For the captains who helmed America’s largest black-owned businesses, managing those businesses in 2002 was like navigating a vessel in an unmerciful storm. Their companies were rocked by crashing waves of hammering forces: a choppy economy, soggy business and consumer confidence, rising oil prices, and the uncertainty — and then painful realization — of Gulf War II. These developments capsized some companies. Others were pushed off course, propelled toward treacherous waters with no safe harbor in sight.
Despite the challenges, one characteristic has always exemplified the skippers of the BE INDUSTRIAL/SERVICE 100: resilience. Applying innovation, focus, and a boatload of determination, a number of companies not only stayed afloat but set sail to new opportunities and areas of profitability. Many companies had to batten down the hatches, getting as much as they could out of every employee and every cent. Other companies saw the flagging economy as an opportunity to chuck the deadwood by selling poorly performing assets, or as an opportunity to soup up their operations with strategic alliances and new products and processes.
Take The Bing Group (No. 7 on the BE INDUSTRIAL/SERVICE 100 list with $344 million in sales), for example. The Detroit-based automotive supplier posted a healthy 19.9% revenue increase over the last year — from $287 million to $344 million — by putting emphasis on a lean manufacturing operation, increasing employee productivity, and implementing tight-fisted cost controls and top-flight customer service. Those moves earned The Bing Group, one of 91 General Motors suppliers worldwide, the coveted BE Supplier of the Year award for outstanding performance in 2002. With a growth goal of 10% — 15% for 2003, the company plans to expand business with existing customers and possibly undertake an acquisition or joint venture within the steel industry.
Despite the company’s bright outlook, CEO David Bing is watchful of storm clouds on the horizon. “I think we are going to continue to see strong downward pricing pressures,” he says. “The industry, from a volume standpoint, has been strong for the last three years. But ’03 is going to be a bigger challenge because I think the market is going to soften a bit. I think we are going to see a lot of companies in trouble.” Bing’s sober prediction can be made about firms across industries.
SINKING FORTUNES
How did the BE INDUSTRIAL/SERVICE 100 fare as a collective in 2002? To attest to these companies’ resilience, total sales were $12.77 billion, up 11.55% from $11.4 billion in 2001. In comparison, sales for the Fortune 500 dropped 6%. Unlike their white counterparts, the BE INDUSTRIAL/SERVICE 100 expanded their crews as well. In 2002, these firms employed 75,020 workers, a 17.91% increase from the 63,627 workers they’d employed in 2001. The La-Van Hawkins Food Group, with 7,133 workers, emerged as this year’s employment leader.
Several companies dropped off the list because of divestitures, bankruptcies, failure to meet our eligibility standards, or the inability to meet this year’s revenue threshold.
One of last year’s freshmen, Thor Construction Inc., felt the harsh winds of the past year’s economic squall as it was swept off the BE INDUSTRIAL /SERVICE 100 list. Revenues for the construction and trucking firm plunged 53.5%. Although school and sewage construction projects spurred the performance of his general contracting division, the economy shredded the transportation unit and forced CEO Richard Copeland to make his first round of layoffs in 15 years.
Many established industrial/service companies were unable to gain adequate cover from the brutal elements. Witness last year’s performance of Lanham, Maryland-based Washington Cable Supply Inc., which lost its leadership position and ranking among the other industrial/service companies. Handling inventory management for a ravaged telecommunications sector, the company’s revenues plunged a staggering 77.14%, from $105 million to $24 million.
The enterprises of the St. Louis-based Roberts brothers were caught in a virtual whirlpool. Roberts Wireless Communications L.L.C. fell off the list, dropping 26% in revenues, from $34.5 million to $25.5 million, while Roberts Broadcasting Co. (No. 88 on the BE INDUSTRIAL/SERVICE 100 list) dipped about 5.6%, from $36 million to $34 million.
Broadcasting CEO Michael Roberts and his brother, Steven, who runs the telecommunications company, had to make a few changes to remain viable entities. They partnered with Univision to run a Spanish-speaking Univision station in Denver, and turned their St. Louis station into a UPN affiliate, becoming the first UPN station in St. Louis. The Roberts brothers are also working with the Federal Communications Commission to build two more UPN affiliates: one in Jackson, Mississippi, and one in Columbia, South Carolina. Michael is drawn to the UPN brand because much of its programming is targeted to young African Americans — content he expects to buoy sales in 2003 and beyond. As operators of a Sprint franchise (Roberts Wireless), the Roberts brothers have less control over the wireless side of the business. But since the telecommunications giant has substantially beefed up customer service, Michael expects the company to ring up more sales and profits in the coming year.
PROFITING FROM HOMELAND SECURITY
The war on terrorism and the conflict with Iraq have torpedoed a wide cross section of American business — and the BE 100S have not been excluded. Although the wartime economy has sapped consumer confidence and created skittish corporate purchasing departments, it has stoked federal government spending, from aviation to defense, to create a terrorist-proof America. As a result, a number of companies have benefited from the Bush administration’s expansive plans for homeland security.
One such entity has been Innovative Logistics Techniques Inc. (INNOLOG) in McLean, Virginia. Rocketing from $36 million to $94 million — a stunning 161% sales increase that propelled it from No. 75 to No. 39 on the BE INDUSTRIAL/SERVICE 100 list — the technical engineering firm was tapped as a subcontractor by Lockheed Martin to help develop the infrastructure of the recently formed Homeland Security Agency. The size of INNOLOG’s mammoth six-month contract: $65 million.
Hurt by the recession in the first half of 2002, INNOLOG was forced to fire 10% of its workforce. The company made an about-face in June when Lockheed Martin, a long-time INNOLOG client, won the contract 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.
RESTRUCTURING FOR GROWTH
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.
AUTO SUPPLIERS REV UP SALES
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 reach outside Michigan to snare lucrative contracts from foreign car manufacturing “transplants.” In fact, Global is cranking up its marketing machinery in Alabama where Mercedes operates a factory and where Hyundai and Honda are on their way. “If we are able to land this (business) with transplants, that would give us a much, much broader customer base,” he says. Currently, Ford, GM, and Chrysler provide 90% of Global’s revenues. Pickard wants sales evenly split four ways between foreign manufacturers and each of the Big Three. Global is intent on cementing a valuable joint venture with a major logistics company in an effort to diversify into the non-automotive arena — a smart plan since Ford and GM have announced major cutbacks in vehicle production.
Another auto supplier, Commodities Management Exchange (CMX), scored a 23.5% sales increase in 2002, from $170 million to $210 million. This accomplishment for the Northfield, Illinois, raw materials, commodities, purchasing, and management firm earned it the 16th spot on our BE INDUSTRIAL/SERVICE 100 list.
So what revved up sales? Ironically, the weak economy worked to CMX’s advantage as companies, including the Big Three, cut staff and outsourced functions. CMX’s profile has also been raised by the wartime economy, which has fueled volatility in the commodities marketplace. Increasingly, companies came to realize that managing price risk for raw materials is essential to their bottom line. “I attribute a lot of our success and growth to the fact that we stayed on course with our original business plan and were able to — with good management and a working team — execute it and leverage off of our existing relationships,” says CEO A. Demetrius Brown.
Moreover, Brown was able to extend the company’s range of product offerings as businesses were pulling back. Using its commodities pricing skills, CMX developed a partnership with the Board of Trade Clearing Corp. to clear derivative transactions through its subsidiary, Guaranty Clearing Corp., in Chicago. Another new division serves as a professional service organization that exclusively helps corporations streamline their processes and trim employees. And Brown, a former college hoops star, forged a strong relationship between a major sports and entertainment promoter and his CMX Sports & Entertainment firm to help professional athletes and entertainers achieve and preserve their wealth.
FOOD COMPANIES PRODUCE YUMMY RETURNS
BE 100S food companies, like Baldwin Richardson Foods Co. (No. 51 on the BE INDUSTRIAL/SERVICE 100 list), have cooked up some rather healthy revenues during 2002. Through the introduction of new products and the growth of its existing business of toppings and condiments, sales of the Frankfort, Illinois-based company rose 12.7% from $62 million to $69.9 million. Roughly $7 million of Baldwin Richardson’s added revenue came from a major new partnership with the Kellogg Co.; they now produce fruit fillings for the food giant’s North American products. CEO Eric Johnson maintains that the partnership will contribute another $16 million to 2003 sales.
International turmoil, however, has presented some major challenges. Unrest on West Africa’s Ivory Coast is affecting the production of cocoa, a key ingredient for Baldwin Richardson. And rising commodity prices of cocoa and petroleum have elevated the production and transportation costs of its brands. With customers like Kellogg, General Mills, McDonalds, and Quaker Oats/Pepsi, Johnson says Baldwin Richardson will need to form an assortment of partnerships “to continue to grow profitably and enhance the quality of our customer base. One of the things that we feel very fortunate about is that we’ve got a very solid creditworthiness with our customer base.”
The La-Van Hawkins Food Group L.L.C. (No. 12 on the BE INDUSTRIAL /SERVICE 100 list) also had a sizzling performance in 2002. It increased sales more than 20%, from $246 million to $296 million. The Detroit-based company, which owns Pizza Hut franchises and Blockbuster video stores, avoided layoffs with belt-tightening measures that clipped operating costs by 35%. CEO La-Van Hawkins streamlined management, sent more salespeople into the field, and persuaded suppliers to lower food and distribution prices. He purchased a 33.7% ownership stake in New World Aviation, a 15-plane aviation company based in Allentown, Pennsylvania. Hawkins also opened Sweet Georgia Brown’s, his homegrown chain of five-star restaurants, from which he expects to reap $1.8 million in profits on $11 million of first-year sales.
Hawkins is now using — believe it or not — divestiture to grow. His conglomerate recently entered into an agreement with Yum! Brands Inc., the parent company of Pizza Hut, to buy its 89 franchises for an estimated $75 million to $100 million. The sale puts Hawkins in a position to broaden his reach into Latino and general markets through a whopper of a plan: the acquisition of a billion-dollar franchise corporation.
SWIMMING AGAINST THE TIDE
From fashion to staffing, this tougher, ultra-competitive environment has forced CEOs to swim against the tide and to develop unique ways to sell their products and capture market share.
Karl Kani Infinity Inc. — the Los Angeles-based apparel manufacturer perched at No. 49 on the BE INDUSTRIAL/SERVICE 100 list with $71.2 million in revenues — has found that young consumers’ appetite for fashion and music overrides any concerns about recession or war. They haven’t altered their buying habits.
The company opened retail stores in Korea and Japan in 2002 that did so well, it plans to open similar outlets in the United States. Last year the company augmented its existing Karl Kani clothing line with a new brand called Life. CEO Karl Kani revitalized Life’s marketing campaign in 2003 by structuring a major endorsement deal with rap label Cash Money Records, which includes product placements in the music videos.
The Bartech Group Inc. (No. 29 on the BE INDUSTRIAL/SERVICE 100 list with $140 million in sales) found that the harsh economy offered a wave of unimaginable prospects. CEO Jon E. Barfield
accelerated the growth of the Livonia, Michigan, staffing company by acquiring other companies. “Last year’s recessionary environment enabled us to make strategic acquisitions at much more reasonable valuations than in the past,” he says.
Barfield completed two strategic acquisitions last year that will give the firm prime positioning when the economy recovers. In September, he acquired Rapid Design Service, a $70 million engineering staffing and outsourcing firm that gives Bartech a much stronger presence in the automotive industry in the Midwest. And in December, he purchased the assets of Pillar Technology Group, an information technology (IT) solutions company, which gives Bartech a presence in the IT solutions market. “The name of the game in the staffing industry is to very quickly build our company to a size and scale and geographic scope such that we can support our customers around the world,” says Barfield. “Today we are a $200 million organization with 4,000 associates. Our goal is to become a $500 million — $600 million company within a five to seven year period, and to become one of the significant players in the staffing industry on a national basis.”
BE 100S CEOs are expecting it to be tough to plot a steady course for the remainder of 2003. The weak job market, languid business spending, and a swelling trade deficit bear out this assertion. Last year’s corporate performance, however, may serve as a barometer of future activity. Even though some may be manning tattered ships of commerce, the BE INDUSTRIAL/SERVICE 100 companies will relentlessly pursue their destinations, even in the face of an economic tsunami.
— Additional Reporting Cliff Hocker& Curtis Simmons
Top 10 Growth Leaders
| Company | Location | 2002 Sales* | 2001 Sales* | % Increase |
| Innovative Logistics (INNOLOG) | McLean, VA | 94.000 | 36.000 | 161.11 |
| The Heritage Networks | New York, NY | 61.500 | 30.500 | 101.64 |
| RLJ Development L.L.C. | Bethesda, MD | 49.400 | 25.100 | 96.81 |
| McNeil Technologies Inc. | Springfield, VA | 38.000 | 25.560 | 48.67 |
| Wilson Office Interiors | Carrollton, TX | 57.000 | 40.000 | 42.50 |
| Paradigm Solutions Corp. | Rockville, MD | 37.600 | 27.244 | 38.01 |
| Rush Communications | New York, NY | 260.000 | 192.000 | 35.42 |
| The Bartech Group Inc. | Livonia, MI | 140.000 | 105.000 | 33.33 |
| Global Automotive Alliance | Detroit, MI | 305.000 | 235.000 | 29.79 |
| RS Information Systems Inc. | McLean, VA | 190.000 | 146.500 | 29.69 |
| *IN MILLIONS OF DOLLARS, TO THE NEAREST THOUSANDTH. AS OF DEC. 31, 2002. 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 |
| The La-Van Hawkins Food Group | Detroit, MI | 7,133 | 296.031 | 1:42 |
| Manna Inc. | Louisville, KY | 6,000 | 159.260 | 1:27 |
| MV Transportation Inc. | Fairfield, CA | 4,186 | 155.309 | 1:37 |
| Barden Companies Inc. | Detroit, MI | 4,050 | 347.000 | 1:86 |
| The Bartech Group Inc. | Livonia, MI | 3,800 | 140.000 | 1:37 |
| V & J Holding Cos. Inc. | Milwaukee, WI | 3,500 | 95.000 | 1:27 |
| Omniplex World Services Corp. | Chantilly, VA | 3,000 | 80.000 | 1:27 |
| Thompson Hospitality | Sterling, VA | 2,500 | 102.000 | 1:41 |
| Exemplar Manufacturing Co. | Ypsilanti, MI | 2,302 | 157.495 | 1:68 |
| RLLW Inc. | Las Vegas, NV | 2,200 | 53.300 | 1:24 |
| *IN MILLIONS OF DOLLARS, TO THE NEAREST THOUSANDTH. AS OF DEC. 31, 2002. PREPARED BY B.E. RESEARCH. REVIEWED BY THE CERTIFIED PUBLIC ACCOUNTING FIRM EDWARDS & CO. | ||||