Year-End and Fourth Quarter 2002

1
Year-End and Fourth Quarter 2002
Investor Update
2
Safe Harbor Statement
Portions of this presentation and other
statements that are not historical information
are forward looking statements. Investors are
cautioned that forward-looking statements involve
risks and uncertainty, that actual results may
differ materially from the results predicted or
implied in such statements and that investors
should not place undue reliance on such
statements. Factors that may cause actual
results to differ materially from those predicted
or implied in our forward-looking statements
include, but are not limited to, potential
regulations the Companys ability to effectively
manufacture, market and distribute new products
the success of the Companys operating plans
regional weather conditions the condition of the
industry and the economy site availability in
designated markets zoning and other local
regulations and the ability to hire qualified
individuals to operate the Service Centers. For
a further discussion of risk factors, investors
should refer to the Companys Securities and
Exchange Commission reports, including but not
limited to Form 10-Q for the quarter ended
September 30, 2002.
3
2002 Pre-tax Charges
4
Operating Results Twelve Months 2002
5
Income StatementTwelve Months 2002
6
Twelve Months Sales (1999 - 2002)
1.5
0.9
8.5
7
Twelve Month Sales - Channels (1999 - 2002)
5.4
(0.1)
(8.9)
8
Twelve Months Sales - Products (1999 - 2002)
(0.5)
5.5
(0.8)
5.8
(8.2)
Other includes Pest Control, Golf Accessories,
Irrigation, and Miscellaneous.
9
Gross Profit on Sales
33.3
36.7
32.4
33.6
s are percent of sales.
Excluding inventory markdown charges
10
Expenses - Total
Excluding one-time charges.
11
Expenses - Components
12
Interest Expense
Total Interest Expense - 2002 - 4.9 million 2001
- 6.2 million
13
Net Income Before One-time Gain and Charges
Note The full year 2002 operating results
excludes a one-time pre-tax gain of 0.2 million
from the sale of the Companys former corporate
headquarters, one-time pre-tax charges totaling
36.6 million to markdown discontinued inventory
for liquidation (9.2 million), to rationalize
its manufacturing invested capital (12.0
million), to record severance costs (3.5
million), to recognize the cumulative effect of
an accounting change for the write-off of
impaired goodwill (7.3 million or 4.6 million
net of tax) and to record an extraordinary charge
related to the early termination of debt (4.6
million or 2.9 million net of tax) and a tax
charge of 0.9 million to record an allowance for
the realization of deferred state taxes generated
by the previously referenced pre-tax charges of
36.6 million.
14
EPS Before One-time Gain and Charges
Note The full year 2002 operating results
excludes a one-time pre-tax gain of 0.2 million
from the sale of the Companys former corporate
headquarters, one-time pre-tax charges totaling
36.6 million to markdown discontinued inventory
for liquidation (9.2 million), to rationalize
its manufacturing invested capital (12.0
million), to record severance costs (3.5
million), to recognize the cumulative effect of
an accounting change for the write-off of
impaired goodwill (7.3 million or 4.6 million
net of tax) and to record an extraordinary charge
related to the early termination of debt (4.6
million or 2.9 million net of tax) and a tax
charge of 0.9 million to record an allowance for
the realization of deferred state taxes generated
by the previously referenced pre-tax charges of
36.6 million.
15
Operating Results Fourth Quarter
16
Income Statement - 4th Quarter
17
Sales Seasonality
18
Fourth Quarter Sales
2.3
2.4
7.5
19
Fourth Quarter Sales - Channels
5.9
2.7
(14.8)
20
Fourth Quarter Sales - Products
(4.0)
10.0
(0.7)
(12.0)
11.4
Other includes Pest Control, Golf Accessories,
Irrigation, and Miscellaneous.
21
Gross Profit on Sales
34.6
29.6
28.5
32.2
s are percent of sales.
22
Expenses - Total
23
Expenses - Components
24
Net Income (Loss) Before One-time Gains Tax
Charge
Note The fourth quarter operating results
exclude one-time pre-tax gains totaling 0.7
million to reflect the actual results from the
inventory liquidation (0.4 million) and the
ultimate cost of employee severance (0.3
million) and a tax charge of 0.9 million to
record an allowance for the realization of
deferred state taxes.
25
EPS Before One-time Gains Tax Charge (fully
diluted)
Note The fourth quarter operating results
excludes one-time pre-tax gains totaling 0.7
million to reflect the actual results from the
inventory liquidation (0.4 million) and the
ultimate cost of employee severance (0.3
million) and a tax charge of 0.9 million to
record an allowance for the realization of
deferred state taxes.
26
December 31, 2002Balance Sheet Cash Flows
27
Consolidated Balance Sheet
28
Consolidated Statementof Cash Flow
29
Working Capital Investment
(a) The above has been adjusted for the asset
securitization 2Q01 of 35.0 million, 3Q01of
37.0 million and 4Q01 of 31.2 million. (b)
Excludes 5.8 million of accruals relative to
asset rationalization and severance costs and
1.1 million of the current portion of long-term
debt.
(c) Excludes 4.9 million of accruals relative to
asset rationalization and severance cost and 1.1
million on the current portion of long-term
debt. (d) Excludes 3.6 million of accruals
relative to asset rationalization and severance
cost and 1.1 million on the current portion of
long-term debt and 57.1 million revolving credit
facility.
30
Borrowings Under Debt Facilities
(a) The above has been adjusted for the asset
securitization 2Q01 of 35.0 million, 3Q01of
37.0 million and 4Q01 of 31.2 million.
31
Strategic Outlook
32
Lawn Care MarketLESCO Share
Total Lawn Care Market 6.4 Billion
33
Current Service Center Locations
227 Service Locations
34
Lawn Care - Zone Market Share
NORTHEAST - 1.0 Billion Market - 8.8 Market
Share
WEST - 1.2 Billion Market - 0.6 Market Share
MID CENTRAL - 2.3 Billion Market 3.0 Market
Share
TRANSITION 1.8 Billion Market 3.3 Market Share
SOUTHEAST - 470 Million Market - 13.4 Market
Share
35
Lawn Care Operator (LCO) Profile

• 30 million acres of residential/commercial turf
• 26 million users of LCO services
• Average residential lawn size 0.12 acres
• In 2002, LCO revenues totaled 17.6 billion
• 2/3 of LCO revenues are generated from
  residential customers
• 76 of LCOs use computers and internet

36
Profile of ResidentialEnd-Customer

• 2/3 of LCO revenues are from residential
  customers
• 50 of the revenues from residential customers
  are from customers with the following profile -
• 50 years old
• 50,000 in annual income
• Busy lifestyle
• Therefore, growth in the U.S. population with the
  above attributes results in LCO revenue growth.

37
Aging of U.S. Population Results in Growth of LCO
Market
In 2014, over 50 million households will be prime
LCO customers.
38
Growth in the Lawn Care Market

• Expected annual growth of 6 - 8
• This growth will be driven by
• Aging of baby boomers
• Higher number of two income families
• 2001/2002 housing boom
• Continuation of consumers opting for professional
  services due to time constraints

39
U.S. Metropolitan Statistical Areas (MSA)
Opportunities for Additional Stores
LESCOs MSA Study identified over 500 new store
opportunities
40
New Store Model - Sales Ramp (s in 000s)
Note Average store cannibalization of existing
stores is included in the above sales numbers.
41
New Store Model - EBIT Ramp (s in 000s)
42
New Store Model - ROIC (s in 000s)
43
Golf Course MarketLESCO Share
Total Golf Course Market 1.2 Billion
44
Golf Course Market Profile

• Over 17,000 courses in the United States
• 26 million golfers playing 518 million rounds -
  20 rounds per year per golfer
• Private courses spend 60,000 - 70,000 on
  fertilizers/chemicals
• Daily fee and public courses spend 45,000 -
  50,000 on fertilizers/chemicals

45
Based Upon LESCOs Statistical Analysis

• Over 30 new Golf Territories
• With these additions, LESCO would cover 11,600
  courses or 2/3rd of the market.
• At maturity, Golf Territories have ROIC gt 20

46
2003 Guidance
47
2003 Guidance

• Sales growth
• Without new Service Centers - 4 to 6
• With new Service Centers - 6 to 8
• EPS in the range of
• Without new Service Centers - 0.80 to 0.90
• With new Service Centers - 0.65 to 0.75
• ROIC - 6.0 to 7.0

48
Questions Answers