August 2008 - Page 2 of 6 - Modern Distribution Management

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August 2008

A Look at Housing Production Numbers

Building Materials/Construction, Economic Trends, Free, Research & Analytics, Subscriber Only, Top Distributor Sectors /

Just as distributors are keeping a closer eye on their inventory in uncertain times, single-family home builders are also doing so by slowing the pace of new production by nearly 3% in July, according to the Commerce Department and reported by the National Association of Home Builders. NAHB says this is the lowest rate of single-family housing starts since January 1991. (See housing starts numbers for July here.)
 
The president of NAHB says: “Though some may be inclined to focus only on the negative angle of this report, there is definitely a bright side. The actions that home builders are taking right now to keep a lid on new production are slowly but surely helping to bring supply and demand back into …

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Legislative Outlook 2009

Management, Strategy, Subscriber Only /

This article looks at five key issues distributors and manufacturers should watch closely in the next year.
 
The U.S. House of Representatives plans to adjourn for the year on Sept. 26. And, with the August recess not over until Sept. 8, Jade West, senior vice president for Government Relations for the National Association of Wholesaler-Distributors, doesn’t expect much more to get done before a new Congress takes its place in January.

However, distributors and manufacturers may want to keep their eye on a few critical issues going into the next session.
 
Energy
The prices of finished energy goods -including home heating oil, gasoline and lubricating oils among others -increased 28 percent from July 2007 to July 2008, according to …

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McJunkin Red Man Corp. Files for Initial Public Offering

Companies, Finance, Mergers & Acquisitions, Subscriber Only, Top Distributor Sectors /

McJunkin Red Man has registered with the SEC for an initial public offering of its common stock for $750 million. The company will be listed under the symbol MRC.”McJunkin Corp. and Red Man Tool and Supply merged in late 2007. At the time, Goldman Sachs owned a majority share of McJunkin.

McJunkin Red Man is a distributor of industrial and oilfield pipe, valve and fittings in North America, operating 250 locations in the U.S., Canada, Nigeria and Puerto Rico. The company has a significant presence in the oil and gas, chemical and petrochemical, refining processes, power company, manufacturing and mining industries.

According to the SEC filing, the company said it generates about 90 percent of its sales from the energy industry. In the SEC filing, McJunkin …

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MDM Inflation Index: July 2008

Economic Trends, Research & Analytics, Subscriber Only /

Modern Distribution Management’s July Inflation Index, which measures a cross-section of industrial supplies, was up 1.23% from the previous month, and up 6.03% from July 2007.
 
Summary of MDM Inflation Index for the past 12 months:
 
July 2008 Index 288.8
June 2008 Index 285.3
May 2008 Index 283.7
April 2008 Index 282.4
March 2008 Index 281.1
February 2008 Index 279.0
January 2008 Index 277.2
December 2007 Index 275.9
November 2007 Index 274.7
October 2007 Index 273.6
September 2007 Index 273.5
August 2007 Index 273.3
July 2007 Index 272.4

Please click below to view a print-ready pdf of the MDM Inflation Index for July 2008, listing the 10 individual product categories that make up the …

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Kennametal Agrees to Buy Tricon

Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Kennametal Inc., Latrobe, PA, has agreed to acquire Tricon Metals &Services, Inc. Closing is planned for October 2008. Tricon will become part of Kennametal’s Advanced Materials Solutions Group (AMSG).
 
Tricon is a provider of custom wear solutions specializing in consumable proprietary steels for the surface and underground mining markets, including hard rock and coal. Solutions include cladded products, wear pins, shafting and custom fabricated replacement components.
 
The acquisition will help Kennametal leverage its presence in emerging markets and achieve geographical balance,” according to Kennametal. In addition, Tricon’s strength in surface mining balances Kennametal’s strength in underground mining …

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MDM August 25, 2008

Subscriber Only /

This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to …

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A Plan to Transfer Knowledge from the Older to the Younger Generations

Free, Human Resources in Wholesale Distribution, Operations, Subscriber Only /

A new report from The Conference Board says that most companies do not have a plan to manage and transfer knowledge, and even fewer factor cross-generational challenges into business strategy. Distributors, as we have said before in this blog, are also seeing this trend and must strategically plan for the day when the younger generation takes over either ownership or management of the company. As the report says, the sky is not falling because the Boomers are leaving the workforce, but there is a significant opportunity in “strategic and targeted knowledge transfer.”
 
A release from the research organization says: “As the Baby …

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MAPI Forecast: GDP Growth Will Slow in 2008 and 2009

Economic Trends, Free, News, Research & Analytics, Subscriber Only /

The weakness in the U.S. economy shows no signs of immediate abatement, and significant challenges may last well into 2009, according to a new report.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted gross domestic product (GDP) growth will slow to 1.6% in 2008 and decelerate to 1.3% in 2009. The 2009 GDP forecast is down from 1.9% growth projected in MAPI’s May report.

The Internal Revenue Service accelerated the payment of tax rebates this year under the economic stimulus plan, getting cash in consumers’hands earlier than expected,”said Daniel J. Meckstroth, Manufacturers Alliance/MAPI chief economist. “The cash windfall is only temporary, and we expect a corresponding decline in spending in fourth quarter 2008 and into …

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McJunkin Red Man Corp. Files for Public Offering

Companies, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

McJunkin Red Man has registered with the SEC for an initial public offering of its common stock for $750 million. The company will be listed under the symbol MRC.”

McJunkin Corp. and Red Man Tool and Supply merged in late 2007. At the time, Goldman Sachs owned a majority share of McJunkin.

McJunkin Red Man is a distributor of industrial and oilfield pipe, valve and fittings in North America, operating 250 locations in the U.S., Canada, Nigeria and Puerto Rico. The company has a significant presence in the oil and gas, chemical and petrochemical, refining processes, power company, manufacturing and mining industries. According to the SEC filing, the company said it generates about 90% of its sales from the energy industry.

 
In the SEC …

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McJunkin Red Man Corp. Files for Public Offering Read More »

Impact of Consolidation on Smaller Customers

Finance, Free, Mergers & Acquisitions, Subscriber Only /

Adam Fein of Pembroke Consulting passed along an article to me today on the consolidation of the newspaper and magazine distribution industry. According to the article, posted at crosscut.com, the industry has gone from 400-plus family-operated magazine wholesale businesses to being dominated by four corporations. This article profiles a few independent newsstands that depended on one larger distributor -Source-Interlink -for their vast array of magazines and newspapers covering unique hobbies and news from every corner of the world. Those newstands will no longer be served by the distributor.

Source-Interlink bought competitors throughout the country and serves more than 114,000 retail outlets. It also publishes some …

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Air Liquide Raises Prices

Free, Gases & Welding Equipment, News, Subscriber Only, Top Distributor Sectors /

Air Liquide America Specialty Gases LLC, Houston, TX, announced it will raise prices on gases, equipment and services beginning Sept. 1, 2008, or as allowed by customer contracts. Prices will increase between 5% and 20% for cylinder oxygen, acetylene, carbon dioxide, hydrogen and other gas products. Prices for helium will be increased between 20% and 25%. In addition, cylinder rental fees will be increased by 10% while delivery charges will be increased by 25%.
 
Rising raw material costs along with growing energy and world commodity costs are driving this inflation. This is further compounded by rising labor and insurance costs and the escalating cost of distribution associated with sourcing and delivery,” said Guy Rowland, president.
 
Air Liquide America …

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Owens & Minor Agrees to Buy The Burrows Company

Finance, Free, Mergers & Acquisitions, News, Pharmaceutical & Health Care, Subscriber Only, Top Distributor Sectors /

Owens &Minor, Richmond, VA-based distributor of medical and surgical supplies, has agreed to acquire The Burrows Company, a Chicago-based, privately-held distributor of medical and surgical supplies to the acute-care market. Owens &Minor will pay $30.2 million for The Burrows Company, which reported 2007 sales of $603 million.
 
The acquisition of The Burrows Company, a large regional distributor with more than 75 years of experience in the acute-care market, is a strong geographic fit for Owens &Minor,” said Craig R. Smith, president and CEO of Owens &Minor.
 
Owens &Minor will launch a conversion process designed to transition The Burrows Company customers to Owens &Minor’s systems by the end the second quarter of …

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United Stationers to Buy NJ Business of Emco Distribution

Free, News, Operations, Paper Products & Packaging Distribution, Subscriber Only, Top Distributor Sectors /

United Stationers Inc., Deerfield, IL, master distributor of business products, reported its wholly owned subsidiary, United Stationers Supply Co., has agreed to buy the New Jersey business of Emco Distribution, LLC, for $15 million.
 
We are absolutely delighted to have the opportunity to work with Emco’s customers and continue providing them with the quality of customer service that they are accustomed to,”said Cody Phipps, president of United Stationers Supply.
 
United Stationers Inc. had sales in 2007 of $4.6 billion. The company stocks over 100,000 items, including technology products, traditional office products, janitorial and breakroom supplies, office furniture, and industrial …

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Higher Costs Probably Here to Stay

Economic Trends, Free, Research & Analytics, Subscriber Only /

According to a recent survey by RSM McGladrey, manufacturers and wholesale distributors are not optimistic about the direction energy, raw material and transportation prices are heading. Nearly half of the responding companies expect energy and raw material costs to increase by at least 10% in the coming months; more than half expect the same drastic increases in transportation costs.
 
The advice from Tom Murphy, executive vice president of manufacturing and wholesale distribution for RSM McGladrey? Get used to it.
 
This inflationary surge is not an anomaly -it’s a sign of a new, long-term global cost environment. It’s paramount that companies change the way they do business to survive now and thrive in the future,”Murphy says.
 
That’s not saying that …

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Private Equity Firms Agree to Buy Industrial Rubber Products

Finance, Free, Mergers & Acquisitions, News, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

Industrial Rubber Products, Inc., Hibbing, MN, has agreed to be acquired by affiliates of Lime Rock Partners, a Westport, CT-based private equity firm focusing on the global energy industry, and Thompson Street Capital Partners, a St. Louis-based private equity firm focused on the manufacturing, distribution and services industries.
 
Industrial Rubber Products will be acquired for $16.50 per share in cash, representing a 49% premium to the average closing price of Industrial Rubber over the past 20 trading days. The plan still must be approved by shareholders.
 
Management of the company will continue in their current officer positions and retain a meaningful portion of their ownership.
 
Daniel Burkes, CEO of Industrial Rubber Products, said: The board …

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Housing Starts Fall 11% From June

Building Materials/Construction, Economic Trends, Free, News, Research & Analytics, Subscriber Only, Top Distributor Sectors /

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 965,000, 11% below the revised June estimate and 29.6% below the revised July 2007 rate, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
 
Single-family housing starts in July were at a rate of 641,000; this is 2.9% below the June figure of 660,000. The July rate for units in buildings with five units or more was 309,000.
 
Year-to-date, the U.S. West saw the most dramatic drop, with a decline in housing starts of 37.7%. In the Midwest, starts fell 32.7%, and in the South housing starts were down 30.3%. The Northeast saw a milder drop of 5.8%.
 
Building Permits
Privately-owned housing units authorized by building …

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Building Materials Holding Corp. Sales Down 41% in 2Q

Building Materials/Construction, Free, News, Subscriber Only, Top Distributor Sectors /

San Francisco, CA-based Building Materials Holding Corp., a provider of building materials and construction services to professional residential builders and contractors, reported sales of $385 million for the second quarter of 2008, a decrease of 41% from the same quarter a year ago. The company reported a net loss of $31.9 million compare to a profit of $19.4 million for second quarter 2007.
 
For the six months ended June 30, 2008, sales decreased 38% to $728 million from the same period of 2007. BMHC reported a loss of $65.8 million for the first half of the year, compared to profit of $14.5 million the prior year.
 
Sales were significantly impacted by continued weakness in new home construction, with single-family building permits in the U.S. down 43% for …

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Transcat Buys Westcon

Free, News, Subscriber Only, Top Distributor Sectors /

Transcat, Inc., Rochester, NY, a distributor of professional grade test, measurement and calibration instruments and accredited provider of calibration and repair services, has acquired privately-held Westcon, Inc., a Portland, OR-based test and measurement instruments distributor and calibration services provider, in a transaction valued at $7.2 million.
 
Charles P. Hadeed, CEO of Transcat, said, This acquisition provides us a West Coast distribution operation that enables us to provide faster service to a broader base of potential customers while adding a Pacific Northwest full-service calibration operation that geographically complements and expands our nationwide network to a total of twelve laboratories. Of added value is Westcon’s focus on the wind industry, an ideal, …

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Norandex Building Materials Opens Two New Branches

Building Materials/Construction, Free, News, Subscriber Only, Top Distributor Sectors /

Norandex Building Materials Distribution, Hudson, OH, a distributor of exterior siding, windows, and doors, has opened two new branch locations in Portland, OR, and Austin, TX. This announcement comes just weeks after Norandex acquired two locations in the Baton Rouge, LA, area.
 
We are in the midst of one of the biggest strategic growth initiatives this company has ever undertaken,” said Brian Chambers, Norandex president and CEO. “Late last year, we devised a growth plan that includes a focus on extending our customer base by helping them be more successful in the market, enhancing our product offering, and expanding our market coverage.”
 
In Portland, Norandex has acquired limited assets from Crown Building Materials. Norandex will service the former customers …

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Home Depot Sales Down 5.4% in 2Q

Building Materials/Construction, Free, News, Subscriber Only, Top Distributor Sectors /

Atlanta, GA-based The Home Depot, a home improvement retailer, reported sales of $21 billion for the second quarter of 2008, a 5.4% decrease from the same period 2007. Profit was $1.2 billion, down 25% from second quarter 2007.
 
For the first six months, sales were down 4.5% to $40.7 billion as compared to the first half of 2007. Profit was $2.6 billion, a decrease of 40% from the prior year.
 
The company’s fiscal 2007 contained 53 weeks of operations, which shifted the company’s 2008 fiscal calendar. Because of this shift, and given the seasonal nature of its business, second quarter sales, on a like for like calendar basis, were negatively impacted by $160 million.
 
At the end of the second quarter, Home Depot operated a total of 2,257 retail …

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