turnaround
OfficeMax
With no small help from a $57.5 million tax break, OfficeMax reported a quarterly profit in May last year — its first in two years.
But the event was no fluke for the country’s third-largest office supply retailer. With the exception of one quarter, throughout 2002, OfficeMax posted profits and same-store sales increases when many analysts and industry experts had written the company off.
What helped it rebound were a series of cost-cutting measures and new distribution and inventory control systems, which CEO Michael Feuer put in place years ago. In fact, OfficeMax’s turnaround mirrors that of its retail colleague, Jo-Ann Stores Inc., down the road in Hudson.
Like Jo-Ann Stores, OfficeMax closed underperforming stores, implemented SAP inventory and distribution software, and opened a new warehouse facility. The steps helped OfficeMax reduce its inventory 9 percent and cut its debt in half. As of press time, Feuer vowed to close its fiscal year debt-free.
Also helping the retailer in 2002 was Mexican investor and entrepreneur Carlos “Slim” Helu reducing his ownership in the company to less than 5 percent. In 2000 and 2001, Helu looked to be plotting a takeover of OfficeMax buying up as much as 9.8 percent of its stock, according to published reports.
As one of the region’s largest companies, OfficeMax is always worth watching. But with Helu out of the way and a much leaner operation in place, OfficeMax deserves renewed attention this year.
Level Propane
Note to all current and prospective business owners: Don’t mess with customers’ ability to heat their homes during a Midwest winter. Level Propane Gases Inc., a local residential propane dealer, learned that the hard way.
But before it learned this lesson, the Ohio Attorney General’s office received more than 4,000 consumer complaints, and class action lawsuits in Ohio and Michigan cost the company approximately $6 million.
Depending on who you talk to, Level Propane’s problems were either the result of former management’s unscrupulous business practices or of a volatile and unpredictable energy market. Either way, something had to change. Level Propane was eventually forced to file for bankruptcy.
The company needed a knight in shining armor — and got it in the form of Richard Jacobs and his investment group, which announced in October that it would invest in and manage the company while providing $15 million to continue restructuring.
Richard Anter was recently made president of the business that provides heating oil for 14 states. Under Anter, the company has made some major improvements, including a more responsive call center and a Web site to check price quotes.
The Jacobs group expects to complete Level’s bankruptcy reorganization process in the spring and start the long road back consumer trust.
STERIS Corp.
STERIS Corp. has been on a roller coaster ride the last few years, but in the last quarter, the company is back up, with a 13 percent increase in revenue over the previous year.
The increase follows a precipitous dip in 2000, which was followed by Les Vinney replacing Bill Sanford as CEO and a restructuring effort that consolidated a series of acquisitions STERIS undertook in the late 1990s.
STERIS is now reporting that in its second fiscal quarter, operating cash flow was up $44 million from $18 million from the previous year’s second quarter. The company also repurchased 900,000 shares of common stock, and the board has authorized the repurchase of another 3 million shares.
More growth is expected in the new decontamination market. STERIS executives testified in Washington, D.C., during the anthrax scare. The company has also developed technology for mail decontamination, and recently secured an agreement to conduct research with the U.S. Army on technology to combat biological and chemical weapons.
The trend in decontamination bodes well for STERIS, and Vinney has predicted a 60 percent to 65 percent increase in earnings in 2003. He also has plans to increase the company’s international market share, which is now about 15 percent of total sales.
At press time, the word on the street was that stock is a bit undervalued, but it looks like that won’t last long. Many analysts believe the domestic hospital industry’s strength will generate growth that will continue to increase earnings as long as costs stay in check.
