Husqvarna Interim Report January - June 2013

Stockholm July 19, 2013

Kai Wärn, President and CEO:

“Group sales improved over the course of the quarter, albeit from a slow start of the season due to unusually cold weather in both Europe and North America. Sales for Europe & Asia/Pacific increased 2%, Construction 7% while Americas’ sales decreased -3%, mainly as a result of the Group’s continued sales channel management to prioritize margin.

Group operating income for the quarter declined, impacted mainly by negative currency effects within Europe & Asia/Pacific. The operating income was also affected by under-absorption due to inventory reductions. The stable earnings improvement for Americas continued, benefiting from dealer channel growth and improved cost efficiency. The positive earnings trend for Construction was supported by higher sales volumes and improved mix. As a result of the inventory reductions, Group operating cash flow for the second quarter was strong.

We have a continued cautious demand outlook for Europe, while the outlook for North America remains more positive for lawn and garden as well as for construction products.

During the second half of the year we will review how we can further accelerate key improvement

programs in order to realize our financial goals.”

Second quarter

•        Net sales amounted to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales were unchanged.

•        Operating income amounted to SEK 1,022m (1,152). Adjusted for changes in exchange rates, operating income improved slightly.

•          Changes in exchange rates negatively impacted operating income by SEK -156m year over year.

•          Strong operating cash flow amounting to SEK 1,915m (2,535).

•          Earnings per share decreased to SEK 1.15 (1.36).

•          Kai Wärn new President and CEO as of July 1, 2013.

SECOND QUARTER

NET SALES

Net sales for the second quarter decreased by -4% to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales for the Group were unchanged, increased by 2% for Europe & Asia/Pacific and by 7% for Construction, while Americas adjusted net sales decreased by -3%.

OPERATING INCOME

Operating income for the second quarter amounted to SEK 1,022m (1,152) and the corresponding operating margin amounted to 10.0% (10.8). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

In addition to changes in exchange rates, operating income was negatively impacted mainly by unfavorable product mix and lower factory utilization levels due to inventory reductions.

Changes in exchange rates had a total negative impact on operating income of SEK -156m compared to the second quarter 2012.

JANUARY – JUNE

NET SALES

Net sales for January – June decreased by -6% to SEK 19,251m (20,517). Adjusted for exchange rate effects, net sales for the Group declined by -2%, for Europe & Asia/Pacific by -2%, for Americas by -2%, while sales for Construction increased by 4%.

OPERATING INCOME

Operating income for January – June amounted to SEK 1,710m (2,082) and the corresponding operating margin amounted to 8.9% (10.1). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

Operating income, excluding changes in exchange rates, was negatively impacted mainly by lower factory utilization levels, the lower sales volume and product mix.

Changes in exchange rates had a total negative impact on operating income of SEK -291m compared to January - June 2012.

FINANCIAL ITEMS NET

Net financial items for the second quarter amounted to SEK -106m (-121). The lower financial cost is explained mainly by lower average interest rates. The average interest rate on borrowings at June 30, 2013, was 3.9% (3.9). For January – June, net financial items amounted to SEK -192m (-255).

INCOME AFTER FINANCIAL ITEMS

Income after financial items for the second quarter decreased to SEK 916m (1,031) corresponding to a margin of 9.0% (9.6). Income after financial items for January - June decreased to SEK 1,518m (1,827) corresponding to a margin of 7.9% (8.9).

TAXES

Taxes for January - June amounted to SEK -390m (-408), corresponding to a tax rate of 26% (22) of income after financial items.

EARNINGS PER SHARE

Income for the second quarter amounted to SEK 661m (786), corresponding to SEK 1.15 (1.36) per share. Income for January – June amounted to SEK 1,128m (1,419), corresponding to SEK 1.96 (2.46) per share.

OPERATING CASH FLOW

Operating cash flow for the second quarter amounted to SEK 1,915 (2,535). Inventory reductions contributed positively to cash flow. The lower operating cash flow was mainly due to stronger sales during the latter part of the quarter, resulting in lower cash flow from change in trade receivables during the second quarter compared with the previous year.

Operating cash flow for January – June amounted to SEK 129m (92).

FINANCIAL POSITION

Group equity as of June 30, 2013, excluding non-controlling interests, amounted to SEK 11,591m (12,149), corresponding to SEK 20.2 (21.2) per share.

Net debt amounted to SEK 8,733m (9,319) as of June 30, 2013, of which liquid funds amounted to

SEK 1,940m (1,658) and interest bearing debt amounted to SEK 10,673m (10,977), including pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -320m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.75 (0.76) and the equity/assets ratio to 38% (39).

In addition to the amendment of IAS 19 “Employee benefits,” 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 June 30, 2013, long-term loans including financial leases amounted to SEK 7,515m (5,211) and short-term loans including financial leases to SEK 1,487m (3,850). Long-term loans consist of SEK 4,939m (2,526) in issued bonds, and bank loans and financial leases of SEK 2,576m (2,685). 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 & Asia/Pacific

Net sales for Europe & Asia/Pacific decreased by -3% in the second quarter 2013. Adjusted for exchange rate effects, net sales increased by 2%.

Demand for lawn and garden products was negatively impacted by a late start of spring due to unusually cold weather, which lasted well into the quarter in many European markets. Consumer demand remained weaker than in the previous year and retailers continued to manage inventory conservatively as the macroeconomic uncertainty remained.

The Group’s sales were off to a slow start, but picked up in May and had a strong finish in June. In terms of products categories, electric products such as robotic mowers had the best development, while handheld products and riders declined. Watering products were in line with prior year.

Operating income amounted to SEK 806m (1,018) and the operating margin amounted to 15.5% (19.0).

In addition to impact from changes in exchange rates, the lower operating income was mainly related to lower utilization levels in factories as a result of inventory reductions, and less favorable product mix.

Changes in exchange rates had a negative year-on-year effect of SEK -153m on operating income.

Americas

           

Net sales for Americas decreased by -8% in the second quarter 2013. Adjusted for exchange rate effects, net sales decreased by -3%.

Although supported by an improving U.S. economy, demand for lawn and garden equipment in North America was off to a slow start due to unfavorable weather.

The Group’s sales recovered in the second half of the quarter, but not enough to exceed prior year’s level. Sales were lower in the U.S. and in Latin America, while sales in Canada were higher. Sales to the dealer channel rose.

Operating income increased to SEK 150m (87) and the corresponding margin improved to 3.6% (1.9). The effects of channel management and manufacturing efficiencies continued to contribute to the positive development.

Changes in exchange rates had a positive year-on-year effect of SEK 11m on operating income.

Construction

Net sales for Construction increased by 1% in the second quarter 2013. Adjusted for exchange rate effects, the increase in sales was 7%.

The positive development in North America continued. Market demand was on a higher level than in the previous year, and the Group achieved additional growth as a result of market share gains. Despite continued weak demand in Europe, the Group’s sales were slightly higher. In the rest of the world, sales also increased, with a particularly good development in Brazil.

Operating income increased to SEK 100m (85) and the operating margin improved to 12.3% (10.5). Operating income was positively impacted mainly by the higher sales volume and mix.

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

PARENT COMPANY

Net sales for January – June 2013 for the Parent Company, Husqvarna AB, amounted to SEK 6,430m (6,886), of which SEK 4,981m (5,365) referred to sales to Group companies and SEK 1,449m (1,521) to external customers.

Income after financial items amounted to SEK 1,012m (743). Income for the period was SEK 907m (461). Investments in tangible and intangible assets amounted to SEK 227m (164). Cash and cash equivalents amounted to SEK 432m (25) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,466m (16,991).

KAI WÄRN NEW PRESIDENT AND CEO AS OF JULY 1

Kai Wärn took office as new President and CEO of Husqvarna as of July 1, 2013. He replaced Hans Linnarson, who will continue to work for the Group until he retires early 2014.

Kai Wärn was born in 1959 and is a graduate from the Royal Institute of Technology in Stockholm, Sweden. Previous positions include President and CEO at Seco Tools AB, a leading global metal cutting tools company, at that time listed at NASDAQ OMX Nordic stock exchange and President of the Business Unit ABB Robotics Products within ABB Group. Most recently Kai has held the position as Operations Partner at the private equity firm IK Investment Partners.

ALAN SHAW APPOINTED NEW HEAD OF AMERICAS

Effective August 15, 2013, Alan Shaw has been appointed Executive Vice President, Head of business area Americas and will become member of Husqvarna Group Management. Alan Shaw has more than 25 years of global experience from consumer durables including barbeque grills and accessories, lawn and garden equipment and major home appliances. Most recently, Alan was President and CEO of Char-Broil LLC.

OPEI Announces 2013-2014 Officers and Board of Directors

The Outdoor Power Equipment Institute (OPEI) recently announced its 2013-2014 Officers and Board of Directors during the OPEI Annual Meeting in Williamsburg, VA, June 18-20, 2013.

Officers for the 2013-2014 year include:

OPEI chairman - Todd Teske, chairman, president & CEO, Briggs & Stratton

OPEI vice chair - Paul Mullet, president, Excel Industries

OPEI secretary/treasurer - Lee Sowell, president of outdoor products, Techtronic Industries, N.A., Inc.

“OPEI is entering this new fiscal year stronger than ever, both organizationally and financially,” said Kris Kiser, president and CEO of OPEI. “The OPEI Board reflects the impressive scope and breadth of our membership. Our membership is at a record high, representing small engine manufacturers with a range of power sources, utility vehicle manufacturers, and a myriad of small engine equipment manufacturers and suppliers serving a broad range of industries and uses.”

"OPEI’s long history and strong membership put us in a unique position to make sure we are bringing good quality high value products to the marketplace,” said OPEI chair, Todd Teske. “Our collective strength to influence legislation in order to protect our employees and consumers and to communicate accurate information about our industry will continue to be our focus into the future. For the over hundred million consumers who use our products, we want them to know we are working hard for them.”

Continuing their service on the OPEI Board are:

Immediate past chairman - Daniel Ariens, president & CEO, Ariens Company

Marc Dufour, president, Club Car

Peter Hampton, president, Active Exhaust Corporation

Jean Hlay, president and chief operating officer, MTD Products Inc.

Steven Bly, executive vice president, Echo Inc.

Ed Cohen, vice president of Government & Industry Relations, Honda North America

Michael Hoffman, chairman, chief executive officer, The Toro Company

Tim Merrett, vice president, AT&T Global Platform Turf & Utility, Deere & Company

Fred Whyte, president, Stihl Incorporated

New to the board this year are:

Tom Cromwell, president, Kohler Engines, Kohler Company

John Cunningham, president, Consumer Products Group, Stanley Black & Decker, Inc.

Briggs and Stratton to Sell Snapper, Simplicity Parts Online to Consumers

July 9 -- Briggs and Stratton's Snapper and Simplicity brands will begin selling certain lawnmower parts online to consumers. Briggs is citing increased demand from some consumers to shop for parts online, as opposed to the more traditional visit to an independently owned servicing dealership.

“Briggs and Stratton wants to assure that its consumers who prefer to shop online have access to original branded equipment parts for their Simplicity and Snapper products,” says Troy Blewett, director of dealer channel marketing for Briggs and Stratton.

Select parts will be available on both the Snapper and Simplicity websites starting July 17, 2013.

According to a memo to dealers from a Briggs representative, each website will provide the opportunity for consumers to find their nearest dealer, along with an online option to purchase OEM parts. The dealer locator search function will assure that consumers understand that they have a local dealer for all of their parts and service needs, the memo states.

“Briggs and Stratton continues to make every effort to drive consumers into its dealers’ brick and mortar stores,” says Blewett. “On each page of the online shopping module, a dealer locator is prominently displayed. In fact, it is our plan to use this selling tool to increase brand awareness thereby driving more footsteps into our dealerships.”

Generally speaking, dealers are not happy as they will likely lose some parts business; consumers already expressing a desire to buy parts online will forego the locate-a-dealer option.

Many dealers already have robust online parts selling capability, but many do not. Briggs assures there is faith in dealers to meet demand and tools made available to support their individual online sales efforts.

“We have great faith in our dealers’ abilities to sell our end products and our OEM parts in their local markets. Not all dealers, however, engage in online selling,” explains Blewett. “Additionally, for our dealers who are selling parts online (or who would like to start), Briggs and Stratton offers a variety of online tools they can use to increase their local search capabilities and drive more consumers to their own websites. In fact, our branded websites link directly to those of our dealers.”

Some suppliers, such as Toro and Rotary (aftermarket parts), do sell parts to consumers online, but filter sales through the appropriate dealers.

The Briggs memo also stated that it's important for the company to provide customers with the original branded equipment parts for trusted brands such as Snapper and Simplicity. Thus, an option to buy online is necessary. The company says dealers will maintain the most competitive pricing on parts.

“Prices are full list plus freight charges and tax where required,” says Blewett. “Dealers will always be more competitive in terms of price. Again, our goal is to provide an avenue for original equipment parts sales for online consumers.” 

The Briggs memo also stated that it's important for the company to provide customers with the original branded equipment parts for trusted brands such as Snapper and Simplicity. Thus, an option to buy online is necessary. The company says dealers will maintain the most competitive pricing on parts.

“Prices are full list plus freight charges and tax where required,” says Blewett. “Dealers will always be more competitive in terms of price. Again, our goal is to provide an avenue for original equipment parts sales for online consumers.”  

www.greenindustrypros.com

Husqvarna Group Appoints Alan Shaw as Head of Americas

Effective August 15, 2013, Alan Shaw has been appointed Executive Vice President, Head of business area Americas and will become member of Husqvarna Group Management.

June 19 -- Alan Shaw has more than 25 years of global experience from consumer durables including barbeque grills and accessories, lawn and garden equipment and major home  appliances.

Most recently, Alan comes from the barbeque grill and accessories company Char-Broil LLC, US, where he has been President and CEO since 2005. Between 2003 and 2005, he held the position as President and CEO of the consumer lawn and garden equipment manufacturer Murray Group, US. Between 1987 and 2003, he held numerous positions within the home appliance company Whirlpool Corporation.

Alan Shaw holds an MBA from Indiana University and a BS from the University of Idaho.

Earl Bennett, who has been Acting Head of Americas, since January 23, 2013, will resume his position as Vice President and General Counsel for Americas.

“Together with my successor Kai Wärn, I would like to welcome Alan Shaw to the Group. In Alan Shaw we have found a strong leader with a solid track record of managing brand driven businesses,” says Hans Linnarson, President and CEO of Husqvarna Group. “I would also like to thank Earl Bennett for his valuable contributions while acting as Head of Americas for the past five months.” 

Judy Altmaier Named New VP and General Manager of Exmark Manufacturing

BEATRICE, NE – June 11 – Judy Altmaier has been named vice president and general manager of Exmark Manufacturing, based in Beatrice, Neb. She succeeds Rick Olson, who recently transitioned to vice president of The Toro Co.'s International Business.

Altmaier joined The Toro Co. in 2009 from Eaton Corporation, and most recently served as vice president of operations and quality management. Her move to the Beatrice area is a homecoming of sorts, as Altmaier earned her bachelor of science in business administration from Kearney State College and an MBA from the University of Nebraska-Kearney, in Kearney, Neb.

Prior to joining Toro, Altmaier held a number of high-level positions with Eaton, including serving as vice president and general manager of the company’s Global Engine Valve Division in Turin, Italy. She also held the position of vice president and general manager of operations for Eaton’s Automotive Group Americas in Marshall, Mich.

“Judy is a seasoned, global leader with broad base experience serving a wide range of internal and external customers,” said Mike Happe, group vice president at The Toro Co. “She will lead a strong Exmark team of employees in Beatrice that’s ready to support her and continue to drive the Exmark business to higher levels of performance in the years to come. She understands our business model and will strive to outperform our customers’ expectations.”

www.lawnandlandscape.com

Ariens Company Closing Plant In Alabama

BRILLION, WI — June 6 -- Ariens Co. said today it will close its manufacturing plant in Opp., Ala.

The plant, which is about 80 miles south of Montgomery, Ala., employs 17 people, and will continue operating until July 26.

The company has operated the facility since 2006 when it acquired Locke Turf Co., a manufacturer of reel mowers and specialty turf equipment. It is located on the Kinston highway, and in Opp, personnel were tasked with manufacturing snow-blowing equipment, Opp Mayor John Bartholomew said.

Corporate officials said the closure was done. in an effort to consolidate manufacturing operations for improved efficiency. Production will run through July 26.

“This decision is not a reflection on the performance of the plant,” said Bob Bradford, senior vice president of operations. “I’d like to thank the employees for the remarkable improvements they made on their lean journey of continuous improvement which began the day we acquired the plant seven years ago. They would be an asset to any of our other manufacturing facilities and we have offered them the option to transfer.”

The company, which makes snow throwers and other power equipment, said employees will be provided severance packages and outplacement assistance.

Customers should not see an impact on product delivery, the company said.

www.postcrescent.com 

Generac Completes Amended/Restated Secured Facility

June 3 -- Generator maker Generac announced this morning it had completed the refinancing of its senior secured term loan credit facility and, as it previously promised, will use part of the proceeds to pay investors a special dividend of $5.00 per share, payable on June 21 to stockholders of record on June 12.

Generac said the refinancing resulted in it incurring $1.2 billion of senior secured term loans that replaced its prior term loan facilities. The new term loans will mature in 2020, with interest initially accruing at LIBOR plus 2.75% with a LIBOR floor of 0.75%. Moreover, beginning in the second quarter of 2014, the spread to LIBOR of the new term loans can be reduced to LIBOR plus 2.50% if its net debt leverage ratio falls below 3.0 times.

Generac also obtained a one-year extension to the maturity date of its existing $150 million senior-secured, asset-based revolving credit facility. The extended revolving credit facility will terminate in 2018, but will continue to accrue interest on drawn proceeds using an "availability-based pricing grid" starting at LIBOR plus 2%.

As previously announced, the generator maker intends to use approximately $342 million of the proceeds from the new term loans to fund a special cash dividend to its stockholders of $5.00 per share. The company does not pay a regular dividend on its common stock. The remaining funds will be used for general corporate purposes and to pay related financing fees and expenses.

As a result of the closing on the $1.2 billion of senior secured term loans, the Company is updating its guidance for interest expense for the full-year 2013. Interest expense is now expected to be in the range of $55.0 to $57.0 million, which includes $50.0 to $51.0 million of debt service costs, at current LIBOR rates, plus $5.0 to $6.0 million for deferred financing cost and original issue discount amortization. Interest expense during the third quarter of 2013, the first full quarter under the new capital structure, is expected to be approximately $13.0 million, which includes approximately $2.0 million of deferred financing costs and original issue discount amortization.

Kohler Co. Adding 300 Jobs in Southeastern Wisconsin

May 29 -- Kohler Co. will add more than 300 jobs in southeastern Wisconsin over the next three years, the company announced Wednesday morning.

The job creation is a result of an expansion of the Kohler-based company’s global power business. Kohler is a privately held company whose products include mobile and standby generators.

The company will add an extension to its production facility in the town of Mosel in Sheboygan County. The jobs will be added at company locations in Mosel and the villages of Saukville and Kohler, the company said.

“This investment reflects our commitment to provide homeowners and businesses with superior product and rapid delivery,” said Herb Kohler, chairman and CEO of Kohler Co.

Since 2011, the demand for standby power has surged with more than 5,000 power outages and more than 50 million homes and businesses affected in North America alone, Kohler Co. said.

www.bizjournals.com 

Extremely Active 2013 Hurricane Season Expected

May 23 -- A year after Superstorm Sandy, residents along the Atlantic and Gulf coasts should prepare for "an extremely active" 2013 hurricane season, U.S. forecasters say.

There is a "70 percent likelihood" that will be three to six major hurricanes this year with winds above 111 mph, according to the 2013 hurricane outlook unveiled by the National Oceanic and Atmospheric Administration's Climate Prediction Center on Thursday.

During the six-month hurricane season, which begins June 1, forecasters anticipate 13 to 20 named storms (winds of 39 mph or higher). Of those, seven to 11 could become hurricanes (winds of 74 mph or higher).

Those ranges are above normal. According to the National Hurricane Center, the seasonal average is 12 named storms, six hurricanes and three major hurricanes. Hurricane season ends Nov. 30.

The dire forecast comes as many shoreline residents—particularly in New York and New Jersey—are still recovering from Sandy, which killed 147 people and caused more than $75 billion in damage in October 2012. It was the second-costliest hurricane in U.S. history.

The 2012 hurricane season produced 19 named storms, including 10 hurricanes and two major hurricanes—Sandy and Michael, a Category 3 storm that stayed over the open Atlantic. The number of named storms and hurricanes were above average, but the two major hurricanes was below the average of three.

Climate factors—including warmer-than-average water temperatures in the Atlantic Ocean—contributed to 2013's active forecast, the NOAA said.

And homeowners should begin their storm preparations now.

"Take time to refresh your hurricane preparedness plan," Kathryn Sullivan, NOAA acting administrator, said during a news conference in College Park, Md., on Thursday. "Bottom line is become weather-ready now—that means starting today."

NOAA also unveiled plans for a new "supercomputer" that will run an "upgraded Hurricane Weather Research and Forecasting models." That, combined with new Doppler technology from NOAA's"hurricane hunter" aircraft, is expected to improve forecast accuracy "by 10 to 15 percent," the NOAA said.

The seasonal hurricane outlook does not predict how many storms will hit land or where a storm will strike. For people living on the shorelines, Sullivan said, "this is your warning."

Ventrac Receives Presidential Award For Export Growth

WASHINGTON – May 20 -- U.S. Acting Secretary of Commerce Rebecca Blank today presented Venture Products, Inc. with the President’s “E” Award for Exports at a ceremony in Washington, D.C. The “E” Awards are the highest recognition any U.S. entity may receive for making a significant contribution to the expansion of U.S. exports.

“I am delighted to be recognizing this year’s Presidential ‘E’ Award winners for their outstanding contributions to U.S. exports and congratulate Venture Products, Inc. on its outstanding export achievement,” said Acting Secretary Blank. “It is businesses like Venture Products that are strengthening the economies of local communities, creating jobs, and contributing to the worldwide demand for ‘Made in the USA’ goods and services.”

“Exporting has enabled us to diversify our revenue streams and weather changes in the marketplace. It allows us to mitigate risk while boosting our competitiveness and bottom lines,” stated Dallas Steiner, President of Venture Products. He adds, “Our products are exported to over 20 countries, with the strongest countries of export being Sweden, Japan, South Korea and Australia.”

Randy Kitzmiller, Director of Operations for Venture Products said, “Export sales over the past three years have grown 80 percent. This growth has allowed us to double our work force and build a new manufacturing facility in Orrville, Ohio.” 

Venture Products, Inc., located in Orrville, Ohio, is the manufacturer of Ventrac compact tractors and commercial grade attachments. Ventrac tractors are unique; the design includes an articulating frame, front-mounted attachments, and all-wheel drive traction in a compact design..

U.S. exports hit an all-time record of $2.2 trillion in 2012, and supported nearly 10 million American jobs. President Obama’s National Export Initiative, which aims to double U.S. exports by the end of 2014 and support an additional 2 million jobs in the United States, is opening new avenues for U.S. exporters through enhanced export assistance and a strengthened trade agenda that is targeting emerging markets and industry sectors across the globe.

President Kennedy revived the World War II “E” symbol of excellence to honor and provide recognition to America's exporters. The “E” Award Program was established by Executive Order 10978 on December 5, 1961. A total of 57 U.S. companies were presented with the President’s “E” Award this year.

U.S. companies are nominated for the “E” Award for Exports through the Department of Commerce’s U.S. and Foreign Commercial Service office network, located within the Department’s International Trade Administration, which has offices in 108 U.S. cities and more than 70 countries to help U.S. exporters.  Four years of successive export growth and an applicant’s demonstration of an innovative international marketing plan that led to the increase in exports is a significant factor in making the award.

The Toro Company Reports Record Second Quarter Results

THE TORO COMPANY REPORTS RECORD SECOND QUARTER RESULTS

·         Sales increase to record $704 million for the quarter

·         Quarterly net earnings per share up 17 percent to a record $1.32

·         Late spring impacts momentum in quarter

·         Company tempers sales growth expectations and maintains earnings outlook

BLOOMINGTON, MN -- May. 23 -- The Toro Company today reported net earnings of $78.4 million, or $1.32 per share, on a net sales increase of 1.9 percent to $704.5 million for its fiscal second quarter ended May 3, 2013. In the comparable fiscal 2012 period, the company delivered net earnings of $68.8 million, or $1.13 per share, on net sales of $691.5 million.

For the first six months, Toro reported net earnings of $109.8 million, or $1.85 per share, on a net sales increase of 3 percent to $1,149.1 million. In the comparable fiscal 2012 period, the company posted net earnings of $88.7 million, or $1.46 per share, on net sales of $1,115.3 million.

“We achieved record sales and earnings in the quarter, despite this year’s challenging weather pattern compared to a year ago,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “In 2012, we enjoyed ideal spring conditions with a warm, early start to the season, while this year much of North America and Europe have dealt with unusually cold weather. These conditions delayed sales, especially of our residential products which are more immediately impacted by weather.

Improved market conditions for some of our professional customers, combined with new products and solid execution, fueled shipment growth that offset the delay of our residential shipments. Through the first six months, our golf and micro irrigation businesses have been strong, and our professional sales in Europe and Asia are ahead of last year. While our earnings benefited from mix and timing, I’m pleased to see our productivity efforts yielding results on the path to our Destination 2014 operating earnings goal.”

“Even with a marginal winter season and late start to spring, we remain cautiously optimistic about the remainder of the year,” said Hoffman. “Retail activity in our residential business started to pick up in late April, and the momentum is continuing in May. Looking forward, we face favorable comparisons to last year, when much of the United States struggled with drought conditions during the summer months. Since we are not likely to make up all of the impact from the late start to spring, including a resulting increase in field inventory, we are tempering our revenue growth expectations for the year. Despite lower sales growth, we are maintaining our earnings outlook on the strength of productivity gains and favorable commodity trends, somewhat offset by anticipated pressures from mix and manufacturing utilization in the second half of the year.”

The company now expects revenue growth for fiscal 2013 to be about 3 to 4 percent, and continues to expect net earnings to be about $2.40 to 2.45 per share, or an increase of about 12 to 15 percent over fiscal 2012.

SEGMENT RESULTS

Professional

Professional segment net sales for the second quarter totaled $496.4 million, up 8.9 percent from the prior year period. Shipments of landscape contractor equipment increased on channel demand in anticipation of the upcoming season. Rental and construction equipment sales were up on strong rental customer demand and incremental sales from the Stone acquisition.

Worldwide sales of golf equipment and irrigation increased on improved budgets that enabled customers to replace aging fleets and systems with new innovative products. Global micro irrigation sales increased on continued demand for more efficient irrigation solutions for agriculture. For the first six months, professional segment net sales were $825.6 million, up 11.6 percent from the comparable fiscal 2012 period.

Professional segment earnings for the second quarter totaled $112.3 million, up 13.8 percent from the prior year period. For the first six months, professional segment earnings were $173.0 million, up 22.9 percent from the comparable fiscal 2012 period.

Residential

Residential segment net sales for the second quarter totaled $201.4 million, down 13.2 percent from the prior year period. Unfavorable weather delayed the start of the spring goods selling season, negatively impacting the sales of walk power mowers and riding products. For the first six months, residential segment net sales were $322.3 million, down 12.8 percent from the comparable fiscal 2012 period. The year-to-date sales results were largely attributable to the unusually mild winter and the late start to spring.

Residential segment earnings for the second quarter totaled $24.7 million, down 13.5 percent from the prior year period. For the first six months, residential segment earnings were $36.8 million, down 10.4 percent from the comparable fiscal 2012 period.

OPERATING RESULTS

Gross margin for the second quarter improved 180 basis points to 35.8 percent due to segment mix, coupled with productivity gains and selective price increases. For the first six months, gross margin was up 210 basis points to 36.4 percent.

Selling, general and administrative (SG&A) expense as a percent of sales increased 50 basis points for the second quarter to 19.1 percent. For the first six months, SG&A expense increased 40 basis points as a percent of sales to 22.1 percent. For both periods, the increase in SG&A as a percent of sales was a result of higher warehousing expense, incremental costs from acquisitions, increased engineering spending, and higher health insurance costs.

Operating earnings as a percent of sales increased 130 basis points to 16.7 percent for the second quarter, and was up 170 basis points to 14.3 percent for the year to date.

The effective tax rate for the second quarter was 32.6 percent compared with 34.1 percent in the same period last year. For the year to date comparison, the tax rate decreased to 31.3 percent from 34 percent. The decrease in both periods was primarily the result of the reenactment of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the second quarter totaled $307.8 million, up 12.8 percent from the prior year period. Net inventories were $310 million, up 23.6 percent from last year’s second quarter. Trade payables were $203.7 million, up 3.7 percent compared with last year.

About The Toro Company

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $1.9 billion in fiscal 2012, Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation, and a commitment to helping customers enrich the beauty, productivity and sustainability of the land.

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

Horst Pudwill Emerges as U.S. Housing Recovery Boosts Techtronic Industries Exports

May 22 -- Horst Julius Pudwill, chairman of Hong Kong-based Techtronic Industries, has emerged as a new billionaire as shares of the power equipment supplier surged by more than 100% in the past year. With the bulk of its manufacturing facilities in southern China, the company delivered record revenues and profit in 2012, boosted by strong sales of power tools and floor care products in the U.S. and European markets.

Benefiting from a nascent recovery in the U.S. housing market and strong cost controls, Techtronic’s group sales increased 8.4% to $3.67 billion in 2012. Profit grew 32% to $201 million.  The share price has climbed 111% in the past twelve months. Pudwill, 69, who owns a bit more than 20% of the company, has seen his net worth jump to over $1 billion, Forbes calculates.

Pudwill first visited Hong Kong from Germany in the mid-1970s as a sales and marketing representative promoting Volkswagen vehicles. In 1985, along with business partner Roy Chung Chi-ping, he founded Techtronic Industries in Hong Kong, which had six employees and focused on producing rechargeable battery packs in hand tools. It later assembled tools for overseas brands. In the 1990s, it began buying up consumer brands. Today, the company has grown to be one of the world’s largest suppliers of cordless power tools and floor care appliances. It employs over 20,000 people worldwide.

In 2000, Techtronic purchased North American power tool operations previously owned by Japan-based Ryobi Limited. It acquired Milwaukee power tools along with AEG, from a Swedish group in 2005 for $626 million. In 2007, Techtronic bought the ailing Hoover brand from Whirlpool WHR -0.34% for $107 million, and turned around the money-losing business.

Pudwill retired as CEO in 2008 but remains chairman of the company.

Techtronic is best known for brands like Milwaukee Electric Tools, Homelite outdoor products, and Dirt Devil and Hoover vacuum cleaners. Consumers in Europe and Australia might be more familiar with its Ryobi and Vax brands. Some 74% of revenues come from the U.S. market and 20% from Europe.

Product demand in the US is benefiting from a recovery in housing and from the reconstruction efforts following Hurricane Sandy., J.P. Morgan Hong Kong analysts Leo Chik and Andrew Hsu said in a recently-released report.

Fueled by the housing market growth, Techtronic’s largest customer, Home Depot HD -1.44%, just reported higher-than-expected results for the first quarter of 2013, and raised its sales and profit outlook for the year. Similar to Home Depot, Techtronic has seen increased demand for tools and power generators after Hurricane Sandy.  Power tool sales in the U.S. grew 10% in the first half of 2012, the analysts said. Milwaukee, the primary professional brand for Techtronic, grew by 23.7% driven by strong demand from U.S. contractors for its new “Fuel” line of brushless motor products launched recently. In Europe, professional tool sales also grew double digits.

The analysts expect lower material costs and an appreciating Euro could help raise 2012 and 2013 EBIT (earnings before interest and tax) margins to a five-year high of 6.7%, rising to 9.7% by 2015 with increased sales growth. However, the key risks to its businesses are rising cost of production in China and a slower-than-expected recovery in US demand.

Headquartered in Hong Kong, Techtronic maintains manufacturing and research facilities in Asia and North America, as well as a customer servicing network in North America, Europe and Australasia.  But the bulk of its manufacturing is in southern Chinese city of Dongguan.

Pudwill holds a master’s degree in engineering and a general commercial degree. He is married to Barbara Pudwill. Their son Stephan Horst Pudwill, 37, joined Techtronics in 2004 and now serves as president of strategic planning.  Pudwill lives in Hong Kong and enjoys golf and tennis.

www.forbes.com     

Servantage Dixie Sales and Outdoor Division of Henry W. O'Neill and Associates Join Forces

Victor, NY business will operate as Servantage O’Neill Outdoor

GREENSBORO, N.C. (April 9, 2013) — Servantage® Dixie Sales announces today that, as of April 15, it will acquire the Outdoor Division of Henry W. O’Neill and Associates. The O’Neill facility in Victor, NY will operate as Servantage O’Neill Outdoor.

Servantage Dixie Sales is a distributor of a full range of products, parts and accessories from the top name brands in lawn and garden, power equipment and outdoor sporting goods. O’Neill Associates distributes lawn and garden equipment, parts and accessories as well as industrial and commercial products to 14 northeastern states.

“The combination of Servantage Dixie Sales and O’Neill will allow us not only to capitalize on the rich legacy that O’Neill provides,” said Harold Reiter, CEO of Servantage Dixie Sales, “but also enables us to better develop the offerings provided by Servantage Dixie Sales, particularly in the North Eastern USA region. O’Neill brings with it a number of new opportunities for industry expansion.”

“We are very eager about joining forces with the Servantage Dixie Sales team and look forward to continuing to build the combined business,” added Virginia O’Neill, president of O’Neill Associates.

“As Dixie prepares to celebrate its 100-year anniversary and O’Neill Associates enters 61 years of operation, we are well positioned to provide a seamless brand experience for all of our business partners and customers,” said Mike Rounsavall, president of Servantage Dixie Sales. “We look forward to teaming up with O’Neill Outdoor as part of the Servantage network.”

About Servantage® O’Neill Outdoor

Servantage® Dixie Sales is an independent, full-service, value-added distributor of lawn and garden equipment that enhances end-user experiences with consumer products. The combined companies of Servantage Dixie Sales and O’Neill Outdoor have over 150 years of experience. The company’s core competencies are customer service, integrated distribution and logistics, and product-support service networks. As a trusted partner and reliable resource, manufacturers and multiple-store retailers depend on Servantage Dixie Sales to create a seamless brand experience for their customers. Headquartered in Greensboro, NC, the Servantage group now operates distribution centers in Greensboro, NC; Memphis, TN; Victor, NY and Toronto, Canada as well as two contact centers in the US and Canada providing customer support in English, French and Spanish. For more about Servantage Dixie Sales and Servantage O’Neill Outdoor, visit www.servantage.net

CEO Aaron Jagdfeld Leads Generac Growth

May 14 -- Aaron Jagdfeld, 41, runs a fast-growing company with $1 billion in annual ­revenue. He’s president and CEO of ­Generac Holdings, a maker of automatic standby generators based in Waukesha, Wis.

Jagdfeld joined Generac in 1994 and became its chief executive in 2008. In the past two years, its workforce has grown from about 1,400 to approximately 3,000 employees, largely due to acquisitions.

EL: How did you become CEO at such a young age?

Jagdfeld: I started here in finance and later became chief financial officer [in 2002]. I think it’s my deep understanding of the business, the products, the customers, the employees, even the supply chain.

EL: If you were to pick one skill that drives your success, what would it be?

Jagdfeld: Decision-making. You’ve got to make educated decisions through data as a leader. With big decisions, you want to solicit opinions from your team, the board of directors and other stakeholders and understand the impact any one decision will have.

EL: But doesn’t gathering wide-ranging input make it harder to decide?

Jagdfeld: I’ll pick a path, and the input process becomes a validation of that path. You can’t go out to people with an open question and just go in any or all directions they take you. 

EL: What lessons have you learned to make sound decisions?

Jagdfeld: You need to act swiftly and decisively. Don’t wait for a problem to solve itself. People resolve problems. My clock speed runs faster. If I have the data, I’ll advance toward making a decision.

EL: How about personnel decisions?

Jagdfeld: If you see someone failing or flailing, give proper feedback quickly.

EL: As CEO, what metrics do you track?

Jagdfeld: We’re heavy into numbers. We use KPIs [key performance indicators] to make sure our team has the resources to execute properly. But to me, leadership is also about having energy: getting excited about our prospects and our growth.

EL: How do you ex­press that excite­­ment?

Jagdfeld: My role is to develop the team. You turn into a head coach, calling plays and executing plays. I get to be a cheerleader, coach and traffic cop. Confidence comes from the team saying, “We can do this.”

EL: How do you set goals?

Jagdfeld: There’s an art to giving teams the confidence, resources and drive to achieve goals. You want to set goals that don’t disillusion people.

EL: How would you describe Generac’s culture?

Jagdfeld: In 2008, we had a culture shaped by the company’s founder. When I became CEO, I had a blank slate to develop our culture going forward. We created a list of what we wanted to keep and what we wanted to change.

We formed a “Culture Club” of employees to go through the list. We kept elements such as our speed, flexibility and work ethic. We changed to develop more team orientation.

www.businessmanagementdaily.com     

Press Release from Schiller Grounds Care regarding April 24 Article "Schiller Grounds Care's Classen Manufacturing Norfolk Plant To Close"

CORRECTION

In the May 1, 2013, Vol. 180 issue of “OPE-In-The Know”, Item # 10 entitled “Schiller Grounds Care’s Classen Manufacturing Norfolk Plant to Close,” was a cut and paste article taken directly from the Web Site of the Norfolk Daily News located in Norfolk, NE.  www.norfolkdailynews.com

The president of Schiller Grounds Care, parent company of Classen, has informed me that the April 24, 2013, Norfolk Daily News article contained numerous inaccuracies; that the closing of the leased Classen plant is part of a manufacturing consolidation; and that the Classen brand will continue to be manufactured in two other Schiller Grounds Care plants.

We’re delighted to provide you with a press release directly from Schiller Grounds Care giving you the accurate facts about the manufacturing consolidation

Please read the brief press release from Schiller Grounds Care below.

                       

Announcement from Schiller Grounds Care

April 24, 2013

Schiller Grounds Care announced today, it is consolidating its manufacturing operations. Effective immediately, production at its Norfolk, Nebraska facility is being consolidated into two of Schiller’s existing operations, Johnson Creek, WI and Southampton, PA.  The Norfolk facility has been leased since the Classen brand was acquired in 2004.  Approximately 27 full time employees are impacted with several individuals being offered positions to relocate.  The decision to consolidate is in no way a reflection on the work of the Classen employees, nor the talent and pride with which they do it.  This consolidation will help ensure that the performance of Classen products remains best in class, and that Schiller’s costs are structured in a way that will keep it strong, efficient and competitive both in today’s economic environment and into the future.

For further inquiries regarding this announcement, please contact Nina DeRosa, at 215- 357-5110.

CPSC, MTD Products Recalls Cub Cadet Commercial Lawn Mowers Due to Fire Risk

Recall date: APRIL 29, 2013

Recall number: 13-733

Recall Summary

Name of product:

Cub Cadet 2011 Model Year Commercial Zero Turn Mowers

Hazard:

Fuel can leak from the vent valve grommet on top of the fuel tank during operation, posing a risk of fire.

Remedy:

Repair

Consumer Contact:

Cub Cadet; toll-free at (888) 848-6038, from 8 a.m. to 5 p.m. ET Monday through Friday, from 9 a.m. to 5 p.m. ET Saturday, or online at www.cubcadet.com and click on “Product Recalls” for more information.

Recall Details

Units

About 2,100

Description

This recall involves eight 2011 model Cub Cadet commercial zero turn lawn mowers. Models included in the recall are: M54-KH, M60-KH, M60-KW, M72-KW, S6031-KW, S7237-KW, TANK L48 and TANK L60.  Mowers included in the recall were manufactured between January 2011 and December 2011. A label located on the frame under the foot rest lists the model number and the month and year date of manufacture (DOM).

Incidents/Injuries

Cub Cadet has received 106 reports of fuel leaking or seeping from the top of the tank, including one report of a fire. No injuries have been reported.

Remedy

Consumers should immediately stop using the recalled mowers and contact an authorized Cub Cadet service dealer for a free repair. Cub Cadet is contacting its customers directly.

Sold at

Independent Cub Cadet dealers nationwide from January 2011 through January 2013 for between $7,700 and $18,700.

Manufacturer

MTD Products Inc, of Cleveland, Ohio

Manufactured in United States

City of Beatrice Loses a Lawn Mower Pioneer

BEATRICE – May 1 -- A pioneer in the lawn mower industry who helped turn sketches drawn in his basement into two successful businesses passed away Monday evening.

Wilfred H. “Dick” Tegtmeier, 74, of Beatrice, was a familiar face around town and instrumental in co-founding Exmark Manufacturing with three others before branching out on his own to start Encore Manufacturing.

Tegtmeier graduated from Hollenberg High School in Hollenberg, Kan. in 1956 and was the only boy in the class of four. He did not attend college.

Tegtmeier’s career in the mower business began at Kees Manufacturing, where he worked with lawn mowers.

“He started with Kees Manufacturing back in the 1970s and they asked him to develop a line of lawnmowers, said Dick’s son, Doug Tegtmeier. “Around 1983, the opportunity came up where he had a chance to spin off and start Exmark with a couple other guys.

“He was a pivotal guy in the lawn and garden business. They always call Beatrice ‘the lawn mower capital of the world,’ and he was pretty much responsible for the whole thing.”

Exmark began with sketches in the founders’ homes before a prototype was made that was displayed at trade shows.

In 1983, Exmark became one of the first businesses to locate in Beatrice's Industrial Park.

Known for making bold business decisions, Dick left Exmark in 1988 when he formed a new mower company, Encore Manufacturing, which was also located in the Industrial Park -- a move many people questioned at the time.

“When we started Exmark, people said, ‘You’re crazy,’” Dick told the Daily Sun at a company anniversary celebration in 2002. “When we started Encore, they said, ‘You have to be a complete idiot.’”

At the time Dick made that comment, Encore’s business has grown 640 percent since its first year and the building had to be expanded in 1993.

“He pretty much risked everything he had to make Encore work,” Doug said. “It was very risky at the time, but it was also a good market. It was scary.”

Encore employed 42 people at its peak, but after 23 years, a harsh economy took its toll on the business and Dick sold Encore Manufacturing to the China-based World Lawn Power Equipment, on the condition the factory still operate in its Beatrice location.

Beatrice Mayor Dennis Schuster said without the two businesses Tegtmeier helped settle in the area, Beatrice’s Industrial Park would likely be a shell of its current self.

"There would probably be one or two occupied buildings, but Exmark’s homegrown-products were really an anchor," Schuster said. “Dick was one heck of an entrepreneur and someone who will be greatly missed.”

While the public will likely remember Dick Tegtmeier as a pioneer of the lawn mower industry, for his family, memories will extend beyond a savvy businessman to a caring family man.

“He was the best man at my wedding, we loved to golf and he enjoyed playing with his grandson,” Doug said. “He just loved his community, family and friends. He taught me how to be a good man.”

Funeral services will be held at 10:30 a.m. Saturday, May 4, at St. Paul Lutheran Church in Beatrice. A family and friends prayer service will be held at 10:15 a.m. Saturday in the fellowship room of the church.