Deere Sells Interest in Landscape Business

October 28 -- Deere and Co. announced Monday that it has agreed to sell a majority interest in its landscapes business to the private equity investment firm of Clayton, Dubilier and Rice LLC.

In a news release, Deere said that it will receive approximately $300 million in cash and initially will retain a 40 percent equity interest in the new company. In its own news release, Clayton, Dubilier and Rice, or CD&R, said the carve-out transaction is valued at about $465 million.

John Deere Landscapes has been included in the Moline-based company's agriculture and turf segment.

"This partial sale allows Deere an opportunity to remain as part of a successful landscapes distribution business," James Field, president of Deere’s Worldwide Agriculture & Turf Division, said in the release. “At the same time, Deere will continue to increase its own strategic focus on the global growth businesses in agriculture and construction and the complementary businesses in turf and forestry."

With more than $1 billion in annual revenue, John Deere Landscapes is the largest North American distributor of landscaping products sold primarily to professional landscape contractors. It distributes wholesale irrigation, landscape lighting, nursery, and turf and maintenance supplies.

"CDandR's focus on growth and deep experience with businesses like ours make them an ideal partner," said David Werning, John Deere Landscapes president, who will retain his position. "Deere's ongoing equity ownership reflects its interest in remaining part of a successful landscapes distribution business."

David Wasserman, a partner with CD&R, said John Deere Landscapes is "managed by a talented executive team that we are very excited to has as partners." "The business has many attractive features, including scale, breadth of product offering and service excellence, all of which provide significant strategic and competitive advantages in supporting the requirements of the professional landscape contractor," he added.

Paul Pressler, a CDandR operating partner, will assume the role of chairman upon close of the transaction, which is expected in December.

"The new company should benefit from a recovery in residential and commercial construction activity as well as through the meaningful value creation opportunities available to drive the business forward," said Ken Giuriceo, a CDandR partner.

Deere formed the landscapes business in 2001 when it purchased and merged wholesalers McGinnis Farms Inc. and Richton International Corp. The business later expanded with the acquisitions of United Green Mark and LESCO, Inc., in 2005 and 2007, respectively. Today, John Deere Landscapes is one of the largest U.S. wholesale suppliers of turf and ornamental agronomics, irrigation, outdoor lighting, nursery and landscape materials.

John Deere Landscapes employs more than 2,000 people at about 400 locations in 41 states. 

Field said Deere recognized the investment firm's broad experience and successful record in distribution businesses and the firm’s longevity and experience in private equity.

Since its inception in 1978, CD&R has managed the investment of more than $18 billion in 56 U.S. and European businesses with an aggregate transaction value of more than $90 billion.

In an interview with the Quad-City Times, Deere spokesman Ken Golden said John Deere Landscapes employees "were told today there is no immediate impact on them. As in any business, future decisions could be made that will result in changes," he said.

The sale is unrelated to Deere's announcement last month that it is reviewing strategic options for the future of its John Deere Water business, which produces precision irrigation equipment for agriculture customers, Golden said.

Jennifer DeWitt              www.qctimes.com   

Dane Scag Passes

October, 2013 -- Dane Scag, who founded Scag Mowers and established several other brands of landscape maintenance equipment, has died. He was 94.

Scag got his start in the industry with his founding of BOB-CAT in the 70s, a brand of mowing equipment that still exists today. It was with BOB-CAT that he designed the commercial-grade 21-inch walk-behind mower, which was used by thousands of contractors and became the leading mower in the industry.

After selling BOB-CAT to Ransomes, Sims and Jeffries, a British agricultural machinery maker, he went on to found Scag Power Equipment. The first mower Scag Power introduced to the industry was a three wheel mowing tractor. He also developed and introduced the first dual hydro drive wide area walk mower, which won him the prestigious OEMie Award in 1990. In 1986, Metalcraft of Mayville purchased the company and Scag stayed on as president.

In 1991, Scag left his namesake company and in 1996 he founded Great Dane Power Equipment. It was at Great Dane that he created the surfer stand mower, the first stand-on mower in the industry. The surfer mower earned Scag his second OEMie. Eventually he sold Great Dane to John Deere in December of 2000.

Steve Redan, chairman of KPM, started distributing for Dane in 1986. He described Scag as a clever and ingenious man who could look at a piece of equipment, and then build a better version.

“He had a great relationship with his dealers,” Redan says. “His dealers loved him. Dealers would suggest things and he would do that. Then he would come back to the dealer six months later and say ‘See what I did for you?’  He would actually buy the loyalty of the customer because he would listen and do what the customers felt was the right thing.”

Rick Cuddihe, CLP, ‎President of Lafayette Consulting Company, Lafayette Property Maintenance, was a longtime friend and business partner of Scag’s. He met Scag in 1972 and in 1996 helped him start Great Dane as a stock holder.

“Dane’s equipment innovations and creative designs have changed our industry for the better and I’ll never forget him,” Cuddihe says. “I learned a lot about equipment design and production from him, but more about life from watching him do the right thing time and time again.”

Katie Tuttle         www.lawnandlandscape.com 

The Toro Company Will Celebrate 100 Years of Industry-Changing Innovation in 2014

BLOOMINGTON, Minn., Oct 23, 2013 -- As The Toro Company nears its 100th anniversary in 2014, it is reflecting upon its past as it continues to drive to the future. Since its beginning, Toro has created innovative products, services and solutions to help customers care for their outdoor environments - from golf courses and sports fields to public green spaces, commercial and residential properties, and agricultural fields. The principles that have guided the company from the very beginning - a commitment to innovation and building lasting relationships - remain a key focus today as Toro looks to its next hundred years.

Driven By Innovation From the company's first patent in 1920 for a convertible cultivator tractor, to the more than 20 U.S. patents it received in 2012, Toro has obtained over 800 U.S. patents - in addition to many corresponding patents outside the U.S. Toro demonstrates its commitment to innovation by annually dedicating at least 3 percent of net sales to research and new product development. Recently, in the Minneapolis/St. Paul Business Journal's list of annual RandD spending among Minnesota public companies, Toro ranked 11th with investments of just over $60 million in fiscal 2012.

The combination of intensive product development and a deep understanding of customer needs has enabled Toro to achieve and maintain market leadership. In 1919 at the request of The Minikahda Club in Minnesota, Toro created a mechanized mowing machine to replace horse-drawn equipment typically used by golf courses at that time. After Minikahda put the new machine to the test, the chairman of the grounds committee, Senator William F. Brooks, predicted it would "revolutionize the cutting of grass on golf courses." His prediction came true and helped establish Toro as the leader in the industry.

More recently, in a broader effort to help customers better manage water resources, Toro introduced the Precision(TM) Soil Sensor - the first wireless moisture sensor for the residential irrigation market. This award-winning technology was recognized for its compatibility with most irrigation controllers, including competitive units, long-range wireless connectivity, and the ability to help homeowners save water by knowing when to water based on moisture levels beneath the surface.

Innovative People Core to the company's success is the drive of its employees in continually seeking new products to deliver top-quality performance, enhance productivity, and improve efficiency for customers. Another key contributing factor to Toro's success is its partnership with researchers worldwide to advance the science of turf management, and help customers conserve water and other resources.

One unique, solutions-based approach was the formation of Toro's Center for Advanced Turf Technology (CATT) in 1998. Comprised of a team of leading agronomists and engineers, CATT has been influential in the development of products that increase productivity, save water, reduce fuel consumption and improve growing conditions. This group also has created the foundation for future innovation in robotics, fuel cells, advanced battery technologies, and site assessment - including Toro's patented PrecisionSense(TM) site assessment solution. Used by golf courses and sports fields around the world, this innovative mobile soil sensing and data collection technology measures the variability of key site attributes - such as soil moisture, salinity, compaction and plant performance - to help improve water and resource efficiency, and produce healthy turf.

Industry Leading Products Understanding the needs of its customers and empowering product development teams to strive for innovation enables Toro to deliver industry-leading advancements in its products. This focus has created all-new product categories, increased customer productivity, and advanced more efficient use of resources.

Generac Reports Third Quarter 2013 Results

Strong organic revenue growth from commercial and industrial products and home standby generators drives continued growth in earnings

WAUKESHA, Wis. -- Oct. 24, 2013-- Generac Holdings Inc., a leading designer and manufacturer of generators and other engine powered products, today reported financial results for its third quarter ended September 30, 2013.

Third Quarter 2013 Highlights

Net sales increased year-over-year by 20.9% to $363.3 million as compared to $300.6 million in the third quarter of 2012.

Net income during the third quarter of 2013 was $47.1 million, or $0.67 per share, as compared to $25.5 million or $0.37 per share for the same period of 2012.

Adjusted net income, as defined in the accompanying reconciliation schedules, increased to $73.7 million from $54.1 million in the third quarter of 2012. Adjusted diluted net income per share was $1.06 as compared to $0.78 per share in the third quarter of 2012.

Adjusted EBITDA increased 31.2% to $100.1 million as compared to $76.3 million in the third quarter last year. Adjusted EBITDA margin during the third quarter improved to 27.5% as compared to 25.4% in the prior year primarily due to warranty rate improvements resulting in a favorable adjustment to warranty reserves.

Cash flow from operations in the third quarter of 2013 was $80.9 million as compared to $69.5 million in the prior year quarter. Free cash flow was $76.7 million as compared to $61.6 million in the third quarter of 2012.

For the trailing four quarters, including the third quarter of 2013, net sales were $1.452 billion; net income was $154.3 million; adjusted EBITDA was $382.1 million; cash flow from operations was $261.6 million; and free cash flow was $238.4 million.

On August 1, 2013, the Company closed on the previously announced acquisition of Tower Light Srl, a leading developer and supplier of mobile light towers throughout Europe, the Middle East and Africa.

Subsequent to the end of the quarter, the Company entered into a purchase agreement on October 7, 2013 to acquire substantially all of the assets of Baldor Electric Company’s generator division (“Baldor Generators”). Baldor Generators offers a complete line of generators ranging from 3kW to 2.5MW throughout North America.

“We experienced double-digit organic revenue growth again during the quarter as a result of increased spending from our national account customers and continued adoption of standby generators for both residential and commercial applications,” said Aaron Jagdfeld, President and Chief Executive Officer.

“We believe our expanded dealer base, targeted marketing efforts and continued roll-out of our PowerPlay® in-home sales process are having an impact on extending the awareness and distribution of standby generators, which is leading to a new and higher baseline level of demand for these products. In addition, over the last twelve months, we have announced several acquisitions that provide us with immediate access to new global markets and new products, helping to further grow and diversify our business.”

Additional Third Quarter 2013 Highlights

Residential product sales for the third quarter of 2013 increased to $192.7 million from $191.0 million for the comparable period in 2012. Shipments of home standby generators were higher sequentially and over the prior year due to a combination of factors including the additional awareness and adoption created by major power outages in recent years, the Company’s expanded distribution, increased sales and marketing initiatives, overall strong operational execution and a more favorable environment for residential investment.

The strength in home standby generators was partially offset by a decline in shipments of portable generators due to less severe power outage events in the current year quarter relative to prior year, although expanded placement for these products continued to lead to year-over-year market share gains. In addition, increased revenue from power washer products also contributed to the year-over-year sales growth in residential products.

Commercial and Industrial (CandI) product sales for the third quarter of 2013 increased 61.8% to $151.5 million from $93.6 million for the comparable period in 2012. Organic net sales increased at a strong double-digit rate during the current year quarter primarily driven by a significant increase in shipments to national account customers and increased sales of natural gas generators used in light commercial/retail applications. In addition, the Ottomotores acquisition, which closed in December 2012, and the Tower Light acquisition, which closed in August 2013, contributed to the year-over-year growth in CandI products.

Gross profit margin for the third quarter of 2013 was 38.4%, which was approximately flat as compared to the third quarter of 2012. Gross margin was affected by the mix impact from the addition of Ottomotores sales along with a higher mix of organic CandI product sales, mostly offset by the positive impact from a moderation in commodity costs and continued execution of cost-reduction initiatives.

Operating expenses for the third quarter of 2013 declined $4.5 million, or 8.0%, as compared to the third quarter of 2012. The expense reduction was driven primarily by warranty rate improvements resulting in a favorable adjustment to warranty reserves, as well as a decline in the amortization of intangibles. These reductions were partially offset by the addition of operating expenses associated with the Ottomotores and Tower Light businesses, and increased sales, engineering and administrative infrastructure to support the strategic growth initiatives and higher baseline sales levels of the Company.

Interest expense in the third quarter of 2013 declined to $12.5 million compared to $16.9 million in the same period last year. The decline was primarily the result of a reduction in interest rate from the current-year credit agreement refinancing completed in May 2013.

Outlook

The Company is revising upward its sales guidance for full-year 2013 primarily due to continued strong demand for home standby generators, as well as a modest impact from the expected closing of the Baldor Generators acquisition in the fourth quarter of 2013.

Full-year 2013 net sales are now expected to increase in the low-to-mid 20% range over the prior year, which is an increase from the low-20% rate previously expected. This top-line guidance continues to assume no material changes in the current macroeconomic environment and no major power outage events for the remainder of 2013.

Gross margins for full-year 2013 are now expected to increase approximately 50 basis points as compared to the prior year, which is an improvement from the previous expectation of approximately flat as compared to the prior year.

Operating expenses as a percentage of net sales, excluding amortization of intangibles, are now expected to decline by approximately 75 to 100 basis points as compared to 2012, which is an improvement from the previous expectation of approximately flat as compared to the prior year.

As a result of the higher sales outlook and the improved gross margin and operating expense guidance, adjusted EBITDA for the full-year 2013 is now expected to increase in the low-30% range, which is an increase from the low-20% range previously expected.

“We remain excited about the compelling secular penetration opportunities for our products,” continued Mr. Jagdfeld. “These organic growth drivers are highlighted by the substantial opportunity to increase the penetration of standby generators in both the residential and light commercial markets, the significant opportunity to provide backup power for critical communications infrastructure, along with the overall ongoing shift in the market toward natural gas generators. At the same time, we continue to remain active on the acquisition front in recent months with the closing of the Tower Light transaction and the agreement to purchase Baldor Generators. These acquisitions are an integral part of our Powering Ahead strategic plan to become a more balanced company with improved global scale.”

Husqvarna Interim Report January-September 2013

Kai Wärn, President and CEO:

“The good sales momentum from the end of the second quarter held up well over the third quarter. Demand

in both Europe and North America was supported by favorable weather conditions and a delayed garden

season. Group sales for Europe and Asia/Pacific increased 8%, Americas 20% and Construction 6%, adjusted for changes in exchange rates.

Group operating income for the third quarter was largely on the same level as prior year. A positive development for Europe and Asia/Pacific was offset by a decline for Americas, as the majority of the strong sales growth in North America referred to low margin consumer products in the retail channel. In addition, operating income was impacted by inefficiencies in the supply chain, caused by inability to benefit from scale.

Cash flow for the quarter had a strong development, driven by continued working capital initiatives related to right sized inventory levels.

Although we see positive signs in our work towards our strategic goals, there is a need to further accelerate and broaden the scope for ongoing programs to reduce product cost and business complexity. From a topline perspective, we will focus resources on our core premium brands Husqvarna and Gardena and product leadership areas like professional handheld, robotic mowers and watering. Additionally, we will review how to further differentiate the dealer and retail business models which we see as a key measure to drive margin recovery, especially in the U.S.”

Third quarter

·         Net sales amounted to SEK 6,349m (5,841). Adjusted for exchange rate effects, net sales increased 12%.

·         Operating income amounted to SEK 206m (197).

·         Continued strong operating cash flow amounting to SEK 2,001m (1,503).

·         Net debt/equity ratio improved to 0.57 (0.68).

·         Earnings per share decreased to SEK 0.16 (0.19).

THIRD QUARTER

Net Sales

Net sales for the third quarter increased by 9% to SEK 6,349m (5,841). Adjusted for exchange rate effects, net sales for the Group increased 12%, by 8% for Europe and Asia/Pacific, by 20% for Americas and by 6% for Construction.

Operating Income

Operating income for the third quarter amounted to SEK 206m (197) and the corresponding operating margin amounted to 3.2% (3.4). Operating income increased for Europe and Asia/Pacific, while it decreased for Americas and Construction.

Operating income was positively impacted by the higher sales volume and savings from staff reductions, while unfavorable business area mix combined with inefficiencies in the U.S. supply chain, caused by inability to benefit from scale, impacted adversely.

Changes in exchange rates had a total negative impact on operating income of SEK -27m compared to the third quarter 2012.

JANUARY – SEPTEMBER

Net Sales

Net sales for January – September decreased by -3% to SEK 25,600m (26,358). Adjusted for exchange rate effects, net sales for the Group increased by 1%, for Americas by 2% and for Construction by 4%, while net sales for Europe and Asia/Pacific were unchanged.

Operating income

Operating income for January – September amounted to SEK 1,916m (2,279) and the corresponding operating margin amounted to 7.5% (8.6). Operating income increased for Americas and Construction, while it decreased for Europe and Asia/Pacific.

Operating income, excluding negative impact from changes in exchange rates, was positively impacted by lower material costs, higher sales volume and savings from staff reductions, while mainly lower factory utilization levels due to inventory reductions had negative impact.

Changes in exchange rates had a total negative impact on operating income of SEK -319m compared to

January - September 2012.

FINANCIAL ITEMS NET

Net financial items for the third quarter amounted to SEK -111m (-93). The higher financial cost is explained mainly by exchange differences. The average interest rate on borrowings at September 30, 2013, was 4.4% (4.0). For January – September, net financial items amounted to SEK -303m (-348).

INCOME AFTER FINANCIAL ITEMS

Income after financial items for the third quarter decreased to SEK 95m (104) corresponding to a margin of 1.5% (1.8). Income after financial items for January - September decreased to SEK 1,613m (1,931) corresponding to a margin of 6.3% (7.3).

TAXES

Taxes for January - September amounted to SEK -393m (-406), corresponding to a tax rate of 24% (21) of income after financial items.

EARNINGS PER SHARE

Income for the third quarter amounted to SEK 92m (106), corresponding to SEK 0.16 (0.19) per share. Income for January - September amounted to SEK 1,220m (1,525), corresponding to SEK 2.12 (2.65) per share.

OPERATING CASH FLOW

Operating cash flow for the third quarter amounted to SEK 2,001 (1,503). The positive development was mainly driven by inventory reductions.

Operating cash flow for January – September amounted to SEK 2,130m (1,595).

FINANCIAL POSITION

Group equity as of September 30, 2013, excluding non-controlling interests, amounted to SEK 11,361m (11,425), corresponding to SEK 19.84 (19.95) per share.

Net debt decreased to SEK 6,511m (7,811) as of September 30, 2013, of which liquid funds amounted to SEK 1,588m (1,285) and interest bearing debt amounted to SEK 6,834m (7,640), excluding pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -300m as a result of changes in exchange rates.

The net debt/equity ratio improved to 0.57 (0.68) and the equity/assets ratio to 44% (42).

In addition to the amendment of IAS 19 “Employee benefits” which is shown on pages 13 and 14, Husqvarna Group has reclassified the net defined pension liability to interest-bearing financial liability and included the liabilities in the calculation of net debt.

On September 30, 2013, long-term loans including financial leases amounted to SEK 6,496m (5,089) and short-term loans including financial leases to SEK 185m (2,306). Long-term loans consist of SEK 4,927m (2,571) in issued bonds, and bank loans and financial leases of SEK 1,569m (2,518). The bonds and bank loans mature in 2014 and onwards. The Group also has an unutilized SEK 6 bn syndicated revolving credit facility, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

Europe and Asia/Pacific

Net sales for Europe and Asia/Pacific increased by 5% in the third quarter 2013. Adjusted for exchange rate effects, net sales increased by 8%.

Demand for lawn and garden products in the third quarter was positively impacted by a prolonged selling season in Europe due to favorable weather conditions as well as a consequence of the late start to the season earlier in the year.

Following the slow start to the year in Europe, activity picked up in May and Group sales were strong over the third quarter. Sales in Asia/Pacific also had a good development, especially in Australia. In terms of product categories, watering products and hand tools had the best development in the third quarter, while electric products such as robotic lawn mowers had the best development for the first nine months of the year.

Operating income for the third quarter increased to SEK 289m (238) and the operating margin increased to 8.9% (7.7).

Operating income for the first nine months amounted to SEK 1,650m (2,102) and the operating margin amounted to 13.1% (16.1).

The improved operating income in the third quarter was mainly related to higher sales volume and favorable product mix, which was partly offset by lower utilization levels in factories as a result of inventory reductions.

For January - September operating income was positively impacted by lower material costs, while mainly changes in exchange rates and under-absorption in factories affected negatively.

Changes in exchange rates had a negative year-on-year effect of SEK -12m on operating income for the third quarter and SEK -311m for January - September.

America’s

Net sales for Americas increased by 16% in the third quarter 2013. Adjusted for exchange rate effects, net sales increased by 20%.

In the third quarter, demand was substantially higher as weather conditions were favorable compared with the serious drought conditions that hampered demand in the third quarter prior year. Demand was also positively impacted by an improving U.S. economy.

Group sales were substantially higher in North America as well as in Latin America in the third quarter. For the first nine months, the higher sales were mainly attributable to North America. Sales in the dealer channel rose for the nine month period while the retail channel accounted for the majority of the growth in the third quarter.

Operating income for the third quarter decreased to SEK -126m (-97) and the corresponding margin decreased to -5.4% (-4.9), mainly as a result of unfavorable channel and product mix as low margin consumer products in the retail channel represented a large share of sales. In addition, operating income was negatively affected by inefficiencies in the supply chain caused by inability to benefit from scale. For January - September, the effects of price, channel management and lower material costs contributed to the positive development.

Changes in exchange rates had a negative year-on-year effect of SEK -3m on operating income for the third quarter and a positive impact of SEK 17m for January - September.

Construction

Net sales for Construction increased by 3% in the third quarter 2013. Adjusted for exchange rate effects, the increase in sales was 6%.

The positive demand trend in North America continued in the third quarter, although somewhat slower than earlier in the year. In Europe demand for construction products recovered for the second consecutive quarter and in the rest of the world, markets also showed continued positive demand growth.

The Group’s sales growth in the third quarter as well as for January - September was primarily attributable to U.S. and Brazil. Sales in Europe were also higher for both periods.

Operating income for the third quarter amounted to SEK 86m (89) and the operating margin amounted to 10.9% (11.7).

Operating income in the third quarter was positively impacted by the higher sales volume, which was offset mainly by lower factory utilization levels and changes in exchange rates. For January – September, operating income benefitted from higher sales and favorable mix.

Changes in exchange rates had a negative year-on-year effect of SEK -10m on operating income for the third

quarter and SEK -21m for January - September.

MANAGEMENT CHANGE IN ASIA/PACIFIC

Nicolas Lanus, Group Management Member and Head of Asia/Pacific, has decided to leave Husqvarna Group.

He will hold his current position until December 31, 2013, when he leaves the company for an external position.

PARENT COMPANY

Net sales for January – September 2013 for the Parent Company, Husqvarna AB, amounted to SEK 8,603m (8,955), of which SEK 6,664 (6,962) referred to sales to Group companies and SEK 1,939m (1,993) to external customers.

Income after financial items amounted to SEK 1,570m (1,761). Income for the period was SEK 1,311m (1,390).

Investments in tangible and intangible assets amounted to SEK 355m (235). Cash and cash equivalents amounted to SEK 171m (34) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,466m (17,915).

CONVERSION OF SHARES

According to the company's articles of association, owners of A-shares have the right to have such shares converted to B-shares. Conversion reduces the total number of votes in the company.

In July 2013, 128,051 A-shares were converted to B-shares at the request of shareholders. In October 2013, another 847,885 A-shares were converted to B-shares at the request of shareholders. The total number of votes thereafter amounts to 171,568,859.

The total number of registered shares in the company at September 30, 2013 amounted to 576,343,778 shares of which 127,441,753 were A-shares and 448,902,025 were B-shares.

Stihl in Virginia Beach Receives Recognition From the Association for Manufacturing Excellence

October 23 -- Stihl's Virginia Beach facility will be recognized for lean manufacturing and management processes at the Association for Manufacturing Excellence conference this week in Toronto.

The Association for Manufacturing Excellence's assessment team reviewed the facility's continous improvement system, advanced technology and data systems and automation integration, according to a news release. The company received the Manufacturing Excellence Award because of total-cost thinking for new product and process development and the use of inventory flywheels to balance high service levels and low-cost production linearity goals.

“Fostering a culture of innovation and excellence is fundamental to American manufacturing success, and encouraging employees to embrace automation and rewarding them for their ideas establishes this culture from the ground up," Christian Koestler, vice president of operations for Stihl Inc., said in a statement.

www.dailypress.com  

Blount Announces Executive Retirement and Management Changes

PORTLAND, Ore., -- Oct. 22 -- Blount International, Inc. announced today that Kenneth O. Saito, Senior Vice President – Supply Chain and Manufacturing Operations will retire from the Company, effective December 31, 2013. Mr. Saito joined the Company in March 1973, and he has held various positions, including Senior Vice President ‑ Manufacturing and Operations, President of the Oregon Cutting Systems Group, and Senior Vice President ‑ Finance and Administration of Oregon Cutting Systems Group.  

"Ken has had a remarkable career with Blount over the past 40 years. His leadership has contributed significantly to our success in becoming a leading company within our industry," stated Josh Collins, Blount's Chairman and CEO. "We offer him our congratulations and best wishes as he transitions over the coming months to a well-deserved retirement."

In advance of his retirement, Mr. Saito's responsibilities will be divided among three new positions. David K. Parrish, currently Blount's Vice President of Supply Chain, has been elected Senior Vice President – Global Supply Chain by the Company's Board of Directors, effective November 1, 2013.

Also, William C. Alford, currently Blount's Vice President of Continuous Improvement and Quality, and Manager of Portland Metro Manufacturing Operations, will assume the role of Vice President – FLAG Manufacturing and will be responsible for all FLAG manufacturing operations worldwide. Lastly, Jeffrey S. Moore, currently Vice President of Manufacturing Development, will become Vice President – Operational Excellence. Mr. Moore will be responsible for global continuous improvement efforts, including lean deployment and quality systems, and environmental, health, and safety (EHandS) initiatives.

"We are fortunate to have strong leaders within the organization to step up and fill the roles needed to continue the significant progress we have made within our manufacturing and supply chain organization," stated Mr. Collins. "David, Bill, and Jeff have worked closely with Ken in recent years, which will support a seamless transition over the coming months."  

Blount is a global manufacturer and marketer of replacement parts, equipment, and accessories for consumers and professionals operating primarily in two market segments: Forestry, Lawn, and Garden ("FLAG"); and Farm, Ranch, and Agriculture ("FRAG"). Blount also sells products in the construction markets and is the market leader in manufacturing saw chain and guide bars for chain saws.  Blount has a global manufacturing and distribution footprint and sells its products in more than 115 countries around the world.  Blount markets its products primarily under the OREGON®, Carlton®, Woods®, TISCO, SpeeCo®, and ICS® brands.

Carlisle to Sell Tire Business for $375 Million

CHARLOTTE -- Oct. 21 -- Charlotte-based Carlisle Cos. said Monday that a New York company is buying its tire division in a $375 million deal that will take Carlisle out of the business on which it was founded.

American Industrial Partners is expected to pay cash for the company’s transportation products segment, Carlisle said. The deal still needs regulatory approval.

When it released second-quarter results in July, Carlisle announced that it was seeking a buyer for the segment, which has produced disappointing results. Specifically, Carlisle has lamented that Chinese tire manufacturers have made it hard for it to grow profit margins for lawn and garden tractor tires – what Carlisle refers to as “outdoor power equipment.”

Carlisle, in the second-quarter announcement, described its transportation products segment, which makes the tires, as “no longer a strategic asset.” Among other things, the segment also makes tires for all-terrain vehicles and boat and horse trailers, but not for use on automobiles.

In a statement Monday, David Roberts, Carlisle president and CEO, described the segment as “not core to Carlisle’s growth strategy nor supportive of our long-term operating profit goals and expectations.” He said the sale will help Carlisle invest in faster-growing businesses with higher profit margins.

In 2012, the transportation products segment had sales of $778 million and a profit margin of 6.7 percent, down from 9.4 percent in 2003 and below the double-digit margins the company’s other segments produced last year.

Carlisle has said the sale of the segment will reduce its employment by one-third. Carlisle employs roughly 12,000 worldwide. Of those, about 4,400 work for the transportation products segment.

No Carlisle tires are made in Charlotte, so the company has said it does not expect jobs in the region to be lost in a sale. The tires the company makes in China are assembled to wheels in a plant in Aiken, S.C., that employs 188 people. The company also has plants elsewhere in the U.S. One in Clinton, Tenn., makes tires for all-terrain vehicles.

Started in 1917 in Carlisle, Pa., Carlisle has its roots in selling inner tubes for automobiles, but it has grown into other lines of business since then.

It will have four remaining segments after the sale: Its construction materials segment makes roofing products. Another sector makes cable and wires for commercial and military aircraft. Another sells brake and friction systems used mostly by the mining, construction and agricultural industries. Another sector provides dishes, cookware and other supplies to restaurants and hospitals.

The sale is expected to be finalized in the first quarter.

Deon Roberts         www.charlotteobserver.com

Briggs and Stratton Corporation Reports Improved First Quarter Sales; Reaffirms Full Year Guidance

MILWAUKEE, Oct. 17 -- Briggs and Stratton Corporation today announced financial results for its first fiscal quarter ended September 29, 2013.

Highlights:

• First quarter fiscal 2014 consolidated net sales were $317.3 million, an increase of $8.3 million or 3% from the prior year.
• Higher North American consumer engine shipments and sales of equipment to dealers increased as consumer demand rebounds from last year's drought.
• Lack of storms in quarter caused lower portable generator sales compared to last year when Hurricane Isaac hit in August.
• Planned engine and products production cuts lowers inventories and reduces margins in the quarter.
• First quarter 2014 adjusted net loss was $16.5 million, $3.3 million higher than the adjusted net loss of $13.2 million in the first quarter of fiscal 2013.

"Our first quarter results were slightly better than we anticipated as we experienced increased consumer demand for lawn and garden equipment leading to higher shipments of engines that power these products and higher shipments of lawn and garden products to our dealers," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation.

"We have also seen continued strength in standby generator sales; however, portable generator sales decreased with Hurricane Isaac landing last year and no significant storm activity this year," continued Teske. 

"Higher retail sales of lawn and garden equipment have helped to reduce channel inventories. We also lowered our inventory by reducing production in the quarter compared to last year.

While this reduced productivity and margins in the near term, our inventory levels are better aligned for manufacturing to retail demand in the upcoming lawn and garden season." 

Consolidated Results:

Consolidated net sales for the first quarter of fiscal 2014 were $317.3 million, an increase of $8.3 million or approximately 3% from the first quarter of fiscal 2013 with sales increases in engines and lawn and garden products, partially offset by lower sales of portable generators.

The fiscal 2014 first quarter consolidated net loss, which includes restructuring charges, was $19.3 million, or $0.41 per diluted share. The first quarter of fiscal 2013 consolidated net loss including restructuring charges was $16.5 million, or $0.35 per diluted share.

Included in the consolidated net loss for the first quarter of fiscal 2014 were pre-tax charges of $3.6 million related to restructuring actions. Included in consolidated net loss for the first quarter of fiscal 2013 were pre-tax charges of $5.1 million also related to restructuring actions.

After removing the impact of these items, the adjusted consolidated net loss for the first quarter of fiscal 2014 was $16.5 million or $0.35 per diluted share, which was $3.3 million higher compared to the first quarter fiscal 2013 adjusted consolidated net loss of $13.2 million or $0.28 per diluted share.

Engines Segment:

Engines Segment fiscal 2014 first quarter net sales were $183.8 million, which was $19.3 million or 11.7% higher than the first quarter of fiscal 2013. This increase in net sales was driven by higher sales of engines used on lawn and garden equipment and related service parts to customers in the North American and European markets due to more favorable late season growing conditions this year. The increase was partially offset by unfavorable sales mix due to fewer sales of larger engines used in snow throwers and in portable generators resulting from a lack of storm activity in the first quarter of fiscal 2014 and unfavorable foreign exchange predominantly related to the Australian dollar.

The Engines Segment adjusted gross profit percentage for the first quarter of 2014 was 14.7%, which was 1.0% lower compared to the first quarter of fiscal 2013. The adjusted gross profit percentage was unfavorably impacted by 2.4% from a 15% reduction in manufacturing volume to reduce inventory.

Unfavorable foreign exchange related to the Australian dollar and Japanese yen also impacted the adjusted gross profit percentage by 0.5%. The decrease was partially offset by an increase to adjusted gross profit of 1.3% related to favorable sales mix of higher margin service parts as well as the contribution of margin generated by the Branco acquisition which closed in the second quarter of fiscal 2013. Margins also benefitted slightly from reduced manufacturing costs and materials costs.

The Engines Segment engineering, selling, general and administrative expenses were $43.3 million in the first quarter of fiscal 2014, an increase of $1.1 million from the first quarter of fiscal 2013 primarily due to higher compensation expense and the addition of expenses from Branco. The increase was partially offset by $1.5 million of lower pension expense in fiscal 2014.

Products Segment:

Products Segment fiscal 2014 first quarter net sales were $153.0 million, a decrease of $20.3 million or 11.7% from the first quarter of fiscal 2013. The decrease in net sales was primarily related to lower sales of portable generators due to no landed hurricanes in the first quarter of fiscal 2014.

Hurricane Isaac occurred in the first quarter of fiscal 2013. In addition, international net sales were lower in the first quarter of fiscal 2014 due to reduced shipments of snow throwers to customers in Europe and unfavorable foreign exchange primarily related to the Australian dollar.  

This decrease was partially offset by favorable late season growing conditions during the first quarter of fiscal 2014 that led to higher sales of lawn and garden equipment through our North American dealer channel, pressure washers and service parts as well as net sales from the Branco acquisition. 

The Products Segment adjusted gross profit percentage for the first quarter of 2014 was 12.8%, which was 0.3% lower than the adjusted gross profit percentage for the first quarter of fiscal 2013. The adjusted gross profit percentage was lower by 0.8% due to a 21% reduction of manufacturing throughput that was planned in order to control inventory in response to lower sales at the outset of the 2013 lawn and garden season. This decrease was partially offset by the margin contributed by the Branco acquisition.

The Products Segment fiscal 2014 fourth quarter engineering, selling, general and administrative expenses were $25.4 million, an increase of $2.0 million from the first quarter of fiscal 2013. The increase was mainly attributable to the additional expenses from Branco.

Corporate Items:

Interest expense for the first quarter of fiscal 2014 was comparable to the same period a year ago.

The effective tax rate for the first quarter of fiscal 2014 was 29.3% compared to 33.6% for the same period in the prior year. The decrease in the effective tax rate for the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013 was primarily driven by non-deductible losses of certain foreign subsidiaries and foreign tax rates that vary from the U.S. statutory rate.

Financial Position:

Net debt at September 29, 2013 was $109.8 million (total debt of $225.0 million less $115.2 million of cash), or $16.6 million lower from the $126.4 million (total debt of $228.0 million less $101.6 million of cash) at September 30, 2012.

Cash flows used in operating activities for fiscal 2014 were $52.9 million compared to $41.4 million in fiscal 2013. The change in operating cash flows was primarily related to changes in working capital needs in fiscal 2014 associated with a lower reduction in accounts receivable partially offset by the benefit of reduced inventory production levels.

Restructuring:

The previously announced restructuring actions remain on schedule. The Company achieved incremental pre-tax savings for the first quarter of $0.7 million. The Company continues to make progress towards moving horizontal engine manufacturing from its Auburn, Alabama plant to China.

As noted previously, pre-tax restructuring costs for the first quarter of fiscal 2014 were $3.6 million. Pre-tax restructuring cost estimates for fiscal 2014 remain unchanged at $6 million to $8 million. Incremental restructuring savings for fiscal 2014 are expected to be $3 million to $5 million.   

Share Repurchase Program:

On August 8, 2012, the Board of Directors of the Company authorized up to $50 million in funds associated with the common share repurchase program with an expiration date of 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 quarter of fiscal 2014, the Company repurchased 482,926 shares on the open market at an average price of $20.08 per share.

Outlook:

For fiscal 2014, the Company reaffirms its guidance of net income to be in a range of $50 million to $62 million or $1.04 to $1.28 per diluted share prior to the impact of any additional share repurchases and costs related to our announced restructuring actions.

Our fiscal 2014 consolidated net sales are projected to be in a range of $1.88 billion to $2.03 billion. We continue to estimate that the retail market for lawn and garden products will increase 4-6% in the U.S. next season. The estimated incremental impact of exiting the sale of lawn and garden equipment through national mass retailers is approximately $10 million to $15 million of reduced sales in fiscal 2014.

In addition, sales in fiscal 2013 were favorably impacted by sales of portable and standby generators in response to power outages during Hurricanes Isaac and Sandy. The upper end of our earnings projections contemplates a higher market recovery in excess of 10% for the U.S. lawn and garden market, normal snowfall and a landed hurricane.

Operating income margins are expected to improve over fiscal 2013 and be in a range of 4.5% to 5.0% and reflect the positive impacts of the restructuring actions. Interest expense and other income are estimated to be approximately $18 million and $5 million, respectively. The effective tax rate is projected to be in a range of 30% to 33% and capital expenditures are projected to be approximately $50 million to $55 million.   

Is This Retailer Gunning For Amazon?

October 7 -- Is it possible that this down and out retailer has a game plan to take on Amazon.com?  Amazon is by far the leading online retailer, but it might surprise most investors that Sears Holdings is considerably along the path toward being a leading online retailer.

No matter what investors think of the plans that CEO Eddie Lampert has undertaken by limiting spending on sprucing up stores, the company has made plans to become a leading online retailer. Sears has even recently advanced fulfillment services to include same-day delivery or in-store pickup that might offer a compelling advantage over Amazon.

Over the last few years, Sears has seen strong growth in online sales even as the in-store sales have faltered. In addition, the company has obtained high rankings for online-shopping experience and has advanced commerce services for merchants to use the platform similar to Amazon. The question is whether Sears can use its dual presence to bounce back in a way reminiscent of Best Buy's that was all the more impressive given that Best Buy was virtually left for dead at the end of 2012.  Best Buy is now prospering from store-in-a-store offerings and same-day pickup.

With online sales surging 20% in its most recent quarter, Sears investors should glean a glimmer of hope that Sears is transitioning away from a store-based retail approach that will allow it to lease out space in valuable mall locations. By treating the collection of discrete assets individually, Sears can sell valuable brands via online and third-party sellers, as opposed to relying on its dying store locations.

A recent report by Web-research group Baymard Institute ranked Sears eighth out of 100 big e-commerce sites for the quality of its online-shopping "checkout experience." For 2012, the company was the number three mass-merchant retailer behind Amazon and Wal-Mart and the number eight overall retailer.

Sears.com has an incredible 60 million items from marketplace sellers only (marketplace for third-party sellers to use the Sears.com website and checkout process for selling products) and was generating 15 million unique visits a month. At only an estimated $4.2 billion in annual sales, it still remains a far cry from the $61 billion in sales generated by Amazon last year.

Earlier this year, Sears launched a turnkey fulfillment service that offers businesses a simple, cost-effective solution for getting seller orders from Sears Marketplace to customers. Fulfilled by Sears, as the program is called, allows sellers to have their inventory at Sears and allow Sears to pick, pack, and fulfill their orders.

A major advantage is that customers can buy from sellers online and pick up in- store at Sears the same day or opt for same-day delivery. Sellers are able to leverage the vast 2,000 store base in order to get customer orders to them quicker. Suddenly those supposedly dying stores become the ideal distribution locations for online shopping.

Best Buy Turnaround

While Best Buy has struggled as a retailer over the last few years due to the encroachment of Amazon on electronics, the company still has one thing that Sears hasn't produced lately. Best Buy is back to reporting solid profits that make all the difference to any stock.

A big reason for the success has been Best Buy setting up Samsung Experience Shops and Windows Stores to improve the in-store experience and rationalize the square footage with sales of commodity electronic products increasingly moving toward online.

In that area, the company saw online sales increase 14.2% in the latest quarter. The improvements in online pricing are helping the company maintain market share while providing solutions such as same-day, in-store pickup provides itself and Sears an advantage over Amazon, which only has an online presence.

Bottom Line

While Sears may not be directly gunning for Amazon, the company is clearly focused on using the Internet to sell its products so that it can redevelop valuable real estate into leased space. In this way, the historic retailer isn't throwing away established brands and valuable customers, but at the same time it can generate higher returns on premium mall space.

In addition, it can use existing distribution centers and under-utilized stores to make the online offering not only more attractive to consumers but also to sellers interested in the fulfillment and marketplace offerings that sit alongside the sales and existing operations of the mass-merchant retailer.

The stock may not duplicate the past returns of Best Buy, but the company appears poised to rebound just as much. Neither company appears headed to the graveyard as both have found ways to use the store base to compete more effectively against the all-mighty Amazon.

Mark Holder            www.fool.com