Blount, Inc.

views updated

Blount, Inc.

4520 Executive Park Drive
Montgomery, Alabama 36116
U.S.A.
(334) 244-4000

Public Company
Incorporated: 1949 as Blount Brothers Construction
Company
Employees: 4,700
Sales: $487.3 million
SICs: 3425 Saw Blades & Handsaws; 3482 Small Arms
Ammunition; 3523 Farm Machinery & Equipment; 1541
Industrial Buildings and Warehouses

By means of a well-conceived expansion strategy and timely acquisitions, Blount, Inc. has grown into one of the leading manufacturing firms based in the United States. The company’s three main businesses include outdoor products, industrial and power equipment, and sporting equipment. Its product line ranges from specialty riding mowers and log loading machinery to small arms ammunition and telescopic rifle sights. With major manufacturing facilities spread throughout the United States, Canada, and Brazil, and with an ever-expanding distribution and sales network in Europe, company sales and earnings are on the rise.

By the time Winton and Houston Blount returned to their hometown of Union Springs, Alabama, after World War II, the family sand and gravel business had almost completely deteriorated. Winton and Houston’s father had died during the war, and along with him the driving force behind the company. But the two brothers were determined to rebuild it, and within a few weeks they had purchased Army surplus equipment to use for sand and gravel projects. Winton, ever on the lookout for opportunities and bargains, decided rather impulsively to purchase four D-7 Caterpillar tractors a short time later. When Houston asked his brother why he had purchased the tractor’s, Winton replied that they were going into the contracting business.

The first contracts the brothers landed were for constructing fish ponds in and around Union Springs. By the summer of 1946, the two siblings were doing subcontract work for the Alabama Highway. Although neither Winton nor Houston had any prior experience in constructing highways, they worked on numerous highways, roads, and bridges throughout Mississippi and Alabama during the late 1940s. Their first big break came in 1949 with a $1 million contract to build the superstructure for a viaduct in Birmingham, Alabama. By 1951, the brothers had constructed their first building, followed shortly by a few gymnasiums. In the same year, the company, known as Blount Brothers Construction Company, procured a very lucrative contract to build a 500,000-square-foot plant used by Sperry to manufacture missile components for the U.S. Navy.

In 1952, the company won a contract that significantly altered the way it conducted business. A highly technical project, the contract was for building segments of a wind tunnel for the U.S. Air Force at the Arnold Engineering Development Center, near Tullahoma, Tennessee. Winton and Houston soon discovered that highly technical projects were not only more profitable, but that there was less competition for such contracts. As a result, they started to concentrate on complex construction-type projects, some of which were one-of-a-kind buildings. Soon after the Air Force project, the company constructed an atomic energy facility at Oak Ridge, Tennessee, and took on other increasingly complex projects.

By the middle of the decade, the Blount brothers were not only deeply involved in the construction industry, but also in the materials business, including gravel and sand, as well as asphalt and concrete pipe production. At this time, Houston Blount decided that he wanted to devote his attention exclusively to the materials operation. Thus, the two brothers organized all their plants in the materials business and formed the Vulcan Materials Company. Houston resigned from Blount Brothers Construction to become president and chief executive officer of the new firm.

Under Winton’s strong leadership, Blount Brothers Construction continued to grow. The company was awarded major contracts by the Air Force to build Bomark and Nike nuclear missile bases in California, Massachusetts, Michigan, and Minnesota. In 1958, Blount Brothers constructed the first intercontinental missile facility in Wyoming. It was the first time the firm was asked to build a site under the “principle of concurrency,” meaning that the design and testing of the missile was carried out as the facility itself was being designed and constructed; each testing of the missile resulted in a change of building specifications on the job site. Shortly afterwards, the company was contracted by the U.S. Navy to build an “indoor ocean” so that ship models could be tested under the most stringent conditions. The company also constructed the launching facilities at Cape Canaveral for the Mercury, Gemini, and Apollo space programs, as well as the world’s biggest rocket test silo. Other projects during the late 1950s involved the construction of nuclear reactors, a cyclotron, the Atlanta airport, and numerous dams and river locks.

By 1962, Blount Brothers was growing so rapidly that it passed the $100 million mark for construction contracts. In the same year, the construction industry’s trade publication, Engineering News-Record, ranked Blount as the thirty-third largest construction company in the United States. However, although Blount benefitted from the federal government’s practice of awarding lump-sum contracts to the lowest bidder that could provide high-quality work, another government policy of using public work funds to regulate the economy began to create extreme cycles within the construction industry as a whole. As a consequence of this latter policy, management at Blount decided to decrease its reliance on government contracts and seek more work in the private or corporate sector.

In order to capture a significant share of the contracts in private industry, the company started a business development department and opened satellite offices in Boston, Chicago, and Houston. Initially, Blount was forced to accept small jobs, but these soon grew into larger and larger contracts. In 1967, management decided to embark upon an aggressive acquisitions program to accelerate its entry into private sector construction. The first acquisition was the Benjamin F. Shaw Company, a leader in the manufacture and installation of piping for chemical, paper, and power plants, as well as for oil refineries.

Winton Blount resigned from his position as president and chairperson in 1968 to accept the nomination as Postmaster General of the U.S. in Richard Nixon’s new Cabinet. During his leave of absence, Austin Paddock, the administrative vice-president of United States Steel Company, was chosen to replace Winton. When Winton Blount left the company, he insisted that it no longer bid for government contracts while he was postmaster. Since over 50 percent of the company’s construction contracts were still with the government, this meant the elimination of a huge amount of business at one stroke; at the same time, it also meant that the firm would devote itself to getting all of its contracts from private industry.

To compensate for the elimination of federal contracts, Blount continued its acquisition program. The most important acquisition during this time involved the purchase J.P. Burroughs & Sons, an agribusiness firm based in Saginaw, Michigan. Buying Burroughs, a public company listed on the American Stock Exchange, allowed privately-owned Blount to acquire all of the Burroughs shareholders. This move had been anticipated for years by management and led to Blount’s listing on the American Stock Exchange in July 1972. In addition, the acquisition introduced the company, now known as Blount, Inc., to the field of agribusiness, which involved the manufacture of seed cleaners, roller mills, grain dryers, and bucket elevators.

When Winton Blount returned to the company in 1974 and assumed his former position as president and chairperson, he decided that it was time to determine the future direction of the firm. Taking advice from both Blount management and his brother Houston, Winton decided that the company would not become a conglomerate with operations in a variety of unrelated fields, but rather focus solely on the construction and agribusiness industries. Since the company was already well established in the construction industry, Winton immediately turned his attention to expanding its agribusiness operations. In 1976, Blount, Inc. purchased Modern Farm Systems, a manufacturer and distributor of grain bins and metal farm buildings. With facilities in Iowa, Indiana, Mississippi, Nebraska, and Pennsylvania, the acquisition enabled Blount, Inc. to quickly set up a comprehensive system to process, handle, and store grain.

In order to develop its agribusiness operations, Blount Inc. purchased York Foundry & Engine Work in 1977. Located in York, Nebraska, the company manufactured and distributed such items as bucket elevators and belt conveyors used to handle feeds, fertilizers, grains, and various other bulk materials. Another acquisition during the same year involved Redex Industries of Elm Creek, Nebraska, another manufacturer of materials handling equipment. The third purchase of that year was Mix-Mill Manufacturing Company of Bluff ton, Indiana, a maker of different types of farm equipment used to process feed for cattle, poultry, and hogs. These acquisitions, in combination with increased grain production during the mid-1970s, led to record sales for the company; by 1979, Blount’s agribusiness operations made up 45 percent of its operating income.

While Blount’s agribusiness revenues were beginning to rise, management decided to expand its construction operations overseas due to a decline in the U.S. market. Offices were opened in the Middle East, and within a short period Blount had secured major contracts with Saudi Arabia and Iran; two of the largest contracts included a $150 million agreement for construction in Tabuk, Saudi Arabia, and a collaborative effort with the French firm Bouygues involving a $3.5 billion contract for constructing the University of Riyadh in Saudi Arabia. On the domestic front, Blount purchased Fred J. Early Jr. Company, a prominent contracting firm located in San Francisco, in order to extend its operations west of the Rocky Mountains. Additional acquisitions such as the R.S. Noonan Company, a process engineering firm, and Hoad Engineers, which provided consulting engineering services, gave Blount the opportunity to enter the utility, paper, chemical, cement, and petrochemical fields. In a risky undertaking, for $61 million management also decided to acquire the Washington Steel Company, a manufacturer of specialty steels. This purchase added a third major product line to Blount’s well-established construction and agribusiness operations.

In 1980, Blount reported revenues of just over $554 million; by the end of fiscal 1982 revenues had increased dramatically to $788 million. The cash flow from the construction project in Saudi Arabia was a boon for the company, as was the performance of Washington Steel, and the burgeoning success of its agribusiness expansion into such countries as Mexico, West Germany, China, Venezuela, Nigeria, and Egypt. Revenues for 1984 were a hefty $847 million and earnings a record $24.3 million. Yet at the pinnacle of its success, trouble started to brew. Blount’s foreign construction contracts began to decrease, and the farm machine business market suddenly tumbled into a worldwide depression. Anticipating these difficulties, Winton Blount began to implement a diversification strategy. Slowly beginning to sell off all the company’s agribusiness holdings, in 1985, he purchased Omark Industries, a chainsaw and materials handling equipment manufacturer for the pulp-wood and timber industry, and a leading producer of gun care equipment. In addition, Blount also bought W&E Environmental Systems, a Swiss-based resources recovery firm specializing in turning garbage into energy. These acquisitions, and the continued success of its projects in Saudi Arabia, helped push revenues past the $1 billion mark in 1986.

In 1987, although he remained the board’s chairperson, Winton Blount decided to decrease the time he spent in managing the day-to-day operations of the company. He promoted his son, Winton Blount III to the position of vice-chairperson and gave him the primary responsibility of supervising the company’s construction business. Having previously been the head of Blount’s international construction operations, Blount III seemed a natural choice. Yet from the very beginning of the younger Blount’s tenure, the company’s performance began to suffer. Washington Steel Corporation was sold off, in spite of its turning a profit during one of the most difficult periods in the steel industry. A $100 million, 80 megawatts co-generation project located in Pennsylvania landed in court following a dispute between Blount and Schuykill Energy Resources. Problems with the company’s handling of a $150 million office complex for AT&T in Chicago also gave rise to litigation. Other construction projects in which the company lost control or entered into contract terms that were unfavorable led to declining revenues and profitability. The younger Blount was asked to vacate his position as vice-chairperson, and his father returned to turn the company around. By the end of fiscal 1990, however, revenues had dropped from over $1 billion to $683 million; revenues for the construction operations alone declined from over $600 million to $348 million.

The early 1990s were a period of disruption and realignment for the company. William R. Van Sant, president and chief executive officer of Blount from December 1990 to October 1992, suddenly resigned, creating a large gap in management. Van Sant had helped the company shift its focus to a more diversified mixture of manufacturing equipment and construction operations. John M. Panettiere, a management expert with considerable experience in the auto industry, was appointed president and chief operating officer, and he immediately began to help Winton Blount iron out the company’s problems. One of their first decisions was to sell the resource recovery operation and not seek any additional contracts in the waste-to-energy business. Their second decision involved a stronger commitment to manufacturing, including outdoor products, such as saw chains and specialty riding mowers; industrial and power equipment, such as industrial tractors and equipment for timber harvesting and loading; and sporting equipment, such as small arms ammunition, gun scopes, and gun care equipment. The company’s overall realignment worked. In 1993, revenues increased to over $691 million from a 1992 figure of $637 million.

In early 1994, management decided to sell almost all of its construction business to Caddell Construction Company, headed by one of Blount’s former employees. This decision opened the way for the company to eliminate the substantial operating losses its construction business experienced in the late 1980s and early 1990s. Although revenues dropped sharply as a result of this move, Blount was able to focus entirely on its three remaining divisions of outdoor products, sports equipment, and industrial equipment. Finally rid of the lingering effects of a worldwide slowdown in the construction industry, Blount’s prospects for the future appeared much brighter.