mestek board of directors september 8, 2007 achieving profitability in cleveland (plus a quick look...
TRANSCRIPT
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Mestek Board of Directors Mestek Board of Directors
September 8, 2007September 8, 2007
ACHIEVING PROFITABILITY IN ACHIEVING PROFITABILITY IN CLEVELANDCLEVELAND
(Plus a Quick Look at Maine, (Plus a Quick Look at Maine, Beijing and Cedar Rapids)Beijing and Cedar Rapids)
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HOW WE STARTEDHOW WE STARTED
Purchase June 30, 2001Purchase June 30, 2001
Secure Hill / Gain CWPSecure Hill / Gain CWP
Yoder, Krasny-Kaplan, MentorYoder, Krasny-Kaplan, Mentor
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Responsibility for invested fundsResponsibility for invested funds
Satisfactory return each yearSatisfactory return each year
Break even point less than 80%Break even point less than 80%
General Manager’s Primary General Manager’s Primary Accountability per John E. ReedAccountability per John E. Reed
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FINANCIAL STATEMENT FINANCIAL STATEMENT HISTORYHISTORY
20062006 20052005 20042004 20032003 20022002 20012001
LeaderLeader MayeMayerr
MayeMayerr
SteelSteel SteelSteel SteelSteel SteelSteel
Net Net SalesSales
24,3724,3711
14,3714,3722
20,4020,4066
11,9011,9022
11,4111,4111
14,6014,6022
GP %GP % 16.816.8%%
25.125.1%%
19.319.3%%
12.2%12.2% 13.2%13.2% 13.3%13.3%
OperatinOperating Profit g Profit (Loss)(Loss)
(296)(296) (383)(383) (1)(1) (1,981(1,981))
(1,514(1,514))
(1,030(1,030))
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EARLY CHALLENGESEARLY CHALLENGES
Machine Tool Recession 2002-3Machine Tool Recession 2002-3 Absorbed Dahlstrom / B&K 2002-3Absorbed Dahlstrom / B&K 2002-3 Krasny Kaplan Machines dropped 2004 Krasny Kaplan Machines dropped 2004 Closed Pipe Mill business 2004 Closed Pipe Mill business 2004 Key Engineering and Manufacturing Key Engineering and Manufacturing
RetirementsRetirements Manufactured Vulcans for Lockformer 2005-7Manufactured Vulcans for Lockformer 2005-7 Mentor unprofitable – sold 2006Mentor unprofitable – sold 2006
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CURRENT ISSUESCURRENT ISSUES Still recovering from loss of key personnel Still recovering from loss of key personnel
in sales and servicein sales and service Still working through challenging and Still working through challenging and
problem jobs – all departments equally at problem jobs – all departments equally at faultfault
Still working through lagging product Still working through lagging product developmentdevelopment
Factory re-organization at early stageFactory re-organization at early stage Way behind booking and shipping targetsWay behind booking and shipping targets Costs still uncompetitiveCosts still uncompetitive Engineering needs more experienceEngineering needs more experience
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FINANCIALSFINANCIALS(7 months)(7 months)
Net SalesNet Sales $7.333 million$7.333 million 53% budget53% budget
GP %GP % 16.3%16.3% 68% budget68% budget
ExpensesExpenses $2.563 million$2.563 million 96% budget96% budget
Operating Operating ProfitProfit
($1.367) ($1.367) millionmillion
$2.0 million $2.0 million off budgetoff budget
Bookings Bookings
8 months8 months$8.954 million$8.954 million 57% budget57% budget
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BY PRODUCT LINEBY PRODUCT LINENet Sales Net Sales (omitting Vulcan and (omitting Vulcan and
Service)Service) Through JulyThrough July Through Through
October October (Projected)(Projected)
YoderYoder 42% of budget42% of budget 82% of budget82% of budget
B&KB&K 45% of budget45% of budget 57% of budget57% of budget
LockformerLockformer 2% of budget2% of budget 8% of budget8% of budget
WinProWinPro 19% of budget19% of budget 115% of budget115% of budget
PartsParts 76% of budget76% of budget 77% of budget77% of budget
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BY PRODUCT LINEBY PRODUCT LINEGP %GP %
Through Through JulyJuly
Through October Through October (Projected)(Projected)
YoderYoder 11.8%11.8% 16.2%16.2%
B&KB&K 8.9%8.9% 5.0% 5.0% (development)(development)
LockformerLockformer NEG.NEG. 0.0%0.0%
WinProWinPro NEG. NEG. 0.0.% 0.0.% (development)(development)
PartsParts 42.8%42.8% 43.0%43.0%
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PROFITABILITY PLANPROFITABILITY PLAN
Product StrategyProduct Strategy
Sales/Marketing StrategySales/Marketing Strategy
Execution StrategyExecution Strategy
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PROFITABILITY PLANPROFITABILITY PLANPRODUCT STRATEGYPRODUCT STRATEGY
Offer full range of roll forming products in Offer full range of roll forming products in pre-cut and post-cut, multiple profiles on pre-cut and post-cut, multiple profiles on adjustable frames, range of material adjustable frames, range of material specifications, notching/punching/cut off specifications, notching/punching/cut off capabilitiescapabilities YoderYoder B & KB & K HillHill Lockformer CustomLockformer Custom WinProWinPro
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PROFITABILITY PLANPROFITABILITY PLANPRODUCT STRATEGYPRODUCT STRATEGY
Good mix of stand-alone/systems; Good mix of stand-alone/systems; custom/standard; repeat profile/new custom/standard; repeat profile/new profileprofile
Solution focus for customersSolution focus for customers Excellent parts and serviceExcellent parts and service
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PARTSPARTS
SuccessSuccess Added TISHKENAdded TISHKEN R. Schaffer technical expertise in ServiceR. Schaffer technical expertise in Service Lowered costs through Formtek BeijingLowered costs through Formtek Beijing
ChallengesChallenges Lost B. HastingsLost B. Hastings Replacement leader failedReplacement leader failed Too much inventoryToo much inventory Not enough promotionNot enough promotion
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PARTS 2007PARTS 2007
New leader who is customer-centricNew leader who is customer-centric Electronic library of reference Electronic library of reference
materialsmaterials Telephone lead generationTelephone lead generation Web-site promotionWeb-site promotion Link more to serviceLink more to service
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YODERYODER
Success Success Refrigeration tube, welding wire, closed Refrigeration tube, welding wire, closed
shapes, custom roll formers, stand alone millsshapes, custom roll formers, stand alone mills With Hill systemsWith Hill systems
ChallengesChallenges Full systems profitabilityFull systems profitability Keeping market share on stand alone millsKeeping market share on stand alone mills Losing rafted jobsLosing rafted jobs Lost D. Muchnicki and D. Krosky in salesLost D. Muchnicki and D. Krosky in sales
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YODER 2007YODER 2007
Focus on stand alone machines, roll Focus on stand alone machines, roll tooling, replacement stands and partstooling, replacement stands and parts
Limit number of systems, tube mills Limit number of systems, tube mills and customand custom
Use Managing Performance process to Use Managing Performance process to price at higher marginsprice at higher margins
Develop quick disconnect and Develop quick disconnect and universal arrangement for “rafting”universal arrangement for “rafting”
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B & KB & K SuccessSuccess
2 DWR and control2 DWR and control 2 DWR Plus2 DWR Plus 3 TSR3 TSR
ChallengesChallenges Structural 12 gage punchingStructural 12 gage punching Bundling and controlBundling and control Accessory lineAccessory line Door lineDoor line VersamillVersamill
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2DWR Supermill2DWR Supermill
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VersamillVersamill
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B & K 2007 B & K 2007
Finish development carefully with a Finish development carefully with a veiw to costs, start up and reliabilityveiw to costs, start up and reliability
Focus on supermill sales while de-Focus on supermill sales while de-emphasizing related productsemphasizing related products
International Sales – CE versionInternational Sales – CE version ROI SellingROI Selling
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HILL HILL
SuccessSuccess P. Williams facilitates sales cooperation P. Williams facilitates sales cooperation
and brings $2.0-$3.0 million/year of and brings $2.0-$3.0 million/year of Yoder and WinPro salesYoder and WinPro sales
ChallengesChallenges No progress in moving people to No progress in moving people to
ClevelandCleveland Costs too highCosts too high
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HILL 2007HILL 2007
Plan to downsize or sell Hill to focus on Plan to downsize or sell Hill to focus on high-end roll forming tools for punch, high-end roll forming tools for punch, notch and cut-offnotch and cut-off
Continue to sell rotary punching Continue to sell rotary punching technologytechnology
Use of EAE Turkey and India sources for Use of EAE Turkey and India sources for standard toolsstandard tools
Continue to look for Cleveland-based Continue to look for Cleveland-based people with tooling skillspeople with tooling skills
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LOCKFORMERLOCKFORMER
SuccessSuccess Triplex in 6” and 8” designedTriplex in 6” and 8” designed Chassis from Formtek BeijingChassis from Formtek Beijing
ChallengesChallenges Lack of pre-cut application engineering Lack of pre-cut application engineering
talenttalent Lack of sales concepting talentLack of sales concepting talent Costs too highCosts too high Competition is diffuse, but strongCompetition is diffuse, but strong
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LOCKFORMER 2007LOCKFORMER 2007
Use R. Heilman for conceptingUse R. Heilman for concepting Re-develop dealers in the U.S.Re-develop dealers in the U.S. Purchase base units for triplex, Purchase base units for triplex,
duplex and double-extended shaft duplex and double-extended shaft models from EAE Turkeymodels from EAE Turkey
Consider line integration in MaineConsider line integration in Maine
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WINPROWINPRO Success Success
SFM: Crystal Achievement AwardSFM: Crystal Achievement Award MRP Downloads - FenevisionMRP Downloads - Fenevision Screen express controlScreen express control Stiffener machineStiffener machine
ChallengesChallenges SFM Profiles / controlsSFM Profiles / controls Screen Express VerticalScreen Express Vertical Residential real estateResidential real estate Controls engineersControls engineers
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Screen ExpressScreen Express
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SFM Roll FormerSFM Roll Former
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WINPRO 2007WINPRO 2007
Be selective on SFM – develop standard Be selective on SFM – develop standard screen frame to sell to small producersscreen frame to sell to small producers
Stop Vertical screen frame developmentStop Vertical screen frame development Delay sales force and service expansion Delay sales force and service expansion
until 2008-9 buying seasonuntil 2008-9 buying season ARX-SYS DevelopmentARX-SYS Development
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ARX-SYS SPACER SYSTEMARX-SYS SPACER SYSTEM
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System OverviewSystem Overview
Drops into existing CED Intercept line – Drops into existing CED Intercept line – 285 units in the field285 units in the field
Structural spacer system with four Structural spacer system with four continuous corners and enhanced rigiditycontinuous corners and enhanced rigidity
Employs a state of the art absorbent Employs a state of the art absorbent technology used in the medical and technology used in the medical and pharmaceutical industries produced by pharmaceutical industries produced by CSP Technologies called the DesiKey.CSP Technologies called the DesiKey.
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Corner AssemblyCorner Assembly
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Plug
Spacer
Connector
Latch (A Raised Featureon the Connector)
Chamfered Edges for Easy Insertion
Bottom View
DesiKeyDesiKey
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AlignmentFeatures
Latch
Muntin AssemblyMuntin Assembly
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CSP’s Activ-PolymerCSP’s Activ-PolymerTMTM
A three component blendA three component blend
1.1. A majority polymerA majority polymer (e.g. PP, PE, …) – the (e.g. PP, PE, …) – the base component -- provides structurebase component -- provides structure
2.2. A particleA particle (e.g. absorbing agent) (e.g. absorbing agent)
3.3. A minority polymerA minority polymer that is immiscible that is immiscible (like mixing oil and water) in the majority (like mixing oil and water) in the majority polymer and has a chemical attraction for polymer and has a chemical attraction for the particlethe particle
Channels composed of the minority polymer and Channels composed of the minority polymer and the particle resides in the channelsthe particle resides in the channels
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Production AdvantageProduction Advantage
Integrates into existing production Integrates into existing production Less heat – quicker cool-down and Less heat – quicker cool-down and
throughputthroughput Greater rigidity – easy of handlingGreater rigidity – easy of handling Reduction of labor and cost of rivet Reduction of labor and cost of rivet Roll-Former capacity of 4200 units per Roll-Former capacity of 4200 units per
shift (based on 36” x 24” IG, 7 hour shift shift (based on 36” x 24” IG, 7 hour shift at 100 FPM)at 100 FPM)
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Quality AdvantageQuality Advantage
No 4No 4thth corner – 4 continuous corners corner – 4 continuous corners Elimination of the screw/rivetElimination of the screw/rivet Better seal with key plugBetter seal with key plug No sagging of Matrix bead/unaffected by No sagging of Matrix bead/unaffected by
UV or southern exposureUV or southern exposure Greater rigidity of spacerGreater rigidity of spacer Aesthetics Aesthetics
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Cost AdvantageCost Advantage
Elimination of PPG royalty payment Elimination of PPG royalty payment Reduction of energy costsReduction of energy costs Elimination of maintenance and parts Elimination of maintenance and parts
of Matrix extruder / alternative useof Matrix extruder / alternative use Consistent cost accounting by unit -Consistent cost accounting by unit -
Intercept does not apply the same Intercept does not apply the same bead sizebead size
Reduced Muntin clip costs (no royalty)Reduced Muntin clip costs (no royalty)
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Savings Analysis AssumptionsSavings Analysis Assumptions
1600 IGUs/shift, 250 work days, 2 shifts/day1600 IGUs/shift, 250 work days, 2 shifts/day PPG Royalty at $.03 / ft.PPG Royalty at $.03 / ft. Matrix costs at $.03 / ft – DesiKey at $.25 eachMatrix costs at $.03 / ft – DesiKey at $.25 each Average unit size of 24” x 36”Average unit size of 24” x 36” Electricity costs of $45 / matrix pump / shiftElectricity costs of $45 / matrix pump / shift 60% of IGUs have grids60% of IGUs have grids Muntin clip cost of $.027 each (ArxSys at $.024)Muntin clip cost of $.027 each (ArxSys at $.024) The ArxSys Spacer incorporates 20% more metalThe ArxSys Spacer incorporates 20% more metal 15/32 Spacer Intercept Strip Width of 1.30” vs. 15/32 Spacer Intercept Strip Width of 1.30” vs.
1.56” for ArxSys at $52/cwt (Intercept $.025/ft)1.56” for ArxSys at $52/cwt (Intercept $.025/ft)
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Savings AnalysisSavings Analysis1 machine1 machine 12 machines12 machines
RoyaltyRoyalty $240,000$240,000 $2,880,000$2,880,000
DesiccantDesiccant $64,000$64,000 $768,000$768,000
Matrix Pump Matrix Pump MaintenanceMaintenance
$5,000$5,000 $60,000$60,000
Power ConsumptionPower Consumption $11,250$11,250 $135,000$135,000
Muntin ClipsMuntin Clips $38,400$38,400 $460,000$460,000
SavingsSavings $358,650$358,650 $4,303,800$4,303,800
Metal DifferenceMetal Difference $40,000$40,000 $480,000$480,000
Net SavingsNet Savings $318,650$318,650 $3,823,800$3,823,800
ArxSys Price $380,000 - $420,000
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PROFITABILITY PLANPROFITABILITY PLANSALES/MARKETINGSALES/MARKETING
Regionalize Sales in North AmericaRegionalize Sales in North America Improve Contract ManagementImprove Contract Management Improve Price Quotation AccuracyImprove Price Quotation Accuracy Tap the power of SalesForce.comTap the power of SalesForce.com Focus on profitable growth in Yoder, Focus on profitable growth in Yoder,
B&K and partsB&K and parts Sell what is in stock and engineeredSell what is in stock and engineered
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Regional SalesRegional Sales
Hired E. Martin to replace key lossesHired E. Martin to replace key losses Created six (6) U.S. RegionsCreated six (6) U.S. Regions Kick off with sales meeting – April Kick off with sales meeting – April
2007 2007 Focus two sales engineers on Focus two sales engineers on
proposalsproposals
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ROLLFORMING CUSTOMERS PER STATEROLLFORMING CUSTOMERS PER STATE
0
1 to 4
4 to 5
5 to 9
9 to 18
18 to 68
(37)
(31)
(43)
(18)
(19) (21)
(25)
(47)
(32)(68)
(33)
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DAN RINEHART
JARED SHEETS
TOM FOX
TBA
OPEN
DAVE VOTH
JACK PENNUTO JR.
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Regional SalesRegional Sales
““Stirring the pot” with telephone, Stirring the pot” with telephone, web-site pop-ups, flash faxes, mailing web-site pop-ups, flash faxes, mailing campaignscampaigns
Training in all product linesTraining in all product lines Manage sales activities and Manage sales activities and
behaviors in Salesforce.combehaviors in Salesforce.com
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Improve Contract Improve Contract ManagementManagement
Hired Chris Shea with 20 years experienceHired Chris Shea with 20 years experience Created standard formats and language Created standard formats and language
onlineonline Trained general managers and controllers Trained general managers and controllers Trained sales peopleTrained sales people Key for Cleveland – 12-15 negotiated Key for Cleveland – 12-15 negotiated
contracts per yearcontracts per year All proposals include sales covenants, All proposals include sales covenants,
product specifications, standard terms and product specifications, standard terms and conditions and, if required, forms of letters of conditions and, if required, forms of letters of creditcredit
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Improve Price Quotation Improve Price Quotation AccuracyAccuracy
Focus only 2 people on proposals and triageFocus only 2 people on proposals and triage Examining costing system resourcesExamining costing system resources Examining product templates by product line Examining product templates by product line
to building a quotationto building a quotation Consider re-instating position of “estimator”Consider re-instating position of “estimator” Reviewing cost build-up methods, rates, Reviewing cost build-up methods, rates,
calculations, forms and team-based processcalculations, forms and team-based process Instituted a “math” reviewInstituted a “math” review
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Tap the Power of Tap the Power of Salesforce.comSalesforce.com
All sales people trained and using to record All sales people trained and using to record sales meetings, proposals and informationsales meetings, proposals and information
Low, medium, high odds attached to pipelineLow, medium, high odds attached to pipeline Campaigns developed for shows and Campaigns developed for shows and
promotionpromotion Managers have standardized reports on Managers have standardized reports on
sales calls, quote tracking and opportunity sales calls, quote tracking and opportunity developmentdevelopment
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FocusFocus
Profit resides in Yoder stand alone, Profit resides in Yoder stand alone, B&K supermills and all parts – focus B&K supermills and all parts – focus herehere
Triage sales response and calls to Triage sales response and calls to these prioritiesthese priorities
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Sell Stock / Light Sell Stock / Light EngineeringEngineering
In stock sales targets reviewed In stock sales targets reviewed weeklyweekly
Orders with less engineering are Orders with less engineering are given prioritygiven priority
Price new profiles to cover risk and Price new profiles to cover risk and quote extra tooling as T & Mquote extra tooling as T & M
Use on-line auction for slow-movingUse on-line auction for slow-moving
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PROFITABILITY PLANPROFITABILITY PLANEXECUTIONEXECUTION
First Class Roll ToolingFirst Class Roll Tooling One Building / One SystemOne Building / One System Measurement ToolsMeasurement Tools Managing PerformanceManaging Performance Best Practices ImprovementBest Practices Improvement
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First Class Roll ToolingFirst Class Roll Tooling
Four solid, experienced tooling Four solid, experienced tooling designers, all with testing ability, and designers, all with testing ability, and operating experience in pre-cut and operating experience in pre-cut and post-cutpost-cut
J. KopsickJ. Kopsick M. GrantM. Grant
R. Abu-HashimR. Abu-Hashim K. JohnsonK. Johnson
Test mills available for 80% of ordersTest mills available for 80% of orders
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First Class Roll ToolingFirst Class Roll Tooling
Four effective roll testers for Four effective roll testers for assembly, start up and field serviceassembly, start up and field service
E. PliskeE. Pliske M. WilesM. WilesM. BoughmanM. Boughman D. ZikeliD. Zikeli
State-of-the-art Mazak/Mitsubishi State-of-the-art Mazak/Mitsubishi Turning /EDM Roll Tooling Turning /EDM Roll Tooling Manufacturing Cell installed in JulyManufacturing Cell installed in July
Reach goal of $3.0 million in sales in Reach goal of $3.0 million in sales in 20082008
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One Building / One SystemOne Building / One System
Could not justify new building in Could not justify new building in 20062006 Bought Commerce Parkway buildingBought Commerce Parkway building Continue to hone two building efficient Continue to hone two building efficient
operation planoperation plan Hired R. Hilfer as Plant Manager in MayHired R. Hilfer as Plant Manager in May Began facility/work space improvement Began facility/work space improvement
programprogram
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One Building / One System One Building / One System
Decided not to purchase M2M for ERPDecided not to purchase M2M for ERP Cost and implementation not justifiedCost and implementation not justified Will upgrade “Jobscope” in 2008Will upgrade “Jobscope” in 2008 Have good core of users who will come Have good core of users who will come
up to speed quicker in 2008up to speed quicker in 2008 Will make a difference to profitability, Will make a difference to profitability,
on-time delivery and inventory control on-time delivery and inventory control in 2009in 2009
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Measurement ToolsMeasurement Tools
Gross Margin ReportsGross Margin Reports Reviewing all unsatisfactory jobs back to Reviewing all unsatisfactory jobs back to
Jan 2006 (>$25K-NS/<20% GP)Jan 2006 (>$25K-NS/<20% GP) Root cause(s) analysis for eachRoot cause(s) analysis for each Correcting procedures and training Correcting procedures and training
people from lessons learnedpeople from lessons learned Reviewing >$25K-NS / >30% GP to learn Reviewing >$25K-NS / >30% GP to learn
what we do wellwhat we do well
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Measurement ToolsMeasurement Tools
Metrics MonthlyMetrics Monthly Department budgetsDepartment budgets Average inventory / inventory turnsAverage inventory / inventory turns
Broken down by type and productBroken down by type and product WarrantyWarranty
Service reportsService reports Engineering/manufacturing/sales reviewEngineering/manufacturing/sales review
Re-work/scrap – manufacturing reviewRe-work/scrap – manufacturing review On-time shipments – all reviewOn-time shipments – all review
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Measurement Tools Measurement Tools
Cost Control SummaryCost Control Summary All WIP jobsAll WIP jobs Record M, L, B and AE actual against Record M, L, B and AE actual against
quote estimatesquote estimates Update weeklyUpdate weekly Review key jobs dailyReview key jobs daily SWAT team for jobs going badSWAT team for jobs going bad
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Managing PerformanceManaging Performance
Team-based activity with all disciplines Team-based activity with all disciplines represented for major jobsrepresented for major jobs At proposalAt proposal If scope changesIf scope changes At order receipt before acknowledgementAt order receipt before acknowledgement
Primary TasksPrimary Tasks Risk assessment / mitigationRisk assessment / mitigation Commitment to profitability, reliability and Commitment to profitability, reliability and
deliverydelivery Within goals and focus of Business PlanWithin goals and focus of Business Plan
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Managing PerformanceManaging Performance ToolsTools
Multi-page documentMulti-page document Check lists by activityCheck lists by activity Commitment PledgeCommitment Pledge
Areas of FocusAreas of Focus Know customer needs, expectations, savingsKnow customer needs, expectations, savings Develop a “complete” proposal that all can commit Develop a “complete” proposal that all can commit
toto All specifications, performance standards, All specifications, performance standards,
acceptance test standards are clear, attainable and acceptance test standards are clear, attainable and risk mitigatedrisk mitigated
Develop ROI selling toolDevelop ROI selling tool Mean what we sayMean what we say
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Managing PerformanceManaging Performance
Proposal messageProposal message Use as a selling opportunity – solution Use as a selling opportunity – solution
for decision-makerfor decision-maker Cover letter addresses CUSTOMER Cover letter addresses CUSTOMER
needs needs No surprisesNo surprises
Negotiation strategyNegotiation strategy Sales supported by execution teamSales supported by execution team
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Managing PerformanceManaging Performance
Project ManagementProject Management From beginning to end, single point From beginning to end, single point
contactcontact Prevents scope creepPrevents scope creep Manages process of fulfillment, factory Manages process of fulfillment, factory
test, punchlist, start up, training, test, punchlist, start up, training, warrantywarranty
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Managing PerformanceManaging Performance
Order AcknowledgementOrder Acknowledgement Last chance to say no and get it rightLast chance to say no and get it right Contract compliance by customer on Contract compliance by customer on
purchase order, down payment, letters purchase order, down payment, letters of credit, required informationof credit, required information
All sign off and commit to PROFITABILITY All sign off and commit to PROFITABILITY and DELIVERYand DELIVERY
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Managing PerformanceManaging Performance
Kick Off MeetingKick Off Meeting Set tone for performanceSet tone for performance Re-examine the risksRe-examine the risks Design communication planDesign communication plan Make sure all disciplines are “in”Make sure all disciplines are “in”
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Best Practices – John ReedBest Practices – John Reed Product Quality Consistently HighProduct Quality Consistently High Very Low Warranty/Return/Allowance ExpenseVery Low Warranty/Return/Allowance Expense Negligible order writing, pricing errorsNegligible order writing, pricing errors Complete, up-to-date knowledge of costsComplete, up-to-date knowledge of costs Fast reaction to raw material and component cost Fast reaction to raw material and component cost
increasesincreases Very few orders taken at low prices and then only Very few orders taken at low prices and then only
for specific policy reasonsfor specific policy reasons Complete understanding of pricing, regularly Complete understanding of pricing, regularly
review price sheets to maximize margins, eliminate review price sheets to maximize margins, eliminate loserslosers
Spending consistently in line with budgetsSpending consistently in line with budgets Customers’ expectations fully met in fact & Customers’ expectations fully met in fact &
perceptionperception
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Best Practices – John ReedBest Practices – John Reed Orders produced and shipped promptlyOrders produced and shipped promptly Labor variances from standard insignificantLabor variances from standard insignificant Continuous improvement programs offset wage Continuous improvement programs offset wage
increasesincreases ““Fires” brought under control promptly so that Fires” brought under control promptly so that
management has time to think and planmanagement has time to think and plan A well balanced team. Each seat on the bus is A well balanced team. Each seat on the bus is
filled with the right personfilled with the right person Intolerance on the part of the executive for Intolerance on the part of the executive for
anything but first class executionanything but first class execution A “breakeven” point that does not put pressure A “breakeven” point that does not put pressure
on either sales or expenseon either sales or expense
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-Action Plan for Each-Action Plan for Each- An Example - An Example
Best Practices “The Fix”Best Practices “The Fix”B.B. VERY LOW WARRANTY/RETURN/ALLOWANCE VERY LOW WARRANTY/RETURN/ALLOWANCE
EXPENSE EXPENSE Initiate quality review prior to shippingInitiate quality review prior to shipping Supply a quality service/operations manual and Supply a quality service/operations manual and
operator trainingoperator training
By improving the overall quality, warranty related By improving the overall quality, warranty related service issues should diminishservice issues should diminish
Any equipment problems must be corrected prior to Any equipment problems must be corrected prior to shipment (even in times of month-end deadlines)shipment (even in times of month-end deadlines)
A procedure must be established to control the return A procedure must be established to control the return of spare parts ordered incorrectly by customersof spare parts ordered incorrectly by customers
Need to establish a restocking cost structureNeed to establish a restocking cost structure Utilize the RGA system to return goodsUtilize the RGA system to return goods Do NOT accept damaged returned goods (parts should Do NOT accept damaged returned goods (parts should
be inspected, before accepted)be inspected, before accepted)
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Best Practices “Fixes”Best Practices “Fixes”
Project Management InitiativeProject Management Initiative Project Management is proposal to Project Management is proposal to
commissioning; full responsibility with commissioning; full responsibility with full authority and accountabilityfull authority and accountability CostCost ScheduleSchedule ScopeScope CommunicationCommunication Cheer Leading (emphasis on leading Cheer Leading (emphasis on leading
with positive attitude)with positive attitude)
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Best PracticesBest Practices
RB Dewey to be in Cleveland majority of RB Dewey to be in Cleveland majority of time September 15 – October 30time September 15 – October 30
Full review of table of organization and Full review of table of organization and people, all process and procedure and all people, all process and procedure and all facilities, equipment and toolsfacilities, equipment and tools
Create new organization and realistic plan Create new organization and realistic plan to achieve profitability in 2008to achieve profitability in 2008
Evaluate long-term prospects and explore Evaluate long-term prospects and explore continued ownershipcontinued ownership
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Formtek Maine – through Formtek Maine – through JulyJuly
RESULTS:RESULTS:
Net SalesNet Sales $7.372 million$7.372 million 84% budget84% budget
Gross ProfitGross Profit 26.7%26.7% 92% budget92% budget
ExpenseExpense $1.571 million$1.571 million 104% budget104% budget
Operating Operating ProfitProfit
$0.396 million$0.396 million 38% budget38% budget
Booked SalesBooked Sales $9.621 million$9.621 million 110% budget110% budget
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Formtek Maine Formtek Maine
Goals MetGoals Met Profitable in first half despite poor Profitable in first half despite poor
backlogbacklog Addressing regional manager and dealer Addressing regional manager and dealer
issuesissues Addressing inventory issuesAddressing inventory issues Breakeven is now under $10.0 millionBreakeven is now under $10.0 million
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Formtek MaineFormtek Maine
Expectations by Year EndExpectations by Year End
Net sales Net sales $13.121 million$13.121 million 87% 87% budgetbudget
Op. Profit Op. Profit $1.068 million$1.068 million 60% budget60% budget
Solid backlog of $5.0 million setting the Solid backlog of $5.0 million setting the stage for good 2008stage for good 2008
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IPI-Cedar Rapids – through IPI-Cedar Rapids – through JulyJuly
RESULTS:RESULTS:
Net SalesNet Sales $14.84 million$14.84 million 103% budget103% budget
Gross ProfitGross Profit 27.2%27.2% 86% budget86% budget
ExpenseExpense $3.104 million$3.104 million 102% budget102% budget
Operating Operating ProfitProfit
$0.935 million$0.935 million 62% budget62% budget
Booked SalesBooked Sales $13.18 million$13.18 million 94% budget94% budget
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IPI-Cedar RapidsIPI-Cedar Rapids
Goals MetGoals Met Implemented and using all M2M modulesImplemented and using all M2M modules Upgrade material management system – hired Upgrade material management system – hired
Dana VigDana Vig Replace non-performing:Replace non-performing:
Engineering Manager – hired Matt LawlerEngineering Manager – hired Matt Lawler Plant Manager – hired Scott SloanPlant Manager – hired Scott Sloan Controller – hired Larry FriedhoffController – hired Larry Friedhoff Industrial Engineer – hired Darlene SmithIndustrial Engineer – hired Darlene Smith
Implement new duct line control – in testImplement new duct line control – in test Rationalize CMP line – 40% doneRationalize CMP line – 40% done Develop CNC punching head – tested and Develop CNC punching head – tested and
operatingoperating
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IPI-Cedar RapidsIPI-Cedar Rapids
Expectations by Year EndExpectations by Year EndNet SalesNet Sales $25.0 million$25.0 million 101% budget101% budgetOp. ProfitOp. Profit $1.945 million$1.945 million 75% budget75% budget(Variance: Robert/IMSA warranty; Airkan/Sotis (Variance: Robert/IMSA warranty; Airkan/Sotis
legal and United Welding R&D - $455,000)legal and United Welding R&D - $455,000)Backlog will be $6.8 million Backlog will be $6.8 million
Keys to 2008Keys to 2008: : ASHRAE success, CMP and FlexFab ASHRAE success, CMP and FlexFab
projectsprojects
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Formtek Beijing – through Formtek Beijing – through JulyJuly
RESULTS:RESULTS:
Net SalesNet Sales $3.9 million$3.9 million 98% budget98% budget
Gross ProfitGross Profit 45.8%45.8% 112% budget*112% budget*
ExpenseExpense $0.775 million$0.775 million 113% budget113% budget
Operating Operating ProfitProfit
$1.009 million$1.009 million 133% budget*133% budget*
Booked SalesBooked Sales $3.392 million$3.392 million 138% budget138% budget
*Before physical inventory, audit and currency adjustment
Shipments Intercompany - $0.330 million Europe; $1.338 million U.S.
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Formtek BeijingFormtek Beijing
GoalsGoals Improve reporting in U.S. accounting – Improve reporting in U.S. accounting –
hired consultanthired consultant Replacement for retiring U.S. engineer Replacement for retiring U.S. engineer
– R. Runyan– R. Runyan Finish Econoslear – one installed in Finish Econoslear – one installed in
China, one headed to IndiaChina, one headed to India Expand Plant economically – plans in Expand Plant economically – plans in
placeplace
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Beijing FacilityBeijing Facility
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Formtek Beijing Formtek Beijing
Expectations for Year EndExpectations for Year EndNet SalesNet Sales $6.668 million $6.668 million 98% budge98% budge
tt
Inter-co SalesInter-co Sales $2.255 million $2.255 million 76% 76% budgetbudget
Op. ProfitOp. Profit $1.700 million $1.700 million 120% budget120% budget
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International Sales ChartInternational Sales ChartBookings by TerritoryBookings by Territory
#/$ #/$ (in thousands US-D)(in thousands US-D)
OceanaOceana 30/ 2,886.6 30/ 2,886.6
AsiaAsia 38/ 914.8 38/ 914.8
Middle EastMiddle East 30/ 2,047.2 30/ 2,047.2
EuropeEurope 124/ 2,341.8124/ 2,341.8
Latin AmericaLatin America 16/ 628.9 16/ 628.9
TotalTotal 238/ 8,819.3238/ 8,819.3
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International Sales ChartInternational Sales ChartBookings by DivisionBookings by Division
#/$ #/$ (in thousands US-D)(in thousands US-D)
LockformerLockformer 47/ 659.6 47/ 659.6IPIIPI 7/ 664.8 7/ 664.8EngelEngel 12/ 1,611.5 12/ 1,611.5F. BeijingF. Beijing 62/ 3,643.2 62/ 3,643.2F. EuropeF. Europe 106/ 1,271.9106/ 1,271.9ClevelandCleveland 1/ 750.0 1/ 750.0HillHill 3/ 218.3 3/ 218.3
TotalTotal 238/ 8,819.3238/ 8,819.3
$8.819 million represents 16.6% of all machinery $8.819 million represents 16.6% of all machinery bookings in 2007 and is 20% ahead of last yearbookings in 2007 and is 20% ahead of last year