MTD Products Signs Joint Development Agreement with Energy Storage Startup Gridtential

April 29 -- Outdoor power equipment manufacturer MTD Products has signed a joint development agreement with energy storage startup Gridtential that supports MTD’s push to replace the emission-heavy combustion engines in its lawn and garden fleet with batteries.

MTD says the move shows that the $3B traction market, which includes small-scale vehicles and equipment historically reliant on emission-heavy combustion engines, is making strides in energy storage adoption.

Gridtential partner Intevac is supporting process development and preparation of its high-performance battery plates. Intevac is providing both technical and manufacturing support based on its widely deployed thin-film deposition equipment for the hard drive media and solar cell markets.

The initial Alpha units are maintenance-free, 6V AGM batteries that deliver high energy density, longer battery life and improved cycling performance, Gridtential says.

www.evironmentalleader.com 

Jacobsen President Comments on Recent Dixie Chopper Acquisition

April 28 -- Jacobsen's recent acquisition of Dixie Chopper reflects the momentum the mower manufacturer has built in the turf industry over the last several years. This success breeds confidence to do more ambitious things in the turf market, says Jacobsen President David Withers.

In an exclusive interview with GCI, Withers, who has served as Jacobsen's president since 2011, says in addition to strong brand recognition and reputation in the turf market Dixie Chopper was an attractive target because there was zero product overlap. The acquisition provided a unique opportunity to cross-pollinate ideas.

"At Jacobsen, we’ve been developing hybrid and electric technology for years and these guys understand how rotary mowers interact with the grass in different conditions," he says. "[The move] enhances both products lines by the strength of each.”

In addition, while Jacobsen has a significant presence in the North American golf market, in the international market that presence is more split between the golf and municipal markets.

"This is where what we see the counter-cyclical nature of the two sides coming into play," he says. "When the private sector is doing well, quite often governments and municipalities spend less and this happens in reverse where government spends more when the private sector is struggling.

"Expanding our portfolio into municipal markets protects us when one of the two sectors goes into a downturn and gives Jacobsen more stability long-term and allows us to compete with our competitors on a broader base," Withers adds. "Today, we only compete with John Deere and Toro in the golf segment and this allows us to now complete in the commercial and landscape markets as well.”

From a market perspective, it appears parent company Textron has refocused its investment on Jacobsen. Withers concurs, adding that Jacobsen's success in the golf market has proven it can grow and expand its market presence.

"Every company is in either an upward spiral or a downward spiral," he says. "You’re either spending less, cut people and guess what, you sell less. We’re in an upward spiral, we’re making good profitability, moving the business forward and therefore you invest more into new products and better service to customers and they tend to reward you for that and that in turn leads to more sales."

www.golfcourseindustry.com   

Brinly-Hardy Planning to Expand Jeffersonville, Indiana Operations

April 28 -- Brinly-Hardy Co. has plans to expand its Southern Indiana operations, pending the approval of tax incentives by the city of Jeffersonville.

According to a news release from One Southern Indiana, Brinly-Hardy, which designs, builds and distributes lawn and garden equipment, could add as many as 44 employees and invest more than $5 million at its Southern Indiana operations.

The plan calls for Brinly-Hardy to invest $1.5 million to improve its existing 240,000 square-foot facility and $3.53 for equipment at that facility, 3230 Industrial Parkway.

The Jeffersonville Redevelopment Commission today voted that the project would be eligible for tax abatements from the city, and Brinly-Hardy is expected to request those incentives at a Jeffersonville City Council meeting on May 5.

“We’ve been so happy with our site here in Southern Indiana,” Brinly-Hardy CEO Jane Hardy said in the release. “We purchased the land and building in 2000 with plans to expand. Now is the time for us to do that. We are thrilled our growth demands it, especially in our 175th year of business.”

Ed Green          www.bizjournals.com/Louisville

CPSC, Ariens Recalls Snow Throwers and Power Brushes

April 24, 2014

Recall Summary

Name of product:

Ariens and Sno-Tek Snow Throwers, Ariens and Gravely All-Season Power Brushes

Hazard:

A drive pulley can crack while in use and cause the auger/impeller or brush to continue to rotate after the clutch lever is disengaged. This poses amputation and laceration hazards to consumers.

Consumer Contact:

Ariens Company toll-free at (877) 740-7060 from 8 a.m. to 5 p.m. ET Monday through Friday or online at www.ariens.com click on “Recall Information” for more information.

Recall Details

Units

About 5,700

Description

This recall involves Ariens and Sno-Tek brand snow throwers and Ariens and Gravely brand power brushes. Ariens Compact and Compack Track Snow-Thro snow throwers included in the recall are orange and 22- to 24-inches wide. Sno-Tek model snow throwers included in the recall are black and 20- to 28-inches wide.

Power brushes included in the recall are Ariens and Gravely model PB-28 All Season Brush and Ariens 28-inch brush CE. The Ariens power brush was sold in orange and the Gravely in red. The snow throwers and power brushes have the Ariens, Sno-Tek or Gravely brand name printed on the product. For all recalled units, model and serial numbers are printed on a white label affixed to the lower rear of the product, near the wheel. Model and serial numbers included in the recall are:

Ariens Compact and Compact Track Sno-Thro

Models                        Serial Number Range

920013                        124912 - 125271

920014                        142966 - 143728

920021                        003089 - 006233

920022                        000531 - 000712

Ariens Sno-Tek

Models                        Serial Number Range

939401                        090112 - 090623

920402                        143967 - 146057

920403                        126501 - 127351

Ariens PB-28 All Season Brush and Ariens 28 CE Brush

Models                        Serial Number Range

921025                        040600 - 040660

921313                        040163 - 040174

Gravely PB-28 All Season Brush

Models                        Serial Number Range

921026                        040061 - 040079

Units with a black check mark on the model/serial number label are not included in the recall.

Incidents/Injuries

None reported.

Remedy

Consumers should immediately stop using the recalled snow throwers and brushes and contact Ariens Company for a free repair. Consumers should remember to never put their hands into the discharge chute.

Sold at

Home Depot stores and other authorized Ariens dealers nationwide from January 2014 to February 2014 for between $500 and $2,200.

Manufactured in

United States

Importer/Manufacturer

Ariens Company, of Brillion, Wisc.

Briggs and Stratton Reports Results for Third Quarter and First Nine Months of Fiscal 2014

MILWAUKEE, April 24, 2014 -- Briggs and Stratton Corporation today announced financial results for its third fiscal quarter ended March 30, 2014.

Highlights:

•         Third quarter fiscal 2014 consolidated net sales were $628.4 million, a decrease of $8.9 million or 1.4% from the prior year.
•         Third quarter 2014 consolidated adjusted net income excluding restructuring actions was $38.7 million, or $5.2 million lower than the adjusted net income of $43.9 million in the third quarter of fiscal 2013.
•           Reduced shipments of generators led to a decrease in net sales and diluted earnings per share by an estimated $25 million and $0.06, respectively, in the third fiscal quarter compared to last year which benefitted from replenishment following Hurricane Sandy.
•           Third quarter cash flows from operations improved over $30 million from the prior year; last twelve month cash flows from operations total $221 million.
•          Fiscal 2014 third quarter net debt decreased $122 million from the third quarter of fiscal 2013.

"During our third quarter, we saw increases in shipments of engines for lawn and garden equipment in the U.S. despite below average temperatures and a slow start to the spring retail season this year," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation. "Our U.S. shipments of large engines increased in excess of 10% in the quarter reflecting our gains in retail placement. Higher U.S. lawn and garden engine shipments were offset by reduced engines shipped for generators compared with last year when we were replenishing generator inventories following Hurricane Sandy," continued Teske. "Shipments of lawn and garden products in the quarter decreased in line with industry trends given the slow start to the spring season."  

"We are pleased with the responses so far to our new product introductions this year. Orders for our innovative new engine technologies, including our Quiet Power Technology™, 810CC Commercial Series™ engine and our Mow-n-Stow™ engine have exceeded our pre-season expectations and we are looking forward to additional consumer response this summer. Also, our Powerflow + Technology™ introduction is showing early success."

Teske further stated, "Cash flows from operations continue to be strong due to continued operational focus on reducing our investment in working capital. Last twelve months cash flows from operations are in excess of $220 million and reflect lower inventories of $68 million despite holding higher inventories of portable generators in the current year."

"We believe that the colder than normal temperatures have delayed retail sales of equipment by approximately 3-4 weeks and perhaps longer as we have not yet seen the weather break across the United States. Weather in Europe has been favorable to date. Moving forward this spring, we continue to focus on successfully launching our new and innovative products, closely managing working capital, optimizing the SKUs in our product portfolio and improving our operations to improve our overall margins in both the engines and products businesses," Teske stated.  

Consolidated Results:

Consolidated net sales for the third quarter of fiscal 2014 were $628.4 million, a decrease of $8.9 million or 1.4% from the third quarter of fiscal 2013, due to lower sales of generators and the engines that power them. The quarterly impact of lower replenishment following fewer weather related events creating demand for generators and the related engines was an estimated sales decrease of $25 million.

This decrease was partially offset by higher sales of engines used on U.S. lawn and garden equipment and increased snow thrower sales due to higher snowfall amounts in North America this winter. The fiscal 2014 third quarter consolidated net income, which includes restructuring actions, was $39.2 million or $0.82 per diluted share. The third quarter of fiscal 2013 consolidated net income, which includes restructuring charges, was $38.5 million or $0.78 per diluted share.

The estimated impact of the reduced storm replenishment generator and related engine sales in the quarter was $0.06 per diluted share compared with last year's third fiscal quarter.

Consolidated net sales for the first nine months of fiscal 2014 were $1.36 billion, a decrease of $23.0 million or 1.7% from the first nine months of fiscal 2013, due to lower sales of generators and the engines that power them.  The impact of fewer weather related events creating demand for generators and the related engines was an estimated sales decrease of $90 million.

This decrease was partially offset by higher sales of engines used on U.S. lawn and garden equipment, increased sales of pressure washers and sales from Branco, which was acquired mid-year in fiscal 2013. The fiscal 2014 nine months consolidated net income, which includes restructuring actions, was $20.5 million or $0.43 per diluted share. The first nine months of fiscal 2013 consolidated net income, which includes restructuring charges, was $21.4 million or $0.44 per diluted share.

The estimated impact of the reduced storm generator and related engine sales in the first nine months of fiscal 2014 was $0.20 per diluted share compared with last year's first nine months which included the benefit of Hurricanes Isaac and Sandy.

Non-GAAP Financial Measures

This release refers to non-GAAP financial measures including "adjusted gross profit", "adjusted income from operations", and "adjusted net income".  Refer to the accompanying financial schedules for supplemental financial data and corresponding reconciliations of these non-GAAP financial measures to certain GAAP financial measures.

Engines Segment:

Engines segment net sales of $452 million in the third fiscal quarter were essentially unchanged from the prior year. Total engine volumes shipped in the quarter were approximately the same between years at 3.2 million units. Net sales increased on higher sales of engines used on lawn and garden equipment for the North American market, partially offset by lower sales of engines used in generators and for products in Latin America and Australia. New innovations, including Quiet Power Technology™ ("QPT™"), Mow-and-Stow™ and Ready Start® for Ride product launches, have been introduced to the market for the spring selling season.

Engines segment adjusted income from operations in the third fiscal quarter was $59.6 million, a decrease of $2.9 million from the prior year. Engines adjusted gross profit margins improved in total by approximately 20 basis points due to improved product sales mix of larger engines and an absorption benefit of approximately 30 basis points on 4% higher production in the quarter compared to last year.

Partially offsetting these improvements were higher manufacturing and shipping costs in the quarter. Engineering, selling, general and administrative increased $3.7 million due to increased compensation expense and higher sales and marketing expenses in our international regions.

Products Segment

Products segment net sales of $205.2 million in the third fiscal quarter decreased by $26.4 million or 11% from the prior year. This decrease was due to lower sales of generators as a result of fewer weather related events during fiscal 2014, decreased sales of lawn and garden equipment due to exiting sales of lawn and garden equipment to mass retailers and a delay in the selling season, and unfavorable foreign exchange related to the devaluation of the Australian Dollar and Brazilian Real.

Partially offsetting these decreases were higher net sales of snow throwers and related service parts due to higher snowfall amounts in North America this winter. New innovations, including Powerflow + Technology™ for pressure washers, have been introduced to the market for the spring selling season and are contributing to higher pressure washer sales compared with last year at improved margins.

Products segment adjusted loss from operations in the third fiscal quarter was $4.9 million, a change of $6.0 million from the prior year adjusted income from operations. Products adjusted gross profit margins decreased in total by 110 basis points due to an unfavorable foreign exchange impact of approximately 130 basis points and a 6.5% reduction in manufacturing throughput that led to an unfavorable absorption impact of approximately 70 basis points.

Partially offsetting this reduction were improvements of 50 basis points due to increased manufacturing efficiencies, including incremental restructuring savings and improved product sales mix through the U.S. dealer channel. Engineering, selling, general and administrative increased $0.5 million due to increased compensation expense and higher advertising related to new product launches.

Corporate Items:

Interest expense for the third quarter and first nine months of fiscal 2014 was comparable to the same periods a year ago.

The effective tax rate for the third quarter of fiscal 2014 was 26.1% compared to 27.6% for the same respective period of fiscal 2013.  The tax rate for the third quarter of fiscal 2014 included a taxpayer election which provided the Company a $2.9 million tax benefit that was previously unavailable, as well as a benefit of $0.7 million from income related to foreign operations subject to different statutory tax rates. 

The tax rate for the third quarter of fiscal 2013 included benefits for the reenactment of the U.S. federal research and development and other credits in the amount of $1.0 million, foreign tax credits in the amount of $0.5 million, and $1.7 million from income related to foreign operations subject to different statutory rates. 

Financial Position:

Net debt at March 30, 2014 was $117.8 million (total debt of $225.0 million less $107.2 million of cash), or $122.1 million lower than the $239.9 million (total debt of $262.5 million less $22.6 million of cash) at March 31, 2013. Cash flows used in operating activities for the first nine months of fiscal 2014 were $14.0 million compared to $73.8 million in fiscal 2013.

The improvement in operating cash flows was primarily related to changes in working capital needs in fiscal 2014 associated with improvements in managing outstanding accounts receivable and reducing required inventory levels. In addition, no contributions to the pension plan were made in fiscal 2014 compared to $29.4 million in the first nine months of fiscal 2013.

Restructuring:

The previously announced restructuring actions are nearing their conclusion as planned.  The restructuring actions for the third quarter resulted in pre-tax income of $0.8 million related to the reduction of an estimated reserve related to plant closure costs. Net pre-tax restructuring costs for the first nine months of fiscal 2014 were $5.1 million; the cost estimates for fiscal 2014 remain unchanged at $6 million to $8 million. Incremental pre-tax restructuring savings for the first nine months of fiscal 2014 were $1.8 million; the incremental savings estimate for fiscal 2014 also remains unchanged at $2 million to $4 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. On January 22, 2014, the Board of Directors of the Company authorized up to an additional $50 million in funds for use in the Company's common share repurchase program with an extension of the expiration date to June 30, 2016.

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 nine months of fiscal 2014, the Company repurchased 1,479,626 shares on the open market at an average price of $20.32 per share.

Outlook :

Due to the slow start to the spring lawn and garden selling season in North America following an unusually cold winter season, we are revising our fiscal 2014 net income projections to be in the range of $43 million to $50 million or $0.88 to $1.04 per diluted share.  These net income projections exclude the impact of any additional share repurchases and costs related to our announced restructuring actions. 

Our market projections for the U.S. market remain at 4-6% higher than last year's season. The lower end of our range contemplates a later start to the spring lawn and garden selling season in the U.S., which could potentially have the impact of extending the season past the end of our fiscal year end and into our fiscal 2015. The higher side of our guidance contemplates a U.S. market higher than 6% for the season assuming that we capture these sales in our fiscal fourth quarter.

Our fiscal 2014 consolidated net sales are projected to be in a range of $1.88 billion to $1.92 billion. Excluding the impact of restructuring charges, operating income margins are estimated to be in a range of 3.8% to 4.2% and interest expense and other income are forecasted to be approximately $18 million and $7 million, respectively. Excluding the impact of restructuring charges, the effective tax rate for the year is anticipated to be in a range of 28% to 29%. We anticipate capital expenditures for the year to be approximately $45 million to $50 million.  

Big One-time Charge Pushes Blount Into Red

April 23 -- Blount International Inc. on Wednesday reported 2013 sales in-line with Wall Street estimates, but a nearly $25 million one-time non-cash charge pushed the company deep into the red for quarter and nearly wiped out its annual profit.

The Portland-based maker of saw chains and other agricultural equipment reported $900.6 million in 2013 sales, a nearly 3 percent drop from 2012, but in-line with the forecasts of Wall Street analysts polled by Thomson Financial.

The company reported a $4.8 million profit for the year, a roughly 88 percent drop from 2012. Its $0.10 in earnings per share was well below the forecasts of Wall Street analysts who expected $0.68 in earnings per share.

The biggest factor in the slim bottom line was a nearly a $25 million one-time non-cash charge related to how the company valued acquisitions made in 2010 and 2011.

The company recorded the charge in the fourth quarter resulting in a $21 million loss for the quarter.

Charge aside, the company had $123.5 million in earnings before taxes and other charges in 2013, down from roughly $135 million a year ago. It also had $37.5 million in 2013 operating income.

Looking ahead, the company expects an improved 2014. It predicts sales between $925 million and $950 million and earnings before taxes and other charges of $130 million to $135 million, up from $123 million in 2013. The big charge that slashes 2013 earnings is non-recurring.

Wednesday's earnings release also brought the company's filings with the Securities and Exchange Commission up to date. It  previously disclosed a "material weakness" in its accounting.

The company released earnings before the market opened. Shares closed down 2 percent at $11.45. They had a 52-week range between $10.52 and $14.74.

Matthew Kish      www.bizjournals.com/Portland

Amazon, in Threat to UPS, Tries Its Own Deliveries

April 24 -- The future of Amazon.com Inc. is hiding in plain sight in a San Francisco parking lot.

Adjacent to recently closed Candlestick Park, Amazon is testing its own delivery network for the "last mile," the final leg of a package's journey to consumers' doorsteps. Trucks loaded with Amazon packages and driven by Amazon-supervised contractors leave for addresses around San Francisco. Similar efforts are under way in Los Angeles and New York.

Delivering its own packages will give Amazon, stung by Christmas shipping delays, more control over the shopping experience. It can also help contain shipping expenses, which have grown as a percentage of sales each year since 2009, according to securities filings.

On Thursday, Amazon reported another quarter of skimpy profit even as sales increased 23% to $19.74 billion. Shipping costs rose 31%, and it also spent on cloud computing and new initiatives. The company reported a first-quarter profit of $108 million, compared with $82 million a year earlier.

The new delivery efforts will get Amazon closer to a holy grail of e-commerce: Delivering goods the same day they are purchased, offering shoppers one less reason to go to physical stores. With its own trucks, Amazon could offer deliveries late at night, or at more specific times.

The move is a shot across the bow of United Parcel Service Inc., FedEx Corp. and the U.S. Postal Service, which now deliver the majority of Amazon packages. It is also a challenge to Wal-Mart Stores Inc., eBay Inc. and Google Inc., each of which is testing deliveries.

Ultimately, a delivery network could transform Amazon from an online retailer into a full-service logistics company that delivers packages for others, according to former Amazon executives. They caution that any such effort likely is years away.

Delivery is a big step in Amazon's ambitions. The largest U.S. Internet retailer has branched into original video programming, set-top boxes for streaming video, and soon, smartphones, among other things.

It is unclear that Amazon will achieve its goals. UPS, founded in 1907, has a head start of more than a century. Industry observers say it will be difficult for Amazon to match the efficiency of UPS or FedEx in more than a handful of U.S. markets, simply because it will be delivering fewer packages over a wider area.

Amazon quietly began rolling out the delivery network in the U.S. late last year, in packages labeled "AMZL" and "AMZN_US." Customer-service representatives and former employees say those codes designate Amazon's in-house delivery network. Customers who have received the packages said they appear to use a different tracking process, with no links to an outside shipper.

Next up for Amazon is Treasure Island, a man-made spit of land in San Francisco Bay. Amazon is reviewing a lease for a site on the island to house trailers and delivery trucks, according to a person familiar with the matter. From there, Amazon would dispatch trucks into San Francisco, likely late at night and early in the morning when traffic is lighter and fewer island residents would be disturbed, this person said.

Amazon offered a peek at the delivery network in a recent job posting on its website. "Amazon is growing at a faster speed than UPS and FedEx, who are responsible for shipping the majority of our packages," the posting reads. "At this rate Amazon cannot continue to rely solely on the solutions provided through traditional logistics providers. To do so will limit our growth, increase costs and impede innovation in delivery capabilities." "Last Mile is the solution to this. It is a program which is going to revolutionize how shipments are delivered to millions of customers."

As a prelude to the U.S. moves, Amazon has been testing a delivery network in the U.K. "We've created our own fast, last-mile delivery networks in the U.K., where commercial carriers couldn't support our peak volumes," Chief Executive Jeff Bezos said in his annual letter to shareholders earlier this month. "There is more invention to come."

Typically using small couriers, Amazon delivers packages under the "Amazon Logistics" moniker and recently acquired an option to invest in Yodel, a U.K.-based parcel-delivery service. Dave Clark, Amazon's vice president for world-wide operations, said in November that Amazon would use its own trucks to make Sunday deliveries in London.

At San Francisco's Candlestick Park, formerly home to the NFL's 49ers, Ryder trucks are scattered around the parking lot, amid rows of bright green AmazonFresh trucks for Amazon's same-day grocery-delivery service. Trailers arrive each morning, and their contents are transferred to vans or trucks for deliveries in and around San Francisco, said one person familiar with the operation.

The precise logistics between Amazon's "last mile" hubs couldn't be learned. Even if Amazon takes over home deliveries, it will be difficult for the company to cut the major shipping carriers out of the process entirely. Amazon still relies on them to move goods around elsewhere in its supply chain.

Planning for the delivery network began several years ago, but the project took on added urgency last winter after UPS and FedEx failed to deliver Amazon packages to some customers by Christmas, according to two people familiar with the matter. Amazon blamed the carriers, but offered $20 credits to many affected customers.

"What happened during Christmas cost a huge amount of money" for Amazon, UPS and FedEx, said Marc Wulfraat, president of logistics consulting firm MWPVL International, which tracks Amazon closely but isn't working with the retailer.

If Amazon expands its delivery network, it would likely rely initially on cheaper, more flexible regional carriers—such as the East Coast's LaserShip Inc. and the West Coast's OnTrac— as well as the Postal Service for deliveries, according to supply-chain experts and logistics consultants. That would affect package volumes at UPS and FedEx, potentially hurting their efficiency. LaserShip and OnTrac declined to comment.

Sanford C. Bernstein and Co. analysts estimate that Amazon shipped about 608 million U.S. packages in 2013. The Postal Service handled 35%, UPS 30%, regional shippers 18% and FedEx about 17%. The distribution hasn't changed much in recent years.

UPS and FedEx ground rates on average have increased 3% to 5% annually in the past five years, an incentive for Amazon to develop its own delivery service, industry observers say. Amazon cited rising shipping costs in boosting the price of its Prime unlimited two-day shipping membership in the U.S. by $20, or 25%, earlier this year.

Amazon typically pays between about $2 and $8 to ship each package, according to shipping-industry analysts, with the cheapest option through the Postal Service and the most expensive via UPS or FedEx.

Amazon shipments should account for less than 1% of revenue for both FedEx and UPS, said Jack Atkins, an airfreight and logistics analyst at Stephens Inc. That suggests Amazon's delivery network would have a limited effect on the shippers' profits, at least initially.

FedEx Chief Executive Fred Smith in December said that Amazon "can unquestionably do local deliveries should they choose to do so." But he said the vast majority of packages would continue to be moved by FedEx, UPS and the Postal Service. A FedEx spokesman declined to comment further.

A UPS spokesman declined to comment.

Amazon's in-house delivery efforts have experienced hiccups. Online forums in the U.K. are rife with customers reporting missed, late or inaccurate deliveries. Several packages shipped to The Wall Street Journal's San Francisco office assigned to "Amazon Logistics" arrived several days after their guaranteed delivery dates. Customer-service representatives said that because the division is new, it is more difficult to track packages.

David Steigman, a customer in San Francisco, said two recent orders of DVDs like "The Hobbit" with tracking information for "AMZN_US" repeatedly missed Amazon's own delivery deadlines. "After the first time, I asked them not to ship me anything using that service, but they did it again anyway" said Mr. Steigman. "I don't want to be Amazon's test market for their new shipping idea—that's not what I am paying for."

www.online.wsj.com/news          Greg Bensinger, Laura Stevens

Husqvarna Interim Report January - March 2014

Stockholm

April 24, 2014

 Kai Wärn, President and CEO:

“We are pleased to see that the first quarter performance is benefiting from the Accelerated Improvement Program and a good market demand. The program that was launched last year and which aims at substantially strengthening the profitability of the Group is delivering encouraging results. In particular, direct material costs have been reduced and the distinct focus on our premium brands and product leadership areas is beginning to have a positive impact.

From a market perspective, the year has started well in Europe, affected favorably by an early spring. Demand in North America developed positively, driven by retail inventory stock-up, despite another long winter across much of the region. Total currency adjusted net sales for the Group increased 7%, with higher sales in all business areas. Operating income rose 31% to SEK 903m – despite a negative currency development – and the operating margin increased to 9.3% (7.6).

Substantial profitability improvements were achieved in Americas. Direct material costs were reduced and the channel mix developed favorably, supporting a continued recovery of the operating income and margin to SEK 218m (142) and 4.8% (3.3) respectively. First experiences of the new organization, based on separate profit centers for retail and dealer operations, is reinforcing our view that this structure will be an important vehicle for further profitability improvements.

In Europe & Asia/Pacific, we are especially pleased with the product mix. Sales developed well for the prioritized areas, including robotic lawn mowers and watering products. Total sales for the business area rose 5% adjusted for currency, and operating income increased 22% to SEK 669m (550).

Construction reported another strong quarter with higher sales in all regions. The margin rose to 9.8% (6.5), leveraging primarily on a sales growth of 11%.

Going forward, we will continue the execution of the Accelerated Improvement Program. In addition, we are cautiously optimistic about the underlying demand.”

First quarter, January - March

•         Net sales increased to SEK 9,685m (9,024). Adjusted for exchange rate effects, net sales increased 7%.
•          Operating income rose 31% to SEK 903m (688), including negative foreign exchange impact of SEK -45m.
•          Higher sales and operating income for all business areas.
•          Operating income positively impacted by lower costs for materials, product mix and channel mix.
•          Earnings per share increased to SEK 1.07 (0.81).
•          The net debt/equity ratio improved to 0.73 (0.90).

FIRST QUARTER, JANUARY – MARCH 2014

Net sales

Net sales for the first quarter 2014 increased by 7% to SEK 9,685m (9,024). Adjusted for exchange rate effects, net sales for the Group increased 7%, by 5% for Europe & Asia/Pacific, by 9% for Americas and by 11% for Construction.

Operating income

Operating income for the first quarter increased 31% to SEK 903m (688), corresponding to an operating margin of 9.3% (7.6). Operating income and margin rose for all business areas.

Operating income was positively impacted primarily by the higher sales volume and lower direct material costs. Costs for selling and administration as a percentage of sales declined, although logistics costs increased due  to the higher sales activity. Operating income also benefitted from savings of SEK 34m related to the staff reduction program from 2012.

Changes in exchange rates had a total negative impact on operating income of SEK -45m compared to the first quarter 2013.

Financial items net

Financial items net amounted to SEK -96m (-86), of which net interest amounted to SEK -82m (-91). The average interest rate on borrowings at March 31, 2014, was 3.3% (3.6).

Income after financial items

Income after financial items increased to SEK 807m (602) corresponding to a margin of 8.3% (6.7).

Taxes

Tax for the first quarter amounted to SEK -191m (-135), corresponding to a tax rate of 24% (22) of income after financial items.

Earnings per share

Income for the period increased to SEK 616m (467), corresponding to SEK 1.07 (0.81) per share.

OPERATING CASH FLOW

Operating cash flow for the first quarter amounted to SEK -1,892m (-1,786). Cash flow from operations, excluding changes in operating assets and liabilities, increased due to the higher result. Cash flow from changes in receivables decreased as a result of the higher sales. The increase in capital expenditure was mainly related to the previously communicated investments within the new manufacturing facility for chainsaw chains in Huskvarna.

Due to the seasonality of the Group’s operations, operating cash flow is normally negative in the first quarter.

FINANCIAL POSITION

Group equity as of March 31, 2014, excluding non-controlling interests, amounted to SEK 11,975m (11,093), corresponding to SEK 20.9 (19.4) per share.

Net debt decreased to SEK 8,698m (10,053) as of March 31, 2014, of which liquid funds amounted to

SEK 1,755m (1,412) and interest-bearing debt amounted to SEK 9,096m (10,043), excluding pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK 375m during the last twelve months as a result of changes in exchange rates.

The net debt/equity ratio improved to 0.73 (0.90) and the equity/assets ratio rose to 38% (35).

On March 31, 2014, long-term loans including financial leases amounted to SEK 6,852m (6,574) and short- term loans including financial leases to SEK 2,041m (3,104). Long-term loans consist of SEK 4,946m (4,061) in issued bonds, and bank loans and financial leases of SEK 1,906m (2,513). The bonds and bank loans mature in 2015 - 2018. During the first quarter the Group has entered into a new long term loan amounting to SEK 425m with a five year maturity. The Group also has an unutilized SEK 6 bn syndicated revolving credit facility, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

Europe & Asia/Pacific

Net sales for Europe & Asia/Pacific increased by 6% in the first quarter.   Adjusted for exchange rate effects, net sales increased by 5%.

Efforts to grow sales of premium brands, in the prioritized product areas and sales channels, developed well. Robotic lawn mowers, watering products and professional chainsaws showed the best development. By sales channel, the sales growth was mainly related to the dealer channel. Market demand was positively impacted by favorable weather conditions due to an early spring.

Operating income increased 22% to SEK 669m (550) and the operating margin improved to 15.4% (13.5), mainly as a result of the higher sales volume, lower direct material costs and favorable product and channel mix.

Changes in exchange rates had a positive year-on-year impact of SEK 5m on operating income.

Americas

Net sales for Americas increased by 8% in the first quarter 2014. Adjusted for exchange rate effects, net sales increased by 9%.

The market continued to gain support from an improving U.S. economy, but was also negatively impacted by the severe winter conditions across much of North America.

Sales increased in the U.S. and Latin America, with the majority of the growth in the wheeled product category. Dealer channel sales continued to develop strongly, increasing 12% in the quarter.

Operating income improved to SEK 218m (142) and the corresponding margin rose to 4.8% (3.3), mainly due to lower direct material costs and the higher sales volume, which partly was offset by higher logistics costs.

Changes in exchange rates had a negative year-on-year effect of SEK -36m on operating income.

Construction

Net sales for Construction increased by 11% in the first quarter 2014. Adjusted for exchange rate effects, the increase in sales was also 11%.

Market demand for construction products developed positively in all regions. Sales increased in all regions, with the best development in the rest of the world, primarily driven by continued strong growth in Brazil.

Operating income increased to SEK 77m (46), mainly as a result of the higher sales volume. The corresponding operating margin improved to 9.8% (6.5).

Changes in exchange rates had a negative year-on-year effect of SEK -13m on operating income.

PARENT COMPANY

Net sales in the first quarter 2014 for the Parent Company, Husqvarna AB, amounted to SEK 3,398m (3,217), of which SEK 2,835 (2,660) referred to sales to Group companies and SEK 563m (557) to external customers.

Income after financial items amounted to SEK 113m (-60). Income for the period was SEK 15m (-111). Investments in tangible and intangible assets amounted to SEK 129m (92). Cash and cash equivalents amounted to SEK 93m (90) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,479m (17,308).

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 January 2014, 3,110,239 A-shares were converted to B-shares at the request of shareholders. In April 2014, another 66,454 A-shares were converted to B-shares at the request of shareholders. The total number of votes thereafter amounts to 168,709,835.3.

The total number of registered shares in the company at March 31, 2014 amounted to 576,343,778 shares of which 123,483,629 were A-shares and 452,860,149 were B-shares.

ONE OF THE WORLD'S 100 MOST SUSTAINABLE COMPANIES

Husqvarna Group has been recognized as one of the 100 most sustainable companies by the 2014 Global 100 list. Since 2005, Canadian Corporate Knights Inc. have been compiling The Global 100, which is an extensive data-driven corporate sustainability assessment, where inclusion is limited to a select group of the top 100 large-cap companies in the world. It is based on 12 key indicators, including energy, carbon, water and waste productivity, innovation capacity, safety performance and leadership diversity.

ANNUAL GENERAL MEETING 2014

The Annual General Meeting of Husqvarna AB (publ) was held on April 10, 2014, in Jönköping, Sweden. A dividend of SEK 1.50 (1.50) per share was resolved.

Lars Westerberg, Magdalena Gerger, Tom Johnstone, Ulla Litzén, Katarina Martinson and Daniel Nodhäll were re-elected as Board members. David Lumley, Lars Pettersson and Kai Wärn were elected as new members while Ulf Lundahl and Anders Moberg declined re-election. Lars Westerberg was elected Chairman of the Board.

The AGM approved the Nomination Committee's proposal to elect Ernst & Young AB as auditor for the period from the AGM 2014 up until the end of the AGM 2018.

Furthermore, the AGM approved the Board's proposal for a performance based long-term incentive program for 2014, and the proposal for principles of remuneration to Husqvarna Group Management.