Premier Industrial Corporation Business Information, Profile, and History
Cleveland, Ohio 44103
History of Premier Industrial Corporation
Premier Industrial Corporation is one of the United States' largest broad-line electronics distributors. It has a record of conservative yet outstanding performance: record earnings in 31 of 33 years as a publicly-traded company, and a balance sheet with 30 percent cash. Despite more than a dozen acquisitions, Premier Industrial Corporation has never been more than $13 million in debt.
Premier started out as a distributor of general automotive supplies, but quickly began to focus on specialized, high-margin parts. In the 1960s, the company diversified into fire-fighting equipment, lubricants and coatings, and, most significantly, electronics. During the 1970s, electrical specialty parts became an increasingly important segment of Premier's business, until 1981, when the division emerged as its primary profit center. In the last decade of the twentieth century, 70 percent of Premier's revenues and operating profits came from electronics distribution.
The company was established in 1940 as Premier Automotive Supply Company when three brothers--Morton, Jack, and Joseph Mandel--bought their uncle's storefront auto parts distributorship for $900. Morton, a 19-year-old college dropout and the youngest brother, gravitated toward administrative duties, while his older brothers honed their sales and marketing skills. In these early years of automotive repair, the Mandels soon learned of a class of parts that were hard to come by because they were hard to describe. The brothers would locate a supplier of these "thingamajigs" and carry them around in cigar boxes so customers could pick out the part they needed.
In 1946, the company was incorporated as Premier Industrial Corporation The name change clarified an ongoing shift from standard automotive parts to specialized industrial maintenance products. The fledgling company grew relatively slowly during its first two decades, but cultivated a reputation for first-rate service and innovation. Even though the company did not manufacture most of the items it sold, Premier worked with its suppliers to customize parts for its clients. The company would even offer to reorganize and resupply a customer's entire inventory of fasteners, including the bins for storing parts. These early efforts were the foundation of the company's longstanding "find a need and fill it" philosophy.
The two older Mandels, Joe and Jack, were responsible for many product and marketing innovations. Joe was instrumental in making Premier one of the first companies to develop rust-resistant plating for most of its fasteners. Until then, nuts, bolts, and screws had been black in color and rusted easily. Fastener plating soon become an industry standard. The Mandels' marketing tactics were ingenious, if a little primitive by today's standards: they sewed Premier parts onto felt books for a display that was much tidier than a cigar box of nuts and bolts. But by the mid-1950s, Premier's roster of products had grown to include three divisions: Premier Fastener Co., which sold screws, nuts, bolts, washers, cotter pins, rivets, and specialty hardware; Premier Autoware Division, which sold brake parts, gaskets, fuel pump apparatus, automatic transmission components and repair kits; and the Certanium Alloys and Research Co., which sold welding equipment and supplies. The display books weighed so much that some ingenious sales reps attached wheels to the books, prompting Premier to publish its first illustrated catalog.
By 1960, when Premier went public, sales revenues stood at $12.6 million. Sales volume had increased one and one-half times from 1953 to 1960, and earnings almost tripled during the same time. Although Premier still did no manufacturing, the products it purchased from over 300 suppliers were made to exacting specifications and sold under the company's brand names. For example, Premier's Supertanium alloy cap screw had a reputation for strength and durability that earned it a place in auto racing history. After the death of an Indianapolis 500 driver was traced to a broken fastener, the U.S. Auto Club asked Premier to supply a more reliable product. In 1960, the company began supplying Supertanium nuts and bolts to Indy drivers at the track's Gasoline Alley. Premier's trademark fasteners registered an uninterrupted safety record.
After twenty years in business, Premier began to expand its distribution network and diversify through acquisitions. The company launched a Canadian division in 1960, and purchased Akron Brass Manufacturing Co. for $6 million in cash and stock in 1962. Within two years, this manufacturer of fire-fighting nozzles, hose controls, couplings and valves completed a new $100,000 research center in Wooster, Ohio. Akron Brass contributed 20 percent of Premier's sales by mid-decade. In 1964, Premier acquired J.I. Holcomb Manufacturing Co. for $10 million from Butler University. This manufacturer compounded its own cleaners, deodorizers, insecticides, waxes and brushes.
Premier's growth during the 1960s was also fueled by the introduction of new and innovative products. In 1967, Akron Brass expanded into couplings for the petroleum and cement industries while orders for its Turbo-Jet fire-fighting nozzles were backlogged. Akron Brass' sales doubled from 1962 to 1967, and 25 percent of its annual volume came from items introduced during that time. The company's business was augmented with the purchase of Western Fire Equipment Co., a producer and supplier of fire-fighting products for government forestry service agencies, in 1968. Premier's "bread-and-butter" line of industrial maintenance products grew to 10,000 items during this period, and the company's distribution network was expanded through new warehouses in Atlanta and Dallas.
The company's 1968 purchase of Chicago-based Newark Electronics Co. for about $6.5 million marked a turning point for Premier. Newark would eventually bring Premier unparalleled growth, but the Mandels first had to turn their new acquisition around. At the time it was acquired, Newark's operations were characterized by poor organizational structure and uninspired marketing. Premier revamped Newark's management, expanded distribution geographically, and boosted sales efforts. The Mandels also shifted Newark's customer base from original equipment manufacturers (OEMs) to the replacement and maintenance market and dropped the manufacturer's high-volume products to concentrate on niche items. The turnaround temporarily cut into Premier's profits, but proved to be one of the company's best investments.
The recessionary 1970s caused Premier to look inward for continued profitability and growth. In some respects, the company was able to thrive during tough economic times because its customers were more likely to repair equipment--using Premier's maintenance products, of course--than purchase new machinery. Premier's diversified markets of products and customers also shielded it from the vacillations of a particular market or the margin-reducing demands of a specific client or supplier.
Premier was forced to tighten its operations somewhat during the 1970s, introducing tighter inventory controls through an improved computer system, for example. But the nature of the business, not to mention the conservative management of the company, allowed Premier's growth to continue nearly uninterrupted throughout the decade. One key to the company's growth was its ability to expand product lines quickly, yet with relatively low startup costs, by simply finding a high-quality, low-cost supplier.
The Newark Electronics division grew dramatically over the course of the 1970s. By 1977, Newark had 53 branches. By the end of the decade, the number of Newark branches had grown to 120, and the division's contribution to annual profits had increased from 17 percent in 1976 to 32 percent just two years later, and to 42 percent in 1980.
Premier was also able to expand internationally during the decade, establishing operations in the United Kingdom, Holland, Belgium, West Germany and France. By 1975, international sales contributed five percent of the company's annual revenues. The enlargement of Premier's salesforce to 1,200 representatives also helped the company's annual sales to triple over the course of the decade, from $103.16 million in 1970 to $317 million in 1980. Premier's commitment to service and quality allowed it to command premium prices that more than quadrupled the company's net income over the same period, from $6.58 million to $31.3 million.
This decade of internal growth and conservative management gave Premier an enviable balance sheet: only $220,000 in long-term debt and $19.4 million in cash and temporary investments. The Mandels were ready for another round of capital investments and acquisitions in the early 1980s to augment the electronics group. Newark opened 30 new sales branches from 1979 to 1981 and distributed a new catalog. In 1981, the electronics division was enlarged with the purchase of Car-lac Electronic Industrial Sales Inc. of Bohemia, New York, a national distributor of electronic components for OEM and maintenance with sales of $10 million annually. The following year, the company acquired Hoffman Industrial Products Inc. of Farmingdale, New York. This supplier of electrical connectors and terminals with $6 million in annual sales helped make electronics Premier's primary business. The acquisitions continued in 1984, when Premier purchased MCM Electronics of Dayton. This distributor helped Premier penetrate the computer-, television-, and stereo-repair markets, and brought another $8 million in annual sales to the balance sheet. By the mid-1980s, Premier had completed its evolution from a focus on automotive replacement parts to industrial maintenance items to electrical components. The Newark Electronics division had grown to become America's largest broad-line electronics distributor and its catalog was considered the industry "bible."
By 1986, Premier stocked the broadest product line in its industry, with more than 100,000 items and deep inventories that permitted 90 percent of orders to be shipped within 24 hours of placement. In spite of its impressive growth, Premier had retained its reputation for service by providing products quickly and reliably. Frequent internal audits, inspections, and recognition of employees who performed well helped maintain the Mandel's high standards. Customers were willing to pay Premier's premium prices for the service and quality they had come to expect. These high standards--and the premium prices they entailed--had made Premier the most profitable of all the major electronics distributors, even though it was the seventh-largest in terms of sales.
Premier's success and growth brought the Mandel brothers, who consistently owned about 60 percent of the company's stock, a great deal of personal wealth. Their philanthropic efforts garnered local and national recognition. Morton Mandel and Premier were instrumental in the creation of Cleveland's Mid-Town Corridor in 1982. The organization was formed to revitalize a one-square-mile area of downtown through business expansion and new development. Within four years, over 100 companies had located in the area, and the project was recognized with the third annual George S. Dively national award for the promotion of urban development. The Mandels also contributed to local education through the funding of a School of Social Work and a Center for Management of Non-profit Organizations, both at Case Western Reserve University.
As the still-vital Mandel brothers advanced in age, industry observers and analysts began to speculate about succession at Premier, especially about who would follow Morton Mandel, chairman and chief executive officer. They got one hint in 1987, when the company's top management was restructured and two young executives, Philip S. Sims and Bruce W. Johnson, were promoted to executive vice-presidencies. Both men retained their respective duties as treasurer and chief financial officer and head of Newark Electronics. Then, in 1991, Sims was awarded a vice chair on Premier's board, and Johnson was named president-elect. The Mandels planned to retain their 60 percent stock holdings as a valuable family legacy.
Premier glided through a late-1980s, early-1990s recession with predictable ease. By 1991, the company had $226 million in working capital and $52 million in cash and cash equivalents. Premier hadn't made an acquisition since 1984, but planned to expand its Newark Electronics subsidiary into Europe. International sales accounted for ten percent of Premier's annual sales in the early 1990s, and the company hoped to increase that segment to 30 percent by 2003. Premier also hoped to continue its growth through acquisition.
Principal Subsidiaries: D-A Lubricant Co. Inc.; Premier Industrial Corporation (Indiana); Newark Electronics Corp.; Premierco Service Corp.; PIC Corp.; MCM Electronics Inc.; Premier Foreign Sales Corp. Inc.; Premier Fastener Ltd.; Certanium B.V.; Premier Industrial Holland B.V.; Premier Industrial Belgium S.A.; Premier Industrial (UK) Ltd.; N.V. Certanium Services S.A.; Premier Industrial France S.A.R.:.; Premier Industrial Deutschaland GmbH; Premierco Espana S.L.; Premier Industrial Italia S.R.L.
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