Amfuel is increasing production and employment while battling decades of neglect and poor management under former owners, the company’s president said Thursday.
Michael Accordino, who is one of the Magnolia company’s owners, spoke to the Rotary Club of Magnolia at the LifeSmart Center.
Two partners, LB Amfuel LLC and LB Amfuel Real Estate LLC, headed by investors Russell Belinsky and Glenn Leonard, bought the company out of bankruptcy last November. The court order authorizing the sale listed the purchase price as $1,624,000.
Amfuel manufactures self-sealing, rubber composite fuel cells for military aircraft.
Accordino said that in the new group’s first month of ownership, the company shipped out 48 fuel cells, “which is atrocious,” he said.
Last month, the company shipped 101 cells.
“We more than doubled capacity and tripled revenue. This is what we do for a living. We find great companies that are misunderstood, under-capitalized and under-human resourced. Amfuel was all of the above. It was also over-leveraged – too much debt on the balance sheet,” Accordino said.
The partners have brought in personnel who have improved efficiency.
“We have more demand than we know what to do with. It’s a very rare situation. Typically, in turn-arounds, you have to worry about your top line. We don’t,” he said.
Amfuel has a core group of about 40 employees who remember the days when the company manufactured up to 250 fuel cells a month, he said. The company hopes to produce up to 175 cells a month by year’s end.
“The people are amazing. We love Magnolia. To be clear, so everyone is abundantly clear, we are staying in Magnolia. We are not going anywhere. We are contractually obligated to do so and we want to do so,” Accordino said.
One of the company’s predecessors, Firestone Coated Fabrics, employed about 700 people and was the city’s largest employer. In addition to fuel cells – which also included installations in race cars -- the company historically had a major business segment in the production of huge rubberized bladders. The bladders could contain a million gallons of water or other liquids.
Accordino said the company’s share of the bladder business fell off because past owners had no interest in it. Accordino is hopeful that the bladder business can be rebuilt.
The number of Amfuel employees fell to 70 a few years ago when previous owners announced plans to move much of the company’s business to Wichita Falls, TX. Now, employment in Magnolia has risen to 270 and “we are hiring,” Accordino said.
“The rumors are either that Amfuel is in bankruptcy, is going back into bankruptcy or is financially stressed. All that could not be further from the truth,” Accordino said.
“We’ve doubled production capacity and we’ve tripled revenue. Last month, we were profitable. This month, we’ll be cash-flow positive,” Accordino said.
“Not only are we not going into bankruptcy again, we are thriving and growing and we are hiring. I want to get that message out so that everyone knows,” he said.
Accordino acknowledged that Amfuel has suffered from two “not-fitting” ownership groups and five “between not-fitting and just bad” management groups over three decades that “drove the company into the ground.”
“We suffer the sins of the past. But we knew that going in. This is how our (turn-around) business works. We’re trying our best to change the culture and do our best to win the hearts and minds of people both inside and outside of the plant. It just takes time,” he said.
Accordino said the present ownership group started performing “due diligence” research into the prospective purchase of Amfuel in March 2018. He said there are “good reasons and bad reasons” for a company to be in bankruptcy.
Lack of investment in capital and infrastructure, and bad management, led to Amfuel’s problems, he said.
Accordino said the “pipeline of demand” for its products by the U.S. Department of Defense will assure the company’s operation going forward. “It’s very rare to have that type of dynamic,” he said.
Amfuel’s fuel cells – by way of aircraft manufacturers -- go into almost every U.S. military aircraft, Accordino said. Amfuel’s product is unique because the cells hold up under ballistics testing. Bullets can literally pass through Amfuel cells loaded with jet fuel without causing an explosion. The cells seal themselves, making it possible for air crews to continue engaging an enemy.
“It’s our technology. It’s pretty cool. It’s unique. There’s only one other company in the world that can do that,” Accordino said.
“It’s very difficult to build a fuel cell. It’s important to remember that. If it were a scalable business, a large business – I assure you, any of our commercial customers, Boeing, Bell, Sikorsky, Lockheed – any humungous aerospace defense company would be doing it. It’s very difficult to build a fuel cell and it’s a tiny market, which is why Amfuel does it,” Accordino said.
Amfuel would have been liquidated decades ago if it wasn’t so critical to the Defense Department, Accordino said.
“Had we not bought the company out of bankruptcy, I am quite confident the government would have paid the least amount to buy the assets out of bankruptcy, and the government would have done it because it is so critical. They can’t lose – they can’t liquidate this company,” he said.
The Amfuel site includes 78 acres off North Vine Street in Magnolia. The center portion of the massive building – a former cotton mill – is almost 100 years old. Additions on either end are more recent but also have physical problems.
The company anticipates constructing an addition later this year. This may lead to the construction of a second structure next year to accommodate increased business.
Flatbed-sized air conditioning units are being installed this weekend, Accordino said. It’s not possible to cool the entire plant, but the new units will improve employee comfort “around the edges.”
Amfuel makes use of Southern Arkansas University chemistry labs for material testing purposes. Accordino said he looks forward to hiring SAU engineering graduates.
Accordino lives in Los Angeles and is a managing director of LB Advisors, a private equity company. He was previously vice president at Rimrock Capital Management and co-head of Tactical Opportunities Group, which specializes in revamping distressed companies. Other prior employment included Cerberus Capital Management and Peter J. Solomon Company.
Accordino earned a bachelor of arts degree from Columbia University.