The 2020 Mid-Year Economic Update_long

Day: March 25, 2008

McKesson May Face Treble Damages in Class-Action

McKesson Corp. must face a class-action lawsuit filed by consumers and third-party payers claiming the drug distributor illegally inflated the wholesale price of prescription medicines, according to a recent court ruling by a U.S. District Court. The class action was certified on Wednesday.
 
The judge initially certified the suit in August 2007, but not for damages, which the most recent ruling includes. Attorneys estimate that damages on behalf of consumers could total from $200 to $800 million and damages on behalf of third-party payers will exceed $5 billion.
 
The lawsuit claims McKesson violated the federal Racketeer Influenced and Corrupt Organizations (RICO) act, and if found guilty, could be forced to pay treble damages.

The suit, originally ...

Monthly Wholesale Trade: January 2008

U.S. wholesale trade revenues in January 2008 sales of merchant wholesalers were $387.7 billion, up 2.7 percent from December and up 15.1 percent from January 2007. The December preliminary estimate was revised upward $0.7 billion or 0.2 percent. January sales of durable goods were up 2.4 percent from last month and were up 5.1 percent from a year ago. Compared to last month, sales of metals and minerals, except petroleum, were up 4.2 percent and sales of furniture and home furnishings were up 3.7 percent. Sales of nondurable goods were up 3.0 percent from last month and were up 24.8 percent from last year. Sales of farm product raw materials were up 16.1 percent from last month and sales of petroleum and petroleum products were up 3.5 percent.

Inventories. Total ...

Report: Canadian Construction Industry Should Expect Lower Profits

After a 22 percent drop in profits last year, Canada's residential construction industry can expect profitability to decline further in 2008, according to the Conference Board's Canadian Industrial Outlook: Canada's Residential Construction Industry -Winter 2008.

With a growing inventory of new homes, declining housing starts and weaker price growth, builders'profits are expected to shrink over the next two years,"said Valérie Poulin, economist.

Profits are expected to fall slightly from 2007 levels to $3.3 billion in 2008. Profitability is expected to decrease by another four percent in 2009, before improving gradually beginning in 2010.

However, profit margins will remain higher than historical norms, staying above their 17-year average over the ...

MDM News Digest 3806

Weyerhaeuser Company, Federal Way, WA, has sold its Containerboard Packaging and Recycling business to International Paper for $6 billion in cash. The transaction includes nine containerboard mills, 72 packaging locations, 10 specialty-packaging plants, four kraft bag and sack locations and 19 recycling facilities.

Wolseley revenues for the six months ended Jan. 31, 2008, increased 2% to £8.02 billion (US$16 billion). Profit fell 23.1% for the period primarily due to losses atStockBuilding Supply in the

Commentary: Get Out of the Sales Feast-or-Famine Cycle

In the movie Groundhog Day, the main character wakes up each morning doomed to repeat the exact same day, until he realizes he can change his life and do better.

That movie might be a useful management tool as we move through the current downturn in the economic cycle. As noted in an upcoming interview in MDM, Al Bates has been conducting financial performance surveys of distributors for nearly three decades. He has a wealth of data on how distributors have done across multiple business cycles. So is this cycle any different? We are going to come out of this recession the same way we came out of 2001-02, he said. Distributors will give up the same ROA they have in every cycle, then rebuild sales, add too many people and overhead, then cut when the next downturn ...

Proposals to Change FMLA Regulations

For some time now, business groups have been calling for a substantial overhaul of FMLA regulations that have proven to be unduly vague, cumbersome, and in some cases, completely out of touch with the realities of today's workplace. It seems that those requests are no longer falling on deaf ears. On Feb. 11, the Department of Labor took a substantial step toward regulatory reform by publishing a Notice of Proposed Rulemaking in the Federal Register.


Once implemented, the final rules will contain regulatory language based upon comments submitted during the review process. Although a final set of new regulations is still months away, a spokesperson for the administration expressed her desire to implement changes by the end of President Bush's term. The proposed rules ...

Backed By Private Equity

This article looks at the impact of private equity on the industrial distribution market. The impact can be seen in other distribution sectors, as well. The author says that increased private equity ownership has fundamentally changed the corporate and strategic landscape of the distribution industry.


Worldwide M&A activity reached a record $3.8 trillion over the first nine months of 2007, according to Dealogic.

Much of the activity was directly attributed to private equity firms, which raised nearly $200 billion worldwide during the year. In particular, industrial distribution experienced unprecedented private equity investment.

Over the last two years, 21 private equity firms have made 46 platform and add-on investments in numerous sub-sectors ...

Survey: Wholesalers Have Low Expectations for 2008

Concerns about the economy and a steep drop in plans for hiring led to a steep decline in the confidence of distribution and wholesale companies during the fourth quarter of 2007, according to the latest Small Business Research Board report.

The study indicated that the Distribution &Wholesale Small Business Confidence Index dropped to 31 during the fourth quarter or 10 points (nearly 25%) from the 41 recorded during the prior quarter.

The third quarter 2007 report was the first wholesale and distribution industry confidence index issued by the Small Business Research Board.

Declines in two of the three major categories comprising the confidence index contributed to the lower fourth quarter results.

Of the respondents, 24% said they believed the ...

Home Depot’s New DC Strategy

The Home Depot, Atlanta, GA, which sold off its wholesale operations mid-2007 but continues to target professionals with its Own the Pro initiative, needed a more effective way to manage inventory for its lower-volume stores and seasonal and promotional products.

The existing Home Depot supply chain worked great for high-volume stores, which had no trouble making frequent orders to vendors for direct store delivery to allow them good in-stocks and inventory turnover,"Mark Holifield, Home Depot's Senior Vice President-Supply Chain, told analysts in HD's recent annual earnings results call with analysts.

"But in lower-volume stores, without an effective central distribution network, our store associates are forced every day to make the tough choice of being ...

Helping Customers Go Green

In addition to saving money by energy-efficient improvements to their own facilities, some distributors are helping customers go green by promoting products that lessen their impact on the environment, including energy-efficient motors, drives and lighting, windows, fittings, cleaners and finishers, and water-saving products.

Not only does the eco-friendly product trend help the environment, if done right, distributors can take advantage of this to become the source of green expertise for their customers; in turn, distributors can become the source for eco-friendly products in their markets.

Portland, OR-based Eoff Electric Supply, a subsidiary of Sonepar USA, has done just that. For the past 12 years, it has worked to help customers cash in on energy ...

Industrial Production Falls 0.5% in February

U.S. industrial production fell 0.5 percent in February after having increased 0.1 percent in January. Much of the decrease in February resulted from a weather-related drop of 3.7 percent in the output of utilities. In the manufacturing sector, output decreased 0.2 percent in February, and declines were fairly widespread across industries. The output of mines moved up 0.4 percent.

At 113.7 percent of its 2002 average, total industrial production was 1.0 percent above its year-earlier level. The capacity utilization rate for total industry in February fell 0.6 percentage point, to 80.9 percent, the lowest rate since November 2005.

More details ...

Canadian Wholesale Revenues Up in January

Wholesalers shook off a disappointing December to start the New Year strong, helped in part by a price driven surge in the sale of agricultural chemicals, according to Statistics Canada.

Sales by Canadian wholesalers rose a healthy 2.6% in January to $44.1 billion, effectively offsetting the 2.6% drop recorded in December.

In January, six of the seven wholesale sectors reported higher sales, led by very strong growth in the other products" sector (+11.4%). The growth in this sector was driven by higher sales of agricultural chemicals, which also benefited from sharply higher prices during the month.

Wholesalers of machinery and electronic equipment (+2.2%), food, beverage and tobacco products (+2.1%) and building materials (+1.7%) were ...

Cooper Industries Acquires Filtronic

Houston, TX-based Cooper Industries has acquired Swedish manufacturer Filtronic AB, which is now part of the Cooper Tools Division.
 
Filtronic manufactures mobile filter systems to protect workers from toxic gases, smoke and dust. Filtronic has distributors in Europe, North America, Australia and Asia.
 
Cooper has $5.9 million in annual ...

Parker Hannifin Files Anti-Dumping Petition

Parker Hannifin Corp., supplier of motion and control technologies, filed a petition with the U.S. Department of Commerce and the International Trade Commission alleging unfair competition from the dumping of valves used in air conditioning systems by two manufacturers in China.

Specifically, the petition alleges that Sanhua group and DunAn group have and continue to sell front-seating service valves for residential air conditioners into the U.S. market at prices below their cost of production in China. Parker is petitioning for dumping penalties which will help to restore fair trade in the U.S. market.
 
Parker, which maintains operations in 43 countries, has annual sales of more than $10 ...

MDM March 25, 2008

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