Kewaunee Scientific Corporation History

Company History:

Since the early 1900s, Kewaunee Scientific Corporation has designed, manufactured, marketed, and installed laboratory furniture. It started out in Kewaunee, Wisconsin, added a plant in Adrian, Michigan, in the 1920s, and then moved all of its manufacturing facilities to Adrian in the 1940s. During the 1950s a wood furniture manufacturing facility was added in Statesville, North Carolina, and in the 1970s Kewaunee added a manufacturing facility in Lockhart, Texas. In the 1980s the company closed its Adrian plant, transferring production to its Statesville and Lockhart facilities.

The company has two primary operating units, the Laboratory Products Group, based in Statesville, North Carolina, and the Technical Products Group, based in Lockhart, Texas. The Laboratory Products Group manufactures quality laboratory furnishings for industrial, government, educational, and healthcare customers. Its product lines include steel and wood laboratory furniture, worksurfaces, flexible systems, and fume hoods. The Technical Products Group is focused on providing modular and durable furniture solutions for high-tech production, technical labs, test and measurement labs, and local area network (LAN) computing centers.

Early History

In 1906 the Kewaunee Manufacturing Company went into the laboratory furniture business. The company first came into existence in 1903 as the Kewaunee Casket and Manufacturing Company in the town of Kewaunee, Wisconsin. In 1906 the same group of local men that started the company reorganized the failed business and dropped "Casket" from the name. At the time, there were only two other manufacturers of laboratory equipment, both based in Chicago, Illinois.

Kewaunee Manufacturing Company was set up as a private company, with four families each having a one-quarter interest. The early years of the company were not profitable, and it was simply making payments against notes payable to the State Bank of Kewaunee to stay in business.

In 1926 the company acquired the plant and equipment of the Economy School Furniture Company, located in Adrian, Michigan. In 1929 the Adrian plant was electrified and a blower system installed. The company produced a profit, but by 1931 falling inventory values resulted in a mere $5,000 profit, barely enough to break even. Then the Great Depression began, and a normal profit was not achieved until 1937. During the Depression, selling prices fell so low that every piece sold resulted in a 25 to 30 percent loss.

Moved from Kewaunee to Adrian, Michigan

During the 1930s several factors combined to cause the company to close its Kewaunee facility and move the entire company to Adrian, Michigan. In 1931 it was decided to equip the Adrian factory for the production of metal furniture, which management felt would experience a growing demand over the next decade. Wood furniture would continue to be manufactured in Kewaunee. By 1932 the Adrian plant was producing metal laboratory furniture. In 1935 the Kewaunee shop became unionized, and by 1939 was fairly militant in its demands. The buildings at Kewaunee were old three- and four-story frame structures. The location was considered a poor one and not conducive to efficient manufacturing. As a result of these factors, all production of wood furniture was moved to Adrian in January 1941. In April 1942 the company rented its empty buildings in Kewaunee to the Kewaunee Shipbuilding and Engineering Corporation, which was beginning to build ships for the war effort. Most of Kewaunee's former employees found employment with the shipbuilding company. The assets of the Wisconsin company were dissolved and transferred to the new Michigan company. The net asset value of the company was $682,400.

During World War II the company received several government contracts. These included making chock blocks, which were used to block airplane wheels. The company also received a top-secret contract to make a certain type of metal enclosure that was used in the Manhattan Project, which led to the development of the atomic bomb.

Sales Increased Dramatically After World War II

After World War II, the company's sales increased dramatically. Sales grew from $2.9 million in fiscal 1947 to $4.1 million in 1948 and $5.1 million in 1949. In 1949 the Adrian plant was expanded with the construction of an engineering building and the establishment of a stainless steel fabricating operation there at a cost of $50,000. An additional $20,000 was spent in 1951 to install water-washed spray booth equipment to prevent paint and lacquer spray from spreading outside the plant.

Sales for 1950 fell back to $4.6 million, and the company reported a profit of $401,000. Around this time the company entered into an agreement with Fisher Scientific Company of Pittsburgh, Pennsylvania, to manufacture a stock line of metal laboratory furniture. Fisher would then warehouse the furniture and sell it to its industrial customers. Kewaunee also began producing its proprietary Kemrock tops, which were made of a natural quarried freestone material impregnated with an acid-resistant coating. Kemrock tops were considered the best available, until Kewaunee introduced the Kemresin top in 1963.

1950s, Growth and Expansion

As the 1950s began, management realized that southeastern Michigan, with its heavy concentration of automobile manufacturers and related suppliers, probably was not the best location for a company making metal and wood laboratory furniture and other scientific equipment. The company began to look for a wood manufacturing facility located in the southern United States.

In 1951 C. G. Campbell became chairman of the company after serving as president for 23 years. J. A. Campbell succeeded him as president. The Campbell family was one of the four families that owned the company. The others were the Bruemmer family (successors to the Borgman estate), the Duvall family, and the Dishmaker family (successors to the Haney estate). John L. Haney, John M. Borgman, and George Duvall were principals in the original Kewaunee Casket and Manufacturing Corporation and held various positions as officers and directors of the company. Throughout the company's early history its board of directors reflected the familial nature of the firm's ownership.

In the spring of 1954 a site for the manufacture of wood furniture was selected in Statesville, North Carolina. A new subsidiary, Technical Furniture, Inc., was formed. Development of the project was financed with $300,000 worth of Kewaunee common stock and term loans totalling $1.2 million. The first phase of construction consisted of 56,000 square feet of office and manufacturing space. The new factory in Statesville began hiring employees and production started in February 1955. In 1959 the name of Technical Furniture, Inc., was changed to Kewaunee Technical Furniture Company, and it became a North Carolina corporation operating as a wholly owned subsidiary of Kewaunee Manufacturing.

In 1956, the company reported sales of $9 million and net income of $622,772. In 1957 sales rose to $11.5 million while net income fell to $602,600. The company was facing increased competition from new companies coming into the laboratory furniture business and from the expansion of existing companies. In October 1957 the Statesville Company was formed to provide warehouse space in Statesville. In 1958 a pilot metal furniture operation was begun in Statesville.

The development of Kemresin began in 1958 with a joint research project with Battelle Laboratories of Columbus, Ohio. Kemresin was a modified epoxy resin product. When production of Kemresin began in Statesville in 1963, the Kemresin factory produced only laboratory sinks. In a couple of years it would be producing the highest quality laboratory tops and sinks available.

1960s: A Decade of Change

By mid-1962 the Statesville operation, with warehouse space expanded to 60,000 square feet, was achieving record sales and profits, while business at the Adrian facility was mediocre at best and labor negotiations were proving difficult. By the end of the year it was decided to discontinue all wood furniture operations at Adrian and re-equip the factory there to produce metal laboratory furniture exclusively. At the same time the Kemresin plant in Statesville was expanded to permit the production of tops as well as sinks.

By 1964 all of the company's metal furniture was being produced in Adrian and all of its wood furniture, plus Kemresin, at Statesville. That year Kewaunee introduced its "Aristocrat" auxiliary air hood and set up a hood demonstration room in Adrian. In 1965 sales topped $20 million, and the company's business remained strong for 1966 and 1967.

In mid-1967 management began discussions with various brokerage houses for a secondary stock offering. The company's name was changed from Kewaunee Manufacturing Company to Kewaunee Scientific Equipment Corporation. Sales for 1967 were $23.2 million, and the company had another $23 million backlog of unfilled orders. The Statesville operations accounted for $16 million of the company's sales. Assets of the Statesville Company were transferred to the Kewaunee Technical Furniture Co. in exchange for 10,647 shares of Kewaunee stock. At the end of the year an underwriting agreement was reached at a special stockholders meeting, and the initial public offering (IPO) of stock was made on February 14, 1968. Kewaunee's IPO was actually a secondary offering, with all proceeds going to the selling stockholders, who generally sold 25 percent of their stock. Some 286,000 shares were sold at a price of $25 per share.

Business Expanded During 1970s

Following the public stock offering, business went into a down cycle for the period, 1970-72. In 1970 the company was reincorporated in Delaware, and Kewaunee Technical Furniture was merged into Kewaunee Scientific Equipment, becoming a division instead of a subsidiary. In 1972 Kewaunee acquired the Angle Steel Division from Gulf and Western Corporation. Angle Steel, located in Plainwell, Michigan, was looked on as a diversification opportunity, and by 1975 it was producing metal farm buildings, or pole barns, as well as other products.

In 1973 the metal furniture operation in Adrian was achieving poor results, and management was becoming concerned whether it would be possible to ever operate profitably in Adrian. By mid-1974 the country was experiencing inflation and a recession, and Kewaunee was having problems profitably fulfilling its long-term fixed-price contracts. In 1974 the company introduced the KemKlad line of plastic laminated particleboard casework for use in arts and crafts and homemaking. By 1975 production levels in Adrian had reached optimum levels.

In 1977 the company purchased a manufacturing facility in Lockhart, Texas, consisting of 30,000 square feet of factory space on 28 acres of land, for $338,000. This location would be the new home of the company's Special Products Division, which was moved from Adrian. In 1978 Kewaunee purchased the assets of Electronic Finishes, Inc. (EFI), a company that had gone bankrupt doing development work in applying acrylic coatings to particleboard and curing the finish with radiation from an electron beam. Kewaunee moved EFI's assets from Plainfield, Illinois, to Statesville, and began working on the electron beam finishing and curing system. After three years of attempting to produce a reliable product, Kewaunee abandoned it.

1980s Began with Recession, Ended with New CEO

The 1979-80 recession strongly affected the company's Angle Steel Division. In 1983, the metal building components part of Angle Steel was sold to another producer, and the Angle Steel Division was renamed the Flexible Furniture Division. It would continue to produce electronic support furniture that could be used with computers, word processors, and other electronic office equipment.

In May 1982 Paul Meech was elected chairman of the board, and William M. Bartlett was elected president. Bartlett had previous experience at American Hospital Supply Company and G.D. Searle Company. Under Bartlett's leadership, Kewaunee moved its corporate headquarters to Wilmette, Illinois, in the Chicago metropolitan area, in May 1984. That same year it acquired the J.M. Manufacturing Corporation of Santa Clara, California, a company that produced high-quality chemical fume hoods and laminar-flow hoods and sinks. It also purchased a 25 percent interest in Triangle Biomedical Sciences, Inc., of Durham, North Carolina. Sales for 1984 were $53.8 million, with net income of $3.1 million.

In 1985 Kewaunee closed and sold its Angle Steel plant in Plainwell, Michigan, and moved production of its Sturdilite product line of flexible furniture to Lockhart, Texas. Management also recommended that the Adrian facility be closed and product lines moved to Statesville and Lockhart. A 57,000-foot expansion to the Lockhart facility was announced. In February 1986, the Adrian plant was closed, and a few months later in August the company changed its name to Kewaunee Scientific Corporation.

A delayed start-up of the transferred operations in Statesville resulted in a net loss of $7.7 million in 1987 (ending April 30). One of the major problems was that North Carolina workers did not have the metal fabrication skills and experience that workers in Adrian had. It took about two years of intensive training programs to bring productivity up to previous levels.

Profits were also negatively affected by the unprofitable instrument distribution business, Scientific Equipment Apparatus Marketing Corporation (known as Seamark), which Kewaunee established in 1985. The subsidiary was formed to import products from the Far East into the United States, but a strong Japanese yen during the period made business difficult. Seamark was sold in 1988.

In 1988 the company was involved in a price war with competitors and the St. Charles division of Whirlpool Corporation. With a well-received new generation of modular workstations, Kewaunee managed to eke out a profit of $786,000 on sales of $68.6 million in 1988. With improved productivity and labor cost savings taking effect at Statesville and Lockhart, Kewaunee saw its net income rise in 1989 to $1.6 million on flat sales of $68.9 million. However, the company still faced difficult circumstances: excess industry capacity and a downturn in prices.

Eli Manchester, Jr., Became President and CEO, 1990

A few months after Kewaunee reported a 70 percent decline in earnings to $472,000 on sales of $74 million (up seven percent) for 1990, William Bartlett resigned unexpectedly. Eli Manchester, Jr., was recruited out of retirement in July 1990 to become Kewaunee's president and CEO. By December Manchester had relocated Kewaunee's corporate headquarters from Wilmette to Statesville. At the company's annual meeting, he told stockholders, "It has become clear that the headquarters office here [in Wilmette] is disassociated from the operations of the rest of the company. It makes more sense to be in North Carolina, closer to our production." The move was expected to save $500,000 annually. Further cost-cutting measures were expected to reduce overhead by another $1 million annually. The company's workforce was 784 employees, its lowest since 1973.

Kewaunee reported net income of $801,000 on sales of $75 million in 1992. For the next three years sales declined, and the company reported net losses of $2.5 million in 1993, $203,000 in 1994, and $1.1 million in 1995. During this period several new programs and strategies were put in place. These included strengthening the company's network of sales agencies and representatives to achieve increased market penetration. Kewaunee wanted not only to increase sales in general, but in particular to increase sales of its higher margin products. A new pricing strategy was introduced to improve profit margins on the low-margin contract-bid portion of the company's business. Additional investments were made in computerized machinery, which helped improve manufacturing efficiencies and reduce costs.

By 1996 Kewaunee was showing signs of revitalization. The company showed a small profit of $361,000 on sales of $57.6 million, the lowest sales level of the decade. In 1997 net earnings increased dramatically by 527 percent to $2.3 million, helped in part by an income tax credit and a 50 percent reduction in interest expense. Sales increased 7.6 percent to $62 million.

By fiscal 1998 (ending April 30), Kewaunee was fully revitalized, with a strong earnings performance and increased sales. Sales rose 18 percent to $73 million. Operating earnings were up 75.8 percent, and pre-tax earnings jumped 95.6 percent to $4.2 million. After-tax net earnings rose 13.3 percent to $2.6 million. Interest expense was again reduced by another 50 percent. During the fiscal year the company's stock price climbed 146 percent, closing at $12.625 per share, up from $5.125 per share at the end of the last fiscal year.

Kewaunee had a particularly strong fourth quarter in fiscal 1998 and entered fiscal 1999 with excellent momentum. President and CEO Eli Manchester, Jr., attributed the company's strong performance not to any one factor or strategy, but to several strategies that had been put in place over the past several years. New product development was contributing to greater sales, with the introduction of the new Research Collection line of steel furniture, a new Alpha System 2000 with modular components, and the Evolution for LANs furniture that supported computer equipment. In addition, the company introduced the Kemresin Lite premium laboratory countertop. Kemresin Lite provided not only chemical resistance, but it had a renewable surface, came in a variety of colors, and was lighter in weight than previous laboratory countertops.

Looking to the future, Kewaunee expected to increase its spending for modern manufacturing equipment. The company spent $1.5 million in fiscal 1998 on capital improvements, and it continued to reduce manufacturing costs and improve productivity through the increased use of computerized manufacturing machinery. These investments were perceived as necessary to meet the expected increased demand for Kewaunee products in the coming years.

Principal Operating Units: Laboratory Products Group; Technical Products Group.

Further Reading:

• Murphy, H. Lee, "Kewaunee's Move South: Bumpy Start, Smooth Finish," Crain's Chicago Business, September 11, 1989, p. 24.
• ------, "Kewaunee Turns Corner--Just in Time for Price Wars," Crain's Chicago Business, September 12, 1988, p. 27.
• ------, "New CEO Out to Slash Costs at Kewaunee," Crain's Chicago Business, September 10, 1990, p. 16.

Source: International Directory of Company Histories, Vol. 25. St. James Press, 1999.

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