 in
2006 and $1.42 in 2005.

A summary of option activities for all plans is as follows:



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|                                    |  |             |   |             |                   |             |        |           |   |                  |   |        |  |            |                  |  |   |     
|----------------------------------- |  | ----------- | - | ----------- | ----------------- | ----------- | ------ | --------- | - | ---------------- | - | ------ |  | ---------- | ---------------- |  | - | ----
|                                    |  | Fiscal 2007 |   | Fiscal 2006 |                   | Fiscal 2005
|                                    |  | Shares      |   |             | Wt. Avg. Ex Price |             | Shares |           |   | Wt. Avg.Ex Price |   | Shares |  |            | Wt. Avg.Ex Price
|Outstanding at beginning of year    |  | 1,233,500   |   |             | $                 | 1.91        |        | 700,000   |   |                  | $ | 1.00   |  | 1,628,760  |                  |  | $ | 2.42
|Granted (Plans prior to 2005)       |  |            |   |             |                   |            |        |          |   |                  |   |       |  | 26,000     |                  |  |   | 5.80
|Granted (2005 Plan)                 |  |            |   |             |                   |            |        | 538,500   |   |                  |   | 3.08   |  | 700,000    |                  |  |   | 1.00
|Exercised                           |  |            |   |             |                   |            |        |          |   |                  |   |       |  | (1,637,239 | )                |  |   | 2.47
|Cancelled                           |  |            |   |             |                   |            |        | (5,000    | ) |                  |   | 1.00   |  | (17,521    | )                |  |   | 1.31
|Assigned to Leslies Holdings, Inc. |  | (1,233,500  | ) |             |                   | 1.91        |        |          |   |                  |   |       |  |           |                  |  |   |    
|                                    |  |             |   |             |                   |             |        |           |   |                  |   |        |  |            |                  |  |   |     
|Outstanding at end of year          |  |            |   |             | $                 |            |        | 1,233,500 |   |                  | $ | 1.91   |  | 700,000    |                  |  | $ | 1.00
|                                    |  |             |   |             |                   |             |        |           |   |                  |   |        |  |            |                  |  |   |     
|Exercisable at end of year          |  |            |   |             | $                 |            |        | 175,000   |   |                  | $ | 1.00   |  |           |                  |  | $ |    
|                                    |  |             |   |             |                   |             |        |           |   |                  |   |        |  |            |                  |  |   |     

The fair value of the common stock underlying the 1998 Incentive Stock Option Plan options granted
during fiscal year 2005 was determined to be $5.80 per share, as that amount was the most recent price paid for the Companys common stock by a third party and no significant intervening events had occurred to change this established fair value
price and as these options were granted prior to the 2005 Recapitalization. Between August and September of 2003, 1,088,030 shares of the Companys common stock and 526,820 warrants for the Companys common stock (greater than 15% of fully
diluted shares then outstanding) were either sold or repurchased for $5.80 per share in eleven separately negotiated arms length transactions. As the Companys stock is privately held and has no quoted market price, the Company determined the
$5.80 per share to be the fair value of the common stock underlying the options granted during fiscal year 2005.

The fair value of the
common stock underlying the 2005 Incentive Stock Option Plan options granted during fiscal year 2005 was determined to be $1.00 per share, consistent with the value of the Companys common stock after the 2005 Recapitalization. As the
Companys stock is privately held and has no quoted market price, the Company determined the fair value of options granted during fiscal year 2006 to be based on an enterprise value of 6.5 times the Companys trailing twelve-month Adjusted
EBITDA results as reported in the companys SEC filings.

For the purpose of Statement 123(R) Share Based Payment, the
Company is considered a non-public entity because it does not have equity securities trading in a public market. For non-public entities the effective date to adopt the complete provisions of Statement 123(R) is for fiscal
years beginning after December 15, 2005. Statement 123(R) was effective for the Company beginning October 1, 2006. If stock options had been accounted for consistent with SFAS No. 123, these amounts would be amortized on a
straight-line basis as compensation expense over the average vesting period of the options and the Companys net income would not have been effected for the fiscal year ended 2007. The Companys net income would have decreased by less than
$0.1 million in fiscal year 2006, with no effect in fiscal year 2005.

15. Supplemental Cash Flow Disclosures

The Company paid interest charges of $13.6 million, $14.4 million, and $15.2 million in 2007, 2006 and 2005, respectively. The Company paid income taxes
of $20.5 million, $16.1 million and $4.3 million in 2007, 2006 and 2005, respectively. The Preferred Stock dividends and the accretion of the Warrants were excluded from the statement of cash flows as non-cash transactions.



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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. 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 the Company, including its 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 controls or in other factors that could significantly affect these controls subsequent
to the Evaluation Date. We have not identified any significant deficiencies or material weaknesses in the Companys internal controls, and therefore there were no corrective actions taken.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors, executive officers and significant employees
of the Company are as follows:



|                    |  |     |  |                                                               
|------------------- |  | --- |  | --------------------------------------------------------------
|Name                |  | Age |  | Positions                                                     
|Lawrence H. Hayward |  | 53  |  | Chairman of the Board and Chief Executive Officer             
|Steven L. Ortega    |  | 46  |  | Executive Vice President, Chief Financial Officer and Director
|Michael L. Hatch    |  | 54  |  | President, Chief Operating Officer and Director               
|Edward C. Agnew     |  | 68  |  | Director                                                      
|John M. Baumer      |  | 40  |  | Director                                                      
|John G. Danhakl     |  | 51  |  | Director                                                      
|Michael J. Fourticq |  | 63  |  | Director                                                      
|Janet I. McDonald   |  | 50  |  | Senior Vice President, Chief Information Officer              
|Rick D. Carlson     |  | 43  |  | Senior Vice President, Commercial, Service and Logistics      
|Brian P. Agnew      |  | 42  |  | Senior Vice President, Store Operations                       

Lawrence H. Hayward is Chairman of the Board of Directors and Chief Executive Officer. He joined
the Company in January 2000 as President and Chief Executive Officer and assumed the additional role of Chairman of the Board in September 2000. Most recently, Mr. Hayward was the President of ABCO Desert Markets located in Phoenix, Arizona.
From 1995 until 1999, he served as President and Chief Executive Officer of Carr Gottstein Foods Co., Alaskas largest food and drug retailer and wholesale provider. From 1990 to 1995, Mr. Hayward held other senior level positions at
Buttrey Food and Drug Store Company. From 1981 until 1990 he served in various corporate positions at American Stores Company headquartered in Salt Lake City, Utah. Mr. Hayward is also a director of Petco Animal Supplies, Inc.



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Steven L. Ortega is Executive Vice President, Chief Financial Officer and Director of the Company and
joined the Company in August, 2005. Mr. Ortega served as Executive Vice President and Chief Financial Officer for BI-LO LLC from 1999 to 2005. Prior to joining BI-LO, Mr. Ortega was with American Stores Company, where he held various
positions within their supermarket and drug store subsidiaries, including Vice President  Finance and Administration, and Vice President  Logistics. Prior to this period at American Stores, Mr. Ortega held various management
positions in finance, accounting, audit and store operations at Lucky Stores, Inc., where he last held the position of Director of Finance and Accounting.

Michael L. Hatch has been President, Chief Operating Officer and Director of the Company since September 2006. Prior to that, Mr. Hatch served as Senior Vice President, Merchandising and Marketing of the Company
since November 2000. Mr. Hatch has more than 30 years of experience in the retail industry. Most recently, Mr. Hatch was the President of ABCO Desert Markets, located in Phoenix, Arizona. From 1996 to 1999 he was employed by Smiths Food
and Drug where he held various positions including Senior Vice President and Southwest Manager and Vice President of Sales, Merchandising and Marketing. From 1970 to 1996, Mr. Hatch held various senior management positions at Smittys
Super Valu, Inc. located in Phoenix, Arizona, which later merged with Smiths Food and Drug.

Edward C. Agnew became a director in
December 2002. He is a former retail executive with over 36 years of retail experience. Mr. Agnew held various officer level assignments with Jewel Companies, Inc., Buttrey Food and Drug, Inc., and American Stores/Albertsons, Inc.
Mr. Agnew began his career in 1963 with Jewel Food & Drug Stores where he served in various capacities including General Manager of its Midwest Division. In 1987, Mr. Agnew was appointed President and Chief Executive Officer of
Buttrey Food and Drug, Inc. In 1990, Mr. Agnew successfully led a leveraged buyout of Buttrey Food and Drug Store Company and successfully completed an initial public offering of the Company in early 1993. In 1994, Mr. Agnew returned to
American Stores, Inc., where he served as a Senior Vice President and member of the Companys Executive Committee until his retirement in 1999.

John M. Baumer became a director of the Company in November 2001. He has been an executive officer and equity owner of LGP, the firm that manages Green Equity Investors II, L.P. (GEI), since 1999.
Mr. Baumer had previously been a Vice President at Donaldson, Lufkin & Jenrette Securities Corporation (DLJ), and had been with DLJ since 1995. Prior to joining DLJ, Mr. Baumer was at Fidelity Investments and Arthur
Andersen. Mr. Baumer is also a director of FTD, Inc., Intercontinental Art, Inc., VCA Antech, Inc., The Brickman Group, Ltd. and Petco Animal Supplies, Inc.

John G. Danhakl became a director of the Company in June 1997. He has been an executive officer and an equity owner of LGP, the firm that manages GEI, since 1995. Mr. Danhakl had previously been a Managing
Director at DLJ and had been with DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel Burnham Lambert Incorporated. Mr. Danhakl is also a director of Arden Group, Inc., Petco Animal Supplies, Inc., The Neiman
Marcus Group, Inc., Sagittarius Brands, The Tire Rack, Inc. and Horseshows In The Sun.

Michael J. Fourticq became a director of the
Company in June 1997. He also served as Chairman of the Board of Directors from May 1988 until January 2000. Between May 1988 and August 1992, he served as the Companys Chief Executive Officer. From 1995 to 2001, Mr. Fourticq had been the
Chairman and Chief Executive Officer of Brown Jordan International, a leading manufacturer of outdoor and casual furniture products. Since 1985 he has been the sole general partner of Hancock Park Associates, which is the general partner and
affiliate of several investment partnerships. Mr. Fourticq is also on the Boards of Mikol Missile-Air, Brown Jordan International, Gordon Biersch, FHI dba Body Home Fitness, The Right Start, Classic Party Rentals, Stanton International and
Saleen, Inc.

Janet I. McDonald is Senior Vice President, Chief Information Officer of the Company. She joined the Company in August of
2000. Ms. McDonald has over 29 years of retail experience. Most recently Ms. McDonald owned and operated her own consulting business where she provided project management, management training, marketing, economic and other business
services. From 1990 to 1992 she served as Director Information Technology for Buttrey Food and Drug Store Company. From 1981 to 1990 she held progressive levels of management responsibility in corporate technology for American Stores Company.

Rick D. Carlson is Senior Vice President of Commercial, Service and Logistics of the Company. Mr. Carlson has over 16 years of retail
experience and has been with the Company since February of 2000 when he joined the team as Vice President of Logistics. Most recently Mr. Carlson was the General Manager of the Alaska Division of Totem Ocean Trailer Express. From 1995 until
1999, he was the Director of Transportation and Freight Operations of Carr Gottstein Foods Co., Alaskas largest food and drug retailer and wholesale provider. Prior to that time he held several management positions at Buttrey Food and Drug Co.



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##### Table of Contents

Brian P. Agnew became Senior Vice President, Store Operations on September 29, 2005. Brian Agnew is
a 15 year retail veteran and was previously the regional Vice President of Operations in the Companys Southeast Region from September 2003 through October 2005. From May 2003 through September 2003 he held the position of District Manager with
the Company. Prior to joining Leslies, Brian Agnew held several management positions in the retail grocery industry with Jewel Foods, American Stores Company and Albertsons, Inc. Brian Agnew is the son of Edward C. Agnew, who has served
as a director of the Company since December 2002.

On July 12, 2007, the Company accepted the resignation, of Mr. Ted C.
Nark from the Companys board of directors.

All executive officers of the Company are chosen by the Board of Directors and serve at
the Boards discretion except as provided in the employment agreements described below under Executive Compensation  Employment Agreements.

No Audit Committee

The Company does not have an audit committee, nor is any member of the Board a financial
expert within the meaning of the regulations of the Securities and Exchange Commission. As a voluntary filer without a public market for our equity securities, we are not required to have an audit committee or a financial expert. We do not
believe that we could recruit a financial expert without unwarranted expense and difficulty.

Code of Ethics

The Company has adopted a Code of Ethics and a copy may be obtained, without charge, by written request to the Company Attention: Corporate Secretary.

Section 16(a) is Not Applicable

The
Company is a voluntary filer without a public market for its equity securities. Consequently, the executive officers and directors are not required to comply with Section 16(a) of the Exchange Act.



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##### Table of Contents

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION, DISCUSSION AND ANALYSIS

The Board of Directors of the Company does not maintain a compensation committee. Our Board of Directors reviews and approves our compensation practices
for attracting, retaining and motivating our Named Executive Officers (or NEOs).

The following Compensation Discussion and Analysis
details the Companys strategy and practices for compensating our NEOs, who in fiscal 2007 were:



|                    |  |                                                         
|------------------- |  | --------------------------------------------------------
|Name                |  | Title                                                   
|Lawrence H. Hayward |  | Chief Executive Officer and Chairman of the Board       
|                    | 
|Steven L. Ortega    |  | Chief Financial Officer, EVP and Director               
|                    | 
|Michael L. Hatch    |  | President, Chief Operating Officer and Director         
|                    | 
|Janet I. McDonald   |  | Senior Vice President, Chief Information Officer        
|                    | 
|Rick D. Carlson     |  | Senior Vice President, Commercial, Service and Logistics

Objectives of the Executive Compensation Program

Our compensation programs are designed to provide a competitive level of total compensation (base salary, variable pay, and benefits) to attract and
retain talented executives and to motivate our Named Executive Officers to achieve the Companys business objectives, as approved by the Board of Directors. The Board of Directors uses published surveys to determine whether the compensation
provided to NEOs and other executives is competitive. However, the Board does not benchmark against any specific companies. Total compensation is reviewed when the Board of Directors deems it necessary but such review does not typically occur on an
annual basis.

Elements of Executive Compensation

The elements of the Companys compensation are comprised of:



| |  |  | Base salary;
| | - |  | ------------



| |  |  | At risk variable bonuses tied to the Companys performance;
| | - |  | -----------------------------------------------------------



| |  |  | Benefits and other perquisites; and
| | - |  | -----------------------------------



| |  |  | Severance and other post-termination payments as defined in certain of the Named Executive Officers employment agreements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



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What the Compensation Element is Designed to Reward and How It Relates to the Objectives

Each pay element is designed to reward different results as shown below:



|                                              |  |                                                                                                                                          |  |                                                                                                                                                
|--------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Compensation Element                          |  | Designed to Reward                                                                                                                       |  | Relationship to the Objectives                                                                                                                 
|Base Salary                                   |  | Experience, knowledge of the Company and industry, dedication to assigned job, and performance by the executive on behalf of the Company |  | Provides competitive pay to attract and retain talented NEOs                                                                                   
|                                              |  |                                                                                                                                         
|Bonus                                         |  | Success in achieving the Companys financial and operational goals                                                                       |  | Motivate and reward executives to achieve the Companys annual business objectives  Provide competitive pay to attract and retain talented NEOs
|                                              |  |                                                                                                                                         
|Benefits and Other Perquisites                |  | Initial and continued employment by the NEOs                                                                                             |  | Provide competitive compensation to attract and retain talented executives                                                                     
|                                              |  |                                                                                                                                         
|Severance and Other Post-Termination Payments |  | Initial and continued employment by the executive                                                                                        |  | Provide competitive compensation to attract and retain talented executives                                                                     

Base Salary

Base salary is paid for on-going employment throughout the year. It is intended to compensate the NEOs for their basic services performed for the Company thorough the year. In setting base salary, the Board of
Directors considers each NEOs experience, role and job responsibilities. The Board or Directors reviews base salary when it deems necessary and such review does not always occur on an annual basis.

Bonus

In the first quarter of each fiscal year, the
Board of Directors meets to review the Companys budget and targeted EBITDA goals for the fiscal year. At that meeting, the Board approves a threshold EBITDA target for the Company before bonuses will be paid to NEOs. If the EBITDA target is
not achieved, bonuses will not be paid. Consequently, all bonuses are at risk.

In fiscal 2007, the Board of Directors set $76.1 million as
the annual EBITDA threshold before bonuses would be paid. Bonuses for NEOs were subject to a cap of 150% of the target bonus and bonuses were targeted in the following amounts:



|                    |  |                   
|------------------- |  | ------------------
|Name                |  | Target Bonus      
|Lawrence H. Hayward |  | 70% of base salary
|                    | 
|Steven L. Ortega    |  | 60% of base salary
|                    | 
|Michael L. Hatch    |  | 60% of base salary
|                    | 
|Janet I. McDonald   |  | 35% of base salary
|                    | 
|Rick D. Carlson     |  | 35% of base salary

The Company exceeded the EBITDA threshold and, consequently, each of the NEOs received more than
their target bonus, as set forth in detail in the Summary Compensation Table below.



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Benefits and Other Perquisites

401(k) Plan

The Company maintains a 401(k) plan that is available for all eligible employees,
including the NEOs. Participants may elect to defer up to 25% of their compensation as pre-tax contributions through regular payroll deductions, subject to the limitations set forth in the Internal Revenue Code. Participants who have attained age 50
before the end of the year are also eligible to make catch-up contributions. The Company currently provides a discretionary matching contribution to each eligible participants account, equal to 50% of an eligible employees elective
contributions, up to 4% of their total compensation.

Welfare Benefits

The NEOs are eligible to participate in any medical, dental, life insurance, disability, 401k or stock option plan made generally available by the Company
to executives.

Cash Allowance

Messrs. Hayward and Ortegas employment agreements provide for the payment by the Company of an annual cash allowance for expenses, including those which may be considered partially or wholly personal in nature. The annual cash
allowance is automatically increased annually by 5% from that paid in the prior year. In addition, Messrs. Hayward and Ortega are each entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. In fiscal 2007,
Mr. Haywards annual cash allowance was $55,125 and his gross-up amount was $33,233. In fiscal 2007, Mr. Ortegas annual cash allowance was $16,500 and his gross-up amount was $10,854.

Separation Arrangements

As described in detail
below, employment agreements for three of the NEOs specify certain severance benefits to be paid in the event of an involuntary termination of such executives employment. Mr. Haywards employment agreement also provides for severance
payment if he elects to terminate his employment following a change in control of the Company. The Company provides such separation benefits in order to remain competitive in attracting and retaining executives.

For further details, please refer to the section Severance, Termination and Change in Control Payments below.



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Stock Option Awards

As of the 2007 Reorganization, all contractual rights and obligations relating to the Companys 2005 Stock Option Plan and related Option Agreements and Notices of Option Grants were adopted by Holdings and
deemed to apply to Holdings common stock. During the second quarter of 2007, Holdings Board of Directors accelerated the vesting of all outstanding stock options to purchase shares of common stock of Holdings. Each of the NEOs exercised his or
her outstanding options in February of 2007.

During fiscal 2007, the Company did not grant any additional option or stock awards to their
Named Executive Officers. However, in November 2007 the Board of Directors of Holdings approved grants of time based options to a number of employees of the Company, including the NEOs as follows:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Name                |  | Number of Options Granted for Fiscal 2008
|Lawrence H. Hayward |  | 40,000                                   
|                    | 
|Steven L. Ortega    |  | 20,000                                   
|                    | 
|Michael L. Hatch    |  | 20,000                                   
|                    | 
|Janet I. McDonald   |  | 10,000                                   
|                    | 
|Rick D. Carlson     |  | 10,000                                   

The options vest over a five year period at a rate of 20% annually on each anniversary of the date
of grant and have an exercise price of $2.30 per share. These option grants are not included in the compensation tables below because they do not relate to compensation for fiscal 2007.

The Board of Directors determined to issue options to purchase shares of Holdings common stock in order to provide an incentive to the NEOs to
remain in the employ of the Company and to align the NEOs interests with the shareholders of Holdings in order to maximize long-term value.



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##### Table of Contents

Compensation of the Named Executive Officers

The following tables show, for fiscal year 2007, compensation awarded or paid to, or earned by, our CEO, CFO, and three most highly compensated executive
officers other than the CEO and CFO. We refer to these executives collectively herein as the Named Executive Officers or NEOs.

SUMMARY
COMPENSATION TABLE



|                                                                         |  |      |  |           |  |          |  |                |  |                 |  |                                         |  |                                                                        |  |                          |     |  |          
|------------------------------------------------------------------------ |  | ---- |  | --------- |  | -------- |  | -------------- |  | --------------- |  | --------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------ | --- |  | ---------
|Name and Principal Position                                              |  | Year |  | Salary($) |  | Bonus($) |  | StockAwards($) |  | OptionGrants($) |  | Non-EquityIncentive PlanCompensation($) |  | Change inPension Value andNonqualifiedDeferredCompensationEarnings ($) |  | All OtherCompensation($) |     |  | Total ($)
|(a)                                                                      |  | (b)  |  | (c)       |  | (d)      |  | (e)            |  | (f)             |  | (g)(1)                                  |  | (h)                                                                    |  | (i)                      |     |  | (j)      
|Lawrence H. Hayward Chief Executive Officer and
Chairman of the Board    |  | 2007 |  | 517,000   |  |         |  |               |  |                |  | 496,521                                 |  |                                                                       |  | 94,558                   | (2) |  | 1,108,079
|Steven L. Ortega Chief Financial Officer, EVP and Director               |  | 2007 |  | 330,750   |  |         |  |               |  |                |  | 272,270                                 |  |                                                                       |  | 31,754                   | (3) |  | 634,774  
|Michael L. Hatch President, Chief Operating Officer and Director         |  | 2007 |  | 320,000   |  |         |  |               |  |                |  | 263,421                                 |  |                                                                       |  | 4,400                    | (4) |  | 587,821  
|Janet I. McDonald Senior Vice President, Chief Information Officer       |  | 2007 |  | 177,500   |  |         |  |               |  |                |  | 84,814                                  |  |                                                                       |  | 4,211                    | (4) |  | 266,525  
|Rick D. Carlson Senior Vice President, Commercial, Service and Logistics |  | 2007 |  | 170,000   |  |         |  |               |  |                |  | 81,273                                  |  |                                                                       |  | 4,400                    | (4) |  | 255,673  

---

|(1) | Bonuses are attributed to the year earned and are paid out after the conclusion of the fiscal year. For fiscal 2007, certain of the NEOs received their bonuses in November 2007 and
others will receive their bonuses in January 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents (i) a cash allowance of $55,125 for all expenses, including those that may be personal in nature, (ii) a gross up payment of $33,233 related to the cash
allowance, (iii) legal and accounting expenses paid by the Company and incurred by Mr. Hayward in connection with negotiating his amended employment agreement, and (iv) the Companys matching contributions to
Mr. Haywards 401(k) account.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents (i) a cash allowance of $16,500 for all expenses, including those that may be personal in nature, (ii) a gross up payment of $10,854 related to the cash
allowance, and (iii) the Companys matching contributions to Mr. Ortegas 401(k) account.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the Companys matching contributions to each NEOs 401(k) account.
|--- | -----------------------------------------------------------------------------



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##### Table of Contents

GRANTS OF PLAN-BASED AWARDS

For Fiscal Year ended September 29, 2007



|                    |  |            |  |                                                                |  |               |  |               
|------------------- |  | ---------- |  | -------------------------------------------------------------- |  | ------------- |  | --------------
|Name                |  | Grant Date |  | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards
|(a)                 |  | (b)        |  | Threshold($) (c)                                               |  | Target($) (d) |  | Maximum($) (e)
|Lawrence H. Hayward |  | 11/15/2006 |  | 180,950                                                        |  | 361,900       |  | 542,850       
|Steven L. Ortega    |  | 11/15/2006 |  | 99,225                                                         |  | 198,450       |  | 297,675       
|Michael L. Hatch    |  | 11/15/2006 |  | 96,000                                                         |  | 192,000       |  | 288,000       
|Janet I. McDonald   |  | 11/15/2006 |  | 31,063                                                         |  | 62,125        |  | 93,188        
|Rick D. Carlson     |  | 11/15/2006 |  | 29,750                                                         |  | 59,500        |  | 89,250        

As of the 2007 Reorganization, all contractual rights and obligations relating to the
Companys 2005 Stock Option Plan (the 2005 Plan) and related agreements were assumed by Holdings. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings board of directors approved the acceleration of the
vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the modification took effect. All of
the outstanding options were exercised in February of 2007 after the 2007 Reorganization and all exercises by the NEOs are reflected in the table below.

During fiscal 2007, our Named Executive Officers did not receive any grants of stock options or other stock awards. However, as described above in the Compensation, Discussion & Analysis, in November 2008 the
Board of Directors of Holdings approved grants of time based options to a number of employees of the Company, including the NEOs. The options vest over a five year period at a rate of 20% annually on each anniversary of the date of grant.



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##### Table of Contents

OPTION EXERCISES

For Fiscal Year Ended 2007



|                          |  |                                          |  |                               
|------------------------- |  | ---------------------------------------- |  | ------------------------------
|                          |  | Option Awards                           
|Name of Executive Officer |  | Number of Shares Acquired onExercise (#) |  | Value Realized on Exercise ($)
|(a)                       |  | (b)                                      |  | (c)                           
|Lawrence H. Hayward       |  | 50,000                                   |  | 291,500                       
|                          |  |                                         
|Steven L. Ortega          |  | 720,000                                  |  | 6,822,600                     
|                          |  |                                         
|Michael L. Hatch          |  | 45,000                                   |  | 323,850                       
|                          |  |                                         
|Janet I. McDonald         |  | 20,000                                   |  | 154,100                       
|                          |  |                                         
|Rick D. Carlson           |  | 20,000                                   |  | 154,100                       



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##### Table of Contents

Severance, Termination and Change in Control Payments

Employment Agreements

Lawrence H. Hayward

The Company entered into an amended and restated employment agreement with Lawrence Hayward on June 15, 2007, for his employment as Chief Executive
Officer and Chairman of the Board of the Company. Under the employment agreement, the Company shall pay Mr. Hayward a salary at an annual rate of $517,000. Mr. Hayward shall also be eligible to participate in the Companys bonus plan,
with a target bonus for each year of not less than 70% of his base salary in effect at the end of such year. Under the employment agreement, the Company shall pay Mr. Hayward an annual cash allowance for expenses, which was $55,125 for 2007
(increased annually by 5%), that relates to his employment which might be considered partially or wholly personal in nature, and he is entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. Mr. Hayward is
entitled to receive other benefits such as four (4) weeks of vacation each year, personal and sick leave, insurance and other benefits consistent with the then-current policies of the Company and equal to those benefits extended to the most
senior executives of the Company. The employment agreement expires on June 15, 2012 but shall automatically extend for successive one-year periods unless notice is provided in accordance with the terms of the employment agreement.
Mr. Haywards employment agreement also contains non-solicitation and confidentiality covenants and provides that Mr. Hayward serves as a Director at the will of the Companys Board of Directors.

If the Company terminates Mr. Haywards employment for any reason other than his death, disability, Just Cause, or pursuant to the
Companys retirement policy or if Mr. Hayward terminates his employment for Good Reason, the Company shall pay him a lump sum cash amount equal to 200% of the sum of (i) his base salary in effect at the time of the termination,
(ii) the greater of his target bonus for such year and the average of his bonuses for the prior five years, (iii) an amount equal to the monthly premium payable to Mr. Hayward for health and medical-care insurance coverage of
Mr. Hayward and his dependents for coverage period required under COBRA, and (iv) an amount equal to the monthly premium payable by Mr. Hayward for health and medical-care insurance coverage of Mr. Hayward and his dependents for
coverage period after the expiration of COBRA period multiplied by 12, provided however, that the amount of such premium will be capped at 150% of the premium that was payable under COBRA. In addition, Mr. Hayward is entitled to a tax gross-up
if excise taxes are imposed as a result of any payments made under the agreement. The amount of the gross-up will be sufficient to cover all such taxes, interests and penalties.

Just Cause is defined in the employment agreement as termination of employment for any of the following reasons:
(i) Mr. Haywards conviction of a felony, without the right of further appeal, which has an adverse impact on the Company or which involves the material misappropriation of the Companys assets, (ii) an intentional or
grossly negligent violation by Mr. Hayward of any reasonable policy of the Board of Directors of the Company that results in material damage to the Company and which, if such violation is curable, after notice to do so, Mr. Hayward fails
to correct within a reasonable time, or (iii) the performance of services by Mr. Hayward for any other company, entity, or person which directly competes with the Company during the time Mr. Hayward is employed by the Company, without
the written approval of the Companys Board of Directors.

Good Reason is described in the employment agreement as
(i) relocation of Mr. Haywards home due to the relocation of the corporate office beyond a 25-mile radius of the current office located in Phoenix, Arizona, or (ii) the consummation of a Change in Control.

Change in Control is defined as any of the following: (i) GCP California Fund, L.P. and its affiliates cease to beneficially own,
directly or indirectly, a majority of the voting securities of the Company, (ii) a merger or consolidation of Holdings or the Company, or (iii) the sale of substantially all of the assets of the Company, in each case in a transaction or
series of transactions as a result of which a majority of the voting securities of the Company cease to be beneficially owned, directly or indirectly, by GCP California Fund, L.P. or any of its affiliates.

Steven L. Ortega

The Company entered into an amended
and restated employment agreement with Steven Ortega on June 15, 2007, for his employment as Executive Vice President and Chief Financial Officer of the Company. The employment agreement provides for a minimum base salary of no less than
$330,750 annually. Mr. Ortega is also eligible to participate in the Companys bonus plan with a target bonus of at least 60% of his base salary in effect for the fiscal year.



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The bonus plan shall provide for a minimum bonus of 50% of target upon achievement of threshold performance. Mr. Ortega is also entitled to receive
prompt reimbursement for all expenses reasonably and necessarily incurred by him in performing his duties. Under the employment agreement, Mr. Ortega is paid an annual cash allowance for expenses, which was $16,500 for 2007 (increased annually
by 5%), that relates to his employment which might be considered partially or wholly personal in nature, and he is entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. Mr. Ortega is eligible to participate in
any medical, dental, life insurance, disability, retirement, profit-sharing, savings, stock option plan or stock-based compensation plan made generally available by the Company to executives. Additionally, he is eligible to receive vacation (not
less than 4 weeks paid vacation per year) and sick leave. The employment agreement contains non-solicitation and confidentiality covenants and provides that Mr. Ortega will serve as a Director at the will of the Companys Board of
Directors. The employment agreement expires on April 22, 2010 but shall automatically extend for successive one-year periods unless notice is given in accordance with the employment agreement.

If the Company terminates Mr. Ortegas employment for any reason other than Cause or Mr. Ortega terminates his employment for Good Reason,
Mr. Ortega will receive the following: (i) any unpaid base salary that has been earned at the time of such termination, (ii) a pro-rata portion of the cash allowance of the year less any amount previously disbursed in that year,
(iii) any reimbursements to which he was entitled, (iv) compensation for accrued but unused vacation, (v) any other amounts or benefits due after the termination of employment under the terms of other agreements, (vi) 200%
percent of (A) his base salary in effect at the time of the termination, plus (B) his target bonus for the year of termination to be paid in accordance with the Companys normal payroll procedures, (vii) reimbursement for the
premium payable by Mr. Ortega for health and medical-care insurance coverage under COBRA for a period of 18 months after termination, and (viii) independent, offsite, executive career transition and outplacement services.

Cause is defined in the employment agreement as any of the following: (i) Mr. Ortegas breach of the employment agreement or a
material Company policy, (ii) the engaging by Mr. Ortega in willful, reckless or grossly negligent misconduct, or (iii) Mr. Ortega failing or refusing to perform any material obligation or to carry out the reasonable directives
of his supervisor consistent with his duties, and Mr. Ortega fails to cure the same within a period of 10 days after written notice of such failure is provided to him by the Company.

Good Reason is deemed to exists if (i) there is a material diminution in the title and/or duties, responsibilities or authority of
Mr. Ortega, (ii) the Company requires Mr. Ortega to move to another location of the Company or any affiliate and the distance between the new job site is at least 50 miles away from metropolitan Phoenix, Arizona, (iii) there is a
willful failure or refusal by the Company to perform any material obligation under the employment agreement, or (iv) there is a reduction in Mr. Ortegas base salary or annual bonus target amount.

Michael L. Hatch

The Company entered into an
employment agreement with Michael L. Hatch on June 15, 2007, for his employment as the President and Chief Operating Officer of the Company. The employment agreement provides for an annual minimum base salary of $320,000, and provides that
Mr. Hatch is eligible during each fiscal year for an annual bonus of 60% of his annual base salary. The employment agreement provides that Mr. Hatch is eligible to participate in the Companys benefit plans consistent with the
benefits generally available to executives. Such benefits include four (4) weeks of vacation each year, personal and sick leave, disability, and medical and life insurance. Under the employment agreement Mr. Hatch is also subject to
non-solicitation and confidentiality covenants, and he serves at the will of the Companys Board of Directors.

If the Company
terminates Mr. Hatchs employment for any reason other than (i) under its retirement policy, (ii) upon Mr. Hatchs death or disability, or (iii) for Just Cause, then the Company shall pay him a lump sum amount
equal to his current annual salary and target bonus, less normal withholdings and will reimburse Mr. Hatch for a period of twelve (12) months after termination for his health and medical-care insurance coverage.

Just Cause is defined in the employment agreement as termination of employment for any of the following reasons:
(i) Mr. Hatchs breach of the employment agreement or of a material policy of the Board of Directors of the Company, (ii) the engaging by Mr. Hatch in willful, reckless or grossly negligent misconduct,
(iii) Mr. Hatchs indictment, charge, conviction or guilty pleas (or plea of nolo contendere) with respect of an offense involving moral turpitude or a felony, (iv) Mr. Hatchs failing or refusing to perform any
material obligation or to carry out the reasonable directives of Mr. Hatchs supervisor consistent with his duties, and Mr. Hatch fails to cure the same within a period of 10 days after written notice of such failure is provided to
Mr. Hatch, or (v) the performance of services by Mr. Hatch for any other company, entity, or person which directly competes with the Company during the time Mr. Hatch is employed by the Company, without the written approval of
the Board of the Company.



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##### Table of Contents

We did not execute employment agreements with any other Named Executive Officers.

Potential Payments Upon Termination or Change in Control

The following table sets forth potential payments for each Named Executive Officer in the event of various termination circumstances. This presentation assumes termination has occurred on the last business day of fiscal 2007. Due to
uncertainties inherent in this estimation process, it is possible actual payments may vary from these estimates.



|                    |  |                                             |           |     |                                     |   |           |                               |  |               |  |       |  |   |            |     |  |                                          |           |     |  |   |           |    
|------------------- |  | ------------------------------------------- | --------- | --- | ----------------------------------- | - | --------- | ----------------------------- |  | ------------- |  | ----- |  | - | ---------- | --- |  | ---------------------------------------- | --------- | --- |  | - | --------- | ---
|Name                |  | Terminationby theCompanyother thanfor Cause |           |     | Resignationby the NEOfor GoodReason |   |           | VoluntaryResignationby theNEO |  | Retirement(7) |  | Death |  |   | Disability |     |  | Terminationby NEOafter aChange inControl |          
|Lawrence H. Hayward |  | $                                           | 2,010,412 | (1) |                                     | $ | 2,010,412 | (1)                           |  |              |  |      |  | $ | 1,377,860  | (2) |  | $                                        | 1,377,860 | (2) |  | $ | 2,010,412 | (3)
|Steven L. Ortega    |  | $                                           | 1,093,381 | (4) |                                     | $ | 1,093,381 | (4)                           |  |              |  |      |  |   | 198,450    | (5) |  |                                          |          |     |  |   |          |    
|Michael L. Hatch    |  | $                                           | 523,537   | (6) |                                     |   |          |                               |  |              |  |      |  |   |           |     |  |                                          |          |     |  |   |          |    
|Janet I. McDonald   |  |                                             |          |     |                                     |   |          |                               |  |              |  |      |  |   |           |     |  |                                          |          |     |  |   |          |    
|Rick D. Carlson     |  |                                             |          |     |                                     |   |          |                               |  |              |  |      |  |   |           |     |  |                                          |          |     |  |   |          |    

---

|(1) | Comprised of 200% of (i) Mr. Haywards base salary in effect at the time of termination, (ii) the greater of his target bonus for such year and the average of
his bonuses for the prior five years, (iii) an amount equal to the monthly premium payable by Mr. Hayward for health and medical insurance coverage for him and his dependents for eighteen months and (iv) an amount equal to the monthly
premium payable by Mr. Hayward for health and medical insurance for him and his dependents coverage for the period after expiration of COBRA for twelve additional months but subject to a cap at 150% of the premium payable under COBRA.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Comprised of (i) 18 months of Mr. Haywards base salary,(ii) a pro-rata portion of the greater of his target bonus or the bonus to which he would otherwise have been
entitled for the year, (iii) a pro rata portion of his cash allowance for the year, and (iv) continuation of health insurance coverage for Mr. Haywards dependents for 18 months under COBRA.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Comprised of all amounts set forth in footnote (1) above. In addition, Mr. Hayward may be entitled to a tax gross-up calculated in accordance with the terms of his employment
agreement.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Comprised of (i) 200% of Mr. Ortegas base salary in effect at the time of termination, (ii) 200% of his target bonus for such year, (iii) an amount equal
to the monthly premium payable by Mr. Ortega for health and medical insurance coverage for him and his dependents for eighteen months, and (iv) an estimate of the costs of providing Mr. Ortega with the career transition and
outplacement services set forth in his employment agreement.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | If Mr. Ortegas employment terminates on account of death, he will receive his target bonus for the fiscal year in which he died.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(6) | Comprised of (i) Mr. Hatchs annual salary at the time of termination, (ii) his target bonus for such year, and (iii) an amount equal to the monthly premium
payable by Mr. Hatch for health and medical insurance coverage for him and his dependents for twelve months.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Directors Compensation

The following table lists each of our directors, who is not also an NEO. Generally, Directors do not receive any compensation for their service on the Companys Board of Directors other than reimbursement for
reasonable out-of-pocket expenses incurred in connection with attending meetings. However, Mr. Edward Agnew and prior to his resignation, Mr. Ted Nark, received $4,000 per each quarterly meeting of the Companys Board of Directors.

DIRECTOR COMPENSATION

For Fiscal Year Ended 2007



|                    |  |                                     |  |                      |  |                       |  |                                                |  |                                                                                 |  |                                |  |              
|------------------- |  | ----------------------------------- |  | -------------------- |  | --------------------- |  | ---------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ------------------------------ |  | -------------
|Name (a)            |  | Fees Earned or Paid in Cash ($) (b) |  | Stock Awards ($) (c) |  | Option Awards ($) (d) |  | Non-Equity Incentive Plan Compensation ($) (e) |  | Change in Pension Value and Nonqualified Deferred Compensation Earnings
($) (f) |  | All Other Compensation ($) (g) |  | Total ($) (h)
|Edward C. Agnew     |  | 16,000                              |  |                     |  |                      |  |                                               |  |                                                                                |  |                               |  | 16,000       
|Ted C. Nark (1)     |  | 8,000                               |  |                     |  |                      |  |                                               |  |                                                                                |  |                               |  | 8,000        
|John M. Baumer      |  |                                    |  |                     |  |                      |  |                                               |  |                                                                                |  |                               |  | 0            
|John G. Danhakl     |  |                                    |  |                     |  |                      |  |                                               |  |                                                                                |  |                               |  | 0            
|Michael J. Fourticq |  |                                    |  |                     |  |                      |  |                                               |  |                                                                                |  |                               |  | 0            

---

|(1) | On July 12, 2007, the Company accepted the resignation, of Mr. Ted C. Nark from the Companys board of directors. As of the effective time of
Mr. Narks resignation, he had attended two meetings of the Board of Directors and was entitled to a fee of $4,000 per meeting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compensation Committee Interlocks and Insider Participation

The Board of Directors of the Company does not have a
compensation committee. The independent members of the Companys Board of Directors sets compensation in executive session. None of our Named Executive Officers participated in discussions of the Board of Directors related to executive
compensation in fiscal 2007.

Compensation Committee Report

The Companys Board of Directors does not have a compensation committee. The Board of Directors of the Company reviewed and discussed with management the Compensation Discussion and Analysis set forth above for
the 2007 fiscal year. As a result of this review and discussion, the Board of Directors approved, the Compensation Discussion and Analysis for inclusion in this annual report.



|                    |  |                               
|------------------- |  | ------------------------------
|BOARD OF DIRECTORS: |  | Lawrence H. Hayward (Chairman)
|                    |  | Steven L. Ortega              
|                    |  | Michael L. Hatch              
|                    |  | Edward C. Agnew               
|                    |  | John M. Baumer                
|                    |  | John G. Danhakl               
|                    |  | Michael J. Fourticq           



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##### Table of Contents

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Holdings beneficially owned 100% of the Companys common stock as of September 29, 2007. Accordingly, Holdings owned 100% of the economic and voting power in the Company. The following table sets forth information as of
September 29, 2007 with respect to (i) all persons known by us to be the beneficial owner of more than 5% of Holdings common stock; (ii) all executive officers; (iii) all directors; and (iv) all directors and executive
officers as a group.



|                                                             |  |                                                           |  |                               
|------------------------------------------------------------ |  | --------------------------------------------------------- |  | ------------------------------
|Name and Address of Beneficial Owner(1)                      |  | Amount and Nature of Beneficial Ownership of Common
Stock |  | Percentage ofSharesOutstanding
|Leslies Coinvestment, LLC(2)                                |  | 9,152,403                                                 |  | 21.0                          
|John M. Baumer(2)(3)                                         |  | 33,867,730                                                |  | 77.6                          
|John G. Danhakl(2)(3)                                        |  | 33,867,730                                                |  | 77.6                          
|GCP California Fund, L.P.(3)                                 |  | 24,715,327                                                |  | 56.6                          
|Michael J. Fourticq                                          |  | 732,270                                                   |  | 1.7                           
|Edward C. Agnew                                              |  |                                                          |  |                              
|Lawrence H. Hayward                                          |  | 3,050,000                                                 |  | 7.0                           
|Steven L. Ortega                                             |  | 920,000                                                   |  | 2.1                           
|Michael L. Hatch                                             |  | 420,000                                                   |  | 1.0                           
|Janet I. McDonald                                            |  | 235,000                                                   |  | 0.5                           
|Rick D. Carlson                                              |  | 270,000                                                   |  | 0.6                           
|All executive officers and directors as a group (10 persons) |  | 39,495,000                                                |  | 90.4                          

---

|(1) | The address of Messrs. Fourticq, Hayward, Ortega, Hatch and Carlson and Ms. McDonald is 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040. The address of LGP, GCP and
Messrs. Baumer and Danhakl is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Leslies Coinvestment, LLC is a Delaware limited liability company managed by LGP. Each of Messrs. Jonathan D. Sokoloff, Peter J. Nolan, John D. Danhakl, Jonathan A. Seiffer,
John M. Baumer and Timothy J. Flynn, either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control LGP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer,
Baumer and Flynn may be deemed to be beneficial owners of the shares of the Companys common stock held or controlled by LGP. However, such individuals disclaim beneficial ownership of the securities held by LGP, except to the extent of their
respective pecuniary interests therein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | GCP is a Delaware limited partnership managed by an affiliate of LGP, which is an affiliate of the general partner of GCP. Each of Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer
and Flynn either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control the affiliate of LGP and such general partner. The affiliate of LGP and such general partner may be deemed to
control the voting and disposition of the shares of the Companys common stock owned by GCP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn may be deemed to be beneficial owners of the shares of
the Companys common stock held by GCP. However, such individuals disclaim beneficial ownership of the securities held by GCP, except to the extent of their respective pecuniary interests therein.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Management Services Agreement

We entered into a Management Services Agreement with LGP concurrent with the consummation of the 2005 Recapitalization. The Management
Services Agreement provides that we will pay LGP an annual fee of $1.0 million for ongoing management, consulting and financial services. In addition, the Management Services Agreement provides that LGP may provide us with financial advisory or
investment banking services in connection with major financial transactions, and LGP will be paid a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution
dated January 25, 2005; provided that the agreement will automatically extend for one year periods thereafter unless either we or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control,
including the date that LGP affiliates hold 40% or less of the Companys shares and (c) the consummation of a public offering of the Companys common stock in an aggregate offering amount of at least $50 million or as a result of
which at least 15% of the Companys shares of common stock is publicly traded. In the event of the Companys bankruptcy, liquidation, insolvency or winding-up, the payment of all accrued and unpaid fees pursuant to the Management Services
Agreement is subordinated to the prior payment in full of all amounts due and owing under the indenture governing the notes.

Stockholders Agreement

We entered into a Stockholders Agreement with GCP and each of the Companys other stockholders concurrent with the consummation of
the 2005 Recapitalization. The Stockholders Agreement generally restricts the transferability of the Companys stock and gives GCP and its affiliates a right of first refusal in the event any other stockholder seeks to transfer any of the
Companys stock to a third party. In addition, GCP and its affiliates have certain drag-along rights and if GCP and its affiliates desire to sell any of the Companys stock, other stockholders will have certain
tag-along rights to participate in such sale. We and certain of the non-management stockholders have certain rights to repurchase a portion of the stock held by management upon their ceasing to provide services to us. The Stockholders
Agreement also grants demand registration rights to the non-management stockholders and piggyback registration rights for all stockholders. Finally, Mr. Fourticq has certain rights to be elected as a director of Leslies.

On October 25, 2005, certain provisions of the Stockholders Agreement were amended dealing with termination of employment and in February 2007, the
Stockholders Agreement was amended further reflecting the certain modifications related to the 2007 Reorganization.

Indemnification

We have agreed that we will indemnify all of the Companys current and former directors and officers after the consummation of the 2005
Recapitalization for all costs and expenses incurred in proceedings arising out of or pertaining to the 2005 Recapitalization.

Director Independence

We are a corporation with public debt (not listed on any exchange) whose equity is privately held by Holdings, a private holding
company. Although our Board has not made a formal determination on the matter, under current New York Stock Exchange listing standards (which we are not currently subject to) and taking into account any applicable committee standards, we believe
that Messrs. Hayward, Ortega and Hatch would not be considered independent under any general listing standards or those applicable to any particular committee due to their employment relationship with the Company, Mr. Edward Agnew would not be
considered independent under any general listing standards or those applicable to any particular committee due to his sons employment with the Company as Senior Vice President of Operations, and Messrs. Danhakl and Baumer may not be considered
independent under any general listing standards or those applicable to any particular committee, due to their direct relationship with LGP and GCP, our largest shareholders.



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##### Table of Contents

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



|                       |  |            |         |            |   |        
|---------------------- |  | ---------- | ------- | ---------- | - | -------
|                       |  | Fiscal2007 |         | Fiscal2006
|Audit Fees (1)         |  | $          | 363,000 |            | $ | 297,000
|Audit-Related Fees (2) |  |            | 38,000  |            |   | 30,000 
|                       |  |            |         |            |   |        
|Total                  |  | $          | 398,000 |            | $ | 327,000

---

|(1) | Includes fees and expenses related to the fiscal year audit and interim reviews,
notwithstanding when the fees and expenses were billed or when the services were rendered.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes fees and expenses for various services rendered from October through
September of the fiscal year, notwithstanding when the fees and expenses were billed.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1), (2) The following financial statements
and financial statement schedules are included herewith and are filed as part of this annual report.



|                                                                                                                        |  |   
|----------------------------------------------------------------------------------------------------------------------- |  | --
|Report of Independent Registered Public Accounting Firm                                                                 |  | 22
|Consolidated Balance SheetsSeptember 29, 2007 and September 30, 2006                                                   |  | 23
|Consolidated Statements of OperationsYears Ended September 29, 2007, September 30, 2006 and October 1, 2005            |  | 24
|Consolidated Statements of Stockholders DeficitYears Ended September 29, 2007, September 30, 2006 and October 1, 2005 |  | 25
|Consolidated Statements of Cash Flows Years Ended September 29, 2007, September 30, 2006 and October 1, 2005           |  | 26
|Notes to Consolidated Financial Statements                                                                              |  | 27

(a)(3) The following exhibits set forth below are filed as part of this annual report or are
incorporated herein by reference.



|              |  |                                                                                                                                                                                                                                                                                                                                          
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                              
|2.1*          |  | Agreement and Plan of Merger dated as of January 7, 2005 between the Company and LPM Acquisition LLC (previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed on January 11, 2005)                                                                                                                                       
|              | 
|2.2*          |  | Agreement and Plan of Merger to Form Holding Company (previously filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)                                                                                                                                                                                    
|              | 
|3.1*          |  | Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on January 25, 2005 (previously filed as Exhibit 3.1 to the Registration Statement on Form S-4 filed
on April 22, 2005)                                                                                                                     
|              | 
|3.2*          |  | Bylaws of the Company (previously filed as Exhibit 3.5 to the Registration Statement on Form S-1 filed on June 27, 1997)                                                                                                                                                                                                                 
|              | 
|3.3*          |  | Form of Certificate of Incorporation of Surviving Corporation (previously filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)                                                                                                                                                                           
|              | 
|4.1*          |  | Indenture dated as of May 21, 2003 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 4.1 to the Registration Statement on Form S-4 filed on July 18,
2003)                                                                                                                                   
|              | 
|4.2*          |  | Supplemental Indenture dated as of January 11, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.01 to the Current Report on Form 8-K filed on
January 25, 2005)                                                                                                                     
|              | 
|4.3*          |  | Indenture dated as of January 25, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on January 28,
2005)                                                                                                                                   
|              | 
|10.1*         |  | Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslies Coinvestment, LLC and the stockholders identified on the signature pages thereto
(previously filed as Exhibit 10.1 to the Registration Statement on Form S-4 filed on April 22, 2005)                                         
|              | 
|10.2*         |  | Amendment dated as of October 25, 2005 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslies Coinvestment, LLC and the
stockholders identified on the signature pages thereto (previously filed as Exhibit 10.3 to the Annual Report on Form 10-K filed on December 20, 2005)
|              | 
|10.3*         |  | Management Services Agreement dated as of January 25, 2005 between the Company and Leonard Green & Partners, L.P. (previously filed as Exhibit 10.2 to the Registration Statement on Form S-4
filed on April 22, 2005)                                                                                                                   



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                      
|10.4*          |  | Lease Agreement dated as of August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.7 to the Registration Statement on Form S-1/A filed on
July 21, 1997)                                                       
|               | 
|10.5*          |  | First Amendment dated as of June 21, 1996 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.4 to the
Registration Statement on Form S-4 filed on April 22, 2005)             
|               | 
|10.6*          |  | Second Amendment dated as of September 30, 1999 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.5 to the
Registration Statement on Form S-4 filed on April 22, 2005)       
|               | 
|10.7*          |  | Third Amendment dated as of April 14, 2000 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.6 to the
Registration Statement on Form S-4 filed on April 22, 2005)            
|               | 
|10.8*          |  | Fourth Amendment dated as of November 1, 2004 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.9 to the
Annual Report on Form 10-K filed on December 20, 2005)              
|               | 
|10.9*          |  | Lease dated as of November 26, 1996 by and between Bedford Property Investors, Inc. and the Company (previously filed as Exhibit 10.8 to Registration Statement on Form S-1/A filed on July 21,
1997)                                                            
|               | 
|10.10*         |  | Addendum dated as of November 1996 to the Lease dated November 26, 1996 by and between Bedford Property Investors, Inc. and the Company (previously filed as Exhibit 10.8 to the Registration
Statement on Form S-4 filed on April 22, 2005)                     
|               | 
|10.11*         |  | Lease Agreement dated as of December 30, 1997 by and between Liberty Property Limited Partnership and the Company (previously filed as Exhibit 10.8 to the Registration Statement on Form S-1/A
filed on July 21, 1997)                                          
|               | 
|10.12*         |  | First Amendment dated as of June 3, 1999 to the Lease Agreement dated December 30, 1997 by and between Liberty Property Limited Partnership and the Company (previously filed as Exhibit 10.10 to
the Registration Statement on Form S-4 filed on April 22, 2005)
|               | 
|10.13*         |  | Lease dated as of April 30, 1998 by and between Paul Hemmer Development Co., III and the Company (previously filed as Exhibit 10.11 to the Registration Statement on Form S-4 filed on April 22,
2005)                                                           
|               | 
|10.14*         |  | First Addendum dated as of July 21, 1999 to the Lease dated April 30, 1998 by and between Paul Hemmer Development Co., III and the Company (previously filed as Exhibit 10.12 to the Registration
Statement on Form S-4 filed on April 22, 2005)                 
|               | 
|10.15*         |  | Lease Agreement dated as of March 30, 2004 between ProLogis and the Company (previously filed as Exhibit 10.13 to the Registration Statement on Form S-4 filed on April 22, 2005)                                                                                
|               | 
|10.16*         |  | Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.14 to the Registration Statement on Form S-4 filed on April 22,
2005)                                                                    
|               | 
|10.17*         |  | First Amendment dated as of November 30, 2000 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.15 to the
Registration Statement on Form S-4 filed on April 22, 2005)               
|               | 
|10.18*         |  | Second Amendment dated as of June 26, 2001 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.16 to the Registration
Statement on Form S-4 filed on April 22, 2005)                  
|               | 
|10.19*         |  | Third Amendment dated as of May 31, 2002 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.17 to the Registration
Statement on Form S-4 filed on April 22, 2005)                    
|               | 
|10.20*         |  | Fourth Amendment dated as of April 9, 2004 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.18 to the Registration
Statement on Form S-4 filed on April 22, 2005)                  



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|               |  |                                                                                                                                                                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                      
|10.21*         |  | Form of Directors and Officers Indemnification Agreement dated as of January 1, 2000 between the Company and certain members of management (previously filed as Exhibit 10.19 to
the Registration Statement on Form S-4 filed on April 22, 2005)                                                                                               
|               | 
|10.22*        |  | 2005 Stock Option Plan (previously filed as Exhibit 10.23 to the Annual Report on Form 10-K filed on December 20, 2005)                                                                                                                                                                                                                          
|               | 
|10.23         |  | Amended and Restated Employment Agreement dated June 15, 2007 between the Company and Lawrence H. Hayward                                                                                                                                                                                                                                        
|               | 
|10.24         |  | Amended and Restated Executive Employment Agreement dated as of June 15, 2007 between the Company and Steven L. Ortega                                                                                                                                                                                                                           
|               | 
|10.25*        |  | Employment Agreement dated as of June 15, 2007 between the Company and Michael L. Hatch (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 19, 2007)                                                                                                                                                              
|               | 
|10.26*         |  | Amended and Restated Loan and Security Agreement dated as of January 25, 2005 between the Company, LPM Manufacturing, Inc., Wells Fargo Retail Finance LLC and the other lenders parties thereto
(previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed on January 28, 2005)                                                  
|               | 
|10.27*         |  | Registration Rights Agreement, dated as of January 25, 2005, between the Company and certain holders of the Companys 7.75% Senior Notes due 2013 (previously filed as Exhibit 10.01 to the
Current Report on Form 8-K filed on January 28, 2005)                                                                                                
|               | 
|10.28          |  | First Amendment dated as of July 26, 2007 to the Lease dated November 26, 2006 by and between Bedford Property Investors, Inc. and the Company                                                                                                                                                                                                   
|               | 
|10.29*         |  | Amendment No. 2 dated as of June 15, 2006 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslies Coinvestment, LLC and the
stockholders identified on the signature pages thereto (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)   
|               | 
|10.30*         |  | Amendment No. 3 dated as of February 7, 2007 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslies Coinvestment, LLC and the
stockholders identified on the signature pages thereto (previously filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on February 9, 2007)
|               | 
|21.1*          |  | Subsidiaries (previously filed as Exhibit 21.1 to the Annual Report on Form 10-K405 filed on December 22, 1999)                                                                                                                                                                                                                                  
|               | 
|24.1           |  | Power of Attorney (included on signature page)                                                                                                                                                                                                                                                                                                   
|               | 
|31.1           |  | Certification of Lawrence H. Hayward                                                                                                                                                                                                                                                                                                             
|               | 
|31.2           |  | Certification of Steven L. Ortega                                                                                                                                                                                                                                                                                                                
|               | 
|32.1           |  | Certification of Lawrence H. Hayward and Steven L. Ortega                                                                                                                                                                                                                                                                                        

---

|* | Previously filed
|- | ----------------

| | Management contract or compensatory plan
|- | ----------------------------------------



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##### Table of Contents

COPIES OF THIS FORM 10-K MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN

REQUEST TO THE COMPANY AT THE FOLLOWING ADDRESS:

LESLIES POOLMART, INC.

3925 E. BROADWAY RD., SUITE #100

PHOENIX, ARIZONA 85040

ATTN:
CORPORATE SECRETARY



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Phoenix, State of Arizona, on December 17, 2007.



LESLIES POOLMART, INC. (Registrant)By:

/s/ STEVEN L. ORTEGASteven L. Ortega Chief Financial
Officer


KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Lawrence H. Hayward, Steven L. Ortega, and each of them, his true and lawful attorney or attorneys-in-fact and agent or agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including pre-or post-effective amendments) to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.



|                                            |  |                                                                    |  |                  
|------------------------------------------- |  | ------------------------------------------------------------------ |  | -----------------
|Signature                                   |  | Capacity                                                           |  | Date             
|/S/ LAWRENCE H. HAYWARD Lawrence H. Hayward |  | Chairman of the Board of Directors and Chief Executive Officer     |  | December 17, 2007
|                                            |  |                                                                   
|/S/ EDWARD C. AGNEW Edward C. Agnew         |  | Director                                                           |  | December 17, 2007
|                                            |  |                                                                   
|/S/ JOHN M. BAUMER John M. Baumer           |  | Director                                                           |  | December 17, 2007
|                                            |  |                                                                   
|/S/ JOHN G. DANHAKL John G. Danhakl         |  | Director                                                           |  | December 17, 2007
|                                            |  |                                                                   
|/S/ MICHAEL J. FOURTICQ Michael J. Fourticq |  | Director                                                           |  | December 17, 2007
|                                            |  |                                                                   
|/S/ MICHAEL L. HATCH Michael L. Hatch       |  | President, Chief Operating Officer andDirector                     |  | December 17, 2007
|                                            |  |                                                                   
|/S/ STEVEN L. ORTEGA Steven L. Ortega       |  | Chief Financial Officer, Director and Principal Accounting Officer |  | December 17, 2007



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