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Shopsmith in 'precarious financial condition'
Wednesday, March 07, 2007
DAYTON — Shopsmith Inc., the woodworking tools manufacturer which has told its shareholders that it is in "precarious financial condition," is paying a turnaround firm $10,000 a week to try to save the company.
Shopsmith informed shareholders that it has given Plan B Associates, a Chicago-based management firm that works with distressed companies, day-to-day decision-making power and about a year to improve the company's performance.
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According to Shopsmith's letter to shareholders, the goals for the overhaul include increasing revenue by 10 percent for the bookkeeping year that will end in March 2008, and achieving pre-tax earnings of at least $250,000. Shopsmith cannot guarantee that the turnaround effort will work, according to the Jan. 31 letter signed by Robert L. Folkerth, company president. The Dayton Daily News obtained a copy of the letter this week.
For the most recent bookkeeping year ended April 1, 2006, Shopsmith had sales of $11.1 million and a loss of $649,000, compared with sales of $13.4 million and a $771,000 loss the prior fiscal year. The Dayton-based company's last profit was $130,000 on sales of $13.8 million for the year ended April 3, 2004, said Mark A. May, the company's vice president for finance and chief financial officer.
May declined on Wednesday to discuss Shopsmith's performance for the current year that will end March 31.
Asked how the reorganization plan will be achieved, May said: "Increasing the value of the company, primarily by expanding sales."
He declined to discuss the efforts intended to increase sales.
Shopsmith's primary product is the Mark V woodworking machine, plus accessories for it. Traditionally, the company sends sales representatives to market the products at state fairs, home shows and Lowe's home improvement stores, to complement sales via telemarketing, catalogs and the Internet.
The field sales promotions are costly and detract from profits, said Neil Willis, a Shopsmith shareholder and former sales representative who lives in Kettering.
"It's pretty obvious they needed to make a change," Willis said. "It's a quality product ... but they spend all their money marketing it. That's where their profits go."
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
