National Sanitary Supply Co. History

Address:

2900 Chemed Center
255 East 5th Street
Cincinnati, Ohio 45202-4729
U.S.A.

Telephone: (513) 762-6500
Fax: (513) 762-6644

Public Company
Incorporated: 1983
Employees: 1,715
Sales: $308.28 million (1994)
Stock Exchanges: NASDAQ
SICs: 5113 Industrial & Personal Service Paper; 5169 Chemicals & Allied Products, Not Elsewhere Classified; 5087 Service Establishment Equipment; 5112 Stationery & Office Supplies

Company History:

National Sanitary Supply Co. is the world's largest distributor of janitorial supplies, but its name is more indicative of its goal than its actual status in the mid-1990s. For although National Sanitary led its industry, its operations were limited to 18 western, southern and midwestern states. Privately owned and operated for over 50 years, the company was acquired by Cincinnati-based Chemed Corporation and taken public in 1986. Chemed continued to hold a controlling 83 percent share of National Sanitary Supply through the mid-1990s.

Using an acquisition strategy to gain critical mass in its highly fragmented industry, National Sanitary Supply experienced an astonishing average annual sales growth rate of 44.85 percent from 1984 to 1994. In fact, the business boasted an unbroken record of 65 years of rising sales from 1929 to 1994. While the company operates in one business segment, its products can be grouped into three main categories: paper goods (about 60 percent of annual sales); industrial cleaners and chemicals (25 percent); and housekeeping goods like mops and brooms (15 percent). National Sanitary Supply manufactures some of its own branded paper goods, cleaners, and chemicals and distributes a broad variety of cleaning supplies ranging from paper goods to waste receptacles and cleaning equipment. The company's clientele includes the industrial market, schools, hotels and motels, retailers, and hospitals.

Early History

National Sanitary Supply Co. (NSS, also known as Nat San) was founded in Los Angeles, California, in 1929 as a private distributor of hand soap to industrial and institutional customers. This company later achieved a measure of vertical integration by affiliating with Sanichem Manufacturing Company and La-Ru Truck Rental Company, Inc. Over the years, Sanichem earned a reputation for innovation in the field of industrial chemicals. This segment of NSS produced specialty cleaners and polishes for particular applications and surfaces, like the marble and composite floors in schools, restaurants and shopping centers. The trucking company, whose fleet numbered nearly 200 trucks by the early 1990s, gave Nat San delivery capabilities. Over the years, the company's line of proprietary and distributed products grew to fulfill virtually every janitorial need, including garbage bags, brooms and mops, buckets, paper goods like toilet tissue and paper towels, and even big-ticket items like ladders, pressure washers and carts. This comprehensive catalog would become a key aspect of NSS's rapid growth in the 1980s.

Postwar Growth

National Sanitary Supply grew slowly in its early decades and didn't establish its first sales office outside Los Angeles until 1957. NSS expanded outside California in 1971 with the acquisition of a small janitorial supply company, but didn't establish another regional center until 1981, when it created one in Las Vegas. Although its geographic growth during this period wasn't particularly earth-shattering, NSS did develop a sales culture focused squarely on gross profits. The company's sales force, which numbered over 700 by the mid-1990s, was considered a key to its ongoing success. Their efforts to saturate the western United States helped multiply sales more than 2.5 times, from $12.8 million in 1975 to $34.6 million in 1980.

National's business is meeting housekeeping and building maintenance needs. This sole focus, however, leads to multi-dimensional service for customers. National starts with a vision to supply the best combination of quality, dependability, and economy possible. This leads to seeking out and providing many innovative cleaning products. Knowledgeable sales people and efficient distribution systems add value to each customer relationship.

Acquisitions in the 1980s

This impressive growth increased after 1983, when NSS was acquired by Chemed Corporation, a diversified manufacturer of specialty chemicals. Chemed, which also owns Roto-Rooter plumbing service, put its significant financial weight behind NSS, and the combined effort quickly bore fruit. Over the course of the decade, NSS purchased companies in New Mexico, Utah, Washington, and Colorado. One of the most significant of these was San Francisco's Paul Koss Supply Co. Chemed took NSS public that same year, selling 17 percent of the company's equity to raise $8.3 million for debt reduction, capital improvements and new acquisitions. A year later, National Sanitary acquired the janitorial supply business of Calgon/Vestal Laboratories, a division of Calgon Corp. The new operation's St. Louis location became NSS's first significant office east of the Rocky Mountains. The company added a subsidiary, Century Papers, Inc., in the fall of 1988.

The acquisitions doubled its sales offices from 13 to 25 and widened its distribution reach from three centers in three states to nine outlets in eight states. For the eight years prior to the acquisition, National Sanitary's sales had been steadily advancing an average of 33.6 percent each year. However, in the six years after the change in corporate ownership, sales increased at an average annual rate of 76 percent, and nearly tripled from $92.6 million in 1987 to $262.4 million in 1989. By 1990, NSS's gross profit exceeded 1986's total sales.

NSS's dramatic growth has been compared to that of Sysco Corp., which blossomed from a regional food distributor into a multibillion-dollar national company in less than 10 years. Like that company, NSS operated in a very fragmented, highly competitive industry--the $7.7 billion sanitary supply business had about 7,000 participant companies in the mid-1980s and enjoyed a healthy eight percent annual growth rate. National Sanitary's dominance has been credited to its comprehensive product line; its large, proficient sales force; and its dedication to customer service. The company's full-service approach, incorporating regulatory advice, just-in-time delivery, and technical support for its 10,000-product line, has won it almost 120,000 customers across the country.

The 1990s and Beyond

Nat San inched closer to a coast-to-coast reach in the early 1990s, adding operations in Ohio, Washington, Michigan and Texas. Financial growth slowed from the breakneck pace of the 1980s but still surpassed the industry average. Sales increased only 16 percent, from $265.42 million to $308.28 million, and after slumping a bit during an early 1990s recession, profits increased apace, from $4.1 million to $4.75 million.

The sanitary supply distribution industry remained fragmented into the mid-1990s. In fact, although National Sanitary Supply was the clear leader of the category, it had only captured about 10 percent of overall sales and served less than 40 percent of the American population. The company still wasn't "the first coast-to-coast supplier of quality sanitary supplies," but it enjoyed a significant head start over all its competitors.

Robert B. Garber, son-in-law of one of the company's cofounders, remained president and chief operating officer of Nat San for nearly a decade after its acquisition by Chemed, bringing a measure of continuity to the takeover. The second founding family was represented by Charles Lane and Thomas Lane, who served in executive capacities through the mid-1990s. In 1992, Chemed exerted closer control over its major investment, installing Paul C. Voet, an Executive Vice-President of Chemed, as Nat San's president and CEO. Chemed Chairman and CEO E. L. Hutton became NSS chairman in 1993. Garber and the Lane brothers continued to work at their fathers' company, albeit in lesser roles.

National Sanitary Supply expected to post record sales and income for 1995 in spite of the loss of about 15 percent of its annual sales when a major customer, fast-food restaurateur Sonic, Inc., defected. The company hoped to use computerized ordering, alternative marketing and sales techniques, intensified research and development, and joint ventures to fulfill the promise its name has held for more than 65 years.

Principal Subsidiaries: Century Papers, Inc.; National Sanitary Supply Development, Inc.

National Sanitary Supply Co. History

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