SUMMERLIN, NEV. (Feb. 27, 1:30 p.m. EST) — Sencorp Inc. is back as an independent company, after surviving a rocky four-year stretch under DT Industries Inc. that included a consolidation, the crash-and-burn U.S. machinery market and a headline-making accounting scandal.
DT announced Jan. 20 that it sold the DT Converting Technologies division to a management team, led by division President Brian Urban. Now Sencorp leaders are focused on business — building thermoforming machines, blister packaging and sealing equipment and rotary compacting presses at the company in Hyannis, Mass., on Cape Cod.
The operation is going by its original name of Sencorp.
“We've straightened the company out,” Urban said. “We're making money. We've got a pipeline of new products. In the past two years, every product group has new products in it.”
Innovations include the Gen II thermoformer, introduced last year at NPE, and new Sencorp-made robots. In the medical sector, the company is building custom-made automation equipment for putting pills into blister packaging. A partnership launched several years ago with Siemens Energy & Automation Inc. means that Sencorp machines have closed-loop controllers.
The three-person management team that bought Sencorp includes Urban, Jim Tedesco, vice president of sales and marketing, and Greg Meikle, chief financial officer. They are backed by Management Capital LLC, a Providence, R.I., investment firm.
The senior lender is Siemens Financial Services Inc., resulting from Sencorp's relationship with Siemens controllers, Urban said.
Urban talked about the “new” company during a Feb. 3 interview at the Plastics News Executive Forum in Summerlin.
Financial problems at DT, a Dayton, Ohio-based industrial conglomerate traded on Nasdaq, led to the sale. DT defaulted on $2.7 million of its senior debt on Dec. 31. DT said the buyers paid about $6 million for DT Converting Technologies, money DT will use to reduce debt.
Urban declined to confirm the $6 million sale price, but he said the timing was right.
“We've been at a revenue level for the past couple of years that has been consistent — in a depression, basically, in capital equipment. So we know we're at bottom. The market's turning and because DT needed to sell to pay down debt, we got a very fair price for the company,” he said.
Sencorp employs 115 and generates about $25 million in annual sales.
“We like to say we're the largest manufacturer on Cape Cod,” Urban said. “I think we're the only manufacturer on Cape Cod!”
Urban came to the Cape in 2000, after spending five years as vice president of sales and marketing at a sister DT business, a contract manufacturer of metal forming and assembly equipment. The company moved him to Hyannis to become president of DT Converting Technologies, which management said was “running like a top.” Sales were peaking at $40 million and selling seven thermoformers a month, Urban said.
Then trouble hit.
In July 1999, DT abruptly closed another thermoforming machinery maker, Armac Industries Ltd. in Fall River, Mass. Newspaper reports said the 40 employees arriving to work were greeted by a police officer and told to clear our their things because the plant was closed. DT was relocating Armac to Sencorp.
According to Urban, DT had hoped the Armac employees would continue working in Hyannis, only about 40 miles away. But the consolidation was poorly coordinated, and only two people actually came over. Plus, during the peak in early 2000, DT Converting Technologies/Sencorp suffered from late deliveries, he said.
DT's fiscal year starts in July. Right about that time in 2000, the bottom fell out of plastics machinery in the United States.
“So we had the Armac issues. We had the market that fell off. And then, in August of 2000, we came across the accounting irregularities,” Urban said.
The accounting problems caused a scandal that rocked DT. An investigation found the company had overstated assets. Nasdaq suspended trading of DT stock. DT was hit with several shareholder lawsuits, and the company fired some executives.
“What basically was happening was, costs were getting parked in inventory,” Urban said. “At that time, we took a write-down in excess of $6 million,” said Urban, who said he helped uncover the problem and ended up testifying before the Securities and Exchange Commission.
In November 2000, Urban and other executives restructured DT Converting Technologies. The company named directors for five product groups: Sencorp and Armac thermoformers; CeraPak blister packaging machines; CeraTek sealing machinery and laboratory formers; Stokes rotary compacting presses for making pills; and tooling. Each group operated as a separate profit center.
To staff the restructured company, management used a draft, like they do in pro sports. Eight people — three executives and the five product group directors — sat around a table.
They decided how many employees each group needed in, say, engineering, sales and accounting, and took turns picking people.
“Everyone was available, from the floor sweeper to the accounting people,” Urban said. “It gave cohesiveness to the groups. Because we were in dire straits. It was a bad situation at that time.”
Automation products will play a key role in Sencorp's future. The Gen II thermoformer comes with a robot to unload trimmed parts as they exit the machine. “We've also extended that and developed an add-on robot for our standard machines,” Urban said. The Talon-brand robots, made in Hyannis, also can be used on thermoformers from other companies.
Another new offering is a closed-loop thermal imager, from Land Instruments International Ltd., that monitors sheet temperature and feeds back the data to the Siemens controller on the thermoformer.
In market-related news, Sencorp is pushing more into the medical/pharmaceutical business. Blister packaging is becoming more common for prescription drugs, as re-packagers are taking bulk pills and putting them into individualized packages than can include separating the pills by each weekday, or put the blister pack inside a folded cardboard package that includes instructions.
Sencorp now makes custom machinery that places the pills — often formed on one of its Stokes presses — into the blisters. “We're coming to the marketplace with a machine-building service for people that have either designed their own processes or their own machines, but they're not machine builders,” Urban said.
Turning to larger-sized thermoformers, Urban said the new Sencorp has assumed the license agreement with Rigo Group, an Italian company that serves the large appliance business.
Sencorp also wants to sell more machines to automotive, including thermoformers to make door shields and energy-absorbing panels.