##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File No. 0-13147
 
 LESCO, Inc.
 (Exact name of registrant as specified in its charter)
 Ohio(State or other jurisdiction of 
incorporation or organization)
    
    34-0904517(I.R.S. Employer Identification No.)1301 East Ninth Street, Suite 1300
Cleveland, Ohio(Address of principal executive offices)
    
    44114(Zip Code)
 Registrants telephone number, including area code
(216) 706-9250
 þ o
  o þ o
 o þ




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 1(a). RISKITEM 2(c). UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITSSIGNATURESEX-31(A)EX-31(B)EX-32(A)EX-32(B)    Table of Contents  
 PART I FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 Three
Months EndedSeptember 30,
    
    

Nine
Months EndedSeptember 30,(Dollars in thousands, except per share data)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    165,445
    
    
    $
    158,867
    
    
    $
    447,233
    
    
    $
    447,122Cost of product (including
distribution costs)
    
    
    (131,854
    )
    
    
    (121,581
    )
    
    
    (346,060
    )
    
    
    (335,568
    )Gross profit on sales
    
    
    33,591
    
    
    
    37,286
    
    
    
    101,173
    
    
    
    111,554Selling expense
    
    
    (27,265
    )
    
    
    (25,327
    )
    
    
    (79,413
    )
    
    
    (76,073
    )General & administrative expense
    
    
    (4,301
    )
    
    
    (4,776
    )
    
    
    (14,661
    )
    
    
    (15,812
    )Merchant discounts and provision for
doubtful accounts
    
    
    (3,952
    )
    
    
    (3,458
    )
    
    
    (10,069
    )
    
    
    (9,311
    )Pre-opening expense
    
    
    (472
    )
    
    
    (534
    )
    
    
    (1,282
    )
    
    
    (1,264
    )Supply chain transaction expense
    
    
    
    
    
    
    (19,041
    )
    
    
    
    
    
    
    (19,323
    )Vendor contract termination
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (474
    )Other expense
    
    
    (1
    )
    
    
    (168
    )
    
    
    (31
    )
    
    
    (114
    )Other income
    
    
    19
    
    
    
    139
    
    
    
    186
    
    
    
    444Loss before interest and taxes
    
    
    (2,381
    )
    
    
    (15,890
    )
    
    
    (4,097
    )
    
    
    (10,373
    )Interest income (expense), net
    
    
    70
    
    
    
    (301
    )
    
    
    72
    
    
    
    (741
    )Loss before taxes
    
    
    (2,311
    )
    
    
    (16,191
    )
    
    
    (4,025
    )
    
    
    (11,114
    )Income taxes:Current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    708
    
    
    
    7,294
    
    
    
    1,917
    
    
    
    6,520Change in valuation allowance
    
    
    (708
    )
    
    
    (7,294
    )
    
    
    (1,917
    )
    
    
    (6,520
    )
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (2,311
    )
    
    $
    (16,191
    )
    
    $
    (4,025
    )
    
    $
    (11,114
    )Loss per common share:Diluted
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    $
    (0.44
    )
    
    $
    (1.25
    )Basic
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    $
    (0.44
    )
    
    $
    (1.25
    )Average number of common shares and
common share equivalents outstanding:Diluted
    
    
    9,147,068
    
    
    
    8,901,528
    
    
    
    9,113,044
    
    
    
    8,869,198Basic
    
    
    9,147,068
    
    
    
    8,901,528
    
    
    
    9,113,044
    
    
    
    8,869,198
  2




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LESCO, INC.
CONSOLIDATED BALANCE SHEETS
 September 30, 2006
    
    
    September 30, 2005
    
    
    December 31, 2005(Dollars in thousands)
    
    (Unaudited)
    
    
    (Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    16,780
    
    
    $
    7,286
    
    
    $
    21,030Accounts receivable, net
    
    
    20,574
    
    
    
    15,082
    
    
    
    15,555Inventories
    
    
    101,624
    
    
    
    126,915
    
    
    
    80,346Other
    
    
    2,341
    
    
    
    3,305
    
    
    
    2,667TOTAL CURRENT ASSETS
    
    
    141,319
    
    
    
    152,588
    
    
    
    119,598Property, plant and equipment, net
    
    
    9,029
    
    
    
    10,409
    
    
    
    9,624Other
    
    
    1,280
    
    
    
    1,138
    
    
    
    904$
    151,628
    
    
    $
    164,135
    
    
    $
    130,126CURRENT LIABILITIES:Accounts payable
    
    $
    86,905
    
    
    $
    66,825
    
    
    $
    60,626Accrued liabilities
    
    
    21,777
    
    
    
    24,422
    
    
    
    24,576Revolving credit facility
    
    
    
    
    
    
    13,454
    
    
    
    TOTAL CURRENT LIABILITIES
    
    
    108,682
    
    
    
    104,701
    
    
    
    85,202Deferred  other
    
    
    2,121
    
    
    
    1,881
    
    
    
    2,166TOTAL LIABILITIES
    
    
    110,803
    
    
    
    106,582
    
    
    
    87,368SHAREHOLDERS EQUITY:Common shares  without par value  19,500,000 shares authorized; 9,242,415 shares
issued
and 9,147,068 outstanding at September 30, 2006;
8,925,844 shares issued and outstanding at
September 30, 2005; 8,949,921 shares issued and
outstanding at December 31, 2005
    
    
    924
    
    
    
    892
    
    
    
    894Paid-in capital
    
    
    40,448
    
    
    
    37,957
    
    
    
    38,051Treasury
shares; 95,347 at September 30, 2006; none in 2005
    
    
    (1,477
    )
    
    
    
    
    
    
    Retained earnings
    
    
    930
    
    
    
    20,523
    
    
    
    4,955Unearned compensation
    
    
    
    
    
    
    (1,819
    )
    
    
    (1,142
    )TOTAL SHAREHOLDERS EQUITY
    
    
    40,825
    
    
    
    57,553
    
    
    
    42,758$
    151,628
    
    
    $
    164,135
    
    
    $
    130,126
  3




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LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 For the Nine Months Ended September 30,(Dollars in thousands)
    
    2006
    
    
    2005OPERATING ACTIVITIES:Net loss
    
    $
    (4,025
    )
    
    $
    (11,114
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    2,632
    
    
    
    5,137(Increase) decrease in accounts receivable
    
    
    (5,019
    )
    
    
    1,849Increase in inventories
    
    
    (21,278
    )
    
    
    (26,333
    )Impairment of property, plant and equipment
    
    
    
    
    
    
    14,118Increase (decrease) in accounts payable
    
    
    19,797
    
    
    
    (1,838
    )Decrease in accrued expenses
    
    
    (2,727
    )
    
    
    (540
    )Other items
    
    
    98
    
    
    
    607NET CASH USED IN OPERATING ACTIVITIES
    
    
    (10,522
    )
    
    
    (18,114
    )INVESTING ACTIVITIES:Proceeds on the sale of property, plant and equipment
    
    
    6
    
    
    
    255Purchase of property, plant and equipment:Stores
    
    
    (1,623
    )
    
    
    (2,792
    )Other
    
    
    (352
    )
    
    
    (882
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (1,969
    )
    
    
    (3,419
    )FINANCING ACTIVITIES:Increase in overdraft balances
    
    
    6,482
    
    
    
    12,292Proceeds from borrowings, net
    
    
    
    
    
    
    6,901Purchase of treasury shares
    
    
    (1,477
    )
    
    
    Exercised stock options
    
    
    3,236
    
    
    
    1,525NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    8,241
    
    
    
    20,718Net change in cash and cash equivalents
    
    
    (4,250
    )
    
    
    (815
    )Cash and cash equivalents  Beginning of the period
    
    
    21,030
    
    
    
    8,101CASH AND CASH EQUIVALENTS  END OF THE PERIOD
    
    $
    16,780
    
    
    $
    7,286Supplemental disclosure of cash flow information:Interest paid, including letters of credit and unused facility fees
    
    $
    (325
    )
    
    $
    (761
    )Income taxes paid
    
    $
    (59
    )
    
    $
    (98
    )
  4




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Description of Business and Segment Information
 ® ®
  Segment Information
  5




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Three
Months EndedSeptember 30,
    
    

Nine
Months EndedSeptember 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net salesStores
    
    $
    152,368
    
    
    $
    142,474
    
    
    $
    403,935
    
    
    $
    383,567Direct
    
    
    13,077
    
    
    
    16,393
    
    
    
    43,298
    
    
    
    63,555Corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    165,445
    
    
    $
    158,867
    
    
    $
    447,233
    
    
    $
    447,122Earnings (loss) before interest and taxesStores
    
    $
    5,866
    
    
    $
    14,991
    
    
    $
    19,560
    
    
    $
    39,909Direct
    
    
    (95
    )
    
    
    1,259
    
    
    
    1,601
    
    
    
    1,545Corporate
    
    
    (8,152
    )
    
    
    (32,140
    )
    
    
    (25,258
    )
    
    
    (51,827
    )$
    (2,381
    )
    
    $
    (15,890
    )
    
    $
    (4,097
    )
    
    $
    (10,373
    )Capital expendituresStores
    
    $
    671
    
    
    $
    656
    
    
    $
    1,623
    
    
    $
    2,792Direct
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    63
    
    
    
    363
    
    
    
    352
    
    
    
    882$
    734
    
    
    $
    1,019
    
    
    $
    1,975
    
    
    $
    3,674Depreciation expenseStores
    
    $
    441
    
    
    $
    338
    
    
    $
    1,303
    
    
    $
    889Direct
    
    
    11
    
    
    
    7
    
    
    
    35
    
    
    
    40Corporate
    
    
    346
    
    
    
    1,372
    
    
    
    1,132
    
    
    
    4,090$
    798
    
    
    $
    1,717
    
    
    $
    2,470
    
    
    $
    5,019Intangible asset amortization expenseStores
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Direct
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    82
    
    
    
    39
    
    
    
    162
    
    
    
    118$
    82
    
    
    $
    39
    
    
    $
    162
    
    
    $
    118
 September 30,2006
    
    
    2005Total assetsStores
    
    $
    106,163
    
    
    $
    97,425Direct
    
    
    656
    
    
    
    696Corporate
    
    
    44,809
    
    
    
    66,014$
    151,628
    
    
    $
    164,135
 Note 2. Summary of Significant Accounting Policies
 Principles of Consolidation
 Use of Estimates
 Earnings per Share
 6




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in thousands, except per share data)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss applicable to common shares
    
    $
    (2,311
    )
    
    $
    (16,191
    )
    
    $
    (4,025
    )
    
    $
    (11,114
    )Weighted average number of common shares
outstanding (basic)
    
    
    9,147,068
    
    
    
    8,901,528
    
    
    
    9,113,044
    
    
    
    8,869,198Weighted average dilutive stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average number of common shares and common share
equivalents outstanding (diluted)
    
    
    9,147,068
    
    
    
    8,901,528
    
    
    
    9,113,044
    
    
    
    8,869,198Diluted loss per share
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    $
    (0.44
    )
    
    $
    (1.25
    )Basic loss per share
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    $
    (0.44
    )
    
    
    (1.25
    )
  Stock Options Accounting for Stock-Based Compensation
  7




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars in thousands, except per share data)
    
    2005
    
    
    2005Net loss as reported
    
    $
    (16,191
    )
    
    $
    (11,114
    )Add: stock option expense included in reported
net loss, net of related tax effects
    
    
    224
    
    
    
    619Less: stock option expense, net of related tax effects
    
    
    (336
    )
    
    
    (864
    )Pro forma net loss
    
    $
    (16,303
    )
    
    $
    (11,359
    )Loss per diluted shareAs reported
    
    $
    (1.82
    )
    
    $
    (1.25
    )Pro forma
    
    $
    (1.83
    )
    
    $
    (1.28
    )Loss per basic shareAs reported
    
    $
    (1.82
    )
    
    $
    (1.25
    )Pro forma
    
    $
    (1.83
    )
    
    $
    (1.28
    )
   Note 3. Accounts Receivable
 September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2005Supplier rebate programs
    
    $
    1,120
    
    
    $
    8,730
    
    
    $
    4,574Supplier other
    
    
    13,439
    
    
    
    
    
    
    
    3,880Trade receivablesOwned  domestic
    
    
    4,488
    
    
    
    5,202
    
    
    
    3,763Owned  international
    
    
    2,461
    
    
    
    2,190
    
    
    
    3,076Other
    
    
    1,081
    
    
    
    2,231
    
    
    
    1,879Allowance for doubtful accounts
    
    
    (2,015
    )
    
    
    (3,271
    )
    
    
    (1,617
    )$
    20,574
    
    
    $
    15,082
    
    
    $
    15,555
  
    
    Rebates calculated on a percentage of the value of merchandise purchased over a
definitive period of time, generally one year or less. Usually, there is a minimum
purchase requirement, and the rebate percentage may be tiered, increasing as the volume
purchased increases over the minimum requirement.
    
    Rebates calculated on a percentage of the purchased cost of merchandise sold by the
Company over a definitive period of time, generally one year or less.
  8




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September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005Logistics charges
    
    $
    3,885
    
    
    $
    
    
    
    $
    2,383Grass seed
    
    
    6,587
    
    
    
    
    
    
    
    1,408Vendor rebates/other
    
    
    2,967
    
    
    
    
    
    
    
    89Supplier other
    
    $
    13,439
    
    
    $
    
    
    
    $
    3,880
      9




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Note 4. Inventories
 September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2005Finished goods and purchased inventoriesSelling locations
    
    $
    91,326
    
    
    $
    88,596
    
    
    $
    72,523Non-selling locations
    
    
    7,585
    
    
    
    37,420
    
    
    
    8,377Less: Markdown, shrink and vendor discount reserves
    
    
    (1,501
    )
    
    
    (3,945
    )
    
    
    (3,887
    )Inventory held on consignment
    
    
    (5,600
    )
    
    
    (5,212
    )
    
    
    (3,961
    )91,810
    
    
    
    116,859
    
    
    
    73,052Raw materials
    
    
    
    
    
    
    10,056
    
    
    
    Grass seed
    
    
    9,814
    
    
    
    
    
    
    
    7,294$
    101,624
    
    
    $
    126,915
    
    
    $
    80,346
     Note 5. Property, Plant and Equipment
   10




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September 30,
    
    December 31,2006
    
    2005
    
    2005(Dollars in thousands)
    
    Stores
    
    Direct
    
    Corp.
    
    Total
    
    Stores
    
    Direct
    
    Corp.
    
    Total
    
    Stores
    
    Direct
    
    Corp.
    
    TotalLand
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    600
    
    
    $
    600
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Buildings and improvements
    
    
    2,439
    
    
    
    
    
    
    
    246
    
    
    
    2,685
    
    
    
    2,350
    
    
    
    
    
    
    
    18,632
    
    
    
    20,982
    
    
    
    2,408
    
    
    
    
    
    
    
    669
    
    
    
    3,077Machinery and equipment
    
    
    5,709
    
    
    
    16
    
    
    
    221
    
    
    
    5,946
    
    
    
    5,072
    
    
    
    7
    
    
    
    20,014
    
    
    
    25,093
    
    
    
    5,189
    
    
    
    7
    
    
    
    349
    
    
    
    5,545Furniture and fixtures
    
    
    6,952
    
    
    
    388
    
    
    
    19,097
    
    
    
    26,437
    
    
    
    6,652
    
    
    
    308
    
    
    
    30,473
    
    
    
    37,433
    
    
    
    6,434
    
    
    
    308
    
    
    
    18,656
    
    
    
    25,398Subtotal
    
    
    15,100
    
    
    
    404
    
    
    
    19,564
    
    
    
    35,068
    
    
    
    14,074
    
    
    
    315
    
    
    
    69,719
    
    
    
    84,108
    
    
    
    14,031
    
    
    
    315
    
    
    
    19,674
    
    
    
    34,020Less: Accumulated depreciation
    
    
    (8,419
    )
    
    
    (315
    )
    
    
    (17,305
    )
    
    
    (26,039
    )
    
    
    (7,539
    )
    
    
    (210
    )
    
    
    (51,832
    )
    
    
    (59,581
    )
    
    
    (7,712
    )
    
    
    (222
    )
    
    
    (16,462
    )
    
    
    (24,396
    )Less: Impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,118
    )
    
    
    (14,118
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    $
    6,681
    
    
    $
    89
    
    
    $
    2,259
    
    
    $
    9,029
    
    
    $
    6,535
    
    
    $
    105
    
    
    $
    3,769
    
    
    $
    10,409
    
    
    $
    6,319
    
    
    $
    93
    
    
    $
    3,212
    
    
    $
    9,624
 Note 6. Borrowings:
 September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2005Current:Revolving credit facility
    
    $
    
    
    
    $
    13,454
    
    
    $
    
 Revolving Credit Facility
  11




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##### Table of Contents



September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2005Supplier contract
    
    $
    15,000
    
    
    $
    10,000
    
    
    $
    10,000Insurance programs
    
    
    2,250
    
    
    
    2,708
    
    
    
    2,708Other
    
    
    3,611
    
    
    
    250
    
    
    
    320$
    20,861
    
    
    $
    12,958
    
    
    $
    13,028
  Note 7. Asset Rationalization and Severance Expense:
 Asset Rationalization AccrualLease
    
    
    Other Exit
    
    
    
    
    
    
    Severance(Dollars in thousands)
    
    Costs
    
    
    Costs
    
    
    Total
    
    
    Accrual
    
    
    TotalAsset rationalization reserves and severance
accruals at December 31, 2005
    
    $
    1,551
    
    
    $
    578
    
    
    $
    2,129
    
    
    $
    840
    
    
    $
    2,9692006 Activity:Additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490
    
    
    
    490Utilized/payments
    
    
    (490
    )
    
    
    (331
    )
    
    
    (821
    )
    
    
    (1,263
    )
    
    
    (2,084
    )Asset rationalization reserves and
severance accruals at September 30, 2006
    
    $
    1,061
    
    
    $
    247
    
    
    $
    1,308
    
    
    $
    67
    
    
    $
    1,375
   Note 8. Stock Incentive Plans:
 12




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##### Table of Contents



Nine Months Ended September 30, 2006Weighted AverageShares
    
    
    Exercise PriceOutstanding  beginning of year
    
    
    1,128,908
    
    
    $
    11.74Granted
    
    
    
    
    
    
    Exercised
    
    
    (330,114
    )
    
    
    9.44Canceled/forfeited
    
    
    (121,751
    )
    
    
    14.32Outstanding  end of quarter
    
    
    677,043
    
    
    $
    12.40Exercisable  end of quarter
    
    
    618,355
    
    
    $
    12.37Reserved for future grants
    
    
    828,449
  Outstanding Options
    
    
    Exercisable OptionsWeighted
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    Number of
    
    
    Exercise
    
    
    ContractualRange of Exercise Prices
    
    Options
    
    
    Price
    
    
    Life
    
    
    Options
    
    
    Price
    
    
    Life$0 to $10.00
    
    
    156,750
    
    
    $
    7.45
    
    
    5.4             years
    
    
    156,750
    
    
    $
    7.45
    
    
    5.4             years$10.01 to $15.00
    
    
    397,393
    
    
    
    12.73
    
    
    6.2             years
    
    
    338,705
    
    
    
    12.74
    
    
    5.0             years$15.01 to $20.00
    
    
    103,050
    
    
    
    16.72
    
    
    3.2             years
    
    
    103,050
    
    
    
    16.72
    
    
    3.2             years$20.01 and above
    
    
    19,850
    
    
    
    22.33
    
    
    1.5             years
    
    
    19,850
    
    
    
    22.33
    
    
    1.5             years677,043
    
    
    $
    12.40
    
    
    5.4             years
    
    
    618,355
    
    
    $
    12.37
    
    
    4.7             years(Dollars in thousands)Aggregate intrinsic value(a)
at September 30, 2006
    
    $
    101
    
    
    
    
    
    
    
    
    
    
    $
    101
 
 (a)
    
    Aggregate intrinsic value at September 30, 2006 is calculated based on stock options for which the market
price exceeds the option exercise price.  13




---



##### Table of Contents



Nine Months Ended September 30, 2006Weighted AverageGrant Date FairShares
    
    
    ValueNonvested  beginning of year
    
    
    156,220
    
    
    $
    13.38Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Canceled/forfeited
    
    
    (37,620
    )
    
    
    13.59Nonvested  end of quarter
    
    
    118,600
    
    
    $
    13.31
 Note 9. Supply Chain Transaction and Long-Term Supply Agreement with Turf Care Supply Corp.:
  Three months ended
    
    
    Nine months ended(Dollars in thousands)
    
    September 30, 2005
    
    
    September 30, 2005Asset impairment
    
    $
    14,118
    
    
    $
    14,118Cost of disposal
    
    
    3,383
    
    
    
    3,665Lease termination
    
    
    949
    
    
    
    949Bank fees and insurance costs
    
    
    591
    
    
    
    591$
    19,041
    
    
    $
    19,323
   14




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##### Table of Contents



Note 10. Detail of Certain Balance Sheets Accounts
 September 30,
    
    
    December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2005Other current assets:Other prepaids
    
    $
    857
    
    
    $
    1,433
    
    
    $
    962Prepaid insurance
    
    
    1,197
    
    
    
    1,623
    
    
    
    1,424Notes receivable
    
    
    187
    
    
    
    187
    
    
    
    187Assets held for sale
    
    
    100
    
    
    
    62
    
    
    
    94$
    2,341
    
    
    $
    3,305
    
    
    $
    2,667Other non-current assets:Notes receivable
    
    $
    328
    
    
    $
    477
    
    
    $
    302Store and miscellaneous deposits
    
    
    573
    
    
    
    578
    
    
    
    572Deferred financing charges
    
    
    364
    
    
    
    40
    
    
    
    Other prepaids
    
    
    15
    
    
    
    43
    
    
    
    30$
    1,280
    
    
    $
    1,138
    
    
    $
    904Accounts payable:Accounts payable to TCS
    
    $
    69,492
    
    
    $
    
    
    
    $
    42,947Accounts payable  other trade
    
    
    6,130
    
    
    
    48,636
    
    
    
    12,878Overdraft balances
    
    
    11,283
    
    
    
    18,189
    
    
    
    4,801$
    86,905
    
    
    $
    66,825
    
    
    $
    60,626Accrued liabilities:Accrued non-income taxes
    
    $
    2,995
    
    
    $
    3,969
    
    
    $
    3,314Commissions and management bonuses
    
    
    4,373
    
    
    
    3,593
    
    
    
    5,707Salaries and wages
    
    
    1,587
    
    
    
    1,485
    
    
    
    358Insurance
 hospitalization and workers compensation
    
    
    2,183
    
    
    
    2,273
    
    
    
    2,771Asset rationalization
    
    
    1,308
    
    
    
    281
    
    
    
    2,129Insurance
 property and casualty
    
    
    2,361
    
    
    
    970
    
    
    
    2,430Severance
    
    
    67
    
    
    
    94
    
    
    
    840Customer rebates
    
    
    3,406
    
    
    
    2,768
    
    
    
    3,433Accrued disposal cost
    
    
    
    
    
    
    3,415
    
    
    
    Other
    
    
    3,497
    
    
    
    5,574
    
    
    
    3,594$
    21,777
    
    
    $
    24,422
    
    
    $
    24,576Deferred  other:Rent
    
    $
    1,213
    
    
    $
    981
    
    
    $
    931Other
    
    
    908
    
    
    
    900
    
    
    
    1,235$
    2,121
    
    
    $
    1,881
    
    
    $
    2,166
 15




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##### Table of Contents



Note 11. Detail of Certain Statements of Operations Accounts
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales:Gross sales
    
    $
    167,122
    
    
    $
    160,433
    
    
    $
    451,703
    
    
    $
    452,412Freight revenue
    
    
    276
    
    
    
    405
    
    
    
    855
    
    
    
    1,016Agency sales, customer discounts and
rebates, and sales adjustments
    
    
    (1,953
    )
    
    
    (1,971
    )
    
    
    (5,325
    )
    
    
    (6,306
    )$
    165,445
    
    
    $
    158,867
    
    
    $
    447,233
    
    
    $
    447,122Merchant discounts and provision for
doubtful accounts:Merchant discountsMulti-purpose credit programs
    
    $
    (672
    )
    
    $
    (609
    )
    
    $
    (1,757
    )
    
    $
    (1,591
    )Private-label business credit programs
    
    
    (2,255
    )
    
    
    (2,198
    )
    
    
    (5,649
    )
    
    
    (6,053
    )Private-label promotional discounts
    
    
    (294
    )
    
    
    (513
    )
    
    
    (968
    )
    
    
    (1,306
    )Provision for doubtful accounts
    
    
    (152
    )
    
    
    (105
    )
    
    
    (248
    )
    
    
    (176
    )Other
    
    
    (579
    )
    
    
    (33
    )
    
    
    (1,447
    )
    
    
    (185
    )$
    (3,952
    )
    
    $
    (3,458
    )
    
    $
    (10,069
    )
    
    $
    (9,311
    )
 16




---



##### Table of Contents



LESCO, INC.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Organization of Information
  
    
    Overview
    
    Business Segment Results of Operation
    
    Liquidity and Capital Resources
    
    Critical Accounting Policies and Estimates
    
    Forward Looking Statements
 OVERVIEW
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Lawn and landscape
    
    $
    128.6
    
    
    $
    119.1
    
    
    $
    362.1
    
    
    $
    352.4Golf
    
    
    38.5
    
    
    
    41.3
    
    
    
    89.6
    
    
    
    100.0$
    167.1
    
    
    $
    160.4
    
    
    $
    451.7
    
    
    $
    452.4
    17




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##### Table of Contents



BUSINESS SEGMENT RESULTS OF OPERATIONS
   Segment
Statements of Operations
 Three Months Ended September 30,Stores
    
    
    Direct
    
    
    Corporate
    
    
    Total(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    152,368
    
    
    $
    142,474
    
    
    $
    13,077
    
    
    $
    16,393
    
    
    $
    
    
    
    $
    
    
    
    $
    165,445
    
    
    $
    158,867Direct cost of product (including
direct distribution costs)
    
    
    (106,840
    )
    
    
    (97,092
    )
    
    
    (10,365
    )
    
    
    (12,873
    )
    
    
    
    
    
    
    (3,793
    )
    
    
    (117,205
    )
    
    
    (113,758
    )% to Net Sales
    
    
    (70.1
    %)
    
    
    (68.2
    %)
    
    
    (79.3
    %)
    
    
    (78.5
    %)
    
    
    
    
    
    
    
    
    
    
    (70.8
    %)
    
    
    (71.6
    %)Indirect supply chain costs
    
    
    (13,451
    )
    
    
    (6,720
    )
    
    
    (1,198
    )
    
    
    (1,103
    )
    
    
    
    
    
    
    
    
    
    
    (14,649
    )
    
    
    (7,823
    )% to Net Sales
    
    
    (8.8
    %)
    
    
    (4.7
    %)
    
    
    (9.1
    %)
    
    
    (6.7
    %)
    
    
    
    
    
    
    
    
    
    
    (8.9
    %)
    
    
    (4.9
    %)Gross profit on sales
    
    
    32,077
    
    
    
    38,662
    
    
    
    1,514
    
    
    
    2,417
    
    
    
    
    
    
    
    (3,793
    )
    
    
    33,591
    
    
    
    37,286% to Net Sales
    
    
    21.1
    %
    
    
    27.1
    %
    
    
    11.6
    %
    
    
    14.8
    %
    
    
    
    
    
    
    
    
    
    
    20.3
    %
    
    
    23.5
    %Selling expense
    
    
    (23,287
    )
    
    
    (21,214
    )
    
    
    (1,318
    )
    
    
    (818
    )
    
    
    (2,660
    )
    
    
    (3,295
    )
    
    
    (27,265
    )
    
    
    (25,327
    )% to Net Sales
    
    
    (15.3
    %)
    
    
    (14.9
    %)
    
    
    (10.1
    %)
    
    
    (5.0
    %)
    
    
    
    
    
    
    
    
    
    
    (16.5
    %)
    
    
    (16.0
    %)Merchant discounts and provision
for doubtful accounts
    
    
    (2,924
    )
    
    
    (2,457
    )
    
    
    (291
    )
    
    
    (340
    )
    
    
    (737
    )
    
    
    (661
    )
    
    
    (3,952
    )
    
    
    (3,458
    )% to Net Sales
    
    
    (1.9
    %)
    
    
    (1.7
    %)
    
    
    (2.2
    %)
    
    
    (2.1
    %)
    
    
    
    
    
    
    
    
    
    
    (2.4
    %)
    
    
    (2.2
    %)Pre-opening expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (472
    )
    
    
    (534
    )
    
    
    (472
    )
    
    
    (534
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    %)
    
    
    (0.3
    %)General & administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,301
    )
    
    
    (4,776
    )
    
    
    (4,301
    )
    
    
    (4,776
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.6
    %)
    
    
    (3.0
    %)Supply chain transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,041
    )
    
    
    
    
    
    
    (19,041
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12.0
    %)Vendor contract termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )% of Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.0
    %)Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    (29
    )
    
    
    18
    
    
    
    (29
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    (0.0
    %)Earnings (loss) before interest and taxes
    
    $
    5,866
    
    
    $
    14,991
    
    
    $
    (95
    )
    
    $
    1,259
    
    
    $
    (8,152
    )
    
    $
    (32,140
    )
    
    $
    (2,381
    )
    
    $
    (15,890
    )% to Net Sales
    
    
    3.9
    %
    
    
    10.5
    %
    
    
    (0.7
    %)
    
    
    7.7
    %
    
    
    
    
    
    
    
    
    
    
    (1.5
    %)
    
    
    (10.0
    %)Interest income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    (301
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    %
    
    
    (0.2
    %)Loss before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,311
    )
    
    
    (16,191
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.4
    %)
    
    
    (10.2
    %)Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,311
    )
    
    $
    (16,191
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.4
    %)
    
    
    (10.2
    %)
 18




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##### Table of Contents



Nine Months Ended September 30,Stores
    
    
    Direct
    
    
    Corporate
    
    
    Total(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    403,935
    
    
    $
    383,567
    
    
    $
    43,298
    
    
    $
    63,555
    
    
    $
    
    
    
    $
    
    
    
    $
    447,233
    
    
    $
    447,122Direct cost of product (including
direct distribution costs)
    
    
    (279,722
    )
    
    
    (260,047
    )
    
    
    (33,649
    )
    
    
    (48,510
    )
    
    
    
    
    
    
    (3,793
    )
    
    
    (313,371
    )
    
    
    (312,350
    )% to Net Sales
    
    
    (69.3
    %)
    
    
    (67.8
    %)
    
    
    (77.7
    %)
    
    
    (76.3
    %)
    
    
    
    
    
    
    
    
    
    
    (70.1
    %)
    
    
    (69.9
    %)Indirect supply chain costs
    
    
    (29,928
    )
    
    
    (17,393
    )
    
    
    (2,761
    )
    
    
    (5,825
    )
    
    
    
    
    
    
    
    
    
    
    (32,689
    )
    
    
    (23,218
    )% to Net Sales
    
    
    (7.4
    %)
    
    
    (4.5
    %)
    
    
    (6.4
    %)
    
    
    (9.2
    %)
    
    
    
    
    
    
    
    
    
    
    (7.3
    %)
    
    
    (5.2
    %)Gross profit on sales
    
    
    94,285
    
    
    
    106,127
    
    
    
    6,888
    
    
    
    9,220
    
    
    
    
    
    
    
    (3,793
    )
    
    
    101,173
    
    
    
    111,554% to Net Sales
    
    
    23.3
    %
    
    
    27.7
    %
    
    
    15.9
    %
    
    
    14.5
    %
    
    
    
    
    
    
    
    
    
    
    22.6
    %
    
    
    24.9
    %Selling expense
    
    
    (67,146
    )
    
    
    (60,102
    )
    
    
    (4,010
    )
    
    
    (6,142
    )
    
    
    (8,257
    )
    
    
    (9,829
    )
    
    
    (79,413
    )
    
    
    (76,073
    )% to Net Sales
    
    
    (16.6
    %)
    
    
    (15.7
    %)
    
    
    (9.3
    %)
    
    
    (9.7
    %)
    
    
    
    
    
    
    
    
    
    
    (17.7
    %)
    
    
    (17.0
    %)Merchant discounts and provision
for doubtful accounts
    
    
    (7,579
    )
    
    
    (6,116
    )
    
    
    (1,277
    )
    
    
    (1,533
    )
    
    
    (1,213
    )
    
    
    (1,662
    )
    
    
    (10,069
    )
    
    
    (9,311
    )% to Net Sales
    
    
    (1.9
    %)
    
    
    (1.6
    %)
    
    
    (2.9
    %)
    
    
    (2.4
    %)
    
    
    
    
    
    
    
    
    
    
    (2.2
    %)
    
    
    (2.1
    %)Pre-opening expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,282
    )
    
    
    (1,264
    )
    
    
    (1,282
    )
    
    
    (1,264
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    %)
    
    
    (0.3
    %)General & administrative expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,661
    )
    
    
    (15,812
    )
    
    
    (14,661
    )
    
    
    (15,812
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.3
    %)
    
    
    (3.5
    %)Supply chain transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,323
    )
    
    
    
    
    
    
    (19,323
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.3
    %)Vendor contract termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (474
    )
    
    
    
    
    
    
    (474
    )% of Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    %)Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    330
    
    
    
    155
    
    
    
    330% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    0.1
    %Earnings (loss) before interest and taxes
    
    $
    19,560
    
    
    $
    39,909
    
    
    $
    1,601
    
    
    $
    1,545
    
    
    $
    (25,258
    )
    
    $
    (51,827
    )
    
    $
    (4,097
    )
    
    $
    (10,373
    )% to Net Sales
    
    
    4.8
    %
    
    
    10.4
    %
    
    
    3.7
    %
    
    
    2.4
    %
    
    
    
    
    
    
    
    
    
    
    (0.9
    %)
    
    
    (2.3
    %)Interest income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    (741
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    (0.2
    %)Loss before taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,025
    )
    
    
    (11,114
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    %)
    
    
    (2.5
    %)Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,025
    )
    
    $
    (11,114
    )% to Net Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    %)
    
    
    (2.5
    %)
 19




---



##### Table of Contents



Sales by Customer Sector and Transacting Selling Locations
 
 Three Months Ended September 30,2006
    
    
    2005
    
    
    % ChangeStores
    
    
    Direct
    
    
    
    
    
    
    Stores
    
    
    Direct
    
    
    
    
    
    
    Stores
    
    
    Direct(Dollars in millions)
    
    Segment
    
    
    Segment
    
    
    Total
    
    
    Segment
    
    
    Segment
    
    
    Total
    
    
    Segment
    
    
    Segment
    
    
    TotalLawn and landscape
    
    $
    117.4
    
    
    $
    11.2
    
    
    $
    128.6
    
    
    $
    104.1
    
    
    $
    15.0
    
    
    $
    119.1
    
    
    
    12.8
    %
    
    
    (25.3
    %)
    
    
    8.0
    %Golf
    
    
    36.5
    
    
    
    2.0
    
    
    
    38.5
    
    
    
    39.8
    
    
    
    1.5
    
    
    
    41.3
    
    
    
    (8.3
    %)
    
    
    33.3
    %
    
    
    (6.8
    %)Gross sales
    
    
    153.9
    
    
    
    13.2
    
    
    
    167.1
    
    
    
    143.9
    
    
    
    16.5
    
    
    
    160.4
    
    
    
    6.9
    %
    
    
    (20.0
    %)
    
    
    4.2
    %Net sales adjustments (a)
    
    
    (1.6
    )
    
    
    (0.1
    )
    
    
    (1.7
    )
    
    
    (1.4
    )
    
    
    (0.1
    )
    
    
    (1.5
    )
    
    
    (14.3
    %)
    
    
    0.0
    %
    
    
    (13.3
    %)Net sales
    
    $
    152.3
    
    
    $
    13.1
    
    
    $
    165.4
    
    
    $
    142.5
    
    
    $
    16.4
    
    
    $
    158.9
    
    
    
    6.9
    %
    
    
    (20.1
    %)
    
    
    4.1
    %
 
 (a)
    
    Net sales adjustments include freight revenue reduced by agency sales, customer discounts,
and customer rebates. Nine Months Ended September 30,2006
    
    
    2005
    
    
    % ChangeStores
    
    
    Direct
    
    
    
    
    
    
    Stores
    
    
    Direct
    
    
    
    
    
    
    Stores
    
    
    Direct(Dollars in millions)
    
    Segment
    
    
    Segment
    
    
    Total
    
    
    Segment
    
    
    Segment
    
    
    Total
    
    
    Segment
    
    
    Segment
    
    
    TotalLawn and landscape
    
    $
    321.8
    
    
    $
    40.3
    
    
    $
    362.1
    
    
    $
    296.2
    
    
    $
    56.2
    
    
    $
    352.4
    
    
    
    8.6
    %
    
    
    (28.3
    %)
    
    
    2.8
    %Golf
    
    
    86.3
    
    
    
    3.3
    
    
    
    89.6
    
    
    
    91.9
    
    
    
    8.1
    
    
    
    100.0
    
    
    
    (6.1
    %)
    
    
    (59.3
    %)
    
    
    (10.4
    %)Gross sales
    
    
    408.1
    
    
    
    43.6
    
    
    
    451.7
    
    
    
    388.1
    
    
    
    64.3
    
    
    
    452.4
    
    
    
    5.2
    %
    
    
    (32.2
    %)
    
    
    (0.2
    %)Net sales adjustments (a)
    
    
    (4.2
    )
    
    
    (0.3
    )
    
    
    (4.5
    )
    
    
    (4.5
    )
    
    
    (0.8
    )
    
    
    (5.3
    )
    
    
    6.7
    %
    
    
    62.5
    %
    
    
    15.1
    %Net sales
    
    $
    403.9
    
    
    $
    43.3
    
    
    $
    447.2
    
    
    $
    383.6
    
    
    $
    63.5
    
    
    $
    447.1
    
    
    
    5.3
    %
    
    
    (31.8
    %)
    
    
    0.0
    %
 
 (a)
    
    Net sales adjustments include freight revenue reduced by agency sales, customer discounts,
and customer rebates. Stores Segment
  Sales
 Three Months Ended September 30,2006
    
    
    2005
    
    
    % ChangeStores
    
    
    
    
    
    
    
    
    
    
    Stores
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    StoresService
    
    
    on
    
    
    
    
    
    
    Service
    
    
    on
    
    
    
    
    
    
    
    
    
    
    Service
    
    
    on(Dollars in millions)
    
    Centers
    
    
    Wheels
    
    
    Total
    
    
    Centers
    
    
    Wheels
    
    
    Other
    
    
    Total
    
    
    Centers
    
    
    Wheels
    
    
    Other
    
    
    TotalLawn and landscape
    
    $
    116.4
    
    
    $
    1.0
    
    
    $
    117.4
    
    
    $
    103.0
    
    
    $
    1.1
    
    
    $
    
    
    
    $
    104.1
    
    
    
    13.0
    %
    
    
    (9.1
    %)
    
    
    
    
    
    
    12.8
    %Golf
    
    
    14.2
    
    
    
    22.3
    
    
    
    36.5
    
    
    
    15.1
    
    
    
    24.7
    
    
    
    
    
    
    
    39.8
    
    
    
    (6.0
    %)
    
    
    (9.7
    %)
    
    
    
    
    
    
    (8.3
    %)Gross sales
    
    
    130.6
    
    
    
    23.3
    
    
    
    153.9
    
    
    
    118.1
    
    
    
    25.8
    
    
    
    
    
    
    
    143.9
    
    
    
    10.6
    %
    
    
    (9.7
    %)
    
    
    
    
    
    
    6.9
    %Net sales adjustments
    
    
    (0.5
    )
    
    
    (1.1
    )
    
    
    (1.6
    )
    
    
    (0.7
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (1.4
    )
    
    
    28.6
    %
    
    
    (57.1
    %)
    
    
    
    
    
    
    (14.3
    %)Net sales
    
    $
    130.1
    
    
    $
    22.2
    
    
    $
    152.3
    
    
    $
    117.4
    
    
    $
    25.1
    
    
    $
    
    
    
    $
    142.5
    
    
    
    10.8
    %
    
    
    (11.6
    %)
    
    
    
    
    
    
    6.9
    %
 Nine Months Ended September 30,2006
    
    
    2005
    
    
    % ChangeStores
    
    
    
    
    
    
    
    
    
    
    Stores
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    StoresService
    
    
    on
    
    
    
    
    
    
    Service
    
    
    on
    
    
    
    
    
    
    
    
    
    
    Service
    
    
    on(Dollars in millions)
    
    Centers
    
    
    Wheels
    
    
    Total
    
    
    Centers
    
    
    Wheels
    
    
    Other
    
    
    Total
    
    
    Centers
    
    
    Wheels
    
    
    Other
    
    
    TotalLawn and landscape
    
    $
    319.5
    
    
    $
    2.3
    
    
    $
    321.8
    
    
    $
    293.2
    
    
    $
    2.1
    
    
    $
    0.9
    
    
    $
    296.2
    
    
    
    9.0
    %
    
    
    9.5
    %
    
    
    (100.0
    %)
    
    
    8.6
    %Golf
    
    
    33.5
    
    
    
    52.8
    
    
    
    86.3
    
    
    
    37.0
    
    
    
    54.7
    
    
    
    0.2
    
    
    
    91.9
    
    
    
    (9.5
    %)
    
    
    (3.5
    %)
    
    
    (100.0
    %)
    
    
    (6.1
    %)Gross sales
    
    
    353.0
    
    
    
    55.1
    
    
    
    408.1
    
    
    
    330.2
    
    
    
    56.8
    
    
    
    1.1
    
    
    
    388.1
    
    
    
    6.9
    %
    
    
    (3.0
    %)
    
    
    (100.0
    %)
    
    
    5.2
    %Net sales adjustments
    
    
    (1.9
    )
    
    
    (2.3
    )
    
    
    (4.2
    )
    
    
    (2.7
    )
    
    
    (1.8
    )
    
    
    
    
    
    
    (4.5
    )
    
    
    29.6
    %
    
    
    (27.8
    %)
    
    
    0.0
    %
    
    
    6.7
    %Net sales
    
    $
    351.1
    
    
    $
    52.8
    
    
    $
    403.9
    
    
    $
    327.5
    
    
    $
    55.0
    
    
    $
    1.1
    
    
    $
    383.6
    
    
    
    7.2
    %
    
    
    (4.0
    %)
    
    
    (100.0
    %)
    
    
    5.3
    %
 20




---



##### Table of Contents



Service Centers
  Three Months Ended September 30,Variance(Dollars in millions)
    
    2006
    
    
    2005
    
    
    Dollars
    
    
    %Stores opened:Prior to 2003
    
    $
    103.0
    
    
    $
    100.8
    
    
    $
    2.2
    
    
    
    2.2
    %2003
    
    
    6.7
    
    
    
    6.9
    
    
    
    (0.2
    )
    
    
    (2.9
    )2004
    
    
    8.8
    
    
    
    7.4
    
    
    
    1.4
    
    
    
    18.9Comparative stores
    
    
    118.5
    
    
    
    115.1
    
    
    
    3.4
    
    
    
    3.02005
    
    
    7.6
    
    
    
    2.3
    
    
    
    5.3
    
    
    
    230.42006
    
    
    4.0
    
    
    
    
    
    
    
    4.0
    
    
    
    100.0Total
    
    $
    130.1
    
    
    $
    117.4
    
    
    $
    12.7
    
    
    
    10.8
    %
 Nine Months Ended September 30,Variance(Dollars in millions)
    
    2006
    
    
    2005
    
    
    Dollars
    
    
    %Stores opened:Prior to 2003
    
    $
    285.4
    
    
    $
    286.9
    
    
    $
    (1.5
    )
    
    
    (0.5
    %)2003
    
    
    18.0
    
    
    
    18.1
    
    
    
    (0.1
    )
    
    
    (0.6
    )2004
    
    
    22.7
    
    
    
    19.3
    
    
    
    3.4
    
    
    
    17.6Comparative stores
    
    
    326.1
    
    
    
    324.3
    
    
    
    1.8
    
    
    
    0.62005
    
    
    19.2
    
    
    
    3.2
    
    
    
    16.0
    
    
    
    500.02006
    
    
    5.8
    
    
    
    
    
    
    
    5.8
    
    
    
    100.0Total
    
    $
    351.1
    
    
    $
    327.5
    
    
    $
    23.6
    
    
    
    7.2
    %
 Stores-on-Wheels:
 Other:
 21




---



##### Table of Contents



Net sales adjustments
 Gross Profit on Sales
  Three Months Ended September 30,(Dollars in millions)
    
    2006
    
    2005
    
    VarianceNet Sales
    
    $
    152.4
    
    
    $
    142.5
    
    
    $
    9.9Direct cost of product (including direct distribution costs)
    
    $
    (106.8
    )
    
    $
    (97.1
    )
    
    $
    (9.7
    )% of Net Sales
    
    
    (70.1
    )%
    
    
    (68.2
    )%
    
    
    (1.9
    )%Indirect supply chain costs
    
    $
    (13.5
    )
    
    $
    (6.7
    )
    
    $
    (6.8
    )% of Net Sales
    
    
    (8.8
    )%
    
    
    (4.7
    )%
    
    
    (4.1
    )%Gross Profit
    
    $
    32.1
    
    
    $
    38.7
    
    
    $
    (6.6
    )% of Net Sales
    
    
    21.1
    %
    
    
    27.1
    %
    
    
    (6.0
    )%
 Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    2005
    
    VarianceNet Sales
    
    $
    403.9
    
    
    $
    383.6
    
    
    $
    20.3Direct cost of product (including direct distribution costs)
    
    $
    (279.7
    )
    
    $
    (260.1
    )
    
    $
    (19.6
    )% of Net Sales
    
    
    (69.3
    )%
    
    
    (67.8
    )%
    
    
    (1.5
    )%Indirect supply chain costs
    
    $
    (29.9
    )
    
    $
    (17.4
    )
    
    $
    (12.5
    )% of Net Sales
    
    
    (7.4
    )%
    
    
    (4.5
    )%
    
    
    (2.9
    )%Gross Profit
    
    $
    94.3
    
    
    $
    106.1
    
    
    $
    (11.8
    )% of Net Sales
    
    
    23.3
    %
    
    
    27.7
    %
    
    
    (4.4
    )%
 Direct cost of product (including direct distribution costs):
 22




---



##### Table of Contents



Indirect supply chain costs:
  Gross Profit per Square Foot of Service CentersNine Months Ended September 30,2006
    
    2005Gross Profit per
    
    
    
    
    
    Gross Profit per# of Stores
    
    Square Foot
    
    # of Stores
    
    Square FootClass of 2006
    
    
    28
    
    
    $
    7.14
    
    
    
    
    
    
    $
    Class of 2005
    
    
    31
    
    
    $
    30.16
    
    
    
    20
    
    
    $
    6.33Class of 2004
    
    
    27
    
    
    $
    37.47
    
    
    
    27
    
    
    $
    33.22Class of 2003
    
    
    21
    
    
    $
    47.15
    
    
    
    21
    
    
    $
    46.90Prior to 2003
    
    
    225
    
    
    $
    69.98
    
    
    
    226
    
    
    $
    73.06Total per square foot leased
    
    
    
    
    
    $
    56.21
    
    
    
    
    
    
    $
    62.06
  Selling Expense:
   Merchant Discounts and Provision for Doubtful Accounts:
   23




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##### Table of Contents



(Loss) Earnings before Interest and Taxes:
  Three Months Ended September 30, 2006Class of 2006
    
    
    Class of 2005
    
    
    Class of 2004
    
    
    Class of 2003(Dollars in thousands)
    
    (28 Stores)
    
    
    (31 Stores)
    
    
    (27 Stores)
    
    
    (21 Stores)
    
    
    TotalNet sales
    
    $
    3,967
    
    
    $
    7,646
    
    
    $
    8,778
    
    
    $
    6,706
    
    
    $
    27,097Direct cost of product
(including distribution
costs)
    
    
    (3,088
    )
    
    
    (5,484
    )
    
    
    (6,403
    )
    
    
    (4,765
    )
    
    
    (19,740
    )Gross profit on sales
    
    
    879
    
    
    
    2,162
    
    
    
    2,375
    
    
    
    1,941
    
    
    
    7,357Selling expense
    
    
    (1,259
    )
    
    
    (1,587
    )
    
    
    (1,385
    )
    
    
    (989
    )
    
    
    (5,220
    )Merchant discount expense
    
    
    (68
    )
    
    
    (134
    )
    
    
    (154
    )
    
    
    (134
    )
    
    
    (490
    )(Loss) earnings before
interest and taxes
    
    $
    (448
    )
    
    $
    441
    
    
    $
    836
    
    
    $
    818
    
    
    $
    1,647
 Three Months Ended September 30, 2005Class of 2005
    
    
    Class of 2004
    
    
    Class of 2003(Dollars in thousands)
    
    (20 Stores)
    
    
    (27 Stores)
    
    
    (21 Stores)
    
    
    TotalNet sales
    
    $
    2,369
    
    
    $
    7,385
    
    
    $
    6,947
    
    
    $
    16,701Direct cost of product (including distribution costs)
    
    
    (1,734
    )
    
    
    (5,244
    )
    
    
    (4,945
    )
    
    
    (11,923
    )Gross profit on sales
    
    
    635
    
    
    
    2,141
    
    
    
    2,002
    
    
    
    4,778Selling expense
    
    
    (880
    )
    
    
    (1,374
    )
    
    
    (1,040
    )
    
    
    (3,294
    )Merchant discount expense
    
    
    (42
    )
    
    
    (114
    )
    
    
    (112
    )
    
    
    (268
    )(Loss) earnings before interest and taxes
    
    $
    (287
    )
    
    $
    653
    
    
    $
    850
    
    
    $
    1,216
 24




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##### Table of Contents



Nine Months Ended September 30, 2006Class of 2006
    
    
    Class of 2005
    
    
    Class of 2004
    
    
    Class of 2003(Dollars in thousands)
    
    (28 Stores)
    
    
    (31 Stores)
    
    
    (27 Stores)
    
    
    (21 Stores)
    
    
    TotalNet sales
    
    $
    5,769
    
    
    $
    19,268
    
    
    $
    22,672
    
    
    $
    18,024
    
    
    $
    65,733Direct cost of product
(including distribution
costs)
    
    
    (4,549
    )
    
    
    (13,795
    )
    
    
    (16,330
    )
    
    
    (12,742
    )
    
    
    (47,416
    )Gross profit on sales
    
    
    1,220
    
    
    
    5,473
    
    
    
    6,342
    
    
    
    5,282
    
    
    
    18,317Selling expense
    
    
    (2,090
    )
    
    
    (4,664
    )
    
    
    (4,142
    )
    
    
    (2,966
    )
    
    
    (13,862
    )Merchant discount expense
    
    
    (90
    )
    
    
    (325
    )
    
    
    (420
    )
    
    
    (344
    )
    
    
    (1,179
    )(Loss) earnings before
interest and taxes
    
    $
    (960
    )
    
    $
    484
    
    
    $
    1,780
    
    
    $
    1,972
    
    
    $
    3,276
 Nine Months Ended September 30, 2005Class of 2005
    
    
    Class of 2004
    
    
    Class of 2003(Dollars in thousands)
    
    (20 Stores)
    
    
    (27 Stores)
    
    
    (21 Stores)
    
    
    TotalNet sales
    
    $
    3,230
    
    
    $
    19,338
    
    
    $
    18,152
    
    
    $
    40,720Direct cost of product (including distribution costs)
    
    
    (2,404
    )
    
    
    (13,715
    )
    
    
    (12,898
    )
    
    
    (29,017
    )Gross profit on sales
    
    
    826
    
    
    
    5,623
    
    
    
    5,254
    
    
    
    11,703Selling expense
    
    
    (1,463
    )
    
    
    (4,026
    )
    
    
    (3,199
    )
    
    
    (8,688
    )Merchant discount expense
    
    
    (57
    )
    
    
    (289
    )
    
    
    (286
    )
    
    
    (632
    )(Loss) earnings before interest and taxes
    
    $
    (694
    )
    
    $
    1,308
    
    
    $
    1,769
    
    
    $
    2,383
  Direct Segment
  Sales :
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    
    2005
    
    
    % Change
    
    
    2006
    
    
    2005
    
    
    % ChangeLawn and landscape
    
    $
    11.2
    
    
    $
    15.0
    
    
    
    (25.3
    %)
    
    $
    40.3
    
    
    $
    56.2
    
    
    
    (28.3
    %)Golf
    
    
    2.0
    
    
    
    1.5
    
    
    
    33.3
    %
    
    
    3.3
    
    
    
    8.1
    
    
    
    (59.3
    %)Gross sales
    
    
    13.2
    
    
    
    16.5
    
    
    
    (20.0
    %)
    
    
    43.6
    
    
    
    64.3
    
    
    
    (32.2
    %)Net sales adjustments
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.8
    )
    
    
    62.5
    %Direct Segment net sales
    
    $
    13.1
    
    
    $
    16.4
    
    
    
    (20.1
    %)
    
    $
    43.3
    
    
    $
    63.5
    
    
    
    (31.8
    %)
 25




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##### Table of Contents



Direct Segment
  Net sales adjustments
 Gross Profit on Sales:
  Three Months Ended September 30,(Dollars in millions)
    
    2006
    
    2005
    
    VarianceNet Sales
    
    $
    13.1
    
    
    $
    16.4
    
    
    $
    (3.3
    )Direct cost of product (including direct distribution costs)
    
    $
    (10.4
    )
    
    $
    (12.9
    )
    
    $
    2.5% of Net Sales
    
    
    (79.3
    )%
    
    
    (78.5
    )%
    
    
    (0.8
    )%Indirect supply chain costs
    
    $
    (1.2
    )
    
    $
    (1.1
    )
    
    $
    (0.1
    )% of Net Sales
    
    
    (9.1
    )%
    
    
    (6.7
    )%
    
    
    (2.4
    )%Gross Profit
    
    $
    1.5
    
    
    $
    2.4
    
    
    $
    (0.9
    )% of Net Sales
    
    
    11.6
    %
    
    
    14.8
    %
    
    
    (3.2
    )%
 Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    2005
    
    VarianceNet Sales
    
    $
    43.3
    
    
    $
    63.5
    
    
    $
    (20.2
    )Direct cost of product (including direct distribution costs)
    
    $
    (33.6
    )
    
    $
    (48.5
    )
    
    $
    14.9% of Net Sales
    
    
    (77.7
    )%
    
    
    (76.3
    )%
    
    
    (1.4
    )%Indirect supply chain costs
    
    $
    (2.8
    )
    
    $
    (5.8
    )
    
    $
    3.0% of Net Sales
    
    
    (6.4
    )%
    
    
    (9.2
    )%
    
    
    2.8
    %Gross Profit
    
    $
    6.9
    
    
    $
    9.2
    
    
    $
    (2.3
    )% of Net Sales
    
    
    15.9
    %
    
    
    14.5
    %
    
    
    1.4
    %
 Direct cost of product (including direct distribution costs):
 26




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##### Table of Contents



Indirect supply chain costs:
 Selling Expense:
  Merchant Discounts and Provision for Doubtful Accounts:
  (Loss) Earnings before Interest and Taxes:
  Corporate
  Gross Profit on Sales:
  Selling Expense:
  27




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##### Table of Contents



Merchant Discounts and Provision for Doubtful Accounts:
   Pre-Opening Expense:
 Three Months Ended September 30,
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangePre-opening expense
    
    $
    472
    
    
    $
    534
    
    
    $
    (62
    )
    
    $
    1,282
    
    
    $
    1,264
    
    
    $
    18Number of Service Centers
opened during the period
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    28
    
    
    
    20
    
    
    
    8
  General and Administrative Expense:
   Supply Chain Transaction:
  Vendor Contract Termination:
  Other Income/(Expense):
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeOther expense
    
    $
    (1
    )
    
    $
    (168
    )
    
    $
    167
    
    
    $
    (31
    )
    
    $
    (114
    )
    
    $
    83Other income
    
    
    19
    
    
    
    139
    
    
    
    (120
    )
    
    
    186
    
    
    
    444
    
    
    
    (258
    )$
    18
    
    
    $
    (29
    )
    
    $
    47
    
    
    $
    155
    
    
    $
    330
    
    
    $
    (175
    )
 28




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##### Table of Contents



Interest Income (Expense):
  Income Taxes and Net Loss:
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,(Dollars in millions, except per share data)
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeLoss before income taxes
    
    $
    (2.3
    )
    
    $
    (16.2
    )
    
    $
    13.9
    
    
    $
    (4.0
    )
    
    $
    (11.1
    )
    
    $
    7.1Income taxes:Current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    0.7
    
    
    
    7.3
    
    
    
    (6.6
    )
    
    
    1.9
    
    
    
    6.5
    
    
    
    (4.6
    )Change in valuation allowance
    
    
    (0.7
    )
    
    
    (7.3
    )
    
    
    6.6
    
    
    
    (1.9
    )
    
    
    (6.5
    )
    
    
    4.6Net loss
    
    $
    (2.3
    )
    
    $
    (16.2
    )
    
    $
    13.9
    
    
    $
    (4.0
    )
    
    $
    (11.1
    )
    
    $
    7.1Loss per common share:Diluted
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    
    
    
    
    $
    (0.44
    )
    
    $
    (1.25
    )Basic
    
    $
    (0.25
    )
    
    $
    (1.82
    )
    
    
    
    
    
    $
    (0.44
    )
    
    $
    (1.25
    )
 Accounting for Income Taxes
  29




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    
    2005Cash used in operations
    
    $
    (10.5
    )
    
    $
    (18.1
    )Cash used in investing activities
    
    
    (2.0
    )
    
    
    (3.4
    )Cash provided by financing activities
    
    
    8.2
    
    
    
    20.7Decrease in cash and cash equivalents
    
    $
    (4.3
    )
    
    $
    (0.8
    )
  September 30,
    
    
    December 31,(Dollars in millions)
    
    2006
    
    
    2005
    
    
    2005Accounts payable
    
    $
    86.9
    
    
    $
    66.8
    
    
    $
    60.6Inventory
    
    $
    101.6
    
    
    $
    126.9
    
    
    $
    80.3Accounts payable leverage
    
    
    85.5
    %
    
    
    52.6
    %
    
    
    75.5
    %
 Capital Expenditures
 Nine Months Ended September 30,(Dollars in millions)
    
    2006
    
    
    2005StoresNew
    
    $
    1.5
    
    
    $
    1.5Other
    
    
    0.1
    
    
    
    1.3Manufacturing facilities
    
    
    
    
    
    
    0.5Corporate systems
    
    
    0.4
    
    
    
    0.4$
    2.0
    
    
    $
    3.7
   30




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##### Table of Contents



Financing Activities:
       Contractual Obligations, Commitments and Off Balance Sheet Arrangements
  31




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Revenue Recognition
   Allowance for Doubtful Accounts
  Inventories
  32




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##### Table of Contents



Income Taxes
  Impairment of Long-Lived Assets
  Accrued Liabilities
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Income Taxes
  FORWARD LOOKING STATEMENTS
  33




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
    34




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##### Table of Contents



PART II  OTHER INFORMATION
  
 ITEM 1. LEGAL PROCEEDINGS
 ®
  
 ITEM 1(a). RISK FACTORS
  Our dependence on one supplier for substantially all consumable products makes us vulnerable to a
disruption in the supply of these products.
  The golf market has been contracting and the Company has transitioned to a revised model for sales
to this sector.
  35




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##### Table of Contents



ITEM 2(c). UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 COL. A
    
    COL. B
    
    COL. C
    
    COL. DMaximum Number(or ApproximateTotal Number of
    
    Dollar Value) ofShares (or Units)
    
    Shares (or Units)Purchased as Part
    
    that May Yet BeTotal Number of
    
    Average Price
    
    of Publicly
    
    Purchased UnderShares (or Units)
    
    Paid per Share
    
    Announced Plans
    
    the Plans orPeriod
    
    Purchased
    
    (or Unit)
    
    or Programs)
    
    ProgramsJuly 1-31, 2006
    
    
    3,825
    
    
    $
    15.71
    (1)
    
    
    3,825
    
    
    
    1,404,653

(2)August 1-31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,404,653
(2)September 1-30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,404,653
(2)Total
    
    
    3,825
    
    
    $
    15.71
    (1)
    
    
    3,825
    
    
    
    1,404,653
(2)
 
 (1)
    
    Average price paid per share is presented at gross amount, which includes commission and fees
paid to the broker.(2)
    
    On October 21, 2005, the Company announced that its Board of Directors approved a stock
repurchase program authorizing the Company to repurchase up to 1.5 million common shares and
common share equivalents. This program does not have a planned expiration date. 
 ITEM 6. EXHIBITS
 Exhibits
    
    Exhibit 2(a)
    
    Letter Agreement by and between Turf Care Supply Corp. and
LESCO, Inc. dated September 22, 2006 (included as an
exhibit to the Registrants Form 8-K dated September 28,
2006 and incorporated herein by reference).Exhibits 3(a)
    
    Amended Articles of Incorporation of the Registrant
(included as an exhibit to the Registrants Quarterly
Report on Form 10-Q for the quarterly period ended March
31, 2006 and incorporated herein by reference).Exhibits 3(b)
    
    Amended Code of Regulations of the Registrant (included as
an exhibit to the Registrants Annual Report on Form 10-K
for the year ended December 31, 2002 and incorporated
herein by reference).Exhibit 10(a)
    
    Revolving Credit and Security Agreement dated September 27,
2006 (included as an exhibit to the Registrants Form 8-K
dated September 28, 2006 and incorporated herein by
reference).Exhibit 10(b)
    
    Fourth Amendment to Private Label Business Credit Program
Agreement dated September 26, 2006 (included as an exhibit
to the Registrants Form 8-K dated September 28, 2006 and
incorporated herein by reference).Exhibit 31(a)
    
    Jeffrey L. Rutherford Rule 13a-14(a)/15d-14(a) CertificationExhibit 31(b)
    
    Michael A. Weisbarth Rule 13a-14(a)/15d-14(a) CertificationExhibit 32(a)
    
    Jeffrey L. Rutherford Section 1350 CertificationExhibit 32(b)
    
    Michael A. Weisbarth Section 1350 Certification
 36




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##### Table of Contents



Date: November 9, 2006
    
    LESCO, INC.By:
    
    /s/ Michael A. WeisbarthMichael A. WeisbarthVice President, Chief Financial Officer and
Treasurer
 37