Tuesday, November 8, 2011

Generac to Add Over 400 Jobs at Wisconsin Plants


November 7 -- Strong sales growth, helped in part by Hurricane Irene and other natural disasters, is leading generator manufacturer Generac Holdings Inc. to add over 400 new jobs at its factories in Waukesha and other Wisconsin communities.

Generac announced Monday it will add 300 to 400 jobs in Waukesha, Whitewater and Eagle, along with 50 to 60 jobs at its recently acquired Magnum Products LLC subsidiary in Berlin. Magnum makes portable light towers, portable generators and pumps used at construction sites.

Waukesha-based Generac, which now has 1,500 to 1,600 employees, plans to hire most of the new workers within 90 days, said company spokeswoman Heather Shannon Gaedtke. All of the new employees will be hired within the next year, she said.

Generac won't release pay data, but all of the jobs pay family-supporting wages and salaries, Gaedtke said.

The new positions range from entry-level to management, and include engineers, designers and technicians, a company statement said.

All of Generac's manufacturing facilities are in Wisconsin. Less than 2% of its workforce was union members as of Dec. 31, according to the company's annual report filed with the U.S. Securities and Exchange Commission.

The company isn't receiving any public financing assistance in connection with the expansion, which is fueled by increased demand for its products, said Art Aiello, a company media relations specialist.

Generac on Nov. 1 reported that its third-quarter profit increased nearly 63%, to $37.4 million, or 55 cents a share, compared with $23 million, or 34 cents a share, for the same period last year.

Sales jumped 49% to $239.3 million, compared with $160.7 million during the year-earlier period.

Generac saw record shipments of its home generators during the third quarter after major power outages occurred in the Midwest and along the East Coast, President and Chief Executive Officer Aaron Jagdfeld said in last week's earnings announcement. Home generators accounted for more than two-thirds of the company's third quarter revenue.

"Our sustained efforts over the past three years to build a leading position in the market for portable generators resulted in a sharp increase in sales due to the increased demand for these products in the third quarter," Jagdfeld said, in a statement. "We also saw increased demand for our home standby generators in the quarter and we expect that demand will grow over the next several quarters as homeowners look to protect themselves from future power outages."

The company expects its home generator sales in the fourth quarter to increase by over 30%, Jagdfeld said.

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Monday, November 7, 2011

As Winter Approaches, Demand for Snow Blowers Exceeds Projections

Dan Ariens is president and CEO of Ariens Co., an outdoor power equipment manufacturer founded by his grandfather and great-grandfather in 1932, originally making tillers for the agricultural market.

He joined the family business in 1983, starting in the marketing department, and for the next 14 years worked in nearly every facet of the company, including sales, engineering and manufacturing.

In 1998 he became president and chief executive officer.

A proponent of lean manufacturing principles, Ariens has been a recipient of the Eli Whitney Productivity Award from the Society of Manufacturing Engineers. He is frequently tapped as a mentor by organizations promoting lean leadership.

Since 2000, Ariens has been a board member of the Outdoor Power Equipment Institute, including a term as chairman.

He is heavily involved in the Wisconsin business community, serving on several boards for educational groups, companies, and economic development organizations including the Wisconsin Economic Development Corp. and Wisconsin Manufacturers & Commerce.

He is also on the executive committee of the Green Bay Packers board of directors.

Privately held Ariens Co. does not release sales figures but said it's one of the market-share leaders in two-stage snow throwers and is a smaller player in the lawn and garden equipment business with larger competitors such as Toro and John Deere.

In an interview, Dan Ariens talks about the outdoor power equipment industry, the economy, manufacturing and employment.

Here are excerpts from that interview:

Q. As we head into winter, what are your thoughts about the health of the outdoor power equipment industry and snow removal products?

A. In a word right now, it's panic in terms of demand. It is exceeding all of our projections and is exceeding just about everyone's estimate for what we thought would be a strong preseason. We are struggling to build enough product right now as fast as it's being consumed. We are setting production records daily, and we still are not getting enough out.

In the last couple of winters, the seasons were strong enough and long enough where most manufacturers ran out of product. So when someone can't get a snowblower when they want one in January or February, they aren't going to miss next year and will start buying in June and July.

Q. Overall, how do you feel about consumer confidence?

A. We actually think consumers are more confident than the numbers show. We had a very strong summer and fall for lawn mowers and lawn equipment, and we are having a very strong fall for snow equipment.

I think consumers are in two camps. They are not very confident about the direction of the country, and that's related to policies and taxes and regulations, but in their own case I think they are feeling that, if they've survived the downturn and haven't lost their job, they are OK.

Q. Ariens products cost more than some others that don't last as long. How do you get people away from the disposable products mentality?

A. Our brand promise has been about products that last a long time. We have snowblowers that are still performing 25 years later. We have a lot of product that was built in the 1960s and is still running. We still design our products so they are repairable.

But Americans want American quality at Chinese prices. That's just the nature of free enterprise, to pay only as much as you have to but wanting the most value for the dollar.

Q. Your products are made in the United States. Why not Mexico or China?

A. I am a pound-the-fist-on-the-table kind of guy who says we won't do that. It goes back to the early 2000s, when this business was in tough shape. We needed our folks here to get engaged in making this a better business. I couldn't do it on my own.

So I made a commitment in 1998 that we were not going to take jobs away if we made productivity improvements. We redeployed, cross-trained and became a smarter manufacturer, but we did not run to China.

We have brought work back from China. In 2000, we were buying things there that we now make in our plant, such as components, shafts and castings.

Q. How do you compete with much bigger companies, such as Honda?

A. We can look at Honda, John Deere, Toro, Briggs & Stratton, all of the big companies. But if we spend our time worrying about that, we aren't going to focus on where we need to make improvements.

We are up against big companies. There are some in China that are out to eat our lunch. I always tell people here: 'They want your job and they want my job. They want to be us.'

But our business is something like a professional sports team. Right now the Packers are on top, so everybody wants to beat them. But the Packers can't look at everybody else. They have to look at themselves and say what mistakes did they make last week and what do they have to improve on when they practice this week.

Q. How troubling is the European economy for Ariens?

A. It's a concern, but in our product category the Europeans are very particular about what they buy. They are very thoughtful consumers.

While an American consumer may choose disposable products, it's absolutely not that way in Europe.

And the European economy is something like the United States in that some states are doing better than others. I had an economist tell me he doesn't think anything major will happen in the European Union until 2013, when a treaty among euro trading partners expires. It calls for the developed countries, such as France and Germany, to subsidize or support the euro. In accordance with the treaty, they are bound to support it until 2013.

Q. Does weather trump the economy in U.S. snow removal equipment sales?

A. For us, the outdoor power equipment industry, the economy really started to fall in 2006 and 2007. What was happening then was consumers had overspent their ability in buying homes, and they weren't putting anything in the garage or the living room. There wasn't any furniture in the house, but they had the big house.

In 2006 and 2007, definitely the economy trumped the weather because we had heavy snow in the Midwest but we didn't have a great year in snow equipment sales.

We started to see a rebound in late 2008. Today I think we are through the malaise, and I would say we are back to the weather trumping the economy in snow equipment sales.

Q. How do you find the employees you need in a rural area surrounded by some big manufacturers, such as Oshkosh Corp. and Manitowoc Cos.?

A. We want to be the No. 1 employer wherever we have a location. So I like to think we have been promoting this idea around the Fox Valley that Ariens is a great place to work.

We do a lot of things, but it starts with saying 'let's have a good attitude.' We expect people to become engaged in this business.

I don't care if you come here to clean bathrooms or to be the next CEO. This has to be a place you really like coming to. It has to be safe, clean and a place that challenges your intellectual curiosity.

Q. What are some things you do to develop talent?

A. We have to develop everyone at every level. If you are an assembler, we want you to grow into becoming the next assembly leader.

We have a lead intern system, where we take someone off the production line and put them through our own classes to get them involved in leadership. They volunteer, and we take about six people a year. We have had managers, assemblers, welders, punch-press operators in the program. In six months we put them through classes, getting them involved in leadership, and hopefully they will be the next leaders in our company.

And in Brillion, the high school is working out fantastic with interns in engineering. We have sent a lot of these kids off to engineering colleges. The hope is that some of them will come back to work here someday.

We have had students in their junior and senior years in high school actually design some parts that are on one of our products. We have an engineer that oversees the work, and the students take it to the lab, where they make a prototype. Then we help them test it and put it into production. So the students go through a whole product development cycle.

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Blount International Announces Third Quarter Results, Updates 2011 Outlook

  • Sales increased 31% from the prior year, 12% from base business and 19% from acquisitions
  • Base business operating income increased 19% from the prior year
  • Full-year outlook for 2011 sales and profit updated to incorporate businesses acquire
  • New $700 million credit facility partially utilized to refinance debt and acquire Woods
    PORTLAND, Ore., Nov. 3 -- Blount International, Inc. today announced results for the third quarter ended September 30, 2011 and updated its full year financial outlook for 2011.

    Results for the Quarter Ended September 30, 2011

    The Company's sales in the third quarter were $212.9 million, a 31.0% increase from the third quarter of 2010, and a 12.4% increase when excluding the impact of acquired businesses.

    Operating income for the third quarter of 2011 was $23.9 million compared to $20.7 million in the prior year.

    During the third quarter, the Company completed the acquisitions of Woods Equipment Company ("Woods") and Finalame SA including its wholly-owned subsidiary PBL SAS ("PBL"). The year-over-year impact of acquired businesses increased sales by $30.2 million and reduced operating income by $0.7 million in the third quarter of 2011.

    The reduction to third quarter 2011 operating income from acquisitions was primarily the result of non-cash charges related to acquisition accounting of $2.3 million. Additionally, third quarter operating income includes $2.5 million of incremental business acquisition expenses compared to the third quarter of 2010. Third quarter income from continuing operations was $10.8 million ($0.22 per diluted share) compared to $10.6 million ($0.22 per diluted share) in the third quarter of 2010.

    Josh Collins, Chairman and Chief Executive Officer, commented on the third quarter results: "We accomplished a great deal in the third quarter this year. Our base business performed well with sales up more than 12%. We closed the acquisitions of PBL and Woods, both of which provide significant opportunity for growth, scale, and capacity for our Farm, Ranch, and Agriculture as well as our Forestry, Lawn, and Garden businesses. We are focused on integrating those businesses within our global sales, supply, and distribution network and executing on operating improvements identified in our due diligence. We expect solid accretion to earnings and value in the upcoming year from both PBL and Woods. Overall, we are excited about the operating opportunities we have ahead of us in all of our business lines."

    Sales

    Sales were 12.4% higher in the third quarter of 2011 compared to the third quarter of 2010 when excluding the impact of acquisitions. For comparability, all sales growth statistics are quoted excluding sales related to acquisitions within the last 12 months. International sales grew 13.5%, and domestic sales grew by 10.0%.

    Domestic sales were most robust for the SpeeCo business, slightly offset by a mostly weather related decline in lawn and garden sales.

    Sales to original equipment manufacturers were essentially flat, and replacement sales increased 15.9%. Price increases implemented in the last 12 months contributed approximately $4.3 million to sales on a year-over-year basis and foreign exchange rate changes added another $2.7 million to sales.

    Sales order backlog was approximately $172.5 million at September 30, 2011 compared to $133.7 million at December 31, 2010 and $130.4 million at September 30, 2010. Excluding backlog related to businesses acquired in 2011, backlog was $150.1 million, which is 15.1% higher than the year-ago period.

    Gross Profit

    Third quarter 2011 gross profit was $65.6 million compared to $50.4 million in the third quarter of 2010. The increase in gross profit was driven primarily by the increase in sales volume, including that from businesses acquired in 2010 and 2011. The favorable impact of selling price increases and higher sales volumes was partially offset by year-over-year unfavorable movement in currency exchange rates and non-cash expenses related to acquisition accounting.

    The foreign exchange impact reflects the strength of both the Canadian Dollar and Brazilian Real compared to the U.S. Dollar, which increased manufacturing conversion costs, offset by European currency strength reflected in sales. The impact of steel purchase prices reduced gross profit by $1.4 million and $0.7 million compared to the second quarter of 2011 and third quarter of 2010, respectively, as steel prices have risen over the course of 2011.

    Cost of sales improved $3.7 million in the third quarter of 2011 compared to the third quarter of 2010, excluding the impact of steel and foreign exchange rate changes. The cost improvement is primarily the result of favorable product mix and volume leverage of $1.6 million and from $1.3 million of inventory charges taken in the third quarter of 2010 and not repeated in 2011. Additionally, Q3 2010 was unfavorably affected by costs associated with the rapid increase in manufacturing output.

    Productivity has improved in the intervening 12 months, and third quarter 2011 production costs have improved as a result. Sales volumes from acquired businesses have reduced gross margins. This impact will continue in the near term, but will be offset by identified synergies, primarily in the supply chain, over the next three to five years.

    Operating Income

    Operating income increased to $23.9 million in the third quarter of 2011 from $20.7 million in the third quarter of 2010.

    SG and A increased by $4.1 million compared to the third quarter of 2010, excluding the impact of acquisitions, spending on acquisition execution and foreign exchange rate changes. The increase was driven primarily by increased compensation and benefits of $2.7 million reflecting annual pay increases and increased headcount in support of the Company's growth. Additionally, the Company incurred approximately $0.7 million additional relocation and travel expenses, and increased advertising spending of $0.5 million, primarily to support new products.

    Income from Continuing Operations

    Third quarter 2011 income from continuing operations improved primarily due to improved operating income and a reduction in net interest expense, partially offset by an increase in income taxes compared to the third quarter of 2010.

    The Company recorded tax expense of $4.9 million in the third quarter of 2011 versus a tax benefit of $4.8 million in the third quarter of 2010. The tax benefit in the third quarter of 2010 was driven primarily by the release of $5.9 million of previously provided income tax expense on uncertain tax positions.

    Cash Flow and Debt

    As of September 30, 2011, the Company had net debt of $470.5 million, an increase of $206.1 million from June 30, 2011. The increase in net debt in the third quarter of 2011 resulted from the acquisitions of Woods and PBL, partially offset by the generation of cash by the Company's ongoing operations. In the third quarter, the Company generated $9.6 million in free cash flow. The Company defines free cash flow as cash flows from operating activities less net capital spending. The ratio of net debt to pro-forma last-twelve-months ("LTM") Adjusted EBITDA was 2.8X as of September 30, 2011, an increase from net leverage of 1.9X at the end of the second quarter of 2011 and 2.1X at the end of December 2010.

    On June 13, 2011, the Company amended the terms of its Senior Credit Facility, which became effective on August 9, 2011 when the amended Senior Credit Facility was initially funded. The Company recorded a non-cash charge to third quarter 2011 pretax income of approximately $3.9 million related to the Amendment. As a result of the Amendment, the Company expects to save approximately $7 million in annual cash interest cost based on current LIBOR rates and borrowing levels at the time of funding.

    2011 Financial Outlook

    The Company's fiscal year 2011 outlook, on an actual or as reported basis, is for sales to range between $825 million and $835 million and operating income to range between $100 million and $103 million.

    Our expectation for 2011 sales levels assumes a full year of SpeeCo ownership and fourth quarter growth for the base business of between 5% and 7%, plus the benefit of the KOX, PBL, and Woods businesses acquired in the last 12 months.

    The expectation for 2011 operating income assumes that the impact of unfavorable foreign currency exchange rates and rising steel prices will reduce year-over-year operating income between $9 million and $10 million, and includes estimated non-cash charges as a result of acquisition accounting of approximately $15.8 million.

    Free cash flow is expected to range between $51 million and $55 million in 2011, after approximately $34 million to $38 million of capital expenditures. Net interest expense is expected to be approximately $18 million in 2011, and the effective income tax rate for continuing operations is expected to be between 31% and 34% in 2011.

    For the full year 2011 on a pro forma basis to incorporate all businesses acquired, we expect $975 million of sales and $172 million of Adjusted EBITDA. We expect pro forma free cash flow of approximately $62 million as increased cash from operations is offset by increased capital spending in the fourth quarter of 2011.

    Blount is a global manufacturer and marketer of replacement parts, equipment, and accessories for the forestry, lawn and garden; farm, ranch and agriculture; and construction markets, and is the market leader in manufacturing saw chain and guide bars for chainsaws. Blount sells its products in more than 100 countries around the world. For more information about Blount, please visit our website at http://www.blount.com/.

    Sheep Lawn Mowers and Other Go-Getters

    OBERLIN, OH – November 2 -- In this verdant lawn-filled college town, most people keep their lawn mowers tuned up by oiling the motor and sharpening the blades. Eddie Miller keeps his in shape with salt licks and shearing scissors.

    Mr. Miller, 23, is the founder of Heritage Lawn Mowing, a company that rents out sheep — yes, sheep — as a landscaping aid. For a small fee, Mr. Miller, whose official job title is “shepherd,” brings his ovine squad to the yards of area homeowners, where the sheep spend anywhere from three hours to several days grazing on grass, weeds and dandelions.

    The results, he said, are a win-win: the sheep eat free, saving him hundreds of dollars a month in food costs, and his clients get a freshly cut lawn, with none of the carbon emissions of a conventional gas-powered mower. (There are, of course, other emissions, which Mr. Miller said make for “all-natural fertilizer.”)

    “They countrify a city,” Mr. Miller said of his four-legged staff. “And they lend a lot of awareness about how people lived in the past.”

    As an uncertain economy and a stagnant hiring climate continue to freeze people out of the traditional job market, a number of entrepreneurs like Mr. Miller, many of them in their 20s and 30s, are heading back to the land, starting small agricultural businesses. And in the process, they are discovering that modern homesteading offers more rewarding work, and possibly more security, than entering the white-collar fray.

    Mr. Miller, a 2010 graduate of Boston University, started his business last year, when several post-college grant applications fell through and no other job opportunities presented themselves. He moved back home and acquired two Jacob sheep, a small, sturdy breed that dates to biblical times. Recently, he added two more to his flock, which he keeps in a pen in the backyard when not in service.

    Customers pay $1 per sheep per day, but Mr. Miller also accepts barter payments, which have so far included karate lessons, jugs of maple syrup and the use of one homeowner’s truck. He has done around 20 homes so far, and has so many requests he can’t keep up with them.

    Mr. Miller, who supplements his income by working on a local farm, has resisted raising his prices because he wants his services to be available to all. And while Heritage Lawn Mowing is not yet in the black, he says he has found a better way of life.

    “It’s a gateway to that whole rural dream,” he said. “And with the type of recession we’re having, there’s stability in it.”

    Other yeoman start-ups are charting a more traditional path to profits.

    Carrie Ferrence, 33, and Jacqueline Gjurgevich, 32, were in business school at Bainbridge Graduate Institute in Washington State when they noticed that many local neighborhoods were “food deserts,” without easy access to fresh local produce and other grocery staples.

    Their answer was StockBox Grocers, a company that repurposes old shipping containers as small grocery stores. The company won $12,500 in a local business plan competition and raised more than $20,000 online in a Kickstarter campaign to finance its first store, which opened in the Delridge neighborhood of Seattle in September.

    “It’s a tough job market, and you have really few instances in your life to do something that you really love,” Ms. Ferrence said. “It’s not that this is the alternative. It’s the new plan A.”

    In terms of social cachet, agricultural start-ups are a long way from Silicon Valley. But the phenomenon seems to be gaining steam.

    Worldwide Opportunities on Organic Farms, a nonprofit that matches willing farmhands with organic farms seeking temporary help, has become, for the 4-H crowd, what Stanford’s computer science department has been for Silicon Valley. In the last three years, membership in the group’s United States branch has quadrupled, and among a certain set of college-age agriculturalists, the organization has become a verb (as in “Did you WWOOF last summer?”).

    The agricultural start-up world has also benefited from the growth of the sustainable business community. There are now business school programs in sustainable entrepreneurship, sustainable start-up conferences and venture capital firms that invest solely in green businesses. Even Nike has gotten into the game, with a new sustainable venture fund that will allow it to “thrive in a sustainable economy, one where people, planet and profit are in balance,” according to the company’s Web site.

    OF course, the mainstreaming of farm life has inspired a certain amount of skepticism among those with more agricultural experience.

    Jason Stroud, 44, of Red Hook, Brooklyn, has been raising chickens since he was 19. He said he thinks many newcomers to the sustainable agriculture world are making a high-tech mountain out of a Bronze Age molehill.

    “It’s simpler than one would think,” he said of modern-day homesteading. “Peasants with zero education were doing this hundreds of years ago.”

    After his regular work, restoring high-end antiques, dried up earlier this year, Mr. Stroud began advertising his farm skills to fad-chasing urbanites: for a price, he would build them backyard chicken coops and teach them to care for the birds.

    The offer was so well received that Mr. Stroud estimates that nearly half of his income now comes from chicken consulting. He dispenses advice on a Web site called Red Hook Chicken Guy, where he lists the benefits of chicken farming in Brooklyn. (Reason No. 10: “It’s just a cool thing to do.”)

    “It’s a good opportunity for kids who have gone to college with degrees in Hungarian literature that they owe $300,000 on,” he said, chuckling.

    Mr. Stroud’s wife, Susan Gregory Thomas, 42, began growing food for their family when her freelance writing failed to pay the grocery bills.

    The economic downturn, she said, has widened the interest in farming beyond the bio-dilettantes and the merely curious: “It’s not a movement that’s going to go away. This economy has been so devastating to so many people that this idea of doing for one’s self, which is very much an American idea, is taking hold.”

    But being an agricultural entrepreneur is not without its risks.

    Richard Charles, a Wall Street technology manager, decided to become an urban farmer after he was laid off twice, first by Citigroup, in 2008, and then by Goldman Sachs, in 2009. He and a former colleague from Citigroup, David Lowe, started EcoVeggies, a company that uses aeroponic technology to grow plants without soil. Their plan is to convert abandoned buildings in Newark into high-tech urban farms that will supply produce to local restaurants and schools.

    The reward “is the immense satisfaction of starting from a dream and doing something,” said Mr. Charles, 44.

    Still, he and Mr. Lowe used personal savings to finance their EgoVeggies project, and so far have failed to turn a profit. Mr. Charles, who has a day job at a renewal energy consulting firm, said he now works harder, and makes less, than he did on Wall Street.

    Likewise, Ms. Ferrence of StockBox Grocers said that although she has gotten interest from investors, the first store is still in the red, and the low margins of the grocery business mean it will probably never generate huge profits.

    As Mr. Charles put it, “Entrepreneurship is a great idea, but it’s not for everyone.”

    Those who can either spare the money and the time or do without both, however, may find that going back to the land offers an appealing challenge.

    On a recent afternoon, Mr. Miller took his flock of sheep to the home of a new client, where he tied them to two stakes in the backyard and watched as they began to eat.

    Jacob sheep, he said, go first for broad-leaf plants, then for dandelions and clovers, and then for grass. They generally avoid flowers and other decorative growth, he added, and seem drawn to intruders like buckthorn plants.

    “They have a built-in weed whacker,” he said, stroking the fleece of a sheep that goes by the name of Princess.

    Mr. Miller has had his setbacks. He lost one lamb to bloating earlier this year, another to parasites and a third when he gave an underperforming animal to a friend who wanted a lamb roast (“Layoffs,” he said with a deadpan expression). Then there was the time his sheep escaped from their pen and were found hours later on a nearby street, and he was fined $50 by the police.

    And now, with winter coming, snow will probably put a crimp in his profits.

    But after seeing the results of his urban farming experiment, he said he wouldn’t have done it any other way.

    “Building a new America will require an understanding of farming,” he said. “We have to look to the past to see the future.”

    Mr. Miller would like to go to graduate school to study sustainable development, and eventually wants to be the chief executive of an organic farm company. For now, though, he is looking to expand Heritage Lawn Mowing into neighboring towns, and increase the size of his flock so he can take on larger projects.

    Highways, he has been thinking, are a good place to start.

    “There’s so much grass in the median strips,” he said. “You could feed a lot of sheep with those.”

    www.nytimes.com