Shelby Williams Industries, Inc.

views updated

Shelby Williams Industries, Inc.

1348 Merchandise Mart
Chicago, Illinois 60654
U.S.A.
(312) 527-3593
Fax: (312) 527-3597

Public Company
Incorporated: 1954
Employees: 1,728
Sales: $159.07million
Stock Exchanges: New York
SICs: 2521 Wood Office Furniture; 2522 Office Furniture
Except Wood

Shelby Williams Industries, Inc., is a leading supplier of furnishings for the contract furniture market. Shelby Williams and its subsidiaries design, manufacture, and distribute furniture, wall coverings and other textiles, and flooring and floor coverings to hotels and restaurants, casinos, country clubs, nursing homes, office buildings, colleges, and other institutions. With nearly 2 million square feet among nine manufacturing and distributing facilities in the United States and Mexico, 15 showrooms in the United States, and representation in 44 other countries, Shelby Williams and its 1,700 employees produced more than 1.25 million units for sales of close to $160 million in 1994. Exports to 63 foreign countries contributed roughly ten percent of its revenues. Among its many customers, Shelby Williams maintains long-term relationships with such corporations as Holiday Inns, Wendy’s, and McDonald’s. Shelby Williams has provided furniture for many of the world’s luxury hotels, as well as for cruise ships such as the Queen Elizabeth Π and the S.S. Norway line. After several years of a soft market, Shelby Williams rode the mid-1990s boom in the casino market.

Manfred Steinfeld, who remained chairman of Shelby Williams in 1995, was born in the farming village of Josbach, Germany, in 1925. The Nazi party began its rise several years later and, in 1939, Steinfeld’s mother sent him to Chicago to live with an uncle. His mother and sister died in the Nazi concentration camps; a brother, sent to the former Palestine, died in the Israeli independence war. Steinfeld joined the U.S. 82nd Airborne as a parachutist and intelligence specialist and participated in the victory over the German army and the liberation of the concentration camps; in 1945, he was assigned to translate the terms of Germany’s unconditional surrender. By the end of the war Steinfeld had received the Bronze Star, the European Campaign medal with five stars, the Bronze Arrowhead, and the Purple Heart. He returned to Chicago and received a degree in business administration from Roosevelt University. After a stint as a research statistician, Steinfeld reenlisted for active duty in the Korean War. He returned to Chicago in 1952, working for Sam Horvitz, a noted restaurant designer. In 1954 Steinfeld and Horvitz bought up the assets of the defunct Great Northern Chair Company, a maker of Vienna bentwood chairs, for $10,000. The partners incorporated the new company under the name Shelby Williams. Horvitz became president, and Steinfeld was named vice-president and manager.

In its first year Shelby Williams employed 30 people and produced 50,000 chairs for sales of $350,000; by the following year production had doubled. The postwar boom had created a new market; previously, the contract market, so called because orders were placed by written contract, had been handled almost exclusively by large department stores. The rise in disposable income, and the corresponding increases in the numbers of people dining out and traveling, encouraged other manufacturers to enter the contract furnishings field. At the same time, department stores turned their focus to the growing numbers of individual consumers and dropped out of the contract market. As travel became less and less the preserve of the wealthy, new hotels—and a new breed of motels—sprang up across the country. Restaurants, especially fast-food restaurants, appeared in greater numbers. Innovations in restaurant design also encouraged the growth of firms offering design and manufacturing capabilities. The standardization of amenities introduced by hotel chains like Ramada Inn, Howard Johnson, and Holiday Inn, as well as restaurant chains like McDonald’s, brought increasingly larger orders into the contract furniture firms.

By 1959 Shelby William’s sales had jumped to $2.5 million. Its catalog had grown from 24 pages in its first year to 64 pages and included contemporary and Scandinavian designs. In response to the population boom on the West Coast, the company opened an assembly plant in Los Angeles. A break occurred for the young company when one of its main competitors, Thonet, the originator of bentwood manufacturing, left the burgeoning hotel and restaurant market. Shelby Williams rushed to fill the gap. From 1961 to 1964, Shelby Williams showrooms appeared in Dallas, Atlanta, Los Angeles, and in the Merchandise Mart in Chicago. The company expanded its product line beyond chairs to include tables and home furnishings with the 1962 acquisition of American of Chicago, the first in a long list of acquisitions. In 1963 Shelby Williams increased production capabilities with the opening of a plant in Morristown, Tennessee, which doubled in size within six months. During this time Horvitz left to return to design, and Steinfeld took over as chairman and president of Shelby Williams.

The company had achieved such steady growth that in 1965 Steinfeld took Shelby Williams public, reincorporating the company as a Delaware corporation. Its initial stock offering went for $10.75 per share. The following year the price had jumped to $15.75 per share, and in 1967, when the company was listed on the American Stock Exchange, its stock had reached $18.59 per share. Shelby Williams acquired Duo-Bed Corp. of Wichita, Kansas, a pioneer in the sleeper sofa, in 1965, and Madison Furniture Industries and its office furniture production plant in Canton, Mississippi, in 1966; the company extended its product range into the hospital and nursing home market in 1968 with the purchase of Goodman Bros. Mfg. Co. of Philadelphia.

By 1968 Shelby Williams sales totaled more than $18 million and its stock had reached a high of $36 per share. In that year Shelby Williams merged into Coronet Industries, Inc., a leading carpet manufacturer. Terms of the merger included an exchange of stock valued at just over $17 million, approximately four times the company’s book value. Steinfeld remained as head of the company and Shelby Williams continued to operate autonomously. Its acquisitions continued: Chicago-based metal chair manufacturer Tri-Par Mfg. Co. in 1968; Morristown Foam and Fiber Corp. of Morristown, Tennessee, in 1970; and Stephen-Black Company of Los Angeles, another dual-purpose sleep furniture manufacturer, also in 1970.

Coronet Industries was acquired by RCA for a one-to-one exchange of stock in 1971. Steinfeld retained his leadership position in his company. Over the next several years RCA poured millions into Shelby Williams, increasing the scope of its operations, and introduced accounting and management disciplines that further increased the company’s profits. The takeover came at a good time. The oil embargo and resulting recession of 1972-1975 severely cut into the contract furniture market; it seemed unlikely the Shelby Williams would have survived this period without the financial strength of RCA to back it.

In 1975, however, RCA decided to leave the contract furniture market. Steinfeld was offered the opportunity to buy back his own company. Gathering a group of investors, Steinfeld purchased Shelby Williams from RCA in 1976 for slightly more than $17 million in cash and notes, just $100,000 more than what he had received for the company less than ten years before. By then, however, Shelby Williams’s sales had reached $44 million per year. The company was now a private company; in order to finance its debt, it sold off Goodman Mfg. in 1977. By 1979 company sales topped $67 million. Its catalog had grown to 240 pages, featuring more than 600 seating styles and serving customers throughout much of the world.

The company repaid its debt of approximately $9 million in promissory notes by 1979. Steinfeld prepared to take the company public once again; in 1983 Shelby Williams posted an initial common stock offering of 2 million shares at $10.75 per share, raising $7 million. Steinfeld controlled 51 percent of the company’s stock, worth some $50 million. Its 1984 sales of $96 million made Shelby Williams the leader in the contract market, capturing as much as 20 percent of the hotel and restaurant furnishings segment. Two years later Steinfeld’s stock, valued at $1 million in 1965, was worth $88 million on sales of $116 million. Apart from its U.S. showrooms, the company’s licensees operated in Canada, the United Kingdom, and South Africa with distributor offices in France, Sweden, Germany, Ireland, and Hong Kong; the company also participated in a joint venture in Mexico. Foreign sales in 1983 reached $5.4 million.

Shelby Williams soon returned to acquiring other related manufacturers. Purchases included Preview Furniture Corp. in 1985; Sellers & Josephson, Inc., in 1986; Thonet Industries Inc. and King Arthur Corp. in 1987; and Pacific Home Furnishings in 1988. The company’s success could be attributed to a number of factors. With such a broad range of products in every price class it offered more variety than any of its competitors. Its emphasis on service above all was central to winning repeat business from its customers; part of its service was its focus on special orders, allowing its customers to build their own combination of furniture styles, fabrics, and fabric designs, rather than having to purchase from a fixed stock. During the 1980s the hotel industry underwent a construction boom, and large numbers of existing hotels, and hotel and restaurant chains, refurbished properties, resulting in large orders for Shelby Williams products. In addition, none of Shelby Williams’s individual customers accounted for more than three or four percent of sales.

The end of the 1980s marked the end of this period of growth. The hospitality industry was becoming glutted with hotels and restaurants. Shelby Williams, with 70 percent of its sales owed to this industry, was also affected by the crimp in the market. The company shifted focus. Its purchase of Thonet Industries brought in that company’s strong presence in the college dormitory and nursing home markets, where it posted roughly $25 million in sales. Shelby Williams also looked for strong growth in international sales, and its purchase of Pacific Home Furnishings of Hawaii, which distributed furniture, floor coverings, and textiles to the Far East, helped push the company’s foreign exports to $8.5 million. On the domestic front, however, the food-service industry slumped. By 1988 Shelby Williams’s sales had dropped to $154.7 million from $159.6 million the year before. The company announced its intention to increase sales in other market segments so that hospitality would account for around 50 percent of its sales. Other markets, however, were also tightening. Government orders, for example, were declining as spending budgets were slashed.

The slump continued across the industry into the 1990s. Shelby Williams’s stock price dropped by as much as 39 percent in 1990 alone, to $6 per share. Meanwhile, many of the acquisitions from the previous years had not performed as well as expected. When Holiday Inns Inc.—Shelby Williams’s largest customer with annual purchases of up to $6 million—was sold in 1990, its furniture orders were put on hold. Shelby Williams announced cost-cutting measures, including the construction of a manufacturing facility in Mexico; the company also heavily discounted its prices.

A factor in its favor, however, was the loyalty Shelby Williams—and especially Manfred Steinfeld—enjoyed among many longtime customers. Growing brands, such as Lettuce Entertain You Enterprises Inc., also remained committed to the Shelby Williams’s brand of high-quality customer service. Nonetheless, the contract market continued to soften, and in November 1991 the company announced restructuring charges of $5.3 million and its intention to divest its international fabrics division. Staff cuts had also reduced the company from 1,800 employees to 1,476. In all, Shelby Williams posted a loss of $3.6 million on sales of $140 million during 1991.

The hotel and hospitality industry was slow to come out of the recession of the early 1990s. Shelby Williams’s fortunes rose, however, with the sudden rise in demand from the casino industry. The 1990s saw the expansion and new construction of casino-hotels in Las Vegas and Atlantic City along with the opening of more and more riverboat gaming operations. Shelby Williams entered this market strongly, opening a showroom and creating a catalog devoted to casino furnishings. Within two years the company’s casino sales reached $8 million, including the sale of 4,000 chairs for slot machines and blackjack tables in the giant MGM Grand Casino in Las Vegas. Other burgeoning markets included time-share condominiums and retirement communities. Shelby Williams sales continued to rise through 1994, when it posted $159 million in sales, with an additional backlog of more than $28 million. Manfred Steinfeld remained at the helm; the appointment of his son, Paul Steinfeld, as vice-chairman and chief operating officer signaled that Steinfeld’s legacy would most likely maintain Shelby Williams’s reputation for quality and service for years to come.