Eljer Industries, Inc. - Company Profile, Information, Business Description, History, Background Information on Eljer Industries, Inc.

17120 Dallas Parkway
Dallas, Texas 75248

Company Perspectives:

Eljer Industries is a company with quality building products and well-trained, dedicated people who serve our customers' needs, equipped with effective manufacturing facilities that ensure our company remains competitive--both in value and in product for changing markets. Eljer is noted for its innovation with 1.6 gallon toilets, suites designed to meet the interior designer's needs, and an expanded gas fireplace product line, innovative new faucets, and in particular, in Europe, a wide range of chimney and venting products to meet the needs of different industries' markets and the design standards of each country. With this product mix, combined with cost-effective manufacturing and strong sales and marketing, Eljer is a leader with the total capability needed to make a difference in the marketplace.

History of Eljer Industries, Inc.

Eljer Industries, Inc. is a leading manufacturer of plumbing and heating, ventilating, and air conditioning (HVAC) products to wholesale, retail, commercial, and institutional markets. Eljer services residential and commercial construction and repair and remodeling markets in particular. Specifically, Eljer makes and sells plumbing and HVAC products in the United States and Canada and HVAC products in Europe. The company is one of North America's three leading suppliers of bath and kitchen fixtures, faucets, registers, grills, and venting systems and one of Europe's leading manufacturers of prefabricated chimneys and venting systems. For the most part, Eljer markets its products through wholesale distribution channels. In North America, it also markets to building product retailers. In January 1997 Eljer was acquired by Dallas, Texas-based Zurn Industries, Inc. A further consolidation occurred in June 1998, when U.S. Industries, Inc. and Zurn agreed to merge. It was expected that the Eljer business and name would continue to thrive under the new ownership.

The Origin and Growth of Eljer, 1900s-90s

Although little information is available for the early years of the company's history, it is known that Eljer was originally the name of a plumbing supply manufacturer that started operations in 1904. In 1925 the company expanded into the HVAC products business. The business manufactured and sold plumbing fixtures for residential and commercial applications. Some of its products have come to include vitreous china toilets, enameled cast-iron tubs, whirlpools, and vitreous china and enameled cast-iron lavatories. The Eljer name is the company's trademark for cast-iron and vitreous china fixtures. Eljer has also come to be known for its manufacture of bathroom and kitchen fixtures for use in new construction or remodeling.

Over the years, Eljer's product line, colors, and styles changed to reflect design trends and demands of consumers. In the mid-1990s the company introduced three new ceramic pedestal lavatories--the Savannah, the Senora, and the Darrow--each with a unique style to fit the design of different bathrooms. Introduced about the same time, Eljer's Hi-Low Undermount cast-iron kitchen sink was designed to be installed under kitchen countertops.

Similarly, Eljer's commercial products underwent changes through the years. For example, the company redesigned its lavatories to be compliant with the Americans With Disabilities Act (ADA). It also introduced products to reflect the changing lifestyles of consumers. With the growth of daycare centers and preschools, the company introduced a two-piece toilet especially for youngsters. Just ten inches from floor to rim, Eljer's Kindergarten model made using a commode safer for small children to use, which contributed to this learner's model being very attractive to daycare institutions.

Despite its efforts to offer new and unique products, in 1993 Eljer was sued by Kohler, its major competitor, for patent infringement. Kohler accused Eljer of "pirating" its designs for toilets, lavatories, and kitchen and bar sinks, among other products. The competitor also cited Eljer for copying its marketing materials. The products in question represented only a small percentage of Eljer's sales and were not recent releases to the marketplace, which prompted Eljer to wonder at the motives behind the lawsuit. "Eljer is investigating whether this aggressive action is an attempt by Kohler to interface with our revitalization as a supplier of choice in this very competitive industry which Kohler dominates," Scott G. Arbuckle, Eljer Industries' president and chief executive officer, told Contractor magazine in 1993.

Technological Improvements

In 1995 the company spent $14 million in capital improvements to its North American plants. With one of the industry's best fill rates, Eljer pursued innovations to increase production and reduce costs at its plants. The foundry for manufacturing enameled cast-iron products--located in Salem, Ohio--received some of the new technology. The addition of robotic enameling stations there allowed Eljer to utilize a more effective process for manufacturing sinks, lavatories, and tubs. Robotics not only proved more efficient, but produced products with smoother, more uniform finishes. Eljer's 477,000-square-foot plant in Tupelo, Mississippi, also benefited from technological improvements. The company installed a cutting-edge pressure cast system in the plant for the manufacture of china products. Eljer also enhanced the material handling system and kilns at the facility, resulting in higher-quality products produced more quickly with reduced energy costs.

U.S. Brass

Besides manufacturing and marketing its own products, Eljer also marketed faucets manufactured by U.S. Brass. U.S. Brass became a plumbing company in 1962. The company manufactured and marketed faucets, plumbing supplies, connectors, and flexible plumbing systems for residential and commercial construction, remodeling, and do-it-yourselfers. Trademarks of the company included Valley, Valley Plus, Eastman, and Qest, and each product line offered its specific consumers a range of items. Valley and Valley Plus brands, for example, offered residential or commercial construction buyers modestly priced as well as luxury bathroom and kitchen faucets. Valley's novel Leisure Personal Shower, on the other hand, was designed for the remodeling market since the shower installed to an existing shower or bath-and-shower faucet. Its adjustable slide bar allowed the height of sprayer to be adjusted to the size of bather, making the shower equipment more convenient and safer for children, the physically challenged, and the odd-sized individual. Another innovative product offered through the commercial construction market, Valley's Regulator, even protected bathers and showers from scalding water. In addition to its own products, U.S. Brass also manufactured private label faucets for large retailers.

U.S. Brass's plumbing supplies--supply tubes, valves, fittings, air gaps, and flexible gas and water connectors--were manufactured under the Eastman trademark. U.S. Brass's plumbing systems were designed under the Qest trade name. Known for their easy installation, tolerance of cold, and lower cost, Qest systems were installed by builders and plumbing contractors extensively from 1975 through 1990. In particular, Qest systems were used in residential site-built installations from 1979 through 1986. Qest products were made with polybutylene pipe and metal connective fittings, which made the system the subject of serious litigation in the early 1990s. Homeowners initiated a class action suit based on the grounds that the plumbing system did not tolerate chlorine well and, thus, leaked profusely, causing significant property damage. U.S. Brass discontinued the Qest polybutylene plumbing system in 1995 when Shell Chemical, its supplier of polybutylene, stopped selling the resin for plumbing applications. In 1996, U.S. Brass introduced QestPEX plumbing systems that used pipe extruded from cross-linked polyethylene resin instead of polybutylene.

This litigation--which began shortly after legal proceedings that ended with a California state court ordering U.S. Brass to pay $3.6 million in damages because of a defective plumbing device in 1993&mdash′ompted U.S. Brass to file for reorganization under Chapter 11 of the Federal Bankruptcy Code in 1994. Shell Chemical and Hoechst Celanese, as the developers of raw material for polybutylene systems, offered a $950 million settlement to repair plumbing systems and pay for property damage to those consumers adversely affected by polybutylene plumbing systems. As the largest manufacturer of these systems, U.S. Brass agreed to contribute to the settlement as well. (A resolution of the U.S. Brass bankruptcy was completed in fiscal 1998, under Zurn ownership.)

To accommodate the production of the QestPEX line, U.S. Brass added production capacity to its plants. The Abilene, Texas, manufacturing facility--where faucets were made&mdash-hanced its operating systems and invested in capital to ensure sufficient production capacity for QestPEX products.

Other North American Divisions

Selkirk Mesbestos and Dry Manufacturing, two other divisions of Eljer, were considered the North American leaders in registers, grilles, and venting systems. Each division made and sold HVAC products--notably registers, grilles, venting systems, prefabricated chimneys, air diffusers, and fireplaces--under the brand names of Metalbestos, Airmate, P.S. Chimney, and Sel-Vent. Their venting systems in residential, commercial, and industrial construction provided for venting discharges from furnaces, appliances, boilers, or diesel engines. The companies' plants in Winters and Coleman, Texas, manufactured registers, grilles, fireplaces, diffusers, and gas vents, while plants in Logan, Ohio, and Nampa, Idaho, made gas vents and chimney systems.

Selkirk/Dry, based in Canada, manufactured products--sold in the United States as Airmate and Selaire brands--for new residential and commercial construction. The company marketed these products in Canada under the Lloydaire trade name and in the retail market under the Showcase trademark. Selkirk/Dry also made specialty products such as gas and woodburning fireplaces. The company's plant in Brockville, Ontario, Canada, manufactured fireplaces and chimney systems, and the plant in Mississauga, Ontario, Canada, produced registers and grilles.

International Operations

Eljer began its European operations in 1964. With subsidiaries in the United Kingdom and Germany, Selkirk Europe made and sold prefabricated chimneys and venting systems. The company provided commercial, industrial, and residential markets with products for new construction, repair and replacement, and energy conversion. The company ranked as a market leader in energy conversion in Europe--especially in Eastern Europe&mdash it converted to natural gas. Projections suggested this as a strong market for the future. The company's European brands included Selkirk, Nova, Supra, and Europa trademarks. Selkirk Europe maintained plants in Barnstaple, England, and in Mullicott Cross, England, for the manufacture of gas vents, chimney systems, and venting and specialty products. Selkirk Europe also sold beyond Europe. According to the company's 1996 annual report, "Eljer Industries recognizes the acceleration and integration of the global economies and continues to implement its strategies to grow on a worldwide basis. Our markets include not only North America, but also Europe, South America, and the Far East.... Eljer sees growth opportunities in South America and continues to grow its presence in the Pacific Rim countries, designing products to fit this market's needs. Our presence has also increased in the Middle East, where the rebuilding process continues to bring significant opportunities for specifying our product. Selkirk Europe's new product introductions have enhanced its penetration of the European markets. The result has been significant improvement in the eastern and southern European markets."

Another subsidiary with international scope, Industrias Eljer de Mexico, S.A. de C.V., was formed under Mexican laws in Ojinaga, Chihuahua, Mexico, in 1995. This subsidiary maintained responsibilities for assembly and packaging operations.

Spinoffs and Mergers, 1980s-90s

Household International acquired the enterprises that comprise Eljer Industries during the 1980s. On January 26, 1989, Eljer Industries incorporated itself in Delaware as a wholly owned subsidiary of Household International. On April 14 of that year, all outstanding shares of Eljer common stock were distributed to holders of Household International's common stock, and Eljer became a publicly held corporation. In 1993 Eljer lost a fraud and misrepresentation case to a former partner of Household. Arbitration in that case called for Eljer to pay $12.2 million to the company. Eljer initiated plans to spin off from Household two years later.

Late in 1996 Eljer announced its plans to merge with Zurn Industries, Inc. All outstanding shares of Eljer common stock were sold at $24 per share. Like Eljer, Zurn manufactured and marketed plumbing products, in addition to providing water resource construction services and fire protection systems. Zurn was attracted to Eljer as it sought to expand its plumbing products business. The merger was expected to establish a new forerunner in the plumbing products and HVAC markets.

Then in June 1998, it was announced that U.S. Industries, formerly part of Hanson PLC, would merge with Zurn in an all-stock transaction. At the time, Zurn had annualized sales of $634 million, while U.S. Industries--whose other holdings included Ertl toys, Jacuzzi, EJ Footwear, and Lighting Corporation of America--had posted revenues of $2.3 billion. A few weeks prior to the announcement, Zurn reported $28.1 million in net income for the fiscal year ended March 31, 1998, a 28 percent increase over 1997. A significant percentage of the increase was attributed to the Eljer business and its "operating synergies" with Zurn. Presumably, this strong alliance would continue under the guidance of U.S. Industries.

Principal Subsidiaries: Eljer Plumbingware; U.S. Brass; Selkirk Metalbestos and Dry Manufacturing; Selkirk/Dry (Canada); Selkirk Europe (U.K.); Eljer de Mexico, S.A. de C.V.

Additional Details

Further Reference

"Eljer Foundry Lowers Belt Splicing Costs," Foundry Management & Technology, January 1996, p. F3."Eljer Industries Reports Court Ruling in U.S. Brass Bankruptcy," Business Wire, May 17, 1995, p. 5171151."Eljer Industries Reports It Is Participant in Proposed Polybutylene Settlement--Eljer Agreement Subject to Confirmation of Reorganization Plan Providing Complete Relief to Eljer and U.S. Brass Unit," Business Wire, November 9, 1995, p. 11091151."Eljer Industries Reports Strike at Salem, Ohio, Plant," Business Wire, March 6, 1996, p. 3061271."Eljer Provides Update on U.S. Brass Bankruptcy," Business Wire, April 15, 1996, p. 4151231."Eljer Reports on U.S. Brass Bankruptcy; Receives Favorable Ruling in Direct Claims Case; Reports Ruling in Suit Against Household International," Business Wire, June 26, 1995, p.6261087."Kohler Sues Eljer; Says Styles, Colors, Marketing Copied," Contractor, May 1993, p. 63."Patent Suit Adds to Eljer's Legal Problems," Chilton's Hardware Age, June 1993, p. 32.Schmitt, Richard B., and Carlos Tejada, "Judge Approves $950 Million Settlement of Suit over Polybutylene Plumbing," Wall Street Journal (eastern edition), November 10, 1995, p. A4."United States Brass Corporation Files Third Amended Plan of Reorganization," Business Wire, December 2, 1996, p. 12021076."U.S. Industries and Zurn Industries Complete Merger," Dallas, Zurn Industries, Inc., June 11, 1998."Zurn Industries, Inc., to Buy Eljer Industries, Inc.," Business Wire, December 16, 1996, p. 12161093."Zurn Reports Strong Operating Performance for Fourth Quarter and 1998 Fiscal Year," Dallas, Zurn Industries, Inc. May 27, 1998.

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