Pelican Products, Inc.

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Pelican Products, Inc.

23215 Early Avenue
Torrance, California 90505
U.S.A.
Telephone: (310) 326-4700
Toll Free: (800) 473-5422
Fax: (310) 326-3311
Web site: http://www.pelican.com

Private Company
Incorporated: 1976
Employees: 590
Sales: $98.6 million (2005)
NAIC: 335129 Other Lighting Equipment Manufacturing; 316991 Luggage Manufacturing

Pelican Products, Inc., is a private company based in Torrance, California, that manufactures a wide variety of high-impact, watertight flashlights and all-purpose cases, sold to such customers as scuba divers, photographers, military personnel, police and firefighters, and outdoors enthusiasts. Cases are made from a lightweight, chemical-resistant polypropylene copolymer material. A pressure equalization valve allows the free passage of vapor and gases to maintain stable pressure inside and outside the case to prevent the compromising of the sealed lid. A hydrophobic membrane on the valve keeps out water, dust, and dirt to protect sensitive equipment stored inside.

Pelican’s heavy-duty flashlights, handheld or hands-free versions, rely on lamps filled with xenon, halogen, or krypton gas and are “non-incendive” because of a circuit that prevents gases from being ignited by any heat thrown off by the light. Some flashlights use an LED light source and achieve a brightness level comparable to incandescent lamps through the use of recoiled technology, which focuses the light backward at a reflector then redirects it forward in a focused beam. In addition to its U.S. operations, Pelican maintains distribution centers in Canada, Spain, Japan, Australia, and New Zealand. The company is majority-owned by Behrman Capital, a New York–San Francisco-based private equity firm. Founder David H. Parker serves as vice-chairman of the company’s board of directors.

FOUNDER BEGINS MAKING PRODUCTS OUT OF GARAGE: 1975

David Parker grew up fascinated with scuba diving. As a 14-year-old growing up in Detroit he came upon a Popular Science article on homemade scuba equipment in 1949. He and some friends concocted a breathing apparatus out of a lawn mower engine, paint compressor, enema bag, and a length of garden hose. It worked but caused terrible headaches. Only later, when he received proper training, did Parker realize they had been breathing carbon monoxide.

As an adult Parker launched a graphics business, creating corporate logos and displays out of his home in Torrance, California, a state where it was a lot easier to indulge in his diving hobby than the cooler climes of Michigan. To make some extra money he salvaged anchors from the ocean floor, selling them to a Redondo Beach store, Dive N’ Surf. To keep track of the anchors, he devised his own diver’s float out of a hockey stick handle and metal weight bound together by twine. It worked better than the floats available commercially, and so in June 1975 he began making them in his spare time in his garage for sale through local dive shops. He called his product the Pelican Float. He expanded the business by placing ads in scuba diving magazines and began doing a mail-order business. His wife, Arline, a flight attendant, joined him in the garage in the evenings, when she was not making coast-to-coast flights for TWA, taking care of the boxing, billing, and mailing of the floats.

The diving equipment business looked promising, and after four months Parker enlisted the help of an old friend, Jerry Linehan, a 1966 graduate of the University of Southern California School of Business, to handle the financial side of the venture. The business, incorporated in 1976, expanded as Parker continued to fashion diving-related products that he wanted for his own use, ones that were better than what he could find in the stores.

He developed a water-tight flashlight for scuba diving and began giving hand-built versions to some of his friends. Word spread about the light’s effectiveness, and one day in 1978 Parker received a call from a man who identified himself as Bob and claimed he was with the military and wanted to order 2,000 of the diving flashlights, offering $43,000 in payment up front, in cash. Parker suspected he was a victim of a joke, but a few days later an unmarked Navy airplane landed at the Torrance airport across the street from where Parker maintained a small office. Some men in civilian clothing emerged and paid a visit to Parker, presenting him with a paper bag containing the promised $43,000 in cash. Not only did the transaction establish Pelican Products in the flashlight business, it also began a relationship with the Navy.

Pelican’s superior products also caught the attention of U.S. Special Forces as well as industrial customers. Over the years the company developed a policy of making sure that the products it developed and sold met what it called its tri-industry standard, meaning that a product needed to have three separate markets it could be sold to without making significant changes beyond the packaging. In 1979 Pelican introduced its first watertight equipment protector case, ideal for diving photographers and other users. The company was established in what became its two main lines of products: flashlights and protective cases. The business was established enough that in 1980 Parker was able to sell his graphics business, and his wife quit her job at TWA.

Pelican products were also gaining customers around the world and interesting retailers in carrying the gear. In 1980 Graeme Roberts, a diving photographer who ran a shop called Sea Optics in Australia, spotted a Pelican ad in a diving magazine for a watertight and corrosion-proof equipment case. Roberts felt there was a use for the product among diving photographers and began importing it because no one in Australia carried it yet. Roberts was able to sell the initial allotments to members of his dive club, friends, and family, and then branched out to sell the cases to photo shops in the major cities of Australia. Gradually Roberts achieved success and as Pelican added new flashlight and cases to serve its military and industrial markets, Roberts established a separate distributing company to handle the expanded product lines. The operation grew into Pelican Products Australia, becoming Pelican’s first international distributor.

PRODUCTION BROUGHT IN-HOUSE: 1989

Pelican Products continued to add products and customers through the 1980s. After graduating from the garage, manufacturing was done on a contract basis. Finally in 1989 production was brought in-house. In the early 1990s the company was finally able to expand retail channels beyond dive shops and marine shops when full-line sporting goods stores began carrying Pelican’s line of waterproof plastic flashlights, the Mity-Lite handheld and the hands-free VersaLite, which could be attached to a hard hat, visor cap, or even a shirt. In short order sporting goods stores became Pelican’s fastest-growing segment of its lighting products.

COMPANY PERSPECTIVES

From its inception as a small garage operation, Pelican has blossomed into an international marketing and manufacturing firm.

The success of Pelican Products also caught the attention of other businessmen. In 1993 Parker was named a Small Business Person of the Year on the local level and then became second runner-up in a national competition. He traveled with his wife to the White House to receive his award from President Bill Clinton. The two struck up a friendship, and Clinton would visit with Parker in Los Angeles on a couple of occasions.

To keep up with the demand for its products, Pelican moved into a new 110,000-square-foot plant in 1995. More expansions would follow, so that by the early 2000s, the facility totaled 158,000 square feet and employed more than 350 people. Pelican also increased its geographic reach during this period. In January 1997 it established Peli Products S.A. in Barcelona, Spain, to better serve current European customers and add new ones. The wisdom of choosing Spain as a strategic location was born out by Pelican expanding its business to include all 25 countries of the European Union plus more than another 25 countries in Africa, the Middle East, and Eastern Europe.

By the late 1990s Pelican was enjoying strong growth, with sales increasing each year by around 20 percent, spurred on by the introduction of many new products. Because Linehan was also thinking about retirement, Parker decided to take on an equity partner in order to provide Linehan with an opportunity to cash in some of his stake in the business, as well as some of his own, while also gaining new capital to fund further growth. In 1998 Minneapolis-based Norwest Equity Partners, a private equity firm with a Los Angeles office, invested $8.5 million to gain a minority stake. The firm then bought out Linehan and acquired some more of Parker’s interest in Pelican.

CANADIAN OPERATIONS LAUNCHED: 2000

Parker retained a majority stake in the company and, despite reaching retirement age himself, continued to run the company he founded. In 2000 Pelican Products Inc. (Canada) was established in Edmonton, Alberta, to increase the company’s business north of the border. The company also pursued ways to increase production without expanding physically or compromising the high quality of its flashlights and cases.

In 2001 Pelican began working with a California state agency, Employment Training Panel, which provided financial support to allow 140 employees to receive training on manufacturing techniques from the Massachusetts-based Lean Enterprise Institute. This instruction allowed Pelican to implement kaizen principles into its operation. Developed in Japan, kaizen (“change for the better”) called for efficiency, just-intime delivery, and the elimination of waste. Just six months after the implementation of kaizen disciplines, Pelican was able to reduce its inventory by one-third, consisting mostly of finished goods. The company was then able to maintain this level while increasing sales.

When the terrorists attacks of September 11, 2001, struck New York City, Pelican was quickly called by the New York Fire Department, which needed a large quantity of heavy-duty flashlights to help in the recovery effort at the World Trade Center site. The company ramped up production to supplement the stock on hand and eventually shipped 10,000 flashlights to New York. The company provided half of them at no charge and the other half at a steep discount. All told the donation came to $100,000.

Ready to retire in the early 2000s, Parker hoped that his wife and their son, J. D., would take over for him. However, Arline Parker contracted cancer and died in April 2002, the same year her husband turned 65. Moreover, their son decided he was not interested in running Pelican by himself. To prepare for his eventual retirement, Parker decided to sell the company, which in 2003 generated sales of $72 million. Over the years there had been no lack of would-be buyers. He generally received a couple of offers each week. He put together a list of the most promising candidates, nearly 40 in all, including the likes of Ford Motor Company and General Electric Company.

In the end Parker elected to sell the business to Behrman Capital, based in New York and San Francisco, for about $200 million in October 2004. At the same time, Norwest also sold its stake in Pelican to Behrman. Regarding the potential buyers, Parker told the Daily Breeze of Torrance, “We methodically boiled them down, and Behrman’s head kept popping up.” The firm was founded in 1992 by brothers Grant G. Behrman and Darryl G. Behrman to specialize in management buyouts and the recapitalization of expanding established companies in the areas of information technology, contract manufacturing, outsourcing, and healthcare.

KEY DATES

1975:: David Parker begins selling diving markers.
1976:: Pelican Products is incorporated.
1979:: Equipment cases are added to product lines.
1989:: Production is brought in-house.
1995:: New state-of-the-art manufacturing facility opens.
2004:: Company is sold to a private equity firm.
2006:: Parker retires as CEO.

Parker stayed on as CEO as the company began to make the transition to the next phase in its history. Parker was still in charge in early 2006 when Pelican was featured on the Travel Channel’s John Ratzenberger’s Made in America television series, which profiled U.S. companies and the products they made. The episode, taped in December 2005, showed a Pelican case containing a glass vase thrown from the factory roof. The vase was unharmed, at least until host Ratzenberger smashed in on the floor to show how fragile it was. Parker was especially pleased to learn that the show’s production crew were Pelican customers, storing their gear in the company’s equipment cases.

Parker, at the age of 69, retired as CEO at the beginning of September 2006 and assumed a newly created position, vice-chairman of the board. He was replaced by 45-year-old Lyndon J. Faulkner, former general manager of Microsoft Corporation’s Americas operations group, involved in such major product launches as Windows XP and Xbox. In a press statement, Faulkner indicated that he to planned to build on the foundation left by Parker “and aggressively expand the business both in existing as well as new markets.”

Ed Dinger

PRINCIPAL SUBSIDIARIES

Peli Products S.A. (Spain); Pelican Products Canada; Pelican Products Australia P/L; Pelican Products NZ Ltd. (New Zealand); Pelican Products K.K. (Japan); Pelican Products China.