強鹿 (DE) 2005 Q1 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Michael DiMino - President and CEO

  • I'd like to welcome everybody to the call. Thank you for all being here today. With me today are Jeff Rutherford, Senior Vice President and Chief Financial Officer, as well as other key members of our senior management team.

  • Today we'd like to accomplish the following. We'd like to provide an overview of our business, then Jeff will give a financial overview of our first quarter, as well as reiterate our guidance for 2005, and then I'd like to offer some concluding comments before we go to questions and answers.

  • So let me start today's call by providing perspective into our first quarter and a refresher on our comprehensive long-term strategic plan for the company. The first quarter is our smallest from a revenue generation perspective providing approximately 18% of our annual sales. However, it's very important for us to use the time to prepare for the critical spring selling season.

  • It is imperative that we have inventory at the right levels and that the stores and stores on wheels are well merchandised. During the month of January, our stores are loaded with inventory for the spring pre-emergent season and as soon as the weather breaks, and after our customers complete their spring cleanup, they begin to apply pre-emergent fertilizers.

  • This season's launch from the time of cleanup until the emergence of broad leave weeds, the pre-emergent season tends to be very short, but high in sales volume. This year, the pre-emergent season has been compressed into the last week of March through the middle of May.

  • We were also pleased that in the first quarter, the class of 2003 service centers produced a 22% sales increase demonstrating that the new service center model is working. In fact, with April now nearly over, lawn care is trending in line with our expectations.

  • While I will not specifically comment on second quarter activity, it is sufficient to state that through April, lawn care and service centers are essentially on plan. Now let me provide some insight into our long-term strategic plan and vision which includes golf.

  • Our best use of capital, generating the highest return on invested capital and producing the highest operating margins, is through the investment and service centers and stores on wheels, thus, moving away from the direct sales model. Two years ago, we disbanded our lawn care sales rep program and this year, we will essentially disband our gold sales representatives.

  • They are being reassigned into regional manager positions, store on wheel positions, or service centers, and I need to add certain representatives have voluntarily decided to leave the company. In the long run, store on wheels do and will operate at a much higher operating margin than a sales representative. The primary reason for this is product mix.

  • Stores on wheels go directly to the customer with a truck that has a defined merchandise assortment that is seasonally adjusted. This differentiates us from our competition, which traditionally operates utilizing a sales rep model. In the market where we piloted this program, we historically had the overlapping of a sales rep and a store on wheels.

  • We divided the markets into two stores on wheels territories by reassigning the sales reps to a second truck. Additionally, we modified the stores on wheels operating model by utilizing smaller trucks to call on more potential customers in smaller geographical territories.

  • In the pilot program, the financial results and customer feedback were extremely positive, so much so, that we have accelerated the expansion of this program throughout the country. The smaller vehicles will support all of our customer's product needs and the savings associated with this new vehicle will enable us to increase the number of them by 50% with no incremental operating costs.

  • While we understand the transition will not be smooth, we are sticking to our long-term growth initiatives knowing that if the long-term works, the short-term will take care of itself. By the end of this year, we expect to have 110 medium-duty straight trucks which will cover less ground and cost substantially less to operate than the 72 pull-size tractor trailers which we started this year with.

  • At this point in time, we have deployed 39 of these smaller stores on wheels. The smaller stores on wheels will not only call on golf courses, but will visit all locations with stationary turf, superintendent functions, including schools, universities, cemeteries, parks, and municipalities, just to name a few. I'd like to update you on our service center openings.

  • After opening 21 new service centers in '03, and 27 in '04, we continued our expansion by opening our first new service center for '05 and our 275th service center across the country. That first location this year was in Upland, California.

  • Like many retailers, we are implementing a balance opening schedule to better utilize our resources throughout the year, even if we are forced to open stores in what we would consider a less than perfect selling opportunity time, such as the fourth quarter. With that in mind, our first quarter openings were on the slower side as certain logistical issues delayed openings until the second quarter.

  • We fully intend to have 13 to 16 new service centers open by the end of June. While many of our initiatives address this top line concern, we are equally focused on enhancing our bottom line. One initiative designed to do that is our strategic pricing program.

  • We engaged a team to analyze our pricing system and they have devised a stronger pricing model that protects our gross margins while also rewarding our best customers. We are currently testing this program in the two Northeastern Ohio regions, with the goal of eventually rolling it out to the entire country.

  • Our direct marketing initiative, the most aggressive in our history, features a series of data-driven campaigns focused on targeting the right customers with the right promotions at the right time. In particular, it will focus on four areas, pest control, equipment, customer retention, and service centers.

  • To date, we are very pleased with the progress we are making with these initiatives in these areas. Lastly, we are moving to a standard stocking assortment across all of our service centers. We realize that this is a fundamental retail concept and that we have much to learn from traditional retailers as we further evolve the company in that direction.

  • While there will be some variations depending on location, particularly because of geography, we feel that it is important that all service centers stock certain key items so that a customer can walk into any store wherever they are and expect to see some consistency in our offerings. We have already started to enhance the LESCO shopping experience through the use of visual merchandising, including clear signage and defined plantagram (ph).

  • We feel these changes will help maximize our investment in our service centers and our stores on wheels by generating incremental revenue and gross profit opportunities. To insure implementation, we have spent a fair amount of time visiting our stores. I personally have been in 10 stores in the last week, and I've seen first hand the progress we are making with these initiatives.

  • Several months ago, we announced that we intend to harvest the working and fixed capital of our supply chain so that can devote our resources to expanding our service center and stores on wheels network. In other words, outsource those processes where we do not hold a clear and differentiated competitive advantage.

  • Industry analysis suggests there is excess lending capacity in turf fertilizer and along with the obvious benefits of capacity, rationalization, purchasing and distribution, synergies should exist and be captured through strategic transactions and/or alliances.

  • With our investment banking partners, we have been exploring strategic options for our supply chain assets and are in the middle of that process. We believe these efforts are in the best interest of our shareholders and our customers, and we are looking to finalize our plans this year.

  • With that, I'll turn the call over to Jeff.

  • Jeff Rutherford - Senior Vice President and CFO

  • Thank you. As Michael said, I will review the results for the first quarter of 2005 and reiterate our previous guidance for the full year. Due to the seasonality of LESCO's business, the first quarter is generally the smallest revenue-generating period of the year, representing 18% of our annual sales; however, did March (ph) to the beginning of the spring selling season.

  • Due to the colder weather patterns we experience in much of the country, particularly late in March, we expect the second quarter to play a more significant role this year than in past, and years past as many of our customers are playing catch up due to the seasonal shift. For the first quarter of 2005, net sales saw 3.9% to $98.1 million from $102 million in the first quarter of last year.

  • Lawn care gross sales fell 1.6% to 84.3 million, while golf gross sales fell 10% to 15.5 million compared to 17.2 million in 2004. Comparable service center sales were down 4.1%. All product category sales were down year-over-year, with the exception of equipment, which was up 8% and pest control, which increased 4%. Both increases were due to enhanced marketing initiatives.

  • We experienced significant weakness in the Northeast, Mid-Atlantic and Mid-Central regions, which not surprisingly, merit the cold weather patterns the country experienced through March. During the first quarter, the 49 service centers open between 2003 and 2005 generated net sales of $7.1 million, and a four-wall pretax loss of $800,000.

  • We added new services to the comp base in their second full calendar year of operations. Thus, the 2003 service centers are included in our same store sales figures while our 2004 new service centers are excluded, and will be included in our same store sales calculations in 2006.

  • Gross profit on sales, which we define as product margin less distribution cost, was 23.4 million or 23.8% of net sales, up 70 basis points from 23.1% of net sales in the first quarter of last year. Product margin was $33 million or 33.7% of net sales compared to $33.1 million or 32.4% of net sales in the same period last year, a 130 basis point increase.

  • Even with challenging sales, we did experience better gross profit margins in the quarter due to higher pricing. We locked in the majority of our urea (ph, phosphorus and potassium costs this year, the three major fertilizer components, with the cost of urea rising 14%.

  • In addition to higher raw material costs, limited availability of certain product components and the elevated freight charges due to the increase in energy prices contributed to the overall increase. Distribution costs were 9.7 million or 9.9% of net sales compared to 9.5 million or 9.3% of net sales in the first quarter of 2004.

  • The 60 basis point increase was due to de-leveraging our fixed costs with lower than expected sales volumes in the first quarter. Selling expense was 23.8 million or 24.3% of net sales compared to 21.9 million or 21.4% of net sales last year.

  • Approximately 1.2 million is attributable to incremental operating costs for service centers open in 2003 through 2005, and $800,000 relates to ongoing training and (inaudible) initiatives. Pre-opening expenses were 157,000 versus 312,000 in 2004, slightly lower on a percentage basis as we opened one service center this quarter compared to nine in the first quarter of 2004.

  • We did incur costs in the first quarter for stores that will open in the second quarter. General and administrative expenses were 7.8 million or 7.9% of net sales compared to 7.3 million or 7.1 of net sales in the first quarter of last year, an 80 basis point increase.

  • The primary reason for this de-leveraging is due to an acceleration in employee benefit related costs into the first quarter of 2005 compared to those costs that affected the second quarter of 2004. Additionally, we have incurred costs for proposed strategic initiatives we are pursuing related to our supply chain assets. Merchant discount provisions for Delpro (ph)expense were 2.1 million compared to $1.6 million last year.

  • We incurred approximately $600,000 of fees for promotional discounts and extended payment terms for certain large customer accounts compared to $200,000 last year. Interest expense was down slightly to 317,000 from $355,000.

  • For the quarter, the company reported on a GAAP basis a net loss of $1.21 per diluted share versus a net loss of 92 centers per diluted share for the same period in 2004. Including a tax benefit at a 39% rate, we would have reported first quarter 2005 adjusted net loss at 74 cents per diluted share as depicted on our reconciliation attached to today's release.

  • Similarly, for the first quarter of 2004, we would have reported an adjusted loss of 54 cents per diluted share. Now I will provide some highlights of our balance sheet. As of March 31, 2005, we had $24.8 million in total debt, consisting entirely of revolving bank debt. This compares to total debt of 23.4 million in the first quarter of last year.

  • Cash and cash equivalents were 9.2 million versus 12.5 million at the same time last year and we continued to reduce our accounts receivable to 9.7 million from 13.9 million at the same point last year. Over the last two quarters, we have been working to get our inventory better in line with our needs so that we have sufficient, but not an over supply of, seasonal and non-seasonal products.

  • On a year-over-year basis, inventory has increased close to 15.3 million, but the majority of this increase is attributable to a delay in sales into April and new service centers. In summary, our balance sheet remains quite healthy and our expected cash flow generation should enable us to self-fund (ph) our new service centers, which we consider the best means to achieve consistent earnings over time.

  • We are reiterating our previous guidance for 2005 of full year revenue growth between 7 and 8%, including a 3 to 4% increase in same store sales. By customer sector, lawn care sales are expected to increase 8 to 10%, while golf is anticipated to be flat to slightly down. For the full year, the company estimates diluted EPS in the range of 60 to 70 cents, which includes a 39% tax provision.

  • We anticipate opening 30 to 35 new service centers in 2005 interspersed through the year with one already open in the first quarter, and 12 to 15 expected in the second quarter.

  • I will now turn the call back to Michael for some concluding thoughts.

  • Michael DiMino - President and CEO

  • Thanks Jeff, good job. Before we turn the call over to Q&A, I wanted to leave you with some thoughts about our industry. We continue to view the demographics of the professional lawn and landscape industry favorably.

  • We consider the same nesting activities that have driven growth in home improvement retailers should also help us as well, as people want to spend more time near home and are willing to spend more money to improve their surroundings.

  • Growth expectations for the professional lawn care industry is more than 7% annually, while the consumables portion of the industry is growing roughly 4%, all of which we have a 15% market share. We all know that interest in lawn and light gardening activities increase with age.

  • As any suburban dweller will tell you, it's often the case that your retired neighbor or elderly person a few doors down has the cleanest, neatest and best-looking lawn on the block either because of their own hard work or more likely, because of professional lawn service.

  • The U.S. Census predicts that the 60 plus age group will grow at 2.3% compound annual growth rates through 2010 versus 1% from the years 1990 through 2003. This subsection of the population boasts both disposable income and key interest in maintaining beautiful lawns.

  • However, they often prefer not to do all the heavy lifting themselves, which represents a significant opportunity for our customers, the professionals who service their lawns. Other positive trends include the population shift to sunnier states, which facilitates higher per capita consumption since warmer weather states have longer growing seasons and of course, rising home ownership.

  • Household ownership has risen from 64% in 1994 to 68% in 2003, bringing new consumers into this category. In terms of our long-term strategy, we have accelerated growth over the last two years by opening nearly 50 new service centers across the country, and we plan to continue focusing on this growth plan in 2005, opening new service centers at an annual rate of 10 to 15% of our store base or between 30 and 35 locations this year.

  • We think the traction we have gained with our newer stores illustrates the opportunities available to us across the country as we fill out the 50% of the market that we have yet not penetrated. We have a stated goal of generating ROIC about 10% and we are making solid progress to move the needle in that direction.

  • Our first quarter results notwithstanding ROIC was 7.2% in 2004, compared to 5.4% in 2003. While there is still much progress left to be made, you can appreciate how far we've come in such a short time. We would also like to get EBIT above 10%, but realize this is even more challenging and could take much longer to accomplish.

  • Our strategic model demonstrates that we will inherently increase our EBIT percentage through the continued profitable expansion of our service center network while controlling leveragable costs such as warehousing and G&A.

  • However, we believe the steps that I mentioned earlier, such as our merchandising strategy, revised store on wheels model, direct marketing and price pilot initiatives, will help expand our operating leverage beyond the inherent growth from expansion.

  • So in conclusion, LESCO is on its way to being a category killer of the industry providing quality products and agronomic expertise, making us a valuable business partner for more than 130,000 lawn care, landscape, golf course and pest control professionals across the country.

  • We look forward to helping more of these businesses grow in the years to come as well as create long-term value to our shareholders in the process.

  • And with that, let me turn the call back over to the operator. Thank you.

  • Operator

  • Ladies and gentlemen, if you wish to ask a question, please press star, followed by one. If your question has been answered, or you wish to withdraw the question, press star, followed by two. Please press star, one, to begin.

  • Your first question comes from Mr. Jim Barrett. Please proceed.

  • Jim Barrett - Analyst

  • Hi Jeff. Hi Mike. I've got a question for you on just generally pricing, fuel surcharges, items such as that. To what degree are your prices to your customers fixed if you see increases within the season on all sorts of things?

  • Michael DiMino - President and CEO

  • Sorry, I missed part of that, about surcharges.

  • Jim Barrett - Analyst

  • Mike, I was really trying to find out how much pricing flexibility do you have if you - how quickly can you take prices up if you're faced with increases in raw materials?

  • Michael DiMino - President and CEO

  • All right. Jim, we know that our customers don't like it. They like getting the price increase at the beginning of the year; however, we have been successful in the last two years of having to do mid-season price increases.

  • Bruce Thorn

  • Or specifically - this is Bruce Thorn. More specifically, on our raw materials, we lock those in and we carry those price increases out at the beginning of the year, and that holds the whole year. In terms of fuel surcharges that we get from our carriers, our contracts are set up so those fuel surcharges pass through.

  • As a result, given what's happened with the fuel increases over the last few years and transportation, we have passed that on to our customers as well. So as we see it coming, as we budget for it and as it exceeds, as its done for many companies in many industries over the last two years, we're passing it along. Our customers understand it. We send out a letter with that, and they explain that to their customers.

  • Jim Barrett - Analyst

  • Okay. Maybe I could ask the question in a slightly different way, and that explanation was helpful, Jeff. I mean, what percentage of your customers today are operating under some sort of fixed price contract for the season?

  • Jeff Rutherford - Senior Vice President and CFO

  • Very little.

  • Jim Barrett - Analyst

  • Okay. I suspected that, but ...

  • Jeff Rutherford - Senior Vice President and CFO

  • I would say it would be our larger customers that have contracts, Jim, and generally speaking, we're talking probably less than 10%, less than 10% of our total sales.

  • Jim Barrett - Analyst

  • Okay. Thank you.

  • Jeff Rutherford - Senior Vice President and CFO

  • You know we're selling to the smaller lawn care operator predominantly.

  • Jim Barrett - Analyst

  • Correct.

  • Jeff Rutherford - Senior Vice President and CFO

  • And so those guys - we don't have any long-term agreements with them.

  • Bruce Thorn

  • In fact, Jim, as Michael was mentioning from our strategic plan perspective, as we move away from our sales rep model to our service center and stores on wheels model, we're moving away from where the industry basically has these fixed price contracts, which are the larger bulk type customers.

  • Jim Barrett - Analyst

  • I understand. Thank you again.

  • Jeff Rutherford - Senior Vice President and CFO

  • Thanks Jim.

  • Michael DiMino - President and CEO

  • Thank you.

  • Operator

  • Your next question comes from the line of Ryan Gonick (ph) of Course Air Capital. Please proceed.

  • Ryan Gonick - Analyst

  • Hi. Good afternoon guys.

  • Jeff Rutherford - Senior Vice President and CFO

  • Good afternoon Ryan.

  • Ryan Gonick - Analyst

  • Michael, in the last couple of shareholder's letters, you've talked about a long-term objective of getting to 10% operating margins and I'm just wondering if you could maybe talk about even if we can get to 5%, what kind of timeframe we might look for that?

  • And can you quantify maybe some of these new initiatives you're talking about, what they might contribute and just sort of give us a bit of a roadmap of how you're going to get to at least 5%?

  • Michael DiMino - President and CEO

  • Well, you know, part of our plan there is we believe it's very important for us to separate the two businesses, which is what we have our investment banking partner helping us with, right? So we've announced the fact that we're going to try to not be in the manufacturing business, but in fact, get supply (inaudible).

  • Once that's done, we believe that we can achieve a very close look at elements that allow us to make more profitable decisions. For instance, we have to be very careful about every customer we have and we have to make sure that we are making - we are able to make a profit on every customer that we do business with.

  • That's one way, Ryan, that we're going to be able to get there. We are going to have a structure that allows us to leverage successfully the new stores. As we've told you and you know, our new service centers generate a much higher EBIT than our current overall model does and over time, that leveraging will continue to develop in a positive way for our shareholders in the terms - in the framework of EBIT.

  • I think Jeff and I think we need some more time yet to generate the percentages, and we're not ready to commit on the actual timeframe of when we'll see that, but the first big step has to occur after manufacturing the (inaudible) manufacturing assets.

  • Ryan Gonick - Analyst

  • So how much of this do you think is going to come from gross margin versus operating margin leverage? Like if you're at 2% today, roughly on operating margin, is there any way you can quantify how much is going to come out of gross margins versus ...

  • Jeff Rutherford - Senior Vice President and CFO

  • You know, Ryan, our issue right now is that we're at the front end of many of these tasks as we've discussed. For example, the pricing model, which is the prime example. One is that in the pilot program, it's been extremely successful And what we've looked at in the pricing model is, it's not necessarily about raising prices.

  • It's about getting to an optimal pricing level for our markets and for our customers, which means at that pricing level, we'll be maximizing gross profit. So that could mean increasing the top line and maintaining current margins, or it could be lowering product margin, raising sales and increasing operating margin. So we're at the front end of that.

  • It's going to be rolled out, so it could mean top line growth or it could mean margin percentage growth, and we're still working on that. As far as some of the other projects that we initiated, for example, the stores on wheels initiative, that should move us into a more profitable marketplace. What we know is that our stores on wheels generate operating margins that are very good.

  • In fact, they're the best of all of our means of selling to our customers, the highest operating margin, you know, the function of product margin and operating cost. The best model we have is stores on wheels.

  • Ryan Gonick - Analyst

  • Right. So ...

  • Jeff Rutherford - Senior Vice President and CFO

  • The worst model we have is the sales rep in direct marketing programs.

  • Ryan Gonick - Analyst

  • Right.

  • Jeff Rutherford - Senior Vice President and CFO

  • So as we move that sales from a less operating margin business to a higher margin, the margins should increase and hopefully, we can hang on to sales. So it's a multitude of those kind of shifts to get us to that 5% operating margin.

  • Michael DiMino - President and CEO

  • Everybody needs to remember that - this is Michael, that we, you know, a lot of the business we have has been justified over the years because of our need to make sure our manufacturing is as efficient as possible.

  • Okay, so that direct sales effort is not as profitable as our store sales effort is and without having to have a manufacturing group to take care of, the need to have - that lower margin business just doesn't need to be there.

  • Ryan Gonick - Analyst

  • Got it. So if we resolve the manufacturing issue hopefully this year, by the end of the year, do you think that even to get the 5% margins, that's something that you're hoping to achieve, you know, over the next two, three years? What's your thinking there?

  • Jeff Rutherford - Senior Vice President and CFO

  • You know what? We haven't provided long-term guidance. And we're going to have to run those models. It's really premature to say until if and when we have a transaction completed.

  • Ryan Gonick - Analyst

  • Right.

  • Michael DiMino - President and CEO

  • When we get the transaction completed, we'll be able to give you probably a better handle on that, because we'll have - we won't have pro forma data that we're playing with anymore. We'll have actual data.

  • Ryan Gonick - Analyst

  • Got it. Okay. Great. Thanks a lot.

  • Operator

  • Your next question comes from the line of Mr. Robert Kasowski (ph). Please proceed.

  • Robert Kasowski

  • Yes, good afternoon guys.

  • Jeff Rutherford - Senior Vice President and CFO

  • Hi Robert.

  • Michael DiMino - President and CEO

  • Hi Robert.

  • Robert Kasowski

  • I was wondering if you have more interest from financial or strategic buyers right now, if you could comment on that?

  • Jeff Rutherford - Senior Vice President and CFO

  • No, Robert, we're right in the middle of this process. We don't want to put our stuff to any disadvantage with any other party, so we're not going to comment on that.

  • Robert Kasowski

  • Fair enough. And what were some of the factors that - I guess with the product margin up as much as it was? It seemed like it was up about 130, 140 basis points better last year?

  • Michael DiMino - President and CEO

  • Well, you know, all of our - as you're probably aware and as everybody understands, we are right in the middle of, you know, some inflationary pressures on our raw materials and what we've been able to do quite successfully is pass those cost increases on to our customers.

  • Robert Kasowski

  • Okay. So it's a matter of you ...

  • Michael DiMino - President and CEO

  • It's really through pricing.

  • Robert Kasowski

  • Okay. So it's a matter of you guys maybe recapturing the increase of your cost (ph) a lot better than you did in the past two years?

  • Michael DiMino - President and CEO

  • If you remember, Robert, I think we've told you a little bit about some of our pricing initiatives, operational, and those are now - we're in our second year with some of those and we still have a further pilot we're testing in the Cleveland area, and all of that is going very well.

  • Robert Kasowski

  • Okay. And you mentioned some logistical difficulties in the new store opening campaign. Could you maybe elaborate on that?

  • Michael DiMino - President and CEO

  • You know, what we've done is - what we used to do is we tried to open as many stores as we possible could in the first quarter, so we wouldn't open any stores, basically new stores, before January 1st and we tried to jam them all in between January 1st and April 15th.

  • And what happens is if you don't get the leases signed at the right time, and under this new lease accounting and all that, you know, if you don't get your leases signed on a timely basis, they slip in the second quarter. And that's what happened to us this year.

  • We did not sign - we're not - you know, this is not a good thing. We did not sign enough leases in the back half or get prepared to sign leases in the back half of last year in order to open up the 8 to 10 stores we had intended to open in the first quarter. What happened is those stores have slipped in to the second quarter, and that's not what we wanted to do.

  • We want to get to a program where we're opening 8 to 10 stores a quarter. It helps us balance merchandising plans, grand opening plans, human resource plans to open stores, and obviously the buildup. So we missed the first quarter, and it slipped into the second quarter. What you should expect to see after second quarter is that we begin to open 7, 8 to 10 stores every quarter from then on.

  • Robert Kasowski

  • Okay. And did any of those create risks because of, you know, you guys are opening double the amount of stores in the second quarter this year? Or, you know, to build - the other resources to build pretty seamlessly?

  • Michael DiMino - President and CEO

  • Yes, you know what? We've had all the resources geared up for those 8 to 10 in the first quarter and they just slipped to the second quarter. The store ops guys will be able to handle that. It will put us a little behind on where we wanted to be from a maturity level this year for new stores, but we expect those stores to perform as second-year stores when they get to 2006.

  • Robert Kasowski

  • All right. Thank you very much.

  • Michael DiMino - President and CEO

  • All right. Thanks Robert.

  • Operator

  • Your next question comes from Mr. Paul .Resnik (ph). Please proceed.

  • Paul Resnik - Analyst

  • Good afternoon.

  • Michael DiMino - President and CEO

  • Hey Paul.

  • Jeff Rutherford - Senior Vice President and CFO

  • Hi Paul.

  • Paul Resnik - Analyst

  • I was just wondering, the results of past initiatives, whether you're seeing the cost savings benefits that you had anticipated for your headquarters move and for the Avon divestment. You know, how is that working out for you?

  • Michael DiMino - President and CEO

  • Actually, the headquarters move has come right in line with our expectations. No offense to the City of Strongsville , but we like being in downtown Cleveland. That's worked out very well and we'll save a million dollars this year for moving downtown.

  • As far as the Avon Lake move, obviously we harvested cash out of the Avon Lake sale, but then we moved that distribution down to Columbus, Ohio and it makes a lot more sense if you think about it from a radius perspective of the distribution center that you wouldn't have it on a lake.

  • So having it done in Columbus, we're been able to realize those cost-savings in our delivered costs. So both of them have worked as far as our plans are concerned.

  • Paul Resnik - Analyst

  • All right. Thank you.

  • Michael DiMino - President and CEO

  • All right Paul.

  • Operator

  • Sir, you have no further questions at this time.

  • Michael DiMino - President and CEO

  • All right. Well, we'd like to thank you for your time and we appreciate very much you guys following us and your support. And if anyone ever needs us, don't hesitate to call us here in Cleveland. Thank you.

  • Operator

  • This concludes today's presentation. You may now disconnect. Thank you and good day.