Martin Industries, Inc.

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Martin Industries, Inc.

301 East Tennessee Street
Florence, Alabama 35630
U.S.A.
Telephone: (256) 767-0330
Fax: (256) 740-5192
Web site: http://www.martinindustries.com

Public Company
Incorporated: 1974
Employees: 701
Sales: $63.7 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: MTIN
NAIC: 333414 Heating Equipment Manufacturing (Except Electric and Warm Air Furnaces); 335221 Household Cooking Appliance Manufacturing; 336212 Truck Trailer Manufacturing; 337214 Nonwood Office Furniture Manufacturing

Martin Industries, Inc., based in Florence, situated in the northwest corner of Alabama, manufactures appliances and utility equipment in two industry segments: home heating and leisure and other products. Martin’s home heating products, which account for about two-thirds of the company’s sales, are produced and sold under the Atlanta Stove, Hunter, Martin Fireplaces, Martin Gas Products, Prime Heat, and Warm Morning brand names. Included are a variety of vented and vent-free gas furnaces and heaters as well as a wide range of gas logs, gas stoves, prefabricated gas and wood fireplaces, and gas inserts. Martin, which manufactures its lines at two plants, one located in Florence and the other in Ontario, Canada, markets its products through a variety of distribution channels in both the United States and Canada. The company’s leisure and other products are produced and sold under Broilmaster and NuWay brand names and include gas barbecue grills and utility trailer kits. They are sold in all fifty states as well as in Canada, Mexico, South America, and Europe. An ESOP company since 1992, about a third of Martin is owned by its employees.

1905-41: Martin Brothers Establish Three Companies

It was in 1905, just after the turn of the 19th century, that two brothers, W.H. Martin Sr. and Charles Martin, founded King Stove and Range Company, a small cast iron foundry in Sheffield, Alabama. The foundry made coal and wood heaters, cooking stoves and ranges.

The Martins expanded their business in 1918, when they purchased a financially sinking stove foundry in Florence, just across the river from Sheffield. The brothers incorporated the acquired business as Martin Stove and Range Company, a separate business from King Stove and Range. There they made coal and wood stoves as well as gray iron castings. The foundry also turned out cast hollowware, iron skillets, and clothes-pressing irons known as “sad” irons.

The Martins again expanded their holdings in 1939, when they traveled to nearby Huntsville, Alabama, to bid on some machinery being auctioned off at a bankrupt manufacturing plant. They opted to bid on the whole operation, not just the equipment, and their bid won. The Martins turned the operation into their third business, Martin Stamping and Stove Company, which began turning out a small line of unvented gas heaters.

1941-76: Martin-Owned Companies Diversify

During World War II, both of the Martins’ foundries manufactured magazine heaters for the Army, and Martin Stamping made bomb crates and other strategic materials. With the end of the war, however, the companies returned to manufacturing their lines of gas, wood, and coal heating equipment. They would add electrical heating equipment in the late 1950s, when Martin Stamping and Stove began making a line of electrical heaters at its facility in Huntsville. Within just few years, demand for its electrical heaters led Martin Stamping and Stove to open a new plant, located in Athens, Alabama. It went into operation, in 1966, as the company’s Electric Heater Division. Also located in Athens, the Martin Fireplace Division began rapid growth, thanks in part to the introduction of Martin Firecones in 1968 and zero-clearance fireplaces in 1970.

On January 1, 1974, the three companies making up the Martin holdings merged to form Martin Industries, Inc. Under the reorganization plan, operational control was combined, and in June 1976, the company’s executive team set up new central administration offices in Florence. In that same year, also in Florence, Martin Industries established a centralized engineering facility.

1977-90: Martin Expands Its Facilities and Acquires Other Companies

While the reorganization and structural changes were in progress, the Sheffield plant discontinued its foundry operations and was converted into a stamping and fabricating plant. In addition, the Florence plant was retooled into a highly automated foundry to meet Martin Industries’ casting demands as well as those of other client companies.

In the late 1970s, the company’s need for additional manufacturing space prompted Martin to buy additional facilities. Towards the end of 1977, it bought a plant located in Americus, Georgia, where, in 1978, it began producing its Ashley line of heaters. It also added a 200,000 square foot building in Huntsville. With the addition of that facility, formerly owned by Genesco, Martin’s total manufacturing and warehouse floor space reached 1.2 million square feet.

The company’s expansion through acquisition continued in the early 1980s. First, in 1980, it purchased the Edison line of dehumidifiers from McGraw Edison. Next, in 1982, it acquired the Sahara line from Hobart Manufacturing, which produced its dehumidifiers for General Electric.

Other changes came later in the decade, notably in 1987, when Martin sold its Florence foundry to several former employees, who entered a long-term agreement with Martin to provide it with its needed cast iron. That same year, Martin purchased the wood and gas divisions of Atlanta Stove, which had been one of Martin’s chief competitors for several years. Martin then transferred the manufacture of Atlanta Stove’s products to its factories in Huntsville and Athens and moved its sales administration to offices in Florence.

In a calculated strategy to decrease the impact of seasonal sales and thereby achieve a greater and more efficient use of its manufacturing capacity, in 1988 Martin acquired the NuWay line of utility trailer kits and, in 1990, the Broilmaster line of gas barbecue grills. In part, these product lines were purchased because their sales climbed during the warmer months of the year, which contrasted with the company’s home heating products, which sold best in the colder seasons.

Martin also diversified into a non-season market, even before acquiring Broilmaster. In 1989, it purchased Filex, Inc., an Ossining, New York company that manufactured and marketed steel office furniture that it sold through major retail outlets. In the third quarter of that year, Martin incorporated production of the Filex desks and filing cabinets into its Sheffield and Huntsville plants. In 1990, Martin also expanded its gas heater lines when, in the same acquisition that brought Broilmaster into its corporate fold, it added the Warm Morning line of vented heaters to its offerings. The purchase included a facility in Washington Park, Illinois, where both Broilmaster barbecues and Warm Morning heaters were made.

1992-96: Martin Establishes ESOP and Goes Public

At the beginning of 1992, Martin instituted an Employee Stock Ownership Plan (ESOP), and in the following year the ESOP purchased a large block of the company’s stock which then became available to eligible employees over an extended time. In the next year, the company sold off its manufacturing plant in Americus, Georgia, and its line of dehumidifiers.

Martin Industries finally went public in 1995, making an initial public offering (IPO) of 2.3 million shares of common stock. It entered the public sector in order to obtain funds for further acquisitions, make capital improvements, and develop new products. Among other things, the funds helped finance the company’s expansion in Canada. Early in 1996, it completed its acquisition of Hunter Energy and Technologies Inc. and its sister company, Ontario, Inc., by purchasing all the outstanding shares of the two corporations. To buy them, Martin formed a wholly-owned Canadian subsidiary, Ontario, Inc. The total purchase price paid by Martin was about $1.94 million, consisting of cash, promissory notes, and funds paid into escrow. In January 1997, Hunter Energy and Ontario merged to form Hunter Technology Inc. Hunter continued to operate in its 100,000 square foot plant located on a 12 acre site in Orillia, Ontario, manufacturing a line of gas space heaters and pre-fabricated fireplaces.

1997-2001: Company Faces Tough Years at Close of Century

In February 1997, Martin discontinued its manufacture of office furniture, bowing to increased competition and only marginal market success. In June of the next year, it also moved its production of gas grills, gas logs, and free-standing vent-free heaters from its facility in Washington Park, Illinois, to its Athens and Huntsville, Alabama facilities.

Company Perspectives:

Our mission is: (1) To provide our customers with the high quality products that we would expect as consumers. Martin ’s emphasis on quality extends from the initial concept and product engineering through production and customer service. We are customer-driven. (2) To provide our employees with a working environment that is motivating and rewards them for achieving the company’s goals. Our employees are Martin’s key resources. (3) To provide our shareholders with an excellent return on their investment. Profits ensure continued growth opportunities for our company and our employees.

In the fall of 1998, Robert L. Goucher replaced William H. Martin III as the company’s CEO and president, a move in part made because of Martin Industries’ need for some fresh strategic planning. Goucher came over from his positions as president and CEO of StarMark, Inc., a subsidiary of Masco Corporation. Based in Sioux Falls, Idaho, StarMark was a manufacturer of high-end kitchen cabinets. While at the helm of StarMark, and in previous executive positions he held with Ryobi North America, Goucher’s responsibilities included strategic planning as well as operations, sales, business development, and quality control.

The late 1990s proved to be very troubling years for Martin Industries. The company’s financial setbacks compelled it to consider stringent counter measures, including the sale of some of its divisions. Martin’s net losses for 1998 reached $3.5 million, then ballooned to $6.2 million the next year. Goucher, quoted in an article in TimesDaily, indicated that “the year 1999 was very difficult for the company, its employees and stockholders,” and further indicated that in 2000 the company was seeking means to restore its financial health. One option was to sell off some or all of its product lines. In fact, it had started to do just that in 1999, when it sold its Ashley solid fuel heating division. Selling the whole enterprise to a “strategic partner” was also under consideration, a partner who, Goucher said, “Will strengthen our position in the market or possibly bring us new markets, or utilize some of our operational capability.”

In 2000, Martin Industries still employed between 150 and 200 people in northwest region of Alabama known as the Shoals, about 400 at its Athens plant, and another 50 at its Canadian operation in Ontario. In that year, as part of its turnaround effort, it expanded its Sheffield operation to allow the plant to assemble gas fireplace log sets and utility trailers. The company also opened a new warehouse, shipping, and distribution center at the Sheffield site, and also upgraded the plant’s equipment and began developing new product lines. However, at the same time, it consolidated some operations and closed its plant in Huntsville, and, late in 2000, sold its Washington Park, Illinois, manufacturing plant and some of its equipment.

The year also saw a change at the top when John L. Duncan replaced Goucher as president and CEO. Duncan, who had been a director of the company since 1999, was formerly the president and CEO of Murray Ohio Manufacturing Co. Goucher, although no longer involved in the company’s day-to-day operations, was still involved in planning strategic alternatives with the company’s investors.

At the end of 2000, Duncan had to face expected but nevertheless very disappointing financial realities. The company reported another net loss, this time climbing to $24.6 million, or $3.19 per share. Sales simply plummeted, falling to $63.7 million, down 29 percent from the company’s 1999 sales of $89.2 million. The company’s drop in sales in part resulted from its inability to manufacture and ship its hearth products on time because of problems encountered when Martin put in place a new distribution system at the start of 2000. However, with the exception of Broilmaster premium barbecue grills, sales for the company’s products fell across the board.

In 2001, Martin, under Duncan’s tutelage, took several steps to counteract its sagging sales, including some belt tightening measures. Among other things, it moved its NuWay Trailer Division to its plant in Canada and discontinued assembling both utility trailers and log sets at its facility in Sheffield. The company was also planning some new strategic initiatives, including the option of divesting its Broilmaster Premium Gas Grill line in order to focus more sharply on its Hearth and Heating divisions. It was hoped that such measures would soon return the company to profitability.

Key Dates:

1905:: W.H. Martin, Sr., and his brother, Charles, found King Stove and Range in Sheffield, Alabama.
1918:: The Martin brothers purchase a stove foundry located in Florence, Alabama, incorporating it as Martin Stove and Range Company.
1939:: The Martins buy a plant in Huntsville, Alabama, which becomes Martin Stamping and Stove Company.
1966:: Martin Stamping and Stove Company builds a new plant in Athens, Alabama, for the company’s Electric Heater Division.
1968:: The company introduces Martin Firecones.
1970:: Martin begins manufacturing and marketing zero-clearance fireplaces.
1974:: The three companies held by the Martins merge to become Martin Industries, Inc.
1976:: Company opens its Central Administration Offices in Florence.
1977:: Martin buys a plant in Americus, Georgia.
1980:: Company purchases a line of dehumidifiers from McGraw Edison.
1987:: Martin sells its Florence foundry to former employees and acquires the wood and gas divisions of Atlanta Stove.
1988:: Company acquires NuWay Manufacturing Co.
1989:: Martin acquires Filex line of metal office furniture.
1990:: Company acquires Broilmaster line of gas barbecue grills and Warm Morning line of vented heaters.
1993:: Martin introduces its series of vent-free gas logs and fireplaces; company sells its Americus facility and its dehumidifier line.
1994:: Company introduces line of free-standing, vent-free heaters.
1995:: Martin goes public with an IPO.
1996:: Company acquires Hunter Energy and Technologies Inc. and Ontario Inc.
1998:: Martin consolidates its manufacturing by moving part of its operation from Illinois to its plants in Athens and Huntsville.
1999:: Martin sells its Ashley solid fuel heating division to United States Stove Company.

In Martin’s favor is the fact that it manufactures goods for a solid market with fairly predictable demands. However, each of the industry segments in which the company operates is cyclical, and its sales are affected by general economic cycles, consumer confidence, inflation, and other factors outside its control, such as the demand for new housing and the availability of financing. Furthermore, home heating product sales are seasonal in nature and are directly affected by weather conditions, so the company will always face risks beyond those inevitably imposed by industrial competitors. Part of Martin’s difficulties in 1998 and 1999 arose from the fact that sales of its heating equipment declined because those years had very mild winters, some of the warmest ever recorded by the National Oceanic and Atmosphere Administration. Still, Martin is not in a terribly volatile industry and does not face any looming threats from either new technologies or competitive industries. Its chances of getting back on a solid profitability track remained strong at the start of the new millennium, though just how long that might take was uncertain.