Fifteen companies were acquired. Fourteen companies went public. Two companies went under.
Marc Bingham, president and chief executive officer of Phone Directories Co., remembers waking up in the middle of the night with a chilling thought: "My company had $5,000 in the bank and a $27,000 payroll to make the next day. "Bingham's company, a Provo, Utah, publisher of independent telephone books that ranked #444 on last year's INC. 500 list, had registered sales of $3.2 million in 1982, and was sporting a 443% five-year growth rate. But, says Bingham, "the pressure was too much. I was becoming an animal of the system, and growth was getting out of hand. Either I had to do something about it or have a nervous breakdown, and I didn't have time for a nervous breakdown."
Bingham resorted to drastic measures to save his sanity. He broke his company up into four divisions and sold three of them to some of his former employees. That reduced his own work force from 65 to 7 and cut his output from 85 directories to 22. He also stopped pumping all of his own earnings back into the company, took more time off for family matters, and soberly marched "back to where I was 10 years ago." This year his sales are projected at about $3.5 million, down from a high of $5 million in 1983.
Not every retrenchment is so much a matter of choice. For Crisstad Enterprises Inc., of La Grande, Ore. (#180 last year), it was market factors, not psychological ones, that kept the company off this year's list. The problems faced by Crisstad, a vendor of logs and wood products, reflected downturns in the homebuilding and paper industries. Like many of its Oregon neighbors, the company closed down its sawmill when lumber demand dropped.
The outlook, however, isn't wholly bleak: Crisstad has been channeling capital into a new chip-burning power plant, and hopes to boost its own production of wood chips. "The chipping market is just now beginning to pick up," says spokesperson Lorna Weller, "and, depending on the lumber market, we should have our mill reopened by June of '85."
All told, 208 companies from last year's fast-growth list returned to this year's, including 63 that appear on the list for the third straight time. What accounts for the 292 nonreturnees? Of the companies that INC. was able to contract, some 162 did well enough to meet almost any performance standard save qualification for this year's honor roll; a dozen of these registered a 400% growth rate or more, and Texas Tumbleweed Inc. (#118), an Austin-based steakhouse chain, hit 430% on $16.9 million in sales.Another 55, including Phone Directories and Crisstad, posted sales figures lower than the previous year's. And then there were 2 that really went the other way: into Chapter 11. One of these, Pied Piper Industries, a Cleveland manufacturer of electronic bug-killers and auto-security systems, reported last summer that it was a victim of an "unfriendly takeover" move; the company resisted the move, and one of its warehouses mysteriously burned down. Now a caller to Pied Piper gets a "telephone disconnected" recording, and the company's hopes for recovery presumably lie in ashes.
The 15 class members bought out by other companies report a mixed bag of experiences. Anadex Inc. (#454), a manufacturer of dot-matrix printers in Chatsworth, Calif., decided it couldn't grow fast enough to keep pace with the marketplace and so entered acquisition talks with Printronix Inc. These talks were successfully completed in September, and Anadex CEO John Weaver foresees no change in top management or basic operations. On the other hand, Mission Home Health Inc. (#65) of San Jose, Calif., a home-nursing-care service business, sold its assets to Beverly Enterprises Inc. of Torrance, Calif, "for over 10 times projected earnings," according to CEO Gene Cochran. But Cochran now has some regrets.
"All of a sudden we had a national flavor instead of a local one," he reports. "Our employees probably aren't as motivated as they were before. And while [Beverly] has done its best to maintain local autonomy, that hasn't been achieved." Cochran adds that part of his personal stake in the deal, a stock transfer from the parent company, has been devalued by a drop in Beverly's price on the New York Stock Exchange.
The 14 INC. 500 veterans that took the plunge into the initial public offering market also report some troubles. Bio-Analytics (#242) of Palm City, Fla., formerly an employee-owned manufacturer of medical testing kits, raised $2.3 million with its February stock sale, paying "not a nickel up front," according to CEO Clyde Patterson. The stock opened at 5, rose to 8, and has since leveled off at 5.5. But only about 15,000 shares a month are changing hands, says a somewhat disappointed Patterson, who adds that life after an IPO is "sort of like moving into a glass house -- it's not that we've changed how we operate, but we're aware that we have to explain a lot more."
The stock value of HCW Oil & Gas Inc. (#41), of Boston, is down as well -- from 12.5 to 8 -- since last November's $13-million offering, although CEO Bob Glassman boasts of "one of the strongest balance sheets in our industry." HCW's IPO followed two rounds of mezzanine financing, in 1978 and '82. Vie de France Corp. (#372) of Vienna, Va., a bakery wholesaler and restaurant chain, floated a stock offering in February of this year, hoping thereby to maintain liquidity for projected expansion. President Lloyd Faul cites '84 net earnings up 35% (to $5.8 million) and overall revenues jumping more than $12 million (to $55.1 million).
Still, says Faul, "The roadshow [leading up to the offering] took an awful lot of our time. We 'went public' in every sense of the term."
Roadshows and sideshows, acquisitions and inquisitions -- it was that kind of year, as usual, for graduates of the INC. 500 list. Now meet four others that are worth a longer look.
Through the Wringer
Who was going to tell me anything? Some accountant? My wife? Hey, I was doing it."
