Jim was right. You’ll likely hear by Labor day that the financing challenge has been has been successfully and cleanly resolved.
There is a special stockholders meeting scheduled within this month for a vote on a proposal and I’d bet my contract position, or at least my wife and kids, that it will become a done deal by Labor Day.
As proposed it would both enable retirement of all general debt and provide a comfortable level of working capital to support production and development.
This is really fantastic news! Getting out from under the debt load, allocating funds for existing and new product development, and allowing the K’s to cash in some stock for a nice payday will allow CD to move up to the next level. That level would be one of a real market force in GA that will set a new standard for performance and safety. Not that CD hasn’t already been a market force!
From a financial perspective, the cash flows provided from operations (I am assuming CD has reached break-even point) and the large infusion of capital will allow some dramatic new product developments on a shorter time frame.
I can’t wait to see what comes out of Duluth next.
Jim was right. You’ll likely hear by Labor day that the financing challenge has been has been successfully and cleanly resolved.
There is a special stockholders meeting scheduled within this month for a vote on a proposal and I’d bet my contract position, or at least my wife and kids, that it will become a done deal by Labor Day.
As proposed it would both enable retirement of all general debt and provide a comfortable level of working capital to support production and development.
I hope it accomplishes all of those things and still leaves the K’s and current management as majority stockholders, i.e., in control of company direction and mission.
If not, I wouldn’t be too surprised (speculation on my part) to see the new owners opt for a serious push upmarket, away from small aircraft like the SR20 and perhaps towards small jet/turboprop craft. That’s where the money is right now and for the near-midterm future.
Greg,
With this level of financing, I’d not get too excited over the near term about additional product innovations. At that level of commitment, a wise investor will first be looking at making Cirrus into a healthy, profitable and self sustaining going concern, rather than immediately betting a lot of that money on unproven new designs. It’s called getting a sound return on your investment.
Look for enhancements in production efficiencies for existing products that are known sellers (SR 20 & SR22), and as the order book begins to be worked down look for what I call “step-out” improvements to the existing products and a greater marketing push to sell more of them profitably.
In other words, I’d expect innovations to be small and relatively low-capital-intensive improvements to the existing products before costly upgrades or fancy new designs that significantly expand the product offerings (ie., additional SRXXs), not to mention tons of cash.
As for making the Klapmeier fellows millionaires overnight, that’s not good business either. A smart deal makes them earn it over the long pull.
Pete
This is really fantastic news! Getting out from under the debt load, allocating funds for existing and new product development, and allowing the K’s to cash in some stock for a nice payday will allow CD to move up to the next level. That level would be one of a real market force in GA that will set a new standard for performance and safety. Not that CD hasn’t already been a market force!
From a financial perspective, the cash flows provided from operations (I am assuming CD has reached break-even point) and the large infusion of capital will allow some dramatic new product developments on a shorter time frame.
I can’t wait to see what comes out of Duluth next.
Jim was right. You’ll likely hear by Labor day that the financing challenge has been has been successfully and cleanly resolved.
There is a special stockholders meeting scheduled within this month for a vote on a proposal and I’d bet my contract position, or at least my wife and kids, that it will become a done deal by Labor Day.
As proposed it would both enable retirement of all general debt and provide a comfortable level of working capital to support production and development.
Pete, responses are posted below.
Greg,
With this level of financing, I’d not get too excited over the near term about additional product innovations. At that level of commitment, a wise investor will first be looking at making Cirrus into a healthy, profitable and self sustaining going concern, rather than immediately betting a lot of that money on unproven new designs. It’s called getting a sound return on your investment.
I am not ‘getting too exited over near term product innovations’. I AM fully aware that when you go from being a cash strapped new airplane company to a nearly debt free well funded new airplane company, your ability to develop current or new products is dramatically improved. In case you hadn’t noticed the K’s DID bet a lot of money on unproven new designs called the SR20 & SR22. It is called innovation.
Look for enhancements in production efficiencies for existing products that are known sellers (SR 20 & SR22), and as the order book begins to be worked down look for what I call “step-out” improvements to the existing products and a greater marketing push to sell more of them profitably.
I’d say we have seen most of the ‘easy’ efficiencies already taken. I have found from my experience in manufacturing that 80% of the efficiences are easy to find, and CD has dramatically lowered the hours it takes to build SRxxs. Now, they will spend far more time chasing smaller cost and quality improvements. Regarding what you refer to as “step out” improvements, I am afraid CD is already ahead of you. Let’s see, diesel power, de-ice, and air conditioning come to mind right away. All widely known to be under development.
In other words, I’d expect innovations to be small and relatively low-capital-intensive improvements to the existing products before costly upgrades or fancy new designs that significantly expand the product offerings (ie., additional SRXXs), not to mention tons of cash.
See above response.
As for making the Klapmeier fellows millionaires overnight, that’s not good business either. A smart deal makes them earn it over the long pull.
I think you would get an argument from the Klapmeiers for implying they became millionaires ‘overnight’, they didn’t. It HAS been a long pull. Since you are waxing philosophical, remember, we live in a capitalistic system that rewards the innovation, efficiency, and risk taking that the Klapmeier’s have undertaken and that IS good business. How they collect their just reward is up to them. They could have kept going without a partner and enjoyed 100% of the future cash flows (provided their debt service wasn’t too big an issue and bankrupted them), they could have sold the entire company and walked away with the proceeds, or they could do what they are doing and sell part of it. I trust they selected a suitable partner.
Anyway, I am happy about the financing and you are not going to ruin it for me. :
Greg>
This is really fantastic news! Getting out from under the debt load, allocating funds for existing and new product development, and allowing the K’s to cash in some stock for a nice payday will allow CD to move up to the next level. That level would be one of a real market force in GA that will set a new standard for performance and safety. Not that CD hasn’t already been a market force!
From a financial perspective, the cash flows provided from operations (I am assuming CD has reached break-even point) and the large infusion of capital will allow some dramatic new product developments on a shorter time frame.
I can’t wait to see what comes out of Duluth next.
Jim was right. You’ll likely hear by Labor day that the financing challenge has been has been successfully and cleanly resolved.
There is a special stockholders meeting scheduled within this month for a vote on a proposal and I’d bet my contract position, or at least my wife and kids, that it will become a done deal by Labor Day.
As proposed it would both enable retirement of all general debt and provide a comfortable level of working capital to support production and development.
Greg,
My observations were in no way intended to be personal as to you, but to merely reflect business experience over 35 years as a CPA with a major accounting firm and substantial experience working with acquirers and investors in financially strapped companies, not to mention having bought and sold several companies myself.
Some other observations:
I am not ‘getting too exited over near term product innovations’. I AM fully aware that when you go from being a cash strapped new airplane company to a nearly debt free well funded new airplane company, your ability to develop current or new products is dramatically improved. In case you hadn’t noticed the K’s DID bet a lot of money on unproven new designs called the SR20 & SR22. It is called innovation.
It is comforting to know that the company’s financial structure is being strengthened significantly. But the fact is, that while the K’s DID bet much on their wonderful innovations, it’s no longer their money at risk, and the new guys will have different goals for realizing a satisfactory return on their huge investment.
I’d say we have seen most of the ‘easy’ efficiencies already taken. I have found from my experience in manufacturing that 80% of the efficiences are easy to find, and CD has dramatically lowered the hours it takes to build SRxxs. Now, they will spend far more time chasing smaller cost and quality improvements. Regarding what you refer to as “step out” improvements, I am afraid CD is already ahead of you. Let’s see, diesel power, de-ice, and air conditioning come to mind right away. All widely known to be under development.
Re “step out” improvements, what CD has already done is not the issue. It’s what the new guys want to do that will tell the story. And my bet is that they will want a satisfactory return on their investment dollars before committing any significant capital to new and untested innovations. Time will tell.
I think you would get an argument from the Klapmeiers for implying they became millionaires ‘overnight’, they didn’t. It HAS been a long pull. Since you are waxing philosophical, remember, we live in a capitalistic system that rewards the innovation, efficiency, and risk taking that the Klapmeier’s have undertaken and that IS good business. How they collect their just reward is up to them. They could have kept going without a partner and enjoyed 100% of the future cash flows (provided their debt service wasn’t too big an issue and bankrupted them), they could have sold the entire company and walked away with the proceeds, or they could do what they are doing and sell part of it. I trust they selected a suitable partner.
As for being made a millionaire overnight, it’s clear that the K’s have developed a major asset, but realization of that asset in terms of investable liquid captital is what affects people’s incentives. I’ve seen far too many acquisition deals where the prior owner suddenly got his hands on huge amounts of investable dollars, and his job performance dropped off. Acquirers became quite disgruntled with the comparative lower level of performance by the continuing former owner. Thus, the business philosphy exists in many quarters to structure an acquisition that involves continuing management by former owners in such a eay as to keep the former owners/continuing mangers well motivated, personally and economically.
As to the K’s keeping going without a partner, that’s not viable. Had they been able to do so, why would they sell out a majority ownership position and put themselves no longer in charge of what they had developed?
And too, like you, I very much hope they selected a partner who is motivated to keep the great ball rolling for Cirrus. The company’s historical contribution to GA has been outstanding, and over the long pull it has the clear potential to make additional substantial strides benefiting themselves and GA. We’re on the same page, here, which also is quite close to Jim Fallows’ observations, too.
Anyway, I am happy about the financing and you are not going to ruin it for me. :
Thanks for the ":
Cheers to ya,
Pete
I hope it accomplishes all of those things and still leaves the K’s and current management as majority stockholders, i.e., in control of company direction and mission.
For their $100 mil the new investors get 59% of the company. But fret not, or at least not much. This is a foreign investor of the type that generally wants nothing to do with management
How did the original investors make out (i.e, some of the little guys who thought this was a great idea, bought an airplane, and parked $10K-$50K in this venture)?
For their $100 mil the new investors get 59% of the company. But fret not, or at least not much. This is a foreign investor of the type that generally wants nothing to do with management
Well, that’s comforting. At least we know, therefore, that it’s not Daimler.
But then again, Toyota and Honda would be hands on type guys, based upon my personal experience with each over the years. And either of them would do a helluva a fine job with Cirrus while respecting the work and accomplishments of the Klapmeier fellows and their team.
Pete
But fret not, or at least not much. This is a foreign investor of the type that generally wants nothing to do with management
How did the original investors make out
Where else could you refer to your President as Bill or Ike or Georgie W. or the founders of your revered plane manufacturer as “the Klaps” and mean no disrespect ? I love this country !
The 'lil investors (I’m one) have not been forgotten. The Klaps have made good compromises. Business decisions, like design decisions are mostly compromises.
I see the new money as coming from a passive source with neither expertise nor interest in governing the direction of the company. They won’t be there to help and they won’t be meddling and that’s fine with me.