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Worker in forklift-truck loading packed goods in huge distribution warehouse with high shelves.
As distributors look to modernize their facility equipment, financing is always the biggest question. This Q&A sheds light on what distributors should keep in mind as they consider buying vs. leasing.

Premium Monthly

With less industry concern over the economy and supply chain, August gave MDM a chance to explore other topics that haven’t dominated headlines in 2023.
Get caught up on all of the Premium content MDM published during July, which was led by a focus on distributor-supplier relations.

Market Insight Reports

See MDM’s analysis of 2Q23 M&A activity pertaining to wholesale distributors, plus M&A financial benchmarks and recent Premium articles that had an M&A focus.
Find a wealth of data and analysis extracted from the 2Q23 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue, expectations and pricing, plus plenty of interesting distributor commentary.

BlueLinx Holdings Inc., Atlanta, GA, distributor of building products, reported sales of $4.9 billion, down 12.9% from $5.62 billion a year ago, reflecting lower structural product prices and unit volume. Profit was $15.8 million, compared with $44.6 million a year ago.

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CEO Stephen Macadam said:&nbsp ; As a distributor of building products, we continued to experience a sharp drop in demand that began earlier in the year as housing starts continued their slowdown and prices for wood-based structural products remained sharply below year-ago levels. The fall-off in demand was exacerbated by ongoing inventory reductions throughout the supply chain, and by the normal seasonal business slowdown associated with the winter months.

Macadam said ...

Ferguson has acquired Grif-Fab Corporation, a distributor and fabricator of fire protection systems with three locations in Colorado, Arizona and New Mexico. In the year ended Nov. 30, 2006, Grif-Fab had revenue of $28.3 million.

UK-based Wolseley plc, Ferguson's parent company, has recently made three other bolt-on acquisitions in addition to the Grif-Fab buy. The four in total will add 29 million pounds, or $37.7 million, to annual revenues.

Since Aug. 1, 2006, Wolseley has made 33 acquisitions in Europe and North America totaling 342 million pounds, or $458 million.

More Breaking ...

Watsco, Inc., distributor of air conditioning and heating products, reported sales of $1.8 billion in 2006, a 7% increase from 2005. Profit was $82.4 million.

Fourth-quarter sales were $388 million.

&nbsp ; “2006 was one of enormous change as virtually half the products we sell were transitioned to new families of higher-efficiency products. We expect these new products to provide a unique and sustainable sales opportunity for us given consumers' high degree of sensitivity and focus on energy costs, President and CEO Albert H. Nahmad said.

The Watsco network expanded by 28 locations in 2006, including locations opened to enhance local service and locations acquired adding new customers, products and market share. Revenues contributed by new ...

The Home Depot, Atlanta, GA, has announced it will evaluate strategic alternatives" for its HD Supply business, including a possible sale, spin or initial public offering of the business.

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In a release, the company said a transaction is not definite. HD has retained Lehman Brothers as its financial advisor. HD said it would not disclose further developments with respect to HD Supply unless the board of directors has approved a definite transaction.

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"Today's announcement is a continuation of the strategic review we did in November," said CEO Frank Blake. "We are undertaking this action today because of our desire to increase our ...

Building Materials Holding Corporation, San Francisco, CA, provider of construction services and products to the homebuilding industry, announced that its wholly owned subsidiary, SelectBuild Construction, has terminated its letter of intent to acquire Willis Roof Consulting Inc.&nbsp ;

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In October of 2006, BMHC announced SelectBuild's intention to acquire 100% of the assets and operations of Willis Roof Consulting, subject to completion of due diligence activities.

Related Links:

Building Materials Holding Corp.&nbsp ; to Acquire&nbsp ; Las Vegas Roofing Specialist

More Breaking ...

The bidding war between The Carlyle Group and Building Materials Corporation of America for ElkCorp has ended, with The Carlyle Group dropping its offer for the roofing and building products manufacturer.

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An affiliate of Building Materials Corporation of America (BMCA), a roofing manufacturer in North America, has agreed to buy ElkCorp for $43.50 a share in cash, or about $1.12 billion, including the assumption of about $173 million in debt.

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The offer represents a 73% premium over ElkCorp's closing share price on Nov. 3, 2006, the last trading day before ElkCorp announced it was considering strategic alternatives.

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ElkCorp terminated its previous merger agreement with Carlyle.

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BMCA, ...

< Emerson, St. Louis, MO, sales for the first quarter ended Dec. 31, 2006,&nbsp ; were $5.1 billion, an increase of 11% over the $4.5 billion reported in the same period last year. Profit for the first &nbsp ; quarter increased 12% to $445 million.

Underlying international sales increased 11%, including strong growth in Europe, Asia and Latin America. This quarter marked the first time that international sales were over 50% of total&nbsp ; sales.&nbsp ; As expected, underlying growth in the U.S. was down 2% driven primarily by weakness in the&nbsp ; residential air-conditioning markets for the Climate Technologies segment, which experienced exceptionally strong growth last&nbsp ; year as the industry converted to 13-SEER ...

Adam Fein, president of Pembroke Consulting, identifies four key trends in Facing the Forces of Change: Lead the Way in the Supply Chain, put together every three years by the National Association of Wholesaler-Distributors. He described these trends in a presentation at the NAW annual meeting in Washington, D.C., last month.

No. 1: Private Label
Adam Fein, author of Facing the Forces of Change: Lead the Way in the Supply Chain, says the use of private-label products will expand substantially over the next few years.

Benefits of a private-label strategy include capturing the manufacturer's margin, and the ability to control profit from the top to the bottom of the supply chain. Customer relationships often improve thanks to lower ...

W.W. Grainger, Chicago, IL, has released its updated 2007 catalog with more than 138,000 MRO products, an increase of 23,000 over last year.

Last year, the distributor increased its catalog by 40 percent, adding 39,000 new products.

This year Grainger has added more than 7,000 plumbing products, including high-grade pipes, valves and fittings; 4,000 material handling supplies such as conveyors, hoists and casters; 5,000 fasteners including nuts, bolts and screws; as well as 1,600 security products including locks and hinges.

The company expects incremental sales from its ongoing product expansion to account for 1 to 2 percentage points of its growth in 2007. The new catalog has more than 3,000 pages.

In addition, online Grainger has added new search and ...

Strategic Distribution will soon shed the costs of public ownership when it sells to Platinum Equity. The two-year decision-making process was explained for shareholders in an SEC filing last month. MDM distills the details in this article.

Competitive pressures, a history of operating losses, limited stock liquidity and trading volume, and the cost of complying with Sarbanes-Oxley all played a part in leading Strategic Distribution to give up the public life and agree to sell to Platinum Equity for $10 a share, or $30 million, last month.

An SEC filing in late January details Strategic's decision to go private. In addition to selling the company, management also considered a liquidation of Strategic's assets.

Several suitors took up ...

Hardware and renovation products distributor and retailer RONA, Boucherville, Quebec, has acquired Noble Trade Inc., a plumbing and heating supply wholesaler in Ontario with annual sales of about C$150 million. The purchase price was close to 7X EBITDA, RONA executives said in a conference call.

Noble Trade was created in 1998 with the merger of Trade Plumbing Supplies and Noble Plumbing Supplies. The company has posted average annual sales increases of 27 percent since 1998. Most of that growth was organic, with either new stores or sales growth at existing stores, said Noble President Michael Storfer.

Storfer said Noble sold to RONA because it had resources it needed to grow the business. We thought they were the most entrepreneurial, and would allow us to continue to ...

Prices charged by manufacturers in Canada, as measured by the Industrial Product Price Index (IPPI), were up&nbsp ; 1.4 percent in December from the month before thanks to a significant increase in prices for petroleum and coal products, primary metal products, and motor vehicles. Higher prices were observed in the majority of product groups.

On a 12-month basis, the IPPI rose by&nbsp ; 3.6 percent, a higher rate of growth than the year-over-year increase recorded between September and November. The upward pressure came mainly from higher prices for primary metal products, pulp and paper products as well as fruit, vegetables and feed products.

Petroleum, Coal Drive Prices
On a month-over-month basis, manufacturers' prices were driven by ...

As reported by The New York Times this week, it did not take long for private equity firms to call the new HD CEO and wave some serious money (some analysts estimated $9 billion for a division doing about $12B in revenue in 2006) to take the HD Supply distraction off his hands. That is how the mainstream media and some analysts are painting it.

At one level, it wasn't surprising based on the departure of the chief exec last month and the arrival on the board of an activist investor none too happy with the company's wholesale foray into distribution.

For many independent distributors with some memory, it sounds eerily like another lesson in the properties of oil and water. There have been multiple failures of manufacturers trying to run profitable distribution ...

Home Depot will consider strategic alternatives for its HD Supply unit, including a sale, spinoff or initial public offering. Nothing is definite. Today's announcement is a continuation of the strategic review we did in November," said CEO Frank Blake. "We are undertaking this action today because of our desire to increase our focus on our retail business. With annual revenues of $12 billion, HD Supply is a healthy, growing and vibrant business and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value." HD said it would not announce updates to its review unless the board of directors approves a definite transaction ...
Modern Distribution Management's December Inflation Index, which measures a cross-section of industrial supplies, was up 0.23% from the previous month, and up 3.47% from December 2005.

Summary of&nbsp ; MDM Inflation Index for the past 12 months:

December 2006 Index&nbsp ; 267.1
November 2006 Index 266.5
October 2006 Index 265.9
September 2006 Index 265.6
August 2006 Index 265.2
July 2006 Index 264.0
June 2006 Index 263.0
May 2006 Index 262.1
April 2006 Index 262.1
March 2006 Index 262.1
Febuary 2006 Index 261.2
January 2006 Index 260.2
December 2005 Index 258.1

Please click below on Related Document to view a print-ready pdf of the&nbsp ; MDM Inflation Index for December 2006, listing the ten ...

Abrasives represented a market in 2006 of $2.76 billion, according to estimates by Industrial Market Information, Minneapolis.

These charts show the top ten industries, by SIC code, consuming these products; and the 2006 end-user consumption of these groups sorted by the nine government market regions.

Click on Related Document below to view a pdf of the chart and end-user consumption by region.


A&nbsp ; Purdue University research project by Steve Epner is trying to understand key reasons why distributors adopt technology. Please take this brief survey now -- less than five minutes to complete. Your participation is completely confidential and makes a difference in the quality of the results. Only summary data will be published. Watch MDM for results in June! Please invite other distributors you know to participate by using the “Forward this e-mail link above. The more responses we have, the more we can learn. Thank you!

Take the survey ...

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