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Poised for a breakthrough.

Having weathered the economy's worst, the B.E. 100s look to exploit openings wrought by change.

Change. It was the watchword of the year in 1992. The U.S. populace needed it, wanted it, believed in it--and before year's end--cast their vote for it. George Bush was out, Bill Clinton was in, optimism was up, and, feeling it, consumers returned to the stores and auto dealerships. They gave businesses and the overall economy a much-needed Christmas gift: a shot in the arm.

The boost was a long time coming, longer, in fact, than most analysts' and entrepreneurs' worst nightmares. Throughout the year, press reports insisted that America was rallying, that the nation's economy was in recovery mode. But the unwavering cycle of cutbacks, layoffs, downsizing and bankruptcies only reinforced a sinking sense that the recession--or at least its lingering effect--was far from over.

Some bright spots emerged. By mid-year the banking system seemed to be out of harm's way, having sidestepped the collapse some feared. The housing market activated again after two years of solid stagnation. Even auto sales--of American cars, no less--were revving pretty strong.

But no new jobs emerged. Unemployment zoomed to 7.8% last June and payroll employment fell by 117,000. With the long-awaited change in power came higher taxes and relief was quickly tempered by ambivalence. For businesses large and small, for Americans struggling with budgets at work and at home, it was a year of taking two steps forward and three steps back, all the while hoping that somehow we'd come out ahead.

Well, BLACK ENTERPRISE's 21st Annual Report on Black Business shows that we did. The collective gross revenues for the nation's 100 largest black-owned industrial/service companies and 100 largest black-owned automobile dealerships climbed to $9 billion, up 14.1% over 1991. That's the largest increase in five years. Combined 1992 sales for the Fortune 500 rose only by 4.4%.

As has been the pattern throughout these troubled times, African-American-owned businesses proved themselves better able to hold up under a lagging economy than many of industry's giants, some of which stumbled, while others fell. Much of corporate America attempted to shrink itself into profitability--Amoco Corp. alone announced plans to cut 8,500 jobs. Yet the BE 100s, which trimmed down in 1991, lost only 703 jobs in 1992, or 1.8% of its collective 38,723 staff.

Vital And Victorious

The nation's 100 largest black-owned industrial/ service companies posted total sales of $5.7 billion, an increase of 13.9% over 1991. Total staff of this group dropped from 32,590 in 1991 to 31,668 last year, a decline of 2.8%.

Threads 4 Life d/b/a Cross Colours was this year's industrial/service standout, earning accolades both as the growth leader and Company of the Year. The Los Angeles-based clothing designer and manufacturer burst onto the scene (under the sobriquet, Solo Joint Inc.) and made the BE INDUSTRIAL/SERVICE 100 list last year at No. 80, with $15 million in gross revenues. It was an astonishing sum for a neophyte company, particularly one in the flat and fickle fashion industry.

Even more remarkable was its progress last year. Thanks to the successful launches of three new divisions in 1992--housewares, women's clothing and Karl Kani, a men's line--Cross Colours posted $89 million in sales, soaring to No. 10 on the list. The company's eye-popping 493% growth margin was so extraordinary that we had to investigate (see Company of the Year, "How Hip-Hop Fashions Won Over Mainstream America," this issue). We found that, yes, Cross Colours really is owned and run by thirtysomething entrepreneur Carl Jones; yes, it really did do that well; and no, 1992 cannot be written off as a fluke. Already this year, Jones has introduced a children's line and other innovative designs are forthcoming.

The four largest African-American-owned industrial/service firms also did well. They maintained their positions on the list, though all of them reported single-digit growth margins. New York-based TLC Beatrice International Holdings Inc.--the nation's largest black-owned company--exceeded its projections, grossing $1.67 billion in sales despite a European recession. The company is made up of food-processing and distribution concerns scattered about Western Europe. Beatrice has ranked No. 1 on the BE INDUSTRIAL/SERVICE 100 list since the late Reginald Lewis bought it in 1987.

Lewis' death from cancer in January saddened the business community. But his final year as TLC Beatrice CEO was vital and victorious. In 1992, Lewis won a $1 million judgment and settled two other lawsuits that had attempted to link him to the 1988 bankruptcy of McCall Pattern Co., a company he owned from 1983 to 1987. Lewis also witnessed the establishment of the Reginald F. Lewis International Law Center at Harvard University, in recognition of an unprecedented $3 million grant bestowed upon his alma mater by his namesake foundation.

Although speculation about the future ownership of TLC Beatrice continues, at press time the Lewis family still owned about 55% of the stock, and Lewis' half-brother, Vice Chairman Jean S. Fugett Jr., was running the company.

Top Twenty Turnover: The Ad Firms Are Back

With the exception of the four front-runners, there was a striking amount of shifting and turnover among the BE INDUSTRIAL/SERVICE Top Twenty. Debuting on the list in the No. 5 slot is The Anderson-DuBose Co., a Solon, Ohio-based food distribution concern (see "Freshman Class," this issue). The two-year-old company, headed by partners Warren Anderson and Stephen M. DuBose, grossed $110 million last year.

In all, 16 industrial/service companies made the list for the first time. They represent a vast range of industries--electrical engineering, construction, hair care products manufacturing and home health care services to name just a few.

Total sales for this year's "freshman" class amounted to $411 million. (This figure does not include the revenues of advertising agencies returning to the list after a change in the way their sales performance had been measured.)

The combined gross revenues of those companies displaced from the BE INDUSTRIAL/SERVICE 100 was $307.9 million. Thus, turnover on the list resulted in a net sales gain of $103.1 million. Companies are displaced from the BE 100s when they are no longer at least 51% black-owned or are no longer among the nation's 100 largest black-owned industrial/service concerns or 100 largest black-owned automobile dealerships as measured by annual gross revenues. (See sidebar, "Eligibility for the BE 100s.")

Bumped from fifth place is one of last year's two companies of the year, Detroit-based Barden Communications Inc. Barden's sales fell by 13.8% in 1992, landing at $78.6 million and dropping the company down to No. 11. CEO Don H. Barden attributes the decline to a rough year for real estate development, a significant part of his business. According to Barden, his company's communications business was up 9% last year, but real estate fell by 40%. The downshift is expected to be temporary, however, and Barden anticipates 1993 sales to be back above the $90 million mark.

Charleston, W. Va.-based C.H. James & Co., last year's other company of the year and the oldest firm on the BE INDUSTRIAL/SERVICE 100, remained stable with $18.7 million in sales. But as 1992 drew to a close, CEO Charles H. James III was nailing down a deal that should propel the 110-year-old company up next year's list. Last January, James acquired 51% of Los Angeles-based North American Produce for an undisclosed amount. The company, which grossed about $15 million last year, provides chopped lettuce and onions to roughly 1,400 McDonald's restaurants within a six-state western region that includes Hawaii. The company also exports its products to McDonald's in Japan.

James formed C.H. James & Son (Holdings) in Charleston to set up an umbrella for both companies. Although he will remain CEO of his family's legacy business, his mother, Lucia B. James, will oversee the daily running of the wholesale food distribution concern as president. Charles James III, who is also president of North American Produce, is running the new Los Angeles concern.

Displacing Chicago-based Soft Sheen Products from the No. 7 position is Gold Line Refining Ltd. The Houston-based oil refinery first appeared on the BE INDUSTRIAL/SERVICE 100 last year, at No. 28. A 157% increase in 1992 sales propelled Gold Line into the top-tier of the list, with $91.9 million. Two major defense contracts, totaling more than $50 million, sparked the dramatic increase.

Despite severe defense cuts on the horizon, CEO Earl Thomas says he is optimistic about 1993. "We're doing things I can't discuss to offset cutbacks in defense business, so we can maintain our position," Thomas says. "We'd be naive not to." Expanding the commercial portion of his business is a must. People will "always be driving cars," he says. "There's always going to be a need for my product." Gold Line Refining follows Cross Colours as one of the three industrial/service companies among this year's Top 10 Growth Leaders (see chart).

Addison, Texas-based Drew Pearson Companies is the third. The sportswear licensing and manufacturing company had 1992 sales of $36 million, a 140% increase over the previous year. CEO Kenneth Shead attributes much of Drew Pearson's growth to the unexpected success of its black colleges line of sportswear. Launched in the final quarter of 1992, the line featuring hats, T-shirts and sweatgear emblazoned with the names of schools such as Howard University and Morehouse College did remarkably well. "The nationalist movement in urban centers has young black kids getting into their heritage," says Shead. "That definitely fed into our success last year." In fact, says Shead, Drew Pearson had to turn away some business in 1992, in order to keep orders manageable.

Contributing to the movement among the top twenty industrial/service companies is a re-emergence of the nation's largest black-owned advertising firms. Chicago-based Burrell Communications Group and New York-based UniWorld Group Inc. now occupy Nos. 13 and 14, respectively.

Five years ago, BLACK ENTERPRISE began requiring ad agencies to submit figures for collected billings only. Then we discovered, as agencies gradually slipped from the list, that the new formula actually yielded a sum that was not truly reflective of their gross revenues.

This year, we revised our formula so that ad agency figures are consistent with those submitted by other industries. Thus, Burrell (No. 100 on last year's list) posted $77 million in revenues; UniWorld, after a one-year absence, returns to the list at No. 14 with $72.4 in revenues. The New York-based Mingo Group also rejoins this list, with $42.7 million gross, as does New York's Lockhart & Pettus Inc., with $24.9 million in revenues. Mingo is No. 30 on the list, Lockhart & Pettus, No. 60.

Revving Up Sales

Finally, Detroit's Big Three are rebounding, better and stronger than anyone thought possible a few years ago. Reveling in that comeback, the nation's largest African-American-owned car dealerships boasted $3.3 billion in gross sales, a welcome 14.5% increase. For the first time in four years, black auto dealers reported a collective rise in employment numbers instead of a drop. The BE AUTO DEALER 100 employed 6,352 people last year, 3.6% more than the previous year when payroll cutbacks hurt significantly.

The big news on the 1993 BE AUTO DEALER 100, is the emergence of a new No. 1 dealer. Not only is Trainer Olds-Cadillac-Pontiac-GMC Inc. new to first-place, but, it's new, period. The Warner Robins, Ga.-based dealership opened in April 1991. In 1992, its first full year in business, the shop grossed $254.6 million in sales. Not surprisingly, fleet sales accounted for more than 60% of the business. But President James E. Trainer doesn't apologize for that at all, although many dealers downplay fleet sales because of their meager profit margin.

Trainer, who started as a General Motors salesman in 1971, concedes that the profit per car in fleet sales is minimal, "but if you can sell 200 or 300 fleets, that little bit of money adds up." His dealership sold more than 15,000 vehicles through fleet sales last year, mostly to rental car companies. The business generated over $100,000 in profit, reports Trainer. Revisions in the system by which fleets are sold have made the process less problematic for dealers, he says, adding that he plans to build on that business.

Part of the reason Trainer did so well is that his timing was right: Many dealers who propelled their sales volume through fleets in the past, exited that market. Atlanta-based Baranco Automotive Group reported 1992 revenues of $69.3 million, a startling 57.71% drop from 1991 sales of $163.9 million. The falloff is due to President Gregory Baranco's refusal to continue selling to rental car companies, which accounted for about 6,000 of his sales units in 1991. [TABULAR DATA OMITTED]

"There were years when we sold as many as 10,000 rental cars," says Baranco, whose auto group was No. 1 on the BE AUTO DEALER 100 two years ago. "It was improving our gross sales dramatically but really damaging our profit margin. In '92, we just were not willing to do business at all cost--literally." Although Baranco's gross revenues are suffering, he says his net is already on the upswing.

BE Auto Dealer of the Year Alan Young Buick-GMC Truck Inc., of Forth Worth, Texas, enjoyed a strong year, with a 35% increase in sales. This is, in part, due to CEO Alan Young's taking on some fleet business, which now makes up a third of the dealership's revenues.

Of the Big Three automakers, Ford had the greatest representation on the BE AUTO DEALER 100 (52%), followed by General Motors (25%) and Chrysler (22%). Ford dealerships also generated the largest percentage of auto list sales, $38.5 million. Sixteen percent of the BE AUTO DEALER 100 sell foreign cars; last year, 15% sold imports.

A total of 23 auto dealers are new to this year's BE AUTO DEALER 100. Their sales range from Trainer's top billing to Paw Paw, Mich.-based Gene Moon Buick-Pontiac Inc., with $14.6 million in gross revenues. New dealerships combined revenues of almost $691 million gave the auto list quite a boost. Total sales for dealerships displaced from the list was $406.5 million. That means turnover on the auto list resulted in an increase of about $284 million.

Lauding Longevity, Bemoaning Bankruptcy

For the most part, African-American CEOs remained optimistic and unbowed in 1992. Three companies heartily celebrated their longevity. The Brooklyn, New York-based Bedford Stuyvesant Restoration Corp., which turned 25 in 1992, is a community development corporation whose Restoration Supermarket Corp. subsidiary is ranked No. 58 on the BE INDUSTRIAL/SERVICE 100. Founded by Senator Robert Kennedy and others in 1967, Restoration ranks among the most successful community development corporations nationwide.

Atlanta-based construction concern H.J. Russell & Co. celebrated 40 years of burgeoning business in a touch-and-go industry. Along with a benchmark birthday year, it was also a transitional period for the company. Egbert Perry, once thought to be CEO Herman J. Russell's heir apparent, resigned from his position as president to pursue his own entrepreneurial dream. With $145.6 million in sales, H.J. Russell remains the nation's fourth-largest African-American-owned industrial/service firm.

Johnson Publishing Co. Inc., the nation's second-largest black-owned company, celebrated its 50th anniversary, rounding off the year with the launch of a new product: Ebone cosmetics (see "Redefining Beauty," this issue).

Johnson Publishing is one of the few companies on the list to have forged major successes in two industries. Its Ebony, Jet and Ebony Man magazines, along with its broadcasting outlets, established the company as Black America's leading media power. In spite of its niche market, Fashion Fair cosmetics has become a force to be reckoned with in the beauty industry. Under the steady guidance of CEO John H. Johnson, the Chicago-based company continues to thrive.

For the first time in many years, two additions grace the health and beauty aids category. Dudley's Products Inc., based in Greensboro, N.C., landed at No. 48, with $30 million in sales. At No. 71, is D-Orum Haircare Products with revenues of $20 million. The two new companies helped boost the beauty industry's overall sales to $290.1 million, up from last year's $228.7 million.

Food and beverage industry sales also grew, but its proportion of the total shrank slightly, dipping from 28.1% last year to its current 27.3% share of the market. Media industry sales were next, at 10%, or $912.7 million in total. Manufacturing sales were relatively flat. The industry posted combined revenues of $492 million, compared with last year's $465 million.

Construction industry sales ticked up, topping out at $349.5 million, compared with the $259.7 million reported a year ago. Figuring into that number are two new companies and one firm returning to the list after a two-year hiatus. Miami's Urban Constructors Inc. makes its BE 100s debut at No. 84 with $15 million in sales. Advantage Enterprises Inc., a Toledo, Ohio-based project integration company, makes its first appearance on the list at No. 47, with gross revenues of $30.1 million. While new to the list, Advantage Enterprises is actually 13 years old, and has four offices (three in Ohio, one in Pittsburgh). CEO Levi Cook says the company distinguishes itself from other electrical or general contracting firms by being a "one-stop shop" for its clients, which include General Motors, The State of Ohio and USAir. The company's in-house expertise in high-voltage application, commercial wiring and specialized instrumentation development is unique, says Cook, noting that ordinarily a customer "would have to go to a number of companies to get what they get here."

New to the BE INDUSTRIAL/SERVICE 100 this year is the list's second health care company, Mid-Delta Home Health Inc. The 15-year-old company, headquartered in the highly populated and largely indigent area in and around the Mississippi Delta, has 345 employees serving a six counties. It grossed $15 million in 1992. Clara Taylor Reed, president and founder of the company, says sales grew 25% last year. Reed, who is a registered nurse, attributes the growth to a rising number of people keeping infirmed loved ones at home. She says many made that choice last year out of a need for the income of a sick relative--however limited.

The representation of transportation companies among the BE 100s took a hard hit with the demise of Monroe, Michigan-based Trans Jones Inc., No. 12 on last year's BE INDUSTRIAL/SERVICE 100. A dispute between the trucking firm and its insurer knocked Trans Jones into Chapter 11 bankruptcy on Dec. 30 (see "Trans Jones Files Bankruptcy," In The News, May 1993). The company is struggling to reorganize.

Unfortunately, Summa-Harrison Metal Products Inc., which ranked No. 60 on last year's BE INDUSTRIAL/SERVICE 100, also dropped from the list this year. Following a sticky scenario that included a Chapter 11 bankruptcy filing, a criminal investigation and the loss of minority-ownership status, the $20 million Mt. Clemens, Michigan-based company was sold to a white-owned auto industry supplier.

Deals And Acquisitions, Past And Possible

Also rumored to be on the sales block was Johnson Products Co. Inc. (JPC), the Chicago-based hair care products manufacturer due to turn 30 next year. CEO Joan B. Johnson rejects those rumors, saying, to the contrary, she is looking for a company to buy.

JPC had a good year. Gross sales increased 4.6% to an even $46 million--this in spite of the touchy turnover-of-power controversy surrounding the resignation of former CEO Eric Johnson, Joan B. Johnson's son. Joan Johnson, who owns 51% of JPC's stock and is also chairman of the board, tightened the reins on costs and expenses last year. She instituted an incentive program for the sales force that is credited with improving revenues in the first two quarters of 1993. Johnson Products manufacturers leading brands such as Ultra Sheen, Gentle-Treatment, Sta-Sof-Fro and Classy Curl. In April, the board of directors announced a two-for-one stock split in the form of a 100% stock dividend to shareholders.

There must be something in the Johnson name. Robert Johnson, president and founder of Black Entertainment Television Holdings Inc. (he is no relation to the Johnson Products' Johnsons), led a minority-owned partnership in acquiring Denver-based Mile-Hi Cablevision last summer. The terms of the agreement were not disclosed, but the move by Johnson to expand his cable empire seems to be working. Washington, D.C.-based BET is No. 17 on the BE INDUSTRIAL/SERVICE 100, with sales of $61.7 million, a 21.4% increase over 1991.

Last summer, Granite Broadcasting Corp. inked a joint-venture agreement with Audio Communications Inc. that enabled the New York-based company to offer customized pay-per-call services at each of its four television properties. The deal represented the first time a television group would offer such services as an ongoing part of its local programming schedules. Granite, headed by CEO W. Don Cornwell, grossed $43.1 million and is No. 29 on the BE INDUSTRIAL/SERVICE 100.

At least two tech-oriented companies landed newsmaking deals last year. In February, The Maxima Corp. became the only company ever to land a major United States Postal Service contract twice. Under the $25 million contract, the Lanham, Md.-based computer information management company is helping the postal service usher in a nationwide automated mailing system.

Maxima won the contract without the benefit of any set-aside programs, notes CEO Joshua I. Smith. Despite this, Maxima's gross fell to $45.1 million, from $49.8 million the previous year. Its fortunes are likely to improve, however. Earlier this year, the company landed a 10-year contract to provide technical services for members of the National Association of Counties (see "Maxima To Upgrade County Technology," In The News, this issue). Maxima is ranked No. 25 on the industrial/service list.

In May, H.F. Henderson Industries Inc. (No. 69 on the industrial/service list, with $20.7 million in sales) won its largest contract ever with the U.S. Air Force. The agreement with Warner Robins Air Force Logistics Center in Warner Robins, Ga., calls for Henderson Industries to manufacture digital radar warning receivers. The contract has options which, if renewed after a year, will be worth $44.5 million to the West Caldwell, N.J., company. In total, technology company sales accounted for 7.4% of the collective revenues of the BE 100s.

Without exception, the BE 100s CEOs interviewed for this story indicated that 1993 sales were already up. Still, with so many companies dependent on government contracts for sales--and having tasted economic upswings gone sour--several CEOs have adopted a wait-and-see attitude for this year.

Change is nothing new to American business--in fact, it is industry's only constant. The difference is that, for the first time in several years, the anticipation of change includes hope, not just fear. The nation's largest black-owned businesses have weathered the worst the economy had to throw at them. They are now poised for the opportunities and challenges that only change can offer--and only battle-tested, adaptable and innovative companies can exploit.
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
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Title Annotation:21st Annual Report on Black Business: B.E. 100s Overview
Publication:Black Enterprise
Date:Jun 1, 1993
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