The Real Crown Jewels

The recent motion by Trainor Glass asking the U.S. Bankruptcy Court if it could sell some of its assets certainly set tongues a ‘waggin. But these assets are chump change compared to the biggest jewel left hiding in Trainor’s crown. And here’s my guess as to where that went.

First, some background. As you remember, Trainor Glass, one of the largest contract glaziers in the country, filed a Chapter 11 bankruptcy in mid-March. Amid all the many legal filings was in mid-May requesting that Court approve the sale to Harmon Inc. of substantially all Trainor’s machinery, tools, supplies and other tangible property from four locations (Florida, North Carolina, Texas and Virginia). Excluded were all office and computer equipment, and things like furniture, boats (boats?) and videoconferencing equipment, among other items. One GC has protested the sale, but that has since been resolved.

So Harmon Inc. was able to pick up a bunch of machinery quickly but not at bankruptcy sale prices. What gives? Here’s my speculation.

At first glance, it might look to anyone familiar with the industry that Harmon Inc. had overpaid for a bunch of equipment until you think about what that equipment is being used for. Add to that the fact that Harmon picked up Trainor’s president, Brian Clark, and a number of its project managers with lightening speed and the purchase makes sense.

The biggest asset that Trainor had was its multi-million backlog and much of that backlog was made up of projects underway in four states—Florida, North Carolina, Texas and Virginia. The company had reported its 2011 sales to USGlass magazine as $110 million. Even if it had run through half that backlog in ’11 and not sold a single job in the first three months of ‘12, that still leaves projects totaling more than $50 million to finish.

Once Trainor filed for bankruptcy, the completion of those jobs became the responsibility of the surety guarantors—the companies that had bonded the jobs. And Harmon Inc. was able to turn, with lightening speed, to those bonding companies and make a deal with them while being able to keep the same project management brain trust working on them.

Once it secured the business, Harmon Inc. would now have to produce it, requiring equipment and machinery to do so. And why would you buy new at higher prices and wait for it, when the very same equipment was also already at the jobsite? You wouldn’t. You would see if you could quickly buy what was already there and available. This is also one of a very few quick sale scenarios that would appeal to a Bankruptcy Court.

Going back 24-36 months, it seemed that Apogee had put Harmon Inc. more on life support than a growth plan, but not any more. If I’m right, kudos to Harmon Inc. for some brilliant, quick moves that gave it a keen advantage in the contract glazing world going forward AND reminded everyone it is a force with a growth plan in place.