Jason Incorporated

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Jason Incorporated

411 E. Wisconsin Avenue, Suite 2500
Milwaukee, Wisconsin 53202
U.S.A.
(414) 277–9300
Fax: (414) 277–9445
Web site: http://www.jasoninc.com

Public Company
Incorporated: 1985
Employees: 3,000
Sales: $481 million (1997)
Stock Exchanges: NASDAQ
SICs: 3511 Turbines & Turbine Generator Sets; 3991 Brooms & Brushes; 2493 Reconstituted Wood Products

Jason Incorporated is a miniconglomerate, active in three distinct business segments—motor vehicle products, power generation products, and industrial products. In the motor vehicle arena, Jason is a major supplier of insulation materials used in the manufacture of many cars and trucks. Through its Milsco Manufacturing unit, Jason also makes the seat for every Harley-Davidson motorcycle that hits the road. Jason’s industrial products segment is a leader in the manufacture of finishing products and a broad range of metal industrial components. The company’s power generation operation is a leader in the production of equipment used in power plant construction. In spite of its size and prominent position in all of the markets in which it competes, Jason maintains only a skeleton crew of about half a dozen employees at its corporate headquarters in Milwaukee. The rest of the company’s staff works out of Jason’s far-flung industrial facilities located in 11 states and seven foreign countries.

Jason was formed in November of 1985 by Vincent Martin and Mark Train. Both men were working as top executives at the Hanover, New Hampshire-based AMCA International Corp. when they seized an opportunity to strike out on their own. AMCA announced that it was putting up for sale seven businesses that it had picked up incidentally over the course of several acquisitions. Martin and Train formed Jason to take three of the businesses off AMCA’s hands. Martin became the new company’s president and Train became its executive vice-president. Jason completed the acquisition of the three AMCA castoffs—Milwaukee-based construction and excavation equipment manufacturer Koehring Co. and two divisions of Giddings and Lewis, Inc., a machine tool manufacturer based in Fond du Lac, Wisconsin—in a leveraged buyout worth $53 million in early 1986, saddling the company with a hefty debt at birth.

1987 IPO Lightened Debt

Jason earned $1.3 million after taxes on sales of $71.6 million in its first year of operation. To lighten the burden of interest payments on its big debt, Martin and Train decided to sell 800,000 shares of stock to the public in 1987. Jason’s history since that time has been a story of steady expansion through strategic and highly selective acquisitions. Virtually all of the companies that Jason has annexed have been manufacturers that were among the top contenders in their markets and generated strong cash flows. In 1989 the company bought another unwanted AMCA unit, Braden Manufacturing. Braden, based in Tulsa, Oklahoma, was founded by retired Standard Oil Co. executive Glenn Braden and had begun making exhaust silencing systems and enclosures for gas turbines in the mid-1960s. Braden now has manufacturing plants in Tulsa and in Fort Smith, Arkansas, a European outpost in the Netherlands, and a sales office in Singapore. By the mid-1990s Braden had more than 300 employees.

By the end of fiscal 1989 Jason was the dominant U.S. manufacturer in each of its product segments. It controlled more than half the market for a number of products, including automotive insulation, industrial buffing wheels, and turbine silencers. In addition, the company was growing at an impressive annual rate of 25 percent. In 1991 Jason boosted its finishing segment with the acquisition of Lea Manufacturing, which was integrated into an amalgamation of eight separate buffing products manufacturers called JacksonLea. The core of JacksonLea was Jackson Buff, a company founded in Jackson, Michigan in 1923. Jackson Buff was moved to Long Island in 1932, then to Conover, North Carolina in 1959. Over the next couple of decades it absorbed a number of other buffing specialists, including Bias Buff and Wheel in 1961, American Buff in 1968, and Churchill Buff in 1980. Two more buffing equipment producers were folded into the JacksonLea mix in the early 1990s: Buckeye Products in 1992 and Hanson & Wells in 1993.

The year 1991 also brought the acquisition of Sackner Products, Inc., an automotive fiber producer founded early in the century and known until 1949 as Grand Rapids Fiber Cord Company. According to company lore, founder Wade Sackner was the only person who could keep the plant’s furnace operating, making it necessary for him to double as company president and coal shoveler. The addition of Sackner solidified the contribution of Jason’s motor vehicle products segment and helped elevate the company’s earnings to $4.9 million, on revenue of $161 million, for fiscal 1991.

Jason continued to fare well in 1992, due in part to a rebound in the slumping auto industry. But the fastest growing segment for Jason was its power generation products business. Led by its Braden unit, Jason recorded strong sales of its exhaust silencers and other equipment for gas turbines. The power generation segment was further bolstered by the 1992 acquisition of Metric Technology International, a Dutch manufacturer of power generating equipment. The addition of Metrio’s damper product meant that Jason could now offer an entire exhaust system for gas turbines to turbine manufacturers, making it the only major supplier with that capability. It also gave Jason a presence in the European market for these products. Metrio was integrated into the company’s Braden subsidiary. Company profit and revenue both continued their steady climb, reaching $6 million and $207 million, respectively, for 1992.

1994 Deltak Purchase Boosted Generating Segment

In early 1994 Jason completed the purchase of Deltak Corp., a Plymouth, Minnesota-based manufacturer of steam power generators and heat recovery systems. Deltak was founded in 1969 as a unit of Raygo Inc. and was spun off as a separate company in 1972. Deltak’s products, which included heat recovery steam generators, specialty waste heat boilers, and other systems used in combination with gas turbines, were an ideal match for Braden’s gas turbine equipment. The merger essentially made Jason a single-source supplier for major power-generation projects, rather than merely a piece in the puzzle. Since problems with nuclear power plants all over the world were making gas turbines a hot product at the time, Jason was able to take advantage of this new synergy right away. At the time of the purchase, Deltak had about 350 employees and annual sales of about $75 million.

Later that year, Jason added another company, Koller Industries, to its growing empire. Koller, based in Milwaukee, actually consisted of three distinct businesses. Koller Manufacturing was founded as a tool and die shop in 1919, before reinventing itself as a stamping plant in the 1960s. Advance Wire Products, founded in 1968, was a wire-forming operation located in suburban Chicago. The third component of Koller, Metalex, was also based in the outskirts of Chicago. It specialized in applications for expanded metal, including leaf guards for rain gutters and the first cost-effective satellite dish petals from expanded metal.

For fiscal 1994 Jason reported sales of $357 million, with $65 million of that total coming from Deltak. Net income reached a company record $11.3 million. In January of 1995 Jason paid $45.5 million for Milsco Manufacturing Co., founded in 1924 as the Milwaukee Saddlery Company. Milsco sold its first motorcycle seat to Harley-Davidson during the Depression and has been supplying seats for Harleys ever since. Milsco also became one of the biggest suppliers of seats for tractors and other agricultural and construction vehicles over the years. The acquisition of Milsco boosted to about 35 percent the share of Jason’s total sales generated by its motor vehicle products segment. It also instantly made Harley-Davidson Jason’s second biggest customer, trailing only General Electric, a major buyer of Jason’s power generating equipment.

Hands-Off Philosophy Spurs Company’s 1990s Growth

Throughout these years of steady expansion company founders Martin and Train remained Jason’s biggest stockholders, controlling about 25 percent and 18 percent of the company’s shares, respectively. Martin and Train were quick to attribute the company’s success to their hands-off approach. The key was to annex only companies that were already being run well. They were not interested in turning around floundering enterprises. “We set performance goals and provide capital if needed,” Martin was quoted as saying in a 1995 Barron’s article. “We pay our people well, give them generous stock options and don’t hammer them over their heads, unless they screw up.” That philosophy helped Jason grow its revenue to $407 million in fiscal 1995, with net income rising slightly to $11.5 million.

In 1996 Jason founders Martin and Train juggled executive titles a bit, with Train becoming company president and Martin retaining the positions of chairman and CEO. In the fall of 1996 Jason announced the acquisition of Suroflex GmbH, a German manufacturer of insulation for automobiles. With annual sales of about $15 million, Suroflex brought with it a customer list that included such noted European car companies as Audi, BMW, and Mercedes-Benz. The deal helped to expand Jason’s presence in the international marketplace for automotive products. In addition to selling Suroflex products to its existing customers, Jason was now able to pitch its Janesville and Sackner products to European automobile manufacturers.

The addition of Suroflex helped elevate Jason’s revenue to $443 million for 1996. For the first time in the company’s history, however, its net income declined, dropping to $8.9 million for the year. Contributing to the decline were the General Motors strike that took place during the year and weakness in the market for its power generating equipment. Nevertheless, Jason’s diversity helped it weather these setbacks, as cash flow from its remaining business segment, industrial products, remained strong.

Diversity the Key Entering Second Decade

A number of developments during fiscal 1996 seemed to point toward a continuation of the steady growth that had marked Jason’s first decade of operation. About $18 million was spent on new capital projects aimed at paving the way for that growth. New manufacturing capacity was added at Janesville Products, where the company’s emerging Marabond moldable fiber product was made, and at Milsco Manufacturing, where seats for Harleys remained much in demand. Revenue from the company’s Marabond business tripled during the year, alone accounting for $21 million of Jason’s revenue. Jason also gave its finishing products business a boost with the acquisition of The Milwaukee Brush Company’s mill brush business. In addition, Braden introduced a filter house product line, the only remaining piece of important auxiliary equipment for gas turbines that the company was not previously offering. The percentage of Jason’s revenue coming from international sales reached a record 28 percent, for a total of $126 million.

In April of 1997 Jason announced that it was organizing its three automotive units—Sackner, Janesville, and Suroflex—into a single group to coordinate the introduction of its new products for automobile interiors. Those products included a fiber substitute for foam in car seats, a new type of moldable plastic insulation, and decorative interior door inserts. The new group was to be headed by James Tyler, who formerly served as president of the company’s Osborn Manufacturing unit. Jason continued to benefit from the good times being enjoyed by Harley-Davidson, which by this time was its largest customer. Unfortunately, that lift was countered by problems in the power generation segment, as the market for gas turbine power plants became rather soft, driving prices down.

For fiscal 1997 Jason reported net income of $12.2 million on sales of $481 million, both figures setting new company records. With the power generation market showing signs of recovery and the automotive and industrial segments showing no signs of slowing down, Jason’s impressive record of profitability and consistency appeared likely to continue through the rest of the century. Jason may not be the most glamorous company ever to offer its stock on NASDAQ, but any company willing to stake its future on the posterior comfort of the world’s Harley riders may be the most courageous.