Acutec Precision Aerospace has employee ownership interest

The inevitability of change has been one of Acutec Precision Aerospace Inc.’s philosophical principles since its founding more than 30 years ago.

Change for the Meadville-based company now includes a move into employee ownership.

Elisabeth Smith, 40, second-generation owner and the firm’s president and chief executive officer since 2014, has sold 25 percent of Acutec to its workers through an employee stock ownership plan, or ESOP. The plan became effective Aug. 31.

Acutec, with 400 workers, manufactures a variety of components for the aerospace industry at locations in Meadville, Saegertown and St. Stephen, South Carolina.

The ESOP shares, valued at $5.5 million, will roll out over the next 10 years to current and future employees, she said.

Giving employees ownership reflects Acutec’s underlying culture of having everyone own their work experience, improve what they’re doing, and look to the long term, according to Smith.

“Folks are putting their careers here — they’re coming here every day, their hard work, their effort. Why shouldn’t they benefit from the profit they’re generating?” she said of the sale.

“It’s empowering,” said Sheryl Eschweiler, a 14-year Acutec worker who is the lead employee of the firm’s tool crib.

“It gives us some incentive to think long term and to want to be here long term because we now have skin in the game,” she said. “I see it as a journey we’re all on together.”

Lee Nickells, a machinist at Acutec for about six years, wholeheartedly agrees.

“For me personally, it’s going to drive us to do better,” Nickells said. “To think outside the box and make things better than they are now. Make things more profitable, to try to help the bottom line at the end of the day.”

Eschweiler and Nickells are two of seven members of Acutec’s ESOP resource team which will explain the program to fellow employee-owners who may have questions.

Having skilled workers who are owners helps with long-term employee retention and gives stability to the firm, both Eschweiler and Nickells said.

The company has a 401(k) retirement plan, but Smith said the ESOP enables employees to benefit financially from the firm’s success through ownership.

“This is on top of the 401(k) program — we didn’t want to be taking away from benefits,” she said.

The idea of forming an ESOP for Acutec came about after Smith saw two other Meadville companies — Voodoo Brewery and C&J Industries — form them in 2016.

It led Smith to a workshop with the Pittsburgh Chamber of Cooperatives and a conference by the National Center for Employee Ownership in 2019 in Pittsburgh.

Formalized by Congress in 1974, the concept of ESOP companies divide the ownership among the employees as a defined retirement contribution plan. ESOP companies are more tax efficient and the profits and future tax savings stay with the company and the new employee-owners.

There is a five-year vesting schedule for Acutec’s ESOP plan, meaning employees who have been with the firm at least five years have full ownership of their shares.

Those with less than five years of service have 20 percent of the stock share value per year until fully vested after five years.

When an Acutec employee leaves or retires, their shares in the ESOP will be cashed out and the shares then go back into the ESOP pool.

“I’m still trying to learn about it for myself, but it’s going to be a huge benefit,” said Zach Smith, Acutec’s chief financial officer. Smith, who is not related to Elisabeth Smith, also is on Acutec’s ESOP resource team.

“With 25 percent of the company going to employees, that distinguishes us from companies in our sector selling to private equity,” he said.

Private equity firms are investment partnerships that buy and restructure firms often before reselling them.

Elisabeth Smith said she feels strongly about not selling Acutec to a private equity firm.

“The profits generated here should stay in the community,” she said. “That’s something I’m very passionate about and interested in maintaining long term. We know we’re going to grow.”

As seen in the Meadville Tribune and written by Keigh Gushard.