Operating In Rough Waters

B.E. Industrial/Service 100 companies seek to grow earnings by battening down the hatches

to federalize airport security personnel. This operation was part of the Strategic Airport Security Rollout (SASR) — a response to the Sept. 11 terrorist attacks — which was mandated by President George W. Bush and Congress. Lockheed Martin brought in INNOLOG to assist in the deployment of federal workers who would screen passengers and baggage at 429 airports nationwide.

Due to the proceeds from the contract, which ended in December, INNOLOG is flush with cash and currently looking at acquisitions as a means of expanding its core competencies and revenue sources.

To steer their companies toward profitability, a number of BE 100S CEOs have had to retrofit and revamp their operations. In some cases, they’ve accomplished the task at a dizzying pace. For example, in 2001, CEO David Steward spun off his Internet service, Telecobuy.com, from World Wide Technology (WWT), creating two BE INDUSTRIAL/SERVICE 100 companies. Last year, he formed World Wide Technology Holding Co., the new parent company for WWT and Telecobuy.com. Ranked No. 2 on the 2003 BE INDUSTRIAL/SERVICE 100 list, the firm grossed $716 million, a 22.5% revenue drop when you consider that the combined sales of WWT and Telecobuy.com was $924 million in 2001. Steward says the maneuver bolsters the recombined company’s balance sheet and increases economies of scale through the consolidation of back-office operations. “This will
allow us to grow the overall business to the next level,” he says.

Other companies have followed suit. CEO Carlton L. Highsmith has spent the last two years repackaging Hamden, Connecticut-based Specialized Packaging Group (No. 37 on the BE INDUSTRIAL/SERVICE 100 list with $97.6 million). SPG, as it is known in the industry, designs and manufactures cartons for Fortune 500 companies such as Procter & Gamble and Bristol-Myers Squibb. Unlike many of its competitors, SPG has been able to avoid significant layoffs through innovative cost-cutting measures at its plants. Roughly 18 months ago, Highsmith created a strategic development team, which has implemented “Six Sigma” — the zero-defect and waste management techniques popularized by large manufacturers like General Electric and IBM. The Six Sigma team then identified and eliminated expenses that didn’t contribute to the bottom line or add value to the company. The initiative proved prescient. The efforts of SPG’s business development team resulted in a 5% growth in company revenue from new products, while Six Sigma teams facilitated the execution and implementation of those products. This helped SPG weather a potentially profit-sapping 37% hike in energy costs last year.

Although much of the automotive industry collided with the economy, most of the BE 100S suppliers received a checkered flag. Take Detroit-based Global Automotive Alliance L.L.C. (No. 10 on the BE INDUSTRIAL/SERVICE 100 list). Revenues grew 29.8%, from $235 million in 2001 to $305 million in 2002. Global’s sales were driven by its production of plastic fuel storage systems. Acting on the philosophy that the time to reduce operating costs is when things are going well, CEO William F. Pickard has been evangelical about efficiency. The reason: Pickard wants to

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