Ronald (Ronnie) Warren
Maria Carmen Martinez Sansano
It is with extremely heavy hearts that we share this quarterly report. Over the last several weeks, the Atlas Family suffered two heart-wrenching losses. On Wednesday, September 23, Ronald (Ronnie) Warren, a long-time associate of our Plaster Rock sawmill of Twin Rivers Paper Company, died as a result of a workplace accident. On October 19, an accident at our Alicante, Spain facility of Aludium claimed the life of a longtime associate, Maria Carmen Martinez Sansano.
Ronnie was a devoted son, husband, father and friend. A trusted colleague to all with whom he worked, he brought both skill and dedication to his craft. At Plaster Rock, Ronnie was a member of the joint occupational health and safety committee and recently served as Vice-President of the local union, Unifor 5080. He cared deeply about Plaster Rock, working each day not only to make the company a successful business, but to make it a great place to work. He succeeded on both counts, and that contribution will endure. Ronnie was a pillar in his community, including serving his neighbors as a volunteer firefighter. His funeral service was attended by over 500 people in a community with a population just over 1,100. Our Plaster Rock mill sat idled in his honor to allow his “second family”, his co-workers, to attend the service. They grieved with his wife of 27 years, Wendy, his sons Brandon and Bradley, and all those whose lives were touched by his.
Maria was a devoted wife to her husband Vincente and mother to daughter Paloma and son Ivan-Vincente. Just 45 years of age when she passed away, Maria was a key part of the Alicante workforce for over a decade. Working in metal handling in the finishing area, Maria left a profound legacy at the company through her leadership within the union’s Works Council. Her focus was on creating equal opportunity for all workers, regardless of whether they were male or female, while ensuring that diversity was celebrated. The management and associates at Aludium have told us that Maria’s work made Alicante a better place—and Aludium a better company.
Our responsibilities as owners and managers to improve operational performance and deliver excellent financial outcomes pale in comparison to our responsibility to our people – and in particular, to create workplaces where the possibility of an accident like those that occurred at Alicante and Plaster Rock is reduced to zero. The painful lesson is that industrial workplaces are inherently dangerous and, notwithstanding the dedication that we and our management partners have to creating world-class safety in every workplace, unwavering commitment and constant vigilance are required.
Aludium’s CEO Arnaud de Weert and Twin Rivers’ CEO Tim Lowe are both deeply experienced industrial company managers and strong champions of safety. Arnaud inherited three Alcoa facilities that were steeped in an excellent Alcoa safety culture and the Alicante facility in particular had a history of outstanding safety performance, which had been sustained after our acquisition. The Twin Rivers assets that we acquired did not have the benefit of a heritage of solid safety practices, but Tim and the management team have worked hard to bring a strong safety culture to the Twin Rivers operations, driving significant improvement from the track record prior to our acquisition.
Sadly, the safety legacy at Aludium and the progress we have seen at Twin Rivers did not prevent these tragic accidents from occurring.
These disastrous events force self-reflection and a redoubling of effort aimed at ensuring that the conditions and behaviors that create the possibility of a severe injury or loss of life are eliminated from our workplaces. Even as we attack workplace hazards and increase safety awareness across all of our facilities, the greatest challenge lies in modifying behaviors so that all of us – our managers, supervisors and all of our direct associates – come to appreciate that we each are responsible for not just our health and well-being, but that of our peers as well. Our most intense efforts must be aimed at engaging all of our associates in this undertaking.
We will remember Maria and Ronnie and we will work hard to ensure that their legacy is the continuation of an intense, unyielding focus on workplace safety across all Atlas companies.
Arnaud de Weert
Chief Executive Officer
Atlas Holdings created Aludium LLC (“Aludium”) to acquire the rolling mill assets of Alcoa, Inc. in Spain and France in December 2014. Aludium is an integrated, midstream aluminum system with casting, hot mill, cold mill and finishing capabilities. The company produces coils, sheets, shates and strips for the distribution, building and construction, beverage closure, cosmetic, decorative, foil and other industrial end markets.
In the third quarter of 2015, Aludium posted an RIR of 1.4 for the quarter as compared to 1.3 for the year to date period; however, this metric is unimportant relative to the gravity of the fatality experienced at the company’s Alicante facility, as discussed in the introduction to this report. An investigation of root cause of the incident is underway and, in the interim, the company is focused on supporting Maria’s family and all Aludium associates.
Aludium made significant “carve out” progress from Alcoa during the quarter. The company’s senior management team continued to win the “War for Talent,” making a number of key senior hires across procurement, supply chain and finance departments. The IT implementation is well underway and significant progress was made during the third quarter on Aludium’s IT infrastructure migration, achieving completion at Amorebieta and Alicante.
Operationally, the company performed well during the quarter. Both Amorebieta and Alicante had solid production quarters; however, on-time delivery in Amorebieta suffered in September due to lack of raw material during the early part of the month. Production at Castelsarrasin declined quarter-over-quarter due in large part to complications resulting from a higher mix of automotive product; however, this mix shift will ultimately yield incremental recurring margin for the company.
ASG operates two packaging businesses, with over 1,300 associates serving the consumer products and electronic media industries. Amaray, a provider of plastic injection-molded packaging, operates four manufacturing facilities located in the U.S. and Europe. ASG Print, a provider of creative services and folding carton packaging, operates six manufacturing facilities across Europe.
ASG had a disappointing third quarter with respect to both financial performance and safety. The company incurred three recordable incidents in the third quarter of 2015, resulting in aggregate RIR of 1.5 as compared to 0.3 during the LTM period.
Amaray’s decline in revenue was driven by lower resin costs and the impact of foreign exchange losses on a softening Euro and declining media volumes. While the Elizabethtown, Kentucky facility remains challenged with the start-up of new non-media business, the associated rework has ended and automation to eliminate labor inefficiencies is in the process of being installed. Additionally, a plant leadership transition took effect in October which should help create positive momentum in Elizabethtown.
Amaray continues to make significant progress in adding U.S. non-media business, with new wins in consumer goods and medical products. While U.S. operations have demonstrated the ability to win new non-media business, Europe operations have lagged in securing new business to offset the media decline, creating overhead underabsorption which contributed to the weak profitability in the third quarter.
ASG Print has enjoyed significantly improved profitability this year, which continued in the third quarter. The Polish operations have been performing well, with new business transferred from the Slough, UK facility. The Slough facility has since backfilled the void with new personal care business wins.
Chief Executive Officer – Banker Steel
Henrik Krabsen Jensen
Chief Executive Officer – Veritas Steel
BF Holdings LLC (“BFH”) consists of two subsidiaries, Veritas Steel (“Veritas”) and Banker Steel (“Banker”). Veritas is a leader in the steel bridge fabrication industry, with extensive experience in the manufacture of highly complex bridge structures. Banker Steel is a full-service fabricator of structural steel components used in commercial and infrastructure projects.
BFH delivered strong financial performance but disappointing safety performance in the third quarter of 2015. Veritas’ safety performance improved, but still remains unsatisfactory. The company reported an RIR of 6.6 for the third quarter of 2015 compared to 7.7 for the LTM period. The disappointing safety metrics are primarily attributable to the addition of new associates in the second quarter of 2015. The company is continuing to refine the onboarding process and safety policies to reduce the higher incident rate generally experienced with new associates. Banker’s safety initiatives are beginning to show favorable results. The company reported an RIR of 4.6 for the third quarter compared to an RIR of 8.9 for the LTM period. In fact, Banker’s RIR has fallen continuously since its acquisition by Atlas in the third quarter of 2014.
Veritas’ strong financial performance in the third quarter was driven by increased volume and productivity gains in each of its three facilities. Increased project workload and key additions to the local management team in the Palatka, Florida facility contributed to an increase in throughput. The timing of this improvement is critical as Veritas begins to experience an overall pick-up in the Florida market. Banker enjoyed a strong third quarter as well, driven by high margin work that carried over from the second quarter and a large project at Rockefeller University in New York City that commenced this period.
Market conditions aside, both businesses remain intensely focused on operations and have seen key operating indicators improve as a result. For example, the Banker team has added new visual management tools to the facilities to continue focusing employees on quality, productivity and safety goals.
Recent progress in Congress on a long-term highway bill holds promise for a significant uptick in demand at Veritas. Given the reasonably high capacity utilization rates across the industry, a successful conclusion to this legislative initiative would position Veritas well for 2016 and beyond.
Detroit Renewable Energy
Chief Executive Officer
Detroit Renewable Energy LLC (“DRE”) operates renewable energy generation and distribution assets that provide the City of Detroit with safe, reliable and cost-effective solutions for clean energy and waste disposal. The company was formed in 2010 with the objective of improving the operating efficiency, safety and reliability of Detroit’s existing renewable energy and waste infrastructure: the city’s energy-from-waste facility (now Detroit Renewable Power) and Detroit Thermal’s underground steam loop, serving downtown and midtown Detroit.
The third quarter of 2015 represented the fifth successive quarter of improved financial performance at DRE. DRE had one recordable incident across its business units in the third quarter, which resulted in an RIR of 1.2 as compared to an RIR of 0.7 over the LTM period. Notably, the company’s Detroit Thermal business (“DT”) has now operated almost five years without a recordable incident.
Detroit Renewable Power (“DRP”), our energy-from-waste facility and DRE’s largest business unit, experienced a few unplanned operational setbacks during the quarter. Though disappointing, these operational setbacks only marginally impacted performance. Slightly lower utilization took a modest toll on revenues, with volumes of waste and corresponding tip fees and metals sales declining. Municipal solid waste receipts for the quarter averaged slightly lower tons per day when compared to the same quarter in 2014, while steam sales to General Motors were adversely impacted compared to the second quarter of 2015 due to planned downtime at GM’s Hamtramck, MI facility.
Chief Executive Officer
Founded forty years ago, Erickson Construction (“Erickson”) is one of the leading providers of construction services and prefabricated building components in the western United States. Erickson helped pioneer the concept of complete framing systems and continues to lead the industry with state-of-the-art, computer-assisted production facilities in both Arizona and California. Atlas Holdings formed Erickson by acquiring the company’s core assets from Masco Corporation in 2012.
Erickson showed significant financial and safety improvement this quarter. The company reported an RIR of 5.7 in the quarter, an improvement from 13.7 in the same quarter of 2014 and 6.3 for the LTM period.
In the third quarter seasonal peak, Erickson’s workforce swells with new hires and these workers have less experience and less exposure to Erickson’s rigorous safety culture. Consistent with prior experience, nearly half of the recordable incidents incurred in the quarter were experienced by employees with fewer than three months’ tenure with Erickson. Fortunately, the number of injuries was far fewer than prior years. Prior to our acquisition of Erickson, the third quarter of 2012 RIR exceeded 20.0. We expect the positive safety trend to continue.
Arizona Framing (“AZ Framing”) has experienced a significant uptick in demand. During the quarter, AZ Framing built more houses than in any quarter since the acquisition of Erickson in 2012. Labor shortages in all phases of construction in the Phoenix market helped pricing, while improved labor performance at Erickson boosted bottom line results. The California Framing division, which includes the Nevada Framing operations, also had solid results in the quarter. Consistent with prior quarters, Nevada Framing continued to generate steady positive EBITDA. The Reno market has been strong, and recent announcements of high-paying jobs coming to Reno (e.g. a new Tesla battery factory) should continue to provide positive momentum. Operations in California also delivered strong performance. The company has built significant backlog that should help mitigate the seasonal slowdown typically experienced in the winter months.
Erickson’s door molding and millwork business (“DSI”), co‐located with AZ Framing, reported a profitable third quarter. DSI experiences a different seasonal cycle than the other divisions and serves as a nice stabilizer during the seasonal slowdown in the framing divisions. Erickson is well-positioned geographically in some of the most attractive residential construction markets. As momentum builds, major homebuilders expect to continue construction during the winter months, traditionally the seasonal trough.
President and Chief Executive Officer
Having begun as a family-owned sawmill, lumberyard and quarry business 145 years ago, Finch Paper LLC (“Finch”) is a premier, vertically integrated paper manufacturer specializing in high-bright, uncoated papers for North American printing and converting markets. Using advanced manufacturing systems, Finch produces a broad portfolio of opaque, text and cover and digital papers for multi-press environments.
Our YTD recordable incident rate for 2015 is 2.8, down from 2.9 after three quarters of 2014 and improved when compared to the last twelve month period. Our commitment-based safety program will leverage experienced, on-site training consultants for the remainder of the year to ensure a safe workplace and enhanced performance.
Market conditions remain soft despite some improvement in demand near the end of the quarter. Overall, the uncoated freesheet market declined during the quarter, while total Finch sales slightly rose, driven primarily by core grades growing with our top 20 customers. Although there are market headwinds in a number of product categories, we continue to implement our strategy of product and customer diversification which will allow us to slowly and methodically stabilize pricing in our largest volume categories. We continue to run at full capacity despite an unfavorable industry operating rate, which declined compared to the first nine months of 2014.
Financial results continue to be driven by strong operational performance and improved selling prices. Our robust sales pipeline displayed momentum with new customers, new products and markets, and provided an increase to selling price for the second straight quarter. Paper and pulp mill production increased versus the second quarter of 2015. Our procurement efforts continue to drive down variable operating costs as we capitalize on favorable input markets.
The third quarter of 2015 represented the 7th consecutive quarter of trailing twelve month EBITDA growth driven by our focus on safety, quality, productivity and sales diversification. Additionally, we continue to execute our continuous improvement plan that will position the organization to perform regardless of industry conditions.
Greenidge Generation Holdings
President and Chief Executive Officer
Greenidge is an environmentally sound power generation facility located in Dresden, New York. Atlas is in the process of reactivating this facility and is preparing to return it to market upon conclusion of regulatory review.
While Greenidge Generation Holdings LLC (“Greenidge”) remains in protective lay-up, positive developments relating to reactivation have occurred in recent weeks. On July 30, 2015, the New York Department of Environmental Conservation (“NYDEC” or “Department”) deemed the facility’s Title V Air Permit complete, triggering the commencement of a public comment period that concluded on September 11, 2015.
On October 26, 2015, NYDEC formally provided both Greenidge’s proposed Title V and Title IV Acid Rain Permit to the U.S. Environmental Protection Agency for a required 45 day review. Accompanying the permits was a “Response to Comments” Memorandum prepared by NYDEC. That document argued persuasively that the factual and legal analyses conducted by the Department supports reactivation of the facility. Final Permits will be issued unless an objection is raised by USEPA. In the interim, we continue to prepare to return this power generation facility to market as soon as possible.
President and Chief Executive Officer – Bridgewell Resources
President and Chief Executive Officer – Merchants Metals Inc.
Guardwell Distribution LLC (“Guardwell”) has two divisions, Bridgewell Resources (“Bridgewell”) and Merchants Metals LLC (“MMI”). Bridgewell is a leading supplier of construction products, utility supplies, wood products, food ingredients and crop inputs, together with logistics services, to suppliers and customers across the globe. MMI is one of the nation’s largest manufacturers and distributors of fencing products and accessories in the United States.
MMI performed solidly in its second quarter under Atlas ownership. While the company exceeded expectations overall, financial performance was adversely impacted by two significant events in the quarter: (i) supply chain issues, which extended lead times to contracted customers; and (ii) the decision by MMI’s largest supplier to exit the industry. By quarter’s end, the MMI leadership team had largely solved the supply chain issues through a modification of legacy inventory management protocols. In addition, the MMI team took initial steps to address supplier concerns, which may create additional benefits.
The new MMI leadership team has approached safety from two fronts; manufacturing sites and service centers. After six months, manufacturing operations have adapted well—associates are actively participating, the safety culture is improving, and we’re seeing tangible results. Conversely, at service centers we’ve experienced a doubling of recordables, as associate engagement and an ownership mentality have been slower to take hold.
Substantial progress was made this quarter regarding transition services, including commencing implementation of a new ERP system and the hiring of three IT professionals to manage infrastructure, email and ERP. MMI also continued to execute its aggressive 80/20 program, part of an Atlas-wide initiative for continuous improvement, which disciplines the organization to better focus its capital and human resources on the 20% of activities, products and customers that produce 80% of the value to the enterprise. During the quarter, MMI also added a new VP of Sales and Marketing, a Regional VP for Eastern Operations and a Director of Human Resources. The “War for Talent” remains a paramount part of the Atlas Operating System, and the MMI team has fully embraced its importance.
Bridgewell continued to experience the impacts of the significant transition undertaken in the second quarter. In May, management executed a restructuring of company operations to better focus resources on its best performing businesses, exit unprofitable businesses and reduce corporate overhead. The restructured business is now focused on four primary divisions: Contractor Direct (“CD”), Utility & Construction (“U&C”), Food & Agriculture (“F&A”) and DWP.
Motus Integrated Technologies
Chief Executive Officer
Motus Integrated Technologies (“Motus”) is a leading global manufacturer of automotive headliners and a variety of unlit, illuminated and auxiliary coverage sun visors. The company has one of the industry’s broadest and most technologically advanced product portfolios. In 2014, Atlas Holdings formed Motus to acquire certain assets of technology and industrial giant Johnson Controls. Motus acquired the assets of Leon Plastics, Inc. (“Leon”) in 2015. Leon is a premier supplier of highly-engineered automotive decorative soft interior trim components, including door and console armrests, instrument panel trim, and interior handles.
Motus delivered solid performance during this quarter. It also achieved a very significant milestone when it completed its transition off of the JCI IT systems and “stood up” on its own enterprise resource planning (“ERP”) platform. Safety results were generally disappointing, as Motus delivered an RIR of 2.4 as compared to an RIR of 1.1 for the LTM period. Our new plant manager at the Uberherrn Germany headliner facility, who began at the end of this quarter, is performing daily safety walks and focusing on improving the safety culture as a top priority. The Ramos, Mexico facility suffered its first recordable incident of 2015, ending a 278 day streak without any incidents. Leon’s plants achieved relatively good safety performance, delivering an RIR of 0.5 which was the best performance yet under Motus ownership. This improvement reflects the increased amount of control and stability the Motus management team has brought to Leon since acquisition.
Motus and Leon had solid operational performance during the third quarter. On the commercial front, it was an important one for both Motus and Leon. Motus North America won three key programs during the quarter: the BMW X5, X6 and X7 sun visor program, the Toyota Avalon sun visor program and the Volkswagen KBB40 sun visor platform. The VW KBB40 program was awarded as a global platform in both Europe and North America. In addition to the BMW X5, X6, and X7 sun visors, Motus Europe also won a Rolls Royce sun visor program as well as an important headliner program with Peugeot. Motus Europe also received confirmation from VW that Motus would remain the supplier of an important VW Transporter van headliner and sun visor program. At Leon, the commercial team continued efforts to regain customer trust following the period of distress prior to our acquisition. The reception has been generally positive, aided by steadily improving operating performance.
Perhaps the most significant accomplishments during the quarter relate to progress made in transforming Motus into a stand-alone enterprise. Motus continued its “War for Talent”, filling a total of 23 positions across many different functions and levels. On the IT front, Motus completed its migration from JCI’s ERP system. Uberherrn and Creutzwald were the last two sites to be migrated and also the most complex. The transition went relatively smoothly, eliminating a major element of the transitional “carve-out” risk.
New Wood Resources
President and Chief Executive Officer
New Wood Resources LLC (“New Wood”) consists of three subsidiaries, Olympic Panel Products and Omak Wood Products both located in the State of Washington and Winston Plywood & Veneer in Mississippi. New Wood companies are engaged in producing and distributing wood panels for industrial and commercial customers in North America.
While New Wood continued to make rapid progress on the construction of its state-of-the-art plywood manufacturing facility in Louisville, Mississippi during the quarter, performance at its Omak Wood Products LLC (“Omak”) business unit was disappointing. While safety improved at Omak, financial performance did not meet expectations. The company had four recordable incidents during the quarter, resulting in an RIR of 3.7 during the quarter compared to an overall RIR of 4.5 for the LTM period.
Omak had a challenging quarter on several fronts. The mill continued to experience inconsistent production due to downtime across a number of its machine centers. The operational issues were further complicated by historic wildfires in August that devastated the region and impacted about 180,000 acres of the Colville commercial forest which serves Omak. While the fires did not directly harm the mill, the damage to the Omak community was severe. The fires created turmoil in operating schedules as associates were focused on caring for their homes and families and log deliveries and product shipments became difficult. The extent of the damage to the surrounding timber basket remains uncertain. This damage will be carefully assessed in coming months as it relates to the long-term implications for Omak.
Olympic Panel Products LLC (“Olympic”) continued to operate well despite continued distractions associated with this unit’s sale earlier this year. In March 2015, New Wood sold Olympic to Swanson Group Manufacturing LLC (“Swanson”), a Pacific Northwest forest products company. Ultimately, Swanson intends to relocate the Olympic assets into a facility currently under construction by Swanson no later than June of 2016. Until then, Olympic is being operated by our team and the economic benefit or losses are for our account.
Winston Plywood LLC (“Winston”) made significant progress during the quarter. The construction of the new plywood mill progressed sufficiently during the quarter to allow the equipment installation to begin in earnest - commercial operations remain scheduled to commence in early 2016. The management team remains focused on the equipment installation schedule, orchestrating the staffing start-up, refining the commercial strategy and production ramp-up plans.
Chief Executive Officer
NOVIPAX Holdings LLC (“Novipax”) is the leading producer of absorbent pads for the meat packaging industry and one of the top manufacturers of expanded polystyrene foam trays in the United States. The company was created by Atlas Holdings’ acquisition of the Trays and Pads business of Sealed Air Corporation in April 2015. It serves more than 150 food processors, supermarkets and food packaging distributors through its five manufacturing facilities.
Novipax delivered strong financial performance but disappointing safety performance during the third quarter of 2015, our second quarter of ownership. The company incurred seven injuries, resulting in an RIR of 3.4 in the quarter as compared to 1.4 for the LTM period. The business historically lacked a central safety leadership presence that ensured consistency from plant to plant. Novipax is highly focused on closing gaps in safety processes and establishing safety training protocols as well as active, structured safety committees.
Several important initiatives advanced this quarter. For example, carve-out activities to move off of shared resources provided by former parent Sealed Air Corporation proceeded according to plan. Sales functions have been completely transitioned to in-house resources and the company hired Jeff Williams as CFO. Jeff most recently served as CFO of the North America Food and Consumer Packaging Division of Coveris, where he reported to Novipax’s current CEO, Bob Larson. Hiring of plant cost accountants, controllers and other finance staff in the third quarter is beginning to remedy the business’ historical lack of insightful financial and operational data.
Operationally, Novipax has focused on instituting business processes and infrastructure. The operations team has begun continuous improvement process training, creation of a strategic sourcing plan and creation of a demand and production planning process. On the sales front, Novipax has invested in extensive product, technical, strategic negotiation and value-based selling training for its salesforce, which is largely composed of new hires. Novipax has also implemented a disciplined new product development process (neglected under prior ownership) to drive innovation.
The Pangborn Group
Henrik Krabsen Jensen
President and Chief Executive Officer
With roots dating back to 1873, the Pangborn Group (“Pangborn”) provides superior surface preparation solutions through a broad range of wheel-blasting, shotpeening and air-blasting equipment and services. Its products are utilized in an array of industries including aerospace, automotive, defense, energy and foundry.
This will be Pangborn Group’s last appearance in our quarterly report. On October 30, 2015, Pangborn was sold to United Generations LLC after more than nine years of ownership by Atlas. We succeeded by doing what Atlas does best; partnering with a great management team, skilled associates and loyal, blue-chip customers to drive value creation. In so doing, we re-established Pangborn as the “go to” shot blast and air blast equipment and services provider in the global marketplace.
Phoenix Services International
Chief Executive Officer
Phoenix Services International LLC (“Phoenix”) provides responsive, world-class service to steel producers around the globe. The company was formed in 2006 through the acquisition of Thor Mill Service Inc. by a partnership of Atlas Holdings and experienced operators in the mill services sector. Through a management team that brings decades of experience and innovation to its customers around the globe, Phoenix provides steel mill services that include slag handling, metal recovery and equipment rental.
Phoenix reported an RIR of 1.7 for the third quarter of 2015, which compares favorably to a 2.4 in the third quarter of 2014. The company continues to grow domestically and internationally. The new site of a 20-year service contract with CSP (Companhia Siderúrgica do Pecém), a green-field steel mill under construction in Fortaleza, Brazil, is being prepared with a new anticipated start date of March, 2016. Also, Phoenix Services’ new site at US Steel’s Kosice, Slovakia facility started in July, 2015, on time and under budget. The site has performed to plan for the past three months and is expected to continue as we start a new service next month operating a pelletizer and briquetter. Phoenix has also been awarded a new service contract with Nucor Gallatin, KY with an expected start date in November, 2015. This more than offsets the lost revenue from the closure of the Arcelor Mittal Georgetown mill in July.
While Indiana Harbor East continues to outperform despite a downturn in the global steel business, most mills in the U.S., France and South Africa are operating below budgeted LST. This downturn, coupled with the closure of the Arcelor Mittal Georgetown mill and the loss of packaging contract in Calvert, has resulted in declining revenue and EBITDA. Also, strong headwinds in foreign exchange rates have significantly reduced international EBITDA for the company.
President and Chief Executive Officer
RedBuilt LLC (“RedBuilt”) was formed by Atlas Holdings in 2009 to acquire the assets of the Trus Joist Commercial division of Weyerhaeuser Company. The company is a leader in the design, manufacture and support of proprietary engineered structural wood products for commercial, industrial and multi-family residential building applications.
RedBuilt continued to post solid safety performance. Year-to-date, five RedBuilt Associates have experienced minor injuries, resulting in a recordable incident rate of 2.1. All safety incidents and near mishaps are investigated, key learnings and trends are shared, and corrective actions implemented. Several locations have engaged OSHA and will use the SHARP certification process to help drive world class performance across the organization.
Commercial construction activity in our core western markets is down versus last year, driven by reduced California opportunities, most notably school construction, declines in Eastern Washington fruit storage construction, and fewer McDonalds restaurants built. Additionally, revenues in our Industrial segment, which consists of scaffold plank and concrete forming products, have seen a significant quarter-over-quarter decline. Slower than expected housing starts have diverted some competing engineered wood products manufacturers’ production output to these price sensitive Industrial markets. The recent AIA’s Architecture Billings Index (“ABI”) and the Dodge Momentum Index, which reflects a nine to twelve month view of future construction spending, continue to forecast moderate improvement in commercial construction for 2016.
Raw material costs have continued to trend flat to up slightly, though within a narrow band. As overall construction continues to expand, we expect to see improvements in future performance on both volume and margins.
Soundview Paper Company
Chief Executive Officer
With operations in New Jersey and Vermont, Soundview Paper Company (“Soundview”) is a leading, world-class manufacturer of recycled and virgin fiber towel and tissue products for the At-Home and Away-From-Home markets in North America. The company commenced operations in April 2012 when it acquired the equity and debt of Marcal Paper Mills, LLC.
Soundview continued “turnaround 2.0” in the third quarter, recording positive EBITDA for the second consecutive quarter. On the safety front, Soundview recorded an RIR of 1.6 for the third quarter of 2015, a deterioration from the LTM period of 1.0. Management remains committed to achieving world class safety performance and continues to drive employee accountability and safe work practices. Soundview Vermont’s safety performance continues to hold steady at zero for the LTM period, showing remarkable improvement after a full year RIR of 12.7 at the time of this unit’s acquisition in 2012.
Key initiatives noted in last quarter’s report are producing results. For example, Soundview’s Sales and Operations Planning process continues to reduce costly outsourcing while improving customer service. Management is leveraging business analytics tools to optimize the profitability of the current sales mix through measured operational improvements. Parent roll sales continue to increase along with selling price relative to the second quarter. Late in this quarter, Soundview also developed a high-brightness recycled parent roll as another tool to secure both improved pricing and profit, as well as future volume.
Important steps were also taken to further bolster Soundview’s leadership team. Sales and Distribution Executive John Glaze was brought on as Executive Vice President of Sales and Marketing. John brings to the business three decades of senior-level sales leadership experience. Bambi Gorman also joined as Vice President of Commercial Operations. Bambi has over twenty years of packaged goods category and pricing management experience, most notably at Kimberly-Clark and Cellu-Tissue. We expect these additions to further accelerate Soundview’s positive momentum.
President and Chief Executive Officer
Tecumseh Products Company is a global manufacturer of hermetically sealed compressors for residential and specialty air conditioning, household refrigerators and freezers, and commercial refrigeration applications, including air conditioning and refrigeration compressors, as well as condensing units, heat pumps and complete refrigeration systems.
In September 2015, Atlas Holdings, together with Mueller Industries, acquired Tecumseh after the successful completion of a tender offer for Tecumseh’s outstanding shares. The transaction and partnership mark several “firsts” for Atlas; the transaction was the first acquisition of a public company and the joint ownership with Mueller represents the first operating partnership with a public company. Under the new ownership structure, Tecumseh will continue to operate as a standalone business.
Since closing the acquisition, we have spent significant time working with management on strategic planning. We expect the business to demonstrate more flexibility and more rapid decision-making, with an objective of driving long-term success. We are excited about the opportunity at Tecumseh and look forward to a strong, long-term partnership with Mueller.
Chief Executive Officer
Twin Rivers is a leading integrated manufacturer of lumber, specialty packaging, label and publishing paper products. The company operates a paper mill located in Madawaska, Maine, a pulp mill and cogeneration plant located in Edmundston, New Brunswick, and a lumber mill located in Plaster Rock, New Brunswick. Atlas acquired a controlling interest in the company in June 2013, in partnership with Blue Wolf Capital.
As mentioned in the opening of this Report, Twin Rivers suffered a heart-wrenching loss with the death of Ronnie Warren, a long-time, dedicated and well-respected employee at the Plaster Rock sawmill. Overall, the company’s RIR during the third quarter was 2.9, a significant drop from 4.7 for the LTM period. Improved safety performance at Madawaska, which had no recordable incidents during the quarter, was offset by higher incident rates in Edmundston and Plaster Rock.
From a commercial standpoint, the market environment in North America continued to prove challenging. Through the first eight months of 2015, industry-wide North American demand for printing and writing grades declined. In uncoated freesheet, North American operating rates (defined as shipments relative to capacity) were down from the prior year period. In uncoated mechanical papers, North American shipments were off through the first eight months of the year. Despite these market headwinds, the commercial and technical development teams at Twin Rivers have done an admirable job, expanding into new high-margin paper grades and staying highly relevant to the company’s core customer base.
The company’s management team is executing against its plan to protect share in core markets, such as religious and pharmaceutical papers, while aggressively pursuing opportunities in highly profitable new product categories, such as sugar packet packaging papers. In the past two years, the company’s product mix has meaningfully shifted away from lower value-add tonnage into profitable grades serving growing end-markets. Management continues to focus on proactively combatting the long-term strategic challenges posed by Twin Rivers’ largest machine, which has exposure to publishing grades in secular decline.
The company’s lumber operation in Plaster Rock continues to underperform. Units sold (measured in Mfbm) decreased sequentially quarter-over-quarter. However, Plaster Rock’s average net selling price per Mfbm increased during the second quarter as a result of beginning the period with a relatively high degree of premium lumber inventory due to stronger production and finishing. While it has taken longer than anticipated to effect the turnaround of the lumber operation, we believe Plaster Rock can be a primary source of value creation over coming years.
Our Atlas Foundation Partner
Create Common Good
Chief Executive Officer
Create Common Good (CCG) uses food to change lives and build healthy communities by providing job training and placement services to individuals with barriers to employment. These individuals include refugees, those previously incarcerated, women overcoming domestic violence situations, those experiencing homelessness, and others. CCG is a 501(c) 3 non-profit social enterprise that does not rely exclusively on donations and grants, but also operates a business-to-business food production kitchen as a way to generate diversified revenue and create sustainability for our job training programs.
Year to date, we have trained 98 individuals, exceeding our 2015 goal of 90. Compared to 70 trained in 2014, we are poised to realize over 50% growth. Currently, 71% of our trainees have non-native English speaking barriers. With refugee resettlement and related global issues at the forefront of our news, we expect demand for our job training and placement programs to grow as populations continue to be displaced and migrate to our community.
Jacksons Food Stores continues to be our largest customer and we launched production of nine, highly anticipated new convection products late September for rollout in stores on October 21. We anticipate the addition of this production will double our current monthly revenue. Additionally, Mobley’s Handcrafted Ice Cream is an artisan vegan dessert company that brought production to CCG in July. Since launching, they’ve transitioned from commercial to retail sales with preliminary success and are now exclusively located in both Boise Co-op locations (a local natural-foods grocery store).
In other news, our former President & COO, Don Berry, has successfully transitioned into retirement and we welcomed Tracy Hitchcock as our new CEO in September. Tracy comes to us with a strong background in global foodservice and leadership along with a true passion and long history of love in action with CCG. In her first few weeks, she has focused on fortifying our food safety processes and GMPs (good manufacturing practices) while learning about operations and getting to know both our staff and trainees on a deeper level. As the previous Director of Global Innovation for a $6 billion family-owned company, Hitchcock will focus on large-scale growth and attracting business customers with national and global footprints. Looking to the next 12-24 months, she plans to focus our strategy on ensuring a stable business foundation that allows us to continue to grow our training programs and provide relevant food solutions while expanding our customer base.