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2008

Associations Face Value Challenges

Free, Research & Analytics, Subscriber Only /

Distribution associations, like most of their members, have been challenged to redefine and focus the value they deliver. Many associations have initiated a strategic planning process to address shrinking membership and participation due to industry consolidation, as well as new competition in the form of marketing groups and other alternate education resources, including trade publications.
 
I recently attended the Fluid Power Distributors Association (FPDA) annual meeting, where they unveiled the results of a three-year strategic planning process. The fluid power industry has been particularly challenged as new electro-mechanical technologies have rapidly developed. In a nutshell, they are aiming to elevate the networking and education value the association can offer, while …

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Building Materials Holding to Discontinue AZ Framing/Concrete Operations

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

Building Materials Holding Corp., San Francisco, CA, a provider of building materials and construction services to professional residential builders and contractors, announced that is wholly-owned subsidiary SelectBuild Arizona will discontinue its residential framing and concrete operations in Tucson, AZ, on July 18.
 
The difficult decision to discontinue our residential framing and concrete operations in Tucson is a necessity based on today’s challenging business environment and weakness in the Tucson housing market,” said President Stanley M. Wilson. “Housing permits in the Tucson market have fallen sharply from 1,349 in the first quarter of 2007 to only 738 in the first quarter of 2008. Tucson has been hit particularly hard by the downturn in the housing market, and we …

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Applied Industrial Agrees to Buy Mexican Firm

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

Applied Industrial Technologies, Cleveland, OH, has agreed to acquire Suministros Industriales Enol, S.A. de C.V. and its group of companies.
 
Enol is one of Mexico’s largest distributors of power transmission products including bearings, hydraulic hose, electric motors, conveyor products, and lubricants, and had sales of US$25 million in 2007.
 
It operates 10 service centers in Saltillo, Monterrey, San Luis Potosi, Queretaro, Silao, Toluca, Tlalnepantla, Puebla, Tehuacan, and Merida. The company has 145 employees and serves a broad segment of industrial customers including steel, cement, pulp and paper, sugar, and others.
 
With this acquisition, Applied Mexico will serve Mexican industry through 17 service centers and three sales offices in 13 …

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Human Due Diligence’ in M&A

Finance, Free, Mergers & Acquisitions, Subscriber Only /

A recent article in the Wall Street Journal (subscription required) says that executives who don’t conduct thorough “human due diligence” before completing an acquisition can suffer “steep long-term attrition.”

One featured researcher says that in a recent study, he found targeted companies lose close to 21% of their managers each year, more than double the turnover experienced in non-merged firms, for at least 10 years after an acquisition. The article goes on to say that though no two companies manage employees and operations in exactly the same way, the more their decision-making styles and value overlap, the more they will benefit from the merger. …

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Graybar Sales Grow 4.8% in 1Q

Companies, Electrical, Free, News, Subscriber Only, Top Distributor Sectors /

Graybar, St. Louis, MO, distributor of electrical and communications products and related supply chain management and logistics services, reported sales grew 4.8% in the first quarter 2008 to $1.28 billion from the same period a year ago. Profit was $18.9 million, a 58.7% increase.
 
The increase was due to modest growth in electrical market sales coupled with a solid growth in the data communications market.
 
During this economic slowdown, we see customers leveraging our distribution services more than ever to lower their total cost of ownership,” said Robert A. Reynolds Jr., president and CEO of Graybar.
 
Reynolds added that Graybar continues to invest in technical resources to help its customers manage the implementation of complex projects such as …

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DXP Enterprises Organic Growth of 13.5% in 1Q

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DXP Enterprises, Inc. reported sales increased 101.5% to $168.5 million in the first quarter 2008, due mostly to sales by four businesses acquired in 2007 and 2008, including Precision Industries. Profit was $5.4 million.
 
Excluding sales from acquired businesses, sales for the first quarter were up 13.5%. Organic sales growth was primarily due to an increase in sales of pumps, bearings, safety products and mill …

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Transport/Logistics Deal Volume Falls in 1Q

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

Both deal volume and value in the transportation and logistics industry declined during the first quarter of 2008, according to the PricewaterhouseCoopers LLP Q1 2008 edition of Intersections: Global Transportation &Logistics Mergers and Acquisitions Analysis. Global Deal activity is not on track to match the levels seen in 2007; however, the 45 deals (worth at least $50 million each) announced in the first quarter are on track to exceed 2006 levels.
 
The credit markets and slowing deal activity in the U.S. significantly affected deal volume in the first quarter of the year. When excluding deals in which a U.S. entity was the acquirer or target, the number of deals (38 deals) is on pace to exceed both 2006 and 2007 levels (119 and 142 deals respectively), indicating that a …

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Park-Ohio Sales Flat in 1Q

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Park-Ohio Holdings Corp., Cleveland, OH, reported sales of $267.1 million for the first quarter 2008, unchanged from the first quarter 2007.
 
Park-Ohio reported profit of $3.5 million, down slightly from the year-ago period.
 
We anticipated a slow start in 2008, with softness in our Supply Technologies and Aluminum Products segments,” said Edward F. Crawford, CEO. “Our international industrial equipment business continues to be robust.”
 
Park-Ohio is a provider of supply management services and a manufacturer of highly engineered products. The company operates 24 manufacturing sites and 55 supply chain logistics …

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RONA Same-Store Sales Drop 5.2% in 1Q

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Quebec-based RONA, distributor and retailer of hardware, renovation and gardening products, reported a 3.8% increase in sales to $911.5 million in the first quarter 2008. Same-store sales declined by 5.2% in the first quarter of 2008.
 
Profit was $1 million, compared with $9 million in the year-ago period.
 
RONA said that economic and weather conditions that were especially unfavorable to construction/renovation activities, particularly in Eastern Canada, largely explain this drop in same-store sales and profits. Results were also affected by a decline in starts of single family homes in Canada and a temporary slowdown in the demand for building materials in Alberta.
 
The results for first quarter 2008 reflect the strong drop in consumer confidence in …

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March Machine Tool Consumption Up 36% Year-Over-Year

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

March U.S. manufacturing technology consumption totaled $544.62 million, according to AMTDA, the American Machine Tool Distributors’Association, and AMT -The Association For Manufacturing Technology. This total, as reported by companies participating in the USMTC program, was up 84.4% from February, and up 36.1% from the total of $400.19 million reported for March 2007. With a year-to-date total of $1,183.75 million, 2008 is up 16.4% compared with 2007.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTC program.

The March consumption numbers, as well as the first quarter as a whole, clearly demonstrate that the investment …

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RBC Bearings Announces Injunction Against SKF USA

Free, Legal Issues in Wholesale Distribution, News, Operations, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

RBC Bearings Inc., Oxford, CT, international manufacturer of precision plain, roller and ball bearings for the industrial, defense and aerospace industries, announced the Federal District Court of Connecticut has issued an injunction against SKF USA Inc. in connection with the sale of Nice radial ball bearings.
 
The Federal Court found that SKF USA Inc.’s use of its current price list and other advertisements created confusion in the marketplace about whether SKF USA Inc. was still an authorized distributor of NICE products. The Federal Court found that SKF USA Inc.’s 2008 price list was missing a significant portion of RBC’s product line,”making its distribution by SKF USA Inc. “more likely to create confusion.”
 
The Federal Court’s injunction prohibits SKF USA …

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Building Materials Holding Corp. Sales Fall 37% in 1Q

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

Building Materials Holding Corp., San Francisco, CA, provider of construction services and building materials to professional residential builders and contractors, reported sales for the first quarter 2008 decreased 37% to $355 million from $559 million in the same quarter a year ago.
 
Net loss for the first quarter 2008 increased to $33.9 million from a net loss of $5.0 million in the same quarter a year ago.
 
Challenging industry conditions continued across U.S. homebuilding markets during the first quarter,” said Robert E. Mellor, CEO. “While the very difficult market conditions continued to impact our operating results, once again the distribution side of our business gained market share with sales declining less than single-family permits in its regions while …

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Parker-Hannifin Buys Remaining Stake in Parker Seal de Mexico

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

Parker Hannifin Corp., Cleveland, OH, supplier in motion and control technologies, has acquired the remaining stake in its joint venture, Parker Seal de Mexico. Parker held a 49% stake in the $8.3 million revenue company prior to acquiring the remaining interest from multiple joint venture partners.
 
The acquired operation will become part of Parker’s Seal Group, and its results will be reported within the Industrial North America business segment. Now, as the sole owner of this operation, Parker can sell any of its thousands of seal products into the Mexican market,” said Heinz Droxner, president of Parker’s Seal Group. “This is part of our long-term strategy to serve customers who have operations in Mexico, and positions Parker to meet all of their sealing requirements …

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Monthly Wholesale Trade: Sales and Inventories March 2008

Economic Trends, Research & Analytics, Subscriber Only /

March 2008 sales of wholesalers, after adjustment for seasonal variations and trading-day differences but not for price changes, were $384.3 billion, up 1.6 percent from the revised February level and up 12.6 percent from March 2007. The February preliminary estimate was revised upward 0.2 percent.

March sales of durable goods were up 2.3 percent from last month and up 4.8 percent from a year ago. Compared to last month, motor vehicle and motor vehicle parts and supplies were up 4.5 percent and sales of metals and minerals, except petroleum, were up 3.5 percent. Sales of nondurable goods were up 1.0 percent from last month and were up 20.1 percent from last year. Sales of farm product raw materials were up 9.4 percent from last month and sales of beer, wine, and distilled …

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Commentary: Tangential Markets Provide Growth Paths

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

The economic outlook in our lead article notes that the link between industrial distribution revenues and manufacturing activity has weakened as traditional industrial distributors have diversified into more general commercial facility supply.

I have certainly seen distributors push hard into new product sectors and customer segments in the past five years with great success. You could argue that this trend is the natural outcome of how industrial channels have matured since the 1980s. Systems contracts emerged as the first step to manage MRO industrial supply procurement from a process versus product focus. Yes, there were clearly some similar models in the first part of the 20th century, but manufacturers held a different position in controlling distribution channels. …

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Purchasing Executives Expect Slow Growth in Manufacturing

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Purchasing Execs Expect Slow Growth in Manufacturing

Manufacturing businesses have concerns about their organizations’prospects for 2008, according to the latest semiannual forecast issued by the Business Survey Committee of the Institute for Supply Management. While 42 percent of manufacturing respondents predict revenues to be 9.2 percent greater in 2008 than in 2007, the overall expected revenue increase is only 1 percent for manufacturing as 31 percent expect a decline, and 27 percent expect no change.
 
Here’s a breakdown of the survey results:
 
Manufacturing

Purchasing Executives Expect Slow Growth in Manufacturing Read More »

WESCO: Bid for IDG Was a `Full and Fair Valuation’

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

In WESCO’s recent conference call on its first-quarter earnings, CFO Stephen Van Oss addressed the distributor’s ultimately withdrawn bid for Industrial Distribution Group in April:

(IDG) strategically fit our business well and they have done a good job on those types of programs with smaller customers, where WESCO’s programs tend to be with much larger engagements. … Additionally, they had a number of specialty businesses, some of which lined up nicely with WESCO’s strength, such as the manufactured housing area, where we could leverage our infrastructure nicely and bring in some new products sets to get better penetration.”

Van Oss said that WESCO felt it had a “full and fair valuation”with its $11.75 bid ($0.05 less than Platinum Equity’s bid) and the …

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MDM News Digest 3809

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Atlanta, GA-based Industrial Distribution Group, Inc., will move forward with a plan to be acquired by Luther King Capital Management, accepting the private equity firm’s $12.10 per share offer -close to $136 million. Platinum Equity notified IDG that it will not match or beat LKCM’s bid. LKCM said it would reimburse IDG for the 3 percent break-up fee required when IDG breaks the Platinum merger agreement. More
HD Supply White Cap, Costa Mesa, CA, distributor of specialty hardware, tools and materials for large and medium-sized contractors, has entered the Minneapolis-St. Paul market with the opening of a 6,000-square-foot warehouse.  More
The Home …

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New MDM Webcast: Distribution M&A 2008 Update – Value Redefined in a Tough Market

Economic Trends, Research & Analytics, Subscriber Only /

Debt markets turned upside down, valuations dropped, and deals have slowed. What a difference a year makes! Strategic buyers have resurfaced as private equity’s hands have been tied in a very different landscape than 12 months ago. There are new drivers and definitions of value in 2008, but there are also good opportunities for distributors to capitalize in the new environment -on the buy and sell sides.

What’s the impact for your company? Join MDM on May 22 as three seasoned M&A experts share their insight on the 2008 distribution M&A market. In this two-hour Webcast, you’ll hear practical tips from professionals with deep experience helping distribution executives navigate deals across a range of company sizes, sectors and ownership structures.

Our three panelists …

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MDM May 10, 2008

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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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