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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 2001 Commission File Number 0-13147
LESCO, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-0904517
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
15885 Sprague Road
Strongsville, Ohio 44136
(Address of principal executive offices) (Zip Code)
(440) 783-9250
(Registrant's telephone number,
including area code)
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 twelve 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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practical date.
Outstanding at
Class August 10, 2001
- ------------------------------- ----------------
Common shares, without par value 8,559,760 shares
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LESCO, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended June 30 Six Months Ended June 30
----------------------------- ---------------------------
(In thousands except per share data) 2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales $ 164,129 $ 158,288 $ 254,857 $ 257,166
Cost of sales 109,283 102,328 172,614 168,199
---------- ---------- ---------- ----------
GROSS PROFIT ON SALES 54,846 55,960 82,243 88,967
Warehouse & delivery expense 13,888 12,381 23,323 21,090
Selling, general & administrative expense 28,013 26,302 53,476 51,670
---------- ---------- ---------- ----------
41,901 38,683 76,799 72,760
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 12,945 17,277 5,444 16,207
Other deductions (income):
Interest expense 1,659 1,644 3,567 3,662
Joint venture results (180) (121) (184) (121)
Other expense 94 60 373 65
Customer finance charges and other income (680) (866) (1,359) (1,525)
---------- ---------- ---------- ----------
893 717 2,397 2,081
---------- ---------- ---------- ----------
Income Before Income Taxes 12,052 16,560 3,047 14,126
Income taxes 4,517 6,600 1,113 5,361
---------- ---------- ---------- ----------
NET INCOME $ 7,535 $ 9,960 $ 1,934 $ 8,765
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.89 $ 1.18 $ 0.23 $ 1.04
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ 0.88 $ 1.16 $ 0.23 $ 1.02
========== ========== ========== ==========
CASH DIVIDENDS PER SHARE $ 0.00 $ 0.15 (a) $ 0.00 $ 0.15 (a)
========== ========== ========== ==========
(a) Represents a dividend of $0.15 per share declared in June 2000 and
paid in July 2000.
See Notes to Consolidated Financial Statements.
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LESCO, INC.
CONSOLIDATED BALANCE SHEETS
June 30 June 30 December 31
(In thousands except share data) 2001 2000 2000
----------- ----------- -----------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash $ 5,366 $ 4,055 $ 849
Accounts receivable -- net 53,859 91,019 78,529
Inventories
Raw materials 11,234 5,043 7,112
Finished goods 102,828 110,449 92,931
----------- ----------- -----------
Total Inventories 114,062 115,492 100,043
Deferred income taxes 2,576 1,672 1,950
Prepaid expenses and other assets 1,684 3,111 5,595
----------- ----------- -----------
TOTAL CURRENT ASSETS 177,547 215,349 186,966
Property, Plant and Equipment 91,198 85,795 90,878
Less allowance for depreciation and amortization (43,949) (39,269) (42,674)
----------- ----------- -----------
Net Property, Plant and Equipment 47,249 46,526 48,204
Other Assets 10,504 8,959 9,723
----------- ----------- -----------
TOTAL ASSETS $ 235,300 $ 270,834 $ 244,893
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 72,110 $ 72,087 $ 33,304
Other current liabilities 9,618 11,939 11,152
Current portion of debt 5,813 5,100 5,100
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 87,541 89,126 49,556
Long-term debt 45,347 80,454 94,707
Deferred income taxes 3,120 2,888 3,194
SHAREHOLDERS' EQUITY:
Preferred shares-- without par value--
authorized 500,000 shares
Common shares--without par value--
19,500,000 shares authorized; 8,620,328 shares issued
and 8,551,885 outstanding at June 30, 2001, 8,526,858
at June 30, 2000, 8,554,235 at December 31, 2000 862 857 862
Paid-in capital 34,806 34,131 34,768
Retained earnings 65,665 65,108 63,730
Accumulated other comprehensive loss (91) 0 0
Less treasury shares 68,443 at June 30, 2001, 45,604 at
June 30, 2000, 61,093 at December 31, 2000 (1,262) (829) (1,154)
Unearned compensation (688) (901) (770)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 99,292 98,366 97,436
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 235,300 $ 270,834 $ 244,893
=========== =========== ===========
See Notes to Consolidated Financial Statements.
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LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
----------------------------------
(In thousands) 2001 2000
--------- ---------
(unaudited)
OPERATING ACTIVITIES:
Net income $ 1,934 $ 8,765
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,806 4,419
Decrease (increase) in accounts receivable 23,884 (24,867)
Provision for uncollectible accounts receivable 786 1,607
Increase in inventories (14,018) (14,821)
Increase in accounts payable 38,806 38,164
Increase in other current items 1,097 3,521
Other (540) 265
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 56,755 17,053
INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (3,521) (4,489)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (3,521) (4,489)
FINANCING ACTIVITIES:
Proceeds from borrowings 110,800 127,400
Reduction of borrowings (159,447) (137,145)
Issuance of common shares net of treasury shares (70) 394
Cash dividends -- (1,268)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (48,717) (10,619)
--------- ---------
Net increase in cash 4,517 1,945
Cash - Beginning of the period 849 2,110
--------- ---------
CASH - END OF THE PERIOD $ 5,366 $ 4,055
========= =========
See Notes to Consolidated Financial Statements.
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LESCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the requirements of Regulation S-X and Form 10-Q.
The statements reflect all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
presentation of the results for interim periods. For further information, refer
to the audited financial statements and footnotes thereto for the year ended
December 31, 2000 included in the Company's Form 10-K.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
In the first quarter 2000, the deferred tax valuation allowance related to Tri
Delta Fertilizer, Inc.'s net operating loss carryforward was reversed because
realization of such deferred tax assets is considered "more likely than not".
Operating results for the six months ended June 30 are not necessarily
indicative of the results to be expected for the year due to the seasonal nature
of the Company's business.
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NOTE B - Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended June 30 Six Months Ended June 30
- ------------------------------------------------------------------------------------------------
(In thousands, except share data) 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------
Numerator:
Net income $ 7,535 $ 9,960 $ 1,934 $ 8,765
Denominator:
Denominator for basic
earnings per share -
weighted average shares 8,482,249 8,459,063 8,482,079 8,457,288
Effect of dilutive securities:
Employee stock options 67,563 123,181 72,977 143,355
Restricted shares 21,790 8,757 21,790 8,757
-------------------------------------------------------
Diluted potential common
shares 89,353 131,938 94,767 152,112
Denominator for diluted
earnings per share -
adjusted weighted average
shares and assumed
conversions 8,571,602 8,591,001 8,576,846 8,609,400
-------------------------------------------------------
Earnings per share
Basic $ 0.89 $ 1.18 $ 0.23 $ 1.04
========== ========== ========== ==========
Diluted $ 0.88 $ 1.16 $ 0.23 $ 1.02
========== ========== ========== ==========
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NOTE C - Segment Information
The Company has four reportable operating segments, which are Product Supply,
Lawn Care, Golf and Corporate. These segments are defined based on management
responsibility.
The Product Supply division manufactures and distributes fertilizers,
combination products, golf course accessories and grass seed to the Lawn Care
and Golf divisions of the Company.
The Lawn Care division operates 228 LESCO Service Centers(R), which enable the
Company to market turf care products, including turf control products,
fertilizer, grass seed and equipment.
The Golf division markets and sells turf care products, including turf control
products, fertilizer, grass seed and equipment to private and public golf
courses and other customers having large turf areas through salesmen who operate
a fleet of 78 LESCO Stores-on-Wheels(R). In addition, this division markets its
products internationally, principally through foreign distributors.
The Corporate division includes the administrative functions of the Company,
which support the Product Supply, Lawn Care and Golf divisions.
The Company is principally engaged in the manufacturing and marketing of turf
care products to the professional sector of the green industry. No significant
intervening events materially affected the financial statements. The Company
measures segment profit as operating profit. Net assets is defined as the sum of
net accounts receivable, inventory, and net property, plant, and equipment less
accounts payable. Management utilizes this information as a basis to calculate
the divisional return of capital employed. Depreciation and operating leases for
specific Product Supply assets are allocated to Corporate for operating profit
measures. Information on segments are as follows (in thousands):
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For the Three Months Ended June 30, 2001
------------------------------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
---------- --------- --------- ------------- ------------
Net Sales to External Customers $ 116,535 $ 47,594 $ 164,129
Intersegment Net Sales $ 108,589 $(108,589)
Operating Profit 581 14,110 6,143 (7,889) 12,945
Total Assets 89,352 80,009 29,936 36,003 235,300
Net Assets $ 17,242 $ 80,009 $ 29,936 $ 15,873 $ 143,060
For the Three Months Ended June 30, 2000
-------------------------------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
------------ ------------ ------------ ------------- -------------
Net Sales to External Customers $ 111,921 $ 46,367 $ 158,288
Intersegment Net Sales $ 118,328 $(118,328)
Operating Profit 4,420 16,045 6,058 (9,246) 17,277
Total Assets 98,812 101,082 39,628 31,312 270,834
Net Assets $ 26,725 $ 101,082 $ 39,628 $ 13,515 $ 180,950
For the Six Months Ended June 30, 2001
------------------------------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
------------ ------------ ------------ -------------- ------------
Net Sales to External Customers $ 185,163 $ 69,694 $ 254,857
Intersegment Net Sales $ 174,557 $(174,557)
Operating Profit (1,464) 15,833 6,581 (15,506) 5,444
Total Assets 89,352 80,009 29,936 36,003 235,300
Net Assets $ 17,242 $ 80,009 $ 29,936 $ 15,873 $ 143,060
For the Six Months Ended June 30, 2000
------------------------------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
------------ ------------ ------------ -------------- --------------
Net Sales to External Customers $ 188,046 $ 69,120 $ 257,166
Intersegment Net Sales $ 179,019 $(179,019)
Operating Profit 3,899 23,482 6,169 (17,343) 16,207
Total Assets 98,812 101,082 39,628 31,312 270,834
Net Assets $ 26,725 $ 101,082 $ 39,628 $ 13,515 $ 180,950
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NOTE D - Derivatives
On January 1, 2001, the Company adopted Statement of Accounting Financial
Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities", as amended (FAS 133). The Company utilizes derivative financial
instruments to reduce its exposure to market risks from changes in interest
rates and foreign exchange rates. The Company will only enter into agreements
with major financial institutions that are considered to be market makers, and
enter into only derivatives that are considered to be completely effective. The
Company has a seven-year, $7,000,000 notional amount interest rate swap
agreement expiring in June 2002, which effectively converts existing
floating-rate payments for 6.335% fixed-rate payments and therefore reduces the
impact of interest-rate changes on future interest expense. The Company
recognizes the swap agreement on the balance sheet at fair value.
NOTE E - Comprehensive Income / Loss
At January 1, 2001, a $58,000 liability and accumulated other comprehensive loss
of $35,000 (net-of-tax) was recognized as a transition adjustment for the value
of the Company's interest rate swap agreement. At June 30, 2001, the liability
increased to $149,000. After tax effects, the Company's comprehensive income for
the three months ended June 30, 2001 was $7,444,000 and for the six months ended
June 30, 2001 was $1,843,000. The full amount of the other comprehensive loss
should be released to income during the next twelve months.
NOTE F - Impact of Recently Issued Accounting Standards
In July 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 addresses
financial accounting and reporting for business combinations superceding APB No.
16 "Business Combinations" and FASB Statement No. 38 "Accounting for
Preacquisition Contingencies of Purchased Enterprises". Statement No. 142
provides that goodwill and indefinite lived intangible assets are no longer
amortized but are reviewed annually (or more frequently if impairment indicators
arise) for impairment. Separable intangible assets that are not deemed to have
an indefinite life will continue to be amortized over their useful lives (but
with no maximum life). The Company is required to adopt these statements
effective January 1, 2002. The effects of adopting these Statements have not
been determined.
NOTE G - Subsequent Events
In early August 2001, the Company amended its $15.0 million revolving credit
facility with banks and extended the maturity to August 2002. Both the
revolving credit facility with banks and the private placement notes were
amended to provide the revolving credit facility and the private placement
noteholders with a security interest in the Company's inventories, machinery
and equipment and a guarantee by certain LESCO wholly owned subsidiaries. This
amendment will provide the Company with greater debt covenant flexibility.
In early August 2001, the Company's Board of Directors declared a $0.075 per
common share cash dividend for shareholders of record as of August 24, 2001
payable on September 4, 2001.
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LESCO, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the second quarter ended June 30, 2001 increased $5.8 million to
$164.1 million from $158.3 million in 2000, a 3.7% increase. This increase in
sales is primarily due to volume increases (2.8%) and selective price increases
(.9%). Sales for the first six months of 2001 decreased .9% to $254.9 million
from $257.2 million in 2000. This decrease in sales is primarily due to volume
decreases in the first quarter. The volume decreases for the first half were
impacted by adverse weather patterns throughout the country and difficult
economic conditions affecting the Company's customers, including significantly
reduced sales to the Company's largest retail customer.
Gross profit, as a percentage of sales, was 33.4% for the second quarter ended
June 30, 2001 compared to 35.4% in the second quarter 2000. This decrease in
gross profit, as a percent of sales, was due primarily to unfavorable raw
material costs (3.0%) and increased costs in the manufacturing plants excluding
the Novex(TM) plant (.6%). This decrease in gross profit for the second quarter
was slightly offset by selective price increases (.9%) and the positive effect
of a favorable product mix (.8%). For the first six months, gross profit, as a
percent of sales, was 32.3% in 2001 compared to 34.6% in 2000. The decrease in
gross profit, as a percent of sales, for the first six months was due primarily
to unfavorable raw material costs (3.1%) and increased costs in the
manufacturing plants excluding the Novex(TM) plant (.5%). However, the gross
profit decrease, as a percent of sales, was slightly offset by selective price
increases (1.1%), and higher production levels in the Novex(TM) plant (.2%).
Gross profit was impacted by higher raw material costs, particularly urea costs,
for both the second quarter and first six months 2001, as higher natural gas
prices have significantly impacted the cost of urea, the Company's most
important raw material.
Delivery and warehouse expenses increased by $1.5 million, a 12.1% increase, to
$13.9 million for the second quarter 2001 compared to $12.4 million in the
second quarter 2000. For the first six months of 2001, delivery and warehouse
expenses increased by $2.2 million, a 10.4% increase, to $23.3 million compared
to the first six months of 2000. The increase for the second quarter and the
first six months is primarily due to increased warehouse utilities and payroll
related expenses in addition to increased costs relating to outbound freight and
intercompany freight expense. The freight cost increases resulted from a higher
volume of direct ship orders to customers, increased intercompany freight costs
due to anticipated sales volumes and increased energy costs.
Selling, general and administrative expenses increased by $1.7 million, a 6.5%
increase, to $28.0 million for the second quarter 2001 compared to $26.3 million
in the second quarter 2000. For the six months ended June 30, 2001, selling,
general and administrative expenses increased by $1.8 million, a 3.5% increase,
to $53.5 million in 2001 compared to $51.7 million in 2000. The increase for the
second quarter and the first six
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months is primarily due to increased rent and utility expenses, health care
insurance costs and other operating expenses.
Interest expense remained relatively unchanged for the second quarter 2001
compared to the second quarter 2000 as higher interest rates offset lower
levels of debt. Interest expense decreased by $95,000, a 2.6% decrease, to
$3.6 million in the first half 2001 compared to $3.7 million in the first half
2000. This decrease was primarily due to lower average interest rates during
the first quarter 2001 compared to the first quarter 2000.
Other expense consists primarily of losses on the sale of fixed assets, service
charge expense, royalty expense and other miscellaneous expenses. Customer
finance charges totaled $435,000 in the second quarter 2001 and $445,000 in the
second quarter 2000. Customer finance charges were $954,000 for the first six
months 2001 compared to $1.1 million for the first six months 2000. The slight
decrease in customer finance charges for both the second quarter and first six
months is attributable to better and more timely accounts receivable collection
efforts.
The effective income tax rate reduced to 37.6% for 2001 compared to 39.6% in
2000 due to lower state income tax rates. In the first quarter 2000, the
valuation allowance related to Tri Delta Fertilizer, Inc.'s net operating loss
carryforward was reversed because realization of such deferred tax assets is
considered "more likely than not".
Product Supply Division - Net sales for the Product Supply division were $108.6
million for the second quarter 2001 compared to $118.3 million in the second
quarter 2000 and were $174.6 million for the first six months 2001 compared to
$179.0 million in 2000. These decreases were due to lower sales demands from the
Lawn Care and Golf divisions as a result of their lower sales volumes related to
unfavorable weather conditions throughout the country and difficult economic
conditions affecting their customers. Operating profit was $581,000 for the
second quarter 2001 compared to $4.4 million for the second quarter 2000 and a
$1.5 million loss for the first six months 2001 compared to a $3.9 million
profit in 2000. The operating profit decreases were due primarily to lower sales
volumes, higher raw material costs, increased expenses for Southern Golf, assets
for which were acquired in August 2000, and increased energy costs in the
manufacturing plants. These costs were slightly offset by increased production
level efficiencies at the Company's Novex facility.
Lawn Care Division - Net sales for the Lawn Care division were $116.5 million
for the second quarter 2001 compared to $111.9 million in the second quarter
2000. The increase for the second quarter was due primarily to an increase in
service center sales, where same store sales increased 6.3% compared to the
second quarter 2000. Retail sales also increased by 15.1% for the second quarter
2001 compared to the second quarter 2000. These increases were slightly offset
by a decrease in sales to large national accounts. Net sales were $185.2 million
for the first six months 2001 compared to $188.0 million in 2000. The decrease
for the first six months is due to a decrease in service center sales in the
first quarter. Same store sales for the first six months decreased 1.3% compared
to the first six months 2000. There was also a decrease in retail sales and
sales to large national accounts of 2.7% and 5.4% respectively, compared to the
first six months 2000. Spring weather related factors and customers' difficult
economic conditions had the largest impact on this division, significantly
impacting both service center and retail sales. Operating profit was $14.1
million for the second quarter 2001 compared to $16.0 million in the second
quarter 2000. Operating profit was $15.8 million for the first six months 2001
compared to $23.5 million in 2000. These decreases were due primarily to lower
sales
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in the first quarter, the effect of higher raw material costs over the first six
months in addition to an increase in selling, general and administrative costs.
Golf Division - Net sales for the Golf division were $47.6 million for the
second quarter 2001 compared to $46.4 million in the second quarter 2000. Net
sales for the first six months 2001 were $69.7 million compared to $69.1 million
in 2000. The sales increase for the second quarter was primarily due to
selective price increases (.9%) and volume increases (1.7%). The sales increase
for the first six months was primarily due to selective price increases (1.0%)
which was slightly offset by slight volume decreases (.1%) from year to year.
Operating profit was $6.1 million for both the second quarter 2001 and 2000 and
was $6.6 million for the first six months 2001 compared to $6.2 million in
2000. The increase in operating profit for the first six months was primarily
due to higher net sales and lower selling, general and administrative costs.
Liquidity and Capital Resources
In April 2001, the Company completed a $50.0 million revolving accounts
receivable securitization program, at variable rates, maturing in April 2004, to
sell, without recourse, through a wholly owned subsidiary, certain trade
accounts receivable. At June 30, 2001, the Company had received $35.0 million
from the sale of trade accounts receivable that had not yet been collected. The
proceeds from the sales were used to reduce borrowings under the Company's
revolving credit facility and to fund working capital needs. The Company, as
agent for the purchaser of the receivables, retains collection and
administrative responsibilities for the purchased receivables.
As of June 30, 2001, total assets of the Company were $235.3 million compared to
$270.8 million as of June 30, 2000 and $244.9 million as of December 31, 2000.
The asset decrease from June 30, 2000 to June 30, 2001 and from December 31,
2000 is primarily related to the Company's revolving trade accounts receivable
securitization program pursuant to which $35.0 million of trade accounts
receivable were sold as of June 30, 2001 and working capital decreases. Net
accounts receivable decreased further due to other receivables relating to the
improved management of vendor sales growth incentives and the seasonality of the
business. Inventories were $114.1 million as of June 30, 2001 compared to $115.5
million as of June 30, 2000, and $100.0 million as of December 31, 2000. The
decrease in inventory compared to June 30, 2000 was due primarily to lower
turfseed, control product and equipment inventories while the increase from
December 31, 2000 was due primarily to the Company's seasonal build for
anticipated sales.
The decrease in working capital assets was primarily offset by a decrease in
accounts payable and a decrease in long-term debt. Accounts payable were $72.1
million as of June 30, 2001, and 2000 and $33.3 million as of December 31, 2000.
The increase in accounts payable from December 2000 to June 2001 reflects
seasonal supplier deferred payment programs which are due in the third quarter
of the year in addition to the seasonal build of inventory. The Company's
long-term debt decreased to $45.4 million as of June 30, 2001 compared to $80.5
million as of June 30, 2000, and $94.7 million as of December 31, 2000, due
primarily to the trade accounts receivable securitization program.
There was no outstanding debt under the Company's revolving credit facility with
banks as of June 30, 2001 compared to $29.3 million as of June 30, 2000 and
$43.6 million as of December 31, 2000. The Company reduced its availability
under this revolving credit facility from $20.0 million to $15.0 million at the
end of June 2001. The Company repaid $5.0 million due under its $50.0 million
private placement notes upon
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normal maturity in June 2001. The current portion of debt increased in June 2001
compared to June 2000 and December 2000 as a result of the June 2002 maturity
for a portion of the Company's remaining private placement notes. In early
August 2001, the Company amended its $15.0 million revolving credit facility
with banks and extended the maturity to August 2002. Both the revolving credit
facility and the private placement notes were amended to provide the revolving
credit facility and the private placement noteholders with a security interest
in the Company's inventories, machinery and equipment.
Capital expenditures for the first six months of 2001 included improvements in
the Company's information systems, furniture and fixtures for the Company's
headquarters, improvement costs for the Company's Novex(TM) fertilizer plant in
Disputanta, Virginia, and improvements to the Company's other manufacturing and
distribution facilities.
The Company believes its current borrowing capacity is adequate for the
foreseeable future.
Forward-Looking Statements
Certain statements included in the report are forward-looking statements that
are based on management's current belief, assumptions and expectations. These
forward-looking statements can be identified by the use of predictive or future
tense terms such as "anticipate," "estimate," "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
future performance may differ materially from that anticipated in
forward-looking statements. Risk factors that would cause or contribute to such
differences include, but are not limited to:
- regional weather conditions which have an impact on both
timing and volume of sales;
- the Company's successful execution of its operating plans;
- the Company's ability to integrate business acquisitions
successfully;
- general economic and business conditions;
- changes in market demographics;
- changes in the regulation of the Company's products,
including applicable environmental regulations; and
- the Company's ability to effectively manufacture, market and
distribute new products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
Not applicable.
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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 4 - Submission of Matters to a Vote of Security Holders
On May 16, 2001, the Company conducted its Annual Meeting of Shareholders. The
following matters were brought before the shareholders for vote at this meeting:
Election of Directors for a One-Year Term
Votes "For" Votes "Withheld"
----------- ----------------
Ronald Best 6,806,170 882,814
Drexel Bunch 6,490,982 1,198,002
Robert F. Burkhardt 6,626,413 1,062,571
J. Martin Erbaugh 6,607,435 1,081,549
William A. Foley 6,386,252 1,302,732
Michael E. Gibbons 6,599,271 1,089,713
Lee C. Howley 6,602,280 1,086,704
Christopher H. B. Mills 5,605,464 2,083,520
Robert B. Stein, Jr 6,491,135 1,197,849
David L. Swift 6,626,765 1,062,219
Shareholder Proposals
Votes "For" Votes "Against" Votes "Abstain" Votes "Non-Voted"
----------- --------------- --------------- -----------------
Proposal on responsibility of the
Board in succession planning 1,930,951 4,483,731 58,081 1,483,521
Proposal on providing for the payment
of benefits upon a change in control 2,331,188 4,085,487 56,089 1,483,521
Proposal that Board designate a non-
executive Chairman or other
independent Board leader 1,952,368 4,456,533 63,863 1,483,521
Proposal concerning redemption of
the LESCO, Inc.'s Shareholders
Rights Plan 3,356,344 2,854,659 261,760 1,483,521
No other matters were brought before shareholders for a vote.
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Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
(10)(y)(2) Amendment No. 1 dated as of August 7, 2001 to the
Credit Agreement among National City Bank; PNC Bank,
National Association; National City Bank, as
Administrative Agent; and the Registrant.
(4)(i)(2) First Amendment dated as of August 7, 2001 to Note
Purchase Agreement.
(10)(z) Form of Security Agreement dated as of August 7, 2001
by and between Wells Fargo Bank Northwest, National
Association, as Collateral Agent, and each of LESCO,
Inc.; Aim Lawn & Garden Products, Inc.; LESCO
Services, Inc.; and LESCO Technologies, LLC.
(b) There were no reports on Form 8-K filed during this period.
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SIGNATURES
Pursuant to the requirements of 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.
LESCO, INC.
August 14, 2001 By /s/ R. Breck Denny
- ---------------- -------------------------------------
R. Breck Denny, Vice-President/
Chief Financial Officer
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