{"id":182,"date":"2011-01-05T18:53:17","date_gmt":"2011-01-05T18:53:17","guid":{"rendered":"http:\/\/www.department99.com\/bobamter\/?page_id=182"},"modified":"2014-08-26T16:06:14","modified_gmt":"2014-08-26T16:06:14","slug":"case-study-wells-aluminum-corp","status":"publish","type":"page","link":"https:\/\/bobamter.com\/?page_id=182","title":{"rendered":"Case Study: Wells Aluminum Corp."},"content":{"rendered":"

Wells Aluminum Corp., Indiana<\/em><\/h2>\n


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

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

In March 1991, Wells Aluminum sold one of its customers, Kero Company, an unusually large volume of aluminum extrusions.\u00a0 Before Wells could obtain payment for the extrusions, Kero filed Chapter 11 Bankruptcy in May 1991.<\/p>\n

Wells Aluminum was owned by Gibbons, Green, van Amerongen – the New York Leveraged Buy-Out Firm.\u00a0 Wells\u2019 subordinated bonds were in work-out at Wells Fargo Bank.\u00a0 Wells Aluminum wanted to advise the bank of the alternatives available, other than a 100% write off of the Kero receivable without the prospect of any recovery.<\/p>\n

Wells Aluminum became Robert Amter\u2019s first client when retained to complete a due diligence review of Kero.<\/p>\n

Kero\u2019s product lines, sales and profit are as follows:<\/p>\n

\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\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 ………….Actual…………
\nProduct Line (000$)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Pretax Profit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales<\/span><\/p>\n

Above ground swimming pools\u00a0\u00a0\u00a0 $9,066\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $\u00a0\u00a0 645\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 7.1%<\/p>\n

Office products: file cabinets,
\nsecurity boxes, desks, chairs\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 6,231\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 (2,019)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (32.4%)<\/p>\n

Radiator enclosures\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 971\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (55)\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 (5.7%)<\/p>\n

Total\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\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $16,268\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(1,429)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (8.8%)<\/p>\n

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

\u00bb Sales could be increased in the swimming pool business.\u00a0 The product was competitively priced.\u00a0 Quality was equal to or better than competition.\u00a0 Sales were limited to the mid-west and mid-atlantic states, and distribution could be expanded to other geographic areas.\u00a0 The product line was not complete, and could be extended without a large capital investment.<\/p>\n

\u00bb The money losing office products line should be shut down.\u00a0 The line was not competitive in price, quality or features.\u00a0 The capital investment needed to improve it would have a negative return.<\/p>\n

\u00bb The radiator enclosure line\u2019s sales could be increased.\u00a0 Quality and reputation were good.\u00a0 Price points were competitive.\u00a0 Distribution was limited to New York City Metropolitan area and could be expanded to additional cold weather geographic areas.<\/p>\n

\u00bb Evaluation of the manufacturing operation indicated that cost of sales and inventories could be improved in the swimming pool and radiator enclosure product lines.<\/p>\n

\u00bb The plant was owned by Kero.\u00a0 It was relatively new, in a good industrial park, and was salable.<\/p>\n

Recommendations and Results:<\/strong><\/p>\n

Suggestions to the creditor committee:<\/span><\/p>\n

~ Not accept a low settlement offer from the owners.<\/p>\n

~ Break Kero\u2019s exclusivity. Petition the Court for the right to present a reorganization plan.\u00a0 Kero agreed to it.<\/p>\n

~ If an acceptable negotiated settlement could not be reached with the owners and the creditors gained control of Kero, the alternatives were as follows:<\/p>\n

Sell Kero\u2019s two profitable businesses and the plant \u201cas is\u201d.<\/p>\n

Hire a general manager to improve Kero\u2019s two profitable businesses.\u00a0 Shut down the money loser.\u00a0 After two years of improved results, sell the company and the plant.<\/p>\n

At this time, the exclusive master distributor of Kero\u2019s swimming pools offered to purchase the entire company for about 7 cents on each dollar owed to the trade creditors.\u00a0 The bank\u2019s $3.3 million loan would be fully paid.<\/p>\n

This was not acceptable.\u00a0 The creditors knew Kero had a higher value.<\/p>\n

Rather than accept this offer, a general partner of Gibbons, Green, van Amerongen entered a bid to acquire Kero and also the swimming pool master distributor\u2019s business.<\/p>\n

\u00bb After meetings in and out of the bankruptcy court, the swimming pool master distributor raised its offer for Kero to 65 cents on the dollar.\u00a0 This offer was accepted by the creditors.<\/p>\n

\n

Wells Fargo Bank reacted favorably to the settlement.<\/em><\/p>\n<\/blockquote>\nTweet<\/a>","protected":false},"excerpt":{"rendered":"

Wells Aluminum Corp., Indiana Situation & Problems: In March 1991, Wells Aluminum sold one of its customers, Kero Company, an unusually large volume of aluminum extrusions.\u00a0 Before Wells could obtain payment for the extrusions, Kero filed Chapter 11 Bankruptcy in May 1991. Wells Aluminum was owned by Gibbons, Green, van Amerongen – the New York […]<\/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-182","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/182","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=182"}],"version-history":[{"count":7,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/182\/revisions"}],"predecessor-version":[{"id":1434,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/182\/revisions\/1434"}],"wp:attachment":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=182"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}