Welcome to the North American Graphic Arts Suppliers Association

Business Conditions Report - Meeting With Secretary O'Neill

North American Graphic Arts Suppliers Association (Greg DuRoss)

We are about to do a survey on the State of the Channel, but since we do not track statistics on a regular basis I really can't be specific. I can say that feedback from members has been somewhat mixed throughout the recession. Many dealers and manufacturers are hurting big time and a number will not survive. They are cutting their presence at trade shows despite the fact that they have prepaid exhibit fees that are not refundable. I do hear from other members (clearly not many) that say they have managed OK given how poorly the economy has been performing. Most say my industry will not see improved sales until 2003.

As to what can be done now, spending has to be encouraged. Here is an example you can use to illustrate the ripple effect both within and outside my industry:

Printed advertising in all forms has been cut way back. The ripple effect is felt at advertising agencies that have be decimated, and it runs throughout the economy: fewer consumable supplies being purchased means reduced manufacturing, less production in printing plants which reduces the demand for new equipment which reduces manufacturing of new equipment. Jobs are eliminated are every stage but especially small distributors that do not have the resources to keep staff on the payroll.

American Machine Tool Distributors Association (Ralph Nappi)

1. By what percentage (estimates are fine) are sales up or down for your members for the year so far, versus 2001 and 2000?
   
   Down 35% from 2001 and 50% since 2000
   
   
2. Same question as above as regards profits.
   
   Profits, what's that??? Most companies in our industry have been using retained earnings for well over a year to float their operations.
   
   
3. Do you believe that sales will stay at the same level...rise...or go down for the balance of the year? By what percentage?
   
   It will stay the same for the remainder of the year--off 35% with an anticipated rise for next year of less than 10%.
   
   
4. Same question as above as regards profits.
   
   Break even is the best we can hope for.
   
   
5. What is the ONE thing which you believe the government can do NOW to quicken the pace of economic recovery?
   
   Get out of our way and let the marketplace work and evolve. Please stop "helping" with things like tariffs on imported steel or costly government regulations. Don't allow lawyers and our legal system to burden our resources with frivolous lawsuits and class actions. Does the public and government recognize how much waste is incurred by companies of all sizes, including valuable mindshare, dealing with actions like suits against fast food companies for making people fat!!!!
   
   

Association of Woodworking & Furnishings Suppliers (Dale Silverman)

With only "hearsay" to go on, based on input from a May industry meeting, furniture manufacturing and thus sales by supplier/distributors in this segment of our industry are significantly down, with China simply taking over the market. Cabinet manufacturers still are holding their own, but equipment purchases (from equipment wholesale/distributors) are down. However, the single largest US trade show for the wood industry in this calendar year is in late August, so everyone is holding their breath and counting on that market. General pessimism as to attendance and thus sales prevails, however.

Copper & Brass Servicenter Association (Frank Brown)

1. First half 2002 vs 2001 -- about even (Down in1st Q - up slightly in 2nd) Vs. 2000 -- down 15 %
   
   
2. First half 2002 vs 01 -- down 6 % vs. 2000 -- down 18 %
   
   
3. Sales will increase slightly (5 %) for balance of year
   
   
4. Profits should increase 2-3 % for bal. of year
   
   
5. ???
   
   

International Association of Plastics Distributors (Deborah Hamlin)

I don't have aggregate information on my members, so I asked my Executive Committee to respond individually. Here is one reply.

My members have been complaining to me all year, so this one seems to be better than what my other members are alluding to!

Member Response:

1. Sales are up 5% over last year.
   
   
2. 2. We have gone from a 2% loss to a 2% profit.
   
   
3. 3. No change for rest of year.
   
   
4. 4. No change for rest of year.
   
   
5. 5. Drop all the fuss on corporate CEO fraud. Let the shareholders take care of the problem. It is just grandstanding by the politicians!
   
   

Industrial Distribution Association (Gary Buffington)

That is good news. Many in our industry believe that the great failure of the Administration has been in not addressing the poor economic condition of industry for almost two years now. I know they have been distracted, but the state of our economy is as crucial as the response to terrorism. To answer your specific questions:

1. Sales for industrial MRO distributors are down 9.21 % through May compared to 2001. In contrast, our Canadian members experienced an 8 % gain for that period. Hardest hit were our Western members who saw a 15 % sales decline. What are the Canadians doing that we aren't?
   
   
2. The profit picture is even more disturbing. Profit before tax for our typical member was .4 % for 2001, compared to 1.3 % the previous year ( a whopping 69 % decline). Even our best performers saw a decline from 4.6% to 3.9 %.
   
   
3. I expect only a modest recovery in sales given what I hear from the market place. I would project that the next 12 months will see no better than a 25 to 30 % recovery from the current levels.
   
   
4. Profits may do a little better for 2002 given the severe cut-backs that many distributors have been forced to put in place. If 2002 were to hit 1.0 %, I would be pleased.
   
   
5. What can be done to assist with a recovery? We need to stimulate jobs creation in the industrial sector as the consumption of our products is largely dependent upon the number of industrial jobs. We are obviously impacted by large end users moving off shore (literally, not just a P.O. box in Bermuda) So we need to build some incentives to keep American industry in America. The decision on tariffs on metals has hurt many of our customers, and the Administration needs to admit it was wrong and modify it.
   
   

International Sanitary Supply Association (John Garfinkel)

The Past. Our distributor surveys indicate that Revenue was down in 2001 over 2000 by about 8% although a great deal of it is pricing pressure resulting in a 15% decline in profit. This year through June they report flat to slightly declining sales and a further profit drop of about 8%. The best claim to running even with last year but fighting for every order and cutting costs. Manufacturers that have strong business in the consumer sector claim they have been offsetting much of the decline in the commercial sector in the consumer retail sector.

The Future. The outlook is not very positive. The commercial cleaning industry is broad based but tends to lag the economy by about 6 months so most remain pessimistic even after others may be seeing a turnaround.

What Can be Done. The one thing I think that is needed by the administration candidly is to let O'Neill and one of their economists who has high credibility on Wall Street and Main Street be much more visible and outspoken using the media more effectively. The President is not doing well in this regard as the recent political and media publicity about business leaders is, I think, hurting and threatening further erosion in the consumer and in the business community. There seems to be no end in sight to the attacks on business in general by Washington and the media. Washington needs to deal with this more swiftly and get the problems behind us as quickly as possible. I don't believe there will be much of a turnaround until the public feels they can trust business again. That may take a while and needs some strong leadership from the administration in this regard.

Irrigation Association (Tom Kimmel)

[Responses from the Irrigation Association which encompasses the whole industry not just the wholesale portion]

1. By what percentage (estimates are fine) are sales up or down for your members for the year so far, versus 2001 and 2000?
   
   [10-15%]
   
   
2. Same question as above as regards profits.
   
   [same]
   
   
3. Do you believe that sales will stay at the same level...rise...or go down for the balance of the year? By what percentage?
   
   [will maintain same level]
   
   
4. Same question as above as regards profits.
   
   [Same]
   
   
5. What is the ONE thing which you believe the government can do NOW to quicken the pace of economic recovery?
   
   [implement conservation programs and shepherd exports]
   
   

National Marine Distributors Association (Nancy Cueroni)

96.15% return rate:

Survey of NMDA Distributor Membership
State of the Industry Results

1. Was your company's total sales volume of marine accessories up or down in 2002 compared to 2001?
   
   Up 72% | Down 12% | Same 16%
   
   
2. Do you expect your company's marine accessory sales for 2003 to be up or down in comparison to 2002?
   
   Up 68% | Down 4% | Same 28%
   
   
3. Because of your sales projections for 2003, do you expect to maintain an inventory that is larger or smaller than in 2002?
   
   Larger 36% | Smaller 20% | Same 44%
   
   
4. Were collections on your sales in 2002 faster or slower than in 2001?
   
   Faster 32% | Slower 8% | Same 60%
   
   

National Paper Trade Association (William Frohlich)

1. -15%
   
   
2. -10%
   
   
3. Sales flat for rest of this year, trending upward in the fourth quarter.
   
   
4. Due to cutting head count and across the board belt-tightening, profits will follow #3 above.
   
   
5. Government can bolster the market and provide confidence. Nervousness in the market is holding down printing and paper usage.

National Welding Supply Association (Rick Doyle)

Sales Volume and Growth
1999 - 2001
Taken from NWSA Profit Reports 2000, 2001, 2002 (Prepared by Profit Planning Group, Boulder, CO)

Outdoor Power Equipment & Engine Service Association (John Kane)

1. By what percentage (estimates are fine) are sales up or down for your members for the year so far, versus 2001 and 2000?
   
   Down this year. Due more to the weather than the general economy.
   
   
2. Same question as above as regards profits.
   
   Same as # 1
   
   
3. Do you believe that sales will stay at the same level...rise...or go down for the balance of the year? By what percentage?
   
   Down due the normal seasonal drop off and the weather.
   
   
4. Same question as above as regards profits.
   
   Same as # 3
   
   
5. What is the ONE thing which you believe the government can do NOW to quicken the pace of economic recovery?
   
   Restore confidence in the market by exposing corp. executives who have broken the law and apply penalties.
   
   

Office Products Wholesalers Association (Cal Clemons)

1. By what percentage (estimates are fine) are sales up or down for your members for the year so far, versus 2001 and 2000?
   
   The range is from -7% to +8.
   
   
2. Same question as above as regards profits.
   
   The range is from -3 to +5%.
   
   
3. Do you believe that sales will stay at the same level...rise...or go down for the balance of the year? By what percentage?
   
   The general response is that sales will remain at about the same level and remain flat. If there is an increase, it will be very small and will not exceed 3%.
   
   
4. Same question as above as regards profits.
   
   The answer is the same as the previous question. However, the percentage of profits may be a little higher as companies seek to achieve productivity gains.
   
   
5. What is the ONE thing which you believe the government can do NOW to quicken the pace of economic recovery?
   
   The universal answer from all respondents is to reduce taxes.
   
   The call is also to make the tax cut permanent rather than temporary. Keeping interest rates low is important.
   
   One respondent said that small and medium-sized businesses should get "free money like the farmers so we could expand." Actually, there is a need for incentives for the small and medium-sized businesses. This segment of the business community accounts for a lot of the jobs in the economy, and it should be targeted for improvement through activities such as tax credits or other financial incentives.
   
   Another said the government needs to stimulate the economy through rises in employment. It is reported that the average expenditure for office products (not including office furniture or computer hardware/software) is $400 - $600 per white-collar worker annually. If we put the 1.2 million workers laid off or terminated last year back to work, well, you can do the math.
   
   

Textile Care Allied Trades Association (David Cotter)

Generally speaking, sales are down about ten percent in 2002 compared to last two years - profits are down, but not as much. Though it is overstated, the best ONE thing government can do is to let small business operate without over-burdensome regulation, including crazy product liability system (couldn't resist giving you two items!)

Waste Equipment Technology Association (Gary Satterfield)

1. By what percentage (estimates are fine) are sales up or down for your members for the year so far, versus 2001 and 2000?
   Answer: Up by 3%
   
   
2. Same question as above as regards profits.
   Answer: Up by 5%
   
   
3. Do you believe that sales will stay at the same level...rise...or go down for the balance of the year? By what percentage?
   Answer: Rise by 10%
   
   
4. Same question as above as regards profits.
   Answer: Up 6% for the year
   
   
5. What is the ONE thing which you believe the government can do NOW to quicken the pace of economic recovery?
   Answer: Restore investor confidence.
   
   

Wholesale Florist & Florist Supplier Association (James Wanko)

1. For the first quarter of 2002 sales are up 4.4% over 2001. For the same period 2001 vs. 2000 sales were down 0.3%
   
   
2. Operating profit for the first quarter of 2002 is 3.4% vs 1.7% for the same period in 2001. Operating profits for the first quarter of 2000 was 1.1%.
   
   
3. We are hearing from our suppliers that there is strong demand for product, so we expect the improved sales to continue. We don't expect much change.
   
   
4. Hard to say. In a survey 42% of our wholesale distributors said they reduced the number of employees and overtime hours to control operating cost. BUT, profits are being eaten alive by insurance cost. ALL TYPES OF INSURANCE - Health, Liability, Property, vehicle, etc.
   
   
5. Reduce the cost of insurance. At a recent Board of Director's strategic planning meeting, escalating INSURANCE cost was the number 1 problem. This comes right off the bottom line.