##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

|                                |  |                               
|------------------------------- |  | ------------------------------
|For quarter ended June 30, 2002 |  | Commission File Number 0-13147

LESCO, INC.

(Exact name of registrant as specified in its charter)


|                                                              |  |                                        
|------------------------------------------------------------- |  | ---------------------------------------
|OHIO                                                          |  | 34-0904517                             
|                                                             
|                                                             
|                                                             
|                                                             
|State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |  |                                        
|                                                             
|                                                             
|                                                             
|                                                             
|15885 Sprague RoadStrongsville, Ohio                          |  | 44136                                  
|                                                             
|                                                             
|                                                             
|                                                             
|(Address of principal executive offices)                      |  | (Zip Code)                             

(440) 783-9250
(Registrants telephone number,
including area code)

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 twelve 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 BOX) No (BOX)

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the close of the latest practical date.

|                                 |  |                            
|-------------------------------- |  | ---------------------------
|Class                            |  | Outstanding atJuly 26, 2002
|                                
|                                
|                                
|                                
|Common shares, without par value |  | 8,545,786 shares           

1



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TABLE OF CONTENTS



|                                                  |                                                                                               |                                                  |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------ |  |  |  |  |  | 
|PART 1. FINANCIAL INFORMATION                    
|                                                  | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED
|                                                  |                                                                                               | CONSOLIDATED BALANCE SHEETS                     
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS           
|                                                  |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      
|                                                  | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED 
|CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED 
|                                                  | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK                               
|PART II  OTHER INFORMATION                      
|SIGNATURES                                       
|EX-10(Y)(3) 13  Revolving Credit Term Loan Agrmnt
|EX-99.2  Consent Pursuant to Section 906         
|EX-99.2  Consent Pursuant to Section 906         



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##### Table of Contents






PART 1. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED

|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---- | -------------------------- | ------- | ------------------------ | ---- | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                            |                                                                                            |      | Three Months Ended June 30 |         | Six Months Ended June 30
|                                                                                            |                                                                                            |      |                            |         |                         
|(In thousands, except per share data)                                                       |                                                                                            | 2002 |                            | 2001    |                          | 2002 |         | 2001   
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |        
|Net sales                                                                                   |                                                                                            | $    | 166,493                    |         |                          | $    | 164,129 |         |   | $ | 259,972 |         |   | $ | 254,857 |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cost of sales                                                                              |      |                            | 109,494 |                          |      |         | 109,283 |   |   |         | 172,921 |   |   |         | 172,614 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cost of sales inventory markdown  Note F                                                  |      |                            | 9,581   |                          |      |         |        |   |   |         | 9,581   |   |   |         |        |  
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Gross profit on sales                                                                       |                                                                                            |      | 47,418                     |         |                          |      | 54,846  |         |   |   | 77,470  |         |   |   | 82,243  |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Warehouse & delivery expense                                                               |      |                            | 12,874  |                          |      |         | 13,888  |   |   |         | 22,790  |   |   |         | 23,323  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Selling expense                                                                            |      |                            | 19,715  |                          |      |         | 19,906  |   |   |         | 37,967  |   |   |         | 37,736  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | General & administrative expense                                                           |      |                            | 8,122   |                          |      |         | 7,727   |   |   |         | 16,737  |   |   |         | 15,242  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Asset rationalization  Note E                                                             |      |                            | 12,044  |                          |      |         |        |   |   |         | 12,044  |   |   |         |        |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Severance expense  Note E                                                                 |      |                            | 1,791   |                          |      |         | 380     |   |   |         | 3,866   |   |   |         | 498     |  
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|                                                                                            |                                                                                            |      | 54,546                     |         |                          |      | 41,901  |         |   |   | 93,404  |         |   |   | 76,799  |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Income (loss) from operations                                                               |                                                                                            |      | (7,128                     | )       |                          |      | 12,945  |         |   |   | (15,934 | )       |   |   | 5,444   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Joint venture results                                                                      |      |                            | (28     | )                        |      |         | (180    | ) |   |         | (28     | ) |   |         | (184    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Customer finance charges                                                                   |      |                            | (394    | )                        |      |         | (451    | ) |   |         | (780    | ) |   |         | (970    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other income                                                                               |      |                            | (144    | )                        |      |         | (229    | ) |   |         | (268    | ) |   |         | (389    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other expense                                                                              |      |                            | 142     |                          |      |         | 94      |   |   |         | 539     |   |   |         | 373     |  
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|                                                                                            |                                                                                            |      | (424                       | )       |                          |      | (766    | )       |   |   | (537    | )       |   |   | (1,170  | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Earnings (loss) before interest and taxes                                                   |                                                                                            |      | (6,704                     | )       |                          |      | 13,711  |         |   |   | (15,397 | )       |   |   | 6,614   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Interest expense                                                                            |                                                                                            |      | 1,323                      |         |                          |      | 1,659   |         |   |   | 2,657   |         |   |   | 3,567   |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Income (loss) before taxes, extraordinary charge and
cumulative effect of accounting change |                                                                                            |      | (8,027                     | )       |                          |      | 12,052  |         |   |   | (18,054 | )       |   |   | 3,047   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Income taxes (benefit)                                                                      |                                                                                            |      | (3,020                     | )       |                          |      | 4,517   |         |   |   | (6,788  | )       |   |   | 1,113   |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Income (loss) before extraordinary charge and
cumulative effect of accounting change        |                                                                                            |      | (5,007                     | )       |                          |      | 7,535   |         |   |   | (11,266 | )       |   |   | 1,934   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Extraordinary charge, net of taxes of $1,697 - Note G                                      |      |                            |        |                          |      |         |        |   |   |         | 2,853   |   |   |         |        |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cumulative effect of accounting change
for goodwill charge, net of taxes of $2,735- Note I |      |                            |        |                          |      |         |        |   |   |         | 4,597   |   |   |         |        |  
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Net income (loss)                                                                           |                                                                                            | $    | (5,007                     | )       |                          | $    | 7,535   |         |   | $ | (18,716 | )       |   | $ | 1,934   |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Basic earnings (loss) per share:                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Income (loss) before extraordinary charge and
cumulative effect of accounting change        |                                                                                            | $    | (0.59                      | )       |                          | $    | 0.89    |         |   | $ | (1.33   | )       |   | $ | 0.23    |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Diluted earnings (loss) per share:                                                          |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Income (loss) before extraordinary charge and
cumulative effect of accounting change        |                                                                                            | $    | (0.59                      | )       |                          | $    | 0.88    |         |   | $ | (1.33   | )       |   | $ | 0.23    |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Extraordinary charge, net of taxes                                                          |                                                                                            |      |                           |         |                          |      |        |         |   |   | (0.34   | )       |   |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cumulative effect of accounting change, net of taxes                                        |                                                                                            |      |                           |         |                          |      |        |         |   |   | (0.54   | )       |   |   |        |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Basic earnings (loss) per share:                                                            |                                                                                            | $    | (0.59                      | )       |                          | $    | 0.89    |         |   | $ | (2.21   | )       |   | $ | 0.23    |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        
|Diluted earnings (loss) per share:                                                          |                                                                                            | $    | (0.59                      | )       |                          | $    | 0.88    |         |   | $ | (2.21   | )       |   | $ | 0.23    |        
|                                                                                            |                                                                                            |      |                            |         |                          |      |         |         |   |   |         |         |   |   |         |        

See Notes to Consolidated Financial Statements.

2



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##### Table of Contents






LESCO, INC.
CONSOLIDATED BALANCE SHEETS

|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |         |         | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------- | ------- | --------- | ------ | ----------- | ------- |  | ------ | ------- | ------- | 
|                                     |                                                                                                                                                                                               |                                            |        | June 30     |         | June 30   |        | December 31
|(In thousands, except share data)    |                                                                                                                                                                                               | 2002                                       |        | 2001        |         | 2001     
|                                     |                                                                                                                                                                                               |                                            |        |             |         |          
|                                     |                                                                                                                                                                                               |                                            |        | (unaudited) |         | (audited)
|ASSETS                               |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                    
|                                    
|                                    
|                                    
|CURRENT ASSETS:                      |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash                                                                                                                                                                                          |                                            | $      | 4,043       |         |           | $      | 5,366       |         |  | $      | 5,035   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable  net of allowance
of $4,854, $4,762 and $4,370, respectively                                                                                                             |                                            |        | 84,842      |         |           |        | 53,859      |         |  |        | 37,571  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Inventories
Raw materials                                                                                                                                                                     |                                            |        | 10,689      |         |           |        | 11,234      |         |  |        | 10,197  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                                                                                                               | Finished goods                             |        |             | 91,156  |           |        |             | 102,828 |  |        |         | 82,799  | 
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | Total inventories                          |        |             | 101,845 |           |        |             | 114,062 |  |        |         | 92,996  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred income taxes                                                                                                                                                                         |                                            |        | 6,496       |         |           |        | 2,576       |         |  |        | 1,753   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses and other assets                                                                                                                                                             |                                            |        | 8,346       |         |           |        | 1,684       |         |  |        | 6,333   |        
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | TOTAL CURRENT ASSETS                       |        |             | 205,572 |           |        |             | 177,547 |  |        |         | 143,688 | 
|                                    
|                                    
|                                    
|                                    
|Property, plant and equipment        |                                                                                                                                                                                               |                                            | 79,128 |             |         |           | 91,198 |             |         |  | 96,936 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Less allowance for depreciation and amortization                                                                                                                                              |                                            |        | (43,568     | )       |           |        | (43,949     | )       |  |        | (47,676 | )      
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | Net property, plant and equipment          |        |             | 35,560  |           |        |             | 47,249  |  |        |         | 49,260  | 
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                                                                                                                                                                               |                                            | 5,328  |             |         |           | 10,504 |             |         |  | 11,648 |        
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | TOTAL ASSETS                               |        | $           | 246,460 |           |        | $           | 235,300 |  |        | $       | 204,596 | 
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                    
|                                    
|                                    
|                                    
|CURRENT LIABILITIES:                 |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                                                                              |                                            | $      | 85,886      |         |           | $      | 72,110      |         |  | $      | 46,847  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other current liabilities                                                                                                                                                                     |                                            |        | 17,441      |         |           |        | 9,618       |         |  |        | 9,181   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of debt                                                                                                                                                                       |                                            |        | 1,140       |         |           |        | 5,813       |         |  |        | 970     |        
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | TOTAL CURRENT LIABILITIES                  |        |             | 104,467 |           |        |             | 87,541  |  |        |         | 56,998  | 
|                                    
|                                    
|                                    
|                                    
|Long-term debt                       |                                                                                                                                                                                               |                                            | 64,266 |             |         |           | 45,347 |             |         |  | 50,141 |        
|                                    
|                                    
|                                    
|                                    
|Deferred income taxes                |                                                                                                                                                                                               |                                            | 1,347  |             |         |           | 3,120  |             |         |  | 3,541  |        
|                                    
|                                    
|                                    
|                                    
|SHAREHOLDERS EQUITY:                |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred shareswithout par value
500,000 shares authorized; 1,523 share issued
and outstanding in 2002, liquidation value $1,000 per share                                                 |                                            |        | 1,523       |         |           |        |            |         |  |        |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Common shareswithout par value
19,500,000 shares authorized; 8,633,053 shares issued
and 8,541,286 outstanding at June 30, 2002, 8,551,885
at June 30, 2001, 8,560,120 at December 31, 2001 |                                            |        | 863         |         |           |        | 862         |         |  |        | 863     |        
|                                    
|                                    
|                                    
|                                    
|                                     | Paid-in capital                                                                                                                                                                               |                                            |        | 34,850      |         |           |        | 34,806      |         |  |        | 34,800  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                                                                                                                                                                             |                                            |        | 41,493      |         |           |        | 65,665      |         |  |        | 60,208  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income (loss)                                                                                                                                                 |                                            |        | (395        | )       |           |        | (91         | )       |  |        |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Less treasury shares, 91,777 at June 30, 2002, 63,083 at
June 30, 2001, 68,443 at December 31, 2001                                                                                           |                                            |        | (1,623      | )       |           |        | (1,262      | )       |  |        | (1,263  | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Unearned compensation                                                                                                                                                                         |                                            |        | (331        | )       |           |        | (688        | )       |  |        | (692    | )      
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | TOTAL SHAREHOLDERS EQUITY                 |        |             | 76,380  |           |        |             | 99,292  |  |        |         | 93,916  | 
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        
|                                     |                                                                                                                                                                                               | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |        | $           | 246,460 |           |        | $           | 235,300 |  |        | $       | 204,596 | 
|                                     |                                                                                                                                                                                               |                                            |        |             |         |           |        |             |         |  |        |        

See Notes to Consolidated Financial Statements.

3



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##### Table of Contents






LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                               |                                                                                   |                                                 |       |                  |         |   |       |          |         |  
|------------------------------ | --------------------------------------------------------------------------------- | ----------------------------------------------- | ----- | ---------------- | ------- | - | ----- | -------- | ------- | -
|                               |                                                                                   |                                                 |       | Six Months Ended
|                               |                                                                                   |                                                 |       | June 30         
|                               |                                                                                   |                                                 |       |                 
|(In thousands)                 |                                                                                   | 2002                                            |       | 2001            
|                               |                                                                                   |                                                 |       |                 
|                               |                                                                                   |                                                 |       | (unaudited)     
|OPERATING ACTIVITIES:          |                                                                                   |                                                 |       |                  |         |   |       |         
|                              
|                              
|                              
|                              
|                               | Net loss before extraordinary charge and cumulative effect of accounting change   |                                                 | $     | (11,266          | )       |   | $     | 1,934    |        
|                              
|                              
|                              
|                              
|                               | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                 |       |                  |         |   |       |          |        
|                              
|                              
|                              
|                              
|                               |                                                                                   | Depreciation and amortization                   |       |                  | 5,185   |   |       |          | 4,806   |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Asset rationalization                           |       |                  | 12,044  |   |       |          |        |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Inventory markdown                              |       |                  | 9,581   |   |       |          |        |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Deferred income taxes                           |       |                  | (3,948  | ) |       |          |        |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Decrease (increase) in accounts receivable      |       |                  | (17,253 | ) |       |          | (11,116 | )
|                              
|                              
|                              
|                              
|                               |                                                                                   | Provision for uncollectible accounts receivable |       |                  | 1,182   |   |       |          | 786     |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Increase in inventories                         |       |                  | (18,430 | ) |       |          | (14,018 | )
|                              
|                              
|                              
|                              
|                               |                                                                                   | Increase in accounts payable                    |       |                  | 39,039  |   |       |          | 38,806  |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Increase in other current items                 |       |                  | 3,350   |   |       |          | 1,097   |  
|                              
|                              
|                              
|                              
|                               |                                                                                   | Other assets/liabilities                        |       |                  | (1,007  | ) |       |          | (540    | )
|                               |                                                                                   |                                                 |       |                  |         |   |       |         
|                               | NET
CASH PROVIDED BY OPERATING ACTIVITIES                                         |                                                 |       | 18,477           |         |   |       | 21,755   |        
|                              
|                              
|                              
|                              
|INVESTING ACTIVITIES:          |                                                                                   |                                                 |       |                  |         |   |       |         
|                              
|                              
|                              
|                              
|                               | Purchase of property, plant and equipment                                         |                                                 |       | (614             | )       |   |       | (3,521   | )      
|                               |                                                                                   |                                                 |       |                  |         |   |       |         
|                               | NET CASH USED IN INVESTING ACTIVITIES                                             |                                                 |       | (614             | )       |   |       | (3,521   | )      
|                              
|                              
|                              
|                              
|FINANCING ACTIVITIES:          |                                                                                   |                                                 |       |                  |         |   |       |         
|                              
|                              
|                              
|                              
|                               | Sale (purchase) of accounts receivable                                            |                                                 |       | (31,200          | )       |   |       | 35,000   |        
|                              
|                              
|                              
|                              
|                               | Proceeds from borrowings                                                          |                                                 |       | 306,863          |         |   |       | 110,800  |        
|                              
|                              
|                              
|                              
|                               | Reduction of borrowings                                                           |                                                 |       | (292,568         | )       |   |       | (159,447 | )      
|                              
|                              
|                              
|                              
|                               | Deferred financing fees                                                           |                                                 |       | (2,000           | )       |   |       |         |        
|                              
|                              
|                              
|                              
|                               | Issuance of common shares, net of treasury shares                                 |                                                 |       | 50               |         |   |       | (70      | )      
|                               |                                                                                   |                                                 |       |                  |         |   |       |         
|                               | NET CASH USED BY FINANCING ACTIVITIES                                             |                                                 |       | (18,855          | )       |   |       | (13,717  | )      
|                               |                                                                                   |                                                 |       |                  |         |   |       |         
|Net change in cash             |                                                                                   |                                                 | (992  | )                |         |   | 4,517 |         
|                              
|                              
|                              
|                              
|Cash  Beginning of the period |                                                                                   |                                                 | 5,035 |                  |         |   | 849   |         
|                               |                                                                                   |                                                 |       |                  |         |   |       |         
|                               | CASH  END OF THE PERIOD                                                          |                                                 | $     | 4,043            |         |   | $     | 5,366    |        
|                               |                                                                                   |                                                 |       |                  |         |   |       |         

See Notes to Consolidated Financial Statements.

4



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##### Table of Contents






LESCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A  Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the requirements of Regulation S-X
and Form 10-Q. The statements reflect all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the results for interim periods. For further
information, refer to the audited financial statements and footnotes thereto
for the year ended December 31, 2001 included in the
Companys Form 10-K and the Companys unaudited
financial statements and footnotes for the quarter ended
March 31, 2002 included in the Companys Form 10-Q.

Operating results for the six months ended June 30, 2002 are not
necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Companys business. Severance costs have been
reclassified in the prior period to conform with current year presentation.

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##### Table of Contents



NOTE B  Earnings per Share

The following table sets forth the computation of basic and diluted earnings
per share:

|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |        | 
|------------------------------------------------------------------------------------ | ---------------------------------------------------- | ---- | -------------------------- | ------- | ------------------------ | ---- | --------- | ------ |  | - | --------- | ------- | - | - | --------- | ------ | 
|                                                                                     |                                                      |      | Three Months Ended June 30 |         | Six Months Ended June 30
|                                                                                     |                                                      |      |                            |         |                         
|(In thousands, except per share data)                                                |                                                      | 2002 |                            | 2001    |                          | 2002 |           | 2001  
|                                                                                     |                                                      |      |                            |         |                          |      |           |       
|Numerator:                                                                           |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Income (loss) before extraordinary charge and
cumulative effect of accounting change |                                                      | $    | (5,007                     | )       |                          | $    | 7,535     |        |  | $ | (11,266   | )       |   | $ | 1,934     |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Preferred stock dividends                            |      |                            | (26     | )                        |      |           |       |  |   |           | (52     | ) |   |           |       | 
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Income (loss) available to common shareholders                                       |                                                      |      | (5,033                     | )       |                          |      | 7,535     |        |  |   | (11,318   | )       |   |   | 1,934     |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Extraordinary charge, net of taxes                   |      |                            |        |                          |      |           |       |  |   |           | (2,853  | ) |   |           |       | 
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Cumulative effect of accounting change, net of taxes |      |                            |        |                          |      |           |       |  |   |           | (4,597  | ) |   |           |       | 
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Net income (loss) available to common shareholders                                   |                                                      | $    | (5,033                     | )       |                          | $    | 7,535     |        |  | $ | (18,768   | )       |   | $ | 1,934     |       
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Denominator:                                                                         |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Basic earnings per share- weighted
average shares                                    |                                                      |      | 8,516,414                  |         |                          |      | 8,482,249 |        |  |   | 8,515,664 |         |   |   | 8,482,079 |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Effect of dilutive securities:                                                       |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Employee stock options                               |      |                            | 200,023 |                          |      |           | 67,563 |  |   |           | 156,114 |   |   |           | 72,977 | 
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Restricted shares                                    |      |                            |        |                          |      |           | 21,790 |  |   |           |        |   |   |           | 21,790 | 
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Diluted potential common shares                                                      |                                                      |      | 200,023                    |         |                          |      | 89,353    |        |  |   | 156,114   |         |   |   | 94,767    |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Diluted earnings per share adjusted weighted
average shares and assumed conversions  |                                                      |      | 8,716,437                  |         |                          |      | 8,571,602 |        |  |   | 8,671,778 |         |   |   | 8,576,846 |       
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Basic earnings (loss) per share:                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Income (loss) before extraordinary charge and
cumulative effect of accounting change |                                                      | $    | (0.59                      | )       |                          | $    | 0.89      |        |  | $ | (1.33     | )       |   | $ | 0.23      |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Diluted earnings (loss) per share:                                                   |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Income (loss) before extraordinary charge and
cumulative effect of accounting change |                                                      | $    | (0.59                      | )       |                          | $    | 0.88      |        |  | $ | (1.33     | )       |   | $ | 0.23      |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Extraordinary charge, net of taxes                                                   |                                                      |      |                           |         |                          |      |          |        |  |   | (0.34     | )       |   |   |          |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Cumulative effect of accounting change, net of taxes                                 |                                                      |      |                           |         |                          |      |          |        |  |   | (0.54     | )       |   |   |          |       
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Basic earnings (loss) per share:                                                     |                                                      | $    | (0.59                      | )       |                          | $    | 0.89      |        |  | $ | (2.21     | )       |   | $ | 0.23      |       
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       
|Diluted earnings (loss) per share:                                                   |                                                      | $    | (0.59                      | )       |                          | $    | 0.88      |        |  | $ | (2.21     | )       |   | $ | 0.23      |       
|                                                                                     |                                                      |      |                            |         |                          |      |           |        |  |   |           |         |   |   |           |       

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##### Table of Contents



NOTE C  Segment Information

The Company has three reportable operating segments, Lawn Care, Golf, and
Corporate, and are defined by management responsibility.

The Lawn Care segment operates 227 LESCO Service Centers®, and 9 market sales representatives which market
products on a localized basis. Also included in the Lawn Care segment is the
operation of National Accounts including 17 sales representatives. The primary products sold by the Lawn Care
segment are turf care products, including turf control products, fertilizer,
grass seed and equipment. The Service Centers market and sell products
principally to smaller lawn care companies, landscapers, nurseries,
municipalities, churches and condominium associations. This segment also
markets and sells products to large national accounts and regional lawn care
customers through a separate group of sales representatives. This segment also
distributes selected products through Home Depot stores in the South,
Southwest, Midwest, Mid-Atlantic and Northeast areas of the country in addition
to selling a consumer line of lawncare products to nationwide retail stores
under several brand names, including Scenic Green, Aim Lawn & Garden Products
and Professional Turf Products.

The Golf segment markets and sells products to private and public golf
courses and other customers having large turf areas through Company
salespersons who operate a fleet of 77 LESCO Stores-on-Wheels®. The primary
products sold by the Golf segment are turf care products, including turf
control products, fertilizer, grass seed and hand held equipment. These
Stores-on-Wheels are well stocked with a wide variety of turf care products and
golf course accessories, which are sold directly from the trucks. The Golf
segment has 49 conventional sales representatives strategically located in the
various markets to help support the Stores-on-Wheels and sell to national golf
customers. In addition, this segment markets its products internationally,
principally through foreign distributors.

The Corporate segment includes the supply chain and corporate support
functions of the Company. This segment includes the manufacturing, warehouse
and distribution functions for the Company, the direct costs of which are fully
allocated to the Lawn Care and Golf segments. Indirect costs of these
functions as well as the Companys costs of administration, finance,
information services, legal and human resources are included in the Corporate
segment. Included in the Corporate segment for three months ended June 30,
2002 are one time charges for inventory markdown, asset rationalization and
severance totaling $9.6 million, $12.0 million and
$1.8 million, respectively.
Results for the six months ended June 30, 2002 include one time charges for inventory markdown,
asset rationalization and severance totaling $9.6 million, $12.0 million and
$3.9 million respectively.

With the asset rationalization and new senior management changes,
including a reorganization of the sales group, the Company is reviewing its
segment reporting structure.

The Company measures segment profitability as operating profit. Certain
prior year data has been reclassified to reflect the changes in management
responsibility. Operating results by segment are as follows (in thousands):

7



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##### Table of Contents



|                                |  |                                          |         |      |  |           |        |              |  |   |         |   |  |   |         |  
|------------------------------- |  | ---------------------------------------- | ------- | ---- |  | --------- | ------ | ------------ |  | - | ------- | - |  | - | ------- | -
|                                |  | For the Three Months Ended June 30, 2002
|                                |  |                                         
|                                |  | Lawn                                     |         |      |  |           |        |              |  |   |         |   |  |  
|                                |  | Care                                     |         | Golf |  | Corporate |        | Consolidated
|                                |  |                                          |         |      |  |           |        |             
|Net Sales to External Customers |  | $                                        | 120,738 |      |  | $         | 45,755 |              |  |   |         |   |  | $ | 166,493 |  
|                               
|                               
|                               
|                               
|Operating Profit (Loss)         |  | $                                        | 14,257  |      |  | $         | 10,153 |              |  | $ | (31,538 | ) |  | $ | (7,128  | )
|                               
|                               
|                               
|                               
|Total Assets                    |  | $                                        | 99,041  |      |  | $         | 39,714 |              |  | $ | 107,705 |   |  | $ | 246,460 |  

|                                |  |                                          |         |      |  |           |        |              |  |   |         |   |  |   |         | 
|------------------------------- |  | ---------------------------------------- | ------- | ---- |  | --------- | ------ | ------------ |  | - | ------- | - |  | - | ------- | 
|                                |  | For the Three Months Ended June 30, 2001
|                                |  |                                         
|                                |  | Lawn                                     |         |      |  |           |        |              |  |   |         |   |  |  
|                                |  | Care                                     |         | Golf |  | Corporate |        | Consolidated
|                                |  |                                          |         |      |  |           |        |             
|Net Sales to External Customers |  | $                                        | 116,298 |      |  | $         | 47,831 |              |  |   |         |   |  | $ | 164,129 | 
|                               
|                               
|                               
|                               
|Operating Profit (Loss)         |  | $                                        | 13,605  |      |  | $         | 7,447  |              |  | $ | (8,107  | ) |  | $ | 12,945  | 
|                               
|                               
|                               
|                               
|Total Assets                    |  | $                                        | 80,009  |      |  | $         | 29,936 |              |  | $ | 125,355 |   |  | $ | 235,300 | 

|                                |  |                                        |         |      |  |           |        |              |  |   |         |   |  |   |         |  
|------------------------------- |  | -------------------------------------- | ------- | ---- |  | --------- | ------ | ------------ |  | - | ------- | - |  | - | ------- | -
|                                |  | For the Six Months Ended June 30, 2002
|                                |  |                                       
|                                |  | Lawn                                   |         |      |  |           |        |              |  |   |         |   |  |  
|                                |  | Care                                   |         | Golf |  | Corporate |        | Consolidated
|                                |  |                                        |         |      |  |           |        |             
|Net Sales to External Customers |  | $                                      | 191,398 |      |  | $         | 68,574 |              |  |   |         |   |  | $ | 259,972 |  
|                               
|                               
|                               
|                               
|Operating Profit (Loss)         |  | $                                      | 18,207  |      |  | $         | 8,087  |              |  | $ | (42,228 | ) |  | $ | (15,934 | )
|                               
|                               
|                               
|                               
|Total Assets                    |  | $                                      | 99,041  |      |  | $         | 39,714 |              |  | $ | 107,705 |   |  | $ | 246,460 |  

|                                |  |                                        |         |      |  |           |        |              |  |   |         |   |  |   |         | 
|------------------------------- |  | -------------------------------------- | ------- | ---- |  | --------- | ------ | ------------ |  | - | ------- | - |  | - | ------- | 
|                                |  | For the Six Months Ended June 30, 2001
|                                |  |                                       
|                                |  | Lawn                                   |         |      |  |           |        |              |  |   |         |   |  |  
|                                |  | Care                                   |         | Golf |  | Corporate |        | Consolidated
|                                |  |                                        |         |      |  |           |        |             
|Net Sales to External Customers |  | $                                      | 184,965 |      |  | $         | 69,909 |              |  |   |         |   |  | $ | 254,874 | 
|                               
|                               
|                               
|                               
|Operating Profit (Loss)         |  | $                                      | 15,133  |      |  | $         | 6,051  |              |  | $ | (15,740 | ) |  | $ | 5,444   | 
|                               
|                               
|                               
|                               
|Total Assets                    |  | $                                      | 80,009  |      |  | $         | 29,936 |              |  | $ | 125,355 |   |  | $ | 235,300 | 

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##### Table of Contents



NOTE D  Other Assets

Other assets consist of the following:

|                                          |  |         |       |         |  |             |        |  |  |   |        | 
|----------------------------------------- |  | ------- | ----- | ------- |  | ----------- | ------ |  |  | - | ------ | 
|                                          |  | June 30 |       | June 30 |  | December 31
|(In thousands)                            |  | 2002    |       | 2001    |  | 2001       
|                                         
|Goodwill  net (see Note I)               |  | $       |      |         |  | $           | 7,623  |  |  | $ | 7,332  | 
|                                         
|                                         
|                                         
|                                         
|Patents and trademarks  net (see Note E) |  |         |      |         |  |             | 1,515  |  |  |   | 1,740  | 
|                                         
|                                         
|                                         
|                                         
|Deferred financing                        |  |         | 2,474 |         |  |             | 288    |  |  |   | 1,472  | 
|                                         
|                                         
|                                         
|                                         
|Assets held for sale (see Note E)         |  |         | 2,417 |         |  |             | 653    |  |  |   | 653    | 
|                                         
|                                         
|                                         
|                                         
|Deposits and other                        |  |         | 437   |         |  |             | 425    |  |  |   | 451    | 
|                                         
|Total other assets                        |  | $       | 5,328 |         |  | $           | 10,504 |  |  | $ | 11,648 | 
|                                         

Deferred financing relates to costs incurred to obtain financing. These
costs are amortized over the life of the various finance agreements. The lower of net
book value or net realizable value of certain land and buildings, which are for sale, is included in
assets held for sale. Brokers are actively marketing these assets and sales are expected in the  next twelve months.
The increase in assets held for sale relates to the
Companys asset rationalization, (see Note E). Deposits and other primarily
includes deposits on properties the Company rents.

NOTE E  Asset Rationalization and Severance Expense

During the second quarter, the Company completed an asset analysis and
finalized plans to rationalize its under-performing assets. The plan includes
ceasing operations at and the decision to sell the Companys manufacturing
facilities in Disputanta, Virginia and Stockton, California. The Company
recorded a pretax charge totaling $13.8 million in the second quarter of 2002,
which is included in the Companys Consolidated Statements of Operations as
Asset Rationalization of $12.0 million and Severance Expense of $1.8 million.
In addition, during the first quarter the Company had recognized severance
expenses of $2.1 million related to changes in executive management and other
employee terminations. These charges of $13.8 million in the second quarter
and $15.9 million for the first half, have reduced net income by $8.6 million,
or $.99 per diluted share for the second quarter of 2002 and $9.9 million, or
$1.14 per diluted share for the first half of 2002. Major components of the
charge for the asset rationalization and severance expense and the related
reserves and accruals as of June 30, 2002 are as follows:

(In thousands):

|                                   |  |                  |        |           |  |       |       |            |  |       |       |  |  |   |       |  |  |   |        |  
|---------------------------------- |  | ---------------- | ------ | --------- |  | ----- | ----- | ---------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------ | -
|                                   |  | Asset Impairment |        | Severance |  | Lease |       | Other Exit |  |       |       | 
|                                   |  | Charges          |        | Expenses  |  | Costs |       | Costs      |  | Total
|                                   |  |                  |        |           |  |       |       |            |  |      
|2002 First Quarter                 |  |                  |       |           |  |       | 2,075 |            |  |       |      |  |  |   |      |  |  |   | 2,075  |  
|                                  
|                                  
|                                  
|                                  
|2002 Second Quarter                |  | $                | 9,214  |           |  | $     | 1,791 |            |  | $     | 1,149 |  |  | $ | 1,681 |  |  | $ | 13,835 |  
|                                   |  |                  |        |           |  |       |       |            |  |       |       |  |  |   |       |  |  |   |        |  
|Total charges                      |  |                  | 9,214  |           |  |       | 3,866 |            |  |       | 1,149 |  |  |   | 1,681 |  |  |   | 15,910 |  
|                                   |  |                  |        |           |  |       |       |            |  |       |       |  |  |   |       |  |  |   |        |  
|Amounts utilized in 2002           |  |                  | (9,214 | )         |  |       |      |            |  |       |      |  |  |   |      |  |  |   | (9,214 | )
|                                  
|                                  
|                                  
|                                  
|Cash paid in 2002                  |  |                  |       |           |  |       | (855  | )          |  |       |      |  |  |   |      |  |  |   | (855   | )
|                                   |  |                  |        |           |  |       |       |            |  |       |       |  |  |   |       |  |  |   |        |  
|Remaining reserve at June 30, 2002 |  | $                |       |           |  | $     | 3,011 |            |  | $     | 1,149 |  |  | $ | 1,681 |  |  | $ | 5,841  |  
|                                   |  |                  |        |           |  |       |       |            |  |       |       |  |  |   |       |  |  |   |        |  

The asset impairment charges of $9.2 million relates to the asset
write-down of the Disputanta and Stockton facilities to net realizable value
and the write-off of patents and trademarks related to products previously
manufactured at the Disputanta facility. The net realizable value of $1.8
million for these facilities is included in Assets Held for Sale in Other Assets. The Company is accounting for the planned sales of the
facilities in accordance with the guidelines of SFAS 144 Accounting for the
Impairment or Disposal of Long Lived Assets, which was adopted as of January
1, 2002.

The severance benefits of $1.8 million for the second quarter relate to
post employment benefits for employees of the Disputanta, Stockton and other
facilities. The severance benefits of $2.1 million for the first quarter
relate to changes in executive management and other employee terminations. As of
June 30, 2002, $855,000 of the total severance benefits accrued have been paid,
leaving a remaining balance to be paid of $3.0 million. The lease cost of $1.1
million includes the aggregate straight-line lease expense for the

9



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##### Table of Contents



Disputanta, Stockton and other facilities. The other exit costs of $1.7
million relate to costs to maintain the facilities until they are sold and
other exit costs.

NOTE F  Inventory Markdown

The Company implemented an inventory life cycle program which requires the
identification of all Stock Keeping Units (SKUs) into one of five categories:
active, watch, phase out, discontinued and purge. SKUs identified as
discontinued will be progressively marked-down over specific periods until the costs
are marked down to zero. At that point SKUs will be purged and the
applicable product destroyed. This progressive markdown policy will replace the
Companys existing obsolescence policy, which maintained a reserve for slow moving parts, discontinued inventory and products with limited
shelf lives.

In
preparation for the conversion to the product life cycle program,
twelve thousand existing SKUs were specifically identified
as discontinued. The Company recorded a $9.6 million one-time
charge, net of the obsolescence reserve, to markdown the cost of these
discontinued SKUs to their expected liquidation value. The charge is included
as cost of sales inventory markdown on the Consolidated Statements of Operations.
The charge reduced second quarter net income by $6.0 million, or $.69 per
diluted share.

NOTE G  Debt

On January 14, 2002, the Company refinanced the private placement notes,
revolving credit agreement and trade receivables facility with a $122.3
million senior secured credit facility. The new facility includes an
amortizing term loan of approximately $7.3 million and a revolving credit
facility of up to $115 million, maturing in January 2005. The variable
interest on this facility is based on the LIBOR plus 2.75% to 3.00% or prime
rates plus .25% to .50%. Availability under the new revolving facility is
determined by a borrowing base formula based upon the Companys eligible
receivables and inventories. The senior secured credit facility contains
various restrictive covenants, including limits on additional borrowings, lease
payments and capital expenditures; maintenance of certain operating and
financial ratios; and maintenance of $70.0 minimum net worth and
restriction on dividend payments. The new facility is
secured by substantially all of the Companys assets.

The Company recorded an extraordinary charge related to the early
termination on debt of approximately $2.9 million after tax in the first
quarter of 2002.

On July 26, 2002, the Company amended its senior secured credit facility.
The amendment addressed the impact of the one-time charges for inventory
markdown, asset rationalization and severance expense on the facilities
covenants. As of June 30, 2002, the Company is in compliance with all of the
various restrictive covenants included in its credit facility, as amended.

NOTE H  Derivatives and Comprehensive Income / Loss

The Company utilizes derivative financial instruments to reduce its
exposure to market risks from changes in interest rates and foreign exchange
rates. The Company will only enter into agreements with major financial
institutions that are considered to be market makers.

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In conjunction with the signing of its senior secured credit agreement
on January 14, 2002, the Company entered into a three-year, $40.5 million
notional amount interest rate swap agreement expiring in January 2005, which
converts existing variable-rate (based on LIBOR or prime rates), plus applicable borrowing margin, payments to
4.2% fixed-rate, plus applicable borrowing margin, payments. The fair value of the interest rate swap is
determined by the estimated cost to terminate the agreement, as determined by
the bank. The Company recognizes the $648,950 fair market value of the
swap agreement as a liability on the balance sheet at June 30, 2002. Since the
Company considers this swap to be completely effective, changes in the fair
market value are recorded in accumulated other comprehensive income,
net of tax effect. The
Companys comprehensive loss for the six months ended June 30, 2002 and June
30, 2001 was as follows:

|                                  |  |               |         |               |  |   |       |  
|--------------------------------- |  | ------------- | ------- | ------------- |  | - | ----- | -
|(In thousands)                    |  | June 30, 2002 |         | June 30, 2001
|                                  |  |               |         |              
|Net income (loss)                 |  | $             | (18,716 | )             |  | $ | 1,934 |  
|                                 
|                                 
|                                 
|                                 
|Other comprehensive loss          |  |               | (395    | )             |  |   | (91   | )
|                                  |  |               |         |               |  |   |       |  
|Total comprehensive income (loss) |  | $             | (19,111 | )             |  | $ | 1,843 |  

NOTE I  Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets. Statement No. 142 provides that goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually (or
more frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have an indefinite life will continue
to be amortized over their useful lives (but with no maximum life). As reported in the Companys 10-K, the results
of Step 1- goodwill impairment tests indicated that a potential impairment
existed. The Company has completed, Step 2  measurement of the impairment
loss, by evaluating the fair value of the reporting units carrying goodwill
through appraisals and discounted cash flow models. Step 2 results indicated
that the goodwill recorded in the Companys Golf ($2,148,000) and Lawn Care
($5,184,000) units was fully impaired. Upon the adoption of FAS 142 the
Company wrote off all its goodwill taking a $4.6 million charge, net of taxes,
as a cumulative effect of accounting change as of January 1, 2002.

The following table reflects consolidated results adjusted as if the
adoption of SFAS 142 occurred as of the beginning of the six month period ended
June 30, 2001.

|                                                                                      |  |               |          |               |  |   |       | 
|------------------------------------------------------------------------------------- |  | ------------- | -------- | ------------- |  | - | ----- | 
|(In thousands, except per share date)                                                 |  | June 30, 2002 |          | June 30, 2001
|                                                                                      |  |               |          |              
|Income (loss) before extraordinary charge
and cumulative effect of accounting
change: |  | $             | (11,266) |               |  | $ | 1,934 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Goodwill amortization ($109 tax effect)                                               |  |               |         |               |  |   | 182   | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |               |          |               |  |   |       | 
|As adjusted                                                                           |  | $             | (11,266  | )             |  | $ | 2,116 | 
|                                                                                      |  |               |          |               |  |   |       | 
|Basic and diluted income (loss) per share
as reported                                 |  | $             | (1.33    | )             |  | $ | 0.23  | 
|Goodwill amortization ($0.01 tax effect)                                              |  |               |         |               |  |   | 0.02  | 
|                                                                                      |  |               |          |               |  |   |       | 

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|                                                      |  |               |         |               |  |   |       | 
|----------------------------------------------------- |  | ------------- | ------- | ------------- |  | - | ----- | 
|(In thousands, except per share date)                 |  | June 30, 2002 |         | June 30, 2001
|                                                      |  |               |         |              
|As adjusted                                           |  | $             | (1.33   | )             |  | $ | 0.25  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Net income (loss)                                     |  | $             | (18,716 | )             |  | $ | 1,934 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill amortization ($109 tax effect)               |  |               |        |               |  |   | 182   | 
|                                                      |  |               |         |               |  |   |       | 
|As adjusted                                           |  | $             | (18,716 | )             |  | $ | 2,116 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Basic and diluted income (loss) per share
as reported |  | $             | (2.21   | )             |  | $ | 0.23  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill amortization ($0.01 tax effect)              |  |               |        |               |  |   | 0.02  | 
|                                                      |  |               |         |               |  |   |       | 
|As adjusted                                           |  | $             | (2.21   | )             |  | $ | 0.25  | 

Information regarding the Companys intangible assets subject to amortization
is as follows (see Note E):

|                          |  |         |        |            |  |       |      |         |  |            |        |       |  |   |       |   |  |   |     |   |  |   |       |  
|------------------------- |  | ------- | ------ | ---------- |  | ----- | ---- | ------- |  | ---------- | ------ | ----- |  | - | ----- | - |  | - | --- | - |  | - | ----- | -
|                          |  | 2002    |        | 2001      
|                          |  |         |        |           
|(In thousands)            |  | Patents |        | Trademarks |  | Total |      | Patents |  | Trademarks |        | Total
|                          |  |         |        |            |  |       |      |         |  |            |        |      
|Beginning of year
balance |  | $       | 1,551  |            |  | $     | 188  |         |  | $          | 1,739  |       |  | $ | 1,187 |   |  | $ | 95  |   |  | $ | 1,282 |  
|                         
|                         
|                         
|                         
|Amortization expense      |  |         | (62    | )          |  |       | (6   | )       |  |            | (68    | )     |  |   | (39   | ) |  |   | (1  | ) |  |   | (40   | )
|                         
|                         
|                         
|                         
|Additions/Disposals*      |  |         | (1,489 | )          |  |       | (182 | )       |  |            | (1,671 | )     |  |   | 256   |   |  |   | 17  |   |  |   | 273   |  
|                          |  |         |        |            |  |       |      |         |  |            |        |       |  |   |       |   |  |   |     |   |  |   |       |  
|End of period balance     |  | $       | 0      |            |  | $     | 0    |         |  | $          | 0      |       |  | $ | 1,404 |   |  | $ | 111 |   |  | $ | 1,515 |  

(*See Note E)

|           |  |                                |         | 
|---------- |  | ------------------------------ | ------- | 
|Year       |  | Estimated amortization expense
|2002       |  |                                | $68,000 | 
|          
|          
|          
|          
|Thereafter |  |                                | $0      | 

NOTE J  Impact of Recently Issued Accounting Standards

In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This Statement is effective for the Company in 2003. SFAS 143
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When a liability
is initially recorded, the entity capitalizes a cost by increasing the carrying
amount of the related long-lived asset. Over time, the liability is accreted
to its present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity either settles the obligation for its recorded amount or incurs a gain
or loss upon final payment. The Company has not yet determined the impact of
adoption on its consolidated financial position or results of operations.

As of January 1, 2002, the Company has adopted FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144
provides a single accounting model for long-lived assets to be disposed of, yet
it retains many of the provisions of SFAS 121. This statement significantly
changes the criteria that would have to be met to classify an asset as
held-for-sale. This distinction is important because assets held-for-sale are
stated at the lower of their fair values or carrying amounts and depreciation
is no longer recognized. See Note E for more information on the impact for the adoption.

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As of May 15, 2002, FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, amendment of FASB Statement No. 13 and technical
corrections. The Company is required to adopt this statement for fiscal year
beginning January 1, 2003. The Company will not early adopt this
statement, however the Company believes the adoption will not impact net income.

In
June 2002, FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit and Disposal Activities. This Statement is
effective for the Company in 2003. The Company will not early adopt
SFAS No. 146. The Company has not yet determined the impact of adoption on
its consolidated financial position or results or operations.

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LESCO, INC.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Included in the Companys results of operations for the three months and
six months ended June 30, 2002 are one time charges for the inventory markdown
of $9.6 million, asset rationalization of $12.0 million and severance expense
of $1.8 and $3.9 million, respectively.

The Company implemented an inventory life cycle program which requires the
identification of all Stock Keeping Units (SKUs) into one of five categories:
active, watch, phase out, discontinued and purge. SKUs identified as
discontinued will be progressively marked-down over specific periods until the costs
are marked down to zero. At that point SKUs will be purged and the
applicable product destroyed. This progressive markdown policy will replace the
Companys existing obsolescence policy, which maintained a reserve for slow moving parts, discontinued inventory and products with limited
shelf lives.

In preparation for the conversion to the product life cycle program,
 twelve thousand existing SKUs were specifically identified
as discontinued. The Company recorded a $9.6 million one-time
charge, net of its obsolescence reserve, to markdown the cost of these
discontinued SKUs to their expected liquidation value. The charge is included
as cost of sales inventory markdown on the Consolidated Statements of Operations.
The Company will track the future sales and margins of these discounted SKUs to
determine if the markdown amount was adequate and will adjust the
amount of the one-time charge as appropriate.

During the second quarter, the Company completed an asset analysis and
finalized plans to rationalize its under-performing assets. The plan includes
ceasing operations at and the decision to sell the Companys manufacturing
facilities in Disputanta, Virginia and Stockton, California. The Company
recorded a pretax charge totaling $13.8 million in the second quarter of 2002,
which is included in the Companys Consolidated Statements of Operations as
Asset Rationalization of $12.0 million and Severance Expense of $1.8 million.
In addition, during the first quarter the Company had recognized severance
expenses of $2.1 million related to changes in executive management and other
employee terminations. These charges of $13.8 million in the second quarter
and $15.9 million for the first half, have reduced net income by $8.6 million,
or $.99 per diluted share for the second quarter of 2002 and $9.9 million, or
$1.14 per diluted share for the first half of 2002. Major components of the
charge for the asset rationalization and severance changes and the related
reserves and accruals as of June 30, 2002 are included in Note E to the
Consolidated Financial Statements.

As a result of the implementation of SFAS No. 142 the Company recorded a $4.6
million, net of taxes of $2.7 million, cumulative effect of accounting change
in the quarter ended March 31, 2002. Refer to Note I in the notes to
consolidated financial statements for the explanation of the goodwill charge.

The company recorded an extraordinary charge
related to the early termination of debt of approximately $2.9 million, net of taxes of $1.7 million, in the first quarter
of 2002. Refer to Note G in the Notes to Consolidated Financial Statements.

The following schedules adjust the Companys reported results of operation, for
the three months and six months ended June 30, 2002, for these one-time charges.
These adjustments follow the guidelines established by Financial Executives
International (FEI) and the National Investor Relations Institute (NIRI) for
consistency and analysis in presenting financial results. This disclosure is
provided to supplement the Companys Generally Accepted Accounting Principles (GAAP) results
and to clarify the results
for the period being reported.

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LESCO, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED

|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |         |  
|----------------------------------------- | --------------------------------------- | ------- | -------------------------------- | ------- | -------- | ----------- | --------- | ------------- | ------- | - | ------------ | ------- | - | - | ------- | ------- | -
|                                          |                                         |         | Three Months Ended June 30, 2002 |         |          |             |          
|                                          |                                         |         |                                  |         |          |             |          
|                                          |                                         |         | Reported                         |         |          |             |           |               | Results |   | Three Months
|                                          |                                         |         | (GAAP)                           |         | One Time |             | Excluding |               | Ended  
|(In thousands, except per share data)     |                                         | Results |                                  | Charges |          | Charges (a) |           | June 30, 2001
|                                          |                                         |         |                                  |         |          |             |           |              
|Net sales                                 |                                         | $       | 166,493                          |         |          | $           |          |               |         | $ | 166,493      |         |   | $ | 164,129 |        
|                                          | Cost of Sales                           |         |                                  | 109,494 |          |             |           |              |         |   |              | 109,494 |   |   |         | 109,283 |  
|                                          | Cost of sales inventory markdown       |         |                                  | 9,581   |          |             |           | (9,581        | )(b)    |   |              |        |   |   |         |        |  
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|Gross profit on sales                     |                                         |         | 47,418                           |         |          |             | (9,581    | )             |         |   | 56,999       |         |   |   | 54,846  |        
|                                          | Warehouse & delivery expense            |         |                                  | 12,874  |          |             |           |              |         |   |              | 12,874  |   |   |         | 13,888  |  
|                                          | Selling expense                         |         |                                  | 19,715  |          |             |           |              |         |   |              | 19,715  |   |   |         | 19,906  |  
|                                          | General & administrative expense        |         |                                  | 8,122   |          |             |           |              |         |   |              | 8,122   |   |   |         | 7,727   |  
|                                          | Asset rationalization                   |         |                                  | 12,044  |          |             |           | (12,044       | )(c)    |   |              |        |   |   |         |        |  
|                                          | Severance expense                       |         |                                  | 1,791   |          |             |           | (1,791        | )(d)    |   |              |        |   |   |         | 380     |  
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|                                          |                                         |         | 54,546                           |         |          |             | (13,835   | )             |         |   | 40,711       |         |   |   | 41,901  |        
|Income (loss) from operations             |                                         |         | (7,128                           | )       |          |             | 23,416    |               |         |   | 16,288       |         |   |   | 12,945  |        
|                                          | Joint venture results                   |         |                                  | (28     | )        |             |           |              |         |   |              | (28     | ) |   |         | (180    | )
|                                          | Customer finance charges                |         |                                  | (394    | )        |             |           |              |         |   |              | (394    | ) |   |         | (451    | )
|                                          | Other income                            |         |                                  | (144    | )        |             |           |              |         |   |              | (144    | ) |   |         | (229    | )
|                                          | Other expense                           |         |                                  | 142     |          |             |           |              |         |   |              | 142     |   |   |         | 94      |  
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|                                          |                                         |         | (424                             | )       |          |             |          |               |         |   | (424         | )       |   |   | (766    | )      
|Earnings (loss) before interest and taxes |                                         |         | (6,704                           | )       |          |             | 23,416    |               |         |   | 16,712       |         |   |   | 13,711  |        
|Interest expense                          |                                         |         | 1,323                            |         |          |             |          |               |         |   | 1,323        |         |   |   | 1,659   |        
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|Income (loss) before taxes                |                                         |         | (8,027                           | )       |          |             | 23,416    |               |         |   | 15,389       |         |   |   | 12,052  |        
|Income taxes (benefit)                    |                                         |         | (3,020                           | )       |          |             | 8,806     |               |         |   | 5,786        |         |   |   | 4,517   |        
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|Net income (loss)                         |                                         | $       | (5,007                           | )       |          | $           | 14,610    |               |         | $ | 9,603        |         |   | $ | 7,535   |        
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|                                          | Basic earnings (loss) per share         |         | $                                | (0.59   | )        |             | $         | 1.72          |         |   | $            | 1.13    |   |   | $       | 0.89    |  
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        
|                                          | Fully diluted earnings (loss) per share |         | $                                | (0.59   | )        |             | $         | 1.69          |         |   | $            | 1.10    |   |   | $       | 0.88    |  
|                                          |                                         |         |                                  |         |          |             |           |               |         |   |              |         |   |   |         |        



|(a) |  | Users of this information are advised to read the Securities Exchange
Commission report Pro Forma Financial Information: Tips for investors
available at www.sec.gov/investor/pubs/proforma12-4.htm.                            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The Company decided to markdown and liquidate its discontinued SKUs
resulting in a $9.6 million pre-tax charge.                                                                                                                   
|   
|(c) |  | During the second quarter, the Company completed a review of its
invested capital resulting in the decision to sell certain
under-performing assets. In conjunction with this decision, a $12
million pre-tax charge was recorded.
|   
|(d) |  | During the second quarter, the Company recognized severance expenses of
$1.8 million related to changes in senior and middle management and
other employee severance due to the asset rationalization.                            

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LESCO, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED

|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |         |  
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------- | ------------------------------ | ------- | -------- | ----------- | --------- | ------------- | ------- | - | ---------- | ------- | - | - | ------- | ------- | -
|                                                                                            |                                                                                          |         | Six Months Ended June 30, 2002 |         |          |             |          
|                                                                                            |                                                                                          |         |                                |         |          |             |          
|                                                                                            |                                                                                          |         | Reported                       |         |          |             |           |               | Results |   | Six Months
|                                                                                            |                                                                                          |         | (GAAP)                         |         | One Time |             | Excluding |               | Ended  
|(In thousands, except per share data)                                                       |                                                                                          | Results |                                | Charges |          | Charges (a) |           | June 30, 2001
|                                                                                            |                                                                                          |         |                                |         |          |             |           |              
|Net sales                                                                                   |                                                                                          | $       | 259,972                        |         |          | $           |          |               |         | $ | 259,972    |         |   | $ | 254,857 |        
|                                                                                            | Cost of Sales                                                                            |         |                                | 172,921 |          |             |           |              |         |   |            | 172,921 |   |   |         | 172,614 |  
|                                                                                            | Cost of sales inventory markdown                                                        |         |                                | 9,581   |          |             |           | (9,581        | )(b)    |   |            |        |   |   |         |        |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|Gross profit on sales                                                                       |                                                                                          |         | 77,470                         |         |          |             | (9,581    | )             |         |   | 87,051     |         |   |   | 82,243  |        
|                                                                                            | Warehouse & delivery expense                                                             |         |                                | 22,790  |          |             |           |              |         |   |            | 22,790  |   |   |         | 23,323  |  
|                                                                                            | Selling expense                                                                          |         |                                | 37,967  |          |             |           |              |         |   |            | 37,967  |   |   |         | 37,736  |  
|                                                                                            | General & administrative expense                                                         |         |                                | 16,737  |          |             |           |              |         |   |            | 16,737  |   |   |         | 15,242  |  
|                                                                                            | Asset rationalization                                                                    |         |                                | 12,044  |          |             |           | (12,044       | )(c)    |   |            |        |   |   |         |        |  
|                                                                                            | Severance expense                                                                        |         |                                | 3,866   |          |             |           | (3,866        | )(d)    |   |            |        |   |   |         | 498     |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            |                                                                                          |         | 93,404                         |         |          |             | (15,910   | )             |         |   | 77,494     |         |   |   | 76,799  |        
|Income (Loss) from operations                                                               |                                                                                          |         | (15,934                        | )       |          |             | 25,491    |               |         |   | 9,557      |         |   |   | 5,444   |        
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            | Joint venture results                                                                    |         |                                | (28     | )        |             |           |              |         |   |            | (28     | ) |   |         | (184    | )
|                                                                                            | Customer finance charges                                                                 |         |                                | (780    | )        |             |           |              |         |   |            | (780    | ) |   |         | (970    | )
|                                                                                            | Other income                                                                             |         |                                | (268    | )        |             |           |              |         |   |            | (268    | ) |   |         | (389    | )
|                                                                                            | Other expense                                                                            |         |                                | 539     |          |             |           |              |         |   |            | 539     |   |   |         | 373     |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            |                                                                                          |         | (537                           | )       |          |             |          |               |         |   | (537       | )       |   |   | (1,170  | )      
|Earnings (loss) before interest and taxes                                                   |                                                                                          |         | (15,397                        | )       |          |             | 25,491    |               |         |   | 10,094     |         |   |   | 6,614   |        
|Interest expense                                                                            |                                                                                          |         | 2,657                          |         |          |             |          |               |         |   | 2,657      |         |   |   | 3,567   |        
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|Income (Loss) before taxes, extraordinary charge and
cumulative effect of accounting change |                                                                                          |         | (18,054                        | )       |          |             | 25,491    |               |         |   | 7,437      |         |   |   | 3,047   |        
|Income taxes (benefit)                                                                      |                                                                                          |         | (6,788                         | )       |          |             | 9,584     |               |         |   | 2,796      |         |   |   | 1,113   |        
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|Income (Loss) before extraordinary charge and
cumulative effect of accounting change        |                                                                                          |         | (11,266                        | )       |          |             | 15,907    |               |         |   | 4,641      |         |   |   | 1,934   |        
|Extraordinary charge, net of taxes                                                          |                                                                                          |         | 2,853                          |         |          |             | (2,853    | )(e)          |         |   |           |         |   |   |        |        
|Cumulative effect of accounting change                                                      |                                                                                          |         | 4,597                          |         |          |             | (4,597    | )(f)          |         |   |           |         |   |   |        |        
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|Net income (loss)                                                                           |                                                                                          | $       | (18,716                        | )       |          | $           | 23,357    |               |         | $ | 4,641      |         |   | $ | 1,934   |        
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            | Basic earnings (loss) per share                                                          |         | $                              | (1.33   | )        |             | $         | 1.87          |         |   | $          | 0.54    |   |   | $       | 0.23    |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            | Fully diluted EPS before extraordinary
charge and cumulative effect of
accounting change |         | $                              | (1.33   | )        |             | $         | 1.86          |         |   | $          | 0.53    |   |   | $       | 0.23    |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            | Extraordinary charge, net of taxes                                                       |         |                                | (0.34   | )        |             |           | 0.34          |         |   |            |        |   |   |         |        |  
|                                                                                            | Cumulative effect of accounting change                                                   |         |                                | (0.54   | )        |             |           | 0.54          |         |   |            |        |   |   |         |        |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        
|                                                                                            | Fully diluted earnings (loss) per share                                                  |         | $                              | (2.21   | )        |             | $         | 2.74          |         |   | $          | 0.53    |   |   | $       | 0.23    |  
|                                                                                            |                                                                                          |         |                                |         |          |             |           |               |         |   |            |         |   |   |         |        



|(a) |  | Users of this information are advised to read the Securities Exchange
Commission report Pro Forma Financial Information: Tips for investors
available at www.sec.gov/investor/pubs/proforma12-4.htm.                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The Company decided to markdown and liquidate its discontinued SKUs
resulting in a $9.6 million pre-tax charge.                                                                                                                                              
|   
|(c) |  | During the second quarter, the Company completed a review of its
invested capital resulting in the decision to sell certain
under-performing assets. In conjunction with this decision, a $12
million pre-tax charge was recorded.                           
|   
|(d) |  | During the first quarter, the Company recorded a $2.0 million pre-tax
charge relative to executive management changes. During the second
quarter the Company recognized severance expenses of $1.8 million
related to changes in senior and middle management
|   
|(e) |  | The Company recorded an extraordinary charge related to the early
termination of debt of approximately $2.9 million, net of taxes, in the
first quarter of 2002.                                                                                             
|   
|(f) |  | The Company wrote off all its goodwill in accordance with SFAS No. 142
taking a $4.6 million charge, net of taxes, as a cumulative effect of
accounting change as of January 1, 2002.                                                                        

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##### Table of Contents



Operating Results for the Three Months Ended June 30, 2002 Excluding One Time Charges

Sales for the second quarter
 ended June 30, 2002 increased approximately
1.5% to $166.5 million compared with $164.1 million in 2001. Sales rose by
approximately $2.4 million primarily due to improved unit volume. Average
selling prices were down slightly from the same period of 2001 causing a $0.9 million reduction in sales.
However from fourth quarter 2001 to second quarter 2002 average selling prices
increased 1%. The sales increased for the Companys Lawn Care segment by $4.2
million, while the Golf segment decreased $1.8 million for the second quarter
ended June 30, 2002. The Lawn Care segment operated 227 LESCO Service Centers
® during the second quarter 2002 compared with 232 stores during 2001. The
Golf segment operated 77 LESCO Stores-On-Wheels® during the first quarter 2002
compared with 78 at 2001. Sales of the Companys combination products, control
products, and equipment products rose in the second quarter 2002 over 2001,
while sales of fertilizer and seed were down.

Gross profit increased by $2.1 million, excluding the inventory markdown,
in the second quarter 2002 as compared to 2001. Factors positively impacting gross
profit dollars in 2002 were lower raw material costs of approximately $1.3 million, improved
sales volume impact on gross profit of $1.0 million and lower manufacturing expense of $0.7 million. The lower raw material costs relate in large part to lower urea costs in 2002 than 2001.
Partially offsetting the gross profit increase was lower average selling prices
of $0.9 million for the quarter ended June 30, 2002. As a percent of sales, gross
profit excluding the inventory markdown was 34.24%, for the quarter ended June
30, 2002 compared with 33.42% for 2001.

Delivery and warehouse expenses decreased to $12.8 million in the second
quarter 2002 from $13.8 million in 2001. Delivery and warehouse costs declined
to 7.7% of sales in second quarter 2002 compared to 8.5% of sales in 2001.
Selling expense was 11.8% of sales in the second quarter 2002 compared to 12.1%
in the second quarter 2001. Total selling expense decreased by $191,000 in
2002, primarily due to tighter controls on store operating expenses. General and administrative costs
increased in 2002 over 2001 by $395,000 primarily due to a $693,000 increase in
payroll related expenses, including performance incentives, a $218,000 increase in health care
costs, and $175,000 in increased deferred financing fees related
to the revolving credit facility. These increases were partially offset by cost
reductions in consulting and outside labor of $578,000 and travel costs reductions of $63,000.

Interest expense decreased $336,000 for the second quarter 2002 compared
to the second quarter 2001. The effective interest rate for the second
quarter 2002 was 4.74% compared to 4.97% for the second quarter 2001. The
average borrowing levels were lower by $16.4 million for the second quarter
ended June 30, 2002 compared to second quarter 2001.

Other expense consists primarily of losses on the sale of fixed assets, service
charge expense, royalty expense and other miscellaneous expenses. Customer
finance charges totaled $394,000 in the second quarter 2002 and $451,000 in the
second quarter 2001.

As a result of the foregoing the Companys net
income excluding the inventory markdown, asset rationalization and severance charges was $9.6 million, or
$1.10 per share, in the quarter ended June 30, 2002 compared with net income of
$7.5 million or $0.89 per share in the second quarter of 2001.

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##### Table of Contents



Operating Results for the Six Months Ended June 30,
2002 Excluding One Time Charges, Extraordinary Charge and Cumulative
Effect of Accounting Change

Sales for the first six months ended June 30, 2002 increased approximately
2.0% to $259.9 million compared with $254.8 million in 2001. Sales rose by
approximately $5.1 million primarily due to improved unit volume of $6.2
million offset by a $1.1 million reduction due to a 0.4% price decrease in
average selling prices. The sales increases for the Companys
Lawn Care segment were $6.6 million, while the Golf segment decreased $1.5
million, respectively. Sales of the Companys combination products, control
products and seed products rose in the second quarter 2002 over 2001, while
sales of fertilizer and equipment were down.

Gross profit excluding inventory markdown increased by $4.9 million, for
the six months ended June 30, 2002 as compared to 2001. Factors positively impacting gross profit dollars in 2002 were
lower raw material costs of approximately $3.5 million, improved sales
volume impact on gross profit of $2.0 million and lower manufacturing expense of $0.5 million. The lower raw material costs
relate in large part to lower urea costs in 2002 than 2001. The Company has
entered into a fixed cost supply agreement for urea through the remainder of
2002. Partially offsetting the gross profit increase was lower average selling
prices of $1.1 million for the six months ended June 30, 2002. As a percent of sales,
gross profit was 33.48% for the first six months ended June 30, 2002 compared
with 32.24% for 2001.

For the six months ended June 30, 2002, delivery and warehouse expenses
decreased by $0.6 million to $22.7 million in 2002 compared to $23.3 million in
2001. As a percent of sales, delivery and warehouse expense was 8.8% for the
six months ended June 30, 2002 versus 9.2% for 2001. For the six months ended
June 30, 2002, selling expenses increased by $231,000, a 0.6% increase, to
$37.9 million in 2002 compared to $37.7 million in 2001. Selling expense was
14.6% of sales in the six months ended June 30, 2002 compared to 14.8% in the
six months ended June 30, 2001. For the six months ended June 30, 2002,
general and administrative expenses increased by $1.5 million to $16.7 million
in 2002 compared to $15.2 million in 2001. The increase was due to a $1.1 million increase in health care
costs, a $900,000 increase in payroll related
expenses, including performance incentives and an increase in deferred financing fees of $235,000 related to the
revolving credit facility. These increases were partially offset by cost reductions in consulting and outside labor
of $432,000 and travel cost reductions of $118,000.

Interest
expense for the first six months ended June 30, 2002 was
$0.9 million less than 2001. Effective interest rates were 6.21% for
the first six months ended June 30, 2002 compared to 7.02% in the prior period. For the
first six months ended June 30, 2002 average borrowing levels were down $14.5
million compared to the first six months 2001.

Customer finance charges were $780,000  for the first six months
2002 compared to $970,000  for the first six months 2001. The decrease
in customer finance charges for first six months is attributable to more
timely accounts receivable collection efforts.

The Companys net income excluding the inventory markdown, asset rationalization charges,
severance charges, extraordinary item and cumulative effect in accounting change was $4.6 million or $0.53 per share
in the six months June 30, 2002 compared with net income of $1.9
million, or $0.23 per share in the six months ended June 30, 2001.

18



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##### Table of Contents



Table of Contents

Lawn Care Segment

Net
sales for the Lawn Care segment were $120.7 million for the
second quarter 2002 compared to $116.2 million in the second
quarter 2001. The increase for the second quarter was due primarily to an
increase in service center sales, where same store sales increased 5.2%
compared to the second quarter 2001. National account sales decreased by 2.7%
for the second quarter 2002 compared to the second quarter 2001. Operating
profit was $14.2 million for the second quarter 2002 compared to
$13.6 million
in the second quarter 2001. The increase in operating profit was due primarily
to the volume increases from the second quarter 2001.

Net
sales for the Lawn Care segment were $191.3 million for the first six
months 2002 compared to $184.9 million in the first six months 2001. The
increase for the first six months was due primarily to an increase in service
center sales, where same store sales increased 5.9% compared to the first six
months 2001. National account sales decreased by 7.0% for the first six months
2002 compared to the first six months 2001. Operating profit was $18.2 million
for the first six months 2002 compared to $15.1 million in the first six months
2001. The increase in operating profit was due primarily to the volume
increases from the first six months 2001.

Golf Segment

Net
sales for the Golf segment were $45.7 million for the
second quarter 2002 compared to $47.8 million in the second quarter 2001. The
sales decrease for the second quarter was primarily due to a volume decrease.
Operating profit was $10.1 million for the second quarter 2002
compared to $7.4 million in the second quarter 2001. The increase in operating profit for the
second quarter is primarily a result of lower expenses.

Net
sales for the Golf segment were $68.5 million for the first six months
2002 compared to $69.9 million in the first six months 2001. The sales decrease
for the first six months was primarily due to a volume decrease. Operating
profit was $8.1 million for the first months 2002 compared to
$6.0 million in
the first six months 2001. The increase in operating profit for the first six
months is primarily a result of lower expenses.

Corporate Segment

The Corporate segment includes the supply chain and
corporate support functions of the Company. This segment includes the manufacturing, warehouse
and distribution functions for the Company, the direct costs of which are fully allocated to the Lawn Care and Golf segments. Indirect
costs of these functions as well as the Company's costs of administration, finance, information services, legal and human resources are
included in the Corporate segment. Included in the Corporate segment for three months ended June 30, 2002
are one time charges for inventory markdown, asset rationalization
and severance totaling $9.6 million, $12.0 million
and $1.8 million, respectively. Results for the six months ended June 30, 2002 include one time charges for inventory markdown, asset rationalization and
severance totaling $9.6 million, $12.0 million and $3.9 million
respectively.


Liquidity and Capital Resources

On January 14, 2002, the Company refinanced the private placement notes,
revolving credit agreement and trade receivables facility with a $122.3
million senior secured credit facility. The new facility includes an
amortizing term loan of approximately $7.3 million and a revolving credit
facility of up to $115 million, maturing in January 2005. The variable
interest on this facility is based on LIBOR plus 2.75% to 3.00% or prime
rates plus .25% to .50%. Availability under the new revolving facility is
determined by a borrowing base formula based upon the Companys eligible
receivables and inventories. The senior secured credit facility

19



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##### Table of Contents



contains various restrictive covenants, including limits on additional
borrowings, lease payments and capital expenditures; maintenance of certain
operating and financial ratios; and maintenance of minimum net worth
of $77.9 million. The new facility is secured by substantially all of the Companys
assets. The Company had $57.4 million available to borrow, under its credit
agreement as of June 30, 2002.

On July 26, 2002, the Company amended its senior secured credit facility.
The amendment addressed the impact of the one-time charges for inventory
markdown, asset rationalization and severance expense on the agreements
covenants. The amended minimum net worth covenant was decreased to
$70.0 million. As of June 30, 2002, the Company is in compliance with all of the
various restrictive covenants included in its credit facility, as amended.

Total outstanding debt was $65.4 million as of June 30, 2002 compared to
$51.1 million as of June 30, 2001 and $51.1 million as of December 31, 2001.
Additionally, at June 30, 2001 and at December 31,
2001 there was $35 million and $31.2 million respectively outstanding from asset securitization of trade accounts
receivable. On January 14, 2002, the asset securitization of trade
accounts receivable was terminated under the new financing agreement.

The Companys invested capital (total assets less non-debt related
liabilities) as of June 30, 2002 was $141.9 million compared to $185.5 million
as of June 30, 2001 and $176.3 million as of December 31, 2001. The following
is a schedule of invested capital and the effect of the one-time charges,
the extraordinary item and cumulative effect of accounting change on invested
capital.

LESCO, INC

|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |       |     | 
|----------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----- | ------- | ---- | ------- | ----- | ----------- | --- | - | ----- | ----- | --- | 
|                                                |                                                                |                                                                                           |       | June 30 |      | June 30 |       | December 31
|                                                |                                                                |                                                                                           |       | 2002    |      | 2001    |       | 2001       
|(In thousands)                                  |                                                                |                                                                                           |       |         |      |        
|Assets
  Accounts receivable  net              |                                                                | $                                                                                         | 84.8  |         |      | $       | 53.8  |             |     | $ | 37.5  |      
|                                                | Add back of sale of accounts receivable (See Note G)           |                                                                                           |       |         |      |         |       | 35.0        |     |   |       | 31.2  |    
|                                                | Inventory                                                      |                                                                                           |       | 101.8   |      |         |       | 114.1       |     |   |       | 92.9  |    
|                                                | Net property, plant and equipment                              |                                                                                           |       | 35.5    |      |         |       | 47.2        |     |   |       | 49.2  |    
|                                                | Remaining other assets                                         |                                                                                           |       | 24.4    |      |         |       | 20.2        |     |   |       | 25.0  |    
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|Total Assets                                    |                                                                | $                                                                                         | 246.5 |         |      | $       | 270.3 |             |     | $ | 235.8 |      
|                                               
|                                               
|                                               
|                                               
|Less: Non-debt related liabilities              |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable                                               |                                                                                           |       | (85.9   | )    |         |       | (72.1       | )   |   |       | (46.8 | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Other current liabilities                                      |                                                                                           |       | (17.4   | )    |         |       | (9.6        | )   |   |       | (9.2  | )  
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes                                          |                                                                                           |       | (1.3    | )    |         |       | (3.1        | )   |   |       | (3.5  | )  
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|Invested Capital                                |                                                                | $                                                                                         | 141.9 |         |      | $       | 185.5 |             |     | $ | 176.3 |      
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|                                               
|                                               
|                                               
|Effect of one-time charges, extraordinary       |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|                                               
|                                               
|                                               
|item and cumulative effect of accounting change |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                                | Inventory markdown                                             |                                                                                           |       | 9.6     |      |         |       |             |     |   |       |       |    
|                                               
|                                               
|                                               
|                                               
|                                                | Asset rationalization:                                         |                                                                                           |       |         |      |         |       |             |     |   |       |       |    
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                | Asset impairment                                                                          |       |         | 11.0 |         |       |             |     |   |       |       |     | 
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                | Asset held for sale                                                                       |       |         | (1.8 | )       |       |             |     |   |       |       |     | 
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                | Severance, lease and other exit cost accruals                                             |       |         | 5.8  |         |       |             |     |   |       |       |     | 
|                                               
|                                               
|                                               
|                                               
|                                                | Write-off of goodwill (cumulative effect of accounting change) |                                                                                           |       | 7.3     |      |         |       |             |     |   |       |       |    
|                                               
|                                               
|                                               
|                                               
|                                                | Write-off of deferred financing (extraordinary item)           |                                                                                           |       | 4.5     |      |         |       |             |     |   |       |       |    
|                                               
|                                               
|                                               
|                                               
|                                                | Effect on income taxes                                         |                                                                                           |       | (13.7   | )    |         |       |             |     |   |       |       |    
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                                |                                                                | Total effect                                                                              |       |         | 22.7 |         |       |             |     |   |       |       |     | 
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|Adjusted Invested Capital                       |                                                                | $                                                                                         | 164.6 |         |      | $       | 185.5 |             |     | $ | 176.3 |      
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                               
|Return on invested capital:                     |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                                |                                                                | Earnings before interest and taxes (EBIT), excluding one time charges
(See Notes E and F) |       | $       | 10.1 |         |       | $           | 6.6 |   |       | $     | 1.2 | 
|                                                |                                                                | Less: taxes on EBIT, excluding one time charges                                           |       | $       | 3.8  |         |       | $           | 2.5 |   |       | $     | 0.5 | 
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      
|                                                |                                                                | Net operating profit after taxes                                                          |       | $       | 6.3  |         |       | $           | 4.1 |   |       | $     | 0.7 | 
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |      
|                                                | Invested capital at period end                                 |                                                                                           | $     | 141.9   |      |         | $     | 185.5       |     |   | $     | 176.3 |    
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |      
|Return on Invested Capital                      |                                                                |                                                                                           | 4.4   | %       |      |         | 2.2   | %           |     |   | 0.4   | %    
|                                                |                                                                |                                                                                           |       |         |      |         |       |             |     |   |       |      

Invested Capital after the effect of one-time charges, extraordinary
item and cumulative effect of accounting change (Adjusted Invested Capital) at June 30, 2002 was $164.6 compared to $185.6 million at June 30,
2001 and $176.3 million at December 31, 2001. The decrease in Adjusted Invested Capital of $20.9 million from June 30, 2001 is due primarily to lower
levels of un-leveraged inventory (inventory less accounts payable) of $16.5
million and accounts receivable of $4.1 million. The decrease in Adjusted Invested Capital
of $11.7 million from December 31, 2001 is due primarily to
lower levels of un-leveraged inventory of $20.9 million and fixed and other
assets of $5.9 million partially offset by higher seasonal accounts receivable
of $16.0 million. The lower levels of un-leveraged inventory are due primarily
to better inventory and payables management.

Return on invested capital, excluding one time charges, increased to
4.4% for the six months ended June 30, 2002 compared with 2.2% for the same period in 2001. For the full year ended
December 31, 2001, return on invested capital was 0.4%. The return on invested capital improvement relates
to higher earnings before interest and taxes in 2002 and lower invested capital. The lower invested capital was due to the
reasons stated in the preceding paragraph and the one time charges.

Capital expenditures for the first six months of 2002 totaled $614,000.
These expenditures consisted of improvements to the Companys
information systems, remodeling of 47 of the 77 for the
Companys Stores-On-Wheels, and improvements to manufacturing facilities.

The Company believes its current borrowing capacity is adequate to
maintain operations and capital requirements for the next three years.

Forward-Looking Statements

Certain statements included in the report are forward-looking statements
that are based on managements current belief, assumptions and expectations.
These forward-looking statements can be identified by the use of predictive or
future tense terms such as anticipate, estimate, project, may, will
or similar terms.

20



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##### Table of Contents



These statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Companys actual future
performance may differ materially from that anticipated in forward-looking
statements. Risk factors that would cause or contribute to such differences
include, but are not limited to:



| |  |  | regional weather conditions which have an impact on both timing and volume of sales;                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Companys successful execution of its operating plans;                                                                        
|
| |  |  | the Companys ability to integrate business acquisitions successfully;                                                            
|
| |  |  | the Companys strategic reviews of its invested capital, could
result in the disposition or closing of locations or product lines;
|
| |  |  | general economic and business conditions;                                                                                         
|
| |  |  | changes in market demographics;                                                                                                   
|
| |  |  | changes in the regulation of the Companys products, including
applicable environmental regulations; and                          
|
| |  |  | the Companys ability to effectively manufacture, market and
distribute new products.                                             




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

Not applicable.




PART II  OTHER INFORMATION

Except as noted below, the items in Part II are inapplicable or, if
applicable, would be answered in the negative. These items have been omitted
and no other reference is made thereto.

Item 6  Exhibits and Reports on Form 8-K



| | (a) |  |        |  | Exhibits:
10(y)(3)13 Third Amendment to Revolving Credit, Term Loan and
Security Agreement
| | --- |  | ------ |  | ------------------------------------------------------------------------------------------
|
| | (b) |  | 99 (1) |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  
|
| | (c) |  | 99 (2) |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  
|
| | (d) |  |        |  | Reports on Form 8-K:    There were no reports on Form 8-K filed during this period.       
|




SIGNATURES

Pursuant to the requirements 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.

|               |  |             |  |                                                                                                   
|-------------- |  | ----------- |  | --------------------------------------------------------------------------------------------------
|               |  | LESCO, INC.
|              
|              
|              
|              
|               |  |             |  |                                                                                                   
|              
|              
|              
|              
|August 9, 2002 |  | By          |  | /s/ Jeffrey L. Rutherford

Jeffrey L. Rutherford
Senior Vice-President and Chief
Financial Officer

21