B.E. Poised for Growth.

The B.E. Industrial/Service 100s companies expand their operations through acquisition and consolidation

DURING 2000, THE CHIEF EXECUTIVES OF AMERICA'S LARGEST black-owned businesses could have easily concluded that the Y2K bug was really in the economy, not in their computers, as what had been the longest sustained period of economic growth in the nation's history quickly turned into one of the fastest economic declines in history. But the dreaded downturn didn't deter the companies that comprise the BLACK ENTERPRISE INDUSTRIAL/SERVICE 100s from turning lessons learned during the last nine years of prosperity into the third straight year of record-breaking growth.

Sensing a change in the economic winds, many of these companies have been preparing themselves for operating in an economic climate that swiftly punishes those who make the slightest miscalculations (ask the dotcoms). Many of the old business fundamentals didn't seem to apply in 2000. Coveting and developing winning areas of business outweighed searching out new businesses. Closing down or selling areas of a business before they became unprofitable, and merging with others to maximize profits, seemed to offer the best opportunities for future growth.

There is more of an emphasis on measuring growth by profitability, not just by size. And if it's most profitable to sell when the value of your firm is highest, then you do it and look for another profitable company to acquire. In the new economy, things can change at any minute, so having a good sense of timing is important.

The timing of the nation's largest black-owned businesses was impeccable. Even as the economy slowed, total revenues for firms on the BE INDUSTRIAL/SERVICE 100s topped the $10 billion mark for the first time, moving up from $8.7 billion in 1999 to $10.9 billion in 2000. The 25.1% increase in revenues was powered by 80% of firms on the list showing an increase in revenues and the emergence of three companies debuting on the list with revenues of $200 million or better. In fact, 22 of these enterprises grossed more than $150 million. There were 16 such firms in 1999.

The strong growth in revenues has been offset by a slight decline in employment among the nation's largest black-owned businesses. In 2000, 65,898 workers were employed by the BE INDUSTRIAL/SERVICE 100s, a 2.5% decrease over 1999. Detroit-based Hawkins Food Group employed 5,833 workers, the greatest number of personnel among the BE INDUSTRIAL/SERVICE 100s list employment leaders (see chart).

[ILLUSTRATION OMITTED]

That revenues continued rising in a year marked by an economic downturn and early signs of an energy crisis is evidence that the companies of the BE INDUSTRIAL/SERVICE 100s have positioned themselves well to with-stand the uncertainties of the impending economic era.

MAKING MAJOR MOVES

The year 2000 was marked by two major events: the loss of a 20-year mainstay on the BE INDUSTRIAL/ SERVICE 100 list and the monumental earnings breakthrough of a relative newcomer that made it the second largest black-owned company in the nation.

The first big event: the astonishing sale of Washington, D.C.-based BET Holdings II Inc. to Viacom for roughly $3 billion in cash, stock, and debt--by far the year's major event. CEO Robert Johnson's sale of the parent company of Black Entertainment Television produced a mixed reaction in the black community, but the business community hailed the move as one of the most significant sales of a black-owned business in history. BET Holdings II Inc. ranked No. 6 on the 2000 BE INDUSTRIAL SERVICE 100 list with $225 million in sales, yet Johnson was able to wrangle 11 times that much in value from his suitors (see "betting on Black," January 2001).

Although the company is no longer black-owned, observers contend that its sale did wonders for the valuation of other black-owned media "fair-market value" for a company that specifically targets the black consumer than anyone else before him. The suggests that black consumers are beginning to be - valued as much as white consumers.

The second big event for the BE INDUSTRIAL/SERVICE 100s in 2000 was the meteoric rise of Pacific Network Supply. Last year, the San Jose, California-based firm ranked No. 37 among black-owned businesses with gross sales of $71 million. This year, fueled by a new agreement to help deploy DSL products, the firm's revenues jumped to $499 million, a whopping 602.8% increase that places it second on the BE INDUSTRIAL /SERVICE 100 list.

Pacific Network Supply CEO Houston Williams says the contract, which should extend until 2002, was worth about $399 million in 2000. He says that creating the infrastructure for the new economy has provided a great run for most telecommunications firms, but tougher times are ahead. "The go-go ear of I'm going to build it and, they may come' doesn't exist anymore," says Williams. "Now, I have to demonstrate to my creditors how I'm going to get a return on my investment. That is what you're seeing in the marketplace today."

Williams says he has more than $1 billion in future projects with Bell South, US West, Verizon, SBC Communications, and a number of competitive local-exchange carriers firm competitive. "The objective is to maintain our existing activity while at the same time ... continuing to pursue additional [business] in the telecommunications sector," says Williams.

Another company that had success generating additional business was St. Louis, Missouri-based World Wide Technology Inc. The information technology products and services distributor nearly doubled its growth, going from $413 million in revenues in 1999 to $802 million in 2000. It's currently No. 1 on the BE INDUSTRIAL/SERVICE 100 list.

There were also several significant additions to the BE INDUSTRIAL/SERVICE 100 list. Netcom Solutions International Inc., Bridgewater Interiors L.L.C., and Alert Staffing Inc., were three entrants that debuted on the BE INDUSTRIAL/SERVICE 100 list, each with revenues of $200 million or more. Ranking No. 8, No. 11, and No. 13, respectively, they prove that even in a difficult economy, black-owned businesses are able to carve out significant new business across industries (see "Neighborhood Improvement," this issue).

KEYS TO GROWTH

Many firms that made acquisitions, mergers, or joint ventures part of an aggressive growth strategy were clear winners in 2000. Essence Communications Inc. (ECI) entered into an historic partnership with Time Inc., a subsidiary of Time Warner Inc. The deal gives the nation's largest publisher, with titles such as Time, People, Sports Illustrated, and In Style magazines, a 49% stake in the publisher of the nation's leading magazine for black women. The deal gives Essence magazine access to the "deep pockets" and "existing channels of distribution" of the industry leader--resources that are critical to improving the future advertising and circulation growth of the magazine (see "As the Page Turns," September 2000).

ECI, which ranks No. 23 on the BE INDUSTRIAL/SERVICE 100 list with sales of $148.9 million, will also receive assistance launching new titles, a move Time executives believe will help Time Inc. "grow into the African American marketplace." ECI will also benefit from Time Inc.'s expertise in film, music, and the Internet.

"We will have the resources to look at other opportunities, start new magazines, acquire other entities, expand our entertainment division, and really become the branded Internet portal for African American women by working with AOL-Time Warner," says Ed Lewis, chairman and CEO of Essence Communications Inc. "It's about expansion and using resources that we have to enable us to truly develop into a multimedia company for the audience that we represent."

Another media company, Radio One Inc., last year's BE Company of the Year, also had a stellar year. After closing a flurry of acquisitions worth an estimated $1.4 billion, Radio One is the fastest-growing company in the radio broadcasting industry. The performance of its 49 stations in 19 markets places the company No. 17 on the BE INDUSTRIAL/SERVICE 100 list with $177.2 million in revenues for 2000, a 90% rise over the $93.3 million it made in 1999, when it ranked No. 29.

The decision to take the company public with an initial public offering in 1999 has fueled much of the company's current growth and also legitimized its worth in the industry. While more acquisitions are planned in the future, they will probably be delayed until the stock performance recovers from the bear market that began last March (see "The Perils of Being Public," April 2001).

BE INDUSTRIAL/SERVICE 100s companies in the manufacturing sector also did well in 2000. Global Automotive Alliance L.L.C. (No. 9 on the BE INDUSTRIAL/SERVICE 100 list) saw its sales jump from $144 million in 1999 to $260 million in 2000 off the strength of several strategic alliances it formed with the six companies that fall under its umbrella. The strategic alliance inked last year between Global affiliate Regal Plastics Co. and Delphi Automotive Systems, the largest automotive supplier in the world, contributed to the 80.6% spike in revenues. Global Chairman and CEO William F. Pickard says moves like these link his firm with major companies that will be considered for the billions of dollars in business that major auto makers contract to minority suppliers.

Pickard also says his growth strategy involves aggressive plans to partner with foreign automakers. He is working on closing a deal with Mercedes-Benz in Tuscaloosa, Alabama. "Joint ventures, strategic alliances, and/or mergers are going to be the heartbeat of how I move my companies forward, and perhaps how a large number of African American companies with size move their companies forward," asserts Pickard.

CHANGING PLACES 

Unfortunately, not all news concerning the nation's largest black-owned businesses was good. Although Pickard's firm had a good 2000, other auto suppliers on the BE INDUSTRIAL/SERVICE 100s did not enjoy similar growth. Firms such as Chivas Industries L.L.C., cmx Change (formerly Fuci Metals), and Wesley Industries were among the few firms on the BE INDUSTRIAL/SERVICE 100 list to tally lower revenues in 2000, while Engineered Plastic Products grew by almost 6% and the Bing Group grew by a little more than 2%. The slowing economy hit the Big Three automakers hard, causing plant closings and layoffs that have caused significant problems for black automotive suppliers. And the forecast for this coming year is even worse.

"Black suppliers tend to be first-generation suppliers [that are] highly leveraged [and have] weak balance sheets," explains Kirk Lewis, president of the Bing Group Manufacturing Corp., the nation's largest African American auto supplier. "When the automotive industry slows down, it's amplified in our segment of the industry. So I think what you'll see here is some significant black automotive suppliers going out of business."

Another problem that the slowing economy presents is the ability to sustain demand for products and services. The Houston-based Olajuwon Group of Cos., owners of several fast-food restaurants, experienced a major loss in business that dropped the firm from ranking No. 36 in 2000 with revenues of $71.26 million to revenues of $12.5 million, which didn't qualify it for the list.

Also, Baltimore-based grocery store chain Super Pride Markets, which ranked No. 67 on the BE INDUSTRIAL/SERVICE 100 list with $40 million in sales in 1999, closed its doors in 2000 due to financial complications. President and Owner Oscar A. Smith Jr. says the company's demise was because of competition from national supermarket chains, urban flight, and declining profitability. The 30-year-old chain had been a member of the BE INDUSTRIAL/SERVICE 100s since 1989.

Top 10 Growth Leaders

                                                          1999
Company                               Location          SALES(*)

Pacific Network Supply                San Jose, CA      $71.000
Bridgewater Interiors L.L.C.          Detroit, MI        52.000
Netcom Solutions International Inc.   Chantilly, VA      86.000
The Gourmet Companies                 Atlanta, GA        41.000
ITS Services Inc.                     Springfield, VA    17.100
MPS Group Inc.                        Detroit, MI        32.000
Thompson Hospitality Corp.            Sterling, VA       20.000
Premier Circuit Assembly Inc.         Spring Hope, NC    25.000
RS Information Systems Inc.           McLean, VA         39.850
Wireamerica Inc.                      Fort Wayne, IN     44.175

Company                               200 SALES(*)   % INCREASE

Pacific Network Supply                  $499.000      602.82%
Bridgewater Interiors L.L.C.             218.415      320.03
Netcom Solutions International Inc.      262.000      204.65
The Gourmet Companies                    101.000      146.34
ITS Services Inc.                         41.284      141.43
MPS Group Inc.                            71.500      123.44
Thompson Hospitality Corp.                62.500      115.52
Premier Circuit Assembly Inc.             52.000      108.00
RS Information Systems Inc.               82.000      105.77
Wireamerica Inc.                          86.696       96.26

(*) In millions of dollars, to the nearest thousand.
As of December 31, 2000.

Prepared by B.E. Research. Reviewed by Mitchell & Titus L.L.P.
Top 10 Employment Leaders

COMPANY                       LOCATION         EMPLOYEES

Hawkins Food Group            Detroit, MI        5,833
Manna Inc.                    Louisville, KY     4,500
V & J Holding Co. Inc.        Milwaukee, WI      3,500
Johnson Publishing Co. Inc.   Chicago, IL        2,614
The Bartech Group Inc.        Livonia, MI        2,600
Exemplar Manufacturing Co.    Ypsilanti, MI      2,500
RLLW Inc.                     Las Vegas, NV      2,000
The Gourmet Co.               Atlanta, GA        1,958
Active Transportation Co.     Louisville, KY     1,800
Thompson Hospitality Corp.    Sterling, VA       1,750

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

Hawkins Food Group            $212.096         1:36
Manna Inc.                     130.000         1:29
V & J Holding Co. Inc.          95.000         1:27
Johnson Publishing Co. Inc.    400.362         1:153
The Bartech Group Inc.         110.000         1:42
Exemplar Manufacturing Co.     165.178         1:66
RLLW Inc.                       56.500         1:28
The Gourmet Co.                101.000         1:52
Active Transportation Co.      320.000         1:178
Thompson Hospitality Corp.      62.500         1:36

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

(**) In thousands of dollars. As of December 31, 2000.

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