July 2009 - Modern Distribution Management

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July 2009

Interline First-Half Sales Down 12.3%

Interline Brands, Inc., Jacksonville, FL, distributor and direct marketer of maintenance, repair and operations products, reported sales for the second quarter ended June 26, 2009, were down 13.3% to $269.9 million from the prior-year period.

Average organic daily sales decreased 14.7% for the quarter.

Interline's facilities maintenance end-market, which comprised 74% of sales, declined 7.8% during the second quarter on an average daily sales basis, and declined 9.9% on an average organic daily sales basis. The professional contractor end-market, which comprised 16% of sales, declined 28.4% in the quarter and the specialty distributor end-market, which comprised 10% of sales, declined 20.6% for the quarter.

Profit (net income) was $6.4 million in the second quarter, compared ...

DXP Enterprises Sales Down 29.5% in Second Quarter

DXP Enterprises reported sales of $144.4 million in the second quarter 2009, a decrease of 23.1% from the prior-year period. Sales by businesses acquired in 2008, on a same-store basis, accounted for $12 million of 2009 sales.
Excluding these sales, sales fell 29.5% in the second quarter.

Profit was $2.16 million, down 31.7%.

Sales for the six months ended June 30, 2009, fell 15.2% to $302 million from the prior-year period. Profit was $5.3 million. Excluding first-half 2009 sales of $26.2 million by the businesses acquired in 2008, sales decreased 22.6% from the first half of 2008.

CFO Mac McConnell said: "Economic conditions for the oil and gas and industrial manufacturing industries have proven to be more severe than anticipated. … We will continue to ...

Rexel Sales Down 17.9% in First Half

Paris-based electrical distributor Rexel Inc. reported sales of €5.6 billion (US$7.9 billion) fell 17.9% on an organic same-day basis in the first half. Sales were down 6.4% on a reported basis.

At constant copper prices, sales would have decreased by 13.7%.

A 20.2% drop in organic sales in the second quarter followed a 15.4% drop in the first quarter. The distributor reported continued weakness in all of its end-markets. The company has also streamlined its branch network - closing 224 branches in the past 12 months.

The sales decline in the second quarter included 4 percentage points due to lower copper-based cables prices; at constant copper price, sales would have decreased 16.1% in the second quarter.

In North America, 31% of the company's sales, first-half sales ...

NAW Legal Advisory on the Red Flags Rule

NAW has released a legal advisory concerning the "Red Flags Rule," which the Federal Trade Commission will start to enforce Nov. 1, 2009. The rule requires creditors and financial institutions to conduct a risk assessment to determine if they have "covered accounts," which include consumer-type accounts or other accounts for which there is a reasonable risk of identify theft.

If so, the creditor must develop and implement a written Identify Theft Prevention Program that identifies and detects the relevant warning signs- or "red flags"- of identity theft. These may include, for example, unusual account activity, fraud alerts on a consumer report, or attempted use of suspicious account application documents. The program must ...

Kennametal FY09 Sales Fall 23%

Kennametal Inc., Latrobe, PA, reported fiscal 2009 fourth quarter sales of $386 million, down 47% over the prior year same period. The company posted a loss of $33 million for the quarter, compared to profit of $59.6 million a year ago. Organic sales fell 43%.

For fiscal year 2009, sales were $2.0 billion, down 23% from fiscal year 2008. The fiscal year net loss was $119.7 million, compared to profit of $167.8 million the prior year. Organic sales fell 21%.

"Fiscal 2009 was the most challenging year in our company's 70-year history," said Carlos Cardoso, president and CEO. The company continued to implement certain restructuring plans to reduce costs and improve efficiencies during the quarter. On June 30, Kennametal completed the sale of its high speed steel drills, related product ...

Parker Hannifin Sales Fall 15.1% in Fiscal 2009

Cleveland, OH-based Parker Hannifin Corp., manufacturer of motion and control technologies, reported sales for the fiscal year 2009 were $10.3 billion, a decline of 15.1% from the previous year. Profit for the year fell 46.4% to $508.5 million. "We started the year strongly, however, our performance in the second half of the year reflected the impact of the ongoing global recession, which resulted in significantly reduced order rates," said CEO and President Don Washkewicz.

Fiscal 2009 fourth quarter sales were $2.2 billion, a decline of 33.9% from $3.3 billion in the same quarter a year ago. Profit for the fourth quarter declined 80.4% to $49.5 million from $252.6 million in the fourth quarter of fiscal 2008.

Washkewicz added: "Our fourth quarter performance was influenced by ...

Flowserve Second Quarter Sales Down 6%

Flowserve Corp., Dallas, TX, reported sales for the second quarter 2009 were $1.09 billion, down 6% from the prior year period. Profit declined 11.9% to $108.2 million.

For the first six months, sales were $2.12 billion, down 2% from the first half of 2008. Profit decreased 4.9% to $200.5 million.

"While we continue to see our markets impacted by the challenging global economic conditions, we are very pleased with the improvement we saw in sequential quarter over quarter bookings and sales," said Lewis Kling, president and CEO. "The continued realignment improvements we made this quarter to our operating platform should not only drive benefits that we will realize later in 2009, but are expected to strengthen the company for growth opportunities well into the future."

Flowserve ...

PTDA Leader Mary Sue Lyon to Retire

Mary Sue Lyon, who has lead the Power Transmission Distributors Association for 15 years, will retire as executive vice president at the end of 2010.

In a letter to PTDA's members, past PTDA president John Masek of Bearing Service Inc., Livonia, MI, and current PTDA president Drew Tucci of Eastern Bearings, Inc., Waltham, MA, commended Lyon on her outstanding leadership and commitment to making PTDA into the premiere networking and educational organization in our industry."

Lyon joined PTDA as the executive vice president in August 1994.

Lyon says the decision to retire was tough."My 15 years at PTDA have been a pleasure andthatis largely due to the individuals who have shown great leadership, vision and commitment to the Association and the industry," she said. "It has been ...

Canada Industrial Product Index Rises 0.7% in June

In June, the Canadian Industrial Product Index rose0.7% compared with May, while the Raw Materials Price Index increased6.2%, according to a report today from Statistics Canada.Both gains were due to a strong increase in petroleum prices.

June's increase in the IPPI followed declines of1.2% in May and0.6% in April. The IPPI was pushed up mainly by the prices for petroleum and coal products and, to a lesser extent, primary metal products. Prices for petroleum and coal products rose10.8%, more than twice the5.2% increase observed in May. However, excluding petroleum and coal products, the IPPI posted a0.3% decline, slower than the1.8% drop recorded in May.

Most of the2.2% increase for ...

United Rentals Posts Loss of $17M in 2Q

United Rentals, Inc., Greenwich, CT, announced sales for the second quarter 2009 of $615 million, down 26% from second quarter 2008. The company reported a net loss of $17 million, compared with a net loss of $202 million for the prior year same period.

During the quarter, 38 branches were closed or consolidated in the quarter, and headcount was reduced by approximately 800.

"Looking forward, we believe that our operating environment will remain very challenging," CEO Michael Kneeland said. "Our best estimate at this time is that non-residential construction activity will continue to decline on a year-over-year basis into 2010, although the rate of decline may moderate. Our infrastructure rentals should see the benefit of stimulus funds, while on a macro level we believe that our ...

Rockwell Automation Sales Fall 31% in Third Quarter

Milwaukee, WI-based Rockwell Automation, Inc. reported fiscal 2009 third quarter revenue of $1.1 billion, down 31% compared with the third quarter fiscal 2008.

Third quarter profit was $32.8 million, compared with $152.6 million in the third quarter 2008.

The manufacturer expects "we may be approaching the bottom of the cycle." But it still sees uncertainty in the global economy and has not yet seen evidence of an upturn.

Control Products & Solutions third quarter sales were $611.3 million, a decrease of 28% from the third quarter 2008. Currency translation contributed 5 percentage points to the decline, partially offset by about 1 percentage point of growth ...

Survey: Pricing, Gross Margins Hold Steady in Second Quarter

The second quarter Baird Industrial Distribution Survey indicates that average second quarter year over year revenues were slightly worse than the first quarter, with the third quarter forecast slightly better than current quarter trends. Encouragingly, pricing and gross margins appear to be holding relatively steady while inventory levels continue to decline with no re-stock expected in the near-term.

The bottoming process appears to be underway in most industries," said David Manthey, CFA, Baird's senior research analyst who leads the firm's Industrial Distribution sector research. "With conditions stabilizing and inventories at very low levels throughout most supply chains, industrial distributors should continue to see improvement into 2009."

Survey Details
Baird's ...

United Stationers 2Q Sales Down 7.4%

United Stationers Inc., Deerfield, IL, a North American wholesale distributor of business products, today sales for the second quarter 2009 were $1.16 billion, down 7.4% from the prior year same period. Profit decreased 1.4% to $21.5 million.

Weak macro-economic conditions contributed to revenue declines in furniture, industrial, technology and traditional office supplies. Despite these conditions, the janitorial/breakroom category experienced sales growth.

"United's results reflected our associates' excellent efforts to control what we can in the face of difficult market conditions," said Richard W. Gochnauer, president and chief executive officer. "While employment and manufacturing trends continued to weaken in the quarter, the rate of change in our sales improved sequentially ...

Timken Agrees to Sell Needle Roller Bearings Unit to Japanese Company

Canton, OH-based The Timken Company has agreed to sell its Needle Roller Bearings business - which serves customers mostly in the automotive OEM sector - to Japan's JTEKT Corp. JTEKT will pay $300 million in cash.

"This transaction is a major step forward in our strategy to transform our portfolio to focus on industrial sectors with strong aftermarkets," said James W. Griffith, Timken president and CEO. "It positions us to concentrate our resources on areas where we can realize mutual value with our customers."

The Needle Roller Bearings business was part of the broader Torrington acquisition Timken made in 2003. It had sales of $621 million in 2008 and has 3,400 employees. The business, with 12 manufacturing facilities and three engineering technology centers, manufactures highly ...

New Orders for Durable Goods Fall in June

New orders for manufactured durable goods in June decreased $4.1 billion or 2.5% to $158.6 billion, according to the U.S. Census Bureau. This decrease followed two consecutive monthly increases including a 1.3% May increase. Excluding transportation, new orders increased 1.1%. Excluding defense, new orders decreased 0.7%.

Shipments of manufactured durable goods in June, down eleven consecutive months, decreased $0.3 billion or 0.2% to $168.3 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 2.6% May decrease.

Unfilled orders for manufactured durable goods in June, down nine consecutive months, decreased $6.6 billion or 0.9% to $740.1 billion. This followed a 0.3% May decrease. ...

Park-Ohio Sales Down 42% in 2Q

Park-Ohio Holdings Corp., Cleveland, OH, announced sales for the second quarter were $163.4 million, down 43% from second quarter 2008. Profit declined 42.1% to $3.3 million.

Year-to-date, sales were $344.7 million, down 38% from the same period of 2008. The company recorded a net loss for the first six months of 2009 of $2.2 million, compared to profit of $9.2 million in the same period of 2008.

Park-Ohio is a provider of supply management services and a manufacturer of highly engineered products. ...

Arrow Electronics 2Q Sales Down 22%

Arrow Electronics, Inc., Melville, NY, reported second-quarter 2009 sales were $3.39 billion, down 22% year over year. Profit declined 78% to $21.1 million.

Global enterprise computing solutions sales of $1.12 billion decreased 19% year over year. Global components sales decreased 23% to $2.27 billion

"While pleased with our second-quarter performance, we also realize that the cost savings we have generated to date have not been enough to offset both the sales declines and margin pressure we have experienced during this downturn," said Paul J. Reilly, executive vice president and CFO. "Given the market realities we are faced with, we have an additional $100 million in annual cost reductions that are expected to be implemented in the second half of 2009, primarily in our European ...

On Invoice Add-Ons and Special Price Records

Fuel, freight, and energy charges are some of the many items distributors are discovering some customers are willing to pay for. The key word is "some."

Brent Grover, author of the new book, "Strategic Pricing for Distributors: Tools and Rules for Building Higher Margins," recently spoke with MDM about his new book for the latest issue, and he says that the key for any add-on to an invoice is to do it in customer segments that are least likely to resist those charges. "It's not a matter of being tough and putting in an across-the-board change," he says. Distributors should not want to lose a customer due to an add-on charge.

"The ability to recover outbound freight charges is a big profit lever for distributors," ...

Praxair Sales Fall 26% in 2Q

Praxair, Inc., Danbury, CT, reported sales for the second quarter 2009 were $2.13 billion, down 26% from the prior year same period. Profit declined 14.3% to $299 million.

For the first six months of 2009, sales were $4.26 billion, down 23.1% from the first half of 2008. Profit decreased 10.2% to $589 million.

"Challenging economic conditions persisted globally in the quarter, resulting in overall volumes on par with the first quarter," CEO Steve Angel said. "We have begun to see pockets of sequential improvement in Asia and South America, where economic activity appears to be reacting positively to fiscal and monetary stimulus programs. In Europe and North America, the overall industrial environment remains very weak, although volumes appear to have stabilized."

In North ...

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