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The Toro Company to Acquire The Charles Machine Works, Inc. 

The Toro Company to Acquire The Charles Machine Works, Inc. 

Parent Company of a Strong Portfolio of Underground Construction Brands 

Including Market-Leading Ditch Witch 

The Toro Company (NYSE: TTC) today announced that it has entered into a definitive agreement to acquire privately-held The Charles Machine Works, Inc., an Oklahoma corporation and the parent company of Ditch Witch and several other leading brands in the underground construction market, for $700 million in cash subject to certain adjustments set forth in the definitive agreement. The transaction is subject to regulatory approvals and other customary closing conditions and is currently anticipated to close before the end of Toro’s fiscal 2019 third quarter. More detailed information regarding the transaction is included in an investor presentation available at www.thetorocompany.com.

Headquartered in Perry, Oklahoma, Charles Machine Works designs, manufactures and sells a range of products to cover the full life-cycle of underground pipe and cable, including horizontal directional drills, walk and ride trenchers, utility loaders, vacuum excavators, asset locators, pipe rehabilitation solutions and after-market tools. The company, known as “The Underground Authority” for their deep understanding of the structures and systems in those markets, and the most important needs of underground construction professionals, generated calendar year 2018 revenues of approximately $725 million.

“The addition of Charles Machine Works will further strengthen our portfolio of market-leading brands supported by talented employees, a commitment to innovation, a best-in-class dealer network and long-standing customer relationships,” said Richard M. Olson, Toro’s chairman and chief executive officer. “As an organization, Charles Machine Works aligns well with and will contribute to our own strategic priorities of profitable growth, operational excellence and empowering people. The company expands our business in a meaningful way in an adjacent category we know well through our own specialty construction business and in a market that is attractive given the potential for growth in addressing both aging infrastructure that is currently in place and new infrastructure that will be needed to support next-generation technologies like 5G.” 

“Culturally, our two organizations are very well aligned and, in our past experience, that has been essential to the success of a business combination like this. We share similar people values, performance expectations, business models focused on innovation, brand and channel, and strong community ties. With its rich multigenerational family legacy, commitment to its employees and market leadership position, we have respected and admired Charles Machine Works for a long time. We were excited when joining forces became a possibility, and we know that both companies will be stronger together.”

“Our success is the result of years of hard work and an unwavering commitment to developing innovative solutions for customers,” said Rick Johnson, Charles Machine Works chief executive officer. “From developing the world’s first service line trencher in Perry, Oklahoma, to today’s robust Ditch Witch dealer network, our family of companies is well-positioned to join The Toro Company’s family of brands. We look forward to building upon our founder’s legacy of best-in-class offerings in the expanding underground construction market.”

Toro expects to finance the transaction with a combination of cash on hand and debt, including from additional financing arrangements and borrowings under its existing credit facility. The all-cash purchase price of $700 million represents a multiple of approximately eight times Charles Machine Works’ calendar year 2018 EBITDA, including $30 million of anticipated annual run-rate cost synergies phased in over three years, that Toro intends to achieve through opportunities in purchasing, manufacturing best practices and administrative efficiencies. Toro expects the transaction to be immediately accretive to EPS excluding purchase accounting adjustments and transaction related expenses.

J.P. Morgan Securities LLC acted as financial advisor to Toro and Fox Rothschild LLP and Latham & Watkins, LLP acted as Toro’s legal counsel. Bank of America Merrill Lynch and J.P. Morgan Chase Bank, N.A. have provided committed debt financing to Toro for the transaction. McAfee & Taft A Professional Corporation, acted as Charles Machine Works’ legal counsel.

 

TRIP Report: NEW MEXICO DRIVERS LOSE $2.7 BILLION PER YEAR ON ROADS THAT ARE ROUGH, CONGESTED & LACK SOME SAFETY FEATURES

… AS MUCH AS $2,058 PER DRIVER. LACK OF FUNDING WILL LEAD TO FURTHER ROAD AND BRIDGE DETERIORATION, INCREASED CONGESTION & HIGHER COSTS TO MOTORISTS

Albuquerque, New Mexico– Roads and bridges that are deteriorated, congested or lack some desirable safety features cost New Mexico drivers a total of $2.7 billion annually – as much as $2,058 per driver in some areas – due to higher vehicle operating costs, traffic crashes and congestion-related delays. Adequate investment in transportation improvements at the local, state and federal levels is needed to relieve traffic congestion, improve road, bridge, and transit conditions, boost safety, and support long-term economic growth in New Mexico, according to a new report released today by TRIP, a Washington, DC based national transportation research nonprofit.

The TRIP report, New Mexico Transportation by the Numbers: Meeting the State’s Need for Safe, Smooth and Efficient Mobility,”  finds that more than half of the state’s major locally and state-maintained roads are in poor or mediocre condition and six percent of locally and state-maintained bridges are structurally deficient. This includes all bridges that are 20 feet or more in length. The report also finds that New Mexico’s major urban roads are becoming increasingly congested, causing significant delays and choking commuting and commerce. The report also includes a list of approximately $3 billion in needed but unfunded transportation projects across the state.

Driving on deficient New Mexico roads costs drivers a total of $2.7 billion annually in extra vehicle operating costs (VOC) as a result of driving on roads in need of repair, lost time and fuel due to congestion-related delays, and the costs of traffic crashes in which roadway features likely were a contributing factor. The chart below details costs to the average motorist of driving on deficient roads in New Mexico’s three largest urban areas and statewide.

The TRIP report finds that 31 percent of major locally and state-maintained roads in New Mexico are in poor condition and another 25 percent are rated in mediocre condition, costing the state’s drivers an additional $1.2 billion each year in extra vehicle operating costs. These costs include accelerated vehicle depreciation, additional repair costs, and increased fuel consumption and tire wear.

“Our state is at a critical point to increase funding for road and highway improvements to keep people and products moving safely in New Mexico,” said New Mexico State Representative Patricia Lundstrom, chairman of the House Appropriations & Finance Committee. “I believe that strategic transportation investments are one of the best approaches to stimulate our economy and provide a competitive advantage for our state.”

Congested roads choke commuting and commerce and cost New Mexico drivers $784 million each year in the form of lost time and wasted fuel. In the most congested urban areas, drivers lose up to $1,069 and more than one full working week each year in congestion.  From 2013 to 2017, vehicle miles of travel in New Mexico increased 18 percent, the fastest rate of growth in the nation during that period.

“New Mexico needs a safe and reliable roads system throughout our state,” said New Mexico State Senator Clemente Sanchez, chairman of the Senate Corporations and Transportation Committee.  “Our rural ranchers, farmers, and small businesses depend on well-maintained roadways for their livelihoods. So many of our children ride school buses every day and deserve safe roads.”

Statewide, six percent of bridges – a total of 251 bridges – are structurally deficient, with significant deterioration to the bridge deck, supports, or other major components. Nearly half – 48 percent – of New Mexico’s bridges are at least 50 years old.

“New Mexico is in the enviable position of having huge budget surpluses for FY 19 and FY 20. The extra revenues will exceed $1 billion dollars for each of these years,” said New Mexico State Representative Cathrynn Brown. “The increases are due primarily to the hard work and productivity of the New Mexico oil and gas industry. As a point of reference, the state’s overall budget for FY 20 will be just north of $7 billion dollars. The New Mexico Legislature and the Governor would be wise to invest a substantial portion of the budget surplus in public infrastructure, especially roads, highways, and bridges. In terms of infrastructure, we have a lot of catching up to do.”

From 2013 to 2017, 1,772 people were killed in traffic crashes in New Mexico. Traffic crashes imposed a total of $2.2 billion in economic costs in New Mexico in 2017 and traffic crashes in which roadway features were likely a contributing factor imposed $726 million in economic costs each year. New Mexico’s overall traffic fatality rate of 1.28 fatalities per 100 million vehicle miles of travel is higher than the national average of 1.16.

The efficiency and condition of New Mexico’s transportation system, particularly its highways, is critical to the health of the state’s economy.  Annually, $124 billion in goods are shipped to and from sites in New Mexico, mostly by trucks, relying heavily on the state’s network of roads and bridges. Increasingly, companies are looking at the quality of a region’s transportation system when deciding where to re-locate or expand. Regions with congested or poorly maintained roads may see businesses relocate to areas with a smoother, more efficient and more modern transportation system. Nearly 350,000 full-time jobs in New Mexico in key industries like tourism, retail sales, agriculture and manufacturing are completely dependent on the state’s transportation network.

“Driving on deficient roads comes with a $2.7 billion price tag for New Mexico motorists,” said Will Wilkins, TRIP’s executive director. “Adequate funding for the state’s transportation system would allow for smoother roads, more efficient mobility, enhanced safety, and economic growth opportunities while saving New Mexico’s drivers time and money.”

New Mexico Transportation

by the Numbers

MEETING THE STATE’S NEED FOR

SAFE, SMOOTH AND EFFICIENT MOBILITY

NEW MEXICO KEY TRANSPORTATION FACTS

 

THE HIDDEN COSTS OF DEFICIENT ROADS

Driving on New Mexico roads that are deteriorated, congested and that lack some desirable safety features costs New Mexico drivers a total of $2.7 billion each year. TRIP has calculated the cost to the average motorist in the state’s largest urban areas in the form of additional vehicle operating costs (VOC) as a result of driving on rough roads, the cost of lost time and wasted fuel due to congestion, and the financial cost of traffic crashes.

 

NEW MEXICO ROADS PROVIDE A ROUGH RIDE

Due to inadequate state and local funding, 56 percent of major roads and highways in New Mexico are in poor or mediocre condition. Driving on rough roads costs the average New Mexico driver $769 annually in additional vehicle operating costs – a total of $1.2 billion statewide.

NEW MEXICO BRIDGE CONDITIONS

Six percent of New Mexico’s bridges are structurally deficient, meaning there is significant deterioration of the bridge deck, supports or other major components. Most bridges are designed to last 50 years before major overhaul or replacement, although many newer bridges are being designed to last 75 years or longer. In New Mexico, 48 percent of the state’s bridges were built in 1969 or earlier.

NEW MEXICO ROADS ARE INCREASINGLY CONGESTED

Congested roads choke commuting and commerce and cost New Mexico drivers $784 million each year in the form of lost time and wasted fuel. In the most congested urban areas, drivers lose up to $1,069 and more than one full working week each year in congestion.  From 2013 to 2017, vehicle miles of travel in New Mexico increased 18 percent, the fastest rate of growth in the nation during that period.

NEW MEXICO TRAFFIC SAFETY AND FATALITIES

From 2013 to 2017, 1,772 people were killed in traffic crashes in New Mexico. Traffic crashes imposed a total of $2.2 billion in economic costs in New Mexico in 2017 and traffic crashes in which roadway features were likely a contributing factor imposed $726 million in economic costs each year.

 

NEEDED PROJECTS OF REGIONAL SIGNIFICANCE

The New Mexico Department of Transportation has identified approximately $3 billion in needed but unfunded transportation projects throughout the state.

 

 

TRANSPORTATION AND ECONOMIC DEVELOPMENT

Each year, $123.5 billion in goods are shipped to and from sites in New Mexico, mostly by truck. The value of freight shipped to and from sites in New Mexico, in inflation-adjusted dollars, is expected to increase 110 percent by 2045.

The design, construction, and maintenance of transportation infrastructure in New Mexico support 26,300 full-time jobs across all sectors of the state economy. These workers earn $802.3 million annually. Nearly 350,000 full-time jobs in New Mexico in key industries like tourism, retail sales, agriculture, and manufacturing are completely dependent on the state’s transportation network.

Full Report available at:tripnet.org

CATERPILLAR ANNOUNCES OFFICER CHANGES

Caterpillar Inc. (NYSE: CAT) announced today several officer moves including changes in responsibilities for three Executive Office members, new roles for two current vice presidents and the appointment of two new vice presidents. All changes are effective March 1.

“These organizational changes will facilitate the acceleration of our strategy for continued profitable growth,” said Caterpillar Chairman and CEO Jim Umpleby.

Tom Pellette to become Senior Vice President of Caterpillar 

After four years as group president separately leading the Construction Industries and Energy & Transportation segments, Tom Pellette has elected to return to San Diego, California for family reasons. Pellette will serve as president of Solar Turbines, a wholly owned subsidiary of Caterpillar and a global leader in the design, manufacture, and service of gas turbine systems and compressors for the oil and gas and power generation industries. He previously spent more than 20 years in the division. Pellette will also serve as strategic advisor to the Caterpillar Executive Office. For more on Pellette’s background, read his bio here.

Ramin Younessi to move to Group President of Construction Industries

Ramin Younessi, currently group president of Energy & Transportation, will transition to lead Construction Industries. Younessi, with more than 30 years of leadership inside and outside of Caterpillar, will now have responsibility of the company’s Earthmoving, Excavation, Building Construction Products, China Operations , and Global Construction & Infrastructure divisions, as well as Global Rental and Used Equipment Services. Younessi’s full bio can be found here.

Ramin Younessi
Ramin Younessi, current group president of Caterpillar’s Energy & Transportation segment, will transition to group president of Construction Industries, effective March 1, 2019.

Billy Ainsworth named Group President of Energy & Transportation

Billy Ainsworth, current senior vice president of the Caterpillar Rail Division and CEO of Progress Rail, will now become the group president of the Energy & Transportation segment. Since 2017, Ainsworth has served as strategic advisor to the Caterpillar Executive Office in addition to his responsibilities for the Rail Division.

“Billy’s customer focus, an entrepreneurial background and deep aftermarket experience will continue to benefit the Energy & Transportation business,” said Umpleby.

To read more on Ainsworth’s background, click here.

To better serve our customers, Caterpillar is separating the current Global Power Systems Divisions into two new industry focused divisions: Oil, Gas and Marine Division and Electric Power Division. These two new divisions will be led by the following Caterpillar vice presidents:

Billy Ainsworth
Billy Ainsworth, current senior vice president of the Caterpillar Rail Division and CEO of Progress Rail, will become the group president of Energy & Transportation, effective March 1, 2019.

Joe Creed will lead new Oil, Gas and Marine Division

Joe Creed, current vice president of Caterpillar’s Finance Services Division, will become the new vice president of the Oil, Gas and Marine Division. He also most recently served as interim Chief Financial Officer for the company. Prior to his leadership in Caterpillar’s finance functions, Creed worked in the company’s engine and machine businesses. Click here to learn more about Creed.

Joe Creed
Joe Creed, current vice president of Caterpillar’s Finance Services Division, will become the vice president of the new Oil, Gas and Marine Division, effective March 1, 2019.

Pablo Koziner will lead new Electric Power Division

Pablo Koziner, current vice president of Caterpillar and president of Solar Turbines, will become the new vice president of the Electric Power Division. He has nearly 20 years of experience in various roles around the world, the last six as a vice president. Koziner’s full bio is here.

Pablo Koziner
Pablo Koziner, current vice president of Caterpillar and president of Solar Turbines, will become the vice president of the new Electric Power Division, effective March 1, 2019.

Marty Haycraft named Vice President of Caterpillar Rail Division

Caterpillar’s board of directors has appointed Marty Haycraft to succeed Ainsworth as vice president of Caterpillar’s Rail Division and CEO of Progress Rail. Haycraft is currently the president of Progress Rail’s global operations where his primary responsibilities include overseeing the company’s rolling stock and infrastructure businesses.

Haycraft began his professional career in 1990 with Wheel Corporation of America, where he worked as a production employee and gained experience on freight car wheel set production and freight car wheel set materials. He joined Progress Rail in 1993 when Corbin Railway Services purchased Steel Processing Services, later to become Progress Rail. He rose through the company, holding several operations, materials management and sales and marketing management positions. Haycraft attended the University of Louisville in Kentucky and finished his accounting degree at Phoenix University.

Marty Haycraft
Marty Haycraft, current president of Progress Rail’s global operations, will become vice president of Caterpillar’s Rail Division and CEO of Progress Rail, effective March 1, 2019.

Kyle Epley named Vice President of Finance Services Division

The company’s board of directors has also appointed Kyle Epley as vice president of the Finance Services Division. He currently serves as corporate controller where he has responsibility for business analysis, competitive analysis, economics, strategic planning and operating & execution model governance.

Epley joined Caterpillar in 1996 and has held a series of positions with growing responsibilities in accounting and finance, including global assignments. Epley has a bachelor’s degree in accounting from Bradley University and is a certified public accountant.

Kylel Epley
Kyle Epley, the current Caterpillar Corporate Controller, has been appointed vice president of the Finance Services Division, effective March 1, 2019.

About Caterpillar
For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2018 sales and revenues of $54.722 billion, Caterpillar is the world’s leading manufacturer of construction and caterpillar.com/social-media equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three primary segments – Construction Industries, Resource Industries and Energy & Transportation – and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.

Tom Ewing’s Environmental Update

*  Who knew, right-?  But today is not just Presidents’ Day, it’s also National Battery Day!  And to celebrate (Battery Day, that is) the US DOE announced the opening of a Battery Recycling Center at Argonne National Laboratory.  The new Center will work to reclaim and recycle critical materials (e.g., cobalt and lithium) from lithium-based battery technology.  It will focus on cost-effective recycling processes to recover as much economic value as possible from spent lithium-ion batteries.  In addition, DOE established the “Lithium-Ion Battery Recycling Prize” to encourage American entrepreneurs to “find innovative solutions to collecting, storing, and transporting discarded lithium-ion batteries for eventual recycling.”  DOE’s cash prizes will total $5.5 million, awarded in three progressive phases designed to accelerate the development of solutions from concept to prototype.  The goal is to develop technologies to profitably capture 90% of all lithium-based battery technologies in the United States and recover 90% of the key materials from the collected batteries. Currently, lithium-ion batteries are collected and recycled at a rate of less than 5%.
*  News-speak from the boss, i.e. CT’s new Governor, Ned Lamont, who has an op-ed in CT papers called “A path forward on tolling.”  Maybe it should be titled “A path forward on trolling, about tolling” since it’s really a heads-up to legislators and citizens that the Guv is getting ready to ask for more money for transportation, most of which, likely, will go for highways.  Lamont writes that CT has it all (at least “on paper,” his words) but that economic development peeps ask: “What about the congestion on your highways?”  Lamont writes that gas tax revenues are flat and unreliable and likely to decline as electric cars increase.  The governor is turning away from bonds.  So watch for tolls – first on trucks, if that single focus is legal, then to benefit specific infrastructure, e.g., bridges, or one bridge.  He’s developed a number of options and tells peeps to be ready for this debate when his budget is introduced on Wednesday.

*  If you’re feeling bad that about 18 billion pounds of plastic waste enters the world’s oceans each year (who doesn’t feel bad about that?), here’s a chance to help. A company called Envision Plastics collects and recycles this waste.  Ocean plastic waste can be recycled just as land-based plastic can be recycled.  If you want to make a statement (and a good one) consider this new upcoming product: business cards made from the recovered plastic.  (China, Indonesia, Vietnam, the Philippines, and Sri Lanka are the five largest plastic polluters, according to Envision Plastics.)  Now the company is teaming up with the Society of Naval Architects and Marine Engineers (SNAME) to promote this business-based recycling effort.  To place an order for these multi-message business cards, contact Envision Plastics (advise if you need that link.)

Tom Ewing

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513-379-5526 voice/text

FY 2019 Spending Bills Are Finally Law

By Dean Franks, senior vice president, congressional relations, ARTBA

The House and Senate Feb. 14 overwhelmingly approved the final seven FY 2019 spending bills after nearly five months of short-term extensions and the longest government shutdown in U.S. history.  President Donald Trump Feb. 15 signed the legislation despite the lack of southern border wall funding included in the Homeland Security portion of the package.

The law includes full FAST Act surface transportation law funding for core highway and transit programs. It also contains $5.5 billion in additional general revenue funding for surface and aviation capital investments as the second part of a two-year bipartisan budget agreement reached in 2018. Here’s the breakdown:

In a Feb. 14 letter, the ARTBA co-chaired Transportation Construction Coalition (TCC) urged all members of the House and Senate to support the package.

The completion of the FY 2019 funding bills is important to the transportation construction industry for multiple reasons:

  • States will receive their full-year spending authority, which should ease uncertainty and allow their transportation departments to continue developing planned projects;
  • Congressional leadership and Trump administration officials can focus on other areas of potential agreement, such as the enactment of a robust infrastructure package in 2019; and
  • the Trump administration can send its FY 2020 budget to Congress, allowing senators and representatives to begin working on the next round spending bills.

ARTBA will continue to encourage Congress and the administration to include a solution to the Highway Trust Fund revenue shortfall in any infrastructure legislation put forward this year.