LDI Ltd., LLC - Company Profile, Information, Business Description, History, Background Information on LDI Ltd., LLC

54 Monument Circle, Suite 800
Indianapolis, Indiana 46204

Company Perspectives:

As a privately held growth institution, it is the mission of LDI Ltd. , LLC, to manage a portfolio of strategic businesses for the purpose of maximizing long-term intrinsic value for our customers, employees and shareholders. Values guiding this mission are: leadership; mainta ining the Company's reputation for integrity; superior service and pr oducts; and outstanding customer, employee and community relations.

History of LDI Ltd., LLC

LDI Ltd., LLC, is a privately owned management holding company that s pecializes in whole distribution of clothing, motorcycle parts, bicyc le frames, and auto products. The company owns Tucker Rocky Distribut ing, a wholesale distributor of apparel and aftermarket equipment for the watercraft, motorcycle, and snowmobile markets. LDI also holds a majority stake in FinishMaster, Inc., a public company that is a lea ding independent distributor of automotive paints, coatings, and rela ted accessories to the $2.5 billion U.S. automotive refinishing m arket.


The company began in 1912 when Howard J. Lacy co-founded the U.S. Cor rugated-Fibre Box Company in Indianapolis, Indiana. His son, Howard J . Lacy II, took over the reins of the company in 1952. Upon his unexp ected death from a heart attack in 1959, his wife Edna Lacy at the ag e of 53 immediately took over leadership responsibilities as presiden t, chairman of the board, and treasurer of the company that her fathe r-in-law had started. By this time, the company had six plants in Ind iana, New York, Pennsylvania, Ohio, Connecticut, and West Virginia. E dna Lacy fended off offers to purchase the company with the intention to carry on the family run business.

Mrs. Lacy was born Edna Balz and raised in Indianapolis. After gradua ting from the University of Michigan in 1928 with a degree in educati on, she taught in the Indianapolis public schools. She married Howard Lacy in 1934 and settled into the role of conventional wife and moth er. After she assumed the leadership of the company, Edna Lacy grew a nd diversified the business as a national leader in corrugated box pr oduction. In 1973, she acquired Jessup Door Company, a producer of so lid wood panel doors, and, in 1972, the company changed its name to L acy Diversified Industries to better reflect its diversification stra tegy. Edna Lacy retired from the day-to-day operations in 1983, handi ng over the reins to her son, Andre. She remained as chairman of the board, however.

The 1980s: New Leadership, New Direction

As LDI's new president and chief executive officer, Andre B. Lacy alr eady had a long association with the family business. He began his ca reer with the company as a child, distributing mail during summer bre aks from school. After graduating from Denison University in 1961 wit h a bachelor of arts in economics, he worked in various positions of increasing responsibility, including as analyst, sales representative , plant manager, regional manager, and eventually, executive vice-pre sident and chief operating officer. As LDI's president and CEO, Lacy soon grew unhappy with the company's direction and began a drastic re structuring. By closing down unprofitable facilities and upgrading ot hers, he and his managers established the company as the nation's sec ond largest independent box manufacturer.

The company made a profitable venture of selling cardboard to contain every conceivable product, but Lacy grew tired of the business. As a result, he decided to sell it. In recounting the reasons behind the divestment, Lacy told the Indianapolis Business Journal in 200 4 that the industry "had a lower appetite for making money than we di d." In the same year, he told the Indiana Business Magazine th at in "1980 I wasn't comfortable where the company was headed. I thou ght we were coming up against a ceiling for what our company could be so we decided to make our move, make improvements and do an orderly divestment." Lacy's decision to sell the business initially ran into trouble with what he found to be an over-controlling and indecisive b oard, but the Lacy family and its outside board of trustees neverthel ess soon began exploring other industries, especially those in which they could add value to the product or service. The corrugated box bu siness was based primarily on a surrogate distribution model with the company buying a product, adding value, and selling it.

After divesting the corrugated box business in 1984, Lacy Diversified Industries became LDI Ltd., LLC, and Lacy began leading the company in the direction of acquiring and reinventing small niche distributor s. It first acquired Major Video Concepts, a recorded-videotape distr ibutor, followed in subsequent years by the purchase of eleven other distributors. LDI sought to invest in low-profile, small-niche distri butors in industries with a total market of $3 billion to $5 billion and in which it could be a leading player. Such small distrib utors often escaped the notice or otherwise attracted little interest of large corporate giants. In 1989, LDI purchased Tucker Rocky Distr ibuting, a Dallas wholesale distributor of after-market parts for pow er-sports industry, including motorcycles, snowmobiles, all-terrain v ehicles, and watercraft. With this purchase, LDI also acquired Answer Products, Inc., a bicycle products distributor based in California, which was owned by Tucker Rocky. Two years later in 1991, the Tucker Rocky subsidiary acquired MS Racing, a leading off-road motorcycling distributor and apparel brand based in Riverside, California, for &#3 6;1.7 million though bankruptcy court. The purchase gave the subsidia ry exclusive rights to High-Point, MS Racing, and Malcolm Smith produ ct brands. Tucker Rocky also acquired Biker's Choice (formerly NEMPCO ), a leading cruiser aftermarket wholesaler.

The 1990s: New Acquisitions

In 1996, the private holding company LDI bought a 67 percent stake in publicly traded FinishMaster of Kentwood, Michigan, a distributor of automotive paints, coatings, and related materials to the automotive refinishing industry. Founded in 1968, FinishMaster grew to operate numerous outlets throughout the U.S. before being acquired by LDI. On e year later in 1997, LDI promised to become a $1 billion company and the leader in the after-market auto finishes business with a &#3 6;69 million offer to purchase of California-based Thompson PBE, Inc. , FinishMater's main rival. The offer was made through LDI's controll ing interest in FinishMaster for $8 a share of Thompson stock, an d stood to give FinishMaster the number one market position in North America.

The two companies--which represented the largest players in the fragm ented market of paint suppliers to auto-body shops and other metal-pa inting businesses--promised to create a company with sales of more th an $300 million. Although both companies had proved profitable by doubling sales since going public in the early 1990s, their profits dropped off as they raced to consolidate the industry through acquisi tion. By comparison, in 1996, FinishMaster reported net income of &#3 6;700,000 on revenue of $125 million, while Thompson posted $ 1.1 million on sales of $178 million. As Thompson's sales rose, i ts stock nose-dived, falling from $19.50 per share in June 1995 t o $2.75 in April. FinishMaster's stock also had taken a hit, but the fundamental difference between the two firms was ownership. Unlik e FinishMaster, Thompson was largely owned by institutional investors and a venture capital firm with expectations to show short-term resu lts. As a subsidiary of a privately-owned firm, however, FinishMaster could afford to be patient in order to grow the business over the lo ng term. With the precipitous decline of Thompson's stock price, Lacy saw opportunity in buying the firm to further his aims of consolidat ing and dominating the industry with an all-cash deal with bank loans . With the acquisition, FinishMaster hoped to battle the estimated 4, 000 competitors in the $3.5 billion industry on a customer-by-cus tomer basis. In subsequent years, FinishMaster winnowed down the nume rous competitors through the acquisition of small distributors, mergi ng them under the FinishMaster umbrella, and bolstering the sales for ce. At the time of LDI's offer for Thompson, the holding company also held a number of other firms, including Tucker-Rocky Distributing, a Dallas supplier of outdoor sports equipment; Answer Products, Inc., a California bicycle-products distributor; and Major Video Concepts, an Indianapolis firm that distributed videos to stores nationwide. In addition, LDI managed an investment portfolio valued at more than &# 36;100 million.

In 1998, LDI's power sports distributor Tucker Rocky announced an ove rhaul of its warehouse distribution network. At the time, Tucker Rock y reached more than 9,000 dealers, had 500 plus employees, and did bu siness with most of the major vendors in the powersports market. The reorganization involved going from twelve branches/warehouses to eigh t, while at the same time tripling its total warehouse space. Tucker Rocky aimed to implement the changes to better serve manufacturers an d retailers with a more up-to-date, state-of-the-art distribution net work. The company believed that new technology would enable it to imp rove product forecasting, ordering, warehousing, and inventory manage ment. The old warehouse system had evolved through a series of acquis itions rather than according to a master plan. The new locations for the implementation of purpose-built facilities were selected for thei r proximity to major shipping centers around the country. The reorgan ization also called for every warehouse to stock every part, which wo uld allow the firm to efficiently serve its various dealers.

The 2000s: Continued Growth

In September, 2003 FinishMaster expanded into ten new markets with th e acquisition of Germany-based BASF Corporation, which had operated u nder the name Automotive Refinish Technologies. The firm's sales outl ets were in Atlanta and Augusta, Georgia; Austin, Texas; Buffalo, New York; Huntsville, Alabama; Las Vegas, Nevada; Memphis, Tennessee; Ok lahoma City, Oklahoma; St. Louis, Missouri; and Spring- field, Illino is. The transaction called for FinishMaster to become BASF's national distributor for paint and materials sales earned through BASF's inte rnet ordering site.

In March 2004, LDI sold Answer Products, Inc., which had become an in dustry leader in the making of handlebars and suspension systems for mountain bikes, to venture capitalist firm, Swander Pace Capital (SPC ) for an undisclosed sum. The sale represented LDI's strategy of spin ning off firms when it believed the industry had reached capacity. Fo r example, it had sold its first venture, Major Video Concepts, in 20 00 after riding the consumer market for home-videos from the beginnin g to almost the end. Answer's director of brand management and sales, Joel Smith, said the bicycle products firm was happy about the chang e and expected the sale would result in expanded business. Based in S an Francisco, California, SPC operated as an investment firm with mor e than $660 million in capital. After being founded in 1996, the investment firm went on an aggressive buying spree, acquiring dozens of consumer product brands. The firm came to manage an eclectic assor tment of companies, including glove and umbrella maker Totes-Isotoner , Mrs. Fields cookies, Reef sandals, Skateboard World Industries, and others. Although LDI had nurtured Answer's growth since its acquisit ion in 1989, the bicycle firm's options were limited when the holding company began an exclusive focus on the distribution business. LDI h ad been looking to sell Answer for five years before concluding the d eal with SPC. Nonetheless, LDI continued to see opportunities in Tuck er Rocky and FinishMaster through developing a strong sales force and making sure the companies were client-friendly.

Principal Subsidiaries: FinishMaster, Inc.; Tucker Rocky Distr ibuting.

Principal Competitors: Cannondale Corporation; Genuine Parts C ompany; Custom Chrome Inc.


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