While I have attended a few auctions over the years, my previous experiences involved more casual situations than the serious business of selling the physical assets of a major, well established pallet company. I attended the Bennett Box and Pallet auction in Ahoskie, North Carolina on July 30 and was somewhat surprised by several things I experienced. In addition to the pallet plant, sawmill and planing mill in Ahoskie, Bennett Box had a recycling operation in Millennium. I will share some thoughts here.
Bennett Box and Pallet — a Perspective
A background on the company will help put a perspective on this particular auction. While there are a lot of good pallet companies, Bennett Box stands out as a long term, quality manufacturer. Barbara Bennett Perry, the owner and manager of Bennett Box and Pallet, comes from a family with a pallet and box tradition. Her great-grandfather was involved in pine boxes way back in the late 1800s. Bennett Box started in 1921 as a pine box manufacturer in the Mid-Atlantic area. The company moved to Ahoskie, North Carolina in 1946, and Barbara joined the family-run company in 1979. With a master’s degree in management science from MIT, Barbara has an unusual background for our industry.
Bennett Box probably built its first pallet before World War II, manufactured many ammunition boxes during WW II, and jumped big time into pallet manufacturing during the growth days of the 1950s. Hardwood pallets have been the main products produced at Bennett Box for many years.
The company ran a hardwood sawmill for manufacturing pallet stock for its pallets and more recently operated a pallet recycling plant a few miles from the main plant. My contacts always indicated that Bennett Box was respected by its peers.
Because of the competitive nature of the pallet industry, a growing number of established pallet company owners have shared that they are considering either selling or shutting down. Why did Barbara decide to take this step and have a complete and final auction?
Barbara shared at least three reasons why she decided to sell the Bennett Box assets. Family situations are often part of the equation; in Barbara’s case she had no immediate successors and experienced pressure from family stockholders. The daily pressures and grind from running a business in the competitive world often take a toll; Barbara expressed feeling these pressures. And of course profits are increasingly difficult to find. Barbara indicated that problems turning a profit made it increasingly difficult to endure difficult business conditions.
Barbara shared another concern that some readers may be able to relate to as well – high taxes and government burden. Ahoskie is located in rural northeastern North Carolina in a very poor county. With welfare responsibilities shifting more to the county level, Barbara found herself with a huge and growing tax burden. Eventually the well runs dry and profits just grow thinner and harder to find.
Unlike many pallet company owners, Barbara’s experience reaches beyond the forest products industry. With a master’s degree in management science from MIT, Barbara believes that she has a great deal to share with other business people in the rural part of eastern North Carolina. So, Barbara hopes to hang out her shingle and see what she can do to help other local small businesses.
The Bennett Box Auction
The three weeks prior to the auction, the Tri-State Auction team worked in Ahoskie and Millennium to catalogue all of the company’s assets. They moved small items and supplies around to group them with other related machinery, cleaned the facilities and power washed machinery to get the machinery in the best condition they could. Two of the benefits of being in business for a long time are relationships and the experience factor. On the other hand, it often means that much of the machinery and assets are older. Even if they have been well maintained, they typically show wear and tear from a physically taxing industry like the pallet and sawmilling industries.
Johnny Kimbel, who manages the family-run auction business, shared the auctioning duties with Bill Billingsley. The seven person Tri-State team also included Sandra White, auctioneer, Treasia Papa, office, Kristie Seymour, office, Terry Swartz, clerk, and Mike Hixon, bid spotter.
Tri-State Auction specializes in auctions and appraisals in the forest products industry. Johnny said, "The forest products industry is all we know. To do a first class job, the auctioneer needs to know his product and audience mix. We worked hard for three weeks to prepare Bennett Box for this auction. The good people at Bennett Box worked right along side us. They did as good a job as I can remember ever seeing. Instead of just saying it’s your job, they worked with us every step of the way."
Tri-State was hoping for a million dollar auction; when the smoke cleared, the total topped that a little. After seeing the way some things brought acceptable money and others sold for so little of replacement value, it is clear that actual value at times has very little to do with what an item will bring at auction.
After a hot period in July, the weather improved a little, but the humidity was still high enough that the auctioneers had to really work to keep people involved. Over 215 people registered at the two day event; fewer than half that many were present on Saturday for the pallet plant, sawmill, and planing mill auctions. In addition, another ten to 15 bidders did not attend but participated via either absentee or telephone bidding. I only recognized ten to 15 pallet companies in the Saturday attendees.
When bidding became lethargic, Johnny and Bill had an effective way of shaking a little life into the bidding. The crowd size was less than I had expected, but given the vacation time of the year and the overall asset age, it is not surprising that the number of bidders was as limited as it was.
I had expected a large crowd because the company was so well known, and the list to be auctioned included close to 800 items. It took two days for the auction; the recycling operation and rolling stock sold on Friday, and the pallet manufacturing plant, sawmill, and planing mill on Saturday.
A major truth became increasingly clear as the auction progressed. The correlation between what an item is worth and what it sells for is often very small. I saw electrical panels and buildings go for a fraction of what they were worth. The auctioneer often would have been excited about settling for a dime on a dollar because many times that target was not even in the wheel house. A perfectly good item can bring very little action if there is no competition for it. The pre-fab 200’x240’ pallet mill building without the electrical and lights (a 48,000 sq.ft. building) sold for a piddling $1500. Admittedly, it can be expensive to disassemble, transport, and reassemble the building, but the real problem is that nobody there appeared to really want it. One of my friends pointed to a large steel beam in the roof and said, "Ed, each one of these beams would cost you over $10,000." Going on memory, I believe that the 26 large three phase lights in the building sold for a grand total of $125.
The bottom line is that Barbara Bennett Perry, the owner of Bennett Box and Pallet, took away just a fraction of the value of her assets. Johnny Kimbel told me that this is normal today for machinery, rolling stock, and buildings that have seen their better day. I have heard about auctions where bargains are hard to find, but at this auction they were plentiful. Some readers may have missed a golden opportunity.
They say that it takes two to tango. It certainly takes two people bidding against each other to bring a selling price close to what an item is worth. A 2002 Baker chamfering machine sold for $7000 when two people were interested, while a 1996 Baker chamfering machine sold for well under half that when interest was limited. A Baker A resaw sold for $5200 while a Brewer Br-8112 gang with motors sold for just a few thousand more.
The pallet machinery mentioned above represented some of the items which fared the best for Bennett Box. The company had four Viking Duo-Matic nailing systems manufactured in the 1980s. Two people bid against each other for the first Duo-Matic, a 1989 60"x60" left hand three stringer system. After the back and forth bidding, a company from Trinidad finally bought this system for a whopping $28,000, without the stacker and motor control center. The same two companies bid on the next system, a 1980 Duo-Matic, and the Trinidad company again prevailed, this time for $14,000.
Pallet One bought the third system, a 1985 Duo-Matic for a mere $8,000 with very little bidding action. The last 1984 Viking Duo-Matic sold for a little more at $20,000. The four systems together sold for only $70,000. With the branders, stackers, and motor control centers, the complete four systems totaled over $80,000, but not that much more. Johnny assures me that this is about what a Duo-Matic that is this old typically sells for today, but it certainly seems like a bargain for a system that can still manufacture a significant number of pallets.
People who purchase items at an auction should expect to establish an accepted method of payment. Accounts are settled promptly with cash, cashiers check, or personal or company check with a bank letter of guaranty. Since the auctioneer is responsible for collecting bids, it behooves him to accept only reliable payment methods.
I asked Johnny what planning people go through at a typical auction. He confirmed what I suspected. People who attend auctions usually come for serious business. They have a plan of attack that brings them, but some unplanned items might catch their attention during the day. Many attendees will arrive early enough to inspect the items that are of the most interest to them. Attending an auction is serious business, not a casual walk in the park.
While this auction may have been typical for those more familiar with auctions, I was a little concerned that many items did not draw any more interest and money. On one hand, one would hope that a few generations of effort would end with a bigger financial payout. On the other hand, you can not expect people to pay any more than necessary when buying an item. After all, people are there to get a bargain.
What does this less than exciting showing for an auction of such a respected, established pallet manufacturer mean? I believe that it points toward several factors. Maybe the heat and vacation time of the year impacted turnout. The absence of newer machinery hurt because serious people typically want newer, more efficient machinery.
I suspect this auction tells us something fairly significant about our industry. Maybe we have matured as an industry to the point that old rules and practices are past. Being progressive to match tomorrow’s needs requires a different level of thinking.
I believe it tells us something about our society as well. Everything in society has to work harder to bring the results once expected. My son, Scott, uses the term cocooning. People are more likely to stay home than they once were. Increasingly they go to the Internet for information and to purchase items. People are less inclined to jump on a plane or even to take a long drive to attend many events, including an industry auction.
I am sure that many in our industry join me in wishing Barbara the best as she starts a local small business management advisory/bookkeeping service.
