Exhibit 99.1
[LESCO LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact:
October 28, 2003
Jeffrey L. Rutherford
Sr. Vice President & Chief Financial Officer
LESCO, Inc.
(440) 783-9250
LESCO ANNOUNCES THIRD QUARTER OPERATING RESULTS
o THIRD QUARTER EPS INCREASED 12% TO $0.65 FROM $0.58 IN 2002; YEAR TO DATE
EPS OF $0.76 VERSUS A LOSS OF $1.61 IN 2002; YEAR-TO-DATE 2002 EPS
EXCLUDING CHARGES WERE INCOME OF $1.10
o TOTAL NET SALES INCREASED 2.6% FOR THE THIRD QUARTER; 2.7% YEAR TO DATE
- LAWN CARE SALES UP 6.3% TO $105 MILLION FOR THE QUARTER; UP 5.5% TO
$314 MILLION YEAR TO DATE
- GOLF SALES DOWN 5.7% TO $43 MILLION FOR THE QUARTER; DOWN 4.9% TO $103
MILLION YEAR TO DATE
o TWENTY NEW SERVICE CENTERS OPENED IN 2003 GENERATED SALES OF $3.7 MILLION
AND EPS OF $0.01 IN THE QUARTER; YEAR-TO-DATE SALES WERE $7.1 MILLION AND
EPS LOSS OF $0.03
o COMPANY ENTERS A DEFINITIVE AGREEMENT TO SELL ITS INVESTMENT IN EQUIPMENT
MANUFACTURER
CLEVELAND, Ohio - October 28, 2003 - LESCO, Inc. (NASDAQ: LSCO), the leading
specialty provider of products for the professional green and pest control
industries, today announced third quarter operating results.
THIRD QUARTER RESULTS
Net sales for the third quarter increased 2.6% to $147.7 million from $144.0
million in 2002.
Lawn Care sales for the quarter increased to $105.2 million, up 6.3% from 2002
($99.0 million). Comparable Service Center sales increased 6.4% and new Service
Centers generated $3.7 million of sales. These increases were offset by
decreases in Lawn Care direct sales and National accounts. Year to date, the
Company has opened 20 new Service Centers and closed one. LESCO ended the
quarter with 246 Service Centers with plans to open one additional Service
Center in Las Vegas in mid-November.
Golf sales declined 5.7% to $42.9 million from $45.5 million. Only the Company's
Southeast Zone experienced growth in Golf sales for the quarter. The Company
ended the quarter with 72 Stores-on-Wheels.
Exhibit 99.1
"The trend we experienced in the first half of 2003 has continued in the third
quarter," stated Michael P. DiMino, president and chief executive officer, "The
Lawn Care industry is growing and we are capturing incremental market share
through our existing and new stores, while the Golf industry continues to
contract as reflected by our negative comparisons.
"This experience, most notably the promising trends of our new Service Centers,
confirms our strategy of investing capital in Lawn Care while continuing to
explore ways to improve the operations of our Golf business," continued Mr.
DiMino. "To that end during the third quarter, we hired a new Vice President of
Marketing, Brett Barthel. Brett, along with our Senior Vice President of Sales,
Steve Cochran, are charged with identifying and executing on opportunities
relative to Golf. Nevertheless, even in this challenging growth period, our Golf
assets continue to generate four-wall returns greater than 20%."
Gross profit increased for the quarter to $50.6 million from $48.6 million in
2002. As a percentage of sales, gross profit increased 47 basis points to 34.25%
from 33.78%.
"It is apparent that the steps we took at the beginning of this quarter,
including a price increase and the removal of the flexibility within our pricing
model, produced the desired impact on gross profit percentage," continued Mr.
DiMino. "Additionally, during the third quarter, we negotiated a contract with
our urea supplier to fix the cost of our urea requirements for all of 2004. With
this contract in place, we will set our prices at the beginning of 2004 and not
suffer through the need for multiple price increases as we did in 2003."
Earnings before interest and taxes (EBIT) increased to $10.3 million from $9.3
million in 2002. This increase is attributable to the $2.1 million increase in
gross profit less a $1.1 million increase in selling expense. The increase in
selling expense is primarily attributable to new Service Center operating
expenses. Warehouse and delivery expense, as a percentage of sales, improved to
8.05% from 8.19% in 2002. General and administrative costs were reduced to $7.2
million from $7.6 million in 2002.
"We continue to execute on opportunities to reduce non-selling expenses,
particularly warehouse, general and administrative expenses," added Mr. DiMino.
"We continue to modify our logistics and supply chain operations and in the
third quarter experienced improvement over the first half of 2002. We are
committed to pursuing all opportunities to reduce and eliminate non-essential
expenditures."
Net income for the third quarter of 2003 was $5.7 million or $0.65 per fully
diluted share versus $5.1 million or $0.58 per fully diluted share in the third
quarter of 2002.
NINE MONTHS RESULTS
Net sales for the nine months ended September 30, 2003 increased 2.7% to $414.7
million, compared with net sales of $404.0 million in the comparable period a
year ago. Gross profit increased to $139.1 million or 33.5% of sales from $126.1
million or 31.2% of sales in 2002. Prior year gross profit excluding inventory
markdown was $135.7 million or 33.6% of sales. Net income increased to $6.7
million or $0.76 per fully diluted share versus a loss of $13.6 million or $1.61
per fully diluted share in 2002. Net income for the first nine months of 2002
excluding charges and cumulative effect of accounting change was $9.6 million or
$1.10 per fully diluted share.
Exhibit 99.1
NEW STORES
New Service Center sales for the third quarter were $3.7 million and for the
year were $7.1 million. New Service Center four-wall operating profit for the
third quarter was income of $178,000 or $0.01 per fully diluted share and year
to date was a loss of $417,000 or $0.03 per fully diluted share.
DEFINITIVE AGREEMENT TO SELL INVESTMENT IN EQUIPMENT MANUFACTURER
LESCO also announced today that is has reached a definitive agreement to sell
its investment in Commercial Turf Products, Ltd. (CTP) to the other principal
CTP investor, MTD Consumer Group Inc. (MTD). LESCO will sell its investment for
a $935,000 promissory note and a release from its 50% guarantee of certain of
CTP's liabilities, including a $7.6 million Industrial Revenue Bond. The
transaction is subject to customary conditions and is expected to close by
mid-November. There will be an immaterial gain on the sale.
LESCO has also entered into a new five (5) year supply agreement with MTD and
CTP to source certain equipment under terms and pricing similar to its
historical relationship with CTP.
CONFERENCE CALL
The Company will host a conference call and webcast with investors, analysts and
other interested parties today at 11:00 a.m. (EST). 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.
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.
BRETT BARTHEL, VICE PRESIDENT OF MARKETING
Mr. Barthel came to LESCO from Ion Beam Applications, a world leader in
sterilization services, where he served as the Senior Director of Business
Development and Marketing, and launched its website and the industry's first
interactive revenue generating portal. Brett received his MBA from Case Western
Reserve University and his BSBA in Finance from The Ohio State University.
ABOUT LESCO, INC.
As of October 28, 2003, LESCO distributes product through nine hubs and serves
more than 130,000 customers worldwide, through 246 LESCO Service Centers(R), 72
LESCO Stores-on-Wheels(R), 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.
Exhibit 99.1
Statements in this news release relating to sales and earnings expectations, an
increase in market share, the expected completion of the sale of the Company's
investment in CTP, new Service Center openings and profitability, the Company's
ability to impose price increases 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, 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; 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 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) September 30 September 30 Charges (a) Charges (a)
------------ ------------ ----------- -----------
Net sales $ 147,721 $ 144,009 $ -- $ 144,009
Cost of Sales 97,120 95,362 -- 95,362
--------- --------- --------- ---------
Gross profit on sales 50,601 48,647 -- 48,647
Warehouse & delivery expense 11,895 11,798 -- 11,798
Selling expense 21,007 19,928 -- 19,928
Bad debt expense 552 657 -- 657
General & administrative expense 7,249 7,604 -- 7,604
Severance expense 81 -- -- --
--------- --------- --------- ---------
40,784 39,987 -- 39,987
Income (loss) from operations 9,817 8,660 -- 8,660
Joint venture results -- 20 -- 20
Customer finance charges 554 494 -- 494
Gain on Sale of fixed assets -- 185 185 (b) --
Other income 191 170 -- 170
Other expense (263) (244) -- (244)
--------- --------- --------- ---------
482 625 185 440
Earnings before interest and taxes 10,299 9,285 (185) 9,100
Interest expense 1,105 1,122 -- 1,122
--------- --------- --------- ---------
Income before taxes 9,194 8,163 (185) 7,978
Income taxes (benefit) 3,476 3,069 (69) 3,000
--------- --------- --------- ---------
Net income $ 5,718 $ 5,094 $ (116) $ 4,978
========= ========= ========= =========
Basic earnings per share $ 0.67 $ 0.59 $ (0.01) $ 0.58
========= ========= ========= =========
Fully diluted earnings per share $ 0.65 $ 0.58 $ (0.01) $ 0.57
========= ========= ========= =========
(a) The Company incurred certain charges in 2002 that were not incurred in 2003
(see following footnote b). 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 $185,000 pre-tax gain on sale of former corporate
offices.
LESCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS- UNAUDITED
2003 2002
------------ ---------------------------------------------------
Nine Months Nine Months Results
Ended Ended Excluding
(In thousands, except per share data) September 30 September 30 Charges (a) Charges (a)
------------ ------------ ----------- -----------
Net sales $ 414,731 $ 403,981 $ -- $ 403,981
Cost of Sales 275,610 268,283 -- 268,283
Inventory markdown - cost of sales -- 9,581 (9,581)(b) --
--------- --------- --------- ---------
Gross profit on sales 139,121 126,117 (9,581) 135,698
Warehouse & delivery expense 37,144 34,589 -- 34,589
Selling expense 65,083 58,232 -- 58,232
Bad debt expense 1,656 1,839 -- 1,839
General & administrative expense 21,823 22,823 -- 22,823
Asset rationalization -- 12,044 (12,044)(c) --
Severance expense 487 3,866 (3,866)(d) --
--------- --------- --------- ---------
126,193 133,393 (15,910) 117,483
Income (Loss) from operations 12,928 (7,276) (25,491) 18,215
Early retirement of debt agreement -- (4,550) (4,550)(e) --
Joint venture results 590 48 -- 48
Customer finance charges 1,201 1,274 -- 1,274
Gain on Sale of fixed assets -- 185 185(f) --
Other income 669 439 -- 439
Other expense (916) (782) -- (782)
--------- --------- --------- ---------
1,544 (3,386) (4,365) 979
Earnings (loss) before interest and taxes 14,472 (10,662) (29,856) 19,194
Interest expense 3,683 3,779 -- 3,779
--------- --------- --------- ---------
Income (Loss) before taxes 10,789 (14,441) (29,856) 15,415
Income taxes (benefit) 4,080 (5,416) (11,212)(g) 5,796
--------- --------- --------- ---------
Net Income (Loss) before cumulative effect
of accounting change 6,709 (9,025) (18,644) 9,619
Cumulative effect of accounting change for
goodwill charge, net of taxes of $2,735 -- 4,597 (4,597)(h) --
--------- --------- --------- ---------
Net income (loss) $ 6,709 $ (13,622) $ (23,241) $ 9,619
========= ========= ========= =========
Basic earnings (loss) per share before cumulative
effect of accounting change $ 0.78 $ (1.07) $ (2.17) $ 1.12
========= ========= ========= =========
Basic earnings (loss) per share $ 0.78 $ (1.61) $ (2.71) $ 1.12
========= ========= ========= =========
Fully diluted earnings (loss) per share $ 0.76 $ (1.61) $ (2.71) $ 1.10
========= ========= ========= =========
(a) The Company incurred certain charges in 2002 that were not incurred in 2003
(see following footnotes b through h). 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 markdown and liquidation of its discontinued SKUs
resulting in a $9.6 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 $12.0 million pre-tax charge was recorded.
(d) The Company recorded a $3.9 million pre-tax charge relative to severance
for executive, senior and middle management terminations.
(e) The Company recorded a $4.6 million pre-tax charge related to the early
termination of debt.
(f) The Company recorded a $185,000 pre-tax gain on sale of former corporate
offices.
(g) The Company recognized the income tax benefit of the adjustment for charges
(excluding the tax effect of the cumulative effect of accounting change
(h)) of $11.2 million.
(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.
LESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31
2003 2002 2002
-------- -------- --------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash $ 2,056 $ 5,782 $ 1,354
Accounts receivable - net 81,145 80,402 68,188
Inventories 105,320 97,401 86,837
Other current assets 5,196 8,003 9,571
-------- -------- --------
TOTAL CURRENT ASSETS 193,717 191,588 165,950
Net property, plant and equipment 32,843 34,459 33,938
Other assets 5,285 6,422 4,094
-------- -------- --------
TOTAL ASSETS $231,845 $232,469 $203,982
======== ======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 62,193 $ 68,320 $ 38,439
Other current liabilities 17,594 18,094 19,869
Revolving credit facility 57,860 53,580 57,052
Current portion of debt 1,096 1,140 1,148
-------- -------- --------
TOTAL CURRENT LIABILITIES 138,743 141,134 116,508
Long-term debt 9,194 10,521 10,227
Deferred income taxes -- -- 314
Shareholders' equity 83,908 80,814 76,933
-------- -------- --------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $231,845 $232,469 $203,982
======== ======== ========
LESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
NINE MONTHS ENDED SEPTEMBER 30
------------------------------
2003 2002
-------- --------
(Unaudited)
OPERATING ACTIVITIES:
Net income (loss) before cumulative effect
of accounting change $ 6,709 $ (9,025)
Depreciation and amortization 6,522 7,284
Early retirement of debt agreement -- 4,550
Asset rationalization -- 12,044
Provision for inventory markdown -- 9,581
Net change in working capital (12,820) 92
Other - net (1,973) (1,835)
-------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,562) 22,691
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (4,645) (1,296)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (4,645) (1,296)
FINANCING ACTIVITIES:
Borrowings - net 6,872 (18,748)
Deferred financing fees -- (2,000)
Exercised stock options, net of treasury shares 37 100
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 6,909 (20,648)
-------- --------
Net Increase in Cash 702 747
Cash -- Beginning of the Period 1,354 5,035
-------- --------
CASH - END OF THE PERIOD $ 2,056 $ 5,782
======== ========