Exhibit 99.1
LESCO ANNOUNCES FOURTH QUARTER & FULL YEAR 2005 RESULTS
- Fourth Quarter Stores Segment Net Sales Increase 18.5% -
- Fourth Quarter Same-Store Service Center Sales Increase 10.4% -
- 31 New Service Centers Open During 2005 -
CLEVELAND, March 3 /PRNewswire-FirstCall/ -- LESCO, Inc. (Nasdaq: LSCO), a
leading provider of products for the professional green and pest control
industries, today announced fourth quarter and full-year results for the period
ending December 31, 2005.
Fourth Quarter 2005 Results
Net sales for the three months ended December 31, 2005 increased 3.5% to
$128.6 million from $124.2 million in the comparable period a year ago. Gross
profit on sales increased to 23.3% of net sales, or $29.9 million, compared to
21.9% of net sales, or $27.2 million, in the fourth quarter of 2004. Beginning
in the fourth quarter, gross profit reflects the incremental cost of the
outsourcing of warehouse and distribution functions to Turf Care Supply Corp.
(TCS). Due to the seasonal nature of the green industry, LESCO historically has
recognized a loss in its fourth quarter. The Company reported a 2005 GAAP-basis
loss of $1.74 per diluted share versus a loss of $1.49 per diluted share in
2004. The net loss was $15.6 million in the fourth quarter of 2005 compared to a
net loss of $13.0 million in the fourth quarter of 2004.
Fourth quarter 2005 operating results included costs of $4.7 million, or
$0.53 per diluted share, related to the Company's supply chain transaction,
including $2.2 million of expense to close the four distribution hubs that were
not purchased by TCS. Additional net charges included $2.5 million, or $0.28 per
diluted share, for the markdown costs to restructure the Company's parts
sourcing model and product offering, which are included in cost of product, and
$2.6 million, or $0.29 per diluted share, for expenses associated with a stock
option buyout and severance costs for former executives, which is included in
general and administrative costs. Fourth quarter 2004 operating results included
$1.9 million, or $0.22 per diluted share, of net expense related to the
Company's corporate headquarters relocation along with hurricane and flood
related activity, and $5.2 million, or $0.60 per diluted share, in charges
associated with a supplier contract termination.
Jeffrey Rutherford, President and Chief Executive Officer stated, "This past
year, the Company reached a significant inflection point as we completed our
strategic and financial restructuring, and our primary focus is now on operating
performance. As we build on the refined model we have put in place over the past
few years, we expect to make additional progress in opening new service centers
and improving our operations in 2006 and the years ahead. We firmly believe
LESCO is well-positioned to increase profitability consistently over the long
term."
The Company's GAAP results do not reflect any tax benefit related to the
Company's fourth quarter 2005 and fourth quarter 2004 loss before income tax
because of the required accounting treatment for LESCO's deferred tax assets.
Assuming a 39% tax rate to realize the deferred tax benefit, which LESCO
typically utilizes to evaluate year-over-year performance, and excluding net
charges totaling $9.8 million related to the sale of the Company's supply chain
assets, its outsourcing of parts merchandise and further rationalization of its
product assortment, and the stock option buyout and severance costs, the Company
would have reported a fourth quarter 2005 adjusted loss of $0.39 per diluted
share. This compares to an adjusted loss of $0.42 per diluted share in the
fourth quarter 2004, excluding net charges of $7.1 million related to corporate
relocation expense, hurricane and flood damage, and vendor contract termination
costs and assuming a 39% tax rate. Management believes these adjusted results
are useful to investors to permit them to assess the Company's results from
ongoing operations. A reconciliation of our adjusted results to the most
directly comparable GAAP measure is set forth in the attached Consolidated
Statements of Operations GAAP to non-GAAP reconciliation.
Full Year 2005 Results
Net sales for the twelve months ended December 31, 2005 increased 2.6% to
$575.7 million from $561.0 million in the comparable period a year ago. Gross
profit increased to $141.4 million, or 24.6% of net sales, from $138.4 million,
or 24.7% of net sales last year. Gross profit was negatively impacted by $6.3
million, or 1.1% of net sales, in 2005 due to inventory markdowns related to the
Company's decision to outsource parts distribution and further rationalize its
product offering, along with costs incurred to dispose of inventory in
conjunction with the supply chain transaction. In 2005, the Company reported a
GAAP basis net loss of $26.7 million, or $3.00 per diluted share, compared to a
net loss of $5.6 million, or $0.65 per diluted share, in 2004.
Included in the full-year 2005 results were costs of $24.0 million, or $2.70
per diluted share, related to the supply chain transaction, including costs for
the closing of four distribution hubs that were not purchased by TCS; $6.3
million, or $0.70 per diluted share, for the markdown charge to restructure the
parts sourcing model and rationalize LESCO's product offering and to dispose of
inventory in conjunction with the supply chain transaction; $2.6 million, or
$0.30 per diluted share, for stock option buyout and severance costs for former
executives; and $0.5 million, or $0.05 per diluted share, for costs associated
with a supplier contract termination. In 2004, full-year results were reduced by
$6.9 million for corporate headquarters relocation expense; $5.2 million for
costs associated with a supplier contract termination including product markdown
costs; and $1.2 million for hurricane and flood-related charges, equating in the
aggregate to a $1.53 charge per diluted share. For the full year, the Company
would have reported adjusted net income of $0.45 per diluted share for 2005
compared to $0.55 per diluted share for 2004, excluding these charges and
assuming a 39% tax rate. A reconciliation of our adjusted results to the most
directly comparable GAAP measures is set forth in the attached Consolidated
Statements of Operations GAAP to non-GAAP reconciliation.
Segment Operating Results
Concurrently with the sale of its supply chain assets, the Company revised
its segment reporting and now reports on two segments - Stores and Direct. The
Stores Segment includes operating results of the Company's Service Centers,
Stores-on-Wheels(R) vehicles and field management costs. The Direct Segment
includes the operating results of all non-store transactions.
Mr. Rutherford added, "We have streamlined our business and are delivering
on our strategic initiatives. During the fourth quarter, we achieved a milestone
by opening our 300th Service Center location, and we began to see more traction
in our Stores Segment strategy as evidenced by the shift in sales towards this
higher growth, higher return store model. Through the use of targeted
promotions, and by leveraging the strength of our store professionals, we were
able to drive sales and market share growth. Drawing on the experience of our
management team, we are improving our merchandising, marketing and store
operations, which should translate into incremental revenues and gross profit
expansion."
Stores Segment Operating Results - Stores Segment net sales for the three
months ended December 31, 2005 increased 18.4% to $115.7 million from $97.7
million in the same period a year ago. Service Center net sales increased 16.2%
and Stores-on-Wheels net sales increased 29.0%. Comparable Service Center sales
increased 10.4%. Gross profit as a percentage of sales increased 140 basis
points to 25.8% from 24.4%, driven by better product margins in our seed and
control product categories.
Stores Segment selling expense increased $5.5 million on a quarter-over-
quarter basis to $21.9 million, or 18.9% of net sales, from $16.4 million, or
16.8% of net sales, in 2004. Of this increase, $1.5 million is directly
attributable to the 31 new Service Centers and $1.0 million to the 38 new
Stores-on-Wheels opened during the past twelve months along with $0.6 million of
additional field management expense to enhance the structure to support future
store growth. Additionally, selling expense increased due to the timing of
certain costs related to training and selling support and the achievement of
sales and productivity goals that resulted in an increase in field personnel
incentive compensation.
Merchant discounts were $2.1 million, or 1.8% of net sales, during the
quarter versus $1.0 million, or 1.0% of net sales, in the same period in 2004.
This increase is due to a shift in mix of customer credit usage towards
higher-cost bank cards from the Company's private label credit program.
Earnings before interest and taxes declined to $5.9 million in fourth
quarter 2005 versus $6.4 million for the same period last year.
Stores Segment net sales for the twelve months ended December 31, 2005
increased 10.4% to $499.5 million. Service Center net sales increased 9.7% and
Stores-on-Wheels net sales increased 14.5%. Comparable Service Center net sales
increased 5.8% for the year. Gross profit as a percentage of net sales increased
60 basis points to 27.8%. The $14.5 million year-over-year increase in selling
expense is directly attributable to $4.5 million for new Service Centers and
$3.9 million for Stores-on-Wheels openings during the past twelve months, along
with $2.7 million for the expansion of the field management team and other
training and incentive costs as discussed above. Merchant discount fees
increased to $8.4 million, or 1.7% of net sales, from $6.3 million, or 1.4% of
net sales, in the previous year. This increase as a percentage of net sales was
driven by the previously described shift in customer credit usage between
private label and national bank cards. Earnings before interest and taxes were
$47.5 million versus $48.4 million during the same period in the prior year.
While Stores-on-Wheels contributed to the expansion of gross profit, their
operating profit was negatively impacted by incremental expenses of $6.6
million, resulting in a net decrease in operating profit of $3.6 million.
Direct Segment Operating Results - Direct Segment net sales were $12.9
million for the three months ended December 31, 2005 versus $26.5 million in the
comparable period a year ago. The decline is directly attributable to the
Company's decision to restructure and redeploy its direct sales representatives
in March of 2005. Gross profit as a percentage of sales increased 360 basis
points to 19.4% from 15.8% as a result of a continued focus in national accounts
on customer profitability rather than sales volume.
Direct Segment selling expense decreased $2.4 million on a quarter-over-
quarter basis to $0.6 million, or 4.7% of net sales, from 11.3% of net sales in
2004. This decrease is due to the significant reduction in the number of direct
sales representatives. Merchant discounts were flat year-over-year at $0.4
million, but increased 160 basis points to 3.1% of net sales reflecting the
write-off of certain recourse accounts.
Earnings before interest and taxes were $1.5 million in the current year
versus $0.8 million in the prior year.
Direct Segment net sales for the twelve months ended December 31, 2005 were
$76.2 million compared to $108.6 million in 2004. Gross profit as a percentage
of sales was 11.7% versus 14.9% in 2004; however, the Company began addressing
lower-profit accounts which were then restructured in 2005. For the full year,
Direct Segment selling expense declined $7.6 million, primarily attributable to
the reduction in direct sales representatives. Merchant discounts increased $0.2
million to 2.5% of net sales in 2005 compared to 1.6% in 2004 primarily due to
recourse account activity as previously discussed. Earnings before interest and
taxes grew to $1.4 million in 2005 from $1.3 million in the prior year.
Corporate
The two operating segments are supplemented by Corporate costs incurred for
support functions, including Corporate selling expenses, merchant discounts,
general and administrative expenses, and new store pre-opening costs. Total
Corporate expense for the fourth quarter of 2005 was $22.8 million, which
included $9.8 million of net costs for the transaction with TCS, accelerated
markdowns, severance and stock option repurchase costs. Total Corporate expense
for the fourth quarter of 2004 was $20.0 million, which included a net expense
of $7.1 million for corporate headquarters relocation, hurricane and flood
related activity, and charges associated with a supplier contract termination.
Corporate selling expense, comprised of customer service, bids processing,
product registration and marketing expenses, was $2.7 million in the fourth
quarter of 2005 compared to $3.2 million for the same period in 2004. Corporate
merchant discounts, which are incurred for the extension of customer payment
terms, increased to $4.1 million from $2.5 million for the like period last year
as market conditions necessitated more aggressive promotional offerings, and our
customers participated at higher-than-historical levels. General and
administrative expense was $8.3 million, including stock option repurchase and
severance expenses, compared to $7.1 million in the fourth quarter of 2004.
These 2005 results reflect a reduction or elimination of some expenses as a
result of the supply chain transaction. Pre-opening expense in the fourth
quarter of 2005 was $0.5 million compared to $0.2 million for the same period
last year.
Total Corporate expense for the full year 2005 was $74.7 million, versus
$54.2 million in 2004, both of which include the incremental expenses delineated
above in the full-year Company results.
New Service Centers and Stores-on-Wheels
LESCO increased its Service Centers by 11% in 2005, opening 11 new Service
Centers during the fourth quarter of 2005 and 31 for the full year. On December
31, 2005, there were 305 Service Centers in operation, versus 274 at the end of
2004. The Company opened 65% of the new Service Centers during the second half
of 2005. The 79 Service Centers that were opened from 2003 through the end of
2005 generated net sales of $14.7 million for the quarter and pre-tax loss of
$0.7 million. For the full year 2005, these Service Centers generated net sales
of $55.4 million and pre-tax income of $0.5 million.
These results reflect our new segment reporting. Our new store financial
model has been revised to include all warehouse and distribution costs, of which
some were historically considered fixed costs and are now reported as variable
costs in our segment results.
LESCO increased its Stores-on-Wheels fleet by 52% in 2005, opening 38 new
Stores-on-Wheels vehicles during the year. On December 31, 2005, there were 111
Stores-on-Wheels vehicles in operation, versus 73 at the end of 2004.
Sale of Supply Chain Assets
On October 11, 2005, the Company announced that it had completed the sale of
its supply chain assets and consumable products inventory, including fertilizer,
seed, control products, combination products, and related products, to TCS. The
supply chain assets sold included all four of LESCO's blending facilities and
the majority of the Company's warehouse and distribution centers. At closing,
the Company received $15 million in cash and $19 million in accounts receivable
from TCS. The accounts receivable were fully collected during the fourth
quarter. Ultimately, the Company expects to harvest $25 million in cash after
settling all requirements associated with the transaction including the accounts
payable due to vendors for the inventory sold to TCS.
Share Repurchase Program
With the sale of the supply chain assets complete, the Company announced on
October 21, 2005 that its Board of Directors had authorized the repurchase of up
to 1.5 million common shares and equivalents. Repurchases under the Company's
share buy back program will be made in the open market or through privately
negotiated transactions. During the fourth quarter, the Company repurchased
options to purchase approximately 336,000 common shares that could have been
exercised at various intervals over the next six years and recognized a related
charge of $1.3 million.
Balance Sheet
As of December 31, 2005, LESCO's cash and cash equivalent balance was $21.0
million versus $8.1 million at the same time last year. The Company had no debt
at December 31, 2005, compared to total debt of $7.3 million as of December 31,
2004.
Full Year 2006 Guidance
The Company announced preliminary guidance for fiscal 2006 for each of its
operating segments, Stores and Direct, as well as for its Corporate support
costs. We currently anticipate the following financial results:
- Stores Segment
- Net revenue growth between 10.0% and 12.0%,
- Gross profit rate (including distribution costs) of 25.6% to 25.9%,
- Selling expense at 16.0% of net sales,
- Merchant discounts expense from 1.5% to 1.7% of net sales,
- Store openings up to 40 new Service Centers,
- New Service Center operating model assumptions:
($000's) Sales 4-Wall EBIT
----------- -------- -----------
Year 1 $ 550 $ (45)
Year 2 $ 800 $ 10
Year 3 $ 1,000 $ 55
Year 4 $ 1,200 $ 80
Year 5 $ 1,300 $ 110
- Direct Segment
- Net revenue declining 14.0% to 15.0%,
- Gross profit rate (including distribution costs) improving to
16.0%,
- Selling expense de-leveraging on a year-over-year basis to 7.6% of
net sales,
- Merchant discounts improving to 2.0% of net sales.
- Corporate Support Costs
- Improvement of 6.0% to 9.0%,
- Selling expense at 1.6% of consolidated net sales,
- Merchant discounts expense at 0.7% of consolidated net sales,
- General and administrative expense of $22 to $23 million,
- No net interest expense,
- Pre-opening expense of approximately $2.5 million.
Conference Call
The Company will host a conference call and audio webcast with investors,
analysts and other interested parties today at 8:30 a.m. (Eastern). Hosting the
call will be Jeffrey Rutherford, President and Chief Executive Officer, and
Michael Weisbarth, Chief Financial Officer and Treasurer. The live call can be
accessed by dialing 1-800-260-8140, passcode 86190023. Participants should
register at least 15 minutes prior to the commencement of the call. The
conference call will also include a question and answer session.
Additionally, a live audio webcast will be available to interested parties
at www.lesco.com. Participants should allow at least 15 minutes prior to the
commencement of the call to register, download and install necessary audio
software. Questions can be submitted either in advance or during the webcast via
email to ir@lesco.com or through the Company's corporate web site where a link
will be provided on the "Home" page.
LESCO's culture demands the highest of ethical standards and accountability
manifested in full and fair financial disclosure to our shareholders. LESCO
management encourages the participation of our shareholders and other interested
parties in our conference calls and live webcasts. For those who cannot
participate in the conference call or the live webcast, a replay will be
available beginning approximately one hour after the conclusion of the event on
LESCO's web site.
About LESCO, Inc.
LESCO currently serves more than 130,000 customers worldwide, through 305
LESCO Service Center(R) locations, 111 LESCO Stores-on-Wheels vehicles, the
Internet, and other direct sales efforts. Additional information about LESCO can
be found on the Internet at www.lesco.com.
Statements in this news release under the heading 2006 Guidance and other
statements relating to sales and earnings expectations, new Service Center
openings and profitability, and other statements that are not historical
information are forward-looking statements and, as such, reflect only the
Company's best assessment at this time. Investors are cautioned that forward-
looking statements involve risks and uncertainties that may cause actual results
to differ materially from such statements and that investors should not place
undue reliance on such statements. Factors that may cause actual results to
differ materially from those projected or implied in the forward- looking
statements include, but are not limited to, the final resolution of certain
contingencies relative to the collection of identified accounts receivable; the
Company's ability to add new Service Centers in accordance with its plans, which
can be affected by local zoning and other governmental regulations and its
ability to find favorable store locations, to negotiate favorable leases, to
hire qualified individuals to operate the Service Centers, and to integrate new
Service Centers into the Company's systems; the Company's ability to transition
quickly and effectively from a golf sales representative model to a
Stores-on-Wheels model; competitive factors in the Company's business, including
pricing pressures; lack of availability or instability in the cost of raw
materials which affects the costs of certain products; the successful and
uninterrupted performance of supply chain services by Turf Care Supply Corp; the
Company's ability to impose price increases on customers without a significant
loss in revenues; potential rate increases by third-party carriers which affect
the cost of delivery of products; changes in existing law; the Company's ability
to effectively market and distribute new products; the success of the Company's
operating plans; any litigation or regulatory proceedings against the Company;
regional weather conditions; and the condition of the industry and the economy.
For a further discussion of risk factors, investors should refer to the
Company's Securities and Exchange Commission reports, including but not limited
to its Form 10-K for the year ended December 31, 2004.
Contact:
Michael Weisbarth
Chief Financial Officer and Treasurer
LESCO, Inc.
(216) 706-9250
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ---------------------------
(Dollars in thousands, except per share data) 2005 2004 2005 2004
- --------------------------------------------- ------------ ------------ ------------ ------------
Net sales $ 128,624 $ 124,153 $ 575,745 $ 561,041
Cost of product
(including distribution
costs) (98,768) (96,954) (434,334) (422,617)
Gross profit on sales 29,856 27,199 141,411 138,424
Selling expense (25,216) (22,619) (98,837) (91,758)
General & administrative
expense (8,317) (7,055) (26,739) (27,000)
Merchant discounts and
provision for doubtful
accounts (6,582) (3,898) (15,893) (10,757)
Pre-opening expense (500) (194) (1,607) (1,158)
Corporate relocation - (1,961) - (6,878)
Hurricane/flood - 107 - (1,243)
Vendor contract termination - (4,404) (474) (4,404)
Supply chain transaction
expense (4,716) - (24,039) -
Other expense (4) (168) (118) (272)
Other income 26 150 470 508
Loss before interest and taxes (15,453) (12,843) (25,826) (4,538)
Interest expense, net (115) (151) (856) (747)
Loss before taxes (15,568) (12,994) (26,682) (5,285)
Income tax (provision) benefit:
Current - 2,825 - (340)
Deferred 3,016 2,205 9,536 2,363
Change in valuation allowance (3,016) (5,030) (9,536) (2,363)
- - - (340)
Net loss $ (15,568) $ (12,994) $ (26,682) $ (5,625)
Loss per common share:
Diluted $ (1.74) $ (1.49) $ (3.00) $ (0.65)
Basic $ (1.74) $ (1.49) $ (3.00) $ (0.65)
Average number of common shares and
common share equivalents outstanding:
Diluted 8,940,502 8,705,527 8,887,024 8,696,356
Basic 8,940,502 8,705,527 8,887,024 8,696,356
LESCO, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
(Dollars in thousands) 2005 2004
- --------------------------------------------- ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 21,030 $ 8,101
Accounts receivable, net 16,310 16,931
Inventories 80,346 100,582
Other 2,667 3,126
TOTAL CURRENT ASSETS 120,353 128,740
Property, plant and equipment, net 9,624 26,019
Other 904 1,234
$ 130,881 $ 155,993
CURRENT LIABILITIES:
Accounts payable $ 61,381 $ 56,371
Accrued liabilities 24,576 24,184
Revolving credit facility - 7,303
TOTAL CURRENT LIABILITIES 85,957 87,858
Deferred - other 2,166 1,612
TOTAL LIABILITIES 88,123 89,470
SHAREHOLDERS' EQUITY:
Common shares--without par value--
19,500,000 shares authorized;
8,949,921 shares issued and
outstanding at December 31,
2005 and 8,697,194 issued and
outstanding December 31, 2004 894 870
Paid-in capital 38,051 34,846
Retained earnings 4,955 31,637
Unearned compensation (1,142) (830)
TOTAL SHAREHOLDERS' EQUITY 42,758 66,523
$ 130,881 $ 155,993
LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended
December 31,
---------------------------
(Dollars in thousands) 2005 2004
- ------------------------------------------------------- ------------ ------------
OPERATING ACTIVITIES:
Net loss $ (26,682) $ (5,625)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 6,057 7,457
Decrease (increase) in accounts receivable 621 (3,599)
Sale of accounts receivable - 5,946
Inventory markdown 6,260 799
Decrease (increase) in inventories 13,976 (7,801)
Loss on sale of fixed assets 14,128 658
Impairment of fixed assets 352 -
Increase in accounts payable 6,047 11,853
Amortization of unearned compensation 1,296 607
(Increase) decrease in current income tax (9) 3,961
Other 1,518 8,618
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,564 22,874
INVESTING ACTIVITIES:
Proceeds on the sale of fixed assets 275 1,822
Purchase of property, plant and equipment, net
Stores (3,094) (1,598)
Other (1,097) (2,747)
NET CASH USED IN INVESTING ACTIVITIES (3,916) (2,523)
FINANCING ACTIVITIES:
Decrease in overdraft balances (1,037) (5,913)
Proceeds from borrowings 704,877 647,187
Reduction of borrowings (712,180) (661,300)
Exercised stock options, net of
treasury shares 1,621 271
NET CASH USED IN FINANCING ACTIVITIES (6,719) (19,755)
Net change in cash and cash equivalents 12,929 596
Cash and cash equivalents - Beginning
of the period 8,101 7,505
CASH AND CASH EQUIVALENTS - END OF THE PERIOD $ 21,030 $ 8,101
Supplemental disclosure of cash flow information:
Interest paid, including letters of
credit and unused facility fees $ (946) $ (776)
Income taxes (paid) refunded $ (140) $ 3,575
LESCO, INC.
SEGMENT INCOME STATEMENT
Three Months Ended December 31,
---------------------------------------------------------
Stores Direct Sales
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ 115.7 $ 97.7 $ 12.9 $ 26.5
Cost of Product (including
distribution costs) (85.8) (73.9) (10.4) (22.3)
Gross profit on sales $ 29.9 $ 23.8 $ 2.5 $ 4.2
% to Net Sales 25.8% 24.4% 19.4% 15.8%
Selling expense $ (21.9) $ (16.4) $ (0.6) $ (3.0)
% to Net Sales (18.9)% (16.8)% (4.7)% (11.3)%
Merchant discounts $ (2.1) $ (1.0) $ (0.4) $ (0.4)
% to Net Sales (1.8)% (1.0)% (3.1)% (1.5)%
Pre-opening expense - - - -
% to Net Sales - - - -
General & administrative expense - - - -
% to Net Sales - - - -
Supply chain transaction expense - - - -
% to Net Sales - - - -
Vendor contract termination - - - -
% to Net Sales - - - -
Corporate relocation expense - - - -
% to Net Sales - - - -
Hurricane/flood expense - - - -
% to Net Sales - - - -
Earnings (loss) before interest and
taxes $ 5.9 $ 6.4 $ 1.5 $ 0.8
% to Net Sales 5.1% 6.6% 11.6% 3.0%
Three Months Ended December 31,
---------------------------------------------------------
Corporate Total
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ - $ - $ 128.6 $ 124.2
Cost of Product (including
distribution costs) (2.5) (0.8) (98.7) (97.0)
Gross profit on sales $ (2.5) $ (0.8) $ 29.9 $ 27.2
% to Net Sales 23.3% 21.9%
Selling expense $ (2.7) $ (3.2) $ (25.2) $ (22.6)
% to Net Sales (19.6)% (18.2)%
Merchant discounts $ (4.1) $ (2.5) $ (6.6) $ (3.9)
% to Net Sales (5.1)% (3.1)%
Pre-opening expense $ (0.5) $ (0.2) $ (0.5) $ (0.2)
% to Net Sales (0.4)% (0.2)%
General & administrative expense $ (8.3) $ (7.1) $ (8.3) $ (7.1)
% to Net Sales (6.5)% (5.7)%
Supply chain transaction expense $ (4.7) - $ (4.7) -
% to Net Sales (3.7)% -
Vendor contract termination - $ (4.4) - $ (4.4)
% to Net Sales - (3.5)%
Corporate relocation expense - $ (1.9) - $ (1.9)
% to Net Sales - (1.5)%
Hurricane/flood expense - $ 0.1 - $ 0.1
% to Net Sales - 0.1%
Earnings (loss) before interest and
taxes $ (22.8) $ (20.0) $ (15.4) $ (12.8)
% to Net Sales (12.0)% (10.3)%
LESCO, INC.
SEGMENT INCOME STATEMENT
Twelve Months Ended December 31,
---------------------------------------------------------
Stores Direct Sales
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ 499.5 $ 452.4 $ 76.2 $ 108.6
Cost of Product (including
distribution costs) (360.8) (329.4) (67.3) (92.4)
Gross profit on sales $ 138.7 $ 123.0 $ 8.9 $ 16.2
% to Net Sales 27.8% 27.2% 11.7% 14.9%
Selling expense $ (82.8) $ (68.3) $ (5.6) $ (13.2)
% to Net Sales (16.6)% (15.1)% (7.3)% (12.2)%
Merchant discounts $ (8.4) $ (6.3) $ (1.9) $ (1.7)
% to Net Sales (1.7)% (1.4)% (2.5)% (1.6)%
Pre-opening expense - - - -
% to Net Sales - - - -
General & administrative expense - - - -
% to Net Sales - - - -
Supply chain transaction expense - - - -
% to Net Sales - - - -
Vendor contract termination - - - -
% to Net Sales - - - -
Corporate relocation expense - - - -
% to Net Sales - - - -
Hurricane/flood expense - - - -
% to Net Sales - - - -
Other income (expense) - - - -
% to Net Sales - - - -
Earnings (loss) before interest and
taxes $ 47.5 $ 48.4 $ 1.4 $ 1.3
% to Net Sales 9.5% 10.7% 1.8% 1.2%
Twelve Months Ended December 31,
---------------------------------------------------------
Corporate Total
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $ - $ - $ 575.7 $ 561.0
Cost of Product (including
distribution costs) (6.2) (0.8) (434.3) (422.6)
Gross profit on sales $ (6.2) $ (0.8) $ 141.4 $ 138.4
% to Net Sales 24.6% 24.7%
Selling expense $ (10.4) $ (10.2) $ (98.8) $ (91.7)
% to Net Sales (17.2)% (16.3)%
Merchant discounts $ (5.6) $ (2.7) $ (15.9) $ (10.7)
% to Net Sales (2.8)% (1.9)%
Pre-opening expense $ (1.6) $ (1.2) $ (1.6) $ (1.2)
% to Net Sales (0.3)% (0.2)%
General & administrative
expense $ (26.7) $ (27.0) $ (26.7) $ (27.0)
% to Net Sales (4.6)% (4.8)%
Supply chain transaction
expense $ (24.0) - $ (24.0) -
% to Net Sales (4.2)% -
Vendor contract termination $ (0.5) $ (4.4) (0.5) $ (4.4)
% to Net Sales (0.1) (0.8)%
Corporate relocation expense - $ (6.9) - $ (6.9)
% to Net Sales - (1.2)%
Hurricane/flood expense - $ (1.2) - $ (1.2)
% to Net Sales - (0.2)%
Other income (expense) $ 0.3 $ 0.2 $ 0.3 $ 0.2
% to Net Sales 0.1% 0.0%
Earnings (loss) before
interest and taxes $ (74.7) $ (54.2) $ (25.8) $ (4.5)
% to Net Sales (4.5)% (0.8)%
LESCO, INC.
SALES BY CUSTOMER SECTOR AND TRANSACTING SELLING LOCATIONS
Three Months Ended December 31, 2005
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care $ 87.4 $ 0.9 $ 10.9 $ 99.2
Golf 7.3 21.9 2.1 31.3
Gross sales 94.7 22.8 13.0 130.5
Net sales adjustments (a) (0.8) (1.0) (0.1) (1.9)
Net sales $ 93.9 $ 21.8 $ 12.9 $ 128.6
Three Months Ended December 31, 2004
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care $ 73.5 $ 0.7 $ 11.9 $ 86.1
Golf 7.8 20.8 11.4 40.0
Gross sales 81.3 21.5 23.3 126.1
Net sales adjustments (a) (0.5) (4.6) 3.2 (1.9)
Net sales $ 80.8 $ 16.9 $ 26.5 $ 124.2
Three Months Ended December 31,
% Change
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care 18.9% 28.6% (8.4)% 15.2%
Golf (6.4) 5.3 (81.6) (21.8)
Gross sales 16.5 6.0 (44.2) 3.5
Net sales adjustments (a) (60.0) 78.3 (103.1) 0.0
Net sales 16.2% 29.0% (51.3)% 3.5%
Twelve Months Ended December 31, 2005
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care $ 388.1 $ 3.5 $ 69.0 $ 460.6
Golf 35.8 77.3 9.2 122.3
Gross sales 423.9 80.8 78.2 582.9
Net sales adjustments (a) (2.4) (2.8) (2.0) (7.2)
Net sales $ 421.5 $ 78.0 $ 76.2 $ 575.7
(a) Net sales adjustments include freight revenue reduced by agency sales,
customer discounts, and rebates.
Twelve Months Ended December 31, 2004
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care $ 349.9 $ 2.7 $ 72.8 $ 425.4
Golf 34.5 70.9 34.7 140.1
Gross sales 384.4 73.6 107.5 565.5
Net sales adjustments (a) (0.1) (5.5) 1.1 (4.5)
Net sales $ 384.3 $ 68.1 $ 108.6 $ 561.0
Twelve Months Ended December 31,
% Change
---------------------------------------------------------
Service Stores on
(Dollars in millions) Centers Wheels Direct Total
- --------------------------------------------- ------------ ------------ ------------ ------------
Lawn care 10.9% 29.6% (5.2)% 8.3%
Golf 3.8 9.0 (73.5) (12.7)
Gross sales 10.3 9.8 (27.3) 3.1
Net sales adjustments (a) (2,300.0) 49.1 (281.8) (60.0)
Net sales 9.7% 14.5% (29.8)% 2.6%
(a) Net sales adjustments include freight revenue reduced by agency sales,
customer discounts, and rebates.
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to Non-GAAP Reconciliation
Three Months Ended December 31, 2005
------------------------------------------
Results
Including
GAAP (a)(b) Adjustments
Results Adjustments (Non-GAAP)
------------ ------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 128,624 $ - $ 128,624
Cost of product (including
distribution costs) (98,768) 2,475 (96,293)
Gross profit on sales 29,856 2,475 32,331
Selling expense (25,216) - (25,216)
General & administrative expense (8,317) 2,635 (5,682)
Merchant discounts and provision
for doubtful accounts (6,582) - (6,582)
Pre-opening expense (500) - (500)
Corporate relocation - - -
Hurricane/flood expense - - -
Vendor contract termination - - -
Supply chain transaction expense (4,716) 4,716 -
Other expense (4) - (4)
Other income 26 - 26
(Loss) income before interest and
taxes (15,453) 9,826 (5,627)
Interest expense, net (115) - (115)
(Loss) income before taxes (15,568) 9,826 (5,742)
Income tax (provision) benefit:
Current - 2,239 2,239
Deferred 3,016 - 3,016
Change in valuation allowance (3,016) - (3,016)
- 2,239 2,239
Net (loss) income $ (15,568) $ 12,065 $ (3,503)
Loss per common share:
Diluted $ (1.74) $ (0.39)
Basic $ (1.74) $ (0.39)
Average number of common shares and
common share equivalents outstanding:
Diluted 8,940,502 8,940,502
Basic 8,940,502 8,940,502
Three Months Ended December 31, 2004
------------------------------------------
Results
Including
GAAP (b)(c) Adjustments
Results Adjustments (Non-GAAP)
------------ ------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 124,153 $ - $ 124,153
Cost of product (including
distribution costs) (96,954) 799 (96,155)
Gross profit on sales 27,199 799 27,998
Selling expense (22,619) - (22,619)
General & administrative expense (7,055) - (7,055)
Merchant discounts and provision
for doubtful accounts (3,898) - (3,898)
Pre-opening expense (194) - (194)
Corporate relocation (1,961) 1,961 -
Hurricane/flood expense 107 (107) -
Vendor contract termination (4,404) 4,404 -
Supply chain transaction expense - - -
Other expense (168) - (168)
Other income 150 - 150
(Loss) income before interest and
taxes (12,843) 7,057 (5,786)
Interest expense, net (151) - (151)
(Loss) income before taxes (12,994) 7,057 (5,937)
Income tax (provision) benefit:
Current 2,825 2,315 5,140
Deferred 2,205 - 2,205
Change in valuation allowance (5,030) - (5,030)
- 2,315 2,315
Net (loss) income $ (12,994) $ 9,372 $ (3,622)
Loss per common share:
Diluted $ (1.49) $ (0.42)
Basic $ (1.49) $ (0.42)
Average number of common shares and
common share equivalents outstanding:
Diluted 8,705,527 8,705,527
Basic 8,705,527 8,705,527
(a) 2005 adjustments include $4.7 million for the supply chain transaction,
$2.5 million for parts merchandise strategy and rationalization of the
Company's product assortment, and $2.6 million of stock option buyout
and severance costs for former executives. Management believes that an
assessment of the Company's ongoing operating results for its fourth
quarter 2005 excluding charges for its supply chain transaction, parts
merchandise strategy, and severance/stock option buyout costs is useful
to investors to permit comparison of ongoing operations.
(b) On a generally accepted accounting principles (GAAP) basis, LESCO cannot
recognize the benefit of establishing a deferred tax asset to be
realized in a future period because of the required accounting treatment
for its current tax position. Management believes that in order to
present meaningful comparison to historical Company results, a tax
benefit should be reflected based on the operating loss recorded in the
fourth quarters of 2005 and 2004. This assumes that LESCO will realize
benefits in the future from its deferred tax assets. The adjusted
results reflect a tax benefit calculated assuming a tax rate of 39%.
(c) 2004 adjustments include $2.0 million for corporate relocation, $(0.1)
million for hurricane/flood expense, and $5.2 million for vendor
contract termination costs. Management believes that an assessment of
the Company's ongoing operating results for its fourth quarter 2004
excluding charges for its relocation of corporate offices,
hurricane/flood expense and vendor contract termination costs is useful
to investors to permit comparison of ongoing operations.
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to Non-GAAP Reconciliation
Three Months Ended December 31, 2005
------------------------------------------
Results
Including
GAAP (b)(c) Adjustments
Results Adjustments (Non-GAAP)
------------ ------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 575,745 $ - $ 575,745
Cost of product (including
distribution costs) (434,334) 6,260 (428,074)
Gross profit on sales 141,411 6,260 147,671
Selling expense (98,837) - (98,837)
General & administrative expense (26,739) 2,635 (24,104)
Merchant discounts and provision
for doubtful accounts (15,893) - (15,893)
Pre-opening expense (1,607) - (1,607)
Corporate relocation - - -
Hurricane/flood expense - - -
Vendor contract termination (474) 474 -
Supply chain transaction expense (24,039) 24,039 -
Other expense (118) - (118)
Other income 470 - 470
(Loss) income before interest and
taxes (25,826) 33,408 7,582
Interest expense, net (856) - (856)
(Loss) income before taxes (26,682) 33,408 6,726
Income tax (provision) benefit:
Current - (2,623) (2,623)
Deferred 9,536 - 9,536
Change in valuation allowance (9,536) - (9,536)
- (2,623) (2,623)
Net (loss) income $ (26,682) $ 30,785 $ 4,103
(Loss) earnings per common share:
Diluted $ (3.00) $ 0.45
Basic $ (3.00) $ 0.46
Average number of common shares and
common share equivalents outstanding:
Diluted 8,887,024 9,179,364
Basic 8,887,024 8,887,024
Three Months Ended December 31, 2005
------------------------------------------
Results
Including
GAAP (b)(c) Adjustments
Results Adjustments (Non-GAAP)
------------ ------------ ------------
(Dollars in thousands,
except per share data)
Net sales $ 561,041 $ - $ 561,041
Cost of product (including
distribution costs) (422,617) 799 (421,818)
Gross profit on sales 138,424 799 139,223
Selling expense (91,758) - (91,758)
General & administrative expense (27,000) - (27,000)
Merchant discounts and provision -
for doubtful accounts (10,757) - (10,757)
Pre-opening expense (1,158) - (1,158)
Corporate relocation (6,878) 6,878 -
Hurricane/flood expense (1,243) 1,243 -
Vendor contract termination (4,404) 4,404 -
Supply chain transaction expense - - -
Other expense (272) - (272)
Other income 508 - 508
(Loss) income before interest and
taxes (4,538) 13,324 8,786
Interest expense, net (747) - (747)
(Loss) income before taxes (5,285) 13,324 8,039
Income tax (provision) benefit:
Current (340) (2,795) (3,135)
Deferred 2,363 - 2,363
Change in valuation allowance (2,363) - (2,363)
(340) (2,795) (3,135)
Net (loss) income $ (5,625) $ 10,529 $ 4,904
(Loss) earnings per common share:
Diluted $ (0.65) $ 0.55
Basic $ (0.65) $ 0.56
Average number of common shares and
common share equivalents outstanding:
Diluted 8,696,356 8,943,205
Basic 8,696,356 8,696,356
(a) 2005 adjustments include $24.0 million for the supply chain transaction,
$6.3 million for parts merchandise strategy and rationalization of the
Company's product assortment, $.5 million for vendor contract
termination, and $2.6 million of stock option buyout and severance costs
for former executives. Management believes that an assessment of the
Company's ongoing operating results for the year ended December 31, 2005
excluding charges for its supply chain transaction, parts merchandise
strategy, settlement costs to KPAC, and severance/stock option buyout
costs is useful to investors to permit comparison of ongoing operations.
(b) On a generally accepted accounting principles (GAAP) basis, LESCO cannot
recognize the benefit of establishing a deferred tax asset to be
realized in a future period because of the required accounting treatment
for its current tax position. Management believes that in order to
present a meaningful comparison to historical Company results, a tax
expense should be reflected based on the operating income recorded in
the annual results of 2005 and 2004. This assumes that LESCO will
realize benefits in the future from its deferred tax assets. The
adjusted results reflect a tax expense calculated assuming a tax rate of
39%.
(c) 2004 adjustments include $6.9 million for corporate relocation, $1.2
million for hurricane/flood expense, and $5.2 million for vendor
contract termination costs. Management believes that an assessment of
the Company's ongoing operating results for its year ended December 31,
2004 excluding charges for its relocation of corporate offices,
hurricane/flood expense, and vendor contract termination charges is
useful to investors to permit comparison of ongoing operations.
SOURCE LESCO, Inc.
-0- 03/03/2006
/CONTACT: Michael Weisbarth, Chief Financial Officer and Treasurer of
LESCO, Inc., +1-216-706-9250/
/Web site: http://www.lesco.com/