Capital Equipment Resources LLC – Q3 Review 2011
Henrik Jensen, President and Chief Executive
Capital Equipment Resources LLC – Q2 Review 2011
Henrik Jensen, President and Chief Executive
Capital Equipment Resources LLC, d/b/a The Pangborn Group, had zero lost-time injuries in Q2 2011 and one lost-time injury YTD through June 2011.
Market conditions in all major regions were favorable in Q2. High production levels at its customers resulted in high order intake on aftermarket parts and services. In Q2 2011, aftermarket sales were 30% higher than Q2 2010. The Pangborn Group’s backlog of machine orders is healthy, and inquiries continue at a high rate.
In addition, the Chinese market is becoming increasingly fruitful for the Pangborn Group as its activities there yield more equipment projects and orders. In order to better support its China growth opportunities, the Company has established the Pangborn Group China, working in close conjunction with our local agents and representatives.
Capital Equipment Resources LLC – Q1 Review 2011
Henrik Jensen, President and Chief Executive
Capital Equipment Resources LLC, d/b/a the Pangborn Group, had one lost-time injury in Q1 2011. In the last six months, we passed safety inspections by government regulators and trade unions in both Germany and Italy, and we completed our People Based Safety training program for all employees in the United States. In Q1 2011, we began a new initiative to improve our safety manuals and signs on our machines, as well as incorporating safety improvements into the engineering designs of our machines.
North American and European Union markets gradually strengthened throughout 2010 and these improvements have continued and even accelerated in early 2011. Asian markets are strong and we are pursuing many new equipment opportunities in China.
We expect that aftermarket orders will continue to exceed prior-year levels and that the prospects for new equipment orders will remain strong. For 2011, we already have 90% of full-year budgeted equipment sales in backlog.
Capital Equipment Resources LLC – Q3 Review 2010
Mike Thuon, Chief Financial Officer
We are very pleased to welcome Henrik Jensen as the new CEO of Capital Equipment Resources LLC (“CER” or the “Pangborn Group”). Henrik joins the Pangborn Group after a distinguished career with Sauer-Danfoss, where he served as Managing Director, Executive Vice President and President of the Work Function Division.
In regard to safety performance, the Pangborn Group had two lost time injuries in Q3 2010, resulting in 10 lost time days. These were the only recordable or lost time incidents in 2010. Prior to these injuries, the Pangborn Group had achieved nearly 12 months with no recordable or lost time incidents.
North American and European Union markets continue to strengthen with the economic recovery. Asian markets have recovered well and we are pursuing many new equipment order opportunities in China. Our experience from prior recessions suggests that the recovery in capital equipment orders tends to lag the improvement in the general economy and, specifically, in the recovery of our aftermarket sales of replacement parts and services.
Consolidated EBITDA was positive in Q3 2010. The positive aftermarket trends from the first half of 2010 continued into the third quarter as utilization of customer machines in our installed base was well above prior year levels. We believe that aftermarket orders will continue to exceed prior year levels and that the prospects for new orders are improving. Nonetheless, we remain cautious and very focused on cost control and liquidity. We have taken significant steps to reduce costs, and remain prepared to take further cost reduction actions if necessary as the market dictates. In the meantime, we are making a renewed push to integrate with and capitalize on the breadth of product and knowledge gained with the acquisition of the European companies, and we are making a concerted effort to expand our geographic market coverage with new manufacturer’s representatives in Asia, Europe and North America.
Capital Equipment Resources LLC – Q2 Review 2010
Mike Thuon, Chief Financial Officer
Capital Equipment Resources LLC (CER) designs and markets shotblast surface preparation equipment and provides aftermarket replacement parts and services. North American and European markets continued to strengthen in Q2 2010, benefitting from a sustained, moderate economic recovery.
Asian markets appear to be ahead of other world markets in terms of improvement, and CER is pursuing many new equipment opportunities in China. Aftermarket service and spare-part orders have increased in all markets, and overall by 10% on a consolidated basis over 2009 levels, which is an indication of higher production and utilization of machines by customers. New machine orders continued to be slow, but inquiries and requests for proposals rose by approximately 20% in the first six months of 2010 compared to the last six months of 2009. Overall, it appears that shotblast equipment users are experiencing improved business levels in 2010 over 2009, but that many companies are still waiting to invest in new production equipment. Based upon CER’s experience from prior recessions, the recovery in capital equipment orders for new machines lags behind the improvement in the general economy.
The positive aftermarket trends from Q1 2010 continued into Q2 as utilization of customer machines in CER’s installed base accelerates. In the United States, the company’s Pangborn unit experienced bookings of aftermarket parts orders throughout Q2 at 24% above budget and 12% above the prior quarter. In Europe, the company’s three subsidiaries also experienced improving market conditions in aftermarket parts orders, exceeding budget and the prior quarter by 21% and 32%, respectively.
While optimistic about the continued improvement of the worldwide economies in the second half of 2010, CER remains cautious and focused on cost control and liquidity. CER has taken significant steps to reduce costs and remain prepared to take further cost reduction actions if necessary as the market dictates. In the meantime, the company is making a renewed push to integrate with and capitalize on the breadth of products and knowledge gained with the acquisition of the European companies, and CER is making a concerted effort to expand its geographic market coverage with new manufacturer’s representatives and agents.
Capital Equipment Resources LLC – Q1 Review 2010
Ken Dickson, President and Chief Executive Officer
Capital Equipment Resources LLC designs and markets shotblast surface preparation equipment and provides aftermarket replacement parts and services. Positive trends that first appeared in Q4 2009 have continued into Q1 2010. In the United States, the company’s Pangborn unit experienced bookings of aftermarket parts orders throughout the first quarter that were 26% above plan and 21% above the same period in 2009. In Europe, the company’s three subsidiaries also experienced improving market conditions, exceeding plans for aftermarket parts orders by 12%.
New machine orders remained slow across the globe, but inquiries were much more active than in recent quarters (a 95% increase over last quarter) and the company is close to landing several significant orders. While the market is driving much of this increased activity, the teams at Pangborn and CER Europe have been very aggressive in expanding their market and sales coverage. Increased attention to aftermarket part sales undoubtedly has contributed to the success experienced this quarter.
Pangborn added two important manufacturers’ representatives in Q1 2010. DeLong Equipment (www.delongequipment.com), based in Atlanta, focuses on the southeastern United States and brings the resources of 12 service and sales employees. ADS (www.ads-shotblast.com), based in Ontario, brings a network of relationships in the Canadian shotblast market with its 24 service and sales employees. Historically, both DeLong Equipment and ADS represented Wheelabrator, Pangborn’s largest competitor, before converting to Pangborn. Pangborn is optimistic that these relationships will yield substantial incremental sales.
Capital Equipment Resources LLC – Q4 Review 2009
Ken Dickson, President and Chief Executive Officer
Recession-level cost management, including a reduction of more than $2 million in salaries and wages, allowed CER to operate at break even levels throughout 2009, even as the company struggled with the impact of market-driven revenue declines of 40%. CER is a leader in the shot blast industry, designing, manufacturing and assembling equipment that cleans and prepares metal surfaces and providing aftermarket parts and service to its installed equipment base. This global base now includes more than 5,000 machines installed at major manufacturers including Ford, GM, Boeing, John Deere and Kohler.
Customers drastically curtailed capital expenditures throughout 2009. Requests for quotes on new machines dropped 50%. Customers used their equipment less frequently, resulting in reduced orders for repair parts.
CER is planning for a slow recovery and revenue growth in 2010, with a more rapid pace of improvement forecast in 2011. CER anticipates a recovery in high-margin aftermarket parts sales first, followed by an increase in purchases of new equipment. Management expects to gain market share, driven by its new Genesis wheel product technology, increased sales coverage with new agents and representatives, and the development of more synergies between Pangborn and the Othello Group, whose acquisition in 2009 doubled CER’s earnings and revenue.
The addition of Othello – three leading wheel blast and surface preparation equipment providers in Europe – established Pangborn as the third-largest wheel blast company in the world, broadened CER’s international scope and offered greater access to growth markets in eastern Europe and Asia. By relying on CER and Othello’s existing corporate leadership and experience, CER was able to close the deal without adding significant incremental costs.
In 2010, the businesses will continue to pursue synergistic opportunities for integration of technology, purchasing and marketing functions. CER’s strong focus on cost management and building global share through aggressive marketing and development of new product technology also will continue. With opportunities emerging in Asia and other developing areas of the world, CER has positioned itself as a strong global player whose substantial intrinsic value will become apparent as markets recover.
Capital Equipment Resources LLC – Q3 Review 2009
Ken Dickson, President and Chief Executive Officer
The “green shoots” of renewed business activity that seemed to appear in June – in the form of a modest improvement in Pangborn’s order rate for aftermarket parts and increased quoting on new equipment – proved to be short-lived. In July and August, order rates and quoting activity returned to lower levels that were driven in part by annual maintenance outages at foundry customers’ plants.
Demand for basic steel and metal products used across North American industries – including automotive, trucking and construction – remained severely depressed for much of Q3. In September, the Company noticed a modest improvement in order rates for aftermarket parts, particularly in the foundry sector, which may have been driven by the “Cash for Clunkers” program.
In the European market, the Othello Group companies experienced continued challenging conditions through Q3. However, toward the end of the quarter, we began to see some improvement in business sentiment as order rates for both parts and equipment appear to be trending upward.
In response to continuing market challenges, Capital Equipment Resources continued its cost-saving measures both in Europe and in North America, reducing the work force and hours of work, as well as deferring wages for certain senior level employees. We appreciate the measures that management and employees have undertaken to preserve the Company’s liquidity position, which remains healthy.
The Company is pleased to welcome Mike Thuon to the Atlas Family. Mike joined Capital Equipment Resources as CFO, following a distinguished career at Ernst & Young, where he served in senior positions in their audit and due diligence practices and as a division controller.
Capital Equipment Resources LLC – Q2 Review 2009
Ken Dickson, President and Chief Executive Officer
The North American and European markets for new shotblast equipment and aftermarket parts remained very soft as a result of low operating rates in the foundry, forge, automotive, trucking and infrastructure sectors. The cautionary good news is that the market appears to have bottomed out as evidenced by a slight improvement in aftermarket parts orders and quoting activity for new equipment that was noticeable toward the end of Q2.
Capital Equipment Resources (CER) announced a major strategic acquisition in Q2 with the purchase of the Othello Group. With this acquisition, CER is now the third largest wheel blast provider in the world.
The acquired Othello Group companies are V+S – Vogel & Schemmann Maschinen GmbH, Berger Strahltechnik GmbH and WG Technology S.r.l. (now renamed Pangborn Europe S.r.l.). CER acquired the companies from Wheelabrator Group and DISA Group as a result of a forced divestiture under an order from the German government’s antitrust department.
The Othello Group acquisition — complex and executed under a tight timeframe — is Atlas at its best: It follows our strategy of purchasing businesses at a compelling valuation in industries where we have deep experience. It leverages our strong management team and builds on our solid record of purchasing divisions of large corporate parents and successfully transitioning them into viable stand-alone entities.
We welcome to the Atlas family the 117 people employed at Berger, V+S and Pangborn Europe, in particular Renzo Boarino, General Manager of Pangborn Europe, Hubert Prokopp, Managing Director of V+S and Christof Ferling, Managing Director of Berger. In conjunction with the acquisition, Joe Camerata was promoted from CFO of Pangborn to President of Pangborn, and Urban Svensson was promoted to President of the European operations. Joe and Urban will continue to report to Ken Dickson, CEO of CER, who has skillfully guided the business through this significant expansion.
Pangborn also continued to drive innovation in Q2, releasing the second generation of its high-tech Genesis family of wheels, providing customers with easier maintenance, key safety features and improved equipment longevity. Despite business conditions and the tight credit market, Pangborn’s financial strength was confirmed when Bank of America agreed to renew the company’s financing.
Capital Equipment Resources LLC – Q1 Review 2009
Ken Dickson, President and Chief Executive Officer
The metal fabrication and foundry markets have slowed considerably as the industrial production sector — and particularly auto manufacturers — have substantially reduced operations amid the global economic meltdown. As a result, Pangborn’s business has slowed, and the company has focused intently on cutting costs, including reducing its work force.
Pangborn is positioning itself during this downturn to garner more market share through the acquisition of weakened competitors, and has developed and introduced a new blast wheel capable of foundry applications. It moved its headquarters from Maryland to Georgia where it is establishing a technology alliance with Georgia Tech. It strengthened its sales management, captured the Pangborn brand in Europe and added distributors in the Midwest and Northeast.
It will be well prepared to benefit as the automotive and structural steel industries benefit from the federal stimulus program.
