The Lane Co., Inc.
Address:
East Franklin Ave.
P.O. Box 151
Altavista, Virginia 24517
U.S.A.
Telephone: (804) 369-5641
Fax: (804) 369-3677
Statistics:
Wholly Owned Subsidiary of Interco Inc.
Incorporated: 1912 as Standard Red Cedar Chest Co.
Employees: 6,000
Sales: $383 million
SICs: 2511 Wood Household Furniture;, 2512 Upholstered Wood Household Furniture; 2521 Wood Office Furniture
Company History:
The Lane Co., Inc. is a leading U.S. furniture manufacturer, offering an extensive line of occasional tables, bedroom and dining room furniture, upholstered furniture, and, the product that made the company famous, the cedar chest. For 75 years the Lane family of Altavista, Virginia, ran the business, which became known for its sound management and enlightened labor policies. In 1987 The Lane Co., Inc. was acquired by Interco, Inc., a St. Louis-based conglomerate. Under the parentage of Interco, Lane was the second largest furniture company in Virginia during the early 1990s.
Holders of farms and a sawmill, and builders of many railway sections in the southeastern United States, the Lane family founded the town of Altavista in 1907 on the site where a section of the Virginian railroad was scheduled to cross the main line of the Southern Railway. Crucial to the town's development, in addition to its rail links, was its location on the Staunton River. The river's water power was vital not only to the future of Lane Co. but also to a cotton mill established by the Lanes.
In 1912 John Edward Lane bought a small packing-box plant in Altavista at a bankruptcy auction for $500. Placed in charge of the small, corrugated iron building, his son Edward Hudson Lane decided to convert the facility in order to make cedar chests. He ordered thousands of dollars of new machinery, and the venture was incorporated as The Standard Red Cedar Chest Co. The firm manufactured and sold hope chests for prospective brides, who used such chests to store linens and other items for setting up housekeeping, as well as keepsakes. In the words of one author, these chests were considered "as authentic a symbol of romance as the wedding ring." Early production of about ten chests a day was sold through independent salesmen who also sold other goods on commission.
In its early days the business was run on a shoestring budget. Nearby buildings were purchased or rented as demand grew, with finished parts transferred from one building to another by means of a mule-drawn cart. Installation of a small sawmill to process the firm's own lumber saved only about five percent in manufacturing costs, but even this small amount gave Standard a crucial cost advantage over its competitors.
During these early years the firm's growth was restricted by elementary manufacturing methods, difficulty in securing financing, and a crude finished product. Ed Lane later recalled he was "one jump ahead of the sheriff most of the time." When a banker told him the company was insolvent, Lane asked him what that meant. "If you don't know what that means," the banker reportedly replied, "you probably would be better off to remain ignorant of its meaning. You might muddle through somehow." The elder John Lane never ceased to be amazed that the factory actually could sell all its production--which at the time of his death in 1930 came to between 250 and 300 chests a day.
Selling the product did not come easy, since multi-line commissioned salesmen could not give the Standard chests their undivided attention. At first Ed Lane had trouble finding reliable people to maintain production while he went out of town drumming up business, or to help manage sales while he attended to plant problems. Moreover, Lane also had to serve as his own advertising director. One early and particularly effective idea of his was a window display using small cedar trees and cedar logs and shavings as well as the company's cedar chests.
During World War I, when the federal government barred rail freight deemed nonessential, Standard Red Cedar Chest converted its plant to producing pine ammunition boxes. Experience in maintaining an assembly line led to the evolution of the first known moving conveyor assembly system in the furniture industry. After the war, the company shared in the remarkable growth of the southern furniture industry during the 1920s. Manufacturers in the Piedmont area, centered in northwestern North Carolina but also extending into southwestern Virginia, benefited from stands of high-grade hardwoods, plentiful water supplies, and a readily available low-wage labor force.
Standard changed its name to The Lane Co. in 1922 and began national advertising that year. The company also began an ambitious program of research and development, with the principal objectives being the utilization of wood waste and perfection of an aroma-tight cedar chest. Another vital objective was to develop a professional sales organization. By the 1930s the company also had its own salaried sales force. And, in 1925, the company hired its first staff designer. A complete design department was added after World War II.
Lane began producing miniature cedar chests in 1925. Five years later, the firm's sales manager converted these miniatures into a great promotional idea: the company invited young women about to graduate from high school to pick up a free miniature chest at their local furniture store. By 1984 more than 15 million prospective Lane customers had received these promotional gifts.
Another valuable promotional idea adopted in 1930 was the establishment of free insurance policies protecting the contents of the chests against damage from moths. To qualify, the consumer filled out and returned a card with information such as the name and age of the purchaser and owner, the price, whether the chest had been bought as a gift, and the dealer from whom it was purchased. The application cards thereby provided the company with useful marketing information.
By the onset of the Great Depression Lane knew all about "insolvency"; the company had barely avoided this fate in 1928, when New York banks unexpectedly called in a number of company notes at the annual peak of Lane's seasonal borrowing cycle. Henceforth the company would be debt-free, operating on a pay-as-you-go basis. As a result of stringent economies, Lane operated continuously through the Depression and maintained its unbroken tradition of paying a dividend each quarter. And Ed Lane was mindful of his father's advice on how to treat his workers; the elder Lane is said to have declared, "Son, I built railroads with a pick handle. You're going to have to handle your people with kid gloves, and your children will have to make them partners." Heeding these words, Ed Lane was an early convert to the creed of profit sharing, which he instituted in 1936.
During World War II The Lane Co. continued to make cedar chests, while also producing aircraft plywood and wood airplane tail assemblies, landing-craft parts, glider wings, and dogsleds. In 1946 the company bought a Smyrna, Tennessee, lumber and panel plant, in the heart of America's best cedar belt. The following year the company perfected a method for producing core particle board from wood waste, using newly available synthetic resin glues. This board, dubbed "Lanewood," was strong, uniform in size, and resistant to moisture and warping. Lanewood was an important forerunner in the development of particle board, which would later have applications in the furniture industry.
In 1951 Lane began the profitable sideline of making occasional tables. Diversification took a giant step in 1956, when Lane acquired Bald Knob Furniture Co. of Rocky Mount, Virginia, in order to produce case goods--the name given in the trade to wooden bedroom and dining-room furniture. In 1965 the company introduced such occasional furniture items as record cabinets and wall units, which became the focus of the company's Accents line. Two years later Lane added upholstered furniture to its line by acquiring the Hickory Chair Co. of Hickory, North Carolina, whose products included its famous James River Collection of authentic eighteenth-century reproductions.
The expansion program continued in 1969 with the acquisition of Clyde Pearson, Inc., of High Point, North Carolina, and the Hickory Tavern and Bruington Furniture companies of Hickory. Pearson and Hickory Tavern were manufacturers of upholstered furniture, while Bruington (later renamed HTB) offered an assortment of sectionals, modulars, sofas, love seats, chairs, and occasional tables. Action Industries of Tupelo, Mississippi, acquired in 1972, added rocker recliners to the Lane line, while Royal Development Co. of High Point, North Carolina, also purchased that year, assured a dependable supply of chair mechanisms for Action recliners. Also in 1972 Hickory Tavern created Venture Furniture, a line of casual pieces, including rattan and wicker. In fact, by the mid-1980s the company's product line would grow to include some 2,500 pieces.
The Lane Co. went public in 1968 and essentially paid for these acquisitions with stock rather than cash. Management of the acquired companies, which became Lane divisions, remained autonomous, free to make design and production decisions. "We believe people who come closest to running their own business do the best job," explained Ed Lane's son Bernard Bell (B.B.) Lane, in a 1985 Forbes interview, adding, "we wouldn't someone who didn't want us--heart and soul." Sounding more like a philosopher than a manufacturer, B.B. Lane told the interviewer, "Christ was a carpenter, and, like him, we are searching for truth--in design and in the way we work with one another."
Under B.B. Lane, who became the company's president in 1976 and assumed the position of chairperson in 1981, a long-standing affiliation with the Bloomingdales department stores allowed Lane to show a line of reproductions authenticated by the Museum of American Folk Art and based on its handcrafted eighteenth- and nineteenth-century furniture collection. During this time, Lane also became the first wood furniture maker to adopt a computer-aided design and manufacturing (CAD/CAM) system. And in 1983 Lane introduced Italian Art Deco-style polyester-coated furniture before its competitors could adapt their production lines to the technically demanding process.
Between 1975 and 1985 Lane increased its earnings every year, except for recessionary 1982. In the fall of 1985 the company's equity was $162 million, and Lane stock reached $52 a share, up from $14 in 1982. During the first half of 1986, however, sales volume dropped by one percent and profits by eight percent, a decline attributed largely to the fact that lacquered furniture was rapidly going out of style and competition was increasing. During this time, Lane was reported to be cutting production of wood furniture and counting on recliners for growth.
Ironically, Lane's rock-solid finances made the company an attractive takeover candidate and eventually cost B.B. Lane his job. In 1980 the company paid corporate raider Victor Posner $550,000 in "greenmail" to look elsewhere for an acquisition, but in December 1986 Interco purchased the company for stock valued at around $487.5 million, or one share of Lane common stock for every 1.5 shares of Interco common stock. While the Lane family and company employees held 35 percent of the stock, B.B. Lane, who opposed the deal, personally held less than five percent. Several other family members also voted no, but the purchase was approved in April 1987 by a seven-to-two margin. R. Stuart Moore, Lane's president and a Korean War buddy of B.B. Lane, retained his job and was also elected an Interco vice-president.
While some institutional investors in Interco, a retailer and manufacturer of consumer products, thought the company was paying too high a price for Lane, the company, which in 1980 had acquired two other big furniture makers--Ethan Allen Inc. (later sold) and Broyhill Furniture Industries Inc.--was determined to raise its stake in the industry.
By 1990 Interco was in deep financial trouble, having borrowed more than $1.6 billion to fight a takeover bid. Its furniture units--Lane and Broyhill--brought in more than half of company revenue but, like other furniture companies, they suffered in 1989 from a drop in housing starts. Because of its high level of debt, Interco fell into Chapter 11 bankruptcy even though its four operating businesses were making money. The company emerged from bankruptcy the following year, and, in August 1994, Interco announced a restructuring. Management planned to spin off its Florsheim shoe business and sell a 16 percent interest in its Converse shoe subsidiary, while continuing to own and operate Lane and Broyhill. This action was expected to reduce the company's debt from $579 million to about $435 million.
In 1994 Lane had six divisions: Lane, Lane Upholstery, Action Industries, Hickory Chair Co., Pearson, and Venture Furniture. The company maintained nine factories: two in Virginia, two in Mississippi, four in North Carolina, and one in Tennessee. The company was operating out of modest offices in a warehouse renovated on the site of the original Standard Red Cedar Chest factory.
Further Reading:
Engardio, Pete, "What's Rearranging America's Furniture Industry," Business Week, September 29, 1986, pp. 86D-86F.
Fix, Janet L., "A Bundle of Sticks," Forbes, November 18, 1985, pp. 202-204.
Kilman, Scott, "Some of Interco's Shareholders Oppose Its $500 Million Accord to Buy Lane Co.," Wall Street Journal, April 1, 1987, p. 16.
"Lane Stockholders Approve Purchase by Interco--At Last," HFD, April 20, 1987, p. 36.
Ringer, Richard, "Interco Plans to Split Four Subsidiaries," New York Times, August 25, 1994, p. D3.
VandeWater, Judith, "Interco's Chief Says There Is a Way Out," St. Louis Post-Dispatch, March 4, 1990, p. E1, E8.
Zaslow, Jeffrey, "Lane Co. Agrees to Be Acquired by Interco Inc.," Wall Street Journal, December 19, 1986, p. 10.
Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.
