Monday, September 23, 2013

Propane Distributors Seek To Boost Demand with Lawn Mowers

September 19 -- The propane industry has set its sights on that symbol of American middle-class achievement: the lawn mower.

Blame it in part on the natural-gas drilling boom, which has left distributors scrambling to find new ways to increase demand for propane.

A liquid cousin to natural gas, propane is best known for home heating and backyard barbecues, although it is also used in the chemical industry and as a fuel in farm equipment. It is easier to transport in liquid form than natural gas, so it generally served areas disconnected from natural-gas pipelines.

But when domestic natural-gas production took off late last decade as companies found ways to economically tap into vast shale formations, more pipelines were built and the steady decline in propane's domestic market share accelerated.

To protect their turf, propane distributors focused first on improving the performance of farm equipment to keep agricultural customers happy. Now, the industry sees propane's role as a fuel for small engines as a growth area, says Roy Willis, head of the Propane Education and Research Council.

By promoting the benefits of propane lawn mowers—which have lower emissions, are cheaper to run and last longer—the group is betting it can grow to a 3% share of all commercial mowers sold in the U.S. by 2016 from 1% now. That would goose propane consumption by the machines to 23.8 million gallons by 2016 from about 7.9 million gallons this year.

Though propane mowers can cost more than comparable gasoline mowers (about 10% more in some cases), they can last two to three years longer because they burn so much cleaner, says Ivan Giraldo, president of landscape-maintenance firm CleanScapes Inc., which has used propane mowers in San Antonio and Austin, Texas, since 2006.

How much the push into lawn mowers will help propane retailers remains to be seen. The market for propane in mowers is much smaller than the residential market, so the industry has a lot of ground to cover. In addition, the U.S. has become a net exporter of propane in recent years—supplying countries such as Mexico, Brazil, Ecuador and Chile with propane for residential heating and cooking. That is starting to push wholesale prices up from their historically low levels of recent years, threatening propane retailers' margins.

Exports grew to about 8.7 million barrels in July 2013 from 2.7 million in July 2010, according to data provider IHS Waterborne Energy. And big exporters such as Enterprise Products Partners LP and Targa Resources Partners LP are expanding capacity in anticipation of even more growth.


Rusty Braziel, an energy-supply analyst with RBN Energy LLC, says that isn't sitting well with the propane distributors he spoke with this summer. "They were a pretty depressed bunch by the time I was through."

Tom Fowler             www.online.wsj.com    

For Stens, Move into New Building Pays Off

JASPER, Ind. – September 16 -- It’s only been a few months since Stens moved into its new facility, but the Jasper, Ind.-based company’s top executive said the move is already paying off.

Stens distributes replacement parts for lawn mowers, chain saws, golf carts and other outdoor power equipment.

Because of company growth over the years, employees were spread out among three different buildings, but the move allowed them to come back under the same roof, said Stens President Peter Ariens.

In late June, Stens moved into the former Columbus Container building, a 208,000-square-foot facility that Stens purchased and renovated. On Monday, the company hosted a ribbon-cutting to celebrate the move.

Having everyone working in the same space again has improved employee communication and creativity, Ariens said. Since the move, he said, employees have had more success coming up with new ideas and programs.

“The creative juices just flow so much better and they can bounce things off each other all through the day,” Ariens said.

The new space will also give Stens room for growth, Ariens said.

Stens first announced its plans in December 2011. At that time the company said it planned to hire up to 98 new employees by the end of 2015.

Based on those plans, the Indiana Economic Development Corp. offered Stens up to $750,000 in conditional tax credits, and the city of Jasper offered a 10-year tax abatement.

Ariens said his company is still on track to meet its job-creation goals, and has begun filling some positions.


According to information on the IEDC’s website, as of the end of last year, Stens was about one-third of the way to its goal, having added 37 of the planned 98 jobs.

Friday, September 13, 2013

Analyst Sees "Short-Term Opportunity in Briggs and Stratton"

Overview

Briggs and Stratton is the largest manufacturer of small gasoline-powered air-cooled engines for outdoors equipment. Eighty-four percent of the company's sales are to original equipment manufacturers (OEMs) for use in this equipment. Briggs and Stratton also manufactures generators and lawn mowers amongst a multitude of other garden equipment.

Financials

Briggs and Stratton maintains a leveraged balance sheet with $226 million in long-term debt. With $188 million of cash on had, the company can easily cover its fiscal obligations, and the leverage should work in favor of the investor.

As a mature company, Briggs and Stratton has generated exceptionally steady revenues over the past decade. Nonetheless, revenues have declined in eight of the past ten years.

A similar trend of declining cash flows is also of concern. In light of this, management has finally taken action and has begun significant restructuring activities which have clouded the results of the past two years. In 2013, revenues declined from $2.1 billion to $1.9 billion.

The company's income was impacted by $18.8 million in restructuring charges, and by over $90 million in goodwill impairment. $29 million in cash was also funneled to the company's underfunded pension, further hurting results.

Nonetheless, gross margins increased from 16.3% to 17.7%, something that the company attributes to lower costs and increase working capital efficiencies.

The company has aggressively returned capitol to shareholders with a variable cash dividend along share repurchases. In 2013, the company returned over $30 million in cash to shareholders via these share repurchases.

Positive Trends

While the market for landscaping equipment is relatively stable, there are indications of potential strength in the near-term future. With the strengthening economy, sales of consumer goods are rising, and that should definitely benefit Briggs and Stratton.

Although market data on year-over-year sales of lawn mowers is not widely available, by tracking interest by means of Google (GOOG) search popularity (limited to United States searches), we see a steady sinusoidal trend with consistent amplitude for three years from 2010-2012.

While interest reached the same nadir on the off-season, in 2013 interest in lawn mowers increased by almost 25% from the prior three seasons.

The divergence from the trends in lawn mower interest alone can be considered a statistical fluke, but a few more searches indicate similar trends across the industry.

Extrapolating sales from search terms is not possible, but overall, enormously increased interest in the term will almost definitely indicate future increases in sales.

In another chart, we can see the drastic effect which storms have on interest and sales of emergency generators. The peaks in the chart below directly correlate with significant storms. While the current hurricane season has been surprisingly quite, experts have predicted an above-average hurricane season. Thus, generators are a wildcard for the company and cannot be accurately incorporated into sales models.

On the heels of Briggs and Stratton's first loss in a decade, the shares are trading at a reasonable 0.5 times sales and 13.6 times expected 2014 earnings. Historically, share price has been steadily correlated with profitability, and for this reason they have underperformed this year.


An anticipated return to profitability, along with the heavily positive indicators for sales should drive the shares higher in the short-term. In the longer term, results will be dependent on management's ability to effectively restructure the company and compete in a mature industry, along with secular economic conditions in the market overall.

Marc Gilbert          www.seekingalpha.com  

The Toro Company Expands Headquarters

BLOOMINGTON, MN - Sep. 5, 2013 - The Toro Company. a leading worldwide provider of turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions, broke ground today on a $25 million expansion in Bloomington, Minnesota that the company has called home for over 50 years. The project begins the process of expanding the company’s product development and test capacities, demonstrating its continued commitment to innovation.

“We are investing in our Bloomington facility to enable our businesses to continue to meet the needs of our customers,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “With the anticipated growth of our businesses, through ongoing product development and the addition of recent acquisitions taking us into new markets, this investment will help to expand our technical capacity and further the innovation our customers expect. As we celebrate our Centennial next year, this project will help position us for the future and reinforce our commitment to innovation, our customers, and our employees.”

The 75,000-square foot expansion is scheduled for completion in the summer of 2014. Toro moved to its Bloomington, MN, location in 1952, opening a research and development facility, and later its headquarters in 1962. The last major addition to the facility came in 1997.

The construction effort is being led by Minneapolis-based Ryan Companies US, Inc. and LEO A DALY LLP is the architect on the project.

About The Toro Company
The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $1.9 billion in fiscal 2012,

Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation, and a commitment to helping customers enrich the beauty, productivity and sustainability of the land.

Since 1914, the company has built a tradition of excellence around a number of strong brands to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields. More information is available at www.toro.com .

Local Shops Fear Amazon's Expansion

September 4 -- Amazon's notoriously low prices have always given traditional retailers a run for their money. But as the online behemoth builds new warehouses to cut shipping times, small shops are getting even more nervous.

Amazon already has 40 massive fulfillment centers around the country, helping it provide remarkably speedy delivery. "Prime" subscribers get free shipping with even faster delivery: Two days, guaranteed.

But it's about to get even faster, as Amazon builds another five distribution centers this year. The company won't disclose where, but the warehouses are expected to be near several major cities -- including rumored locations outside of Manhattan.

Joe Perrotto owns Power Equipment Plus, an outdoor equipment retailer with three locations, including one outside of Philadelphia. He already keeps a close eye on what Amazon charges for things like lawn mowers and leaf blowers and tries to price his products accordingly. But faster Amazon delivery will squeeze him further.

"They'll have the convenience and immediacy of retail," said Perrotto. "Ultimately, it's going to erode our profitability as we try to offer a price advantage to counter their convenience advantage."

It's the latest in what some view as Amazon's war on small businesses. First came the rock-bottom prices. Then came the Price Check app, allowing shoppers to scan items and compare in-store prices to those on Amazon -- essentially turning independent shops into a showroom for Amazon.

Amazon didn't comment about its impact on small businesses, but spokeswoman Kelly Cheeseman did say new fulfillment centers have boosted local employment and increased demand at restaurants.

For example, Ziggy's Pizza and Sandwich Shop in Gladeville, Tenn., saw its daily deliveries jump 20% this year after Amazon's warehouse opened in a nearby town.

"It's definitely a positive for the community," said Ziggy's owner Adam Shireman.

Other small business owners welcome Amazon's expansion and hope to ride the wave with it.

Sara Selepouchin Villari produces her own line of handcrafted towels and sells them directly to Amazon, which stores them in nine warehouses across the country. It takes care of the orders, shipping and pays Villari a cut.

The more warehouses Amazon adds, the closer she is to her customers.

"During the holidays, it'll be awesome," she said. "When I have customers asking about expedited shipping, I'll be able to point them to Amazon. I'm going to go home and have dinner with my family."

Villari also owns a boutique in Philadelphia, Girls Can Tell, but she's not worried customers will turn to Amazon. While Amazon threatens stores that sell generic items easily found online, Villari has filled her shop with unique artisan products.

"A good boutique has been curated. You're going to stumble upon gifts you never knew existed," she said.

But benefiting from Amazon's new warehouses isn't an option for Meyer Dagmy, owner of the Mashern Army/Navy supply store in New York City. He tried selling through Amazon, but found it almost impossible to sell his goods at prices that could compete online. In some cases, he'd even lose money on a sale.

Now he just hopes Amazon stays away from his specialty: Military and tactical gear.



"Amazon's got bigger fish to fry than me. But if they get into my niche, they could take me out of business," he said. 

Better Ways to Battle Weeds

August 27 -- Barbara Geltosky has long avoided using chemical herbicides to kill weeds she finds on her half-acre property—until this year.

"We needed the big guns" to try to control the crab grass poking up on the front lawn, says Ms. Geltosky, a retired art teacher in Malvern, Pa. Even so, the herbicide didn't do much good, and the weed "took off insanely."

Weeds are bigger and badder this year in most states east of the Rocky Mountains than in recent memory, horticulture experts say. A particularly wet growing season, following a mild winter and last year's dry summer, has helped weeds flourish, weather experts say.

"It's part of summertime. But this year it's pretty unbelievable," says Susan Pezzolla, a community horticulture educator in Voorheesville, N.Y., with the Cornell University Cooperative Extension. University cooperative extensions provide services to farmers and home gardeners.

"I don't care how good of a gardener you are, this year you had trouble," says Richard Hentschel, a horticulture educator with the University of Illinois Extension.

Larry Caplan, Evansville, Ind.-based horticulture educator for the Purdue Extension Service, says because the weeds have gotten so bad he has begun encouraging gardeners to get a head start on next year. He says he is recommending that homeowners apply so-called pre-emergent herbicides on their lawns this fall in addition to the usual time of early next spring. Pre-emergents are designed to prevent seeds from sprouting, which is why gardeners are told not to sow grass at the same time.

Many gardeners may be tempted to throw up their hands in despair. But experts say it is a crucial time to wage war on weeds. Summer annuals are beginning to produce seeds in much of the country. Among these are such wide-ranging plants as lamb's quarters (Chenopodium album); redroot pigweed (Amaranthus retroflexus) and large crab grass (Digitaria sanguinalis). Pulling them before they scatter the next generation all over flower beds can prevent lots of headache next year.

Lamb's quarters, for instance, can easily produce 100,000 seeds from a single plant, about 25% of which will germinate in the first year. The other seeds might lay dormant for a few years, eventually bursting into life, says Antonio DiTommaso, a weed ecologist at Cornell University, in Ithaca, N.Y. "Just having one or two plants escape control and you get that kind of seed production."

Winter weeds also will start to appear in the coming weeks, as days get shorter. These include wild mustard (Sinapis arvensis), common chickweed (Stellaria media) and purple deadnettle (Lamium purpureum), all found in much of the U.S. Catching them now before they grow over the winter can save on spring cleanup.

Natasha Hurwitz, a gardener in Silver Spring, Md., says that because the weeds are so bad this year she does "triage" when clearing her community-garden plot. "Anything that has a flower or seeds, I try to get that out of the garden first," she says. Even so, Ms. Hurwitz says it's been demoralizing to see the weeds continue to multiply every time she visits her garden.

"It seems like I just can't weed often enough," she says.

Perennial weeds can be trickier than annuals to control. That's because perennial species often establish deep root systems and will return year after year. The only way to clear them is by pulling up the roots, which in some cases can be nearly impossible.

A particularly frustrating perennial that gardeners have been seeing more of this year is field bindweed (Convolvulus arvensis), a vine that wraps around other plants in the garden. Its root system can burrow 30 feet underground. Spraying it with an herbicide can be tricky because gardeners run the risk of getting the poison on the plant the bindweed is attached to.

Mr. Hentschel, the Illinois horticulture educator, says the best strategy for getting rid of bindweed is to hoe it back every two weeks, exhausting its resources, until it's finally gone. The key is persistence. "You are wearing down its ability to survive," he says. "If you keep that up, you will win."

"It's a real pain," says Gerald Turner, who has been battling bindweed in the vegetable garden at his weekend home in Paris, Va. "When you try to pull it out, you can get 6 inches of root up with it. And you think, great, I've got it. But no, you haven't got it. That's the problem with it," says Mr. Turner, who works as an investment banker in Washington, D.C.

Rainfall has been abundant east of the Rocky Mountains, giving weeds a big boost. From January through July of this year, Southeastern states have received 9.4 inches above average in rainfall, and the Midwest is 5.7 inches above average, making those two regions the second wettest since 1895. Northeastern states have gotten 2.8 inches more rain than average, according to data from the National Oceanic and Atmospheric Administration.

On the other side of the country—west of the Rockies—the story has been much the opposite. Areas considered to be in "moderate to exceptional" drought have expanded by 8% this year, NOAA says.

In California, which has had its driest year to date since 1895, "there are still lots of weeds out here, just not as robust as they'd be in a normal wet year," says Joe DiTomaso, a weed ecologist at the University of California, Davis. Cheatgrass (Bromus tectorum) and medusa head (Taeniatherum caput-medusae), in particular, are considered fire hazards in grassier areas, he says.


Lots of rain in the East has been a boon for weeds in other ways—many gardeners couldn't get outdoors as often to do yard work. James Hodges, senior horticultural agent for the Clemson University Extension Service in Greenwood, S.C., says that on a recent Monday morning he didn't get any phone calls from home gardeners, a rare occurrence. "That's because nobody was out this weekend because it rained," he says. For gardeners, "normal operations have been difficult."

Anne Marie Chaker         www.online.wsj.com