Ameriwood Industries International Corp.
Ameriwood Industries International Corp.
Sales: $100.8 million (1995)
Stock Exchanges: NASDAQ
SICs: 2511 Wood Household Furniture; 2517 Wood TV & Radio Cabinets; 2679 Converted Paper Products, Not Elsewhere Classified; 6719 Holding Companies, Not Elsewhere Classified
Ameriwood Industries International Corp. is one of the leading manufacturers of wood products such as unassembled furniture, stereo speaker cases, and stereo component racks in the United States. The company sells its products to regional discount stores, office and electronics superstores, home improvement chains, warehouse clubs, and catalog showrooms. Ameriwood is also an original equipment manufacturer of various raw wood and laminated particle board products, which it sells to many other manufacturers for use in their own products. Finally, the company produces and markets its own line of stereo speakers through one of its subsidiaries, B.I.C. America. Ameriwood is the corporate successor of Rospatch Corporation, which was a manufacturer of wood products, plastic packaging, printed garment labels, and defense electronics.
Early Years as the Rose Patch and Label Company
Ameriwood's foundations were laid on September 14, 1915, with the incorporation of the Rose Patch and Label Company, a manufacturer of fabric patches and garment labels. The company soon positioned itself as a leader in the industry, and for years it was one of the largest producers of printed garment labels, such as those detailing manufacturer information and care instructions in clothing items. Although business was extremely good, there was little room for growth in its chosen line of business. Therefore, in the 1930s Rose Patch and Label formulated a plan to sell label-making equipment to other companies. This venture was funded by selling shares, shifting the company into the public arena.
Postwar Diversification: Rospatch Corporation
It was not until the 1950s that Rose Patch and Label diversified beyond the business of label production. At that time, the company purchased a plastic packaging company and began creating printed plastic packaging for a variety of retail items, including food and cleaning aids. This shift in focus brought about a company name change in 1968, when in an attempt to accommodate the new business ventures under the corporate umbrella, the Rose Patch and Label Company became Rospatch Corporation.
While the plastic packaging division contributed to Rospatch’s yearly sales, the company’s principal focus remained the manufacture of garment labels. Throughout the early 1970s, Rospatch searched for another solid acquisition to further boost its profits. In the process it acquired and subsequently divested numerous companies that did not suit its needs, until it bought Jessco Inc. in 1978. A wood and particle-board laminator that sold its product to manufacturers of stereo speaker casings and television cabinets, Jessco boosted Rospatch’s yearly sales from approximately $35 million in 1978 to almost $52 million in 1979.
Unfortunately, the success provided by Jessco only hid the fact that Rospatch was beginning to suffer. In mid-1980 Rospatch’s President, Richard F. Brush, hired Joseph A. Parini to help begin a restructuring process and be prepared to take over for Brush within a few years. Parini had spent the previous 25 years as an executive in the defense business at Lear Siegler and had just become the head of its aerospace group. Brush died just months after Parini arrived, leaving Parini as Rospatch’s new President and Chief Executive Officer.
A Shift in Focus for the 1980s
Parini immediately began restructuring Rospatch, strengthening management at all levels. He divided the company’s existing holdings into two separate operating divisions: the identification products division, which included the printed garment label business and the plastic packaging operation; and the wood products division, which consisted solely of Jessco Inc. He then began laying the foundations for Rospatch to enter into the defense electronics business when he created a third division in 1981, the technical products group, which was to include Rospatch’s own research and development division as well as any future defense electronics acquisitions. Recognizing the country’s emphasis on modernizing the armed forces, and also taking into account the large amount of defense spending by President Ronald Reagan’s administration, Parini saw defense electronics as an excellent opportunity for growth. He began searching for acquisition candidates, screening hundreds of companies before finally settling on three.
In 1982, after selling off the plastic packaging division because it was proving unprofitable, Rospatch made three defense electronics acquisitions in rapid succession. The company purchased Edmac Corp., an $8 million radio receiver and navigational electronic equipment manufacturer; Guidance Technology Inc., a $1.5 million producer of gyroscopes for missiles and military vehicles; and Oaks Development Labs, a $1 million company which dealt in photolithography for the semiconductor industry. Meanwhile, the identification products division was bolstered by its entrance into the business of woven fabric labels, such as those found on neckties, and 1982 sales for the wood products division saw a boost with the acquisition of a ready-to-assemble furniture line, Affordable Furniture.
In order to accommodate heightened manufacturing demands resulting from the addition of the Affordable Furniture product line, Rospatch bought Tiffin Enterprise, Inc., a manufacturing plant in Tiffin, Ohio, in 1984. This plant soon became the site of Rospatch’s stereo speaker and original equipment manufacturing (OEM) operations. These operations included the application of wood grain or opaque laminate finishes to particle-board, which was then sold to producers of stereo speaker and component parts and other manufacturers for use in their own products. Use of the Tiffin plant for this purpose enabled the company’s manufacturing facility in Dowagiac, Michigan, to focus primarily on the production of retail items such as the new furniture line.
As annual sales in the wood products division increased rapidly, Rospatch continued its push into the defense electronics business with the 1986 addition of the $13.7 million Infrared Industries, Inc., to its technical products group. The purchase strengthened the company’s hold in the avionics, antisubmarine warfare instrumentation, and infrared detector businesses, and by 1988 the technical products segment appeared to be Rospatch’s most promising opportunity for growth. Rumors of a corporate buyout began to surface, however, signaling problems within Rospatch’s empire of three unrelated businesses.
A top contender for purchase of the company was Atlantis Group, Inc., which controlled more than 18 percent of Rospatch’s stock by the end of 1988. Nonetheless, Rospatch insisted that it was not putting itself up for sale, and the Insiders’ Chronicle quoted Parini in November 1988 as saying that he was exploring “various options for the restructuring of Rospatch.” Parini first sold the printed and woven label businesses, then, in 1989, he divested the entire technical products division as well.
At that point, Rospatch’s largest single shareholder, Atlantis, had increased its stake in the company, which now consisted of only the wood products group, to almost 20 percent. Upon Rospatch’s release of the technical products group, Atlantis filed a civil fraud suit against Rospatch in March 1990. The suit alleged that Rospatch had overstated the inventory and assets of the technical products group before it was sold, which led Atlantis to purchase shares of the company under false pretenses. Within months, Parini had left Rospatch, succeeded as chairman by Neil L. Diver and as president and CEO by Joseph J. Miglore.
The 1990s: Ameriwood Is Born
1990 marked the emergence of Rospatch Corp. as a company whose sole focus was the manufacture of wood products. When Diver and Miglore took control, they began creating a three-year strategic plan to increase sales of Rospatch’s ready-to-assemble furniture, stereo speakers, and OEM products. They also worked to mount a vigorous defense against Atlantis, which was attempting to gain complete control of Rospatch.
Diver and Miglore managed to realign their company’s focus and improve its standing in the wood products industry. In December 1991 a majority vote of Rospatch’s shareholders changed the name of the company to Ameriwood Industries International Corp. In September 1991 a U.S. district court judge in Michigan supported a recommendation that the Atlantis suit be dismissed, although appeals by Atlantis were immediately set in motion. By April 1992, Ameriwood and Atlantis had settled their dispute, and Ameriwood repurchased Atlantis’s stake in its company.
The next few years were devoted to restructuring the company. Two main operating divisions were created: Ameriwood Furniture and Ameriwood OEM. Ameriwood Furniture became the division responsible for the manufacture of ready-to-assemble furniture for the home and office. Ameriwood OEM served as an original equipment manufacturer of custom stereo speaker and component cabinets, as well as manufacturing wood materials to be used by other manufacturers in their products. Ameriwood also retained its line of stereo speakers, marketed by a subsidiary called B.I.C. America.
Ameriwood is developing or manufacturing custom products as far-ranging as cremation caskets, component parts for contract office furniture, point-of-purchase displays, private label furniture for retailers or other items.
The company placed its initial emphasis on the Ameriwood Furniture division, because it offered greater potential for rapid growth than did the Ameriwood OEM or B.I.C. America divisions. Management began plans to broaden Ameriwood’s furniture product line, with hopes of gaining the ability to enter more distribution channels and target a greater number of consumers. When Diver and Miglore had taken control of Ameriwood’s management in 1991, the company manufactured furniture items that retailed for $100 or less through regional discount stores, and the price of Ameriwood (Rospatch) stock was less than $4 per share. Within two years, Ameriwood was offering furniture products at mid- and upscale price points as well, enabling it to target warehouse clubs and other new distribution channels. Because of this, Ameriwood’s stock price had risen to more than $20 per share, and the company began planning to add new machinery to its two manufacturing plants in order to accommodate growing demand.
Among Ameriwood’s new mid- and higher-priced offerings were the Members Only and Portfolio furniture lines, which were introduced in 1992. While the company’s Affordable brand furniture continued to target the consumers at discount mass-merchant stores, Members Only was channeled into national chains such as warehouse clubs and electronics superstores, and Portfolio entered the home and small office furniture markets. This diversity reduced Ameriwood’s dependence on any single distribution channel and allowed the company to reach a broader range of consumers, helping it achieve sales of $87.7 million in 1992.
1993 saw a 34 percent increase in Ameriwood’s ready-to-assemble furniture sales, which helped the company break the $100 million mark. This achievement was aided by the introduction of Axial brand furniture for the home office and small business. Ameriwood’s increased emphasis on the office furniture market was well planned, as home-based businesses and personal computer use boomed in the early to mid-1990s. Manufacturers including Ameriwood upgraded the quality, style, and ease of assembly of ready-to-assemble furniture at all price levels. For example, Ameriwood instituted a toll-free telephone help line, which not only helped customers who had questions regarding assembly or problems with a product, but also relieved Ameriwood’s retailers of such customer service burdens. Such innovations were key to Ameriwood’s success in an increasingly competitive environment.
Ameriwood continued to expand and broaden its product offerings in 1994, but was unable to increase its overall sales at the same rate that it had enjoyed during the previous two years. The company’s continued focus on the Ameriwood Furniture division had finally taken its toll on the OEM and B.I.C. America operations, both of which suffered decreases in sales. Ameriwood OEM’s primary raw material was particle-board, which had increased in price nearly 40 percent in less than two years, due in part to the sudden popularity of ready-to-assemble furniture. Furthermore, electronics superstores had quickly become consumers’ preferred retail outlet for electronics, and Ameriwood was just beginning to enter its B.I.C. America stereo speaker line into the superstore channel. Ameriwood Furniture was the only division to enjoy an increase in sales in 1994, but the higher cost of particle-board affected this segment’s profits as well.
1995 was more disappointing: the company experienced a $4.3 million decrease in sales. Joseph Miglore left the company, and Charles Foley was elevated from the position of chief financial officer to president and chief executive officer. Foley and Chairman Neil Diver placed greater emphasis on the Ameriwood OEM and B.I.C. America operations, as Ameriwood sought new channels to market its existing products while also attempting to expand its product line. The furniture division was also expanded, as the company added to its Kids ‘N’ Kolor children’s furniture line, and also began producing an unassembled upholstered furniture line, called Home Suite, which included sofas and futons.
These efforts were rewarded when Ameriwood reported improvements in overall sales for the first half of 1996. Furthermore, the company also experienced an increase in furniture orders by its retailers, which showed a potential for continued future success. Ameriwood’s B.I.C. speakers were recognized for their excellent quality in Consumer Reports’ February 1996 report, giving a boost to speaker sales. During this period Ameriwood OEM was renamed Custom Solutions, as a means of reflecting the expansion of its product line to include such items as cremation caskets and contract furniture. With obvious understanding of its customer base and the importance of altering its emphasis to mirror changing consumer demands, Ameriwood Industries International Corp. entered the late 1990s with great potential for continued growth.
Ameriwood Furniture; Ameriwood OEM; B.I.C. America, Inc.; Rospatch Jessco Corp.; Tiffin Enterprise, Inc.; Rospatch Orlando, Inc.; Rospatch Carpinteria, Inc.; Rospatch Exchange, Inc.
“Can He Change the Label?” Financial World, February 15, 1983, p. 21.
“Companies Involved in Largest Insider Purchases: Rospatch Corp.,” Insiders’ Chronicle, November 21 & 28, 1988, p. 3.
“Companies Involved in Largest Insider Purchases: Rospatch Corp.” Insiders’ Chronicle, October 28, 1991, p. 3.
Hollow, Michele C., “RTA Furniture Builds on Shoppers’ ‘Can-Do’ Attitude,” Discount Store News, June 20, 1994, p. 31.
“Particleboard RTA Builds up Finished Look,” Discount Store News, April 15, 1996, p. 44.
Richman, Tom, “What Business Are You Really In?” Inc., August 1983, p. 77.
“Rospatch Corp.,” Insiders’ Chronicle, August 15, 1988, p. 2.
Zisser, Melinda, “Atlantis Hits Rospatch with Fraud Suit,” South Florida Business Journal, March 19, 1990, p. 9.
—Laura E. Whiteley