<PAGE> 1
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 ending June 30, 1995 Commission File Number 0-13147
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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)
20005 Lake Road
Rocky River, Ohio 44116
- ------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
(216) 333-9250
---------------
(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 8, 1995
- ------------------------------- ----------------
Common shares without par value 7,894,538 shares
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<TABLE>
PART I - FINANCIAL STATEMENTS
LESCO, INC.
BALANCE SHEETS
<CAPTION>
June 30 June 30 December 31
ASSETS 1995 1994 1994
------------ ------------ -------------
<S> <C> <C> <C>
Current Assets:
Cash $ 3,221,203 $ 2,716,429 $ 3,336,984
Accounts receivable -- net 48,950,523 41,534,429 38,415,407
Inventories 63,991,220 53,201,387 51,676,234
Prepaid expenses and other assets 2,772,021 2,850,700 3,174,009
------------ ------------ -------------
Total Current Assets 118,934,967 100,302,945 96,602,634
Property, Plant and Equipment 39,429,283 35,133,002 35,992,303
Less allowance for depreciation and
amortization 20,276,536 17,500,880 18,926,159
------------ ------------ -------------
19,152,747 17,632,122 17,066,144
Other Assets 947,397 1,804,066 942,726
------------ ------------ -------------
TOTAL ASSETS $139,035,111 $119,739,133 $ 114,611,504
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 25,540,938 $ 19,981,071 $ 20,667,349
Other current liabilities 6,284,419 6,569,527 4,896,094
Current portion of long-term debt 200,000 200,000 200,000
------------ ------------ -------------
Total Current Liabilities 32,025,357 26,750,598 25,763,443
Long-Term Debt 45,050,120 37,132,066 29,541,528
Deferred Federal Income Taxes 1,132,000 1,006,000 1,132,000
Shareholders' Equity:
Preferred shares-- without par value--
authorized 500,000 shares
Common shares--without par value--
19,500,000 shares authorized; outstanding
7,888,638 shares at June 30, 1995,
7,761,960 at June 30, 1994,
7,798,923 at December 31, 1994 789,539 776,871 780,567
Paid-in capital 24,354,789 22,908,583 23,552,180
Retained earnings 35,720,778 31,202,487 33,879,258
Less treasury shares (6,750 shares) (37,472) (37,472) (37,472)
------------ ------------ -------------
Total Shareholders' Equity 60,827,634 54,850,469 58,174,533
------------ ------------ -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $139,035,111 $119,739,133 $ 114,611,504
============ ============ =============
</TABLE>
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<TABLE>
LESCO, INC.
STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 71,464,682 $ 60,505,501 $ 118,701,809 $ 99,822,599
Cost of sales 47,267,587 39,151,746 78,986,897 65,404,800
------------ ------------ ------------- ------------
Gross Profit on Sales 24,197,095 21,353,755 39,714,912 34,417,799
Selling, general and
administrative expenses 18,978,038 15,923,256 35,069,262 29,216,465
------------ ------------ ------------- ------------
Income from Operations 5,219,057 5,430,499 4,645,650 5,201,334
Other deductions (income):
Interest expense 695,961 495,829 1,323,513 979,208
Other - net (603,791) (440,821) (980,869) (852,173)
------------ ------------ ------------- ------------
92,170 55,008 342,644 127,035
------------ ------------ ------------- ------------
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle 5,126,887 5,375,491 4,303,006 5,074,299
Income taxes 1,999,000 2,096,000 1,678,000 1,979,000
------------ ------------ ------------- ------------
Income Before Cumulative Effect of
Change in Accounting Principle 3,127,887 3,279,491 2,625,006 3,095,299
Cumulative effect on prior years of
changing the method of capitalizing
certain inventory costs -- -- -- 1,149,268
------------ ------------ ------------- ------------
NET INCOME $ 3,127,887 $ 3,279,491 $ 2,625,006 $ 4,244,567
============ ============ ============= ============
Earnings Per Share:
Income before cumulative effect
of change in accounting
principle $ .39 $ .41 $ .32 $ .39
Cumulative effect on prior years of
changing the method of capitalizing
certain inventory costs -- -- -- .14
------------ ------------ ------------- ------------
EARNINGS PER SHARE $ .39 $ .41 $ .32 $ .53
============ ============ ============= ============
Weighted average number of
common and common equivalent
shares outstanding 8,120,617 8,057,180 8,096,422 8,022,019
============ ============ ============= ============
</TABLE>
3
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<TABLE>
LESCO, INC.
STATEMENTS OF CASH FLOW
<CAPTION>
SIX MONTHS ENDED JUNE 30
-----------------------------
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 2,625,006 $ 4,244,567
Adjustments to reconcile net income to
net cash used by operating activities:
Cumulative effect of accounting change (1,149,268)
Depreciation and amortization 1,575,722 1,531,470
Increase in accounts receivable (10,881,786) (9,422,898)
Provision for uncollectible accounts
receivable 346,670 204,677
Increase in inventories (12,314,986) (4,149,033)
Increase in accounts payable 4,873,589 4,753,329
Increase in other current items 1,790,313 1,885,641
Other (4,671) (65,000)
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NET CASH USED BY
OPERATING ACTIVITIES (11,990,143) (2,166,515)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,662,325) (1,305,938)
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NET CASH USED BY INVESTING ACTIVITIES (3,662,325) (1,305,938)
FINANCING ACTIVITIES:
Proceeds from borrowings 46,100,000 35,300,000
Reduction of borrowings (30,591,408) (31,289,689)
Issuance of common shares 811,581 421,133
Cash dividend (783,486) (698,272)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 15,536,687 3,733,172
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Net (Decrease) Increase in Cash (115,781) 260,719
Cash -- Beginning of the Period 3,336,984 2,455,710
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CASH - END OF THE PERIOD $ 3,221,203 $ 2,716,429
============= =============
</TABLE>
4
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LESCO, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE A - Basis of Presentation
- ------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles 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, 1994.
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.
5
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LESCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
For the second quarter ended June 30, 1995, the Company increased sales
$10,959,000, an 18.1% increase from $60,506,000 in 1994 to $71,465,000 in 1995.
Sales for the six months ended June 30, 1995 increased $18,879,000 which
represents an 18.9% increase over 1994 sales of $99,823,000 to $118,702,000 in
1995. Sales of both hard goods and consumable goods increased at approximately
the same rate as the Company's overall sales for the quarter and year-to-date
1995 compared to 1994. All sales groups increased for both the three months
and six months ended June 30, 1995 compared to 1994. Same store sales for the
Company's Service Centers increased in 1995 over 1994 by 17.5% for the second
quarter and 17.4% year-to-date.
Gross profit as a percentage of sales was 33.9% for the second quarter 1995
compared to 35.3% for 1994 and 33.5% for the six months ended June 30, 1995
compared to 34.5% in 1994. The reason for the decline in gross profit margins
is due to fertilizer and combination products (which contain fertilizer)
margins both of which declined for the quarter and year-to-date periods in
1995 compared to 1994. The principal raw material used in the Company's
fertilizers is urea which is an agricultural-commodity driven product. The
marketplace cost for urea has increased in excess of 50% in the last year
which has reduced fertilizer margins. Due to the rapid increase in urea cost,
the Company was unable to pass along 100% of the cost increase to customers.
Most of the fertilizer margin shortfall was offset by improved margins in the
remaining product lines.
The Company's selling, general and administrative expenses for the second
quarter 1995 were 26.6% of sales compared to 26.3% in 1994. The main cause
for the $3,055,000 increase in selling, general and administrative expenses in
the second quarter 1995 compared to 1994 is the $1,402,000 cost increase due to
the increase in Service Centers from 131 in operation as of June 30, 1994 to
169 as of June 30, 1995. The six month selling, general and administrative
expenses in 1995 were 29.5% of sales compared to 29.2% for 1994. The total
dollar increase in 1995 was $5,853,000 over 1994 with $2,984,000 of this
increase representing the additional Service Centers in operation as noted
above. Selling expenses also increased for Golf Course Sales for the quarter
and year-to-date with 65 Golf Course Sales territories in operation in 1995
compared to 59 in 1994 and the employment of 12 Regional Golf Course
Agronomists in 1995 compared to 6 in 1994. Remaining selling, general and
administrative expenses were relatively constant as a percentage of sales for
the second quarter and for the six months ended June 30, 1995 compared to 1994.
Interest expense for both the quarter and six months ended June 30, 1995
increased over comparable periods for 1994. This increase is due to both
interest rate increases and increased borrowings. Other deductions -- net
include customer finance charges which total $569,000 for the second quarter
1995 compared to $706,000 in 1994 and $910,000 for the six months 1995 compared
to $1,068,000 in 1994.
The Company's effective tax rate for the second quarter and year-to-date 1995
and 1994 is 39%.
6
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Financial Condition
- --------------------
Total assets are $139,035,000 as of June 30, 1995 compared to $119,739,000 at
June 30, 1994 and $114,612,000 at December 31, 1994. The principal reason for
the increase from June 30, 1994 to 1995 is the increase in sales volume while
the increase from December 31, 1994 to June 30, 1995 is principally due to the
Company's seasonal nature. Inventories increased to $63,991,000 as of June 30,
1995 from $53,201,000 as of June 30, 1994, a 20.3% increase. This compares
with the sales increase of 18.9%. Inventories increased primarily due to the
number of Service Centers and Golf Course Trucks in operation in 1995 compared
to 1994. As of December 31, 1994, inventories totaled $51,676,000. The
increase from December 31, 1994 to June 30, 1995 relates both to the sales
volume increase and the seasonal nature of the Company. Accounts receivable
also increased from $41,534,000 at June 30, 1994 to $48,951,000 at June 30,
1995, a 17.9% increase. At December 31, 1994, accounts receivable totaled
$38,415,000 with the increase to June 30, 1995 also related to sales volume
and the seasonal nature of the Company.
The funding for these increases was provided by long-term debt and accounts
payable. The principal change in the Company's long-term debt is additional
borrowings under its revolving credit agreement which totaled $38,300,000 as of
June 30, 1995, $30,200,000 as of June 30, 1994 and $22,700,000 as of December
31, 1994. Accounts payable increased from $19,981,000 at June 30, 1994 to
$25,541,000 at June 30, 1995, a 27.8% increase. As of December 31, 1994,
accounts payable totaled $20,667,000. The June to June increase relates to
business volume and the December to June increase reflects the seasonality of
the Company's business.
As of June 30, 1995, the Company had $6,700,000 available for borrowing under
its revolving credit agreement. Expenditures for capital improvements totaled
$3,662,000 for the first six months of 1995. Included in the capital
improvements is the purchase of the Company's previously leased Avon Lake
distribution facility for approximately $2 million. The remaining capital
expenditures relate primarily to the opening of 31 new Service Centers in
1995. Management believes its credit position will allow for capital
improvements and seasonal working capital needs.
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PART II - OTHER INFORMATION
---------------------------
Except to the extent 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 17, 1995, the Registrant 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
-----------------------------------------
<TABLE>
<CAPTION>
Votes "For" Votes "Withheld"
----------- ----------------
<S> <C> <C>
Drexel Bunch 6,517,973 24,890
Robert F. Burkhardt 6,531,798 11,065
Paul H. Carleton 6,516,498 26,365
David H. Clark 6,530,998 11,865
Daniel G. Dunstan 6,531,698 11,165
J. Martin Erbaugh 6,531,309 11,554
Stanley M. Fisher 6,530,598 12,265
William A. Foley 6,530,398 12,465
F. Leon Herron Jr. 6,516,748 26,115
William B. Nicol 6,515,298 27,565
Karl E. Ware 6,529,948 12,915
</TABLE>
Adoption of a Directors' Stock Option Plan effective March 3, 1995
------------------------------------------------------------------
<TABLE>
<CAPTION>
For Against Abstain/Broker Non-Votes
--- ------- ------------------------
<S> <C> <C> <C>
Directors' Stock Option Plan 6,247,430 212,288 83,145
</TABLE>
No other matters were brought before the shareholders for a vote.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(27) Financial Data Schedule
8
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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 8, 1995 By: Daniel G. Dunstan
- --------------- ______________________________
Chief Operating Officer
Executive Vice President/Secretary
Principal Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,221,203
<SECURITIES> 0
<RECEIVABLES> 51,901,523
<ALLOWANCES> 2,951,000
<INVENTORY> 63,991,220
<CURRENT-ASSETS> 118,934,967
<PP&E> 39,429,283
<DEPRECIATION> 20,276,536
<TOTAL-ASSETS> 139,035,111
<CURRENT-LIABILITIES> 32,025,357
<BONDS> 45,050,120
<COMMON> 789,539
0
0
<OTHER-SE> 60,038,095
<TOTAL-LIABILITY-AND-EQUITY> 139,035,111
<SALES> 118,701,809
<TOTAL-REVENUES> 118,701,809
<CGS> 78,986,897
<TOTAL-COSTS> 34,722,592
<OTHER-EXPENSES> (980,869)
<LOSS-PROVISION> 346,670
<INTEREST-EXPENSE> 1,323,513
<INCOME-PRETAX> 4,303,006
<INCOME-TAX> 1,678,000
<INCOME-CONTINUING> 2,625,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,625,006
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
