LESCO Announces First Quarter 2006 Results

CLEVELAND, April 28  /PRNewswire-FirstCall/ -- LESCO, Inc. (NASDAQ:LSCO), a leading provider of products for the professional green and pest control industries, today announced first quarter results for the period ending March 31, 2006.

First Quarter 2006 Results

Net sales for the three months ending March 31, 2006 increased 1.7% to $99.8 million from $98.1 million in the comparable period a year ago.  Gross profit on sales increased to 24.0% of net sales, or $23.9 million, compared to 23.8% of net sales, or $23.4 million, in the first quarter of 2005. Gross profit reflects the incremental cost of outsourcing the Company's manufacturing, warehouse and distribution functions to Turf Care Supply Corp. (TCS).  Due to the seasonal nature of the green industry, LESCO historically has recognized a loss in its first quarter.  The Company reported a 2006 GAAP- basis loss of $10.6 million, or $1.18 per diluted share, versus a loss of $10.7 million, or $1.21 per diluted share in 2005.

The Company's GAAP results do not reflect any tax benefit related to the Company's first quarter 2006 and first quarter 2005 loss before income tax because of the required accounting treatment for LESCO's deferred tax assets. Assuming a 39% tax rate to realize the deferred tax benefit, which LESCO typically utilizes to evaluate year-over-year performance, the Company would have reported an adjusted loss of $0.72 per diluted share in the first quarter 2006, and an adjusted loss of $0.74 per diluted share in the first quarter 2005.  Management believes these adjusted results are useful to investors to assess the Company's results from ongoing operations.  A reconciliation of our adjusted results to the most directly comparable GAAP measure is set forth in the attached Consolidated Statements of Operations GAAP to non-GAAP reconciliation.

Stores Segment Operating Results

The Stores Segment includes the operating results of the Company's Service Centers, Stores-on-Wheels(R) vehicles and field management costs.  Stores Segment net sales for the three months ended March 31, 2006, increased 10.7% to $84.2 million from $76.1 million during the same period a year ago. Service Center net sales increased 10.7% and Stores-on-Wheels net sales increased 27.1%.  Comparable Service Center sales (those opened prior to 2005) increased 5.4%.  Ice melt sales were lower than prior year due to an unseasonably warm winter; however, this decline was offset by strength in fertilizer and seed sales driven by favorable early spring conditions.  Gross profit as a percentage of net sales was 24.5% compared to 26.2% in the same period in 2005, predominantly due to the incremental cost of outsourcing the Company's manufacturing and distribution functions to TCS.

Jeffrey Rutherford, President and Chief Executive Officer, stated, "The first quarter, our lowest sales volume quarter of the year, benefited from relatively mild winter weather conditions as spring product sales accelerated, offsetting the $2.5 million in lost ice melt sales and lower-than anticipated equipment sales. Our challenge in the second quarter is to achieve the same level of sales growth while recognizing that some sales have accelerated into the first quarter."

Stores Segment selling expense increased $2.8 million on a quarter-over- quarter basis to $21.1 million, or 25.1% of net sales, from $18.3 million, or 24.1% of net sales, in 2005.  The increase in selling expense is primarily attributable to the 35 net new Service Centers and 16 new Stores-on-Wheels opened since the first quarter of 2005, along with the expansion of the field management organization to support store growth.  Merchant discounts were $1.7 million, or 2.0% of net sales, during the quarter versus $1.0 million, or 1.4% of net sales, in the same period in 2005.  This increase is primarily due to an increase in discount rates on a year-over-year basis.

Stores Segment loss before interest and taxes was $2.2 million in first quarter 2006 versus earnings before interest and taxes of $0.6 million for the same period last year.

Direct Segment Operating Results

The Direct Segment includes the operating results of all non-store transactions.  Direct Segment net sales were $15.6 million for the three months ended March 31, 2006, versus $22.0 million during the comparable period a year ago.  The decline is primarily attributable to the Company's decision in the first half of 2005 to restructure and redeploy its direct sales representatives.  Gross profit as a percentage of sales increased 600 basis points to 21.4% from 15.4% as a result of our continued focus on the profitability of direct sales, rather than the sales volume.

Direct Segment selling expense decreased $2.1 million on a quarter-over- quarter basis to $1.4 million, or 9.1% of net sales, from $3.5 million, or 16.0% of net sales, in 2005.  This decrease is due to the significant reduction of direct sales representatives.  Merchant discounts decreased $0.2 million year-over-year to $0.5 million, but increased 10 basis points to 3.1% of net sales.

Earnings before interest and taxes were $1.4 million in the current year versus a loss before interest and taxes of $0.8 million in the prior year.

Corporate

The two operating segments are supplemented by Corporate costs incurred for support functions, including Corporate selling expenses, promotional merchant discounts, general and administrative expenses, and new store pre- opening costs.  Total Corporate expense for the first quarter of 2006 was $9.7 million, compared to $10.2 million for the first quarter of 2005.

Corporate selling expense, composed of customer service, bids processing, product registration, and merchandising and marketing expenses, declined $0.7 million to $2.7 million in the first quarter of 2006 as compared to the same period in 2005. Corporate merchant discounts, which are incurred for the extension of customer payment terms, increased to $0.5 million from $0.3 million for the same period last year as the Company guaranteed some promotional, early order commitments in the fourth quarter of 2005 that were honored in the first quarter of 2006.  General and administrative expense was flat at $6.4 million in the first quarter of 2005.  Pre-opening expense in the first quarter of 2006 was $0.3 million compared to $0.2 million for the same period last year.

New Service Centers and Stores-on-Wheels

During the first quarter of 2006, the Company opened six new Service Centers and closed one.  On March 31, 2006, there were 310 Service Centers in operation, versus 275 on March 31, 2005.  The 85 Service Centers that were opened from 2003 through the end of the first quarter of 2006 generated net sales of $11.6 million for the quarter and a pre-tax loss of $1.8 million.

LESCO added three new Stores-on-Wheels during the first quarter of 2006. On March 31, 2006, there were 114 Stores-on-Wheels in operation, versus 98 on March 31, 2005.

Share Repurchase Program

In October 2005, the Company's board of directors approved the repurchase of up to 1.5 million common shares.  During the first quarter of 2006, the Company repurchased 17,160 common shares at a total cost of $0.3 million. This is in addition to the approximately 336,000 stock options that were repurchased in 2005.

Balance Sheet

As of March 31, 2006, LESCO's cash and cash equivalent balance was $8.4 million versus $9.2 million at the same time last year.  The Company had $5.2 million total debt at March 31, 2006, compared to $24.8 million as of March 31, 2005.

Conference Call

The Company will host a conference call and audio webcast with investors, analysts and other interested parties today at 8:30 a.m. (Eastern).  Hosting the call will be Jeffrey Rutherford, President and Chief Executive Officer, and Michael Weisbarth, Chief Financial Officer and Treasurer.  The live call can be accessed by dialing 1-866-277-1182, passcode 49434020.  Participants should register at least 15 minutes prior to the commencement of the call. The conference call will also include a question and answer session.

Additionally, a live audio webcast will be available to interested parties at http://www.lesco.com/.  Participants should allow at least 15 minutes prior to the commencement of the call to register, download and install necessary audio software.  Questions can be submitted either in advance or during the webcast via email to  or through the Company's corporate web site where a link will be provided on the "Home" page.

LESCO's culture demands the highest of ethical standards and accountability manifested in full and fair financial disclosure to our shareholders. LESCO management encourages the participation of our shareholders and other interested parties in our conference calls and live webcasts.  For those who cannot participate in the conference call or the live webcast, a replay will be available beginning approximately one hour after the conclusion of the event on LESCO's web site.

About LESCO, Inc.

LESCO currently serves more than 130,000 customers worldwide, through 310 LESCO Service Center(R) locations, 114 LESCO Stores-on-Wheels vehicles, the Internet, and other direct sales efforts.  Additional information about LESCO can be found on the Internet at http://www.lesco.com/.

Statements in this news release relating to sales and earnings expectations, new Service Center openings and profitability, and other statements that are not historical information are forward-looking statements and, as such, reflect only the Company's best assessment at this time. Investors are cautioned that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from such statements and investors should not place undue reliance on such statements. Factors that may cause actual results to differ materially from those projected or implied in the forward-looking statements include, but are not limited to, the final resolution of certain contingencies relative to the collection of identified accounts receivable; the Company's ability to add new Service Centers in accordance with its plans, which can be affected by local zoning and other governmental regulations and its ability to find favorable store locations, to negotiate favorable leases, to hire qualified individuals to operate the Service Centers, and to integrate new Service Centers into the Company's systems; the Company's ability to transition quickly and effectively from a golf sales representative model to a Stores-on-Wheels model; competitive factors in the Company's business, including pricing pressures; lack of availability or instability in the cost of raw materials which affects the costs of certain products; the successful and uninterrupted performance of supply chain services by Turf Care Supply Corp; the Company's ability to impose price increases on customers without a significant loss in revenues; potential rate increases by third-party carriers which affect the cost of delivery of products; changes in existing law; the Company's ability to effectively market and distribute new products; the success of the Company's operating plans; any litigation or regulatory proceedings against the Company; regional weather conditions; and the condition of the industry and the economy.  For a further discussion of risk factors, investors should refer to the Company's Securities and Exchange Commission reports, including but not limited to its Form 10-K for the year ended December 31, 2005.

   Michael Weisbarth
   Chief Financial Officer and Treasurer
   LESCO, Inc.
   [phone]



                               LESCO, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS


  (Dollars in thousands, except per             Three Months Ended March 31,
   share data)                                      2006             2005

  Net sales                                       $99,837          $98,054
     Cost of product (including
      distribution costs)                         (75,906)         (74,702)

  Gross profit on sales                            23,931           23,352

     Selling expense                              (25,212)         (25,156)
     General & administrative expense              (6,399)          (6,382)
     Merchant discounts and provision
      for doubtful accounts                        (2,607)          (2,050)
     Pre-opening expense                             (288)            (197)
     Other expense                                      -             (102)
     Other income                                     135              179

  Loss before interest and taxes                  (10,440)         (10,356)
  Interest expense, net                              (175)            (317)
  Loss before taxes                               (10,615)         (10,673)
  Income tax (provision) benefit:
     Current                                            -                -
     Deferred                                       4,261            3,540
     Change in valuation allowance                 (4,261)          (3,540)
                                                        -                -

  Net loss                                       $(10,615)        $(10,673)

  Loss per common share:
     Diluted                                       $(1.18)          $(1.21)
     Basic                                         $(1.18)          $(1.21)

  Average number of common shares and
   common share equivalents outstanding:
     Diluted                                    9,007,235        8,818,121
     Basic                                      9,007,235        8,818,121



                               LESCO, INC.
                       CONSOLIDATED BALANCE SHEETS

                                           March 31,  March 31, December 31,
  (Dollars in thousands)                     2006       2005        2005
  CURRENT ASSETS:
    Cash and cash equivalents                $8,413      $9,150     $21,030
    Accounts receivable, net                 20,204       9,653      16,310
    Inventories                              99,139     130,146      80,346
    Other                                     2,112       3,087       2,667
      TOTAL CURRENT ASSETS                  129,868     152,036     120,353
  Property, plant and equipment, net          9,253      25,506       9,624
  Other                                         910       1,196         904
                                           $140,031    $178,738    $130,881

  CURRENT LIABILITIES:
    Accounts payable                        $78,698     $76,059     $61,381
    Accrued liabilities                      19,720      19,539      24,576
    Revolving credit facility                 5,187      24,751         -
      TOTAL CURRENT LIABILITIES             103,605     120,349      85,957
  Deferred - other                            2,213       1,741       2,166
      TOTAL LIABILITIES                     105,818     122,090      88,123

  SHAREHOLDERS' EQUITY:
    Common shares--without par value--
      19,500,000 shares authorized;
      9,171,084 shares issued and
      9,153,924 outstanding at March 31,
      2006; 8,872,914 shares issued and
      outstanding at March 31, 2005 and
      8,949,921 shares issued and
      outstanding at December 31, 2005          916         887         894
    Paid-in capital                          39,906      37,235      38,051
    Treasury shares; 17,160 at March
     31, 2006; none in 2005                    (255)          -           -
    Retained earnings                        (5,660)     20,964       4,955
    Unearned compensation                      (694)     (2,438)     (1,142)
      TOTAL SHAREHOLDERS' EQUITY             34,213      56,648      42,758

                                           $140,031    $178,738    $130,881



                               LESCO, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                        For the Three Months Ended March 31,
  (Dollars in thousands)                         2006           2005
  OPERATING ACTIVITIES:
    Net loss                                  $(10,615)      $(10,673)
    Adjustments to reconcile net loss
     to net cash used in operating
     activities:
       Depreciation and amortization               883          1,652
       (Increase) decrease in accounts
        receivable                              (3,392)         7,278
       Loss on sale/disposal of
        property, plant and equipment               55             66
       Increase in inventories                 (18,793)       (29,564)
       Increase in accounts payable             17,198         19,526
       Stock compensation (forfeiture)             (14)           192
       Decrease in other items                  (4,249)        (4,479)
    NET CASH USED IN OPERATING ACTIVITIES      (18,927)       (16,002)

  INVESTING ACTIVITIES:
    Proceeds on the sale of property,
     plant and equipment                             1              1
    Purchase of property, plant and
     equipment
       Stores                                     (329)          (860)
       Other                                      (250)          (306)
    NET CASH USED IN INVESTING ACTIVITIES         (578)        (1,165)

  FINANCING ACTIVITIES:
    Increase in overdraft balances                 119            162
    Proceeds from borrowings, net                5,187         17,448
    Purchase of treasury shares                   (255)             -
    Exercised stock options                      1,837            606
    NET CASH PROVIDED BY FINANCING
     ACTIVITIES                                  6,888         18,216

  Net change in cash and cash equivalents      (12,617)         1,049

  Cash and cash equivalents - Beginning
   of the period                                21,030          8,101

    CASH AND CASH EQUIVALENTS - END OF
     THE PERIOD                                 $8,413         $9,150

  Supplemental disclosure of cash flow
   information:
    Interest paid, including letters of
     credit and unused facility fees             $(126)         $(299)
    Income taxes (paid) refunded                  $(34)          $(32)



                               LESCO, INC.
                         SEGMENT INCOME STATEMENT

                                       Three Months Ended March 31,
  (Dollars in thousands)                Stores             Direct Sales
                                    2006       2005       2006      2005

  Net sales                       $84,196    $76,060    $15,641   $21,994
     Cost of Product (including
      distribution costs)         (63,609)   (56,100)   (12,297)  (18,602)
  Gross profit on sales            20,587     19,960      3,344     3,392
      % to Net Sales                 24.5  %    26.2  %    21.4 %    15.4 %

    Selling expense               (21,133)   (18,305)    (1,426)   (3,517)
      % to Net Sales                (25.1) %   (24.1) %    (9.1)%   (16.0)%

    Merchant discounts             (1,652)    (1,048)      (478)     (657)
      % to Net Sales                 (2.0) %    (1.4) %    (3.1)%    (3.0)%

    Pre-opening expense                 -          -          -         -
      % to Net Sales                    -          -          -         -

    General & administrative
     expense                            -          -          -         -
      % to Net Sales                    -          -          -         -

    Other income (expense)              -          -          -         -
      % to Net Sales                    -          -          -         -

  Earnings (loss) before interest
   and taxes                      $(2,198)      $607     $1,440     $(782)
      % to Net Sales                 (2.6) %     0.8  %     9.2 %    (3.6)%



                                         Three Months Ended March 31,
  (Dollars in thousands)               Corporate              Total
                                    2006      2005      2006        2005

  Net sales                           $-        $-     $99,837    $98,054
     Cost of Product (including
      distribution costs)              -         -     (75,906)   (74,702)
  Gross profit on sales                -         -      23,931     23,352
      % to Net Sales                                      24.0 %     23.8 %

    Selling expense                 (2,653)   (3,334)  (25,212)   (25,156)
      % to Net Sales                                     (25.3)%    (25.7)%

    Merchant discounts                (477)     (345)   (2,607)    (2,050)
      % to Net Sales                                      (2.6)%     (2.1)%

    Pre-opening expense               (288)     (197)     (288)      (197)
      % to Net Sales                                      (0.3)%     (0.2)%

    General & administrative
     expense                        (6,399)   (6,382)   (6,399)    (6,382)
      % to Net Sales                                      (6.4)%     (6.5)%

    Other income (expense)             135        77       135         77
      % to Net Sales                                       0.1 %      0.1 %

  Earnings (loss) before interest
   and taxes                       $(9,682) $(10,181) $(10,440)  $(10,356)
      % to Net Sales                                     (10.5)%    (10.6)%



                               LESCO, INC.
        SALES BY CUSTOMER SECTOR AND TRANSACTING SELLING LOCATIONS

                                          Three Months Ended March 31,
                                                      2006

                                                 Stores
                                        Service    on
  (Dollars in millions)                 Centers  Wheels  Direct    Total

  Lawn care                               $69.7    $0.6    $15.1    $85.4
  Golf                                      5.9     8.9      0.6     15.4
  Gross sales                              75.6     9.5     15.7    100.8
  Net sales adjustments (a)                (0.3)   (0.6)    (0.1)    (1.0)
     Net sales                            $75.3    $8.9    $15.6    $99.8


                                         Three Months Ended March 31,
                                                    2005

                                              Stores
                                     Service   on
  (Dollars in millions)              Centers  Wheels  Other  Direct  Total

  Lawn care                           $62.7   $0.2    $0.9   $18.3   $82.1
  Golf                                  6.4    7.3     0.2     3.8    17.7
  Gross sales                          69.1    7.5     1.1    22.1    99.8
  Net sales adjustments (a)            (1.1)  (0.5)     -     (0.1)   (1.7)
     Net sales                        $68.0   $7.0    $1.1   $22.0   $98.1


                                                   % Change

                                 Service  Stores on
  (Dollars in millions)          Centers   Wheels   Other   Direct   Total
  Lawn care                        11.2 %   200.0 % (100.0)% (17.5)%   4.0 %
  Golf                             (7.8)     21.9   (100.0)  (84.2)  (13.0)
  Gross sales                       9.4      26.7   (100.0)  (29.0)    1.0
  Net sales adjustments (a)        72.7     (20.0)       -      -     41.2
     Net sales                     10.7 %    27.1 % (100.0)%  29.1 %   1.7 %


  (a) Net sales adjustments include freight revenue reduced by agency
      sales, customer discounts, and rebates.



                               LESCO, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                     GAAP to Non-GAAP Reconciliation

                                          Three Months Ended March 31, 2006

                                                                   Results
                                             GAAP         (a)     Including
                                            Results  Adjustments Adjustments
   (Dollars in thousands,                                        (Non-GAAP)
    except per share data)

  Net sales                                  $99,837        $-      $99,837
    Cost of product (including
     distribution costs)                     (75,906)        -      (75,906)
  Gross profit on sales                       23,931         -       23,931
    Selling expense                          (25,212)        -      (25,212)
    General & administrative expense          (6,399)        -       (6,399)
    Merchant discounts and provision
     for doubtful accounts                    (2,607)        -       (2,607)
    Pre-opening expense                         (288)        -         (288)
    Other expense                                  -         -            -
    Other income                                 135         -          135

  Loss before interest and taxes             (10,440)        -      (10,440)
  Interest expense, net                         (175)        -         (175)
  Loss before taxes                          (10,615)        -      (10,615)
  Income tax (provision) benefit:
    Current                                              4,140        4,140
    Deferred                                   4,261         -        4,261
    Change in valuation allowance             (4,261)        -       (4,261)
                                                   -         -        4,140
  Net loss                                  $(10,615)   $4,140      $(6,475)

  Loss per common share:
    Diluted                                   $(1.18)    $0.46       $(0.72)
    Basic                                     $(1.18)                $(0.72)
  Average number of common shares and
   common share equivalents outstanding:
    Diluted                                9,007,235              9,007,235
    Basic                                  9,007,235              9,007,235



                    Three Months Ended March 31, 2005
                                                                   Results
                                             GAAP         (a)     Including
                                            Results  Adjustments Adjustments
   (Dollars in thousands,                                        (Non-GAAP)
    except per share data)

  Net sales                                 $98,054        $-      $98,054
    Cost of product (including
     distribution costs)                    (74,702)        -      (74,702)
  Gross profit on sales                      23,352         -       23,352
    Selling expense                         (25,156)        -      (25,156)
    General & administrative expense         (6,382)        -       (6,382)
    Merchant discounts and provision
     for doubtful accounts                   (2,050)        -       (2,050)
    Pre-opening expense                        (197)        -         (197)
    Other expense                              (102)        -         (102)
    Other income                                179         -          179

  Loss before interest and taxes            (10,356)        -      (10,356)
  Interest expense, net                        (317)        -         (317)
  Loss before taxes                         (10,673)        -      (10,673)
  Income tax (provision) benefit:
    Current                                       -     4,162        4,162
    Deferred                                  3,540         -        3,540
    Change in valuation allowance            (3,540)        -       (3,540)
                                                  -         -            -
  Net loss                                 $(10,673)   $4,162      $(6,511)

  Loss per common share:
    Diluted                                  $(1.21)    $0.47       $(0.74)
    Basic                                    $(1.21)                $(0.74)
  Average number of common shares and
   common share equivalents outstanding:
    Diluted                               8,818,121              8,818,121
    Basic                                 8,818,121              8,818,121


  (a) On a generally accepted accounting principles (GAAP) basis, LESCO
      cannot recognize the benefit of establishing a deferred tax asset to
      be realized in a future period because of the required accounting
      treatment for its current tax position.  Management believes that in
      order to present a meaningful comparison to historical Company
      results, a tax benefit should be reflected based on the operating loss
      recorded in the first quarter of 2006 and 2005.  This assumes that
      LESCO will realize benefits in the future from its deferred tax
      assets.   The adjusted results reflect a tax benefit calculated
      assuming a tax rate of 39%.


DATASOURCE: LESCO, Inc.



CONTACT:  Michael Weisbarth, Chief Financial Officer and Treasurer of

LESCO, Inc., [phone]



Web site:  http://www.lesco.com/

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