STRONGSVILLE, Ohio - While most lawn care professionals reported strong business for 2001, the leading supplier to these businesses didn't enjoy similar fortunes this year. LESCO, the leading supplier to much of the lawn care and landscape industry, pointed to a slowing golf course industry, poor spring weather and the aftershocks of the events of Sept. 11 as key obstacles it has dealt with this year.
"Given all of the market conditions we faced in the third quarter, I am pleased with our sales performance despite the effects of intense price competition and a significant drop in sales after Sept. 11," explained Bill Foley, chairman, president and chief executive officer. "Because of price competition and large increase in raw material costs, margins declined significantly."
In fact, the company achieved little profit in the third quarter - roughly $300,000 on sales of $144.1 million
"Sales for the golf division were flat, but down 17 percent in September," Foley noted. "Golf, in general, has been under pressure. Golf rounds were down 15 percent for the first nine months of the year due to the weaker economy, and the September tragedy accelerated this trend. Lawn care sales for the quarter were up 4 percent over year-ago levels but down 2 percent for the month of September. Equipment sales were off 7 percent for the quarter and 21 percent for September."
LESCO has eliminated 1,500 slow-moving products and let go of about 60 people in order to control costs, but new problems have surfaced as the company failed to meet some of the conditions of its loans in October. "While we were not having a good year prior to the third quarter, the third quarter was not at all what we had expected," noted Breck Denny, vice president and chief financial officer. "We fell below some of the restricted loan covenants set by our lenders. We are actively engaged in negotiating relief from these covenants with our existing lenders while at the same time we are seeking to refinance our credit-based facilities on an asset-based loan. While we cannot guarantee success on these fronts, we are optimistic that we will get the relief we are seeking."
Foley told investors in a conference call that he remains optimistic about Lesco's future for the lawn care industry. "We believe we've gained a little over 1 point in marketshare in lawn care this year, and when there are difficult economic conditions in the marketplace, a lot of the people who come into the industry, the smaller guys, we're very good at reaching and selling those guys at higher margin levels," he pointed out.
"We think things will get better," agreed Denny, noting that LESCO sales could grow 4 to 5 percent next year with better spring weather. "As they say, it's always darkest before the dawn."