Waterman stays in the black

Waterman Industries, Inc. announced last week that it has had six consecutive months of positive cash flow since entering Chapter 11 on Feb. 10 to resolve its $19.3 million debt.

Waterman Industries, Inc. and an affiliate company, Waterman Industries Sales, Inc. each filed separate Chapter 11 proceedings - where the company maintains control during a court-supervised reorganization - following enforcement actions by its primary secured lender. Since the reorganization, Waterman Industries Sales has sold off almost all of its assets and will shortly convert to Chapter 7 - the sale of assets to pay off creditors - to finish the liquidation of the few remaining assets. Waterman Industries, Inc. is one of the largest creditors of Waterman Industries Sales and anticipates receiving a distribution once the liquidation is complete.

Ken Leddon, the chief restructuring officer to Waterman Industries, Inc. said, "Since the petition was filed, Waterman Industries, Inc. has made much progress. There have been six straight months of profitable operations. Employment costs are down sharply. Costs of materials are down as well. Costs for employee benefits are also down."

Birch Brown, Chief Operating Officer, reports that the conversion to Chapter 7 by the affiliate company will not adversely affect Waterman Industries, Inc. at all. Brown also said that the company is working on a plan to further create an incentive-based structure for the sales representatives and expect this to be circulated within the next 30 days.

"It is important to our reorganization to stimulate sales and a strong dealer network is vital to our success," Brown said.

Background

Waterman Industries laid off about 180 employees until further notice on Friday, Feb. 6 after announcing it was suspending operations indefinitely due to "unforeseen business circumstances, that include unexpected actions taken by our bank."

The unforeseen circumstances was a cash crunch created by the closure of the company's foundry and pattern operations plant in 2002.

At that time, Appling said the plant had consistently lost money due to increasingly strict environmental standards, which doubled the cost of making castings that were less expensive to purchase from out of state. Manufacturing of the company's castings for irrigation and water control systems were transferred to out-of-state suppliers. When the doors of the plant on the corner of G Street and Firebaugh Avenue in Exeter closed, more than 50 employees lost their jobs. Unanticipated cost overruns associated with shutting down the foundry in 2002, market conditions, substantial increases in workers' compensation and benefit cost increases combined with lower than expected sales due to insufficient cash to fill existing orders all contributed to Waterman's financial crunch.

A small crew of administration and sales staff, about 20 people, continued to work while the company went through the bankruptcy process. The company has brought back an additional 49 employees since the reorganization. The current staff includes 44 employees in manufacturing, 23 in administration and sales and two in their Texas division.

Located on Spruce Road south of Exeter, the irrigation valve manufacturer has been family owned since 1912 and has historically employed a significant number of local residents. The company has been an industry leader worldwide in irrigation components throughout its history.

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