LESCO Reports Seasonal Loss From Late Spring, Increased Raw Material Costs

"Our first quarter loss was impacted by a late spring over the northern two-thirds of the country, a severe drought in Florida and a 54 percent urea cost increase," said William Foley, LESCO chairman, president and CEO. "We have been impacted by significantly increased urea costs in the past and by drought and late spring weather from time to time, but I cannot recall a time when our industry has been hit by all three external factors at the same time. This has been a tough quarter, but based on our research, we continue to increase our market share."

LAWN CARE DIVISION. Lawn care division sales in the first quarter were $68.6 million, down 9.8 percent compared to 2000. LESCO noted that first quarter lawn care division sales to retailers like Home Depot™ were sharply impacted by the contrasting quarter-to-quarter weather pattern. Net sales to retailers were down about 15 percent in 2001's first quarter compared with last year. LESCO's first quarter sales to retailers were up 50 percent in 2000, due to increased penetration of large retailers and also in part due to the early spring weather. For the full year 2000, net sales to retailers represented about 5 percent of the corporate total.

GOLD DIVISON. Golf division sales were $22.1 million, down only 2.9 percent from last year despite significantly reduced rounds of play at many courses due to weather. The relatively stronger performance of the golf division was aided by a more than 800 percent increase in sales of LESCO’s Novex™ fertilizers. After a difficult start-up of the new Novex plant last year, throughput rates have improved, and the first stage of the capacity expansion is complete. Plant production rates exceeded plans for the first quarter, and by year-end, LESCO expects output to double.

Gross margins continued to be impacted by higher fertilizer raw material costs, particularly urea. Urea prices increased sharply, as higher natural gas prices have significantly influenced LESCO’s most important raw material. Average urea costs were 54 percent higher than last year.The quarter was also impacted by severance costs due to a reduction in work force. As a result of this cost cutting action, future costs are expected to be reduced by about $1.2 million beginning in the second quarter. Based on current plans, LESCO anticipates it will reduce operating costs by more than $7 million in 2001.

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