Penn Engineering & Manufacturing Corp.

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Penn Engineering & Manufacturing Corp.

P.O. Box 1000
Danboro, Pennsylvania 18916
U.S.A.
(215) 766-8853
Fax: (215) 766-7366
Web site: http://www.pemnet.com

Public Company
Incorporated : 1942
Employees : 1,368
Sales : $179.7 million (1998)
Stock Exchanges : New York
Ticker Symbol : PNN
NAIC : 332722 Bolt, Nut, Screw, Rivet, & Washer Manufacturing; 333513 Machine Tool Manufacturing; 335312 Motor & Generator Manufacturing

When Penn Engineering & Manufacturing Corp. celebrated its 50th anniversary in 1992, it was on the way to becoming the leading manufacturer of self-clinching fasteners used by the computer, data communications, telecommunications, general electronics, automotive, and avionics industries. Between 1991 and 1995 the company’s shipments of fasteners doubled to more than 1.8 billion annually. The company’s growth continued during the second half of the decade, and in 1998 it was named to Forbes magazine’s list of the “200 Best Small Companies.” Its second line of business is the manufacture of small high-performance DC (direct current) motors used in lightweight precision applications.

Company Founded in 1942

In 1942 K.A. Swanstrom, formerly president of Elastic Stop Nut Corporation, left the company and founded Penn Engineering & Manufacturing Corp. Penn began operations on Christmas Eve, 1942, in the rented corner of an old stocking mill located in a small Pennsylvania town. The next year Swanstrom obtained a license from RCA for a new type of clinch nut, which was a screw machined from square stock. RCA needed a new type of fastener when it switched from using thick cast metal sections to thin sheet metal for its military electronics enclosures. RCA held the patent, but Swanstrom was able to improve upon the original design and create Penn’s first product, the original S-nut, which was screw machined from round stock. Later that year Penn developed a cold-headed clinch nut, known as the CL-type.

Swanstrom’s self-clinching design was simple and solved RCA’s need for reliable threads in thin sheet metal. As the fastener is pressed into a punched hole, the sheet material actually moves or “cold flows” into an undercut below the fastener head, locking the device securely into the sheet. The fastener provides a reliable threaded insert allowing other components to be assembled and disassembled with the thin sheet metal.

Penn built its business on self-clinching fasteners. These small devices allowed sheet metal fabricators to easily and cost-effectively provide strong threads in thin sheet metal. Self-clinching fasteners become an integral part of the material in which they were installed. Like other small manufacturers in the 1940s, Penn was creating a new technology that would lead to the future world of automation and electronics. Over the next 60 years its fasteners would be used in personal computers, computer cabinetry, power supplies, instrumentation, telecommunications equipment, and certain automobile parts such as air bags and windshield wipers.

Going Public: 1950s-60s

In 1952 the company purchased 15 acres in Danboro, Pennsylvania, for the construction of a 10,800-square-foot manufacturing plant. In 1956 the company officially registered its PEM and Triangle trademarks, which had been in use since 1946.

In 1966 Penn became a publicly traded company, first listing its stock on the over-the-counter market and then gaining admission to the American Stock Exchange. The Swanstrom family owned or controlled more than 50 percent of the company’s stock, however, giving it effective control of the firm. In 1967 the Pemserter Series 1 press was introduced. The company’s presses provided for rapid and accurate installation of fasteners. Over the years the company would introduce new models of manual and automated presses for fastener installation to provide its customers with complete fastening systems.

Diversification and Expansion in the 1970s

Penn diversified by acquiring Pittman Company, based in Sellersville, Pennsylvania, in 1970 for $262,500. Pittman manufactured miniature DC (direct current) motors. As the motor division grew, its high-quality, high-performance, permanent magnet DC motors would be used in lightweight precision applications such as archival storage, printing, copying, robotics, and medical diagnostic equipment. The Pittman division made a broad range of products that were typically adapted to the specific requirements of individual customers.

The Danboro facility was expanded in the early 1970s, and the company established PEM International Ltd. as a subsidiary in Doncaster, England, to serve as a U.K. distributor.

In 1976 the Pittman motor operation moved to a new 30,000-square-foot facility located in Harleysville, Pennsylvania. Major expansions were completed in 1978 at plants located in Danboro, Harleysville, and Winston-Salem, North Carolina. In 1979 Ken Swanstrom, son of the founder, was named president of the company.

Solid Performance Continued As Manufacturing Capacity Increased in the 1980s

In 1980 the Pemserter Series III press was introduced, and the company manufactured its six billionth PEM fastener. In 1981 the Winston-Salem plant was expanded by 8,000 square feet, and a 45,000-square-foot manufacturing facility called Plant 2 was completed in Danboro. Four years later 40,000 square feet of space was added to Plant 2 and 23,000 square feet was added to the Winston-Salem facility.

In 1983 Pittman introduced the first line of brushless motors. Penn’s engineering department acquired CAD (computer-assisted design) equipment, and Penn introduced the microprocessor-controlled Pemserter Series 100 press and the manual Series 4 press. In 1986 Penn paid $3.5 million in cash for Standard Insert Co., which became a division of the company in 1991.

Company sales for 1989 were about $66 million. Fasteners accounted for $48 million, and $18 million came from Pittman motors and controls. Net income was $6 million, a 60 percent increase over the previous year. International sales accounted for about 17 percent of revenue.

Manufacturing Capacity Increased to Meet Growing Demand in the 1990s

In 1990 Penn established its own export department to handle the world marketing of PEM fasteners. PEM International Ltd. became the company’s master distributor for Europe. During the 1990s Penn’s international distributor network would grow to include some 40 authorized distributors located in 30 countries, which were supplied from warehouses located in Doncaster, England, and in Singapore. The company’s independent distributors carried their own inventories and sold other industrial components, but they could not sell fasteners that competed with Penn’s.

Also in 1990, 16,000 square feet of space was added to the Pittman manufacturing facility in Harleysville and a new plant in Suffolk, Virginia, came on line. The Suffolk plant added 25,000 square feet of manufacturing space and was built at a cost of $3.5 million.

The company’s new manufacturing resource planning system (MRP II) became operational in 1990. It linked the company’s manufacturing operations to provide better coordination among its three facilities in Danboro, Winston-Salem, and Suffolk.

In 1992 the company celebrated its 50th anniversary, and the next year founder K.A. Swanstrom died. During the year a 25,000-square-foot addition to the Suffolk plant and a 6,300-square-foot addition to the Danboro plant were completed.

In 1995 the Pemserter Systems Division introduced the Series 2000 press and Pemserter Plus automatic feed module. Autospec product capabilities were introduced to meet the fastening needs of the worldwide automotive industry. For 1995 Penn reported net income of $13.8 million on net sales of $141.3 million.

Between 1991 and 1995 the company’s fastener shipments doubled, from 896 million units to 1.8 billion units annually. Demand for the company’s fasteners had increased faster than its manufacturing capacity, and in 1996 the Winston-Salem plant was replaced by a new 120,000-square-foot manufacturing facility there. With a 43,000-square-foot addition to the Danboro plant, Penn had 375,000 to 400,000 total square feet of manufacturing floor space in its facilities. During the year the company’s stock was listed on the New York Stock Exchange. The Swanstrom family continued to hold about 52 percent of the firm’s voting stock and remained in control of the company. Sales increased to $160.3 million, while net income remained relatively flat at $13.9 million. That year the fastener and motor divisions were awarded ISO 9001 certification.

Company Perspectives

Invention is rooted in Penn Engineering’s heritage. The original S-nut was the first self-clinching fastener that Penn Engineering produced when K.A. Swanstrom founded the company in a rented garage in 1942. Over the years, new product development and R&D efforts enabled the company to expand its product offerings from this single product to a product catalog of 28 fastener families and over 12,000 different line items. Today Penn Engineering ships over two billion fasteners to manufacturing companies worldwide — and the original S-nut still accounts for over 25 percent of that volume. All of which proves that “Today’s Innovations are Tomorrow’s Solutions.”

Also in 1996 the company created a new, wholly owned subsidiary, PEM International Singapore Pte. Ltd., after acquiring the assets and inventory of a former authorized distributor for $2.9 million. This location would serve as a distribution center for the Pacific Rim and adjacent regions.

In 1997 Penn introduced R’Angle fasteners, which allowed panels to be clinched at right angles. For the year net income rose to $14.5 million and sales were $167.7 million. In 1998 the company introduced threaded steel R’Angle fasteners. A new LightStream infrared safety system was introduced for the Series 2000 press. Martin Bidart replaced Ken Swanstrom as president and chief operating officer, with Swanstrom remaining as chairman and CEO.

Penn was named to Forbes magazine’s 1998 list of the “200 Best Small Companies.” Companies were ranked based on growth and profitability. Penn had a five-year average annual sales growth of 14 percent and a five-year average annual growth in earnings per share of 13 percent. It was ranked 200th on the list. For 1998 Penn reported record net sales of $179.7 million and net income of $16.6 million. The fastener division accounted for $146.9 million of sales, or 82 percent, and the Pittman motor division accounted for 18 percent of sales with $32.8 million.

As a recognized leader in fastening solutions, Penn was in a strong position to continue setting record levels of sales and net income. It had good working relationships with original equipment manufacturers (OEMs) and their subcontractors, working with them early in the design process to provide fastener solutions. Moreover, it had supplied companies such as IBM, Hewlett-Packard, Pitney Bowes, and Xerox for more than 25 years. Finally, it possessed a stable, experienced senior management team, and family control of the majority of the company’s voting stock would protect it from hostile takeover attempts.