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CLEVELAND, Ohio – LESCO, a leading provider of products for the professional green and pest control industries, today announced third-quarter and nine-month results for the period ending Sept. 30, 2005. Additionally, on October 21, 2005, the company announced that Jeffrey Rutherford was appointed president and chief executive officer and that the Board of Directors had approved a share repurchase program of up to 1.5 million shares. Also as previously announced, the company has completed the sale of its supply chain assets and consumable products inventory and, concurrent with the sale, entered into a long-term supply agreement with Turf Care Supply Corp., an affiliate of Platinum Equity LLC.
| LESCO OPENS 16th NEW YORK SERVICE CENTER | ||||||||||||||||
CLEVELAND, Ohio – For the second consecutive year, LESCO has opened a new LESCO Service Center location in New York. This location – the 16th in the Empire State for LESCO – is located on Long Island in Southampton, N.Y. Last year, LESCO opened a new Service Center in Malta, N.Y. Other LESCO Service Centers in New York include:
LESCO has now opened 22 new locations in 2005, bringing its nationwide total to 296 Service Centers in 39 states. “The combination of local convenience with national coverage is a critical component of LESCO’s success,” noted Jeff Rutherford, LESCO’s chief executive officer. “As we continue opening new LESCO Service Centers and putting more Stores-on-Wheels vehicles on the road, we will continue serving our customers better while also driving LESCO’s growth.” The Southampton service center is managed by Ron Paparelli and Kevin Hegarty, and is located at: 15-B Mariners Drive You can contact this new LESCO Service Center by calling 631/287-1029. |
Q3 & NINE MONTH RESULTS. Net sales for the three months ended September 30, 2005, increased 4.1 percent to $158.9 million from $152.7 million in the comparable period a year ago. Lawn care gross sales grew 8.5 percent to $122.2 million from $112.6 million in the third quarter of 2004, while golf gross sales were down 6.4 percent to $38.2 million versus $40.8 million in the same quarter last year.
"With the sale of the supply chain assets complete, LESCO has transitioned from a vertically integrated business model to a company that is now focused on the profitable growth of our store segment composed of Service Centers and Stores-on-Wheels,” Rutherford says. “I strongly believe that we have the right team in place to execute on this revised model as our senior management team has significant retail experience and the proper skill sets to capitalize on the opportunity to grow our store segment profitably over time."
In the third quarter of 2005, the company also recorded an additional $19 million charge related to the supply chain transaction, which consisted primarily of the impairment of certain assets.
Net sales for the nine months ended Sept. 30, 2005, increased 2.3 percent to $447.1 million from $436.9 million in the comparable period a year ago. For the first nine months of 2005, lawn care gross sales expanded 6.5 percent to $361.4 million from $339.5 million for the same period of 2004, while Golf gross sales declined 9 percent to $91 million versus $100 million for the first nine months in 2004.
The first nine months of 2005, results were reduced by $20.1 million, or $2.27 per diluted share, for costs related to the supply chain transaction, by $3 million, or $0.34 per diluted share, for the markdown charge to restructure the parts sourcing model and product offering, and by $0.5 million, or $0.05 per diluted share, for settlement costs paid to KPAC Holdings.
LESCO's gross profit for the third quarter decreased to 23.5 percent of net sales ($37.3 million), compared to 26.7 percent of net sales (40.7 million) for the same quarter last year. The company reports that gross profit for the quarter was negatively impacted by $3.8 million, or 2.4 percent of net sales, due to $3 million of inventory markdowns related to LESCO's decision to outsource parts distribution and $800,000 of disposed inventory in conjunction with their supply chain transaction.
Year-to-date, LESCO's overall gross profit has increased to $111.6 million (24.9 percent of net sales). This is up from $111.2 million (25.5 percent of net sales) in the first nine months of 2004. The same negative impact of $3.8 million was 0.8 percent of the company's net sales. For the first nine months of 2005, LESCO reported a GAAP basis net loss of $11.1 million, or $1.25 per diluted share, compared to net income of $7.4 million or $0.82 per diluted share last year.
NEW SERVICE CENTERS. LESCO opened nine new Service Centers during the third quarter of 2005, in areas where the company already had a market presence. On Sept. 30, 2005, there were 294 Service Centers in operation, versus 273 at the end of the third quarter of 2004. The 68 Service Centers opened from 2003 through the third quarter of 2005 generated net sales of $16.7 million for the quarter and four-wall, pre-tax income of $0.8 million. These 68 Service Centers generated net sales of $40.7 million for the first nine months of 2005.
SALE OF SUPPLY CHAIN ASSETS. On Oct. 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. 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. Repurchases under the company's share buy back program will be made in the open market or through privately negotiated transactions. The timing, manner and amount of repurchases will be based on the company's evaluation of market conditions, applicable legal requirements and other factors.
2005 FULL-YEAR GUIDANCE. LESCO updated guidance for fiscal 2005 for revenue growth expected to range from 1 to 1.5 percent, with an 8 percent increase in Service Center sales.
Mr. Rutherford concluded, "We remain committed to investing capital in our high-growth, high-return Stores segment. Based on the consistent increase in our year-over-year sales performance, we are confident that over time the cash flow and profitability of the business will improve, resulting in improved value for our shareholders."
As part of the company's refined strategy of opening new Service Centers throughout the entire year, LESCO expects to open approximately 32 Service Centers in 2005, with approximately 12 openings in the fourth quarter 2005.