And Still They Rise.

Through partnership, acquisition and synergy, the ascent of the B.E. Industry/Service 100 will not be denied

After more than a decade as the nation's largest black-owned company, TLC Beatrice International Holdings Inc. relinquished its hold on the title of largest black-owned company in the nation. But the retrenchment of TLC is one of many tales that have occurred among the nation's largest black-owned businesses in what has been both a compelling and portentous year.

Certain sectors proved to be particularly profitable for our industrial/service companies. These included the information technology sector as concerns such as World Wide Technology (No. 6 on the BE INDUSTRIAL/SERVICE 100 list) and Digital Systems International Corp. (No. 18 on the BE INDUSTRIAL/SERVICE 100 list) saw double-digit percentage increases in revenues in 1998. The food manufacturing business also proved to be a booming arena, as Simeus Foods International and Hawkins Food Group also saw rapid increases in revenue.

Amid a flurry of recent activity, the dethroning of TLC Beatrice was not unexpected. The company's rapid rise to prominence is well documented. The dream of the late CEO Reginald Lewis was realized when he orchestrated the historic $985 million acquisition of the company in 1987. The deal catapulted the company to the head of the BE INDUSTRIAL/SERVICE 100 list in 1988 and Lewis into business lore. TLC continued to prosper following Lewis death in 1993. But as his widow, Loida Lewis, ponders the next chapter in her life, the dismantling of TLC, which began in 1997, continued throughout much of last year. The company, which had $2.2 billion in sales in 1996, sold off its French food-distribution business for $573 million in 1997. That sale brought TLC back down to earth, but still allowed it to hold on to its No. 1 ranking. But the breakup continued last year, as the company sold its interests in its European beverage group for $44 million. As a result, there was a 77% drop in revenues from the $1.4 billion the company earned in 1997 to the $322 million it earned in 1998.

"This is part of a managerial strategy to unlock the value of the company for our shareholders," says TLC Vice President Butch Meily. "Selling the beverage group will enable the business to continue to develop and grow." Perhaps TLC, in a different incarnation, will indeed return one day to its top ranking. But for the time being its departure paved the way for an interesting battle between John Johnson's Johnson Publishing Co. and Bruce Llewellyn's Philadelphia Coca Cola Bottling Co. for the coveted top spot. When the smoke cleared, Llewellyn's concern, whose revenues increased 8.9% to $389 million in 1998, rose to the top spot on the the BE INDUSTRIAL/SERVICE 100 list.

A YEAR OF UPS AND DOWNS 

But before we look forward, let's consider what's occurred over the course of the past year. TLC wasn't the only industrial/service firm to go through radical restructuring in 1998. The granddaddy of BE 100s companies, 116-year-old C.H. James & Son (No. 78 on the BE INDUSTRIAL/SERVICE 100 list with $31.4 million in sales), recently completed a strategic divestiture of North American Produce (NAP), valued in excess of $10 million. James also sold its 40% stake in GSF Australia, a Sydney, Australia-based company that processes and distributes pre-cut lettuce to McDonald's. "I had everything tied up in the business," Charles H. James III says. "I felt it was time to make sure that my family's future was secure, and, at the same time, free up dollars to reinvest in the business."

Closer to the home front, BLACK ENTERPRISE publisher Earl G. Graves, also the CEO of Pepsi Cola of Washington, D.C. L.P. rode the wave of soft drink industry buybacks as he sold the majority interest in his distributorship, Pepsi Cola of Washington, D.C.L.P. back to Pepsi. Graves retains a minimal stake in the business.

Other deals involving BE 100s CEOs are pending. Russell Simmons, CEO of Rush Communications, is in the final stages of negotiating a deal that will see his remaining 40% interest in Def Jam Records (home to rappers Jay-Z, DMX, Foxy Brown and the Wu-Tang Clan's Method Man) go to Seagram Co. for about $100 million to $110 million.

Word on the street is Simmons isn't the only CEO looking to sell off his enterprise. Industry insiders say two of the BE advertising agencies, UniWorld Group Inc. and Burrell Communications, are in early talks that could culminate with the sale of either firm.

But while many companies divested themselves of various holdings, others worked vigorously not only to stay on, but to increase their rankings on our list. For these companies, the key was often growth through acquisition, innovation or enterprise.

Case in point: Terry Manufacturing Co., which among other recent transactions landed a lucrative contract with the National Hockey League to produce NHL-branded apparel. The Roanoke, Alabama-based apparel manufacturer already boasts over 150 licenses for collegiate apparel. "But we believe the NHL license will be a growing part of our business," says Co-CEO Roy Terry. "We believe the product range is the broadest license ever awarded to a minority firm by a major sports league."

As it courts potential suitors, advertising firm UniWorld Group Inc. has already expanded its orbit by hosting such events as the UniverSoul Circus and the Acapulco Black Film festival. Last year it fully embraced this niche by launching a new division, Uniworld Films, which will work with existing film studios to market black-themed films to an African American audience.

On other fronts, plans to bring Black Entertainment Television back into private hands were finalized in 1998. CEO Bob Johnson announced his desire to reclaim his company in 1997 -- thus opening up his concern to perhaps more speculative maneuvers without risking the wrath of nervous stockholders. Soon after, the company announced plans to move ahead with the creation of its own movie production company. Unfettered by the quarter-to-quarter profit mentality of sensitive shareholders, Johnson says he at last can focus on the long term. The movie studio will specialize in small, independent films, producing approximately three per year. "So we plan on committing to this venture over a long period of time," says Johnson.

Some executives are aggressively seeking out venture capital to help grow their companies. Pro-Line Corp. recently received a $5 million cash infusion from venture capital firm Patricof & Co. Ventures Inc., a leading international private equity firm. CEO Comer Cottrell says the goal is to increase the sales of his Dallas-based cosmetics and haircare company nationally and internationally. Then he plans on seeking acquisition opportunities within his industry. "There have been quite a few acquisitions in our industry in recent months," says Cottrell. "It appears that today bigger is better."

That mandate hasn't been lost on fellow BE 100s CEO Carlton Highsmith. The CEO of Specialized Packaging Group (No. 35 on the BE INDUSTRIAL/SERVICE 100 list with $71.3 million in sales) recently boxed up a $24 million acquisition of Lawson Mardon Carton of North America. That purchase allowed SPG to cut out an expensive middleman by producing its own packaging within the company, rather than designing packaging and outsourcing the manufacturing to another firm. A few months later Highsmith leveraged the clout of his newer, bigger concern, snagging a lucrative contract with Procter & Gamble. The three-year, $100 million contract will allow SPG to handle the global packaging of P&G's Fabric and Home Care lines, which include products such as Tide, Cheer and Puffs. From now through December 2001, the Hamden, Connecticut-based SPG will receive $33.5 million annually as a result of the contract. "SPG was already a great packaging, designing and engineering company," says Highsmith. "By combining it with the excellence of Lawson Mardon, we expect to become one of the highest-rated packaging companies in the country."

Highsmith wasn't alone in his desire to seek growth through acquisition. Golden West Foods CEO Frank Brooks recently purchased a turkey-processing plant from Wampler Foods Inc., which he then converted into a chicken-processing facility. The new plant will manufacture breaded and batter-dipped chicken tenders, patties and nuggets. And it now opens up Golden West (No. 65 on the BE INDUSTRIAL/SERVICE 100 list with $37.5 million in sales) to a client base that potentially includes Kentucky Fried Chicken and lunch-school programs across the United States.

Others in the food game saw growth through expansion. Dumas M. Simeus, CEO of Simeus Foods International, acquired a processing facility of his own. Simeus purchased Fast Food Merchandisers Inc. (FFM) of Forest City, North Carolina, which had projected sales of $70 million in 1998 and a team of 350 employees. The acquisition expanded the Texas-based concern to more than 750 workers and helped boost revenues 42% to $150 million. "This is really a step toward reaching our vision of being a $1 billion company in the next five years," says Simeus.

OUT WITH THE OLD ...

While many moved up, others moved on. IntelliSys Technology Corp., which finally made the BE INDUSTRIAL/SERVICE 100 list in 1996, departed following a deal that placed a majority of the firm's ownership in the hands of four executives from high-tech giant BTG, reducing the African American ownership to 50%.

Other companies fell off because of financial difficulty, among them systems engineering company Maxima Corp. The Lanham, Maryland-based concern recently filed for bankruptcy.

The computer systems integration company (the 1986 BE Company of the Year), which had sales of more than $60 million at the peak of its success a decade ago, saw revenues shrink steadily and, according to court filings, owes about $2.5 million, mostly in taxes and debts to suppliers. In recent years, the company has lost nearly all of its key contracts and spent considerable sums on a legal dispute between company founder Joshua Smith and his son, Joshua Smith II, who was a Maxima vice president until his father fired him in 1993. Maxima sued the younger Smith and two colleagues for allegedly diverting company funds improperly; Joshua Smith II responded with a lawsuit accusing the company of defamation.

A settlement in the case was eventually negotiated, but Maxima had lost many of its government contracts and the business was in turmoil.

Other companies bowed to the consolidation trends within their respective industries and were sold outright. Such was the case with Soft Sheen, which was sold to the Paris-based cosmetics giant L'Oreal.

The sale of Soft Sheen to L'Oreal came as a surprise to few. Indeed, the sale was just the tip of a shakeup in the ethnic haircare industry that also saw Johnson Products sold to Carson Products from IVAX for $70 million. Terri Gardner, who remains at the company as president of the Soft Sheen division, said Soft Sheen fielded overtures from many companies while the concern was on the block, and was contacted by L'Oreal in 1997. "In L'Oreal we saw a strategic partner with muscle through which we could fulfill our vision for the company," says Gardner. "Going forward, this opportunity will magnify Soft Sheen's success on multiple levels."

...IN WITH THE NEW

Akinola Olajuwon may not be headed to the Basketball Hall of Fame like his older brother Hakeem, but this former Merrill Lynch stockbroker is making his own way. He's the CEO of Olajuwon Holdings, a Houston-based investment firm that counts among its holdings 73 Denny's restaurants across 13 states. The restaurants accounted for $85 million in revenue last year. Olajuwon is an example of growth through ingenuity. Exploiting Denny's parent company Advantica Restaurant Group's desire to change its image in the African American community, Olajuwon saw an opportunity and jumped at it. "I see it as an advantage, because if you're coming into a company that is looking to change its image, you're in a good position to work with them and help prove this is a good place to be."

Others executives are returning in a lead role after serving as CEOs of majority-owned concerns. Bob Holland spent 10 months at ice cream manufacturer Ben & Jerry's before finding his way to Workplace Integrators. And there's Cathy Hughes, founder of Lanham, Maryland-based Radio One. Over the past year, Hughes' broadcasting concern has snapped up radio outlets left and right. It broke into a number of lucrative markets, including Detroit. (See "The New Blood," this issue).

So, as the makeup of the industrial/service rankings begins to shift, the question remains. What image will the listing reflect as we move into 2000 and beyond? Which companies will prosper and whose fortunes will fall? For now, the power players remain unknown. But one thing is certain. If black-owned businesses are to thrive in the future, simply maintaining the status quo won't get the job done. Perhaps with TLC Beatrice missing in action, the mere possibility of becoming the nation's largest black-owned business and breaking the billion-dollar mark will prod our CEOs to stretch farther and think globally. Who will accept the challenge? Who will be the next keeper of the crown?

[GRAPH OMITTED]

TOP TEN GROWTH LEADERS
                                          1997
COMPANY                  LOCATION         SALES(*)

Olajuwon Holdings        Houston, TX       3.000

H.L.W. FastTrack Inc.    Youngstown,       7.000
                         OH

Specialized Packaging    Hamden,          24.880
Group                    CT

Exemplar Manufacturing   Ypsilanti,       51.950
Co.                      MI

Fuci Metals USA Inc.     Northbrook,      86.500
                         IL

The Holland Group        Bingham Farms,   34.991
L.L.C.                   MI

Wilson Office            Carrollton,      31.000
Interiors                TX

Washington Cable         Lanham, MD       42.000
Supply Inc.

Rush Communications      New York, NY     40.000

Powers & Sons            Gary, IN         18.654
Construction Co. Inc

                           1998      PERCENT
COMPANY LOCATION          SALES(*)   INCREASE

Olajuwon Holdings         85.000     2733.33%

H.L.W. FastTrack Inc.     25.000     257.14%

Specialized Packaging     71.310     186.62%
Group

Exemplar Manufacturing   132.363     154.79%
Co.

Fuci Metals USA Inc.     200.000     131.21%

The Holland Group         80.798     130.91%
L.L.C.

Wilson Office             55.000     77.42%
Interiors

Washington Cable          74.300     76.90%
Supply Inc.

Rush Communications       70.000     75.00%

Powers & Sons             30.624     64.17%
Construction

1999 TOP 100 INDUSTRIAL/SERVICE COMPANIES

BLACK INDUSTRIAL/SERVICE   1997           1998     % CHANGE
COMPANIES

NUMBER OF EMPLOYEES        48,005       59.648     24.25

TOTAL SALES(*)         $7,637.958   $7,734.920      1.27

(*) In millions of dollars, to the nearest thousand. Prepared by B.E. Research. Reviewed by Mitchell & Titus L.L.P.

TOP TEN EMPLOYMENT LEADERS

COMPANY                  LOCATION          EMPLOYEES

Hawkins Food Group       Detroit, M        6,143

Active Transportation    Louisville, KY    3,200

Olajuwon Holdings        Houston, TX       3,000

Johnson Publishing       Chicago, IL       2,647
Company

V and J Holding          Milwaukee, WI     2,600
Companies Inc.

Bridgeman Foods          Louisville,KY     2,500

The Bartech Group        Livonia, MI       2,010
Inc.

H.J. Russell &           Atlanta, GA       1,900
Company

Philadelphia Coca-Cola   Philadelphia, PA  1,700
Bottling Co.

Barden Companies         Detroit, MI       1,675
Inc.

                        1998       EMPLOYEE-TO
COMPANY                 SALES(*)   SALES RATIO(**)

Hawkins Food Group      129.703    1:21

Active Transportation   250.000    1:78

Olajuwon Holdings        85.000    1:28

Johnson Publishing      371.945    1:141
Company

V and J Holding          74.000    1:28
Companies Inc

Bridgeman Foods          72.000    1:28

The Bartech Group Inc.   76.500    1:38

H.J. Russell & Company   184.436   1:97

Philadelphia Coca-Cola   389.000   1:229
Bottling Co.

Barden Companies         143.500   1:86
Inc.

(*) In millions of dollars, to the nearest thousand.

(**) In thousands of dollars, as of December 31, 1998.

Prepared by B.E. Research. Reviewed by Mitchell & Titus L.L.P.3