Justin Industries, Inc.

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Justin Industries, Inc.

2821 West Seventh Street
P.O. Box 425
Fort Worth, Texas 76101
U.S.A.
(817) 336–5125
Fax: (817) 390–2477
Web site: http://www.justinind.com

Public Company
Founded: 1879
Employees: 4,481
Sales: $447.8 (1996)
Stock Exchanges: NASDAQ
SICs: 3251 Brick & Structural Clay Tile; 3271 Concrete Block & Brick; 3143 Men’s Footwear Except Athletic; 2731 Book Publishing

Justin Industries, Inc. combines two very disparate businesses—boots and building materials—to form a uniquely successful corporation. While outsiders struggle to perceive the synergies between boots and bricks, Chairman and Chief Executive Officer John Justin Jr. drew parallels between them in a 1981 interview with Forbes reporter Anne Bagamery: “Why, just take a look at them. They’re both made of natural materials and they both protect you—that puts them practically in the same family.” Dan McGraw of U.S. News & World Report averred that wily CEO’s “very name is an icon of Western heritage,” while analyst David Leibowitz called his company “a perennial standout and the quintessential Lone Star firm.” Over the course of his more than 45 years at the helm, the CEO—an octogenarian in 1997—increased annual sales from less than $1 million to nearly $450 million.

Widely known as the “Standard of the West,” the company’s high-quality boots have been worn by the likes of Lyndon Johnson and Michael Jackson, not to mention tens of thousands of cowboys. Its line includes the venerable Justin brand, produced since frontier times; Nocona boots, also made by the Justin family since the turn of the century; pricey Tony Lama boots; and Chippewa work and hiking boots. Even into the 1990s, it did not seem to matter that, in the words of John Justin Jr., “God ain’t making any more cowboys,” there were enough cowboy wannabes in the world to justify the company’s production of 6,500 pairs of boots every day.

Justin Industries’ building materials segment was led by the Acme Brick Company subsidiary. As one of the nation’s largest brick manufacturers, Acme churns out more than 750 million face bricks each year, accounting for an estimated ten percent of the domestic industry’s output. Other subsidiaries manufacture concrete building materials as well as ceramic and marble tile. The company also owns Northland Publishing, which “specializes in Western and Southwestern Americana, art, history, and Native American culture.”

Origins in Frontier Texas

The business was founded and named for H.J. Justin, who as a teenager moved from Indiana to Spanish Fort, Texas in the 1870s. Spanish Fort was located on what would become the West’s famous Chisholm Trail and was, therefore, a stop for cowboys driving cattle to market. In 1879, Justin borrowed $35 from the local barber (for whom he had been doing odd jobs) and started a boot repair business in service to the nomadic cowboys. His “on-the-job training” soon led to full-fledged bootmaking. The business grew rapidly in concert with Justin’s skill and renown for quality. He moved the operation to Nocona, Texas to be near the railroad station built there in the late 19th century.

Second Generation Diversifies in Early 20th Century

When the founder died in 1908, sons John, Earl, and Samuel took charge and renamed the company H.J. Justin & Sons. A second and final move, to Fort Worth, Texas in 1925, split the business in two. H.J.’s daughter, Enid Justin, remained in Nocona as leader of Nocona Boot Co., while her brothers continued on as Justin Boot & Shoe Co. (The two businesses were reunited in 1981, when Justin acquired Nocona.)

Believing that the urbanization of the West would bring the demise of the cowboy—and with him his particular footwear—Justin’s second generation managers began to deemphasize bootmaking in favor of city-style shoes in the 1930s and 1940s. By the postwar era, John Justin was ready to abandon the boot trade, according to a 1981 Forbes article. In fact, he discouraged his son and namesake from joining the family business. Little did he know that his own son would take the company to heights heretofore unimagined.

Third Generation Sets the Stage for a Postwar Rejuvenation

Given his father’s attitude about the future of the footwear company, it is not surprising to find that John Justin Jr. took a circuitous route to the family firm. Born in 1917, he studied in Washington, D.C. and Oklahoma during the Great Depression, eventually returning to Fort Worth and Texas Christian University. When he was not studying, the restless young man crafted belts from scraps of leather. Demand for his hand-made, fire-branded belts grew such that the young Justin could not concentrate on his school work. In 1938, at the age of 21, he left school and worked briefly at the family business. Later that year, he borrowed $1,000 to launch the Justin-Barton Belt Co. with partner W.D. Barton.

Military service during World War II interrupted Justin’s career again, but upon his return he was able to buy out his partner’s stake in the company and rename it for himself. By 1949, Justin had accumulated enough money—and moxie—to acquire a controlling stake in the struggling family business. Convinced that cowboy boots were not a product for the past, the 33-year-old designed and launched a new model called the “roper.” It featured a rounded toe that made it easier for rodeo competitors and performers to dismount from their horses. The new style appealed not only to rodeo riders and ranchers, but also to what would come to be called “urban cowboys.” John Justin Jr. was appointed president in 1951.

Justin set out to bolster both quality and service, both of which would become company hallmarks. He established close communication with retailers, who assured him that the market for western-style boots was far from dead. Attention to customer service would lead Justin to maintain rather large inventories. Although costly, this enabled the company to fill orders in a timely fashion. Furthermore, it was a strategy that would also apply to Justin’s future business interests.

Diversification into Brickmaking in the Late 1960s

The new CEO was not content to remain in boots alone. In 1968, he guided Justin’s merger with Acme Brick Company to form First Worth Corporation. The Justin Boot Co. must have remained privately held throughout most of its first hundred years in operation; an October 1981 Forbes article noted that the Acme union was made “to protect the family business from estate taxes.” Based in Bennett, Texas, Acme also boasted a history that dated back to the 19th century. These two disparate businesses complemented each other surprisingly well, for when one was in decline, the other was usually on the rise. This countercyclicality made for steady, and sometimes rambunctious, growth. Within a couple of years of the merger, John Justin Jr. had advanced to the miniconglomerate’s chief executive office. In 1972, the enterprise was renamed Justin Industries, Inc.

Despite dire predictions that less expensive aluminum and wood sidings would supplant brick, especially in residential construction, Acme Brick grew rapidly in the 1970s. Sales more than doubled from 1975 to 1979 alone, totaling $184.5 million in the latter year. Shareholders made out handsomely as well; the stock increased from a low of $2.50 in 1975 to a high of nearly $22 in 1979. By 1980, Acme’s 19 plants in six southwestern states manufactured nearly 50 percent of the region’s face brick, giving it a ten percent stake nationwide.

Growth Slows Dramatically in the 1980s

Justin’s bipolar formula for success did not add up nearly as well in the early 1980s, however. In 1982, brickmaking profits were not sufficient to offset an operating loss of $8.9 million in the footwear division, resulting in the company’s first-ever overall loss, a $6.3 million shortfall. But the 1980s were actually hardest on the brick business. In the last half of the decade, Acme’s sales declined by more than ten percent to less than $114 million in 1989. Moreover, brick price reductions ate away at this segment’s operating margins.

As it turned out, 1982’s bootmaking lapse preceded a much-needed housecleaning. With costs in line, Justin sought to broaden its shoe business mid-decade, acquiring Chippewa Shoe, a manufacturer of sport and work boots. The “new” subsidiary (Chippewa was 83 years old at the time of the purchase) increased Justin’s potential footwear market fourfold from the ten-million-unit cowboy boot segment. Justin also acquired the Larry Mahan line of boots from Hyer Boot and added its first line of children’s boots, dubbed “Justin Junior Ropers,” during this period. Boot sales increased from $103.9 million in 1985 to $142.1 million in 1989 to surpass the brick business, which had dominated Justin’s balance sheet for nearly 20 years.

Company Perspectives:

Justin Industries is a unique combination of businesses, a combination that provides stability, flexibility, and unusual opportunities to serve not only one of the fastest-growing regions in the country, but also growing markets nationally and throughout the world. With emphasis on the quality of our people, our products, and our service, and with the determination to expand the markets for our superior products, we at Justin Industries are proud of our past and prepared for the future.

Though its growth rate had slowed substantially from that of the 1970s, Justin’s overall revenues increased by 50 percent over the course of the 1980s, from $184 million in 1979 to nearly $278 million in 1989. Return on sales declined substantially, however, from six percent in 1978 (or more than $10 million) to barely more than two percent in 1989, for a net of $7.2 million.

Early 1990s Bring Tandem Growth

Justin’s two main businesses grew in tandem in the early 1990s, as the southwestern United States enjoyed a housing boom, country-western music and fashion grew ever more mainstream, and the company’s Chippewa work boots became the footwear of choice for many fans of Seattle-style “grunge” music. Footwear sales burgeoned nearly 63 percent from $181.4 million in 1990 to $295.2 million in 1993, and brick revenues increased more than 50 percent from $118.9 million to $179.7 million over the same term.

But the early 1990s were not without conflict, specifically the threat of a hostile takeover. The dilemma actually began in 1989, when Barry Rosenstein and Perry Sutherland formed JTN Acquisition Corp. and purchased six percent of Justin’s outstanding shares. Both of the 30-something investors had trained at the knee of Asher Edelman, an early 1980s takeover maven. Justin’s stock was then trading at $10, a 20 percent discount on its book value, which the raiders perceived as a juicy bargain. By the fall of 1990, they had doubled their stake in the company and secured $112 million in junk bond financing to back an $18 per share buyout offer.

Believing that the raiders planned to auction off his family’s boot business and merge the remaining building materials interests with the Sutherland family’s Sutherland Lumber Co., John Justin Jr. staunchly opposed the takeover. In keeping with the dual nature of his business, the chairman and CEO pursued a two-fold defense. He personally owned about 20 percent of the company’s outstanding stock and solicited the solidarity of shareholding employees, relatives, insiders, and friends in the impending battle for control. At the same time, Justin cannily pursued the acquisition of a troubled competitor, Tony Lama Company Inc. The fall 1990 purchase cost the company $18 million in cash and, more important, required the assumption of $35 million in debt. Like a stinkbug to a hungry bird, Justin suddenly did not seem so appetizing to JTN—or its bankers. To add insult to injury, though Justin’s stock was trading at about $14, only ten percent of the company’s shareholders voted with the raiders in favor of the $18 per share tender offer that fall. Thoroughly repulsed, Rosenstein and Sutherland withdrew their bid in March 1991.

Boosted by record unit sales and a strategic acquisition, sales in Justin’s building materials segment continued to grow through the mid-1990s. Its sale of more than 750 million bricks in 1996 established a new company record and pushed divisional revenues to more than $260 million that year. The addition of American Tile Supply Company, a 1994 acquisition, also benefited this segment of Justin’s business. Footwear sales, however, did not fare nearly as well, declining from a historic high of $295.2 million in 1993 to $186.5 million in 1996. Net, too, declined mid-decade, from a high of $37.1 million in 1993 to 23.3 million in 1996. In its January 1997 evaluation of the company, Value Line forecast that Justin’s building materials segment would continue to grow and that its footwear sales would continue to shrink.

Principal Subsidiaries

Acme Brick Company; Featherlite Building Product Corporation; American Tile Supply Company; Tradewinds Technologies, Inc.; Justin Boot Company; Tony Lama Company; Nocona Boot Company; Chippewa Shoe Company; Northland Publishing.