A Collection of Current Outdoor Power Equipment (OPE) Industry Related News Articles From OPEESA's (Outdoor Power Equipment and Engine Service Association) Newsletter "OPE-In-The-Know," the Business of OPE.
WASHINGTON, D.C. – July 14 -- The U.S. Consumer Product Safety Commission and Health Canada, in cooperation with the firm named below, today announced a voluntary recall of the following consumer product. Consumers should stop using recalled products immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product.
Name of product: Power Clear 180 Single Stage Snow Blowers
Units: About 35,700 in the United States and 2,300 in Canada
Manufacturer: The Toro Company, of Bloomington, Minn.
Hazard: Exposure to ethanol in gasoline can cause the carburetor needle to become corroded. A corroded needle can stick in the open position and allow fuel to leak from the carburetor, posing a fire hazard to consumers.
Incidents/Injuries: Toro has received 2,200 reports of carburetor leaks. No fires or injuries have been reported.
Description: This recall involves Toro® Power Clear 180 Single Stage snow blowers. The recalled snow blowers have model numbers 38272 and 38282. Serial numbers included in the recall range from 310000001 through 310999999. The model and serial number can be found on a decal on the lower right side of the snow blower.
Sold at: Toro dealers and The Home Depot stores nationwide from November 2009 through May 2010 for between $400 and $440.
Manufactured in: U.S.A.
Remedy: Consumers should immediately check to see if their snow blowers are included in this recall and contact an authorized Toro service dealer to arrange a free repair. To obtain the location of the nearest dealer, consumers should contact Toro.
July 19 -- Briggs and Stratton Corporation, a maker of air-cooled gasoline engines for outdoor power equipment, will invest $35.5 million in a Murray, Kentucky renovation, retaining more than 640 employees.
The Kentucky Economic Development Finance Authority has preliminarily approved Briggs and Stratton for tax incentives up to $15 million over 10 years through the Kentucky Reinvestment Act.
“Briggs and Stratton has a longstanding relationship with the Commonwealth of Kentucky, and receiving this incentive is key to ensuring the ongoing success of our Murray, Kentucky facility,” said Senior Vice President of Briggs and Stratton and President of the Engine Power Products Group, Joseph C. Wright. “This program shows Kentucky's commitment to the retention and continued success of businesses currently operating in the state.”
The company’s 290,040-square-foot facility completes die casting, machining, and assembly of engines and related components. Briggs and Stratton will use the money to make renovations, upgrade tooling, install new machinery, and provide worker training.
July 12 -- Echo Inc., maker of hand-held outdoor power equipment, opened its new 129,000-square-foot warehouse in Lake Zurich today.
The new facility at 400 Oakwood Road brings the total operation of the U.S. headquarters in the Lake County community to 540,000 square feet.
"We're just about ready to move in," said Joe Fahey, vice president of marketing for Echo, a company that has been in the United States for about 30 years.
The warehouse expansion is necessary to accommodate the merger with Shindaiwa about nine months ago. Shindaiwa, which was based in the Portland area, will move most of its operations to the new Lake Zurich warehouse.
"We brought the Shindaiwa operations here with the expansion so we can better serve our Shindaiwa dealers," Fahey said.
He added that the goal is to ultimately move more of the Shindaiwa operations from Japan.
"This will ultimately mean more local jobs," Fahey said.
Echo in Lake Zurich now employs more than 700 people at the office, manufacturing and warehouse complex in Lake Zurich.
"This is a big day for us. It's a culmination of all the efforts of the merger and bringing the brands together," Fahey said.
Echo develops and manufactures hand-held outdoor power equipment for commercial and high-end residential clients. Shindaiwa has focused more on the commercial market, Fahey added.
Top items for the privately held company include grass trimmers, blowers and chain saws.
Power edgers, bed re-definers, power pruners, sprayers, earth augers, water pumps and safety accessories are other items included under the Echo brand.
Founded as Kioritz Corp. of America in 1972, the company serves landscaping, arborist and industrial markets. It changed its name to Echo in 1978, and today operates as a subsidiary of Yamabiko Corp., a billion dollar company.
Alexandria, VA – July 7, 2010 -The Outdoor Power Equipment Institute (OPEI) announced its 2009-10 Officers and Board of Directors during its 58th Annual Meeting in Couer D’Alene, Idaho held June 25-27, 2010.
Officers for 2010-11 include: OPEI ChairmanFred Whyte, President, STIHL, Inc ; OPEI Vice Chairman Jean Hlay, President and Chief Operating Officer, MTD Products, Inc;andSecretary/Treasurer Richard Fotsch, President of the Global Power Group, Kohler Company.
“Our new officers will lend their leadership during what’s expected to be a pivotal year for our industry,” said Kris Kiser, Executive Vice President at OPEI. “As a team on the OPEI Board of Directors, they will bring forward thinking to a variety of issues that our industry is tackling in the next 12 months from legislative and regulatory issues to market issues.”
“The international scope of the Outdoor Power Equipment Institute will drive decision making to meet global business challenges,” said Mr. Whyte. “And, we look forward to meeting those challenges through responsible research, design and manufacturing processes that ultimately benefit our customers and the environment worldwide.”
Continuing their service on the board are: Immediate Past Chairman, Michael Hoffman, Chairman, Chief Executive Officer, The Toro Company; Daniel Ariens, President, Ariens Company; Steven Bly, Executive Vice President, Echo Inc; Edward Cohen, Vice President- Government & Industry Relations, American Honda Motor Co., Inc.; Michael Jones, President, Husqvarna Professional Products; John May, Senior Vice President, AT&T Global Platform, Turf & Ag Division, John Deere Company; Gary Michel, President & CEO, Club Car, Inc; Paul Mullet, President, Excel Industries; Todd Teske, President; CEO, Briggs and Stratton Corp.; and Dan Wilkinson, President. Jacobsen, A Textron Company
About the Outdoor Power Equipment Institute
OPEI is an international trade association representing the $15 billion landscape, forestry, utility and lawn and garden equipment manufacturing industry. OPEI is a recognized Standards Development Organization for the American National Standards Institute (ANSI) and active internationally through the International Standards Organization (ISO) in the development of safety standards. Founded in 1952, OPEI represents and promotes the outdoor power equipment industry and ensures the public may continue to benefit from the economic, lifestyle and environmental contributions of landscapes and turfgrass. For more information on OPEI, visit www.OPEI.org.
Sonoma, CA – July 5 -- It’s a polarizing device that pits neighbor against neighbor.
For some, it frays irritated nerves, disrupts their serenity and ought to be banned. To others, it’s a highly efficient, cost-effective tool.
“It’s one of those things that’s worthy of having controversy about,” said June King, owner of Landmark Landscape Co. in Sonoma.
“There are all kinds of different opinions about them — and they’re all valid. How do you do the job without them? And yeah, they’re noisy.”
Leaf blowers are essential for her business, King said, but she’d just as soon have them muffled.
Dave Waldron of Waldron Landscaping said he isn’t necessarily opposed to a ban as long as it applies equally to all landscapers.
“We would use brooms probably,” Waldron said. “(Leaf blowers) make the job cheaper for people. They can get the job done faster; it takes a lot longer to use a broom.”
Sonoma’s City Council on Wednesday is set to discuss whether to proceed with an ordinance that would restrict, or perhaps ban, the power landscaping tools.
The issue pops up from time to time, some might say like a dandelion or crabgrass, in Sonoma County communities. But so far, none has gone so far as to legislate leaf blowers beyond standard noise restrictions.
Some Sebastopol residents pushed the issue as far as the City Council last year, but the issue was put off until the fall.
Sonoma resident Lisa Summers’ research on potential health and environmental risks of leaf blowers caught the attention of councilmembers Ken Brown and Joanne Sanders, who asked that the issue be addressed by the full council.
The result, City Manager Linda Kelly said, could be to write an ordinance banning or restricting leaf blowers in the city. Or the issue could be sent to a committee that studies environmental concerns within the city.
A ban on the use of leaf blowers, if applied to city properties, could increase costs, Kelly warned, because of the extra time needed to clean walkways and parks of leaves and other debris that can become hazards or block storm drains.
If Sonoma votes to ban leaf blowers, it will join the ranks of about 20 other California cities to have done so, including Belvedere, Beverly Hills, Carmel, Del Mar, Malibu, Santa Monica, Mill Valley, Berkeley and Palo Alto.
Other cities restrict their hours of operation, or allow only electric or battery-powered blowers.
Kris Kiser, an executive vice president of the Outdoor Power Equipment Institute in Virginia, said his trade group understands the tools can be irritating.
“It bothers people. We recognize that,” he said. “It’s a challenge because they’ve become ubiquitous. Millions of units sell every year because they’re very efficient. They work very well for what they’re designed for.”
The trend is toward quieter blowers, he said. Most newer machines operate at 65 decibels or lower, which is quieter than most lawn mowers and chainsaws, he said.
Sonoma’s noise ordinance prohibits the use of “residential power equipment” before 8 a.m., later on weekends and holidays, and every day after 6 p.m. Noise limits are set at 90 decibels.
Often, though, Kiser acknowledged, it’s the pitch of the blowers more than the volume.
Summers, who submitted a letter seeking an outright ban in a 22-page packet sent to the City Council, said she has lived in Sonoma for 13 years.
“During the countless hours I’ve spent at city parks with my four children, nothing in my mind stands out as a more constant and insidious disruption to the quality of life in the valley than the ever-increasing use of leaf blowers,” she wrote.
For years, she said, she has seen city maintenance workers use leaf blowers “in close proximity to playgrounds where young children and babies play without the ear protection the workers wear.”
And, she argues, leaf blowers cause air pollution and health problems.
“Leaf blowers are associated with a wide range of impacts to human health and the environment, including but not limited to respiratory illness and distress, air pollution from unburned fuel, redistribution of pesticides, herbicides, fertilizers, dust particles and animal feces into the air we breathe,” she wrote.
A study issued in 2000 by the California Air Resources Board in response to questions from the Legislature was inconclusive regarding potential health and environmental impacts.
Developed in the early 1970s, the leaf blower became popular in California when water was banned for many garden clean-up tasks because of drought concerns, the report noted. In 1998, nearly 2 million of the tools were sold nationwide.
“Health effects from hazards identified as being generated by leaf blowers range from mild to serious, but the appearance of those effects depends on exposures: the dose, or how much of the hazard is received by a person and the exposure time,” the report said.
King said in her nearly 30 years as a landscape company owner, “none of my clients have ever asked me not to use one.”
“As with anything, common sense is a guideline that I encourage my guys to use,” she said. “Our guys are supposed to be conscientious. If someone’s having a party, don’t use it.”
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (issued June 4, 2010)
Nature of Operations
The Toro Company is in the business of designing, manufacturing, and marketing professional turf maintenance equipment and services, turf and agricultural micro-irrigation systems, landscaping equipment, and residential yard and snow removal products.
We sell our products through a network of distributors, dealers, hardware retailers, home centers, mass retailers, and over the Internet.
Our businesses are organized into three reportable business segments: professional, residential, and distribution. Our distribution segment, which consists of our company-owned domestic distribution company, has been combined with our corporate activities. Our emphasis is to provide innovative, well-built, and dependable products supported by an extensive service network. A significant portion of our revenues has historically been, and we expect it to continue to be, attributable to new and enhanced products.
RESULTS OF OPERATIONS
Overview
Our results for the second quarter of fiscal 2010 were generally positive with a net sales growth rate of 12.6 percent and a net earnings growth rate of 23.9 percent compared to the second quarter of fiscal 2009. Year-to-date net earnings increased 29.8 percent in fiscal 2010 compared to the same period in the last fiscal year on a year-to-date sales growth rate of 6.4 percent.
Shipments of most professional segment products were up primarily from improved economic conditions, increased demand for our products, the successful introduction of new products, and customers who aligned their orders closer to retail demand. Net sales of micro-irrigation products continued to gain momentum with our investment in addition manufacturing capacity to increase production of our water conserving products to meet the growing worldwide market demand. Residential segment net sales also increased due to favorable weather conditions, as well as increased demand and additional product placement for riding products. In addition, shipments of snow thrower products were up for the second quarter and year-to-date period of fiscal 2010 compared to the same periods in the prior fiscal year due to increased demand from heavy snow falls during the winter season of 2009-2010 and the timing of the introduction of our new redesigned offering of snow thrower products that shipped to customers in the first quarter of fiscal 2010.
Net earnings as a percentage of net sales rose to 8.1 percent and 6.3 percent in the second quarter and year-to-date period of fiscal 2010, respectively, compared to 7.4 percent and 5.2 percent in the second quarter and year-to-date period of fiscal 2009, respectively. Higher gross margins, leveraging of selling, general, and administrative expenses, and a lower effective tax rate also contributed to the earnings improvement.
We continued to focus on reducing working capital and improving asset management. As a result of our efforts, as of the end of our fiscal 2010 second quarter we achieved our long-term goal to reduce average net working capital (accounts receivable plus inventory less trade payables) as a percentage of net sales to below 20 percent, or “in the teens.” Our average net working capital as a percentage of net sales for the twelve months ended April 30, 2010 was 19.0 percent. The impact of our efforts to reduce working capital resulted in a significant improvement of our cash flows from operating activities for the first six months of fiscal 2010 compared to the first six months of fiscal 2009. We also paid a cash dividend of $0.18 per share during the second quarter of fiscal 2010, which was an increase of 20 percent over our cash dividend of $0.15 per share for the second quarter of fiscal 2009.
Our fiscal 2010 second quarter financial results were positive, and we are generally optimistic that the positive momentum from our second quarter should continue through the remainder of fiscal 2010. We are off to a good start with our new one-year initiative, “5 in One: Back on Course,” which is intended to guide us through this year of anticipated recovery with an even stronger focus on the customer and a single financial goal: five percent profit after tax as a percentage of net sales for fiscal 2010.
We believe we have taken the necessary proactive measures through our continued focus on asset management, reductions to our cost structure, and our commitment to product innovation, to position us well to benefit if our markets continue to improve. We will continue to keep a cautionary eye on the global economies, and particularly Europe, retail demand, field inventory levels, commodity prices, weather, competitive actions, and other factors identified below under the heading “Forward-Looking Information,” which could cause our actual results to differ from our outlook.
Net Sales
Worldwide consolidated net sales for the second quarter and year-to-date periods of fiscal 2010 were up 12.6 percent and 6.4 percent, respectively, from the same periods in the prior fiscal year. Worldwide professional segment net sales were up 12.6 percent and 4.2 percent for the second quarter and year-to-date periods of fiscal 2010, respectively, compared to the same periods in the prior fiscal year.
Shipments of most professional segment products were up as a result of improved economic conditions, the successful introduction of new products, and customers who aligned their orders closer to retail demand, all of which resulted in increased demand for our products.
Retail sales increased for the second quarter and year-to-date periods of fiscal 2010 compared to the same periods in fiscal 2009, mainly as the result of increased retail demand for landscape contractor equipment. Professional segment field inventory levels were down as of the end of the second quarter of fiscal 2010 compared to the end of the second quarter of fiscal 2009. Net sales of micro-irrigation products were up due to our investments in additional manufacturing capacity that increased production of our water conserving products to meet the growing worldwide market demand.
Residential segment net sales increased 14.5 percent and 12.5 percent for the second quarter and year-to-date periods of fiscal 2010, respectively, compared to the same periods in fiscal 2009 as a result of favorable weather conditions, increased demand and additional product placement for riding products, and the introduction of our new cordless electric walk power mower. In addition, shipments of snow thrower products were up for the second quarter and year-to-date periods of fiscal 2010 compared to the same periods in the prior fiscal year due to increased demand from heavy snow falls during the winter season of 2009-2010 and the timing of the introduction of our new redesigned offering of snow thrower products that shipped to customers in the first quarter of fiscal 2010.
Net sales of Pope irrigation products sold in Australia also increased for the year-to-date period of fiscal 2010 compared to the year-to-date period of fiscal 2009 as a result of dry weather conditions in that region. International net sales for the second quarter and year-to-date periods of fiscal 2010 increased 13.5 percent and 6.5 percent, respectively, from the same periods in the prior fiscal year due in part to a weaker U.S. dollar compared to other currencies in which we transact business that accounted for approximately $4.7 million and $14.2 million of additional net sales for the second quarter and year-to-date periods of fiscal 2010, respectively.
Gross Profit
As a percentage of net sales, gross profit for the second quarter of fiscal 2010 increased to 33.3 percent compared to 32.3 percent in the second quarter of fiscal 2009. Gross profit as a percent of net sales for the year-to-date period of fiscal 2010 also increased to 34.0 percent compared to 33.3 percent for year-to-date period of fiscal 2009.
These improvements were due to the following factors: (i) lower average commodity costs in the first half of fiscal 2010 compared to the first half of fiscal 2009, primarily from lower steel and aluminum costs; (ii) lower manufacturing costs from increased plant utilization due to increased demand for our products; (iii) a weaker U.S. dollar compared to other currencies in which we transact business; and (iv) resulting effects from cost reduction efforts implemented in fiscal 2009. Somewhat offsetting those positive factors was an increase in freight expense.
Selling, General, and Administrative Expense
SG and A expense increased $13.1 million, or 12.8 percent, for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009 due to an increase in employee incentive compensation expense, but was even as a percentage of net sales at 20.5 percent as compared to the second quarter of fiscal 2009. SG and A expense increased $5.1 million, or 2.5 percent for the year-to-date period of fiscal 2010 compared to the year-to-date period of fiscal 2009. SG and A expense as a percentage of net sales for the year-to-date period of fiscal 2010 decreased to 23.7 percent compared to 24.6 percent for the year-to-date period of fiscal 2009.
This decrease was primarily attributable to our leaner cost structure resulting from cost reduction efforts taken in fiscal 2009, costs incurred in fiscal 2009 for workforce adjustments of $2.1 million that were not duplicated in fiscal 2010, and a decrease in bad debt expense of $1.1 million. Somewhat offsetting those decreases was an increase in employee incentive compensation expense of $9.0 million from anticipated improved financial performance in fiscal 2010, as compared to fiscal 2009.
Interest Expense
Interest expense for the second quarter and year-to-date periods of fiscal 2010 decreased 3.4 percent and 3.0 percent, respectively, compared to the same periods in the prior fiscal year as a result of lower average debt levels.
Other Income, Net
Other income, net for the second quarter and year-to-date periods of fiscal 2010 decreased $0.6 million and $0.5 million, respectively, compared to the same periods in the prior fiscal year. These decreases were due to lower foreign currency exchange rate gains, a decrease in finance charge revenue, somewhat offset by income from our investment in Red Iron.
Provision for Income Taxes
The effective tax rate for the second quarter and year-to-date period of fiscal 2010 was 33.6 percent compared to 34.2 percent for the same periods in fiscal 2009. The decrease in the effective tax rate was primarily the result of a valuation allowance for foreign net operating losses and provision adjustments in fiscal 2009, somewhat offset by the expiration of the domestic research tax credit.
BUSINESS SEGMENTS
As described previously, we operate in three reportable business segments: professional, residential, and distribution. Our distribution segment, which consists of our wholly owned domestic distribution company, has been combined with our corporate activities that is shown as “Other” in the following tables. Operating earnings for our professional and residential segments are defined as earnings from operations plus other income, net. Operating loss for “Other” includes earnings (loss) from operations, corporate activities, other income, net, and interest expense.
Professional
Net Sales. Worldwide net sales for the professional segment in the second quarter and year-to-date periods of fiscal 2010 increased 12.6 percent and 4.2 percent, respectively, compared to the same periods in the last fiscal year. Shipments of most professional segment products were up as a result of improved economic conditions, increased demand for our products, the successful introduction of new products, and customers who aligned their orders closer to retail demand.
Retail sales increased for the second quarter and year-to-date periods of fiscal 2010 compared to the same periods in fiscal 2009, mainly as the result of increased retail demand for landscape contractor equipment. Professional segment field inventory levels were down as of the end of the second quarter of fiscal 2010 compared to the end of the second quarter of fiscal 2009. Net sales of micro-irrigation products were up due to our investments in additional manufacturing capacity that increased production of our water conserving products to meet the growing worldwide market demand.
Operating Earnings. Operating earnings for the professional segment in the second quarter and year-to-date periods of fiscal 2010 increased 18.9 percent and 7.4 percent, respectively, compared to the same periods in the last fiscal year. Expressed as a percentage of net sales, professional segment operating margin increased to 19.3 percent compared to 18.3 percent in the second quarter of fiscal 2009, and fiscal 2010 year-to-date professional segment operating margin also increased to 16.6 percent compared to 16.1 percent from the same period in the last fiscal year.
These profit improvements were primarily attributable to higher gross margins due to the same factors discussed previously in the Gross Profit section. In addition, a decline in SG&A expense as a percentage of net sales also contributed to the operating earnings improvement, which was due mainly to leveraging SG&A costs over higher sales volumes.
Residential
Net Sales. Worldwide net sales for the residential segment in the second quarter and year-to-date periods of fiscal 2010 increased 14.5 percent and 12.5 percent, respectively, compared to the same periods in the last fiscal year. These sales increases were due mainly to favorable weather conditions, additional product placement for riding products, and the introduction of our new cordless electric walk power mower, all of which contributed to an increase in demand for our products.
In addition, shipments of snow thrower products were up for the second quarter and year-to-date period of fiscal 2010 compared to the same periods in the prior fiscal year due to increased demand from heavy snow falls during the winter season of 2009-2010 and the timing of the introduction of our new redesigned offering of snow thrower products that shipped to customers in the first quarter of fiscal 2010. Net sales of Pope irrigation products sold in Australia also increased for the year-to-date period of fiscal 2010 compared to the year-to-date period of fiscal 2009 as a result of dry weather conditions in that region.
Operating Earnings. Operating earnings for the residential segment in the second quarter and year-to-date periods of fiscal 2010 increased 51.5 percent and 79.9 percent, respectively, compared to the same periods in the last fiscal year. Expressed as a percentage of net sales, residential segment operating margin increased to 12.0 percent compared to 9.0 percent in the second quarter of fiscal 2009, and fiscal 2010 year-to-date residential segment operating margin increased to 11.8 percent compared to 7.4 percent last fiscal year. These profit improvements were due to higher gross margins primarily from lower average commodity costs in the first half of fiscal 2010 compared to the first half of fiscal 2009, a weaker U.S. dollar compared to other currencies in which we transact business, resulting effects of cost reduction efforts implemented in fiscal 2009, and increased sales volumes of higher-margin products. Somewhat offsetting the profit improvements were higher freight expense and an increase in SG and A expense.
Other
Net Sales. Net sales for the other segment include sales from our wholly owned domestic distribution company less sales from the professional and residential segments to that distribution company. In fiscal 2009, “Other” also included elimination of the professional and residential segments’ floor plan interest costs from Toro Credit Company (TCC), our wholly owned financing company. With the establishment of Red Iron, net sales for the “Other” segment no longer includes corporate financing activities, including the elimination of floor plan costs from TCC, which results in lower net sales for the other segment. Net sales for the “Other” segment were down for the second quarter and year-to-date periods of fiscal 2010 compared to the same periods in the last fiscal year by $2.8 million, or 46.9 percent, and $4.8 million, or 49.0 percent, respectively, as a result of the elimination of TCC floor plan interest costs, as well as lower net sales at our wholly owned distributorship.
Operating Losses. Operating losses for the other segment were up for the second quarter and year-to-date periods of fiscal 2010 by $6.6 million, or 37.8 percent, and $4.5 million, or 10.8 percent, respectively, compared to the same periods in the last fiscal year. These loss increases were primarily attributable to an increase in employee incentive compensation expense due to anticipated improved financial performance in fiscal 2010, as compared to fiscal 2009, lower foreign currency exchange rate gains, and the elimination of TCC floor plan interest costs, as described above. Somewhat offsetting those factors was overall reduced spending from our leaner cost structure as a result of actions we implemented in fiscal 2009, as well as elimination of costs incurred in fiscal 2009 for workforce adjustments.
