Koch Enterprises, Inc.

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Koch Enterprises, Inc.

10 South llth Avenue
Evansville, Indiana 47744
U.S.A.
(812) 465-9600
Fax: (812) 465-9724
Web site: http://www.kochg.com

Private Company
Founded: 1873
Employees: 2,800
Sales: $520 million (1998
NAIC: 331521 Aluminum Die-Casting Foundries; 332999 All Other Miscellaneous Metal Product Manufacturing; 422690 Adhesives & Sealants Wholesaling; 42173 Warm Air Heating & Air-Conditioning Equipment & Supplies Wholesalers; 541330 Engineering Services

Koch Enterprises, Inc. is a family-owned holding company that operates through several wholly owned subsidiaries. George Koch Sons, LLC, engineers, installs, and services various types of finishing systems for automotive and other industries. Koch Air, LLC, distributes Carrier heating, ventilating, and air conditioner equipment and provides design equipment selection and engineering assistance. The company’s UniSeal, Inc. subsidiary manufacturers specialty sealant, adhesive, and low-density cellular rubber products for automotive, appliance and communications applications. Koch’s Brake Supply Co. Inc. provides engineering services on hydraulic and pneumatic components, air compressors, and lubrication systems. Gibbs Die Casting Corp., located in Henderson, Kentucky, provides die casting to Toyota Motor Manufacturing and Toyota Motor Corporation.

George Koch: First Generation of a Family Business

George Koch (pronounced “cook”), founder of Koch Enterprises, was four years old when he left Germany with his parents and three brothers to settle in Evansville, Indiana, where relatives already awaited them. Arriving in Indiana in 1843, Koch’s father first tried his hand at farming before opening a successful brewery in Evansville. Although three of his brothers followed their father into the brewing business, Koch opted instead to join his cousins’ business—a foundry that built steam engines and boilers, as well as saw and grist mill machinery. At 19, after a five-year apprenticeship at the foundry, he set off on a flatboat bound for New Orleans with a family friend. That the boat made it only as far as Vicksburg, Mississippi, did not seem to bother Koch, who decided to stay in Vicksburg. With his foundry training, he was easily able to find work as a tinsmith.

With the onset of the Civil War in 1861, Koch enlisted in the Confederate Army, serving for the duration of the war before returning to Vicksburg. Reverting to his prewar profession, he opened a tin shop, which ran successfully until it was destroyed by fire in 1872. After the fire, he went back home to Indiana, bringing with him his wife and two children. In Evansville, as in Vicksburg, Koch opened his own shop—the George Koch Tin Shop—with the help of his younger brother, William. Although there was not a large demand for tin work, the business kept afloat by doing repair work and manufacturing cookware and cistern covers. Soon, however, the resourceful Koch diversified into making stove venting, tin roofs, and guttering. In 1888, ready for expansion, he purchased property just down the street from his original shop and built a new two-story brick building. The shop, which was decorated with Koch’s own decorative metal work, housed a showroom, a tin shop, and the family’s residence.

Koch’s three sons—George, Louis, and Albert—all worked in the tin shop as teenagers and joined the business on a full-time basis as they became old enough. When George Koch died in 1903, the three brothers assumed responsibility for running the shop, with Louis becoming the general manager. The Koch brothers changed the name of the company to George Koch Sons to reflect its new ownership. In the 1920s, the company was joined by yet another Koch: Malcolm Koch, the oldest son of George’s brother Ralph. Shortly after Malcolm came on board, the Kochs purchased machine shop equipment and began providing tooling services for various Evansville businesses. Soon, the shop was busy turning out equipment for the various industries that were springing up in and around Evansville.

1930-40s: New Divisions

With the dawn of the 1930s, the Kochs began to turn their metalworking talents toward different ends. One of the first endeavors was the production of ornamental metalcraft pieces for the home. This new venture was begun on a small scale, by manufacturing decorative flower containers. When the flower containers proved well-received, the company followed up with an increasingly broad line of metal products. By the late 1930s, the company’s decorative metalcraft department was operating in its own 100,000-square foot plant and producing more than 500 different articles, including wall and window shelves, coffee tables, magazine racks, hurricane lamps, and fireplace screens. A 25-person sales force marketed Koch’s wares to every state in the United States. The metalcraft line continued to grow in popularity throughout the 1940s. Between 1940 and 1950, sales for the division increased by 300 percent, and its sales force doubled in size. The company also developed a Floral Metalcraft Division, which produced baskets, planters, candelabra, wedding accessories, and flower carts.

Another diversification in the Koch business came in 1936, when the company teamed up with Carrier Air Conditioning Corp. to form an air conditioning division. Carrier had been founded by Willis Carrier, the inventor of modern air conditioning, and was easily the leader in the air emerging air conditioning field. Koch Air, the company’s new subsidiary, agreed to sell, distribute, install, and service Carrier products. In the late 1930s and early 1940s, air conditioning for both residential and commercial uses was only gradually became more common. Koch Air grew slowly but steadily during these years, capitalizing on the relative lack of competition.

At the same time the company was exploring new avenues of business, it was also nurturing and growing its core business, which had, by that time, become the making of heavy industrial equipment for various manufacturers. By 1940, Koch had garnered a national reputation as a maker of drying and baking ovens for industrial uses. Throughout the 40s, the company extended its capabilities to include the production of air handling and dust collecting equipment, spray painting booths, exhaust systems, and material handling conveyors. The company was considered a leading maker of conveyor-type finishing systems for wood and metal products, and had customers throughout the country.

1950s: Steady Growth

Business grew steadily in all of Koch’s divisions throughout the 1940s and into the 1950s. Koch Air especially was boosted by the growing use of air conditioning both in homes and in commercial and industrial settings. Increasingly, builders were installing central air in new homes as a matter of course. In addition, many owners of existing homes were retrofitting their heating systems to accommodate add-on air conditioning units. As production of air conditioners increased, their prices dropped, making them a viable option for more and more consumers. In 1953, Koch Air expanded its distributorship area by approximately 30 percent and began to turn its focus toward industrial air conditioning applications. Koch also worked quickly to bulk up its work force, increasing employment by 25 percent in 1955. “We of George Koch Sons concur in the belief of the national forecasters that business is going to continue on the up-grade for the next several years, particularly in the air conditioning field,” Robert Koch, secretary-treasurer of the company, said in a November 1955 interview with the Evansville Courier, adding that “In order to keep abreast of this increased business and to retain our leadership in the field, we are increasing our personnel as rapidly as we can absorb them into our organization.”

Air conditioning sales continued to swell through the second half of the decade, spurring still more expansions. At the close of 1957, anticipating a 25 percent increase in business for 1958, the company once again added employees. It also began renovating and expanding its service department and general office space. By the close of the 1950s, Koch had largely moved away from residential air conditioning, and was primarily targeting industrial and commercial customers.

A series of lucrative contracts in the early 1950s enhanced the performance of Koch’s industrial division, as well. In April of 1953, the company was awarded a $30 million contract to design, fabricate, and install all of the ductwork for a new Portsmouth, Ohio, atomic energy plant. Koch was also awarded a contract to modernize the painting and processing equipment at the Fisher Body Company plant in Flint, Michigan. Other contracts for Koch included installation of a ventilation system for Ford Motor Company foundry in Ohio and installation of a finishing system for a Chrysler plant in Los Angeles.

In 1958, Koch’s industrial division entered into a joint venture with the Memphis, Tennessee-based Wilco Machine Works, Inc., a woodworking machinery distributor. Under the terms of the agreement Koch and Wilco together began to manufacture and sell the patented Steinemann Coating Machine, an innovative high-speed fluid-coating system often used in the woodworking industries. At the end of the first year, the agreement was modified to split up the manufacturing and sales functions: Koch assumed responsibility for producing the machines, while Wilco took on the sales operation. In addition, Koch expanded its industrial product line by agreeing to carry Wilco’s line of refuse burners. The burners were used for disposing of industrial waste, wood pulp, and agricultural refuse.

Koch’s metalcraft division also grew during the 1950s, becoming one of the U.S. leaders in decorative metal furniture. In 1956, after steady increases in yearly sales, the company added both production equipment and personnel to accommodate increased orders. Annual sales continued to swell through the late 1950s, and in 1958 the company substantially expanded its sales force. By the end of the decade, Koch Metalcraft had established permanent showrooms in the Chicago Merchandise Mart and the Home Furnishings Mart in Dallas, Texas.

1960s-90s: Acquisitions and Expansions

In the early 1960s, Koch expanded and diversified again, purchasing the Chicago-based Bloomlife Floral Chemicals as a complement to its Floral Metalcraft Division. The new company produced chemicals used in the floral industry to lengthen the life of cut flowers. Koch moved the operation from Chicago to Evansville, purchasing a new building to house it.

Business continued apace, and by 1980 Koch was once again aggressively growing its business. In 1984 the company acquired Uniseal, Inc., a manufacturer specialty sealant, adhesive, and cellular rubber products for automotive, industrial, and communications companies. The following year, Uniseal, which had been in operation in Evansville since 1961, opened a second facility in St. Louis. Another of Koch’s acquisitions was Brake Supply Co. Inc., a provider of hydraulic and pneumatic components and systems, application engineering services, and contract maintenance and repair. Brake Supply, also located in Evansville, had been in business for more than 30 years. Gibbs Die Casting Corp. was Koch’s third acquisition and its first business to be headquartered outside Evansville. Gibbs, which was founded in 1966, was located in Henderson, Kentucky, and provided machined aluminum die casting, machining, assembly, and die building.

Focusing its energies more completely on industrial applications, Koch spun off its furniture and floral metalcraft divisions in 1988. The new company—Koch Originals—was headed by Louis J. Koch, a descendant of the company’s founder. It remained in Evansville and continued to flourish throughout the 1990s.

In the mid-1990s, Koch and its subsidiaries kicked off another major growth initiative. In 1994, Koch Air acquired Carrier Midwest, a Carrier equipment distributor with offices in Indianapolis and Louisville. A similar acquisition followed in 1997 when the company purchased Marco Sales, a St. Louis-based Carrier distributor. With these two additions, Koch Air expanded its sales territory to cover almost all of Indiana and Kentucky, 80 percent of Illinois, and most of Missouri.

In the spring of 1995, Gibbs Die Casting announced that it was planning a $44 million expansion of its facilities, which would eventually add 250 jobs. The expansion was to include a 20,000 square foot addition to its existing facility and the construction of a new 60,000 square foot die casting plant with 10 casting presses and six melting furnaces. Just a few months later, Koch’s Uniseal subsidiary, which had doubled in sales since Koch acquired it, purchased a 130,000 square foot building in Evansville. The company used the additional space to move its St. Louis operations to Evansville and combine the two operations.

In 1996, Koch partnered with a Cincinnati company to form a joint venture known as Audubon Metals, LLC. Koch’s partner in the venture was the Cincinnati-based David J. Joseph Co., an automobile-shredding facility. Audubon Metals, which processed aluminum alloy from scrap metal, was built in Henderson, Kentucky, next to Gibbs Die Casting.

Two years later, George Koch Sons began a $4 million project to add 42,000 square feet to its existing facility. The expansion, once complete, would allow Koch to consolidate its operations and thereby lower its overhead. “The rationale behind this is to become more competitive on the world market,” said the company’s purchasing manager, Jim Russell, in an August 1998 interview with the Evansville Courier.

Future Plans

On January 1, 1999, Koch completed a reorganization of its corporate structure, creating a new entity—Koch Enterprises, Inc.—to serve as a parent company for all of the company’s subsidiaries. George Koch Sons, which had previously been the parent company, then became a subsidiary of Koch Enterprises.

According to a June 1998 article in the Evansville Courier, the company was striving toward a goal of reaching $1 billion in sales. Given this goal, it appeared likely that Koch would continue its growth efforts into the new century, both by acquiring new businesses and by expanding upon existing subsidiaries. Tapping new geographic markets was another likely avenue of growth. As suggested by its 1998 and 1999 consolidation efforts, Koch appeared to be angling for an expanded and strengthened position both in domestic and overseas markets.