ALEXANDRIA, Va. — August 30 -- The Outdoor Power Equipment Institute (OPEI) today announced that on August 26, 2010, in a unanimous 32-0 vote, the California State Senate adopted SB 1402, a bill that will begin to make the California Air Resources Board’s (CARB) enforcement program transparent, consistent and fair. OPEI and its CERT partners applaud the legislature’s adoption of SB 1402 without a single negative vote, and now urge the Governor to sign SB 1402 into law.
OPEI is a founding partner of and one of 17 national and California-based associations that belong to Californians for Enforcement Reform and Transparency (CERT). CERT is committed to working cooperatively with CARB to enhance CARB’s compliance and enforcement programs.
Senator Dutton, the incoming Republican Senate leader who drafted and sponsored the legislation, stated: “I urge the Governor to sign this legislation, which has received unanimous bipartisan support. This bill will help private businesses in California achieve fair and consistent settlements. This legislation also helps create greater transparency at CARB, which will ultimately help this state retain and create jobs in California.”
CARB is charged with attaining and maintaining air quality standards in the State of California, which includes the enforcement of air quality standards. Currently, it is not clear whether and how CARB applies criteria or policies when it assesses penalties. This results in a subjective, ad hoc enforcement program that does not clearly or consistently distinguish serious violations that harm air quality from minor administrative glitches.
For that reason, former CARB Chairman, John Dunlap, explained that “Under the current situation, the public and the regulated community are left in the dark about how CARB calculates penalties. This leads to the perception that CARB’s proposed penalties are arbitrary and inconsistent – which in turn results in protracted enforcement disputes and litigation.”
If signed into law, the new rules will require CARB to:
• provide a clear explanation of how penalties are assessed on a per-unit basis,
• develop a written, consistent penalty policy that ensures the largest penalties are imposed on serious violations that adversely impact air quality, and
• report those penalties to the Legislature annually.
Kris Kiser, Executive Vice President of the Outdoor Power Equipment Institute said “Too often, CARB’s enforcement actions against non-compliant, unsafe products from off-shore, new market entrants appear less aggressive than CARB’s actions taken against ‘deep pocket,’ reputable manufacturers for minor administrative errors. SB 1402 will help CARB address this problem in a thoughtful and consistent manner. OPEI looks forward to continuing its long-term partnership with CARB and the US EPA to create a transparent, fair and even playing field where there is strong enforcement against gross violations from non-compliant products.”
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 lawns and landscapes. For more information on OPEI, visit www.OPEI.org.
For more information on CERT and its positions go to www.certreform.org.
Members of CERT are: American Home Furnishing Alliance; California Chapter of the American Fence Contractors Association; California Dump Truck Owner Association; California Motorcycle Dealers Association; California Moving and Storage Association; California Retailers Association; Construction Industry Air Quality Coalition; Engineering Contractors Association; Flasher/Barricade Association; Independent Waste Oil Collectors and Transporters; Marine Builders Association; Moving and Storage Association; National Marine Manufacturers Association; Outdoor Power Equipment Institute; Sand Car Manufacturers Association; Southern California Contractors Association; California Manufacturers and Technology Association.
Monday, August 30, 2010
GE Capital is Agent To Blount for $425 Million Credit Facility
NORWALK, Conn., Aug 20, 2010 -- GE Capital, Corporate Finance today announced it is administrative agent for a $425 million cash flow credit facility to Blount International, Inc., a leading outdoor products manufacturer.
The loan amends and extends an existing $165 million facility and will be used to refinance debt and for acquisitions. GE Capital Markets served as sole lead arranger.
Headquartered in Portland, OR, Blount International, Inc. is a global manufacturer and marketer of replacement parts, equipment, and accessories for the forestry, lawn and garden, and outdoor power equipment sectors, and is the market leader in manufacturing saw chain and guide bars for chain saws.
"For over seven years now GE Capital has helped finance our growth with significant financial commitments," said Josh Collins, chairman and chief executive officer for Blount International, Inc. "Expanding our existing facility allows us to lower our overall cost of capital and supports our growth strategy."
"Meeting the evolving capital needs of manufacturers is our specialty," said Tom Quindlen, president and chief executive officer of GE Capital, Corporate Finance. "Deep industry knowledge, expert loan structuring and the ability to commit large amounts of capital leads to smarter liquidity for borrowers."
Funding in part was provided through GE Capital, Corporate Finance's bank affiliate, GE Capital Financial, Inc.
The loan amends and extends an existing $165 million facility and will be used to refinance debt and for acquisitions. GE Capital Markets served as sole lead arranger.
Headquartered in Portland, OR, Blount International, Inc. is a global manufacturer and marketer of replacement parts, equipment, and accessories for the forestry, lawn and garden, and outdoor power equipment sectors, and is the market leader in manufacturing saw chain and guide bars for chain saws.
"For over seven years now GE Capital has helped finance our growth with significant financial commitments," said Josh Collins, chairman and chief executive officer for Blount International, Inc. "Expanding our existing facility allows us to lower our overall cost of capital and supports our growth strategy."
"Meeting the evolving capital needs of manufacturers is our specialty," said Tom Quindlen, president and chief executive officer of GE Capital, Corporate Finance. "Deep industry knowledge, expert loan structuring and the ability to commit large amounts of capital leads to smarter liquidity for borrowers."
Funding in part was provided through GE Capital, Corporate Finance's bank affiliate, GE Capital Financial, Inc.
Toro Profits Increase 70% As Demand Rebounds
Minneapolis – St. Paul – August 19 --Renewed demand from golf courses and landscape businesses sparked robust third-quarter sales and earnings gains at Toro Co. that left Wall Street estimates in the dust. The Bloomington-based maker of outdoor maintenance equipment also raised its estimates for the year by more than 12 percent.
Toro reported Thursday a 16 percent increase in revenue to $458.9 million for the quarter ended July 30. Earnings rose almost 70 percent to $33.4 million, or $1.01 a share. Analysts had estimated earnings per share of 78 cents on revenue of $429.9 million.
The company boosted its earnings forecast for fiscal 2010 from $2.40 a share to $2.70 a share. That would compare with $1.73 a share for 2009.
The stock traded as high as $55 a share Thursday before closing at $51.65 a share, up just 12 cents on unusually high volume of about 655,400 shares.
In a research note, James Lucas, an analyst at Janney Capital Markets, said, "While Toro has done the right things internally, and the top line has rebounded, we believe the shares are fairly valued." He said he is keeping his neutral rating on the stock and his 12-month target price of $54 a share.
In a conference call with analysts, CEO Michael Hoffman said, "We remain mindful of the sluggish nature of the recovery." Even so, he noted, Toro is seeing increased sales from pent-up demand in the professional segment, while new products are a key driver in the residential business unit.
The professional segment, which accounts for about 70 percent of total sales, had double-digit sales gains in all product categories during the quarter. Sales growth in the residential products segment was more modest at close to 8 percent.
One performance benchmark at Toro is to have at least 35 percent of overall sales come from products introduced in the current year and previous two years. Hoffman said the company is exceeding that goal, with nearly 50 percent of sales coming from newer products.
Toro reported Thursday a 16 percent increase in revenue to $458.9 million for the quarter ended July 30. Earnings rose almost 70 percent to $33.4 million, or $1.01 a share. Analysts had estimated earnings per share of 78 cents on revenue of $429.9 million.
The company boosted its earnings forecast for fiscal 2010 from $2.40 a share to $2.70 a share. That would compare with $1.73 a share for 2009.
The stock traded as high as $55 a share Thursday before closing at $51.65 a share, up just 12 cents on unusually high volume of about 655,400 shares.
In a research note, James Lucas, an analyst at Janney Capital Markets, said, "While Toro has done the right things internally, and the top line has rebounded, we believe the shares are fairly valued." He said he is keeping his neutral rating on the stock and his 12-month target price of $54 a share.
In a conference call with analysts, CEO Michael Hoffman said, "We remain mindful of the sluggish nature of the recovery." Even so, he noted, Toro is seeing increased sales from pent-up demand in the professional segment, while new products are a key driver in the residential business unit.
The professional segment, which accounts for about 70 percent of total sales, had double-digit sales gains in all product categories during the quarter. Sales growth in the residential products segment was more modest at close to 8 percent.
One performance benchmark at Toro is to have at least 35 percent of overall sales come from products introduced in the current year and previous two years. Hoffman said the company is exceeding that goal, with nearly 50 percent of sales coming from newer products.
Friday, August 20, 2010
Toro Reports 3rd Quarter Fiscal 2010 Results
Sales grow 16.2 percent led by strong performance across all Professional businesses
Company delivers net earnings per share of $1.01, up 87 percent from prior year period
Increased profitability and lower net working capital drives record 9-month operating cash flow
BLOOMINGTON, Minn., Aug 19, 2010 -- The Toro Company today reported net earnings of $33.4 million, or $1.01 per share, on net sales of $458.9 million for its fiscal third quarter ended July 30, 2010. In the comparable fiscal 2009 period, the company reported net earnings of $19.8 million, or $0.54 per share, on net sales of $394.9 million.
For the fiscal year to date, Toro reported net earnings of $90 million, or $2.66 per share, on net sales of $1,353.1 million. In the comparable fiscal 2009 period, the company reported net earnings of $63.4 million, or $1.73 per share, on net sales $1,234.9 million.
"Even with concerns expressed by many economists of a slower recovery, we experienced strong end-user demand during our summer selling season," said Michael J. Hoffman, Toro's chairman and chief executive officer. "Positive momentum for our innovative new products, particularly within our Professional markets, enabled us to deliver better-than-expected revenue and profit growth. Additionally, our ongoing focus on asset management resulted in a further reduction of average net working capital which, along with improved earnings, contributed to record operating cash flow for the nine month period."
SEGMENT RESULTS
Professional
Professional segment net sales for the fiscal 2010 third quarter totaled $317.9 million, up 21.8 percent compared with the same period last year. Worldwide orders for golf equipment and irrigation systems were strong as customers increased their capital equipment spending. Shipments for landscape maintenance equipment and residential and commercial irrigation products were up, driven by continued momentum for new products. For the year to date, professional segment net sales were $880.3 million, up 9.9 percent compared with the first nine months of fiscal 2009.
Professional segment earnings for the fiscal 2010 third quarter totaled $62.7 million, up $23.2 million from the same period last year. For the year to date, professional segment earnings were $156.1 million, up $29.7 million compared with the first nine months of fiscal 2009.
Residential
Residential segment net sales for the fiscal 2010 third quarter totaled $135.8 million, an increase of 7.6 percent compared with the same period last year. Sales benefited from strong customer acceptance for the Toro(R) TimeCutter(R) and TITAN(R) zero-turn mowers. For the year to date, residential segment net sales were $462.6 million, up 11 percent compared with the first nine months of fiscal 2009.
Residential segment earnings for the fiscal 2010 third quarter totaled $10.7 million, roughly flat with the same period last year. For the fiscal year to date, residential segment earnings were $49.2 million, up $17.1 million compared with the first nine months of fiscal 2009.
REVIEW OF OPERATIONS
Gross margin for the fiscal 2010 third quarter improved to 35.2 percent from 33.9 percent in last year's third quarter. For the fiscal year to date, gross margin improved to 34.4 percent compared with 33.5 percent in the first nine months of fiscal 2009. For both periods, the margin improvement resulted primarily from favorable product mix and lower manufacturing variances.
Selling, general and administrative (SG&A) expense for the fiscal 2010 third quarter totaled $107.8 million, up 14.5 percent from last year's third quarter, but declined as a percent of sales to 23.5 percent from 23.9 percent. For the year to date, SG&A expense was $319.7 million, up 6.2 percent from the same period last year; but decreased as a percent of sales to 23.6 percent compared with 24.4 percent. In both periods, SG&A expense was up primarily due to higher employee incentive expense related to improved financial and operating performance. However, SG&A as a percent of sales declined in both periods, reflecting the company's leaner cost structure and continued spending discipline.
Other income for the fiscal 2010 third quarter was $2.4 million, up $6.4 million from the same period last year. The increase was due to expenses incurred last year for several legal matters and income this year from our investment in Red Iron Acceptance, the company's channel financing joint venture.
Interest expense for the fiscal 2010 third quarter was $4.2 million compared with $4.4 million in last year's third quarter. For the year to date, interest expense totaled $12.8 million compared with $13.2 million in the first nine months of fiscal 2009.
The effective tax rate for the fiscal 2010 third quarter was 35.7 percent compared with 36.6 percent in last year's third quarter.
Accounts receivable at the end of the fiscal 2010 third quarter totaled $170.1 million, down $99.8 million from last year's third quarter, on a sales increase of 16.2 percent. The reduction in accounts receivable was attributable to Red Iron Acceptance. Net inventories in the third quarter were $177.2 million, up $16.6 million from the same period last year. Trade payables were $118 million, up $49.7 million from last year's third quarter.
At the end of the third quarter, the company's 12-month average net working capital as a percent of sales was 15.4 percent compared with 27 percent a year ago, reflecting a continued focus on inventory, accounts receivable and trade payables management.
Resulting from improved earnings and working capital benefits, the company's cash flow from operations for the first nine months totaled $157.4 million compared with $119 million in the same period last year. For the year to date, the company repurchased $135.3 million of company stock.
BUSINESS OUTLOOK
"We are encouraged by the recovery of our markets and the increased demand for our products," said Hoffman. "As we finish the fiscal year, we will stay focused on driving end-user demand and closely managing inventory levels. In fiscal 2011, our customers can expect us to once again bring forward a number of innovative new products to help them create and maintain beautiful landscapes, precisely irrigate turf and crops, and improve their productivity."
The company now expects earnings for fiscal 2010 to be about $2.70 per share on a revenue increase of approximately 10 to 11 percent.
Non-GAAP Financial Measure
The company's long-term asset management goal was to reduce average net working capital as a percent of net sales below 20 percent, or "into the teens." The company defines net working capital as accounts receivable plus inventory less trade payables. In fiscal 2009, Toro's average net working capital as a percentage of net sales was 26.2 percent.
Company delivers net earnings per share of $1.01, up 87 percent from prior year period
Increased profitability and lower net working capital drives record 9-month operating cash flow
BLOOMINGTON, Minn., Aug 19, 2010 -- The Toro Company today reported net earnings of $33.4 million, or $1.01 per share, on net sales of $458.9 million for its fiscal third quarter ended July 30, 2010. In the comparable fiscal 2009 period, the company reported net earnings of $19.8 million, or $0.54 per share, on net sales of $394.9 million.
For the fiscal year to date, Toro reported net earnings of $90 million, or $2.66 per share, on net sales of $1,353.1 million. In the comparable fiscal 2009 period, the company reported net earnings of $63.4 million, or $1.73 per share, on net sales $1,234.9 million.
"Even with concerns expressed by many economists of a slower recovery, we experienced strong end-user demand during our summer selling season," said Michael J. Hoffman, Toro's chairman and chief executive officer. "Positive momentum for our innovative new products, particularly within our Professional markets, enabled us to deliver better-than-expected revenue and profit growth. Additionally, our ongoing focus on asset management resulted in a further reduction of average net working capital which, along with improved earnings, contributed to record operating cash flow for the nine month period."
SEGMENT RESULTS
Professional
Professional segment net sales for the fiscal 2010 third quarter totaled $317.9 million, up 21.8 percent compared with the same period last year. Worldwide orders for golf equipment and irrigation systems were strong as customers increased their capital equipment spending. Shipments for landscape maintenance equipment and residential and commercial irrigation products were up, driven by continued momentum for new products. For the year to date, professional segment net sales were $880.3 million, up 9.9 percent compared with the first nine months of fiscal 2009.
Professional segment earnings for the fiscal 2010 third quarter totaled $62.7 million, up $23.2 million from the same period last year. For the year to date, professional segment earnings were $156.1 million, up $29.7 million compared with the first nine months of fiscal 2009.
Residential
Residential segment net sales for the fiscal 2010 third quarter totaled $135.8 million, an increase of 7.6 percent compared with the same period last year. Sales benefited from strong customer acceptance for the Toro(R) TimeCutter(R) and TITAN(R) zero-turn mowers. For the year to date, residential segment net sales were $462.6 million, up 11 percent compared with the first nine months of fiscal 2009.
Residential segment earnings for the fiscal 2010 third quarter totaled $10.7 million, roughly flat with the same period last year. For the fiscal year to date, residential segment earnings were $49.2 million, up $17.1 million compared with the first nine months of fiscal 2009.
REVIEW OF OPERATIONS
Gross margin for the fiscal 2010 third quarter improved to 35.2 percent from 33.9 percent in last year's third quarter. For the fiscal year to date, gross margin improved to 34.4 percent compared with 33.5 percent in the first nine months of fiscal 2009. For both periods, the margin improvement resulted primarily from favorable product mix and lower manufacturing variances.
Selling, general and administrative (SG&A) expense for the fiscal 2010 third quarter totaled $107.8 million, up 14.5 percent from last year's third quarter, but declined as a percent of sales to 23.5 percent from 23.9 percent. For the year to date, SG&A expense was $319.7 million, up 6.2 percent from the same period last year; but decreased as a percent of sales to 23.6 percent compared with 24.4 percent. In both periods, SG&A expense was up primarily due to higher employee incentive expense related to improved financial and operating performance. However, SG&A as a percent of sales declined in both periods, reflecting the company's leaner cost structure and continued spending discipline.
Other income for the fiscal 2010 third quarter was $2.4 million, up $6.4 million from the same period last year. The increase was due to expenses incurred last year for several legal matters and income this year from our investment in Red Iron Acceptance, the company's channel financing joint venture.
Interest expense for the fiscal 2010 third quarter was $4.2 million compared with $4.4 million in last year's third quarter. For the year to date, interest expense totaled $12.8 million compared with $13.2 million in the first nine months of fiscal 2009.
The effective tax rate for the fiscal 2010 third quarter was 35.7 percent compared with 36.6 percent in last year's third quarter.
Accounts receivable at the end of the fiscal 2010 third quarter totaled $170.1 million, down $99.8 million from last year's third quarter, on a sales increase of 16.2 percent. The reduction in accounts receivable was attributable to Red Iron Acceptance. Net inventories in the third quarter were $177.2 million, up $16.6 million from the same period last year. Trade payables were $118 million, up $49.7 million from last year's third quarter.
At the end of the third quarter, the company's 12-month average net working capital as a percent of sales was 15.4 percent compared with 27 percent a year ago, reflecting a continued focus on inventory, accounts receivable and trade payables management.
Resulting from improved earnings and working capital benefits, the company's cash flow from operations for the first nine months totaled $157.4 million compared with $119 million in the same period last year. For the year to date, the company repurchased $135.3 million of company stock.
BUSINESS OUTLOOK
"We are encouraged by the recovery of our markets and the increased demand for our products," said Hoffman. "As we finish the fiscal year, we will stay focused on driving end-user demand and closely managing inventory levels. In fiscal 2011, our customers can expect us to once again bring forward a number of innovative new products to help them create and maintain beautiful landscapes, precisely irrigate turf and crops, and improve their productivity."
The company now expects earnings for fiscal 2010 to be about $2.70 per share on a revenue increase of approximately 10 to 11 percent.
Non-GAAP Financial Measure
The company's long-term asset management goal was to reduce average net working capital as a percent of net sales below 20 percent, or "into the teens." The company defines net working capital as accounts receivable plus inventory less trade payables. In fiscal 2009, Toro's average net working capital as a percentage of net sales was 26.2 percent.
Teske Named Briggs & Stratton Chairman
Todd Teske has been named chairman of Briggs and Stratton Corp., effective upon the conclusion of the company’s annual shareholder’s meeting in October.
Teske currently serves as president and CEO of Wauwatosa-based Briggs and Stratton, a manufacturer of small engines and outdoor power equipment. The role of chairman will be added to his current duties. He will succeed John Shiely, who will retire as chairman and director at the shareholders meeting.
Briggs and Stratton also announced that James Humphrey has been named to the company’s board of directors, also effective at the conclusion of the shareholders meeting. Humphrey will serve as a member of the class of directors whose terms of office expire in 2012. He will fill the vacancy created by Shiely’s retirement.
Humphrey is chairman and CEO of privately held Andersen Corp., a Bayport, Minn.-based window and door manufacturer.
Teske currently serves as president and CEO of Wauwatosa-based Briggs and Stratton, a manufacturer of small engines and outdoor power equipment. The role of chairman will be added to his current duties. He will succeed John Shiely, who will retire as chairman and director at the shareholders meeting.
Briggs and Stratton also announced that James Humphrey has been named to the company’s board of directors, also effective at the conclusion of the shareholders meeting. Humphrey will serve as a member of the class of directors whose terms of office expire in 2012. He will fill the vacancy created by Shiely’s retirement.
Humphrey is chairman and CEO of privately held Andersen Corp., a Bayport, Minn.-based window and door manufacturer.
Briggs & Stratton Reports Improved Results for Fiscal 2010 and 4th Quarter
MILWAUKEE -- Aug 12 -- Briggs and Stratton Corporation today announced financial results for its fourth quarter and fiscal year ended June 27, 2010.
Highlights:
Fourth quarter fiscal 2010 consolidated net sales of $615.6 million, an increase of $132.9 million or 27.5% from the fourth quarter of fiscal 2009.
Fourth quarter fiscal 2010 consolidated net income of $18.2 million, or $0.36 per diluted share, increased from $5.3 million, or $0.11 per diluted share, one year ago. The fourth quarter of fiscal 2009 included a $5.8 million pretax charge ($3.5 million after tax or $0.07 per diluted share) for plant closure costs.
Fiscal 2010 consolidated net income of $36.6 million, or $0.73 per diluted share, included a $30.6 million pretax charge ($18.7 million after tax or $0.37 per diluted share) for a previously disclosed litigation settlement. Fiscal 2009 net income was $32.0 million, or $0.64 per diluted share.
Strong cash flows from operations in fiscal 2010 of $243.7 million drove down net debt outstanding by $178.2 million.
"We continued to execute our operational initiatives to strengthen the company and improve profitability in fiscal 2010," commented Todd J. Teske, President and Chief Executive Officer of Briggs and Stratton. "Despite challenging economic conditions over the past year, operating profits and cash flows from operations increased and significantly improved our balance sheet.
Our fiscal 2010 results position us to be successful for either a prolonged economic recovery in the US and Europe or a stronger rebound as consumer confidence returns. We are also pleased that our financial results allowed us to pay our employees the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year. The response of our employees to our business challenges during fiscal 2010 was extraordinary."
Consolidated Results:
Fiscal 2010 fourth quarter results included consolidated net sales of $615.6 million and consolidated net income of $18.2 million or $0.36 per diluted share. The fourth quarter of fiscal 2009 had consolidated net sales of $482.8 million and consolidated net income of $5.3 million or $0.11 per diluted share. Included in net income for the fiscal 2009 fourth quarter was a $5.8 million pretax ($3.5 million after tax) expense associated with the closing of a manufacturing facility in Jefferson, Wisconsin. The consolidated net sales increase of $132.9 million or 27.5% was due primarily to increased shipment volumes in both the Engines and Power Products Segments.
After considering the impact of the fiscal 2009 item related to the Jefferson, Wisconsin facility closure, fourth quarter consolidated net income was $18.2 million, which was higher by $9.4 million as compared to the prior year adjusted net income of $8.8 million. This increase was the result of increased shipment and production volumes as well as improved productivity, partially offset by the $4.4 million repayment to employees for the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year.
For fiscal 2010, the company had consolidated net sales of $2.03 billion and consolidated net income of $36.6 million or $0.73 per diluted share. Fiscal 2009 consolidated net sales were $2.09 billion and consolidated net income was $32.0 million or $0.64 per diluted share. The $64.3 million decrease in consolidated net sales was primarily due to reduced generator shipment volumes due to the absence of landed hurricanes. In addition, sales were also impacted by lower average prices for engines offset by a favorable mix of engines and favorable currency exchange primarily related to the Euro and Australian dollar.
Included in fiscal 2010 consolidated net income was a $30.6 million pretax expense ($18.7 million after tax or $0.37 per diluted share) associated with a class action lawsuit regarding horsepower labeling that was previously disclosed in a Current Report on Form 8-K filed on March 2, 2010. Fiscal 2009 consolidated net income included the $5.8 million pretax ($3.5 million after tax) expense associated with the closing of the Jefferson, Wisconsin manufacturing facility. After considering the impact of these items, fiscal 2010 adjusted consolidated net income was $55.3 million, which was higher by $19.8 million compared to the prior year adjusted net income of $35.5 million. The increased net income was primarily the result of reduced manufacturing costs, lower commodity costs and transportation expenses and planned manufacturing cost savings.
Engines Segment:
Fiscal 2010 fourth quarter net sales were $423.1 million versus $336.0 million for the same period a year ago, an increase of $87.1 million or 25.9%. The increase in net sales was the result of increased sales volume to U.S. OEM customers and a favorable mix of product shipped that reflected higher priced units used on riding lawn and garden equipment.
Engine shipments were favorably impacted by the improvement in lawn and garden products sold at retail primarily due to favorable weather conditions domestically. Lower average sales prices and unfavorable exchange rates compared to last year partially offset the higher volumes and favorable product mix.
Net sales for fiscal 2010 were $1.40 billion versus the $1.41 billion in the prior year, a decrease of $7.4 million or 0.5%. Total engine volumes for the year were essentially flat as an increase in engines used in lawn and garden applications was offset by reduced demand for engines for portable generators due to no landed hurricane activity. Lower average prices during the year were effectively offset by a favorable mix of higher priced engines shipped for use on riding equipment and a slightly favorable foreign currency impact.
Income from operations for the fourth quarter of fiscal 2010 was $27.2 million, up $6.8 million from the $20.4 million earned during the same period in the prior year. The increased income from operations was the result of increased sales and production volumes, lower commodity costs, a favorable mix of product shipped that reflected higher priced units, and improved productivity, offset by lower average prices and increased engineering, selling and administrative expenses.
Engineering, selling, general and administrative expenses were higher due in part to recognizing the expense for repayment of the remaining salaries and 401(K) company match benefits that were reduced from salaried employees earlier in the fiscal year.
Income from operations for fiscal 2010 was $83.1 million. Income from operations after adjusting for the $30.6 million litigation settlement was $113.7 million, up $30.3 million from the $83.4 million in fiscal 2009. The increased income from operations was the result of lower manufacturing costs and efficiencies, lower average commodity costs, a favorable mix of product shipped that reflected higher priced units, and improved productivity, partially offset by lower average sales prices and higher selling and administrative expenses.
Power Products Segment:
Fiscal 2010 fourth quarter net sales were $248.8 million versus $195.2 million from the same period a year ago, an increase of $53.6 million. The net sales increase was due to increased shipments of lawn and garden equipment and pressure washers, both driven by favorable weather conditions domestically.
Net sales for fiscal 2010 were $814.3 million versus $892.9 million in the prior year, a $78.6 million decrease. The net sales decrease for the year was the result of decreased portable generator sales volume due to the absence of any landed hurricanes in fiscal 2010 partially offset by higher volumes of other power products.
The income from operations in the fourth quarter of fiscal 2010 was $2.1 million. The loss from operations in the fourth quarter of fiscal 2009 was $6.1 million, which included a $4.6 million impairment expense related to the write-down of assets associated with the closure of the Jefferson, Wisconsin facility. After considering the impact of the Jefferson closure, income from operations between years improved by $3.6 million.
The improvement resulted from increased sales and production volumes of lawn and garden equipment and pressure washers. Offsetting the improvement was a decrease in absorption rates due to lower production levels of portable generators and snow throwers compared to the prior year, as well as increased engineering, selling, general and administrative expenses related to the repayment to employees for the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year.
The loss from operations for fiscal 2010 was $5.9 million. The loss from operations for fiscal 2009 was $15.0 million, which included the $4.6 million expense related to the write-down of assets associated with the closure of the Jefferson, Wisconsin facility. After considering the impact of the Jefferson closure, the loss from operations between years was improved by approximately $4.5 million. The majority of the improvement was the result of lower manufacturing costs, primarily related to lower commodity costs and planned cost savings initiatives.
The improvements were partially offset by lower sales and production volumes primarily related to the significantly lower portable generator production and shipments in fiscal 2010. Transition costs of approximately $8.0 million related to the closure of the Jefferson, Wisconsin facility more than offset the related cost savings of approximately $3.0 million in fiscal 2010 associated with consolidating the manufacturing and administrative footprint accomplished in fiscal 2010.
Corporate Items:
Other income for the fourth quarter and fiscal 2010 was greater than the same periods last year primarily because of improved earnings of our joint ventures. Interest expense for the fourth quarter and twelve months of fiscal 2010 was less than the comparable periods of last year due to lower average borrowings offset by a premium expense of $0.1 million and $2.5 million, respectively, related to the repurchase of a portion of outstanding senior notes.
The effective tax rate was 28.2% and 5.3% for the fourth quarter of fiscal 2010 and 2009, respectively. The effective tax rate was 25.4% and 20.9% for fiscal 2010 and fiscal 2009, respectively. The variation between quarters is due to the required recognition of the tax effects of certain events as discrete items in the quarter they occur rather than in the overall expected annual tax rate. In addition, the annual fluctuation reflects the impact of changes in foreign earnings at different tax rates and the taxation of dividends from foreign operations as well as a larger benefit from the production activities deduction and resolution of certain tax matters.
Financial Position:
The 8.875% Senior Notes that are due in March 2011 have been classified as Short-Term Debt in the consolidated balance sheet as of the end of fiscal 2010. The company believes it will be able to replace these borrowings with new financing at or prior to the maturity date of the Senior Notes.
Net debt at June 27, 2010 was $89.9 million (total debt of $206.5 million less $116.6 million of cash), an improvement of $178.2 million from fiscal 2009. The reduction of debt was attributable to cash flows from operations. Cash flows provided by operating activities were $243.7 million during fiscal 2010, an increase of $71.3 million over fiscal 2009.
Outlook:
For fiscal 2011, the company projects that consolidated net income will be in the range of $60 million to $70 million or $1.20 to $1.40 per diluted share. Consolidated net sales are projected to be higher by approximately 2% to 4% depending on the level of recovery of consumer spending within the outdoor power equipment category.
Engines Segment sales are forecasted higher on modest volume and pricing improvements while the Power Products Segment sales are forecasted higher primarily due to higher volumes of lawn and garden equipment. Demand for portable generators and the related engines due to landed hurricane activity have not been included in our fiscal 2011 sales forecast.
Operating income margins are projected to be in the range of 5.0% to 6.0%, and interest expense and other income are forecasted to be in the range of $23 million to $25 million and $4 million to $5 million, respectively. The effective tax rate for the full year is projected to be in a range of 32% to 35%.
Highlights:
Fourth quarter fiscal 2010 consolidated net sales of $615.6 million, an increase of $132.9 million or 27.5% from the fourth quarter of fiscal 2009.
Fourth quarter fiscal 2010 consolidated net income of $18.2 million, or $0.36 per diluted share, increased from $5.3 million, or $0.11 per diluted share, one year ago. The fourth quarter of fiscal 2009 included a $5.8 million pretax charge ($3.5 million after tax or $0.07 per diluted share) for plant closure costs.
Fiscal 2010 consolidated net income of $36.6 million, or $0.73 per diluted share, included a $30.6 million pretax charge ($18.7 million after tax or $0.37 per diluted share) for a previously disclosed litigation settlement. Fiscal 2009 net income was $32.0 million, or $0.64 per diluted share.
Strong cash flows from operations in fiscal 2010 of $243.7 million drove down net debt outstanding by $178.2 million.
"We continued to execute our operational initiatives to strengthen the company and improve profitability in fiscal 2010," commented Todd J. Teske, President and Chief Executive Officer of Briggs and Stratton. "Despite challenging economic conditions over the past year, operating profits and cash flows from operations increased and significantly improved our balance sheet.
Our fiscal 2010 results position us to be successful for either a prolonged economic recovery in the US and Europe or a stronger rebound as consumer confidence returns. We are also pleased that our financial results allowed us to pay our employees the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year. The response of our employees to our business challenges during fiscal 2010 was extraordinary."
Consolidated Results:
Fiscal 2010 fourth quarter results included consolidated net sales of $615.6 million and consolidated net income of $18.2 million or $0.36 per diluted share. The fourth quarter of fiscal 2009 had consolidated net sales of $482.8 million and consolidated net income of $5.3 million or $0.11 per diluted share. Included in net income for the fiscal 2009 fourth quarter was a $5.8 million pretax ($3.5 million after tax) expense associated with the closing of a manufacturing facility in Jefferson, Wisconsin. The consolidated net sales increase of $132.9 million or 27.5% was due primarily to increased shipment volumes in both the Engines and Power Products Segments.
After considering the impact of the fiscal 2009 item related to the Jefferson, Wisconsin facility closure, fourth quarter consolidated net income was $18.2 million, which was higher by $9.4 million as compared to the prior year adjusted net income of $8.8 million. This increase was the result of increased shipment and production volumes as well as improved productivity, partially offset by the $4.4 million repayment to employees for the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year.
For fiscal 2010, the company had consolidated net sales of $2.03 billion and consolidated net income of $36.6 million or $0.73 per diluted share. Fiscal 2009 consolidated net sales were $2.09 billion and consolidated net income was $32.0 million or $0.64 per diluted share. The $64.3 million decrease in consolidated net sales was primarily due to reduced generator shipment volumes due to the absence of landed hurricanes. In addition, sales were also impacted by lower average prices for engines offset by a favorable mix of engines and favorable currency exchange primarily related to the Euro and Australian dollar.
Included in fiscal 2010 consolidated net income was a $30.6 million pretax expense ($18.7 million after tax or $0.37 per diluted share) associated with a class action lawsuit regarding horsepower labeling that was previously disclosed in a Current Report on Form 8-K filed on March 2, 2010. Fiscal 2009 consolidated net income included the $5.8 million pretax ($3.5 million after tax) expense associated with the closing of the Jefferson, Wisconsin manufacturing facility. After considering the impact of these items, fiscal 2010 adjusted consolidated net income was $55.3 million, which was higher by $19.8 million compared to the prior year adjusted net income of $35.5 million. The increased net income was primarily the result of reduced manufacturing costs, lower commodity costs and transportation expenses and planned manufacturing cost savings.
Engines Segment:
Fiscal 2010 fourth quarter net sales were $423.1 million versus $336.0 million for the same period a year ago, an increase of $87.1 million or 25.9%. The increase in net sales was the result of increased sales volume to U.S. OEM customers and a favorable mix of product shipped that reflected higher priced units used on riding lawn and garden equipment.
Engine shipments were favorably impacted by the improvement in lawn and garden products sold at retail primarily due to favorable weather conditions domestically. Lower average sales prices and unfavorable exchange rates compared to last year partially offset the higher volumes and favorable product mix.
Net sales for fiscal 2010 were $1.40 billion versus the $1.41 billion in the prior year, a decrease of $7.4 million or 0.5%. Total engine volumes for the year were essentially flat as an increase in engines used in lawn and garden applications was offset by reduced demand for engines for portable generators due to no landed hurricane activity. Lower average prices during the year were effectively offset by a favorable mix of higher priced engines shipped for use on riding equipment and a slightly favorable foreign currency impact.
Income from operations for the fourth quarter of fiscal 2010 was $27.2 million, up $6.8 million from the $20.4 million earned during the same period in the prior year. The increased income from operations was the result of increased sales and production volumes, lower commodity costs, a favorable mix of product shipped that reflected higher priced units, and improved productivity, offset by lower average prices and increased engineering, selling and administrative expenses.
Engineering, selling, general and administrative expenses were higher due in part to recognizing the expense for repayment of the remaining salaries and 401(K) company match benefits that were reduced from salaried employees earlier in the fiscal year.
Income from operations for fiscal 2010 was $83.1 million. Income from operations after adjusting for the $30.6 million litigation settlement was $113.7 million, up $30.3 million from the $83.4 million in fiscal 2009. The increased income from operations was the result of lower manufacturing costs and efficiencies, lower average commodity costs, a favorable mix of product shipped that reflected higher priced units, and improved productivity, partially offset by lower average sales prices and higher selling and administrative expenses.
Power Products Segment:
Fiscal 2010 fourth quarter net sales were $248.8 million versus $195.2 million from the same period a year ago, an increase of $53.6 million. The net sales increase was due to increased shipments of lawn and garden equipment and pressure washers, both driven by favorable weather conditions domestically.
Net sales for fiscal 2010 were $814.3 million versus $892.9 million in the prior year, a $78.6 million decrease. The net sales decrease for the year was the result of decreased portable generator sales volume due to the absence of any landed hurricanes in fiscal 2010 partially offset by higher volumes of other power products.
The income from operations in the fourth quarter of fiscal 2010 was $2.1 million. The loss from operations in the fourth quarter of fiscal 2009 was $6.1 million, which included a $4.6 million impairment expense related to the write-down of assets associated with the closure of the Jefferson, Wisconsin facility. After considering the impact of the Jefferson closure, income from operations between years improved by $3.6 million.
The improvement resulted from increased sales and production volumes of lawn and garden equipment and pressure washers. Offsetting the improvement was a decrease in absorption rates due to lower production levels of portable generators and snow throwers compared to the prior year, as well as increased engineering, selling, general and administrative expenses related to the repayment to employees for the remainder of the salaries and 401(K) company match benefits that were reduced earlier in the fiscal year.
The loss from operations for fiscal 2010 was $5.9 million. The loss from operations for fiscal 2009 was $15.0 million, which included the $4.6 million expense related to the write-down of assets associated with the closure of the Jefferson, Wisconsin facility. After considering the impact of the Jefferson closure, the loss from operations between years was improved by approximately $4.5 million. The majority of the improvement was the result of lower manufacturing costs, primarily related to lower commodity costs and planned cost savings initiatives.
The improvements were partially offset by lower sales and production volumes primarily related to the significantly lower portable generator production and shipments in fiscal 2010. Transition costs of approximately $8.0 million related to the closure of the Jefferson, Wisconsin facility more than offset the related cost savings of approximately $3.0 million in fiscal 2010 associated with consolidating the manufacturing and administrative footprint accomplished in fiscal 2010.
Corporate Items:
Other income for the fourth quarter and fiscal 2010 was greater than the same periods last year primarily because of improved earnings of our joint ventures. Interest expense for the fourth quarter and twelve months of fiscal 2010 was less than the comparable periods of last year due to lower average borrowings offset by a premium expense of $0.1 million and $2.5 million, respectively, related to the repurchase of a portion of outstanding senior notes.
The effective tax rate was 28.2% and 5.3% for the fourth quarter of fiscal 2010 and 2009, respectively. The effective tax rate was 25.4% and 20.9% for fiscal 2010 and fiscal 2009, respectively. The variation between quarters is due to the required recognition of the tax effects of certain events as discrete items in the quarter they occur rather than in the overall expected annual tax rate. In addition, the annual fluctuation reflects the impact of changes in foreign earnings at different tax rates and the taxation of dividends from foreign operations as well as a larger benefit from the production activities deduction and resolution of certain tax matters.
Financial Position:
The 8.875% Senior Notes that are due in March 2011 have been classified as Short-Term Debt in the consolidated balance sheet as of the end of fiscal 2010. The company believes it will be able to replace these borrowings with new financing at or prior to the maturity date of the Senior Notes.
Net debt at June 27, 2010 was $89.9 million (total debt of $206.5 million less $116.6 million of cash), an improvement of $178.2 million from fiscal 2009. The reduction of debt was attributable to cash flows from operations. Cash flows provided by operating activities were $243.7 million during fiscal 2010, an increase of $71.3 million over fiscal 2009.
Outlook:
For fiscal 2011, the company projects that consolidated net income will be in the range of $60 million to $70 million or $1.20 to $1.40 per diluted share. Consolidated net sales are projected to be higher by approximately 2% to 4% depending on the level of recovery of consumer spending within the outdoor power equipment category.
Engines Segment sales are forecasted higher on modest volume and pricing improvements while the Power Products Segment sales are forecasted higher primarily due to higher volumes of lawn and garden equipment. Demand for portable generators and the related engines due to landed hurricane activity have not been included in our fiscal 2011 sales forecast.
Operating income margins are projected to be in the range of 5.0% to 6.0%, and interest expense and other income are forecasted to be in the range of $23 million to $25 million and $4 million to $5 million, respectively. The effective tax rate for the full year is projected to be in a range of 32% to 35%.
Market Snapshot: Lawn & Garden
It’s summertime and the livin’ is fairly easy with some of the new lawn and garden products on the market that promise to make mowing and trimming a breeze.
August 11 -- Consumer spending is up slightly, and 2010 is looking better for the lawn and garden equipment industry than 2009. Projections from the Outdoor Power Equipment Institute (OPEI), an international trade association representing the $15 billion landscape, lawn and garden, forestry, and utility equipment manufacturing industry, show a drab 2009 will gradually bloom into a slightly brighter 2010.
For instance, U.S. walk-behind rotary mower shipments slid below 5 million units to 4.660 million in 2009, but OPEI projects that during 2010, shipments will start to recover, posting a 3.8% gain over 2009. These numbers are expected to climb 6.5% in 2011, to 5.152 million units—that’s a lot of people getting their exercise.
Residential zero-turn-radius riding mower shipments in the U.S. totaled 198,769 units for 2009, 12.3% below 2008. After two down years, however, recovery is expected in 2010 with a 6.0% increase in shipments.
Residential riding lawn mowers, a new category for the OPEI, combines products that previously were labeled front engine lawn tractors and riding garden tractors. Shipments of this product fell 13.7% in 2009, but are expected to rebound slightly during 2010, rising 2.0% above 2009. Calendar year 2011 shipments will expand a modest 2.5% over 2010 levels, with total 2011 shipments for residential riders expected to be nearly 1.107 million units.
According to the latest figures from the National Gardening Assn., in 2009, 72% (83 million households) participated in lawn and garden activities, up from 81 million households in 2008. Lawn and garden retail sales totaled $36.060 billion in 2008, but dropped 16% to $31 billion in 2009. “Given the recession, the one thing that went up in 2009 was vegetable gardening, and that was up 20%,” commented Bruce Butterfield, NGA’s research director. “We’ve seen that trend before in hard times.”
That was also evidenced by the OPEI’s figures, which showed that shipments of walk-behind rotary tillers, typically used in vegetable gardens, were up 30.9% (296,407 units) over 2008. The OPEI expects 2010 shipments to be up 10% to 326,048 units and 2011 shipments to be up 8.1% over 2010 to 352,458 units.
Global demand for power lawn and garden equipment is projected to expand 2.8% annually through 2013 to $18.4 billion, according to The Freedonia Group’s report, Power Lawn & Garden Equipment (August 2009). While sales have been sluggish due to a downturn in consumer spending, the “bedrock U.S. market will provide the best opportunities, accounting for slightly over one-half of the additional demand generated between 2008 and 2013.” The report noted that an expected turnaround in the housing crisis and “consumers’ continued enthusiasm for lawn care” will account for an uptick in this market. U.S. power lawn and garden equipment sales will also benefit from the introduction of improved products, such as cordless electric models.
North America and Western Europe will continue their domination of these markets, comprising more than 85% of the demand, thanks in large part to the high per capita income of these nations that allow for these purchases. The fact that these regions are also home to the majority of the world’s golf courses—major consumers of lawn and garden equipment – doesn’t hurt either.
Although golf courses have a lot of equipment, the residential market accounted for 60% of power lawn and garden equipment sales in 2008. However, demand in the commercial market is anticipated to outpace the residential market in most regions through 2013 due to the rising number of professional landscapers who will see increased demand for their services in both residential and commercial properties, said Freedonia.
The report also said lawnmowers will continue to be the largest product segment of the market, benefitting from their wide use in both residential and commercial applications. Trimmers and edgers, like lawnmowers, will benefit as well, but intense price pressures from China-produced products will limit value gains. Other products such as rotary tillers, leaf blowers, snow throwers, parts, and accessories will grow from rising standards of living in developing nations.
The United States remains the dominant lawn and garden equipment producer, with shipments of $9 billion in 2008 and net exports of nearly $500 million. However, China was the largest net exporter, with a trade surplus of $800 million. Many Western European nations are significant exporters, although Italy is the only nation in the region with a trade surplus, said the Freedonia report.
The world power lawn and garden equipment industry is made up of a variety of companies, including those specializing in specific product segments to those multinationals that provide a wide range of products. The four largest producers, according to The Freedonia Group, are Husqvarna (Sweden), and U.S.-based Deere & Co., Toro, and MTD Products. Those four companies supplied more than 50% of the market in 2008.
Deere & Co. has been manufacturing lawn and garden equipment for several decades, and John Deere’s Horicon, WI manufacturing facility recently rolled out its 5 millionth lawn tractor built there—a model from the Select Series X700 Ultimate Tractor lineup.
John Deere’s Cary, NC manufacturing facility launched a new family of walk-behind mowers that provides added features for improved cut quality. The three new “best-in-class” walk-behind mowers for 2010, models JS26, JS36, and JS46, are designed with enhanced features to improve quality of cut and overall performance.
All three models boast more power and durability, including MowMentum Drive, a variable-drive system that allows operators to modify the mower speed to match their stride, delivering more control and comfort. The new walk-behinds also include a broad cut height range from 1.2-4.2 inches. The JS36 and JS46 include rear-wheel drive, which allows for added traction when bagging clippings.
Toro Co. introduced new products for its spring 2010 lineup, including the new e-Cycler electric mower and the Titan zero-turn mower to make keeping your lawn in shape easy and eco-friendly. The Toro e-Cycler is lightweight and built to the same performance standards as Toro’s most popular Recycler Series mowers, while the 2010 Titan line combines stout, commercial-inspired construction and user-friendly features.
Materials
One material supplier that serves lawn and garden is Ticona Engineering Polymers. Steve Bassetti, North American marketing manager for Ticona, says that on an industry level, many of the same drivers that impact the automotive industry also influence the direction lawn and garden products are taking. “There’s an awareness around sustainability and environmental impact that continues to grow,” Bassetti noted in an interview. “Anyone in this arena is looking at their portfolio of products, in addition to the products’ performance, and also looking at materials and processes to improve in all these areas.”
The company says its Celcon/Hostaform POM provides a good choice for this market by offering durability, light weight, and ultraviolet (UV) resistance. “We’ve seen a lot of interest—with growing success—in finding ways to eliminate paint with molded-in colors, specifically metallic-looking colors with our MetaLX metal-effect polymers,” says Bassetti. “We’ve been successful in applications where they’re trying to eliminate paint while maintaining the aesthetics of the products.”
Bassetti points out that 50 years ago, lawn and garden products were about functionality. Today, the advent of the Big Box retailers has created a need for aesthetics and styling as well, much like that seen in the automotive industry. “These players want to become more automotive-like in that they pay more attention to the aesthetics and styling, as well as achieving environmental goals by eliminating paint using the molded-in-color technology,” Bassetti adds. “There are also significant systems cost savings when using the molded-in color technology option.”
On another level, Bassetti notes that Ticona’s Celcon/Hostaform also goes into functional parts in lawn and garden equipment. “The new high-impact modified HS15 series performs well in abrasive environments, which means consumers replace parts less frequently,” he says. While this translates into savings in energy throughout the manufacturing channel, the main benefit is that the components such as gears, bearings, and other moving components “last longer and work better.”
Due to its extreme impermeability to gasoline and alcohol, Celcon/Hostaform POM is currently being evaluated for potential use as a permeation barrier in small engine fuel tanks, in order to meet the latest evaporative emissions regulations proposed by California and the U.S. Environmental Protection Agency (EPA).
Outside of powered equipment, Celstran long-fiber-reinforced thermoplastic is used for housings, footrests, and carriers, with the base resin being either polypropylene or nylon. In these exterior applications, UV protection can be provided by incorporation of carbon black. Ticona also has extensive experience and knowhow in the use of chemical UV stabilizers, where a black color is not desired.
“The reduction of weight, part consolidation, and consolidation of functionality are big advantages to the lawn and garden OEMs as they are in the automotive industry,” says Bassetti. “Celstran has a big role in contributing to the ease of the manufacturing process and energy savings by allowing processors to produce one part instead of five separate parts, as well as getting the weight out to make lawn and garden equipment more fuel efficient, and lighten up the devices, whether hedge trimmers or chain saws.”
August 11 -- Consumer spending is up slightly, and 2010 is looking better for the lawn and garden equipment industry than 2009. Projections from the Outdoor Power Equipment Institute (OPEI), an international trade association representing the $15 billion landscape, lawn and garden, forestry, and utility equipment manufacturing industry, show a drab 2009 will gradually bloom into a slightly brighter 2010.
For instance, U.S. walk-behind rotary mower shipments slid below 5 million units to 4.660 million in 2009, but OPEI projects that during 2010, shipments will start to recover, posting a 3.8% gain over 2009. These numbers are expected to climb 6.5% in 2011, to 5.152 million units—that’s a lot of people getting their exercise.
Residential zero-turn-radius riding mower shipments in the U.S. totaled 198,769 units for 2009, 12.3% below 2008. After two down years, however, recovery is expected in 2010 with a 6.0% increase in shipments.
Residential riding lawn mowers, a new category for the OPEI, combines products that previously were labeled front engine lawn tractors and riding garden tractors. Shipments of this product fell 13.7% in 2009, but are expected to rebound slightly during 2010, rising 2.0% above 2009. Calendar year 2011 shipments will expand a modest 2.5% over 2010 levels, with total 2011 shipments for residential riders expected to be nearly 1.107 million units.
According to the latest figures from the National Gardening Assn., in 2009, 72% (83 million households) participated in lawn and garden activities, up from 81 million households in 2008. Lawn and garden retail sales totaled $36.060 billion in 2008, but dropped 16% to $31 billion in 2009. “Given the recession, the one thing that went up in 2009 was vegetable gardening, and that was up 20%,” commented Bruce Butterfield, NGA’s research director. “We’ve seen that trend before in hard times.”
That was also evidenced by the OPEI’s figures, which showed that shipments of walk-behind rotary tillers, typically used in vegetable gardens, were up 30.9% (296,407 units) over 2008. The OPEI expects 2010 shipments to be up 10% to 326,048 units and 2011 shipments to be up 8.1% over 2010 to 352,458 units.
Global demand for power lawn and garden equipment is projected to expand 2.8% annually through 2013 to $18.4 billion, according to The Freedonia Group’s report, Power Lawn & Garden Equipment (August 2009). While sales have been sluggish due to a downturn in consumer spending, the “bedrock U.S. market will provide the best opportunities, accounting for slightly over one-half of the additional demand generated between 2008 and 2013.” The report noted that an expected turnaround in the housing crisis and “consumers’ continued enthusiasm for lawn care” will account for an uptick in this market. U.S. power lawn and garden equipment sales will also benefit from the introduction of improved products, such as cordless electric models.
North America and Western Europe will continue their domination of these markets, comprising more than 85% of the demand, thanks in large part to the high per capita income of these nations that allow for these purchases. The fact that these regions are also home to the majority of the world’s golf courses—major consumers of lawn and garden equipment – doesn’t hurt either.
Although golf courses have a lot of equipment, the residential market accounted for 60% of power lawn and garden equipment sales in 2008. However, demand in the commercial market is anticipated to outpace the residential market in most regions through 2013 due to the rising number of professional landscapers who will see increased demand for their services in both residential and commercial properties, said Freedonia.
The report also said lawnmowers will continue to be the largest product segment of the market, benefitting from their wide use in both residential and commercial applications. Trimmers and edgers, like lawnmowers, will benefit as well, but intense price pressures from China-produced products will limit value gains. Other products such as rotary tillers, leaf blowers, snow throwers, parts, and accessories will grow from rising standards of living in developing nations.
The United States remains the dominant lawn and garden equipment producer, with shipments of $9 billion in 2008 and net exports of nearly $500 million. However, China was the largest net exporter, with a trade surplus of $800 million. Many Western European nations are significant exporters, although Italy is the only nation in the region with a trade surplus, said the Freedonia report.
The world power lawn and garden equipment industry is made up of a variety of companies, including those specializing in specific product segments to those multinationals that provide a wide range of products. The four largest producers, according to The Freedonia Group, are Husqvarna (Sweden), and U.S.-based Deere & Co., Toro, and MTD Products. Those four companies supplied more than 50% of the market in 2008.
Deere & Co. has been manufacturing lawn and garden equipment for several decades, and John Deere’s Horicon, WI manufacturing facility recently rolled out its 5 millionth lawn tractor built there—a model from the Select Series X700 Ultimate Tractor lineup.
John Deere’s Cary, NC manufacturing facility launched a new family of walk-behind mowers that provides added features for improved cut quality. The three new “best-in-class” walk-behind mowers for 2010, models JS26, JS36, and JS46, are designed with enhanced features to improve quality of cut and overall performance.
All three models boast more power and durability, including MowMentum Drive, a variable-drive system that allows operators to modify the mower speed to match their stride, delivering more control and comfort. The new walk-behinds also include a broad cut height range from 1.2-4.2 inches. The JS36 and JS46 include rear-wheel drive, which allows for added traction when bagging clippings.
Toro Co. introduced new products for its spring 2010 lineup, including the new e-Cycler electric mower and the Titan zero-turn mower to make keeping your lawn in shape easy and eco-friendly. The Toro e-Cycler is lightweight and built to the same performance standards as Toro’s most popular Recycler Series mowers, while the 2010 Titan line combines stout, commercial-inspired construction and user-friendly features.
Materials
One material supplier that serves lawn and garden is Ticona Engineering Polymers. Steve Bassetti, North American marketing manager for Ticona, says that on an industry level, many of the same drivers that impact the automotive industry also influence the direction lawn and garden products are taking. “There’s an awareness around sustainability and environmental impact that continues to grow,” Bassetti noted in an interview. “Anyone in this arena is looking at their portfolio of products, in addition to the products’ performance, and also looking at materials and processes to improve in all these areas.”
The company says its Celcon/Hostaform POM provides a good choice for this market by offering durability, light weight, and ultraviolet (UV) resistance. “We’ve seen a lot of interest—with growing success—in finding ways to eliminate paint with molded-in colors, specifically metallic-looking colors with our MetaLX metal-effect polymers,” says Bassetti. “We’ve been successful in applications where they’re trying to eliminate paint while maintaining the aesthetics of the products.”
Bassetti points out that 50 years ago, lawn and garden products were about functionality. Today, the advent of the Big Box retailers has created a need for aesthetics and styling as well, much like that seen in the automotive industry. “These players want to become more automotive-like in that they pay more attention to the aesthetics and styling, as well as achieving environmental goals by eliminating paint using the molded-in-color technology,” Bassetti adds. “There are also significant systems cost savings when using the molded-in color technology option.”
On another level, Bassetti notes that Ticona’s Celcon/Hostaform also goes into functional parts in lawn and garden equipment. “The new high-impact modified HS15 series performs well in abrasive environments, which means consumers replace parts less frequently,” he says. While this translates into savings in energy throughout the manufacturing channel, the main benefit is that the components such as gears, bearings, and other moving components “last longer and work better.”
Due to its extreme impermeability to gasoline and alcohol, Celcon/Hostaform POM is currently being evaluated for potential use as a permeation barrier in small engine fuel tanks, in order to meet the latest evaporative emissions regulations proposed by California and the U.S. Environmental Protection Agency (EPA).
Outside of powered equipment, Celstran long-fiber-reinforced thermoplastic is used for housings, footrests, and carriers, with the base resin being either polypropylene or nylon. In these exterior applications, UV protection can be provided by incorporation of carbon black. Ticona also has extensive experience and knowhow in the use of chemical UV stabilizers, where a black color is not desired.
“The reduction of weight, part consolidation, and consolidation of functionality are big advantages to the lawn and garden OEMs as they are in the automotive industry,” says Bassetti. “Celstran has a big role in contributing to the ease of the manufacturing process and energy savings by allowing processors to produce one part instead of five separate parts, as well as getting the weight out to make lawn and garden equipment more fuel efficient, and lighten up the devices, whether hedge trimmers or chain saws.”
Beatrice Nebraska Works for Jobs Amid Losses
BEATRICE, Neb. — August 11 -- Terri Dageford was vacationing in Arizona in May when she checked her voice mail: Husqvarna planned to close its lawn mower and power equipment plant by the end of the year, throwing 390 people out of work.
Dageford, director of business and industry for Gage County Economic Development, spent most of that day on the phone, alerting the mayor of Beatrice, state officials and others.
“Out of all our companies, we did not see this coming,” she said.
Husqvarna is consolidating operations worldwide, and that includes shifting its Beatrice production to facilities in South Carolina.
It’s the kind of story that has played out across Nebraska many times since the recession began, resulting in the loss of 8,000 manufacturing jobs since 2008.
Many high-profile losses have occurred at major employers in small towns, such as Newell Rubbermaid’s Vise-Grip plant in DeWitt, which eliminated 350 jobs in that village of 550 when production moved to China. Or the Tenneco auto parts manufacturing plant in Cozad, population 4,300, which once employed as many as 500 people.
Over-reliance on one industry can make small towns particularly vulnerable, and the solutions include diversification and collaborating with other towns and counties to attract businesses, approaches that Beatrice is embracing.
Heavily dependent for years on Husqvarna and its in-town rival Exmark, which together employ more than 700 people, Beatrice officials hope a new hospital and health center scheduled to open next year will draw technology and medical businesses.
A new National Guard and Reserve center opening this fall should bring nonresidents, and their money, into town for training sessions.
Economic development officials also are working with regional groups to step up recruitment of Midwest companies most likely to move to a rural area.
“You can’t recruit somebody from Chicago and expect them to like Beatrice,” Dageford said. “It’s not going to work unless they have roots here.”
Beatrice, with a population of 12,564, is only the 14th largest city in the state, but it draws people to its stores and businesses from a nine-county area in Nebraska and across the border into Kansas.
The downtown area extends several blocks in four directions from the intersection of Highways 77 and 136, and it includes a live community theater, home decorating store, gift shop and pharmacy, and the Holly movie theater, which this week was showing the new Will Farrell comedy “The Other Guys.”
But manufacturing makes up about 20 percent of Beatrice’s economy, officials say, and since 2008 as many as 400 people have been out of work at one time or another.
Beatrice is the county seat and largest city in Gage County, which last year had a 6.3 percent unemployment rate, the third-highest in the state. Husqvarna’s closing in December could push the jobless rate to 8 percent, whereas unemployment in the state overall has gradually declined and in June stood at 4.8 percent.
Filling the plant is a top priority, Dageford said, but short of that it could take more than a year for all its workers to find jobs in the area.
Eating lunch at a sandwich shop, Bruce Cooper, director of sales at Exmark, said he was concerned about keeping the duplex he owns occupied if people move out of Beatrice to seek jobs elsewhere.
Exmark isn’t closing, but the cyclical nature of lawn mower manufacturing means the company lays off workers after the busy winter months. Layoffs of one or two weeks in the summer or fall are typical, but this year Exmark idled all but a handful of its 365 workers for the entire month of August.
Tyler Berry, manager of human resources at Exmark, said more people are repairing or making do with their old lawn mowers rather than buying new machines.
And there have been job losses at other companies.
A biodiesel plant that was to turn soybeans into fuel never opened and now sits empty. It filed for bankruptcy protection and laid off more than 20 workers two years ago.
Nineteen people lost their jobs when North American Containers Corp. closed its Beatrice shop in 2008. That same year, Hoover Materials Handling also closed, a loss of six more jobs.
“It’s a little sour, I think, right now,” said Mayor Dennis Schuster. “It’s a recession when my neighbor is out of work, it’s a depression when I’m out of work. The feeling is spreading that, ‘Now I’m afraid it will hit me.’”
Sales tax receipts in Beatrice have declined more than 5 percent from two years ago, though they improved over the last few months, said City Administrator Neal Niedfeldt.
The city postponed some purchases, such as street sweepers and trucks, but it finished some street projects, Niedfeldt said. It will replace an aging sewage pump to better service the industrial park, he said.
There are some signs of recovery, and Sen. Mike Johanns, R-Neb., came here this week to tout the good news.
Accuma Corp. plans to add six workers to its 49-employee battery components plant on the north edge of town.
Custom cabinet manufacturer Store Kraft laid off 68 of its 145 workers last September but has hired most of them back and hopes to add 20 more employees over the next two years.
Neapco, which laid off 33 workers early last year, now plans to add 90 jobs over the next two years, bringing total employment at its vehicle components plant to 210 as the company shifts production from a plant in Pennsylvania.
Those are good signs, Schuster and Niedfeldt said.
“You just keep working,” Schuster said. “And you never stop promoting.”
Dageford, director of business and industry for Gage County Economic Development, spent most of that day on the phone, alerting the mayor of Beatrice, state officials and others.
“Out of all our companies, we did not see this coming,” she said.
Husqvarna is consolidating operations worldwide, and that includes shifting its Beatrice production to facilities in South Carolina.
It’s the kind of story that has played out across Nebraska many times since the recession began, resulting in the loss of 8,000 manufacturing jobs since 2008.
Many high-profile losses have occurred at major employers in small towns, such as Newell Rubbermaid’s Vise-Grip plant in DeWitt, which eliminated 350 jobs in that village of 550 when production moved to China. Or the Tenneco auto parts manufacturing plant in Cozad, population 4,300, which once employed as many as 500 people.
Over-reliance on one industry can make small towns particularly vulnerable, and the solutions include diversification and collaborating with other towns and counties to attract businesses, approaches that Beatrice is embracing.
Heavily dependent for years on Husqvarna and its in-town rival Exmark, which together employ more than 700 people, Beatrice officials hope a new hospital and health center scheduled to open next year will draw technology and medical businesses.
A new National Guard and Reserve center opening this fall should bring nonresidents, and their money, into town for training sessions.
Economic development officials also are working with regional groups to step up recruitment of Midwest companies most likely to move to a rural area.
“You can’t recruit somebody from Chicago and expect them to like Beatrice,” Dageford said. “It’s not going to work unless they have roots here.”
Beatrice, with a population of 12,564, is only the 14th largest city in the state, but it draws people to its stores and businesses from a nine-county area in Nebraska and across the border into Kansas.
The downtown area extends several blocks in four directions from the intersection of Highways 77 and 136, and it includes a live community theater, home decorating store, gift shop and pharmacy, and the Holly movie theater, which this week was showing the new Will Farrell comedy “The Other Guys.”
But manufacturing makes up about 20 percent of Beatrice’s economy, officials say, and since 2008 as many as 400 people have been out of work at one time or another.
Beatrice is the county seat and largest city in Gage County, which last year had a 6.3 percent unemployment rate, the third-highest in the state. Husqvarna’s closing in December could push the jobless rate to 8 percent, whereas unemployment in the state overall has gradually declined and in June stood at 4.8 percent.
Filling the plant is a top priority, Dageford said, but short of that it could take more than a year for all its workers to find jobs in the area.
Eating lunch at a sandwich shop, Bruce Cooper, director of sales at Exmark, said he was concerned about keeping the duplex he owns occupied if people move out of Beatrice to seek jobs elsewhere.
Exmark isn’t closing, but the cyclical nature of lawn mower manufacturing means the company lays off workers after the busy winter months. Layoffs of one or two weeks in the summer or fall are typical, but this year Exmark idled all but a handful of its 365 workers for the entire month of August.
Tyler Berry, manager of human resources at Exmark, said more people are repairing or making do with their old lawn mowers rather than buying new machines.
And there have been job losses at other companies.
A biodiesel plant that was to turn soybeans into fuel never opened and now sits empty. It filed for bankruptcy protection and laid off more than 20 workers two years ago.
Nineteen people lost their jobs when North American Containers Corp. closed its Beatrice shop in 2008. That same year, Hoover Materials Handling also closed, a loss of six more jobs.
“It’s a little sour, I think, right now,” said Mayor Dennis Schuster. “It’s a recession when my neighbor is out of work, it’s a depression when I’m out of work. The feeling is spreading that, ‘Now I’m afraid it will hit me.’”
Sales tax receipts in Beatrice have declined more than 5 percent from two years ago, though they improved over the last few months, said City Administrator Neal Niedfeldt.
The city postponed some purchases, such as street sweepers and trucks, but it finished some street projects, Niedfeldt said. It will replace an aging sewage pump to better service the industrial park, he said.
There are some signs of recovery, and Sen. Mike Johanns, R-Neb., came here this week to tout the good news.
Accuma Corp. plans to add six workers to its 49-employee battery components plant on the north edge of town.
Custom cabinet manufacturer Store Kraft laid off 68 of its 145 workers last September but has hired most of them back and hopes to add 20 more employees over the next two years.
Neapco, which laid off 33 workers early last year, now plans to add 90 jobs over the next two years, bringing total employment at its vehicle components plant to 210 as the company shifts production from a plant in Pennsylvania.
Those are good signs, Schuster and Niedfeldt said.
“You just keep working,” Schuster said. “And you never stop promoting.”
Firms Spend More - Carefully
Equipment Purchases Make Up For Recession Cutbacks, Not To Raise Production
Companies in the U.S. are stepping up purchases of equipment and software at the fastest pace since the late 1990s. But much of the spending is aimed at replacing older equipment after recession-related postponements or to improve efficiency—not to raise production or boost hiring.
After one of the sharpest declines in spending on equipment and software, companies in the U.S. boosted their spending on such products at a 21.9% inflation-adjusted annual rate in the second quarter, after the first quarter's 20.4% increase, the U.S. Commerce Department said.
The second-quarter jump was the biggest since 1998, when enthusiasm for technology was running hot. It was a much stronger increase than what was seen after the previous two recessions.
That stands in sharp contrast to the muted hiring and lackluster consumer spending that have characterized the economy since it began growing again in the middle of last year.
International Paper Corp., for instance, cut capital spending to $534 million last year from $1 billion in 2008. This year, it expects to raise spending to about $800 million.
Some of the company's higher spending will add capacity in developing markets such as Brazil, where demand for paper products is growing. But in the U.S., where the bulk of International Paper's operations are, the money will go into maintenance, improving energy efficiency and meeting regulatory standards, rather than boosting capacity.
"Businesses invest when there's demand," said International Paper Chief Executive John Faraci. "There's not going to be any [U.S.] capacity expansion, or for that matter job creation, until you see an increase in demand."
American companies, particularly manufacturers, recently have been raising output without adding workers.
The Labor Department reported Tuesday that productivity, measured in output per hour of work, fell at a 0.9% annual rate in the second quarter from the previous quarter. It was the first quarter since the end of 2008 in which productivity didn't rise. That's a hint that companies may soon need either to increase workers' hours, hire new ones or install more labor-saving equipment.
Companies may keep increasing spending on equipment, computers and software even if they don't add capacity. Nomura Securities economist David Resler calculates that businesses didn't spend enough in 2009 on new equipment to offset the wear and tear on their existing equipment. As a result, the capital stock—the inflation-adjusted value of all business equipment and software in place in the U.S.—dropped 0.9% from 2008—its first decline since World War II.
Mr. Resler estimates that even with the recent sharp increases in capital spending, the total capital stock is still $100 billion less than it was two years ago. That suggests that capital spending could continue to grow strongly the rest of the year.
The rebound in capital spending and strong demand from overseas markets such as China have boosted companies that make equipment and software. Revenue at technology companies in the S&P 500 index was up an estimated 21% in the second quarter versus a year earlier, according to Thomson Reuters, and profit rose by 65%. Capital equipment makers such as Caterpillar Inc., Rockwell Automation Inc. and Illinois Tool Works Inc. reported large second-quarter sales and profits gains.
Sales at Bishop-Wisecarver Corp, a Pittsburg, Calif.-maker of motion systems used in everything from wood-shop machinery to food-processing plants, are up sharply from last year, and are on track to be as strong as in 2007, before the recession kickded in.
Bishop-Wisecarver President Pamela Kan thinks some of the rebound has come from companies trying to make plants more efficient, but she worries that many customers are catching up on projects put off during the downturn. That makes it difficult for her to gauge how strong business will be in the future and plan accordingly.
"I don't know how much of this is just pent-up demand," she said. "It's a finger in the wind now."
As a result, she's hesitant to hire, but is looking to add a few workers to the company's payroll of about 45. She doesn't plan to make any big purchases, in part because the company did major upgrades to its equipment right before the recession hit.
In general, manufacturers, which are benefiting from the global economic upswing, are boosting capital spending more than services companies are.
In a survey conducted by KPMG International in June, 35% of U.S. manufacturing executives said they expected to increase capital spending over the next year, while just 7% said they expected such spending to decline. In comparison, 27% of service company executives expected to increase spending, with about 9% expecting to spend less.
On Monday, Carrols Restaurant Group, which operates Burger King franchises and other restaurants in the U.S., said it expected to make capital expenditures of $40 million to $45 million this year, up from $37 million in 2009, but below 2008's $62 million. Most of that increase will be devoted to remodeling and equipment purchases at existing restaurants.
"We have limited capital spending for new-unit development this year so that we can continue to reduce debt," said company President Dan Accordino.
Ariens Co. of Brillion, Wisc., which employs about 1,000 workers making lawn mowers and snow blowers, has been buying capital equipment steadily over the past two years, taking advantage of the flood of inexpensive machinery that came on the market as other companies pulled back. Those purchases were aimed not at increasing Ariens' manufacturing capacity, but rather to bring in house work that it used to have outside suppliers perform.
Last year the company bought a pulley-making machine from a former General Motors Co. supplier for $1 million—a new one would have costs $4 million, said CEO Dan Ariens—and began making pulleys it used to buy. "It kept about 15 of our people busy," he said, helping the company avoid layoffs.
Mr. Ariens reckons he will keep buying equipment, but that he will be getting less bang for his buck in the year ahead than he has in the past year.
"I'm pretty confident that the cost of hardware and software is going to go up as the recession abates," he said.
Companies in the U.S. are stepping up purchases of equipment and software at the fastest pace since the late 1990s. But much of the spending is aimed at replacing older equipment after recession-related postponements or to improve efficiency—not to raise production or boost hiring.
After one of the sharpest declines in spending on equipment and software, companies in the U.S. boosted their spending on such products at a 21.9% inflation-adjusted annual rate in the second quarter, after the first quarter's 20.4% increase, the U.S. Commerce Department said.
The second-quarter jump was the biggest since 1998, when enthusiasm for technology was running hot. It was a much stronger increase than what was seen after the previous two recessions.
That stands in sharp contrast to the muted hiring and lackluster consumer spending that have characterized the economy since it began growing again in the middle of last year.
International Paper Corp., for instance, cut capital spending to $534 million last year from $1 billion in 2008. This year, it expects to raise spending to about $800 million.
Some of the company's higher spending will add capacity in developing markets such as Brazil, where demand for paper products is growing. But in the U.S., where the bulk of International Paper's operations are, the money will go into maintenance, improving energy efficiency and meeting regulatory standards, rather than boosting capacity.
"Businesses invest when there's demand," said International Paper Chief Executive John Faraci. "There's not going to be any [U.S.] capacity expansion, or for that matter job creation, until you see an increase in demand."
American companies, particularly manufacturers, recently have been raising output without adding workers.
The Labor Department reported Tuesday that productivity, measured in output per hour of work, fell at a 0.9% annual rate in the second quarter from the previous quarter. It was the first quarter since the end of 2008 in which productivity didn't rise. That's a hint that companies may soon need either to increase workers' hours, hire new ones or install more labor-saving equipment.
Companies may keep increasing spending on equipment, computers and software even if they don't add capacity. Nomura Securities economist David Resler calculates that businesses didn't spend enough in 2009 on new equipment to offset the wear and tear on their existing equipment. As a result, the capital stock—the inflation-adjusted value of all business equipment and software in place in the U.S.—dropped 0.9% from 2008—its first decline since World War II.
Mr. Resler estimates that even with the recent sharp increases in capital spending, the total capital stock is still $100 billion less than it was two years ago. That suggests that capital spending could continue to grow strongly the rest of the year.
The rebound in capital spending and strong demand from overseas markets such as China have boosted companies that make equipment and software. Revenue at technology companies in the S&P 500 index was up an estimated 21% in the second quarter versus a year earlier, according to Thomson Reuters, and profit rose by 65%. Capital equipment makers such as Caterpillar Inc., Rockwell Automation Inc. and Illinois Tool Works Inc. reported large second-quarter sales and profits gains.
Sales at Bishop-Wisecarver Corp, a Pittsburg, Calif.-maker of motion systems used in everything from wood-shop machinery to food-processing plants, are up sharply from last year, and are on track to be as strong as in 2007, before the recession kickded in.
Bishop-Wisecarver President Pamela Kan thinks some of the rebound has come from companies trying to make plants more efficient, but she worries that many customers are catching up on projects put off during the downturn. That makes it difficult for her to gauge how strong business will be in the future and plan accordingly.
"I don't know how much of this is just pent-up demand," she said. "It's a finger in the wind now."
As a result, she's hesitant to hire, but is looking to add a few workers to the company's payroll of about 45. She doesn't plan to make any big purchases, in part because the company did major upgrades to its equipment right before the recession hit.
In general, manufacturers, which are benefiting from the global economic upswing, are boosting capital spending more than services companies are.
In a survey conducted by KPMG International in June, 35% of U.S. manufacturing executives said they expected to increase capital spending over the next year, while just 7% said they expected such spending to decline. In comparison, 27% of service company executives expected to increase spending, with about 9% expecting to spend less.
On Monday, Carrols Restaurant Group, which operates Burger King franchises and other restaurants in the U.S., said it expected to make capital expenditures of $40 million to $45 million this year, up from $37 million in 2009, but below 2008's $62 million. Most of that increase will be devoted to remodeling and equipment purchases at existing restaurants.
"We have limited capital spending for new-unit development this year so that we can continue to reduce debt," said company President Dan Accordino.
Ariens Co. of Brillion, Wisc., which employs about 1,000 workers making lawn mowers and snow blowers, has been buying capital equipment steadily over the past two years, taking advantage of the flood of inexpensive machinery that came on the market as other companies pulled back. Those purchases were aimed not at increasing Ariens' manufacturing capacity, but rather to bring in house work that it used to have outside suppliers perform.
Last year the company bought a pulley-making machine from a former General Motors Co. supplier for $1 million—a new one would have costs $4 million, said CEO Dan Ariens—and began making pulleys it used to buy. "It kept about 15 of our people busy," he said, helping the company avoid layoffs.
Mr. Ariens reckons he will keep buying equipment, but that he will be getting less bang for his buck in the year ahead than he has in the past year.
"I'm pretty confident that the cost of hardware and software is going to go up as the recession abates," he said.
Blount International Acquires Speeco
PORTLAND, Ore., Aug. 10 -- Blount International, Inc., a leader in the manufacturing, marketing, and distribution of replacement parts, equipment, and accessories for the global forestry, lawn and garden, and construction industries, today announced the acquisition of SP Companies, Inc. and its wholly-owned subsidiary, SpeeCo, Incorporated, a Golden, Colorado-based supplier of log splitters, post-hole diggers, tractor three-point linkage parts and equipment, and farm accessories. Blount purchased all of the stock of SpeeCo for approximately $90 million in cash, subject to certain adjustments, and funded the acquisition utilizing its new credit facility.
The acquisition of SpeeCo is expected to provide several benefits to Blount:
Expands product lines and expertise in whole goods and farm and ranch markets
Establishes a platform for further growth in the farm, ranch, and agricultural end markets
Adds well known brands to the Blount portfolio
Improves low-cost country product sourcing capabilities
Produces profit and cash flow that are accretive in the near-term
"Blount's acquisition of SpeeCo will provide an immediate, substantial entry into products and markets that complement our existing businesses," stated Josh Collins, Blount's Chairman and Chief Executive Officer. "SpeeCo's well known and respected farm and ranch brands and experienced management team, coupled with our global distribution network, provide attractive growth opportunities. We intend to utilize fully the strengths of each company to realize the benefits of this acquisition."
In the twelve months ended July 31, 2010, SpeeCo's revenue was $77.1 million, operating income was $8.2 million, and adjusted earnings before interest, taxes, depreciation, and amortization ("adjusted EBITDA") amounted to $13.1 million. Revenue has grown from approximately $53.3 million in 2006 to current levels, representing a compound annual growth rate of approximately 10.8%.
The acquisition is expected to be accretive to profit and cash flow in the near term. Commenting on SpeeCo's profitability and cash generation profile, Blount's Senior Vice President and Chief Financial Officer, Calvin Jenness, stated, "Earnings before interest, taxes, and amortization ("adjusted EBITA") for the twelve months ended July 31, 2010 was $12.6 million. This metric indicates a solid profit to cash conversion rate that will be accretive to Blount's cash generation profile. While we will experience non-cash charges related to purchase accounting in calendar year 2010, SpeeCo is expected to be accretive to Blount profit in 2011."
Under the corporate structure going forward, Paul Valas, President and Chief Executive Officer of SpeeCo, will report to Mr. Collins and join the Blount senior leadership team. "We are excited about Blount's acquisition of SpeeCo and look forward to continuing our history of providing industry-leading, high quality products to our customers," Mr. Valas commented. "Blount brings a wealth of resources to SpeeCo, particularly a global distribution network, which will help drive our continued growth."
Founded in 1957, SpeeCo is the North American market leader in the manufacturing of log splitters and a leading distributor of parts and accessories to farm, ranch, and related markets. A key customer demographic for SpeeCo is the growing "ruralist" market segment, which consists of landowners who purchase outdoor equipment and supplies largely from farm and ranch retail and farm equipment dealers. SpeeCo's corporate headquarters and operations are located in Golden, Colorado. SpeeCo also has an office in Changzhou, China, where sourcing and engineering personnel are located. SpeeCo markets its products under a variety of brands, including SpeeCo® and Farmex.
The acquisition of SpeeCo is expected to provide several benefits to Blount:
Expands product lines and expertise in whole goods and farm and ranch markets
Establishes a platform for further growth in the farm, ranch, and agricultural end markets
Adds well known brands to the Blount portfolio
Improves low-cost country product sourcing capabilities
Produces profit and cash flow that are accretive in the near-term
"Blount's acquisition of SpeeCo will provide an immediate, substantial entry into products and markets that complement our existing businesses," stated Josh Collins, Blount's Chairman and Chief Executive Officer. "SpeeCo's well known and respected farm and ranch brands and experienced management team, coupled with our global distribution network, provide attractive growth opportunities. We intend to utilize fully the strengths of each company to realize the benefits of this acquisition."
In the twelve months ended July 31, 2010, SpeeCo's revenue was $77.1 million, operating income was $8.2 million, and adjusted earnings before interest, taxes, depreciation, and amortization ("adjusted EBITDA") amounted to $13.1 million. Revenue has grown from approximately $53.3 million in 2006 to current levels, representing a compound annual growth rate of approximately 10.8%.
The acquisition is expected to be accretive to profit and cash flow in the near term. Commenting on SpeeCo's profitability and cash generation profile, Blount's Senior Vice President and Chief Financial Officer, Calvin Jenness, stated, "Earnings before interest, taxes, and amortization ("adjusted EBITA") for the twelve months ended July 31, 2010 was $12.6 million. This metric indicates a solid profit to cash conversion rate that will be accretive to Blount's cash generation profile. While we will experience non-cash charges related to purchase accounting in calendar year 2010, SpeeCo is expected to be accretive to Blount profit in 2011."
Under the corporate structure going forward, Paul Valas, President and Chief Executive Officer of SpeeCo, will report to Mr. Collins and join the Blount senior leadership team. "We are excited about Blount's acquisition of SpeeCo and look forward to continuing our history of providing industry-leading, high quality products to our customers," Mr. Valas commented. "Blount brings a wealth of resources to SpeeCo, particularly a global distribution network, which will help drive our continued growth."
Founded in 1957, SpeeCo is the North American market leader in the manufacturing of log splitters and a leading distributor of parts and accessories to farm, ranch, and related markets. A key customer demographic for SpeeCo is the growing "ruralist" market segment, which consists of landowners who purchase outdoor equipment and supplies largely from farm and ranch retail and farm equipment dealers. SpeeCo's corporate headquarters and operations are located in Golden, Colorado. SpeeCo also has an office in Changzhou, China, where sourcing and engineering personnel are located. SpeeCo markets its products under a variety of brands, including SpeeCo® and Farmex.
Ener1 To Put Batteries in Hyundai Buses, Toro Lawnmowers
August 10 -- Ener1 has just added two new entries to its growing customer roster, and the products couldn't be much more different. Hyundai Heavy Industries (HHI) has need of the company's EnerDel battery packs to power new buses while Toro, the lawnmower people, are seeking somewhat smaller units for, well, their lawnmowers.
The composite-bodied all-electric buses should be high on the priority list. Fifteen of them are planned for three routes in the Namsan area of Seoul as soon as this November. There's no word on the exact size of the packs in killowatt hours but the people-carrier is said to have a range of 110 kilometers (68 miles) and a top speed of 100 km/h (62 miles per hour). This market, with its potentially exponential growth possibility, could be an especially lucrative one for the company. Seoul alone wants to replace half of its 7,000+ fleet with electric models by 2020 and it was intimated during the Ener1 Q2 conference call that these packs have a comfortable profit margin.
As for Toro, they will get a ready-to-install battery based on the same 17.5 Ah cell found within the Think City. They have just recently started selling an electric cordless mower called the e-Cycler, though it's not known whether the "turnkey solution" is destined for this model or a larger push mower.
The composite-bodied all-electric buses should be high on the priority list. Fifteen of them are planned for three routes in the Namsan area of Seoul as soon as this November. There's no word on the exact size of the packs in killowatt hours but the people-carrier is said to have a range of 110 kilometers (68 miles) and a top speed of 100 km/h (62 miles per hour). This market, with its potentially exponential growth possibility, could be an especially lucrative one for the company. Seoul alone wants to replace half of its 7,000+ fleet with electric models by 2020 and it was intimated during the Ener1 Q2 conference call that these packs have a comfortable profit margin.
As for Toro, they will get a ready-to-install battery based on the same 17.5 Ah cell found within the Think City. They have just recently started selling an electric cordless mower called the e-Cycler, though it's not known whether the "turnkey solution" is destined for this model or a larger push mower.
Husqvarna Interim Report January - June 2010 Excerpts
Stockholm 20 July 2010
Magnus Yngen, President and CEO:
“The year had a slow start due to the late spring in several markets. However, during the second quarter
activities gradually improved with strong sales in June.
Sales adjusted for changes in exchange rates, acquisitions and divestments (adjusted sales) were up
5% during the quarter. Europe & Asia/Pacific increased by 10% and Americas was down 1%. In Americas we
were able to compensate most of the lost low-end listings with strong improvements in other accounts.
End-user demand has increased compared to the preceding season. Performance was strong in
several important markets, especially in Europe. Our estimate is that we have gained market shares in Europe
during the first half of the year.
Dealer sales were up significantly in all markets, demonstrating the strength of
our brand in the market for high-end products. In other important areas such as Eastern Europe, demand
continued to recover and sales picked up substantially.
Construction showed good improvement in sales; the sustained focus on innovation and market-leading products have resulted in increased market shares.
Operating income adjusted for items affecting comparability, changes in exchange rates, acquisitions
and divestments (adjusted operating income) increased by 34%. Increased sales and production volumes,
improved mix as well as continued cost efficiency gains contributed positively.
Although it seems our industry has passed the bottom of the recession and end-user demand is on the
rise, the trade still remains cautious regarding inventory management. Lead times are short and shipments
are unusually volatile. Our estimate is that Group shipments in the third quarter will be slightly higher
compared with the third quarter of 2009.”
SECOND QUARTER
Net sales
Net sales for the second quarter were unchanged and amounted to SEK 11,457m (11,481). Adjusted for
exchange-rate effects, sales increased by 5%. Prices were unchanged. Europe & Asia Pacific accounted for
5 percentage points of the adjusted increase and Construction for 1 percentage point while Americas
accounted for a decrease of 1 percentage point.
The reduced listings with a major retailer in North America for the 2010 season had a negative effect on
sales, which were nearly offset by sales to other accounts. Efforts to grow sales in the dealer channel
continued to be successful and increased double digit both in Europe & Asia/Pacific and in Americas.
The second quarter predominantly consists of sell-out and replenishment orders from the trade. The low
inventory levels of lawn and garden products in the trade at the end of the first quarter combined with the
late spring had a positive effect on sales in the second quarter.
Operating income
Operating income for the second quarter increased by 18% compared to the corresponding quarter 2009
and amounted to SEK 1,319m (1,116). Currency had a negative effect of approximately 4% and the net
effect from items affecting comparability was negative 12%. Adjusted operating income increased by 34%.
Operating income includes charges of SEK 157m for the previously announced closure of two factories in
North America and Greece. For further information see page 6. The second quarter 2009 included
restructuring charges of SEK 18m related to personnel cut-backs.
The increase in operating income was mainly due to higher sales and production volumes, a better mix
and favorable direct material costs. Selling and administrative costs increased, mainly due to higher
transportation costs and costs for implementation of IT systems. Operating margin, excluding items
affecting comparability, increased to 12.9% (9.9).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
negative effect on operating income of SEK -30m (-35). Hedging contracts had a positive effect of SEK 26m
(-92).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, while
decreasing somewhat for Americas.
FIRST HALF-YEAR
Net sales
Net sales for the first half-year declined by 9% to SEK 20,539m (22,633). Adjusted for exchange-rate effects,
sales decreased by 2%. Prices were unchanged. Europe & Asia/Pacific accounted for a positive 2
percentage points of the adjusted change and Americas for a negative 4 percentage points while
Construction’s contribution was limited. Efforts to grow sales in the dealer channel were successful and
sales to dealers increased in all major markets.
Operating income
Operating income for the first half-year increased by 10% compared to the first half-year of 2009 and
amounted to SEK 2,097m (1,902). Currency had a positive effect of approximately 7% and the net effect
from items affecting comparability was negative 8%. Adjusted operating income increased by 11%.
Operating income includes charges of SEK 207m for the previously announced closure of two factories in
North America and Greece and costs related to a legal case in North America. For further information see
page 6. The first half-year 2009 included restructuring charges of SEK 53m related to personnel cut-backs.
The increase in operating income was mainly a result of lower costs for direct material, improved mix and
lower selling and administrative costs. Operating margin, excluding items affecting comparability,
increased to 11.2% (8.6).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
positive effect on operating income of SEK 113m (58). Hedging contracts had a positive effect of SEK 52m
(-17).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, but
decreased for Americas.
OUTLOOK FOR THE THIRD QUARTER 2010
Inventories in the trade of the Group’s products at the end of the second quarter were estimated to be
slightly lower than a year ago in the dealer channel and approximately on the same level in the retail
channel. End-user demand increased in most markets compared to the preceding season, but the trade is
still reluctant to build inventory. The positive development in Europe & Asia/Pacific and for Construction is
expected to continue. For the Americas, shipments are not expected to exceed last year’s numbers. For
garden products, the season normally ends towards the end of the third quarter. In total, Group shipments
in the third quarter of 2010 are expected to be slightly higher than in the third quarter of 2009.
PERFORMANCE BY BUSINESS AREA
As of 1 January 2010, external reporting comprises three business areas:
• Europe & Asia/Pacific, comprising forestry and garden products sold in Europe, Asia and the
Pacific region
• Americas, comprising forestry and garden products sold in North America and Latin America
• Construction, comprising products for the global construction and stone industries.
Europe & Asia/Pacific
Sales for Europe & Asia/Pacific in the second quarter increased 4%. Adjusted for exchange-rate effects the
sales increase was 10%. In the first half-year, sales decreased 3%. Adjusted for exchange-rate effects, sales
in the first half-year increased by 3%.
The year started slow as spring was unusually late and in addition retailers and dealers were cautious about
building up inventories ahead of the season. Activity picked up in March and accelerated in the latter part
of the second quarter. Sales in the dealer channel developed strongly while the retail channel experienced
minor growth. Prices were stable during the first two quarters.
Demand in Eastern Europe continued to recover and sales increased considerably both for the second
quarter and for the first half-year compared to the corresponding periods of 2009. The Nordic region was
also strong, while UK and France were weaker than last year. Over-all, it is estimated that the Group
gained market share in Europe during the first half-year.
Operating income and operating margin increased in the second quarter. Performance was strong for all
product categories. Operating income was positively affected by higher sales and production volumes as
well as an improved mix.
Americas
Sales for Americas in the second quarter decreased 5%. Adjusted for exchange-rate effects the decrease
was 1%. In the first half-year, sales decreased 16%. Adjusted for exchange-rate effects, sales in the first
half-year decreased by 8%.
The season started later than in the preceding year due to the late spring. Activity picked up in March and
held up well over the second quarter. The reduced listings with a major retailer in North America for the
2010 season had a negative effect on sales, especially for low-end lawn mowers. However, efforts to grow
sales in the dealer channel and with other retail accounts continued to pay off and almost compensated
the reduced listings. Prices were stable during the period.
Brand-building activities to promote the Husqvarna brand have been successful and the Husqvarna brand
is gaining market share on the North American market. Retailers continued their cautious approach to
building inventory.
Operating income for the second quarter of 2010 includes a charge of SEK 110m for the closure of the
factory in Beatrice and transfer of the production to the Group’s plant in Orangeburg. The first quarter
included a charge of SEK 50m for settlement of an engine-capacity lawsuit.
Operating income in the second quarter was positively affected by lower costs for direct material and
higher production volumes, while restructuring costs and merchandising and transportation costs had a negative effect. Operating margin for the second quarter, excluding items affecting comparability, amounted to 6.4% (6.5).
Construction
Sales for Construction in the second quarter increased 7%. Adjusted for exchange-rate effects the sales
increase was 12%. In the first half-year, sales were unchanged. Adjusted for exchange-rate effects, sales in
the first half-year increased by 6%. Demand for construction products improved in both North America
and Europe during the first half of the year. Stimulus packages for infrastructure projects in North America
had a positive effect on demand in the second quarter.
During the year a number of new products have been successfully launched and market shares are
estimated to have increased.
Operating income and margin in the second quarter improved, mainly due to higher sales and production
volumes. Operating income in the second quarter was charged with restructuring costs amounting to
SEK 47m. Operating margin for the second quarter, excluding items affecting comparability, increased to
7.8% (-2.0).
PARENT COMPANY
Net sales in the first half-year 2010 for the Parent Company, Husqvarna AB, amounted to SEK 6,201m
(5,372), of which SEK 4,716m (4,146) referred to sales to Group Companies and SEK 1,485m (1,226) to
external customers. Income after financial items amounted to SEK 1,518m (525). Income for the first halfyear
was SEK 1,266m (458).
The increase in income after financial items is mainly related to received dividend from subsidiaries of SEK
542m (249) and changes in market value of net investment hedges of SEK 336m (102). These hedges are
made in the Parent Company to limit the effects on the Group's consolidated equity resulting from
translation differences. In the Group's financial statements these effects are included in Other
comprehensive income.
Investments in tangible and intangible assets amounted to SEK 151m (119). Cash and cash equivalents
amounted to SEK 1,478m (1,297). Undistributed earnings in the Parent Company at the end of the period
amounted to SEK 17,308m (15,029). A dividend payment to shareholders in the amount of SEK 574m (0)
was made during the period.
RESTRUCTURING
In Q2 2010, the Group announced further restructuring in line with its strategy which includes increasing
efficiency by consolidating the manufacturing footprint. The factory in Beatrice, Nebraska, will be closed
and the production will be transferred to the factory in Orangeburg, South Carolina. The factory for
construction equipment in Athens, Greece will also be closed. Annual savings from the initiatives will
amount to SEK 60m and will be realized gradually with full effect from the first quarter of 2012. Secondquarter
operating income was charged with SEK 157m, of which the closure of the Beatrice factory
accounted for SEK 110m.
In October 2009, the Group announced the implementation of a number of structural changes in 2009-
2011. These measures are aimed at eliminating overlapping and increase efficiency within production and
administration, and involve consolidation of production in Sweden and the US, and of the sales
organization in Europe & Asia/Pacific.
The total cost of these measures amounts to SEK 399m and annual
savings from these activities are expected to amount to approximately SEK 400m, and will be realized
gradually from the second half of 2010 with full effect from the first quarter of 2012. Capital expenditure
related to the restructuring is expected to amount to approximately SEK 400m, of which a new plant in
Poland will account for approximately SEK 250m.
In September 2008, an initiative to reduce fixed costs through personnel cut-backs was announced. The
total costs for the cut-backs were SEK 369m and the annual savings are SEK 450m as of the third quarter
2009.
Magnus Yngen, President and CEO:
“The year had a slow start due to the late spring in several markets. However, during the second quarter
activities gradually improved with strong sales in June.
Sales adjusted for changes in exchange rates, acquisitions and divestments (adjusted sales) were up
5% during the quarter. Europe & Asia/Pacific increased by 10% and Americas was down 1%. In Americas we
were able to compensate most of the lost low-end listings with strong improvements in other accounts.
End-user demand has increased compared to the preceding season. Performance was strong in
several important markets, especially in Europe. Our estimate is that we have gained market shares in Europe
during the first half of the year.
Dealer sales were up significantly in all markets, demonstrating the strength of
our brand in the market for high-end products. In other important areas such as Eastern Europe, demand
continued to recover and sales picked up substantially.
Construction showed good improvement in sales; the sustained focus on innovation and market-leading products have resulted in increased market shares.
Operating income adjusted for items affecting comparability, changes in exchange rates, acquisitions
and divestments (adjusted operating income) increased by 34%. Increased sales and production volumes,
improved mix as well as continued cost efficiency gains contributed positively.
Although it seems our industry has passed the bottom of the recession and end-user demand is on the
rise, the trade still remains cautious regarding inventory management. Lead times are short and shipments
are unusually volatile. Our estimate is that Group shipments in the third quarter will be slightly higher
compared with the third quarter of 2009.”
SECOND QUARTER
Net sales
Net sales for the second quarter were unchanged and amounted to SEK 11,457m (11,481). Adjusted for
exchange-rate effects, sales increased by 5%. Prices were unchanged. Europe & Asia Pacific accounted for
5 percentage points of the adjusted increase and Construction for 1 percentage point while Americas
accounted for a decrease of 1 percentage point.
The reduced listings with a major retailer in North America for the 2010 season had a negative effect on
sales, which were nearly offset by sales to other accounts. Efforts to grow sales in the dealer channel
continued to be successful and increased double digit both in Europe & Asia/Pacific and in Americas.
The second quarter predominantly consists of sell-out and replenishment orders from the trade. The low
inventory levels of lawn and garden products in the trade at the end of the first quarter combined with the
late spring had a positive effect on sales in the second quarter.
Operating income
Operating income for the second quarter increased by 18% compared to the corresponding quarter 2009
and amounted to SEK 1,319m (1,116). Currency had a negative effect of approximately 4% and the net
effect from items affecting comparability was negative 12%. Adjusted operating income increased by 34%.
Operating income includes charges of SEK 157m for the previously announced closure of two factories in
North America and Greece. For further information see page 6. The second quarter 2009 included
restructuring charges of SEK 18m related to personnel cut-backs.
The increase in operating income was mainly due to higher sales and production volumes, a better mix
and favorable direct material costs. Selling and administrative costs increased, mainly due to higher
transportation costs and costs for implementation of IT systems. Operating margin, excluding items
affecting comparability, increased to 12.9% (9.9).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
negative effect on operating income of SEK -30m (-35). Hedging contracts had a positive effect of SEK 26m
(-92).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, while
decreasing somewhat for Americas.
FIRST HALF-YEAR
Net sales
Net sales for the first half-year declined by 9% to SEK 20,539m (22,633). Adjusted for exchange-rate effects,
sales decreased by 2%. Prices were unchanged. Europe & Asia/Pacific accounted for a positive 2
percentage points of the adjusted change and Americas for a negative 4 percentage points while
Construction’s contribution was limited. Efforts to grow sales in the dealer channel were successful and
sales to dealers increased in all major markets.
Operating income
Operating income for the first half-year increased by 10% compared to the first half-year of 2009 and
amounted to SEK 2,097m (1,902). Currency had a positive effect of approximately 7% and the net effect
from items affecting comparability was negative 8%. Adjusted operating income increased by 11%.
Operating income includes charges of SEK 207m for the previously announced closure of two factories in
North America and Greece and costs related to a legal case in North America. For further information see
page 6. The first half-year 2009 included restructuring charges of SEK 53m related to personnel cut-backs.
The increase in operating income was mainly a result of lower costs for direct material, improved mix and
lower selling and administrative costs. Operating margin, excluding items affecting comparability,
increased to 11.2% (8.6).
Changes in exchange rates, including both translation and transaction effects net of hedging, had a total
positive effect on operating income of SEK 113m (58). Hedging contracts had a positive effect of SEK 52m
(-17).
Operating income and operating margin for Europe & Asia/Pacific and Construction increased, but
decreased for Americas.
OUTLOOK FOR THE THIRD QUARTER 2010
Inventories in the trade of the Group’s products at the end of the second quarter were estimated to be
slightly lower than a year ago in the dealer channel and approximately on the same level in the retail
channel. End-user demand increased in most markets compared to the preceding season, but the trade is
still reluctant to build inventory. The positive development in Europe & Asia/Pacific and for Construction is
expected to continue. For the Americas, shipments are not expected to exceed last year’s numbers. For
garden products, the season normally ends towards the end of the third quarter. In total, Group shipments
in the third quarter of 2010 are expected to be slightly higher than in the third quarter of 2009.
PERFORMANCE BY BUSINESS AREA
As of 1 January 2010, external reporting comprises three business areas:
• Europe & Asia/Pacific, comprising forestry and garden products sold in Europe, Asia and the
Pacific region
• Americas, comprising forestry and garden products sold in North America and Latin America
• Construction, comprising products for the global construction and stone industries.
Europe & Asia/Pacific
Sales for Europe & Asia/Pacific in the second quarter increased 4%. Adjusted for exchange-rate effects the
sales increase was 10%. In the first half-year, sales decreased 3%. Adjusted for exchange-rate effects, sales
in the first half-year increased by 3%.
The year started slow as spring was unusually late and in addition retailers and dealers were cautious about
building up inventories ahead of the season. Activity picked up in March and accelerated in the latter part
of the second quarter. Sales in the dealer channel developed strongly while the retail channel experienced
minor growth. Prices were stable during the first two quarters.
Demand in Eastern Europe continued to recover and sales increased considerably both for the second
quarter and for the first half-year compared to the corresponding periods of 2009. The Nordic region was
also strong, while UK and France were weaker than last year. Over-all, it is estimated that the Group
gained market share in Europe during the first half-year.
Operating income and operating margin increased in the second quarter. Performance was strong for all
product categories. Operating income was positively affected by higher sales and production volumes as
well as an improved mix.
Americas
Sales for Americas in the second quarter decreased 5%. Adjusted for exchange-rate effects the decrease
was 1%. In the first half-year, sales decreased 16%. Adjusted for exchange-rate effects, sales in the first
half-year decreased by 8%.
The season started later than in the preceding year due to the late spring. Activity picked up in March and
held up well over the second quarter. The reduced listings with a major retailer in North America for the
2010 season had a negative effect on sales, especially for low-end lawn mowers. However, efforts to grow
sales in the dealer channel and with other retail accounts continued to pay off and almost compensated
the reduced listings. Prices were stable during the period.
Brand-building activities to promote the Husqvarna brand have been successful and the Husqvarna brand
is gaining market share on the North American market. Retailers continued their cautious approach to
building inventory.
Operating income for the second quarter of 2010 includes a charge of SEK 110m for the closure of the
factory in Beatrice and transfer of the production to the Group’s plant in Orangeburg. The first quarter
included a charge of SEK 50m for settlement of an engine-capacity lawsuit.
Operating income in the second quarter was positively affected by lower costs for direct material and
higher production volumes, while restructuring costs and merchandising and transportation costs had a negative effect. Operating margin for the second quarter, excluding items affecting comparability, amounted to 6.4% (6.5).
Construction
Sales for Construction in the second quarter increased 7%. Adjusted for exchange-rate effects the sales
increase was 12%. In the first half-year, sales were unchanged. Adjusted for exchange-rate effects, sales in
the first half-year increased by 6%. Demand for construction products improved in both North America
and Europe during the first half of the year. Stimulus packages for infrastructure projects in North America
had a positive effect on demand in the second quarter.
During the year a number of new products have been successfully launched and market shares are
estimated to have increased.
Operating income and margin in the second quarter improved, mainly due to higher sales and production
volumes. Operating income in the second quarter was charged with restructuring costs amounting to
SEK 47m. Operating margin for the second quarter, excluding items affecting comparability, increased to
7.8% (-2.0).
PARENT COMPANY
Net sales in the first half-year 2010 for the Parent Company, Husqvarna AB, amounted to SEK 6,201m
(5,372), of which SEK 4,716m (4,146) referred to sales to Group Companies and SEK 1,485m (1,226) to
external customers. Income after financial items amounted to SEK 1,518m (525). Income for the first halfyear
was SEK 1,266m (458).
The increase in income after financial items is mainly related to received dividend from subsidiaries of SEK
542m (249) and changes in market value of net investment hedges of SEK 336m (102). These hedges are
made in the Parent Company to limit the effects on the Group's consolidated equity resulting from
translation differences. In the Group's financial statements these effects are included in Other
comprehensive income.
Investments in tangible and intangible assets amounted to SEK 151m (119). Cash and cash equivalents
amounted to SEK 1,478m (1,297). Undistributed earnings in the Parent Company at the end of the period
amounted to SEK 17,308m (15,029). A dividend payment to shareholders in the amount of SEK 574m (0)
was made during the period.
RESTRUCTURING
In Q2 2010, the Group announced further restructuring in line with its strategy which includes increasing
efficiency by consolidating the manufacturing footprint. The factory in Beatrice, Nebraska, will be closed
and the production will be transferred to the factory in Orangeburg, South Carolina. The factory for
construction equipment in Athens, Greece will also be closed. Annual savings from the initiatives will
amount to SEK 60m and will be realized gradually with full effect from the first quarter of 2012. Secondquarter
operating income was charged with SEK 157m, of which the closure of the Beatrice factory
accounted for SEK 110m.
In October 2009, the Group announced the implementation of a number of structural changes in 2009-
2011. These measures are aimed at eliminating overlapping and increase efficiency within production and
administration, and involve consolidation of production in Sweden and the US, and of the sales
organization in Europe & Asia/Pacific.
The total cost of these measures amounts to SEK 399m and annual
savings from these activities are expected to amount to approximately SEK 400m, and will be realized
gradually from the second half of 2010 with full effect from the first quarter of 2012. Capital expenditure
related to the restructuring is expected to amount to approximately SEK 400m, of which a new plant in
Poland will account for approximately SEK 250m.
In September 2008, an initiative to reduce fixed costs through personnel cut-backs was announced. The
total costs for the cut-backs were SEK 369m and the annual savings are SEK 450m as of the third quarter
2009.
Stihl Shop Program Grows Successfully in New Zealand
August 5 -- In partnership with local Kiwi business owners, leading outdoor power equipment brand STIHL has created its own retail category. Undaunted by the recession, the company added 13 more stores to their STIHL SHOP' retail group in 2009. The latest three store openings in Hawera, Masterton and Cambridge takes the group to a total of 56 stores nationwide (generating $80 million in annual revenues) - within reach of its goal of 65 stores by 2011.
Before 2002 the outdoor power equipment market was merely embryonic. This changed when STIHL decided to develop a retail chain of locally owned stores under its own brand; called STIHL SHOP'. The outcome for STIHL after years of groundwork is improved store branding and infrastructure, investment into human capital through training, a focus on customer service and top position in the now highly competitive retail category.
The steady growth of the STIHL SHOP' retail brand follows a tough decision made by STIHL CEO Jim Bibby seven years ago. Faced with a choice between attempting a risky new distribution strategy (through big-box stores) or investing in their own loyal Dealer channel, Mr Bibby opted for the latter, creating the STIHL SHOP' retail concept as a hub for quality, technical know-how and customer service in both urban and provincial areas.
In his mind, the case for change was clear - STIHL's brand visibility and shop appeal urgently required modernising. It had an inconsistent and low-profile image and needed to keep pace with retail trends, match the store experience to customer expectations in order to withstand increasing pressure from mass merchants while improving service and providing better options (including exit strategies) for owners.
Kiwi STIHL SHOP' owners' approach to marketing and selling their products is based on extensive groundwork, including customer research. In developing the concept, Mr Bibby and his team worked with consumers in key STIHL markets (forestry, farming and landscaping) to learn what they wanted, and the result has since been seized upon by home and property owners who liked the combination of quality product, know-how and service.
Based on the idea of delivering on the needs of the market, he wagered that the STIHL SHOP' concept would achieve store owners' aims, and since that turning point, 56 STIHL SHOP' stores have opened, and revenues have increased by 30 percent in a declining market.
The STIHL SHOP' retail model is unique in the STIHL brand's global presence. Its success has been such that visiting senior managers from STIHL's international head office have been inspired to explore the formula in the rest of STIHL's markets, where products are sold through conventional retail channels. In New Zealand, STIHL SHOP' is the only national retail brand specialising in outdoor power equipment.
Phil Weedon, STIHL SHOP' Group Manager, says, "Eighty percent of the stores are family-owned small businesses run by baby-boomers; the remainder are operated by an increasing complement of younger entrepreneurs who find the business proposition appealing."
"All our owners are experienced businesspeople, many of whom have worked in other industries," Mr Weedon says. "The attraction to STIHL SHOP' has been the facility for Kiwi businesspeople to live in their hometown while benefiting from a strong international brand and systemised approach as their business foundation."
"Comparing the margins of the new business model with the old way of doing business demonstrates why it's such an appealing model. Two examples are stores in Christchurch and Auckland, where margins have improved by 25% and 22% respectively since the conversion to the STIHL SHOP' programme."
Mr Weedon says, "New Zealand has a lot of great businesspeople who live here because they want a particular lifestyle, whether urban or more rural, but often they have to compromise on where they live if they want to run a successful business. STIHL SHOP' is a great example of what a thriving Kiwi business can look like, and it's an example of how a global brand like STIHL can be given a true local feel, if you adjust it to suit your market."
Would-be STIHL SHOP' owners operate under a license and are required to undertake a rigorous training programme - another unique point of practice in the global STIHL market.
Before 2002 the outdoor power equipment market was merely embryonic. This changed when STIHL decided to develop a retail chain of locally owned stores under its own brand; called STIHL SHOP'. The outcome for STIHL after years of groundwork is improved store branding and infrastructure, investment into human capital through training, a focus on customer service and top position in the now highly competitive retail category.
The steady growth of the STIHL SHOP' retail brand follows a tough decision made by STIHL CEO Jim Bibby seven years ago. Faced with a choice between attempting a risky new distribution strategy (through big-box stores) or investing in their own loyal Dealer channel, Mr Bibby opted for the latter, creating the STIHL SHOP' retail concept as a hub for quality, technical know-how and customer service in both urban and provincial areas.
In his mind, the case for change was clear - STIHL's brand visibility and shop appeal urgently required modernising. It had an inconsistent and low-profile image and needed to keep pace with retail trends, match the store experience to customer expectations in order to withstand increasing pressure from mass merchants while improving service and providing better options (including exit strategies) for owners.
Kiwi STIHL SHOP' owners' approach to marketing and selling their products is based on extensive groundwork, including customer research. In developing the concept, Mr Bibby and his team worked with consumers in key STIHL markets (forestry, farming and landscaping) to learn what they wanted, and the result has since been seized upon by home and property owners who liked the combination of quality product, know-how and service.
Based on the idea of delivering on the needs of the market, he wagered that the STIHL SHOP' concept would achieve store owners' aims, and since that turning point, 56 STIHL SHOP' stores have opened, and revenues have increased by 30 percent in a declining market.
The STIHL SHOP' retail model is unique in the STIHL brand's global presence. Its success has been such that visiting senior managers from STIHL's international head office have been inspired to explore the formula in the rest of STIHL's markets, where products are sold through conventional retail channels. In New Zealand, STIHL SHOP' is the only national retail brand specialising in outdoor power equipment.
Phil Weedon, STIHL SHOP' Group Manager, says, "Eighty percent of the stores are family-owned small businesses run by baby-boomers; the remainder are operated by an increasing complement of younger entrepreneurs who find the business proposition appealing."
"All our owners are experienced businesspeople, many of whom have worked in other industries," Mr Weedon says. "The attraction to STIHL SHOP' has been the facility for Kiwi businesspeople to live in their hometown while benefiting from a strong international brand and systemised approach as their business foundation."
"Comparing the margins of the new business model with the old way of doing business demonstrates why it's such an appealing model. Two examples are stores in Christchurch and Auckland, where margins have improved by 25% and 22% respectively since the conversion to the STIHL SHOP' programme."
Mr Weedon says, "New Zealand has a lot of great businesspeople who live here because they want a particular lifestyle, whether urban or more rural, but often they have to compromise on where they live if they want to run a successful business. STIHL SHOP' is a great example of what a thriving Kiwi business can look like, and it's an example of how a global brand like STIHL can be given a true local feel, if you adjust it to suit your market."
Would-be STIHL SHOP' owners operate under a license and are required to undertake a rigorous training programme - another unique point of practice in the global STIHL market.
Husqvarna Professional Products Recalls Riding Lawn Tractors
The following product safety recall was voluntarily conducted by the firm in cooperation with the CPSC. Consumers should stop using the product immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product.
Name of Product: Husqvarna Riding Lawn Tractors
Units: About 1,700
Manufacturer: Husqvarna Professional Products Inc., of Charlotte, N.C.
Hazard: The fuel line on the rear-mounted fuel tank is too long and can come in contact with moving parts while the tractor is in use, posing a fire hazard.
Incidents/Injuries: The firm has received 53 reports of fuel line damage. No injuries have been reported.
Description: This recall involves gas-powered Husqvarna riding lawn tractors designed for residential use. The lawn tractor's model and serial numbers are printed on an identification plate located underneath the tractor seat. Models and serials numbers included in the recall are: GTH27V52LS lawn tractors with model numbers 96043009100 and 96043009900, with serial numbers 010810A00XXXX through 05061000XXXX.
Sold by: Husqvarna authorized dealers nationwide from January 2010 to May 2010 for about $3,000.
Manufactured in: U.S.A.
Remedy: Consumers should immediately stop using the recalled riding tractors and contact Husqvarna to arrange a free repair.
Consumer Contact: For more information or to schedule a free repair, contact Husqvarna toll-free at (877) 257-6921 between 8 a.m. and 8 p.m. ET Monday through Friday, and between 8 a.m. and 3 p.m. ET Saturday. Consumers can also visit the firm's website at www.husqvarna.us/july2010Alert
Name of Product: Husqvarna Riding Lawn Tractors
Units: About 1,700
Manufacturer: Husqvarna Professional Products Inc., of Charlotte, N.C.
Hazard: The fuel line on the rear-mounted fuel tank is too long and can come in contact with moving parts while the tractor is in use, posing a fire hazard.
Incidents/Injuries: The firm has received 53 reports of fuel line damage. No injuries have been reported.
Description: This recall involves gas-powered Husqvarna riding lawn tractors designed for residential use. The lawn tractor's model and serial numbers are printed on an identification plate located underneath the tractor seat. Models and serials numbers included in the recall are: GTH27V52LS lawn tractors with model numbers 96043009100 and 96043009900, with serial numbers 010810A00XXXX through 05061000XXXX.
Sold by: Husqvarna authorized dealers nationwide from January 2010 to May 2010 for about $3,000.
Manufactured in: U.S.A.
Remedy: Consumers should immediately stop using the recalled riding tractors and contact Husqvarna to arrange a free repair.
Consumer Contact: For more information or to schedule a free repair, contact Husqvarna toll-free at (877) 257-6921 between 8 a.m. and 8 p.m. ET Monday through Friday, and between 8 a.m. and 3 p.m. ET Saturday. Consumers can also visit the firm's website at www.husqvarna.us/july2010Alert
MTD To Add 107 Jobs With $9.3 Million Mississippi Plan Expansion
The expansion at MTD Products into the former Eljer Plumbingware building is valued at more than $9.3 million.
Here's where the money comes from:
$7.1 million - MTD
$1.2 million - state funding
$721,700 - local funding
$300,000 - ARC grant
VERONA, MS - A multimillion-dollar expansion of MTD Products will serve two important functions - adding more than 100 jobs and putting an old industrial building to use.
On Tuesday, state and local officials gathered at the Tupelo-Lee Industrial Park South to formally announce the $9.3 million project, which includes a $7.1 million investment by the outdoor equipment maker itself.
MTD's expansion into the former Eljer Plumbingwear building will give MTD much-needed elbow room. Ten plastic injection molding machines already have been installed in the 525,000-square-foot building.
Later this year, two more assembly lines and a paint applicator system will be installed.
With the expansion come an additional 107 workers. MTD, a privately held company based in Cleveland, Ohio, now employs 1,150 in Lee County.
"We like doing business in Mississippi," said MTD Chairman Ted Moll. "Mississippi has been good for us. We especially like doing business in Lee County."
"We're a global organization and this work force is second to none."
MTD has been in business since 1932 and came to Lee County in 1986 when it bought Aircap Industries.
MTD's brands include Cub Cadet, Cub Cadet Commercial, Cub Cadet Yanmar, Troy-Bilt, White Outdoor, Yard-Man, Yard Machines, Bolens, Arnold, GardenWay, MTD Pro and MTD Gold.
The expansion will allow MTD to build and supply its own parts, rather than rely on others.
Holding one plastic part that the new machinery will be producing soon, Moll said the company will save 60 cents in transportation costs alone on each piece. Multiply that by the hundreds of thousands of lawn mowers produced each year at the facility, and the savings add up.
"We can control our quality," said Jomae Kimble, who's worked at MTD for 13 years and inspects the parts that arrive at MTD. "We don't have to wait six weeks for the parts to come from somewhere else and then discover there's a problem and have to ship them back. And that happens."
In addition to the money MTD is plowing into the project, the Mississippi Development Authority helped with $1.2 million in Community Development Block Grant Program funds, local sources pitched in $721,700, and the Appalachian Regional Commission added $300,000 to help pay for infrastructure improvements, including a fire-suppression sprinkler system and new roofing.
"This is a significant project when you create 107 jobs with an empty building," said Gov. Haley Barbour, who lauded MTD as a "great entrepreneurial company."
David Rumbarger, president and CEO of the Community Development Foundation said the expansion helps ensure MTD's future.
"As long as grass grows and as long as we're cutting grass, they'll will be selling lawn mowers," he said.
$7.1 million - MTD
$1.2 million - state funding
$721,700 - local funding
$300,000 - ARC grant
VERONA, MS - A multimillion-dollar expansion of MTD Products will serve two important functions - adding more than 100 jobs and putting an old industrial building to use.
On Tuesday, state and local officials gathered at the Tupelo-Lee Industrial Park South to formally announce the $9.3 million project, which includes a $7.1 million investment by the outdoor equipment maker itself.
MTD's expansion into the former Eljer Plumbingwear building will give MTD much-needed elbow room. Ten plastic injection molding machines already have been installed in the 525,000-square-foot building.
Later this year, two more assembly lines and a paint applicator system will be installed.
With the expansion come an additional 107 workers. MTD, a privately held company based in Cleveland, Ohio, now employs 1,150 in Lee County.
"We like doing business in Mississippi," said MTD Chairman Ted Moll. "Mississippi has been good for us. We especially like doing business in Lee County."
"We're a global organization and this work force is second to none."
MTD has been in business since 1932 and came to Lee County in 1986 when it bought Aircap Industries.
MTD's brands include Cub Cadet, Cub Cadet Commercial, Cub Cadet Yanmar, Troy-Bilt, White Outdoor, Yard-Man, Yard Machines, Bolens, Arnold, GardenWay, MTD Pro and MTD Gold.
The expansion will allow MTD to build and supply its own parts, rather than rely on others.
Holding one plastic part that the new machinery will be producing soon, Moll said the company will save 60 cents in transportation costs alone on each piece. Multiply that by the hundreds of thousands of lawn mowers produced each year at the facility, and the savings add up.
"We can control our quality," said Jomae Kimble, who's worked at MTD for 13 years and inspects the parts that arrive at MTD. "We don't have to wait six weeks for the parts to come from somewhere else and then discover there's a problem and have to ship them back. And that happens."
In addition to the money MTD is plowing into the project, the Mississippi Development Authority helped with $1.2 million in Community Development Block Grant Program funds, local sources pitched in $721,700, and the Appalachian Regional Commission added $300,000 to help pay for infrastructure improvements, including a fire-suppression sprinkler system and new roofing.
"This is a significant project when you create 107 jobs with an empty building," said Gov. Haley Barbour, who lauded MTD as a "great entrepreneurial company."
David Rumbarger, president and CEO of the Community Development Foundation said the expansion helps ensure MTD's future.
"As long as grass grows and as long as we're cutting grass, they'll will be selling lawn mowers," he said.
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