<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 2000 Commission File Number 0-13147
------------------ -------
LESCO, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0904517
-------------------------------- ---------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
20005 Lake Road
Rocky River, Ohio 44116
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(440) 333-9250
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practical date.
Outstanding at
Class November 9, 2000
-------------------------------- ----------------
Common shares, without par value 8,569,724 shares
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LESCO, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 September 30 December 31
(In thousands except share data) 2000 1999 1999
--------------- --------------- ---------------
(unaudited) (audited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,653 $ 2,937 $ 2,110
Accounts receivable -- net 91,619 81,067 67,759
Inventories
Raw material 8,154 9,063 7,886
Work in process/finished goods 102,014 106,424 92,785
--------------- --------------- ---------------
Total Inventories 110,168 115,487 100,671
Deferred income taxes 1,919 1,727 1,154
Prepaid expenses and other assets 2,921 2,453 5,480
--------------- --------------- ---------------
TOTAL CURRENT ASSETS 209,280 203,671 177,174
Property, Plant and Equipment 89,056 80,091 81,573
Less allowance for depreciation and amortization (41,869) (33,691) (35,412)
--------------- --------------- ---------------
Net Property, Plant and Equipment 47,187 46,400 46,161
Other Assets 10,137 8,899 9,448
--------------- --------------- ---------------
TOTAL ASSETS $ 266,604 $ 258,970 $ 232,783
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 51,408 $ 54,017 $ 33,923
Other current liabilities 13,009 12,540 10,269
Current portion of debt 5,100 100 100
--------------- --------------- ---------------
TOTAL CURRENT LIABILITIES 69,517 66,657 44,292
Long-term debt 91,129 99,021 95,199
Deferred income taxes 2,959 1,650 2,750
SHAREHOLDERS' EQUITY:
Preferred shares-- without par value--
authorized 500,000 shares
Common shares--without par value--
19,500,000 shares authorized; 8,615,328 shares issued
and 8,569,724 outstanding at September 30, 2000,
8,444,763 at September 30, 1999, 8,499,093 at 862 851 854
December 31, 1999
Paid-in capital 34,710 33,004 33,594
Retained earnings 69,352 58,922 57,610
Less treasury shares 45,604 at September 30, 2000, 19,075 at (829) (59) (684)
September 30, 1999, 37,317 at December 31, 1999
Unearned compensation (1,096) (1,076) (832)
--------------- --------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 102,999 91,642 90,542
--------------- --------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 266,604 $ 258,970 $ 232,783
=============== =============== ===============
</TABLE>
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LESCO, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
---------------------------------- ----------------------------------
(In thousands except per share data) 2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 139,640 $ 130,938 $ 396,806 $ 364,707
Cost of sales 93,562 86,563 261,761 240,464
--------------- --------------- --------------- ---------------
GROSS PROFIT ON SALES 46,078 44,375 135,045 124,243
Warehouse & delivery expense 11,421 9,312 32,511 28,356
Selling, general & administrative expense 26,982 24,715 78,652 72,061
--------------- --------------- --------------- ---------------
38,403 34,027 111,163 100,417
--------------- --------------- --------------- ---------------
INCOME FROM OPERATIONS 7,675 10,348 23,882 23,826
Other deductions (income):
Interest expense 1,547 1,561 5,209 4,504
Joint venture results (173) 573 (294) 875
Other - net (795) (1,285) (2,255) (2,790)
--------------- --------------- --------------- ---------------
579 849 2,660 2,589
--------------- --------------- --------------- ---------------
Income Before Income Taxes 7,096 9,499 21,222 21,237
Income taxes 2,851 3,702 8,212 8,280
--------------- --------------- --------------- ---------------
NET INCOME $ 4,245 $ 5,797 $ 13,010 $ 12,957
=============== =============== =============== ===============
BASIC EARNINGS PER SHARE $ 0.50 $ 0.69 $ 1.54 $ 1.54
=============== =============== =============== ===============
DILUTED EARNINGS PER SHARE $ 0.49 $ 0.68 $ 1.51 $ 1.51
=============== =============== =============== ===============
CASH DIVIDENDS PER SHARE $ 0.15(a) $ 0.14(b)
=============== ===============
(a) Represents a dividend of $0.15 per share declared in June 2000 and paid in July 2000.
(b) Represents a dividend of $0.14 per share declared and paid in June 1999.
</TABLE>
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LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------
(In thousands) 2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,010 $ 12,957
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 6,641 4,993
Increase in accounts receivable (26,097) (18,189)
Provision for uncollectible accounts receivable 2,303 2,480
Increase in inventories (9,293) (28,825)
Increase in accounts payable 17,391 17,879
Increase in other current items 3,376 6,838
Other (146) (33)
--------- ---------
NET CASH PROVIDED (USED) IN
OPERATING ACTIVITIES 7,185 (1,900)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (6,912) (12,315)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (6,912) (12,315)
FINANCING ACTIVITIES:
Proceeds from borrowings 207,100 167,400
Payments on borrowings (206,170) (152,077)
Issuance of common shares 604 1,172
Cash dividends (1,268) (1,184)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 266 15,311
--------- ---------
Net increase in cash 543 1,096
Cash - Beginning of the period 2,110 1,841
--------- ---------
CASH - END OF THE PERIOD $ 2,653 $ 2,937
========= =========
</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 in the United States 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, 1999 included in the Company's Form 10-K.
In the first quarter 2000, the deferred tax valuation allowance related to Tri
Delta Fertilizer, Inc.'s net operating loss carryforward was reversed because
realization of such deferred tax assets is considered "more likely than not".
Operating results for the 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.
NOTE B - Earnings per Share
---------------------------
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(In thousands except share data) 2000 1999 2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 4,245 $ 5,797 $ 13,010 $ 12,957
Denominator:
Denominator for basic
earnings per share -
weighted average shares 8,479,438 8,436,974 8,464,671 8,403,994
Effect of dilutive securities:
Employee stock options 170,082 127,825 152,264 161,226
Restricted shares 15,274 9,826
-------------------------------------------------
Diluted potential common shares 185,356 127,825 162,090 161,226
Denominator for diluted
earnings per share - adjusted
weighted average shares and
assumed conversions 8,664,794 8,564,799 8,626,761 8,565,220
Earnings per share
Basic $ .50 $ .69 $ 1.54 $ 1.54
Diluted $ .49 $ .68 $ 1.51 $ 1.51
</TABLE>
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NOTE C - Segment Information
----------------------------
As a result of the Company's structural reorganization announced in January
2000, the Company elected to change the reporting of its business segments as of
January 1, 2000, and restated its prior years' presentation to conform to the
revised segment reporting. The Company changed from one reportable segment to
four reportable operating segments to include Product Supply, Lawn Care, Golf
and Corporate, which are defined based on management responsibility.
The Product Supply division manufactures and distributes fertilizers,
combination products, golf course accessories and turfgrass seed and is also
responsible for purchasing raw materials in addition to purchasing and
distributing turf protection products, turf care equipment and related parts,
and golf course accessories. The Product Supply division sells exclusively to
the Lawn Care and Golf divisions of the Company.
The Lawn Care division operates 234 LESCO Service Centers(R), which enable the
Company to market its products on a localized basis. The primary products sold
by the Lawn Care division are turf care products, including turf control
products, fertilizer, grass seed and equipment. The Service Centers market and
sell its products principally to smaller lawn care companies, landscapers,
nurseries, municipalities, churches and condominium associations. This division
also markets and sells its products to large national and regional lawn care
customers through a separate group of sales representatives. This division
distributes selected products through Home Depot stores in the South,
Mid-Atlantic and Northeast areas of the country in addition to selling a
consumer line of lawncare products to nationwide retail stores under several
brand names, including TruGreen, ChemLawn and Barefoot.
The Golf division markets and sells its products to private and public golf
courses and other customers having large turf areas through company salesmen who
operate a fleet of 75 LESCO Stores-on-Wheels(R). The primary products sold by
the Golf division are turf care products, including turf control products,
fertilizer, grass seed and equipment. These Stores-on-Wheels are well-stocked
with a wide variety of turf care products and golf course accessories which are
sold directly from the trucks. The Golf division has conventional sales
representatives strategically located in the various markets to help support the
Stores-on-Wheels and sell to national golf customers. In addition, this division
markets its products internationally principally through foreign distributors.
The Corporate division includes the administrative functions of the Company,
which support the Product Supply, Lawn Care and Golf divisions and include
Administration, Finance, Information Services, Legal and Human Resources.
The Company is principally engaged in the manufacturing and marketing of turf
care products to the professional sector of the green industry. There are no
significant intervening events, which materially affected the financial
statements. The Company measures segment profit as operating profit. Net assets
is defined as the sum of net accounts receivable, inventory, and net property,
plant, and equipment less accounts payable. Management utilizes this information
as a basis to calculate the divisional return of capital employed. Depreciation
and operating leases for specific Product Supply assets are allocated to
Corporate for operating profit measures. Information on segments are as follows
(in thousands):
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<TABLE>
<CAPTION>
For the Three Months Ended September 30, 2000
--------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
---------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales from External Customers $ 92,513 $ 47,127 $ 139,640
Intersegment Net Sales $ 58,125 $ (58,125)
Operating Profit 984 10,706 5,007 (9,022) 7,675
Total Assets 98,552 96,501 38,897 32,654 266,604
Net Assets $ 47,144 $ 96,501 $ 38,897 $ 15,024 $ 197,566
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended September 30, 1999
--------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
---------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales from External Customers $ 85,185 $ 45,753 $ 130,938
Intersegment Net Sales $ 89,332 $ (89,332)
Operating Profit 3,047 9,352 4,504 (6,555) 10,348
Total Assets 84,716 108,947 34,004 31,303 258,970
Net Assets $ 30,699 $ 108,947 $ 34,004 $ 15,287 $ 188,937
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 2000
--------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
---------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales from External Customers $ 280,561 $ 116,245 $ 396,806
Intersegment Net Sales $ 237,144 $(237,144)
Operating Profit 4,879 34,191 11,171 (26,359) 23,882
Total Assets 98,552 96,501 38,897 32,654 266,604
Net Assets $ 47,144 $ 96,501 $ 38,897 $ 15,024 $ 197,566
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1999
--------------------------------------------------------------
Product Lawn Elimination &
Supply Care Golf Corporate Consolidated
---------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales from External Customers $ 252,884 $ 111,823 $ 364,707
Intersegment Net Sales $ 243,883 $(243,883)
Operating Profit 4,612 28,741 9,668 (19,195) 23,826
Total Assets 84,716 108,947 34,004 31,303 258,970
Net Assets $ 30,699 $ 108,947 $ 34,004 $ 15,287 $ 188,937
</TABLE>
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NOTE D - Purchase of Southern Golf Products, Inc.
-------------------------------------------------
On August 28, 2000, a wholly owned subsidiary of the Company completed the asset
purchase of Southern Golf Products, Inc., located in Peachtree City, Georgia,
for $375,000 in Company common shares and $900,000 in former advances to
Southern Golf Products, Inc. Southern Golf is one of the nation's leading
producers of golf accessories including custom embroidered and silk screened
flags, flag sticks, tee markers, signage, uniforms and promotional apparel. The
asset purchase included working capital and other manufacturing equipment and
golf accessory assets.
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LESCO, INC.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Results of Operations
---------------------
Net sales for the third quarter ended September 30, 2000 increased $8.7 million
to $139.6 million from $130.9 million in 1999, a 6.6% increase. Net sales for
the first nine months of 2000 increased 8.8% to $396.8 million from $364.7
million in 1999. The increase in net sales for both the third quarter and first
nine months is due primarily to volume increases. Net sales for the third
quarter and first nine months 2000 compared to 1999 decreased 34.9% and 2.8% for
the Product Supply division, increased 8.6% and 10.9% for the Lawn Care division
and increased 3.0% and 4.0% for the Golf division respectively.
Gross profit, as a percentage of sales, was 33.0% for the third quarter ended
September 30, 2000 compared to 33.9% in 1999. For the first nine months, gross
profit as a percent of sales was 34.0% in 2000 compared to 34.1% in 1999. Gross
profit increases occurred in all major product categories with the exception of
equipment for the third quarter and for the first nine months ended September
30. The decrease in gross profit, as a percent of sales, for the third quarter
was primarily due to lower than anticipated production levels associated with
the start-up of the Novex(TM) plant (.4%), increased costs in the other
manufacturing plants (.3%), a decrease in vendor sales growth incentives (.9%),
and increased costs relating to the impact of the TriDelta, Inc, consolidation
in 1999 (.4%). The gross profit decrease was slightly offset by the positive
effect of a favorable product mix (.5%) and selective price increases to both
lawncare and golf customers (.8%). The decrease in gross profit, as a percent of
sales, for the first nine months of 2000 was primarily due to lower than
anticipated production levels associated with the start-up of the Novex(TM)
plant (.6%), increased costs in the other manufacturing plants (.5%), and
increased reserves for obsolete inventory (.2%), which were slightly offset by
positive effect of product mix (.6%), cost effect (.5%) and selective price
increases (.2%).
Delivery and warehouse expenses, as a percent of sales, increased to 8.2% for
the third quarter ended September 30, 2000 from 7.1% in the third quarter 1999.
For the first nine months, delivery and warehouse expenses, as a percent of
sales, were 8.2% in 2000 compared to 7.8% in 1999. The increase for the third
quarter as well as for the nine months ended September 30 is primarily due to
increased outside delivery expenses relating to shipments of inventory from our
warehouses directly to our customers which was directly impacted by the mix of
sales that occurred in addition to increased energy costs.
Selling, general and administrative expenses increased by $2.3 million, a 9.2%
increase, to $27.0 million for the third quarter 2000 compared to $24.7 million
in the third quarter 1999. For the nine months ended, selling, general and
administrative expenses increased $6.6 million, a 9.1% increase to $78.7 million
for 2000 compared to $72.1 million for 1999. As a percent of sales, selling,
general and administrative expenses increased slightly for the third quarter to
19.3% compared to 18.9% in 1999 and remained relatively unchanged at 19.8% for
both the nine months ended September 30, 2000 and 1999. The expense increases
for
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both the third quarter and the first nine months were primarily attributable to
an increase in sales and administrative support personnel added in the last
quarter of 1999 and the first nine months of 2000 to support the continuing
business growth. Also impacting the third quarter and first nine months of 2000
were $315,000 of non-recurring costs associated with an acquisition that was not
completed.
Interest expense decreased to $1.5 million in the third quarter 2000 from $1.6
million in 1999 and increased to $5.2 million in the first nine months 2000 from
$4.5 million in 1999. The increase for the first nine months was primarily due
to higher average levels of outstanding debt and higher average interest rates
in 2000 compared to 1999. In 2000, average borrowings were higher due to larger
working capital needs associated with the growth of the business.
Commercial Turf Products, Ltd. (CTP), the Company's 50% owned equity investment,
loss was $634,000 in the third quarter 2000 compared to $1,145,000 loss in the
third quarter 1999. For the nine months ended September 30, 2000, CTP's income
was $604,000 compared to a $1,750,000 loss in 1999. The Company was able to
recognize $173,000 of income for the third quarter and $294,000 for the first
nine months 2000 as inventory purchased from CTP was sold, compared to $573,000
loss for the third quarter 1999 and $875,000 loss for the first nine months
1999. The remainder of the equity income for 2000 was eliminated due to the
purchased inventory from CTP remaining on hand as of September 30, 2000. The
improvement in CTP's performance was primarily attributable to increased
production volumes from year to year.
Other-net is primarily customer finance charges which totaled $726,000 in the
third quarter 2000 and $1,014,000 in 1999. For the nine months ended September
30, 2000, customer finance charges were $1,807,000 compared to $2,261,000 in
1999. Customer finance charges decreased primarily due to improved receivables
management and the outsourcing of the Company's equipment financing programs.
Income tax expense decreased by $851,000, a 23.0% decrease, to $2.9 million for
the third quarter 2000 compared to $3.7 million in the third quarter 1999. For
the first nine months ended September 30, 2000, income tax expense remained
relatively unchanged compared to 1999. Income taxes were calculated at 39.6% for
2000 compared to 39% in 1999 due to the impact of projected increased earnings
and therefore, income tax rate increases. In the first quarter 2000, the
valuation allowance related to Tri Delta Fertilizer, Inc.'s net operating loss
carryforward was reversed because realization of such deferred tax assets is
considered "more likely than not".
Product Supply Division - Net sales for the Product Supply division were $58.1
million for the third quarter 2000 compared to $89.3 million in the third
quarter 1999. Net sales were $237.1 million for the first nine months of 2000, a
decrease of $6.8 million, compared to $243.9 million in 1999. The decrease for
the third quarter 2000 as well as for the nine months ended September 30, were
due to lower sales volumes to the Lawn Care and Golf divisions to help support
the Company's overall strategy to reduce inventory levels. Operating profit was
$984,000 for the third quarter 2000 compared to a $3.0 million operating profit
for the third quarter 1999 and $4.9 million for the first nine months of 2000
compared to $4.6 million in 1999. The operating profit decrease in the third
quarter is due primarily to lower intercompany sales and the timing of the
recognition of purchased cost savings through vendor incentive programs from
quarter to quarter. The operating profit increase for the first nine months of
2000 compared to 1999 is attributable to year to date increased purchased cost
savings through vendor incentive programs.
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Lawn Care Division - Net sales for the Lawn Care division were $92.5 million for
the third quarter 2000 compared to $85.2 million in the third quarter 1999. Net
sales were $280.6 million for the first nine months of 2000, an increase of
$27.7 million, compared to $252.9 million in 1999. These increases were due
primarily to an increase in service center sales, driven by volume and selective
price increases, where same store sales for the third quarter 2000 compared to
1999 were 2.9% higher and were 5.4% higher for the first nine months of 2000
compared to 1999. Retail sales also had a significant impact on sales in the
third quarter 2000 with a 22.6% increase compared to the third quarter 1999 and
a 35.5% increase in the first nine months of 2000 compared to 1999. Operating
profit was $10.7 million for the third quarter 2000 compared to $9.4 million in
the third quarter 1999. For the first nine months of 2000, operating profit was
$34.2 million, a $5.5 million increase over 1999's operating profit of $28.7
million. The operating profit increase was due primarily to increased gross
margins due to selective price increases, lower costs and favorable product mix.
Golf Division - Net sales for the Golf division were $47.1 million for the third
quarter 2000 compared to $45.8 million in the third quarter 1999. Net sales were
$116.2 million for the first nine months 2000, an increase of $4.4 million from
$111.8 million in 1999. These increases were due primarily to an increase in
Stores-on-Wheels sales, driven by volume and selective price increases, for both
the third quarter and first nine months of 2000 compared to 1999. Operating
profit was $5.0 million for the third quarter 2000 compared to $4.5 million for
the third quarter 1999. For the first nine months of 2000, operating profit was
$11.2 million, a $1.5 million increase over 1999's operating profit of $9.7
million. The operating profit increases were due primarily to increased gross
margins due to selective price increases, a favorable product mix and a slight
reduction of selling, general and administrative costs as a percent of sales.
Liquidity and Capital Resources
-------------------------------
As of September 30, 2000, total assets of the Company were $266.6 million
compared to $259.0 million as of September 30, 1999 and $232.8 million as of
December 31, 1999. The asset increase from September 30, 1999 to September 30,
2000 is primarily related to an increase in accounts receivable, property, plant
and equipment and other assets, which were slightly offset by a decrease in
inventories. The increase from December 31, 1999 is due primarily to the
seasonality of the business. Net accounts receivable were $91.6 million as of
September 30, 2000 compared to $81.1 million as of September 30, 1999, a 13.0%
increase and $67.8 million as of December 31, 1999, a 35.2% increase. Compared
to a year ago, net accounts receivable increase was due primarily to an increase
in accounts receivable trade of 9.5% which is primarily due to a $3.5 million
sales increase from September 1999 to September 2000 along with an increase in
early order sales programs. The additional increase in net accounts receivable
is primarily due to other receivables relating to vendor sales growth incentive
programs. The increase in net accounts receivable from December 31, 1999 to
September 30, 2000 reflects the businesses seasonality in addition to the
increase in customer early order sales programs. Other assets were $10.1 million
as of September 30, 2000 compared to $8.9 million as of September 30, 1999 and
$9.4 million as of December 31, 1999. The increase in other assets is primarily
attributable to an increase in goodwill in association with the asset purchase
of Southern Golf Products, Inc. which took place in August 2000. Inventories
were $110.1 million as of September 30, 2000 compared to $115.5 million as of
September 30, 1999, and $100.7 million as of December 31, 1999. The decrease in
inventory compared to September 30, 1999 was due primarily to lower turfseed
inventory due to deferred turfseed receipts compared to 1999, which was offset
slightly by higher equipment-related inventories. The
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increase of inventories from December 31, 1999 was due primarily to the
Company's seasonal build for anticipated sales.
Funding for the asset changes was provided primarily from borrowings under the
Company's credit facilities. The Company's debt was $96.2 million as of
September 30, 2000 compared to $99.1 million as of September 30, 1999 and $95.3
million as of December 31, 1999. Accounts payable decreased to $51.4 million as
of September 30, 2000 from $54.0 million as of September 30, 1999 and $33.9
million as of December 31, 1999. The decrease in accounts payable from September
1999 to September 2000 relates primarily to the decrease in inventory purchases.
The increase in accounts payable from December 1999 to September 2000 is
primarily related to seasonality.
Outstanding debt under the Company's credit facility was $40.0 million as of
September 30, 2000 compared to $42.8 million as of September 30, 1999 and $39.0
million as of December 31, 1999. The Company's revolving credit facility, which
will mature on June 30, 2003, provides for maximum unsecured borrowing of $60.0
million with no prepayment penalty. As of September 30, 2000, the Company had
$20.0 million under its bank credit facility. The current portion of debt
increase in September 2000 compared to September 1999 and December 1999 is a
result of a June 2001 maturity of a portion of the Company's private placement
debt. The Company believes its current borrowing capacity is adequate for its
needs into the foreseeable future.
Capital expenditures for the first nine months of 2000 included improvements in
the Company's information systems, investment costs in the Company's Novex(TM)
fertilizer plant in Disputanta, Virginia, improvement costs for the fertilizer
plant in Sebring, Florida, and improvements to the Company's other manufacturing
and distribution facilities.
Forward-Looking Statements
--------------------------
Certain statements included in the report are forward-looking statements that
are based on management's current beliefs, assumptions and expectations. These
forward-looking statements can be identified by the use of predictive or future
tense terms such as "anticipate," "estimate," "project," "may," "will" or
similar terms. These statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company's actual
future performance may differ materially from that anticipated in
forward-looking statements. Risk factors that would cause or contribute to such
differences include, but are not limited to:
- regional weather conditions which have an impact on both timing and
volume of sales;
- the Company's successful execution of its operating plans;
- the Company's ability to integrate business acquisitions
successfully;
- general economic and business conditions;
- changes in market demographics; and
- changes in the regulation of the Company's products, including
applicable environmental regulations.
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PART II - OTHER INFORMATION
---------------------------
Except 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 5 - Other Information
--------------------------
The Company has entered into a 15 year and three month lease with two five-year
renewal options commencing on October 15, 2000 for its new corporate
headquarters located in Strongsville, Ohio. Monthly base rent payments begin on
January 15, 2001 with an initial annual base rent of approximately $1.0 million.
The Company is currently marketing for sale its existing corporate headquarters
building located in Rocky River, Ohio.
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 9, 2000 By /s/ R. Breck Denny
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R. Breck Denny, Vice-President/
Chief Financial Officer
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