Lesco Inc. - Company Profile, Information, Business Description, History, Background Information on Lesco Inc.

20005 Lake Road
Rocky River, Ohio 44116

Company Perspectives:

"Vision--Lesco is committed to making you our customer for life. Quality Policy--It is Lesco's policy to provide only those products and services that meet or exceed our customer's expectations. Further, all of our associates will work together as a team; striving for continuous improvement in everything we do."

History of Lesco Inc.

Known throughout the $4-billion green industry for its turf control products, fertilizer, and grass seed, Lesco Inc. is the largest manufacturer and distributor of turf care products and equipment in the United States. Preeminent in serving commercial clients with extensive turf areas, including the more than 41,000 golf courses in its care, Lesco also manages the lawn care needs of landscapers, lawn maintenance companies, municipalities, and industrial parks with a vertically integrated line of products. Its innovative marketing system includes Lesco Superstores, Service Centers, and Stores-on-Wheels--a fleet of tractor trailers that delivers goods directly to many of Lesco's over 90,000 customers. Sales representatives, trade shows, direct mail and selected merchandise at Home Depots help to maintain a broad customer base and to attract new clients.

A Local Greens-Keeper, 1962 to 1969

Lesco Inc. began business as the Lakeshore Equipment & Supply Company in 1962. Located on the shores of Lake Erie outside Cleveland, Lakeshore was founded by James I. Fitzgibbon and Robert F. Burkhardt to service the lawn care needs of local golf courses and cemeteries. With just five employees, Lakeshore opened its first sales office and began promoting its products at competitive prices. The company's first full-time salesperson, Tom Gartner, promoted the company by attending a local trade show. This marked the beginning of a trend, as attending and exhibiting at trade shows and seminars became a company hallmark and major venue of Lakeshore's sales and merchandising.

Before the end of Lakeshore's first year the company had expanded into irrigation products and was soon earning a reputation in the area as a dependable, one-stop turf care supplier. The company also started publication of a newsletter in 1965 (later known as the Lesco News) and had branched out to cover local, regional, and national trade shows.

Rapid Growth in the 1970s

The 1970s were a decade of immense growth for Lakeshore, both inside and out. After distributing other suppliers' golf course-related products the company began making its own under the private label of "Lesco," a shortened version of Lakeshore Supply & Equipment Company. In 1974 the company hit a major milestone by formulating its first proprietary fertilizer at a facility in Wellington, Ohio. Although few could foresee it at the time, the company's brand name later became synonymous with dozens of high quality, high performance fertilizer blends.

To augment the company's burgeoning sales, Fitzgibbon initiated a new program of marketing and distribution in 1976 by stocking a tractor trailer with goods and sending it directly to nearby clients. Response to the loaded truck was positive and the Stores-on-Wheels program began in earnest, calling on clients every couple of weeks. The fleet trucks were filled with fertilizers, pesticides, grass seed, and a wide range of hand tools and equipment for area greens-keepers. For customers, the convenience of immediate access to supplies, many formulated to each location's specifications, often eliminated the need for large on-site storage facilities; for Lakeshore, it meant a continuous flow of goods and increased visibility.

The Stores-on-Wheels concept worked, especially in Florida's year-round warm climate, and slowly expanded within the region. Another milestone was reached in 1978 with the opening of a manufacturing plant dedicated to formulating sulphur-coated urea. The first commercial facility of its kind in the United States, Lakeshore was betting heavily on the specialized fertilizer to revolutionize the industry. The next year, 1979, the company had a 100-plus work force, up from 40 employees earlier in the decade, with annual revenue of $13.2 million.

Lakeshore's sulphur-coated urea fertilizers were both a breakthrough and a rarity in the United States and beyond. By spraying granular urea (a soluble nitrogenous compound) first with sulphur and secondly with a polymer, nutrients were sealed in for a slower dissemination over time than traditional fertilizing products. With gradual release, clients needed fewer applications and reduced the possibility of overfertilization.

Rebirth and Growth, the 1980s

The dawn of the 1980s brought much in the way of dollars and diversification for Lakeshore. In 1980 the company relocated to its fourth headquarters, a nest of operations in Rocky River that continued the house the company administration into the mid-1990s. The year closed with sales of over $21 million, more than 60 percent higher than 1979's figure. The trend continued (as it did for the next 16 years) in 1981 and 1982 with revenue hitting $28.4 million and $32.2 million respectively.

While Lakeshore's sulphur-coated urea blends had quickly become a signature product, they represented only one facet of the company's research and development. After using a wide range of machinery designed and built by other companies, Lakeshore's first piece of lawn care equipment--a rotary spreader--debuted in 1982. By the time the Lesco Spreader made an impression on the green industry, Lakeshore was already designing additional turf care equipment and tools. With repeated success of its proprietary products, however, Lakeshore Equipment & Supply faced a new dilemma. The once-tiny company, which had begun with a handful of employees 22 years ago, now had a work force of over 200 and annual sales topping $39 million. To capitalize on the growing recognition of its product line and to simplify corporate paperwork, the Lakeshore Equipment & Supply Company officially changed its name to Lesco, Inc. in February of 1984. Soon after, the rechristened company went public on NASDAQ with 690,000 shares selling for $11--13 each. Lesco finished the year with $45 million in sales, about 15 percent higher than 1983's year-end figure of $39.1 million.

In 1985 Lesco achieved two firsts--receiving its first patent for the Jet-Action Deflector (part of a spreader to distribute fertilizer or seed) and the building of its first Service Center supply store in Plantation, Florida (near Ft. Lauderdale). A second Service Center followed in Boca Raton, then another in Rocky River catering to landscapers, lawn care and maintenance contractors, and do-it-yourselfers. This latest merchandising concept measured approximately 5,000 square feet, was filled with a variety of bulk turf care products and equipment, and offered a drive-through purchasing window for added speed and convenience. Additional Service Centers were opened in Orlando, Florida, and Carrollton, Texas. Sales for 1985 topped $53.3 million and leapt to $69.3 million in 1986--helped by the introduction of two exclusive grass seeds (a Kentucky bluegrass and Cimarron, a tall fescue), the Lesco 300 Greensmower, and an expanded Stores-on-Wheels fleet, now servicing 31 states.

Lesco celebrated 25 years of business in 1987, with more than 500 employees, 700 proprietary products (making up 80 percent of its sales), more than 25,000 customers, nearly $89 million in sales, and the notice of Forbes magazine (which ranked Lesco #66 among the Best Small Companies in America). By the following year about two dozen Service Centers dotted the country, and the company passed the $100-million mark in sales ($100.3 million with income of $1 million)--nearly double its figure of just five years earlier.

A New Era, the 1990s

By the end of 1990 Lesco's sales had risen to $117.5 million and income nearly tripled from the previous year to reach $3 million. Lesco's equipment line now encompassed several mowing machines, other specialized equipment, and replacement parts for its ever-growing list of golf course customers, the majority of which were located in the South and along the Northeast shorelines. When new models were introduced, Lesco took the products directly to clients, giving greens-keepers the opportunity to "test-drive" mowers and related equipment. Additionally, the Stores-on-Wheels fleet continued to crisscross the country carrying upwards of 700 different products, while another two dozen Service Centers had opened their doors.

In 1991 Lesco's sales climbed to $131.4 million with net income of about $2.5 million, despite some tense weeks in the first quarter due to raw material price fluctuations and the company's expansion. By the following year, sales grew to $145.7 million, and income hit almost $3.6 million. Despite occasional dips in income Lesco's sales continued to be strong and garnered the company further national attention. Its brands, both in consumables and hard goods, were increasingly recognized. Consumable goods numbered not only its mainstay--fertilizers (both granular and specially formulated liquids using sulfur-coated urea)--but turf control products (herbicides, insecticides, and fungicides) and a burgeoning line of grass seed.

In hard goods, Lesco carried a myriad of equipment, including standard lawn and turf care machinery (riding and walk-behind mowers, fertilizer and seed spreaders, sprayers, dethatchers, and aerators), accessories (aftermarket parts for all of the above), irrigation systems (above- and below-ground), hand tools (tree pruners, shovels, rakes) and protective gear (gloves, goggles and masks), as well as golf course odds and ends (flagpoles, putting green cups, ball washers, tee markers, sand trap rakes, and more). For the majority of its customers, Lesco had indeed reached its goal of decades earlier&mdashø become a one-stop shop--supplying competitively priced products in a variety of modes.

In 1993 the company's exposure increased dramatically through an agreement with Home Depot to carry Lesco merchandise in 103 of its stores. Through this deal Lesco reached thousands of additional retail customers, primarily residential homeowners, and had the opportunity to fill the lawn care needs of this vast market segment. Service Center sales continued to grow with 103 facilities in operation. By July, the company's shareholders enjoyed a three-for-two stock split. By the end of the year Lesco had income of just over $4.7 million on sales of $166.2 million. Consumable goods made up $124.3 million or nearly 75 percent of total sales, with hard goods/equipment sales holding up the remaining 25 percent or $41.8 million.

Though 1994 proved another banner year for Lesco, it was marred by the passing of James I. Fitzgibbon in October after a lengthy illness. To insure the company's smooth passage, Fitzgibbon had selected William A. Foley to take over the reins as chairman, CEO and president. The company he founded with Burkhardt (who was retired but still worked with Lesco as a consultant), however, continued to boom beyond his or anyone's initial expectations. Analysts had estimated total 1994 sales to jump by 20 percent to between $192 and $205 million, with a 40 percent rise in income due in part to the company's Home Depot deal and Service Center expansion. With over 120 Service Centers throughout the Midwest, Northeast, and South, and plans for another 18 before the end of 1994, the Service Centers were Lesco's fastest growing segment. The company's fleet of Stores-on-Wheels, which numbered 59 in May, also helped propel sales for a year-end total of $204.5 million--for a 23.1 percent volume increase. Income was $6.9 million and consumables again dominated equipment by 75.5 to 24.5 percent respectively, or sales of $154.4 million versus $50.1 million.

As projected, Lesco had 138 Service Centers operating in the United States by early 1995 with plans for an additional 35 (for 173 total) in 34 states by year's end. Same-store sales rose 16.7 percent as stores matured and the Stores-on-Wheels fleet grew to 65, providing goods to more than 7,000 golf courses. Though expanding more slowly than the Service Centers, Stores-on-Wheels' segment sales increased 13.2 percent from 1994 and 15.1 percent over 1993.

Big news came in December when Lesco announced plans for a northeastern expansion through the purchase of Pro-Lawn, a division of Agway, one of the biggest regional agricultural cooperatives in the United States. With estimated sales for fiscal 1995 of $30 million, Pro-Lawn was the Northeast's largest turf products supplier. Lesco finished the year with sales of $241.6 million, yet income was down from the previous year's 86 cents a share to 59 cents because of delayed shipments and further urea price fluctuations. Urea prices had begun to rise in the last quarter of 1994 (by 30 percent) and continued to climb in 1995, forcing Lesco to raise prices, though this was too late to affect profit margins for the year (which fell by 4.4 percent in fertilizing products), taking overall margins down from 1994's 34.6 percent to 33.6 percent in 1995.

In January of 1996 Lesco completed its Pro-Lawn acquisition for $11.2 million in cash, taking over the company's inventories, certain fixed assets, licenses, trademarks, and key personnel. First quarter sales reflected the purchase at $53.5 million (up 13.3 percent from 1995's $47.2 million), rebounding from the last quarter of 1995. For the remainder of 1996, Lesco planned to open 20 Service Centers and add three Stores-on-Wheels trucks. In March of 1996 the company introduced its first Lesco Superstore. Located in Pinehurst, North Carolina, the store was the latest offering from its marketing and distribution think tank. Lesco also increased sales through home office staff (who fielded 1,000 calls a day), regional sales reps, telemarketing, mail order catalogs, and more frequent appearances at regional and national trade shows.

Lesco's seed, harvested from over 16,500 acres of land in the Pacific Northwest, Canada, Florida and Georgia, continued to gain popularity with 28 proprietary blends and 21 standard mixtures. To ensure quality and effectiveness, the company maintained agreements with several universities to test fertilizers, turf control products, and grass seed varieties. Nearly half of the nation's major golf courses, including many of the Top 10, have used Lesco's products (fertilizers, herbicides, grass seed, equipment and supplies) for decades. With more Lesco Superstores on the drawing board, along with increased exposure through Service Centers, Stores-on-Wheels, and Home Depot, Lesco was poised to assert itself further into the turf care marketplace and garner sales in the neighborhood of $290 million for 1996. Based on past experience, Lesco demonstrated more than enough staying power to substantially increase sales and income in 1997 and beyond.

Principal Operating Units:Lesco Service Centers; Lesco Stores-on-Wheels; Lesco Superstores.

Additional Details

Further Reference

Cerankosky, C. E., "Lesco Inc.," Hancock Institutional Equity Services, October 26, 1995, pp. 1-2."Company Expects 1994 Sales to Increase More Than 15%," Wall Street Journal, March 3, 1994, p. A5."Higher Costs, Weather Hurt Second-Quarter Performance," Wall Street Journal, June 16, 1995, p. A5.Labate, John, "Companies to Watch: Lesco," Fortune, May 2, 1994, p. 79."Pact Is Signed to Acquire Agway's Pro-Lawn Unit," Wall Street Journal, December 27, 1995, p. 12.Slawson, S. E., "Lesco Inc.," Merrill Lynch Capital Markets, August 1, 1995, pp. 1-3.Winter, Ralph E., "Lesco Sees 20% Growth in Sales, Net for 1994 as Lawn Care Market Grows," Wall Street Journal, December 5, 1994, p. A9I.

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