LESCO Relocating Headquarters to Cleveland

STRONGSVILLE, Ohio -- In a move aimed at reducing overhead costs, lawn-care products company LESCO is relocating its headquarters to downtown Cleveland from its current base in suburban Strongsville, the company announced during its quarterly news conference Tuesday.

“We are always looking to further reduce our overhead costs,” says LESCO President and Chief Executive Officer Michael DiMino. “For some time now we’ve pursued the relocation of our corporate headquarters to a suitable location that best serves our needs and keeps square footage requirements to a minimum.”

The company will move from its current 94,000-square-foot location to a 40,000-square-foot facility by mid-November. LESCO will pay approximately $7.5 million in relocation expenses, $4.8 million in tenant and landlord inducements and $2.7 million in broker commissions, legal fees, letter of credit costs, move costs and fixed-asset write-offs. The charges will be recorded in the company’s third and fourth-quarter operating results.

Starting in 2005, the company expects $1 million in annual costs savings, DiMino says.

The company’s new lease will be five years, and an unnamed public company will assume the remaining 11 years of LESCO’s current lease at the Strongsville location, pending landlord approval. LESCO will pay $100,000 annually to defray the cost of a $4.4 million letter of credit the unnamed company will pay to guarantee its performance.

As part of an incentive package, the City of Cleveland has offered a $750,000 loan that is forgivable after five years if LESCO stays in town, says LESCO Director of Marketing Bob West. City council will vote on the proposed loan next week, West adds.

The company also announced that it intends to open two additional service centers in the third and fourth quarters of 2004, bringing the year total to 27. “We view new service centers as the primary method to leverage our cost base and grow earnings consistently over time,” DiMino explains.

The company also announced that net sales in the second quarter of 2004 increased 6 percent to $182.2 million from $172.6 million in the second quarter of 2003. Lawn care gross sales improved 7 percent to $141.2 million versus $131.6 million last year.

Gross profit increased from $43 million during the second quarter of 2003 to $47 million in 2004. Earnings before income tax increased 31 percent to $14.2 million from $10.8 million last year.

The company plans to continue seeking cost-cutting opportunities, says Jeffrey Rutherford, senior vice president and chief financial officer.

“Although we are pleased with the improvement we have made to our balance sheet, we see opportunities in streamlining our inventory and making sure we reduce our holdings of non-seasonal products,” Rutherford says.