Jacuzzi Brands Inc.

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Jacuzzi Brands Inc.

777 South Flagler Drive, Suite 1100 West
West Palm Beach, Florida 33401
U.S.A.
Telephone: (561) 514-3838
Fax: (561) 514-3839
Web site: http://www.jacuzzibrands.com

Public Company
Incorporated: 1915 as Jacuzzi Brothers, Inc.
Employees: 5,929
Sales: $1.34 billion (2004)
Stock Exchanges: New York
Ticker Symbol: JJZ
NAIC: 326191 Plastics Plumbing Fixture Manufacturing; 333911 Pump and Pumping Equipment Manufacturing; 332913 Plumbing Fixture Fitting and Trim Manufacturing

Jacuzzi Brands Inc. operates as a leading manufacturer and distributor of bath and plumbing products, including whirlpool baths, spas, showers, sanitary ware, and bathtubs. The company also offers professional grade drainage, water control, commercial faucets, and various other plumbing products to customers in residential, commercial, and institutional markets. Jacuzzi has several brands in its arsenal, including its namesake, Sundance, Zurn, and Astracast. The company is the originator and one of the world's largest manufacturer of whirlpool baths, with which its name has become synonymous. Jacuzzi was founded in 1915 and remained a family owned and operated company until 1979 when it was bought by Kidde Inc. The latter company was subsequently purchased by the huge British conglomerate Hanson plc, which later spun off a number of its American subsidiaries as U.S. Industries (USI). USI sold off many of its businesses during the early years of the new millennium and changed its name to Jacuzzi Brands in 2003.

Company Origins in the Early 20th Century

Jacuzzi was founded by seven brothers who emigrated from Italy to California in the early 1900s. Engineers by trade, the brothers produced a variety of aviation-related innovations including a pitched propeller developed for the American government and the first enclosed cabin monoplane, which was used to carry mail and passengers for the U.S. postal service. According to certain accounts, the Jacuzzis' mother was unhappy with the risks involved in aviation and asked her sons to work on something more down to earth. The Jacuzzi Brothers family firm began to design hydraulic pumps and eventually became one of the world leaders in the engineering and production of agricultural pumps used for irrigation.

The Invention of the Whirlpool Bath in the Late 1940s

The company's hallmark product, the Jacuzzi whirlpool bath, was invented in the late 1940s as a personal project of one of the second generation of Jacuzzi company managers, Candido Jacuzzi. Candido's son Kenneth, stricken with rheumatoid arthritis, had been receiving hospital hydrotherapy treatment and, as Kenneth would later relate in People Weekly, "as good Italian parents do, my folks thought more is better." A team of Jacuzzi engineers were put to work to develop a home version of the hydrotherapy pump. The result was the J-300, a small portable pump that could be placed in a bathtub to create a soothing hydromassage. In 1956, Jacuzzi began marketing the therapeutic device to hospitals and schools, developing a small but solid niche in the surgical supplies market. Kenneth, who continued to battle the physical challenges of rheumatoid arthritis, went on to found his own successful software company and the Jacuzzi pump that was invented for him achieved its own fame as the plaything of celebrities.

By the mid-1950s the privately owned Jacuzzi Brothers was being run by the second generation of Jacuzzis. In addition to its market-leading agricultural pumps and the J-300, the company patented and produced a large variety of products that made use of their expertise in hydraulic technology, including water jet propulsion motors for a growing recreational motor boat industry as well as swimming pool equipment and a wind machine that helped protect crops from frost.

In 1968, Roy Jacuzzi, a member of the third generation of Jacuzzis to work for the company, graduated from college with a degree in industrial design and joined the family firm as head of the research division. Searching for new applications for the company's products, Roy struck upon the idea of marketing the J-300 hydrotherapy device to the growing leisure and fitness market. In order to create enough room to accommodate a more relaxing soak, Roy developed and patented the first bathtub with a built-in whirlpool system. Dubbed the Roman Bath, this unit made it unnecessary to place a portable pump into the tub, allowing the bather the full interior of the tub in which to enjoy the hydromassage. The self-contained unit was marketed as a replacement for the standard bathroom tub and could be used with or without the hydromassage feature. Although, by his own admission, the senior generation of Jacuzzis thought he was "a little weird," Roy set out to create a market for the Roman Bath by displaying it at country fairs and housing trade shows.

By 1970 sales of the built-in whirlpool bath were promising enough to justify the introduction of a larger model, the Adonis, and within two years the company was manufacturing a two-person unit, dubbed the Gemini, available in a wide range of colors and styles. The Gemini line was followed by even larger models called spas, which were produced complete with filters and water heaters to obviate the necessity of filling and emptying them with every use. The laid-back culture of California in the 1970s turned out to be the perfect launching ground for the leisure-oriented product and by the middle years of the decade owning a "Jacuzzi" had become a symbol of the mellow California lifestyle. With the endorsement of high-profile movie stars, sales of the units took off and soon the whirlpool bath division was Jacuzzi's biggest profit maker. As the sole supplier of the patented system, the Jacuzzi brand name was synonymous with the whirlpool baths. Although Candido Jacuzzi, the conservative inventor of the original J-300 pump, was reportedly embarrassed about their sybaritic associations, the company's whirlpool baths and spas, and the Jacuzzi name, became identified with indulgent relaxation.

Bought by Kidde Inc. in 1979

In 1976 Jacuzzi moved its corporate headquarters from Berkeley to Walnut Creek, California. By the late 1970s, thanks both to sales of whirlpool baths and the growing export market for the company's irrigation pumps, Jacuzzi Brothers sales reached about $90 million. The company, which by then employed about 100 members of the Jacuzzi family, became the subject of family disagreement, however, and in 1979 the privately owned firm began to look for a buyer. After merger talks with Textron broke down, Kidde Inc., a conglomerate that manufactured products ranging from consumer appliances to hydraulic cranes, bought Jacuzzi Brothers for about $70 million.

Under Kidde, Jacuzzi lost most of its family-run quality as many family members left the firm. The notable exception was Roy Jacuzzi, who remained in charge of the company's whirlpool bath division. Although only a tiny part of Kidde's huge operations, both of Jacuzzi's main product lines, agricultural pumps and whirlpool baths, continued to thrive. The company was operated as two separate subsidiaries: Jacuzzi Brothers, with headquarters in Little Rock, Arkansas, manufactured pumps and pumping equipment for use in agriculture and swimming pools; and Jacuzzi Whirlpool Bath, run out of Walnut Creek, California, manufactured the company's renowned jetted baths as well as a variety of more conventional bathroom faucetry and equipment.

For both Jacuzzi subsidiaries foreign sales showed particularly strong growth. The company's water pumping equipment was in great demand in the developing countries of Central America, which were looking to develop small, efficient irrigation systems. In 1984 the company signed an agreement to become Nicaragua's sole supplier of water pumping equipment, although the subsequent American-imposed trade embargo on Nicaragua meant that products had to be shipped via the company's Spanish and Canadian branches. The European market for whirlpool bath and bathroom fixtures began to take off in the 1980s and Jacuzzi's presence in Italy and Spain assured the company a strong showing in this area. By 1987, Jacuzzi's whirlpool products alone were garnering some $57 million in sales.

Through the 1980s the trend in both America and Europe was for bathrooms to get larger and bathroom fixtures to be designed for appearance as well as function. Jacuzzi's product line expanded to dozens of models available in a huge assortment of colors and with a variety of optional features. Some options available on the more luxurious models included the "Water-Rainbow" waterfall-like fill spout, programmable massage jets, underwater lights, and built-in mirrored vanity cases. Roy Jacuzzi was personally responsible for designing many of the features of the new product lines; by 1987 Roy held 160 patents for innovations in whirlpool design and technology.

Acquired by Hanson in 1987

In late 1987, the huge British conglomerate Hanson PLC bought out Kidde Inc. and its 100 subsidiaries, including Jacuzzi, for $1.7 billion. One of Hanson's first moves in its reorganization of the acquired businesses was to appoint Roy Jacuzzi as president and CEO of Jacuzzi Inc., an umbrella company headquartered in Walnut Creek that was to control the management of both the pump and filter products of Little Rock-based Jacuzzi Brothers and the bathroom and whirlpool products of Jacuzzi Whirlpool Bath. The newly organized company employed a workforce of 1,843 and had annual revenues of about $160 million.

Under Hanson Jacuzzi continued its international expansion and its new product introductions. Chief among the company's innovations in the 1990s was the development of the J-Dream steam shower system. With the J-Dream, Jacuzzi hoped to transform the nature of showering as the whirlpool bath had transformed bathing. The shower system, available to accommodate either one or two users, featured molded seats, programmable hydrotherapy jets, multifunction shower heads, and steam therapy as well as luxurious options such as built-in CD players, cascade waterfalls, and waterproof concealed closets to store bathrobes and towels.

Company Perspectives:

At Jacuzzi Brands, our mission is to develop great brands and great products so that we are the company of choice to drive our customers' success.

Spun Off As U.S. Industries in 1995

Although Jacuzzi remained solidly profitable through the early 1990s, Hanson decided to sell off a number of its Ameri-can businesses to raise cash for further British acquisitions. Although analysts speculated that Jacuzzi, with its widely recognized brand identity, would be spun off as an independent public company, it was decided that 34 of Hanson's American holdings would be rolled together as a unit to be called U.S. Industries (USI), a public company with a listing on the New York Stock Exchange. Other companies that were to join Jacuzzi as part of U.S. Industries included well-known brands such as Farberware Cookware, Tommy Armour Golf, Rexair Vacuum Cleaners, and Ertl Toys.

The year after the spinoff operating income for Jacuzzi Inc. rose to $55 million on revenues of $332 million. Almost 80 percent of this revenue was contributed by the company's bath products, including whirlpool baths, spas, shower systems, and non-jetted baths. The remainder came from sales of the water systems and swimming pool equipment that had been the foundation of the company since its early years. In April 1996 this segment was strengthened with the purchase of Haugh's Products Ltd., a leading Canadian manufacturer of above-ground swimming pools and equipment with estimated annual sales of more than $11 million.

As Jacuzzi entered the final years of the 1990s international sales appeared to be the major arena of future growth for the company. By 1996 international markets, including Europe, South America, the Middle East, and the Pacific Rim, accounted for about 46 percent of Jacuzzi's sales and analysts predicted that this sector would increase into the next century as the popularity of large, elaborate bathrooms spread worldwide. Plans for a new facility in Singapore that would manufacture products specifically designed for Asian consumers were under way in 1997 and promised to deliver a significant new share of this market.

Streamlining Operations Leading to a Name Change in 2003

While Jacuzzi worked to strengthen its market share in the late 1990s, USI struggled to shore up positive financial results and was burdened with major debt. The company was forced to rethink its strategy in order to cut costs and reduce its growing debtload. As such, the company set plans in motion to streamline its operations. Beginning in early 2000, USI launched a series of selloffs that would dramatically reshape the company. One of its most significant divestitures came later that year when Citicorp's venture capital firm Vectura Holdings L.L.C. agreed to buy its Diversified division in a $600 million deal. USI retained an 18.6 percent interest in the division, which included a host of different companies, such as Garden State Tanning, Leon Plastics Inc., EJ Footwear Corporation, Lehigh Safety Shoe Company, Huron Inc., Bearing Inspection Inc., Bilt Best Products Inc., Native Textiles Inc., and Jade Technologies Singapore Ltd.

USI continued to shape itself into a plumbing and bath products concern over the next two years by selling its lawn and garden and lighting businesses. The company jettisoned its Ames True Temper landscaping tools business, Spear & Jackson, SiTeco Lighting, Lighting Corporation of America, and Selkirk Group. Overall, nearly $600 million in assets was sold. Company headquarters were moved from New Jersey to West Palm Beach, Florida, in 2002 as part of its cost reduction program.

When the dust settled on USI's streamlining efforts, Jacuzzi stood as one of its major holdings. The final step in USI's transformation was the adoption of the Jacuzzi Brands name for its corporate moniker in 2003. Jacuzzi was one of the top 25 most recognizable brands in the world and company management hoped to capitalize on its status. Later that year, Jacuzzi Brands formed a partnership with home improvement retailer Lowe's, which put the Jacuzzi product line in nearly 900 stores across the United States.

At first glance, the company's strategy appeared to pay off. Sales and profits were on the rise in 2004 and Jacuzzi controlled 24 percent of the domestic market, with competitors American Standard and Kohler trailing behind it. Trouble proved to be lurking around the corner, however, and in May 2005 the company hired investment firm Lazard Freres & Co. to look into strategies that would improve shareholder value. Once again, Jacuzzi Brands began selling assets to improve its bottom line. Majority interests in vacuum cleaner subsidiary Rexair Inc. and sanitary ware manufacturer Eljer Plumbingware Inc. were sold that year.

By this time, Jacuzzi and Zurn—the company's major plumbing brand—were the two largest divisions in its arsenal. Analysts began to speculate that one of the brands would be sold. Zurn's operations proved successful but costs were climbing at the Jacuzzi division. Chief Operating Officer Donald Devine, slated to take over the CEO position later in the year, was fired just before the company announced significant losses in the third quarter of 2005. Alex Marni, president of the plumbing division, was named Devine's successor. While management worked to stabilize Jacuzzi Brand's earnings, the future of one of the most recognizable brands in the world remained up in the air.

Key Dates:

1915:: Jacuzzi is established to design hydraulic pumps.
1956:: The company begins marketing the J-300, a small portable pump that can be placed in a bathtub to create a soothing hydromassage.
1968:: The first whirlpool bathtub is launched.
1979:: Kidde Inc. buys the company.
1987:: Hanson PLC purchases Kidde Inc.
1995:: U.S. Industries Inc. (USI), which includes the operations of Jacuzzi, is spun off.
2000:: USI sells its Diversified division.
2003:: USI adopts the Jacuzzi Brands Inc. name.

Principal Subsidiaries

Asteria Company; Astracast GmbH (Germany); Astracast plc; Bathcraft Inc.; BB Investments Ltd.; Eljer Industries, Inc.; Eljer Plumbingware, Inc.; Gatsby Spas, Inc.; Jacuzzi Brands, Inc.; Jacuzzi do Brasil Industria e Commercio Ltda. (Brazil); Jacuzzi Europe SpA; Jacuzzi France S.A.S.; Jacuzzi Inc.; Jacuzzi (Chili) S.A.; Jacuzzi Investments Ltd.; Jacuzzi Singapore Pte Ltd.; Jacuzzi UK Group plc; Jacuzzi Universal S.A. (49%); Jacuzzi Whirlpool Bath, Inc.; Jacuzzi Whirlpool GmbH (Germany); JBI Holdings Ltd.; JUSI Holdings, Inc.; KLI, Inc.; Les Aeliers de la Motte S.A.; PH Property Development Company; Redmont, Inc.; Rexair Holdings, Inc.; Rexair, Inc.; Silverdale Ceramics Ltd.; Spring Ram Bathrooms plc; Spring Ram Corporation Overseas Ltd.; Stainless Steel Products Ltd.; Sundance Spas, Inc.; The Spring Ram Corporation plc; USI American Holdings, Inc.; USI Atlantic Corporation; USI Canada Inc.; USI Capital, Inc.; USI Mayfair Ltd.; USI Overseas Holdings Ltd.; USI Plumbing plc; USI Properties, Inc.; Val Industria e Commercio Ltda.; Zurco, Inc.; Zurn Industries Ltd.; Zurn Industries, Inc.; Zurn Pex, Inc.