its a wonder that lesco is still in bidness!

Discussion in 'Lawn Mowing' started by Norm Al, Dec 22, 2004.

  1. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    CLEVELAND, Dec. 21 /PRNewswire-FirstCall/ -- LESCO, Inc. (Nasdaq: LSCO), a leading provider of products for the professional green and pest control industries, today announced that the Company will record an approximately $5.2 million charge during the fourth quarter ending December 31, 2004 related to a contract with a supplier.

    In November 2002, LESCO and its supplier entered into a five-year supply agreement, which obligated LESCO to purchase annually 8,000 tons of methylene urea fertilizer at a fixed conversion cost of $500/ton plus the prevailing commodities market prices. In the professional green industry, the primary use of methylene urea fertilizer is in the golf market. Due to various issues, including the tepid state of the golf industry, LESCO has been challenged to sell its commitment of 8,000 tons, and has resorted to aggressive promotions and inventory write-downs to liquidate the product. As disclosed in the Company's third quarter Form 10-Q, LESCO notified its supplier in October 2004 that it intended to cease performing under the agreement. After unproductive settlement negotiations, the Company opted to invoke judicial assistance to determine its liability. On November 29, 2004, LESCO filed a declaratory judgment action against its supplier in the Court of Common Pleas in Cuyahoga County, Ohio to ask the court to determine the Company's liability to the supplier.

    The approximate $5.2 million charge includes the Company's estimated costs related to the discontinuation of the contract of $2.2 million, forgiveness of a note receivable of $1.3 million, the markdown of inventory value of discontinued methylene urea products of approximately $1.0 million and miscellaneous costs of approximately $0.7 million. LESCO has secured an alternative, lower-cost source of methylene urea fertilizer. The alternative source does not require a tonnage commitment. The Company anticipates that these actions will result in annual savings of over $2 million.
     
  2. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    going to spend 5 million to save 2 million per year?
     
  3. Gene $immons

    Gene $immons LawnSite Bronze Member
    Posts: 1,028

    I was just complaining about Lesco's prices the other day. I Needed to buy a round-up generic product and bought some of their Prosecutor for $115.00 for 2.5 gallons. (1/2 case)

    Another chemical supplier had Glyphosate (same thing) for 65.00 for 2 - jugs
    (full case)

    you know where I'll be shopping.
     
  4. riches139

    riches139 LawnSite Senior Member
    Posts: 369

    Alot of their equipment seems to be overpriced also. :realmad:
     
  5. richard coffman

    richard coffman LawnSite Senior Member
    Posts: 341

     
  6. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Posts: 7,603

    Actually, they are really just recognizing and writing off cost they have already incurred. They probably booked a liability as a deferred expense for the value of the contract and now they are charging the whole thing to this years expenses because it went sour. From the information, they are expensing the decreased value of the inventory and recognizing other related expenses related to the sour deal in the current year. It's basically an accounting entry but watch their stock take a hit. They are reducing their earnings per share for the quarter and the year.
     
  7. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    Pro Source has some awesome prices!
     
  8. wanabe

    wanabe LawnSite Senior Member
    from So. IL
    Posts: 943

    Urea for $500 a ton? If that is the case, I can get them all they need! Never has been over $225 a ton here.
     
  9. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    thats what i was thinkin too,,,,,,who the &&^% wrote that deal for them?
     
  10. lawnmechanix

    lawnmechanix LawnSite Member
    Posts: 1

    I encourage all LCO out there, big or small to stop dealing with lesco and find a new supplier. I am sick of there price increases and there shitty no knowledge employee's.
     

Share This Page