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Kendall International, Inc. Business Information, Profile, and History

products company healthcare usa

15 Hampshire Street
Mansfield, Massachusetts 02048
U.S.A.

History of Kendall International, Inc.

Kendall International, Inc. manufactures, markets, and distributes disposable medical supplies and devices. It specializes in serving wound care, vascular therapy, and home healthcare markets, but also manufactures miscellaneous healthcare and industrial products. Although Kendall filed for bankruptcy in 1992, it restructured its organization and was able to resume the steady growth it has achieved since the beginning of the century.

The company that would become Kendall International was born in Walpole, Massachusetts in 1903. Henry P. Kendall, an entrepreneur with a knack for improving products and production processes, purchased the Lewis Batting Company, a small textile mill. The mill employed 80 people and produced cotton batts, carpet linings, and absorbent cotton. Kendall soon expanded that limited product line to include various cotton health and hygienic products, such as sterile wipes, surgical dressings, and protective tape coatings.

In 1916, Kendall purchased a cotton mill in Camden, South Carolina. In what would later be recognized as a shrewd innovation, Kendall became one of the first American companies to vertically integrate its production process; his company handled the spinning, weaving, and finishing of the broadwoven fabrics they made into dressings. The move allowed Kendall to boost earnings from his already growing business and to position his company to capitalize on a surge in demand for his medical products during the late 1910s.

World War I provided an opportunity for Kendall to serve his country by meeting a massive demand for his surgical dressings and cotton gauze. As he stepped up production and worked to create improved products, his mill became focused almost solely on the production of healthcare products. After the war, in fact, Kendall continued to chase the healthcare market. By the 1920s, Kendall was manufacturing hospital dressings, cheesecloth, sanitary gauze, and numerous coarse-mesh products. It sold its products under brand names that included Curity, Kendall, and Polyken.

The 1920s and 1930s represented an era of rapid growth for Kendall. It acquired other manufacturers of dressings and related healthcare products and also purchased additional spinning and weaving plants to meet the swelling demand for its products. Kendall even expanded outside of the United States in 1926, opening a subsidiary in Toronto, Canada. Kendall's early interest in foreign ventures would eventually result in nearly 20 percent of the company's revenues coming from cross-border operations. In 1928 the name of the company was changed to The Kendall Company.

World War II resulted in another period of huge growth for The Kendall Company, as the demand for Kendall's broad line of surgical dressings and first aid products ballooned. The company expanded its offerings during that period to include elastic stockings, nonwoven fabrics, and industrial tapes that utilized technology already implemented in some of its healthcare products. Examples of Kendall-manufactured goods included Curad adhesive bandages, Curity gauze bandages, Curity diapers and baby knits, Polyken plastic-coated electrical tape, and Curity Burn-a-lay (a burn relief cream).

Although The Kendall Company had to overcome a temporary reduction in shipments following World War II, it benefited during the 1950s and 1960s from the general expansion of the U.S. economy. As the population boomed, sales of its Curity diapers and other baby products shot up, as did shipments of its home first-aid products. Strong growth in the healthcare field boosted revenues from its gauzes, dressings, tapes, and ointments. Industrial and construction markets generated demand for Kendall's industrial adhesive tapes. Furthermore, U.S. government purchases bolstered Kendall's bottom line during the Korean War and the Vietnam War.

By the early 1970s, The Kendall Company had progressed from a small-town textile mill into a leading U.S. provider of hospital and home healthcare dressings and first aid products. Recognizing its market strength and future potential, The Colgate-Palmolive Company purchased Kendall in 1972. Kendall became a wholly-owned subsidiary of Colgate, and its products and brand names were swept into that massive U.S. conglomerate. Colgate owned Kendall and its products for 16 years, during which Curad, Curity, Polyken and other brands realized strong growth. Colgate's hefty capital backing and marketing savvy made many of Kendall's products household and hospital staples.

Until 1988, the subordinate Kendall was enveloped in the operations of its giant owner. In late 1988, however, a group of Colgate-Palmolive/Kendall managers, together with some outside vendors, formed Kendall International, Inc. as a holding company. Kendall International was created to purchase The Kendall Company and some related businesses and assets from Colgate-Palmolive. The management and investment group incurred $1 billion of debt during the acquisition. At the time of purchase, Kendall was garnering about $650 million in annual sales. By that time it had increased its product lines to include numerous industrial coating products, medical supplies and devices, generic drugs, and personal healthcare products.

Shortly after Kendall regained its independence, the United States spiraled into a deep recession. Although many of Kendall's products were relatively unscathed by the downturn, growth fell short of projections, hurting the company's financial performance. Furthermore, three specific setbacks occurred in 1989 and 1990. First, the latex glove market collapsed as a result of industry overcapacity, stunting Kendall's margins in that important segment. Second, sales of oil pipeline coatings to Russia took a severe and unexpected downturn. Finally, Federal Food and Drug Administration (FDA) product approvals slowed to a near halt, forcing Kendall to sell its state-of-the-art generic drug facility and cede its share of that profitable market niche.

By 1990, Kendall International was buckling under its massive debt load. In an attempt to recover, the buyout team brought in a new chief executive, Dick Gilleland, a recognized "turnaround" expert in the healthcare industry. During 1990 and 1991, Gilleland worked to meet Kendall's debt payments. With sales falling below the projections made before the merger, he was forced to jettison a significant chunk of Kendall's assets for relatively low prices. Kendall raised $221 million, most of which came from the sale of its McGaw intravenous solutions division. Despite Gilleland's efforts, Kendall failed to meet its loan obligations. In June of 1992, Kendall International entered into a restructuring plan under Chapter 11 of the U.S. Bankruptcy Code.

As a result of Kendall's restructuring during 1992, which entailed a sale of company stock that raised $112 million, Kendall was able to reduce its debt payments to a manageable sum; further refinancing in response to low interest rates during 1993 improved the company's position. In addition, Kendall benefited from an uptick in the economy in 1992 and 1993 that allowed it to increase sales and profits. After rising to $688 million in 1990, Kendall's revenues climbed to $738 million in 1991, $775 million in 1992, and to $826 million in 1993. Likewise, net income increased to a healthy $52 million by 1993, the first positive figure since the company had secured its independence. Kendall appeared to be engaged in a healthy recovery.

The company was able to emerge from its debt load and the economic downturn largely through the efforts of its competent staff and managers. By the early 1990s, Kendall had about 8,500 people working in its organization, about 4,500 of whom were located in the United States. In addition to Gilleland, senior management included many seasoned industry veterans. For example, James S. Fraser, senior vice-president, had formerly served as president of Calcitek, a dental products manufacturer. Likewise, Kendall Healthcare Products Company President Richard J. Meelia had previously been president of Infusaid/Pfizer Hospital Group, a maker of implantable drug delivery products.

The company that emerged from the reorganization comprised four business units; Kendall Healthcare Products Company, The Kendall-Futuro Company, Polyken Technologies, and the International Division. The smallest of these divisions was the Kendall-Futuro Company, which accounted for about 15 percent of company sales in the early 1990s. Kendall-Futuro manufactured and distributed home health care and first-aid products. Besides products under its popular Curad, Curity, Futuro, and Telfa brand names, the subsidiary produced a variety of miscellaneous goods, such as elastic supports and hosiery, wheelchairs and walkers, and diabetes management products.

Kendall's International Division accounted for approximately 17 percent of company receipts. It was responsible for manufacturing, marketing, and exporting Kendall products in more than 80 countries. It was primarily active in three regions: Europe, the Far East, and Latin America. However, Kendall also had operations in Australia, China, Thailand, Venezuela, and many other regions. Although the International Division focused on the sale of Kendall's hospital health care items, the company also used this division to procure raw materials for manufacturing.

Also making up about 17 percent of Kendall's shipments in the early 1990s was its Polyken Technologies subsidiary. Polyken manufactured and sold adhesive products and tapes for industrial and consumer applications worldwide. It sold such products as pipeline coatings, duct tape, and high-performance aerospace industry adhesives. Polyken also produced various goods for Kendall's medical product lines.

Kendall International's largest division was Kendall Healthcare Products Company, which generated more than 50 percent of the company's revenues in the late 1980s and early 1990s. That segment included various disposable medical, surgical, and vascular therapy products. Its three main product groups were: wound care supplies; urology and incontinent care, such as catheters and urine drainage devices; anesthesia products, such as airway management devices; and vascular therapy products, such as stockings and compression devices that reduce the risk of blood clots in immobilized patients. Kendall held an 80 percent share of the entire U.S. vascular compression market in 1993 and was experiencing its strongest demand for that line.

Despite tribulations during the late 1980s and early 1990s, Kendall International was relatively well positioned to take advantage of opportunities that were expected to arise during the middle and late 1990s. Importantly, Kendall held a solid leadership position in its key markets: it was at the head of both the U.S. wound care and vascular compression markets, and held the third leading spot in the urological industry. In addition, Kendall was recognized as maintaining state-of-the-art, efficient manufacturing operations. Kendall had established relationships with hospitals across North America and enjoyed a reputation for quality and service. Also to Kendall's credit were its respected consumer brand names. Finally, Kendall's chief competitor, Johnson & Johnson, was posing less of a threat to Kendall's profit margins going into the mid-1990s.

However, Kendall faced a range of obstacles that would likely hinder its success later in the decade. Healthcare initiatives proposed by Congress in 1994, for example, threatened to increase cost containment pressures on Kendall's largest customers--hospitals. Such efforts would likely reduce its already slipping profit margins from that market. Also, most of Kendall's businesses were in relatively mature, slow-growth areas that offered little chance of future expansion in the United States. Shorter hospital stays, less-invasive surgery techniques, and greater competition were a few of the major factors that were changing Kendall's market.

Only Kendall's important vascular compression product line proffered hope for hot growth in the 1990s. Sales of those items were expected to lurch from $86 million in 1992 to $167 million by 1996, providing the large majority of the gains for Kendall Healthcare. Unfortunately, Kendall severely underspent on research and development after its separation from Colgate-Palmolive. As a result, Kendall faced an uphill battle in sustaining its long-term leadership in some of its high-tech, high-profit niches. It would likely have to rely on acquisitions of other companies or products. Evidencing this likelihood was Kendall's announced buyout of Rhode Island-based Superior Healthcare Group, Inc., in 1994. Superior was a major producer of respiratory, urology, and nursing care products.

Going into the mid-1990s, Kendall, still under the direction of Gilleland in 1994, was making great strides in overcoming its debt problems. After boosting sales every year after Kendall International's formation in 1988, management was looking forward to continued growth as well as greater stability. At least one major market analyst predicted steady gains for Kendall through 1995 or 1996, when its reorganization would be complete. After that, its growth rate would likely slow to the single digit range. Kendall was looking to international expansion, increased demand for its vascular compression products, and continued dominance of its established brand names to drive future growth. In late 1994, Kendall was purchased by Tyco International Ltd. of Exeter, New Hampshire.

Principal Subsidiaries: The Kendall Company; The Kendall-Futuro Company; Kendall Healthcare Products Company; Polyken Technologies.

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