Simplicity Manufacturing, Inc. Business Information, Profile, and History

Company Perspectives:

"The way to a beautiful lawn."

History of Simplicity Manufacturing, Inc.

Wisconsin-based Simplicity Manufacturing, Inc., makes lawn mowers, riding mowers, garden tractors, and a variety of attachments. The company is also known for its Giant-Vac leaf blowers, trail vacuums, debris handlers, and collection systems, as well as for chipper shredders, tillers, and field and brusher mowers. The wide range of snowthrowers and attachments it manufactures rounds out the company's products and provides some seasonal diversity to the business. With manufacturing facilities in Georgia and New York, the company is majority owned by Kohlberg & Co., a New York state private investment firm. Employees also own a share of Simplicity through an Employee Stock Ownership Trust. In 2004 Simplicity agreed to be acquired by Briggs & Stratton Corporation, a large manufacturer of gasoline-powered engines for outdoor equipment.

The Early Years

The roots of Simplicity can be traced back to Milwaukee, Wisconsin, where in 1872 the Western Malleable and Gray Iron Manufacturing Company was established to produce gray iron castings. With the advent of the automobile, the company began to make gasoline-powered engines, marketed under the "Simplicity" trade name. Western was bought by businessman L.M. Turner in 1911 and moved to the shores of Lake Michigan, to Port Washington, Wisconsin, where the company, now called Turner Manufacturing, continued to produce internal combustion engines as well as two models of farm tractors. Unfortunately, Henry Ford entered the tractor market after World War I, cut prices, and drove several firms out of business, including Turner Manufacturing, which went under in 1920. Turner's sales manager, William J. Niderkorn, acquired some of the assets of his former employer including the Simplicity name. In 1922 he founded Simplicity Manufacturing in Port Washington.

Simplicity's first product was a portable cylinder-boring machine used to rebuild car and truck engines. It was a popular enough product that the company was able to carry on through the first several years of the Great Depression, but in 1936 the market collapsed when Detroit automakers began to rebuild engines, selling them at low prices directly to car and truck owners. Forced to find a new product, Simplicity, in 1937, entered the garden tractor market with a two-wheel walking tractor that was sold by Montgomery Ward and Company. It was the popularity of this product that laid the foundation for Simplicity's long-term success. Not only did the company make money selling the walker, but the machine was versatile and could be fitted with a wide range of attachments produced by Simplicity, including a cultivator, plow, and sickle bar mower. In 1939 a "sulky attachment" (essentially two wheels and a simple seat) was introduced, converting the walker into a rudimentary riding garden tractor.

Postwar Growth

World War II intervened, temporarily putting a halt to Simplicity's growth in the lawn and garden market, as the government limited the number of tractors the company could produce. As part of its war effort, the company manufactured electric fence controllers, a product it had recently introduced, and external surface grinders. Simplicity elected to focus its resources on the garden tractor business in 1945 and enjoyed steady growth in the postwar years that saw large number of war veterans getting married and raising families in the suburbs sprouting up across the country, many of whom would now be in the market for garden and lawn equipment.

A major step in the company's evolution took place in 1955 when Simplicity began to offer a snow throwing attachment to its walker. This advance led to the 1961 launch of a single purpose, walk-behind, 23-inch rotary snowthrower using a 3.5 horsepower motor. The Snow-Away retailed for $285. Other major developments also took place during this period. In 1955 the company introduced the Simplicity Roticul, a single-purpose, walk-behind rotary tiller. Two years later Simplicity brought out the Wonder-Boy, the first rear-engine riding mower. This model featured a full floating mower deck and relied on a joy stick for steering. In 1959 the company produced the 700 Wonder-Boy, its first four-wheel riding tractor. As Simplicity entered the 1960s, it was generating close to $9 million in annual revenues and posting profits in the $500,000 range. It was also a public company by now, and its common shares traded over the counter.

Simplicity continued its steady pace of growth. In 1963 it began to manufacture its first lawn tractor. Then, in 1965, it underwent a change in ownership. A major farm equipment manufacturer, Allis-Chalmers Corporation, sought to acquire Simplicity to gain entrance into the suburban market for lawn and garden equipment. At first, the transaction was challenged by the government, which questioned whether it violated fair trade laws. As part of its attempt to address concerns that it controlled too much of the market, thus stifling competition, Allis-Chalmers opened a plant in South Carolina to manufacture garden tractors under its own name. Six years later, after the Nixon administration repealed the fair trade laws, Allis-Chalmers closed the South Carolina plant and moved all of its garden tractor production to the Port Washington plant. Under new ownership, Simplicity also began to look more at foreign markets. In 1969 it opened an office in Brussels, Belgium, to handle its European business.

1970s-80s: New Products and Directions

Simplicity continued to expand its product offerings and make improvement to existing lines during the 1970s. In 1971 the company began selling its first commercial industrial tractor. A year later it introduced a new garden tractor, the three-speed PowrMax. The PowrMax, being larger than a traditional garden tractor yet smaller than a farm tractor, set the standard for a new category in the industry: the compact tractor. In 1973 a more robust engine, featuring 19.5 horsepower, was added to the PowrMax. The tractor was so popular that the government acquired a number for use on military bases. Some of the PowrMax models would eventually, in the early 2000s, become virtual collector's pieces, fetching double the price originally paid for them. Simplicity also reached a milestone during the 1970s, turning out its one-millionth power unit in 1975. On the snowthrower side of the business during this period, Simplicity introduced a new single-stage snowthrower in 1978.

More changes in ownership took place during the 1980s. In 1983 three Simplicity executives--Warner C. Frazier, president; Nicholas P. Trunzo, vice-president of operations; and Carl Charles, vice-president of finance--teamed up with Wesray Corporation, a private investment firm, to buy the business from Allis-Chalmers. Wesray, formed just two years earlier, was headed by a former Secretary of the United States Treasury, William E. Simon, and had already completed a number of acquisitions, including Gibson Greeting Cards and Wear-Ever Aluminum. A subsidiary, Wesray Equipment, was formed to serve as the new parent company for Simplicity. At this point in its history, Simplicity was logging annual sales of $70 million and employing a work force of 500. The relationship with Wesray, however, would prove to be short-lived. In 1985, just two years later, Wesray sold its interest to an Employee Stock Ownership Trust (ESOT). Papers filed in this transaction indicated that in fiscal 1985 Simplicity sales had grown to $90 million.

Simplicity faced some challenges in the late 1980s. A drought during the summer of 1988 hurt sales of lawn and garden equipment, and was followed by a dry winter, which adversely impacted the sale of snowthrowers. As a result, sales that had increased to $100 million in 1988 receded to $90 million in 1989. Of greater long-term significance was the maturation of the lawn mower and snowthrower markets. The sales of outdoor power equipment had peaked in the early 1970s, and there were dozens of American companies involved in the business, as well as Japanese heavyweights like Honda. Simplicity was, to some extent, a victim of its own success; the better the company built its products, the longer they lasted and the less often customers would reward Simplicity with repeat business.

As a way to generate growth, Simplicity looked for opportunities beyond the consumer market. In 1989 it acquired Middlesworth Engineering and Manufacturing Inc., a Greentown, Indiana, maker of industrial mowers, which had patented an advanced steering mechanism. Some of Simplicity's dealers had begun selling turf maintenance machinery and suggested Simplicity try that market as well. The company was able to modify the Middlesworth products to create a line of six professional lawn cutters. Simplicity quickly surpassed Middlesworth annual sales in the $500,000 range. Simplicity also invested money in the development of a new snowthrower that relied on tracks rather than wheels for propulsion, but the track supplier proved to be unreliable, hampering the introduction of this winter product line.

Acquisitions in the 1990s

In the early 1990s, Simplicity was able to take advantage of changes in a law that prohibited yard waste from landfills, introducing to the market an attachment that would fit on most of the company's mower decks to mulch grass clippings. Patented shredder blades could also shred fallen leaves. Simplicity entered the stand-alone chipper shredder business when it acquired Tornado Products Company in 1992. The line, which featured patented triangular hammers to boost shredding power, was later supplemented with an electric-powered unit as well as larger commercial versions. Walk-behind chipper vacuums were then added in 1994.

Simplicity again experienced another change in ownership during the 1990s. In 1994 an affiliate of private investment firm Kohlberg & Co., based in Mount Kisco, New York, bought a 70 percent interest from the ESOT. It appeared that the company would change hands yet again in 1997. A sale appeared imminent to Questor Partners Fund L.P., a Detroit-area buyout firm that had recently acquired Ryder TRS Inc. and Schwinn Cycling & Fitness Inc. However, that deal ultimately fell through, and Simplicity was taken off the block.

To maintain its steady growth in the late 1990s Simplicity introduced several innovations. In 1998 the company invested more than $1 million in new technology to increase productivity. A laser-cutting machine, costing more than $1 million, was installed, capable of cutting through steel sheets as large as four by eight feet and three-quarters of an inch thick. Simplicity also invested in a 165-ton hydraulic press with quick die-change capabilities to bend the cut steel into the necessary parts for tractor frames or lawnmower decks. Previously, parts had to be cut with a traditional punch press, which was both time consuming and expensive because a die had to be fashioned for each individual part and that die would cost in the $10,000 range. The laser cutter could be programmed to cut steel in any number of shapes without need for a die. Moreover, it could be set to continue work unmanned over weekends. The punch press continued in use for larger production runs where it was much faster than the laser, but the laser was ideally suited for a variety of smaller jobs. Simplicity also invested in robotics, introducing welding robots in the mid-1990s. In the end, the addition of new technology was intended to increase efficiency rather than capacity, given that the lawn-and-garden industry was a cyclical business and management was careful not to overextend itself.

In February 1999, a new president was brought in: Jim Weir, who had been groomed to succeed Warner Frazier as chief executive officer. A Wisconsin native, Weir went to the University of Wisconsin to study mechanical engineering but graduated in 1966 with a business degree instead. After going to work for the Arthur Anderson firm in Milwaukee, he was drafted during the Vietnam War and spent two years stateside. After returning to Arthur Anderson, he went to work for Briggs & Stratton, the top manufacturer of lawn mower engines. One of Briggs' major customers was Simplicity. Wier started out in the finance department and rose to the rank of executive vice-president of operations, overseeing four divisions, a position he held for ten years. During his time at Briggs he was involved in some difficult labor negotiations and was believed to be instrumental in the cutting of jobs in Milwaukee, a reputation which would follow him to Simplicity.

When Wier arrived, Simplicity began to initiate a plan to move into the fast-growing lawn-and-garden equipment market, serving such customers as municipal parks and landscaping companies. It was also interested in growing its European business, and developed a riding mower more suited to the lush grass found on the Continent. Rather than discharging the grass out the side of the mower, the new units discharged from the back. However, Simplicity's efforts were soon placed in jeopardy when management and the Machinists union were unable to reach agreement on a new labor contract. In October 1999 some 350 union workers walked off the job. With Frazier, who had a good reputation with the union, set to retire at the end of the year, labor leaders expressed concern that Wier, given his history at Briggs, was more likely to take a hard line on the negotiations. Health care, rather than higher wages, proved to be the sticking point for workers, while management insisted on a five-year contract, rather than three, to give Simplicity a better chance to grow the business without labor distractions. Finally, after more than six weeks on strike, the union workers agreed to a new five-year contract that addressed the major concerns of both parties.

2000 and Beyond

Before Warner stepped down as CEO on January 1, 2000 (he stayed on as chairman), Simplicity announced that it had agreed to purchase Ferris Industries, a Munnsville, New York-based company that produced professional turf care machinery. Like Simplicity, Ferris had started out in an unrelated field, launched in 1909 to make milking machines. It did not become involved in the manufacture of commercial walk-behind and riding mowers until 1985 but quickly gained a solid reputation for innovation, in particular for its revolutionary suspension system. For Simplicity, the addition of Ferris helped fill out its product line in the fast growing commercial mower market. In 2000 Simplicity completed another purchase, picking up Giant-Vac Manufacturing Inc., a Connecticut company that added leaf blowers to a product mix that was increasingly being steered towards the commercial sector, for sale through independent dealers rather than mass-market retail chains.

An even more important acquisition would take place in October when Simplicity agreed to a $73.3 million purchase (later adjusted to $55.8 million) of Georgia-based Snapper Inc., a lawn equipment manufacturer which Simplicity had been pursuing for several years. Snapper, founded in 1890 to make saws, was owned by Metromedia International Group Inc, which after a change in leadership elected to put the business up for sale. Simplicity finished second in the bidding, but when a deal with the high bidder failed to materialize, Simplicity was quick to step in and buy the Snapper assets. In addition to doubling its size, becoming a company with annual sales in the $350 million range, Simplicity gained the valuable Snapper brand name, and in addition to supplementing its current lines of lawn and garden equipments, it gained a line of walk-behind lawnmowers that it previously did not sell. Moreover, it expanded the company's reach into the southern states.

Then, in June 2004, Simplicity announced that it would be acquired by Briggs & Stratton for some $225 million in cash. Expected to be completed in 2005, the deal would make Simplicity a part of its new parent's Power Products Group, though the company planned to maintain its current management team and manufacturing facilities. "We're pleased with the acquisition," said CEO Wier, the former Briggs & Stratton executive, adding, "We believe Briggs & Stratton has the financial resources and support to allow us to continue our current growth strategy."

Principal Subsidiaries: Ferris Industries; Giant-Vac, Inc.; Snapper, Inc.

Principal Competitors: The Black & Decker Corporation; Deere & Company; Honda Motor Co., Ltd.; The Toro Company.

Chronology

• Key Dates:
• 1922: Company founded by William J. Niederkorn.
• 1937: Simplicity builds first walking tractor.
• 1957: Wonder-Boy riding mower introduced.
• 1961: Sno-Away Snowthrower introduced.
• 1965: Allis-Chalmers Corporation acquires business.
• 1985: Employee Stock Ownership Trust buys company.
• 1994: Kohlberg & Co. acquires controlling stake.
• 2002: Snapper, Inc. acquired.
• 2004: Briggs & Stratton acquires Simplicity.