ARC Group Worldwide slashes workforce, vacates building

FIRESTONE and LONGMONT — A Florida-based manufacturing company with operations in Firestone and Longmont has slashed about 32 percent of positions in a key division and is vacating one building entirely, even as it faces potential delisting from the Nasdaq stock exchange.

ARC Group Worldwide Inc. (Nasdaq: ARCW), based in Deland, Fla., said in a quarterly filing with the U.S. Securities and Exchange Commission that is has largely completed a restructuring that saw it reduce costs in its Precision Components Group by $7.1 million annually.

The Precision Components Group includes what was formerly known as Advanced Forming Technology, based at 7040 Weld County Road 20 in Firestone. ARC acquired Advanced Forming Technology Inc. in August 2012. The company followed that up by acquiring two other area companies, including Longmont-based Advance Tooling Concepts LLC, which it purchased for $24 million in 2014, and Firestone-based Thixoforming LLC, which it acquired at the same time for an undisclosed amount.

AFT provided metal injection molding services to companies in the transportation, aerospace, firearms, medical and other industries. Advance Tooling Concepts was a plastic injection-molding company. Thixoforming provided magnesium injection molding, producing complex, high-density molding components from magnesium alloys.

The company merged and consolidated the three Colorado entities into Advanced Forming Technology and changed the name to ARC Colorado Inc. in the summer of 2018.

“The Precision Components Group, mainly through the ARC Colorado facility, has implemented a plan to reduce costs by $7.1 million on an annualized basis beginning in March 2019,” the company said in its SEC filing. “This plan included cancelling certain operating leases, building leases, increased spending controls, and a labor reduction of approximately 32 percent of the workforce.”

Advanced Forming Technology had 450 employees as of 2017, according to Upstate Colorado Economic Development. It’s unclear whether that number remained valid prior to the recent cutbacks of 32 percent.

ARC said it chose to close an “independent, small facility in Colorado, which will save us about $567,000 in annual lease costs.” The only leased facility in Colorado, according to a 10k filed with the SEC last summer, is a 34,000-square-foot facility at 33 S. Pratt Parkway in Longmont. That facility still appeared to be occupied on Monday.

Messages left for ARC CEO Alan Quasha were not returned.

The company said in its quarterly filing that it would move its clean-room operations to one of its two facilities in Firestone and to Florida. ARC owns a 105,000-square-foot location at 7040 Weld County Road 20 and an adjacent 23,000-square-foot facility at 8906 Frontier St.

“At the end of Q3 2019, the cost improvement plan was approximately 53 percent completed, with approximately 91 percent completion achieved at the end of April 2019,” the company said.

Advanced Forming Technology/ARC Group Worldwide had received an incentive from Weld County related to an expansion of the Firestone facility in 2016. The personal-property-tax incentive payments totaled $57,449 and were to be paid over 10 years. It’s unclear whether the employee reductions will affect those payments.

ARC has been struggling of late. Its May 17 quarterly report — representing the third quarter of its fiscal year — revealed sales of $19.9 million, down 5.7 percent from $21 million in the third quarter of fiscal 2018.

“The decrease in revenue was primarily driven by lower sales in our plastics division from reduced orders in the defense market,” the company said. “Additionally, the company began divesting low margin and unprofitable programs across all of the Precision Components Group.  This process is expected to continue in fiscal fourth quarter of 2019.”

ARC Group Worldwide CEO Quasha said in a prepared statement,  “The results of the past quarter were quite disappointing and reflect, in addition to subpar performance in Colorado and Stamping, the implementation of our restructuring efforts which are still ongoing this quarter and beginning to show healthy signs of progress.”

The company sold its 3D Material Technologies LLC unit, a Florida-based entity that applies metal-additive manufacturing and 3D printing to take design concepts to functional metal components. The operation had been a money-losing venture for ARC.

“During the quarter, we concluded the sale of the 3DMT business and ceased other unprofitable business operations,” the company said. “Although our internal restructuring plan will take additional time to fully bear fruit, we believe that we are at a turning point and that management’s financial and strategic decisions will provide a pathway to profitability.”

But ARC’s stock has been suffering, with shares closing Monday at 51 cents. That low price means that the company is noncompliant for continued listing on the Nasdaq exchange, which requires that stocks trade at $1 or more.

Responding to a question from a shareholder during a May 17 earnings conference call, Quasha said, “So I’ll address the NASDAQ listing, and obviously, we’re hoping to take steps to get it back over a dollar. We have I think until late fall to September, October to do that. So hopefully, it’ll take care of itself. We will do what we can do, obviously to avoid that, and I think will be successful in that. But it does require us to make a fundamental turnaround here, and for shareholders to buy more than they sell. So I don’t know what else to say about that but it’s, obviously, something where we intend to deal with.”

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