Formica Corporation Business Information, Profile, and History
Wayne, New Jersey 07474
History of Formica Corporation
Perhaps best known for its kitchen counter surfaces, Formica Corporation is the world's largest manufacturer of high-pressure laminate for use in residential and commercial building. In fact, the name Formica has become virtually synonymous with decorative laminate, and the company's products, available in a wide variety of colors, textures, and patterns, are used extensively on countertops, cabinets, and furniture, not only in the United States, but increasingly in other countries. The company maintains factories in England, France, Germany, Spain, Canada, and Taiwan.
Daniel J. O'Conor and Herbert A. Faber, the founders of Formica, were two engineers who met in 1907, their first year of employment at Westinghouse Electric in Pittsburgh. Westinghouse was one of many manufacturers experimenting with the developing field of synthetics manufacture, with each scrambling to find applied uses for the new materials. O'Conor and Faber rose through the ranks of the company, with O'Conor in the research engineering department and Faber in sales. Westinghouse and others soon began to experiment with several new laminate processes that had been patented by renowned inventor Dr. Leo Baekeland. In 1907, Baekeland had created Bakelite--the first totally synthetic plastic--which proved to be the heat- and moisture-resistant material that prompted a revolution in American industry. After Baekeland had made his invention known and received the patents for it in 1910, many manufacturers rushed to take advantage of the new material's properties. Bakelite in liquid form could impregnate materials such as canvas or paper to them give insulating properties. In that year O'Conor at Westinghouse manufactured the first sheet of laminate by coating kraft paper with liquid Bakelite and then pressing it flat. Westinghouse applied for the patent for the process in 1913, and it was granted in 1918.
Faber and O'Conor left Westinghouse in 1913, convinced that this new laminated material was an important one and that it was underappreciated and underdeveloped at Westinghouse. In search of capital, they found a partner in J.G. Tomlin, a lawyer and banker from Kentucky who gave them $2,500, for which he received a one-third stake in the new venture. They made Cincinnati, Faber's home town, its headquarters. The company's first plant was a rented two-story space, and it held a 35-horsepower boiler and a gas stove. It opened its doors in 1913 with an order to be filled: commutator V-rings for the Chalmers Motor Company. Other early clients were Ideal (later Delco) Electronics and Bell Electric Motor.
O'Conor and Faber saw the future of this new product as an insulating material, especially suited in electrical processes. Mica had been popular as just such an insulator but had grown expensive and hard to come by. Faber called the new material Formica, at it could be used "for mica." Thus the first applications for the material were almost exclusively industrial. This early Formica was dark in color and without the surface layer that was to be added later. During the first year the company made only rings and tubes.
The company incorporated on October 15, 1913 as the Formica Insulation Company. The new corporation was listed on the Cincinnati stock exchange, and 600 shares were issued at $25. Faber was president and treasurer, and O'Conor was vice-president and secretary.
In July 1914, a new flat-sheet press arrived at the factory, which allowed the company to produce laminate. Formica produced laminate on order only, buying the resin that was necessary to the process from the Bakelite Company; from the beginning, it had been operating under license from Baekeland. However, that year Bakelite--under pressure from its biggest client, Westinghouse--informed O'Conor that it would no longer sell resin to the company (except for the manufacture of commutator rings) and that Westinghouse was going to start to manufacture laminate. O'Conor and Faber immediately found an alternative in the resin known as Redmanol, developed by L.V. Redman. Redman was a chemist who had previously worked for Adolph and Sam Karpen, Chicago-based furniture manufacturers, to find ways to improve their furniture's varnish.
The first years were lean ones for the new company, and for much of its early existence it owed everyone. Nevertheless, the list of clients grew to include Kellogg Switchboard, Cutler-Hammer, and Allis-Chalmers Manufacturing. Sales in 1917 reached $75,000. By 1919, the company had taken advantage of contracts with the military and its sales had grown to $175,000.
The newly emergent field of plastics manufacture was predictably riven by claims and counterclaims of patent infringement. On June 11, 1919, Westinghouse sued Formica for infringing on its patent for laminated phenolic canvas. The district court in Cincinnati eventually ruled in favor of Formica. Westinghouse then brought two more lawsuits against it--one regarding rods, tubes, and molded parts, the second concerning the patent that Westinghouse had acquired in 1913 for the process that O'Conor had developed while working there. Formica won those suits, also. The company was then sued by Continental Fibre; again, Formica prevailed. Then, Baekeland took actions to sue users of Formica and Redmanol. Interestingly, the Karpen brothers bought a majority interest in Condensite Corporation, which carried numerous laminate patents; then, in 1922, Condensite Corporation, Redmanol Company, and Bakelite Company merged to form the Bakelite Corporation. From that point forward Formica was able to again have access to Bakelite's products.
In the early 1920s, radios grew popular, and Formica was able to take advantage of this boon as its laminate was not only used as a mounting table to insulate the interior's parts from one another but also as paneling on the exterior of the radio. Many of those sets were do-it-yourself models. Although homemanufacture radios were a short-lived fad, the process brought the company much-needed capital and the company found itself solvent for the first time since its inception. Company sales were $400,000 in 1920; $1.9 million in 1923; and $3 million by 1924. Also, the company started to make brown as well as the standard black so as to better match household furniture. Formica was moving beyond its early uses for electrical insulation as well as for electronic and automobile parts to take advantage of the popularity of the new consumer appliances; beside radios, these included washing machines, vacuum cleaners, and refrigerators.
In the mid-1920s, the company pushed further to discover new decorative applications for their product. It soon hired Jack Cochrane, an MIT graduate, to develop the technology to make Formica more consumer-friendly by becoming more appealing and colorful. The company also brought in new capital by a new stock offering so as to extend its research and facilities. Expansion was important at this time as Bakelite's patents expired in 1926 and 1927, and many competitors--including Monsanto and Spaulding Fibre Company--eagerly entered the laminate business. In 1927, Formica jumped ahead of the pack with two important patents that spelled out the production of a multilayer lithographed woodgrain laminate on a flat-bed press. These patents were the starting point for Formica's lead in decorative laminate. In 1931, the company received three more patents, which concerned an all-paper laminate, as well as a process by which the laminates were made cigarette burn-resistant. These changes also made the product more appealing to the consumer.
In the early 1930s, Jack Cochrane, who was to become the director of research, developed a laminate that used urea instead of phenol to coat the top layer of kraft paper, and which was then laminated under pressure to the phenol-impregnated pages underneath. This change made Formica laminate easy-to-clean, fire-resistant, durable, and available in dozens of colors. Formica won several major commissions; for wall panels in the HMS Queen Mary and reading tables in the Library of Congress in Washington, D.C. However, the urea-formaldehyde laminate was expensive to produce. The company continued to search for ways to add color to the laminate as well as to lower its cost; only dark colors were able to hide the resin that formed the core of a sheet of Formica.
Finally, in 1938, those qualities became possible when Formica replaced its urea-formaldehyde resin with melamine, which allowed for greater durability and improved appearance. (Melamine had been popularized in the durable dishes that were marketed in the United States by American Cyanamid.) In this configuration, which was to become the standard Formica laminate that became so well-known in the 1950s and 1960s, the seven layers of kraft paper were still impregnated with phenol-formaldehyde resin; the difference was that the top decorative layer was coated with melamine and then topped with an opaque sheet melamine, which, when cured in the press, became transparent. This innovation allowed light colors to be used, and melamine was less costly and easier to cure. Formica could then became a product that was widely available and more affordable. With this important innovation, Formica was soon incorporated into furniture manufacturing, especially kitchen counter tops and dinettes.
Formica endeavored to interest the big furniture manufacturers of its laminate's functionality and appeal but did not stir much interest. It also sought to excite store-fixture makers, especially those that made soda fountains, of Formica's advantages. Failing that, the company went into the furniture business itself--the company began to produce whole dinette tops that were then shipped to furniture manufacturers, who added legs and chairs. The product proved popular and moved briskly, and its increasing sales were only interrupted by the war, during which the company was given over completely to war goods.
During World War II, only industrial-grade Formica was produced, and it found many uses in the war effort. Sales, which in 1940 had been $4.25 million, grew to $15.74 million in 1943. After the war, Formica, like so many other companies, sought to take advantage of the consumer-goods explosion. It began to direct its efforts into placing its products in homes, schools, and other public buildings. Hundreds of colors and patterns of its laminate were available. Dinette production exploded; in mid-1948, the company produced 28,000 dinette sheets (table tops) weekly, and this number grew to 55,000 in 1950. The company's sales of decorative laminate reached approximately $15 million; its industrial laminates brought in about $5 million. As a mark of the change in direction of the company, the name was changed from the Formica Insulation Company to the Formica Company. By 1951, sales had reached $24 million. Demand for Formica laminate consistently outpaced supply, a problem that was aggravated by Formica's policy of producing laminate on order only. Many dealers got around this by ordering material in bulk.
In 1956, the company was bought by American Cyanamid, and its name was changed to Formica Corporation as it became a subsidiary of that huge conglomerate. Many felt that American Cyanamid did not invest the energy or resources to keep Formica in the vanguard, instead relying on its brand name to earn income. "Cyanamid didn't invest as much as entrepreneurs would, and they began to rely on the strength of the brand when competitors were saying, 'That's the guy to get'," said Vincent Langone, who joined Cyanamid in 1967 and who later became Formica's president. In 1966, the company opened a new plant in Sacramento, California, and for the first time since World War II, the company was able to keep up demand for its laminate.
In the 1970s, Formica was unseated as the dominant force in U.S. laminate manufacture by Ralph Wilson Plastics of Tempe, Texas. Ralph Wilson and its Wilsonart products were able to take advantage of the perception that Formica, having grown to number one, had become sluggish and arrogant, often taking weeks to deliver product.
In the early 1980s, Formica tried to update its image, which for many had passed from being synonymous with American ingenuity to the worst excess of American consumerism--man-made, synthetic, and tacky. Formica unveiled a new product, ColorCore, which was a laminate that gave the appearance of solidity. In other words, an object covered with ColorCore laminate seemed as though it was made of that product's color throughout; that is, it was not as apparently artificial as standard laminate. Formica also sponsored an exhibition, which traveled to various galleries and museums, and many leading designers and artists responded to its call for entries, and that show produced some well-received pieces. Despite these and other efforts, Formica was unable to make its laminate a hip, post-modern decorating tool.
In May 1984, American Cyanamid decided to divest itself of Formica, believing that the company did not fit into its strategy of focusing upon high-growth potential and high-technology businesses. The company, which earned about $335 million in sales, was purchased by a group of senior managers and Shearson Lehman in a leveraged buyout that became effective in May 1985 for a reported $200 million in cash and preferred stock. The sale involved all of Formica's U.S. and overseas operations except for those in Latin America. The company quickly acquired Design Plus of York, Pennsylvania, a company that used computers to aid in kitchen remodeling, and Wildon Industries of Mount Bethel, Pennsylvania, which produced synthetic marble. The company saw its future in higher-margin products.
In 1987 Formica went public. Sales had grown since the divestiture from American Cyanamid, and the company had sought to aggressively make itself more competitive, but the company needed capital as the leveraged buyout of 1985 had brought with it a heavy debt and burdensome interest payments. The stock offering went for $11.75 a share and raised about $50 million.
In May 1989, after various suitors expressed an interest in gaining control of Formica, the company was again taken private after it was sold to FM Acquisition Corporation, a group led by company president Vincent Langone. Sales that year reached $410 million. The company again suffered the burden of heavy debt payments, however, requiring an estimated $40 million annually to pay the interest alone.
Nevertheless, analysts noted that the company was focusing effectively on customer service and support in the 1990s. Moreover, Formica continued to improve upon its product line, introducing new surface materials under the brand names of Nuvel, Surell, Granulon, and Formica Ligna, a wood veneer product. Although du Pont, manufacturer of the popular Corian counter surface, had gained the greatest market share for laminates in the United States, Formica ran a strong second. With over 50 percent of its sales derived from international operations in the mid-1990s, Formica seemed likely to maintain its position as the world's leading laminate producer.
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