{"id":161,"date":"2011-01-05T18:11:49","date_gmt":"2011-01-05T18:11:49","guid":{"rendered":"http:\/\/www.department99.com\/bobamter\/?page_id=161"},"modified":"2014-08-25T18:09:52","modified_gmt":"2014-08-25T18:09:52","slug":"case-study-springfield-precision-instruments-inc","status":"publish","type":"page","link":"https:\/\/bobamter.com\/?page_id=161","title":{"rendered":"Case Study: Springfield Precision Instruments Inc."},"content":{"rendered":"

Springfield Precision Instruments Inc., <\/em><\/h2>\n

Wood-Ridge, NJ<\/em><\/h2>\n


\n<\/em><\/p>\n

Robert Amter was appointed Chief Executive Officer of Springfield by its owner The CIT Group\/Private Equity Investments Inc.\u00a0 Springfield was a CIT leveraged buy-out from Sunbeam Corp.<\/p>\n

Situation:<\/strong><\/p>\n

$20 million in sales Springfield is a manufacturer of household and garden analog and digital thermometers and timers.\u00a0 Thermometers have been manufactured for over 40 years and timers for over 20 years.\u00a0 Sell to the big-box retail channel segment including Wal-Mart, Target, Home Depot, Tru-Serv, Sears.<\/p>\n

\u00bb Of 9 total product lines, 5 incurred operating losses in CY1999, a 6.7% operating loss.<\/p>\n

\u00bb Of 62 customers in CY1999: 30 had pre-tax losses totaling $1.0 million.\u00a0 Overall the 62 customers incurred a pre-tax loss of $706,000.<\/p>\n

\u00bb In CY1999, 12 customers accounted for 80% of Springfield\u2019s sales. In total, the 12 customers had pre-tax losses of $684,000 a 4.2% deficit.<\/p>\n

Problems:<\/strong><\/p>\n

\u00bb Incurring Operating Losses.<\/p>\n

Actual
\n(000$)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 CY2000<\/span><\/p>\n

Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $21,854<\/p>\n

Operating Profit (Loss)\u00a0\u00a0\u00a0 (276)
\n% of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0\u00a0 (1.2)%<\/p>\n

EBITDA\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0457
\n% of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2.1%<\/p>\n

Enterprise Value\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $2,742<\/p>\n

\u00bb Unqualified Chief Executive Officer.<\/p>\n

\u00bb Poorly focused strategically and operationally.<\/p>\n

~ Trying to do too many projects at the same time. Trivial many versus vital few error.<\/p>\n

~ Knee jerk reactions and decision making. Rush to judgment. Did not do their homework, evaluations were superficial.<\/p>\n

~ Not focused on profit.\u00a0 Focused on sales.\u00a0 Controller is excellent, but not involved in decision making.<\/p><\/blockquote>\n

\u00bb Absence of the interactive process of cross-functional communication which created silo management.\u00a0 CEO did not have meetings which included managers at all levels at the same time to discuss issues and problems.\u00a0 There was no openness, financial information was restricted to three people.\u00a0 Met alone with each functional manager and issued direct orders.\u00a0 As a result, made a lot of mistakes.<\/p>\n

\u00bb Below market selling prices.\u00a0 Ran scared faced with any customer demand.\u00a0 Springfield did not use fully absorbed costs.\u00a0 Use contribution margin pricing (i.e., direct material + direct labor + 50% of direct labor for manufacturing overhead).<\/p>\n

\u00bb High cost New Jersey manufacturing operation.\u00a0 Teamsters union.<\/p>\n

\u00bb Absence of marketing.\u00a0 Sold a dated and bland product in a fashion, style and innovative industry.<\/p>\n

\u00bb Poor product planning and development.\u00a0 Too many stock keeping units (SKUs).\u00a0 The money losing clock business is a prime example.\u00a0 The product line was incomplete and not a factor in this highly competitive industry.<\/p>\n

~~~~~~~~~~~~~~~~~~~~~~~~<\/strong><\/p>\n

Corrective Actions:<\/strong><\/p>\n

\u00bb Closed USA manufacturing plant.\u00a0 Built 100% owned plant in Shanghai, China.\u00a0 Operated in CY2001 in leased facility in China to train and develop staff and hourly employees.\u00a0 Construction of new plant completed in May 2002.<\/p>\n

\u00bb Implemented fully absorbed prices.\u00a0 Stopped contribution margin pricing.\u00a0 Only the Chief Executive Officer and Controller had price approval authority \u2013 a change from prior practices.<\/p>\n

\u00bb Transitioned customers\u2019 assortments into higher price point and more profitable merchandise.\u00a0 The planogram presented in a product line review included new high gross profit SKUs which improved the set\u2019s overall pre-tax profit margin.<\/p>\n

\u00bb Reduced SKUs 64% from 906 to 324.<\/p>\n

\u00bb Exited the clock business.<\/p>\n

\u00bb Contrary to most turnarounds, increased salaried headcount, did not reduce it.\u00a0 The marketing, sales and offshore procurement departments were too small.<\/p>\n

\u00bb Rebuilt the company employed sales organization.\u00a0 Replaced several manufacturers\u2019 rep firms.<\/p>\n

\u00bb Increased market share by adding 13 new customers.\u00a0 Including replacing Timex as Target\u2019s timer vendor with newly designed, innovative timer line.<\/p>\n

\u00bb CIT invested $1.5 million of equity capital into Springfield.<\/p>\n

~~~~~~~~~~~~~~~~~~~~~~~~~~~<\/strong><\/p>\n

Results Achieved:<\/strong><\/p>\n

Actual
\n(000$)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 CY2000\u00a0\u00a0\u00a0 CY2001\u00a0\u00a0\u00a0 CY2002\u00a0\u00a0\u00a0 CY2003<\/span><\/p>\n

Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $21,854\u00a0\u00a0\u00a0 $20,649\u00a0\u00a0\u00a0 $18,743\u00a0\u00a0\u00a0 $17,847<\/p>\n

Operating Profit (Loss)\u00a0\u00a0\u00a0\u00a0\u00a0 (276)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 94\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 462\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,847
\n% of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (1.2)%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 0.5%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2.5%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 10.3%<\/p>\n

EBITDA\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 457\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 730\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,004\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2,224
\n% of Sales\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2.1%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 3.5%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 5.4%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 12.5%<\/p>\n

Enterprise Value\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $2,742\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $4,380\u00a0\u00a0\u00a0\u00a0\u00a0 $6,024\u00a0\u00a0\u00a0 $13,344<\/p>\n

Robert Amter operated as chief executive officer of Evenflo Co. and Burke Industries Inc. while CEO of Springfield Precision.<\/p>\nTweet<\/a>","protected":false},"excerpt":{"rendered":"

Springfield Precision Instruments Inc., Wood-Ridge, NJ Robert Amter was appointed Chief Executive Officer of Springfield by its owner The CIT Group\/Private Equity Investments Inc.\u00a0 Springfield was a CIT leveraged buy-out from Sunbeam Corp. Situation: $20 million in sales Springfield is a manufacturer of household and garden analog and digital thermometers and timers.\u00a0 Thermometers have been […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"page_full.php","meta":{"footnotes":""},"class_list":["post-161","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=161"}],"version-history":[{"count":9,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/161\/revisions"}],"predecessor-version":[{"id":1401,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/161\/revisions\/1401"}],"wp:attachment":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}