Shaped Up, Shipped Out

When cutting tools manufacturer Kennametal Inc. sold off its J&L Industrial Supply catalog division to maintenance, repair and operations (MRO) supplies cataloger MSC Industrial Direct Co. in a deal that closed June 8 for a cool $349.5 million, the seller said it would recognize an estimated $215 million to $225 million pre-tax gain in its fourth fiscal quarter ended June 30. These are striking figures, considering that as recently as five years ago, most people — both within Kennametal and on the outside — would've laughed at the idea that J&L could fetch that much, never mind find a buyer.

But beginning in 2001, with a mostly new management team in place, J&L, which sells saw blades, drill sets, milling cutters and other metal-cutting tools to machine shops that cut and finish metal, began an aggressive turnaround process to make itself a more salable entity for Kennametal. The parent firm had wanted to unload the catalog since the late 1990s when it realized that J&L didn't fit into its long-term growth plans.

J&L's downfall started shortly after Kennametal spun off the unit in 1997 as a public entity, much like similar industrial marketers were doing at the time, on a specialty retail/catalog platform. And to build up some mass, J&L used the proceeds of the initial public offering to buy some companies, each of which had varying business models. "There was never really a cohesive strategy to make it all work together," recalls J&L's vice president of marketing and strategy, Chuck Moyer, who joined the company in 2001.

As the '90s wound down, J&L's sales fell, operating expenses rose and its stock plummeted. Kennametal brought in four presidents over the course of four years. The parent firm tried to sell J&L, but couldn't get good value for it. So it brought the cataloger private at the end of 2000. Over the next couple of years, the firm hired Moyer; Michael Wessner as president; Nick Darin as vice president of finance, technology and supply chain; Chad Spawr as vice president of human resources; and Joe Scime as vice president of sales. They set out to reinvent and reinvigorate the company.