<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 March 31, 1995 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)
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.
<TABLE>
<CAPTION>
Outstanding at
Class May 8, 1995
- ------------------------------- -----------------
<S> <C>
Common shares without par value 7,830,238 shares
</TABLE>
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PART I - FINANCIAL STATEMENTS
LESCO, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 March 31 December 31
1995 1994 1994
-------- -------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,418,530 $ 4,186,815 $ 3,336,984
Accounts receivable -- net 50,417,412 41,991,416 38,415,407
Inventories 64,100,215 55,165,146 51,676,234
Prepaid expenses and other assets 3,300,130 3,209,338 3,174,009
----------- ----------- -----------
Total Current Assets 121,236,287 104,552,715 96,602,634
Property, Plant and Equipment 36,764,027 34,821,202 35,992,303
Less allowance for depreciation
and amortization (19,655,170) (16,884,951) (18,926,159)
----------- ----------- -----------
17,108,857 17,936,251 17,066,144
Other Assets 954,753 1,782,503 942,726
----------- ----------- -----------
TOTAL ASSETS $139,299,897 $124,271,469 $114,611,504
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 35,003,611 $ 24,627,161 $ 20,667,349
Other current liabilities 4,634,937 4,183,789 4,896,094
Current portion of long-term debt 200,000 200,000 200,000
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 39,838,548 29,010,950 25,763,443
Long-Term Debt 40,596,061 42,177,015 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;
7,810,513 shares issued and
7,803,763 outstanding at March 31,
1995, 7,739,360 at March 31, 1994,
7,798,923 at December 31, 1994 781,051 774,611 780,567
Paid-in capital 23,613,332 22,719,097 23,552,180
Retained earnings 33,376,377 28,621,268 33,879,258
Less treasury shares (37,472) (37,472) (37,472)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 57,733,288 52,077,504 58,174,533
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $139,299,897 $124,271,469 $114,611,504
=========== =========== ===========
</TABLE>
2
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LESCO, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------
1995 1994
------------- --------------
<S> <C> <C>
Net sales $ 47,237,127 $ 39,317,098
Cost of sales 31,719,310 26,253,054
------------ -------------
GROSS PROFIT ON SALES 15,517,817 13,064,044
Selling, general and
administrative expenses 16,091,224 13,293,209
------------ -------------
LOSS FROM OPERATIONS (573,407) (229,165)
Other deductions (income):
Interest expense 627,551 483,379
Other - net (377,077) (411,352)
------------ -------------
250,474 72,027
------------ -------------
Loss Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle (823,881) (301,192)
Income taxes (321,000) (117,000)
------------ -------------
Loss Before Cumulative Effect of
Change in Accounting Principle (502,881) (184,192)
Cumulative effect on prior years
of changing the method of
capitalizing certain inventory
costs 1,149,268
------------ -------------
NET (LOSS) INCOME $ (502,881) $ 965,076
============ =============
Earnings (Loss) Per Share:
Loss before cumulative effect
of change in accounting
principle $ (0.06) $ (0.02)
Cumulative effect on prior
years of changing the method
of capitalizing certain
inventory costs 0.14
------------ -------------
EARNINGS (LOSS) PER SHARE $ (0.06) $ 0.12
============ =============
Weighted average number of
common and common equivalent
shares outstanding 7,802,536 7,986,858
============ =============
</TABLE>
3
<PAGE> 4
LESCO, INC.
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (502,881) $ 965,076
Adjustments to reconcile net (loss) income
to net cash used by operating activities:
Cumulative effect of accounting change (1,149,268)
Depreciation and amortization 784,541 766,870
Deferred income taxes
Increase in accounts receivable (12,338,009) (9,956,105)
Provision for uncollectible accounts
receivable 336,004 280,897
Increase in inventories (12,423,981) (6,112,792)
Increase in accounts payable 14,336,262 9,399,419
Increase in other current items (387,278) (858,735)
Other (12,027) (43,437)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (10,207,369) (6,708,075)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (827,254) (845,467)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (827,254) (845,467)
FINANCING ACTIVITIES:
Proceeds from borrowings 18,200,000 14,700,000
Reduction of borrowings (7,145,467) (5,644,740)
Issuance of common shares 61,636 229,387
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,116,169 9,284,647
----------- -----------
Net Increase in Cash 81,546 1,731,105
Cash -- Beginning of the Period 3,336,984 2,455,710
----------- -----------
CASH - END OF THE PERIOD $ 3,418,530 $ 4,186,815
=========== ===========
</TABLE>
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<PAGE> 5
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 three months ended March 31 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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<PAGE> 6
LESCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's first quarter sales increased $7,920,000, a 20.1% increase to
$47,237,000 in 1995 compared to $39,317,000 for the first quarter 1994. All
sales channels recognized increases with Service Centers realizing the largest
increase of $3,200,000 for the quarter. The Company's Service Center sales on a
comparative basis of 103 stores was up 17.3% for the first quarter 1995
compared to 1994. In addition, both consumable and hard good products sales
increased in the first quarter 1995 over 1994.
Gross profit as a percentage of sales declined slightly from 33.2% for the
first quarter 1994 compared to 32.9% in 1995. The Company's consumable
products margins declined primarily due to the increasing costs of fertilizer
products and due to the competitive marketplace, particularly as it relates to
pre-emergent turf protection products. The Company's hard goods products
margin increased due primarily to price increases which offset a portion of the
consumable goods gross margin decline.
Selling, general and administrative expenses increased to 34.1% of sales for
the first quarter 1995 compared to 33.8% in 1994. The increase was
$2,798,000, a 21% increase in the first quarter 1995 over 1994 which compares
to a sales increase of 20.1%. $1,582,000 of the increase is due to the newly
opened Service Centers during the first quarter 1995 compared to 1994. The
Company opened 21 new Service Centers in the first quarter of 1995 and had 159
in operation as of March 31, 1995 compared to 121 stores open as of March 31,
1994. In addition, sales expenses increased with the addition of six new
Stores-On-Wheels and six Regional Agronomists which were added in the first
quarter of 1995. Distribution, delivery, marketing and general administrative
expenses all increased at a percent less than the Company's sales growth.
The Company's interest expense increased to $628,000 in the first quarter 1995
compared to $483,000 in 1994. This increase is due to market rate increases in
1995 compared to 1994. Other deductions - net, consist primarily of customer
finance charges which totaled $341,000 in the first quarter 1995 compared to
$362,000 in 1994.
The Company's effective tax rate for both the first quarter of 1995 and 1994 is
39%.
Financial Condition
The Company's financial condition continued to strengthen with long-term debt
reducing to $40,596,000 as of March 31, 1995 compared to $42,177,00 at March
31, 1994. The Company's long-term debt did increase from $29,541,000 as of
December 31, 1994 in order to fund the seasonal increases required in accounts
receivable and inventories. Accounts receivable increased to $50,417,000 as
of March 31, 1995 compared to $41,991,000 as of March 31, 1994 and $38,415,000
as of December 31, 1994. Inventories increased to $64,100,000 as of March
31, 1995 compared to $55,165,000 as of March 31, 1994 and $51,676,000 as of
December 31, 1994. Both the accounts receivable (20.1%) and the inventory
(16.2%) increases from March 31, 1994 to March 31, 1995 compare favorably to
the Company's sales increase of 20.1% for the first quarter 1995 compared to
1994. The increase
6
<PAGE> 7
in inventories is funded by both long-term debt, as noted above, and by
accounts payable. Accounts payable as of March 31, 1995 was $35,004,000
compared to $24,627,000 as of March 31, 1994 and $20,667,000 as of December 31,
1994.
As of March 31, 1995 the Company had $11,200,000 remaining available under its
revolving credit agreement. Expenditures for capital improvements totaled
$827,000 in the first quarter and relates primarily to expenditures for the
opening of new Service Centers. In April, the Company exercised a purchase
option for its leased Avon Lake, Ohio distribution facility. This facility is
approximately 139,000 square feet and its purchase price is slightly in excess
of $2,000,000. This transaction is scheduled to be consummated within the next
90 days.
7
<PAGE> 8
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 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(27) Financial Data Schedule
8
<PAGE> 9
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.
May 8, 1995 By: Daniel G. Dunstan
------------------------------------
Daniel G. Dunstan
Chief Operating Officer
Executive Vice President/Secretary
Principal Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,418,530
<SECURITIES> 0
<RECEIVABLES> 53,336,126
<ALLOWANCES> 2,918,714
<INVENTORY> 64,100,215
<CURRENT-ASSETS> 121,236,287
<PP&E> 36,764,027
<DEPRECIATION> 19,655,170
<TOTAL-ASSETS> 139,299,897
<CURRENT-LIABILITIES> 39,838,548
<BONDS> 40,596,061
<COMMON> 781,081
0
0
<OTHER-SE> 56,952,237
<TOTAL-LIABILITY-AND-EQUITY> 139,299,897
<SALES> 47,237,127
<TOTAL-REVENUES> 47,237,127
<CGS> 31,719,310
<TOTAL-COSTS> 15,755,220
<OTHER-EXPENSES> (377,077)
<LOSS-PROVISION> 336,004
<INTEREST-EXPENSE> 627,551
<INCOME-PRETAX> (823,881)
<INCOME-TAX> (321,000)
<INCOME-CONTINUING> (502,881)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (502,887)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
