<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
Confidential, for Use of the Commission Only
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)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
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
(4) Date filed:
Not Applicable
<PAGE> 2
LESCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1997
APRIL 10, 1997
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 14, 1997, at 9:30 a.m.,
local 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 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 4, 1997, 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,
PATRICIA W. PRIBISKO, Secretary
<PAGE> 3
LESCO,INC.
20005 LAKE ROAD
ROCKY RIVER, OHIO 44116
PROXY STATEMENT
April 10, 1997
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 14, 1997, 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,
1996, are first being sent to shareholders on or about April 10, 1997.
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. Under Ohio law, broker non-votes and abstaining votes will not
be voted in favor of or against any nominee. 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 4, 1997, has been fixed as the
record date (the "Record Date") for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. At that time, the Company's
voting securities outstanding consisted of 8,073,947 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> 4
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. The Board increased the number of directors
from nine to eleven. 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 eleven 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.
The following table sets forth information with respect to
each nominee:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DIRECTOR
CONTINUOUSLY
NAME AGE POSITION SINCE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William A. Foley 49 Chairman of the Board of 1993
Directors, President and
Chief Executive Officer
Robert F. Burkhardt 60 Consultant and Director 1963
Paul H. Carleton 49 Director 1984
David H. Clark 68 Director 1985
F. Leon Herron, Jr. 75 Director 1991
Stanley M. Fisher 69 Director 1994
Drexel Bunch 52 Director 1995
J. Martin Erbaugh 48 Director 1995
Michael J. FitzGibbon 31 Director 1996
Lee C. Howley 49 Director 1996
Ronald Best 61 Nominee for Director --
</TABLE>
William B. Nicol served on the Board of Directors from 1984
until his resignation on September 30, 1995. Following his resignation from the
Board, Mr. Nicol became Director Emeritus and attends Board meetings but does
not vote.
-2-
<PAGE> 5
Karl E. Ware is retiring from the Board and will not stand for
re-election as a director at the Annual Meeting. The Board of Directors, through
the Nominating Committee, has nominated Ronald Best to fill the vacancy created
by Mr. Ware's retirement.
During 1996, the Board of Directors of the Company met 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 1996.
The Company has a Finance 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
Finance Committee, which consists of Paul H. Carleton, Chairman, Stanley M.
Fisher and Michael J. FitzGibbon, met two times during 1996.
The Company has a Compensation and Governance Committee which
is responsible for determining executive compensation and administering the
Company's compensation plans. The Compensation and Governance Committee, which
consists of J. Martin Erbaugh, Chairman, Drexel Bunch, Stanley M. Fisher and Lee
C. Howley (with a Granting Subcommittee consisting of the same directors, with
the exception of Stanley M. Fisher), met two times during 1996.
The Nominating Committee consists of William A. Foley,
Chairman, Robert F. Burkhardt and David H. Clark. 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 one
time during 1996.
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 for
the election of directors 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 each of eleven nominees up to that
number of votes that equals the number of shares held by him as of the Record
Date. The eleven nominees receiving the greatest number of votes 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 Alltrista Corporation, a consumer
and industrial products manufacturing company, and Libbey, Inc., a producer of
glass products.
-3-
<PAGE> 6
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 August 1996, Mr. Carleton has been Executive Managing Director of,
and a principal in, Carleton, McCreary, Holmes & Co., a division of Key Capital
Markets, Inc., an investment banking firm located in Cleveland, Ohio,
specializing in mergers, acquisitions and public and private financings. In
August 1996, Carleton, McCreary, Holmes & Co. was purchased by Key Corp. Prior
to the purchase, from January 1993 to August 1996, Mr. Carleton was Managing
Director of, and a principal in, Carleton, McCreary, Holmes & Co. 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. Mr. Carleton is a director of
University Hospitals of Cleveland (Ohio), a major teaching hospital, and
Bluecoats, Inc., an organization devoted to the welfare of families of Cuyahoga
County (Ohio) safety forces employees who lost their lives in the line of duty.
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
LTV 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 LTV 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.
Stanley M. Fisher was the Company's outside counsel from 1975
to December 1994, and has been a director of the Company since December 1994. He
is Of Counsel with the Cleveland, Ohio, law firm Arter & Hadden. 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 and reappointed to a five year-term in
January 1997. 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 The Cleveland State University, Cleveland, Ohio.
Drexel Bunch has been a director since March 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. He is a trustee and treasurer
of the Westlake (Ohio) Education Foundation and a trustee of the Nordson
Corporation Foundation and the Lorain County (Ohio) Chamber of Commerce.
J. Martin Erbaugh has been a director since March 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 J.M. Erbaugh Co., a private investment firm, and President of Coer
Inc., a real estate development firm. He is a director of Morgan Fun Shares,
Inc., a closed-end investment company, and Vice Chairman 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
Burton D. Morgan Foundation.
Michael J. FitzGibbon has been a director since March 1, 1996.
Mr. FitzGibbon is Director of Graduate Programs for the Mandel Center for
Non-Profit Organizations at Case Western Reserve University. Mr. FitzGibbon is
also a Ph.D. candidate in the Social Policy History Program at Case Western
Reserve University. Mr. FitzGibbon serves as a trustee of the Diabetes
Association of Greater Cleveland (Ohio) and the Westside YMCA.
-4-
<PAGE> 7
In 1995, he was a John D. Rockefeller III Fellow at the Yale University Program
on Non-Profit Organizations. During the 1993-94 academic year, Mr. FitzGibbon
was a Doctoral Fellow at the Indiana University Center on Philanthropy.
Lee C. Howley has been a director since March 1, 1996. Mr.
Howley has been a principal in the construction, financing and operation of
health care-related real estate and in telecommunications systems. He has served
in leadership capacities for a number of civic organizations. From 1994 to 1995,
Mr. Howley represented the United States at the United Nations as the Country's
Public Delegate, at the request of President Clinton. Since 1981, Mr. Howley has
served as President of Howley & Company, a real estate development and
management company; since 1987, he has served as Chairman of Coast Management
Company, a real estate cleaning company; and since 1995, he has served as
Principal of Howley & Leroux Health Services, a consulting company for the
merger, affiliation and acquisition of health care providers. He was founder and
a general partner of North Coast Cable, Ltd., a cable television company
servicing Cleveland, Ohio, from 1981 to 1994. Mr. Howley is a director of Boykin
Lodging Company, a hotel and restaurant management company, and DMI, a provider
of consulting services to the health care industry.
Ronald Best is a nominee for election as director. Since 1995,
Mr. Best has been President and Managing Partner, First Marquis International,
an equity investor and workout consulting firm located in Toronto, Canada;
Executive Vice President, Hall International Group Inc., a project management
firm specializing in real estate development in China located in Mississauga,
Canada; and Chairman and Chief Executive Officer, Eccobox Industries, a beverage
processing company located in Richmond Hill, Canada. From 1992 to 1994, Mr. Best
was President and Chief Executive Officer of Totes Incorporated, a rainwear
manufacturing and distribution company, located in Cincinnati, Ohio. From 1980
to 1991, Mr. Best held several executive positions with Rubbermaid, Inc., a
rubber and plastics products manufacturing and distribution company, located in
Wooster, Ohio, completing his career at Rubbermaid as Senior Vice President,
International and Business Development. Prior to joining Rubbermaid, Mr. Best
held several executive positions with G.E. Canada in its Consumer, Industrial
and Power Generation Divisions, closing out his career there as Vice President
Finance and Strategic Planning (C.A.M.C.O.) and a director of G.E. Credit
Canada. He is a director of Milltronics, Inc., a process control company;
Moneysworth & Best, a shoe care and repair company; and Battery Technology,
Inc., a licensor of rechargeable consumer batteries.
-5-
<PAGE> 8
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 five most highly
compensated officers (the "Named Executive Officers") during or with respect to
the fiscal years ended December 1996, 1995 and 1994 for services in all
capacities to the Company.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
- -----------------------------------------------------------------------------------------------------------------------------------
Restricted All Other
Fiscal Salary Bonus Stock Options Compensation(2)
Name and Principal Position Year ($) ($) Awards ($)(1) (# of shares) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Foley, 1996 300,014 84,450 90,002 18,000 10,231
Chairman of the Board, President 1995 275,000 - - 4,000 7,924
and Chief Executive Officer 1994 275,000 - - 4,000 6,358
- -----------------------------------------------------------------------------------------------------------------------------------
John M. Freise, 1996 190,000 17,605 55,573 18,000 8,398
Vice President, Sales 1995 67,315(3) - - 10,000 973
- -----------------------------------------------------------------------------------------------------------------------------------
Philip R. Gardner, 1996 145,300 6,717 35,711 18,000 4,815
Vice President, International 1995 145,000 - - 4,000 5,363
and Key Accounts 1994 145,000 - - 4,000 5,771
- -----------------------------------------------------------------------------------------------------------------------------------
Ware H. Grove, 1996 106,731(4) 37,015 73,975 33,000 3,207
Vice President and Chief
Financial Officer
- -----------------------------------------------------------------------------------------------------------------------------------
C. Thomas Smith,(5) 1996 132,954 15,096 41,876 18,000 6,628
Vice President, Operations 1995 127,200 - - 4,000 5,453
- -----------------------------------------------------------------------------------------------------------------------------------
Michael A. Sotak,(5) 1996 155,120 8,320 8,320 18,000 5,152
Vice President, Marketing 1995 146,440 - - 4,000 8,563
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Messrs. Foley, Freise, Gardner, Grove and Smith were granted an award
of 6,207; 2,620; 2,000; 2,551 and 1,848 Restricted Shares,
respectively, which on the date of grant had a market value of $90,002;
$37,990; $29,000; $36,990 and $26,796, respectively. The Restricted
Shares are subject to forfeiture if Company performance goals are not
met for fiscal years 1996, 1997 and 1998. Dividends on the Restricted
Shares are payable in additional Restricted Shares also subject to
forfeiture. In addition, Messrs. Freise, Gardner, Grove, Smith and
Sotak received 1,082; 413; 2,276; 928 and 512 Common Shares,
respectively, which on the date of grant had a market value of $17,583;
$6,711; $36,985; $15,080 and $8,320, respectively, representing a
portion of their bonus payable for 1996. These Common Shares are not
forfeitable, but restricted from transfer until March 10, 1998 (except
to satisfy tax withholding obligations). Dividends on these Common
Shares are paid in cash.
2 Reflects (i) the Company's contributions to the LESCO, Inc. Stock
Investment and Salary Savings Plan and Trust and (ii) reimbursement for
medical expenses pursuant to an insurance program.
3 Mr. Freise was first employed by the Company effective September 11,
1995, and the salary for fiscal year 1995 reflects the period September
11 through December 31.
4 Mr. Grove joined the Company as an executive officer June 3, 1996, and
the salary for fiscal year 1996 reflects the period June 3 through
December 31.
5 Mr. Smith and Mr. Sotak both joined the Company in 1994 and became
executive officers in 1995.
</TABLE>
-6-
<PAGE> 9
Option Grants in Last Fiscal Year
---------------------------------
The following table sets forth the stock options granted
during the year ended December 31, 1996, to the Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
- ----------------------------------------------------------------------- ----------------------------------
% of Total
Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year ($/sh) Date 0%($) 5%($) 10%($)
- ---- ------- ------------ ------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
William A. Foley(2) 18,000 6.6 14.50 4/01/06 0 164,200 416,000
John M. Freise(2) 18,000 6.6 14.50 4/01/06 0 164,200 416,000
Philip R. Gardner(2) 18,000 6.6 14.50 4/01/06 0 164,200 416,000
Ware H. Grove(3) 33,000 12.1 15.00 6/03/06 0 311,200 789,000
C. Thomas Smith(2) 18,000 6.6 14.50 4/01/06 0 164,200 416,000
Michael A. Sotak(2) 18,000 6.6 14.50 4/01/06 0 164,200 416,000
- ----------------------------------------
<FN>
1 Amounts have been calculated using the exercise price per share at
assumed compound annual rates of stock appreciation from the date of
grant to the date of expiration of 0%, 5% and 10% respectively.
2 The options were granted pursuant to the Company's 1992 Stock Incentive
Plan. Of the total, 6,000 options vested and became fully exercisable
on December 31, 1996, and 6,000 options will vest and become fully
exercisable on each of December 31, 1997 and 1998.
3 The options were granted June 3, 1996. Of the total, 15,000 options
vested and became fully exercisable on the date of grant, 6,000 options
vested and became fully exercisable on December 31, 1996 and 6,000
options will vest and become fully exercisable on each of December 31,
1997 and 1998.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
-----------------------------------------------
and Fiscal Year-End Option Value
--------------------------------
The following table sets forth information for each Named
Executive Officer with regard to the aggregate stock options exercised during
the year ended December 31, 1996, and the stock options held as of December 31,
1996.
<TABLE>
<CAPTION>
Value of Unexercised
in-the-Money
Number of Unexercised Options at
Options at Fiscal Year-End Fiscal Year-End($)(1)
------------------------------- ----------------------------
Shares Acquired Value
Name on Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Foley 0 0 167,960 132,000 1,040,993 804,000
John M. Freise 0 0 16,000 12,000 37,000 24,000
Philip R. Gardner 0 0 32,000 12,000 95,530 24,000
Ware H. Grove 0 0 21,000 12,000 31,500 18,000
C. Thomas Smith 0 0 12,000 12,000 17,500 24,000
Michael A. Sotak 0 0 25,000 0 41,000 0
- -----------------------------------
<FN>
1 Market value of underlying securities at December 31, 1996, of $16.50 minus
the exercise price.
</TABLE>
COMPENSATION OF DIRECTORS
The Company pays all directors who are not employees a
retainer of $12,000 per year, $750 per Board meeting attended, and $1000 for the
chairman of a committee and $750 for each member for each committee meeting
attended (other than those held on the same day as a Board meeting). Directors
Emeritus are paid a retainer of $6,000 per year and $375 per Board meeting
attended.
-7-
<PAGE> 10
REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEE
The Compensation and Governance Committee of the Board of Directors (the
"Compensation Committee") was responsible for determining compensation paid to
the Company's executive officers during 1996. The Compensation Committee's
members are J. Martin Erbaugh (Chairman), Drexel Bunch, Stanley M. Fisher and
Lee C. Howley. This report describes the Compensation Committee's executive
compensation philosophy and the policies and actions of the Compensation
Committee with respect to fiscal year 1996 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 has set base
salaries at levels slightly below the levels at those companies and has set
overall compensation (base salary plus short-term and long-term incentives) at
levels slightly above the levels at those companies.
The Compensation Committee has reviewed the Company's compensation levels in
connection with Section 162(m) of the Internal Revenue Code, as amended, and, at
this time, does not foresee exceeding the $1 million deduction limitation for
any executive officer.
For fiscal year 1996, 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 reviews management compensation reports,
uses, from time to time, outside compensation consultants and considers publicly
available information concerning the companies comprising the peer group
identified on page 10 (the "Peer Group") and 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.
MANAGEMENT INCENTIVE PLAN. The Compensation Committee established an Executive
Incentive Plan (the "Incentive Plan") in fiscal 1996, comprised of short-term
and long-term incentive components, to enable the Company to reward achievement
of the objectives outlined in the Company's Strategic Plan.
SHORT-TERM INCENTIVES. The financial criteria used to measure achievement of the
objectives in the Strategic Plan were earnings per share growth and sales
growth. In addition, each of the executive officers had individual performance
measures as determined by the Chairman. Earnings growth (adjusted for
nonrecurring items) and sales growth fell within the performance range approved
by the Committee at the beginning of the plan year, and the appropriate
incentive payment in a combination of cash and Common Shares was made to
executive officers.
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 1996, each Named Executive Officer was granted options to purchase 18,000
Common Shares; these options vest in 33-1/3% annual increments. In the past, the
Compensation Committee has annually made a grant of options to
-8-
<PAGE> 11
executive officers. The 1996 grant of 18,000 options is intended to cover a
three-year period, and the committee does not currently anticipate additional
option grants in 1997 or 1998. The Compensation Committee believes that option
grants should continue to provide eligible employees a proprietary and vested
interest in the growth and performance of the Company, and it does not
specifically consider the number of options held by an employee in making an
award.
The Incentive Plan also provides for the award of Restricted Shares to executive
officers. The shares, which were awarded to executive officers in 1996, are
subject to forfeiture if growth objectives for 1996, 1997 and 1998, as measured
by cumulative compounded earnings per share, are not met.
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 "Employment Agreement"), which was entered into in July 1993.
BASE SALARY. Mr. Foley currently receives an annual base salary of $300,000
which was targeted as described in the third paragraph of this report. Mr.
Foley's annual base salary may be increased in accordance with performance
standards established by the Compensation Committee and approved by the Board of
Directors from time to time. Mr. Foley's base salary has not been adjusted for
fiscal year 1997.
SHORT-TERM INCENTIVES. Mr. Foley received an incentive payout of $84,450 in 1997
for attainment of objectives in 1996. Mr. Foley received his targeted level of
the discretionary portion of the incentive award based on the Committee's review
of Mr. Foley's accomplishments during 1996 and the Company's progress with
respect to certain strategic initiatives. However, instead of receiving a
portion of his payout in Common Shares (as did other executive officers),
$42,225 was earmarked for the exercise of options held by Mr. Foley with the
intent that shares acquired by him upon such exercise will be retained for a
period of one year.
LONG-TERM INCENTIVES. Mr. Foley was granted options to purchase up to 300,000
Common Shares in July 1993 pursuant to the Employment Agreement. These options
vest at the rate of 20% per year over a five-year period beginning on June 30,
1994. The per share exercise prices of $9.33 per share for the first 60,000
Common Shares and $10.00 per share for the remaining 240,000 Common Shares were
set below the then-current market price of $15.167 (adjusted for a 3-for-2 stock
split) 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. During 1996, Mr. Foley was granted options to purchase 18,000
Common Shares under the Company's equity-based award plan; these options vest in
33-1/3% annual increments. As stated above, this grant is intended to cover a
three-year period in lieu of annual grants. In addition, Mr. Foley was awarded
6,207 restricted Performance Shares in 1996, which are subject to forfeiture if
growth objectives for 1996, 1997 and 1998 are not met.
In 1996, the Compensation Committee formalized a performance appraisal process
for the Chief Executive Officer. The Committee plans to continue this process in
1997 and make appropriate recommendations to the Board with respect to Chief
Executive Officer compensation.
The Compensation Committee
J. Martin Erbaugh, Chairman
Drexel Bunch
Stanley M. Fisher
Lee C. Howley
-9-
<PAGE> 12
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, 1991 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>
1997 PROXY PERFORMANCE GRAPH
[GRAPH]
1991 1992 1993 1994 1995 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LESCO $100.00 $131.45 $187.33 $151.40 $180.01 $200.16
NASDAQ $100.00 $108.37 $116.12 $112.41 $144.21 $165.88
PEER GROUP $100.00 $112.26 $135.41 $122.85 $136.32 $140.38
</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.
- The Scotts Company - Manufactures and markets consumer
do-it-yourself lawn care and professional golf course turf
care products. (Scotts 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> 13
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of the Company's Common Shares as of March
19, 1997 (unless otherwise indicated) 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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SHARES BENEFICIALLY OWNED (1)
BENEFICIAL NUMBER PERCENT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ronald Best -0- *
Drexel Bunch 100 *
Robert F. Burkhardt (2)(3)(4) 571,033 6.8
Paul H. Carleton 300 *
David H. Clark (3) 10,750 *
J. Martin Erbaugh (5) 24,184 *
Stanley M. Fisher (6) 20,610 *
Michael J. FitzGibbon (7) 35,000 *
William A. Foley (2)(3)(8) 198,713 2.4
John M. Freise (3) 21,301 *
Philip R. Gardner (2)(3) 62,450 *
Ware H. Grove 26,863 *
F. Leon Herron, Jr. (9) 2,700 *
Lee C. Howley (10) 7,500 *
William B. Nicol 600 *
C. Thomas Smith (3) 14,399 *
Michael A. Sotak (2)(3) 26,907 *
Karl E. Ware (11) 14,700 *
All directors, nominees and 1,038,110 12.3
executive officers as a group
(18 persons)
Naomi C. FitzGibbon (2)(12) 978,053 11.6
1285 Gulfshore Blvd., 6-D
Naples, Florida 34102
Kalmar Investments Inc. (13) 516,775 6.1
1300 Market Street, Suite 500
Wilmington, DE 19801
- ----------------------------
<FN>
* Less than one percent
</TABLE>
-11-
<PAGE> 14
(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.
(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, 151,833 shares; Mrs. FitzGibbon, 197,635 shares; Mr. Foley, 1,906
shares; Mr. Gardner, 27,927 shares; and Mr. Sotak, 1,395 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) The following hold exercisable options to purchase the shares as indicated:
Mr. Burkhardt, 66,900 shares; Mr. Clark, 7,500 shares; Mr. Foley, 166,960
shares; Mr. Freise, 16,000 shares; Mr. Gardner, 32,000 shares; Mr. Grove, 21,000
shares; Mr. Smith, 12,000 shares; and Mr. Sotak, 25,000 shares.
(4) Includes 68,885 shares owned by Mr. Burkhardt's wife; 15,000 shares owned by
the Robert and Virginia Burkhardt Charitable Foundation; 118,100 shares owned by
the Burkhardt Family Limited Partnership (Mr. Burkhardt disclaims beneficial
ownership with respect to 113,376 of these shares); and 5,140 shares owned by
Mr. Burkhardt's wife as custodian for minor grandchildren.
(5) Includes 1,800 shares owned by Mr. Erbaugh's wife and 4,684 shares owned by
his minor children.
(6) Includes 19,750 shares in a Rollover Individual Retirement Account and 860
shares held by Stanley M. Fisher, Trustee.
(7) Excludes 162,195 shares owned by the FitzGibbon Family Limited Partnership,
of which Mr. FitzGibbon has a 32% limited partnership interest and Naomi C.
FitzGibbon, Mr. FitzGibbon's mother, is general partner.
(8) Includes 1,840 shares owned by Mr. Foley's minor children.
(9) Includes 200 shares owned by Mr. Herron's wife.
(10) Includes 7,500 shares owned by the Howley Family Partnership.
(11) Includes 8,700 shares owned jointly by Mr. Ware and his wife, and 6,000
shares owned by his daughter.
(12) Includes 162,195 shares owned by the FitzGibbon Family Limited Partnership,
of which Mrs. FitzGibbon is general partner (Mrs. FitzGibbon disclaims
beneficial ownership with respect to 155,708 of these shares); 137,961 shares
owned by the Naomi C. FitzGibbon Charitable Remainder Unitrust, of which Mrs.
FitzGibbon is sole trustee; 10,400 shares held by the FitzGibbon Family
Foundation (of which Mrs. FitzGibbon disclaims beneficial ownership), of which
Mrs. FitzGibbon is sole trustee; and 20,500 shares owned by the James I.
FitzGibbon Trust, of which Stanley M. Fisher is Trustee.
(13) Based on information set forth on a Schedule 13G dated January 14, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING 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 1996 fiscal year, pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, all required
reports were filed by reporting persons on a timely basis, except Mr. Howley
failed to timely file a Form 4 to report one transaction. Upon discovery of the
failure to file, a report was promptly filed.
-12-
<PAGE> 15
CERTAIN TRANSACTIONS
The Company has advanced funds, evidenced by demand promissory
notes, to Philip R. Gardner, Vice President, International and Key Accounts.
These loans bear interest (payable on demand) at the prime rate. As of March 31,
1997, the aggregate amount outstanding (including accrued but unpaid interest)
on the loan to Mr. Gardner was $94,245.
Arter & Hadden, a law firm with which Stanley M. Fisher is Of
Counsel, performed legal services for the Company during 1996. Mr. Fisher is a
director of the Company.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the independent
auditors for the Company for the fiscal year ended December 31, 1996, and the
Company has selected Ernst & Young LLP to so serve for the year ending December
31, 1997. 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 9, 1997.
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.
Patricia W. Pribisko, Secretary
DATED: April 10, 1997
-13-
<PAGE> 16
DETACH CARD
- --------------------------------------------------------------------------------
LESCO, INC. PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING MAY 14, 1997
The undersigned appoints William A. Foley, Ware H. Grove and Patricia W.
Pribisko 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 4, 1997, at the
Annual Meeting of shareholders to be held on May 14, 1997, or any adjournment
thereof.
1. ELECTION OF DIRECTORS.
<TABLE>
<C> <S> <C> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
[ ] (except as marked to the contrary below) [ ] to vote for all nominees listed below
</TABLE>
William A. Foley, Robert F. Burkhardt, Paul H. Carleton, David H. Clark, F. Leon
Herron, Jr.,
Stanley M. Fisher, Drexel Bunch, J. Martin Erbaugh, Michael J. FitzGibbon, Lee
C. Howley and Ronald Best
(Instructions: To withhold authority for any individual nominee(s), write the
name of such nominee(s) in the space provided below.)
- --------------------------------------------------------------------------------
(2) 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)
<PAGE> 17
DETACH CARD
- --------------------------------------------------------------------------------
(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. 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 , 1997
------------------
------------------------------
Signature
------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
