Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Executive Update Date: Thu, 12 Nov 92 13:00:17 EST Message-ID: <9.1992Nov12.130018@AmeriCast.com> 11/12/92 TITLE Executive Update #m#gm/hed tk#m#Bootmaker John Justin: Rid- ing High As Cowboy Look (And Texas Economy) Return Paul Sperry In Houston Cowboy boot magnate John Justin Jr. can laugh easily now about how he sent a New York corporate raider packing in 1990. He has since steered Fort Worth, Texas-based Justin Industries Inc. clear of the troubles that attracted the bargain hunters then. At the time, though, it wasn't so funny. The affable chairman and chief executive had to circle the wagons. An investor group led by a protege of raider Asher Edelman had put up an $18-a-share bid for the struggling boot and brick maker that was nearly dou- ble the stock's price at the time, but - as Justin knew - was far short of the company's value. He quickly worked the phone, convincing shareholders - who had en- John Justin dured a decade of virtually flat stock growth - not to tender into the offer. He promised a profit turnaround, ushered in by a long-overdue rebound of the Texas economy. "I had no thought of letting them have it," Justin said. "These were a couple of guys who thought they could make big money by breaking apart the com- pany and selling it." Justin, who owns 20% of the company's com- mon shares, didn't just keep his promise to shareholders. He delivered a mother lode. Over the past 12 months, the company's shares have more than tripled to a split-adjusted 30 on explosive earnings growth. Analysts credit Justin with making the smart moves, including buying Tony Lama Co. and doubling brick market share, that repositioned the company for maximum growth. "They (the raiders) got a hold of the wrong guy," Justin, 75, said in an interview. It's understandable how the lanky Texan could get a little testy around pushy Wall Street pencil-necks who don't wear boots with their suits. Besides, his feelings for the com- pany run deep. Justin's grandfather, H.J. Justin, founded the company in the late 1880s Justin, 75, Is Kicking Up His Heels Again while working as a barber in Spanish Fort, a small Texas town on the Oklahoma border. He, along with his three sons, turned a sideline job of patching cowboys' boots into a $1 million busi- ness by 1950. Grandson John Jr. took over H.J. Justin & Sons then, diversifying into the brick business. After merging the company with Acme Brick, he renamed it Justin Industries in 1972. The cyclical brick business, however, has been a mixed blessing for Justin Industries, which had 1991 sales of $410 million. While the boot business has grown steadily, the building materi- als division - made up largely of Acme Brick -acted as a drag on earnings from 1985 to 1991. Better Year For Bricks Justin Industries' earnings languished at 64 cents a share last year. In 1985, when Oil Patch housing starts peaked, they reached $1.14 a share. But the brick business this year has released its stranglehold on the company's overall profits, analysts say, thanks to a resur- gence in Texas housing starts. "We had to have faith in the Tex- as economy," Justin said. The company's secondary brick markets include Kansas, Arkansas, Tennessee, Oklahoma and Louisiana. The fallout in the Texas brick industry last decade allowed Justin Industries to scoop up market share. Last year, Justin directed the acquisition of an Austin-area brick maker, paying for it with proceeds from a windfall $20 million sale of a ceramic cooling tower unit. The company now controls 50% of the brick manufactur- ing market. For 1992, the building materials segment should show a $16 million profit, compared with a low of $500,000 in 1989, estimates Jessica Tully, analyst with Eppler, Guerin & Turner Inc. in Dallas. But that's still off the 1984 mark of $23 mil- lion. Still, boot sales are even stronger now. They constitute about 60% of total sales and about 80% of total profits. Tully says that by year-end the boot division will register a five-year compounded operating profit margin of 25%. As a result, analysts project full-year profits to hit $1.45 a share - a 127% improve- ment over 1991. Boosted By Music Craze Analysts say the 1990 acquisition of Tony Lama, the prestigious but debt-laden bootmaker, is a chief source of new growth. The El Paso-based company reported sales of $79 million in 1989 and is well-positioned to respond to expected Mexican demand under the North American Free Trade Agreement, Justin believes. But boot sales have also been buoyed by a country- and-western craze not seen since the early 1980s, when the movie "Urban Cowboy" and the honky-tonk Gilley's made cowboy duds the fashion rage. Now it's superstar Garth Brooks and Billy Ray Cyrus ("Achy Breaky Heart") - a younger, flashier generation of C&W singers - that's motivating fans to clear shelves at western wear outlets. "C&W is now the most listened- to music format," Tully said. One of the hottest-selling items is Justin Industries' trendy "Roper" label. The boot line is affordable ($60-$90 retail) and comfort- able, and it appeals to the younger crowd. Lady Ropers come in colors such as pink, or red, and are often dressed up with decorative jewelry. Justin says the Roper line was originally started in the 1950s but was discontinued to accommodate the ex- otic tastes of the "urban cowboy" crowd. Orders for Justin label boots made from alligator, eel and ostrich skins - some fetching $1,200 a pair -were stretching the company's plants to capacity. "When the urban cowboy thing slowed down," Justin said, "we started to make Ropers again." Justin says he designed the Roper at the behest of calf ropers, who needed a low-heel boot. In the 1950s, calf ropers began shucking their Stetsons for baseball caps and their boots for tennis shoes. The wide brims just got in the way when they jumped off their horses to tie a calf, Justin explained, and their boots hurt their feet when they hit the dirt. But caps and sneakers weren't fitting for rodeos, organizers ruled. And they were banned. Smooth Salesman "The ropers came to me and said, 'You've gotta help us - we need a flat-heeled shoe,' " Justin recalled. So Justin designed a boot for them, borrowing from a custom- made boot the company supplied to the Texas A&M University Corps of Cadets. Today, the Roper -produced largely at plants in south Missouri - is popular with Texas law enforcement officers. Get Justin talking about boots - his first love - and he becomes a smooth salesman. "The thing with boots is there's no seams. Nikes have all those pieces," he said in his soft, North Texas drawl. "You get a nice piece of cow leather on the inside, and it's sugar and cream." Justin, who furnished former President Ronald Reagan with a cus- tom pair, predicts his latest boot line, Lacers -they lace up - will match the Roper's popularity. New lines also include Justin Juniors, for kids, and Diamond J - a low-end boot designed to compete with Justin Industries' last remaining competitor, Clarksville, Tenn.-based Acme Boot Co. Nocona is another Justin Industries boot line and one close to Justin's heart. Not The A-Type His aunt, who died last year, founded the Nocona Boot Co. when her brother decided in 1925 to pack up and move the family boot business from their hometown of Nocona, Texas, to Fort Worth, which had better banking and transportation. "She was kind of contrarian. She wanted to stay and develop a line," said Justin, who was mayor of Fort Worth in the 1960s. "They had a big rhubarb about it (but) she was a tough gal." Despite successfully fending off corporate raiders, Justin hardly fits the type- A executive mold. He is, to say the least, laid back. The company runs a tiny publishing house, Northland Press, in Flagstaff, Ariz. Asked how books fit in with boots and bricks, Justin replied: "It'll probably make a buck for us once and a while. But it's not a drain on us, so we keep it." This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. 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