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Distribution Industry News Archives:
News from the week of March 28, 2005

Strategic Distribution posts loss in Q4, 2004
Construction spending climbs in February
ISM: PMI slips in March
Columbus McKinnon sells Virginia property
Parker enters joint venture with Chinese hydraulics maker
Unemployment falls to 5.2 percent in March
Timken raises first quarter guidance
Factory orders increase in February
Prophet 21 forms fluid power distributor advisory council
Parts Plus names Timken vendor of the year
Kennametal names chief financial officer
Horan joins Indian River Consulting Group
IBT to open new facility
Software focuses on needs of showroom distributors
Carolina Belting joins IDC-USA
Professional Conveyor changes name
M.A. Ford joins IBC IndustrialSupplyPlus
Airgas to purchase Kanox Inc.
ISM MRO Group changes name

Strategic Distribution posts loss in Q4, 2004
Strategic Distribution Inc. reported fourth quarter 2004 revenues of $31.9 million, up from revenues of $26.4 million during the prior-year period. The company posted a net loss of $103,000 during the quarter, or 3 cents per share, compared to a net loss of $690,000, or 23 cents per share, in Q4 2003.

For its entire fiscal year, Strategic Distribution generated revenues of $121.9 million, compared to $134.6 million in 2003. The company's 2004 net loss grew to $2.6 million, or 89 cents per share, compared to a net loss of $724,000, or 24 cents per share, the year before.

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Construction spending climbs in February
Construction spending was estimated at a seasonally adjusted annual rate of $1 trillion in February, up 0.4 percent from January, according to the Commerce Department.

The February figure is 10 percent above the the year-ago mark of $952.2 billion.

During the first two months of 2005, construction spending amounted to $143.4 billion, 10.4 percent above the $129.9 billion for the same period in 2004.

Commercial construction spending fell to a seasonally adjusted annual rate of $65.4 billion in February, down 2.6 percent from the $67.1 billion January estimate. However, the February 2005 rate was 7.1 percent higher than the rate for February 2004.

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ISM: PMI slips in March
Economic activity in the manufacturing sector grew in March for the 22nd consecutive month, while the overall economy grew for the 41st consecutive month, according to the Institute for Supply Management's (ISM) Report On Business.

"The manufacturing sector maintained its strength in March, finishing the first quarter in a relatively strong position," said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee.

The PMI indicates that the manufacturing economy grew in March for the 22nd consecutive month. The PMI for March registered 55.2 percent, a decrease of 0.1 percentage point compared to February's seasonally adjusted reading of 55.3 percent.

A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (55.6 percent) corresponds to a 4.7 percent increase in gross domestic product (GDP) on an annual basis.

Respondents to ISM's survey included:
• "The construction sector continues to expand. Business is slowly growing. The only significant concern is rising interest rates, which could restrain capital expenditures."

• "Business has increased significantly over the past two months. We may be overbooked within four to six weeks and will have to add staff and shop employees."

• "Steel suppliers are grudgingly giving back some price, but not without tough talk."

• "The wet weather has kept shipments at a below-average level for this time of the year. However, we expect a very healthy year once we get through this current period."

• "Business continues very strong in all product categories for the markets we serve. Our open order status is 2.5 times what it was last year for the same timeframe."

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Columbus McKinnon sells Virginia property
Material handling product manufacturer Columbus McKinnon Corp. completed the sale of a 6.6-acre property that included a 112,000-square-foot manufacturing and warehouse facility in Abingdon, Va., for $600,000 in cash.

The favorable effect to net income in the fourth quarter of fiscal 2005, which ended March 31, is expected to be $200,000, or approximately 1 cent per diluted share.

The building was available for sale as a result of Columbus McKinnon's facility rationalization and lean manufacturing initiatives. It had previously been used as a manufacturing and warehouse site for Columbus McKinnon's Virginia Hoist operations, which were consolidated in 2004 into its existing plant in nearby Damascus, Va.

Also, during the fiscal 2005 fourth quarter, the company completed the sale of two other properties and these sales were previously announced.

The total favorable net income effect in the fourth quarter of fiscal 2005 as a result of the gains made on the three property sales during the quarter is expected to be $3.9 million, or 26 cents per share.

Total cash proceeds received from the sale of the three properties were $6.9 million. The company intends to use these proceeds to reduce debt.

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Parker enters joint venture with Chinese hydraulics maker
Parker Hannifin Corp. entered into a joint venture agreement with Tianjin Tejing Hydraulics Company LTD to produce hydraulic components and systems in China.

Parker will be the major partner in the new venture known as Parker Tejing Hydraulics (Tianjin) Co. Ltd.

The business included in the joint venture produced sales of $20 million for the fiscal year ended Dec. 31, 2004. The agreement is subject to Chinese local government regulatory approval.

Tejing produces hydraulic pumps, valves and cylinders for mobile platforms at a facility located in Tianjin City. Parker established sales and service operations in China in the early '90s. Parker also operates two other wholly owned production facilities, plus another two joint ventures, and three sales offices and two warehouses in China.

The agreement with Tejing will enable Parker, a global leader in fluid power systems, to manufacture a range of hydraulic devices for mobile equipment in the burgeoning China market.

"We are excited by the opportunity to combine Parker's broad product and system technology with the manufacturing platform of Tejing for hydraulics in China," said Michael Leung, country managing director. "China is an incredibly dynamic market and the country's many construction, public works and agricultural projects rely heavily on the power of hydraulics for mobile and industrial equipment. We look forward to this being a long and mutually successful partnership."

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Unemployment falls to 5.2 percent in March
Total nonfarm payroll employment increased by 110,000 in March, and the unemployment rate declined to 5.2 percent, according to Department of Labor.

Several industries added jobs over the month, including construction, mining, health care and wholesale trade.

Both the number of unemployed persons, 7.7 million, and the unemployment rate, 5.2 percent, was down from 5.7 percent a year earlier.

Wholesale trade employment was up by 15,000 over the month, with gains in both its durable and nondurable components. Since its most recent low in August 2003, the industry added 112,000 jobs.

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Timken raises first quarter guidance
The Timken Co. increased earnings expectations for the first quarter and full year, based on strong industrial market demand, price increases, raw material surcharges and increased productivity.

The company estimates earnings per diluted share of 57 cents to 62 cents for the first quarter of 2005 and $2.05 to $2.20 for the full year, excluding special items.

The company's previous estimates were 38 cents to 43 cents per diluted share for the first quarter and $1.70 to $1.85 for the full year, excluding special items.

"The strength of the global industrial market is continuing into 2005, and the company continues to leverage this volume and improve earnings performance," said James W. Griffith, president and CEO. "The recent slowdown in North American light vehicle production has been more than offset by strong industrial markets. We are seeing stronger-than-expected sales volume within our Steel Group, especially in the general industrial, oil and aerospace end markets. Annual contracts with Steel Group customers have provided for price increases and improved surcharge mechanisms."

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Factory orders increase in February
New orders for manufactured goods increased $600 million, or 0.2 percent, to $380.4 billion in February, according the the Commerce Department.

This was at the highest level since the series was first published on a NAICS basis in 1992. The increase followed a slight January decrease.

New orders for durable goods increased $900 million, or 0.5 percent, to $200.9 billion, revised up from the previously published 0.3 percent increase. This followed a 1.2 percent January decrease.

Transportation equipment, up following two consecutive decreases, had the largest increase, at $900 million, or 1.6 percent, to $53.6 billion. The increase was due to nondefense aircraft and parts, which increased $1.8 billion.

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Prophet 21 forms fluid power distributor advisory council
Prophet 21 asked distribution leaders in the fluid power industry to serve on a fluid power advisory council. These councils meet regularly with Prophet 21 staffers and suggest different features and functionality that will help increase sales, improve customer service, and reduce operating costs.

“The best way to develop the tools distributors need to improve their businesses is to listen and learn from them,” said Chuck Boyle, Prophet 21 president and CEO. “Prophet 21 developed CommerceCenter...based on our years of experience working with distributors, and we plan to continue to increase the functionality of CommerceCenter based on our distributors’ changing needs.”

The Fluid Power Advisory Council recently held its kick-off meeting at Prophet 21’s corporate headquarters in Yardley, Pa. In addition to discussing industry trends and business processes, the council will offer feedback and guidance to help Prophet 21 develop stronger solutions and services for the fluid power industry.

“This gave us a formal opportunity to get involved in helping to steer the development of the solution we use every day,” said Tom Nicholson, manager of finance and operations of the Wisconsin-based GS Hydraulics Inc. “We got a chance to dig into different issues and talk about different features and functionality that will help fluid power distributors do business better.”

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Parts Plus names Timken vendor of the year
Timken was awarded Vendor of the Year for Product Excellence by Parts Plus for providing a full line of automotive hub assemblies, bearings and seals to the North American aftermarket through the Parts Plus distributor network.

"Timken continues to work in partnership with Parts Plus, bringing real value to the distributor network. The partnership has yielded significant growth opportunities for both organizations while providing customers with Timken bearings, seals, hub assemblies and rebuild kits," said Jack A. Cameron, general manager, automotive aftermarket, North and South America. "Timken's presence in the automotive aftermarket is growing at a fast pace because our full line of products meets our customers' need to work with a value-added supplier."

In addition to being awarded Vendor of the Year for Product Excellence, Timken also was recognized by Parts Plus as one of the top three vendors for marketing. Last year, Timken was honored by Parts Plus as Vendor of the Year for Outstanding Logistics.

"This year's award is particularly gratifying because the winner was determined by popular vote among the Parts Plus membership," said Cameron. "It is a testament to the exceptional effort put forth by Timken associates. In addition, it reinforces our ongoing commitment to enhance Part Plus' performance through our total solutions approach to friction management -- technology, manufacturing, products, service and support -- to deliver unparalleled value and innovation.

"Automotive aftermarket distribution has undergone tremendous change in the last several years," he said. "Timken and Parts Plus are industry leaders, well positioned to meet and exceed customer demands."

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Kennametal names chief financial officer
Kennametal Inc. named Cathy R. Smith executive vice president and chief financial officer, effective April 11. Smith will oversee the company's finance, treasury, accounting, M&A and investor relations functions.

Before Kennametal, Smith worked for the Bell Systems business segment of Textron Inc., a global multi-industry company, where she served as executive vice president and chief financial officer.

While at Textron, Smith was responsible for all financial planning, accounting and reporting matters associated with Bell Systems -- a business segment with approximately $2.4 billion in annual revenues -- including M&A, Sarbanes-Oxley compliance, capital investments and financial strategy.

Prior to joining Textron, she served as vice president and chief financial officer of the intelligence and information systems business of Raytheon Co., a defense and aerospace systems supplier.

Smith is a certified public accountant and holds a bachelor's degree in business economics from the University of California, Santa Barbara, and a master's degree in business administration from the University of Southern California, Los Angeles.

"Cathy's experience in all facets of finance and operations in the industrial and defense arena make her a perfect fit for her new role at Kennametal," said Kennametal chairman, president and CEO Markos I. Tambakeras. "She is energetic, a critical thinker, and a change agent, and as a member of our senior leadership team, Cathy will be in an excellent position to help us accomplish our company's vision."

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Horan joins Indian River Consulting Group
Indian River Consulting Group (IRCG) welcomed Tim Horan as its newest consultant. Horan brings more than 25 years of experience in distribution, most recently as president and CEO of a multi-million dollar beverage alcohol distribution company.

He holds a master’s degree in organizational management and his experience ranges from sales to technology to acquisitions, and includes a myriad of other management issues.

For more information, visit www.ircg.com.

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IBT to open new facility
Industrial distributor IBT is opening an industrial distribution superstore in Merriam, Kan. The store will consolidate activities and customer services from the current Lenexa, Kan., location.

"The new superstore is an exciting development," said IBT vice president of marketing Jerry Hayes. "We are taking all the knowledge and experience that we had at our Lenexa location and backing it up with a building filled with our technical and application experts. They will be available face-to-face for customers, all day, every day.

"Access to our huge inventory will be an even greater advantage for our customers. With more than $15 million in inventory on hand – more than 200,000 items – customers will find what they need, when they need it," he said.

Hayes said IBT will open a new customer service desk inside the store to reduce order turnaround time.

IBT anticipates the move will be completed by May 1. The Lenexa location will remain open until May 1. The company does not expect any interruption of service or change in customer convenience, both during the transition and in the future.

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Software focuses on needs of showroom distributors
Distribution software provider DDi System LLC's Distribution Management Software (DMS) helps showroom distributors with special order payment tracking, showroom inventory-tracking, real-time buyer notification and sales order updates.

The DDi System DMS also prevents showroom price quotes from being shopped to a competitor by enabling personnel to print quotes with generic product descriptions and total job pricing.

Additionally, DDi System's Electronic Document Scanning solution enables showroom personnel to scan handwritten notes and important documents into the DDi System DMS. The document is then stored on the DDi server as a .PDF file.

According to Adam Waller, DDi System founder and president, showroom distributors are continually fending off competition from other distributors and home center chains, creating a need to stand out from the pack by offering high customer service levels.

"With our DDi System Distribution Management Software, showroom distributors can streamline time-consuming processes and enhance customer relationships with the solution's integrated contact management features," said Waller.

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Carolina Belting joins IDC-USA
Independent Distributors Cooperative – USA (IDC-USA) added Carolina Belting Co. to its national group of bearing and power transmission distributors.

Established in 1936 as a textile and industrial belt shop, Carolina Belting sells state-of-the-art products conveyors, conveyor components and conveyor service.

“We are excited to be a part of IDC-USA. Our membership in the member-owned cooperative gives us leverage against the big boxes in the power transmission industry. IDC-USA enables us to provide a broader product offering to our existing customer base and equips us with a stronger marketing tool to recruit new customers,” said Bob Hammersla, president of Carolina Belting.

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Professional Conveyor changes name
Professional Conveyor Inc. changed its name to Nationwide Conveyor Specialists LLC (NCS) and launched a new Web site.

NCS specializes in installations, refurbishment and replacement of conveyor systems for the baggage handling, air cargo and package/unit industry.

Richard Bugryn, co-founder of Professional Conveyor, is the founder and head of operations at NSC.

“We operate throughout the U.S. and abroad, so the name change fits the company very well; but most importantly, our customers feel it’s a stronger team now,” said Bugryn.

To find out more about NCS, visit www.nationwideconveyor.com.

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M.A. Ford joins IBC IndustrialSupplyPlus
IBC added M.A. Ford Mfg. Co. Inc. as a preferred supplier to its IndustrialSupplyPlus division. M.A. Ford, headquartered in Davenport, Iowa, with another manufacturing facility in Vero Beach, Fla., manufactures high-performance cutting tools.

Founded in 1919 by Matthew A. Ford, this ISO 9001-certified company offers a comprehensive line of solid carbide round tools, as well as HSS countersinks and end mills. Its carbide tools include burs, end mills, drills, reamers, circuit board drills, boring tools, grinding tools and carbide and diamond grind routers.

For special or unique applications that require more than standard tooling, M.A. Ford runs a custom tool division that designs unique solutions for customers' specific application needs.

“M.A. Ford enhances IBC’s ability to meet the demands of the end-user marketplace by providing 'standards and specials' in solid carbide round products," said Ed Sullivan, president of IBC. "This gives our members the opportunity to continue to provide cutting-edge solutions to the marketplace.”

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Airgas to purchase Kanox Inc.
Airgas Inc. signed a non-binding letter of intent to acquire Kanox Inc., a Kansas-based distributor of packaged gases and welding hardgoods.

Airgas currently owns 25 percent of the outstanding stock and would purchase the remaining shares from private shareholders. The companies are working toward signing a definitive purchase agreement and anticipate closing the transaction before mid-calendar-year, subject to customary closing conditions.

Kanox generates about $23 million in revenues annually. The company is headquartered in Hutchinson, Kan., and operates nine locations in Colorado, Kansas and Oklahoma. It employs about 120 people.

“Kanox has built a strong, multi-state distribution network with roots that go back to its founding in 1946, and we are very excited about the prospects of welcoming Kanox people to our organization at closing,” said Airgas chairman and CEO Peter McCausland. “Three Colorado branches would be integrated with Airgas Intermountain and the remaining six branches would be integrated with Airgas Mid South. Our people in both of these regional companies look forward to working with Kanox on a smooth transition for employees and customers.”

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ISM MRO Group changes name
The Institute for Supply Management's MRO Group changed its name to the Indirect-MRO Buyers Group in January, according to group chairman Joel Thomas.

The group's new Web site is up, running and continuously updated at www.indirectmro.com.

The steering committee continues to work toward development and approval of a set of rules of management, along with succession planning, and so forth. This will provide for continued service to Indirect-MRO Buyers Group membership.

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