Market Trends: Sept. 2000

On the Lawn & Landscape Online bulletin boards, contractors get a chance to network with each other. And every once in a while, the conversations get quite interesting – particularly when contractors talk about meeting "special" client demands.

According to one Lawn & Landscape Online user: "I’ll do pretty much anything my customers want as long as they pay me what I want for the work. They are the boss and I want them happy. I even taught one man how to launch and navigate his boat."

Some other out-of-the-ordinary client wishes contractors shared include:

• Can you change the oil in my car?
• Can you build me a shed?
• Can you paint my house?
• Can you give my dog a bath?
• Can you polish my silver?
• Can you retrieve my wallet from my sunken ski boat?
• Can you let my kids help you with the landscaping?

If you have an experience dealing with unusual client requests, fax your story to Nicole Wisniewski at 216/961-0364 or e-mail it to nwisniewski@lawnandlandscape.com. To see the full conversation on the Lawn & Landscape Online bulletin boards, visit www.lawnandlandscape.com/bullframe.asp.

When the time comes for equipment shopping, contractors know what they need, especially after a productive season ends and one of their mowers or trucks has seen its fair share of repairs, and is starting to look – and act – rundown.

Fortunately for equipment manufacturers, contractors spend quite a bit on new product purchases. According to a Research USA survey of 1,000 industry professionals, Lawn & Landscape readers spent more than $3.5 billion on equipment and plant material purchases last year. Eighty-nine percent of responding contractors noted that they purchased at least one piece of equipment or equipment accessory in 1999. Some of the most popular items for purchase were trucks, hand-held power equipment, walk-behind and riding mowers, and computer software.

DOWNERS GROVE, ILL. – Industry scuttlebutt in recent months carries a common theme – life is not rosy at TruGreen LandCare. The industry’s primary consolidator showed the first signs of challenges associated with assimilating more than 100 acquisitions into one organization when it reported that its second-quarter earnings were lower than expected for this year, and earnings for the entire year 2000 aren’t likely to meet earlier estimates.

"The process of bringing over 100 separate business units into one company is taking longer than we anticipated," noted C. William Pollard, ServiceMaster chairman and chief executive officer. "Performance issues and additional investment costs in integrating landscape services, combined with lower than planned sales and higher fuel and other operating costs in TruGreen lawn care, were the major causes for our lower than planned second-quarter results."

In addition, there was a management change as Paul Anderegg, who had been president of TruGreen LandCare, was re-assigned to vice president of sales and marketing. Dave Slott, president and chief operating officer of TruGreen-ChemLawn since 1996, and Don Karnes, who preceded Slott in that role and has spent the last four years overseeing ServiceMaster’s Consumer and Commercial Services division, have assumed greater roles at TruGreen LandCare.

The company reported that TruGreen-ChemLawn showed "modest revenue increases and slightly lower profits, primarily attributed to lower-than-planned volume in its full-service program and higher operating expenses." In particular, increased fuel prices and a lack of available telemarketers challenged the company through the first half of the year 2000 as it was generally unable to grow its customer base.

There were some positive signs from the landscape side of the business as TruGreen LandCare reported double-digit revenue gains from internal and acquisition sources, although they were mitigated by "a significant decline in operating income reflecting slower than anticipated integration of the landscape platform initiative and higher labor costs," according to a company release.

Matthew Litfin is a financial analyst with William Blair & Co., New York, N.Y., a financial investment firm that is among the largest ServiceMaster shareholders. Despite recent problems, he remains optimistic about the company’s future. "The issues the company laid out to [investors] in a recent conference call can’t be resolved in a two-month period, but my money is on those guys to turn it around," Litfin said.

"I like that they’re in the landscape business," he noted when asked if the LandCare USA acquisition appears to have been a mistake by ServiceMaster. "There are synergies between lawn care and landscape, and they needed to start targeting the commercial customer who offers better customer retention, better margins and deeper pockets."

Litfin also believes TruGreen LandCare has a unique position in the industry and competitive advantages from a marketing standpoint. "This may be a three-year integration process rather than a one-year process, but I do think this will be a growth business," he said. "They’ve bobbled the ball a little bit, but they haven’t fumbled it."

Slott and Karnes have spent more time in TruGreen LandCare branches in recent weeks as the company identifies problem areas. And, at least for the short term, acquisitions are on hold. "We’re always open to opportunities, but right now the focus is on integrating the operations we have," noted Claire Buchan, a spokesperson for the company.

Meanwhile, ServiceMaster stock was trading at $9 per share at presstime, which represents its lowest level in the last year. When ServiceMaster purchased Land-Care USA in November 1998, its stock was trading for more than $21 per share. – Bob West

GREENSBORO, N.C. – The U.S. Environmental Protection Agency (EPA) wants to complete its reassessment of organophosphate products by the end of this year, and diazinon is next in line.

Novartis Crop Protection, producer of the popular insecticide, has more reason to be optimistic about the eventual fate of its product than Dow AgroSciences, Indianapolis, Ind., had when it watched the EPA reassess chlorpyrifos (marketed as Dursban). While Dow AgroSciences ultimately lost the right to sell Dursban in the lawn and pest control markets, EPA’s preliminary reassessment found that granular diazinon products have an acceptable margin of safety. "Also, the agency determined that no dietary or ground water sourced drinking water concerns exist for the product," according to a release from Novartis.

Not all of the news was good for Novartis, however. When EPA requested more data for some uses of the product, the company elected to withdraw those uses, including indoor and greenhouse applications.

However, this action shouldn’t be construed as an indication of diazinon’s future, according to Pat Willenbrock, diazinon market manager and home and garden product manager for Novartis. The company now can put dollars that would have been spent to continue research on indoor uses of diazinon toward additional research efforts on exterior applications, which represents a considerable portion of diazinon sales, Willenbrock explained.

Novartis has requested a meeting with EPA to continue the dialogue about diazinon, and Willenbrock expects to have it scheduled by Sept. 30. The company has also developed a Web site – www.cp.us.novartis/diazinon – to keep lawn care operators and diazinon users updated on its research and its dealings with EPA.

BOISE, Idaho –J.R. Simplot Co. has finalized its expected purchase of the turfgrass seed and specialty distribution assets of AgriBioTech, Las Vegas, Nev. (ABT) to increase its increasingly powerful position in the turfseed market.

The acquisition will become a part of Simplot Turf & Horticulture, the turf and horticulture group of the agribusiness corporation. The divisions before the acquisitions in Simplot Turf & Horticulture included Professional Products and Jacklin Seed.

The deal was negotiated through ABT’s court-appointed reorganization consultant, Development Specialist Inc. following ABT’s Chapter 11 bankruptcy filing in January. The ABT purchase had been bid on by both Simplot and Kenneth Budd, former president and chief operating officer of ABT, however, the purchase by Simplot is now official, according to the company.

This deal concludes the five-year rollercoaster ride of ABT, a company that barged on to the scene in the turfseed industry in 1995 with an aggressive acquisition plan. ABT had acquisition goals of 45 percent marketshare or $500 in annual revenue by this year, but that success never materialized. ABT management came under extensive fire as the company’s stock price continued to decline, and class-action lawsuits were filed on behalf of shareholders in dozens of states. Eventually, the company found itself out of cash and with little choice other than to sell the business and pay off its debt.

Terms of Simplot’s transaction include the production and marketing rights for a number of turfgrass seed varieties, various international production contracts as well as ownership of several distribution locations.

Additionally, Simplot has acquired three of ABT’s distribution locations in Phoenix, Ariz.; Florence, Ky.; and Las Vegas, Nev.