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 ~~June~~March 3031, ~~2004 Commission File No. 0-13147~~2007

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ~~For the transition period from to~~

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.)


Ohio		34-0904517
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

1301 East Ninth Street, Suite 1300		44114
Cleveland, Ohio		(Zip Code)
(Address of principal executive offices)

~~15885~~Registrant’s ~~Sprague~~telephone ~~Road Strongsville~~number, ~~Ohio~~including ~~(Address~~area ~~of principal executive offices) 44136~~ code (~~Zip Code~~216) 706-9250

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. ~~(as~~See definition of “accelerated filer and large accelerated ~~defined~~filer” in Rule ~~12b~~12B-2 of the Exchange Act). ~~Yes o No þ~~

~~Number~~Large ofaccelerated ~~Common~~filer ~~Shares~~o Accelerated ~~outstanding~~filer asþ Non-accelerated offiler ~~August 2, 2004: 8,704,694~~ o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-1-2 of the Exchange Act). Yes o No þ

Number of Common Shares, without par value, outstanding on May 31, 2007: 1,500

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 1(a). RISK FACTORS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
	ITEM 6. EXHIBITS
SIGNATURES
EX-31(A) 302 Certification for CEO
EX-31A
EX-31(B) 302 Certification for CFO
EX-31B
EX-32(A) 906 Certification for CEO
EX-32A
EX-32(B) 906 Certification for CFO
EX-32B

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LESCO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED


	Three Months Ended March 31,
(Dollars in thousands, except per share data)	2007			2006
Net sales	$	130,405		$	99,837
Cost of product (including distribution costs)		(111,006	)		(75,906	)


Gross profit on sales		19,399			23,931

Selling expense		(27,731	)		(25,212	)
General & administrative expense		(5,445	)		(6,399	)
Merchant discounts and provision for doubtful accounts		(3,397	)		(2,607	)
Pre-opening expense		(287	)		(288	)
Other expense		(2	)		—
Other income		28			135


Loss before interest and taxes		(17,435	)		(10,440	)
Interest expense, net		(640	)		(175	)

Loss before taxes		(18,075	)		(10,615	)
Income taxes:
Current		—			—
Deferred		6,205			4,261
Change in valuation allowance		(6,205	)		(4,261	)

		—			—


Net loss	$	(18,075	)	$	(10,615	)


Loss per common share:
Diluted	$	(1.98	)	$	(1.18	)

Basic	$	(1.98	)	$	(1.18	)


Average number of common shares and common share equivalents outstanding:
Diluted		9,147,068			9,007,235

Basic		9,147,068			9,007,235

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands, except per share data)	2004			2003			2004			2003
Net sales	$	182,189		$	172,560		$	284,233		$	267,010
Cost of product		(120,566	)		(114,623	)		(189,513	)		(178,441	)
Distribution cost		(14,618	)		(14,951	)		(24,100	)		(25,253	)
Gross profit on sales		47,005			42,986			70,620			63,316
Selling expense		(23,037	)		(22,259	)		(44,877	)		(43,001	)
General & administrative expense		(6,574	)		(7,222	)		(13,862	)		(14,573	)
Merchant discounts and provision for doubtful accounts		(2,554	)		(1,211	)		(4,182	)		(1,742	)
Pre-opening expense		(503	)		(124	)		(725	)		(290	)
Other expense		(130	)		(565	)		(192	)		(604	)
Other income		173			518			369			1,066
Earnings before interest and taxes		14,380			12,123			7,151			4,172
Interest expense, net		(169	)		(1,290	)		(553	)		(2,578	)
Earnings before taxes		14,211			10,833			6,598			1,594
Income tax (provision) benefit:
Current		(905	)		—			(1,245	)		—
Deferred		(4,637	)		(4,096	)		(1,328	)		(604	)
Change in valuation allowance		5,542			—			2,233			—
		—			(4,096	)		(340	)		(604	)
Net income	$	14,211		$	6,737		$	6,258		$	990
Earnings per share of common stock:
Diluted	$	1.58		$	0.77		$	0.70		$	0.11
Basic	$	1.63		$	0.79		$	0.72		$	0.11
Average number of common shares and common share equivalents outstanding:
Diluted		8,975,352			8,758,672			8,914,320			8,769,788
Basic		8,697,694			8,525,914			8,687,601			8,525,025

See Notes to Consolidated Financial Statements.

~~See Notes to Consolidated Financial Statements.~~2

-2- Table of Contents

~~Table~~LESCO, ofINC. CONSOLIDATED ~~Contents~~BALANCE SHEETS - UNAUDITED

LESCO, INC.


	March 31, 2007			March 31, 2006			December 31, 2006
(Dollars in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	13,263		$	8,413		$	4,009
Accounts receivable, net		9,363			20,204			12,727
Inventories		107,405			99,139			92,647
Other		2,379			1,991			2,989

TOTAL CURRENT ASSETS		132,410			129,747			112,372
Property, plant and equipment, net		9,637			9,253			9,623
Other		1,064			1,031			1,205


	$	143,111		$	140,031		$	123,200


CURRENT LIABILITIES:
Accounts payable	$	88,335		$	78,698		$	48,832
Accrued liabilities		17,775			19,720			17,059
Revolving credit facility		27,810			5,187			29,959

TOTAL CURRENT LIABILITIES		133,920			103,605			95,850
Deferred — other		2,004			2,213			2,172

TOTAL LIABILITIES		135,924			105,818			98,022

SHAREHOLDERS’ EQUITY:
Common shares—without par value—
19,500,000 shares authorized; 9,242,415 shares issued and 9,147,068 outstanding at March 31, 2007 and December 31, 2006; 9,171,084 shares issued and 9,153,924 outstanding at March 31, 2006		924			916			924
Paid-in capital		40,590			39,212			40,506
Treasury shares
95,347 at March 31, 2007 and December 31, 2006; 17,160 at March 31, 2006		(1,478	)		(255	)		(1,478	)
Retained deficit		(32,849	)		(5,660	)		(14,774	)

TOTAL SHAREHOLDERS’ EQUITY		7,187			34,213			25,178


	$	143,111		$	140,031		$	123,200

~~CONSOLIDATED~~See ~~BALANCE~~Notes ~~SHEETS~~to Consolidated Financial Statements.

	June 30, 2004			June 30, 2003			December 31, 2003
(Dollars in thousands)	(unaudited)			(unaudited)			(audited)
CURRENT ASSETS:
Cash and cash equivalents	$	26,914		$	5,934		$	7,505
Accounts receivable		12,839			84,760			19,278
Inventories		118,543			111,046			93,580
Deferred income taxes		—			3,719			—
Other		2,864			4,546			6,980
TOTAL CURRENT ASSETS		161,160			210,005			127,343
Property, plant and equipment, net		28,192			34,264			31,481
Other		2,374			4,076			2,541
	$	191,726		$	248,345		$	161,365
CURRENT LIABILITIES:
Accounts payable	$	91,994		$	86,066		$	53,874
Accrued liabilities		15,353			17,347			14,626
Revolving credit facility		—			56,057			15,513
Current portion of debt		—			1,123			28
TOTAL CURRENT LIABILITIES		107,347			160,593			84,041
Long-term debt		5,875			9,454			5,875
Deferred — other		509			314			179
SHAREHOLDERS’ EQUITY:
Preferred shares— without par value— 500,000 shares authorized; 1,683 shares issued and outstanding at June 30, 2003, liquidation value $1,000 per share		—			1,683			—
Common shares—without par value— 19,500,000 shares authorized; 8,697,694 shares issued and outstanding at June 30, 2004; 8,639,563 shares issued and 8,525,914 outstanding at June 30, 2003 and 8,668,914 shares issued and outstanding at December 31, 2003		870			864			867
Paid-in capital		34,934			34,916			34,619
Retained earnings		43,521			43,580			37,262
Unearned compensation		(1,330	)		—			(1,478	)
Accumulated other comprehensive loss		—			(1,104	)		—
Less: Treasury shares, 113,649 at June 30, 2003		—			(1,955	)		—
TOTAL SHAREHOLDERS’ EQUITY		77,995			77,984			71,270
	$	191,726		$	248,345		$	161,365

SeeTable Notesof to Consolidated Financial Statements. Contents

~~-3-~~LESCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED


	For the Three Months Ended March 31,
(Dollars in thousands)	2007			2006
OPERATING ACTIVITIES:
Net loss	$	(18,075	)	$	(10,615	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		884			883
Decrease (increase) in accounts receivable		3,364			(3,392	)
Increase in inventories		(14,758	)		(18,793	)
Increase in accounts payable		38,253			17,198
Increase (decrease) in accrued expenses		686			(4,866	)
Other		678			658

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		11,032			(18,927	)

INVESTING ACTIVITIES:
Proceeds on the sale of property, plant and equipment		3			1
Purchase of property, plant and equipment:
Stores		(819	)		(329	)
Other		(63	)		(250	)


NET CASH USED IN INVESTING ACTIVITIES		(879	)		(578	)

FINANCING ACTIVITIES:
Increase in overdraft balances		1,250			119
(Reduction of) proceeds from borrowings, net		(2,149	)		5,187
Purchase of treasury shares		—			(255	)
Exercised stock options		—			1,837


NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(899	)		6,888

Net change in cash and cash equivalents		9,254			(12,617	)

Cash and cash equivalents — Beginning of the period		4,009			21,030


CASH AND CASH EQUIVALENTS — END OF THE PERIOD	$	13,263		$	8,413


Supplemental disclosure of cash flow information:
Interest paid, including letters of credit and unused facility fees	$	(635	)	$	(126	)

Income taxes refunded (paid)	$	6		$	(34	)

~~LESCO,~~See ~~INC~~Notes to Consolidated Financial Statements.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED~~4

	Six Months Ended June 30,
(Dollars in thousands)	2004			2003
OPERATING ACTIVITIES:
Net income	$	6,258		$	990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,716			3,757
Amortization of unearned compensation		324			—
Amortization of deferred financing fees and other		85			521
Loss on sale of assets		76			—
Deferred income taxes		—			(452	)
Decrease (increase) in accounts receivable		1,225			(16,985	)
Provision for uncollectible accounts receivable		—			1,104
Decrease in current income tax		3,984			1,176
Increase in inventories		(24,963	)		(24,209	)
Increase in accounts payable		40,795			40,488
Increase (decrease) in other items		1,271			(2,396	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		32,771			3,994
INVESTING ACTIVITIES:
Proceeds on the sale of fixed assets		1,592			—
Purchase of property, plant and equipment		(2,095	)		(4,083	)
NET CASH USED IN INVESTING ACTIVITIES		(503	)		(4,083	)
FINANCING ACTIVITIES:
Sale of accounts receivable		5,214			—
(Decrease) increase in overdraft balances		(2,675	)		6,081
Proceeds from borrowings		295,059			280,320
Reduction of borrowings		(310,600	)		(282,113	)
Exercised stock options, net of treasury shares		143			15
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES		(12,859	)		4,303
Net change in cash and cash equivalents		19,409			4,214
Cash and cash equivalents — Beginning of the period		7,505			1,720
CASH AND CASH EQUIVALENTS — END OF THE PERIOD	$	26,914		$	5,934
Supplemental disclosure of cash flow information:
Interest paid, including letters of credit and unused facility fees	$	(479	)	$	(2,596	)
Income taxes refunded	$	3,584		$	60

~~See~~NOTES ~~Notes~~TO toCONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial Statements.~~STATEMENTS

~~-4-~~Note 1. Description of Business and Segment Information

~~Table~~ LESCO, Inc. (“LESCO” or the “Company”) is a leading provider of ~~Contents~~lawn care, landscape, golf course and pest control products to the $7 billion professional green and pest control industries. Products distributed include turf control products, fertilizer, combination fertilizer and control products (combination products), grass seed, pest control products and equipment. As of March 31, 2007, the Company distributes products through 345 LESCO Service Center® stores, 114 Stores-on-Wheels® vehicles and other direct sales efforts.

~~NOTES~~ In TOthe ~~CONSOLIDATED~~opinion ~~FINANCIAL~~of ~~STATEMENTS~~the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 31, 2007, and the results of operations and cash flows for the three months ended March 31, 2007 and 2006. The results of operations for the three months ended March 31, 2007, are not necessarily indicative of the results of operations that will occur for the year ending December 31, 2007.

~~Note~~ Segment 1Information: The Stores and Direct segments are reported below. ~~Description~~Operating results for each of ~~Business~~these segments are evaluated regularly by the Chief Executive Officer in deciding resource allocation and in assessing performance. The Stores Segment ~~Information~~is composed of the assets and related operating results of Service Centers, Stores-on-Wheels vehicles (Service Centers and Stores-on-Wheels vehicles are collectively referred to as “Stores”) and field management organization. The Direct Segment consists of direct sales (sales not transacted at Stores), including national account customers, large retailer accounts, and the operations of LESCO sales representatives. The two operating segments are supplemented by Corporate costs incurred for support functions, such as Corporate selling expenses, including marketing costs, general and administrative expenses, merchant discounts for promotional activities, pre-opening costs for new Service Centers and Stores-on-Wheels vehicles, and other expenses that are not allocated to the Stores and Direct Segments.

~~LESCO,~~The ~~Inc.~~Company ~~(“LESCO”~~maintains orseparate ~~“the~~operating ~~Company”)~~statements is(Four-Wall ~~the~~P&Ls) ~~largest~~for ~~provider~~each ofselling ~~products~~location ~~for~~within the ~~professional~~Stores ~~turf~~and ~~care~~Direct ~~segment~~Segments. ofThese ~~the~~Four-Wall ~~green~~P&Ls ~~industry. Products distributed~~ include ~~turf~~the ~~control products~~sales, ~~fertilizer,~~cost ~~combination~~of ~~fertilizer~~product, and ~~control~~operating ~~products~~expenses ~~(combination~~necessary ~~products),~~to ~~grass~~operate ~~seed~~each ~~and~~individual ~~equipment~~selling location. The ~~Company~~ ~~distributes~~Stores ~~products~~and Direct ~~through~~Segments’ ~~272~~operating ~~Service~~results ~~Centers,~~reflect 72the ~~Stores~~aggregate Four-~~on-Wheels,~~Wall P&Ls of the selling locations 76adjusted ~~direct~~for ~~sales~~costs ~~representatives~~of zone and ~~other~~regional ~~direct~~management, sales ~~efforts.~~commission ~~The~~expense, ~~Company~~indirect supply chain ~~operates~~costs ~~eight~~and ~~distribution~~a ~~hubs,~~portion ~~three~~of ~~fertilizer~~merchant ~~blending~~discounts ~~facilities~~not ~~and~~charged ~~a grass~~to ~~seed~~the ~~processing~~Four-Wall ~~plant~~P&Ls.

~~Segment~~Below ~~Information: The Selling and Support segments reported below~~ are ~~the~~ ~~segments of~~ the ~~Company~~unaudited ~~for~~results ~~which separate information is available and~~ for ~~which~~ ~~operating results are evaluated regularly by~~ the ~~Chief~~Stores ~~Executive~~Segment, ~~Officer in~~Direct ~~deciding~~Segment ~~how to allocate resources~~ and ~~in assessing performance.~~Corporate:

The Company maintains separate operating statements (Four-Wall P&Ls) for each selling location. These Four-Wall P&Ls include the sales and operating expenses necessary to operate the individual selling locations. The Selling segment operating results reflect the aggregate Four-Wall P&Ls of the selling locations adjusted for costs of zone and regional management, sales commission expense, working capital interest charge and the portion of merchant discounts and provision for doubtful accounts not previously charged to the Four-Wall P&Ls.


	Three Months Ended March 31,
(Dollars in thousands)	2007			2006
Net sales
Stores	$	114,543		$	84,196
Direct		15,862			15,641

	$	130,405		$	99,837

(Loss) earnings before interest and taxes
Stores	$	(7,483	)	$	(2,198	)
Direct		(1,220	)		1,440
Corporate		(8,732	)		(9,682	)

	$	(17,435	)	$	(10,440	)

Capital expenditures
Stores	$	819		$	329
Corporate		63			250

	$	882		$	579

Depreciation expense
Stores	$	542		$	421
Direct		8			12
Corporate		294			410

	$	844		$	843

Intangible asset amortization expense
Corporate		40			40

	$	40		$	40

The Support segment represents the operating results and invested capital of all non-selling locations including manufacturing facilities (blending facilities and seed processing plant), distribution hubs and the corporate office.


	March 31,
	2007		2006
Total assets
Stores	$	110,128	$	92,822
Direct		993		1,552
Corporate		31,990		45,657

	$	143,111	$	140,031

~~Below are the unaudited results for the Selling and Support segments for~~5 ~~the three months and six months ended June 30:~~

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Net sales
Selling	$	182,189		$	172,560		$	284,233		$	267,010
Support		—			—			—			—
	$	182,189		$	172,560		$	284,233		$	267,010
Earnings (loss) before interest and taxes
Selling	$	26,307		$	26,033		$	32,051		$	31,017
Support		(11,927	)		(13,910	)		(24,900	)		(26,845	)
	$	14,380		$	12,123		$	7,151		$	4,172
Capital expenditures
Selling	$	188		$	851		$	783		$	2,752
Support		1,103			574			1,312			1,331
	$	1,291		$	1,425		$	2,095		$	4,083
Depreciation expense
Selling	$	276		$	145		$	548		$	292
Support		1,571			1,746			3,168			3,465
	$	1,847		$	1,891		$	3,716		$	3,757
Intangible asset amortization expense
Selling	$	—		$	—		$	—		$	—
Support		40			260			85			521
	$	40		$	260		$	85		$	521
Identifiable assets
Selling	$	106,908		$	153,957		$	106,908		$	153,957
Support		84,818			94,388			84,818			94,388
	$	191,726		$	248,345		$	191,726		$	248,345

~~-5-~~Note 2. Summary of Significant Accounting Policies

~~Table~~ Principles of ~~Contents~~Consolidation: The consolidated financial statements include the accounts of LESCO and its subsidiaries after elimination of intercompany transactions and accounts. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

~~Note~~ Use 2.of ~~Summary~~Estimates: The preparation of ~~Significant~~financial ~~Accounting~~statements ~~and~~in ~~Reporting~~conformity ~~Policies~~with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.

~~1. Principles~~Earnings ofper ~~Consolidation~~Share: The ~~accompanying~~Company ~~unaudited~~presents ~~consolidated financial~~both ~~statements~~basic ~~have~~and ~~been~~diluted ~~prepared~~earnings inper ~~accordance~~share ~~with accounting~~(EPS) ~~principles~~amounts. ~~generally~~Basic ~~accepted~~EPS inis ~~the~~calculated ~~United~~by ~~States~~dividing ~~for~~net ~~interim~~income ~~financial information~~or ~~and~~loss ~~pursuant~~by tothe ~~rules~~weighted ~~and~~average ~~regulations~~number of common ~~the~~shares ~~Securities~~outstanding ~~and Exchange~~during ~~Commission~~the period. ~~The~~Diluted ~~statements~~EPS ~~reflect~~is ~~all~~based ~~adjustments,~~upon ~~consisting~~the ~~only~~weighted average number of ~~normal~~common ~~recurring~~shares ~~accruals,~~and ~~which~~common ~~are,~~share inequivalents outstanding during the ~~opinion~~period ofutilizing ~~management,~~the treasury ~~necessary~~stock method for astock ~~fair~~awards. ~~presentation~~Common ofshare ~~the~~equivalents ~~results~~are ~~for~~excluded ~~interim~~from the EPS computation in periods in which they have an anti-dilutive effect. ~~For further~~Stock ~~information,~~options ~~refer~~for towhich the ~~audited~~exercise ~~financial~~price exceeds ~~statements~~the ~~and~~average ~~footnotes thereto~~market ~~for~~price over the ~~year~~period ~~ended~~have ~~December 31~~an anti-dilutive effect on EPS and, accordingly, ~~2003~~are ~~included~~excluded infrom the ~~Company’s~~calculation ~~Annual Report~~of oncommon ~~Form~~share ~~10-K~~equivalents.

~~The~~Common ~~Company’s~~share ~~consolidated~~equivalents ~~financial~~of ~~statements~~73,331 for the three ~~and six~~ months ended ~~June~~March 3031, ~~2004~~2007, and ~~2003~~176,468 ~~included in this Quarterly Report on Form~~for ~~10-Q have been prepared in accordance with~~ the ~~accounting~~same ~~policies~~period ~~described~~ in ~~the~~ ~~Notes to Consolidated Financial Statements for the year ended December 31~~2006, ~~2003~~ ~~which~~ were ~~included~~excluded infrom the ~~Company’s~~diluted ~~Annual~~EPS ~~Report~~calculation onbecause ~~Form~~they 10were anti-Kdilutive ~~filed~~due ~~with the~~to ~~Securities~~net ~~and Exchange Commission (File No~~losses. ~~0-13147)~~ onBasic ~~March 29, 2004. Certain information~~ and ~~footnote~~diluted ~~disclosures~~loss ~~normally~~per ~~included~~share inwas financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission($1. ~~These~~98) ~~financial statements should be read in conjunction with the financial statements~~ and ~~the notes thereto included in the Form 10-K referred to above~~($1. ~~Certain~~18) ~~reclassifications have been made to prior year amounts to conform to the current presentation. Operating results~~ for the ~~three~~first quarter ~~and six months~~ ended ~~June~~ March 3031, ~~2004~~2007 ~~are~~and ~~not~~2006, ~~necessarily indicative of the results to be expected for the year due to the seasonal nature of the Company’s business~~respectively.

~~2. Earnings~~Stock ~~Per Share~~Options: The Company ~~presents~~utilizes ~~both~~the ~~basic~~fair ~~and~~value ~~diluted~~method of recording stock awards under ~~earnings~~Statement ~~per~~of ~~share~~Financial ~~(EPS) amounts.~~Accounting ~~Basic~~Standards ~~EPS~~No. 123R is(SFAS ~~calculated~~123R), byAccounting ~~dividing~~for ~~net~~Stock-Based ~~income,~~Compensation. ~~less~~SFAS ~~the~~123R ~~preferred~~requires ~~dividend~~that inall ~~2003,~~share-based bypayments ~~the~~to ~~weighted~~employees, ~~average~~including ~~number~~grants of ~~common~~employee ~~shares~~stock ~~outstanding~~options, ~~during~~be valued at fair value on the ~~three~~date ~~months~~of grant and ~~six~~be ~~months~~expensed ~~ended~~over ~~June 30.~~the ~~Diluted~~applicable ~~EPS~~vesting isperiod. ~~based~~In ~~upon~~addition, ~~the~~companies ~~weighted~~must ~~average~~recognize ~~number~~compensation ofexpense ~~common~~related ~~and common~~to ~~equivalent~~any ~~shares~~stock-based ~~outstanding~~awards ~~during~~that ~~the~~are ~~quarter~~not ~~utilizing~~fully vested as of the ~~treasury~~effective ~~stock method~~date. Compensation expense for ~~stock~~the ~~options.~~unvested ~~Common~~awards ~~equivalent~~is ~~shares~~measured ~~are~~based ~~excluded~~on ~~from~~the fair value of the awards at the date of grant and ~~computation~~is inrecognized ~~periods~~ratably in ~~which~~the ~~they~~statement ~~have~~of anoperations ~~anti-dilutive~~over ~~effect,~~the ~~such~~options’ asvesting ~~when the~~period. ~~exercise~~The ~~price~~cost related ofto stock-based ~~options~~employee ~~exceeds~~compensation ~~the~~included ~~average~~in ~~market~~the ~~price~~net loss for the quarters ended March ~~period~~31, or2007 ~~when~~and ~~the~~2006, ~~Company~~reflects ~~incurs~~the afair ~~net~~value ~~loss~~method for ~~the~~all ~~period~~unvested ~~reported~~stock awards.

ACompensation ~~reconciliation~~expense offor ~~net~~restricted ~~income~~share ~~applicable~~awards tois ~~common~~recognized ~~shares~~ratably ~~and~~over the period of ~~weighted~~service, ~~average~~usually ~~number~~the ofrestricted ~~common~~period, ~~and~~based ~~common~~upon ~~equivalent~~the fair value of the shares ~~outstanding~~on ~~is as~~the ~~follows:~~date of the grant.

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share data)	2004		2003			2004		2003
Net income	$	14,211	$	6,737		$	6,258	$	990
Preferred shares dividend		—		(26	)		—		(53	)
Net income applicable to common shares	$	14,211	$	6,711		$	6,258	$	937
Weighted average number of common shares outstanding (basic)		8,697,694		8,525,914			8,687,601		8,525,025
Weighted average dilutive stock options		277,658		232,758			226,719		244,763
Weighted average number of common and common equivalent shares outstanding (diluted)		8,975,352		8,758,672			8,914,320		8,769,788
Diluted earnings per share	$	1.58	$	0.76		$	0.70	$	0.11
Basic earnings per share	$	1.63	$	0.79		$	0.72	$	0.11

Additional information on stock-based compensation is provided in Note 8.

Note 3. ~~Stock~~ ~~Based~~Accounts ~~Compensation~~Receivable: ~~The~~Accounts ~~Company~~receivable ~~uses~~consists ~~the intrinsic-value method~~ of ~~accounting for stock-based awards granted to employees and, accordingly, does not recognize compensation expense for its stock-based awards to employees in~~ the ~~Consolidated Statements of Operations.~~following:

-6-


	March 31,						December 31,
(Dollars in thousands)	2007			2006			2006
Supplier rebate programs	$	945		$	337		$	1,757
Supplier other		1,170			10,574			6,361
Trade receivables
Owned — domestic		6,947			6,018			2,940
Owned — international		1,392			2,904			1,964
Other		207			1,867			1,362
Allowance for doubtful accounts		(1,298	)		(1,496	)		(1,657	)

	$	9,363		$	20,204		$	12,727

~~Table~~ The Company earns product discounts under various supplier rebate programs, which are recorded as accounts receivable and a reduction to the cost of ~~Contents~~inventory, as inventory valuation reserves, when earned. When the related inventory is sold, the inventory valuation reserves are recognized as reductions to cost of product. The Company typically earns vendor rebates on finished goods under one of the following methods:

~~The~~• ~~following~~Rebates ~~table~~calculated ~~reflects~~on ~~pro~~a ~~forma~~percentage ~~net~~of ~~income~~the ~~and~~value ~~earnings~~of ~~per~~merchandise ~~share had~~purchased ~~the~~over ~~Company~~a ~~elected~~definitive toperiod ~~adopt~~of ~~the~~time, ~~fair~~generally ~~value~~one ~~approach~~year ofor ~~Statement~~less. ~~of Financial~~Usually, ~~Accounting~~there ~~Standards~~is ~~No. 123~~a minimum purchase requirement, ~~Accounting~~and ~~for~~the ~~Stock-Based Compensation:~~ rebate percentage may be tiered, increasing as purchases increase over the minimum requirement.

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands, except per share data)	2004			2003		2004			2003
Net income as reported	$	14,211		$	6,737	$	6,258		$	990
Less: stock option expense, net of tax		(150	)		161		(283	)		(428	)
Pro forma net income	$	14,061		$	6,898	$	5,975		$	562
Earnings per diluted share
As reported	$	1.58		$	0.77	$	0.70		$	0.11
Pro forma	$	1.57		$	0.79	$	0.67		$	0.06
Earnings per basic share
As reported	$	1.63		$	0.79	$	0.72		$	0.11
Pro forma	$	1.62		$	0.81	$	0.69		$	0.07

InTable the second quarter of 2003, there were 84,045 stock options forfeited which exceeded the number of new options issued resulting in an add back to pro forma net income for the quarter. Contents

~~These~~• ~~pro~~Rebates ~~forma~~calculated ~~amounts~~on ~~may~~a ~~not~~percentage ~~be representative~~ of ~~future disclosures because~~ the ~~estimated~~purchased ~~fair~~cost ~~value~~ of ~~stock~~merchandise ~~options~~sold isby ~~amortized~~the toCompany ~~expense~~ over ~~the~~ ~~vesting~~a definitive period, ~~and~~of ~~additional~~time, ~~options~~generally ~~may~~one beyear ~~granted~~or ~~in future periods~~less.

4Based on the Company’s purchase and sales history and the relatively short duration of the agreements, the Company is able to project reasonably whether the Company will achieve the cumulative level of purchases or sales required for vendor rebates. ~~Accounts~~ ~~Receivable~~Therefore, the Company recognizes the rebates ratably over all purchases or sales. The Company does not recognize a rebate if it is uncertain whether a specific purchase will qualify under its rebate arrangements. If the Company subsequently determines that it will not achieve a rebate threshold, it reverses the recognition of the rebate. The Company defers recognition of income relative to purchases that remain in inventory.

~~Accounts~~The Company is in the second year of a long-term supply agreement with Turf Care Supply Corp. (TCS) that requires TCS to manufacture and supply to the Company branded and non-branded consumable products for an initial term of not less than five years. Pursuant to that agreement, LESCO pays invoiced costs of third-party logistic providers during a transition period for the shipment of product to the Company’s selling locations and customers and is reimbursed by TCS for such costs based upon a predetermined payment schedule, but not later than the last calendar week of the month subsequent to that in which the invoice was paid by LESCO. Beginning January 1, 2007, TCS pays logistic costs directly and the amount receivable ~~consist~~at March 31, 2007 is for expenses paid by the Company and incurred prior to January 1, 2007. An additional provision of the long-term ~~following:~~supply agreement requires LESCO to remit payment to, and maintain contractual liability with, agricultural consortiums for the growth and harvest of grass seed received by TCS. The Company has recorded a receivable balance from TCS equivalent to the non-reimbursed payments at March 31, 2007 and 2006. Furthermore, the Company recognizes estimated annual third-party vendor rebates in the cost of product purchased from TCS. Pursuant to the long-term supply agreement, the estimated annual value of these rebates is funded on a straight-lined basis to TCS. When TCS receives payment from the third-parties after year-end, the entire rebate is paid to the Company. A reconciliation of the ‘Supplier other’ receivable balance is as follows:

	June 30,						December 31,
	March 31,						December 31,
(Dollars in thousands)	~~2004~~2007			~~2003~~2006			~~2003~~2006
Supplier rebate programs	$	6,169		$	5,452		$	9,328
Vendor rebates/other	$	879		$	973		$	3,890
Trade receivables
Grass seed		190			4,771			2,442
Owned – domestic		7,908			82,294			6,798
Logistics charges		101			4,830			29
Owned – international		2,002			1,622			1,578
Supplier other	$	1,170		$	10,574		$	6,361
Recourse		945			—			5,751
Other		1,215			536			709
Allowance for doubtful accounts		(5,400	)		(5,144	)		(4,886	)
	$	12,839		$	84,760		$	19,278

~~The~~LESCO ~~Company~~utilizes ~~earns~~GE ~~product~~Capital ~~discounts~~Financial ~~under~~Inc., ~~various~~dba ~~supplier~~GE ~~rebate~~Business Credit Services (GEBCS), for the ~~programs~~Company’s private label business credit program. Under its Credit Agreement with GEBCS, ~~which~~GEBCS extends ~~are~~commercial ~~recorded~~credit asto ~~accounts~~qualified ~~receivable~~customers of LESCO and afunds ~~reduction~~the program sales, less program fees and discounts, within three business days. The Credit Agreement also provides the Company the option of extending deferred payment terms to customers through the ~~cost~~payment of incremental promotional discounts. The in-transit funds due from GEBCS as of ~~inventory~~a ~~when~~balance ~~earned~~sheet date are recognized by the Company as cash equivalents. ~~When~~The program fees and discounts and promotional discounts are recognized as merchant discounts in the ~~related~~Consolidated ~~inventory~~Statements of Operations. GEBCS is ~~sold~~the exclusive owner of the program accounts and, except for the ~~inventory~~recourse account portfolio ~~valuation~~discussed ~~reserves~~below, ~~are~~bears ~~recognized~~all ascredit ~~reductions~~risk and losses. The initial term of the Credit Agreement is through December 30, 2008, with automatic three-year renewals unless either party terminates at least six months prior to ~~cost~~the end of ~~sales~~the expiration of a term.

OnThe ~~December 30,~~owned ~~2003,~~domestic ~~the~~credit ~~Company~~accounts ~~sold~~are aaccounts ~~majority~~that, ofat ~~its~~the ~~trade~~outset ~~accounts receivable~~of ~~portfolio~~the toGEBCS GEprogram, ~~Capital~~did not ~~Financial~~qualify ~~Inc.,~~for ~~dba~~sale GEto ~~Business~~GEBCS ~~Credit Services~~or ~~(“GEBCS”),~~did ~~for~~not ~~cash~~qualify ~~proceeds~~for ofthe ~~approximately~~credit ~~$57 million~~recourse portfolio. InLESCO ~~the~~has ~~first~~retained ~~half of 2004,~~ the ~~Company~~ownership ~~sold~~and ~~additional~~management ~~accounts~~of ~~for~~the ~~cash~~owned ~~proceeds~~domestic ~~of approximately~~credit ~~$5 million~~accounts.

~~Concurrent~~The ~~with~~Credit ~~the~~Agreement ~~sale,~~does ~~the~~not ~~Company~~allow ~~and~~for ~~GEBCS~~the ~~entered~~ownership aof ~~private~~international ~~label business~~ credit ~~program~~accounts ~~agreement (Credit Agreement)~~by GEBCS. ~~Under~~As ~~the Credit Agreement~~such, ~~GEBCS extends commercial credit to qualified customers of~~ LESCO ~~and funds~~retains the ~~program~~ownership ~~sales, less program fees~~ and ~~discounts,~~management ~~within~~of ~~three~~international ~~business days~~accounts. ~~The Credit Agreement also provides the Company the option of extending~~All ~~deferred~~international ~~payment~~accounts ~~terms~~are todenominated ~~customers~~in ~~through the payment of incremental promotional discounts~~U.S. ~~The in-transit~~dollars.

~~-7-~~ GEBCS has sole discretion under the Credit Agreement to approve or decline prospective account holders. LESCO may request GEBCS to include declined accounts in a portfolio of credit recourse accounts. LESCO bears all credit losses on credit recourse accounts and pays a fee to GEBCS to manage the credit recourse portfolio.

~~Table~~ In the allowance for doubtful accounts, the Company provides for expected losses from all owned receivables and GEBCS-owned recourse accounts. Expected losses are estimated based upon the number of ~~Contents~~days the accounts are past due, historical loss experience of the Company, historical loss experience of credit portfolios with characteristics similar to the Company’s portfolio, and the current business environment.

~~funds are recognized by the Company as cash equivalents. The program fees and~~7 discounts and promotional discounts are recognized as merchant discounts in the Consolidated Statements of Operations. GEBCS is the exclusive owner of the program accounts and, except for the recourse account portfolio discussed below, bears all credit losses.

TheTable owned domestic credit accounts are accounts that did not qualify for sale to GEBCS or for the credit recourse portfolio. LESCO has retained the ownership and management of the owned domestic credit accounts. Contents

~~The~~Note ~~Credit~~4. ~~Agreement~~Inventories: ~~does~~Inventories ~~not~~consist ~~allow for the ownership~~ of ~~international credit accounts by GEBCS. As such, LESCO has retained~~ the ~~ownership and~~following: ~~management of international accounts. All international accounts are denominated in U.S. dollars.~~

GEBCS has sole discretion under the Credit Agreement to approve or decline prospective account holders. LESCO may request GEBCS to include declined accounts in a portfolio of credit recourse accounts. LESCO bears all credit losses and pays a fee to GEBCS to manage the credit recourse portfolio. LESCO did not recognize the initial sale of recourse accounts to GEBCS as of December 30, 2003. As such, all recourse receivable balances that existed at December 30, 2003 (the date of the GEBCS transaction) continue to be recognized as accounts receivable by the Company, along with a corresponding borrowing from GEBCS. Sales activity on recourse accounts subsequent to December 30, 2003 is not recognized on the Company’s balance sheet. A reconciliation of total recourse account balances to the receivable portion owned by the Company and recorded in the balance sheets is as follows:


	March 31,						December 31,
(Dollars in thousands)	2007			2006			2006
Finished goods and purchased inventories
Selling locations	$	96,499		$	82,454		$	85,582
Non-selling locations		10,411			11,648			9,148
Less: Markdown, shrink and vendor discount reserves		(1,271	)		(2,025	)		(1,793	)
Inventory held on consignment		(4,820	)		(4,332	)		(5,187	)

		100,819			87,745			87,750
Grass seed		6,586			11,394			4,897

	$	107,405		$	99,139		$	92,647

	June 30,					December 31,
(Dollars in thousands)	2004			2003		2003
Total recourse account balances	$	5,984		$	—	$	5,751
Accounts owned by GEBCS		(5,039	)		—		—
Recourse receivables owned by LESCO	$	945		$	—	$	5,751

Inventories are valued at the lower of cost (First In, First Out cost method) or market. Consignment inventory is considered purchased at time of sale and, at the time of sale, cost of product is recognized. Procurement, warehousing and distribution costs to bring the products to market are capitalized to inventory on hand and expensed to cost of product when the inventory is sold. The Company includes its procurement costs in inventory. The amount of these costs included in inventory was $307,000 at March 31, 2007, $540,000 at March 31, 2006, and $486,000 at December 31, 2006, which represented 0.3%, 0.5% and 0.5% of the value of the Company’s total inventory as of the respective balance sheet dates. Shrink and vendor discount reserves are recorded for expected inventory shrink and earned supplier discounts for inventory remaining on hand.

InThe ~~the~~Company ~~allowance~~maintains ~~for~~an ~~doubtful~~inventory ~~accounts,~~life ~~the~~cycle ~~Company~~program ~~provides~~that ~~for~~requires ~~expected losses~~the ~~from~~classification of all stock ~~owned~~keeping ~~receivables~~units ~~and~~(SKUs) ~~GEBCS-owned~~into ~~recourse~~one ~~accounts.~~of ~~Expected losses~~five ~~are~~categories: ~~estimated~~active, ~~based~~watch, ~~upon~~phase-out, ~~the~~discontinued ~~number~~and liquidated. The selling price of ~~days~~SKUs ~~the~~identified ~~accounts~~as discontinued are ~~past~~progressively ~~due,~~marked down ~~historical~~over ~~loss~~specified ~~experience~~periods, ofuntil the ~~Company,~~selling ~~historical~~price ~~loss~~is ~~experience~~marked ofdown ~~credit~~to zero. At the time a SKU is ~~portfolios~~identified ~~with~~as ~~characteristics~~discontinued, ~~similar~~a tomarkdown ~~the~~valuation ~~Company’s~~reserve ~~portfolio~~is ~~and~~recorded to adjust the inventory cost ~~current~~to ~~business~~expected ~~environment~~net realizable value.

5The Company has retained its grass seed licenses and, as such, purchases all seed from the growers. ~~Inventories~~ The raw seed is sold to TCS for processing, packaging and labeling. LESCO is required to repurchase its forecasted seed requirements from TCS; therefore, the seed that resides at the TCS facilities to fulfill the Company’s forecasted orders must be reflected as LESCO’s inventory with a corresponding account payable.

~~Inventories~~Inventory ~~consist~~at “non-selling locations” is primarily comprised of product not sourced from TCS but which is handled within the ~~following:~~TCS distribution network.

	June 30,						December 31,
(Dollars in thousands)	2004			2003			2003
Finished goods and purchased inventories
Selling locations	$	67,257		$	64,981		$	46,858
Distribution hubs and plants		48,858			42,509			37,664
Capitalized procurement, warehousing and distribution costs		7,962			8,610			6,681
Less: Markdown and shrink reserves		(2,255	)		(3,077	)		(1,563	)
Inventory held on consignment		(11,325	)		(10,461	)		(5,832	)
		110,497			102,562			83,808
Raw Materials		8,046			8,484			9,772
	$	118,543		$	111,046		$	93,580

Note 5. Property, Plant and Equipment: Property, plant and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. Buildings are depreciated over 15 to 20 years, and machinery, equipment and other depreciable assets are depreciated over three to 12 years. Leasehold improvements are depreciated over the life of the initial lease term, which typically is five years. Expenditures for maintenance and repairs are charged to expense as incurred. Additions and improvements are capitalized.

~~Inventories~~The ~~are~~Company ~~valued~~currently atretains ~~the~~certain ~~lower~~properties ofrelated ~~cost~~to ~~(average~~former ~~cost~~operations ~~method)~~that orare being ~~market.~~held ~~Consignment~~for ~~inventory~~sale. There is ~~considered~~approximately ~~purchased~~$102,000 ~~and~~recorded ~~cost~~as ofan ~~product~~asset ~~is recognized~~for atthese ~~the~~properties ~~time~~at ofMarch 31, ~~sale~~2007. ~~Procurement,~~All ~~warehousing~~future ~~and distribution~~ costs ~~are~~incurred ~~capitalized~~ to ~~inventory~~prepare onthe ~~hand~~remaining sites for sale, including environmental testing and ~~expensed~~environmental remediation costs, will be capitalized up to ~~distribution~~the ~~cost~~realizable ~~when~~market ~~the~~value ~~inventory~~of iseach ~~sold~~respective property. ~~Markdown~~The ~~and~~Company ~~shrink~~currently ~~reserves~~estimates ~~are~~that ~~provided~~it ~~for~~will cost ~~markdown~~approximately of$1.0 million ~~inventory~~ to ~~net~~prepare ~~realizable~~its ~~value~~Windsor, ~~expected~~New ~~inventory~~Jersey ~~shrink~~property for sale and that its ~~earned~~estimated ~~supplier~~market ~~discounts~~value ofis ~~inventory~~sufficient ~~remaining~~to onrecover ~~hand~~the preparation costs.

-8-

6. Property, ~~Plant~~plant and ~~Equipment~~equipment, net, consists of the following:

Property, plant and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. Buildings are depreciated over 15 to 20 years, and machinery, equipment and other depreciable assets are depreciated over three to 12 years. Expenditures for maintenance and repairs are charged to expense as incurred. Additions and improvements are capitalized.


	March 31,																								December 31,
	2007												2006												2006
(Dollars in thousands)	Stores			Direct			Corp.			Total			Stores			Direct			Corp.			Total			Stores			Direct			Corp.			Total

Buildings and improvements	$	2,921		$	6		$	259		$	3,186		$	1,862		$	—		$	246		$	2,108		$	2,608		$	—		$	255		$	2,863
Machinery and equipment		6,483			17			221			6,721			5,261			7			221			5,489			6,407			17			221			6,645
Furniture and fixtures		7,801			352			19,298			27,451			6,670			308			19,118			26,096			7,466			387			19,184			27,037


Subtotal		17,205			375			19,778			37,358			13,793			315			19,585			33,693			16,481			404			19,660			36,545
Less: Accumulated depreciation		(9,539	)		(348	)		(17,834	)		(27,721	)		(7,623	)		(234	)		(16,583	)		(24,440	)		(9,050	)		(329	)		(17,543	)		(26,922	)


Property, plant and equipment, net	$	7,666		$	27		$	1,944		$	9,637		$	6,170		$	81		$	3,002		$	9,253		$	7,431		$	75		$	2,117		$	9,623

~~During~~Note ~~the second quarter of 2004, the Company sold its Avon Lake, Ohio distribution facility for $1~~6.~~5 million~~ inBorrowings: ~~cash.~~Borrowings ~~Based~~consist ~~on the remaining net book value~~ of the ~~assets sold, this resulted in a loss on sale of less than $0.1~~following: ~~million. The distribution operations for customer orders previously fulfilled from the Avon Lake facility have been transferred to a third party logistics provider based in Columbus, Ohio.~~

Property, plant and equipment, net consists of the following:


	March 31,				December 31,
(Dollars in thousands)	2007		2006		2006
Current:
Revolving credit facility	$	27,810	$	5,187	$	29,959

	June 30, 2004									June 30, 2003									December 31, 2003
	Selling									Selling									Selling
(Dollars in thousands)	Locations			Support			Total			Locations			Support			Total			Locations			Support			Total
Land	$	—		$	600		$	600		$	—		$	934		$	934		$	—		$	834		$	834
Buildings and improvements		1,360			18,558			19,918			1,107			20,524			21,631			1,391			21,174			22,565
Machinery and equipment		3,788			20,700			24,488			3,701			22,960			26,661			3,746			20,549			24,295
Furniture and fixtures		7,071			29,892			36,963			4,464			30,761			35,225			6,262			29,636			35,898
Subtotal		12,219			69,750			81,969			9,272			75,179			84,451			11,399			72,193			83,592
Less: Accumulated depreciation		(7,280	)		(46,497	)		(53,777	)		(6,667	)		(43,520	)		(50,187	)		(6,324	)		(45,787	)		(52,111	)
Property, plant and equipment, net	$	4,939		$	23,253		$	28,192		$	2,605		$	31,659		$	34,264		$	5,075		$	26,406		$	31,481

Revolving Credit Facility

~~Depreciation~~On ~~expense~~September 27, is2006, ~~included~~the inCompany entered into a five-year, $55 million Revolving Credit Facility with National City Business Credit, Inc. (the ~~following:~~NCBC Facility). Effective the same date, the Company terminated its Amended and Restated $50 million Revolving Credit Facility with PNC Bank, N.A. (the PNC Facility) dated October 7, 2005. The NCBC Facility is secured by inventory, owned receivables, equipment, investment instruments, real property interests, and general intangibles, including intellectual property.

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2004		2003		2004		2003
Cost of product	$	510	$	679	$	1,027	$	1,376
Distribution cost		222		121		464		247
Selling expense		276		145		548		293
General and administrative expense		839		946		1,677		1,841
Total	$	1,847	$	1,891	$	3,716	$	3,757

For the period beginning September 27, 2006, through December 27, 2006, the NCBC Facility bore interest at either prime rate minus 0.50% or LIBOR plus 1.50% with a facility fee of 0.25% payable on the unused portion of the NCBC Facility.

~~-9-~~ The Company amended the NCBC Facility on December 28, 2006. For the period of December 28, 2006 through April 30, 2007, the NCBC Facility bore interest at the prime rate minus 0.50% or LIBOR plus 2.25%, with a facility fee of 0.25% payable on the unused portion of the NCBC Facility.

~~Table~~ On March 14, 2007, the Company entered into a Second Amendment to the NCBC Facility that revised a provision in the First Amendment to the NCBC Facility that required the Company to pay in full all outstanding revolving advances on or before April 30, 2007, and to maintain a $0 revolving advance balance for at least fifteen consecutive days thereafter. The Second Amendment to the NCBC Facility provided that, no later than May 31, 2007, the Company’s revolving advances must be $10 million or less, which position must be maintained for at least fifteen consecutive days. The Second Amendment to the NCBC Facility further required that the Company must pay in full all outstanding revolving advances on or before August 31, 2007 and maintain a $0 revolving advance balance for at least sixty consecutive days thereafter. The amount of ~~Contents~~deferred financing charges associated with the NCBC Facility included in assets was $624,000 as of March 31, 2007.

7.Effective May ~~Borrowings~~7, 2007, in conjunction with the acquisition of the Company by Deere & Company, LESCO has paid in full the outstanding revolving advances and has terminated the NCBC Facility.

~~Borrowings~~The amount ~~consist~~of funds available under the NCBC Facility was determined by a borrowing base formula calculated based on eligible inventory and eligible accounts receivable less such reserves as National City Business Credit, Inc. deemed reasonably appropriate. As of March 31, 2007, there was $53.6 million of borrowing capacity under the ~~following:~~NCBC Facility based on the borrowing base formula. The Company had $27.8 million of outstanding borrowings under the NCBC Facility as of March 31, 2007. Letters of credit, up to a maximum of $25 million, were also available under the NCBC Facility and were considered outstanding borrowings when calculating the unused portion of availability. Letters of credit in the aggregate amount of $17.4 million were outstanding as of March 31, 2007, resulting in unused borrowing capacity of $8.4 million. Letter of credit fees under the NCBC Facility were 2.25% from December 28, 2006, through April 30, 2007; subsequent to that date, the fee varied based on the Company’s Borrowing Threshold with an issuance fee fixed at 0.25%.

	June 30,					December 31,
(Dollars in thousands)	2004		2003			2003
Current:
Revolving credit facility	$	—	$	56,057		$	15,513
Current portion of long-term debt		—		1,123			28
	$	—	$	57,180		$	15,541
Long-term:
Term loan	$	—	$	4,620		$	—
Industrial revenue bonds		5,875		5,875			5,875
Other debt		—		82			28
Less: current portion		—		(1,123	)		(28	)
	$	5,875	$	9,454		$	5,875

RevolvingTable Creditof Facility Contents

OnOutstanding ~~December 30,~~letters ~~2003,~~of ~~the~~credit ~~Company~~issued ~~entered~~under ~~into~~the aNCBC ~~$50 million Revolving Credit~~ Facility ~~(the~~and ~~Facility)~~PNC ~~which replaced a prior credit facility. Borrowings under the~~ Facility were ~~used~~as ~~to retire the prior credit facility,~~follows: ~~including a term loan, buy-out an interest rate swap agreement and buy-back outstanding preferred stock.~~

The Facility matures December 30, 2006 and is secured by inventory, owned receivables, equipment, investment interests, real property interests, and general intangibles, including intellectual property. The Facility bears interest at LIBOR plus 2.0% to 2.5% per annum, based on the level of borrowings, and requires the payment of a facility fee ranging from 0.4% to 0.5% per annum on the unused portion of availability. The availability under the Facility is determined by a borrowing base formula calculated on eligible inventory. As of June 30, 2004, there was $48.7 million available, with unused capacity of $38.5 million. Letters of credit, up to a maximum of $20 million, are also available under the Facility and are considered outstanding borrowings when calculating the unused portion of availability. Letters of credit in the aggregate amount of $10.2 million were outstanding as of June 30, 2004. Letter of credit fees range from 2.0% to 2.5% with an issuance fee ranging from 0.125% to 0.150%.


	March 31,				December 31,
(Dollars in thousands)	2007		2006		2006
Supplier contract	$	15,000	$	10,000	$	15,000
Insurance programs		2,164		2,708		2,250
Other		195		400		195

	$	17,359	$	13,108	$	17,445

The NCBC Facility ~~requires~~required the maintenance of certain covenants, with the only ~~financial~~ financial covenant being athe fixed charge coverage ratio. If the Borrowing Threshold less outstanding borrowings and letters of credit remained at or above $10 million, the fixed charge coverage ratio was not tested and could not constitute an event of default. At March 31, 2007, the Borrowing Threshold was $72.6 million. The Company was in compliance with the NCBC Facility’s covenants as of ~~June~~March 3031, ~~2004~~2007.

8Note 7. Asset Rationalization and Severance Expense: Major components of the remaining reserves and accruals for asset rationalization and severance expense as of March 31, 2007, and December 31, 2006, are as follows:

Major components of the remaining reserves and accruals for asset rationalization and severance expense as of June 30, 2004 and December 31, 2003 are as follows:


	Asset Rationalization Accrual
				Other Exit						Severance
(Dollars in thousands)	Lease Costs			Costs			Total			Accrual			Total
Asset rationalization reserves and severance accruals at December 31, 2006	$	907		$	146		$	1,053		$	5		$	1,058

2007 Activity:
Additions		—			—			—			3			3
Reduction		(444	)		(36	)		(480	)		—			(480	)
Utilized/payments		(72	)		(11	)		(83	)		(6	)		(89	)

Asset rationalization reserves and severance accruals at March 31, 2007	$	391		$	99		$	490		$	2		$	492

	Asset Rationalization Accrual
	Lease			Other Exit						Severance
(Dollars in thousands)	Costs			Costs			Total			Accrual			Total
Asset rationalization and severance accruals at December 31, 2003	$	220		$	830		$	1,050		$	532		$	1,582
2004 Activity
Additions		—			—			—			114			114
Utilized/payments		(23	)		(118	)		(141	)		(540	)		(681	)
Asset rationalization reserves and severance accruals at June 30, 2004	$	197		$	712		$	909		$	106		$	1,015

The additional $3,000 of expense recognized in 2007 was recorded in general and administrative expense. The remaining severance was paid in the second quarter of 2007, and asset rationalization will be paid through 2011.

The ~~Company~~majority ~~anticipates~~of ~~utilizing~~ the ~~remaining~~2007 asset rationalization activity was related to the four distribution facilities closed effective December 31, 2005. In February 2007, the distribution facility located in Chicago, Illinois was re-opened as part of a pilot program to improve product distribution within a geographical market. Therefore, the remaining accrual byattributable to that facility of $480,000 was recognized as a reduction of general and administrative expense in the ~~end~~first quarter of ~~2004~~2007.

Note 8. Stock Incentive Plans: The Company has stock option plans that provide for the issuance of incentive stock options; non-10qualified stock options; stock appreciation rights (SARs), either in connection with, or independent of, any option; and restricted and other share awards. The plans provide for the issuance of a maximum of 2,014,168 common shares to employees or directors. At March 31, 2007, there were 829,899 shares reserved for future grants, consisting of 562,109 under the 1992 and 2000 Stock Incentive plans, 171,290 under the 2000 Broad-Based Stock Option Plan, and 96,500 under the 1995 Directors’ Stock Option Plan. Options pursuant to any of the Company’s plans have exercise periods ranging from 6 to 10 years at an option price equal to the fair market value of a common share on the date the option was granted. The Company has issued in the past, and may issue from time to time in the future, options outside of the Company’s plans, in connection with the employment of key employees, at an exercise price equal to the fair market value of a common share at the grant date. There are 78,000 outstanding stock options that have been issued outside of the plans.

~~Table of Contents~~10

9. DetailTable of Certain Balance Sheets Accounts Contents

	June 30,				December 31,
(Dollars in thousands)	2004		2003		2003
Other current assets:
Income tax refund receivable	$	—	$	1,896	$	3,740
Other prepaids		1,564		1,674		1,548
Prepaid insurance		434		494		1,033
Notes receivable		592		482		385
Assets held for sale		274		—		274
	$	2,864	$	4,546	$	6,980
Other non-current assets:
Notes receivable	$	1,322	$	705	$	1,466
Store deposits		570		613		572
Deferred financing charges		396		1,606		416
Assets held for sale		—		325		—
Miscellaneous deposits		86		86		87
Investment – joint venture		—		741		—
	$	2,374	$	4,076	$	2,541
Accounts payable:
Accounts payable	$	81,511	$	77,638	$	35,910
Overdraft balances		9,538		8,428		12,213
Accounts payable to GEBCS for recourse accounts receivable		945		—		5,751
	$	91,994	$	86,066	$	53,874
Accrued liabilities:
Accrued non-income taxes	$	3,582	$	3,165	$	3,510
Commissions and management bonuses		3,299		2,113		2,650
Salaries and wages		2,122		1,742		1,918
Insurance – hospitalization and workers’ compensation		2,609		2,655		2,383
Asset rationalization		909		1,655		1,050
Insurance – property and casualty		991		1,138		1,028
Severance		106		1,238		532
Interest rate swap		—		1,811		—
Other		1,735		1,830		1,555
	$	15,353	$	17,347	$	14,626

No stock options were exercised in the first quarter of 2007. Excess tax benefits from the exercise of stock options in the first quarter of 2006 were not recorded as no current benefit is realized due to the Company’s net operating loss carryforward position. The total intrinsic value of stock options exercised in the first quarter of 2006 was $2.1 million. The following table summarizes the changes in the outstanding stock options:

-11-


	Three Months Ended March 31, 2007
				Weighted Average
	Shares			Exercise Price
Outstanding — beginning of year		642,743		$	12.36
Granted		—			—
Exercised		—			—
Canceled/forfeited		(30,266	)		15.24

Outstanding — end of quarter		612,477		$	12.22


Exercisable — end of quarter		592,976		$	12.22
Reserved for future grants		829,899

~~Table~~ The following table summarizes information about stock options outstanding and exercisable as of ~~Contents~~March 31, 2007:

10. Detail of Certain Statements of Operations Accounts


	Outstanding Options					Exercisable Options
			Weighted		Weighted			Weighted		Weighted
			Average		Average			Average		Average
	Number of		Exercise		Contractual	Number of		Exercise		Contractual
Range of Exercise Prices	Options		Price		Life	Options		Price		Life
$0 to $10.00		156,750	$	7.45	4.9 years		156,750	$	7.45	4.9 years
$10.01 to $15.00		352,227		12.69	5.4 years		332,726		12.71	5.0 years
$15.01 to $20.00		83,650		16.78	3.3 years		83,650		16.78	3.3 years
$20.01 and above		19,850		22.33	1.0 years		19,850		22.33	1.0 years

		612,477	$	12.22	4.8 years		592,976	$	12.22	4.6 years


(Dollars in thousands)
Aggregate intrinsic value ^(a) at March 31, 2007	$	1,736				$	1,695

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Net sales:
Gross sales	$	183,218		$	173,333		$	286,081		$	268,844
Agency sales		(427	)		—			(427	)		—
Freight revenue		514			519			820			819
Customer discounts and rebates		(1,116	)		(1,292	)		(2,241	)		(2,653	)
	$	182,189		$	172,560		$	284,233		$	267,010
Merchant discounts and provision for doubtful accounts:
Merchant discounts
Multi-purpose credit programs	$	(576	)	$	(489	)	$	(882	)	$	(783	)
Private label business credit programs		(1,892	)		—			(2,939	)		—
Private label promotional discounts		55			—			(154	)		—
Provision for doubtful accounts		—			(675	)		—			(1,104	)
Customer finance revenue		98			254			202			648
Other		(239	)		(301	)		(409	)		(503	)
	$	(2,554	)	$	(1,211	)	$	(4,182	)	$	(1,742	)
Other expense:
Severance	$	(41	)	$	(447	)	$	(114	)	$	(453	)
Loss on sale/disposal of fixed assets		(89	)		(108	)		(76	)		(139	)
Other		—			(10	)		(2	)		(12	)
	$	(130	)	$	(565	)	$	(192	)	$	(604	)
Other income:
Joint venture income	$	—		$	221		$	—		$	590
Payment discounts		138			271			267			420
Other		35			26			102			56
	$	173		$	518		$	369		$	1,066
Interest expense and facility fees:
Borrowings on revolver	$	(37	)	$	(509	)	$	(306	)	$	(1,019	)
Other revolver fees		(68	)		(406	)		(112	)		(767	)
Interest rate swap		—			(299	)		—			(577	)
Other debt and letters of credit costs		(64	)		(76	)		(135	)		(215	)
	$	(169	)	$	(1,290	)	$	(553	)	$	(2,578	)


^(a)		Aggregate intrinsic value at March 31, 2007 is calculated based on stock options for which the market price exceeds the option exercise price.

~~Note~~ The 3estimated fair value of each option granted is calculated using the Black-Scholes option-pricing model. ~~Subsequent~~The ~~Event~~Company did not grant options during the first quarters ended March 31, 2007 and 2006.

~~Subsequent~~The toCompany utilizes the ~~balance~~fair ~~sheet~~value ~~date,~~method ~~LESCO~~of ~~reached~~accounting ~~agreements~~for tostock ~~relocate its~~options ~~corporate~~under ~~headquarters~~SFAS ~~from~~123R. For ~~its~~the ~~current~~three ~~approximately~~months 94ended March 31,~~000~~ ~~square~~2007 ~~foot facility~~and ~~in Strongsville~~2006, ~~Ohio~~compensation expense recognized related to stock anoptions ~~approximately~~was 40$8,000 ~~square~~and ~~foot facility in downtown Cleveland~~$50,000, ~~Ohio~~respectively. ~~The~~Compensation ~~term~~expense of ~~the~~$39,000 ~~Company’s~~had ~~new~~not ~~lease~~yet been ~~will~~recognized beat ~~five years~~March 31, ~~and~~2007, ~~the~~as ~~Company~~it ~~expects~~relates to ~~complete~~nonvested ~~the~~stock ~~relocation~~option ~~this~~awards ~~year.~~which ~~A division of a public company (the Assignee)~~ will ~~assume the remaining 11 years~~vest ofthrough ~~LESCO’s current lease at the Strongsville location, subject to landlord approval~~2008.

~~Relocation costs are estimated at approximately $7.5 million, including~~11 ~~$4.8 million in tenant and landlord inducements, and $2.7 million in broker commissions, legal fees, letter of credit costs, move costs and fixed-asset write offs. The charges will be recorded in~~

-12- Table of Contents

~~Table~~ The Company recorded compensation expense of ~~Contents~~$77,000 and forfeiture income of $64,000 related to restricted shares for the three months ended March 31, 2007 and 2006, respectively. The unamortized balance of restricted shares is included in additional paid-in capital, a component of shareholders’ equity. As of March 31, 2007, the Company had $258,000 of unearned compensation related to restricted shares that will be amortized to expense through January 2008. The following table summarizes the changes in the outstanding restricted shares:

the Company’s third and fourth quarter operating results. Beginning in 2005, the financial effect of the relocation is expected to be accretive to earnings on an annual pre-tax basis by over $1.0 million, while the return on the cost to relocate is estimated at greater than 7%.


	Three Months Ended March 31, 2007
			Weighted Average
	Shares		Grant Date Fair Value
Nonvested — beginning of year		64,600	$	14.38
Granted		—		—
Vested		—		—
Canceled/forfeited		—		—

Nonvested — end of quarter		64,600	$	14.38

~~LESCO~~In accordance ~~will~~with ~~guarantee~~ the ~~Assignee’s~~merger ~~performance~~agreement ~~under~~with ~~the~~Deere ~~Strongsville lease.~~& ~~The~~Company, ~~Assignee~~all options ~~will~~for bethe ~~obligated~~purchase ~~to secure a $4.4 million letter~~ of ~~credit~~ ~~backing~~Company ~~its~~stock ~~performance~~were ~~under~~extinguished ~~the~~and ~~lease, with LESCO making an~~all ~~approximate~~restricted ~~$100,000~~shares ~~annual~~became ~~payment~~fully tovested ~~the~~effective on ~~Assignee to defray~~ the ~~cost~~date of the ~~letter~~ ~~of credit~~merger.

Note 9. Long-13Term Supply Agreement with Turf Care Supply Corp.: In 2005, the Company entered into a long-term supply agreement with TCS pursuant to which TCS manufactures or sources for LESCO substantially all consumable goods sold by the Company. For the first quarters ended March 31, 2007 and 2006, consumable goods constituted approximately 85% and 83%, respectively, of the Company’s consolidated net sales. The Company has minimum annual commitments of $7.5 million under the agreement, which expires no earlier than September 2010.

~~Table~~Note 10. Income Taxes: In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income tax positions and requires applying a “more likely than not” threshold to the recognition and the de-recognition of ~~Contents~~tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 effective January 1, 2007. The Company does not currently have an income tax contingency accrual and does not expect it to materially change in the next 12 months. LESCO’s federal income tax returns for years ending prior to December 31, 2003 are no longer subject to examination by the Internal Revenue Service. The majority of the Company’s state and local income tax returns for years ending before December 31, 2002 are no longer subject to tax authority examinations.

~~LESCO, INC.~~12

ITEMTable 2.of MANAGEMENT’S DISCUSSION AND ANALYSIS OFContents

~~FINANCIAL~~Note ~~CONDITION~~11. ~~AND~~Detail ~~RESULTS~~of OFCertain ~~OPERATIONS~~Balance Sheets Accounts

Organization of Information


	March 31,				December 31,
(Dollars in thousands)	2007		2006		2006
Other current assets:
Prepaid insurance	$	728	$	818	$	1,132
Product registration fees		896		542		965
Assets held for sale		102		112		102
Notes receivable		—		187		—
Other		653		332		790

	$	2,379	$	1,991	$	2,989


Other non-current assets:
Store and miscellaneous deposits	$	622	$	721	$	596
Notes receivable		—		310		—
Deferred financing charges		442		—		609

	$	1,064	$	1,031	$	1,205


Accounts payable:
Accounts payable to TCS	$	63,892	$	58,046	$	23,583
Accounts payable — other trade		17,204		15,732		19,260
Overdraft balances		7,239		4,920		5,989

	$	88,335	$	78,698	$	48,832


Accrued liabilities:
Accrued non-income taxes	$	3,201	$	3,073	$	1,506
Commissions and management bonuses		3,860		1,291		4,367
Salaries and wages		1,540		1,670		407
Insurance — hospitalization and workers’ compensation		2,007		2,344		2,021
Asset rationalization		490		1,794		1,053
Insurance — property and casualty		1,756		2,168		1,742
Severance		2		1,290		5
Customer rebates		1,918		2,912		2,661
Other		3,001		3,178		3,297

	$	17,775	$	19,720	$	17,059


Deferred — other:
Rent	$	1,297	$	994	$	1,264
Other		707		1,219		908

	$	2,004	$	2,213	$	2,172

~~Management’s Discussion and Analysis provides a narrative on the Company’s~~13 ~~financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements. It includes the following sections:~~

•Table Overviewof • Consolidated Results • Business Segments • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Forward Looking StatementsContents

~~OVERVIEW~~Note 12. Detail of Certain Statements of Operations Accounts

LESCO is the largest provider of products to the professional turf care segment of the green industry. The professional users of our products include lawn care and landscape firms and the employees of a variety of commercial, governmental, institutional and industrial establishments, including golf courses, sod farms, airports, cemeteries, professional sports organizations, universities, schools, commercial properties and numerous other organizations that use in-house employees to maintain lawns and gardens.


	Three Months Ended March 31,
(Dollars in thousands)	2007			2006
Net sales:
Gross sales	$	131,716		$	100,830
Agency sales		(166	)		(330	)
Freight revenue		255			233
Customer discounts and rebates & sales adjustments		(1,400	)		(896	)

	$	130,405		$	99,837


Merchant discounts and provision for doubtful accounts:
Merchant discounts
Multi-purpose credit programs	$	(522	)	$	(340	)
Private-label business credit programs		(1,620	)		(1,238	)
Private-label promotional discounts		(1,064	)		(824	)
Customer finance revenue		54			99
Other		(245	)		(304	)

	$	(3,397	)	$	(2,607	)

WeNote ~~track~~13. ~~our~~Subsequent ~~customers~~Event: ~~through~~Effective ~~two~~May 7, ~~customer~~2007, ~~sectors:~~Deere ~~Lawn~~& ~~Care~~Company completed its acquisition of LESCO for $14.50 per common share in cash. Concurrent with the acquisition, the NCBC Facility utilized by the Company was paid in full and ~~Golf~~terminated. In addition, as a result of the transaction, the Company’s common shares are no longer traded on NASDAQ.

~~Gross sales for these sectors for the three months and six months ended~~14 ~~June 30 were as follows:~~

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2004		2003		2004		2003
Lawn Care	$	141.2	$	131.6	$	226.9	$	209.2
Golf		42.0		41.7		59.2		59.6
	$	183.2	$	173.3	$	286.1	$	268.8

~~The~~LESCO, ~~separation of our customers into these two sectors is important as distribution to the sectors is markedly different and their growth prospects vary significantly~~INC.

~~Our~~ITEM ~~Lawn Care sector includes all non-golf related customers and is dominated by lawn care and landscape firms~~2. ~~Historically, distribution of products into this sector has been fragmented and inefficient. We believe that our model of Service Centers and direct sales provides efficiency to the sector~~MANAGEMENT’sS ~~distribution~~DISCUSSION ~~channels~~AND ~~through~~ANALYSIS ~~easily~~OF ~~accessible,~~FINANCIAL ~~strategically positioned~~CONDITION ~~real~~AND ~~estate~~RESULTS ~~where~~OF ~~we provide agronomic expertise through our 272~~OPERATIONS Service Centers and direct sales associates with products specifically targeted to the Lawn Care sector. We estimate the market for our Lawn Care products at $7.0 billion, and independent research indicates that organic growth in the sector is expected to exceed 5% annually for the next several years due to the aging of the “baby boomers” and their increasing desire to contract lawn care professionals, the higher number of two-income families and continued time constraints on consumers.

~~The~~Organization golf industry is a smaller market (estimated at $1.2 billion) and is not expected to grow significantly in the near future, nor do we believe our opportunities are as great in this sector as those in the Lawn Care sector. Additionally, the industry has experienced a decline in annual rounds of ~~golf~~Information being played, which has decreased the budgets of golf course superintendents; however, that trend appears to be moderating in the first half of 2004. The ability to capture incremental market share in this industry is limited as distribution of our products to the industry is dominated by a few national and regional distributors. We anticipate that we will be able to expand our presence in under-serviced markets, but we are not planning any major expansion of Stores-on-Wheels or direct golf sales in the near future.

~~-14-~~ Management’s Discussion and Analysis provides a narrative on the Company’s financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements. It includes the following sections:

~~Table~~• Overview • Business Segment Results of ~~Contents~~Operation • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Forward Looking Statements

~~RESULTS OF OPERATIONS~~OVERVIEW

On February 19, 2007, Deere & Company (Deere) and LESCO announced that they had entered into a definitive merger agreement. Under the terms of the agreement, ~~Inc~~Deere acquired LESCO for $14.50 per common share in cash on May ~~CONSOLIDATED~~7, ~~STATEMENTS~~2007 OFwhen ~~OPERATIONS~~the -transaction ~~UNAUDITED~~closed. As a result of the transaction, the Company’s shares no longer trade on the NASDAQ.

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2004			2003			2004			2003
Net sales	$	182,189		$	172,560		$	284,233		$	267,010
Cost of product		(120,566	)		(114,623	)		(189,513	)		(178,441	)
Distribution cost		(14,618	)		(14,951	)		(24,100	)		(25,253	)
Gross profit on sales		47,005			42,986			70,620			63,316
Selling expense		(23,037	)		(22,259	)		(44,877	)		(43,001	)
General & administrative expense		(6,574	)		(7,222	)		(13,862	)		(14,573	)
Merchant discounts and provision for doubtful accounts		(2,554	)		(1,211	)		(4,182	)		(1,742	)
Pre-opening expense		(503	)		(124	)		(725	)		(290	)
Other expense		(130	)		(565	)		(192	)		(604	)
Other income		173			518			369			1,066
Earnings before interest and taxes		14,380			12,123			7,151			4,172
Interest expense		(169	)		(1,290	)		(553	)		(2,578	)
Earnings before taxes	$	14,211		$	10,833		$	6,598		$	1,594

LESCO is a leading provider of lawn care, landscape, golf course and pest control products to the professional green and pest control industries. The professional users of our products include lawn care and landscape firms, pest management professionals and the employees of a variety of commercial, governmental, institutional and industrial establishments, including golf courses, sod farms, airports, cemeteries, professional sports organizations, universities, schools, commercial properties and other organizations that use in-house employees to maintain lawns, grounds and gardens.

~~Sales~~ We track our customers through two customer sectors: Lawn and landscape and Golf.

~~Service Centers:~~ Gross sales for ~~LESCO~~these ~~Service~~sectors ~~Centers® of $126.7 million~~ for the ~~second quarter of 2004, reflect sales transacted through our 272 Service Centers in operation as of June 30, 2004, including 25 new Service Centers opened in the~~ first ~~half of 2004, of which 16 opened in the second~~ quarter, ~~and 21 new Service Centers opened during 2003. The total increase~~ of 7% ~~over~~2007 ~~the prior year second quarter results of $118.0 million reflects an increase of 1% in same-store sales (excluding the 46 new units)~~ and an2006 increase of 6% from incremental new Service Center sales of $7.4 million. The sales growth for the quarter was predominantly generated in the fertilizer and combination product categories. For the first six months, Service Center sales expanded 8% to $195.7 million from $181.4 million for the same period in 2003. The increase in sales revenues was produced from a 2% same-store sales advance coupled with a 6% sales lift, or $10.6 million, from incremental new store revenues. Similar to the second quarter sales growth, fertilizer and combination products provided the vast majority of the sales increase for the first half of 2004 compared to the same period in 2003. The primary products sold through Service Centers are turf care products, including turf and pest control products, fertilizer, grass seed and equipment. The Service Centers market and sell products principally to lawn care companies, landscapers, public and private golf courses, nurseries, municipalities, churches and condominium associations. The Company plans to open 27 Service Centers during 2004 of which 25 were ~~opened~~as ~~in the first half of the year.~~follows:

Other Selling Locations: The Company also markets and sells products to private and public golf courses and other customers having large turf areas through direct sales programs and our fleet of LESCO Stores-on-Wheels®. Through these selling channels, the Company generated sales of $56.5 million for the second quarter of 2004, a 2% increase over the $55.3 million in sales for the second quarter of 2003. The fertilizer and combination product categories experienced favorable sales trends in these channels as they did for Service Centers. For the first half of 2004, these other selling channels produced a 3% increase, led by fertilizer and combination products, to $90.4 million from $87.4 million for the same period in 2003. The Company’s direct channel markets and sells products to large national and regional lawn care customers utilizing sales representatives, markets products by mail order catalog, and participates in national and regional lawn care trade shows. A telemarketing sales group calls on inactive accounts and contacts customers not currently serviced by the Company’s outside sales forces. In addition, products are marketed internationally, principally through foreign distributors. The Stores-on-Wheels are well stocked with a wide variety of turf care products and golf course accessories, which are sold directly from the trucks. The Company operated 72 LESCO Stores-on-Wheels in the second quarter of 2004 and 71 vehicles for the same period in 2003. The primary products sold through this channel are turf care products, including turf and pest control, fertilizer, grass seed, hand held equipment and golf course accessories.


(Dollars in millions)	2007		2006
Lawn and landscape	$	111.0	$	85.4
Golf		20.7		15.4

	$	131.7	$	100.8

~~-15-~~ Operating decisions made in 2006 have had a significant influence on gross sales. In the third quarter of 2006, the Company reinstated its direct sales representative model that had been disbanded in the first half of 2005. As a result of the reinstatement, gross sales to customers supported by a direct sales representative in 2005 increased approximately $2 million in the first quarter of 2007 as compared to the same period in 2006. In the second half of 2006, the Company implemented a change to its early order program (EOP), a promotion designed to encourage customers to purchase product during October through December for their needs the following spring. The Company extended the EOP promotion into 2007, resulting in a shift of approximately $22 million in comparable sales to the first quarter of 2007, which negatively impacted gross margin.

~~Table~~ Although many of ~~Contents~~our customers purchase products from LESCO through both of our operating segments (Stores and Direct), the separation of our customers into these two sectors is important as customer relationship management and distribution to the sectors is vastly different and their growth prospects vary significantly.

~~The~~Our ~~following~~lawn ~~table~~and ~~provides~~landscape ~~supplemental~~sector ~~detail~~includes ofall ~~sales~~non-golf related customers and is dominated by larger, ~~customer~~regional lawn care and landscape firms. Historically, industry-wide distribution of products into this sector has been fragmented and ~~transacting~~inefficient. We believe that our model of Service Centers and direct selling ~~locations~~efforts provides efficiency to the sector through easily accessible, strategically positioned real estate, where we provide agronomic expertise and products specifically targeted to the lawn and landscape sector through 345 Service Centers and direct sales associates. We estimate the market for our consumable lawn and landscape products at $7.2 billion, of which $3.5 billion is in the ~~second~~professional ~~quarter~~sector and ~~first~~$3.7 billion ~~half~~is in the consumer sector. Independent research indicates that organic growth in the industry is expected to reach nearly 5% annually for the next several years due to the aging of ~~each~~the “baby ~~respective~~boomers” ~~year:~~and their increasing desire to hire lawn care professionals due to time or ability constraints, coupled with their desire to have healthy and aesthetically pleasing lawns, and the higher number of dual-income families.

	Three Months Ended June 30,
	2004							2003							% Change
			Other							Other								Other
	Service		Selling					Service		Selling					Service			Selling
(Dollars in millions)	Centers		Locations		Total			Centers		Locations		Total			Centers			Locations			Total
Lawn care	$	116.1	$	25.1	$	141.2		$	109.9	$	21.7	$	131.6			5.6	%		15.7	%		7.3	%
Golf		10.6		31.4		42.0			8.1		33.6		41.7			30.9			(6.5	)		0.7
Gross sales	$	126.7	$	56.5	$	183.2		$	118.0	$	55.3	$	173.3			7.4	%		2.2	%		5.7	%
Agency sales						(0.4	)						—									—
Freight revenue						0.5							0.5									—
Customer discounts and rebates						(1.1	)						(1.3	)								(15.4	)
Net sales					$	182.2						$	172.5									5.6	%

	Six Months Ended June 30,
	2004							2003							% Change
			Other							Other								Other
	Service		Selling					Service		Selling					Service			Selling
(Dollars in millions)	Centers		Locations		Total			Centers		Locations		Total			Centers			Locations			Total
Lawn care	$	181.3	$	45.6	$	226.9		$	170.1	$	39.1	$	209.2			6.6	%		16.6	%		8.5	%
Golf		14.4		44.8		59.2			11.3		48.3		59.6			27.4			(7.2	)		(0.7	)
Gross sales	$	195.7	$	90.4	$	286.1		$	181.4	$	87.4	$	268.8			7.9	%		3.4	%		6.4	%
Agency sales						(0.4	)						—									—
Freight revenue						0.8							0.8									—
Customer discounts and rebates						(2.3	)						(2.6	)								(11.5	)
Net sales					$	284.2						$	267.0									6.4	%

~~Agency~~The ~~Sales,~~golf ~~Freight~~industry ~~Revenue~~is ~~and~~a ~~Customer~~smaller ~~Discounts~~market estimated at $1.0 billion and ~~Rebates:~~is ~~During~~not expected to grow significantly in the ~~second~~near ~~quarter,~~future. Over the ~~Company~~past ~~entered~~few ~~into~~years, ~~agency~~the ~~agreements~~industry ~~with certain~~has ofexperienced ~~its~~a decline ~~suppliers~~in ~~whereby~~annual ~~the~~rounds ~~Company~~of ~~operates~~golf asplayed, awhich ~~sales~~has ~~agent~~decreased the budgets of ~~those~~golf ~~suppliers~~course superintendents. ~~The~~Furthermore, ~~suppliers~~the ~~retain~~expansion ~~title~~of togolf ~~their~~course ~~merchandise~~acreage, ~~until~~in itterms isof ~~sold~~new bycourse ~~the~~construction, ~~Company~~has slowed ~~and~~in ~~determine~~recent ~~the~~years. ~~prices~~In ataddition ~~which~~to ~~LESCO~~these ~~can~~external ~~sell~~factors, the ~~suppliers’~~Company ~~merchandise.~~has ~~As such,~~lost ~~the~~market ~~Company~~share ~~recognizes~~in ~~sales~~the golf oncustomer sector as a ~~net~~result ~~basis~~of ~~and~~the ~~records~~elimination ~~only~~of its ~~product margin~~direct assales ~~revenue.~~representative ~~The~~organization in ~~$0.4 million~~the offirst ~~agency~~half ~~sales~~of ~~represents~~2005. Although the ~~portion~~114 ~~of revenue~~Stores-on-Wheels vehicles that ~~exceeds~~currently service the golf ~~Company’s~~industry ~~net~~have ~~product~~maintained ~~margin.~~and/or ~~Freight~~developed ~~revenue~~certain customer relationships, ~~which~~the direct sales ~~represents~~representative ~~fees~~is ~~charged~~an important asset to ~~customers~~cultivate incustomer ~~sales~~loyalty ~~transactions~~with ~~for~~expansive ~~shipping~~product ~~and~~knowledge ~~handling,~~and ~~remained~~personalized ~~flat~~customer ~~year~~service. ~~over~~In ~~year~~July 2006, ~~for~~ the ~~quarter~~Company ~~and~~announced onits aintention ~~year-~~to~~-date~~ ~~basis.~~immediately ~~Customer~~re-establish ~~discounts~~the ~~and~~direct ~~rebates~~sales ~~declined~~organization. ~~slightly~~By ~~from~~March 31, 2007, the ~~prior~~Company ~~year~~had ~~in both~~re-deployed ~~the~~30 ~~quarter,~~golf aand ~~$0.2 million~~21 ~~decline,~~lawn and landscape ~~the~~sales ~~first~~representatives ~~six~~in ~~months,~~key amarkets ~~$0.3 million~~to ~~reduction,~~enhance asservice ~~the~~levels ~~number~~to ofexisting ~~customer~~customers ~~rebate~~and extend ~~programs~~its ~~has~~reach ~~been~~to ~~reduced~~new customers.

~~-16-~~BUSINESS SEGMENT RESULTS OF OPERATIONS

~~Table~~ The ofCompany ~~Contents~~manages the business utilizing two business segments — Stores and Direct, which are supplemented by Corporate support functions.

~~Gross~~ The ~~Profit~~following are the operating results of each of our operating segments. Earnings before interest and taxes (EBIT) is a non-GAAP financial measure that reflects our earnings before the payment of interest on ~~Sales:~~indebtedness and taxes. We use EBIT as a measure of the profitability of our segments because it excludes the effects of our capitalization structure and taxes. Interest and taxes are accounted and paid for on a consolidated Company basis. Neither capitalization structure nor taxes reflects the efficiency of the operation of our segment assets. Additionally, we use EBIT in determining whether to finance a project with debt or equity. EBIT should not be considered an alternative to net income or loss or any other measure of performance calculated in accordance with GAAP.

	Three Months Ended June 30,												Six Months Ended June 30,
	2004						2003						2004						2003
(Dollars in millions)	Dollars			% of Net Sales			Dollars			% of Net Sales			Dollars			% of Net Sales			Dollars			% of Net Sales
Product margin	$	61.6			33.8	%	$	58.0			33.6	%	$	94.7			33.3	%	$	88.5			33.1	%
Distribution cost		(14.6	)		(8.0	)		(15.0	)		(8.7	)		(24.1	)		(8.5	)		(25.2	)		(9.4	)
Gross profit	$	47.0			25.8	%	$	43.0			24.9	%	$	70.6			24.8	%	$	63.3			23.7	%

ProductTable margin has remained consistent in the second quarter of 2004 compared to the like period in 2003. Our largest single purchased product or raw material is urea, the nitrogen source for blended fertilizers and combination products. Urea can represent from approximately 7% to 9% of our cost of sales. Urea is a second derivative of natural gas and its cost has increased with the increased cost of natural gas. For 2004, we have entered into a contract with our urea supplier to fix the cost of a majority of our urea needs at a price reflecting the prevailing market in late 2003; however, our year-over-year comparative price for urea increased approximately 25% for the second quarter and nearly 30% for the first half of 2004. Contents

InSegment ~~2003,~~Statements ~~we expanded our distribution network to provide support to our increasing base~~ of ~~Service Centers and to create efficiencies in our~~Operations distribution channel. As a result, we incurred approximately $0.4 million in network start-up costs in the first half of 2003. In the second quarter and first half of 2004, we have leveraged our distribution cost as a percentage of sales and realized cost savings as this network becomes more efficient. We are experiencing more optimal shipping quantities and direct distribution routes resulting in lower costs. We expect to continue to leverage our distribution costs as a percentage of sales for the full year in 2004 as compared to prior year results.

Operating Expenses:


	Three Months Ended March 31,
	Stores						Direct						Corporate						Total
(Dollars in thousands)	2007			2006			2007			2006			2007			2006			2007			2006
Net sales	$	114,543		$	84,196		$	15,862		$	15,641		$	—		$	—		$	130,405		$	99,837

Cost of product (including distribution costs)		(97,138	)		(63,609	)		(13,868	)		(12,297	)		—			—			(111,006	)		(75,906	)
% to Net Sales		(84.8	%)		(75.6	%)		(87.4	%)		(78.6	%)								(85.1	%)		(76.0	%)

Gross profit on sales		17,405			20,587			1,994			3,344			—			—			19,399			23,931
% to Net Sales		15.2	%		24.5	%		12.6	%		21.4	%								14.9	%		24.0	%

Selling expense		(22,313	)		(21,133	)		(2,632	)		(1,426	)		(2,786	)		(2,653	)		(27,731	)		(25,212	)
% to Net Sales		(19.4	%)		(25.1	%)		(16.6	%)		(9.1	%)								(21.3	%)		(25.3	%)

Merchant discounts and provision for doubtful accounts		(2,575	)		(1,652	)		(582	)		(478	)		(240	)		(477	)		(3,397	)		(2,607	)
% to Net Sales		(2.2	%)		(2.0	%)		(3.7	%)		(3.1	%)								(2.6	%)		(2.6	%)

Pre-opening expense		—			—			—			—			(287	)		(288	)		(287	)		(288	)
% to Net Sales		—			—			—			—									(0.2	%)		(0.3	%)

General & administrative expense		—			—			—			—			(5,445	)		(6,399	)		(5,445	)		(6,399	)
% to Net Sales		—			—			—			—									(4.3	%)		(6.4	%)

Other income, net		—			—			—			—			26			135			26			135
% to Net Sales		—			—			—			—									0.0	%		0.1	%


Earnings (loss) before interest and taxes	$	(7,483	)	$	(2,198	)	$	(1,220	)	$	1,440		$	(8,732	)	$	(9,682	)	$	(17,435	)	$	(10,440	)

% to Net Sales		(6.4	%)		(2.6	%)		(7.7	%)		9.2	%								(13.5	%)		(10.5	%)

Interest expense, net																				(640	)		(175	)
% to Net Sales																				(0.4	%)		(0.2	%)


Loss before taxes																				(18,075	)		(10,615	)
% to Net Sales																				(13.9	%)		(10.6	%)

Income taxes																				—			—
% to Net Sales																				—			—


Net loss																			$	(18,075	)	$	(10,615	)

% to Net Sales																				(13.9	%)		(10.6	%)

	Three Months Ended June 30,
	2004					2003					Change
(Dollars in millions)	Dollars		% of Net Sales			Dollars		% of Net Sales			Dollars		%			Basis Points
Selling expense	$	23.0		12.6	%	$	22.3		12.9	%	$	0.7		3.1	%	(30) bps
Merchant discounts and provision for doubtful accounts		2.6		1.4			1.2		0.7			1.4		116.7		70 bps
	$	25.6		14.0	%	$	23.5		13.6	%	$	2.1		8.9	%	40 bps

Sales by Customer Sector and Transacting Selling Locations

	Six Months Ended June 30,
	2004					2003					Change
(Dollars in millions)	Dollars		% of Net Sales			Dollars		% of Net Sales			Dollars		%			Basis Points
Selling expense	$	44.9		15.8	%	$	43.0		16.1	%	$	1.9		4.4	%	(30) bps
Merchant discounts and provision for doubtful accounts		4.2		1.4			1.7		0.6			2.5		147.1		80 bps
	$	49.1		17.2	%	$	44.7		16.7	%	$	4.4		9.8	%	50 bps

The following table provides supplemental detail of sales by customer sector and transacting selling locations:

Selling Expense


	Three Months Ended March 31,
	2007									2006									% Change
	Stores			Direct						Stores			Direct						Stores			Direct
(Dollars in millions)	Segment			Segment			Total			Segment			Segment			Total			Segment			Segment			Total
Lawn and landscape	$	98.1		$	12.9		$	111.0		$	70.3		$	15.1		$	85.4			39.5	%		(14.6	%)		30.0	%
Golf		17.4			3.3			20.7			14.8			0.6			15.4			17.6	%		450.0	%		34.4	%
Gross sales		115.5			16.2			131.7			85.1			15.7			100.8			35.7	%		3.2	%		30.7	%
Net sales adjustments (a)		(1.0	)		(0.3	)		(1.3	)		(0.9	)		(0.1	)		(1.0	)		(11.1	%)		(200.0	%)		(30.0	%)

Net sales	$	114.5		$	15.9		$	130.4		$	84.2		$	15.6		$	99.8			36.0	%		1.9	%		30.7	%

~~Selling~~(a) ~~expense~~Net ~~includes~~sales ~~all~~adjustments ~~operating~~include ~~expenses~~freight ofrevenue ~~Service~~reduced ~~Centers~~by ~~and Stores-on-Wheels,~~agency ~~direct~~ sales, ~~sales~~customer ~~management~~discounts, ~~customer service~~ and ~~marketing~~ ~~expense.~~customer ~~The increase of $0~~rebates.7 million for the second quarter relates to new Service Center operating costs which increased $1.3 million in second quarter 2004 compared to new Service Centers selling expense for the same period last year. Total new Service Center expense in the first six months for 2004 was $3.3 million compared to $1.1 million for the like period in 2003.

~~-17-~~Stores Segment

~~Table~~ Our Stores Segment is composed of ~~Contents~~the operating results of our Service Centers and Stores-on-Wheels vehicles along with the costs of operation of our field management organization. We maintain Four-Wall P&Ls for each Service Center and Stores-on-Wheels vehicle. These Four-Wall P&Ls include the sales, cost of sales and operating expenses (including payroll, benefits, rent, utilities, in-bound freight to selling locations and out-bound freight to customers) necessary to operate each individual selling location. The Stores Segment operating results reflect the aggregate Four-Wall P&Ls of Service Center and Stores-on-Wheels selling locations

~~Merchant Discounts and Provision for Doubtful Accounts~~17

AsTable a percentage of net sales, these expenses increased 70 basis points year-over-year for the second quarter. On December 30, 2003, we sold our trade accounts receivable portfolio to General Electric Business Credit Services (GEBCS) for $57 million and entered a private label business credit program agreement with GEBCS. In the second quarter and first six months of 2004, this arrangement has resulted in increased merchant discounts as we pay program fees and discounts to GEBCS of approximately 1.3% of sales; however, interest expense, provision for doubtful accounts, the general and administrative costs to service the previous in-house program and customer finance revenue have been significantly reduced as compared to the same periods in 2003. Contents

~~General~~adjusted &for vendor ~~Administrative~~and ~~Expense:~~customer rebates, sales commission expense, indirect supply chain costs, and merchant discounts and other income and expense items not directly charged to the Four-Wall P&Ls.

	Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in millions)	2004		2003		Change			2004		2003		Change
General & administrative expense	$	6.6	$	7.2	$	(0.6	)	$	13.9	$	14.6	$	(0.7	)

Sales: The following table provides supplemental detail of sales by customer sector and transacting selling locations:

We reduced general & administrative expense in the second quarter of 2004 by $0.6 million as compared to the same period in 2003. For the quarter and six months ended June 30, 2004, the cost savings recognized from tightened expense controls along with the strategic outsourcing of customer financing to GEBCS have virtually offset the increase in expense related to more stringent governance guidelines as well as management bonus and insurance expenses.


	Three Months Ended March 31,
	2007									2006									% Change
	Service			Stores on						Service			Stores on						Service			Stores on
(Dollars in millions)	Centers			Wheels			Total			Centers			Wheels			Total			Centers			Wheels			Total
Lawn and landscape	$	97.2		$	0.9		$	98.1		$	69.7		$	0.6		$	70.3			39.5	%		50.0	%		39.5	%
Golf		6.4			11.0			17.4			5.9			8.9			14.8			8.5	%		23.6	%		17.6	%

Gross sales		103.6			11.9			115.5			75.6			9.5			85.1			37.0	%		25.3	%		35.7	%
Net sales adjustments		(0.7	)		(0.3	)		(1.0	)		(0.3	)		(0.6	)		(0.9	)		(133.3	%)		50.0	%		(11.1	%)

Net sales	$	102.9		$	11.6		$	114.5		$	75.3		$	8.9		$	84.2			36.7	%		30.3	%		36.0	%

~~Pre~~ Service Centers: Service Center gross sales reflect sales transacted through the 345 Service Centers in operation as of March 31, 2007, including six new Service Centers opened during the first quarter of 2007. The total net sales increase of 36.7% in first quarter 2007 reflects a same-~~Opening~~store ~~Expense~~(defined as stores opened prior to 2006) increase of 28.4% and growth of 8.3% from new 2006 Service Center sales of $6.4 million. Comparing the first quarter of 2007 to the comparable period of 2006, the $27.6 million sales increase is primarily composed of: (1) $16.0 million resulting from the shift in the EOP promotion, from fourth quarter 2006 into first quarter 2007, driving sales predominantly in the fertilizers and combination and control product categories; (2) $4.1 million increase in equipment sales from aggressive promotion and new product introduction; (3) $2.8 million growth in sales of ice melt due to more inclement weather conditions in the first quarter of 2007; and (4) $1.7 million due to the reinstatement of the direct sales representative organization in the second half of 2006.

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2004		2003		Change		2004		2003		Change
Pre-opening expense	$	0.5	$	0.1	$	0.4	$	0.7	$	0.3	$	0.4
Number of Service Centers opened during the period		16		9		7		25		19		6

Stores-on-Wheels: Stores-on-Wheels gross sales for the quarter reflect sales transacted through the 114 Stores-on-Wheels vehicles in operation as of March 31, 2007. The total net sales increase of 30.3% for the first quarter of 2007 was predominantly driven by a $2.6 million increase in EOP sales on a quarter-over-quarter basis. Stores-on-Wheels sales to customers previously called on by a direct sales representative grew $0.2 million, or 9.8%, on a quarter-over-quarter basis.

~~Pre-opening~~Net ~~expense~~sales ~~increased~~adjustments: ~~significantly~~The inCompany has entered into agency agreements with certain of its suppliers whereby the ~~second~~Company ~~quarter~~operates ~~2004~~as a sales agent of those suppliers. The suppliers retain ~~compared~~title to ~~the~~their ~~same~~merchandise ~~period~~until ~~last~~it ~~year~~is assold by the Company ~~opened~~and 16determine ~~new~~the ~~Service~~prices at which LESCO ~~Centers~~can sell the suppliers’ merchandise. ~~Pre-opening~~As ~~expense~~such, ~~which~~the ~~consists~~Company ~~primarily~~recognizes ofsales ~~grand~~on ~~opening~~a net basis and ~~advertising~~records only its product margin as revenue. Agency sales adjustments, ~~payroll~~combined with freight revenue (i.e., ~~supplies~~fees charged to customers in sales transactions for shipping and ~~distribution~~handling), and customer ~~storage~~discounts ~~costs,~~and isrebates ~~expensed as~~increased ~~incurred~~$0.1 million ~~Last~~in ~~year~~the ~~during~~first quarter of 2007 compared to the same ~~second~~period ~~quarter~~in 2006, ~~the~~mainly ~~Company~~attributable ~~opened~~to ~~nine Service~~increased ~~Centers~~customer rebates earned on eligible sales.

~~Other~~Gross ~~(Expense)/Income~~Profit on Sales:

	Three Months Ended June 30,									Six Months Ended June 30,
(Dollars in millions)	2004			2003			Change			2004			2003			Change
Other expense	$	(0.1	)	$	(0.6	)	$	0.5		$	(0.2	)	$	(0.6	)	$	0.4
Other income		0.2			0.5			(0.3	)		0.4			1.1			(0.7	)
	$	0.1		$	(0.1	)	$	0.2		$	0.2		$	0.5		$	(0.3	)

Stores Segment gross profit as a percentage of net sales in the first quarter decreased to 15.2% in 2007 from 24.5% in 2006. The decrease is primarily an outcome of increased product and indirect supply chain costs, which were not wholly offset in product pricing for competitive reasons, combined with promotional activity. Direct cost of product sold as a percent of net sales increased by 180 basis points driven by increased raw material costs and promotional activity. Indirect supply chain costs, comprised of warehouse operation costs, warehouse-to-warehouse product transportation costs and other costs under the supply agreement with Turf Care Supply Corp. (TCS), are relatively fixed expenses. Indirect supply chain costs as a percent of net sales increased by 680 basis points. Indirect supply chain costs are allocated to the operating segments based on the cost of product sold; consequently, the Stores Segment received a higher allocation due to its higher percentage of total cost of product sold in the first quarter of 2007 than in the comparable period of 2006.

~~The increase in other expense/income, net for the second quarter compared~~18 to the same period in 2003 was due to the non-recurrence of $0.4 million of severance expense recognized in the second quarter 2003, which was partially offset by $0.2 million of income from our former joint venture. The decrease for the first six months predominantly relates to our former joint venture. There was no income or loss recorded in the first half of 2004, as we sold our ownership in the joint venture in the fourth quarter of 2003, and $0.6 million of income was recognized in the first half of 2003.

-18- Table of Contents

~~Table~~Selling ~~of Contents~~Expense:

~~Interest~~ Selling ~~Expense:~~expense includes all operating expenses of Service Centers, Stores-on-Wheels vehicles, and field management. The quarter-over-quarter increase of $1.2 million to $22.3 million, or 19.4% of net sales, in the first quarter 2007 is primarily attributable to the additional expense for 41 new Service Center openings in 2007 and 2006 and for national sales conferences held in the first quarter 2007. This increase was partially offset by a change in estimates for incentive compensation of $15 million.

	Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in millions)	2004		2003		Change			2004		2003		Change
Interest expense	$	0.2	$	1.3	$	(1.1	)	$	0.6	$	2.6	$	(2.0	)

Merchant Discounts and Provision for Doubtful Accounts:

~~Interest~~Merchant ~~expense~~discounts ~~declined~~increased by $10.19 million, or 20 basis points, in the ~~second~~first quarter ~~2004~~of ~~and $2.0~~2007 ~~million~~compared ~~for~~to the first ~~six~~quarter ~~months~~of ~~versus~~2006. For the ~~same~~first ~~periods~~quarter inof ~~2003~~2007, ~~which~~total ~~was~~merchant discounts, ~~directly~~including ~~related~~GEBCS, tofor ~~the~~regular ~~sale~~payment terms were 2.2% of ~~the~~net ~~Company’s~~sales. ~~accounts~~In ~~receivable~~the ~~portfolio~~first toquarter of 2006, ~~GEBCS.~~discount ~~The~~expense ~~sale~~for regular payment terms was 2.0% of ~~the~~net ~~portfolio~~sales. ~~has~~The ~~reduced~~increased ~~the~~cost ~~year~~on a quarter-over-~~year~~quarter ~~outstanding borrowings~~basis onis primarily the ~~revolving~~result ~~credit~~of ~~facility~~a ~~during~~continued shift ~~the~~to ~~second~~national ~~quarter~~bank ~~and~~card ~~first half,~~credit ~~and~~as the ~~interest~~payment ~~rate~~media ~~swap~~type along ~~agreement~~with ~~that~~the ~~was~~EOP inand ~~place~~equipment ~~during~~clearance ~~2003~~promotional ~~was eliminated~~financing offers.

~~Pre-Tax~~(Loss) Earnings before Interest and Taxes:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2004		2003		Change		2004		2003		Change
Earnings before taxes	$	14.2	$	10.8	$	3.4	$	6.6	$	1.6	$	5.0

By the end of the first quarter 2007, the Company had increased its Service Center base by 11%, adding a net 35 Service Centers to its base of 310 stores at March 31, 2006. Management views new Service Centers as a significant means to leverage the Company’s cost base and grow earnings consistently over the long term.

InAs ~~the~~a ~~second~~result ~~quarter~~ of ~~2004~~the foregoing factors, ~~the~~including ~~Company~~increased ~~opened~~sales 16from ~~Service~~the ~~Center locations~~shift ~~bringing~~in the ~~year-to-date~~EOP promotion ~~total~~from ~~openings~~2006 to 252007 ~~Service Centers.~~and In the ~~second~~reinstatement ~~quarter~~ of ~~2003~~the direct sales representative organization in 2006, ~~the~~decreased ~~Company~~gross ~~opened~~profit ~~nine~~caused ~~Service~~by ~~Centers~~higher ~~and~~raw material costs for ~~the~~urea-based products, ~~full~~promotional ~~year~~pricing on equipment products, increase in ~~2003~~indirect ~~opened~~supply 21chain ~~Service~~costs, and ~~Centers.~~the ~~Management~~operating ~~views~~results of the new Service Centers asand ~~the~~Stores-on-Wheels ~~primary~~vehicles ~~method~~opened toin ~~leverage~~2007 and ~~our~~2006, ~~cost~~the ~~base~~Stores ~~and~~Segment ~~grow~~had ~~earnings consistently~~a ~~over~~loss ~~time.~~before ~~Below~~interest ~~are~~and ~~the~~taxes ~~operating~~of ~~results~~$7.5 million ~~for~~in the ~~three months~~first ~~and~~quarter ~~six~~2007 ~~months~~versus ~~ended~~a ~~June 30,~~loss ~~2004~~before ~~compared~~interest toand taxes of $2.2 million for the same period in ~~2003~~2006. See ~~for~~management’s discussion regarding the ~~class~~ use of ~~2003~~EBIT ~~and~~on ~~2004~~page ~~Service Centers:~~16.

	Three Months Ended June 30,
	2004									2003
	Class of 2004			Class of 2003						Class of 2003
(Dollars in thousands)	(25 Stores)			(21 Stores)			Total			(19 Stores)
Sales	$	4,318		$	6,261		$	10,579		$	3,197
Cost of product		(2,927	)		(4,229	)		(7,156	)		(2,252	)
Distribution cost		(262	)		(244	)		(506	)		(115	)
Gross profit on sales		1,129			1,788			2,917			830
Selling expense		(1,079	)		(1,016	)		(2,095	)		(767	)
Pre-opening expense		(503	)		—			(503	)		(96	)
Merchant discount expense		(56	)		(83	)		(139	)		(9	)
Earnings (loss) before interest and taxes	$	(509	)	$	689		$	180		$	(42	)

Direct Segment

The Direct Segment consists of direct (non-19store) sales to national account customers, including large retailer accounts, along with the operations of the Company’s direct sales representatives. Similar to the Stores Segment, we maintain Four-Wall P&Ls for each Direct Segment unit and adjust for the same indirect income and expense items.

~~Table~~Sales: The following table provides supplemental detail of ~~Contents~~sales by customer sector:

	Six Months Ended June 30,
	Three Months Ended March 31,
	2004									2003
(Dollars in millions)	2007			2006			% Change
	Class of 2004			Class of 2003						Class of 2003
Lawn and landscape	$	12.9		$	15.1			(14.6	%)
(Dollars in thousands)	(25 Stores)			(21 Stores)			Total			(19 Stores)
Golf		3.3			0.6			450.0	%
Sales	$	4,768		$	9,206		$	13,974		$	3,435
Gross sales		16.2			15.7			3.2	%
Cost of product		(3,230	)		(6,219	)		(9,449	)		(2,417	)
Net sales adjustments		(0.3	)		(0.1	)		200.0
Distribution cost		(358	)		(399	)		(757	)		(189	)
Direct Segment net sales	$	15.9		$	15.6			1.9	%
Gross profit on sales		1,180			2,588			3,768			829
Selling expense		(1,312	)		(1,992	)		(3,304	)		(1,052	)
Pre-opening expense		(725	)		—			(725	)		(262	)
Merchant discount expense		(63	)		(123	)		(186	)		(9	)
Earnings (loss) before interest and taxes	$	(920	)	$	473		$	(447	)	$	(494	)

AsDirect aSegment: ~~result~~All ofgross ~~the~~sales ~~foregoing~~reflect ~~factors,~~sales ~~including~~transacted ~~the~~as ~~operating~~direct ~~results~~(non-store) ofsales with our ~~new~~national ~~Service~~account ~~Centers~~customers, including large retailer accounts, along with the ~~Company~~operations ~~had~~of ~~pre-tax~~our direct ~~income~~sales representatives. The increase of $140.23 million, ~~for~~or ~~the quarter~~1.9%, ~~ended~~in ~~June 30,~~the ~~2004~~first quarter 2007 compared to ~~pre-tax~~the ~~income~~same ofperiod ~~$10.8 million~~in ~~for~~2006 is primarily attributable to the ~~comparable~~ ~~period~~shift ~~last~~in ~~year,~~the anEOP ~~improvement~~promotion and reinstatement of ~~$3.4 million,~~the ordirect ~~31%~~sales representatives offset by a decline in sales to national accounts.

~~For~~Net ~~the~~sales ~~six~~adjustments: ~~months~~Freight ~~ended June 30~~revenue, ~~2004~~which represents fees charged to customers in sales transactions for shipping and handling, ~~the~~and ~~Company~~customer ~~generated~~discounts ~~$6.6 million~~and rebates are combined and ofreported ~~pre-tax~~as ~~income~~net ~~compared~~sales toadjustments. Net sales adjustments increased by $10.62 million ~~for~~in the first quarter of 2007 compared to the same period in ~~2003~~2006, anmainly ~~over 300%~~due to an increase in the amount of customer $5rebates corresponding to a decrease in eligible sales.~~0 million.~~

~~Income Taxes and Net Income:~~19

	Three Months Ended June 30,									Six Months Ended June 30,
(Dollars in millions, except per share data)	2004			2003			Change			2004			2003			Change
Earnings before income tax (provision) benefit	$	14.2		$	10.8		$	3.4		$	6.6		$	1.6		$	5.0
Income tax (provision) benefit:
Current		(0.9	)		—			(0.9	)		(1.2	)		—			(1.2	)
Deferred		(4.6	)		(4.1	)		(0.5	)		(1.3	)		(0.6	)		(0.7	)
Change in valuation allowance		5.5			—			5.5			2.2			—			2.2
		—			(4.1	)		4.1			(0.3	)		(0.6	)		0.3
Net Income	$	14.2		$	6.7		$	7.5		$	6.3		$	1.0		$	5.3
Earnings per share of common stock:
Diluted	$	1.58		$	0.77					$	0.70		$	0.11
Basic	$	1.63		$	0.79					$	0.72		$	0.11

~~Net~~Gross ~~income~~Profit ~~was~~on ~~$14.2 million, or $1.58 per diluted share, in the second~~Sales: quarter of 2004 and $6.7 million, or $0.77 per diluted share, in second quarter 2003. For the first six months of 2004, net income was $6.3 million, or $0.70 per diluted share, compared to $1.0 million, or $0.11 per diluted share, for the like period in 2003.

InDirect ~~accordance~~Segment ~~with~~gross ~~the~~profit ~~provisions~~as a percentage of ~~FAS~~net ~~109,~~sales in the ~~fourth~~first quarter ~~of 2003,~~decreased ~~the Company recorded a charge~~ to ~~establish a valuation allowance for its~~ ~~net~~12.6% ~~deferred~~in ~~tax~~2007 ~~assets,~~from ~~including~~21.4% ~~amounts~~in ~~related to its net operating loss carryforwards~~2006. The ~~Company~~decrease ~~intends~~is toprimarily ~~maintain~~ a ~~full~~result ~~valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support reversal~~ of ~~some~~contractual ~~portion or the~~pricing ~~remainder~~arrangements oflosing ~~the~~leverage ~~allowance.~~against ~~Until~~increased ~~such~~product ~~time, except for minor state~~ and ~~local provisions~~indirect ~~and~~supply ~~adjustments~~chain ~~to federal tax refunds, the Company will have no reported tax provision or benefit, net of valuation allowance adjustments~~costs. ~~In the first half of 2004, the Company~~ ~~adjusted previously estimated federal tax refunds by $0.3 million.~~

~~The~~Selling ~~impact of the valuation allowance increased the Company’s income tax~~Expense: benefit, and net income, by $5.5 million and increased the earnings per diluted share by $0.61 for the second quarter. For the first half 2004, the valuation allowance impact enhanced the tax benefit $2.2 million and earnings per diluted share by $0.25.

Selling expense includes all operating expenses of direct sales activities, including, but not limited to, payroll and related costs, incentive compensation, trade shows, and targeted marketing campaigns. In the first quarter of 2007, selling expense increased $1.2 million to $2.6 million, or 16.6% of net sales, from $1.4 million, or 9.1% of net sales, for the comparable period in 2006. This increased cost is primarily a result of the addition of 51 direct sales representatives on a quarter-20over-quarter basis.

~~Table~~Merchant ofDiscounts ~~Contents~~and Provision for Doubtful Accounts:

~~BUSINESS~~ In ~~SEGMENTS~~the first quarter of 2007, merchant discount fees were $0.6 million, or 3.7% of net sales, compared to $0.5 million, or 3.1% of net sales, in the first quarter of 2006. Merchant discounts expense includes fees incurred for regular payment terms. The 60 basis point increase year-over-year is due to the write-off of certain customer account balances, service charges, and late fees.

We(Loss) ~~manage~~Earnings ~~LESCO’s~~before ~~business~~Interest ~~utilizing two business segments – Selling~~ and Taxes: ~~Support.~~

~~Selling~~ As a result of the shift in the EOP promotion, reinstatement of the direct sales representatives, decline in sales to national accounts, de-leveraging of product and indirect supply chain costs to contractual pricing arrangements, and customer account write-offs, the Direct Segment incurred a loss before interest and taxes of $1.2 million in the first quarter of 2007 versus earnings before interest and taxes of $1.4 million in the comparable period of 2006. See management’s discussion regarding the use of EBIT on page 16.

WeCorporate ~~maintain Four-Wall P&Ls for each of our selling locations (Service~~ Centers, Stores-on-Wheels, direct sales representatives and all other direct selling efforts). These Four-Wall P&Ls include sales, cost of product, distribution cost (freight in-bound to selling locations and out-bound to customers) and operating expenses (including payroll, benefits, rent and utilities) necessary to operate the individual selling locations. The Selling segment operating results reflect the aggregate Four-Wall P&Ls of selling locations adjusted for costs of zone and regional management, sales commission expense, working capital interest charge and the portion of merchant discounts and provision for doubtful accounts not previously charged to the Four-Wall P&Ls.

WeThe ~~allocate~~two ~~resources,~~operating ~~including~~segments ~~working,~~are ~~fixed~~supplemented ~~and~~by ~~leased~~Corporate ~~capital,~~costs ~~to existing~~incurred ~~and~~for ~~potential~~support functions, including Corporate selling ~~locations~~expenses, ~~based~~general ~~upon~~and ~~projected~~administrative ~~sales~~expenses, ~~and~~marketing ~~return~~costs, onmerchant ~~invested~~discounts ~~capital~~for ~~(ROIC).~~promotional Weactivities, ~~define~~pre-opening ~~ROIC~~costs asfor ~~the~~new ~~percentage~~Service ~~calculated~~Centers byand ~~dividing~~Stores-on-Wheels ~~net~~vehicles, ~~operating~~and ~~profit~~other ~~after~~expenses ~~tax~~that ~~(NOPAT) by~~are ~~invested~~not ~~capital.~~allocated ~~For~~to the ~~Selling~~ ~~segment~~Stores weand ~~calculate ROIC as follows:~~Direct Segments.

ROIC =		NOPAT / Invested Capital
NOPAT =		Selling Segment Operating Results
		X 61% (1 – effective tax rate)
Invested Capital =		Accounts Receivable (excluding rebate receivable, see Note 2 to Consolidated Financial Statements); plus
		Inventory (excluding capitalized distribution and procurement costs, markdown and shrink reserves and credit for inventory held on consignment – see Note 2 to Consolidated Financial Statements); plus
		Fixed Capital (see Note 2 to Consolidated Financial Statements)

Selling Expense:

~~Our~~Corporate ~~measures~~selling expense, comprised of ~~ROIC~~customer ~~may~~service, ~~not~~bids beprocessing, ~~similar~~product registration toand ~~other~~merchandising ~~similarly~~and ~~titled~~marketing ~~captions~~expenses, increased $0.1 million to $2.8 million in ~~used~~the byfirst ~~other~~quarter ~~companies~~of 2007 from $2.7 million ~~For~~in ~~example,~~the wesame doperiod ~~not~~of ~~capitalize~~2006. ~~operating~~The ~~leases~~majority orof the ~~utilize~~increase ~~average~~on ~~invested~~a ~~capital~~ quarter-over-quarter ~~given~~basis ~~periods~~is due to additional marketing materials produced and distributed in the first quarter of 2007.

~~-21-~~Merchant Discounts and Provision for Doubtful Accounts:

~~Table~~ In the first quarter of ~~Contents~~2007, merchant discounts and provision for doubtful accounts expense was $0.2 million compared to $0.5 million in the first quarter of 2006. First quarter 2007 expense reflects a reduction in the provision for doubtful accounts due to customer account collection and write-off activities partially offset by an increase in promotional discount terms for the EOP and equipment clearance promotions.

~~Selling~~Pre-Opening ~~Segment Operating Results~~Expense:

	Six Months Ended June 30,
(Dollars in millions)	2004			2003
Net sales	$	284.3		$	267.0
Cost of product		(193.9	)		(183.9	)
Distribution cost		(12.8	)		(10.9	)
Gross profit on sales		77.6			72.2
Selling expense		(40.6	)		(39.2	)
Merchant discounts and provision for doubtful accounts		(4.2	)		(1.7	)
Pre-opening expense		(0.7	)		(0.3	)
EBIT	$	32.1		$	31.0
NOPAT – Six months ended June 30, 2004 and 2003	$	19.6		$	18.9
NOPAT – Six months ended December 31, 2003 and 2002	$	21.1		$	24.5
NOPAT – Rolling 12 months ended June 30, 2004 and 2003	$	40.7		$	43.4
Invested capital at period end
Accounts receivable	$	6.7		$	79.3
Inventory		67.3			65.0
Property, plant and equipment, net		4.9			2.6
	$	78.9		$	146.9
ROIC		51.6	%		29.6	%

Pre-opening expense remained flat at $0.3 million in the first quarter of 2007 and 2006. The Company opened 6 new Service Centers in each of the first quarters ended March 31, 2007 and 2006. Pre-opening expense, which consists primarily of real estate broker and legal fees, grand opening advertising, payroll, supplies, third-party consulting fees, distribution, rent, and storage costs, is expensed as incurred and, thus, some costs were incurred in the first quarters of both 2007 and 2006 for stores expected to open in subsequent quarters of each respective year.

~~Support Segment~~20

TheTable Support segment includes the operating results and invested capital of all non-selling locations including manufacturing (blending facilities and seed processing plant), distribution hubs (including in-bound freight costs to the distribution hubs), and corporate costs (including corporate management of sales, marketing, customer service, accounting and finance, human resources, information systems, etc.). We believe that these costs are essential to managing the selling locations and to managing a public company, but are not costs that directly translate into incremental sales or positive ROIC. Therefore, resources are only allocated to the Support segment if the result is a net reduction in expenses or the allocation is necessary for the maintenance of facilities, the support of the expansion of selling locations, the maintaining of the corporate structure or is mandated by law or governmental order. Contents

AsGeneral ~~the~~and ~~Support~~Administrative Segment operates at a negative ROIC, the Selling Segment must provide an adequate return in order for the Consolidated Company results to generate a positive ROIC. The Selling Segment’s results continue to be sufficient to support a positive ROIC on a Consolidated basis as reflected belowExpense:

In the first quarter of 2007, general and administrative expense decreased $1.0 million to $5.4 million from $6.4 million in the comparable period of 2006. The decrease is due primarily to favorable payroll and associated payroll benefits from reduced headcount and the reduction of the asset rationalization reserve related to the re-~~22-~~opening of a distribution facility which had been closed in 2005 partially offset by transaction costs incurred correlating to the acquisition of LESCO by Deere & Company.

~~Table~~Other ofIncome, ~~Contents~~Net:

~~Consolidated~~The ~~Operating~~$0.1 million ~~Results~~decrease in other income, net, for the first quarter of 2007 compared to the same period in 2006 is primarily a result of the decreased discounts earned on vendor payment terms.

	Six Months Ended June 30,
(Dollars in millions)	2004			2003
Net sales	$	284.2		$	267.0
Cost of product		(189.5	)		(178.4	)
Distribution cost		(24.1	)		(25.3	)
Gross profit on sales		70.6			63.3
Selling expense		(44.9	)		(43.0	)
General & administrative expense		(13.9	)		(14.6	)
Merchant discounts and provision for doubtful accounts		(4.2	)		(1.7	)
Pre-opening expense		(0.7	)		(0.3	)
Other expense		(0.1	)		(0.6	)
Other income		0.4			1.1
EBIT	$	7.2		$	4.2
NOPAT – Six months ended June 30, 2004 and 2003	$	4.4		$	2.6
NOPAT – Six months ended December 31, 2003 and 2002 (a)	$	2.4		$	3.5
NOPAT – Rolling 12 months ended June 30, 2004 and 2003	$	6.8		$	6.1
Invested capital
Debt	$	5.9		$	66.6
Equity		78.0			78.0
Total invested capital	$	83.9		$	144.6
ROIC		8.1	%		4.2	%

Interest Expense:

~~(a)~~ Interest ~~NOPAT~~expense, ~~for~~net, ~~the~~increased ~~six~~$0.4 million ~~months~~in ~~ended~~the ~~December~~first ~~31,~~quarter ~~2003~~of ~~excludes~~2007 ~~the~~to ~~charge~~$0.6 million versus ~~incurred~~$0.2 million ~~for~~in the ~~sale~~comparable period of 2006 due to higher borrowings and higher borrowing rate. The average debt during the ~~Company’s~~first ~~accounts~~quarter ~~receivable~~of ~~portfolio~~2007 towas ~~GEBCS~~$29.4 million versus $2.8 million in the ~~December~~same ~~2003~~period of 2006.

~~The~~Income ~~improvement~~Taxes ~~in the Company’s ROIC for the Selling Segment~~ and ~~Consolidated~~ ~~Company~~Net ~~results is due to LESCO’s sale of its accounts receivable~~Loss: ~~portfolio to GEBCS in December 2003 which enabled the Company to reduce its invested capital.~~

LIQUIDITY AND CAPITAL RESOURCES


	Three Months Ended March 31,
(Dollars in millions, except per share data)	2007			2006			Change
Loss before income taxes	$	(18.1	)	$	(10.6	)	$	(7.5	)
Income taxes:
Current		—			—			—
Deferred		6.2			4.3			1.9
Change in valuation allowance		(6.2	)		(4.3	)		(1.9	)

		—			—			—

Net loss	$	(18.1	)	$	(10.6	)	$	(7.5	)


Loss per common share:
Diluted	$	(1.98	)	$	(1.18	)

Basic	$	(1.98	)	$	(1.18	)

AAs ~~summary~~a result of the ~~change~~foregoing factors, including, but not limited to: (1) the shift in ~~cash~~a portion ~~and~~of ~~cash~~EOP ~~equivalents~~sales from 2006 into the first quarter of 2007; (~~see~~2) the ~~Statement~~reinstatement of the direct ~~Cash~~sales ~~Flows~~representative ~~included~~organization in 2006; (3) higher raw material costs for urea-based products; (4) promotional activities; (5) the ~~attached~~de-leveraging ~~Consolidated~~of ~~Financial~~indirect ~~Statements~~supply chain costs and contractual pricing arrangements; (6) the isoperating asresults of new Service Centers ~~follows:~~and Stores-on-Wheels vehicles opened in 2007 and 2006; and (7) customer account write-off activity, the Company had a pre-tax loss and net loss of $18.1 million, or $1.98 per diluted share, in the first quarter 2007 compared to a pre-tax loss and net loss of $10.6 million, or $1.18 per diluted share, in the same period of 2006.

	Six Months Ended June 30,
(Dollars in millions)	2004			2003
Cash provided by operations	$	32.8		$	4.0
Cash used in investing activities		(0.5	)		(4.1	)
Cash (used) provided by financing activities		(12.9	)		4.3
Increase in cash and cash equivalents	$	19.4		$	4.2

In accordance with the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), the Company has established a valuation allowance for its net deferred tax assets, including amounts related to its net operating loss carryforwards. The Company intends to maintain a full valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support a reversal of some portion or the remainder of the allowance. Until such time, except for minor state and local provisions and adjustments to federal tax refunds, the Company expects to have no reported tax provision or benefit, net of valuation allowance adjustments. LESCO increased its valuation allowance $6.2 million and $4.3 million in the first quarter of 2007 and 2006, respectively.

~~-23-~~ The impact of the valuation allowance decreased the Company’s income tax benefit by $6.2 million and $4.3 million and increased the loss per diluted share by $0.68 and $0.46 for the three months ended March 31, 2007 and 2006, respectively.

~~Table of Contents~~21

TheTable cash provided by operations in the first half of 2004 was generated predominantly through continued strong leverage of our accounts payable relative to our inventory balance. Additionally, we did not experience an increase in accounts receivable during our, historically, highest sales volume period of the year. Contents

~~Accounts~~LIQUIDITY ~~payable~~AND ~~leverage~~CAPITAL ~~is summarized as follows:~~RESOURCES

	June 30,
(Dollars in millions)	2004			2003
Accounts payable	$	92.0		$	86.1
Less: Payable to GEBCS		(0.9	)		—
Adjusted accounts payable	$	91.1		$	86.1
Inventory	$	118.5		$	111.0
Accounts payable leverage		76.9	%		77.6	%

A summary of the change in cash and cash equivalents (see Statements of Cash Flows included in the attached Consolidated Financial Statements) is as follows:

Payable to GEBCS represents the portion of the receivable portfolio sold to GEBCS on December 30, 2003 that remains uncollected by GEBCS and secured by the Company.


	Three Months Ended March 31,
(Dollars in millions)	2007			2006
Cash provided by (used in) in operations	$	11.0		$	(18.9	)
Cash used in investing activities		(0.8	)		(0.6	)
Cash (used in) provided by financing activities		(0.9	)		6.9

Increase (decrease) in cash and cash equivalents	$	9.3		$	(12.6	)

~~Capital~~Cash ~~Expenditures:~~was ~~Our~~provided by operations in the first ~~half~~quarter ~~capital~~of ~~expenditures~~2007 ~~can~~as cash in flows from sales improved, driven by EOP promotion activity, and a significant portion of the related cash payments for the cost of goods sold will be made in the second ~~summarized~~quarter resulting in an increase in accounts payable as ~~follows:~~of March 31, 2007. The Company’s inventories and corresponding accounts payable increased from December 31, 2006 in preparation for second quarter projected sales activity.

(Dollars in millions)	2004		2003
New Service Centers	$	1.0	$	1.0
Manufacturing facilities and corporate systems		1.1		3.1
	$	2.1	$	4.1

Accounts payable leverage is summarized as follows:

Our capital needs going forward will be predominantly related to new Service Centers and maintaining information systems and manufacturing facilities.


	March 31,						December 31,
(Dollars in millions)	2007			2006			2006
Accounts payable	$	88.3		$	78.7		$	48.8

Inventory	$	107.4		$	99.1		$	92.6

Accounts payable leverage		82.2	%		79.4	%		52.7	%

~~Financing~~ Capital ~~Activities~~Expenditures: Our first quarter 2007 and 2006 capital expenditures can be summarized as follows:

In the fourth quarter of 2003, the Company entered into a $50 million Revolving Credit Facility (the Facility) which replaced a prior credit facility. Borrowings under the Facility were used to retire the prior credit facility, including a term loan, buy-out an interest rate swap agreement and buy-back outstanding preferred stock, including accrued dividends, all of which were outstanding at June 30, 2003.


	Three Months Ended March 31,
(Dollars in millions)	2007		2006
New stores	$	0.8	$	0.3
Corporate systems & miscellaneous		0.1		0.3

	$	0.9	$	0.6

~~The~~We ~~Facility~~expect ~~matures~~to ~~December 30,~~focus ~~2006~~future ~~and~~capital isexpenditures ~~secured~~primarily byon ~~inventory,~~Service ~~owned receivables, equipment, investment interests, real property interests, and general intangibles, including intellectual property~~Centers. ~~The~~We ~~Facility bears~~will ~~interest~~continue ~~at LIBOR plus 2.0%~~ to ~~2.5%~~maintain ~~per~~information ~~annum,~~systems ~~based on the level of borrowings,~~ and ~~requires~~other ~~the~~assets ~~payment~~that ofsupport ~~a facility fee ranging from 0.4% to 0.5% per annum on~~ the ~~unused~~operating ~~portion of availability~~segments. ~~Availability under the~~We ~~Facility~~currently isestimate ~~determined~~that ~~by a borrowing base formula calculated on eligible inventory. As of June 30~~ongoing, ~~2004,~~annual ~~there~~capital ~~was~~needs ~~$48.7 million~~will ~~available,~~range ~~with~~from ~~unused capacity of~~ $~~38.5~~3 million. ~~Letters of credit, up~~ to ~~a maximum of~~ $204 million~~, are also available under the Facility and are considered outstanding borrowings when calculating the unused portion of availability~~. ~~Letters of credit in the~~ ~~aggregate amount of $10.2 million were outstanding as of June 30, 2004. Letter of credit fees range from 2.0% to 2.5% with an issuance fee ranging from 0.125% to 0.150%.~~

~~The~~A ~~interest~~new ~~rate,~~Service ~~facility~~Center ~~fee,~~requires ~~letter~~approximately of$50,000 ~~credit~~in ~~fee~~capital cost and ~~letter~~is ofexpected ~~credit~~to achieve ~~issuance~~break-even ~~fee~~operating ~~are~~results ~~determined~~during ~~based~~its onsecond ~~the~~full ~~Company’s~~year ~~fixed~~of ~~charge~~operations ~~coverage~~and ~~ratio.~~to become profitable ~~The~~thereafter. ~~Facility~~A ~~requires~~Stores-on-Wheels ~~the~~vehicle ~~maintenance~~requires ofminimal ~~certain~~capital investment ~~covenants,~~and ~~with~~is ~~the~~expected ~~only financial~~to ~~covenant~~turn ~~being~~profitable ~~the~~in ~~fixed~~its ~~charge~~second ~~coverage~~year ~~ratio~~of operation. ~~The~~Typically, ~~Company~~it takes ~~was~~at ~~in compliance~~least ~~with~~five ~~the~~years ~~Facility~~for ~~covenants~~Service asCenters and Stores-on-Wheels vehicles to achieve a mature level of ~~June 30,~~operating ~~2004~~results.

WeFinancing ~~believe that the Company’s financial condition is strong and that its~~Activities: ~~cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity, collectively, provide adequate resources to fund short-term and~~

~~-24-~~ Based on the seasonal use of the Company’s products, a large percentage of its sales and cash generation occur during the spring and summer. As a result of this seasonality, the Company’s working capital requirements fluctuate significantly during the year. Historically, the Company has borrowed from a revolving credit facility during the first and fourth quarters of the year in order to assure proper inventory levels and to finance operations.

~~Table of Contents~~22

long-termTable operating requirements and future capital expenditures related to Service Center expansion and other projects. However, the Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control. Contents

~~Contractual~~ Effective ~~Obligations~~May 7, ~~Commitments~~2007, ~~and~~Deere ~~Off~~& ~~Balance~~Company ~~Sheet~~completed ~~Arrangements~~its acquisition of LESCO. Concurrent with the acquisition, the revolving credit facility utilized by the Company was paid in full and terminated.

~~Subsequent~~Contractual ~~to the balance sheet date~~Obligations, ~~LESCO~~Commitments reached agreements to relocate its corporate headquarters from its current approximately 94,000 square foot facility in Strongsville, Ohio to an approximately 40,000 square foot facility in downtown Cleveland, Ohio. The term of the Company’s new lease will be five years, and ~~the~~Off ~~Company~~Balance ~~expects~~Sheet ~~to complete the relocation this year. A~~Arrangements ~~division of a public company (the Assignee) will assume the remaining 11 years of LESCO’s current lease at the Strongsville location, subject to landlord approval.~~

~~Relocation~~During ~~costs~~the ~~are~~first ~~estimated~~quarter ~~at approximately $7.5 million, including $4.8 million in tenant and landlord inducements, and $2.7 million in broker commissions, legal fees, letter~~ of ~~credit costs~~2007, ~~move~~there ~~costs~~were ~~and~~no ~~fixed-asset write~~material ~~offs.~~changes ~~The~~to ~~charges will be recorded in~~ the Company’s ~~third~~contractual obligations and ~~fourth quarter~~commercial ~~operating~~commitments ~~results.~~as ~~Beginning~~reported in ~~2005,~~its ~~the~~Annual ~~financial~~Report ~~effect of the relocation is expected to be accretive to earnings~~ on anForm ~~annual pre~~10-~~tax~~K ~~basis by~~for ~~over $1.0 million, while~~ the ~~return on the cost to relocate is estimated at~~year ~~greater~~ended ~~than~~December 31, 7%2006.

~~LESCO~~CRITICAL ~~will~~ACCOUNTING ~~guarantee~~POLICIES ~~the~~AND ~~Assignee’s performance under the Strongsville~~ESTIMATES lease. The Assignee will be obligated to secure a $4.4 million letter of credit backing its performance under the lease, with LESCO making an approximate $100,000 annual payment to the Assignee to defray the cost of the letter of credit.

~~CRITICAL~~ Our ~~ACCOUNTING~~consolidated ~~POLICIES~~financial ~~AND~~statements ~~ESTIMATES~~are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the allowance for doubtful accounts, inventories, intangible assets, long-lived assets, income taxes, and accrued liabilities. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Our~~The ~~consolidated~~Company’s ~~financial~~significant ~~statements are prepared in accordance with~~ accounting ~~principles~~policies ~~generally~~are ~~accepted~~described in the ~~United~~Notes ~~States.~~to ~~The preparation~~Consolidated ofFinancial ~~these~~Statements ~~financial~~included ~~statements~~in ~~requires~~the usCompany’s toAnnual ~~make~~Report ~~estimates~~on ~~and~~Form ~~judgments~~10-K ~~that affect~~for the ~~reported~~year ~~amounts of assets~~ended December 31, ~~liabilities,~~2006. ~~revenues~~This ~~and~~discussion ~~expenses,~~ and ~~related~~ ~~disclosure~~analysis of ~~contingent~~financial ~~assets~~condition ~~and~~contains ~~liabilities.~~various Onreferences and andisclosures ~~on-going~~concerning ~~basis, we~~our ~~evaluate~~accounting ~~our~~policies. ~~estimates~~Additionally, ~~including~~we ~~those~~have ~~related~~identified toeach ~~the~~of ~~allowance for~~the ~~doubtful~~following ~~accounts,~~as ~~inventories,~~a ~~intangible~~“critical ~~assets,~~accounting ~~long-lived assets~~policy,” ~~income taxes,~~either ~~and~~because ~~contingencies~~it ~~and~~has ~~litigation.~~the Wepotential ~~base~~to ~~our~~have ~~estimates on historical~~a ~~experience~~significant ~~and~~impact on ~~various~~our ~~other~~consolidated ~~assumptions~~financial ~~that are believed to be reasonable under the circumstances~~statements, ~~the~~because ~~results~~ of ~~which form~~ the ~~basis~~significance ~~for~~of ~~making~~the ~~judgments~~financial ~~about~~item ~~the~~to ~~carrying~~which ~~values~~it ofrelates, ~~assets~~or ~~and~~because ~~liabilities~~it ~~that~~requires ~~are~~judgment ~~not readily~~and ~~apparent~~estimation ~~from~~due ~~other~~to ~~sources. Management has discussed~~ the ~~development~~ ~~and~~uncertainty ~~selection~~involved ofin ~~the~~measuring, ~~critical~~at ~~accounting~~a ~~estimates,~~specific ~~and~~point ~~the~~in ~~disclosures made herein~~time, ~~with~~events ~~the~~which ~~Audit~~will ~~Committee~~be ofsettled ~~the~~in ~~Board of Directors and its external~~the ~~auditors~~future. ~~Actual results may differ from these estimates under different~~ ~~assumptions or conditions.~~

~~The~~Revenue ~~Company’s significant accounting policies are described in the Notes~~Recognition to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. This discussion and analysis of financial condition contains various references and disclosures concerning our accounting policies. Additionally, we have identified each of the following as a “critical accounting policy,” because (i) it has the potential to have a significant impact on our consolidated financial statements, (ii) of the significance of the financial item to which it relates, or (iii) it requires judgment and estimation due to the uncertainty involved in measuring at a specific point in time events which will be settled in the future.

~~Revenue~~ The ~~Recognition~~Company’s sales are composed of five major revenue classifications: sales of owned product to customers, sales of vendor- consigned products, sales of product under agency arrangements, freight revenue, and contra sales recorded for customer discounts and rebates.

We recognize revenue when ~~goods~~the ~~are~~earnings ~~shipped~~process tois complete, generally at the point-of-sale to a customer or when goods are shipped and title and risk of loss passes to the customer. The Company’s shipping terms are FOB shipping point and title passes to the customer at the time of shipment. We have consigned inventory agreements on certain products. We report gross revenue from the sales of consigned inventory in accordance with Emerging Issues Task Force 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Sales of consigned inventory, which are included in “Gross Sales,” were $1.1 million for the first quarter of 2007 and $1.3 million for the same period in 2006. Additionally, we have agency ~~agreements~~ arrangements with vendors for which we recognize sales “net” as an agent. ~~Sales~~Agency sales are initially recorded at their gross amount and then reduced by the portion of revenue that exceeds the Company’s earned commission. ~~consigned~~Commissions ~~inventory~~included in net sales were approximately $~~11.5 million~~70,000 and $~~11.1 million~~114,000 for the quarters ended ~~June~~March 3031, ~~2004~~2007 and ~~2003~~2006, respectively,. Revenues generated in transactions for shipping and handling ~~$16~~services are included in “Net Sales.~~2 million~~” Additionally, the related costs incurred for shipping and ~~$15~~handling are included in “Cost of Product” to determine the Company’s “Gross Profit on Sales.~~6 million~~” Certain customers receive discounts or rebates for purchases made from the Company. The discount or rebate is recorded as a reduction to sales in the ~~corresponding~~period ~~six~~in ~~month~~which ~~periods.~~the sale transaction occurs as there is no expected future benefit to be derived from the discount or rebate.

Allowance for Doubtful Accounts

Accounts receivable consists primarily of amounts due from vendors under purchase rebate, cooperative advertising and other contractual programs and trade receivables not financed through outside programs. The Company earns product discounts under various supplier rebate programs, which are recorded as accounts receivable and ~~credited~~a reduction to inventory ~~valuation reserves~~ when earned. The Company provides for expected losses from all owned and recourse accounts in the allowance for doubtful accounts. Expected losses are estimated based upon the number of days the accounts are past due, historical loss experience of the Company, historical loss ~~experience of credit portfolios with~~ ~~characteristics similar to the Company’s portfolio and the current business environment.~~

~~-25-~~23

~~Inventories~~experience of credit portfolios with characteristics similar to the Company’s portfolio and the current business environment. Bad debt expense for the first three months of 2007 was income of $377,000 and $104,000 for 2007 and 2006, respectively. The allowance for doubtful accounts decreased by $372,000 and by $164,000 in the first quarters of 2007 and 2006, respectively.

Inventories ~~are valued principally at the lower of cost (average cost~~ method) or market. Procurement, warehousing and distribution costs are capitalized to inventory on hand and expensed to distribution cost when the inventory is sold. Vendor rebates earned on purchases are recorded as a reduction to inventory on hand and recognized when the inventory is sold. We have an inventory life cycle program that requires the classification of all Stock Keeping Units (“SKUs”) into one of five categories: active, watch, phase out, discontinued and liquidated. SKUs identified as discontinued are progressively marked-down to expected net realizable value over specific periods until the costs are marked down to zero. At that point, the products are liquidated. Estimated net realizable value of 20% of cost is based on historical sales of discontinued inventory. We maintain a reserve for inventory shrink, based on historical experience of 0.2% of sales. Actual shrink is charged against the reserve.

~~Income~~ Inventories ~~Taxes~~are valued principally at the lower of cost (First In, First Out cost method) or market. Vendor rebates earned on purchases are recorded as a reduction to inventory on hand and recognized when the inventory is sold. The Company maintains an inventory life cycle program that requires the classification of all Stock Keeping Units (“SKUs”) into one of five categories: active, watch, phase out, discontinued and liquidated. SKUs identified as discontinued are progressively marked-down to expected net realizable value over specific periods until the costs are marked down to zero. At that point, the products are liquidated and purged from the inventory system. Estimated net realizable value of 20% of cost is based on historical sales of discontinued inventory. At March 31, 2007, a 1% change in net realizable value of current discontinued inventory would affect the reserve by approximately $3,000. We maintain a reserve for inventory shrink on a site-specific basis. This reserve is based on historical Company-wide experience of 0.2% of sales until the location obtains two physical inventory audits performed by a third-party inventory control organization. The site-specific reserve rate is then adjusted to reflect the average shrink rate from the two physical inventory counts. Actual shrink at the time of each physical inventory count is charged against the reserve. A change in the rate of inventory shrink of 0.1% of sales would have impacted the reserve for shrink by approximately $297,000 at March 31, 2007.

The Company uses the liability method whereby income taxes are recognized during the fiscal year in which transactions enter into the determination of financial statement income. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between financial statement and tax bases of assets and liabilities. The Company assesses the recoverability of its deferred tax assets in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes~~” (SFAS 109). In accordance with that standard, the Company~~ has provided a $1.5 million valuation allowance equal to its net deferred tax assets. The Company intends to maintain a full valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support the reversal of some portion or the remainder of the allowance. Until such time, the Company will have no reported tax provision, net of valuation allowance adjustments. Any future decision to reverse a portion or all of the remaining valuation allowance will be based on consideration of several factors including, but not limited to, the Company’s expectations regarding future taxable income and the Company’s cumulative income or loss in the then most recent three-year period. In the event the Company was to determine, based on the existence of sufficient positive evidence, that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made.

~~Impairment~~ The Company uses the liability method whereby income taxes are recognized during the fiscal year in which transactions enter into the determination of ~~Long-Lived~~net income. Deferred tax assets and liabilities ~~Intangible~~are ~~Assets~~recognized for the expected future tax consequences of temporary differences between financial statement and tax bases of assets and liabilities. The Company assesses the recoverability of its deferred tax assets in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109). In accordance with that standard, the Company has a $28.9 million valuation allowance equal to its net deferred tax assets, including amounts related to its net operating loss carryforwards, as of March 31, 2007. The Company intends to maintain a full valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support the reversal of some portion or the remainder of the allowance. Until such time, the Company will have no reported tax provision, net of valuation allowance adjustments. Any future decision to reverse a portion or all of the remaining valuation allowance will be based on consideration of several factors including, but not limited to, the Company’s expectations regarding future taxable income and the Company’s cumulative income or loss in the then most recent three-year period. In the event the Company was to determine, based on the existence of sufficient positive evidence, that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made.

~~The~~Impairment ~~Company assesses the recoverability~~ of ~~its long~~Long-~~lived~~Lived ~~and intangible~~Assets assets by determining whether the amortization of the remaining balance over its remaining useful life can be recovered through undiscounted future operating cash flows. If impairment exists, the carrying amount of the related asset is reduced to fair value.

InThe ~~September 2001,~~Company assesses the ~~Financial~~recoverability ~~Accounting Standards Board (FASB) issued Statement~~ of ~~Financial~~its ~~Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” SFAS 142 provides that goodwill and indefinite~~long-lived ~~intangible~~ assets ~~are~~by nodetermining ~~longer~~whether ~~amortized but are reviewed annually (or more~~the ~~frequently~~depreciation ifof ~~impairment~~the ~~indicators~~remaining ~~arise)~~balance ~~for~~over ~~impairment.~~its ~~Separable intangible~~remaining ~~assets~~useful ~~that are not deemed to have an indefinite~~ life ~~will~~can ~~continue to~~ be ~~amortized~~recovered ~~over their useful lives (but with no maximum life). The~~through ~~Company~~undiscounted ~~adopted~~future ~~SFAS~~operating ~~No. 142~~cash ~~effective January 1, 2002~~flows. ~~Upon~~If ~~adoption, the Company determined that goodwill~~ impairment ~~existed.~~exists, ~~The impairment loss was measured by evaluating~~ the ~~fair~~carrying ~~value~~amount of the ~~goodwill using discounted cash~~related ~~flow~~asset ~~appraisal models. These models indicated that the goodwill of $7.3 million was fully impaired. Upon the adoption of SFAS 142, the Company wrote off all of its goodwill and there~~ is noreduced ~~amortization~~to ~~expense~~fair ~~for goodwill recorded in the operating results for the quarters and six months ended June 30, 2004 and 2003~~value.

Accrued Liabilities

Certain accrued liabilities, including employee health insurance and workers’ compensation, are estimated based on historical experience and lag analysis due to the difference between the time the expense is incurred and when the expense is paid. A valuation analysis is performed to estimate the accrual required for property and casualty insurance claims expense. Accrued environmental costs are estimated based on the Company’s previous environmental contamination and remediation experience along with site-specific conditions.

~~FORWARD LOOKING STATEMENTS~~24

CertainTable statements included in this report are forward-looking statements that involve a number of risks and uncertainties and which are based on management’s current beliefs, assumptions and expectations. These forward-looking statements can be identified by the use of predictive or future tense terms such as “anticipate,” “estimate,” “expect,” “believe,” “project,” “may,” “will” or similar terms. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results may differ materially from those stated, implied or anticipated in the forward-looking statements, as a result of a number of factors that include, but are not limited to, the Company’s ability to add new Service Centers in accordance with its Contents

~~-26-~~FORWARD LOOKING STATEMENTS

~~Table~~ Certain statements included in this report are forward-looking statements that involve a number of ~~Contents~~risks and uncertainties and which are based on management’s current beliefs, assumptions and expectations. These forward-looking statements can be identified by the use of predictive or future tense terms such as “anticipate,” “estimate,” “expect,” “believe,” “project,” “may,” “will” or similar terms. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results may differ materially from those stated, implied or anticipated in the forward-looking statements, as a result of a number of factors that 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 attract quickly and retain direct sales representatives who are respected in the industry and engender customer loyalty; the Company’s ability to satisfy minimum purchase requirements to meet contractual commitments and/or maximize supplier rebates; the Company’s ability to increase sales volume, particularly through its Service Centers, to leverage its capital investment and its direct and indirect supply contracts; 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; the timing and volume of customer purchases made during the Company’s early order program promotion; 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; 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

~~plans,~~ITEM 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; 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 Company’s ability to impose price increases on customers without a significant loss in revenues; potential rate increases by third-party carriers which affects the cost of delivery of products; potential regulations; the Company’s ability to effectively manufacture, market and distribute new products; the success of the Company’s operating plans; regional weather conditions; and the condition of the industry and the economy3. ~~For~~QUANTITATIVE ~~a further~~AND ~~discussion~~QUALITATIVE ofDISCLOSURES ~~risk~~ABOUT ~~factors,~~MARKET ~~investors should refer to the Company’s~~RISK ~~Securities and Exchange Commission reports, including but not limited to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.~~

~~ITEM~~ The 3Company is exposed to market risk, principally interest rate risk. ~~QUANTITATIVE~~Market ~~AND~~risk ~~QUALITATIVE~~can ~~DISCLOSURES~~be measured ~~ABOUT~~as ~~MARKET~~the ~~RISK~~potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates over time. Interest paid on the Company’s debt is sensitive to changes in interest rates. The interest rate for the Facility is variable, while the interest component of its operating leases is generally fixed. The Company believes its potential exposure to interest rate risk is not material to the Company’s financial position or the results of its operations.

~~The~~As ~~Company~~part isof our ongoing business, we are exposed to certain market ~~risk~~risks, ~~principally~~including fluctuations in interest ~~rate~~rates ~~risk~~and commodity prices. We have used derivative financial and other ~~Market~~instruments, ~~risk~~where ~~can~~appropriate, beto ~~measured~~manage asthose ~~the~~risks. ~~potential~~We ~~negative~~do ~~impact~~not onenter ~~earnings,~~into ~~cash~~transactions for ~~flows~~trading or ~~fair~~speculative ~~values~~purposes. ~~resulting~~As ~~from~~of March 31, 2007, there had not been a ~~hypothetical~~material change in ~~interest rates~~any ~~over~~of ~~time.~~the ~~Interest~~market ~~paid~~risk oninformation ~~its~~disclosed ~~debt~~by isthe ~~sensitive~~Company toin ~~changes~~its inAnnual ~~interest~~Report ~~rates. The~~on ~~interest~~Form ~~rate~~10-K for the year ~~Company’s~~ended ~~revolving~~December 31, ~~credit~~2006. ~~facility~~See is“Item 7A. ~~variable,~~Quantitative and Qualitative Disclosures ~~while~~About Market Risk” on page 39 of the Company’s ~~long~~Annual Report on Form 10-~~term~~K ~~debt~~for ~~and~~the year ended December 31, 2006, filed with the ~~interest~~Securities ~~component~~and ofExchange ~~its~~Commission ~~operating~~on March 16, 2007, for more ~~leases~~detailed isinformation ~~generally~~regarding ~~fixed~~market risk.

~~The~~ITEM ~~Company believes its potential exposure to interest rate risk is not material to the Company’s financial position or the results of its operations~~4. As ofCONTROLS ~~June 30,~~AND ~~2004, there had not been a material change in any of the market~~PROCEDURES risk information disclosed by the Company in its Annual Report on Form 10-K for the year ended December 31, 2003. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” on page 28 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission on March 29, 2004, for more detailed information regarding market risk.

~~ITEM~~ The 4Company performed an evaluation under the supervision, and with the participation, of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. ~~CONTROLS~~Based ~~AND~~on ~~PROCEDURES~~that evaluation, the

~~The Company performed an evaluation under the supervision, and with the~~25 participation, of the Company’s management, including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Senior Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective in ensuring that material information relating to the Company with respect to the period covered by this report was recorded, processed, summarized and reported on a timely basis.

ATable control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Contents

~~During~~Company’s management, including the ~~quarter,~~Chief ~~there~~Executive ~~have~~Officer ~~been~~and noChief ~~significant~~Financial ~~changes~~Officer, inconcluded that the Company’s ~~internal~~disclosure controls and procedures were effective in ensuring that ~~have~~material ~~materially~~information ~~affected,~~relating orto ~~are~~the ~~reasonably~~Company with ~~likely~~respect to ~~materially~~the ~~affect~~period covered by this report was recorded, ~~these~~processed, ~~controls.~~summarized and reported on a timely basis.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-~~27-~~effective control system, misstatements due to error or fraud may occur and not be detected.

~~Table~~ During ofthe ~~Contents~~first quarter, management did not identify any significant changes in the Company’s internal controls in connection with its evaluation thereof that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

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

ITEM 1. LEGAL PROCEEDINGS

OnIn ~~July 14,~~ 2003, an administrative complaint was filed against the Company by the State of New York Department of Environmental Conservation (“NYSDEC”) alleging violation of state law regarding the registration of pesticides. The complaint alleges that the Company distributed 3,~~440~~400 bags of ~~the Company’s~~ Dimension® Crabgrass ~~Pre-emergent~~Preemergent Plus Fertilizer to one of its retail customers in New York State without having proper registration ~~therefor~~thereof. The complaint seeks a civil penalty of $3,440,000. NYSDEC filed a similar complaint against the retail customer seeking a civil penalty of $3,440,000. The Company intends to indemnify the retail customer for such claim pursuant to a vendor agreement between the parties. The Company ishas inheld discussions with the NYSDEC relative to a settlement.

There are other legal actions, governmental investigations and proceedings pending to which the Company is a party or to which its property is subject. In the opinion of our management, after reviewing the information that is currently available with respect to these matters and consulting with counsel, any liability that may be ultimately incurred with respect to these matters is not expected to materially affect our consolidated results of operations, cash flows or financial condition.

ITEM 41(a). ~~SUBMISSION~~RISK ~~OF MATTERS TO A VOTE OF SECURITY HOLDERS~~FACTORS

AtIn ~~the~~its ~~Company’s~~ Annual ~~Meeting~~Report ofon ~~Shareholders~~Form ~~held~~10-K onfor ~~May~~the year ended December 1231, ~~2004~~2006, the Company described ~~shareholders~~the ~~elected~~risks ~~nine~~considered ~~directors~~to be the most material to ~~serve~~its ~~one~~business. See “Item 1a Risk Factors” on page 5 of the Company’s Annual Report on Form 10-K for the year ~~terms.~~ended NoDecember 31, ~~other~~2006, ~~matters~~filed with the ~~were~~Securities ~~voted~~Exchange ~~upon~~Commission aton ~~the~~March 16, ~~meeting~~2007, for more detailed information regarding risk factors.

~~Following is the final results of the votes cast:~~26

	For	Withheld
Ronald Best	7,398,355 votes	128,205 votes
Robert F. Burkhardt	7,400,665 votes	125,895 votes
Michael P. DiMino	7,392,440 votes	134,120 votes
J. Martin Erbaugh	7,363,294 votes	163,266 votes
Michael E. Gibbons	7,364,656 votes	161,904 votes
Enrique Foster Gittes	7,400,456 votes	126,104 votes
Lee C. Howley	7,399,274 votes	127,286 votes
Christopher H.B. Mills	7,364,656 votes	161,904 votes
R. Lawrence Roth	7,363,509 votes	163,051 votes

ITEM 6. EXHIBITS ~~AND REPORTS ON FORM 8-K~~

(a)	Exhibits	Exhibit 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 quarter ended March 31, 2002 and incorporated herein by reference).
	Exhibit 2(a)	Agreement and Plan of Merger among Deere & Company, Deere Merger Sub, Inc. and LESCO, Inc. dated as of February 19, 2007 (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
		Exhibit 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)	LESCO, Inc. Employment Retention Plan (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
		Exhibit 31(a)	Michael P. DiMino Rule 13a-14(a)/15d-14(a) Certification
	Exhibit 10(b)	Employment Retention Agreement, dated February 19, 2007, between the Company and Jeffrey L. Rutherford (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
		Exhibit 31(b)	Jeffrey L. Rutherford Rule 13a-14(a)/15d-14(a) Certification
	Exhibit 10(c)	Employment Retention Agreement, dated February 19, 2007, between the Company and Bruce K. Thorn (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
		Exhibit 32(a)	Michael P. DiMino Section 1350 Certification
	Exhibit 10(d)	Employment Retention Agreement, dated February 19, 2007, between the Company and Michael A. Weisbarth (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
		Exhibit 32(b)	Jeffrey L. Rutherford Section 1350 Certification
	Exhibit 10(e)	Employment Retention Agreement, dated February 19, 2007, between the Company and Kathleen M. Minahan (included as an exhibit to Registrant’s Form 8-K dated February 19, 2007 and incorporated herein by reference).
	Exhibit 31(a)	Jeffrey L. Rutherford Rule 13a-14(a)/15d-14(a) Certification
	Exhibit 31(b)	Michael A. Weisbarth Rule 13a-14(a)/15d-14(a) Certification
	Exhibit 32(a)	Jeffrey L. Rutherford Section 1350 Certification
	Exhibit 32(b)	Michael A. Weisbarth Section 1350 Certification

~~(b) Reports on Form 8-K:~~27

OnTable May 3,of 2004, the Company filed a report on Form 8-K relating to the Company’s Earnings Release for the first quarter ended March 31, 2004. Contents

~~-28-~~SIGNATURES

~~Table~~ Pursuant to the requirements of ~~Contents~~the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIGNATURES


		LESCO, INC.

Date: May 31, 2007		By: /s/ Michael A. Weisbarth
		Michael A. Weisbarth Chief Financial Officer

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the~~28 ~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

		LESCO, INC.
Date: August 4, 2004		By: /s/ Jeffrey L. Rutherford
		Jeffrey L. Rutherford
		Senior Vice President, Chief Financial Officer, Treasurer and Secretary

-29-

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