201 Cahaba Valley Parkway
Pelham, Alabama 35124
Telephone: (205) 403-0206
Fax: (205) 403-0403
Sales: $144 million (1996)
Stock Exchanges: NASDAQ
SICs: 2510 Household Furniture
WinsLoew Furniture, Inc. designs, manufactures, and distributes casual furniture, contract seating, and ready-to-assemble (RTA) furniture. While no one company dominates the highly competitive furniture industry, WinsLoew management believes that its "innovatively styled product offerings and merchandising programs, the quality of its products, and [its] emphasis on providing high levels of customer service" help the company successfully compete in the market. In 1996, WinsLoew's casual furniture and contract seating accounted for about 70 percent of revenues. While Winsloew's RTA division accounted for a much smaller portion of revenues, it was the second largest futon manufacturer in that $250 million industry.
WinsLoew's casual furniture is manufactured in Alabama, North Carolina, and Texas, is constructed of aluminum, wrought iron, wood, and fiberglass, and is purchased mainly by specialty patio stores, department stores, and furniture stores, as well as apartment developers, management companies, hospitality providers, and municipalities. The contract furniture is manufactured in Florida and North Carolina and consists of contemporary and traditional seating for hospitality, office, and other institutional uses. It is purchased by architectural design firms, office furniture dealers, and retail store planners or directly by such end users as restaurants and lodging chains. The RTA furniture is manufactured in Tennessee and California, includes futons and accessories and ergonomically designed computer workstations for home and office use. Purchasers include catalog firms, office furniture wholesalers, specialty retailers, and mass merchandisers. To increase sales in the late 1990s, WinsLoew was broadening the reach of its casual furniture products west of the Rocky Mountains in the United States and had increased marketing efforts that targeted commercial customers, including hotels, restaurants, country clubs, interior designers, and apartment and hotel developers.
Casual Furniture since 1975
In December 1994 Winston Furniture Company, Inc. and Loewenstein Furniture Group, Inc. merged into WinsLoew Furniture, Inc. The merger pooled the interests and financial statements of the companies. Winston Furniture Company originated as a division of Marathon Corporation in 1975. By 1976, Winston management along with other investors acquired the aluminum furniture business of that division through a leveraged buy out. Over the next decade Winston grew, acquiring the wrought iron and tubular steel furniture business of Lyon-Shaw, Inc., a division of B.B. Walker Company, in 1986. Operating independently for more than a decade, Winston completed an initial public offering of shares in August 1987. By 1988, however, Winston was purchased in a leveraged buyout by WF Acquisition Corp., a company formed by affiliates of Trivest, Inc. specifically for the buyout. The two companies merged after the buyout, and Winston was able to reduce its indebtedness and expand its operations. In 1992, Winston was incorporated under the laws of the State of Delaware, and Winston Furniture Company of Alabama, Inc. became its sole operating subsidiary.
By 1994, Winston had become a leader in the casual furniture market. The company had pioneered the use of all-weather cushions on aluminum furniture in the 1970s and was awarded the 1993 Casual Furniture Manufacturer Leadership Award at the National Casual Furniture Market in Chicago, Illinois. Winston, which had also won the award in 1990 and had been a finalist for the award in each of its previous four years, was the only company to win the award twice. The award is based on the manufacturer's leadership in the areas of quality of goods, design, merchandising, customer service, ethics, communications, and trade relations. Winston continued to expand its casual furniture operations by purchasing all the assets of Texacraft, a privately held manufacturer of contract aluminum furniture, in 1994.
Loewenstein, Inc.: Contract Seating since 1967
Loewenstein, Inc. was founded in 1967 as a manufacturer of contract seating for the hospitality market. Atlantis, an affiliate of Trivest, acquired the company in 1985 and Loewenstein operated as part of the "Atlantis Furniture Group" until 1990. The Atlantis Furniture Group consisted of Southern Wood Products, Inc., a manufacturer of promotionally priced RTA furniture; Gregson Furniture Industries, Inc., a manufacturer of traditional and transitional-styled seating for the office and institutional markets; and Excel Office and Contract, Inc., a manufacturer of contemporary and traditional-styled seating for the office furniture market. In 1990, Loewenstein was incorporated and purchased the Atlantis Furniture Group. In 1993, the company completed an initial public offering of common stock. The $17.2 million raised effectively retired all of Loewenstein's outstanding indebtedness and allowed for additional working capital.
As Loewenstein retired its debt, it expanded its futon offerings through acquisition. In 1993, Loewenstein purchased Shaffield Industries, Inc., a manufacturer of RTA furniture, including futons, chairs, tables, and related accessories under the brand name "From the Source." In 1994, Loewenstein acquired another futon manufacturer, New West Industries.
While Winston and Loewenstein operated separately and in different niche markets, their destinies were mingled because they shared certain officers. Earl W. Powell had founded Atlantis Plastics, Inc. in 1984, served as chairman of the board of Loewenstein since 1985, and was chairman of the board of Winston since 1988. In addition Powell had cofounded Trivest, a Miami-based private investment firm which provided services to both Winston and Loewenstein, with Dr. Phillip T. George. Dr. George served as director of Loewenstein since 1985 and as director of Winston since 1989. Peter W. Klein served as director of Winston since 1988 and as director of Loewenstein since 1993; he also acted as secretary and general counsel of Trivest since 1986. Peter C. Brockway served as director of Winston since 1988 and executive officer, managing director, and executive vice-president of Trivest since 1986, 1991, and 1993, respectively. He has also served as vice-president of Atlantis since 1986.
Although certain officers had informally discussed the possibility of merging Winston and Loewenstein, an official proposal came in 1994 from Earl W. Powell. He suggested a stock-for-stock, tax-free business combination. To investigate the potential of such a merger, the board of directors for each company appointed a committee of directors who were neither employees of Winston, Loewenstein, nor Trivest to study the proposal's feasibility.
At the time of the study, both companies were financially stable. Winston had sales of $33.7 million, and Loewenstein had sales of $66.6 million for the nine months ended September 30, 1994. The combined financial strength of the companies was hoped to allow the created company to expand product lines from a larger operating base, have better access to public and private financing due to the strength of a combined financial base, and enhance the attractiveness of company stock to investors because of a larger market capitalization. Independent analysts believed that the merger was fair from a financial standpoint. The merger was effected on December 16, 1994. Each outstanding share of common stock of Winston was converted into the right to receive one share of common stock of WinsLoew and each outstanding share of the common stock of Loewenstein was converted into the right to receive 1.05 share of common stock of WinsLoew.
Trivest played an important role in the history of both companies. Before the merger those officers controlling Winston and Loewenstein were affiliates of Trivest and controlled approximately 31.5 percent of Winston's outstanding common stock and approximately 34.3 percent of Loewenstein's. With the merger the Trivest and affiliated parties would own 33.3 percent of the outstanding WinsLoew common stock. Until the merger, Trivest offered its specialized management services to both Winston and Loewenstein, receiving aggregate fees of $850,000 per year. In October 1994, WinsLoew entered a ten-year agreement with Trivest, Inc.; under the agreement, Trivest would provide corporate finance, financial relations, strategic and capital planning, and other management advice to WinsLoew for a base fee of $500,000, with increases for cost of living and additional businesses acquired.
Operating as One: Results of the Merger, 1994
Initially the pooled interests of the companies looked good. Operating results for the first year as WinsLoew Furniture, Inc. marked a 34 percent increase in sales to $137.8 million. An additional bonus came when WinsLoew won the 1994 Design Excellence Award from the Summer Casual Furniture Manufacturers Association for its tubular aluminum dining chair called Magnolia Sling.
The increase in sales and honor from the award did not cloud management's vision for the future, however. WinsLoew management introduced a strategic plan in mid-1995 to cut costs and improve efficiency in the coming years due to the manufacturing and marketing problems it saw in its low-end futons and Southern Wood division. The effects of the plan did not save the company from posting disappointing operating results after its second year. The management cited "higher raw material costs, competitive pricing pressures, and production inefficiencies," as well as the discontinuance of low-end futon production, for the decrease in income in 1995. WinsLoew had a net loss of $4.0 million in 1995, compared to a net income of $6.4 million in 1994.
To further implement its strategic plan, WinsLoew sold its subsidiary Excel Office and Contract because its products were deemed "inconsistent with WinsLoew's," according to president and chief executive Bobby Tesney in HFN. Tesney added that the sale of Excel would "enhance profitability by reducing embedded costs and maximizing marketing opportunities in each of our product groups." He anticipated that the results of the sale along with increased sales and cost cutting measures would be reflected in improved operating results for 1996.
The benefits of WinsLoew management's vision came in the fourth quarter of 1995, and the company continued to post increases in every quarter into 1997. Net income for 1996 was $8.3 million, compared to a net loss of $4.0 million the year before. Management noted 1996 was a "very successful" year. In addition, the company reported improvement in the gross margins of each of its business segments. The company credited its "price increases, overhead reductions, production improvements, refocused or expanded marketing strategies, and new product designs" along with the consolidation of some warehousing and manufacturing facilities for its turnaround.
WinsLoew's numbers for 1996 far exceeded analysts' expectations. Individual Investor reported that analysts were "expecting just $0.77" earnings per share, but WinsLoew had reached $0.95 earnings per share. Given WinsLoew management's stellar performance, analysts expected double-digit growth for the company in 1997 as well. Wallace W. Epperson, Jr. of Interstate/Johnson Lane noted in Buyside the difficulty of finding "value" or, even more rarely, companies "exceptionally well-positioned in growth markets" with a "management team that has proven itself in difficult conditions." He concluded that WinsLoew offered all these attributes. Nancy Zambell of UnDiscovered Stocks, Inc. declared in Buyside that WinsLoew's earnings per share for 1996 was the "'proof-of-the-pudding' that WinsLoew has the management team to direct its future growth." In addition, WinsLoew's focus on national chain retailers was seen as good fuel to drive the company's growth, according to Individual Investor. The predictions seemed accurate by the end of the second quarter of 1997, when the company again reported earnings higher than analysts' estimates.
Product Improvement in the 1990s
The financial benefits reaped from WinsLoew management's strategic plan could not have been realized without the company's strong product offerings. More than 70 percent of WinsLoew's revenues came from the casual and contract seating groups. WinsLoew's casual residential furniture is marketed under the Winston label for aluminum furniture and under the Lyon-Shaw label for wrought iron. The September 1994 acquisition of Texacraft, a privately-held manufacturer of aluminum, iron, wood, and fiberglass casual furniture allowed WinsLoew to enter the contract casual furniture arena. WinsLoew augments its quality of design by using stronger components than its medium-priced competitors and applying its exclusive Diamond bond paint finishing system, which gives the furniture a durable, chip- and fade-resistant protective finish.
Contract seating is sold under the Loewenstein and Gregson labels. Loewenstein's Breeze chair won the International Interior Design Association and Contract Design magazine's APEX Award in the seating category in 1996. Entries in the design competition were judged on innovation, durability, performance, and value. The Breeze chair was designed by the Italian designer Carlo Bartoli, a man who "uses technical solutions in an intelligent way, discreetly offered within the object almost as a bonus to the buyer," according to Jacques Toussaint in Contemporary Designers. "He never cuts short his design component, such as aesthetics or function [...] these qualities are what place Bartoli among the most highly rated designers." To enhance its designs, Loewenstein improved its finishing process to produce the hardest and most vibrant finish in the industry. The electrostatic spray guns and three-dimensional ultraviolet drying system have increased efficiency in manufacturing and reduced the emission of volatile organic compounds 50 percent below permitted levels, a feat recognized appreciatively by the state of Florida.
WinsLoew markets ready-to-assemble furniture under three labels: New West for futons and frames, MicroCentre for ergonomically-designed computer furniture, and Southern Wood for promotionally-priced spindle (including coffee tables, wall units, children's furniture, and TV carts) and flatline products (including bookshelves, computer desks, printer stands, and bath-related storage units). New West was ranked second among manufacturers in the futon industry. Part of the company's plans included eliminating the noncompetitive and low-margin futon products and broadening the market for futons by participating in non-futon trade shows. MicroCentre's computer workstations feature among other things the patented view-down monitor configuration. The design came from the research of ergonomist Stewart B. Leavitt. In light of the increasing numbers of health problems related to stress at work, MicroCentre sponsored research by Leavitt in 1996. Leavitt studied how the height and placement of video display terminals affected vision comfort and related to health care issues. He discovered that the eyes could more easily focus when the monitor was placed 15 to 45 degrees below eye level. He also found that this positioning of the monitor could reduce eye strain, redness, and headaches over long periods. As part of WinsLoew's strategy to curtail production of low-end products, WinsLoew drastically reduced the offerings in the Southern Wood line. However, WinsLoew did improve the designs of the remaining pieces and invested nearly $1 million in new production equipment. The company anticipated that the more "sophisticated" designs would improve sales and profit margins. With WinsLoew's improved financial position and its efforts toward improving the quality of its product, many of the benefits of merging Winston and Loewenstein were only just becoming apparent in the late 1990s.
Allegrezza, Ray, "Execs Buy Excel Back from WinsLoew," HFN, December 4, 1995, p. 15.
"Analyst Roundtable," Buyside, April 1997.
Greenwald, Nathan, "Hot Stocks: Momentum Investing," Individual Investor, April 1997, p. 94.
Toussaint, Jacques, "Carlo Bartoli," Contemporary Designers, Detroit: St. James Press, 1996.
Source: International Directory of Company Histories, Vol. 21. St. James Press, 1998.