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ROBERT BOSCH Bosch acquired ITK Engineering AG, a development services company that is a leading provider of model-based system and software development. Financial details were not disclosed. ITK makes machines smarter in a variety of industries, and over the past twenty years has grown from 50 employees to more than 800. ITK will become part of Bosch Engineering. Robert Bosch is partnering with RAM trucks and vans, offering Pros an opportunity to win $50,000 towards the purchase of a new RAM pickup or van. All they have to do is submit a photo of themselves on a jobsite or with a completed project. The sweepstakes runs through the end of November. Bosch will post entries online in a rotating display. STANLEY BLACK & DECKER Q3 revenues rose 2% ex currency to $2.9 billion, and organic growth rose 3%. Tools & Storage sales rose 5%, with organic growth up 4% in North America and 11% in Europe. Overall organic growth was held down by modest growth in emerging markets. From their Q3 Conference Call with Analysts: Early indications suggest that the DeWalt FlexVolt introduction will be the most successful power tool product rollout in the company’s history. They credited very enthusiastic response from professional customers and the breadth and depth of the marketing campaign for driving early momentum. In North America, share gains were driven by U.S. retail, which was up in the high-single digits, despite inventory reductions by certain retail partners. They also had very strong performance in Canada, with share gains up in the high-single digits. This strong performance more than offset persistent weakness in the North American industrial tool channel. POS remained healthy and excitement around the FlexVolt launch met very high expectations, with the product on track to deliver their 2016 revenue expectations. They developed FlexVolt from scratch using their breakthrough innovation process and took it from concept to store shelves in just under two years. It was the first global product launch in the company’s 170+-year history. The channel fill has been fairly comprehensive and is still on target. They will be in the $100 million range for the fourth quarter, which meets expectations. Right now they are paying attention to how much capacity they have if FlexVolt becomes a much bigger program than $200 million in 2017. Currently they are in the $400 million range for total capacity and are working to ensure that if demand is even stronger than that they could deal with bottlenecks. They don’t think they could go much beyond $400 million. Power Tools were up 8% due to the FlexVolt launch; Hand Tools & Storage dropped 3% due to pressure in the Industrial Tool Channels. The Tools business delivered $330 million of operating profit despite currency pressure. The success of the Tools business over the past two years is the primary reason they are so excited about the Newell Tools acquisition (see acquisition conference call highlights following this section). They are looking at the Newell acquisition as primarily a bolt-on acquisition for their tools business. There is also some other activity going on in the tool industry that might lead to further consolidation, which they would like to be part of. They’re looking at organic growth on the low-side of their earlier projections of 4% to 6%, and think organic growth for 2017 will be in the same range. The Tools business will probably grow about 7% by the end of this year, with slightly less growth next year. The fourth quarter typically has a sequential decline in margins because there is a significant mix shift and a higher percentage of Black & Decker-branded products are sold, plus there is promotional activity. They are planning for $20 million to $30 million in commodity inflation next year, not a level they consider significant. SB&D’s acquisition of Newell’s Tools Business: SB&D is buying Newell Brands’ tools business for $1.95 billion in cash. Brands being acquired include Lenox and Irwin. Newell Brands is not selling the Dymo Industrial labeling operation, which currently is part of the Tools division. Pending regulatory approvals and other standard conditions the deal should close during the first half of 2017. SB&D projects annual cost synergies of between $80 million and $90 million by the third year after the deal closes. The deal is expected to add $0.15 to their earnings per share the first year, and $0.50 by the third year. SB&D held a special conference call with analysts to go over details of their acquisition of Newell Brand’s tools business. Greg Waybright, VP, Investor and Government Relations, joined CEO Jim Loree and CFO Don Allan on the call. Acquisition conference call highlights: NB’s tool business includes Irwin and Lenox, and is about a $760 million business. The majority of sales are in North America. SB&D believes that leaves them a lot of opportunity to grow globally, with opportunities in Germany, South Korea, China, Russia, India and elsewhere. The product mix is complementary, and nearly doubles SB&D’s existing accessories business plus significantly bolsters the company’s presence in pliers, linear edge and band saw categories. Irwin’s sales account for about 60% of the total, with sales split fairly evenly between accessories and hand tools. Lenox is much more heavily weighted to the accessories category, with the majority of revenues coming from sales of band saw blades, hole saws and various other accessories. SB&D expects annual synergies of $80 to $90 million in total after the businesses are integrated. SB&D plans to apply the Made in USA initiative to Lenox and Irwin products, as it has been very successful for DeWalt. The MRO and STAFDA channels are very strong for Lenox. Their home center volume was described as between $100 million and $200 million and “not substantial.” Irwin margins are very similar to SB&D margins overall. Lenox margins are substantially higher; SB&D says that is because Lenox has a tremendous product with great performance, value and technology. With channel overlap it will enable them to get very strong incremental margins out of combining the two. Jim Loree said the deal actually started back in 2002 when American Saw was for sale. SB&D believed American Saw would be a huge asset; eventually it was purchased by Newell, which also owned American Tool. Loree said they basically made a pitch for the business every year, but the combination of Jarden and Newell created an opportunity because it was no longer in the mainstream of where Newell Brands wanted to take the company. When Newell acquired Jarden they got a lot of interest from other players in the power tools industry, including SB&D. The market will continue to see a lot of core innovations come from hand tools, both from Irwin and from SB&D’s own portfolio. As far as further acquisitions go, the job of integrating the brands will be the focus of the tools business for quite a while, but that does not mean they won’t be looking for acquisitions in other parts of the business. There is a perception that they don’t serve smaller customers, but Loree said they actually have a huge business with smaller customers. He said the supply chain expertise required to be successful in hand tools is very sophisticated; the Stanley fulfillment system runs about a 98% fill rate and their total big-box and large customer exposure out of their $7.5 billion business is about $3 billion. They have traditionally been “under-indexed” in the accessories business which is very similar to the hand tools business in terms of supply chain challenges and they believe they have a competitive advantage compared to a power tool player used to high-volume, large-dollar, simple SKU assortments, and their supply chain expertise will be a real advantage. Other News: SB&D is working with Goldman Sachs on a process to sell their mechanical lock business, which could fetch as much as $1 billion, according to sources. Analysts say the sale could allow Stanley to raise cash for the acquisition of Newell Brand’s Irwin and Lenox tool brands. DeWalt’s FlexVolt system won the Popular Science Best of What’s New award. Each year Popular Science reviews thousands of new products and innovations and chooses the top 100 winners across 10 categories. NEWELL BRANDS Q3 Net sales rose 158.5% to $3.95 billion, but were nevertheless below analysts' expectations. Top-line growth was primarily due to incorporation of Jarden’s sales; Jarden was acquired in April. Core sales increased 3% in the third quarter. Newell Brands expects core sales growth for 2016 to range between 3.5%-4%. The sale of the Tools business to Stanley Black & Decker is part of the strategy to put a new growth plan in place and consolidate their business units. Net sales for the divested businesses were approximately $760 million for the past twelve months. Newell Brands is simplifying their operating structure, consolidating their existing 32 business units to 16 operating divisions, and will create a new global enterprise-wide ecommerce division. NB will use the proceeds from the sale of the Tools business, along with the sale of several other segments, to accelerate debt pay down and create a platform for future acquisitions that strengthen and add scale to the company’s core businesses. NB hopes to complete the divestiture of the assets they are selling in the first half of 2017. MAKITA Makita recalled one of their circular saws with dust collector because the lower blade guard can malfunction and expose the blade, posing a laceration hazard and risk of injury to the consumer. The saws were sold at Tools Plus and at other industrial supplier as well as online from March through September of this year. TRIMBLE Trimble has formally changed the company name from Trimble Navigation Limited to Trimble Inc. and also completed their reincorporation from the State of California to the State of Delaware. Trimble sold their unmanned aircraft system business to Delair-Tech and Microdrones of Siegen, Germany. Financial terms were not disclosed. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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