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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1996 Commission File No. 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
incorporation or organization) Identification No.)
20005 Lake Road, 44116
Rocky River, Ohio (Zip Code)
(Address of principal executive offices)
(216) 333-9250
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None Not Applicable
- ------------------------ ------------------------
Securities registered pursuant to Section 12(g) of he Act:
Common Shares, without par value
--------------------------------
(Title of class)
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 12 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of Common Shares held by nonaffiliates on March 18,
1997: approximately $104,500,000.
Number of Common Shares outstanding on March 18, 1997: 8,079,675.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 Annual Report are incorporated by reference in
Parts III and IV and portions of the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held in 1997 (the "Proxy Statement") are
incorporated by reference in Part III.
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PART I
Item 1. Business
--------
General
- -------
The Registrant was incorporated in 1962 under the laws of the State of
Ohio. As used in this report, the terms "Company," "LESCO" and "Registrant"
refer to LESCO, Inc.
The Company is engaged in the manufacture and sale of an extensive line
of golf course and lawn care products which are marketed throughout the United
States, primarily under the LESCO name. These products include fertilizers, turf
protection products, grass seed, turf care equipment and replacement parts and
golf course accessories. The Company's customers include golf courses, lawn care
companies, landscapers, municipalities, theme parks and industrial concerns.
Products are marketed directly through the Company's sales organization, which
includes localized service centers and a fleet of LESCO tractor trailers
operated by salesmen trained in turf care management. The Company's operations
constitute a single industry segment.
Products
- --------
The Company manufactures and sells to the green industry an extensive
line of turf care products, comprising two major lines: (1) consumable goods,
including turf control products, fertilizer and grass seed, and (2) hard goods,
including equipment, accessories and other related products such as irrigation
equipment, protective gear and hand tools. These products are marketed under the
names "LESCO(TM)," "LESCO Products" and "Pro-Lawn Products." In addition, the
Company sells a diverse line of turf products under the manufacturer's brand
name.
Sales by product line for the years ended December 31, 1996, 1995
and 1994 are as follows:
Year Ended December 31
----------------------------------------------------------------------------
(Net sales in thousands)
1996 1995 1994
---------------------- ------------------- -------------------
Net Sales Percent Net Sales Percent Net Sales Percent
--------- ------- --------- ------- --------- -------
Consumable goods $247,454 79.3% $184,545 76.4% $154,408 75.5%
Hard goods 64,577 20.7% 57,122 23.6% 50,115 24.5%
-------- ------ -------- ------ -------- ------
Total $312,031 100.0% $241,667 100.0% $204,523 100.0%
======== ====== ======== ====== ======== ======
Consumable Goods
- ----------------
TURF CONTROL PRODUCTS. The Company offers a full line of turf control
products including herbicides, insecticides and fungicides. These products
control weeds, insects and fungal diseases for turf, trees, shrubs and landscape
beds. The Company's turf control products include its LESCO BioChoice(TM)
alternative product line. In addition, in order to offer its customers a more
complete product line, the Company sells turf control products produced by other
major manufacturers.
FERTILIZER. The Company sells a broad assortment of standard
fertilizers, including combination products which combine fertilizer with turf
control products. The Company also custom-blends fertilizer according to its
customers' specifications. The Company's fertilizers include specialized
products for golf course applications including greens, tees and fairways,
products for use in the lawn care industry, and products for trees, shrubs and
landscape beds. Fertilizers are generally sold in a granular form, although
specialized liquid formulations are also available.
The majority of the fertilizers sold by the Company are formulated with
sulfur-coated urea fertilizer. The Company is one of a few manufacturers of
these products in the world. Sulfur coating produces a gradual release of
nutrients over time, which reduces the number of required applications and the
risk of overfertilization. ELITE(R)
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is the Company's premium brand sulfur-coated urea fertilizer, specially sized
and formulated for low-cut turf on greens, tees and fairways.
GRASS SEED. The Company markets LESCO and other brands of grass seed,
most of which are certified by authorities of various states to guarantee the
varietal purity of the seed. The Company contracts for the production of grass
seed with growers in the Pacific Northwest and Western Canada for cool season
grasses and in California for warm season grasses. The Company has more than
27,000 production acres under contract in these regions. The Company's seed line
includes 34 proprietary varieties as well as 28 standard blends and mixtures.
Hard Goods
- ----------
EQUIPMENT AND ACCESSORIES. The Company manufactures a broad line of
equipment including reel mowers, such as greens and fairway mowers, rotary
mowers, spreaders, sprayers, aerators, renovation equipment and aftermarket
replacement parts. The Company believes that the LESCO spreader, first
introduced in 1982, is an industry leader in sales to the professional sector of
the market. In addition, the Company offers a broad line of handheld power tools
and a variety of golf course accessories including ball washers, tee markers,
sand trap rakes, putting green cups and flagpoles. Equipment sales are supported
by field equipment specialists, a toll-free hotline staffed by trained
technicians and repair facilities in the Service Centers. Parts support is fully
computerized, and the Company is generally able to provide overnight parts
delivery nationwide.
OTHER. The Company offers underground irrigation equipment and systems,
protective gear such as goggles, masks and gloves, and hand tools such as tree
pruners, shovels and rakes. These products are produced for the Company by third
parties.
Product Improvement and Development
- -----------------------------------
The Company's research and development efforts focus on improvements to
and development of new turf control products and fertilizers, turf care
equipment and golf course accessories and new grass seed varieties. The Company
also has a number of agreements with state universities which test turf control
products, grass seed and fertilizers for the Company.
Marketing and Distribution
- --------------------------
LESCO SERVICE CENTERS(R). The Company operates Service Centers which
enable the Company to market its products on a localized basis. The Service
Centers are generally established in easily accessible industrial parks which
allow for sales directly to commercial users. The Company opened 23 new Service
Centers in 1996, including three Golf Super Stores, and had 196 Service Centers
in operation as of December 31, 1996. The Company plans to open twenty Service
Centers in 1997. With the exception of the new Golf Super Stores, which market
products primarily to golf courses, the Service Centers market products
principally to smaller lawn care companies, landscapers, nurseries,
municipalities, churches and condominium associations. The Company may face
increased competition in this market.
LESCO STORES-ON-WHEELS(SM). The Company markets its products to private
and public golf courses and other customers having large turf areas through
salesmen who operate a fleet of Stores-on-Wheels consisting of 66 tractor
trailers. These trucks are well-stocked with a wide variety of turf care
products, all of which are sold directly from the trucks.
CONVENTIONAL SALES FORCE. The Company's conventional sales
representatives are strategically located in the various markets served by the
Company and sell to large customers such as national and regional lawn care
companies. Sales through this distribution channel, which typically generate
lower gross margins than the Service Centers and Stores-on-Wheels, have declined
as a percentage of total net sales as the number of Service Centers and
Stores-on-Wheels has increased.
OTHER. The Company also markets its products by mail order catalog and
participates in national and regional lawn care and golf course trade shows. A
telemarketing sales group calls on inactive accounts and contacts customers not
currently serviced by the Company's outside sales forces. The Company
distributes selected products
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through Home Depot stores in the South, Mid-Atlantic and Northeast areas of the
country. In addition, the Company markets its products internationally
principally through foreign distributors.
TECHNICAL EXPERIENCE OF SALES PERSONNEL. Most of the Company's
salespersons are agronomists or horticultural specialists or have had prior
experience with lawn care companies or golf courses. The Company believes that
the training and experience of its salespersons have helped promote customer
reliance on the Company's technical expertise with respect to existing turf care
products and new product development in the turf care industry.
Manufacturing and Suppliers
- ---------------------------
FERTILIZERS AND COMBINATION PRODUCTS. Poly Plus(R) sulfur-coated
fertilizers are manufactured by spraying dry fertilizers first with sulfur, then
with a polymer sealant to seal the sulfur and retard the release of nutrients.
Uncoated fertilizers are blended in accordance with Company or customer
specifications. Combination products are processed by impregnating fertilizers
with technical grade herbicides, insecticides or fungicides. Raw materials used
in the manufacture of fertilizer are nitrogen, phosphorus, potash and sulfur.
TURF PROTECTION PRODUCTS. In producing both liquid and granular turf
protection products, the Company purchases technical-grade or highly
concentrated chemicals and blends them with various solvents, emulsifiers and
surfactants purchased from various suppliers.
TURF CARE EQUIPMENT, REPLACEMENT PARTS AND GOLF COURSE ACCESSORIES.
Certain turf care equipment and replacement parts are manufactured and assembled
by the Company, primarily at its Sebring, Florida facilities. The Company
purchases metal components and performs such aspects of manufacturing as
stamping, bending, cutting, welding, drilling, grinding and punching of parts
such as mower reels and bedknives. The Company also assembles greens mowers,
fairway mowers, rotary mowers, aerators, turf renovators, spreaders, sprayers
and other turf care equipment at Sebring using components acquired from a
variety of suppliers or parts manufactured by the Company. Additional equipment
and parts, as well as most golf course accessories, are manufactured by various
contractors with tooling, dies and molds owned by the Company.
In October 1996, the Company announced the formation of a joint venture
with MTD Products, Inc. This joint venture will manufacture commercial lawn care
equipment to be marketed by both partners. The joint venture will be located in
Streetsboro, Ohio and is expected to commence operations in mid-1997. As a
result, the Company intends to close its current equipment manufacturing
facilities in Sebring, Florida, in late 1997.
SOURCES OF SUPPLY. It is the Company's policy to have multiple sources
of supply or acceptable substitutes for all raw materials and metal components
which the Company uses in manufacturing or assembling its products. The only
exception to this policy is the Company's purchase of proprietary products.
Competition
- -----------
The Company competes with a number of companies within each of its
product lines including national, regional and local distributors, turf care
product manufacturers and retailers such as mass merchandisers, local nurseries
and hardware stores. Some of these national competitors have greater name brand
recognition than the Company. The Company's principal competitors for its turf
control, fertilizer and grass seed product lines include Andersons, Lebanon,
Scott's, Terra, United Horticultural Supply and Vigoro. The Company's principal
competitors for equipment are Jacobsen, John Deere, Ransomes, Scag and Toro. The
Company, however, believes that it is the only national company that supplies a
full range of products and sells directly to the commercial user. The Company
competes primarily on the basis of service to customers and product quality,
selection and price.
Seasonality and Backlog
- -----------------------
The Company's business is seasonal since the customers in northern
states do not have the same year-round requirements for products as do customers
in southern states. Demand for the Company's products is generally greatest
during the second quarter of its fiscal year.
The Company offers an early order program to lessen the second quarter
demand on its manufacturing and distribution facilities. This program allows the
Company to schedule manufacturing and distribution of products prior
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to the time when customers need such products. This has reduced variations in
sales and earnings from quarter to quarter. The Company's backlog as of December
31, 1996 and 1995 was $5,315,000 and $4,100,000, respectively.
Employees
- ---------
As of December 31, 1996, the Company had 1,132 full-time employees, of
which 355 were involved in manufacturing, assembly and warehouse operations, 518
in sales-related activities and 259 in management and administration. Of the
total number of full-time employees, 676 are salaried and 456 are hourly
employees. At the Company's Martins Ferry facility, 86 employees are represented
by a union. The Company has not experienced any strikes or work stoppages by
employees and generally considers its employee relations to be good.
Environmental Matters
- ---------------------
Turf control products sold by the Company are subject to registration
by the Environmental Protection Agency (the "EPA") and similar regulatory
authorities in various states. The process of obtaining such registration may be
lengthy and expensive. The labeling and advertising of turf control products are
also subject to EPA regulation. While the Company's turf control product labels
and advertising materials are consistent with EPA and state guidelines, there
can be no assurance that EPA or state regulations or interpretations may not
change in the future or that the EPA or any state will not challenge the
Company's advertising materials.
Fertilizer products are currently regulated by individual state
departments of agriculture and must generally be registered or licensed in most
states in which they are sold. There can be no assurance that the state
regulations or interpretations will not change in the future or that the
Company's registration in any state will not be challenged. The Company is also
required to obtain permits from a number of governmental agencies in order to
conduct various aspects of its business. These permits are subject to
modification and revocation, which could impair the Company's ability to conduct
its business in the manner in which and at the places at which it is presently
conducted.
Because of the nature of the Company's business, the Company is subject
to various environmental laws and regulations and incurs routine costs in
complying with these laws and regulations. It is the Company's policy to provide
for nonroutine costs relating to environmental matters when a loss is probable
and the amount of the loss can be reasonably estimated. There are no such
reserves for environmental matters at December 31, 1996.
Insurance
- ---------
The Company maintains comprehensive general liability insurance
coverage (which includes product liability insurance coverage) at levels which
the Company believes are prudent and most cost-effective. The Company's
insurance program includes significant deductible amounts with respect to such
coverages. Certain coverages, including environmental pollution, are restricted
or have been excluded under current policies. The level of coverage and
deductible maintained generally reflects trends in the liability insurance
industry and is not unique to the Company. The Company regularly evaluates the
cost-effectiveness as compared to the risks assumed in determining its insurance
program.
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Item 2. Properties
----------
The Company owns its principal executive office building and owns or
leases its warehouse and manufacturing facilities. The Company believes these
facilities are well-maintained, adequately insured and adequate and suitable for
their present and intended uses. In addition, the Company leases facilities for
temporary storage of inventory products during its peak seasonal demand. The
Company maintains sales offices at each of the following locations, except its
executive offices. Detail by location is as follows:
Location (1) Principal Use Square Feet Status
- ------------ ------------- ----------- ------
Rocky River, OH Executive offices 41,000 Owned
Avon Lake, OH Blending of grass seed and distribution center 139,000 Owned
Charlotte, NC Distribution center for various products 57,600 Leased(2)
Lawrenceville, NJ Distribution center for various products 100,500 Leased(3)
Martins Ferry, OH Manufacturing facility and distribution center for
fertilizers, including sulfur-coated fertilizers,
and turf control products 234,000 Owned(4)
Pittsburgh, PA Distribution center for various products 131,000 Leased(5)
Sebring, FL Manufacturing facility for fertilizers;
manufacturing and assembly of turf care
equipment, replacement parts and golf course
accessories; and distribution center for
principal products 277,000 Leased(6)
Silverton, OR Blending of grass seed and distribution center 66,200 Leased(7)
Wellington, OH Manufacturing facility for turf control products
and distribution center for principal products 60,000 Owned
Windsor, NJ Distribution center for principal products 37,000 Owned(8)
(1) Does not include Service Centers or Stores-on-Wheels. As of December
31, 1996, the Company operated Service Centers in 196 facilities of
which three are owned, and 193 are leased, by the Company. These
facilities range in size from 2,500 to 7,200 square feet. The Company
owns or leases 66 tractor-trailers for its Stores-on-Wheels.
(2) This facility is subject to a lease expiring in 1998. The Company has
an option to renew the lease for a three-year term.
(3) This facility is subject to a lease expiring December 31, 1997.
(4) These facilities are subject to mortgages in the aggregate amount of
$6,549,000 as of December 31, 1996.
(5) This facility is subject to a lease expiring in 2001. The Company has
two five-year renewal options.
(6) These facilities consist of nine buildings subject to leases expiring
in 1997, 2000 and 2001. It is the Company's intent to renew these
leases upon their expiration.
(7) This facility is subject to a fifteen year lease, expiring in 2009,
which includes an option to purchase.
(8) The facility is subject to a mortgage in the amount of $155,000 as of
December 31, 1996.
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In January 1996, the Company completed the purchase of certain assets of the
Pro-Lawn Division of Agway, Inc. The Company distributes Pro-Lawn products from
five Agway distribution centers which were used by Pro-Lawn prior to the
acquisition and which total approximately 100,000 square feet.
Item 3. Legal Proceedings
-----------------
No legal proceedings are pending to which the Company is a party or to
which any of its property is subject other than litigation incidental to the
conduct of its business and which in the aggregate is not material to the
operations of the Company as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
Company's executive officers, including their respective positions with the
Company.
Name Age Position
- ---- --- --------
William A. Foley 48 Chairman of the Board, President and Chief Executive Officer
John M. Freise 50 Vice President, Sales
Philip R. Gardner 52 Vice President, International and Key Accounts
Ware H. Grove 46 Vice President, Chief Financial Officer
C. Thomas Smith 47 Vice President, Operations
Michael A. Sotak 41 Vice President, Marketing
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 from 1984 to 1988, and
was Vice President - Sales and Marketing for Anchor Hocking Corporation from
1970 to 1984, a producer of glass products. Mr. Foley is also a director of
Alltrista Corporation, a consumer and industrial products manufacturing company,
and Libbey, Inc., a producer of glass products.
John M. Freise is Vice President, Sales. Mr Freise joined the Company
in 1995 as Vice President, Service Centers. From 1991 to 1995, Mr. Freise was a
Regional Vice President Store Operations and Vice President/General
Merchandise/Hardlines for Roses Stores, a regional discount store chain. Mr.
Freise was District Manager (Director Level) from 1990 to 1991, and from 1987 to
1990 was District Manager of Target Stores, a national discount retailer.
Philip R. Gardner is Vice President Lawn, International and Key
Accounts. He served as Executive Vice President, Sales of the Company from March
1991 until February 1995, and as Vice President-Sales from January 1985 until
March 1991. Mr. Gardner joined the Company in September 1976, was promoted to
Regional Sales Manager in 1979 and Southeast Sales Manager in 1983.
Ware H. Grove joined the Company in June 1996 as Vice President, Chief
Financial Officer. From 1994 to 1996, Mr. Grove was Vice President and Treasurer
at Revco D.S. Inc., a national drugstore chain. From 1991 to 1994, Mr. Grove was
Vice President and Treasurer at Vanstar (formerly Computerland Corporation), a
global distributor and reseller of personal computers and related products. From
1983 to 1991, Mr. Grove was the Assistant
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to the President at Manville Corporation, a global building materials
manufacturing company; and from 1977 to 1983, Mr. Grove was Cash Manager at The
Upjohn Company, a multinational pharmaceutical company.
C. Thomas Smith joined the Company is 1994 as Vice President, Operations.
From 1979 to 1994, Mr. Smith was Group Director, Advanced Manufacturing at
Frigidaire Co., a manufacturer of household major appliances. From 1978 to 1979,
Mr. Smith was Manager, Materials and Production at Anderson IBEC, a manufacturer
of food processing equipment. From 1970 to 1977, Mr. Smith was a Senior Buyer,
Mfg. & Capital Equipment at Babcock & Wilcox Co., a manufacturer of power
operation equipment.
Michael A. Sotak joined the Company in 1994 as Vice President,
Marketing. From 1991 to 1993, Mr. Sotak was a Director of Marketing at
Pitman-Moore, Inc., now known as Mallinckrodt Veterinary, Inc., Division of
Mallinckrodt, Inc. Mr. Sotak also held the following positions with
Pitman-Moore, Inc.: 1989 to 1991, Director of Business Management; 1988 to 1989,
Director, International Marketing; and, 1987 to 1988, National Sales Manager.
From 1978 to 1987, Mr. Sotak was Senior Product Manager of Schering-Plough
Corporation, a pharmaceutical manufacturer and marketer.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
---------------------------------------------------------------------
The Company's Common Shares are traded in the National Market System
over-the-counter market under the NASDAQ symbol "LSCO." The following are high
and low market prices by quarter:
1996 1995
------------------ -----------------
Quarter Ended High Low High Low
------------- ---- --- ---- ---
March 31 15-3/4 12 15-3/4 12-3/4
June 30 18-5/8 13-3/4 17-3/4 14-1/4
September 30 19-3/4 14-1/2 15-5/8 12-3/4
December 31 18 14-1/2 15-1/8 13
The Company paid an annual dividend of $.11 per Common Share in 1996 and
$.10 in 1995. Certain provisions of the principal credit agreement of the
Company restrict the right of the Company to pay dividends. See Note C of Notes
to Financial Statements.
As of March 18, 1997 there were approximately 1,160 holders of record
of the Company's Common Shares.
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Item 6. Selected Financial Data
-----------------------
Five Year Summary
(Amounts in Thousands Except Per Share Data)
Year Ended December 31
------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Statement of Income Data:
Net sales $312,031 $241,667 $204,523 $166,203 $145,704
Cost of sales 211,825 160,576 133,826 108,703 97,782
Other cost of sales 6,771 -- -- -- --
--------------------------------------------------------------
Gross Profit on Sales 93,435 81,091 70,697 57,500 47,922
Selling, general and
administrative expenses 91,065 71,635 60,175 47,868 39,776
Other expenses 4,745 1,035 1,071 1,918 1,537
--------------------------------------------------------------
(Loss) Income from Operations (2,375) 8,421 9,451 7,714 6,609
Other deductions-net 1,177 585 71 189 550
--------------------------------------------------------------
(Loss) Income Before Income Taxes
and Cumulative Effect of
Change in Accounting Principle (3,552) 7,836 9,380 7,525 6,059
Income tax (benefit) expense (1,203) 3,009 3,608 2,765 2,202
---------------------------------------------------------------
(Loss) Income Before Cumulative
Effect of Change in Accounting
Principle (2,349) 4,827 5,772 4,760 3,857
Cumulative effect on prior years of
changing the method of capitalizing
certain inventory costs -- -- 1,149 -- --
-------------------------------------------------------------
Net (Loss) Income $ (2,349) $ 4,827 $ 6,921 $ 4,760 $ 3,857
=============================================================
Earnings Per Share:
(Loss) Income before cumulative effect
of change in accounting principle ($.29) $.59 $.72 $.68 $.60
Cumulative effect on prior years of
changing the method of
capitalizing certain
inventory costs -- -- .14 -- --
-------------------------------------------------------------
(Loss) Earnings Per Share ($.29) $.59 $.86 $.68 $.60
==========================================================
Cash dividends per
common share $.11 $.10 $.09 $.08 $.07
Weighted average number of
common and common
equivalent shares
outstanding 8,007,001 8,116,740 8,034,387 6,963,994 6,438,024
Year Ended December 31
------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ------- ----
Balance Sheet Data:
Working capital $ 99,904 $ 85,950 $ 70,839 $ 65,414 $ 56,873
Total assets $164,673 $137,821 $114,612 $104,471 $ 95,882
Long-term debt, net
of current portion $ 64,704 $ 43,258 $ 29,542 $ 33,122 $ 45,499
Shareholders' equity $ 61,699 $ 63,878 $ 58,175 $ 50,883 $ 29,453
Notes:
A. All per share data have been adjusted to give effect to a
3-for-2 stock split completed by the Company in July 1993.
B. Effective January 1, 1994, the Company changed its method of
accounting for inventory costs to include the capitalization
of certain warehousing, transportation and procurement costs
which were previously expensed.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations Results of Operations
- -----------------------------------
Incorporated by reference to pages 12 and 13 of the Registrant's 1996
Annual Report.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Incorporated by reference to pages 15 through 20 of the Registrant's
1996 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
- --------------------
Not Applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Reference is made to the information set forth under the captions
"Election of Directors" and "Business Experience of Directors and Nominees" in
the Proxy Statement, which information is incorporated herein by reference.
The information required with respect to executive officers is set
forth in Part I of this Form 10-K under the heading "Executive Officers of the
Registrant." All officers serve at the discretion of the Board of Directors.
Item 11. Executive Compensation
----------------------
Reference is made to the information set forth under the caption
"Executive Compensation" in the Proxy Statement, which information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Reference is made to the information set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Reference is made to the information set forth under the caption
"Certain Transactions" in the Proxy Statement, which information is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)(1) and (2). Financial Statements and Financial Statement Schedules.
The following financial statements of LESCO, Inc. included in the
Registrant's 1996 Annual Report are incorporated by reference in Item 8:
Balance Sheets--December 31, 1996 and 1995
Statements of Operations--Years ended December 31, 1996, 1995 and 1994
Statements of Shareholders' Equity--Years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows--Years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
The following financial statement schedule is included herewith:
Schedule II--Valuation and Qualifying Accounts--December 31, 1996
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(3) See Exhibit Index.
(b) The Registrant has not filed any current report on Form 8-K during the
quarter ended December 31, 1996.
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedule
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
LESCO, INC.
DECEMBER 31, 1996
===================================================================================================================================
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
DESCRIPTION BALANCE AT DEDUCTIONS BALANCE AT
BEGINNING OF DESCRIBE END OF PERIOD
PERIOD
--------------------------------------------
CHARGED TO COSTS CHARGED TO OTHER
AND EXPENSES ACCOUNTS--DESCRIBE
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996:
Deducted from assets accounts-
Reserve for inventory obsolescence $ 250,000 $ 6,884,000 $ 7,134,000
===================================================================================================================================
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ William A. Foley
---------------------------
William A. Foley
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William A. Foley
- -------------------------- President, Chairman, Chief March 26, 1997
William A. Foley Executive Officer and Director
/s/ Ware H. Grove
- -------------------------- Chief Financial Officer March 26, 1997
Ware H. Grove
/s/ Drexel Bunch
- -------------------------- Director March 26, 1997
Drexel Bunch
/s/ Robert F. Burkhardt
- -------------------------- Director March 26, 1997
Robert F. Burkhardt
/s/ Paul H. Carleton
- -------------------------- Director March 26, 1997
Paul H. Carleton
/s/ David H. Clark
- -------------------------- Director March 26, 1997
David H. Clark
/s/ J. Martin Erbaugh
- -------------------------- Director March 26, 1997
J. Martin Erbaugh
/s/ Stanley M. Fisher
- -------------------------- Director March 26, 1997
Stanley M. Fisher
/s/ Michael FitzGibbon
- -------------------------- Director March 26, 1997
Michael FitzGibbon
/s/ F. Leon Herron
- -------------------------- Director March 26, 1997
F. Leon Herron
/s/ Lee Howley
- -------------------------- Director March 26, 1997
Lee Howley
/s/ Karl E. Ware
- -------------------------- Director March 26, 1997
Karl E. Ware
13
LESCO, INC.
FORM 10-K
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
3(a)1 Amended Articles of Incorporation of the Registrant.
3(b)1 Amended Code of Regulations of the Registrant.
4(a)2 Specimen certificate for the Registrant's Common Shares.
4(c)3 Reimbursement Agreement dated March 1, 1993, between Pittsburgh
National Bank and the Registrant.
4(d)1 Loan Agreement dated as of January 1, 1988 between County of
Belmont, Ohio, and the Registrant ($5,875,000 County of Belmont,
Ohio Industrial Development Revenue Bonds).
4(e)1 Loan Agreement dated as of January 28, 1988 between the Director of
Development of the State of Ohio and the Registrant.
4(f) Amended Articles of Incorporation of the Registrant (appears as
Exhibit 3(a) above).
4(g) Amended Code of Regulations of the Registrant (appears as Exhibit
3(b) above).
10(a)4 LESCO, Inc. Stock Investment and Salary Savings Plan and Trust, as
amended and restated.
10(e)3 Reimbursement Agreement dated March 1, 1993, between Pittsburgh
National Bank and the Registrant (appears as Exhibit 4(c) above).
10(g)1 Loan Agreement dated as of January 28, 1988 between the Director of
Development of the State of Ohio and the Registrant (appears as
Exhibit 4(e) above).
10(k)3 1992 Stock Incentive Plan.
10(l)5 Stock Bonus Plan (appears as Exhibit 4(d) to Registrant's Form S-8).
10(o)1 Loan Agreement dated as of January 1, 1988 between County of
Belmont, Ohio, and the Registrant ($5,875,000 County of Belmont,
Ohio Industrial Development Revenue Bonds) (appears as Exhibit 4(d)
to Registrant's Form 10-K for fiscal year 1987).
10(p)6 Employment Agreement by and between the Registrant and William A.
Foley.
10(q)7 Second Amendment to the Credit Agreement dated November 1, 1996.
10(r)4 Credit Agreement dated September 30, 1994 among National City Bank,
PNC Bank, National Association, NBD Bank, N.A., National City Bank,
as agent, and the Registrant (the "Credit Agreement")(appears as
Exhibit 10(r) to Registrant's Form 10-K for fiscal year 1994).
10(s)4 Consulting Agreement by and between the Registrant and Robert F.
Burkhardt (appears as Exhibit 10(s) to Registrant's Form 10-K for
fiscal year 1994).
13 7 The following portions of the 1996 Annual Report: Financial Review,
Financial Statements, Report of Independent Auditors and Notes to
Financial Statements
23 7 Consent of Ernst & Young LLP, Independent Auditors.
27 7 Financial Data Schedule.
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14
Exhibit
- -------
1 Incorporated by reference to exhibits, with the corresponding exhibit
numbers unless otherwise indicated, filed by Registrant with its
Annual Report on Form 10-K for the year ending November 30, 1987 (File
No. 0-13147).
2 Incorporated by reference to exhibits, with the corresponding exhibit
numbers, filed by Registrant with its Registration Statement on Form
S-l (File No. 2-90900).
3 Incorporated by reference to exhibits, with the corresponding exhibit
numbers unless otherwise indicated, filed by Registrant with its
Annual Report on Form 10-K for the year ending December 31, 1992.
4 Incorporated by reference to exhibits, with the corresponding exhibit
numbers unless otherwise indicated, filed by Registrant with its
Annual Report on Form 10-K for the year ending December 31, 1994.
5 Incorporated by reference to exhibits, with the corresponding exhibit
numbers unless otherwise indicated, filed by Registrant with its
Registration Statement on Form S-8 (File No. 33-22685).
6 Incorporated by reference to exhibits, with the corresponding exhibit
numbers, filed by Registrant with its Registration Statement on Form
S-2 (File No. 33-67348).
7 Filed herewith.
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15
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
----------------------------
Exhibits 10(a), 10(k), 10(1) and 10(p) are compensation plans in which
executive officers participate.
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