AAI sells weather systems business Hunt Valley unit's 83 employees can keep their jobs

Defense

October 04, 1997|By Greg Schneider | Greg Schneider,SUN STAFF

AAI Corp. of Hunt Valley has sold a weather systems business that accounted for at least a fifth of the company's overall profits.

The 83 people who work for the weather subsidiary will keep their jobs and continue to work in Hunt Valley, said AAI President and Chief Executive Officer Richard R. Erkeneff.

All Weather Inc., a holding company formed by two capital investment firms and the subsidiary's management, is buying the unit for about $21 million.

AAI decided last year to focus on a core mission of defense-related work, and, Erkeneff said, the weather business did not fit the plans. The company will use money from the sale -- $18.5 million in cash and a five-year note for $2.375 million -- for internal growth and to make acquisitions, he said.

"In fact, without any acquisitions we will be able to make up for part of [the lost revenue] with the growth of other business," he said.

The subsidiary, which will keep the name Systems Management Inc., accounted for $1.2 million of the $5.5 million in pretax profits for the whole corporation during the first six months of 1997. That's about 22 percent of profits -- even though the subsidiary contributed only $18 million of the $114 million in total sales for the corporation during that period.

SMI makes automated stations that measure the weather and supply the data to airports. The National Weather Service has bought hundreds of the stations and placed them all over the country, in many cases replacing human forecasters.

The systems caused some controversy, as critics charged that they are not as reliable or able to distinguish between subtle weather shifts as human meteorologists. Nonetheless, SMI teams continue to roam the country installing and servicing them.

"This has been a good business for us," Erkeneff said. But he said the company chose "areas other than weather systems for us to invest in."

The sale leaves AAI with a little more than 1,300 employees in Hunt Valley.

The company still has a wide range of business: It makes flying drones for the Navy, training and simulation systems for the military and for firefighters, aircraft test and maintenance equipment, combat vehicles and ordnance systems, and big transportation components -- such as frames for electric trolley buses and light-rail cars.

Erkeneff declined to comment on whether AAI will be selling more parts of the company.

He said he talked with politicians and local officials to assure them that the sale of SMI would not hurt the area or the company's employees.

"We worked hard to try to find a buyer that would be a good deal for our people, and we feel we've accomplished that in this divestiture," Erkeneff said.

Aside from SMI's management, the purchasers include Ridge Capital Corp. of Barrington, Ill., and Northstar Capital Ltd. of Minneapolis.

Erkeneff said SMI will continue to lease its current facilities from AAI until the beginning of the year, when it will move into other offices already lined up in Hunt Valley.

"We accomplished as good a result as I think we could possibly do for our people," he said.

Stock in United Industrial Corp., AAI's parent company in New York, fell 12.5 cents yesterday to close at $9.75.

Pub Date: 10/04/97

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