Wednesday, January 30, 2013

Maine Eyeing to Ban E15 Fuel - Kris Kiser Comments


MAINE SHOULD LIMIT ETHANOL IN GASOLINE
By Kris Kiser, President OPEI, Special to the Bangor Daily News

January 28 -- I read with interest the story about Maine eyeing to ban fuel with more than 10 percent ethanol in the Jan. 11 article http://bangordailynews.com/2013/01/10/news/state/maine-dep-working-on-plan-to-ban-gas-blends-with-more-than-10-percent-ethanol/           

Hats off to the Maine Department of Environmental Protection and hopefully Maine lawmakers in their quest to ensure consumer safety.

As the head of the Outdoor Power Equipment Institute, an organization that has been battling the introduction of higher ethanol blend fuels for several years, Maine’s effort to protect consumers from the risky and harmful effects of ethanol 15’s use should be lauded.

Ethanol 15 (E15) was prematurely introduced into the marketplace. In a rush to introduce a renewable fuel, E15 now appears at gas pumps across the country, causing confusion, anxiety, anger — and engine failure.

Too many citizens do not understand that E15 is only approved for use in 2001 and newer automobiles or flex-fuel vehicles, according to the Environmental Protection Agency. This means any other product with an engine is incompatible with E15, by law.

The risks of misfueling with higher ethanol fuel blends are not trivial, especially for Maine. Engine failure from using E15 is no small matter. For one, the forest and paper industry are greatly impacted when the engines of their chainsaws, chippers and grinders fail. Boats, snowmobiles and utility vehicles have stranded their users when their engine quits. Expensive landscape, snow removal and other power equipment have been ruined. These scenarios are not only inconvenient, but dangerous.

Even automobile makers are not convinced it is good for vehicle engines. We fully concur with AAA’s (Triple A) call that the sale and use of E15 “be suspended until additional gas pump labeling and consumer education efforts are implemented to mitigate problems for motorists and their vehicles.”

We agree consumers should always have a choice. Our country should move toward energy independence, and other fuel sources should be investigated. But to introduce a fuel that is potentially dangerous and harmful to so many engine products is reckless.

The totality of EPA’s education effort on E15 for the 150 million Americans using hundreds of millions of products is a 3-by-3-inch label at the gas pump. We find this wholly inadequate and dangerous.

OPEI is asking members of Congress to halt the sale of E15 and not ask consumers to bear the brunt of this hasty decision. Then, revisit our renewable fuel policy and make sure we introduce a biofuel that is safe and sustainable. If we truly believe in energy independence, it shouldn’t come at the price of putting our citizens at risk.

Maine’s action to preempt the known problems of E15 should be a model for other states who wish to protect their citizens from the dangers of this new fuel blend.

Teske Re-Elected Chairman, Dan Ariens as Vice-Chair of Wisconsin Business Group


Briggs and Stratton Corp. chairman, president and chief executive officer Todd Teske was re-elected chairman of Wisconsin Manufacturers & Commerce, the state’s chamber of commerce and largest business association, in a vote of the WMC Board today.

Daniel Ariens, president and CEO of Ariens Company, was re-elected vice chair at the WMC annual board meeting at the Pfister Hotel in Milwaukee.

“Wisconsin has made great strides in the past two years improving our business climate, but we can do even more,” said WMC president and CEO Kurt Bauer. “We have a real opportunity to build on our successes and get into the Top 10 pro-business states in the nation.”

WMC will continue to pursue a broad public policy agenda aimed at cutting taxes, reforming regulation relief, lawsuit reform, workforce development and infrastructure improvements, Bauer said.

In addition, Tod Linstroth, senior partner and  member of the management committee at Michael Best & Friedrich LLP, was re-elected secretary of the WMC, and Timothy Christen, CEO of  Baker Tilly Virchow Krause, LLP, was re-elected treasurer.

Others elected or re-elected to WMC’s board included: Randal Baker, P and H Mining Equipment Inc.; Robert Keller, J.J. Keller & Associates Inc.; Patrick McConnell, Flash, Inc.; James McIntyre, Greenheck Fan Corp.; Scott Mayer, QPS Employment Group; Gina Peter, Wells Fargo Bank Wisconsin; Karl Schmidt, Belmark Inc.; Kristine Seymour, Humana Inc.; Karen Szyman, The Chamber of Manitowoc County; S. Mark Tyler, OEM Fabricators; and David Yanda, Lakeside Foods, Inc.

Message From OPEESA Member Stan Crader About His Latest Novel


Attached is a copy of the cover of my latest novel.  The Longest Year features a fantastic cover. The art work on the cover is worth the price of the book. And all proceeds from book sales are being donated to www.resurrectinglives.org, so there’s no way you can lose with the purchase of 2013’s best novel depicting the year leading up to one’s driver’s test.

If you’re one of those digital people, then a great deal awaits you at Amazon or Barnes & Noble. The eBook version of The Longest Year is now available for only $2.99. And it’s now possible to purchase an eBook and send as a gift. What will they think of next?

The Longest Year begins while the band of boys anguish in those final days before the driver’s test and then follows them along during their adventures on the open road. The story has no political or religious agenda, just a simple nostalgic journey for the reader. 

It’s a story that will be good for the soul and the proceeds help our veterans.

Cheers,
Stan Crader – www.stancrader.com




Thursday, January 24, 2013

Briggs Reports Results for 2nd Quarter and First Six Months of Fiscal 2013


MILWAUKEE, Jan. 24, 2013 -- Briggs and Stratton Corporation today announced financial results for its second fiscal quarter ended December 30, 2012.

Highlights:

•           Second quarter fiscal 2013 consolidated net sales were $439.1 million, or 2.0% lower than the second quarter of fiscal 2012.
•           Fiscal 2013 second quarter consolidated net income excluding restructuring charges was $3.7 million, or $1.0 million higher than the net income of $2.7 million in the second quarter of fiscal 2012.
•           The Company's restructuring program started in fiscal 2012 achieved pre-tax savings of $19.1 million during the first six months of fiscal 2013.
•           The Company recorded pre-tax restructuring charges of $6.6 million ($4.3 million after tax or $0.09 per diluted share) during the three months ended December 30, 2012.
•           Completed the acquisition of Companhia Caetano Branco, of Brazil ("Branco"), further expanding the Company's geographic footprint in the developing region of Brazil.

"Sales of portable and standby generators in response to Hurricane Sandy were offset by lower sales of snow throwers and engines for snow throwers in the U.S. and a significantly weaker market for lawnmowers in Australia, our third largest market," said Todd Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation. "Sales of lawnmower engines to our U.S. OEM customers continue to show growth over last year as dealers and retailers prepare for an anticipated improvement in this year's lawn and garden season after last year's drought in the U.S." continued Teske. "We continue to be pleased with the execution and the financial impact of the cost reduction activities that we began last year which are positively impacting the results of both our engines and products businesses."

Consolidated Results:

Consolidated net sales for the second quarter of fiscal 2013 were $439.1 million, a decrease of $8.9 million or 2.0% from the second quarter of fiscal 2012. Fiscal 2013 second quarter consolidated net loss including restructuring charges was $0.6 million, or $0.02 per diluted share. The second quarter of fiscal 2012 consolidated net income was $2.7 million, or $0.05 per diluted share.

Included in the consolidated net loss for the second quarter of fiscal 2013 were pre-tax charges of $6.6 million ($4.3 million after tax or $0.09 per diluted share) related to previously announced restructuring actions. After considering the impact of the restructuring charges, the adjusted consolidated net income for the second quarter of fiscal 2013 was $3.7 million or $0.07 per diluted share, which was $1.0 million or $0.02 per diluted share higher compared to the second quarter fiscal 2012 consolidated net income of $2.7 million or $0.05 per diluted share. There were no restructuring costs incurred in the second quarter of fiscal 2012; however, the Company did record a net tax benefit of $5.5 million in fiscal 2012 related to a reduction in tax reserves that did not recur in fiscal 2013. 

For the first six months of fiscal 2013, consolidated net sales were $748.1 million, a decrease of $97.2 million or 11.5% when compared to the same period a year ago. The consolidated net loss for the first six months of fiscal 2013 was $17.2 million or $0.37 per diluted share. The consolidated net loss for the first six months of fiscal 2012 was $2.5 million or $0.05 per diluted share.

Included in the consolidated net loss for the first six months of fiscal 2013 were pre-tax charges of $11.8 million ($7.6 million after tax or $0.16 per diluted share) related to the aforementioned restructuring actions. After considering the impact of the restructuring charges, the adjusted consolidated net loss for the first six months of fiscal 2013 was $9.5 million or $0.21 per diluted share, which was a decrease of $7.0 million or $0.16 per diluted share compared to the first six months of fiscal 2012 consolidated net loss of $2.5 million or $0.05 per diluted share. There were no restructuring costs incurred in the first six months of fiscal 2012.

Engines Segment fiscal 2013 second quarter net sales were $274.2 million, which was $11.9 million or 4.2% lower than the second quarter of fiscal 2012. This decrease in net sales was driven by reduced shipments of engines used on snow thrower equipment in the North American market and walk mowers in the Australian market. Sales were also impacted by an unfavorable mix of engines sold that reflected proportionately lower sales of large engines and reduced pricing as a result of lower year-over-year material costs.

The Engines Segment adjusted gross profit percentage for the second quarter of 2013 was 20.8%, which was 3.6% higher compared to the second quarter of fiscal 2012. The adjusted gross profit percentage was favorably impacted by 4.2% due to lower manufacturing costs, partially offset by the planned price decrease. The lower manufacturing costs resulted from start-up costs incurred in fiscal 2012 associated with launching our phase III emissions compliant engines, lower material costs and $2.5 million of cost savings as a result of restructuring actions initiated in fiscal 2012.

The Engines Segment engineering, selling, general and administrative expenses were $43.9 million in the second quarter of fiscal 2013, a decrease of $3.2 million from the second quarter of fiscal 2012 primarily due to lower compensation costs of $2.3 million as a result of the previously announced global salaried employee reduction and reduced selling expenses, partially offset by $0.7 million of increased pension expense compared to the same period last year. 

Engines Segment net sales for the first six months of fiscal 2013 were $438.7 million, which was $50.8 million or 10.4% lower than the same period a year ago. This decrease in net sales was primarily driven by reduced shipments of engines used on snow thrower equipment in the North American market as well as lower sales to OEM customers in the Australian and Asian markets, an unfavorable mix of engines sold that reflected proportionately lower sales of large engines and unfavorable foreign exchange of $1.6 million.

The Engines Segment adjusted gross profit percentage for the first six months of 2013 was 18.9%, which was 1.3% higher compared to the first six months of fiscal 2012 due to lower manufacturing costs. The lower manufacturing costs improved gross margin by 1.1% due to $4.7 million of cost savings as a result of fiscal 2012 restructuring actions, 1.8% attributable to manufacturing cost improvements because of start-up costs incurred in fiscal 2012 associated with launching our phase III emissions compliant engines, partially offset by 1.6% due to the unfavorable absorption of fixed manufacturing costs as a result of a 6% reduction in engines built.

The Engines Segment engineering, selling, general and administrative expenses were $86.1 million in the first six months of fiscal 2013, or $3.3 million lower compared to the first six months of fiscal 2012 primarily due to lower compensation costs of $4.6 million as a result of the previously announced global salaried employee reduction and reduced selling costs in response to the softness in the global markets, partially offset by $2.1 million of increased pension expense compared to the same period last year.

Products Segment fiscal 2013 second quarter net sales were $197.5 million, a decrease of $17.9 million or 8.3% from the second quarter of fiscal 2012. The decrease in net sales was primarily due to reduced sales of snow thrower equipment and related service parts due to the lack of meaningful snowfall in the U.S. and reduced sales of lawn and garden equipment as a result of unusually dry conditions in the North American and Australian markets. This decrease was partially offset by higher shipments of portable and standby generators due to Hurricane Sandy and slightly improved pricing on lawn and garden equipment sold in the North American market.

The Products Segment adjusted gross profit percentage for the second quarter of 2013 was 10.6%, which was 1.8% lower compared to the second quarter of fiscal 2012. The adjusted gross profit percentage decreased 4.0% due to unfavorable absorption and reduced efficiencies associated with a 49% decrease in production. The McDonough, Georgia manufacturing facility was temporarily idled for four weeks in the second quarter of fiscal 2013 to reduce inventory levels in response to a decline in market demand for snow and lawn and garden products and to re-tool the plant for new products to be launched for the upcoming spring season. This decrease was partially offset by a benefit of 2.2% due to cost savings of $4.4 million as a result of restructuring actions. The benefit of implementing price increases on domestic lawn and garden equipment sales was offset by an unfavorable mix of products sold that reflected fewer sales of higher margin service parts as well as lower sales of lawn and garden products in Australia.

The Products Segment fiscal 2013 second quarter engineering, selling, general and administrative expenses were $25.4 million, a decrease of $0.9 million from the second quarter of fiscal 2012. The decrease was attributable to lower compensation costs of $0.7 million as a result of the previously announced global salaried employee reduction and reduced selling costs in response to the softness in the global markets.

Products Segment net sales for the first six months of fiscal 2013 were $370.8 million, a decrease of $79.9 million or 17.7% from the same period a year ago. The decrease in net sales was primarily due to lower sales volumes of snow equipment due to a lack of meaningful snowfall in the U.S and reduced sales of lawn and garden equipment resulting from prolonged drought conditions in North America and as a result of our decision to exit the sale of lawn and garden equipment through national mass retailers. This decrease was partially offset by improved pricing.

The Products Segment adjusted gross profit percentage for the first six months of 2013 was 11.8%, which was 0.3% lower compared to the first six months of fiscal 2012. The adjusted gross profit percentage benefited from cost savings of $8.4 million as a result of restructuring actions initiated in fiscal 2012 as well as increased pricing. Offsetting this was the unfavorable impact of reduced absorption and inefficiencies associated with a 43% decrease in production throughput. As previously indicated, we reduced production volumes in the first six months of fiscal 2013 in order to manage inventory levels in response to a decline in near-term market demand.

The Products Segment engineering, selling, general and administrative expenses were $48.8 million in the first six months of fiscal 2013, a decrease of $2.7 million from the first six months of fiscal 2012. The decrease was attributable to lower compensation costs of $1.4 million as a result of the previously announced global salaried employee reduction and reduced selling expenses in response to the softness in the global markets.

Corporate Items:

Interest expense was lower compared to the prior year periods by $0.2 million and $0.1 million for the second quarter and first six months of fiscal 2013, respectively.

The effective tax rate for the second quarter and first six months of fiscal 2013 was 156.2% and 27.8%, respectively, compared to 195.6% and 63.9% in the same respective periods last year. The second quarter and first six months of fiscal 2013 include a tax expense of $1.0 million primarily driven by non-deductible acquisition costs and un-benefitted losses for certain foreign subsidiaries. The second quarter of fiscal 2012 reflected a tax benefit of $5.5 million in spite of a loss before taxes of $2.8 million due to the settlement of U.S. audits and the expiration of a non-U.S. statute of limitation period in the second quarter of fiscal 2012.

Financial Position:

Net debt at December 30, 2012 was $228.7 million (total debt of $246.9 million less $18.2 million of cash), slightly lower from the $229.1 million (total debt of $243.0 million less $13.9 million of cash) at January 1, 2012. Cash flows used in operating activities for the first six months of fiscal 2013 were $75.4 million compared to $165.0 million in the first six months of fiscal 2012. The improvement in operating cash flows was primarily related to lower working capital needs in the most recent period associated with decreased receivables, lower production levels and planned inventory reductions, partially offset by contributions to the pension plan of $16.2 million in fiscal 2013.

Restructuring:

The Company's execution of its previously announced restructuring actions remains largely on schedule. In the second quarter of fiscal 2013, the Company announced changes to its defined benefit pension plan that included freezing accruals for all non-bargaining employees effective January 1, 2014. This plan change resulted in the Company recognizing a pre-tax curtailment charge of $1.9 million in the second quarter of fiscal 2013. In addition to the benefit plan changes, the Company has made progress towards finalizing its exit from the Newbern, Tennessee and Ostrava, Czech Republic manufacturing facilities and the consolidation of its Auburn, Alabama plant. Given the incremental demand for engines and portable generators resulting from storms that occurred in the first six months of fiscal 2013, the Auburn plant consolidation will extend into fiscal 2014. As noted previously, pre-tax restructuring costs for the second quarter and first six months of fiscal 2013 were $6.6 million and $11.7 million, respectively. The total estimated pre-tax expense related to restructuring actions in fiscal 2013 is expected to be $12 million to $22 million. In addition, the Company continues to anticipate pre-tax savings associated with restructuring actions of $30 million to $35 million in fiscal 2013 and $40 million to $45 million in fiscal 2014.

Share Repurchase Program:

On August 10, 2011, the Board of Directors of the Company authorized up to $50 million in funds for use in a common share repurchase program with an expiration of June 30, 2013. On August 8, 2012 the Board of Directors of the Company authorized up to an additional $50 million in funds associated with the common share repurchase program and an extension of the expiration date to June 30, 2014.  The common share repurchase program authorizes the purchase of shares of the Company's common stock on the open market or in private transactions from time to time, depending on market conditions and certain governing loan covenants. During the first six months of fiscal 2013, the Company repurchased 1,053,125 shares on the open market at an average price of $18.26 per share.

Branco Acquisition:

The Company also announced on December 7, 2012, that it had completed the acquisition Branco for approximately $57 million in cash, adjusted for certain liabilities. Branco is a leading brand in the Brazilian light power equipment market with a broad range of outdoor power equipment used primarily in light commercial applications in Brazil. Todd Teske commented on the acquisition stating, "The acquisition of Branco is another step forward in executing our strategic initiatives to grow in higher margin products in emerging regions of the world.  The Branco brand is the most recognized brand in light power equipment in Brazil. We welcome all of Branco's valued employees and dealers to Briggs and Stratton." Due to the timing of completing the acquisition, the sales and profitability were not significant to the Company's fiscal second quarter results.

Outlook:

For fiscal 2013, the Company continues to project net income to be in a range of $60 million to $75 million or $1.25 to $1.55 per diluted share prior to the impact of any additional share repurchases and costs related to our announced restructuring programs. The Company previously indicated that it would exit sales of lawn and garden products to national mass retailers. The estimated impact of exiting this business in fiscal 2013 is approximately $100 million of reduced sales.

Although sales in the first six months of fiscal 2013 were favorably impacted by sales of generators in response to power outages during Hurricanes Isaac and Sandy, drought conditions and a lack of meaningful snowfall in a significant portion of the U.S. and a reduction in sales demand from many of our international markets have continued to negatively impact shipment volumes, offsetting the storm benefit. Our fiscal 2013 consolidated net sales are projected to be in a range of $1.95 billion to $2.15 billion.

Operating income margins are expected to improve over fiscal 2012 and be in a range of 5.1% to 5.6% and reflect the positive impacts of the restructuring programs announced during fiscal 2012. Interest expense and other income are estimated to be approximately $18 million and $7 million, respectively. The effective tax rate is projected to be in a range of 31% to 34%, and capital expenditures are projected to be approximately $50 million to $60 million.   

EETC Appoints Eric Sides as New Executive Director


January 22 -- The Board of Directors of the Equipment and Engine Training Council (EETC) recently announced the appointment of a new Executive Director. Erik Sides was chosen to succeed Jim Roche with the appointment effective upon Roche’s retirement Dec. 17.
                                                                               
Sides has been in the power equipment industry for the past 15 years, working as a training manager for turf equipment manufacturer Jacobsen. In addition to developing technical training programs, manuals and videos for turf equipment, Sides worked closely with several engine manufacturers, including Kubota, Honda and Briggs and Stratton. He has also served as an active EETC board member for the past eight years.

“Erik has been a very involved, influential and respected EETC board member,” said Roche. “With Erik serving as Executive Director, I believe I am leaving the EETC in great hands. He has the knowledge, experience and respect to keep the EETC moving in the right direction.”

The EETC is grateful to Roche for his 12-year tenure as Executive Director. “Jim played a big role in getting the EETC where it is today,” said EETC President Ed Cole. “It was his vision that helped expand our reach and create the respected organization that the EETC has become today.”

The EETC offices have been relocated to York, S.C. The EETC’s new contact information is: 3880 Press Wallace Drive; York, SC 29745; phone (803) 222-6149; and eetc at eetc.org. The EETC’s 17th annual conference will take place April 10-13 in Bloomington, Minn. For more information, visit the EETC’s website at www.eetc.org.

No. 1 in Snow Jobs


In Syracuse, the forecast calls for shoveling.

New York's fifth-largest city gets the most snow in the U.S., with 103 inches per year, according to AccuWeather. Erie, Pa., comes in second at 101 inches, and Flagstaff, Ariz., ranks third at 100 inches.

These are the lands of frosty fingers and aching backs. Making the job a little easier, though, is a snowblower, which can reduce the strain and lifting of shoveling.  Spread Sheet looked into snowblower sales to see which region ranks No. 1. Coming in first is the Northeast, where 40% of the country's snowblowers are sold, according to data from Sears Holdings. Next is the Midwest, where 28% of Sears's snowblowers are sold. The Northwest accounts for 20% of sales, and the South and Southwest get 12% of sales.

Demand for snowblowers is highest in December, when 29% of all units are sold, with sales tapering down to 10% in January.

Snowblowers have become easier to maneuver in recent years, says Dean Schwartz, vice president and general merchandise manager for lawn and garden at Sears Holdings. Two-stage snowblowers are the most powerful and effective, experts say. These work by first picking up snow with a metal auger and then shooting the snow out of a chute from a fast-spinning impeller.

Of course, many still opt for the tried-and-true shovel.

"Even if you have a really good snowblower, it can't get into the nooks and crannies, like steps and stairs," says Martin Tirado, a Milwaukee resident and executive director of Snow & Ice Management Association, a trade organization for the snow-removal industry. "Everyone has a shovel."

Karen Benvin Ransom, associate broker at Houlihan Lawrence, owns a plastic shovel but rarely uses it. Instead, she hires a plow service to clear the 10,000-square-foot driveway at her Katonah, N.Y., home. "I don't even have to call them," she says. "They just show up."

Each plowing costs just under $100, she says, adding that there were 26 snowstorms during her first winter at the house about 20 years ago. "That was a fortune, an absolute fortune," Ms. Benvin Ransom says. The snow has slowed since then—the service has only had to clear away snow twice this season.

Paul Vanderzon, chief executive of Deneigement Vanderzon, a snow-clearing service just outside Montreal, has about 3,400 residential clients within four square miles. Using commercial-grade snow-removal equipment, a skilled driver can clear 150 driveways in four hours, he says.

Last year's mild winter caused his clientele to dip slightly, Mr. Vanderzon says. Although more people are signing up this year, he says "there are still those die-hards who decide not to sign on and whip out the shovel instead.

Sanette Tanaka       www.professional.wsj.com

Friday, January 18, 2013

Is The Dry Season Over for Briggs and Stratton?


The Milwaukee-based manufacturer hopes global diversification and a focus on higher margin products will help it escape the effects of drought and add green to its bottom line.

January 17 -- Too little water, and then too much. That's a very abbreviated description of the conditions in the United States that tugged at Briggs and Stratton in 2012. For the outdoor power equipment company, drought and then flooding had very different results.

Last year, a light snow season impacted Briggs and Stratton's sales of snow blowers and also helped set up the most severe drought to hit the country in 50 years. According to the Department of Agriculture, approximately 80% of the agricultural land in the country was impacted by drought conditions.

Briggs and Stratton's CEO, Todd Teske, 47, notes that 2012 started off hopefully as there were signs that the U.S. housing market had begun to recover. That and a warm spring helped company sales get off to a good start. But then came the drought and lawnmower sales tanked. "I didn't mow my lawn for seven weeks," he recalls.

Briggs and Stratton's second largest market, Western Europe, didn't fare much better. "Europe had been extremely strong for us up until 2012," says Teske, but austerity measures in Greece and other parts of the eurozone took a huge bite out of consumer confidence. Teske says sales in the European market were off 15% year over year. 

The company finished its fiscal year 2012 in July with sales of $2.1 billion, down 2.1% from fiscal 2011. The first quarter of fiscal 2013 fared even worse, as sales dropped 22.2% to $309 million.

Still there were bright spots last year for Briggs and Stratton in Australia and emerging markets such as Latin America. They reinforced Teske's decision to pursue global diversification as one element of a three-part strategy that also included growing the company's core engine business and focusing on higher margin products. That strategy, announced in April 2012, prompted a series of restructuring moves. The company will no longer sell lawn and garden products at national mass retailers, though its engines will still be found in garden equipment OEMs who sell through those channels. Instead, Briggs and Stratton will focus on higher margin products sold through its Simplicity, Snapper and Ferris dealers.

Teske also announced that Briggs and Stratton is reducing its white collar workforce by 10% (approximately 210 employees), explaining that the company does not expect the lawn and garden market to return to the peaks seen in 2004-05 "for the foreseeable future." 

Briggs and Stratton shifted production of horizontal shaft engines -- typically used in power generators and pressure washers -- from its Auburn, Ala., plant to its factory in Chongqing, China or to third parties in Southeast Asia. Those engines are sold in both China and the U.S. In 2007, Briggs and Stratton had moved manufacturing of smaller horizontal shaft engines to the Chongqing plant. The company laid off 250 employees as a result of the move.

The company had already decided to close its plants in Newbern, Tenn., and Ostrava, Czech Republic. It also downsized the workforce by 210 and reconfigured its Poplar Bluff, Mo., factory.

As a result of those restructuring moves, Briggs and Stratton expects to save $30 to $35 million in fiscal 2013 and $40 to $45 million in fiscal 2014.

Teske says he has been communicating constantly inside and outside the company to make sure that workers and investors understand what the plant closings represent. "Simply because we are downsizing doesn't mean that we are in trouble. It means we are refocusing and making sure we are a really great company going forward," he says. "This is an exciting place to be."

While drought severely impacted Briggs and Stratton in 2012, the company has benefited from damaging storms that knocked out power and boosted the sales for both portable and standby generators. Its fiscal 2012 results were helped by both Hurricane Irene and major snow storms that hit the east coast.

Teske tells IndustryWeek the company typically keeps a "storm stock," an inventory of portable generators in strategic locations around the country. Working with its channel partners, those generators are put on trucks and shipped to where a storm is occurring.

Superstorm Sandy followed a typical pattern in spurring portable generator sales, Teske observes. "We were moving generators from throughout the country to the affected areas on the east coast," he says. But he adds that it was unusual in that it was a late season storm, occurring when inventory stocks were typically being depleted so it did not have the same magnitude of impact on sales as an earlier storm would have had.

Storms such as Sandy also prompt consumers to purchase standby generators, Teske says. "A lot of people say they want something that is more permanent. They say, 'I don't want to have to do anything when the power goes out. I want an automatic solution.' The standby generator sits next to your house, turns off and on once a week to make sure everything is good and when the power goes out, everything is automatic."

Briggs and Stratton admits that the potential impact of drought and storms could "cause wide variability in our sales results for fiscal 2013." The company has projected sales at $1.95 to $2.15 billion for the current fiscal year.

The company is trying to fight some of this unpredictability by expanding into growing markets. Last month, it announced that it had purchased Companhia Caetano Branco in Brazil for $57 million. Briggs and Stratton said Branco is a leading brand in the Brazilian light power equipment market, producing generators, water pumps and light construction equipment. The company sells its products through a network of 1,200 dealers throughout Brazil.

"With Branco's brand strength, employees and customer base, we will have an established, well performing company in a country that has aggressive infrastructure needs and a history of higher growth opportunities, which can only add to the operating performance of our company," says Teske.

The company is also betting heavily on innovation to drive improved results. In October 2010, Teske moved the company's research and development operations out of the individual business groups and had them report directly to him.

"Over the last year, we have made tremendous headway in filling the innovation pipeline," says Teske. "This upcoming season, we are introducing 40 new models of lawn and garden and outdoor power equipment for our dealer channel. We have never done that much."

Teske says the company doesn't typically take a blue sky approach to innovation. "We have user-driven innovation. We do a lot of consumer research. We also do a fair amount of going out and observing the users of our products and really trying to figure out the problems they are having. We come back and ask, 'How can we solve their problem?' That is how we look at product development."

Teske says Briggs and Stratton also tries to be "as simple as we can in new product development." He notes that there are many companies "are viewed as innovative, but really what they are doing is taking what is out there already and repurposing or repackaging it. When you look at it, it was pretty simple but at the end of the day it was really innovative."

"Focusing on the consumer of the goods is the key to product innovation," says Teske.

While the company is focused on innovation, Teske says it holds to its traditional belief in the importance of U.S. manufacturing. On December 3, 2012, the company announced that it had produced its 70 millionth small engine at its Murray, Ky., plant since its opening in 1985. The 300,000-square-foot facility performs die casting, machining and assembly of engines and related components.

Teske says the company's U.S. workforce is "very productive and very efficient." Still, like many other U.S. manufacturers, Briggs and Stratton has been investing in advanced tooling in an effort to boost its productivity.

"It really comes down to helping our workers be more productive," Teske says. "I have been with company 16½ years. When I would tour one of our plants back in 1996 when I started, we would have a handful of robots. Now there are a lot more robots, perhaps more robots in one cell than we had in an entire plant back then. Obviously, the cost of robotics and automation has come down dramatically over the last several years and it makes it more economical. What that has caused us to do is enhance skill sets and go out and look for people who have different skill sets than we had in the past."

Teske has been involved in a number of efforts at the local, state and national level to address the skills gap. "It's real," he says emphatically. "As technology becomes more important in our plants, we're doing a lot to train our workers and to work cooperatively with those who can help educate and develop those skills so we can have a pipeline of workers that meet the needs of today's manufacturing environment."

After three years as a CEO, Teske says he has learned that constant, consistent communication is critical to his job. "It is really important to make sure our employees understand where we are headed and what we need them to do. Being available to our employees and making sure we are doing all the right things -- that is absolutely critical." 

Teske employs a variety of means to facilitate that communication. "We have quarterly meetings with our employees. We shut down the production floor for an hour or two and I talk to all of our employees. I do video blogs every two weeks on different topics. We post those on our Intranet. We have lunches where we'll get 10-15 employees together once a month, at random. We sit around and talk about what is going on and take their questions. It is one of those things where as a CEO from an internal perspective, you just can't communicate enough. And then also you need to meet with customers on the external side, to make sure you understand what is going on in the field."

Now, at the start of a new year and new political season, Teske says he hopes there is "an understanding and realization by policymakers that manufacturing is really important. It is not just clean tech or high-tech. It is basic metal bending, metal forming, metal machining that makes this country great. Policies and regulation and legislation that support that are significantly important to the future of our country."

Steve Minter    www.industryweek.com  


Made In America: Generators


January 9 -- When the lights go out, most businesses idle their production until the electricity is restored by the power company.  However, a periodic disruption in utility service is exactly the time when the power generation industry’s products spring into service.

Generators provide backup power to homes and businesses, generally delivering between 800 watts and 9 megawatts of power through diesel, propane, natural gas, or bio-fuel sources. The industry has attracted notable attention in recent years as increasingly frequent storms make generators an important infrastructure asset for a wide range of businesses.  Best of all, many of the leading products are made right here in America.

The #1 manufacturer of home generators is Wisconsin-based Generac.  Founded in 1959, the company makes a variety of standby and portable generators through four manufacturing plants located in Wisconsin and Georgia.

While its products have historically been powered by diesel and propane fuels, Generac has been developing products that utilize cleaner-burning natural gas or bio-fuel in order to comply with government emissions rules.  In addition, the company has been diversifying into related markets through the acquisition channel, including the 2011 purchase of Magnum Products, a leading provider of light towers and mobile generators.

In its latest fiscal year, Generac reported revenues and adjusted EBITDA of $792.0 million and $188.5 million, increases of 33.6% and 20.6%, respectively, versus the prior year.  The company's strong sales were aided by a greater level of purchases by U.S. customers who were affected by recent storm activity, as well as its limited exposure to weakening international economies.

While operating margins slipped compared to the prior year level, the major cause of the decline was a shift to lower priced portable generators, rather than inefficiencies in its operations.  Gross margins have also been affected somewhat by rising commodity prices, but the company has been able to hedge their significant raw material needs and has found domestic sources for over half of its products’ components.

In FY2012, Generac has continued to generate solid results, with increases in revenues and adjusted EBITDA of 59.0% and 102.0%, respectively, compared to the prior year period.  All of the company’s segments have enjoyed double digits gains in sales, led by the commercial unit’s 81.9% increase.

While healthcare organizations have long recognized the need for generators, a wider range of businesses are adding power-related products to their mission-critical infrastructure.  Generac’s profits have also benefited from more favorable commodity prices, due to slower economic growth in emerging markets.  The higher profitability has led to strong operating cash flows, with $129.2 million generated in the first nine months of the year, which has allowed the company to return money to shareholders.

Generac estimates that only 2.5% of U.S. residential homes have emergency generators, which represents a significant growth opportunity for the company.  Given the company’s narrow focus on the generator market, though, where can investors find industry investments with greater product diversity?  One avenue would be to look at the manufacturers of engines for power generation products.  Two of the leading companies in this area are Briggs & Stratton and Cummins.

Founded in 1908, Briggs & Stratton is the largest producer of air-cooled gas engines for outdoor power equipment, with leading positions in the portable generator and power washing product lines.  While the company continues to derive the majority of its business from engine sales, it moved into the generator business through the acquisition of Generac’s portable generator unit in 2000.

Like Generac, Briggs & Stratton manufactures products in U.S. based facilities, although it has moved some production overseas.  In its latest fiscal year, the company reported declines in revenues and operating income of 2.1% and 14.5%, respectively, compared to the prior year period.  While sales of power generation products rose during the period, engine sales declined 13% due to Briggs & Stratton’s significant exposure to contracting European markets.  Despite weak current profit margins, Briggs & Stratton's restructuring activities should provide solid operating leverage for an eventual rebound in international economies.

Founded in 1919, Cummins is a global manufacturer of commercial engines and related components, as well a developer of power generation products and systems.  The company has built a $13 billion business around the sale of diesel and natural gas engines, which generates over 60% of total sales, and Cummins has been a beneficiary of rising demand for construction equipment in the fast-growing economies of China, Brazil, and India.

In FY2012, though, the company has been affected by the same global financial pressures and negative factors that have hurt Briggs & Stratton.  In the first six month of the year, Cummins reported declines in revenues and operating profit of 0.6% and 7.6%, respectively, versus the prior year period.  

Robert Hanley      www.beta.fool.com

Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.


Thursday, January 17, 2013

Jim Roche Selected as 2012 OPE Winner of Most Influential People in the Green Industry


January 16, 2013 – “Green Media, a division of M2MEDIA360 -- publisher of Outdoor Power Equipment, Landscape and Irrigation, Arbor Age and SportsTurf -- is proud to present the 2012 selections for “Most Influential People in the Green Industry.”

Green Media’s “Most Influential People in the Green Industry” were nominated by their peers for their ongoing contributions to the Green Industry. The professionals selected for this honor were chosen from throughout the Green Industry, and exemplify a commitment to the industry and a widespread influence on their peers.

Green Media congratulates all of those selected as “Most Influential People in the Green Industry.”

Jim Roche
Executive Director
Equipment & Engine Training Council, Inc.

As executive director of the Equipment & Engine Training Council, Inc. (EETC) since 2000, Jim Roche has been responsible for handing out dozens of awards to his peers for their outstanding contributions to the EETC, a non-profit association whose mission is to address the shortage of qualified service technicians in the outdoor power equipment industry through education, certification and training.

So, after all that Roche has accomplished with the EETC -- as well as at the dealer, distributor and manufacturer levels during his nearly 35-year career in the OPE industry -- it is rather fitting that he was selected as one of the “Most Influential People in the Green Industry,” shortly before he retired on Dec. 17.

"Jim Roche brought professionalism to the EETC in his role as Executive Director,” said Jim Starmer, senior advisor, Servantage Dixie Sales. “He helped make the EETC an organization highly respected throughout the OPE industry, focused on the education and training of skilled technicians, for the benefit of all industry participants. It was a huge task, but Jim, with his wife Rachel at his side, succeeded in providing professional leadership to the EETC, strengthening an organization that will benefit our industry for years to come. As a former board member of the EETC, I am honored and proud to have known and worked with Jim and Rachel, to be able to call them friends, and to thank them for what they have accomplished for our industry."

And Roche is quick to acknowledge that his wife, Rachel, had a tremendous amount to do with his success. “Let me just say that when I married her, I married up,” he said. “She is extremely intelligent. On top of that, she’s extremely supportive. I could have never done it without her.”

The EETC was founded in 1996 and incorporated in 1997, with Virgil Russell serving as its first executive director until he underwent quadruple bypass surgery and stepped down in 2000. Roche stepped in and worked tirelessly to take the association to new heights. For starters, he developed a strategic plan for the EETC’s mission, led the development and implementation of the EETC’s school accreditation program, managed the EETC’s national technician certification program, and launched the EETC’s website, among many other things.

Establishing the school accreditation program was not only one of Roche’s proudest accomplishments with the EETC, but it also set the tone for how he ultimately ran the association, which is a diverse group currently made up of approximately 450 industry professionals -- including manufacturers, distributors, dealers, associations and educators.

“It was a long, hard struggle because we had to have meetings with everybody, committee meetings, to kind of lay out what should be in that manual; and it took a lot of hard work and there was some ‘taking off of the hat,’ so to speak, and I’ll use that terminology loosely,” he said. “Each manufacturer or distributor walked in with his corporate hat on, and basically what we had to do was say, ‘OK, well, take off your corporate hat. We’re all working together for a common goal here. This common goal is going to help all of us, whether there’s people that are not here from certain manufacturers or all of the people that are here. We’re sharing information for a positive purpose, and that is to promote our industry and to supply the industry that is constantly growing and developing new products to having technicians that can repair them.’ And so that was a big factor too is that everybody comes in, and you’re no longer ‘Bob from Husqvarna.’ You’re just ‘Bob,’ and everybody knows you, and it’s like, ‘Well, where does he work?’ Well, it doesn’t matter where he works. He’s here to support the organization.”

Recognizing those who support the EETC and its mission has always been of the utmost importance to Roche, who established a formal awards reception/dinner, followed by live entertainment, on the final evening of the annual conference. Roche often became so overcome with emotion before or during the awards presentations that he would call on others to handle the honors on his behalf.

When asked what makes the awards presentations such an emotional experience for him, Roche replied, “I’ve worked with these people for years. They’ve become family to me. And it gets me to the point, when I think about it, I get very emotional because I love these guys and because they deserve the award that they’re going to get. So, what ends up happening for me is that it all comes to the surface at that point. I’m very excited that they’ve been chosen to get the award, number one. But to deliver the award, it’s like I’m delivering the award to either one of my kids or my best friend in the whole world. We work with people in our entire business lives. We find some that we really can connect with. We find others that we don’t connect with very well. However, in the service industry, it seems to be a little bit different. It seems to be less dog-eat-dog, or I’m going towards the top -- I’m going to be the best of this and the best of that. That never seems to play into the side of service. The service guy’s attitude seems to be, ‘I’m going to do the best job I can for this manufacturer or this distributorship, and represent the product as best I can.’”

Pre-EETC days

Given Roche’s lifelong journey to become executive director of the EETC, it is easy to see why his emotions would get the best of him when presenting the awards. Born and raised in Milwaukee, Wis., he graduated from Washington High School. He attended a local tech college, the Milwaukee Institute of Technology, where he pursued Commercial Art as a career path, but found it really wasn’t enough for him. He then attended a four-year college, Stout State University (now known as the University of Wisconsin-Stout) in Menomonie, Wis., where he majored in Fine Arts.

While attending college, Roche became a professional musician, singing and playing guitar among other instruments, and then traveled around the country, performing mostly folk music at different college campuses. Although he couldn’t make a living playing music, he said it helped him become comfortable standing up in front of people.

When his first wife became pregnant, Roche needed to figure out a way to make a living, which prompted him to pursue a career as a service technician. He enrolled in the power equipment program at what is now known as Chippewa Valley Technical College in Eau Claire, Wis., and earned a two-year associate’s degree in Small Engine & Chassis Repair. Despite graduating in a first-place tie in his class, Roche had no luck finding a job in the power equipment industry, so he decided to open his own dealership, H&R Small Engine Repair, in Osseo, Wis. Roche ran the dealership for about three years before he and his first wife split up, and she and their two children moved to Chicago.

“Ironically, she was looking for an apartment,” Roche said, “and the prospective landlord said, ‘Well, what does your husband do (for a living)?’ And she said, ‘Well, he’s in the small-engine business and has his own shop.’ And the guy said, ‘Wow. That’s very interesting because my company is looking for a guy just like that. Why don’t you have him call Ken Anderson (director of technical services) at Echo Incorporated?’And so, I did that, because I was planning to move to the Chicago area anyway, and ended up getting a job at Echo Incorporated.”

Roche worked as the Eastern Regional Service Manager at Echo from 1981 to 1984, but found that he was missing a connection between the dealership and manufacturer levels, so he went to work for a distributor, Virginia Outdoor Equipment in Charlottesville, Va., as service manager from 1984 to 1985. He then decided to return to the Midwest and work for a manufacturer, landing a job as the North American Service Manager at Husqvarna, which was then based in Itasca, Ill., from 1985 to 1990. When Husqvarna announced that it was moving to Charlotte, N.C., Roche decided not to return to the South, opting to stay closer to his son and daughter. He became president of Service Center/USA Inc. in Glenview, Ill., from 1990 to 1992. Roche returned to his home state to serve as Technical Service Manager at Scag Power Equipment in Mayville, Wis., from 1992 to 2000 before he became the executive director of the EETC and influenced the lives of so many people.

“Jim was always looking to promote an industry that he truly believes in,” said Dave Worden, SkillsUSA program director, EETC board member and long-time friend. “It allowed people like me to present and deliver information with a passion that is becoming rare. He gives, and will continue to give, you his best and support the cause and also look at how he can help out others. He is a mentor, a passionate leader, an honest man doing what he could to try and ‘pay it forward’ in an industry that was at times harsh and cold. He has a sense of humor and was always available. He looks out for others and is always ready to help advise and promote the association and the industry and its partners without the political stress showing.”

Influential people

When asked who have been the most influential people in his life, both personally and professionally, Roche was quick to name the man who gave him his first big break. “There’s been a lot of different teachers that I’ve had through my life that have influenced me a lot, but in business, it was Ken Anderson,” Roche said. “Ken Anderson taught me how to handle myself in front of groups. Ken Anderson taught me how to dress correctly for the job. He was truly, in my life, a mentor in this industry. There have been other people in the industry as well, but Ken Anderson really stands out as the first person that I met who wasn’t critical of who you were. He looked for your potential.”

Roche said the second-most influential person in his professional career has been Andy Kuczmar, who currently works at Husqvarna but was the service manager at Echo when Roche worked there. “Andy Kuczmar was a tyrant when it came to doing things correctly and would let you know if you did it wrong,” Roche said. “And in no few words, he would tell you that ‘You’re an idiot.’ And it took many, many years for me not to be an idiot in Andy’s eyes, but he was, and is still, probably one of the most influential people that I’ve ever come in contact with. He’s a genius. He knows his stuff. He knows everything about engines that could possibly be needed and constantly would test me on what I knew and what I didn’t know.”

Future plans

As for the future, the 66-year-old Roche said that one of his first plans is to get a dog in the spring. He also wants to get back to doing the things that he pushed aside for years because of his devotion to the EETC. He plans to spend more time playing music, which he currently does on Wednesday nights at a “local watering hole” in Oconomowoc, Wis., as well as devote more time to his artwork and other projects.

When asked how he would like to be remembered by his peers, Roche responded, “as a good guy who was helpful to people.” He added, “I just hope people feel that I did a good job at the EETC and that they remember me for that. Like anything, we all move on. We let the younger people who have the energy to come in and take over, and I think that’s an important thing for our industry.”

Final thoughts

For those interested in pursuing a career in the OPE industry, Roche offered the following words of wisdom: “I think this is a great industry to be in. I think it’s extremely rewarding. I think it’s not too big where you get lost. And I think it is not pretentious in how it runs its business. It’s very down to earth. If you’re in this industry to make a living, you can make a good living and also be very satisfied. What I have found is that it’s all about the inner relationships. The power equipment industry is small enough that you know an awful lot of people that are in the industry, and if you burn your bridges as you go, you’re not going to be in the industry for very long. But if you become part of it, if it becomes part of your soul, you’re going to be extremely successful and you’re going to be rewarded financially as well. But if you don’t put your soul into it, if you don’t put your heart into it, you’re just spinning your wheels and kind of wasting your time. That’s always been my philosophy of the power equipment industry.”

-- Steve Noe          www.outdoorpowerequipment.com