MOSS looks good, here is a Q & A about the co.
Like the ticker symbol,,,,goes well with the company <ggg>
The American Group, Inc.
Questions & Answers
The American Group, Inc. (OTC BULLETIN BOARD: MOSS) is a holding company for two subsidiaries: Florida-based Lantana Peat and Soil, a processor and wholesale distributor of custom-blended soil mixes; and Canadian based Torland, a harvester and producer of sphagnum peat moss.
The American Group, currently based in Boynton Beach, Fla., acquired Lantana Peat and Soil in May 1998. The company purchased Torland in August 1999.
The acquisition of the complementary operations, Lantana Peat and Soil and Torland, positions The American Group for significant growth in Florida's horticulture industry - an industry with an estimated $5 billion economic impact on the Florida economy and direct annual sales of $1.5 billion a year. To the Company's knowledge, it is the only major custom soil producer with its own supply of premium Canadian sphagnum peat moss. Geographic advantages and specialized harvesting techniques give the company additional advantages over its competitors.
In the following pages, Eric Deckinger, President, discusses The American Group's market position, competitive strategy, and his blueprint for continued growth.
Q. Tell us about your company and what you do.
A. The American Group, Inc. operates two subsidiaries: Lantana Peat and Soil, a Florida-based processor and wholesale distributor of custom-blended soil mixes to the domestic and international markets, and Torland, a Canadian harvester and producer of sphagnum peat moss.
Q. What does the operation of the Lantana Peat & Soil subsidiary consist of?
A. Lantana Peat and Soil currently operates a soil-blending facility in Palm Beach County, Fla. The current plant has a production capacity of approximately $3.0 million. Lantana also operates a fleet of trucks that delivers the soil mixes to wholesale nurseries. The soil is primarily used to grow tropical, ornamental and landscape plants and foliage.
The American Group presently is constructing a $1.5-million state-of-the-art soil-blending facility in Dade County, Fla., in what is referred to as the Homestead area. This new facility, which we expect to be operational within the next few months, will be able to produce more than five times the current capacity of custom blended soil mixes annually.
Q. Are you gaining any competitive advantage with the new facility, other than increased production capacity?
A. Absolutely. This facility will be located in the heart of Florida's wholesale nursery industry. We will be located within 20 minutes drive time of more than two-thirds of our customers. Our company will then become the only supplier located directly within this Homestead market. This means we not only save on delivery expenses, but we also gain a geographic advantage over our competitors.
Q. Tell us about your Torland subsidiary.
A. Torland is a harvester, producer and distributor of sphagnum peat moss. Torland controls 5,000 acres, or an estimated 3 trillion cu. ft., of sphagnum peat moss and a processing facility. Torland has an estimated $400 million in reserve potential.
Lantana Peat and Soil purchases almost all of its sphagnum peat moss - a critical ingredient for high-quality custom soil blends - from Torland.
Q. How important is Torland to Lantana Peat and Soil's operations?
A. Having its own, guaranteed supply of sphagnum peat moss places Lantana Peat and Soil at an advantage over its competitors. Here's why. Peat moss is a commodity. This means supply and pricing are always in a state of flux. When weather conditions make it difficult to harvest peat moss, supply diminishes and prices go up.
Lantana Peat and Soil, because of its relationship with Torland, is guaranteed a consistent supply of sphagnum peat moss at stable prices. This is true not solely because of the supply agreement between the two subsidiaries, but also because Torland uses a harvesting method called Block Cutting, in addition to Vacuuming, that makes the company less susceptible to interruptions in production caused by unfavorable weather conditions.
Q. How does Block Cutting work?
A. The Block Cutting method of harvesting peat moss is used in Europe, but rarely in North America. Torland is one of the few North American peat moss producers that uses this method. To understand why Block Cutting is advantageous, let's look first at how peat moss traditionally has been harvested.
The peat moss harvest season in Canada runs from late May through mid-September. To harvest the peat, producers drain the bog, vacuum the peat moss off the top, then send it to a filtering and bagging facility. Large, expensive machinery is required to vacuum the bogs. And vacuuming cannot take place during periods of excessive rain.
The Block Cutting method consists of using special equipment that cuts out large sections of peat moss that can then be sent to an onsite production facility, or stacked in the bog for drying. Block Cutting is more cost-effective than vacuuming for several reasons. Rainy weather does not impede the process. This means harvesting - and peat moss shipments and sales - are not interrupted by unpredictable weather. In addition, peat moss harvested using the Block Cutting method can be stored for long periods of time, so the producer has better control over production and shipping operations. Finally, using the Block Cutting method generates a more fibrous product that improves the quality of the peat moss that is ultimately sold to the consumer.
Q. So, the advantages of Torland's Block Cutting method carry over to Lantana Peat and Soil, giving it an edge over the competition, right?
A. Lantana Peat and Soil now has a sister company that guarantees supply of sphagnum peat moss. If the Canadian bogs - which supply the bulk of North America's sphagnum peat -- experience excessive rain during the harvest season, Lantana's competitors will likely either run into supply problems, or have to pay premium prices.
Q. How critical is peat moss to the commercial lawn and garden market?
A. Peat moss remains one of the most important and versatile products within the lawn and garden industry because it is a natural, organic soil conditioner that regulates moisture and air around the roots of plants. Sphagnum peat can retain up to 20 times its weight in moisture and releases water slowly as plants need it, assuring that the plants remain properly hydrated in periods of heavy rain as well as during extended dry spells.
Q. Let's talk about Lantana's customers and the wholesale nursery business in general. You mentioned that your new facility is located within a 20-minute drive of two-thirds of your customers. How will you grow sales to those customers?
A. Our sales will grow because our customer's markets are expanding at a furious pace. First, remember that Florida is one of the major producers of horticultural products for the U.S. and Europe. That's because the climate in Florida is better suited than anywhere else in the continental U.S. for growing tropical, ornamental and landscape plants cost effectively. There are nurseries in other parts of the country. However, it is difficult for them to compete with Florida-based nurseries because weather conditions make it necessary for them to build and maintain expensive greenhouses to grow products year-round.
In 1997, Florida's nursery industry generated more than $1.5 billion in sales and had $5 billion in economic impact on various segments of the horticultural industry in the State of Florida..
With that in mind, let's talk about the market in general for horticultural products.
Since the 1980s, the market for lawn and garden products has grown consistently - both in the U.S. and worldwide. (And remember, Florida nurseries ship products all over the world).
Between 1984 and 1994, the industry nearly tripled to $63 billion in the U.S. alone. If you look at any commercial development - shopping centers, golf courses, planned communities -- you'll see that more and more attention is being paid - and more money spent -- on landscaping. In the late 1960s, only about 10 percent of a new development was devoted to green spaces. Today, it's closer to 30 percent - and growing. Demand for quality landscaping for both exterior and interior areas is growing dramatically.
In addition, consumers are buying more plants and foliage, as evidenced by the growing number of nursery departments at chain stores such as Home Depot, Wal-Mart and Kmart. Even supermarkets are adding flower and plant departments. Whenever you see well-stocked nursery departments at any of these chains, it's almost certain that the majority of the plants on sale there were supplied by Florida-based wholesale nurseries.
Q. But what happens when the economy slows down and new development grinds to a halt?
A. That's the beauty of the landscaping business. When the economy is strong, people build or buy new. The landscaping business flourishes. When the economy slows down, people tend to remodel or build additions. Rather than move, they often choose to spruce up their homes and commercial buildings, and landscaping is a popular way to do that. No industry is 100-percent recession-proof. However, the wholesale nursery business is very well protected and positioned for movement in the event of an economic downturn.
Q. So the horticulture industry is growing worldwide. What is your strategy for growing The American Group?
A. First of all, our new processing and distribution facility in Dade County gives us enormous expansion potential. Add to that our acquisition of Torland, and we have a successful formula for internal growth.
In addition, we are looking for key complementary acquisitions of both production and distribution operations in Florida and southern Georgia. The industry is still very fragmented, which leads us to believe there is ample opportunity to grow through acquisition.
Our overall strategy is to expand the rate of growth as soundly and rapidly as possible over the next several years.
Q. Where do you see the company five years from now?
A. The company is positioned for significant growth in the next several years on the basis of its production expertise, geographic advantage and marketing infrastructure. The acquisition of Torland will give us extensive reserves, easier access to capital for growth, and the ability to acquire additional complementary reserves, production capacity and distribution capabilities.
Susie |
