Never say 'dye'

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When an entire staff is sent home with pink slips and customers learn their preferred vendor is facing liquidation, that’s usually the end of the story.

But the behind-closed-doors scenario at Harrison Paint Co. inspired a new chapter in the chronicles of one of Stark County’s most esteemed businesses.

As an independent manufacturer of paint, stains and specialty coatings coveted by dealers across the eastern United States, this once-proud company had by the 1990s swelled to more than 160 employees and $18 million to $20 million in sales. But the vibrant colors of Harrison Paint’s 90-year-old legacy began fading in 1999, less than a month after Canton entrepreneur Roger Walters sold his family business to New Jersey-based Cook & Dunn LLC. (See sidebar, “Layers of legacy.”)

Almost immediately, the new owners sold Harrison’s retail shop and Enviro-Coat industrial division to Perry & Derrick, a Cincinnati-based paint distributor. Months later, Cook & Dunn lost a major customer account that could have generated $10 million annual revenue for six years. It didn’t help that Perry & Derrick defaulted on $800,000 in paint materials. Subsequently, all of Harrison’s retail stores closed.

Extreme cash flow problems and accumulated debt forced Harrison Paint to file bankruptcy in February 2000. Hoping to reorganize, the owners hired a Philadelphia consulting firm to structure a turnaround. But Cook & Dunn’s high interest loan with Pittsburgh-based Mellon Bank complicated matters. Ultimately, the reorganization effort disintegrated.

By June, production lines for Harrison’s famed Dutch Standard brand screeched to a halt. To fill customer orders, operations manager Tom Schmidt milked the inventory, mixing paint and splitting five-gallon drums into one-gallon cans. Meanwhile, the bankruptcy proceeding progressed rapidly, with liquidation imminent because Mellon perpetually rejected offers from potential buyers.

In October, the doors were about to slam shut. But Schmidt and the two remaining employees just wouldn’t leave, even though they hadn’t received a paycheck in months — and the factory’s furnace had quit working.

“After you’ve been in one place for 27 years, it’s hard to leave,” says paint maker Tom Slack, who, from late September through December worked every day, doing everything from repairing broken windows to shoveling snow.

Although Schmidt had only been with the firm since 1999, he couldn’t bring himself to give up, even if the bank had.

“No matter what the high-priced bankers, attorneys and consultants said, I couldn’t see a good reason to close this place down because there was so much to fight for,” he says.

Schmidt refers in part to loyal employees such as Tony Lippert, Harrison’s vice president of sales and marketing, and sales rep Brett Shinn. Lippert had been laid off in September; Shinn got walking papers in July. But both continued to work with customers on their own time.

“Besides trying to fill orders, they provided daily updates to the customers, trying to assure the dealers’ hope that we wouldn’t go under,” says Schmidt.

That wasn’t about to happen if Schmidt had his way. But he had to move fast.

Intangible assets

“It was Tom Schmidt’s bulldog attitude that kept Harrison Paint from failing,” says W.R. Covey, founder of Covey & Koons Inc., the Canton ad agency that represented Harrison.

Covey says that, on his own time and his own dime, Schmidt worked day in and day out trying to save the company.

“It became almost an obsession with him, because in addition to spending his own money on overnight packages and photocopying at Kinkos, he must have made about 400 calls in his crusade,” Covey says.

Covey’s firm can take partial credit for what happened next. Rod Covey, president, had given Schmidt contact numbers for five area entrepreneurs who might be interested in buying the business. Two names on the list were Patrick and Mark Lauber, business partner brothers with an impressive history of rejuvenating struggling businesses.

The Laubers had owned and operated Rolite Plastics in Midvale for six years and Invincible AirFlow Systems in Baltic for 15 years. They also had a tie to Harrison Paint — Harrison used some of Rolite’s floor mats, and the industrial coating on Invincible’s machines was a Harrison brand.

Patrick Lauber’s connection to the company was more personal. Roger Walters was his neighbor for six years, and eventually sold his house to Pat Lauber. Little did he know that a year later, Lauber would move into his former office.

Since 1998, after selling Rolite and Invincible to larger manufacturers, the brothers had been looking for another challenging business opportunity. This seemed to be it, despite the paint company’s insolvency crisis. On Oct. 9, they met with Schmidt; Stark Development Board vice president of finance Larry Marcus; and Raymond Sales, administrator for the Canton Community Improvement Corp., an independent entity dedicated to Canton’s economic development.

“At that meeting, we learned that the Laubers had significant management experience and a great track record of running other successful business,” Marcus says. “They also had some financial resources and brought a good business plan to the table. And they were very serious about trying to acquire Harrison Paint to return it to its past success.”

Ask the Laubers what made them jump into the fray in U.S. Bankruptcy Court in Youngstown, and they say the worth they saw in Harrison Paint was something much greater than any tangible asset. In fact, they sum it up in one word: loyalty.

“Tom was keeping in touch with the employees that had been laid off, and while we were here doing due diligence, several former workers would come in without pay to show us around and explain the plant’s operations. That spoke volumes about the employee loyalty,” Mark Lauber says.

“When you get to know this business and the people, you find an extreme amount of loyalty from the employees and the customer base,” Patrick Lauber adds. “Whenever we were here, we’d run into customers coming to the warehouse to pick out their own paint. They’d just find what they needed on their own because there wasn’t any personnel here to help them.”

One of those customers was Paint & Carpet Center in Carrollton, a Harrison distributor since 1976. Betty Gray, owner, says that when she and her store manager, Dottie Pugh, learned of Harrison’s problems, they were hoping it would survive.

“We had a very loyal clientele that wanted Harrison’s paints because their products were always such high quality, and our customers actually told us they’d be willing to wait until January when the company planned to start making paint again,” Pugh says. “So in the meantime, we’d go and pick through what was in the warehouse, trying to get as much of the Dutch Standard brand that we could.”

Pat Lauber says that of 30 Harrison Paint customers that had been dealers for years, 28 assured him they’d stay with the Dutch Standard brand if Harrison could stay open.

“We stuck it out because we felt confident they would get back on their feet again,” says Debbie Nussbaum, owner of Dalton Hardware in Wayne County. “We’ve never regretted that decision to hang in there.”

The color of success

After stepping up as potential buyers, the Laubers worked with a team of officials who collectively brainstormed a plan for the Harrison sale. The group included Canton’s mayor, its economic development division and law department, Stark Development Board, The Ohio Department of Development and the Canton Regional Chamber of Commerce.

Mark Lauber says the Ohio Department of Development proposed certain state incentives and financing for some of the company’s equipment needs.

Despite these negotiations, several parties involved in the bankruptcy process still favored liquidation. Seeing this, Schmidt launched a dramatic letter writing campaign, persuading customers, suppliers, city officials and other groups to write to the bankruptcy court in Youngstown.

“So many people wrote letters, including Canton’s mayor and several congress people, the Stark Development Board and the chamber, several suppliers, customers, even many local businesses,” says Marcus. “The judge held up that stack of letters in court and strongly suggested to the secured creditors that the sale would be a better outcome than liquidation.”

Schmidt’s efforts and the Laubers’ official bid paid off. On Dec. 22, 2000, the Laubers purchased Harrison’s assets through U.S. Bankruptcy Court for less than $2 million. Harrison Paint made rehire offers to 28 former employees, and all have returned to their posts. Pat Lauber, now president, says this core group of people will help rebuild the company until they’re joined by other former workers he hopes will return when finances allow.

“If our team can be successful, we can all look at that and be proud that we all worked together to save the company,” says Mark Lauber, CEO.

After tackling plant renovations and equipment upgrades, and replenishing depleted inventory, the Laubers reopened the Harrison Paint store that formerly operated from the first floor of the factory at 1329 Harrison Ave. SW. With high hopes, Mark Lauber projects that 2001 sales revenue will be about $5 million.

In retrospect, Walters regrets what happened to Harrison Paint after he sold it to Cook & Dunn.

“But the company’s in good hands now, and if the Laubers keep the quality of the product and get the accounts back, they’ll have themselves a winner,” Walters says.

Since customers are clamoring for Harrison paints, that eases the challenges that lie ahead. Patrick Lauber says the company’s expansive line of industrial paints and anticorrosion products, niche paints for specialty markets, and popular wall paints and primers is an attractive package for independent dealers who prefer dealing with one reliable vendor that devotes itself to quality and service.

“So we’ll focus our efforts on providing quality products and excellent customer service that the dealers have come to expect over the years, and eventually, we’ll expand that dealer base and offer new products and ideas” he says.

Marcus is confidenct the Laubers can take the firm back to its former levels of success.

“They’ve got the ability to gain back a significant amount of their former customer base, and I see them creating a lot of new jobs there in the future,” Marcus says.

Paint & Carpet Center’s Dottie Pugh says that, considering Harrison’s customer and employee loyalty, the company is already painting its future in bright shades of success.

“You just don’t see that kind of loyalty much anymore, and that says a lot for Harrison Paint and the new owners, who we believe will keep up the high standards,” she says.

Schmidt, now executive vice president, says Harrison’s magical formula of employee, customer and community loyalty was precisely what kept the company from fading to black.

“People still ask me why I fought so hard and wouldn’t give up,” he says. “But when you’re surrounded with such loyal customers and employees, giving up isn’t an option.” How to reach: Harrison Paint Co. (330) 455-5125

Victoria Reynolds is a contributing editor to SBN Magazine.

Layers of legacy

* 1911 — Second-generation varnish maker Clarence Harrison incorporates Harrison Paint & Varnish Co. in Cleveland.

* 1929 — Gordon G. Walters purchases the business, consummating the sale exactly one month before the stock market crash.

* 1934 — Significant growth calls for a larger facility with railway siding. Walters finds the perfect location at the abandoned Arlington Paint & Varnish Co. manufacturing plant in Canton. Oddly enough, the street name is Harrison Avenue.

* 1959 — Capabilities expand to commercial and industrial coatings with the purchase of Cleveland-based Midland Varnish Co.

* 1980 — The company acquires the trade sales and Kilrust division of Hanna Paint Co. in Columbus, adding a renowned rust-preventive coating to Harrison’s line.

* 1983 — Roger Walters steps into his father’s shoes as chairman and CEO of Harrison Paint.

* 1987 — The acquisition of Worth Paint Co. in Lake Worth, Fla., gives Harrison Paint a southern base from which to distribute its products.

* December 1998 — Roger Walters sells the company to New Jersey-based Cook & Dunn LLC.

* January 1999 — Cook & Dunn sells Harrison’s retail shop and Enviro-Coat industrial division to Cincinnati-based paint manufacturer Perry & Derrick.

* March 2000– Perry & Derrick and Cook & Dunn battle over paint supplies. Giving only 24 hours notice to the store managers, Perry & Derrick close all five of Harrison’s retail stores.

* February 2000 — Cook & Dunn, having merged with Harrison to form Harrison Brands, files for Chapter 11 bankruptcy.

* September 2000 — Alarmed at the news that primary lender Mellon Bank has given up on the company, operations manager Tom Schmidt places a desperate phone call to business entrepreneurs Mark and Patrick Lauber. And the rest, as they say ….