TB Wood's Corporation History

Address:

440 North Fifth Avenue
Chambersburg, Pennsylvania 17201-1763
U.S.A.

Telephone: (717) 264-7161
Fax: (717) 264-6420

Public Company
Incorporated: 1897 as T.B. Wood's Sons Company
Employees: 950
Sales: $104.38 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: TBWC
NAIC: 333999 All Other Miscellaneous General Purpose Machinery Manufacturing

Company Perspectives:

TB Wood's Corporation's primary goal is to grow net sales and profitability. The company's strategy for achieving this goal is to be a highly valued supplier to its customers by: (i) offering new and differentiated products and services, and (ii) distributing its products through a select group of distributors. The company's strategy also includes (i) continuous efforts to improve production efficiencies and otherwise reduce operating costs, and (ii) a program for external growth through strategic acquisitions and alliances both marketing and technical to further expand its product offerings and broaden its geographical market.

Key Dates:

1857:: T.B. Wood establishes a foundry and machine shop in Pennsylvania.
1897:: Company is incorporated as TB Wood's Sons.
1900:: TB Wood's enters the power transmission industry.
1930:: The Depression slows down production; sales later improve under the New Deal.
1943:: TB Wood's standard products help the war effort as well as its steel turret rings for tanks and machine-gun mounts.

1950s:The company markets its mechanical variable speed-belted drives and its new Sure-Flex coupling product.
1968:: With its new Ultracon product, TB Wood's enters the electronic drives market.
1986:: Thomas E. Foley buys the company.
1991:: Michael L. Hurt succeeds five generations of Wood presidents.
1996:: TB Wood's is traded on the New York Stock Exchange.
2001:: Stock is moved to the NASDAQ.
2003:: TB Wood's declares its 29th consecutive dividend since going public and buys back 100,000 shares of its stock.

Company History:

TB Wood's Corporation is a leading innovator, designer, manufacturer, and marketer of electronic and mechanical industrial power-transmission products, which are used to transfer controlled power from an electric motor or internal combustion engine to a machine. Operating from 11 production facilities and with close to 950 employees in the United States, Mexico, Germany, India, and Italy, TB Wood's sells its products to North American and international distributors, original equipment manufacturers (OEMs), and end-users for manufacturing and commercial applications. In addition to such clients as Motion Industries and Kaman Industrial Technologies, among the largest distributors in the industrial power-transmission industry, TB Wood's markets its products through a network of some 1,000 independent distributors in North America. The company operates in two business segments: mechanical--which includes belted drives, couplings, and gearboxes--and the electronics industrial power-transmission segment--which consists of electronic drives and electronic-drive systems. TB Wood's standard AC drive products are programmable for specific applications in such industries as food processing, materials handling, packaging, heating and ventilating systems, and general machinery applications. The mechanical business segment (62.7 percent of net sales in 2002) offers a full line of stock and made-to-order products for the construction, oil field, specialized industrial machinery, food processing, mining, and agricultural equipment industries.

1800s Origins

In the United States, manufacturing processes remained simple and relatively slow until 1769, when James Watt made a breakthrough, adding a double-acting cylinder and gear to Newcomen's atmospheric pumping engine to provide the rotary motion needed for mechanical power to move other machinery. When Eli Whitney invented the cotton gin and introduced standard tooling, fixtures, jigs, and dies that allowed for interchangeable machine parts, mass production became possible--and the Industrial Revolution was on its way.

In 1857, T.B. Wood--a master mechanic and the shop superintendent of the Cumberland Valley Railroad--partnered with millwright Peter Housum, a designer and builder of machinery, to buy the Chambersburg, Pennsylvania-based Franklin Foundry & Machine Shop, which produced wood-burning stoves and specialized in "mill gearing." Judging from extant records of the Franklin Foundry, the two partners and their 24 employees also offered a variety of products, such as the pulleys, gears, couplings, rope sheaves, and flat belting that drove the mills and factories of that time. While the partners concentrated on building their business, the Southern States seceded and the nation was plunged into the Civil War. Colonel Peter Housum died in that war; T.B. Wood bought Housum's part of the business.

Franklin Foundry ironworks played a major role in the reconstruction of Chambersburg, a town nearly destroyed by the war. As two of T.B. Wood's sons joined the enterprise, it continued to focus on mill gearing and introduced new products, such as bridges, feed troughs, and a corn cob crusher labelled "The Miller's Friend." At their father's death in 1897, his sons took charge of the business and renamed it T.B. Wood's Sons. In 1899, Charles Wood--George's eldest son--joined the company as a partner; seven years later he became president of T.B. Wood's Sons Company.

1900-50s: Ups and Downs

Under the leadership of the next generation of Woods, the company entered the power-transmission industry with the introduction of flat-belted and line-shaft mechanical drives, power transmission appliances, clutches, couplings, manila rope, and hangers. The company prospered and continued to expand until World War I.

Business declined in 1917, plummeted in 1921, recovered, and began to experience the effects of the Great Depression in the spring of 1930. According to company literature, TB Wood's did its utmost to keep employees on the payroll during this time, assigning available work as fairly as it could and even creating projects (painting, mowing grass, and other odd jobs) to keep employees at work. Under Roosevelt's New Deal, TB Wood's business slowly improved, growing steadily until World War II. Although the company was not directly involved with the production of armaments, it served the war effort through meeting heavy demand for its standard products, chiefly through subcontracts from the Chambersburg Engineering Company (CECO) for parts for the CECO forges. To meet demand, TB Wood's reopened its old Foundry No. 1 to make small parts for the CECO forges and Foundry No. 2 to make larger castings for the CECO forges and other standard products. Other subcontracts included the production of steel turret rings for tanks and heavy machine-gun mounts for P.T. boats.

By the end of World War II, TB Wood's had found a way to enhance its profits through a product of its own that became known as the Sure-Grip bushing. The company originally manufactured sheaves and pulleys and purchased its bushings from the Worthington Corporation. Adapting a new technology from Worthington, however, TB Woods soon secured its own license to produce and market interchangeable bores for sheaves and other shaft-mounted products. Demand for this Sure-Grip bushing increased.

In the mid- and late 1940s, major improvements to the company's machine shops were launched, as heavy molding machines and a large-capacity mechanized sand system were installed, eliminating much manual labor. Keeping up with technology continued to challenge the company during this time as well. While a rapid move to individual motors and drives for machines increased V-belt sales at TB Wood's, sales of lineshaft products, clutches, and hangers, as well as other older products decreased when replacement parts were no longer in demand.

To fill the void created by the discontinued products, TB Wood's began to market several new products in the 1950s, including mechanical variable speed-belted drives, synchronous-timing belt drive systems, and a newly patented Sure-Flex coupling product, which captured a significant segment of its market. The 1967 acquisition of Stratford, Ontario-based Bettger Industries Ltd.--a manufacturer of mechanical power transmission products--gave TB Wood's a wholly owned subsidiary with which it could reach the Canadian market. Next, an international molding machine placed in the foundry increased production of smaller castings.

1960s-90s: Continued Expansion

In 1968 Wood's entered the electronic drives market with Ultracon, the first of a new generation of drives which were versatile and offered powerful operating features and capabilities. A separate manufacturing subsidiary, Ultracon, Inc., was formed to manufacture the new product and its accessories.

In 1971, Wood's installed an eight-ton electric holding furnace in its foundry and only two years later replaced that with a 30-ton furnace. The foundry cleaning room was enlarged, as were the distribution centers located in Illinois and California. One of the company's most ambitious projects, installation of the Molding 2 high-pressure molding center, was completed in 1975; a new automatic molding machine reduced maintenance and improved the output of iron. In an alliance with U.S. Rubber Co. (Uniroyal), TB Wood's manufactured and marketed high torque drives and synchronous belted drive systems that replaced a large number of chain sprocket systems.

Since its inception in 1857, Wood's had used the coke-fired cupola method to make iron for castings. Because the removal of solid pollutants from the cupola exhaust required expensive maintenance and coke had become expensive--to name but two of many considerations--the foundry was converted to electric melting and replaced by a new facility in mid-1980. After 123 years of cupola melting, three 30/40-ton electric-induction furnaces were installed in a new melt building, which also housed a control room and a new metallurgical lab, as well as indoor storage of raw materials for the furnaces.

ln the late 1980s, TB Wood's established a new machining facility in Trenton, Tennessee; this plant was the company's first manufacturing facility away from the Chambersburg area. It served as a satellite machine shop for the Atlanta, Chicago, and Dallas distribution centers and for the southern marketing region. Among the products introduced in 1981 was the Pro series of sheaves that provided maintenance-free service and eliminated the need for traditional oil lubricating systems. In 1984, TB Wood's further strengthened its position in the electronic controls business when it introduced its AC electronic drivers (inverters) to control electric motors.

Five generations of Wood family ownership and management had made TB Wood's a leading innovator of power transmission products. In December 1986 Thomas E. Foley bought the company. In 1991 he was joined by Michael L. Hurt who, as president, hired key managers to continue implementation of the company's growth strategy. They sought acquisitions and alliances to enhance product offerings, leverage fixed costs, and extend international market penetration. For example, the company bought several businesses that had a flexible coupling and mechanical variable-speed drive product line and two manufacturing facilities. In January 1994, TB Wood's acquired Plant Engineering Consultants, Inc., a manufacturer and marketer of integrated electronic drive systems for the fibers industry.

TB Wood's became a publicly held company in February 1996 when it completed an initial public offering (IPO) of its common stock on the New York Stock Exchange under the symbol TBW. Five years later, the company would move to NASDAQ and trade under the symbol TBWC.

In order to access technology and products that could not easily or effectively be made in its existing facilities, TB Wood's formed strategic technical and marketing alliances. For instance, in April 1992 Wood's set up a marketing and technical alliance for the development of high horse-power synchronous drives and introduced two new synchronous drives. In August 1992, the company entered into an alliance with Industry Uniserve Pty Ltd to sell AC electronic drives in Australia, New Zealand, and parts of Asia; in 1993 the company formed an alliance with Var-Spe S.p.a. to sell their hydrostatic variable speed drives in North America, and licensed Japan's Daido Precision for Form Flex couplings. In 1996 Wood's established electronic and marketing partnerships with Finland's Vaasa Controls and marketing agreements in Taiwan and Brazil. The company also owned 76 percent of a joint venture formed with Colorado-based Electron Corporation, a privately held foundry operation that specialized in gray and ductile iron casting solutions and manufactured industrial mechanical power transmission products, especially belt-drive components. By 2002, TB Wood's would purchase Electron's share of that venture.

In 1996 TB Wood's acquired Grupo Blaju S.A. de C.V., and gained a leading market share position in belted drive systems components in Mexico as well as a cost-effective Mexican manufacturing operation. The purchase of Ambi-Tech Industries, Inc.--a leading manufacturer of electronic brakes--allowed for extension of an important TB Wood's product and support for growth in the electronics business. The November 1996 acquisition of Deck Manufacturing's line of gear couplings added to the fastest growing area of TB Wood's mechanical business. In December 1997, TB Wood's purchased Germany-based Berges electronic GmbH and its Italian subsidiary, Berges electronic S.r.l. The Berges companies, located in two of the most important European machinery markets were well-established developers, manufacturers, and marketers of variable frequency drives for AC induction motors.

TB Wood's continued to introduce new electronic and mechanical products, including an award-winning line of inverters in 1991. A 1993 strategic acquisition made the company a market leader in mechanical variable-speed drives and complemented its coupling line with a metallic disc product. During 1995-97, TB Wood's expanded the horsepower range of its AC drives with the installation of newly designed high-performance software.

In 1997 more than 30 percent of the company's sales came from internally developed products. In an interview for the July 7, 1997, issue of Design News, President Michael Hurt spoke of outsourcing as "a passing fad" popular in an era when Original Equipment Manufacturers (OEMs) and suppliers were farming out design. Hurt averred that given his company's talent to develop, manufacture, and sell its products, the company had to control its core manufacturing in-house. He was also of the opinion that "rather than have ... employees 'chase rainbows elsewhere'" it was better to provide them with incentives to stay with TB Wood's.

2000 and Beyond

At the beginning of the 21st century, TB Wood's was a leading designer and marketer for the industrial power transmission industry. This industry consisted of three product categories: mechanical power transmission components, electronic drives, and gearboxes. For financial reporting purposes, Wood's classified its manufactured products into two business segments: the mechanical and the electronics industrial-power transmission business.

The mechanical business segment included a full line of stock and made-to-order products, such as belted drives, couplings, and gearboxes. The electronic business segment included electronic drives and electronic drive systems. TB Wood's standard AC electronic VFD products represented the major part of the company's sales of electronic drive products which were designed to meet electrical standards in both North America and Europe. The company's integrated electronic drive systems were uniquely configured for AC and/or DC electronic VFDs, had programmable logic controllers and in-house designed, custom-printed circuit boards and software.

When the economy began to spiral downwards in 2001, TB Wood's experienced some decreased demand for its products. In an April 2003 news release, President Hurt commented that while recovery from economic downturn was slow, he was pleased "with the growth of our targeted OEM programs, the initial demand for our new E-trAC(r)EF1 micro drive ... and the increased output of our new Mexican plant." Sales of $104.38 million for the year 2002 were down 4.1 percent from the previous year. In response, the company continued to focus on matching costs with market demand; net inventory was reduced 16.2 percent and total debt dropped 16.9 percent. When the economy had not rebounded in 2003, TB Wood's saw the need to reduce employee work hours and eliminate several benefit programs. "Once the economy improves and inventory reduction activities end, we expect to return to our historical levels of performance," President Hurt affirmed. On April 3, 2003, the TB Wood's board of directors showed its belief in the future of the company by declaring the 29th consecutive dividend since the company's 1996 IPO. Moreover, on April 16, 2003, the board authorized the repurchase of an additional 100,000 shares of stock under the company's share repurchase program. Based on the company's resilience during its more than 146-year history, and the Board's confidence in Wood's viability, one could assume that Wood's would remain a leading and innovative provider of industrial-power transmission products--and again attain profitable growth.

Principal Subsidiaries: Berges electronic GmbH (Germany); Berges Electronic, S.r.l. (Italy); Industrial Blaju, S.A. de C.V. (Mexico); Plant Engineering Consultants, Inc.; T.B. Wood's Canada Ltd.; TB Wood's Inc.; TB Wood's (India) Pte Ltd.

Principal Competitors: Allen-Bradley; Asea Brown Boveri Ltd.; Emerson Electric Co.; Lovejoy, Inc.; Allen Bradley Martin Sprocket & Gear, Inc.; Rexnord Industries, Inc.; Rockwell Automation, Inc.; Siemens Corporation.

TB Wood's Corporation History

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Key Dates:

Company History:

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