Whether the blame falls on the sluggish economy, take-no-prisoners competition, or poor business management, a majority of CEOs who run the nation’s largest black-owned industrial/service companies found 2003 to be a downright nasty year. In fact, the unmerciful business environment produced a number of casualties. Take Exemplar Manufacturing Co., ranked No. 26 on last year’s BE INDUSTRIAL/SERVICE 100 list with $157.5 million in sales. After 12 years in business, the Ypsilanti, Michigan-based automotive supplier bade farewell to the BE 100S when it filed for voluntary Chapter 11 bankruptcy in January 2003. Prior to this move, Exemplar was forced to lay off 80 employees after General Motors cancelled its multimillion-dollar contract to produce fasteners. Also, Ford Motor Co. yanked Exemplar’s contract to develop wire harnesses. Both auto manufacturers cited production and delivery concerns as the reason for severing ties with Exemplar. CEO Anthony Snoddy told BE: “There is no future for Exemplar Manufacturing Company. All assets have been liquidated.”
Exemplar’s fate is just one example of the harsh realities of today’s unforgiving business climate. Performance is the key to growth and survival. And the environment will become more intense as customer standards become more stringent and competition remains relentless. This is demonstrated by the key fact that sales for the companies ranked on the BE INDUSTRIAL/SERVICE 100 remained flat. Total sales for 2003 were $12.9 billion, up 1.1% from $12.8 billion in 2002. This year’s revenue growth leader is the 2004 Company of the Year, Peebles Atlantic Development Corp., which ranked No. 42 with sales of $82 million, a 141.2% increase from 2002. (See “The Prince of South Beach,” this issue.)
Like majority firms, the BE INDUSTRIAL/SERVICE 100 focused on productivity, doing more with less people. In 2003, these firms employed 74,402 workers, a 0.8% drop from the 75,020 workers employed in 2002. La-Van Hawkins Food & Entertainment Group L.L.C., ranked No. 13 with sales of $293 million, emerged as this year’s employment leader with 6,831 staffers.
SEISMIC SHIFTS
There were a number of major shifts among the BE INDUSTRIAL/SERVICE
CAMAC fell to the No. 2 slot after it underwent a major corporate reshuffling. By placing its offshore holdings in a separate non-U.S. entity, sales for the Houston-based oil and gas exploration and trading company dropped from $1 billion to $573.3 million. Now, Act-1 Group, the Torrance, California-based staffing firm ranked No. 3 on the BE INDUSTRIAL/SERVICE 100 list with sales of $520 million, is nipping at CAMAC’s heels for the coveted spot. BE INDUSTRIAL/SERVICE 100S perennials Johnson Publishing Co. Inc., which had sales of $488.5 million, and Philadelphia Coca-Cola Bottling Co., which had sales of $447 million, round out the top five.
A HOST OF CASUALTIES
The most notable development on this year’s list is the large number of business casualties. In addition to Exemplar, approximately 12 dropped off the list because of divestitures, bankruptcies, and failure to meet our eligibility standards or inability to meet this year’s revenue threshold. (See box on BE 100S standards in the BE 100S overview.) For example, Culver City, California-based Alert Staffing was removed from the ranks of the BE 100S. Says CEO Victoria Lowe: “We were forced to shut down operations
Another BE 100s mainstay, uniform maker Terry Manufacturing, which ranked No. 74 with $44.5 million in sales last year, filed for bankruptcy amid a federal investigation over missing assets from its books. Brothers Rudolph and Roy Terry, who headed the 41-year-old Roanoke, Alabama-based manufacturing company, maintained that cash flow problems were responsible for the business shutdown. Reportedly, their accounts receivables and inventory dropped from more than $37 million to only $2 million in the second quarter of last year. While the brothers blame the dramatic drop in assets on unsecured company debt, some contend that they used company funds to pay personal bank loans. Once hailed as a top performer, Terry Manufacturing included the U.S. Armed Forces, the 1996 Olympic Committee, and McDonald’s among its major clients. (See “Historic Black-owned Firm Suspected of Fraud” on blackenterprise.com.)
Also falling from this year’s BE INDUSTRIAL/SERVICE 100, but not necessarily falling from grace, is ITS Services Inc. The Springfield, Virginia-based technology support firm, which ranked No. 53 with $67 million in sales last year, is no longer in black hands. Majority-owned Arlington Capital Partners recapitalized the 13-year-old company last year and brought in new management, replacing its African American founder and CEO, Angela M. Mason.
GROWTH THROUGH DIVESTITURE
Some notables on the BE INDUSTRIAL/SERVICE 100 found new energy by joining forces with majority-owned firms. Russell Simmons, CEO of Rush Communications (No. 9 with sales of $320 million) sold his flagship Phat Farm apparel unit for $140 million to Seventh Avenue giant Kellwood. In a shrewd move, Simmons still retains the posts of president and CEO and will earn half of the clothing line’s gross sales.
Simmons has become a master at gaining strength through partnerships. In 1999, he crafted a similar transaction with Universal Records when he sold Def Jam Recordings for more than $100
million. In that deal, he retained the post of chairman of the record label. “Def Jam had pretty much leveled off at $180 million and within two years it was doing $600 million,” explains Simmons from his cell phone en route to work. “I don’t regret it because I don’t know if I could have given [Def Jam] the same opportunity.”He expects to duplicate the same type of success through the Phat Farm deal. “Phat Farm is near $350 million, which is great, but now the opportunity to do a billion dollars is much closer,” asserts Simmons, who is focusing on the UniRush financial services division and Run Athletics apparel unit to drive revenues. In April, UniRush launched the Rush Card, a prepaid Visa debit card that generated more than 240,000 customers. Run Athletics’ sneaker line produced gross sales of $130 million.
BENEFITS OF A WEAK RECOVERY
Some say that the government’s attempt to rebound the economy with tax and interest rate cuts has had little impact on the fortunes of the BE 100S. Some industrial/service CEOs may beg to differ. A number of firms have proven to be beneficiaries of the Federal Reserve’s low interest rate posture. For example, the Fed’s policy has been able to keep real estate a prime growth sector, maintains Michael Russell, the newly-m
inted CEO of H.J. Russell & Co. (In one of the most historic management moves among BE 100S companies last year, construction magnate Herman Russell passed the torch to his youngest son.) “The economy was struggling in 2003, but as an organization we did well,” Russell says of the Atlanta-based construction and real estate development firm that grossed $303 million and earned the No. 12 spot on this year’s list. Contributing to the company’s success: its participation in the construction of Atlanta’s High Museum of Art and the Phoenix Civic Center Plaza.
President George W. Bush’s Jobs and Growth Tax Relief Reconciliation Act of 2003 didn’t exactly stimulate corporate spending like he had hoped. However, some BE 100S companies did take
advantage of tax cuts to realize productivity gains and an increase in revenues. CEO Rodney P. Hunt of RS Information Systems (No. 15 on the BE INDUSTRIAL/SERVICE 100 list with sales of $260 million) says it encouraged him to upgrade equipment for the McLean, Virginia-based information technology and engineering support firm.But the Bush administration’s emphasis on security will have a more lasting impact on RS Information System’s bottom line than its tax policy. Last year, the U.S. Department of Energy awarded RS Information Systems a five-year, $409 million contract to provide, among other things, computer security and network engineering services. It represents the largest contract ever awarded to a small business, defined by the federal government as one with fewer than 1,500 employees. As a result, 2003 gross sales grew an impressive 36.8%. And over the next few years, RS Information Systems is expected to add $80 million to $100 million in annual revenues. The firm has managed to structure a strategy that all BE INDUSTRIAL/SERVICE firms must adopt if they expect to thrive in an increasingly Darwinian environment: a formula for longevity.
Industrial/Service Eligibility
A company must be at least 51% black-owned and have been fully operational for the previous calendar year (Jan. 1, 2003 through Dec. 31, 2003). Companies listed must manufacture or own the products they sell, or provide industrial or consumer services. (Brokerages, real estate firms, and firms that provide professional services such as accounting firms and law offices are not eligible.)
TOP 10 GROWTH LEADERS
| Company | Location | 2003 Sales* |
2002 Sales* |
% Increase |
| Peebles Atlantic Development Corp | Coral Gables, FL | 82.000 | 34.000 | 141.18 |
| Thor Construction Inc. | Minneapolis, MN | 34.800 | 14.500 | 140.00 |
| Management & Engineering Technologies International Inc. | El Paso, TX | 43.500 | 22.000 | 97.73 |
| World Wide Technology Inc. | Maryland Heights, MO | 1,164.000 | 716.000 | 62.57 |
| RLJ Development L.L.C. | Bethesda, MD | 79.300 | 49.400 | 60.53 |
| Powers & Sons Construction Co. Inc. | Gary, IN | 41.779 | 26.633 | 56.87 |
| Sun State International Trucks L.L.C. | Tampa, FL | 60.000 | 40.000 | 50.00 |
| Thompson Hospitality | Herndon, VA | 140.000 | 102.000 | 37.25 |
| RS Information Systems Inc. | McLean, VA | 260.000 | 190.000 | 36.84 |
| McNeil Technologies Inc. | Springfield, VA | 52.000 | 38.000 | 36.84 |
*In millions of dollars. As of Dec. 31, 2003. Prepared by B.E. Research. Reviewed by the certified public accounting firm Edwards & Co.
TOP 10 EMPLOYMENT LEADERS
| Company | Location | Employees | Sales* | Employee To Sales Ratio |
| La-Van Hawkins Food & Entertainment Group L.L.C. | Detroit, MI | 6,831 | 293.000 | 1:43 |
| Manna Inc. | Louisville, KY | 6,000 | 173.000 | 1:29 |
| MV Transportation Inc. | Fairfield, CA | 5,873 | 210.500 | 1:36 |
| Barden Cos. Inc. | Detroit, MI | 4,053 | 354.000 | 1:87 |
| The Bartech Group Inc. | Livonia, MI | 3,900 | 190.000 | 1:49 |
| V and J Holding Cos. Inc. | Milwaukee, WI | 3,500 | 90.000 | 1:26 |
| OMNIPLEX World Services Corp. | Chantilly, VA | 3,500 | 75.500 | 1:22 |
| Thompson Hospitality | Herndon, VA | 2,500 | 140.000 | 1:56 |
| The Gourmet Cos. | Atlanta, GA | 2,025 | 169.000 | 1:83 |
| The Philadelphia Coca-Cola Bottling Co. | Philadelphia, PA | 1,850 | 447.000 | 1:242 |
*In millions of dollars. As of Dec. 31, 2003. Prepared by B.E. Research. Reviewed by the certified public accounting firm Edwards & Co.
Industrial/Service Summary
| 2003 | 2002 | % Change | |
| Total Staff | 74,402 | 75,020 | -0.82 |
| Total Sales* | 12,916.875 | 12,774.727 | 1.11 |
* In millions of dollars. As of December 31, 2003. Prepared by B.E. Research. Reviewed by the Certified Public Accounting firm Edwards & Co.