DMI Furniture, Inc.

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DMI Furniture, Inc.

One Oxmoor Place, Suite 205
101 Bullitt Lane
Louisville, Kentucky 40222
U.S.A.
Telephone: (502) 426-4351
Fax: (502) 429-6285
Web site: http://www.dmifurniture.com

Public Company
Incorporated: 1911 as Huntingburg Furniture Company
Employees: 371
Sales: $97.14 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: DMIF
NAIC: 337122 Nonupholstered Wood Household Furniture Manufacturing; 42121 Furniture Wholesalers

DMI Furniture, Inc. manufactures, imports, and markets furniture for the home and office. The company operates in four divisions: DMI Office Furniture, DMI Desk Company, Wynwood, and Home Styles. DMI Office Furniture offers complete collections of office furniture. DMI Desk markets both residential and home-office desks. Wynwood and Home Styles both carry lines of home furnishings, with Wynwood products being more upscale and Home Styles more casual.

Headquartered in Louisville, Kentucky, DMI owns and operates three furniture production plants and one sawmill in southern Indiana. In addition to manufacturing its own furniture, the company also imports from producers in Asia and Latin America. DMI sells its products through independent sales representatives in the United States, Puerto Rico, Canada, Mexico, the Caribbean, and Saudi Arabia. The majority of sales are to furniture chain stores and independent stores, wholesale clubs, catalog retailers, and independent distributors.

Early to Mid-1900s: Inception and Steady Growth

The company that is today DMI Furniture was first established as the Huntingburg Furniture Company in 1911 in Huntingburg, Indiana, a small town in the far southern part of the state. Its three founders—Edwin Fish, George Brown, and Harry Gabriel—were local businessmen who viewed furniture manufacturing as a promising enterprise for the area, due to the abundance of native timber. Incorporating their new business, the three men built a one-story brick building in downtown Huntingburg, hired some twenty-five workers, and began producing bedroom furniture. By June 1912, the company was profitable.

Throughout the 1920s, Huntingburg Furniture expanded its operations. In 1920, the company enlarged its original facility by purchasing the adjacent property. In 1928, still operating solely out of its Huntingburg plant, the company expanded its capabilities significantly when it purchased an additional plant in Ferdinand, Indiana. This second plant, which eventually came to be called the Stylemaker Furniture Company division, was remodeled for furniture manufacturing and enlarged with a 11,000 square foot, two-story addition. It employed approximately 90 production workers.

More expansion followed. In 1936, the year Huntingburg Furniture celebrated its 25th anniversary, two of the company’s directors acquired a third manufacturing facility. They leased the plant, located in Huntingburg, to the company, enabling it to again increase capacity. That same year, the company purchased its second property in Ferdinand, Indiana—a former flour mill—for $2,700. By that time, Huntingburg Furniture had managed to amass considerable capital reserves—some $99,000.

The fast-growing furniture company made still two more expansions before the 1930s ended. In 1939, it purchased a two-story building in Huntingburg. Another former mill, the new facility was fitted out for furniture manufacturing, and soon began operations. That same year, the company purchased a warehouse in Huntingburg, which it converted into a furniture showroom.

The 1940s brought more growth. In 1941, the company expanded its offices to accommodate a growing administrative and clerical staff. In 1943, it acquired the Indiana Wood Industries, in English, Indiana, which it converted and renamed English Furniture Works. By the middle of the decade, the company’s increased furniture production had resulted in an increased need for dimensioned lumber parts—lumber that was pre-cut into precise, standard lengths and widths, such as two feet by four feet. To ensure its supply at a reasonable cost, Huntingburg Furniture partnered with another investor to organize and incorporate the Wood Cellulose Products Company. Based in Chattahoochee, Florida, the company served as supplier of dimensioned wood parts.

In 1946, Huntingburg Furniture sold one of its Ferdinand plants to a new furniture company starting up in the area. That same year, it acquired a former tomato canning factory in Marengo, Indiana, which soon became the Marengo Furniture Company.

Meanwhile, the company was exploring the prospects for business further afield. In 1946, Huntingburg Furniture purchased a former military airfield in Dothan Alabama. Dothan was located in the far southeastern corner of Alabama, approximately twenty miles from both Florida and Georgia. One of the most heavily forested areas of the United States, Alabama, like southern Indiana, seemed hospitable to the furniture industry. Huntingburg Furniture established the Napier Furniture Company on the former airfield, and it began operations in 1947.

1950s to Mid-1960s: Decentralization and Further Expansion

At the mid-point of the century, Huntingburg Furniture had grown to include seven production plants, plus a share of the dimensioned lumber producer in Florida. The company had also established trucking distribution centers, with company-owned fleets for moving finished product to its network of dealers. Huntingburg Furniture’s manufacturing operations were grouped into four divisions: Huntingburg Furniture Company Plant, Stylemaker Furniture Company, English Furniture Works, and Napier Furniture Company.

Up until 1953, bookkeeping and record keeping for all the various plants were centralized in the Huntingburg office. In 1953, however, due to the geographic dispersion of the various plants, the company decided to establish separate offices for its four divisions. Managerial responsibility was also decentralized at this time, and the company hired a manager for each plant.

Huntingburg Furniture kept up a steady rate of expansion throughout the 1950s. In 1954, the company acquired a lumber company in Ferdinand, Indiana, which produced crating lumber and dimensioned lumber. The property was renamed, somewhat whimsically, the Wonderland Manufacturing Company. In 1956, Huntingburg Furniture constructed a 20,000-square-foot warehouse in Huntingburg, just east of one of its manufacturing plants. In 1957, the company acquired a former pottery production facility in Huntingburg which it used the following year to house a newly acquired subsidiary: Fawn Lake Shops. Fawn Lake was a manufacturer of novelty tables and other decorative pieces.

In 1958, Huntingburg Furniture entered a new area of manufacturing and marketing: dining room furnishings. The company converted its former showroom to a production plant for the new venture, and created a division named Paragon Furniture Company. Also in 1958, the company bought out its partner in the Wood Cellulose Products Company for $200,000, becoming the sole owner of that subsidiary. The following year, as the 1950s drew to a close, Huntingburg Furniture purchased a new office building in downtown Huntingburg and moved its home office to that location. By that time, the company and its subsidiaries employed more than 800 workers, and had a sales volume of $7.8 million.

While the 1960s were to bring real change to Huntingburg Furniture, the decade started out with business as usual, which, for the expansion-minded furniture maker, meant acquiring new land and facilities and continuing to grow. In 1961, the company took several steps forward, including enlarging its Stylemaker Furniture plant in Ferdinand, Indiana, and broadening its delivery capabilities by acquiring a fleet of tractors and vans that had previously been operated by a local trucking line. Also in that year, the company acquired the land and buildings formerly owned by a furniture company and a panel company in Gettysburg, Pennsylvania. The facilities were put into operation producing bedroom furniture and given the name Timely of Gettysburg.

Two years later, in 1963, Huntingburg Furniture contracted with a landowner in Crockett, Texas, to establish the company’s first operation in that state. Under the terms of the contract, the owner of the land agreed to build an 80,000-square-foot manufacturing plant and to lease it to Huntingburg Furniture at a set price for 25 years. The company also prepared to make further expansions to its Huntingburg operation by purchasing several acres of land on which to build a fabricator plant. Also in 1963, several of Huntingburg Furniture’s subsidiaries—including Fawn Lake Shops, Napier Furniture Company, Wood Cellulose Products Company, and Timely of Gettysburg—were merged into the parent company.

Mid-1960s to 1970: Dolly Madison Industries

In 1964, Huntingburg Furniture’s officers ordered an appraisal of the company’s value. When the appraisal was completed in July, the results were good: The total fair market value of the company and all its assets was $5.25 million—$3.5 million more than the book value of the company’s fixed assets. Armed with this news, Huntingburg’s board of directors began exploring the possibility of taking the company public. In the course of talking with underwriters, however, they learned of a holding company in New York that was interested in acquiring Huntingburg Furniture outright.

Company Perspectives:

We are a vertically integrated manufacturer, importer, and marketer of office and residential furniture, and a leader in our primary product lines: home office and computer workstations; desk chairs; commercial office furniture collections; casual lifestyle furniture; and collections of better quality, wood residential furniture.

The company was Rittmaster & Co., and it owned, among other things, Dolly Madison Foods—the maker of Dolly Madison ice cream. Rittmaster offered $6 million in cash for Huntingburg Furniture, which was to become a division of Dolly Madison Foods. In September of 1964, Huntingburg’s shareholders voted to okay the sale of the company.

During the first few years of its new ownership, the furniture company continued to expand with even greater vigor. In 1965, it acquired the assets of Carter Furniture Company, a Salisbury, North Carolina-based maker of upholstered furniture, office furniture, and stereo, television, and sewing machine cabinets. This acquisition added four manufacturing plants and in excess of $5 million in annual sales.

By the end of 1965, Dolly Madison Foods was engaged in a range of non-food related businesses. Over the course of the year, the company had not only acquired Huntingburg Furniture, but had also obtained a company that converted wood waste into fertilizer and mulch and had established a new division for leasing furniture. In early 1966, the company changed its name to better reflect the diversity of its operations, becoming Dolly Madison Industries, Inc.

In 1966, Dolly Madison expanded many of its furniture-making facilities, including the Stylemaker plant in Alabama, the saw mill in Indiana, the Timely plant in Pennsylvania, and one of the newly acquired Carter plants in North Carolina. The following year, the company saw good results in its new furniture leasing division; revenue more than doubled and earnings increased by 30 percent. Encouraged by this performance, the leasing division was expanded and turned into its own subsidiary—American Furniture Leasing, Inc.

Their leasing success notwithstanding, 1967 was a difficult year for Dolly Madison Industries. Sales in the furniture division did not increase enough to make full use of all the newly added manufacturing capability. Sales were also soft in the foods division, while operating costs increased. These factors combined to drive year-end earnings down by 50 percent, from $1.5 million in 1966 to $755,658 in 1967.

In 1968, Dolly Madison Industries embarked on an acquisition campaign that was to more than triple its size by the end of the decade. The businesses it acquired during this period—some thirty-five in all—included several small furniture retail chains, various producers and distributors of foodstuffs, a carpet company, an upholstery plant, a maker of steel kitchen cabinetry and furniture, and a maker of ice cream and milk vending machines.

1970s to the Mid-1990s: Bankruptcy and Reorganization

The company’s efforts to become a super-conglomerate did not work as planned. In 1970, with $38 million in debt and a slowdown in furniture sales, the company filed for Chapter 11 bankruptcy protection. At the time the company went into reorganization, it consisted of 18 furniture manufacturing plants, 56 retail furniture stores, fourteen furniture leasing centers, and a host of food-related businesses.

During the course of the reorganization, which lasted for seven years, all of the food-related subsidiaries—and some of the furniture-related ones as well—were sold or dissolved. In 1977, when the company emerged from bankruptcy, its new name reflected its single focus: DMI Furniture, Inc.

The company’s troubles were not over, though. Again pursuing an overly ambitious course of expansion, the company suffered through years of loss. According to an August 21, 1994 article in the Louisville Courier Journal, DMI lost $18 million in the first nine years after it emerged from bankruptcy. By the spring of 1986, the board of directors needed to install a new CEO for the struggling firm, someone who could turn things around. They found their leader Donald Dreher, the company’s former financial officer, who stepped in as interim CEO. Although Dreher’s stay was not intended to be a permanent one, it soon became apparent that he was the right man for the job. Under his leadership, DMI almost immediately began to improve. From 1987 through the middle of the 1990s, the company enjoyed record sales and did not post a loss in any quarter.

Part of DMI’s turnaround was attributable to its ability to lower production costs by moving the bulk of its home office furniture manufacturing to China. In the early 1990s, the company first began importing product from Asian factories. While clearly cost-effective, the sourcing was not without its problems. One of the first hurdles DMI faced was an uneven level of quality in the finished product. To overcome this problem, the company took a more hands-on approach with its Asian producers, establishing an office in southern China with its own managers and inspectors. As it was able to ensure consistent quality, DMI moved more and more of its home office furniture production to China.

Key Dates:

1911:: Edwin Fish, George Brown, and Harry Gabriel form the Huntingburg Furniture Company to produce bedroom furniture.
1928:: Huntingburg Furniture expands its capacity by purchasing a second manufacturing plant, in Ferdinand, Indiana.
1936:: The company adds its third and fourth manufacturing facilities in Huntingburg and Ferdinand, Indiana.
1945:: The company purchases partial ownership in Wood Cellulose Products Company.
1963:: Huntingburg Furniture merges several of its subsidiaries into parent company.
1964:: Dolly Madison Foods acquires Huntingburg Furniture.
1970:: Dolly Madison files for Chapter 11 reorganization.
1977:: The company emerges from reorganization as DMI Furniture, Inc.
1998:: The company forms Home Styles and DMI Office Furniture divisions.

Late 1990s: New Divisions

At the midpoint of the 1990s, DMI was operating two furniture manufacturing plants in Huntingburg, Indiana, one in Ferdinand, Indiana, and one in Gettysburg, Pennsylvania. The company also had a saw mill and dimension parts plant in Ferdinand and a fabrication plant in Huntingburg. Its products include low- and medium-priced bedroom furniture, accent furniture, and home and office desks, conference tables, and chairs.

In late 1995, DMI idled its production plant in Gettysburg, and in 1996 sold the property. The following three years were marked by changes in DMFs product line and its structure, as the company both expanded its offerings and made clearer distinctions between the various markets it was trying to reach. In September of 1997, DMI launched a new division to produce and market a higher-end line of furniture. The division, named Wynwood, offered upscale bedroom, dining room, home office, and occasional furniture.

Just a month later, the company introduced another new division—DMI Desk Company. DMI Desk was formed to focus on home office furnishings and to help the company separate and expand its existing desk and home office furniture lines. In January of 1998, the company created their Home Styles division. Aimed at a younger, less affluent consumer, the Home Styles line included casual furnishings—including futon-style pieces, glider rockers, and kitchen islands and carts—that were affordable and easy to assemble.

Late 1998 saw still another division added to the rapidly growing DMI portfolio: DMI Office Furniture. This division, like DMI Desk, was designed to help the company better focus its sales efforts on the specific market it was trying to reach. Previously, office furniture had been marketed as part of its overall DMI Furniture product mix; by setting it apart, DMI hoped to achieve greater penetration of its distribution channels.

In 1999, DMI closed its Ferdinand, Indiana manufacturing plant, citing underused capacity. The company’s sawmill and dimension mill in Ferdinand remained open. During the last few years of the century, it appeared that DMFs multiple-division strategy was paying off. Sales increased by 15 percent from 1997 to 1998, by 25 percent from 1998 to 1999, and by 30 percent from 1999 to 2000. Growth in the Home Office division was particularly strong, accounting for approximately 36 percent of the total sales increase in 1999 and 48 percent of the 2000 increase.

New Century, New Challenges

DMFs performance suffered somewhat in 2001, with both net sales and income declining—the latter by a sizable amount. This earnings nosedive was due not only to an overall economic slowdown, but also to costs associated with the company’s decision to discontinue its manufacture of fully assembled, promotional-priced bedroom furniture. DMI recorded a pre-tax charge of $775,000 for inventory, bad debt, and severance pay for laid-off workers as part of the closing.

As 2001 drew to a close, DMI, like so many other companies, struggled against the ill effects of a recessionary economy. Even so, the company believed that the changes it had made over the previous few years had served to position it well for the future. In a November 2001 press release, Donald Dreher acknowledged that economic conditions were likely to damage the company’s performance in the short term, but said he was optimistic about DMFs long-range prospects, stating that “we continue to believe in the operating strategy that drove the record setting performance in fiscal 1999 and fiscal 2000.… As the economy improves, we believe our domestic and Asian infrastructure can capitalize on the changing dynamics in the furniture industry and deliver long-term value to our investors.”