CLEVELAND – LESCO, Inc., manufacturer and supplier of lawn care products, has announced a strategy to restructure debt and strengthen the company’s balance sheet through a number of initiatives that it expects will close by the end of the first quarter of 2004, including:
Buy-out of its interest rate swap agreement.
Under the terms of its agreements with GEBCS, the company will sell its existing accounts receivables portfolio to GEBCS for approximately $55 million and will outsource its private label credit program through the GE platform. The company expects the transaction, which is subject to certain closing conditions, to close by the end of the first quarter of 2004. All proceeds will be utilized to reduce outstanding debt.
Management expects to incur a one-time charge of $2.0 to $3.0 million in connection with the agreement either in the fourth quarter of 2003 or the first quarter of 2004.
In addition to the GEBCS agreements, the Company has engaged PNC Bank, National Association to arrange a three-year $50.0 million Senior Secured facility to replace LESCO’s existing bank loan facility. A charge of approximately $1.1 million is expected to be recorded to write-off the deferred financing costs of the existing credit facility either in the fourth quarter of 2003 or the first quarter of 2004.
LESCO intends to buy out and terminate its current interest rate swap agreement for approximately $1.3 million and buy-back its outstanding preferred stock for approximately $1.7 million. The swap buy-out is expected to close concurrently with the new credit facility and a one-time charge of approximately $1.3 million is expected to be taken either in the fourth quarter of 2003 or the first quarter of 2004. No charge will be necessary for the preferred stock buy-back.
“We are excited by our new agreements with GEBCS and PNC,” commented Michael DiMino, president and CEO of LESCO. “In combination, these agreements will allow us to reduce debt by over $50 million and increase our financial flexibility, which is critical for long-term growth. Once complete, these transactions will also drive cost savings and operational improvements over time, but even more importantly, will allow us to open new service centers without incurring the additional working capital necessary to finance our own accounts receivable portfolio. It’s a win-win for everyone involved.”
Additionally, LESCO announced that earnings per share for the year ended Dec. 31, 2003 will likely range from $0.20 to $0.25 per diluted share before any charges related to the GE transaction, swap buyout or the revolving credit refinancing. This is an increase from the previously announced guidance of $0.15 to $0.20 per diluted share.
“We are certainly pleased to increase our guidance for 2003,” DiMino concluded. “Continued comparable Service Center growth and our ability to maintain gross margin amid rising raw material costs, combined with operational improvements and financial discipline, have resulted in a more efficient and profitable operation. Furthermore, we expect many of today’s announced initiatives will have a positive effect in 2004 and beyond.”
The company expects to announce its financial results for the fourth quarter and fiscal 2003 on or about Feb. 23, 2004.