Exhibit 99.1
[LESCO LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:
April 24, 2003
Jeffrey L. Rutherford
Sr. Vice President & Chief
Financial Officer
LESCO, Inc.
(440) 783-9250
LESCO ANNOUNCES FIRST QUARTER RESULTS
---------------------------------------------------------------------
CLEVELAND - April 24, 2003 - LESCO, Inc. (NASDAQ: LSCO), the leading specialty
provider of products for the professional green and pest control industries,
today announced first quarter operating results. Due to the seasonality of the
Company's industry segments, the first quarter is LESCO's lowest sales volume
quarter and has historically generated net losses.
SALES
Net sales for the first quarter of 2003 were $94.5 million, up 1% from $93.5
million for the first quarter of 2002. Lawn Care gross sales, which include the
Company's Service Center and Lawn Care national accounts, were $77.7 million, up
4.0% from $74.7 million in 2003. Sales from the ten Service Centers(R) and
one Store-on-Wheels(R) opened during the quarter totaled $238,000, resulting
in comparable Lawn Care sales growth of 3.7%. All sales for new stores were
pre-grand opening, as the Company's first Service Center grand opening occurred
on April 2, 2003. Golf gross sales were $17.8 million, down 9.1% from 2002 sales
of $19.6 million.
First quarter Lawn Care sales were negatively impacted by the late spring in the
Northeast and the Company's decision to curtail sales of bulk sulfur coated urea
(SCU). Northeastern Lawn Care sales for the quarter were flat (2003 - $13.3
million versus 2002 - $13.2 million) and bulk sales declined $2.2 million.
"When adjusted for new stores, the Northeast and bulk sales, Lawn Care sales
increased 8.1%," stated Michael P. DiMino, president and chief executive
officer. "As we have been consistently stating, our Lawn Care business has the
potential to grow at a rate greater than the projected industry growth rate of
5%."
First quarter Golf sales were also negatively impacted by the late spring in the
Northeast. Northeastern Golf sales were down 40% (2003 - $2.6 million versus
2002 - $4.3 million) and the remainder of Golf sales were flat (2003 - $15.2
million versus 2002 - $15.3 million).
"We did not plan on significant growth in Golf in 2003," added Mr. DiMino. "The
Golf business has not begun in the Northeast and remains soft throughout the
country. We expect the Golf
2
business, particularly in the Northeast, to bounce back in the second quarter.
Nevertheless, we expect 2003 Golf sales growth to be less than 2%."
OPERATING RESULTS
Gross profit increased to $30.6 million or 32.4% of sales from $30.1 million or
32.1% for the first quarter of 2002. The Company was successful in offsetting
the negative impact of pricing pressures and increased raw material costs with
improvements in manufacturing expenses and inventory control.
Earnings before interest and taxes (EBIT) were a loss of $8.0 million in 2003
versus a loss of $13.2 million in 2002. EBIT in 2002 included charges for
severance expense ($2.0 million) and early retirement of debt ($4.6 million).
Adjusted for the severance and debt retirement charges, 2002 EBIT was a loss of
$6.6 million.
EBIT in 2003 was negatively impacted by increases in warehouse and delivery
expense ($0.4 million) and selling expense ($2.7 million). EBIT was positively
impacted by a reduction in General and Administrative (G&A) expense ($0.7
million). The increase in warehouse and delivery expense was due to the fixed
costs associated with the new distribution hubs in Atlanta and Chicago. The
increase in selling expense was due to the operating costs of new stores ($0.4
million), the payroll costs from the expansion of the direct sales force
announced in the third quarter of 2002 ($0.6 million) and the timing effect from
the change in the sales force commission program ($1.0 million). Under the
Company's current commission program, progress payments will be earned, expensed
and paid each quarter. Under the Company's previous commission program, no
commissions were earned, expensed or paid in the first quarter.
"We made the conscious decision to invest in selling programs, people and assets
where return on invested capital will be greater than 30%. Although currently
clouded by the negative results in the Northeast, the model for the rest of the
country is performing to our expectations," added Mr. DiMino. "However, as
everyone knows, the second and third quarters are our highest volume sales and
profit quarters, representing greater than 60% of annual sales and 100% of
annual profits."
Net loss was $5.7 million, as compared to the 2002 net loss of $13.7 million.
First quarter 2003 included a pretax loss from new stores of $366,000. Net
income in 2002 included the previously referenced charges for severance and debt
retirement and a charge for the effect of an accounting change for goodwill.
Adjusted for these charges, the net loss in 2002 was $5.0 million. Fully diluted
loss per share was $0.68 in 2003 as compared to $1.61 in 2002. Adjusted for
charges, the 2002 fully diluted loss per share was $0.59.
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. (EDT). 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. Management's slide presentation will
be available for downloading beginning Thursday, April 24 at 9:00 a.m. at
LESCO's web site, www.lesco.com.
3
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 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 on the "Corporate Overview" page.
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.
ABOUT LESCO, INC.
LESCO is a specialty provider of products for the professional green and pest
control industries. As of April 24, 2003, LESCO distributes product through nine
hubs and serves more than 130,000 customers worldwide, through 240 LESCO Service
Centers(R), 78 LESCO Stores-on-Wheels(R), 68 lawn care service representatives
and other direct sales efforts. Sales in 2002 totaled $511.7 million. Additional
information about LESCO can be found on the Internet at www.lesco.com.
Statements in this news release relating to growth expectations and other
statements that are not historical information are forward-looking statements
and, as such, reflect only the Company's best assessment at this time. Investors
are cautioned that forward-looking statements involve risks and uncertainties,
that actual results may differ materially from such statements and that
investors should not place undue reliance on such statements. Factors that may
cause actual results to differ materially from those projected or implied in the
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; 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 Form
10-K for the year ended December 31, 2002.
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED
2003 2002
------------ ---------------------------------------------------
Three Months Three Months Results
Ended Ended Excluding
(In thousands, except per share data) March 31 March 31 Charges (a) Charges (a)
-------- -------- -------- --------
Net sales $ 94,450 $ 93,479 $ -- $ 93,479
Cost of Sales 63,818 63,427 -- 63,427
-------- -------- -------- --------
Gross profit on sales 30,632 30,052 -- 30,052
Warehouse & delivery expense 10,302 9,916 -- 9,916
Selling expense 21,209 18,482 -- 18,482
Bad debt expense 429 405 -- 405
General & administrative expense 7,353 8,009 -- 8,009
Severance expense -- 2,042 (2,042)(b) --
-------- -------- -------- --------
39,293 38,854 (2,042) 36,812
Income (loss) from operations (8,661) (8,802) (2,042) (6,760)
Joint venture results 370 -- -- --
Customer finance charges 393 386 -- 386
Other income 180 142 -- 142
Other expense (233) (415) -- (415)
Early retirement of debt agreement -- (4,550) (4,550)(c) --
-------- -------- -------- --------
710 (4,437) (4,550) 113
-------- -------- -------- --------
Earnings (loss) before interest and taxes (EBIT) (7,951) (13,239) (6,592) (6,647)
Interest expense 1,288 1,334 -- 1,334
-------- -------- -------- --------
Income (loss) before taxes (9,239) (14,573) (6,592) (7,981)
Income taxes (benefit) (3,492) (5,465) (2,479) (2,986)
-------- -------- -------- --------
Net income (loss) before cumulative
effect of accounting change $ (5,747) $ (9,108) $ (4,113) $ (4,995)
-------- -------- -------- --------
Cumulative effect of accounting change for
goodwill charge, net of taxes of $2,735 -- 4,597 (4,597)(d) --
-------- -------- -------- --------
Net Income (loss) $ (5,747) $(13,705) $ (8,710) $ (4,995)
======== ======== ======== ========
Basic and diluted loss per share before
cumulative effect of accounting change $ (0.68) $ (1.07) $ 0.48 $ (0.59)
======== ======== ======== ========
Basic and diluted loss per share $ (0.68) $ (1.61) $ 1.02 $ (0.59)
======== ======== ======== ========
(a) The Company incurred certain charges in the first quarter of 2002 that
were not incurred in 2003 (see following footnotes b, c, and d).
Management believes that the 2002 results excluding these charges are a
better comparison to the 2003 operating results. For purposes of
reconciliation and better comparability, the above statement includes the
2002 operating results with these charges, in accordance with generally
accepted accounting principles (GAAP), in column 2, the charges in column
3 and the operating results excluding the charges in column 4. The
schedule includes a reconciliation of earnings before interest and taxes,
net loss and basic and fully diluted net loss per share for 2002 including
the charges in column 2, the effect of the charges in column 3, and
excluding the charges in column 4.
(b) The Company recorded a $2.0 million pre-tax charge relative to severance
for executive terminations.
(c) The Company recorded a $4.6 million pre-tax charge related to the early
termination of debt.
(d) 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.
LESCO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
MARCH 31 MARCH 31 DECEMBER 31
2003 2002 2002
-------- -------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 3,459 $ 2,520 $ 1,354
Accounts receivable - net 81,995 82,375 68,188
Inventories 109,794 114,534 86,837
Other current assets 12,257 11,398 9,571
-------- -------- --------
TOTAL CURRENT ASSETS 207,505 210,827 165,950
Net property, plant and equipment 34,730 46,694 33,938
Other assets 4,780 5,666 4,094
-------- -------- --------
TOTAL ASSETS 247,015 263,187 203,982
======== ======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 57,414 71,813 38,439
Other current liabilities 15,252 10,425 19,869
Revolving credit facility 92,061 84,816 57,052
Current portion of debt 1,150 1,140 1,148
-------- -------- --------
TOTAL CURRENT LIABILITIES 165,877 168,194 116,508
Long-term debt 9,941 12,148 10,227
Deferred income taxes -- 901 314
Shareholders' equity 71,197 81,944 76,933
-------- -------- --------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $247,015 $263,187 $203,982
======== ======== ========
LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
THREE MONTHS ENDED MARCH 31
-----------------------------
2003 2002
-------- --------
(Unaudited)
OPERATING ACTIVITIES:
Net loss $ (5,747) $ (9,108)
Depreciation and amortization 2,126 2,560
Early retirement of debt -- 4,550
Net change in working capital (29,337) (8,878)
Other - net (439) (2,622)
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (33,397) (13,498)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (2,658) (251)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (2,658) (251)
FINANCING ACTIVITIES:
Borrowings - net 38,160 11,234
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 38,160 11,234
-------- --------
Net Increase in Cash 2,105 (2,515)
Cash -- Beginning of the Period 1,354 5,035
-------- --------
CASH - END OF THE PERIOD $ 3,459 $ 2,520
======== ========