Tricorn Share Discussion Threads

[markgahagan] 10/3/2013 23:00

Hi guysGot the employee data for 2011 on a company directory website:http://companies.findthecompany.com/l/540930/Whitley-Products-Inc-in-Warsaw-INIf any one gets more up to date info let me knowThere's a lot of stuff on local news sites in Indiana and North Carolina re this company and its situation.Unfortunately with it being a private company there are no public filings for exact info.Mark

[electronica] 10/3/2013 22:28

Daz

I got the HQ employee figure from Markg (see post 1301) - he quoted 12,employees & his research is 2nd to none.

Perhaps Mark will post a link to his source - but I will also try to track one down.

[daz] 10/3/2013 22:03

Electronica

Agreed, the questions should be how many of the 100 employees are likely to be retained. My thinking behind the question was that if the average cost per employee is say £50,000, then the wage bill alone would come to £5m, which means they need meaningful revenues just to break even. Maybe £50,000 is too high but I presume the company employs some skilled engineers and managers.

How did you know corporate HQ employed 10 people out of interest, was that in one of the links posted above?

The Sunday Times (Money Section) today confirms your post about the resurgence in US manufacturing BTW.

[electronica] 10/3/2013 17:58

Daz

On your Point 4 - TCN are buying Whitley out of administration so there will be no pre-existing staff contracts to buy out. Everyone will effectively be "new hires" & I assume TCN will only take the people that they want.

Apart from the usurious interest charges Whitley was bearing the cost of a separate 10 person Corporate HQ. This was probably costing in the order of $1m per annum & the majority of that will go. Rationalising onto 1 production site from 2 could, perhaps, save the same order of costs.

[daz] 10/3/2013 17:35

Hi Riv,

I was also thinking of contacting the directors, my questions are:
1. How much will the company be saving in rent and executive management and HQ costs? If Whitley lost £0.5m before interest & exceptionals, it may have been close to break even, once these are stripped out.
2. Can the company quantify approximately how much business has already been lost? (He may not answer).
3. Was Whitley cash flow generative at the operating level?
4. The announcement doesn't specifically mention whether staff are covered by the acquisition, are the 100 employees mentioned being retained? If so, will there be any one-off rationalisation costs
5. How much revenue is needed for Franklin to break even approximately.
6. Are margins at Franklin comparable to those of Tricorn?

I think there is a good risk/reward here. You would think that previous management have already have tried to cut costs, so I would hope the factory operations are quite lean.
That said, I think there probably be some one-off costs and the operation will probably be loss making until H1 2014 and so forecasts might be downgraded, especially if the Rolls Royce business isn't replaced.

The potential is substantial, if the company can build revenue at Franklin to say £10m and achieve a £1m profit, that adds about 3p to earnings, so if things go well, the company could be generating around 7p in earnings in a few years time.
The key thing though is how much business they can retain at decent margins.

[markgahagan] 08/3/2013 14:49

I have already asked Mike Wellburn re RR. He wouldn't commit. Pretty much said that any update would be released to the market. I got the impression the RR revenues had not yet been replaced.

[apad] 08/3/2013 14:29

Riv,
I don't think that they will be able to say anything new about the US, I would prefer you asked about RR and what they see their future as a 2nd tier supplier, after their stock has gone. They might be able to say more now the fuss is gone.
Here's what you might call a forecast or, alternatively, a hostage to fortune.
I predict that, probably without fanfares, TCN will remain a significant supplier of bent pipes to Royce's.
This question is based on my prejudice about AVG and what I would do to neutralise TCN's pricing power if I was RR.
apad

[rivaldo] 08/3/2013 14:00

Yep, I echo APAD's comments - excellent, balanced and informative posts revealing the true situation here.

It seems that the acquisition news has (unsurprisingly imo) brought out a few buyers and is starting to have an effect on the share price.

Has anyone actually talked to the directors about the purchase etc? If not, I might try to get hold of them when I've some free time soon. If anyone wants to put up some relevant questions I could try and get them answered.

[apad] 08/3/2013 13:40

So, new management will be saviours and there should be a honeymoon period. The only downside I can see is that the customer base could have walked. But, Chapter 11 means that the company can carry on trading so perhaps that's not a problem either.
Thanks for the research people - great example of how a good bulletin board can work.
apad

[electronica] 08/3/2013 13:22

markgahagan

Just as I suspected - Private Equity vultures.

They've done as much damage in the US as they have done over here. The list of good, solid engineering victims destroyed by over leveraging is endless.

[harry the haddock] 08/3/2013 13:13

i wouldn't mind betting that whitley paid well over the odds for that final loan. keltic will surely have been aware of the circumstances and charged accordingly

[markgahagan] 08/3/2013 12:41

Just to add to research, Whitley was acquired in 2006 by TMB industries, a private equity firm. Fits in with local commenters saying new management came in 6 years ago

[markgahagan] 08/3/2013 09:32

A bit more research suggests this company(Whitley) spent the noughties expanding quite significantly, right into the recession. I suspect it over stretched this with finance and the recession did for it. Local commenters suggest the company was profitable before current management arrived about 6 years ago. I would agree that the finance in feb 12 is a last ditch attempt to stave off what was by then inevitable, and indeed by jan 2013 it had closed due to insolvency, briefly restarted and then closed finally in feb.

[markgahagan] 08/3/2013 09:21

Not sure about negatives as such, but there are risks:The company management reputation is trashed going by local commenters but hopefully they will be moved on.This may affect future workforce relationships at a trust levelThe CEO estimate of retaining $20m of revenue may be ambitiousIt may not be possible to transpose the margins at the existing tricorn to the new Tricorn. This very much depends on significant rationalisation, not just the removal of the crippling interest charges.

[apad] 08/3/2013 09:07

That none of us can find any negatives is seriously worrying.
Try harder!
apad

[markgahagan] 08/3/2013 08:50

So, in summary we have received $20m (CEO estimate) of revenue for $2.9m in cash. There seems every reason to suggest that revenue will produce, at the average op margin of 5% ish(for tricorn), to $1m of operating profit per annum (absent the interest charges suffered by Whitley and with rationalisation within Tricorn's existing business model). So probably going to add about £600000 to tricorn a op profit.With a company Tricorns size that will definitely be transformational.

[markgahagan] 08/3/2013 08:29

ElectronicaThat finance deal was announced 24 feb 2012 so was only a year ago.

[royaloak] 07/3/2013 22:32

Yes guys, but from my experience it is much easier to run a US production unit than a UK one, TCN Management will find it easier running a comparible operation in the US than in the UK. For example more labour flexibility and lower costs.

[electronica] 07/3/2013 20:09

APAD

"ps US company efficiency is not all it's cracked up to be. They're good at image the Yanks:-)"

I'll 2nd that - having spent 12 years in the states running hi-tech machine tool businesses with myriad small suppliers.

The TCN team have been running a pretty tight ship in their transportation & energy businesses & I have no worries about their ability to do the same with Whitley.

The deal had to be done. TCN needed critical mass & now they've got it.

[royaloak] 07/3/2013 19:42

It is much easier to run a small american business than a comparable british business also. Higher productivity and a more flexible labour force amongst other things.

[electronica] 07/3/2013 19:37

markg

Have you got a date for that Keltic funding deal?

This would have been costing Whitley up to $600k per annum + capital repayments. That + an expensive management & HQ would more than account for all the recent losses at the operation.

[markgahagan] 07/3/2013 18:19

Hi Electronica
Found this as well:

Keltic Financial Services announces the recent funding of an $8,925,000 senior secured credit facility consisting of a $7,500,000 revolving line of credit, a $925,000 term loan and a $500,000 Cap Ex loan to Whitley Products. The company, headquartered in Warsaw, IN is the leading and largest Tier Two supplier of fabricated tubular products serving the diesel engine, agricultural and off highway industries.

With revenues around $28m a year as far as I can find this is a heck of a big debt on that revenue. This outfit took over the company in administration after calling the loan. As you say it seems to have funded extravagance such as corporate HQ with 12 employees (doing what?)

[electronica] 07/3/2013 18:00

markg

Beat me to it. Over leveraged debt repayment seems to be the root of the Whitley problem & that has gone.

Also what was a company of this size doing with a separate (expensive) corporate HQ - that's gone too.

Single site operation & the future ability to supplement US sales with cheaper Chinese & UK production make this deal transformational for TCN in my view