Friday, March 11, 2011

Inventory Valuations Get Sticky

The GoIndustry Dovebid Valuations Team was recently engaged by an Asset Based Lender (ABL) to reappraise a manufacturer of self adhesive tapes.  Following a successful MBO supported by an ABL facility, the lender required an inventory reappraisal in order to assess the performance post buy-out.

The company manufacture as well as buy in adhesive tapes in various forms, with inventory on hand comprising of raw materials, work in progress and finished goods.  The work in progress is mainly produced to order and therefore in its own right would generate a relatively high value in an exit scenario. Raw materials together with the factored finished goods were reviewed for ROT, resulting in raw materials being eliminated and an element of finished goods due to the easily identifiable nature of the goods.

Raw Material price pressures had resulted in margins lowering, however with inventory turn improving our overall reported NOLV % was broadly similar to our prior appraisal resulting in the lender maintaining the facility at the same level. The appraisal involved two valuers visiting the company over one site day with site work included a test count, three different cost tests, retention of title and slow moving analysis and an exit cost calculation amongst other tests.

For more information on GoIndustry DoveBid inventory appraisals then please contact the GoIndustry DoveBid Valuations Team.

Wednesday, March 2, 2011

Locomotive Manufacturer

The GoIndustry DoveBid Valuations team was awarded an assignment to appraise the assets of a large locomotive manufacturer.  The company is one of the largest North American privately held global providers of new and remanufactured locomotives, locomotive products and wheel services. This represents the first time the company was to use an asset based lending (ABL) financial structure.  Additionally, the client had a very tight time frame.  The Go-Dove team provided multiple values on approximately $150 million of assets encompassing 9 facilities containing over 275 acres in more than 1.3 million square feet under roof. 

About the Rail Industry: 

The US railroad equipment manufacturing industry includes about 175 companies with combined annual revenue of about $13 billion. The railroad equipment ("rolling stock") industry is highly concentrated: the 20 largest companies account for nearly 90 percent of revenue.  The economic downturn over the past couple of years has impacted many companies in the rail industry.  However, it appears the rail industry is near rolling to better days:

  • Modern 6 axle road locomotives have been pushed hard during the recession and are showing signs of accelerated need for overhauls.
  • Older Core locomotives have been stored or have had deferred maintenance to keep operating costs down. (Pay me now or pay me later). We are now at the pay me later. 
  • Shortline Rail customers are back in the market.  These customers that were short of good dependable power before the recession are coming back into the market for locomotives.
  • Deferred maintenance by all of the railroads is causing an increase in demand for replacement parts and services.  Since a big part of the market place is shortline railroads, qualified or running takeout parts at a fair price will see increasing demand.
  • In May of 2010 rail traffic was increasing enough to start pulling both cars and locomotives out of storage. Railroad system velocities have remained relatively high and terminal dwell times have remained relatively low during the increase in traffic without the difficulties normally experienced in the past. It appears that both the slow recovery from the recession and the positive effects of the massive railroad CAP X programs are paying off for the railroads.

This is another prime example of how GoIndustry DoveBid has exercised its asset intelligence to assist others in making key strategic decisions for finance purposes.