Syratech Corp.

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Syratech Corp.

175 McClellan Highway
East Boston, Massachusetts 02128
U.S.A.
(617) 561-2200
Fax: (617) 561-0275

Public Company
Incorporated: 1986
Sales: $242.2 million
Employees: 1,225
Stock Exchanges: New York
SICs: 3914 Silverware, Plated Ware & Stainless Steel Ware

Founded in 1986, Syratech Corp. is a leader in the tabletop- and giftware-products industry. Its subsidiaries include such prestigious silverware producers and marketers as Towle, International Silver, and Wallace Silversmiths. Syratech designs, manufactures, imports, and distributes holloware (goods such as trays, bowls, and pitchers), flatware (utensils such as knives, forks, and spoons), and numerous giftware products such as picture frames, photo albums, candlesticks, cosmetic accessories, and seasonal merchandise.

One of eight children of an immigrant Russian-Jewish grocer, Leonard Florence grew up living over the store in Chelsea, Massachusetts, a blue-collar suburb of Boston. He shined shoes to help support his family and never saw a piece of sterling silver in his youth. Florence attended Boston University on a scholarship provided by Dewey Stone, an industrialist. Upon his graduation in 1954, he was hired by Stone to help run one of his companies, Raimond Silver Manufacturing Co. of Chelsea, which at the time was losing money. Florence reduced staffing, dropped unprofitable items, and found an unexploited niche for Raimond making silver picture frames. When the company was sold in 1968 for $2.1 million, Florence received half the proceeds. He used the money to start his own company, Leonard Silver, which specialized in low-priced silverplated giftware. Company sales came to $269,000 in its initial year and profits to $14,000.

Leonard Silver first operated out of a Chelsea garage, with the entire staff pitching in to do chores: writing orders, polishing silver, and carrying boxes to be shipped. When the company erected an office building across the street, the staff helped pour concrete, thereby enabling Florence to fulfill his promise to teach his employees the business “from the ground up.” Leonard Silver sold silverplated holloware at one-half to one-third the prices charged for similar goods by competing firms and still made money. In 1979 Leonard Silver merged with Towle Manufacturing Co.

Unlike plebeian Leonard Silver, Towle (rhymes with “bowl”), had a pedigree going back to 1690, when William Moulton II set up shop in what became Newburyport, Massachusetts. Five generations of Moulton silversmiths followed before Anthony F. Towle and William P. Jones, apprentices of William Moulton IV, bought the business from him and Joseph Moulton IV in the 1860s. It was incorporated in 1880 as the Towle Manufacturing Co. The conservatively managed company was the one of the first to stress coordinated marketing of silver, china, and glass, and it made a steady profit even during the Great Depression. Although not reaching an annual net income of $1 million until the 1960s, it paid a dividend in every year after 1917. Towle’s silver patterns included Chippendale, King Richard, and Old Master. As late as the 1970s its showroom was a 250-year-old Newburyport clapboard house, adjacent to the ivy-covered factory.

A survey of the $620 million tableware industry in 1970 found Towle to be one of the eight leading marketers. Among the others were International Silver Co. and Wallace Silversmiths Inc., later acquired by Syratech. By then Towle had been systematically diversifying its line of products from sterling (92.5 percent silver) flatware to silverplated (about ten percent silver) holloware in order to reduce its exposure to the fluctuating price of silver. Silverplated holloware, the fastest-growing area in silverware, was believed to account for around 40 percent of Towle’s estimated sales in 1971. The company also was selling over 20 basic sterling flatware patterns under the Towle name through 3,000 retail outlets. It recorded after-tax profits of 9 to 10.5 percent of sales between 1966 and 1970.

Towle’s solid performance and lack of long-term debt attracted a takeover attempt in 1974 from Nortek Inc., a diversified company only seven years old. In response, more than 800 residents in the Newburyport area signed an advertisement in the local newspaper expressing concern that Towle might move out if purchased by Nortek. Towle executives, who called their company the oldest in America doing business in the same place, voiced gratitude to their shareholders when Nortek’s bid failed. The company’s days as an independent entity were to prove numbered, however.

Leonard Silver, with sales of $38.7 million and earnings of about $2 million in 1977, claimed to be the nation’s leading manufacturer of silverplated holloware when it took aim at Towle the following year. By contrast, Towle was the nation’s second-largest manufacturer of sterling silver, its sterling flatware accounting for 80 percent of its sales volume of $35 million in 1977. According to Florence, he engineered a “reverse takeover” by threatening to make a tender offer to Towle’s shareholders. In September 1978 Towle acquired Leonard Silver by issuing stock with a combined value of nearly $13.4 million. Leonard Silver stockholders received a share of Towle stock for each Leonard Silver share they held. Since Florence owned 40 percent of Leonard Silver, he emerged as Towle’s largest stockholder and in essence elected himself Towle’s president and chief executive officer.

The merger brought Florence the prestige of the Towle name, sterling flatware to fill in the high end of his line, and cash for his heavily indebted former company, now a Towle division. He immediately moved corporate headquarters to East Boston and redefined Towle by broadening its clientele. He made price, for the first time, a major consideration in selling the company’s silverware, and only items that lent themselves to mass merchandising remained in production. To reduce overhead, salaried salespeople replaced jobbers, and silverplate was promoted through mail-order catalogues. Unlike sterling silver, silver-plated holloware was recession-proof, Florence told a Forbes reporter in 1981. “No one’s going to tell a bride, ‘I can’t give you a gift, there’s a recession on. Come back next year.’” His oft-pronounced motto was, “Today Mrs. Jones wants to live like Mrs. Rockefeller,” to which he added, “And I intend to let her think she can.”

Florence not only introduced silverplated flatware under the Towle name, he also moved the company into china, glassware, stainless-steel flatware, dinnerware, barware, brass furnishings, pots and pans, ceramic gifts—even candles and silk flowers— by acquisition. In the following years Towle bought 14 companies. Nearly half of Towle’s sales volume of about $200 million in 1980 came from nonsilver items. In 1981 a new 578,000-square-foot Towle automated distribution plant opened in Revere, Massachusetts.

Towle’s old-line Yankee competitors accused Florence of cheapening the silverware industry through his sales promotions—many of which they subsequently imitated—and, they claimed, shoddy workmanship. He outraged them by his willingness to cut prices in order to bolster market share and by copying their designs. Dubbed the “King of Kitsch,” he flaunted his parvenu trappings, which included four homes, a Rolls-Royce, Mercedes, and Jaguar, multiple gold chains, and a diamond-studded bracelet and Rolex gold watch. Florence compensated for these indulgences by habitually working seven days a week, spending nine months out of the year on the road, and sleeping, by his own account, only four hours a night. A New York department store executive told a trade-newspaper reporter, “Lenny Florence is successful because he has the ability to change with the times. The rest of the silver industry has been asleep for 100 years.”

By 1980 Towle was the largest tabletop and giftware concern in the United States and the largest producer of silverware. It was selling 7,000 items, ranging from sterling silver tea sets commanding up to $10,000 to $20 vinyl ice buckets and $15 Muppet figurines and Kliban-cat clay coffee mugs. By 1984 Towle was selling 35,000 different items.

By late 1982, however, Towle was so heavily in debt that it had to sell 750,000 shares of newly issued common stock to a conglomerate, Anchor Hocking Corp., for $16.9 million in cash. Despite record sales of $285 million in 1983, earnings dropped sharply in 1982 and 1983, and in 1984 Towle lost $15.6 million. The problem stemmed partly from consolidating shipping operations in its state-of-the-art Revere facility. The computer system, unable to handle Towle’s volume, broke down, and delays left the company unable to fill Christmas orders. More generally, analysts said, Towle emphasized growth without a corresponding attempt to integrate its acquisitions into the parent company. As a result, one retailer told a Boston Globe reporter, “We’re constantly confused about prices, programs, and deliveries.”

Towle’s board of directors forced Florence to resign in November 1985. It lost $67 million in 1985, and its debt reached $142 million. Paul J. Dunphy, the company treasurer and a former Arthur Hocking executive, succeeded Florence as president and chief executive officer. Towle filed for protection from its creditors under Chapter 11 of the federal bankruptcy code in March 1986. Its stock dropped in value to $3.25 a share, compared to a high of more than $31 a share in 1983.

Under Dunphy, Towle consolidated into three business divisions and began divesting itself of unprofitable operations. Its school-ring division, Old Harbor Candles affiliate, Deldan silk flowers unit, and Christmas Place ornaments lines were sold. Its brass furniture company was liquidated. Its practice of deep discounting was ended. The company lost $22 million in 1986, but the following year it became a subsidiary of First Republic Corp. of New York and emerged from bankruptcy. However, Towle again filed for Chapter 11 bankruptcy in 1989, acknowledging that its plan for anticipated “rather aggressive growth” had not materialized.

Florence, who with other family members still owned at least 12 percent of Towle at the time of his resignation, had raised $5 million and started a new company, Syratech. It bought money-losing Wallace International Silversmiths from Katy Industries Inc. in September 1986. Wallace Silversmiths Inc. and International Silver Co. had been merged into a single unit in 1983. The former company derived from Robert Wallace, who manufactured the first spoons made in the United States of German or nickel silver in 1835. Founded in 1898, International Silver Co. was at one time the world’s largest manufacturer of silverware.

Syratech also bought Syroco, an unprofitable plastic-injection molding company that made decorative trim, in 1986. Florence moved it into plastic-resin patio furniture. Both units were profitable within a year. Acquiring Syroco enabled Syratech to keep its employees busy year-round, since outdoor furniture sold best in the spring while tableware sold best in the fall. In 1993 Business Week cited Syratech as one of 250 “companies on the move,” and Forbes called it one of “the best small companies in America.”

Florence reacquired four Towle units—Towle Canada, Towle Hong Kong, Towle Retail, and the Silversmiths division—in July 1990 for $20 million and merged them into Syratech. He told a Forbes interviewer in 1995, “In my humble opinion, Towle would not have gone into bankruptcy if they had let us stay the course…. I was let go wrongly, and I had to go out and prove it.” At the beginning of 1993 Syratech went public, offering 2.2 million shares of common stock (about a quarter of the total) at an initial $17 per share. This stock issue raised $39 million. By then Syratech consisted of frame and gift companies as well as tableware and furniture and accessories. Of $127.7 million in sales in 1991, tableware and giftware accounted for 65 percent, furniture and accessories for 35 percent. In 1993 sales reached $210 million, and profits were nearly $18 million.

In 1995 Syratech sold Syroco to Marley pic, a British company, for $140 million. Syratech’s sales had grown in 1994 to $242.2 million, of which Syroco accounted for 39 percent. Net income came to $19.9 million. Florence had a 28 percent stake in the company in 1994, while Katy Industries owned 29 percent. Long-term debt was only $2.3 million.

In 1995 Syratech was designing, manufacturing, importing, and distributing a variety of tabletop and giftware products, including sterling silver, silverplated, and stainless steel flatware and holloware, and seasonal items. Holloware and giftware items sold by the company included trays, coffee and tea services, goblets, pitchers, candlesticks and candelabra, picture frames, cosmetic accessories, vanity pieces, and Christmas and other seasonal merchandise.

Syratech was manufacturing sterling silver flatware in San German, Puerto Rico, in 1995, and was also fabricating silver there. Sterling silver and silverplated giftware products, including holloware, were being manufactured in North Dighton, Massachusetts. (The Newburyport plant was closed in 1994.) Products were also being purchased from about 160 foreign manufacturers. The company had warehouses in China, North Dighton, East Boston, and Kansas City, Missouri, and warehouse/distribution centers in Revere, Massachusetts, and Corona, California. There were showrooms in New York City, Los Angeles, Dallas, Atlanta, East Boston, and Hong Kong.

Syratech was selling its sterling silver and silverplated flatware and holloware under a number of trade names, including Tuttle, Wm. Rogers & Son, Leonard, Supreme Cutlery, Westmoreland, Melannco, International Christmas, and Holiday Workshops, as well as Towle, Wallace Silversmiths, and International. Its proprietary patterns and designs included King Richard and Old Master in the Towle line, Grand Baroque and French Regency in the Wallace line, Joan of Arc and Royal Danish in the International line, and Onslow in the Tuttle line.

Principal Subsidiaries

International Silver Co.; Leonard Florence (Leonard) Associates, Inc.; Syratech H.K. (Hong Kong); Syratech Holding Corp.; Syratech Silver Sales Corp.; Towle Holloware, Inc.; Towle Manufacturing Co.; Wallace International Silversmiths, Inc.