<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement
X Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LESCO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
LESCO, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
<PAGE> 2
(4) Date filed:
Not Applicable
<PAGE> 3
LESCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1995
APRIL 13, 1995
TO THE SHAREHOLDERS OF
LESCO, INC.:
The annual meeting of the shareholders of LESCO, Inc., an Ohio
corporation (the "Company") will be held at the offices of the Company, 20005
Lake Road, Rocky River, Ohio 44116 on Wednesday, May 17, 1995 at 9:30 a.m.,
Cleveland time, for the following purposes:
1. To elect Directors, each to hold office for a one-year term
and until his successor is elected and qualified.
2. To consider and act upon a proposal to adopt the LESCO, Inc.
Directors' Stock Option Plan.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on April 7, 1995 will be
entitled to notice of and to vote at the meeting. Shareholders are urged to
complete, date and sign the enclosed proxy and return it in the enclosed
envelope.
By Order of the Board of Directors,
DANIEL G. DUNSTAN, Secretary
<PAGE> 4
LESCO,INC.
20005 LAKE ROAD
ROCKY RIVER, OHIO 44116
PROXY STATEMENT
April 13, 1995
GENERAL INFORMATION
This proxy statement is furnished in connection with the
solicitation of proxies to be used at the annual meeting of shareholders (the
"Annual Meeting") of LESCO, Inc., an Ohio corporation (the "Company"), to be
held at the offices of the Company, 20005 Lake Road, Rocky River, Ohio, on
Wednesday, May 17, 1995, at 9:30 a.m., local time, and at any adjournment
thereof. This proxy statement and the accompanying notice and proxy, together
with the Company's Annual Report to Shareholders for the year ended December
31, 1994, are first being sent to shareholders on or about April 13, 1995.
The solicitation of proxies is made by and on behalf of the
Board of Directors. The cost of the solicitation of proxies will be borne by
the Company. The Company may also reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for expenses incurred by them in sending
proxy materials to the beneficial owners of the Company's Common Shares,
without par value (the "Common Shares").
If the enclosed proxy is properly executed and returned, the
Common Shares represented thereby will be voted in accordance with any
directions properly specified therein. If no directions are indicated, the
Common Shares will be voted to elect the directors set forth under "Election of
Directors" below and FOR the proposal to approve the LESCO, Inc. Directors'
Stock Option Plan. A shareholder's presence alone at the Annual Meeting will
not operate to revoke that shareholder's proxy. The proxy is revocable by a
shareholder at any time insofar as it has not been exercised by giving notice
to the Company in writing or in open meeting.
The close of business on April 7, 1995, has been fixed as the
record date for the determination (the "Record Date") of shareholders entitled
to notice of and to vote at the Annual Meeting. At that time, the Company's
voting securities outstanding consisted of 7,803,763 Common Shares, each of
which is entitled to one vote at the Annual Meeting. The presence, in person
or by proxy, of persons entitled to vote a majority of the Common Shares
outstanding will constitute a quorum for the conduct of all business to be
considered at the annual meeting.
<PAGE> 5
ELECTION OF DIRECTORS
The Code of Regulations of the Company (the "Code") fixes the
number of Directors at nine but authorizes the Board of Directors to increase
or decrease the number of Directors by not more than two. The Code also
authorizes the Board of Directors to fill any vacancy by the affirmative vote
of a majority of the Directors then in office. In accordance with those
provisions, Stanley M. Fisher was elected to fill the vacancy created by the
death of James I. FitzGibbon in October 1994, and the Board increased the
number of directors from nine to eleven and elected Drexel Bunch and J. Martin
Erbaugh to the Board. Each Director elected serves until the next annual
meeting and until his successor is elected and qualified.
The Board of Directors of the Company, through the Nominating
Committee, has nominated the persons listed below for election as Directors.
If any nominee declines or is unable to serve (which the Board of Directors has
no reason to expect), the persons named in the accompanying Proxy intend to
vote for the balance of those nominees named, and, if they deem it advisable,
for a substitute nominee.
<TABLE>
The following table sets forth information with respect to
each nominee:
<CAPTION>
DIRECTOR
CONTINUOUSLY
NAME AGE POSITION SINCE
<S> <C> <C> <C>
William A. Foley 47 Chairman of the Board of 1993
Directors, President and
Chief Executive Officer
Daniel G. Dunstan 51 Executive Vice-President, 1977
Chief Operating Officer,
Chief Accounting and
Financial Officer,
Secretary and Director
Robert F. Burkhardt 58 Consultant and Director 1963
Paul H. Carleton 47 Director 1984
William B. Nicol 77 Director 1984
David H. Clark 66 Director 1985
Karl E. Ware 68 Director 1987
F. Leon Herron, Jr. 73 Director 1991
Stanley M. Fisher 67 Director 1994
Drexel Bunch 50 Director 1995
J. Martin Erbaugh 46 Director 1995
</TABLE>
-2-
<PAGE> 6
During 1994, the Board of Directors of the Company met, or
took unanimous written action in lieu of a meeting, on six occasions. No
director attended less than 75% of the meetings of the Board of Directors and
committees of which he was a member held during 1994.
The Company has an Audit Committee that reviews, with the
Company's independent auditors, the audit plans, the results of the audit
engagement and the adequacy of the Company's internal accounting controls. The
Audit Committee, which consisted of William B. Nicol, Chairman, Paul H.
Carleton, and David H. Clark, met two times during 1994.
During 1994, the Company had a Compensation Committee which
was responsible for determining executive compensation and administering the
Company's compensation plans. The Compensation Committee consisted of David H.
Clark, Chairman, Karl E. Ware, F. Leon Herron, Jr. and Paul H. Carleton. This
committee met four times during 1994. In March 1995, the Board of Directors
replaced the Compensation Committee with a Compensation and Governance
Committee, which consists of J. Martin Erbaugh, Chairman, David H. Clark,
Drexel Bunch and Stanley M. Fisher.
The Nominating Committee consisted of William B. Nicol, James
I. FitzGibbon and William A. Foley prior to Mr. FitzGibbon's death, and
consisted of Karl E. Ware, Paul H. Carleton and William A. Foley thereafter.
The Nominating Committee nominates candidates for election to the Board of
Directors and will consider suggestions forwarded by shareholders to the
Secretary of the Company concerning qualified candidates for election as
Directors. The Nominating Committee met two times during 1994.
Ohio law provides that if notice in writing is given by any
shareholder to the President or a Vice-President or the Secretary of the
Company not less than forty-eight hours before the time fixed for holding the
Annual Meeting, which states that the shareholder desires that the voting at
such election be cumulative, and an announcement of the giving of such notice
is made upon the convening of the meeting by the Chairman or Secretary or by or
on behalf of the shareholder giving such notice, then each shareholder will
have cumulative voting rights in the election of directors. If cumulative
voting is invoked: (i) each shareholder will be entitled to cast an aggregate
number of votes in the election of Directors determined by multiplying the
number of persons to be elected by the number of shares the shareholder holds
as of the Record Date and to distribute such votes among nominees in any
fashion the shareholder sees fit; and (ii) unless express contrary instructions
are given therein, a proxy in the enclosed form will include discretionary
authority to cumulate votes and distribute them among persons nominated by the
Board of Directors in such fashion as the proxies believe will maximize the
number of such nominees elected. If cumulative voting is not invoked, each
shareholder will be entitled to cast for any nominee (up to the number of
nominees to be elected) up to that number of votes that equals the number of
shares held by him as of the Record Date. The nominees receiving the greatest
number of votes, up to the number of nominees to be elected, will be elected.
Submission of a Proxy withholding authority from a nominee or a broker non-vote
has the effect of failing to vote for such nominee but does not otherwise act
as a vote "against" such nominee.
BUSINESS EXPERIENCE OF DIRECTORS AND NOMINEES
William A. Foley joined the Company in July 1993 as President,
Chief Executive Officer and a director. He was elected Chairman of the Board
of Directors in October 1994 following the death of James I. FitzGibbon. Mr.
Foley was President and Chief Executive Officer of Imperial Wallcoverings,
Inc., a wallpaper producer and a subsidiary of Collins & Aikman, Inc., from
October 1990 until February 1993. From January 1988 to October 1990, Mr. Foley
was Vice President and General Manager of The Scotts Company Consumer Business
Group, a producer and marketer of turf care products. Mr. Foley was Vice
President and General Manager of Rubbermaid Specialty Products Division, a
producer of rubber and plastic products, from 1984 to 1988, and was Vice
President - Sales and Marketing for Anchor Hocking Corporation, a producer of
glass products from 1970 to 1984. Mr. Foley is also a director of Associated
Estates Realty Corporation, a real estate investment trust, and Libbey, Inc., a
producer of glass products.
-3-
<PAGE> 7
Daniel G. Dunstan has served as Secretary, Chief Financial
Officer and a director of the Company since 1977, as Executive Vice President
since January 1987 and as Chief Operating Officer since March 1991. Mr.
Dunstan was the Treasurer of the Company from 1979 until March 1988.
Robert F. Burkhardt has served as a consultant to the Company
since July 1994 and as a director since 1963. He is a co-founder of the
Company and served as Vice Chairman from January 1987 to June 1994. Mr.
Burkhardt served as President of the Company from May 1984 to January 1987, and
as Vice President from 1963 to May 1984.
Paul H. Carleton has been a director of the Company since May
1984. Since January 1993, Mr. Carleton has been Managing Director of, and a
principal in, Carleton, McCreary, Holmes & Co., an investment banking firm
located in Cleveland, Ohio, specializing in mergers, acquisitions and public
and private financings. From July 1989 through December 1992, Mr. Carleton was
President, and a principal in, The Carleton Group, an investment banking firm
located in Cleveland, Ohio. Prior thereto, Mr. Carleton was a Managing
Director of McDonald & Company Securities, Inc., a Cleveland investment banking
firm.
David H. Clark has been a director of the Company since
December 1985. Mr. Clark was President of McLouth Steel Products Corp. from
1986 to 1988 and is now retired. From 1984 to 1985, Mr. Clark was a Vice
President of L.T.V. Steel Company, Inc., and President of its Bar Division. He
had also been Executive Vice-President--Steel Group for Republic Steel
Corporation prior to the merger of Republic and L.T.V. in 1984.
F. Leon Herron, Jr. has been a director of the Company since
June 1991. Mr. Herron was employed by O.M. Scott & Sons, Inc., a producer and
marketer of turf care products, prior to his retirement in 1983, and served as
President from 1966 to 1983 and Chairman from 1971 to 1983.
William B. Nicol has been a director of the Company since May
1984. Prior to his retirement in 1983, Mr. Nicol was a partner in Meaden &
Moore, independent certified public accountants, where he served as Managing
Partner from 1964 to 1980. Meaden & Moore served as the Company's auditors
from 1962 to 1984.
Karl E. Ware has been a director of the Company since March
1987. Mr. Ware is currently Chairman and Chief Executive Officer of Ware
Industries, Inc., a wire bending company. Prior to his retirement in 1986, Mr.
Ware was employed by White Consolidated Industries, Inc., where he served as
Vice Chairman and Chief Administrative Officer from 1984 to 1986 and Senior
Executive Vice President and Chief Operating Officer from 1976 to 1984. He is
a director of Lubrizol Corporation, a specialty chemical manufacturer; Oatey
Co., a plumbing and aftermarket automotive supplier; Pioneer Standard
Electronics, Inc., a national distributor of industrial electronics; and
Acme-Cleveland Corporation, a diversified manufacturer and supplier of
industrial and telecommunications products.
Stanley M. Fisher was the Company's outside counsel from 1975
to December 1994, and became a director in December 1994. He is Of Counsel
with the Cleveland, Ohio law firm Arter & Hadden. Mr. Fisher was appointed by
the Board of Directors to fill the vacancy created by the death of James I.
FitzGibbon, a co-founder and former Chairman of the Board of Directors of the
Company. Mr. Fisher has been a member of the National Conference of
Commissioners on Uniform State Laws since 1983. He was appointed in 1994 by
the President of the United States to the Federal Service Impasses Panel. He
is a past National President of the Federal Bar Association and serves as an
Adjunct Professor of Law at The Cleveland-Marshall College of Law of Cleveland
State University, Cleveland, Ohio.
Drexel Bunch has been a director since March 3, 1995. Mr.
Bunch has been employed by Nordson Corporation, a producer and marketer of
industrial equipment along with software and application technologies, since
1983, where he has been Vice President, Manufacturing, since 1985. Prior to
that, Mr. Bunch held the positions of Vice President of Quality and
Productivity and Director of Quality Assurance. Prior to joining Nordson
Corporation, Mr. Bunch was employed for more than 16 years by the Ford Motor
Company.
-4-
<PAGE> 8
J. Martin Erbaugh has been a director since March 3, 1995.
Mr. Erbaugh is an attorney who has had 17 years of management experience in the
lawn care industry as President of Lawnmark, a lawn care company. Currently,
he is President of Erbaugh Corp., a private investment firm; President of Coer
Inc., a leasing firm; a principal of Double Play, Inc., a recreational services
company; and a partner in Coer Properties, a real estate development firm. He
is a director of Barefoot, Inc., a national lawn care company; a director of
Morgan Fund Shares, Inc., a closed-end investment company; and a director of
Morgan Bank, NA, a national bank. He is Founder, a past President and Director
of The Professional Lawn Care Association of America. He is a trustee of the
Morgan Foundation.
-5-
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
--------------------------
The following table summarizes the compensation paid to the
Chief Executive Officer and each of the Company's other four most highly
compensated officers (the "Named Executive Officers") during or with respect to
the fiscal years ended December 1994, 1993 and 1992 for services in all
capacities to the Company.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Awards
All Other
Fiscal Salary Bonus Options Compensation3
Name and Principal Position Year ($) ($) (# of shares) ($)
--------------------------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
William A. Foley1 1994 $275,000 - 4,000 $ 6,358
Chairman of the Board, President 19932 139,615 - 300,000 615
And Chief Executive
Officer
James I. FitzGibbon 1994 225,961 - 4,000 5,752
Chairman of the Board1 1993 182,692 - 9,000 5,854
1992 250,000 - 9,000 5,296
Robert F. Burkhardt, 1994 185,177 - 4,000 7,175
Vice Chairman 1993 138,846 - 9,000 5,250
1992 190,000 - 9,000 4,421
Daniel G. Dunstan, 1994 182,000 - 4,000 8,015
Executive Vice-President 1993 184,692 15,0004 9,000 11,422
Chief Operating Officer, 1992 168,039 15,0004 9,000 7,388
Chief Accounting and
Financial Officer and Secretary
Philip R. Gardner, 1994 145,000 - 4,000 5,771
Executive Vice President, Sales 1993 147,500 - 9,000 5,027
1992 122,596 - 9,000 4,085
<FN>
1 James I. FitzGibbon served as Chairman of the Board until his death in
October 1994. William A. Foley was elected Chairman shortly
thereafter.
2 Mr. Foley was first employed by the Company effective July 1, 1993,
and the salary reported for fiscal year 1993 reflects the period July
1 through December 31, 1993.
3 Reflects (i) the Company's contributions to the LESCO, Inc. Stock
Investment and Salary Savings Plan and Trust and (ii) reimbursement
for medical expenses pursuant to an insurance program.
4 Reflects payment of a bonus in connection with increased services
rendered during the Company's search for a new president and chief
executive officer.
</TABLE>
-6-
<PAGE> 10
Option Grants in Last Fiscal Year
---------------------------------
<TABLE>
The following table sets forth the stock options granted
during the year ended December 31, 1994 to the Named Executive Officers.
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term1
- - -------------------------------------------------------------------- -----------------------------
% of Total
Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted2 Fiscal Year ($/sh) Date 0%($) 5%($) 10%($)
- - ---- ------- ------------ ------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
William A. Foley 4,000 3.5 16.000 3/1/04 0 $40,200 $102,000
James I. FitzGibbon 4,000 3.5 16.000 3/1/04 0 $40,200 $102,000
Robert F. Burkhardt 4,000 3.5 16.000 3/1/04 0 $40,200 $102,000
Daniel G. Dunstan 4,000 3.5 16.000 3/1/04 0 $40,200 $102,000
Philip R. Gardner 4,000 3.5 16.000 3/1/04 0 $40,200 $102,000
- - ----------------------------------------
<FN>
1 Amounts have been calculated using the exercise price per share at
assumed compound annual rates of stock appreciation from the date of
grant to the date of expiration of 0%, 5% and 10% respectively.
2 The options were granted pursuant to the Company's 1992 Stock
Incentive Plan. The options became fully exercisable on December 31,
1994. None of the options include "reload" or tax reimbursement
features.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year,
------------------------------------------------
and Fiscal Year-End Option Value
--------------------------------
<TABLE>
The following table sets forth information for each Named
Executive Officer with regard to the aggregate stock options exercised during
the year ended December 31, 1994, and the stock options held as of December 31,
1994.
<CAPTION>
Value of Unexercised
in-the-Money
Number of Unexercised Options at
Options at FY-End FY-End($)2
----------------------------- ------------------ ---------
Shares Acquired Value
Name on Exercise(#) Realized ($)1 Exercisable Unexercisable Exercisable Unexercisable
- - ---- -------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Foley 24,200 143,264 39,800 240,000 122,436 660,000
James I. FitzGibbon3 None n/a 73,900 0 342,117 -0-
Robert F. Burkhardt None n/a 73,900 0 342,117 -0-
Daniel G. Dunstan 15,000 142,980 43,900 0 151,038 -0-
Philip R. Gardner 13,950 123,124 22,000 0 12,780 -0-
- - -----------------------------------
<FN>
1 Market value of underlying securities at exercise, minus the exercise price
of $9.333 for William A. Foley, $6.500 and $6.417 for Daniel G. Dunstan
and $7.000 and $6.417 for Philip R. Gardner.
2 Market value of underlying securities at December 31, 1994 of $12.75 minus
the exercise price.
3 Reflects options held by the estate of James I. FitzGibbon.
</TABLE>
-7-
<PAGE> 11
COMPENSATION OF DIRECTORS
In 1994 the Company paid all Directors who are not employees a
retainer of $7,500 per year and $400 per Board and committee meeting attended.
Effective January 1, 1995, the annual retainer is $12,000, the compensation for
Board meeting attendance is $750 and the compensation for committee meeting
attendance (other than on the same day as a Board meeting) is $1,000 for the
chairman of the committee and $750 for each member.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the
"Compensation Committee") was responsible for determining compensation paid to
the Company's executive officers during 1994. The Compensation Committee's
members during 1994 were David H. Clark (Chairman), Paul H. Carleton, F. Leon
Herron, Jr. and Karl E. Ware. This report describes the Compensation
Committee's executive compensation philosophy and the policies and actions of
the Compensation Committee in fiscal 1994 in considering compensation of the
executive officers of the Company, including the Named Executive Officers.
The basic philosophy of the Compensation Committee is to
provide compensation to the executive officers in a manner that (1) relates
total compensation appropriately to corporate performance and the individual
performance of each executive officer, (2) motivates the executive officers to
achieve increased shareholder value, and (3) aligns the interests of the
executive officers with the long-term interests of the Company's shareholders.
The Compensation Committee also intends to provide
compensation to the executive officers at a level consistent with compensation
available to executives with similar responsibilities at companies of similar
size in order to continue to attract and retain key executives. The
Compensation Committee generally attempts to set base pay at levels slightly
below the levels at those companies and to set overall pay at levels slightly
above the levels at those companies.
For fiscal 1994, the Compensation Committee reviewed the
performance of management in connection with the considerations discussed
below.
BASE SALARY. Base salaries are set in accordance with the
Compensation Committee members' collective experience and perception of the
compensation paid to executives with similar responsibilities in companies of
similar size. In this context, the Compensation Committee considers management
compensation reports and publicly available information concerning the peer
group identified on page 10 (the "Peer Group") and concerning other competitors
of, and other companies of similar size to, the Company that are not included
in the Peer Group. Adjustments are made for individual performance, levels of
experience and the level of responsibility undertaken.
ANNUAL INCENTIVES. The Compensation Committee established a
Management Incentive Plan (the "Incentive Plan") in fiscal 1994 to enable the
Company to reward achievement of the objectives outlined in the Company's
Strategic Plan. The financial criteria used to measure achievement of these
objectives for fiscal 1994, as set forth in the Incentive Plan, were earnings
per share, total sales, net income, Common Share price and return on assets.
While the Company outperformed both the NASDAQ Industrial Index and its Peer
Group in shareholder value and growth, it did not achieve all of the Incentive
Plan objectives in 1994 and no Incentive Plan payout was made.
LONG-TERM INCENTIVES. The Company has an equity-based award
plan that provides for awards of share options, restricted shares, share
appreciation rights, limited share appreciation rights and performance units.
This plan is designed to create long-term incentives that align the interests
of the Company's shareholders and its management. The plan is available to
midlevel and senior Company officers and executives who are responsible for the
Company's long-term growth. In 1994, each Named Executive Officer was granted
options
-8-
<PAGE> 12
to purchase 4,000 Common Shares. The Compensation Committee believes that
option grants should be made on an annual basis to continue to provide eligible
employees a proprietary and vested interest in the growth and performance of
the Company, and does not specifically consider the number of options held by
an employee in making an award.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Company's
compensation philosophy for its Chief Executive Officer is based on the
principles of corporate and individual performance set forth above. The
Company has an employment agreement with William A. Foley, its Chairman of the
Board, President and Chief Executive Officer (the "Agreement"), which was
entered into in July 1993. Pursuant to the Agreement, Mr. Foley receives
annual compensation of $275,000, which was targeted as described in the third
paragraph of this report. Mr. Foley's annual compensation may be increased in
accordance with performance standards established by the Compensation Committee
and approved by the Board of Directors from time to time. Under the Agreement,
Mr. Foley was granted options to purchase up to 300,000 Common Shares. These
options vest at the rate of 20% per year over a five-year period beginning June
30, 1994. The below-market per share exercise prices of $9.33 for the first
60,000 Common Shares and $10.00 per share for the remaining 240,000 Common
Shares were set in lieu of additional cash compensation and to provide Mr.
Foley an enhanced proprietary and vested interest in the future growth and
performance of the Company. As stated above under "Long-term Incentives," Mr.
Foley was also granted options during 1994 to purchase 4,000 Common Shares
under the Company's equity-based award plan.
The Compensation Committee
David H. Clark, Chairman
Karl E. Ware
F. Leon Herron, Jr.
Paul H. Carleton
-9-
<PAGE> 13
PERFORMANCE COMPARISON
The following graph illustrates the return that would have
been realized (assuming reinvestment of dividends) by an investor who invested
$100 on December 31, 1989 in each of (i) the Company's Common Shares, (ii) the
NASDAQ Industrial Index, and (iii) a fund investing proportionately, based on
respective market capitalization, in the common stocks of the group of
companies which the Company has identified as its peer group solely for this
purpose.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<C> <C> <C> <C> <C> <C>
LESCO $100.00 $73.89 $129.60 $170.90 $242.90 $196.54
NASDAQ 100.00 90.64 149.32 161.82 173.40 167.85
PEER GROUP 100.00 67.22 94.35 111.43 135.23 122.24
</TABLE>
The Company is engaged in the manufacture and marketing of an
extensive line of golf course and lawn care products. These products include
fertilizers, turf protection products, grass seed, turf care equipment,
replacement parts and golf course accessories. In reviewing published industry
and line of business indexes, the Company has not identified an index which
portrays the Company's line of business. The Company competes with national
suppliers that market strictly fertilizers, turf protection products or
equipment directly to the end users. The Company also competes with numerous
privately held regional and local suppliers which offer a more diverse line of
turf care products than do the national suppliers. LESCO believes it is the
only national, publicly held company that supplies a full range of products to
the turf industry and sells directly to the end user.
Therefore, for purposes of preparing the above graph, LESCO
has selected a peer group of publicly held companies as follows:
. Toro Company - Manufactures lawn maintenance equipment.
. General Host - Operates a chain of specialty retail stores
devoted to the sale of lawn and garden products, craft and
Christmas merchandise.
. Ringer Corp. - Develops and sells environmentally compatible
lawn, garden and turf products. (Ringer Corp. commenced
trading on NASDAQ in 1990 and is included in the peer group
index only after December 31, 1990.)
. O.M. Scott & Sons, Inc. - Manufactures and markets consumer
do-it-yourself lawn care and professional golf course turf
care products. (Scott's commenced trading on NASDAQ in 1992
and is included in the peer group index only after December
31, 1992.)
The above list represents publicly held companies that
manufacture or market turf care related products. The Company intends to add
to this peer group list as additional publicly held companies are identified.
-10-
<PAGE> 14
PROPOSAL TO APPROVE THE LESCO, INC. DIRECTORS' STOCK OPTION PLAN
DESCRIPTION
The Company's Board of Directors (the "Board") adopted a
Directors' Stock Option Plan (the "Plan") on March 3, 1995 (the "Effective
Date"). This description is a summary of the Plan and is subject to and
qualified in its entirety by reference to the complete text of the Plan. (A
copy of the Plan may be obtained by written request sent to Daniel G. Dunstan,
Secretary, LESCO, Inc., 20005 Lake Road, Rocky River, Ohio 44116.)
Under the Plan, awards of options to purchase Common Shares
("Options") may be made to any Director of the Company who is not an employee
of the Company or of any of its subsidiaries (an "Eligible Director"). The
Options provided for under the Plan are not intended to and do not qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The Plan is not qualified under Section 401(a) of the Code and
is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974.
PURPOSE OF THE PLAN
The purpose of the Plan is to encourage those directors of the
Company who are not employees of the Company or of any of its subsidiaries to
acquire share ownership in the Company, to permit those directors to benefit
from share value appreciation, and to assist the Company in attracting and
retaining highly qualified directors.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time terminate, suspend, or amend the
Plan, but no such termination, suspension, or amendment may materially and
adversely affect any outstanding Options without the consent of the Eligible
Directors to whom such Options have been granted (a "Grantee"), and no
amendment may be made without shareholder approval if the amendment would: (a)
materially increase the benefits accruing to participants under the Plan; (b)
increase or decrease the number of Common Shares which may be issued under the
Plan; or (c) materially modify the eligibility requirements of the Plan.
SHARES SUBJECT TO THE PLAN
The aggregate number of Common Shares with respect to which
awards may be made under the Plan is 100,000. This maximum number of Common
Shares is subject to appropriate adjustment upon the occurrence of certain
events, including stock dividends, stock splits, mergers, consolidations,
reorganizations, recapitalizations, or other capital adjustments. If any
Option granted under the Plan expires, terminates, or is surrendered or
cancelled without having been exercised in full, the Common Shares then subject
to the Option will again be available for awards under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Company's Compensation and
Governance Committee (the "Committee"), which consists of not less than three
Directors of the Company appointed by the Board. The members of the Committee
serve at the pleasure of the Board, which may remove members from the Committee
or appoint new members to the Committee from time to time. Members of the
Committee may resign by written notice to the Chairman of the Board or the
Secretary of the Company. The Committee may adopt any rules it considers
appropriate for the conduct of its business or the administration of the Plan,
make interpretations of the Plan which it deems consistent with the Plan's
provisions, and take any other actions it considers appropriate in connection
with the Plan. The Committee has such additional authority as the Board may
determine to be desirable from time to time. All awards under the Plan will be
evidenced by an agreement between the Company and the Grantee.
-11-
<PAGE> 15
ELIGIBILITY FOR PARTICIPATION IN THE PLAN
Only an individual who is a director of the Company and not an
employee of the Company or of any subsidiary of the Company is eligible to
participate in the Plan.
GRANT OF OPTIONS
<TABLE>
Options are granted annually based on the Company's
performance results for the prior fiscal year as measured by net income. Each
Eligible Director will be granted options as follows:
<CAPTION>
Actual Net Income as a
Percentage of Budgeted Net Income Number of Options
--------------------------------- -----------------
<S> <C>
95 - 99.99% 500
100 - 104.99% 1,000
# 105% 2,000
</TABLE>
Awards will be calculated and granted as soon as practicable
after audited financial statements for the applicable fiscal year are
available.
Options granted under the Plan will have an exercise price
equal to the fair market value of the Common Shares on the date of grant. The
exercise price and the number of Common Shares subject to Options will be
appropriately adjusted in the event of stock splits, stock dividends,
recapitalizations, and certain other events involving a change in the Company's
capital structure.
EXERCISE OF OPTIONS
All Options granted under the Plan are fully vested on the
date of grant. Options become exercisable on December 31 of the year in which
they are granted but on the death of a Grantee or the departure from the Board
of Directors of a Grantee for reasons other than cause, all options held by
that Grantee become immediately exercisable. No option is exercisable more
than ten years from the date of grant. If a Grantee ceases to be an Eligible
Director for any reason, then all Options or any unexercised portion of such
Options which otherwise are exercisable will terminate unless exercised within
six months after the Grantee ceases to be an Eligible Director (but in no event
after expiration of the original term of the Option), but if the Grantee ceases
to be an Eligible Director by reason of the Grantee's death, the six month
period will instead be a one-year period. Notwithstanding the foregoing, upon
the discharge of any Grantee as a Director of the Company for cause, all
unexercised Options awarded to that Grantee will immediately lapse and be of no
further force or effect. No Option under the Plan is transferable by a Grantee
other than by will or the laws of descent and distribution. Upon the death of
a Grantee under the Plan, Options are exercisable only by the executor or
administrator of the Grantee's estate.
PAYMENT FOR COMMON SHARES
Payment for Common Shares issuable on the exercise of Options
under the Plan is permitted in the form of cash, by the surrender of Common
Shares valued at their then fair market value, or by a combination of Common
Shares and cash.
FEDERAL INCOME TAX CONSEQUENCES
All of the Options under the Plan are nonqualified stock
options. With respect to nonqualified stock options, in general, for federal
income tax purposes under present law:
(i) The grant of a nonqualified stock option, by itself,
will not result in income to the optionee.
-12-
<PAGE> 16
(ii) Except as provided in (v) below, the exercise of a
nonqualified stock option (in whole or in part, according to its
terms) will result in ordinary income to the optionee at that time in
an amount equal to the excess (if any) of the fair market value of the
shares on the date of exercise over the option price.
(iii) Except as provided in (v) below, the tax basis of the
shares acquired upon exercise of a nonqualified stock option, which
will be used to determine the amount of any capital gain or loss on a
future taxable disposition of such shares, will be the fair market
value of the shares on the date of exercise.
(iv) No deduction will be allowable to the employer
corporation upon the grant of a nonqualified stock option, but upon
the exercise of a nonqualified stock option, a deduction will be
allowable to the employer corporation at that time in an amount equal
to the amount of ordinary income realized by the optionee exercising
such option if the employer corporation deducts and withholds
appropriate federal withholding tax.
(v) With respect to the exercise of a nonqualified stock
option and the payment of the option price by the delivery of Common
Shares, to the extent that the number of shares received does not
exceed the number of shares surrendered, no taxable income will be
realized by the optionee at that time, the tax basis of the shares
received will be the same as the tax basis of the shares surrendered,
and the holding period of the optionee in the shares received will
include his holding period in the shares surrendered. To the extent
that the number of shares received exceeds the number of shares
surrendered, ordinary income will be realized by the optionee at that
time in the amount of the fair market value of such excess shares, the
tax basis of such excess shares will be equal to the fair market value
of such shares at the time of exercise, and the holding period of the
optionee in such shares will begin on the date such shares are
transferred to the optionee.
The federal income tax information presented herein is only a
general summary of the applicable provisions of the Internal Revenue Code and
regulations promulgated thereunder as in effect on the date of this Proxy
Statement. The actual federal, state, local, and foreign tax consequences to
an optionee may vary depending upon his particular circumstances.
Approval of the Plan requires the affirmative vote of the
holders of a majority of the Common Shares represented at the meeting, in
person or by proxy. Abstentions will have the same effect as a vote against
approval of the Plan, and broker non-voters will not affect the outcome of the
vote. If the Plan is approved by the shareholders, it will continue in effect
until terminated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
-13-
<PAGE> 17
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information with
respect to the beneficial ownership of the Company's Common Shares as of April
1, 1995 by each of the Directors (including nominees to be elected as
Directors), each of the Named Executive Officers, the Directors and executive
officers as a group, and each person known to the Company to be the beneficial
owner of five percent or more of the outstanding Common Shares.
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
BENEFICIAL NUMBER PERCENT
<S> <C> <C>
Drexel Bunch -0- *
Robert F. Burkhardt (2)(3)(4) 637,317 8.1
Paul H. Carleton 300 *
David H. Clark (3) 10,750 *
Daniel G. Dunstan (2)(3)(5) 197,802 2.5
J. Martin Erbaugh (10) 8,500 *
Stanley M. Fisher (8) 18,610 *
William A. Foley (2)(3)(9) 61,239 *
Philip R. Gardner (2)(3) 49,627 *
F. Leon Herron, Jr. (11) 2,700 *
William B. Nicol 600 *
Karl E. Ware (6) 14,700 *
All directors, nominees and 1,002,145 12.0
executive officers as a group
(12 persons)
Naomi C. FitzGibbon (2)(3)(7) 1,178,027 15.0
1330 Galleon Drive
Naples, Florida 33940
____________________________
<FN>
* Less than one percent
(1) The persons named in the table have sole voting and investment power
with respect to all shares shown as beneficially owned by them, subject to the
information contained in the footnotes below.
-14-
<PAGE> 18
(2) Includes shares held by the LESCO, Inc. Stock Investment and Salary
Savings Plan and Trust which are beneficially owned by the named persons as
follows: Mr. Burkhardt, 150,377 shares; Mr. Dunstan, 56,403 shares; Mrs.
FitzGibbon, 197,009 shares; Mr. Foley, 639 shares; and Mr. Gardner, 27,350
shares. Persons who beneficially own shares held by the LESCO, Inc. Stock
Investment and Salary Savings Plan and Trust have sole voting power with
respect to such shares.
(3) Mr. Burkhardt and Mrs. FitzGibbon, as personal representative of the
estate of James I. FitzGibbon, hold exercisable options to purchase 73,900
shares each. Mr. Dunstan holds exercisable options to purchase 43,900 shares.
Mr. Gardner holds exercisable options to purchase 22,000 shares. Mr. Clark
holds exercisable options to purchase 7,500 shares. Mr. Foley holds
exercisable options to purchase 37,960 shares.
(4) Includes 68,885 shares owned by Mr. Burkhardt's wife; 16,600 shares
owned by the Robert and Virginia Burkhardt Charitable Foundation; 124,800
shares owned by the Burkhardt Family Limited Partnership (Mr. Burkhardt
disclaims beneficial ownership with respect to 119,780 of these shares); and
3,940 shares owned by Mr. Burkhardt's wife as custodian for minor
grandchildren.
(5) Includes 30 shares owned by Mr. Dunstan's son.
(6) Includes 8,700 shares owned jointly by Mr. Ware and his wife, and
6,000 shares owned by his daughter.
(7) Includes 182,195 shares owned by the FitzGibbon Family Limited
Partnership (Mrs. FitzGibbon disclaims beneficial ownership with respect to
174,907 of these shares), 175,000 shares owned by the Naomi C. FitzGibbon
Charitable Remainder Unitrust, of which Mrs. FitzGibbon is sole trustee; and
13,000 shares held by the FitzGibbon Family Foundation (of which Mrs.
FitzGibbon disclaims beneficial ownership), of which Mrs. FitzGibbon is sole
trustee.
(8) Includes 17,750 shares in the Employee Retirement Plan and Trust,
Stanley M. Fisher, Trustee.
(9) Includes 1,840 shares owned by Mr. Foley's minor children.
(10) Includes 1,000 shares owned by Mr. Erbaugh's wife and 833 shares owned
by his minor children.
(11) Includes 200 shares owned by Mr. Herron's wife.
</TABLE>
SECTION 16 COMPLIANCE
Based solely on the Company's review of Forms 3, 4 and 5 filed
by or on behalf of the Company's directors, executive officers and principal
shareholders and certain written representations from those persons, which have
been submitted to the Company with respect to the 1994 fiscal year, pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, all required
reports were filed on a timely basis.
CERTAIN TRANSACTIONS
The Company has advanced funds, evidenced by demand promissory
notes, to Daniel G. Dunstan, Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary and a director, and Philip R. Gardner,
Vice President-Lawn Care Sales and National Accounts. These loans bear
interest (payable on demand) at 1/2% above a specified bank's prime rate for
Mr. Dunstan and at the prime rate for Mr. Gardner. Mr. Dunstan paid $79,674,
the aggregate amount outstanding including accrued interest in March 1994. As
of March 31, 1995, the aggregate amount outstanding (including accrued but
unpaid interest) on the loan to Mr. Gardner was $79,900.
Arter & Hadden, a law firm with which Mr. Fisher is Of
Counsel, performed legal services for the Company during 1994. Mr. Fisher is
a director of the Company.
-15-
<PAGE> 19
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the independent
auditors for the Company for the fiscal year ended December 31, 1994, and the
Company has selected Ernst & Young LLP to so serve for the year ending December
31, 1995. A representative of Ernst & Young LLP is expected to be present at
the annual meeting of shareholders. This representative will be afforded an
opportunity to make a statement at the meeting, if he so desires, and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered for inclusion in the
Proxy Statement for next year's annual meeting of shareholders must be received
by the Company at 20005 Lake Road, Rocky River, Ohio 44116 on or before
December 13, 1995.
OTHER MATTERS
The management of the Company does not know of any matters
which may properly be presented at the meeting other than as specifically set
forth in the Notice of Annual Meeting. If any other matter comes before the
meeting or any adjournment thereof, the persons named in the accompanying form
of Proxy and acting thereunder will vote in accordance with their best judgment
with respect to such matter.
LESCO, INC.
Daniel G. Dunstan, Secretary
DATED: April 13, 1995
-16-
<PAGE> 20
<TABLE>
<S> <C>
LESCO, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING MAY 17, 1995
The undersigned hereby appoints William A. Foley, Robert F. Burkhardt and
Daniel G. Dunstan as Proxies, each with full power to appoint his or her
substitute, and hereby authorizes them to represent and to vote as designated
below, all the Shares of LESCO, Inc. held of record by the undersigned on April
7, 1995, at the Annual Meeting of shareholders to be held on May 17, 1995, or
any adjournment thereof.
1. ELECTION OF DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
William A. Foley, Robert F. Burkhardt, Daniel G. Dunstan, Paul H. Carleton,
William B. Nicol, David H. Clark, Karl E. Ware, F. Leon Herron, Jr.,
Drexel Bunch, J. Martin Erbaugh and Stanley M. Fisher.
(Instruction: To withhold authority to vote for any individual nominee(s),
write the name of such nominee(s) in the space provided below.)
- - -------------------------------------------------------------------------------
2. Proposal to approve the LESCO, Inc. Directors' Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be signed on reverse side)
(Continued from other side)
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the nominees listed in item 1 above and FOR item 2 above. If voting
for directors is cumulative, the Proxies may cumulate or distribute votes in
such fashion as they believe will maximize the number of persons elected from
among nominees for whom authority is granted.
Please sign exactly as name appears below. When shares are held as joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
Dated _______________, 1995
________________________________________
Signature
________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
</TABLE>
