LESCO, Inc., a provider of products for the professional green and pest control industries, announced a loss for the first quarter of 2006, which ended March 31.
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The company reported a 2006 loss of $10.6 million, or $1.18 per diluted share, versus a loss of $10.7 million, or $1.21 per diluted share in 2005. The company historically has recognized a loss in its first quarter due to the seasonal nature of the green industry.
Sales for the three-month period rose, however. LESCO reported net sales increased 1.7 percent to $99.8 million from $98.1 million in the comparable period a year ago. Gross profit on sales increased to 24.0 percent of net sales, or $23.9 million, compared to 23.8 percent of net sales, or $23.4 million, in the first quarter of 2005. Gross profit reflects the incremental cost of outsourcing the company's manufacturing, warehouse and distribution functions to Turf Care Supply Corp. (TCS).
Stores Segment Operating Results
Stores Segment net sales for the three months ended March 31 increased 10.7 percent to $84.2 million from $76.1 million during the same period a year ago. The Stores Segment includes the operating results of the Company's Service Centers, Stores-on-Wheels vehicles and field management costs.
Service Center net sales increased 10.7 percent and Stores-on-Wheels net sales increased 27.1 percent. Comparable Service Center sales (those opened prior to 2005) increased 5.4 percent.
Ice melt sales were lower than the prior year due to an unseasonably warm winter; however, this decline was offset by strength in fertilizer and seed sales driven by favorable early spring conditions. Gross profit as a percentage of net sales was 24.5 percent compared to 26.2 percent in the same period in 2005, mostly due to the incremental cost of outsourcing the Company's manufacturing and distribution functions to TCS.
"The first quarter, our lowest sales volume quarter of the year, benefited from relatively mild winter weather conditions as spring product sales accelerated, offsetting the $2.5 million in lost ice melt sales and lower-than anticipated equipment sales," says Jeffrey Rutherford, president and CEO of LESCO. "Our challenge in the second quarter is to achieve the same level of sales growth while recognizing that some sales have accelerated into the first quarter."
New Service Centers and Stores-on-Wheels
During the first quarter of 2006, the company opened six new Service Centers and closed one. On March 31, there were 310 Service Centers in operation, versus 275 on March 31, 2005. The 85 Service Centers that were opened from 2003 through the end of the first quarter of 2006 generated net sales of $11.6 million for the quarter and a pre-tax loss of $1.8 million.
LESCO added three new Stores-on-Wheels during the first quarter of 2006. On March 31, 2006, there were 114 Stores-on-Wheels in operation, versus 98 on March 31, 2005.
Share Repurchase Program
In October 2005, the Company's board of directors approved the repurchase of up to 1.5 million common shares. During the first quarter of 2006, the Company repurchased 17,160 common shares at a total cost of $0.3 million. This is in addition to the approximately 336,000 stock options that were repurchased in 2005.