Kanaly Trust
First profiled: Spring 2001
Houston-based Kanaly Trust was featured in Family Business Magazine twice in the past 25 years—once in 2001, when founder E. Deane Kanaly was struggling to develop a succession plan, and again in 2007, when a non-family CEO was appointed to lead the wealth management and financial planning firm after Deane’s death.
In the past seven years, Kanaly has undergone some big changes, according to Deane’s son Drew Kanaly, who now serves as president and chairman. The recession and the death of Drew’s brother Steven Kanaly in 2011 were just two of the events that led Drew and his surviving brother, Jeff, to reevaluate the direction of their family firm.
In 2012, Philadelphia-based private equity firm Lovell Minnick Partners approached the Kanaly family about acquiring the company. The brothers knew that the capital could fuel the company’s growth nationally. “This wasn’t some kind of roll-it-up-and-gut-it deal,” says Drew. “What interested us in the proposition was the fact that they understood clearly that this is a client-facing business. In a client-facing business, talent retention and maintaining the client experience is key. They wanted to do it exactly the Kanaly way.”
The sale of the company to Lovell Minnick provided liquidity for several family shareholders who were not actively involved in the business. “As generations go on, not everybody that is a stakeholder is participating in the enterprise,” says Drew. “This transaction allowed us to give those constituencies liquidity at a decent price.”
After the acquisition, William Rankin, who previously served as president and CEO of New York-based Shelterwood Financial, was appointed CEO of the firm. Although Kanaly is no longer family-owned, several family members, including Drew and Jeff, remain significant shareholders and continue their client relationships.
Kanaly, which has more than $2 billion in assets under management, is looking to expand into more locations and acquire other wealth management firms.—Deidre Grieves
ABC Recycling
First profiled: Summer 2009
ABC Recycling has been salvaging and recycling scrap metal for more than a century. From its origins in the junk business, it has grown to become the largest recycling firm in British Columbia. Under the leadership of David Yochlowitz, great-grandson of the founder, the company has flourished. When Family Business featured ABC Recycling on the cover in Summer 2009, the company had three recycling locations and 130 employees. Today, it has eight locations in British Columbia and one in Alberta, and employs 225 people.
David Yochlowitz was only 33 when he assumed leadership of the company from his father, Harold, in 1999, bringing a new level of organization and professionalism to the business. He developed a strong team of non-family executives, hired professional salespeople and gave managers more autonomy in running the business. David’s younger brother, Mike, is director of sales at the company’s head office in Burnaby, B.C.
In 2012, ABC Recycling celebrated its centennial with a gala party for employees and customer partners. One factor in the company’s longevity is the congruence of family and business values, and the Yochlowitz family works hard to reinforce those connections. In 2004, David hired a family business consultant to help the family resolve grievances over company policies some considered unfair and outdated, such as the shareholder agreement and a rule prohibiting spouses from working in the company. The process resulted in unanimous acceptance of new policies and the family’s newfound confidence in talking openly about sensitive issues. The family continues to work with the consultant on governance issues and improving communication.
The Yochlowitz family and the business have a long tradition of tzedakah (Hebrew for “charity”). A few years ago, the company created a new position, manager of community relations, to oversee philanthropy and other community activities. Fourth-generation member Karen Bichin, who previously headed the HR department, was named to the position. Bichin also acts as a steward of leadership development for the fifth generation, whose ages range from three to 14.
Bichin notes that “2013 was a challenging year in our industry, but now things are picking up. We used that slow time to identify areas that needed improvement, and we’ve come out stronger. We’re feeling good about the business, the family and the foundation we’ve set for moving forward in our next 100 years.”—Deanne Stone
Conwin Carbonic Co.
First profiled: Winter 2007
The great helium scare of 2013 may not have made front-page headlines, but it had the full attention of Michael Wing, second-generation owner of Conwin Carbonic, a supplier of precision instruments to the balloon industry around the world. A shutdown of the U.S. Federal Helium Reserve was averted by legislation passed just five days before it was mandated in October 2013. “The shortage struck at the core of our business,” Michael says. It wasn’t the only recent challenge the 50-year-old CEO has faced.
Last year also marked the retirement of Michael’s father, company founder Al Wing, 89. Michael’s mother, Alberta, had retired in 2009. For the first time, Michael had complete management control of the 54-year-old company. “A couple of years prior to his retirement, my father and I started to cross over responsibilities, and there were some ruffled feathers,” Michael says. “I changed us from a top-down to a team management style and hired some people, like a director of operations, that he felt we already had. But we didn’t.”
Michael also did some heavy number crunching and reached some difficult conclusions. “After breaking out the cash-and-carry division from the manufacturing division, I decided to sell the store,” he reports. “It was profitable, but not the right fit.” Conwin’s store had catered primarily to wholesale customers in the Los Angeles area. The store staff will be absorbed into the parent company. Today, the company has about 35 employees.
Michael has been assembling his own team of advisers. “All of my dad’s associates are dying or retiring,” Michael says, “so I’m in the process of realigning with new accountants and insurance brokers and things like that.” He also outsourced all his employees to an employee leasing service. “It’s more expensive,” he acknowledges, “but I don’t have any issues with compliance or other HR problems.”
With the helium crisis and behind him and management changes in process, Michael is contemplating the future. “The focus going forward will be the manufacturing of gas handling equipment sold through a distributor network,” he says. Nearly 60% of the total business today comes from international markets. “We do a tremendous business in Russia, believe it or not,” Michael says. “There aren’t a lot of people with money there, but those who have it, really spend it.”—Dave Donelson
Beam Construction Co.
First profiled: Winter 2001
In 2001, a major challenge for Susan Lewis, the second-generation president of Beam Construction Co. in Cherryville, N.C., was proving herself as a leader in a traditionally male-dominated industry. Today, she says, her primary concern is a decrease in the volume of work. “It’s not as much fun as it used to be,” the fifty-something mother of three sons admits. “Since 2010, the economy has hit the construction industry hard, and while we have not lost money, we are not making what we were.”
Lewis says Beam Construction was generating $70 million a year at its peak; today, company revenues are $30 million. “Our volume is way down, and we’ve had to lay people off,” she says. “People are really hurting in the construction business.”
Lewis says she has also seen a dramatic change in “the way owners do business.” She observes, “Everybody wants a bargain, and there is a lot less teamwork on the job site. Everybody seems to be in it for themselves because everybody has a lot at stake. Nobody is willing to go above and beyond because everybody is fighting to not lose money. The attitudes are much more aggressive.”
On the positive side, Lewis says she rarely encounters resistance based on her gender, even though she acknowledges that construction is still primarily not a “female” business. “I have seen more subcontractors who are women, along with female project managers and architects,” she notes.
Lewis’s father, Tom Browne, who purchased Beam Construction from the Beam family in the mid-1950s, passed away in 2003. At the time of his death, Browne was chairman of the board and, according to his daughter, “still involved” with the company. Today, Lewis co-owns the company with her brother, executive vice president Robert Browne. While her sons are still young (the oldest is a senior in college), Lewis’s middle son has shown an interest in engineering and construction. “He has worked the last couple of summers for the company, and he could do it [join the business] if he wanted,” she says. “But he is just a freshman in college, so we are a ways away.”
Beam is now starting work on a new $18 million municipal job. “I can’t tell you how long it has been since we’ve had a job that size,” says Lewis. “Its good to know we’re still very competitive.”—Kathryn Levy Feldman
Sargento Foods Inc.
First profiled: Summer 2004
In October 2013, Sargento underwent a transition. Second-generation family business leader Lou Gentine retired, and his son, Louie, stepped up to the CEO role. (Lou remains chairman of the board.)
“My father and I have been transitioning for some time, which has really made it rather smooth,” says Louie Gentine, who turns 40 in September. Since he has been at the helm, “The company’s doing great,” he says, noting that the business has experienced significant growth over the past ten years. “We’re up to about 1,600 employees, with about 400 to 500 new employees over the decade, and net sales of about $1.2 billion, or more than double the figure quoted in the earlier article,” Gentine says. (In Summer 2004, Family Business reported that Sargento’s net sales were $534 million.)
New products abound. In 2014 alone, five snack and sliced natural cheese items were introduced along with Tastings chunk cheeses. Sargento’s Ultra-Thin sliced cheeses received a Nielsen Breakthrough Innovation Award this year. Sargento has developed a strong social media presence to communicate with consumers, and has partnered with food bloggers to help promote its brand.
The company continues to espouse the same core values that Lou Gentine discussed at length in the 2004 article. “My grandfather believed in hiring good people and treating them like family, and we’re still grounded in those values,” Louie Gentine says. Sargento still invests in the communities where it operates, as well. “It goes back to people, pride and progress,” Gentine says, citing the “three Ps” that the company emphasizes in its corporate philosophy. “We believe that whatever we do, we need to be grounded in our culture. It provides us a distinct advantage.”—Patricia Olsen
W.S. Darley & Co.
First profiled: Summer 2009
W.S. Darley & Co., a manufacturer of fire trucks and firefighting equipment, may hold the record for the longest succession planning process in a family firm—and, in the Darleys’ case, it paid off. After having emergency triple bypass surgery, Bill Darley, the company’s CEO and president, created an executive committee in 1989 composed of his sons, Peter and Paul, and his nephew Jeff. He asked each to write a business plan describing where he would take the company if he were to succeed Bill as president. Six years passed before Bill responded to their plans with his surprising decision: His successor would be chosen not by him, but by the executive committee. The committee spent the next few years researching and discussing how they might run the company together. In the end, they decided the company needed a primary spokesperson and, in 1998, they chose Paul, the youngest of Bill’s five sons, as the president.
Now in its 106th year, W.S. Darley & Co., located in Itasca, Ill., is enjoying record growth. Since Family Business reported on the company in 2009, Bill has retired; Paul, now 51, became chairman and CEO this past May. Over the past five years, the company’s sales have almost doubled. Paul expects sales to top $175 million in 2014, despite a sluggish few years in its core market, firefighting equipment. “We’ve felt the effects of the budget crunch in municipalities in the U.S.,” says Paul, “but our sales to China have reached $20 million. We’ve also had great success with our water-purification equipment sales to the U.S. military and to developing countries.”
The Darley family is still thinking about succession, only now its focus is on younger family members. Four members of the fourth generation are already working in the business, and a fifth will join in the fall. With 33 fourth-generation members potentially eligible to work in the business, the family set qualifications for joining the company, such as having to first work outside the business and agreeing to abide by the family constitution. “Our family is working closely together to grow the business and keep in mind the health and welfare of the company and the family,” says Paul. “A strong family is a strong business.”—Deanne Stone
Petz Enterprises LLC
First profiled: Spring 2006
A lot has happened at Petz Enterprises LLC, a provider of tax software solutions for consumers and tax professionals, since the company was profiled in the Spring 2006 issue. Back then, the company operated as Petz Enterprises Inc. Leroy Petz Sr. was the chair and CEO; his wife, Glenna Sue, was executive vice president of administration. Three sons worked in the business, each managing his own department.
Advisers warned that the company’s decentralized organizational structure posed a potential problem. Who could replace Leroy or Glenna Sue if one of them were to die suddenly? Heeding their advisers, the family hired a professional manager who had worked in the industry for 20 years. Besides streamlining operations, he brought in new clientele.
The family’s accountant also warned that the sudden death of Leroy or Glenna Sue would trigger serious tax consequences for the business. In 2013, the senior Petzes sold the business to their family, who created a new entity, Petz Enterprises LLC, to run daily operations. “We had been gifting shares from Petz Enterprises Inc. to our family, but the company was growing so fast that we were advised to transfer assets to the LLC,” says Glenna Sue. Petz Enterprises Inc. holds the remaining assets that exceeded the $5 million allowable transfer.
In 2006 the company’s biggest product was Tax Brain, an online tax center that offered tax preparation advice and services to Internet consumers. Several years ago, Petz sold Tax Brain and invested profits in developing the product that the company felt had the greatest growth potential—CrossLink, desktop software for tax professionals who file clients’ returns electronically in large volume to the IRS. The company also bought the failing businesses of two competitors and inherited the trained staffs who were left behind. The acquisitions doubled the number of employees to 105 and more than doubled the company’s profits.
Petz is still headquartered in Tracy, Calif., with regional offices in Bellevue, Wash., and Rome, Ga. “We had an electronic engineer who figured out how to transmit information electronically to the IRS before our competitors did,” says Glenna Sue. “When we started in this business in the mid-’80s, there were 100 companies in this industry. Now there are ten.”
Two grandsons work in the business, and a granddaughter plans to join when she finishes her education. Leroy and Glenna Sue’s philosophy, “Give kids a good education, and they’ll come back with good ideas,” led to their paying for the college educations of their eight grandchildren. Newly retired, Leroy Sr. and Glenna Sue took their first trip to Europe this summer.—Deanne Stone
Meijer Inc.
First profiled: Summer 2007
In 2013, grocery chain Meijer Inc. named Mark Murray, who had been president of the company since 2006, to serve as co-CEO along with third-generation member Hank Meijer. Murray is also vice chairman of the company’s board. Non-family member J.K. Symanck, who had been COO, succeeded Murray as president. “We’ve had a tradition of strong non-family leadership that has served the company well,” Hank Meijer says.
Hank Meijer is co-chairman along with his brother, Doug Meijer. Hank and Doug’s father, chairman emeritus Fred Meijer, died in 2011 at age 91.
In recent years, Hank Meijer says, Meijer’s biggest challenge has been “to maintain and build the company’s reputation for fresh food while competing on price with discounters ranging from Aldi to Walmart.” Meijer, a regional retailer, must balance its goal of being the leading supermarket in town with the reality of vying with national and international competitors who built their reputation on price.
Seven or eight years ago, says Meijer, the company was in the middle of repositioning itself to be price competitive with others who were building supercenters—a store concept that Meijer Inc. pioneered—while also building a platform for growth. That has included investing in software, especially in ordering and replenishment, to increase efficiency. In addition, the company has made a significant move into manufacturing. In 2011 Meijer acquired a small dairy in Michigan, and it is building another at its distribution facility in Ohio, which will allow the company to produce more of its own dairy products. Meijer has also resurrected its Purple Cow brand.
Besides its manufacturing and business software initiatives, Meijer is investing in the distribution end of the supply chain. For example, the company has acquired a competitor’s warehouse to better serve its Chicago stores and aid its expansion into Wisconsin. “So we’re making adjustments needed to be competitive, and investing in platforms for growth,” Hank Meijer explains. “We see an opportunity to grow more aggressively in new territory and fill in stores in our existing markets.”—Patricia Olsen
Renfro Foods Inc.
First profiled: Summer 2002
Bill Renfro, CEO of Renfro Foods, and his brother Jack, the COO, are semi-retired now. But third-generation president Doug Renfro says he isn’t steering the ship alone; the other third-generation members are there with him. “There’s never been anyone with majority control since my grandmother,” Renfro says. “We only have titles because the bank makes us have titles.” Three third-generation and two fourth-generation members work in the business.
The company, which 12 years ago was exporting its Tex-Mex condiments via distributors, has made an even bigger expansion overseas, and revenues from exports have more than doubled, according to Renfro. “We’re up to about 350,000 units in Canada now, and those exports have grown over 20% for several years in a row,” he says. Renfro Foods now has 39 full-time employees, compared with 22 in 2002; some long-time temps recently were added to the payroll.
This year, the company sold products twice to a new Australian distributor. (Renfro notes that he never gets excited about a new contract until he receives a second order.) Renfro Foods has also added a second Spanish distributor and a German distributor. The company’s U.K distributor has become a steady customer, ordering a dozen times in the last few years.
On the negative side, a major Renfro customer that owed the company $1 million filed for Chapter 11 bankruptcy protection, but the Renfros arranged a favorable, quite involved, eight-year deal that still has a few years to run. Renfro Foods already has collected $700,000. “It’s worked beautifully,” Doug Renfro says. “It’s kept them alive and benefited us.”
The company has kept pace with the fusion and ultra-hot food trends, introducing quite a few new products such as Ghost Pepper Salsa and Pomegranate Salsa. And as luck would have it, Renfro products have appeared in scenes on the popular TV sitcom The Big Bang Theory. The value of that free product placement? Priceless.—Patricia Olsen
Florence Eiseman Company
First profiled: Autumn 2003
The Florence Eiseman Company is gearing up for 2015, when the business will celebrate its 70th anniversary. The classic children’s wear designer and manufacturer is now owned by Laurence “Laurie” Eiseman (currently 83 and chairman of the board), son of the late children’s wear designer Florence Eiseman; the wife and children of Laurence’s brother Robert (who passed away in 2011); Frank Botto, the company president; Terri Shapiro, head designer and vice president (who learned her trade working alongside the legendary Florence); and “a handful of investors,” says Botto. He credits the longevity of the business to the vision of its founder.
In 1999, the current ownership group, headed by the brothers Eiseman, bought back their mother’s company from a partnership headed by the late Kenneth M. Parelskin, a former executive with JH Collectibles. Since then, the Eiseman label has added two brands intended to be updated versions of its classic look. The first, T.F. Lawrence (the name is an amalgam of Botto and Shapiro’s first initials and Laurie Eiseman’s first name), is a collection for boys that Botto describes as “less sweet and more cool.” Studio 342 (the company’s old address) is the girl’s counterpart. “What’s great about both these collections is that they are all in good taste but more ‘today,’ ” Botto says. “In other words, mom, grandma and child are all happy.”
The company, still based in Milwaukee, recently relocated its corporate headquarters to multifunctional space that the executives designed themselves. The new space includes areas for design, warehousing, patterning and administrative duties. The business also beefed up its Internet presence, although its website lacks an e-commerce function. “Our website enables us to sponsor some of our best stores and let our customers know where they can find our brand,” says Botto.
Botto says the company’s best customers remain grandmas (with young mothers close behind). What keeps bringing them back is their confidence in the brand, he says. The line has been sold in Neiman Marcus stores continually for 67 years, Botto says. “That is where Mrs. Eiseman launched her business, and it is very important to all of us that we uphold her tradition of quality. Her standards were way ahead of their time.”—Kathryn Levy Feldman
Hare Auto
First profiled: Autumn 2005
Sixth-generation sisters Courtney Cole and Monica Peck purchased the majority ownership of Hare Auto from their parents in January 2008. Peck, 40, recalls that their father, Dave Cox, told them at the closing table, “You girls have never known hard times in the car business.”
That soon changed. “We like to say that it was right before the wheels fell off of the economy,” Peck notes. General Motors filed for bankruptcy on June 1, 2009. GMAC, which provided floorplan financing (loans to acquire inventory) for dealers, needed a bailout by the federal government.
Their father, who by then was living in Florida nine months of the year, called often, but he needn’t have. “Through all of the turmoil, we never had one month where we lost money as a business,” says Peck proudly. Now, the sisters laugh about it, she reports.
Hare Auto began as Hare & Son Inc., a Noblesville, Ind., buggy business, in 1847. Dave Cox had grown Hare Auto from one location to three dealerships, but in 2007 GM restructured, and Hare lost its Buick/Pontiac/GM location. After a push by Chrysler to consolidate Chrysler/Jeep and Dodge dealerships, Hare sold a second location. Still, Peck says, “We’ve been able to do more with the one store than we could do with the three.” Today, Peck says, Hare is the No. 1 volume Chevrolet dealer in Indiana. Revenues were slightly over $130 million in 2013, and the dealership is on track to increase that figure by $10 million in 2014, according to Peck. The business has 188 employees, about a quarter of whom are women.
The sisters had been handling day-to-day operations for several years before they purchased the dealership. Their mother, Jacqueline Hare Cox, is a fifth-generation descendant of founder Wesley Hare. Because of their different last names, acquired through marriage, Peck and Cole needed to find a way to convey in a 30- or 60-second radio or TV ad that they were sixth-generation members of the Hare family. They launched a contest on Facebook and adopted the winning entry, “The Sisters of Savings,” as their slogan.
The sisters’ long-term goal is to expand into “more rooftops,” Peck says. But while their children are young, they are focusing on developing additional profit centers at their current location, such as a rental car business, which they added a few years ago. The dealership also has begun a million-dollar renovation to its building.
There have been other challenges. In March 2014, two months after completing her first marathon, Courtney Cole—a non-smoker—was diagnosed with stage 3 lung cancer. Cole, 43, is now undergoing treatment.
Peck praises her employees for “the support that they’ve shown our family, and the way that they’ve all stepped up through Courtney’s absence.” She adds, “Going through what we’ve gone through the last four months or so with Courtney, you really learn how ÂÂblessed you are when you have a team of employees that you think of like family.”—Sally M. Snell
Erving Industries
First profiled: Winter 1997
Charles Housen, the second-generation owner of Erving Industries, and his son, Morris, had such different opinions about the future that they penned separate articles for Family Business Magazine in 1997. While much has changed at the Erving, Mass., paper mill in the last 17 years, father and son still don’t always see eye-to-eye.
“We have very different approaches and styles, and we never came to a complete meeting of the minds on strategy,” Morris Housen says, “but we worked around it.” He succeeded his father as CEO in 2009. “The transition was really seamless, from my perspective,” Morris says. “My dad remains chairman of the board. Our personal relationship is perfectly intact and healthy, and so is our business relationship.”
At the time the father-and-son articles were published, Erving Industries included 13 companies in addition to the paper mill, which was founded in 1905 and acquired by Morris’s grandfather after World War II. Morris says his father liked the converting business, which involves making products like napkins, toilet paper and toweling rather than simply the production of the base paper, which other companies then convert into finished products. “I was insistent that the paper mill is the heart of the business and overly extending ourselves in the converting process was hurting us in the core business,” Morris explains. “I sold off all our converting operations, and the paper mill is the only operating entity today.”
About the time of the management transition, the company also underwent a difficult financial period and filed for Chapter 11 bankruptcy protection in 2009. “We never stopped operating, nor did we ever run out of cash,” Morris points out. “Our pension fund crashed with the stock market in 2008, and the situation was unsustainable. It was never about our business itself, which was untroubled. It was certainly a challenging time and a remarkable learning experience.”
At 50, Morris isn’t ready for retirement or really giving more than passing thought to succession planning. His kids, 18 and 20, are still in school. “I will take the same attitude with them that my father took with me,” he says. “He said I could do anything I liked, as long as I did it the best I could.”—Dave Donelson
Forbes Media LLC
First profiled: August 1990
How would Malcolm Stevenson Forbes Sr. view what remains of the empire he worked so hard to build?
Between the mid-1990s and 2012, bit by bit, Malcolm S. “Steve” Forbes Jr. and his four siblings unloaded their father’s massive collections: a castle in London, a palace in Tangiers, an island, a 170,000-acre ranch in Colorado, the 151-foot Highlander yacht, the company’s headquarters on Manhattan’s Fifth Avenue and the sumptuous townhouse next door, plus Fabergé eggs, works of art and 70,000 toy soldiers. Malcolm used the exotic assets to market the magazine while entertaining corporate executives, the literati and the glitterati.
The transactions culminated this summer with the sale of the family’s core asset—the “capitalist tool” itself, Forbes Media LLC—to a consortium of Asian investors at a price estimated in several news reports at $475 million.
The Forbes family retains a minority stake, and family members who work at Forbes will keep their positions. “It was a precondition,” Steve Forbes tells Family Business. “No family, no deal.” So Steve, who owned 51% of the voting shares at the time of the sale, will continue as chairman and editor-and-chief, and brothers Tim and Kip will keep their posts on the board of the new Forbes Media. Although Steve’s brothers will not be involved in operations, they will have a say in strategy, in sales and “elsewhere,” says Steve. Brother Robert stepped down a year ago. “He was in his mid-60s, why not?” says Steve. Steve’s daughter, Moira, retains her post as president and publisher of ForbesWoman.
There might also be opportunities for any of the other five G3 or six G4 family members to join the business, says Steve, should any indicate future interest. “Asia puts premium on family, so we’ll see,” says Steve.
Steve says the main motivation for the sale was to take advantage of “enormous opportunities with the Forbes name to do brand extension. We need capital to move forward. We have done a little in business education and real estate. Our new partners see an opportunity go full bore on that. On the media side, we need to expand there and do more websites overseas.”
The sale also provided some liquidity to family members and to Elevation Partners, a private equity firm (owned partly by rock star Bono) that purchased a minority stake in 2006 and will now exit its investment in Forbes Media.
“You have drastic changes brought about the web, and we can’t be nostalgic,” says Steve Forbes. “What happens if we don’t respond to changes? We were not going to be that story. We took to heart what management consultant Peter Drucker said many times about asking yourself, ‘What’s your mission?’ Circumstances may change, your mission stays the same. No magazine has made the transition as well as we have. Overall, I think we’ve done pretty well.”—Jayne A. Pearl
Sugar Bowl Bakery
First profiled: Winter 2006
When Sugar Bowl Bakery was featured in Family Business Magazine in 2006, the five founding Ly brothers had grown the business from a single San Francisco location in the early 1980s to six retail bakery/restaurants and an expanding wholesale operation. Annual revenues exceeded $35 million.
Two years later, the bakery made a sharp course change amid a rough economic climate. Between 2008 and 2010, Sugar Bowl closed its retail operations and food-service baking in order to focus on mass-volume baking. “We literally cut the company in half in 2010,” says Andrew Ly, the chairman, president and CEO.
The company, which now has two high-volume manufacturing facilities in Hayward, Calif., is now experiencing double-digit growth. Revenues are about double what they were in 2006, and are projected to reach $100 million shortly, Ly says. The company has approximately 250 full-time employees, plus 100 temporary workers.
Sugar Bowl sells its products in mass volume to supermarkets, specialty grocers and club warehouses across the U.S. It also exports to Canada, Mexico and parts of Asia. “It’s an exciting time for food manufacturing in America,” Ly says. “The demand for quality food is very high.” To meet increased demand along the East Coast, the bakery is preparing to open a third manufacturing facility there, Ly says.
The bakery has adjusted its product line to suit the market. Ly says Sugar Bowl was the first to manufacture bite-size desserts and among the first to reduce the use of trans fats. Most recently, Sugar Bowl became an organic-certified bakery and introduced a line of gluten-free products.
With no outside investors, the company can act quickly in response to customer demand, Ly notes. He says he is lucky that members of the extended family live within their means. “If we decide to bring in any investors from outside, we want to make sure we can work and treat each other with respect and second-to-none integrity,” Ly says.
Andrew Ly’s four brothers remain active on the board, though they have reduced their roles to “make room for the second generation.” Seven second-generation members work at the bakery. Five have joined the family council (formerly called the “Brothers Council”). Andrew Ly’s nephew Michael serves as the second-in-command of day-to-day operations.
Ly describes his management team—both family and non-family members—as dynamic and hardworking and notes that they “embrace teamwork.”
As for the future of Sugar Bowl Bakery, Ly says, “We cannot dip deeper than yesterday. Today we have to do better than yesterday, and we must think how to do better tomorrow than today, and it has to be that way consistently.” That was his guiding principle when he came to the U.S. as a refugee more than three decades ago, he says. “I had nothing with me but the will to work hard and to do better.”—Sally M. Snell
U.S. Engineering Co.
First profiled: Spring 1997
Kansas City-based U.S. Engineering, founded in 1883, was led by a member of the Nottberg family until 1996, when fourth-generation president Skip Nottberg stepped down to battle an aggressive form of melanoma. When Skip died the next year at age 47, his oldest child, Tyler, was 20. In 2006, Tyler Nottberg was named U.S. Engineering’s chairman and CEO.
Before his death, Skip had established a “bridge plan” for future ownership and leadership of the company. His children would receive 25% of the shares, with the rest owned by the company and key non-family executives. If his children joined the company before age 30, they would be able to buy back 26% from existing stockholders to own a majority of the shares. If they didn’t join the company, the children would sell their stock to the other shareholders. “He didn’t want passive shareholders,” explains Tyler, now 38.
Tyler studied political science and economics in college. He was a policy analyst at the Eisenhower Institute and worked for Sen. Richard Lugar (R-Ind.), both in Washington, D.C., and on the senator’s 1996 presidential campaign. He then worked in the legal, economic and regulatory affairs practice at Gerson Lehrman Group, a Wall Street research firm. That outside experience, he says, “really helped me gain a little bit of a foothold on concepts in practice related to cash flow, profitability, the private sector [and] how business takes place.”
In 2004, Tyler and his wife began talking about moving back to Kansas City. “All these conversations happened to coincide with a number of events that were going on at U.S. Engineering,” he recalls. Skip’s successor, Dwight Brinkman, was planning to retire, and Tyler, then 28, was approaching the deadline his father had set for him to decide whether to join the company.
Tyler says his father’s plan was well thought-out. “But really,” he adds, “the success of the plan, in my opinion, was predicated on the people who were at the company being engaged and aware of what they needed to do in order to execute on this plan if I was serious about it.”
In addition to mentoring Tyler in company operations, the non-family executives communicated to the staff “that this was a real positive for the future of the organization,” Tyler says. “A member of the Nottberg family was coming back to be involved, and this represented stability, new energy, a new perspective.”
Tyler notes that “I was included as part of the leadership team from Day 1.” His “very deliberate” training program included a stint in the warehouse and the Colorado office.
Today U.S. Engineering has about 1,000 employees and in 2013 generated slightly more than $300 million in revenues. Tyler and his wife purchased the shares held by Tyler’s sister a few years after he became CEO.
In 2011 the company opened a third office, located in Virginia. U.S. Engineering Company Innovations LLC, a sister company that specializes in modular construction and prefabrication for industrial and manufacturing markets, was founded in 2012.
“I’m excited about the future,” Tyler says. “I feel like the investments we’ve made, and what our capabilities are, allow us to legitimately go out into the marketplace and say, ‘We’re actually helping to literally build a better world.’ “
As his father did, Tyler has created a “bridge plan” for his children. “If I get hit by a bus tomorrow,” he says, “there will be a very similar plan in place for both of my children.”—Sally M. Snell
Stew Leonard’s
First profiled: Premier Issue 1989
In 1993, Stew Leonard Sr. was sentenced to four years in federal prison for an elaborate tax-evasion scheme, in a case that made national headlines. (He ended up serving only 18 months.) His son Stew Jr. took over the family’s dairy stores in his absence.
When Family Business Magazine checked in with Stew Sr. in 1999, the company was about to open its third location in Yonkers, N.Y., in addition to its flagship store in Norwalk, Conn., and a second grocery in Danbury, Conn. Stew Sr. hinted sales were approaching $1 billion, up from $100 million a decade before.
Today, the company’s revenues are nowhere near that high. Stew Leonard’s generates sales of $400 million and has 2,000 employees. But Stew Jr. and his sisters—Beth Leonard Hollis, executive vice president, and Jill Leonard Tavello, the executive vice president of culture—have put their own stamp on the company, while making room for the next generation.
“It’s a transition time for our family,” says Stew Jr. A fourth store is scheduled to open next year in Farmingdale, N.Y., with Jill’s son Jake Tavello, 25, assisting in operations.
Stew Jr.’s daughter Ryann Leonard, 24, studied business at Elon University in North Carolina and is currently working in New York City. His oldest daughter, Blake, 28, worked at the family business as a sommelier and in marketing and is pursuing a master’s degree in marketing at New York University, “She’ll be leaving for the next few years,” says Stew Jr. “I hope she’ll come back.” His youngest daughter, Madison, 19, spent the summer assisting store buyers and helping out in the finance and accounting departments. She’s currently a sophomore at Cornell University, studying finance.
Will Hollis, Beth’s son, is finishing his senior at Sacred Heart University. “He really loves film and social media,” Stew Jr. says. “So he has been doing a lot neat video clips we show in the store, of recipes and different trips we’ve taken.”
Stew Jr., who turns 60 this fall, says he’s not ready to step down, but the need to devise a succession plan is on his mind. “Although we don’t have a lot of the next generation working right now in any top management roles, we do have to decide on career paths for them,” he says. “We have things penciled out for not just our family, but for the organization over the next five to ten years. There are a couple of blank boxes, obviously. The challenge is to make sure the most qualified people earn those top positions—whether they are family or non-family.”
What if something were to happen to him in the meantime? “That’s the one blank box, the one pressing question,” he admits. “I’m working on that right now. I’m still young, though, right?”—Jayne A. Pearl
Stratose Inc.
(formerly Coalition America Inc.)
First profiled: Winter 2002
When Coalition America’s founders, identical twins Sean and Scott Smith, shared their story with Family Business in 2002, their healthcare resource management company was seven years old and generated annual revenues of more than $16 million. Their uncle Scott Sr.—now retired—observed that the twins found delegation challenging. Twelve years later, the company has grown and is now known as Stratose Inc. The executive team is strong and more seasoned, and the two brothers, now 46, have been able to step away from day-to-day operations to focus on strategy. Scott Smith is CEO; Sean is chairman.
Stratose, headquartered in Atlanta, now has five locations and about 170 employees. Revenues for 2013 were about $60 million. “We’ve really built a lot of infrastructure, and we’re doing significantly more volume, but we also have a really strong team today,” says Scott Smith. “It’s easier to delegate when you’ve got the right people in place.”
Stratose helps clients such as insurance carriers, third-party payers, health plans and employer groups to control costs. “We use our proprietary knowledge of bill data, analytics, assets we own and [relationships] with selected vendors,” says Smith.
Over the years, the brothers have made seven acquisitions, with more planned for the future. They bought their first company in 2007. The Smiths, who had also founded Internet-based medical claims processor MCOnline, rolled that technology into Coalition America rather than take MCOnline public. The entrepreneurial brothers also founded two other healthcare data companies, HealthLink Dimensions and CareLike. In 2013, Inc. magazine recognized HealthLink Dimensions as one of the country’s fastest growing privately held companies. Inc. had bestowed that honor on a young Coalition America in 2000.
Spurred by the company’s growth, in 2012 the executive team suggested to the Smiths that it was time to rename the company. Coalition America and its affiliate brands were consolidated and rebranded as Stratose. Scott Smith describes the name selection process as similar to “March Madness bracketology.” The team started out with dozens of options, then narrowed the field by assessing the strength of one name against another. The new name refers to the company’s “stratified approach” to claims cost management, as opposed to in- or out-of-network.
Smith says the company has changed “pretty significantly” in response to the Affordable Care Act and other developments in the industry. Stratose has acquired additional preferred provider organizations (PPOs) and is contracting directly with providers rather than working primarily with vendor partners. The company also diversified its income stream by adding cost-containment services for dental and workers’ compensation.
The biggest challenge the company has faced in the last decade, Smith says, is focusing on growth in a dynamic marketplace, “and making sure we stay ahead of the competition, and also making sure we understand what our customers’ needs are.”
The twins married in the same year, and each has three children. Whatever opportunities lie ahead, it seems likely the two brothers will pursue them together. “I can’t seem to shake my brother, and he can’t seem to shake me,” says Scott Smith.—Sally M. Snell
Robinson Helicopter Co.
First profiled: March/April 1991
Succession planning, or the lack thereof, at Robinson Helicopter was the main focus of a 1991 profile of the company in Family Business Magazine. “They blasted my dad for not having a succession plan,” says CEO Kurt Robinson, the son of founder Frank Robinson, with a laugh. “It was true!” Kurt says his father was unfazed by his portrayal in the magazine. (The cover featured a photo of Frank in flight along with the headline, “Flying without a plan.”) “It didn’t spur him on that much,” Kurt says. “He retired in 2010, and I took over as president at that time.”
Kurt adds that he understands why business leaders hesitate to complete a succession plan. “It’s a very difficult thing that can’t be solved overnight,” he points out. “The toughest part is that the right thing to do today won’t necessarily be the right thing five or ten years from now. Businesses constantly evolve.”
Since it was established in 1973, the Torrance, Calif., company has produced more than 11,000 helicopters. “For the last 15 years, we’ve been the world’s No. 1 producer of commercial helicopters,” Kurt says. The staff has grown from 480 to 1,200 since 1991, according to Kurt, and the company’s product line has grown, too, with two-, four-, and five-seat helicopters in production. “In this industry, the products have a very long life,” Kurt notes. “Our first model went into production in 1979. I think of it as a Porsche 911 that can run forever if it’s properly taken care of.” The company derives a significant portion of its revenues from maintenance and repairs of the large number of Robinson helicopters in service.
The company is still fully owned by the family. Kurt works with his sister, Terry Hane, who serves as director of sales and marketing. Both he and Terry have kids. Her son, Trevor Christen, works at the company, but future leadership is anything but certain.
“When my father stepped down, he did not nominate anybody to take his place. He left it entirely to the board of directors,” Kurt says. “I am very proud to have been chosen.” The board consists of several key employees and the two Robinsons. Like his father, Kurt, 57, doesn’t have a succession plan. “But there is a methodology set up to handle it,” he says. “Is there a hand-picked successor? Absolutely not.”—Dave Donelson
Duncan Aviation Inc.
First profiled: Summer 2010
The aviation industry was still reeling from the terrorist attacks of Sept. 11, 2001, when parts and equipment manufacturers entered a “recession-depression” from having “overbuilt aircraft for so many years,” according to Todd Duncan, chairman of Duncan Aviation, a maintenance, repair and overhaul facility. In 2009, for the first time in its history, Duncan Aviation laid off 13% of its workforce.
Rather than retreat to its own corner, Duncan Aviation reached out to parts manufacturers that were experiencing financial difficulties and “tried to support them, befriend them, and again make a long-term relationship between us,” says Todd Duncan, 48.
That strategy has paid off. Through sacrifices, wise decisions and belt-tightening, the company has grown. Today Duncan Aviation generates annual revenues of just under $500 million, compared with $300 million in 2010.
“I’ll never forget the loyalty and the support” of employees and their sacrifices during the lean times, Duncan says. “We communicated, we worked hard at it, but at the same time, our employee base stood by us.”
More than 2,100 employees work at Duncan’s three main facilities in Lincoln, Neb.; Battle Creek, Mich.; and Provo, Utah. Duncan also has 25 satellite offices and ten rapid response centers.
The company invested about $50 million in its facilities. In 2012 it added a paint facility in Lincoln. This year, it built two 40,000-square-foot heavy maintenance hangars. “The new space gives us a tremendous amount of flexibility in selling to different customer needs,” says Duncan.
Although Duncan continues to operate on a “reduced Plan B” at its Provo facility, “We’ve slowly been adding capacity, with the goal that in 2016 we do the ultimate and spend our big bucks and build our new paint and maintenance facility there,” Todd Duncan says. He says he expects the company to break even at that location this year.
“I tell people I got involved in this industry because we all like the equipment, and yet the real joy of it is the people and their relationships,” Duncan says. He and his father, chairman emeritus Robert Duncan, recently returned from a trip to the West Coast, where they visiting competitors, customers and satellite shops. “It’s really encouraging to meet the customer—to see who it is we’re working for,” Todd Duncan says. “I’m a small business. I always will be the underdog, and so it’s exciting to make inroads in a world that’s kind of dominated by the giant public company, and to know that we can carve out our niche and do a really fine job at it. That’s exciting to me.”
Todd Duncan’s 20-year-old twins took flying lessons this summer. “I can’t tell you they know how to land that sucker yet,” their father says, but they’re both flying; they’re both working on it.”—Sally M. Snell
The Rhett House Inn
First profiled: July/August 1990
When Stephen and Marianne Harrison opened the Rhett House Inn in Beaufort, S.C., in 1986, prospective guests often asked if the rooms had private bathrooms. Today, Stephen Harrison says, “The expectations of the traveler have become much more sophisticated.” And, he adds, the rise of “boutique” hotels has brought increased competition.
In the industry’s early days, homeowners could simply convert a few extra rooms and hang out a shingle calling their home a bed and breakfast. “Now, in order to be a profitable, professional business, you probably need upwards of 15 to 25 rooms,” says Harrison, 74. “And people expect a lot more. They want more of an ‘inn’ feeling, with amenities that show that.”
The Rhett House Inn’s average occupancy rate is about 65%. A partnership with a local country club gives guests access to a golf course, tennis court and swimming pool. Another business offers kayaking and boating. The Rhett House recently added a croquet lawn and bocce court. In the evening, the inn serves hors d’oeuvres and special mixed drinks, and guests are offered a glass of sparking wine at check-in.
“We basically do whatever we can for everybody who stays there,” Harrison says. We don’t say no to anything, whatever it is.” That philosophy has proved successful; 60% of the inn’s business comes from returning guests.
The town of Beaufort, with a population just shy of 13,000, has been popular with film crews since the early ’90s, when it served as the backdrop for The Prince of Tides. Celebrities who have stayed at the Rhett House include Barbra Streisand, Tom Hanks, Sandra Bullock and Kevin Bacon.
In the inn’s earliest years, the couple had to hire “inn-sitters” when they wanted to go away. After a series of expansions that increased the size of the inn from five rooms to 20 in three buildings, the couple hired a full-time staff, which gave them the freedom to travel about half the year. “We figured out early on that if we didn’t leave the inn, we would burn out very quickly,” Harrison says. “You can’t do anything seven days a week, 24 hours a day.” Travel recharges the couple and offers a wellspring of ideas for their business, he says.
Harrison notes that while they are away, he and his wife are in frequent contact with their staff. “I think the hardest part of every business is having people you can trust, you can empower, and who will take on an entrepreneurial role in your business,” Harrison says.
The couple aren’t in any hurry to retire, Harrison says. “I just like doing it, and I’d like to do it for the rest of my life,” Harrison says.—Sally M. Snell
The Kiplinger Washington Editors
First profiled: May 1990
Back in 1990, Austin Kiplinger was the president and CEO of The Kiplinger Washington Editors and was mulling over his succession plan. In the intervening 24 years, the family, the company and the publishing industry have been through monumental changes, including the development of digital media, a recession that rocked traditional publishing, an aggressive buyback of employee-owned stock and the 2008 death of Austin’s oldest son, Todd Kiplinger.
Austin’s surviving son, Knight Kiplinger, now chairman, president and CEO, is the only family member working in the business. He acts as the editor-in-chief of all company publications, including the weekly Kiplinger Letter, the monthly Kiplinger’s Personal Finance magazine and the Kiplinger.com website.
Recalling the transfer of leadership within the organization, Kiplinger says, “It was very seamless. There were no ceremonies, no parties and no press release. That is a compliment to my father, because he was gradually stepping back.”
In the early aughts, when the Internet was becoming a bigger part of the publishing industry, Kiplinger launched its website and figured out how to make it profitable. The company’s online presence helped it to offset some losses in print revenues and subscriptions during the recession. “In any business you’re always looking at your product line—what you do, the services you provide,” Kiplinger says. “The Internet was the biggest new thing of the past 20 years, and it’s now contributing to our profits very strongly.”
Concern about the cyclical nature of the publishing business caused the family to reevaluate the employee stock trust that was set up by founder W.M. Kiplinger. The family gradually bought back the employee shares at ever-higher prices. The Kiplinger family now retains 100% ownership of the company. “By buying back those shares, we insulated the employees from cyclical swings,” says Kiplinger. “I sleep better at night knowing that, through the difficult waters that we have been navigating, our employees do not have as much riding on it as the owners of the company do.”
Kiplinger has no plans to retire or to sell the publishing business any time soon. His three adult children have their own careers. But he says he often thinks about the future of the financial media company that his family built. “If five or ten years from now, I decide I have to do something else and I look for a new owner of this magazine, it would be a very short list of respected publishing companies whom I could trust to be good stewards of this business,” he says. “The biggest determinant of the future of a business that’s put in somebody else’s hands is who that somebody else is.”—Deidre Grieves
Patton Electronics Co.
First profiled: September 1990
The rapid pace of change in communications technology has been the key to Patton Electronics’ success, according to Bobby Patton, 51, the president and CEO.
“A lot of what’s kept our business thriving have been changes in the industry,” says Patton. “We know that companies are trying to manage the transitions themselves, and so there’s always going to be a mix of old equipment and new equipment. You’ll have a system inside your business that might be based on the latest and greatest technology, but you’re connecting to a legacy phone system. We’ll provide the gateway between those two worlds.”
An essential part of the company’s business model is fast-paced research and development, says Patton, who works alongside his brothers Burt, executive vice president, and Bruce, vice president of finance and administration.
Bobby and Burt Patton founded Patton Electronics in 1983 and ran it out of their parents’ basement. Their father, Bob Patton Sr., joined the young company in 1986, and his managerial experience and knowledge of the electronics industry helped the company to grow. Patton Electronics acquired its first technology business, located in Bern, Switzerland, in 2001. The Swiss firm provided technologies in voice-over-Internet-protocol that Patton Electronics was seeking, “so we were able to take those technologies and move the manufacturing into our factory here in the U.S.,” Patton says.
Going global has its pitfalls, such as “dealing with the rolling recessions in the last five or six years,” says Patton. “As the markets in different parts of the world have gone up and down, just managing the changes in revenue in those different places has been one of the more challenging things that we’ve had to deal with.”
Today the company, based in Gaithersburg, Md., has 140 employees and multiple sales and support offices around the world. It generates about $25 million in annual revenues.
Besides the three Patton brothers, other siblings, nieces and nephews have been involved in the business over the years. Currently Bobby Patton’s oldest son, a recent college graduate, serves on the product management team, and a niece works in accounting.
Bob Patton Sr. passed away in March 2014. “He was still active online until a week or two before he passed away,” his son Bobby says. “He was monitoring the financials and giving us advice, and even in his last week on his deathbed he was giving me advice about the business.”
Bob used to say, “There’s no deception like self-deception,” Bobby Patton says. “He was very keen on making sure that we were clear-eyed looking at the numbers and the facts and understood what was happening in the world in terms of competitive landscape and trends and mindsets in the industry.”—Sally M. Snell
Decorated Products Inc.
First profiled: Winter 2005
No one can say Jeffrey Glaze didn’t give Decorated Products Inc. his best shot. The company, which Glaze’s father founded in 1950, manufactures metal nameplates and roll labels for machines. When Family Business interviewed Glaze in 2005, Decorated was losing so much business to China that he’d had to lay off half his 80 employees after sales sank to $2.4 million in 2003 from $4.5 million a few years earlier. “We couldn’t buy metal for the price the Chinese could provide for an entire product,” Glaze laments. A new niche based on his son Justin’s interest in racing—a line of plastic logo plates for off-road vehicles—helped the manufacturing company to limp along for a few years.
While he hoped and waited for the company to bounce back, Glaze began moonlighting, providing training in Epicor enterprise resource planning software, which Decorated used. “As my stock was going up in the Epicor world, my business was going down the tubes,” Glaze says. Eventually, Epicor invited him to become a partner.
In 2007 he took his controller, materials manager, IT manager and customer service employees and launched EpiCenter, a firm that provides training and consulting for Epicor users. For a while he still kept Decorated Products, hoping it might yet rebound. But when his children grew old enough to choose careers, none of them wanted to run “a smelly manufacturing company,” Glaze says. In 2010, he sold the family business to “a friendly competitor.”
Today Justin, 29, Glaze’s oldest son, manages Hampden Village, the family’s residential real estate concern in Western Massachusetts. Daughter Jocelyn, 23, manages human resources and administration for both EpiCenter and Hampden Village. Son Jordan, 26, had a stint at EpiCenter before moving to Los Angeles to pursue a career in music.
EpiCenter, with 45 employees, is now the largest services provider for Epicor software globally. Glaze says his clients’ companies have problems similar to the ones he faced when he ran Decorated. “A lot of my work becomes management consulting in addition to the technical work,” he says. “An integrated approach: That’s our secret sauce.”
Glaze says EpiCenter’s annual revenues are somewhere between $5 million and $10 million. “It’s more profitable than the manufacturing company—and a lot more fun,” he says of his new venture.—Jayne A. Pearl
Vietri Inc.
First profiled: Spring 1996
While vacationing in Italy in 1983, Lee Gravely, a North Carolina widow, had lunch with her two daughters in a hotel on the Amalfi coast. Captivated by the colorful and whimsical hand-painted plates, they inquired where the dishes were made. The ceramicist lived nearby, and after lunch the women visited his factory. Several more visits followed, and ultimately the Gravelys offered to become the factory’s wholesaler in the U.S. From that chance encounter a thriving import business was born.
Lee Gravely was the major shareholder, but her daughters, Susan and Frances, ran the business, which they named Vietri, after the town where the factory was located. The business was a perfect fit for the family, for whom entertaining was a way of life. Both sisters were experienced businesswomen who had worked in retail, had good business contacts in North Carolina and knew where to go for good advice. Within a few months, Vietri was flooded with orders.
Today, the company represents 40 Italian manufacturers that make products exclusively for Vietri. Besides dinnerware, it has added glassware, flatware, table linens and lighting. Its brand is sold in 1,200 specialty stores and in Bloomingdale’s, Neiman Marcus, Saks Fifth Avenue and Belk department stores; Vietri also has a strong online presence.
Frances, who had been vice president of brand marketing, retired in 2012. Her son, Lee Gravely Frankstone, 32, an engineer, is vice president of technology and strategic development. Frankstone is the only member of the next generation, which presented a succession planning challenge.
“We did a lot of consulting with board members and outside experts,” says Susan, who is Vietri’s CEO. “We all agreed not to try to duplicate me, but rather to build a team that reflected my