The tough get going: in a merciless business environment, the B.E. Industrial Service 100 produced a number of casualties—and winners

Black Enterprise, June, 2004 by Sakina Spruell

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 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 100. And quite a few could be considered seismic. One of the most significant developments has been a change in leadership. After being dethroned two years ago, Maryland Heights, Missouri-based World Wide Technology Holding Co. Inc., a distributor of information technology products and services, re-emerged as the nation's largest black-owned business with sales of $1.2 billion. Its strategy to recombine its World Wide Technology and Telecobuy.com units as well as aggressively pursue government and corporate contracts paid off handsomely. In 2003, World Wide added Boeing, Dell, DaimlerChrysler, EDS, and the Transportation Security Administration as clients by building and deploying their information technology infrastructure in a cost-efficient manner. This expansion of World Wide Technology's five-star roster of customers increased gross sales by a whopping 62.6%. CEO David Steward says, "World Wide's growth was broad-based across all of our vertical markets, which include the public sector, telecommunications, automotive, and Fortune 500 commercial customers."

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 and relaunch the business as a new entity." That's the second major overhaul for a firm that made its debut on the 2001 BE INDUSTRIAL/SERVICE 100 list in the No. 13 position with gross sales of $204.2 million.

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 www.black-enterprise.com.)