Brown Jordan International Inc.

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Brown Jordan International Inc.

1801 North Andrews Avenue
Pompano Beach, Florida 33069
U.S.A.
Telephone: (954) 960-1117
Fax: (954) 960-1849
Web site: http://www.brownjordan.com

Private Company
Incorporated: 1994
Employees: 1,460
Sales: $346.3 million (2003)
NAIC: 337121 Upholstered Household Furniture Manufacturing; 337124 Metal Household Furniture Manufacturing; 337129 Wood Television, Radio, and Sewing Machine Cabinet Manufacturing

Brown Jordan International Inc. (BJI), formerly known as WinsLoew Furniture Inc., operates as a designer, manufacturer, and marketer of furnishings and accessories to residential and commercial customers in the United States and abroad. The company's furnishings are sold under the brand names of Brown Jordan, Tommy Bahama, Pompeii, Winston, Molla, Vineyard, Atlantis, Stuart Clark, Casual Living, Tradewinds, Loewenstein, Charter, Lodging by Charter, Woodsmiths, Wabash Valley, Texacraft, and Tropic Craft. The company was born out of a 1994 merger of Winston Furniture Co. and Loewenstein Furniture Group. It operated as WinsLoew Furniture after the deal, acquired BJI in 2001, and adopted the BJI moniker in 2002.

Casual Furniture Since 1975

In December 1994 Winston Furniture Company, Inc. and Loewenstein Furniture Group, Inc. merged into WinsLoew Furniture, Inc. The merger pooled the interests and financial statements of the companies. Winston Furniture Company originated as a division of Marathon Corporation in 1975. By 1976, Winston management along with other investors acquired the aluminum furniture business of that division through a leveraged buyout (LBO). Over the next decade Winston grew, acquiring the wrought iron and tubular steel furniture business of Lyon-Shaw, Inc., a division of B.B. Walker Company, in 1986. Operating independently for more than a decade, Winston completed an initial public offering (IPO) of shares in August 1987. By 1988, however, Winston was purchased in a LBO by WF Acquisition Corporation, a company formed by affiliates of Trivest, Inc. specifically for the buyout. The two companies merged after the buyout, and Winston was able to reduce its indebtedness and expand its operations. In 1992, Winston was incorporated under the laws of the State of Delaware, and Winston Furniture Company of Alabama, Inc. became its sole operating subsidiary.

By 1994, Winston had become a leader in the casual furniture market. The company had pioneered the use of all-weather cushions on aluminum furniture in the 1970s and was awarded the 1993 Casual Furniture Manufacturer Leadership Award at the National Casual Furniture Market in Chicago, Illinois. Winston, which also had won the award in 1990 and had been a finalist for the award in each of its previous four years, was the only company to win the award twice. The award is based on the manufacturer's leadership in the areas of quality of goods, design, merchandising, customer service, ethics, communications, and trade relations. Winston continued to expand its casual furniture operations by purchasing all the assets of Texacraft, a privately held manufacturer of contract aluminum furniture, in 1994.

Loewenstein, Inc.: Contract Seating Since 1967

Loewenstein, Inc. was founded in 1967 as a manufacturer of contract seating for the hospitality market. Atlantis, an affiliate of Trivest, acquired the company in 1985 and Loewenstein operated as part of the "Atlantis Furniture Group" until 1990. The Atlantis Furniture Group consisted of Southern Wood Products, Inc., a manufacturer of promotionally priced RTA furniture; Gregson Furniture Industries, Inc., a manufacturer of traditional and transitional-styled seating for the office and institutional markets; and Excel Office and Contract, Inc., a manufacturer of contemporary and traditional-styled seating for the office furniture market. In 1990, Loewenstein was incorporated and purchased the Atlantis Furniture Group. In 1993, the company completed an IPO of common stock. The $17.2 million raised effectively retired all of Loewenstein's outstanding indebtedness and allowed for additional working capital.

As Loewenstein retired its debt, it expanded its futon offerings through acquisition. In 1993, Loewenstein purchased Shaffield Industries, Inc., a manufacturer of RTA furniture, including futons, chairs, tables, and related accessories under the brand name "From the Source." In 1994, Loewenstein acquired another futon manufacturer, New West Industries.

While Winston and Loewenstein operated separately and in different niche markets, their destinies were mingled because they shared certain officers. Earl W. Powell had founded Atlantis Plastics, Inc. in 1984, served as chairman of the board of Loewenstein since 1985, and was chairman of the board of Winston since 1988. In addition, Powell had cofounded Trivest, a Miami-based private investment firm that provided services to both Winston and Loewenstein, with Dr. Phillip T. George. Dr. George served as director of Loewenstein since 1985 and as director of Winston since 1989. Peter W. Klein served as director of Winston since 1988 and as director of Loewenstein since 1993; he also acted as secretary and general counsel of Trivest since 1986. Peter C. Brockway served as director of Winston since 1988 and executive officer, managing director, and executive vice-president of Trivest since 1986, 1991, and 1993, respectively. He also served as vice-president of Atlantis since 1986.

Although certain officers had informally discussed the possibility of merging Winston and Loewenstein, an official proposal came in 1994 from Earl W. Powell. He suggested a stock-for-stock, tax-free business combination. To investigate the potential of such a merger, the board of directors for each company appointed a committee of directors who were neither employees of Winston, Loewenstein, nor Trivest to study the proposal's feasibility.

At the time of the study, both companies were financially stable. Winston had sales of $33.7 million, and Loewenstein had sales of $66.6 million for the nine months ended September 30, 1994. The combined financial strength of the companies was hoped to allow the created company to expand product lines from a larger operating base, have better access to public and private financing due to the strength of a combined financial base, and enhance the attractiveness of company stock to investors because of a larger market capitalization. Independent analysts believed that the merger was fair from a financial standpoint. The merger was effected on December 16, 1994. Each outstanding share of common stock of Winston was converted into the right to receive one share of common stock of WinsLoew and each outstanding share of the common stock of Loewenstein was converted into the right to receive 1.05 share of common stock of WinsLoew.

Trivest played an important role in the history of both companies. Before the merger those officers controlling Winston and Loewenstein were affiliates of Trivest and controlled approximately 31.5 percent of Winston's outstanding common stock and approximately 34.3 percent of Loewenstein's. With the merger Trivest and affiliated parties would own 33.3 percent of the outstanding WinsLoew common stock. Until the merger, Trivest offered its specialized management services to both Winston and Loewenstein, receiving aggregate fees of $850,000 per year. In October 1994, WinsLoew entered a ten-year agreement with Trivest, Inc.; under the agreement, Trivest would provide corporate finance, financial relations, strategic and capital planning, and other management advice to WinsLoew for a base fee of $500,000, with increases for cost of living and additional businesses acquired.

Operating As One: Results of the 1994 Merger

Initially the pooled interests of the companies looked good. Operating results for the first year as WinsLoew Furniture, Inc. marked a 34 percent increase in sales to $137.8 million. An additional bonus came when WinsLoew won the 1994 Design Excellence Award from the Summer Casual Furniture Manufacturers Association for its tubular aluminum dining chair called Magnolia Sling.

The increase in sales and honor from the award did not cloud management's vision for the future, however. WinsLoew management introduced a strategic plan in mid-1995 to cut costs and improve efficiency in the coming years due to the manufacturing and marketing problems it saw in its low-end futons and Southern Wood division. The effects of the plan did not save the company from posting disappointing operating results after its second year. The management cited "higher raw material costs, competitive pricing pressures, and production inefficiencies," as well as the discontinuance of low-end futon production, for the decrease in income in 1995. WinsLoew had a net loss of $4.0 million in 1995, compared with a net income of $6.4 million in 1994. To further implement its strategic plan, WinsLoew sold its subsidiary Excel Office and Contract because its products were deemed "inconsistent with WinsLoew's," according to president and chief executive Bobby Tesney in HFN. Tesney added that the sale of Excel would "enhance profitability by reducing embedded costs and maximizing marketing opportunities in each of our product groups." He anticipated that the results of the sale along with increased sales and cost-cutting measures would be reflected in improved operating results for 1996.

The benefits of WinsLoew management's vision came in the fourth quarter of 1995, and the company continued to post increases in every quarter into 1997. Net income for 1996 was $8.3 million, compared with a net loss of $4.0 million the year before. Management noted that 1996 was a "very successful" year. In addition, the company reported improvement in the gross margins of each of its business segments. The company credited its "price increases, overhead reductions, production improvements, refocused or expanded marketing strategies, and new product designs" along with the consolidation of some warehousing and manufacturing facilities for its turnaround.

Company Perspectives:

Brown Jordan International is dedicated to long-term strategic growth achieved by maximizing efficiency and envisioning areas for growth worldwide.

WinsLoew's numbers for 1996 far exceeded analysts' expectations. Individual Investor reported that analysts were "expecting just $0.77" earnings per share, but WinsLoew had reached $0.95 earnings per share. Given WinsLoew manage-ment's stellar performance, analysts expected double-digit growth for the company in 1997 as well. Wallace W. Epperson, Jr., of Interstate/Johnson Lane noted in Buyside the difficulty of finding "value" or, even more rarely, companies "exceptionally well-positioned in growth markets" with a "management team that has proven itself in difficult conditions." He concluded that WinsLoew offered all these attributes. Nancy Zambell of UnDiscovered Stocks, Inc. declared in Buyside that WinsLoew's earnings per share for 1996 was the " 'proof-of-the-pudding' that WinsLoew has the management team to direct its future growth." In addition, WinsLoew's focus on national chain retailers was seen as good fuel to drive the company's growth, according to Individual Investor. The predictions seemed accurate by the end of the second quarter of 1997, when the company again reported earnings higher than analysts' estimates.

Product Improvement in the 1990s

The financial benefits reaped from WinsLoew manage-ment's strategic plan could not have been realized without the company's strong product offerings. More than 70 percent of WinsLoew's revenues came from the casual and contract seating groups. WinsLoew's casual residential furniture was marketed under the Winston label for aluminum furniture and under the Lyon-Shaw label for wrought iron. The September 1994 acquisition of Texacraft, a privately held manufacturer of aluminum, iron, wood, and fiberglass casual furniture, allowed WinsLoew to enter the contract casual furniture arena. WinsLoew augmented its quality of design by using stronger components than its medium-priced competitors and applying its exclusive Diamond bond paint finishing system, which gave the furniture a durable, chip- and fade-resistant protective finish.

At this time, contract seating was sold under the Loewenstein and Gregson labels. Loewenstein's Breeze chair won the International Interior Design Association and Contract Design magazine's APEX Award in the seating category in 1996. Entries in the design competition were judged on innovation, durability, performance, and value. The Breeze chair was designed by the Italian designer Carlo Bartoli, a man who "uses technical solutions in an intelligent way, discreetly offered within the object almost as a bonus to the buyer," according to Jacques Toussaint in Contemporary Designers. "He never cuts short his design component, such as aesthetics or function—these qualities are what place Bartoli among the most highly rated designers." To enhance its designs, Loewenstein improved its finishing process to produce the hardest and most vibrant finish in the industry. The electrostatic spray guns and three-dimensional ultraviolet drying system have increased efficiency in manufacturing and reduced the emission of volatile organic compounds 50 percent below permitted levels, a feat recognized appreciatively by the state of Florida.

WinsLoew marketed ready-to-assemble furniture under three labels: New West for futons and frames, MicroCentre for ergonomically designed computer furniture, and Southern Wood for promotionally priced spindle (including coffee tables, wall units, children's furniture, and TV carts) and flatline products (including bookshelves, computer desks, printer stands, and bath-related storage units). New West was ranked second among manufacturers in the futon industry. Part of the company's plans included eliminating the noncompetitive and low-margin futon products and broadening the market for futons by participating in non-futon trade shows. MicroCentre's computer workstations featured among other things the patented view-down monitor configuration. The design came from the research of ergonomist Stewart B. Leavitt. In light of the increasing numbers of health problems related to stress at work, Micro-Centre sponsored research by Leavitt in 1996. Leavitt studied how the height and placement of video display terminals affected vision comfort and related to healthcare issues. He discovered that the eyes could more easily focus when the monitor was placed 15 to 45 degrees below eye level. He also found that this positioning of the monitor could reduce eye strain, redness, and headaches over long periods.

As part of WinsLoew's strategy to curtail production of lowend products, WinsLoew drastically reduced the offerings in the Southern Wood line. WinsLoew did improve the designs of the remaining pieces, however, and invested nearly $1 million in new production equipment. The company anticipated that the more "sophisticated" designs would improve sales and profit margins. With WinsLoew's improved financial position and its efforts toward improving the quality of its product, many of the benefits of merging Winston and Loewenstein were only just becoming apparent in the late 1990s.

Key Dates:

1967:: Loewenstein Inc. is established as a manufacturer of contract seating for the hospitality market.
1975:: Winston Furniture Co. originates as a division of Marathon Corporation.
1985:: Atlantis, an affiliate of Trivest, Inc., acquires the company.
1988:: Winston is purchased in a leveraged buyout by WF Acquisition Corporation, a company formed by affiliates of Trivest.
1990:: Loewenstein incorporates and purchases the Atlantis Furniture Group.
1993:: Loewenstein goes public.
1994:: Winston and Loewenstein merge into WinsLoew Furniture Inc.
2001:: Brown Jordan International is acquired.
2002:: The company adopts the Brown Jordan International name.

Changes in the Late 1990s and Beyond

During the late 1990s, WinsLoew remained focused on acquiring companies that manufactured furnishings at varying price points. Pompeii Furniture Industries, a manufacturer of high-end casual furniture for commercial markets, was acquired in 1998. During the following year, WinsLoew added Tropic Craft Aluminum Furniture Manufacturers, a maker of casual furniture for the contract and hospitality markets, to its arsenal. In addition to growth strategy, WinsLoew began to sell off unprofitable businesses that did not fit into the company's core line of casual furniture and contract seating. Included in its divestiture program was the Lyon-Shaw wrought iron casual furniture unit, which it sold to Woodard Inc. in 1997.

Changes were on the horizon for WinsLoew as it prepared to enter the new millennium. The first came in 1999, when a buyout group led by Chairman Earl Powell set plans in motion to acquire the company for $220 million and take it private. Trivest Furniture Corporation was created by the buyout partners and became WinsLoew's parent company after the deal. Over the next 18 months, the company grew through acquisition. It made its sixth and largest purchase in 2001 when it agreed to buy Brown Jordan International Inc. for $100 million. WinsLoew President and CEO Bobby Tesney commented on the purchase in a May 2001 HFN article claiming, "The Brown Jordan name is number one in casual furniture today, and has been for many years. We think the name adds a lot to our presence in the market." Indeed, after the deal WinsLoew controlled 22 percent of the casual furniture market.

In early 2002, WinsLoew announced a major corporate restructuring in which all of its operational lines were consolidated under the WinsLoew Furniture Inc. corporate name. It shifted gears in May of that year and decided instead to adopt the Brown Jordan International Inc. (BJI) corporate moniker. Management hoped to capitalize on Brown Jordan's powerful brand name and reputation. In addition, the company shuttered its mass market headquarters in Ripon, Wisconsin, and moved key personnel to Pompano Beach, Florida. BJI also closed DesignResource, its creative division in Long Beach, California, and relocated it to Pompano Beach.

As an affiliate of Trivest Partners L.P., BJI's corporate mission was to position itself as the market leader in the retail, mass, and contract distribution channels. At this time, the company elected Bruce Albertson as president and CEO, while Tesney acted as vice-chairman. The executive group also included Jerry Camp, president of the retail market division; Dale Boles, president of the mass market division; and Darryl Rosser, president of the contract market division. With a solid executive team in place, a group of strong brands in its holdings, and a definitive business strategy, BJI appeared well positioned for success in the years to come.