[LESCO LOGO] Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:
February 25, 2003
Jeffrey L. Rutherford
Senior Vice President, Chief Financial Officer
LESCO, Inc.
440-783-9250
LESCO REPORTS FULL-YEAR AND
FOURTH QUARTER 2002 RESULTS
- - FULL-YEAR 2002 EARNINGS PER SHARE (EXCLUDING ONE-TIME GAIN AND CHARGES)
INCREASED TO $0.70 FROM A LOSS OF $0.34 IN 2001; FULL-YEAR 2002 EARNINGS
PER SHARE INCLUDING ONE-TIME GAIN AND CHARGES WAS A LOSS OF $2.06.
- - FULL-YEAR 2002 NET SALES INCREASED 1.5% IN COMPARISON TO PRIOR YEAR; 2.3%
INCREASE IN THE FOURTH QUARTER.
- - FULL-YEAR 2002 FREE CASH FLOW (DEFINED AS OPERATING CASH FLOW LESS
INVESTING ACTIVITIES) INCREASED TO $23.4 MILLION IN 2002; $19.5 MILLION IN
2001.
- - COMPANY PROVIDES GUIDANCE FOR 2003.
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CLEVELAND - February 25, 2003 - LESCO, Inc. (NASDAQ: LSCO), the leading provider
of products for the professional turf care and green industry markets, today
announced full year and fourth quarter 2002 operating results. The full year
2002 operating results include a one-time pre-tax gain of $0.2 million from the
sale of the Company's former corporate headquarters, one-time pre-tax charges
totaling $36.6 million to markdown discontinued inventory for liquidation ($9.2
million), to rationalize its manufacturing invested capital ($12.0 million), to
record severance costs ($3.5 million), to recognize the cumulative effect of an
accounting change for the write-off of impaired goodwill ($7.3 million or $4.6
million net of tax) and to record an extraordinary charge related to the early
termination of debt ($4.6 million or $2.9 million net of tax) and a tax charge
of $0.9 million to record an allowance for the realization of deferred state
taxes generated by the previously referenced pre-tax charges of $36.7 million.
The fourth quarter operating results include one-time pre-tax gains totaling
$0.7 million to reflect the actual results from the inventory liquidation ($0.4
million) and the ultimate cost of employee severance ($0.3 million) and a tax
charge of $0.9 million to record an allowance for the realization of deferred
state taxes.
FULL YEAR 2002 RESULTS
Net sales for 2002 were $511.7 million, up 1.5% from the $504.3 million reported
in 2001. Lawn Care sales for the year increased to $281.7 million, which is a
5.4% increase from the $267.3 million reported in 2001. Golf sales were flat
($152.7 million versus $152.6 million) and National Account sales declined 8.9%
($79.0 million versus $86.7 million).
"We used the second half of 2002 to position LESCO for growth in 2003 and
beyond," stated Mr. Michael P. DiMino, President and Chief Executive Officer.
"We have restructured the sales force, increasing our direct sales force by 60
individuals and changing our commission programs to reward superior performance.
These efforts have already contributed to sales growth as demonstrated by the
2.3% sales increase in the fourth quarter."
Gross profit (excluding the one-time inventory markdown of $9.2 million)
increased to $170.4 million or 33.31% of 2002 net sales from $155.0 million or
30.73% of 2001 net sales. This $15.4 million or 258 basis point improvement is
attributable to better sourcing decisions and favorable raw material pricing
totaling approximately $8.6 million, lower manufacturing expense of $2.5
million, improved sales volume impact on gross profit of $2.7 million and a
reduction of inventory shrink of $3.0 million. Partially offsetting these
increases were lower average selling prices of $1.4 million. Gross profit,
including the one-time inventory markdown of $9.2 million, was $161.2 million or
31.5% of 2002 net sales.
Earnings before interest and taxes (EBIT) (excluding one-time gain and charges)
increased to $14.9 million from $1.3 million in 2001. This $13.6 million
increase was primarily attributable to the $15.5 million increase in gross
margin and a $1.2 million decrease in warehouse and delivery costs, offset by a
$3.5 million increase in selling expenses. EBIT, including one-time gain and
charges, was a loss of $9.8 million.
Net income (excluding one-time gain and charges) increased to $6.2 million from
a loss of $2.9 million in 2001. This $9.1 million increase reflects the $13.6
million increase in EBIT (excluding one-time gain and charges) and a $1.2
million reduction in interest expense, net of taxes. Fully diluted earnings per
share (excluding one-time gain and charges) increased to $0.70 from a $0.34 loss
in 2001. Net income in accordance with Generally Accepted Accounting Principles
in the United States (GAAP), which include the one-time gain and charges, was a
loss of $17.5 million. Fully diluted earnings per share, including one-time gain
and charges, was a loss of $2.06.
FOURTH QUARTER RESULTS
Net sales for the three months ended December 31, 2002 increased 2.3% to $107.7
million compared to net sales of $105.3 million in the comparable period of
2001. For the three months, Lawn Care and Golf sales increased 5.9% and 2.7%,
respectively, while National Accounts decreased 14.8%. Gross profit (excluding
the one-time gain of $0.4 million for inventory liquidation) increased to $34.7
million or 32.25% of net sales from $31.2 million or 29.58% of net sales in
2001. Gross profit in the quarter including the one-time gain was $35.1 million
or 32.6% of net sales. Due to the seasonal nature of the green industry, the
Company has historically recognized a loss in its fourth quarter. Net loss
(excluding one-time gains and
4
charge) decreased to $3.4 million or $0.41 per diluted share compared to a loss
of $5.2 million or $0.61 per diluted share in 2001. Net loss for the quarter,
including the one-time gains and charge, was $3.8 million or a loss of $0.45 per
fully diluted share.
2002 CASH FLOWS
2002 free cash flow (defined as operating cash flow less investing activities)
increased to $23.4 million in 2002, up $3.9 million from the $19.5 million
realized in 2001. This $3.9 million increase is attributable to a reduction in
capital spending of $8.4 million plus proceeds from the sale of fixed assets of
$1.3 million, offset by a $5.8 million decline in cash from operating
activities.
2003 GUIDANCE
Net sales in 2003, excluding new Service Centers sales, are expected to increase
in the range of 4% to 6% over 2002 net sales. New Service Centers are expected
to generate approximately $10 million of net sales in 2003, bringing the total
net sales increase to a range of 6% to 8%.
The Company is targeting fully diluted earnings per share, before the loss from
new Service Centers, in a range of $0.80 to $0.90. The Company expects the loss
from new Service Centers to be approximately $0.15, bringing the total Company
targeted earnings per share to a range of $0.65 to $0.75.
Return on invested capital (ROIC), which the Company consistently calculates
based upon the invested capital at the end of a given period, is targeted to be
in the range of 6% to 7%.
Commenting on the 2003 guidance, Mr. DiMino stated, "In order to maximize the
long-term value inherent in the LESCO model, we have to open additional Service
Centers. We should always have a group of stores entering their third year of
operation. In the third year stores become profitable and defray the costs of
additional new stores. Unfortunately, LESCO has not opened new stores since 1998
and for the next two years we will have to pay for store openings through the
sacrifice of short-term earnings. On April 2 we will grand open in Haverhill,
Massachusetts, which is our first new Service Center since June 1, 1998.
Additionally, we have completed our statistical analysis of the U.S. markets and
believe that the major U.S. markets can support over 500 additional stores. We
plan to open twenty to twenty-five new Service Centers in 2003."
CONFERENCE CALL AND WEBCAST
The Company will host a conference call and webcast with investors, analysts and
other interested parties today at 11:00 a.m. (ET). The live call can be accessed
by dialing 1-800-915-4836. Participants should allow at least fifteen minutes
prior to the commencement of the call to register. The conference call will
include a question and answer session. The slide presentation will be available
for downloading beginning today at 8:30 a.m. at LESCO's web site, www.lesco.com.
Additionally, a live webcast will be available to interested parties at
www.lesco.com. Participants should allow at least fifteen minutes prior to the
commencement of the call to register, download and install any necessary audio
software. Questions can be submitted either
in advance or during the webcast via email to ir@lesco.com or through the
Company's corporate web site where a link will be provided.
THE WALL STREET ANALYST FORUM INSTITUTIONAL INVESTOR CONFERENCE
Messrs. DiMino and Rutherford will make a presentation to analysts and portfolio
managers at The Wall Street Analyst Forum's Institutional Investor Conference in
New York City on Monday, March 3, 2003 at 1:20 p.m. Eastern time. Approximately
100 public companies will be presenting at the Conference from March 3, 2003
through March 5, 2003.
Analysts and portfolio managers who wish to attend the presentation should
contact The Wall Street Analyst Forum at (802)-253-7596 to request additional
information. Investors may access an Internet webcast of the presentation from
LESCO's website or at:
http://events.onlinebroadcasting.com/fdfn/wsaf/030303/index.php
ABOUT LESCO, INC.
LESCO's culture demands the highest of ethical standards and accountability
manifested in full and fair financial disclosure to our shareholders. LESCO
management encourages the participation of our shareholders and other interested
parties in our conference calls and live webcasts. For those who cannot
participate in the conference call or the live webcast, a replay will be
available beginning approximately one hour after the event on LESCO's web site.
LESCO is a specialty provider of products for the professional turf care market.
Serving more than 130,000 customers worldwide, LESCO distributes through 227
LESCO Service Centers(R), 77 LESCO Stores-on-Wheels(R), 68 lawn care sales
representatives, 46 golf sales representatives and other direct sales efforts.
Additional information about LESCO can be found on the Internet at
www.lesco.com.
Statements in this news release under the heading "2003 Guidance" and other
statements that are not historical information are forward looking statements.
Investors are cautioned that forward-looking statements involve risks and
uncertainty, that actual results may differ materially from the results
predicted or implied in such statements and that investors should not place
undue reliance on such statements. Factors that may cause actual results to
differ materially from those predicted or implied in our forward-looking
statements include, but are not limited to, 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; the
condition of the industry and the economy; site availability in designated
markets; zoning and other local regulations; and the ability to hire qualified
individuals to operate the Service Centers. For a further discussion of risk
factors, investors should refer to the Company's Securities and Exchange
Commission reports, including but not limited to Form 10-Q for the quarter ended
September 30, 2002.
##
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED
Twelve Months Ended December 31, 2002
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Reported Results Twelve Months
(GAAP) One Time Excluding Ended
(In thousands, except per share data) Results Charges Charges (a) December 31, 2001
-------------- ------------- -------------- ----------------------
Net sales $ 511,705 $ - $ 511,705 $ 504,268
Cost of Sales 341,268 - 341,268 349,303
Cost of sales inventory markdown 9,225 (9,225)(b) - -
-------------- ------------- -------------- ----------------------
Gross profit on sales 161,212 (9,225) 170,437 154,965
Warehouse & delivery expense 44,201 - 44,201 45,416
Selling expense 79,187 - 79,187 75,643
Bad debt expense 2,243 2,243 2,247
General & administrative expense 31,482 - 31,482 31,231
Asset rationalization 12,044 (12,044)(c) - -
Severance expense 3,523 (3,523)(d) 790
-------------- ------------- -------------- ----------------------
172,680 (15,567) 157,113 155,327
Income (Loss) from operations (11,468) 24,792 13,324 (362)
Joint venture results 164 - 164 (538)
Customer finance charges 1,822 - 1,822 2,399
Gain on sale of fixed assets (93) (185)(e) (278) (321)
Other income 682 - 682 609
Other expense (862) - (862) (515)
-------------- ------------- -------------- ----------------------
1,713 (185) 1,528 1,634
Earnings (loss) before interest and taxes (9,755) 24,607 14,852 1,272
Interest expense 4,933 - 4,933 6,116
-------------- ------------- -------------- ----------------------
Income (Loss) before taxes, extraordinary charge and
cumulative effect of accounting change (14,688) 24,607 9,919 (4,844)
Income taxes (benefit) (4,679) 8,438 (f) 3,759 (1,960)
-------------- ------------- -------------- ----------------------
Income (Loss) before extraordinary charge and
cumulative effect of accounting change (10,009) 16,169 6,160 (2,884)
Extraordinary charge, net of taxes 2,853 (2,853)(g) - -
Cumulative effect of accounting change 4,597 (4,597)(h) - -
-------------- ------------- -------------- ----------------------
Net income (loss) $ (17,459) $ 23,619 $ 6,160 $ (2,884)
============== ============= ============== ======================
Basic earnings (loss) per share (i) $ (1.19) $ 1.90 $ 0.71 $ (0.34)
============== ============= ============== ======================
Fully diluted EPS before extraordinary charge
and cumulative effect of accounting change (i) $ (1.19) $ 1.90 $ 0.70 $ (0.34)
============== ============= ============== ======================
Extraordinary charge, net of taxes (0.33) 0.33 - -
Cumulative effect of accounting change (0.54) 0.54 - -
-------------- ------------- -------------- ----------------------
Fully diluted earnings (loss) per share (i) $ (2.06) $ 2.77 $ 0.70 $ (0.34)
============== ============= ============== ======================
(a) Users of this information are advised to read the Securities and Exchange
Commission report "Pro Forma Financial Information: Tips for Investors"
available at www.sec.gov/investor/pubs/proforma12-4.htm.
(b) The Company completed a markdown and liquidation of its discontinued SKUs
resulting in a $9.2 million pre-tax charge.
(c) The Company completed a review of its invested capital resulting in the
decision to sell certain under-performing assets. In conjunction with this
decision, a $12 million pre-tax charge was recorded.
(d) The Company recorded a $3.5 million pre-tax charge relative to severance
for executive, senior and middle management terminations.
(e) Gain on sale of former corporate offices.
(f) The Company recognized the income tax benefit of the one-time charges
(excluding the tax effect of the extraordinary charge (g) and cummulative
effect of accounting change (h)) of $9,338,000 less an allowance for the
realization of deferred state taxes of $900,000.
(g) The Company recorded an extraordinary charge related to the early
termination of debt of approximately $2.9 million, net of taxes, in the
first quarter of 2002.
(h) The Company wrote off all its goodwill in accordance with SFAS No. 142
taking a $4.6 million charge, net of taxes, as a cumulative effect of
accounting change as of January 1, 2002.
(i) GAAP earnings per share are based on 8,519,789 basic shares outstanding.
Results excluding charges for fully diluted earnings per share are based on
8,712,180 shares and share equivalents outstanding.
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED
Three Months Ended December 31, 2002
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Reported Results Three Months
(GAAP) One Time Excluding Ended
(In thousands, except per share data) Results Charges Charges (a) December 31, 2001
--------------- ---------------- --------------- ------------------------
Net sales $ 107,724 $ - $ 107,724 $ 105,327
Cost of Sales 72,985 - 72,985 74,168
Cost of sales inventory markdown (356) 356 (b) - -
--------------- ---------------- --------------- ------------------------
Gross profit on sales 35,095 356 34,739 31,159
Warehouse & delivery expense 9,613 - 9,613 10,169
Selling expense 21,221 - 21,221 18,855
Bad debt expense 404 - 404 827
General & administrative expense 8,393 - 8,393 8,484
Asset rationalization - - - -
Severance expense (343) 343 (c) - -
--------------- ---------------- --------------- ------------------------
39,288 343 39,631 38,335
Income (loss) from operations (4,193) 699 (4,892) (7,176)
Joint venture results 116 - 116 (574)
Customer finance charges 548 - 548 707
Gain on sale of fixed assets (6) (6) (165)
Other income 243 - 243 72
Other expense (351) - (351) (199)
--------------- ---------------- --------------- ------------------------
550 - 550 (159)
Earnings (loss) before interest and taxes (3,643) 699 (4,342) (7,335)
Interest expense 1,154 - 1,154 1,056
--------------- ---------------- --------------- ------------------------
Income (loss) before taxes (4,797) 699 (5,496) (8,391)
Income taxes (benefit) (960) (1,077)(d) (2,037) (3,238)
--------------- ---------------- --------------- ------------------------
Net income (loss) $ (3,837) $ (378) $ (3,459) $ (5,153)
=============== ================ =============== ========================
Basic earnings (loss) per share $ (0.45) $ 0.04 $ (0.41) $ (0.61)
=============== ================ =============== ========================
Fully diluted earnings (loss) per share $ (0.45) $ 0.04 $ (0.41) $ (0.61)
=============== ================ =============== ========================
(a) Users of this information are advised to read the Securities and Exchange
Commission report "Pro Forma Financial Information: Tips for investors"
available at www.sec.gov/investor/pubs/proforma12-4.htm.
(b) The Company completed the liquidation of its discontinued SKUs resulting in
a $356,000 adjustment in the fourth quarter.
(c) During the fourth quarter, the Company recorded a $343,000 adjustment to
reduce the severance accrual provided in the second quarter.
(d) The Company recognized an income tax provision for the one-time charges of
$177,000 plus an allowance for the realization of deferred state taxes of
$900,000.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
------------------------------------------
2002 2001
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OPERATING ACTIVITIES:
Net income (loss) before extraordinary charge and
cumulative effect of accounting change $ (10,009) $ (2,884)
Depreciation and amortization 9,545 9,942
Asset rationalization 12,044 -
Provision for inventory markdown 9,225 -
Net change in working capital and other 3,846 23,441
-------------------- -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,651 30,499
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,660) (11,085)
Proceeds on sale of fixed assets 1,387 77
-------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES (1,273) (11,008)
FINANCING ACTIVITIES:
Borrowings and other financings - net reduction (25,160) (12,156)
Cash dividends - (629)
Deferred financing and other (1,899) (2,520)
-------------------- -------------------
NET CASH USED BY FINANCING ACTIVITIES (27,059) (15,305)
-------------------- -------------------
Net Increase (Decrease) in Cash (3,681) 4,186
Cash -- Beginning of the Period 5,035 849
-------------------- -------------------
CASH - END OF THE PERIOD $ 1,354 $ 5,035
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LESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN THOUSANDS)
DECEMBER 31
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2002 2001
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash $ 1,354 $ 5,035
Accounts receivable - net 68,188 37,571
Inventories 86,837 92,996
Other current assets 9,571 8,086
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TOTAL CURRENT ASSETS 165,950 143,688
Net property, plant and equipment 33,938 49,260
Other assets 4,094 11,648
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TOTAL ASSETS $ 203,982 $ 204,596
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LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 38,439 $ 46,847
Other current liabilities 16,290 9,181
Asset rationalization and severance 3,579 -
Revolving credit facility 57,052 -
Current portion of debt 1,148 45,970
------------------- --------------------
TOTAL CURRENT LIABILITIES 116,508 101,998
Long-term debt 10,227 5,141
Deferred income taxes 314 3,541
Shareholders' equity 76,933 93,916
------------------- --------------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 203,982 $ 204,596
=================== ====================