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Fuqua Enterprises, Inc., through its principal subsidiaries, is a leading supplier of processed leather to manufacturers of finished leather goods and a growing manufacturer of medical products for the institutional and home health care markets. In 1995 the company changed its name from Vista Resources, Inc., to Fuqua Enterprises, reflecting the growing involvement of the Fuqua family, headed by 77-year-old John B. Fuqua and his son, 44-year-old J. Rex Fuqua. Not to be confused with the similarly-named Fuqua Industries, Inc. (see International Directory of Company Histories, Vol. I), Fuqua Enterprises sold off its insurance subsidiary in 1995 and decided to get into the growing medical products market by acquiring two companies in that industry in 1995 and 1996. The company also retained its leather tanning businesses, the Irving Tanning Company, which was acquired in 1962, and Kroy Tanning Company, acquired in 1965.
Vista Resources, Inc.
As the company began its second century of operations in 1980, it changed its name from the Seagrave Corporation to Vista Resources, Inc. Seagrave and its subsidiaries manufactured a wide range of products, including paint, industrial coatings and chemicals, glass products, and metal windows and related products for large buildings, among others. They were also involved in leather tanning, the sale of architectural products, and the marketing of solid waste disposal systems.
Along with changing its name, Vista decided that its future was in the leather tanning business. It sold off all of the assets or capital stock of its other operating businesses effective September 30, 1980, for approximately $20.3 million and the assumption of certain liabilities. The businesses that were sold generated approximately $86.4 million in annual sales in 1979. Vista retained its leather business and $6.5 million in cash.
The late 1970s were an era of escalating inflationary and deflationary pressures. Interest rates were soaring and federal monetary policies were generally unfavorable to business. The sale of more than $20 million in assets, primarily for cash and in excess of their net worth, significantly helped Vista increase its liquidity and book value while reducing its fixed debt. In light of the prevailing economic conditions, the company made a strategic decision to focus on building the per share value of its stock and having cash resources sufficient to ride out money shortages and credit crunches.
In 1981, its first full year of operations as Vista Resources, the company's leather operations show improved sales volume, produced a better quality of leather products, and upgraded its equipment. Vista terminated a joint venture with its Spanish partners and took over ownership of the Wilton, Maine facilities, which would be used exclusively for the production of lambskins by its subsidiary, Kroy Tanning. Financial results showed a significant improvement in earnings per share, to $2.28, on sales of $45.8 million. At this time Vista's stock was traded on the NASDAQ exchange.
For most of the 1980s, Vista's sales volume fluctuated between a low of $42.3 million in 1982 and highs of $60 million in 1984 and 1986. The company paid its last cash dividend in 1988. Economic conditions in general were not favorable for Vista's leather operations. Lower offshore labor costs attracted much of the domestic market for shoes and other finished leather goods, and U.S. leather production declined during the 1980s. Personal consumption of finished leather goods was adversely affected by a recession. The only benefit to Vista was that its raw material costs, primarily leather hides and lambskins, also declined. Lower raw material costs, combined with more efficient production, enabled Vista to improve its profit margins.
According to Barron's, Vista in 1989 was a cash-rich company, holding cash or cash equivalents equal to 73 percent of the value of its stock. In April 1989 John B. Fuqua, aged 70, acquired 35 percent of Vista Resources from Vista's long-time president and CEO, Arnold A. Saltzman. J.B. Fuqua, as he was known, became chairman of the board and brought in his associate Robert S. Prather, Jr., as president and CEO. He moved the company's headquarters to Atlanta from New York City and had Vista's stock listed on the New York Stock Exchange.
Sensing a takeover, Wall Street pushed Vista's stock price up from about $9 to $18. Investors were already familiar with the Fuqua name. As chief executive officer (CEO) of Atlanta-based Fuqua Industries, Inc., J.B. Fuqua transformed the small brick manufacturer in 1965 into a $2 billion conglomerate in the 1980s that sold lawn mowers, sporting goods, and photo finishing. In 1989 he sold his seven percent stake in Fuqua Industries to Intermark and retired as CEO.
Under new management in 1989, Vista's leather sales improved to more than $70 million. The company declared a 400 percent stock dividend in August of 1989 in lieu of a cash dividend. Adjusted for the split, its stock traded in the $15.25 to $7.375 range in 1989. The next year was even better. Leather sales reached a historical high of $71.9 million, two percent higher than 1989. Financially, 1990 was a year for the company to "clean up its balance sheet," according to the annual report. Vista "wrote off goodwill and provided for certain foreseeable contingent and real liabilities," according to Chairman Fuqua. The company recorded $2.026 million in corporate expenses and took a $1.515 million loss from discontinued operations and from the settlement of litigation as well as a $1.715 million loss from continuing operations. The loss from discontinued operations represented $.41 per share.
The year 1991 began with the installation of new management. Fuqua's associate Robert Prather left under friendly terms as president and CEO. Fuqua brought in Samuel P. Norwood III, to take over as president and CEO. Norwood had worked with J.B. Fuqua for approximately 20 years in corporate development at Fuqua Industries. As Chairman Fuqua noted in the company's annual report, "As has been my practice in other companies over the past 30 years, a portion of [management's] personal compensation is determined by the earnings for which each one is responsible, and is also tied to the increase in the value of the stock you and I own." He also noted that leather was not a high-growth industry, hence the compelling need to diversify through acquisitions. In fact, leather sales declined ten percent in 1991, due to lower selling prices and to a lower quantity of leather produced. Modernization of the company's tanneries, located in Maine, produced a positive effect on profits for the second half of 1991 and allowed the company to reduce its inventories.
Still flush with cash, Vista announced in September 1991 that it had reached an agreement to purchase the stock of the Atlanta-based American Southern Insurance Co. from InterRedec, Inc., which was based in Savannah, Georgia. The sale price of $30 million included $20 million cash at closing, a five-year note of $8 million, and $2 million payable in five years based on meeting specific earnings targets in 1992, 1993, and 1994. As reported in the Journal of Commerce, closing of the deal was subject to regulatory approval and "the absence of any governmental action precluding the transaction." What the Journal of Commerce did not point out, but the New York Times did, was that American Southern's parent, InterRedec, was the holding company for the American investments of Saudi Arabian Ghaith Pharaon. Pharaon was a central figure in the unfolding Bank of Credit and Commerce scandal, and the U.S. government had frozen his American assets in September of 1991. However, InterRedec was allowed to withdraw funds to finance its operations, but it had to put up as collateral its large estate at its headquarters in Richmond Hill, Georgia. The government's action to freeze its assets was simply designed to keep Mr. Pharaon from taking any cash out of the country.
In October, the sale of American Southern to Vista was approved by Georgia's insurance commissioner. The insurance company had annual revenues of about $40 million. It specialized in six distinct types of insurance, but its primary niche was insuring fleet vehicles owned by state and local governments. The company was licensed in 15 states and conducted business on a "non-admitted" basis in two other states. At the time of the sale it had 39 employees, low overhead, and an experienced claims management staff. It also had a high-quality investment portfolio, with only short-term liabilities and no debt.
With the acquisition of American Southern, Vista was divided into two groups, the Leather Group and the Insurance Group. After sales for the Leather Group increased in 1992 by 30 percent as a result of increased domestic market share and growing export sales, the company posted sales of more than $100 million in 1993 for the first time in its history. American Southern contributed about $40 million.
In 1993 J.B. Fuqua paid $1 million to buy back the Fuqua Industries name from the company that subsequently renamed itself Actava Group, Inc. After J.B. left Fuqua Industries in 1989, the company had fallen on hard times. It was eventually merged into Metromedia International in 1995. In a 1991 article in Business Atlanta, Vista's new president, Samuel Norwood III, noted that "keeping the Vista name is not important." Few investment analysts had followed the company during the 1980s, so it was not a well-known name on Wall Street. In fact, Norwood didn't rule out the possibility of merging Vista with another, more well-known company as a way of enhancing its value when he came on board in 1991.
In 1994 sales rose to $126.5 million. During the year John J. Huntz, Jr., 43, was named to the new post of senior vice-president for corporate development. He was formerly managing partner of Noble Ventures International, a venture investment firm. At the end of the year Vista and its subsidiaries employed 672 people. The company owned active tanneries in Hartland and East Wilton, Maine, which it was in the process of modernizing, and a discontinued tannery in Ellsworth, Maine, plus corporate offices and insurance operations in Atlanta, Georgia.
In mid-1995 Vista announced that it was planning to change its name. It originally planned to change its name to Fuqua Industries, Inc., but instead changed it to Fuqua Enterprises, Inc. The name change reflected the growing investment and commitment of the Fuqua family to the enterprise. J.B. Fuqua brought in Lawrence Klamon, 58, a member of the prestigious Atlanta law firm Alston & Bird, to replace Samuel Norwood as president and CEO. Klamon was an officer of the former Fuqua Industries, Inc., for 24 years, rising from general counsel to serve as its president and CEO from 1989 to 1991. J. Rex Fuqua, son of J.B. Fuqua, became vice chairman whose duties included guiding strategic planning. John J. Huntz, Jr., was promoted to executive vice-president and chief operating officer. As the name change and new management were announced, J.B. Fuqua, then 77, was quoted in the Wall Street Journal as saying, "We're trying to see if you can go back and do a thing over again." Together, J.B. Fuqua and his son owned nearly 40 percent of the company's common stock.
Fuqua Enterprises, Inc.
Immediately following its change in name and management, Fuqua Enterprises announced in October 1995 that it was selling off its insurance unit, American Southern Insurance Co., to Atlantic American Corp. The sale price of $34 million was $4 million more than Vista paid for it in 1991. Although American Southern was a solid and profitable company, Fuqua Enterprises did not wish to remain in the insurance business. Keeping American Southern was "not consistent with our strategic direction," according to the company's 1995 annual report. The company expected to use the proceeds from the sale to expand further into growth industries in general and the medical equipment market in particular.
In November Fuqua Enterprises entered the medical equipment field with the purchase of privately-held Basic American Medical Products for $16 million. In addition to using cash for the acquisition, the company issued an additional 600,000 shares to Basic's primary shareholder. Basic was an Atlanta-based maker of healthcare equipment, primarily for institutional markets. Its products included patient beds, furniture, wheelchairs, and other patient aids for hospitals, extended care facilities, and home care. The acquisition of Basic also brought in SSC Medical Products, which Basic acquired subsequent to its agreement with Fuqua Enterprises. SSC was based in Tupelo, Mississippi, and produced home care beds. In the company's annual report, J.B. Fuqua noted that the medical equipment industry was a growing one.
In addition to getting into medical equipment, Fuqua Enterprises maintained its commitment to its leather tanning business, which continued to be profitable. In January 1996 the company decided to discontinue the operation of Kroy Tanning Co. and its tannery in East Wilton, Maine, which had been historically unprofitable. Kroy produced sheepskin and deerskin leathers which were sold mainly to garment manufacturers. All of the company's leather operations would be concentrated in its subsidiary, the Irving Tanning Company, and its 444,000-square-foot facility in Hartland, Maine. Over the past five years, Irving had undergone a $14 million capital improvement program.
Fuqua's leather business was now an international business that involved selling to Nike in Indonesia, Doc Martens in Thailand, and Reebok in China. Fuqua was also working on completing a joint venture in China that would use low-cost hides for products in Asia. In March 1996 Fuqua agreed to acquire a 70 percent interest in this joint venture for about $1.5 million. Under the joint venture, Fuqua would provide machinery and raw materials to a Chinese tannery. The joint venture provided Fuqua with a market for the lower-grade hides that it bought when it purchased truckloads of hides of varying grade levels. By exporting the lower-grade hides to China, Fuqua would be able to devote more of its tanning facilities to processing the higher grade leathers that were primarily used by its customers. Although Fuqua's leather operations were not dependent upon a single customer or a few customers, one individual customer in 1995 accounted for sales of $23.662 million, and another for $15.938 million. While the company had no foreign leather operations, sales to customers in foreign countries accounted for 27 percent of 1995 leather sales, down from 30 percent in 1994.
In March 1996 Fuqua Enterprises furthered its strategy to become a major provider of medical products by acquiring the Lumex medical products division of Lumex, Inc., for $40.75 million in cash. The division's major market was home health care, to which it sold specialty seating and healthcare beds, including wheelchairs, hospital beds, and reclining chairs for dialysis. It had sales in 1995 of about $63 million. It also sold to institutional markets, such as acute care and extended care facilities and dialysis clinics. The Lumex brand name had been in existence for over 35 years, and Fuqua acquired rights to use the name. Lumex was based in Bay Shore, Long Island, New York.
Soon after the acquisition Fuqua appointed a new president of Lumex and new head of marketing. It also eliminated about 60 redundant jobs at the Long Island facility and announced the closing of Lumex's Pennsylvania manufacturing plant, with operations to be transferred to Basic American's Mississippi and Wisconsin facilities. These moves were expected to lower production costs and improve capacity utilization of the company's facilities. The company's medical products were manufactured in Fond du Lac, Wisconsin, Toccoa, Georgia, and Tupelo, Mississippi. It also maintained a 50,000-square-foot medical products showroom in Atlanta.
With the acquisition of Lumex, Fuqua Enterprises was positioned to compete in two of the fastest growing medical markets, extended care and home health care. Together, Lumex and Basic American were projected to provide Fuqua with sales of $100 million in medical equipment alone.
Fuqua Enterprises expected to have a significant increase in net income and earnings per share in 1996, due to the addition of revenue from Basic American for a full year and from Lumex for approximately nine months. The outlook for the firm's leather operations was good, with strong retail demand and steady or falling raw materials prices. The joint venture in China was moving forward faster than expected. The company would also have use of the proceeds from the sale of American Southern. Results from the first half of 1996 supported the company's high expectations. Income from continuing operations for the first six months of 1996 was $3.4 million, or $.76 per share, on revenues of $78.7 million, compared with $2.0 million and $.52 per share on revenues of $58.1 million the previous year.
Principal Subsidiaries: Basic American Medical Products, Inc.; Irving Tanning Company; Lumex Medical Products, Inc.