Rexnord Corporation - Company Profile, Information, Business Description, History, Background Information on Rexnord Corporation

4701 Greenfield Avenue
Milwaukee, Wisconsin 53214
U.S.A.

Company Perspectives:

The company's mission is to be a leading marketer and world class man ufacturer of power transmission, aerospace, and specialty components, products & systems and provide superior growth and command susta inable competitive advantage.

History of Rexnord Corporation

Rexnord Corporation is a major supplier of power transmission and con veying components to a variety of industries around the globe. Headqu artered in Milwaukee, Wisconsin, the company operates from more than 35 manufacturing locations worldwide. Products include power transmis sion components; bearings; brakes, clutches, and electronic component s; conveying equipment, including bucket elevators, industrial elevat ors, and apron conveyors; couplings; drive products; engineered chain and roller chain; and more. Rexnord was acquired by The Carlyle Grou p in 2002 and was reorganized under the parent company RBS Global Inc . In 2005 Rexnord acquired its own Milwaukee neighbor, gear and coupl ing manufacturer The Falk Corporation.

Origins in 1892

The company was first incorporated in Wisconsin on February 20, 1892, as the Chain Belt Company, to manufacture a chain belt that would re place the leather belting then used to drive agricultural equipment. The company was established in Milwaukee by inventor C.W. LeValley an d two foundry operators, F.W. Sivyer and W.A. Draves. After proving t hat chain belts worked well on farm machinery, the concept was applie d to conveying equipment and construction machinery. During the 1890s the company manufactured chain-driven material handling conveyors an d bucket elevators for Milwaukee breweries. The company also worked w ith customers to develop chain drives for new applications.

By 1894 the company had started developing international markets, wit h the export of chain to Europe and the opening of a sales office in England. The company paid its first dividend that year and would neve r miss a dividend payment as long as it was a publicly owned company.

The company reached its first significant milestone in 1913, when ann ual sales reached $1 million. At that time the company's products were organized into three major divisions: chain products for power transmission; a line of chain-driven construction machinery; and chai n-powered bulk conveying equipment. In 1914 it introduced the Rex bra nd-name, which was first used on a chain-driven concrete mixer. It so on became a widely recognized trademark.

Sales continued their upward trend throughout the 1920s and 1930s. In 1941, sales passed the $10 million mark for the first time. Rese arch and development was credited with the growth in sales, as the co mpany focused on developing new products, new methods, and new market s. It was the beginning of Rexnord's tradition of manufacturing techn ologically advanced products of the highest quality.

Growth and a Name Change in the 1960s

At the beginning of 1964 the company changed its name to Rex Chainbel t, Inc. Sales for the year reached the $100 million mark for the first time. A highly developed marketing and distribution system was in place. A growing commitment to international development had resul ted in increased sourcing capabilities around the world. The company' s product development efforts focused on several promising growth are as.

Under the company's new management sales went from $100 million t o $1 billion in a 25-year period. William C. Messinger joined the company in 1963 as president and in 1967 became chairman of the boar d, with Robert V. Krikorian as president. Under their leadership, Rex nord would grow from a small capital goods manufacturer into a highly diversified corporation serving worldwide markets with sales surpass ing $1 billion by 1980.

It was in the late 1960s that management set the company on a new cou rse, to minimize the business cycles that capital goods companies wer e subject to. Prior to this time, sales followed a cyclical pattern, with two or three good years followed by a down year. The company's n ew strategy called for a broader line of products, especially those t hat were consumed in use or required proprietary replacement parts. M anagement felt that demand for these products would continue, even wh en capital spending had to be curtailed. The goal, therefore, was to build a portfolio of businesses with offsetting economic cycles as we ll as to achieve geographical diversity by operating on an internatio nal basis.

When Messinger later retired in 1980 at the age of 65, more than half of Rexnord's sales came from components and replacement parts. Two c ountercyclical business segments, process machinery and environmental control equipment, accounted for approximately one-third of total sa les, and international sales accounted for 28 percent of the company' s total revenues.

Acquisitions in the 1970s

In 1970 the company made the significant acquisition of the Nordberg Manufacturing Company. The acquisition of Nordberg broadened the comp any's markets and put it strongly into minerals mining and aggregate (crushed stone) equipment. Affected by changing price levels for mine rals and by worldwide demand for crushed stone, these markets were co nsidered countercyclical to the domestic economy, as were sales of en vironmental control equipment.

At the beginning of 1973 the company adopted a new name, Rexnord, Inc ., and undertook a new corporate identification program. A brochure, "Serving the Needs of the People," was issued as the second part of t he company's two-part annual report in 1974. At this time the company had five major business segments: power transmission components, min eral and rock crushing and processing machinery, environmental contro l equipment, material handling equipment, and construction machinery. Its international operations consisted of subsidiaries in West Germa ny, Belgium, and Australia, that produced construction machinery, pow er transmission components, and pollution control equipment. Operatio ns also included Racine Hidraulica S.A. in Brazil, which manufactured hydraulic components and systems. Altogether, Rexnord operated 29 pl ants in 14 countries during 1973.

Sales continued to grow at a 10 to 20 percent annual rate throughout the 1970s, reaching $1.01 billion in 1979. Profitability also con tinued to rise. During this time, the company pursued a carefully pla nned strategy of product and market diversification to offset weaknes s in one by strength in another. International growth was planned and timed to avoid becoming overly dependent on the economy of any one n ation. Rexnord also concentrated on products that were either consume d in use or required Rexnord replacement parts. Such a product mix pr ovided a continuity of earnings, even when industry conditions might restrain capital expenditures. The company audited all of its product lines on a regular basis. During the 1972 to 1977 period, for exampl e, it sold or discontinued product lines with annual sales of $51 million, but that had losses of $2.7 million.

New Management and Challenges in the 1980s

During 1979 management changes were put into effect in anticipation o f Messinger turning 65 in January 1980 and retiring. Krikorian, presi dent since 1967, was elected vice-chairman and CEO, then he succeeded Messinger as chairman of the board in 1980. Donald Taylor was electe d president. He had joined Rexnord in the Nordberg merger of 1970. Th e next year Rexnord honored Messinger by naming its Milwaukee researc h center after him.

By 1980 Rexnord's five business segments were grouped into two major product groups, components and machinery. The components product grou p, consisting of power transmission components and specialty fastener s, accounted for 59 percent of Rexnord's sales and more than 72 perce nt of operating income in 1980. They were the company's most profitab le businesses and had received the bulk of capital expenditures in re cent years. The machinery product group included process machinery, w hich emphasized products having a strong replacement parts business, environmental control equipment, and construction machinery.

Rexnord began the 1980s with more than 17,000 employees in 51 U.S. an d Canadian plants and in 22 overseas facilities. Like many other busi nesses, it experienced difficulties in the post-inflationary recessio nary early 1980s. In spite of high interest rates and a generally wea k economy, Rexnord achieved its 20th consecutive year of sales growth in 1981 when sales reached $1.13 billion, up from $1.084 bil lion in 1980. However, real unit volume declined 2 percent. The compa ny's strengths were its replacement parts business, which provide mor e than half of its 1981 volume, and international markets, which acco unted for nearly one-third of sales.

During 1981 the company divested several product lines, including its European construction machinery operations and its subsidiary Rockfo rd Aerospace Products, located in California. In 1982 it sold two sig nificant businesses for approximately $70 million: the Constructi on Machinery Division and the Fluid Power Division. It also closed it s process machinery foundry in Milwaukee. With a worldwide recession and high long-term interest rates, 1982 was a difficult year for oper ations, with the company emphasizing cost reduction programs, signifi cant restructuring, and continued investment in research and developm ent. Capital goods spending had been in decline for the past year and a half, and Rexnord reported reduced earnings and its first sales de cline in 20 years, down 17 percent. It now had three major business s egments: power transmission components, specialty fasteners, and proc ess equipment (which included the company's water, wastewater, and re lated sludge conditioning and treatment equipment and systems). Durin g the year it acquired Contech, Inc., for $16 million in cash. Wi th sales of more than $29 million, the 16-year-old company manufa ctured and marketed a wide line of adhesives, sealants, caulkings, an d specialty chemicals used in building construction, maintenance, and renovation.

Sales again declined in 1983 to $804.5 million, compared to $ 936.6 million in 1982, while net income dropped to $3.93 million, compared to $7.15 million in 1982. Orders for industrial machine ry products remained at low levels and overall sales were 14 percent below 1982 levels.

With four acquisitions in 1984, sales increased to $921 million. Acquired for $68.8 million, Clausing Corporation was the largest acquisition of the year. Clausing manufactured component products in plastics engineering, which added to Rexnord's portfolio of component products for use in a broad cross-section of industrial markets. Cla using's products served the automotive and electronics markets and co uld be used to develop new markets. Its industrial process control pr oducts supported Rexnord's strategy of strengthening and expanding it s electronics-related businesses. Clausing also brought to Rexnord a profitable Industrial Distribution Group, which handled several lines of high-quality metal-working machine tools and accessories imported from European countries.

During the year Rexnord created a Process Controls Division and was b uilding a major instrumentation and controls business in the process control and industrial automation markets. Two of its 1984 acquisitio ns, Tano Corporation and InstaRead Corporation, further expanded Rexn ord's instrumentation and control capabilities in the industrial auto mation area. Tano was an industry leader in the design and manufactur e of computer-based electronic systems for marine, oil and gas and en ergy management applications. Tano manufactured moving beam laser bar code scanners, with applications on the shop floor and in warehouse inventory control. These scanners complemented Rexnord's own omnidire ctional bar code scanner, called Lasertrak.

The year 1985 was one of moderate growth in sales, earnings, and divi dends for Rexnord. The company further expanded its instrumentation a nd control capabilities in the industrial automation area when it pur chased Electronic Modules Corporation (EMC) for $46 million in ca sh and 42 million shares of Rexnord common stock in April 1985. With 1984 sales of $68 million, EMC designed and manufactured industri al and factory process controls. With EMC as its flagship, Rexnord cr eated a new subsidiary, Rexnord Automation, that included its former Process Controls Division.

Since June 1981, Rexnord had divested 15 businesses with annual sales of $220 million, for $145 million. The company announced in 1985 that its major divestitures had been completed, although it said that there may be more in the future. In 1985 Robert Krikorian retir ed as chairman. Donald Taylor, formerly vice-chairman and CEO, became chairman and CEO. John P. Calhoun became president and chief operati ng officer.

Acquisition by Banner Industries in 1987

With the company in the process of repositioning itself, 14 percent o f Rexnord's stock was acquired by Banner Industries of Cleveland, Ohi o, in 1986. When Rexnord announced in December 1986 that it was plann ing a massive restructuring, including selling most of its capital go ods businesses and moving toward higher technology products, Jeffrey J. Steiner, chairman of Banner Industries and Rexnord's largest stock holder, opposed it.

In March 1987 Banner completed its acquisition of Rexnord. In connect ion with the acquisition, Banner entered into a $550 million cred it agreement with a group of financial institutions. Proceeds from th e sale of certain Rexnord assets were to be used to reduce $420 m illion in term loans that were part of the $550 million credit ag reement. As of June 30, 1987, approximately $105.8 million of Rex nord's net assets were held for sale.

By the end of 1987 Banner had sold one subsidiary of Rexnord, Mathews Conveyor of Kentucky, while employees of the Louisiana-based Rexnord Instrument Products purchased the division from Rexnord. Texas-based Rexnord Automation was also put up for sale, after the company decid ed it did not have the resources to compete in the automation sector. Additional assets were sold by February 1988 to finance the acquisit ion.

After offering $500 million earlier in 1988, Banner Industries ac quired PT Components, Inc., of Indianapolis, Indiana, an auto brake s ystems manufacturer, for an undisclosed amount in August 1988. Intere stingly, PT Components had a history longer than and somewhat paralle l to that of Rexnord. It was originally founded in the 1870s as Ewart Manufacturing Company in Indianapolis, Indiana, by W.D. Ewart, a co- worker of Rexnord's founder, C.W. LeValley. Ewart had beaten inventor LeValley in the race to patent detachable link belts, but LeValley d iscovered a way to develop a link belt product that did not infringe on Ewart's patent and established his own company. The two companies were competitors in this field. Ewart Manufacturing later became the Link Belt Company and eventually PT Components.

Banner then organized Rex-PT Inc. as a combination of the Mechanical Power Division of Rexnord, Inc., and PT Components, Inc. Rex-PT would be a $500 million supplier of industrial couplings, conveying ch ain, and other industrial chains, bearings, reducers, clutches, brake s, and drives.

In September 1988 Banner Industries sold its 60 percent majority owne rship in Rex-PT Holdings, Inc., to a group of investors, and kept a 4 0 percent interest. Rex-PT Holdings was the parent of Rex-PT, Inc., w hich was renamed Rexnord Corporation by the end of 1989. The sale of its majority interest resulted in an after-tax gain in excess of $ ;45 million for Banner. Net proceeds were $360 million, including an increase of $260 million in cash and debt reduction of $1 00 million.

In June 1989 Banner Industries acquired the outstanding common stock of Fairchild Industries, Inc., for $18 per share. The transaction was valued at approximately $400 million and included the assump tion of certain liabilities. Effective November 15, 1990, Banner Indu stries changed its name to The Fairchild Corporation.

At this time, Rexnord became one of Fairchild's operating subsidiarie s. In 1991 Rexnord's fastener operations were merged with the fastene r operations of Fairchild Industries. While Rexnord had mainly served the industrial and military markets, Fairchild primarily served the commercial aviation industry.

By 1991 Rexnord was focused as a leading manufacturer of mechanical p ower transmission components. Its products were sold to such major in dustries as food and beverage processing, aerospace, construction, en ergy, and agriculture. Major product lines included chains, conveying equipment, bearings and seals, couplings, clutches, brakes, and driv es. Some 55 percent of sales were for replacement parts. The internat ional market continued to be a significant component of Rexnord's ove rall business, with 28 percent of sales coming from overseas customer s in fiscal 1991. Outlook was good for growth in Europe, the Far East , and South America. Rexnord's 1991 sales were $552 million, comp ared to $567 million in 1990. During 1991, the Fairchild Corporat ion owned a 42 percent interest in Rexnord Corporation. In 1992, it w as a 45 percent stake.

Public in 1992

In 1992 Fairchild's recapitalization program transformed Rexnord into a publicly traded company listed on the New York Stock Exchange. Pri or to the recapitalization, Rexnord Corporation was merged into its i mmediate parent, Rex-PT Holdings, Inc, in June 1992. The Fairchild Co rporation continued to own a controlling interest, through subsidiari es, of about 45 percent of the outstanding common stock. In July 1992 Rexnord made an initial public offering (IPO) of more than nine mill ion shares of common stock at $17 per share to raise money to red eem notes and preferred stock and to pay the costs of recapitalizatio n. It also issued $172.5 million worth of unsecured ten-year corp orate bonds (senior notes at 10.75 percent interest) for similar purp oses. Immediately prior to the IPO, Rexnord was merged into Rex-PT Ho ldings, Inc., which was the surviving corporation. Rex-PT Holdings su bsequently changed its name to Rexnord Corporation.

As a result of the IPO, the company was much less leveraged and had i mproved financial flexibility with more liquidity. The company was co mmitted to a continuing program of cost reduction as well as plant co nsolidation. At the time of its IPO Rexnord's business consisted main ly of manufacturing and supplying mechanical power transmission compo nents and related products. Principal products included engineered, c onveying, flat top, and roller chains; various types of anti-friction bearings, speed reducers, shaft couplings and seals; and idlers, spr ockets, and electric motor brakes and clutches. Major markets include d food and beverage processing, pharmaceutical, commercial aerospace, chemical, petrochemical, coal oil field, transportation, sanitation, construction, machinery, cement, forest products, farm machinery, an d industrial equipment industries.

In 1993 Rexnord achieved an operating profit of $82.7 million, up 21 percent from 1992 levels. Sales increased by 3.4 percent over the previous year. Recessionary conditions in Europe and in the commerci al aerospace markets served by Rexnord were offset by aggressive cost reductions to preserve profit margins until full economic recovery. Rexnord's market value increased to approximately $140 million, s ome $80 million higher than the value carried on Fairchild's book s. The investment was seen as a valuable, though undervalued, asset t hat would help Fairchild's ongoing recapitalization and debt reductio n plans.

Sale to BTR in 1994

In December 1993 the pending acquisition of Rexnord by BTR plc, an in ternational holding company based in London, England, was announced. BTR offered to purchase all of Rexnord's outstanding shares at $2 2.50 a share, with the total purchase price estimated to be approxima tely $420 million. Rexnord's stock value rose, and the company ex pected a bond upgrade from Moody's Investors and Standard & Poor' s credit rating services. By the end of December Fairchild had sold i ts stock interest in Rexnord Corporation at a premium price, resultin g in a pre-tax gain of $129.1 million. Fairchild received $18 1.9 million in cash. On December 23, 1993, the sale of Fairchild's 43 .9 percent interest in Rexnord to BTR Dunlop Holdings, Inc., an Ameri can subsidiary of BTR plc, was completed. Approximately eight million shares were sold at $22.50 per share. In January 1994 the propos ed merger with BTR Dunlop Holdings, Inc., a subsidiary of BTR, was ap proved at a special shareholders meeting. By this time, BTR Dunlop ha d acquired 52.8 percent of Rexnord's outstanding common stock. The me rger took place between a wholly owned subsidiary of BTR Dunlop and R exnord, with Rexnord being the surviving corporation. With BTR PLC as its ultimate parent company, Rexnord Corporation continued as a prem ier supplier of power transmission and conveying components to many d ifferent industries worldwide.

Rexnord made fewer major acquisitions in the second half of the decad e. It did buy Addax Inc. in 1998. Addax, based in Lincoln, Nebraska, made mechanical power transmission components using advanced composit e materials.

During this time, the Rexnord companies were part of the BTR's PowerD rives Group. In 1999, BTR merged with Siebe plc to form Invensys plc; Rexnord's ownership would soon change. By 2000, Rexnord employed 5,0 00 people at more than 30 plants around the world, and sales were abo ut $700 million a year. Rexnord was investing considerable resour ces into replacing its sometimes antiquated equipment with state-of-t he-art technology. This included optical inspection systems and new C NC grinding machines for producing roller bearings.

New Ownership in the Early 2000s

By 2002, parent company Invensys was struggling with debt and looking to focus on energy and production management. A buyer for Rexnord wa s found in The Carlyle Group, the famously well-connected investment group in Washington, D.C., which paid $880 million for Rexnord. T he deal also included an infusion of $33 million in working capit al. When the deal was completed in November of that year, RBS Global, Inc., became the holding company for Rexnord Corporation. It was a p rivate company but filed annual reports with the SEC to accommodate t he terms of some of its debt.

Company officials tied Rexnord's prospects to the health of the manuf acturing sector at large, and the economy as a whole was not faring v ery well in 2003. Rexnord management made plans to shift about 50 job s from Milwaukee to a plant in Morganton, North Carolina, but cancele d the move after the unionized Wisconsin employees agreed to wage cut s of $3 an hour, or 13 percent, on average. Rexnord then decided to shut down the Morganton factory, which employed 160 people, even t hough it was not unionized. "Clearly the competitive pressures facing the business dictated that extraordinary efforts would be required," explained a company spokesperson.

Rexnord made a major acquisition in 2005, buying industrial power tra nsmission product manufacturer The Falk Corporation from the Hamilton Sundstrand unit of United Technologies Corporation, which had owned Falk since 1968. The deal was worth $295 million and made Rexnord a $1 billion company again. Falk, also based in Milwaukee, had e ntered the gear business in 1899. In the early 2000s, Falk had plants in six countries, about 1,100 employees and annual sales of about &# 36;200 million. While Falk and Rexnord had competed in gear drives an d couplings, Falk also had strengths in the mining industry. Falk con tinued to operate independently though plans were to integrate it int o Rexnord over time.

Company representatives told the Milwaukee Journal Sentinel th at Rexnord was able to combine operations and cut costs following the merger; a recovery in the aviation industry was also playing to its benefit. Before the merger, Rexnord had posted net income of $21. 6 million, up 51 percent, on revenues of $811.0 million, up 13.8 percent for its 2005 fiscal year.

Principal Subsidiaries: Rexnord S.A. (France); Rexnord Corrent es Ltda. (Brazil); Rexnord FlatTop Europe BV (Netherlands); Rexnord K ette GmbH (Germany); Rexnord Marbett Srl (Italy).

Principal Competitors: Emerson Electric Company; Renold plc; R ockwell Automation, Inc.; Tsubakimoto Chain Company.

Chronology

  • Key Dates:
  • 1892: Chain Belt Company is formed to make chain belts for agr icultural equipment.
  • 1913: Sales reach $1 million.
  • 1914: Rex brand introduced.
  • 1941: Sales exceed $10 million.
  • 1964: Company is renamed Rex Chainbelt, Inc.; sales reach $ ;100 million.
  • 1970: Acquisition of Nordberg Manufacturing Company expands co mpany into mining equipment.
  • 1973: Company is renamed Rexnord.
  • 1980: Sales exceed $1 billion.
  • 1981: Rexnord begins divesting major businesses in early 1980s recession.
  • 1984: Acquisitions strengthen component products, industrial p rocess control lines.
  • 1987: Cleveland's Banner Industries acquires Rexnord.
  • 1992: Rexnord goes public on the New York Stock Exchange.
  • 1994: Rexnord is acquired by Britain's BTR plc (later renamed Invensys plc).
  • 2002: The Carlyle Group investment firm buys Rexnord from Inve nsys.
  • 2005: Rexnord acquires The Falk Corporation.

Additional Details

  • Private Company
  • Incorporated: 1892 as the Chain Belt Company
  • Employees: 4,800
  • Sales: $811 million (2004)
  • NAIC: 333131 Mining Machinery and Equipment Manufacturing; 333 319 Other Commercial and Service Industry Machinery Manufacturing; 33 3613 Mechanical Power Transmission Equipment Manufacturing; 333922 Co nveyor and Conveying Equipment Manufacturing; 334513 Instruments and Related Products Manufacturing for Measuring, Displaying, and Control ling Industrial Process Variables; 336340 Motor Vehicle Brake System Manufacturing; 336350 Motor Vehicle Transmission and Power Train Part s; 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing

Further Reference

  • Barrett, Rick, "Rexnord Shows Signs of Merger's Benefit," Milwaukee Journal Sentinel, August 12, 2005, p. D3.
  • ------, "Rexnord to Buy Competitor Falk; Longtime Local Firms Mak e Gears, Other Industrial Equipment," Milwaukee Journal Sentinel,< /I> April 6, 2005, p. 1.
  • "BTR to Buy Rexnord at $22.50 a Share," Reuters Business R eport, December 2, 1993.
  • Content, Thomas, "Rexnord Corp. Again Up for Sale," Milwaukee Journal Sentinel, February 23, 2002, p. 1D.
  • Fauber, John, "Rexnord Sold to British Firm," Milwaukee Journa l, December 2, 1993.
  • Fromstein, Ruth, Milwaukee, The Best of All Worlds: A Contempo rary Portrait, Chatsworth, Calif.: Windsor Publications, 1990.
  • Holman, Kelly, "Rexnord Buys UT Unit for $295M," TheDeal.c om, April 6, 2005.
  • Kirchen, Rich, "Rexnord Likes Long-Term Outlook," Business Jou rnal (Milwaukee), December 4, 1993.
  • Knoche, Eldon, "Rexnord President and Art Benefactor Krikorian Em phasized Business Ethics," Milwaukee Journal Sentinel, April 1 0, 1999, p. 1.
  • McBride, Janet, "Invensys Sells Unit to Carlyle for $880 Mln, " Reuters News, September 28, 2002.
  • MacFadyen, Ken, "Carlyle Group to Buy Rexnord from Invensys PLC," Buyouts, October 21, 2002.
  • Mecia, Tony, "Milwaukee-Based Equipment Maker Changes Deal, Will Shut Morganton, N.C., Plant," Charlotte Observer, March 11, 20 03.
  • Radkowski, Leo, "Getting a Bonus: When This Company Traded Its Vi ntage ID Grinders for CNC Machines, It Got More Grinding Capacity/Cap ability Than It Expected," Modern Machine Shop, December 2001, pp. 82+.
  • Sandler, Larry, "Rexnord Buyout Boosts Stock Price," Business Journal (Milwaukee), December 3, 1993.
  • "Steelworkers Agree to Concessions at Rexnord West Milwaukee Plan t," Associated Press Newswires, March 6, 2003.

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