LMNOP

1. LMNOP Lyndsay Tapases, Lead Forecaster Monica Tassoni, Manager & CEO Mike Griffith, Index Developer Nick Vita, Lead Researcher

2. About Us • LMNOP, Lyndsay, Mike, Monica and Nick Operations was founded in 2007. • The mission of LMNOP is to deliver the most precise and up to date forecasts for all clients nationwide. • LMNOP’s forecasts are used in a variety of indices specialized for each client. • Each index has been fine tuned, tested, and designed uniquely to cater to each clients’ specific needs. • LMNOP and its hard working team of talented forecasters will create the perfect index to help your company reduce cost.

3. History of Forecasting • Predicting future weather has always been a hassle for many because it is a complex and difficult task • Knowledge of weather is on the rise • Accuracy in weather forecasting has been on the rise. • 48-hr precipitation forecasts are now as accurate as 24-hr forecasts compared to a decade ago • Skill of the five-day forecast has more than doubled since the late 1970s • Skill of operational forecast of U.S. temperature and precipitation for an average of 6-10 days has more than doubled since the 1970s

4. Short Term • Short term forecasts are most important • Increase in accuracy http://www.vos.noaa.gov/MWL/dec_07/Images/Figure3-WeatherPrediction.jpg

5. Medium/Long Range • 1-2 weeks • Recent developments in academia and technology have increased the knowledge of weather patterns • Numerical weather prediction systems and ensemble techniques are improving • Accuracy in predicting severe weather over a week in advance • Better computer models and forecasters working together

6. Seasonal Outlooks • Become more popular over the past decades • Climate Prediction Center (CPC) • Outlooks like this can really help a company prepare for conditions that have the potential to devastate business.

7. CPC Outlooks • Outlooks can be incorporated into weekly forecasts http://www.cpc.noaa.gov/products/predictions/long_range/lead01/off01_temp.gif http://www.cpc.noaa.gov/products/predictions/long_range/lead01/off01_prcp.gif\

8. The Vital Forecaster • Even though weather forecasting tools and models have been increasing in accuracy and readily available to the public, there is still one important aspect that needs to be factored in. Forecasters remain an integral part of the current state of forecasting. Forecasters today are better educated and continually trained on how best to use the latest data, model outputs and forecast tools (1). Models and data are like guidelines that a forecaster can use when putting a weather forecast together. With knowledge of the weather being so great these days, forecasters are able to improve this data and create a more accurate, detailed and even localized forecast. At LMNOP, we know that we have the best forecast due the experience and superior quality each of our forecasters carry with them. With that being said, we would now like to introduce you to the talented faces of LMNOP.

9. Leslie’s Poolmart, Inc. • Leslie’s Poolmart, Inc. is the leading national specialty retailer of swimming pool supplies and related products. • The company currently markets its products through 604 company-owned retail stores in 35 states, mail order catalogues sent to selected pool owners nationwide, and internet web stores. • These company owned stores, mail order catalogues, and internet web stores represent a wide range of geographical locations nation-wide, each with very different daily and yearly weather patterns. • Certain regions of the nation are likely to be in favorable weather patterns at different times of the week, month, or year, which is why a weather index would be beneficial to help the corporation pinpoint that information.

10. Distribution of Stores

11. 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. • Although Leslie’s does feel the company has a distinct advantage over the competition, we at LMNOP seek to minimize losses due to situations that could have been avoided had the appropriate short or long range forecast been known ahead of time by the company.

12. Seasonality • The company’s business exhibits substantial seasonality, which the company believes is typical of the swimming pool supply industry. The principal external factor affecting the company’s business is weather. • In general, sales and net incomes 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. • In FY 2008. Leslie’s incurred a loss of $7 million in the quarter ending December 29, and a loss of $6 million in the quarter ending March 29th.

13. Seasonality • 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. • A weather index would provide short and long range forecasts for the company for each individual location of its stores nationwide. • This would give the company an advantage in that it could prepare for an exceptionally favorable weather pattern in one location or an exceptionally unfavorable patter in a different location.

14. The Weather and Leslie’s • As a pool company, the weather will influence the amount of sales, what people purchase, and when they will purchase products. • Hot weather creates a higher frequency of pool usage. • Cool weather and rain can cause pool usage to decrease substantially. • This can really hurt sales when this type of weather pattern is prevailing in the peak months of June-September. • Monitoring future weather for a pool company can save a substantial amount of money. • Long range forecasts can influence the decision for a company to send certain supplies to a particular region of the U.S. • Weather can also have an influence on the amount of employees Leslie’s regional stores would need. • Our index is to help the company save as much as possible through inventory, overtime cost and operational expenses.

15. The “Dive-In”-dex • Addition to familiar weather indices • UV Index, Heat Index • The formulation for the index is as follows: [.35(25-POP/4) + .25(HI) +.15(CC) +.1(25-W) +.1(DFN) +.5(TOY)]. • Takes this formula based on weather variables and gives a number between 0 and 25 • 0 is worst swimming index and thus lowest expected sales • 25 is perfect swimming conditions for the weekend • Index is indicative expected sales

16. The Forecast • Accurate forecasts can be issued up to a week in advance • Index is issued Monday of every week • Monday is perfect for issuance so Leslie’s can have the week to prepare for the potentially busy weekend • Can order extra supplies if there is a high index 20-25 for the upcoming weekend • Can use advertising to boost sales when index is 0-20

17. Weekly Sales • Spoke with representatives from stores in Pennsylvania, Texas, and California • They stated that for the most part their busiest days of the week were Friday and Saturday • Index will help company decide on what types of products sold based upon month • Warmer months would sell pool accessories • Cooler months such as early spring and late fall would sell open and closing supplies respectively

18. Meteorological Variables • Important in deciding swimming comfort levels for the public • Weighted from most to least important • Probability of Precipitation (POP), ), heat index (HI), temperature departure from normal (DFN), Cloud cover (CC), wind speed (W), and the time of year (TOY) • Probability of Precipitation is most crucial factor since people do not want to swim outdoors in the rain

19. Source of Data for Index • We will be making our own forecasts based on computer models • We would not be using these specific maps for our forecasts. • Non meteorological components include day of the week for sales • Busy days of the week for shopping are usually Friday and Saturday • With good swimming weather this means higher sales on these two days • Bad weather (low index) means less sales, use advertising during those weeks

20. Graphics from www.accuweather.com and www.wunderground.com