<PAGE> 1
FORM 11-K. - FOR ANNUAL REPORTS OF EMPLOYEE STOCK
PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO
SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Exch Act Rel No. 35113, eff. 1/30/95.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998 Commission File Number 0-13147
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A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
B. Name of the Issuer of the securities held pursuant to the plan and the
address of its principal executive office:
LESCO, Inc.
20005 Lake Road
Rocky River, Ohio 44116
REQUIRED INFORMATION
See attached financial statements for the Plan for the year ended
December 31, 1998.
<PAGE> 2
Audited Financial Statements and
Supplemental Schedules
LESCO, INC. STOCK INVESTMENT AND
SALARY SAVINGS PLAN AND TRUST
December 31, 1998 and 1997
PLAN SPONSOR AND ADMINISTRATOR
LESCO, INC.
20005 Lake Road
Rocky River, Ohio 44116
(440) 333-9250
Employee Identification Number: 34-0904517
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[ERNST & YOUNG LLP LOGO]
Report of Independent Auditors
Plan Administrator
LESCO, Inc. Stock Investment and
Salary Savings Plan and Trust
We have audited the accompanying statements of net assets available for benefits
of LESCO, Inc. Stock Investment and Salary Savings Plan and Trust as of December
31, 1998 and 1997, and the related statement of changes in net assets available
for benefits for the year ended December 31, 1998. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 31, 1998 in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998 and reportable transactions
for the year then ended are presented for the purpose of additional analysis and
are not a required part of the financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The Fund Information in the statements of net assets available for
benefits and the statement of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The supplemental schedules and Fund Information have been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
1
<PAGE> 4
[Ernst & Young LLP Logo]
The schedule of assets held for investment purposes that accompanies the Plan's
financial statements does not disclose the historical cost of certain plan
assets held by the Plan trustee. Disclosure of this information is required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
/s/ ERNST & YOUNG LLP
June 7, 1999
2
<PAGE> 5
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1998
<TABLE>
<CAPTION>
Invesco Janus
PNC Index Invesco Select Total Worldwide Scudder
Equity Fund Income Fund Return Fund Fund Value Fund
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
LESCO, Inc. common stock
Blackrock Index Equity Fund $9,401,807
Invesco Select Income Fund $84,141
Invesco Total Return Fund $ 2,768,294
Janus Worldwide Fund $1,504,235
Scudder Value Fund $284,068
PNC EBT Investment Contract Fund
Participant loans
--------------------------------------------------------------------
Total investments 9,401,807 84,141 2,768,294 1,504,235 284,068
Receivables:
Participant contribution 39,612 1,183 17,313 9,621 3,760
Employer contribution 47,114 1,201 21,450 14,851 5,123
--------------------------------------------------------------------
Total receivables 86,726 2,384 38,763 24,472 8,883
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $9,488,533 $86,525 $ 2,807,057 $1,528,707 $ 292,951
====================================================================
</TABLE>
<TABLE>
<CAPTION>
PNC EBT LESCO, Inc.
Investment Company
Contract Fund Stock Fund Loan Fund Total
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
LESCO, Inc. common stock $6,301,393 $ 6,301,393
Blackrock Index Equity Fund 9,401,807
Invesco Select Income Fund 84,141
Invesco Total Return Fund 2,768,294
Janus Worldwide Fund 1,504,235
Scudder Value Fund 284,068
PNC EBT Investment Contract Fund $6,438,126 6,438,126
Participant loans $732,130 732,130
----------------------------------------------------------
Total investments 6,438,126 6,301,393 732,130 27,514,194
Receivables:
Participant contribution 24,996 21,592 118,077
Employer contribution 26,620 30,894 147,253
----------------------------------------------------------
Total receivables 51,616 52,486 265,330
----------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $6,489,742 $6,353,879 $732,130 $27,779,524
==========================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 6
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1997
<TABLE>
<CAPTION>
Fidelity Invesco PNC EBT LESCO, Inc.
Advisor PNC Index Total Investment Company
Overseas Fund Equity Fund Return Fund Contract Fund Stock Fund Loan Fund Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
LESCO, Inc. common stock $ 8,999,656 $ 8,999,656
Fidelity Advisor Overseas Fund $ 579,797 579,797
Compass Index Equity Fund $ 7,574,694 7,574,694
Invesco Total Return Fund $ 2,686,574 2,686,574
PNC EBT Investment Contract Fund $ 5,077,944 5,077,944
Participant loans $ 730,258 730,258
-----------------------------------------------------------------------------------------------
Total investments 579,797 7,574,694 2,686,574 5,077,944 8,999,656 730,258 25,648,923
Receivables:
Participant contribution 7,475 40,912 17,665 23,595 26,846 116,493
Employer contribution 31,273 157,849 69,980 109,304 104,651 473,057
-----------------------------------------------------------------------------------------------
Total receivables 38,748 198,761 87,645 132,899 131,497 589,550
-----------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 618,545 $ 7,773,455 $ 2,774,219 $ 5,210,843 $ 9,131,153 $ 730,258 $26,238,473
===============================================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 7
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Fidelity Invesco Invesco Janus
Advisor PNC Index Select Total Worldwide
Overseas Fund Equity Fund Income Fund Return Fund Fund
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions (reductions) to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments $ 36,243 $ 2,036,767 $ (1,919) $ 217,870 $ 121,629
Interest and dividend income 121,102 2,612 142,438 5,940
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36,243 2,157,869 693 360,308 127,569
Contributions:
Participants 34,815 1,059,216 12,268 490,218 295,085
Employer 190,985 2,402 89,957 56,457
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34,815 1,250,201 14,670 580,175 351,542
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Total additions (reductions) 71,058 3,408,070 15,363 940,483 479,111
Deductions from net assets attributed to:
Benefits paid to participants 2,470 563,390 352 139,474 64,313
Administrative costs
---------------------------------------------------------------------
Total deductions 2,470 563,390 352 139,474 64,313
---------------------------------------------------------------------
Net increase (decrease) prior to
interfund transfers 68,588 2,844,680 15,011 801,009 414,798
Interfund transfers (net) (687,133) (1,129,602) 71,514 (768,171) 1,113,909
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Net (decrease) increase (618,545) 1,715,078 86,525 32,838 1,528,707
Net assets available for benefits
at beginning of year 618,545 7,773,455 2,774,219
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NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 0 $ 9,488,533 $ 86,525 $2,807,057 $1,528,707
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
PNC EBT LESCO, Inc.
Scudder Investment Company
Value Fund Contract Fund Stock Fund Loan Fund Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions (reductions) to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments $ (9,998) $ 327,756 $(3,512,563) $ (784,215)
Interest and dividend income 12,469 $ 53,256 337,817
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2,471 327,756 (3,512,563) 53,256 (446,398)
Contributions:
Participants 130,784 493,495 701,255 3,217,136
Employer 14,312 109,835 136,258 600,206
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145,096 603,330 837,513 3,817,342
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Total additions (reductions) 147,567 931,086 (2,675,050) 53,256 3,370,944
Deductions from net assets attributed to:
Benefits paid to participants 16,012 748,746 162,959 105,097 1,802,813
Administrative costs 27,080 27,080
-----------------------------------------------------------------------
Total deductions 16,012 775,826 162,959 105,097 1,829,893
-----------------------------------------------------------------------
Net increase (decrease) prior to
interfund transfers 131,555 155,260 (2,838,009) (51,841) 1,541,051
Interfund transfers (net) 161,396 1,123,639 60,735 53,713 0
-----------------------------------------------------------------------
Net (decrease) increase 292,951 1,278,899 (2,777,274) 1,872 1,541,051
Net assets available for benefits
at beginning of year 5,210,843 9,131,153 730,258 26,238,473
-----------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 292,951 $6,489,742 $ 6,353,879 $ 732,130 $27,779,524
=======================================================================
</TABLE>
5
<PAGE> 8
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Notes to Financial Statements
December 31, 1998 and 1997
A. SUMMARY OF ACCOUNTING POLICIES
The accounting records of the Plan are maintained on the accrual basis.
Investments are stated at fair value. The LESCO, Inc. common stock, which is
traded on a national securities exchange, is valued at the last reported sales
price on the last business day of the year. The shares of registered investment
companies are valued at quoted market prices which represent the net asset
values of shares held by the Plan at year-end. The investment in the common
trust fund is valued based on the redemption price of units in the fund, which
is based on the market values of the underlying assets of the fund. The
participant loans receivable are valued at their outstanding balances, which
approximate fair value.
Administrative expenses of the Plan may, at the discretion of the Company, be
paid by the Company. Any expenses not paid by the Company will be paid out of
Plan assets.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results may differ from these estimates.
B. DESCRIPTION OF PLAN
The following brief description of the LESCO, Inc. Stock Investment and Salary
Savings Plan and Trust (Plan) provides only general information. Participants
should refer to the plan agreement for a more complete description of the Plan's
provisions.
The Plan covers all eligible employees, as defined, of the Company. A
participant may, pursuant to a Salary Deferral Agreement, annually elect to have
the Company contribute a percentage of his or her compensation to the Plan in
accordance with the Internal Revenue Code (IRC). Subject to provisions of the
Plan, the Company shall contribute an amount equal to 25% of the participant's
contribution, applicable to such participant contributions of up to 10% of
covered compensation for the participant. A participant for whose account a
contribution referred to above is made shall have the right to direct the
Trustee to invest such contribution, in one or more permitted investment funds,
as offered by the Plan, as they may choose.
6
<PAGE> 9
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Notes to Financial Statements--Continued
B. DESCRIPTION OF PLAN--CONTINUEd
In addition, the Company at its discretion may for any Plan year, contribute an
additional amount (discretionary contribution) either in the form of cash or
employer stock or both which would be allocated to each active participant's
account pro-rata based on the participant's annual compensation received.
Plan participants are fully vested in all contributions to their accounts, with
the exception of the discretionary contributions, which vest at the rate of 10%
per year for the first four years and 20% per year thereafter, until fully
vested.
Under the Plan, the Company has the right to discontinue such contributions and
terminate the Plan at any time. In the event of termination, all participants'
accounts become fully vested, and are to be distributed to the participants
according to the directions of the Plan Advisory Committee administering the
Plan.
Participants may borrow from their fund accounts up to an amount equal to the
lesser of $50,000 or 50% of their vested account balance, reduced by the
outstanding loan balances of the participant, as defined in the Plan agreement,
at the date of borrowing. Loan transactions are treated as a transfer from (to)
the investment fund to (from) the loan fund. Loan terms range from 1-5 years.
The loans are secured by the balance in the participant's account and bear
interest at the prime rate in effect at the time of the loan, plus 1%. Principal
and interest is paid ratably through payroll deductions.
C. BENEFITS/PARTICIPANT ACCOUNTS
Individual accounts are maintained for all participants, the sum of which equals
the fair value of Plan assets less unallocated forfeitures (no unallocated
forfeitures at December 31, 1998 or 1997). Each participant's account is
credited with earnings, based on account balance, as defined. The liability of
the Plan for benefits to participants is limited to the fair value of Plan
assets. A participant is entitled to receive the vested full value of his or her
account at age 65, death or disability prior to retirement, or upon termination
of employment. Upon retirement or termination, the participant may elect to
receive his or her distribution in a lump sum or a series of installments, as
determined by the Plan Advisory Committee and commencing in accordance with the
terms of the Plan.
The investment in the LESCO, Inc. Company Stock Fund assigns units to its
investment. At December 31, 1998 and 1997 participants owned 680,834 and 609,120
units, respectively, at $9.26 and $14.77 per unit, respectively.
7
<PAGE> 10
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
Notes to Financial Statements--Continued
D. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated January 16, 1996, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (IRC) and, therefore, the related trust is exempt
from taxation. Once qualified, the Plan is required to operate in conformity
with the IRC to maintain its qualification. The Plan administrator believes the
Plan is being operated in compliance with the applicable requirements of the IRC
and therefore, believes that the Plan is qualified and the related trust is tax
exempt.
E. YEAR 2000 (UNAUDITED)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project by mid-1999. Costs associated with
modifying software and equipment are not estimated to be significant and will be
paid by the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated they
will be year 2000 compliant by mid-1999. If modification of data processing
systems of either the Plan, the Plan Sponsor, or its service providers are not
completed timely, the year 2000 problem could have a material impact on the
operations of the Plan. Plan management has not developed a contingency plan,
because they are confident that all systems will be year 2000 ready.
8
<PAGE> 11
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
EIN 34-0904517 Plan 002
Line 27(a)--Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Identity of Issue Description of Assets Cost Current Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LESCO, Inc. Common Stock* 489,429 shares (A) $ 6,301,393
PNC EBT Investment Contract Fund* Common/Collective
Fund--3,235,890 units $ 5,811,570 6,438,126
Registered Investment Companies:
Blackrock Index Equity Fund* 396,533 shares 6,172,851 9,401,807
Invesco Select Income Fund 12,787 shares 86,093 84,141
Invesco Total Return Fund 88,275 shares 2,282,572 2,768,294
Janus Worldwide Fund 31,762 shares 1,386,713 1,504,235
Scudder Value Fund 11,986 shares 291,484 284,068
Participants loans* 7% to 10% 732,130
------------------------------------
$16,031,283 $27,514,194
====================================
</TABLE>
(A) This information is not available
* Indicates party-in-interest to the Plan.
9
<PAGE> 12
LESCO, Inc. Stock Investment and Salary Savings Plan and Trust
EIN 34-0904517 Plan 002
Line 27(d)--Schedule of Reportable Transactions
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Current Value
of Asset on
Purchase Selling Transaction Net
Description Price Price Cost Date Gain
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
PNC Index Equity Fund*
Purchases $2,181,646 $2,181,646 $2,181,646
Sales $2,391,300 1,707,101 2,391,300 $684,199
PNC Investment Contract Fund*
Purchases 2,835,012 2,835,012 2,835,012
Sales 1,802,589 1,656,437 1,802,589 146,152
LESCO, Inc. Common Stock*
Purchases 1,382,064 1,382,064 1,382,064
Sales 568,734 502,524 568,734 66,210
Janus Worldwide Fund
Purchases 1,517,873 1,517,873 1,517,873
Sales 135,267 131,161 135,267 4,106
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions for the year
ended December 31, 1998.
* Indicates party-in-interest to the Plan.
10
<PAGE> 13
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
LESCO, Inc. Stock Investment and
Salary Savings Plan and Trust
Date: 6/28/99 /s/ Kenneth J. Kossin, Jr.
--------------------------------------------
Kenneth J. Kossin, Jr., Corporate Controller
LESCO, Inc.
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-38118) pertaining to the LESCO, Inc. Stock Investment and
Salary Savings Plan and Trust of our report dated June 7, 1999, with respect to
the financial statement and schedules of LESCO, Inc. Stock Investment and Salary
Savings Plan and Trust included in this Annual Report (Form 11-K) for the year
ended December 31, 1998.
/s/ ERNST & YOUNG LLP
-----------------------
ERNST & YOUNG LLP
Cleveland, Ohio
June 24, 1999
