ClarionFit Tanned And On The Move

April 28, 2003
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GRAND RAPIDS — Speculation about this company’s demise, to paraphrase Mark Twain, has been greatly exaggerated.

Yet the last two years have not been all that kind to Clarion Technologies Inc., either.

Now, after a major restructuring that included reworking the company’s sizable debt load and leaving one sector, the Grand Rapids-based plastics molder sees better times on the horizon.

Clarion Technologies, which serves the automotive, consumer products and office furniture industries, even recently reopened one of its Greenville plants that closed two years ago July as the company’s finances headed south.

“We are doing well,” said Bill Beckman, Clarion’s president and CEO who helped to found that company five years ago.

“We definitely got our house in order,” Beckman said. “We’re back and we are healthy and we look forward to our future.”

That immediate future is predicated in part on one large customer — a household appliance manufacturer — signed last year. Clarion believes that during its five-year life, the contract will generate up to $100 million in annualized revenues.

To Clarion Technologies, which recorded $80.6 million in sales in 2002 with a net loss of $7.5 million, the contract provided a much-needed boost “over the hump” that was much more than financial.

The contract, Beckman said, provided a clear signal to Clarion Technologies’ customers that the company had a future and was headed toward a turnaround.

“It just kept us strong and gave them a sense of confidence,” Beckman said.

The tough road of the last two years stemmed from the combination of “a whole bunch of things,” Beckman said.

Clarion Technologies was founded in Holland in late 1997 under the premise of providing consolidation to the highly fragmented plastics-injection industry. From 1997 to the end of 2000, the company executed six separate acquisitions to build up mass and manufacturing capabilities.

In late 2000, that business strategy ran head-on into the nation’s economic downturn.

The resulting drop in sales quickly turned Clarion Technologies into a highly leveraged company that lacked adequate revenues. Moreover, it was unable to squeeze out the costs or to generate operating efficiencies fast enough from its acquisitions.

“You put it all together and it adds up to trouble,” said Beckman. Beckman previously was a vice president for finance at the former Prince Corp. He also was chief financial officer of the automotive interiors operations at Johnson Controls Inc. in Holland.

“It was probably more expensive than we anticipated to cover the debt load that we had without enough sales,” he said of Clarion Technologies.

“We had to back up, so that’s what we did,” he said.

After peaking at $107.1 million in 2000, more than five times the sales level of the previous year, Clarion Technologies’ revenues fell to $90.5 million in 2001.

The company, beset with a high cost structure and dwindling sales volumes, lost $35.1 million in 2001 and began the process of restructuring the business and lowering its cost structure.

In addition to the Greenville plant, Clarion closed an engineering center in Jenison and relocated the corporate headquarters from Holland to Grand Rapids. It also exited the heavy truck business a year ago with the sale of its Montpelier, Ohio, plant for $12.8 million. Proceeds from the sale went to pay off debt.

Along the way, speculation grew about Clarion’s future and whether the company could survive, particularly in early 2002 after its shares were de-listed from Nasdaq.

“Everybody had written us off for dead, but prematurely,” said Ed Walsh, the chief financial officer.

Looking back, Beckman said that the tough times of the last two years have made Clarion a stronger company as it begins to emerge from its financial difficulties.

He said he always believed that Clarion’s fortune would improve and that he remained confident in the company’s business strategy and executive management team.

“There were long days,” he said, “but you never give up.”

As the company steadily improved operating margins during 2002, the restructuring took a major step forward in December when Clarion converted $37.7 million of debt into securities, a move that eliminated $600,000 in monthly interest payments.

Given all that occurred, 2002 was not that bad of a year for Clarion from a purely operational standpoint, Beckman said.

Minus the interest payments, the company was profitable, he said. Converting the debt to securities cleared the way for Clarion to begin posting far better financial results in 2003.

“Operationally, we really did have an excellent year, but we had to get the balance sheet squared away to get the results to show this year,” he said.

Further progress on the restructuring was made April 14 when Clarion Technologies refinanced $14.5 million in debt and secured a $9 million line of credit through Bank One.

The debt restructuring “was sort of the last piece that really puts everything in a very nice situation and poises us to go on,” Beckman said.

The company today employs about 560 people operating manufacturing plants in Greenville, Caledonia and South Haven and the town of Anderson, S.C.

The focus for now, Beckman said, is to continue progress on reducing costs and raising sales “to fill up what we have,” rather than pursue new acquisitions.

“Let’s leverage what we have,” he said. “We have capacity to fill up and we’ll fill that up first.”               

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