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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 September 30, 1995 Commission File Number 0-13147
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LESCO, INC.
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(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
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(Address of principal executive offices) (Zip Code)
(216) 333-9250
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(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
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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 November 13, 1995
- -------------------------------- -------------------
Common shares without par value 7,946,088 shares
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<TABLE>
LESCO, INC.
BALANCE SHEETS
<CAPTION>
September 30 September 30 December 31
ASSETS 1995 1994 1994
- ------ ------------ ------------ ------------
<S> <C> <C> <C>
Current Assets:
Cash $ 3,053,589 $ 2,096,536 $ 3,336,984
Account receivable - net 53,463,438 40,536,906 38,415,407
Inventories 62,008,535 52,248,211 51,676,234
Prepaid expenses and other assets 2,741,467 3,493,604 3,174,009
------------ ------------ ------------
Total Current Assets 121,267,029 98,375,257 96,602,634
Property, Plant and Equipment 41,002,857 35,660,293 35,992,303
Less allowance for depreciation and amortization (20,912,105) (18,260,591) (18,926,159)
------------ ------------ ------------
20,090,752 17,399,702 17,066,144
Other Assets 970,897 1,258,355 942,726
------------ ------------ ------------
TOTAL ASSETS $142,328,678 $117,033,314 $114,611,504
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 28,273,190 $ 22,561,186 $ 20,667,349
Other current liabilities 6,821,120 5,420,708 4,896,094
Current portion of long-term debt 200,000 200,000 200,000
------------ ------------ ------------
Total Current Liabilities 35,294,310 28,181,894 25,763,443
Long-term Debt 42,204,082 30,386,905 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
7,946,088 shares at September 30, 1995,
7,792,798 at September 30, 1994,
7,798,923 at December 31, 1994 795,284 779,955 780,567
Paid-in capital 24,820,473 23,279,818 23,552,180
Retained earnings 38,120,001 33,436,214 33,879,258
Less treasury shares (6,750 shares) (37,472) (37,472) (37,472)
------------ ------------ ------------
Total Shareholders' Equity 63,698,286 57,458,515 58,174,533
------------ ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $142,328,678 $117,033,314 $114,611,504
============ ============ ============
</TABLE>
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<TABLE>
LESCO, INC.
STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $69,429,264 $57,254,964 $188,131,073 $157,077,563
Cost of sales 46,891,580 37,707,569 125,878,477 103,114,859
----------- ----------- ------------ ------------
Gross Profit on Sales 22,537,684 19,547,395 62,252,596 53,962,704
Selling, general and
administrative expenses 18,644,137 16,005,617 53,713,399 45,219,592
----------- ----------- ------------ ------------
Income from Operations 3,893,547 3,541,778 8,539,197 8,743,112
Other deductions (income):
Interest expense 731,396 479,824 2,054,909 1,459,032
Other - net (771,073) (599,773) (1,751,942) (1,451,946)
----------- ----------- ------------ ------------
(39,677) (119,949) 302,967 7,086
----------- ----------- ------------ ------------
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle 3,933,224 3,661,727 8,236,230 8,736,026
Income taxes 1,534,000 1,428,000 3,212,000 3,407,000
----------- ----------- ------------ ------------
Income Before Cumulative Effect of
Change in Accounting Principle 2,399,224 2,233,727 5,024,230 5,329,026
Cumulative effect on prior years of
changing the method of capitalizing
certain inventory costs 1,149,268
----------- ----------- ------------ ------------
NET INCOME $ 2,399,224 $ 2,233,727 $ 5,024,230 $ 6,478,294
----------- ----------- ------------ ------------
Earnings Per Share:
Income before cumulative effect
of change in accounting principle $ .30 $ .28 $ .62 $ .67
Cumulative effect of changing
the method of capitalizing
certain inventory costs .14
----------- ----------- ------------ ------------
NET INCOME PER SHARE $ .30 $ .28 $ .62 $ .81
=========== =========== ============ ===========
Weighted average number of
common and common equivalent
shares outstanding 8,105,317 8,048,593 8,099,388 8,030,877
=========== =========== ============ ===========
</TABLE>
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<TABLE>
LESCO, INC.
STATEMENTS OF CASH FLOW
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------------
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 5,024,230 $ 6,478,294
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Cumulative effect of accounting change (1,149,268)
Depreciation and amortization 2,406,431 2,294,100
Increase in accounts receivable (15,885,402) (8,843,405)
Provision for uncollectible accounts receivable 837,371 622,707
Increase in inventories (10,332,301) (3,195,857)
Increase in accounts payable 7,605,841 7,333,444
Change in other current items 2,357,568 93,918
Other (28,171) 480,711
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NET CASH (USED)PROVIDED BY
OPERATING ACTIVITIES (8,014,433) 4,114,644
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (5,431,039) (1,836,148)
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NET CASH USED IN INVESTING ACTIVITIES (5,431,039) (1,836,148)
FINANCING ACTIVITIES:
Proceeds from borrowings 59,800,000 71,400,000
Reduction of borrowings (47,137,446) (74,134,850)
Issuance of common shares 1,283,009 795,452
Cash dividend (783,486) (698,272)
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NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 13,162,077 (2,637,670)
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Net decrease in cash (283,395) (359,174)
Cash - beginning of the period 3,336,984 2,455,710
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CASH - END OF THE PERIOD $ 3,053,589 $ 2,096,536
============= =============
</TABLE>
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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 three months and nine months ended September 30, 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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LESCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
The Company's sales for the three months ended September 30, increased
$12,174,000, a 21.3% increase to $69,429,000 in 1995 compared to $57,255,000 in
1994. Year-to-date sales increased $31,054,000, a 19.8% increase to
$188,131,000 compared to 1994 sales of $157,078,000. The rate of growth for
the Company's consumable goods for the quarter and year-to-date were slightly
higher than the Company average while the growth rate for hard goods for both
the quarter and year-to-date were slightly below the Company average. Sales
for each of the Company's sales groups continued to expand for both the quarter
and year-to-date periods with Service Center sales recognizing the largest
dollar increase. Same store sales for Service Centers increased 1995 over 1994
by 19.3% for the quarter and 18.1% year-to-date.
Gross profit as a percentage of sales was 32.5% for the third quarter 1995
compared to 34.1% in 1994 and 33.1% year-to-date 1995 compared to 34.4% in
1994. Fertilizer margins continued to adversely affect the Company's overall
margin performance for both the third quarter and year- to-date results. The
Company continues to monitor pricing in the fertilizer marketplace. In
addition, the Company has increased communication to its customers regarding
the current fertilizer market conditions. The Company's hard goods product
margins have increased for both the quarter and year-to-date 1995 over 1994;
however, these margin increases did not completely offset the reduction in
fertilizer product margins.
The Company's selling, general and administrative expenses declined to 26.9% of
sales in 1995 compared to 28.0% in the third quarter of 1994 and 28.6%
year-to-date 1995 compared to 28.8% in 1994. Overall, selling, general and
administrative expenses increased $2,639,000 in third quarter 1995 over 1994
and $8,494,000 year-to-date 1995 over 1994. The principal reason for the
dollar increase in selling, general and administrative expenses is due to the
expansion of Service Centers to 173 in operation as of September 30, 1995
compared to 137 as of September 30, 1994. The increase in Service Center
operating expenses in the third quarter 1995 over 1994 was $1,638,000 and
year-to-date was $4,622,000. Other selling expenses also increased in 1995 due
to the increase in number of the Company's Golf Course sales representatives to
65 in 1995 compared to 59 in 1994 and Regional Golf Course Agronomists to 12
in 1995 compared to six in 1994.
Interest expense for both the quarter and year-to-date 1995 increased over
comparable periods for 1994 due to both increased borrowing levels and rate
increases. Other deductions -- net include customer finance charges which
totaled $710,000 for the third quarter 1995 compared to $602,000 in 1994 and
$1,619,000 in year-to-date 1995 compared to $1,369,000 in 1994.
The Company's effective tax rate for the third quarter and year-to-date 1995
and 1994 is 39%.
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Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
As of September 30, 1995, the Company's total assets were $142,329,000 compared
to $117,033,000 at September 30, 1994 and $114,612,000 at December 31, 1994.
The principal reason for the increase from September 30, 1995 from 1994 is
accounts receivable which increased $12,927,000, a 31.9% increase to
$53,463,000 in 1995 from $40,537,000. The increase in receivables is due to
the Company's increase in sales plus increased customer participation in the
early-order dating programs. The Company's receivables were $38,415,000 as of
December 31, 1994. Inventories increased to $62,009,000 at September 30, 1995
compared to $52,248,000 at September 30, 1994 and $51,676,000 at December 31,
1994. The increase in inventories is due principally to the increase in the
Company's sales volume and expansion in the number of Service Centers and Golf
Course sales locations.
The funding for the above increases was provided primarily by increases in
long-term debt and accounts payable. Long-term debt increased to $42,204,000
as of September 30, 1995 compared to $30,387,00 as of September 30, 1994 and
$29,542,000 as of December 31, 1994. Accounts Payable increased to $28,273,000
as of September 30, 1995 compared to $22,561,000 as of September 30, 1994 and
$20,667,000 as of December 31, 1994. The increase in payables is directly
related to the increases in inventories while debt and equity increases fund
the remaining increases in assets. As of September 30, 1995, the Company had
$9,500,000 available for borrowing under its $45 million revolving credit
agreement.
Expenditures for capital improvements totaled $5,431,000 for the nine-months
ended September 30, 1995. These expenditures include the purchase by the
Company of a distribution facility previously leased in Avon Lake, Ohio which
totaled approximately $2 million. The remaining capital expenditures relate to
the opening of 35 new Service Centers in 1995 and to improvements in the
Company's information systems. Management believes sufficient credit is
available to allow for current anticipated capital improvements and seasonal
working capital requirements.
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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 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(27) Financial Data Schedule
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SIGNATURES
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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.
November 13, 1995 By: Daniel G. Dunstan
- ----------------- -----------------------------------
Daniel G. Dunstan
Chief Operating Officer
Executive Vice President/Secretary
Principal Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,053,589
<SECURITIES> 0
<RECEIVABLES> 56,995,438
<ALLOWANCES> 3,532,000
<INVENTORY> 62,008,535
<CURRENT-ASSETS> 121,267,029
<PP&E> 41,002,857
<DEPRECIATION> 20,912,105
<TOTAL-ASSETS> 142,328,678
<CURRENT-LIABILITIES> 35,294,310
<BONDS> 42,204,082
<COMMON> 795,284
0
0
<OTHER-SE> 62,903,002
<TOTAL-LIABILITY-AND-EQUITY> 142,328,678
<SALES> 188,131,073
<TOTAL-REVENUES> 188,131,073
<CGS> 125,878,477
<TOTAL-COSTS> 52,876,028
<OTHER-EXPENSES> (1,751,942)
<LOSS-PROVISION> 837,371
<INTEREST-EXPENSE> 2,054,909
<INCOME-PRETAX> 8,236,230
<INCOME-TAX> 3,212,000
<INCOME-CONTINUING> 5,024,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,024,230
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
