The Tranzonic Companies

1892–1968

The Tranzonic Companies manufactures personal care products, wiping and cleaning goods, safety products, and washroom supplies and distributes its products to industrial and institutional clients. Tranzonic makes both private-label and brand-name goods, including Bottoms Up diapers and Tampax and Maxithins feminine hygiene products, and, through subsidiary CCP Industries, distributes industrial textiles, such as restroom supplies, disposable work clothing, floor mats, industrial wiping materials, and cleaning chemicals.

Early Years as a Cigarette Vendor: 1930s--1950s

The business was founded in 1933 by Louis B. Golden, who emigrated to Cleveland, Ohio, from Russia in 1892 at the age of 17. Golden earned a bachelors degree from Case Western Reserve University and a law degree from the John Marshall Law School but eschewed a legal career to found the Golden Tobacco Co. in 1931. With the help of wife Miriam and an $800 initial investment, Golden ran the business--renamed Ace Cigarette Service Co. in 1933--from his kitchen table.

Ace Cigarette was incorporated in 1946, by which time it was already one of America's largest cigarette vendors. From this early foundation the company expanded into candy and soft drinks. A registered dietitian and longtime company executive, Miriam probably influenced the firm's move into automatic food service. In the late 1950s, the company acquired a half-interest in the Industrial Vending Co. and began to sell food prepared at its Cleveland headquarters through vending machines in local factories. Annual sales surpassed $6.5 million by 1957, when profits totaled about $83,750. While sales remained flat through the remainder of the 1950s, profits multiplied to $174,500 by 1959. The family took the company public and changed its name to Ace Vending Co. to reflect its broadened activities in 1961. A 1962 name change to American Automatic Vending Corp. anticipated an acquisitive push that took the firm nationwide.

Expansion and Diversification in the 1960s and 1970s

American Automatic Vending (AAV) used the proceeds of its initial public offering to fund a decade-long spate of acquisitions that expanded its business interests beyond vending into personal care products and manual food service. Before its first fiscal year was out, the company had purchased Cincinnati's American Vending Service Inc. and Detroit's Market Vending Co. In 1962, the company acquired Consumers Cigarette Service Co., Seaway Vending Co., and Hospital Specialty Co., a business that would prove key to AAV's long-term growth. At the time it was purchased, Hospital Specialty had over 80,000 vending machines in all 50 states and brought with it valuable contracts to vend leading Kotex and Tampax brands of feminine napkins and tampons, as well as its own Gards, She, and Soft n' Thin labels. Hospital Specialty had been founded by the Ensheimer family, called 'pioneers in the vending industry' in a 1962 Cleveland Plain Dealer article. Swifty Food Commissaries, Inc., a Cleveland catering company, was acquired in 1963, by which time AAV ranked as 'Ohio's largest operator of vending equipment.'

The ensuing years brought a relative lull in the pace of acquisitions. AAV bought Deegan-Denham Candy and Tobacco Co., a distributor of tobacco, candy, and over-the-counter drugs, in 1965 and expanded its vending reach into Kentucky and Indiana with the acquisitions of Southern Automatic Music Co., Wagg Vending Co., and Toledo Music and Novelty Co. in 1968. AAV rounded out the busy 1960s with the purchases of Nursing Homes Council, Budd, Inc., and Catering Management Inc. Renamed American Nursing Home Consulting Company, Nursing Homes Council formed the core of AAV's institutional food service division, which also catered to schools and factories.

Annual sales surpassed $6.5 million by 1957, when profits totaled about $83,750.

1921–1988

Fueled by the growth of the overall vending industry, which doubled from $3 billion in 1963 to $6 billion in 1970, as well as its string of acquisitions, AAV's sales increased from $14.3 million in 1962 to $37.67 million in 1969. During that same period, net income nearly tripled, from $392,000 to $1.2 million. By 1971, American Automatic Vending boasted over 20,000 vending machines in Ohio, Michigan, Indiana, Kentucky, and Florida and ranked among the top ten players in the industry. In 1972, the company formally abbreviated its name to AAV Cos. to reflect its expansion beyond vending. Having surpassed many of his growth goals, Golden moved to Florida in 1970 and was succeeded by his son-in-law, Robert S. Reitman, that same year. Golden continued as chairman until 1973, when Reitman assumed that title as well.

Reitman continued his father-in-law's acquisition strategy into the early 1970s, purchasing Scan-O-Vision, a closed-circuit television security service, in 1971; Standard Cigar & Tobacco Co., a Washington, D.C. distributor, in 1972; and Beaver Falls Candy and Tobacco Co., a Pennsylvania distributor, in 1974. AAV's sales burgeoned over the course of the decade, from $40 million in 1970 to $73.8 million in 1979. But while the company's profits grew steadily to $1.8 million in 1976, AAV endured three consecutive annual earnings declines from that point through 1979, by which time net income had halved to $834,000. Mitchell Gordon, an analyst for Barron's magazine, blamed the erosion of AAV's profits on 'the deteriorating industrial economy in the upper Midwest region, where its vending and distribution activities were located.'

Shifting Focus in the 1980s

CEO Reitman must have concurred. In 1981, he began to execute a reorganization strategy that shed two-thirds of his company's operations and created an entirely new corporate focus. That year's $9.5 million acquisition of Cleveland Cotton Products Co. was a pivotal factor in the new corporate scheme. Founded in 1921, this family owned firm had grown to lead the industrial wiping cloth business by the late 1970s. Industrial wiping cloths, which Reitman called 'new rags' in a 1988 Crain's Cleveland Business article, were tailored to customers' requirements for strength, absorbency, and texture. The disposable cloths were used in health care, food service, auto repair and auto body, oil-drilling, and electronics. When Cleveland Cotton Products' second-generation company leaders died within six months of one another in 1979, the private firm became an asset of their estate, and executor Larry L. Wymor sold Cleveland Cotton Products to AAV in 1981. Wymor went on to become president of Cleveland Cotton Products, which formed the core of the parent company's Industrial Wiping Division, contributing over half of total annual revenues by 1983.

In 1982, Chairman and CEO Robert S. Reitman decided to sell off AAV's traditional vending machine business, as well as its tobacco and candy wholesaling and food service operations. Crain's Cleveland Business called the spun-off businesses 'regional cash cows that in recent years drained each other.' Reitman's original deal with Edwin M. Roth's Electronic Theatre Restaurants Corp. fell through, but before the year was out, AAV sold the businesses to Crescott, Inc., a New York firm, for $5.6 million in cash and $6.3 million in notes. In order to keep its bond payments coming, Reitman's firm continued to provide Crescott with support such as public and shareholder relations and financial services through the ensuing few years.

Reitman retained the Personal Care Division and expanded its product line from the core feminine hygiene goods into elastic-leg disposable diapers, sterile obstetrical pads for hospitals and nursing homes, and an adult incontinent diaper. While AAV's share of the disposable diaper market stood at less than 1 percent, CEO Reitman told Crain's Cleveland Business that he expected the company's own-label diapers under the 'Best Buy,' 'Precious,' and 'Happy Bottom' names to 'come into their own' in the 1980s. Indeed, the $1.9 billion private-label disposable diaper market was advancing at about 8 percent each year during the early 1980s, and this became 'one of AAV's fastest-growing segments' mid-decade.

Reitman changed his company's moniker to Tranzonic Companies in 1983. Flush with cash from the divestment, the CEO started aggressively seeking out acquisition candidates, eyeing at least six companies from 1983 to 1985. Left with two core businesses, industrial textiles and personal care, the company hoped to focus its future efforts on other 'low-cost, repeatable goods.' In 1987, Reitman told Barron's reporter Richard J. Maturi that Tranzonic was 'looking for a complementary firm with growth opportunities and a reasonable price.' Although the firm had trouble finding a good takeover target, its stock was one of Forbes magazine's 100 best-performing stocks for 1987, ranking 66th on that year's list.

1983–2001

After suffering a net loss during the transition from vending to industrial wiping, Tranzonic's sales increased steadily from $43 million in 1983 to $58.6 million in 1987. Profits grew erratically, from $1.2 million in 1983 to a high of $4.1 million in 1986, then declined to $2.4 million in 1987.

Rapid Growth and Change: Late 1980s--1990s

Tranzonic made its first post-reorganization acquisition the following year, a transaction that heralded a rash of corporate purchases in the late 1980s and early 1990s. American Homeware Inc. was a Dallas company whose line of personal travel organizers, garment bags, sweater drying racks, clothes hampers, and other storage items were made overseas and shipped directly to retailers, thereby eliminating warehousing expenses. American Homeware became the nucleus of Tranzonic's Housewares Division. The 1989 purchase of J.C. Baxter Co. formed the core of Tranzonic's industrial packaging division, which made spiral-wound paper tubes and cores for industrial and consumer markets.

In 1992, Tranzonic bought Tambrands Inc.'s Maxithins sanitary pad business, giving the company a nationally recognized addition to its line of feminine hygiene products. The parent increased its holdings in the household goods business with the purchase of Ever-Ready Appliance Manufacturing Co., a top producer of ironing boards and step stools, the following year. Tranzonic then combined its three laundry care companies--American Homeware, Pressing Supply, and Ever-Ready--into one company known as Design Trend, Inc.. The 1995 acquisition of Plezall Wipers & Cleaning, Inc., complemented Tranzonic's Industrial Textiles Division.

These acquisitions fueled a 113 percent increase in sales, from $69.7 million in 1988 to a record $149 million in 1995. Profits slid from $3.9 million in 1988 to $2.8 million in 1994, then reached a record $5.3 million in 1995. Tranzonic's fiscal 1995 annual report laid out CEO Reitman's plan to more than triple annual sales to $500 million by fiscal 2001. While the corporate leader expected internal growth to contribute to the realization of this 'admittedly ambitious' objective, his 1995 letter to shareholders acknowledged that the firm 'will not achieve [its] growth goal without acquisitions, given the slow-growth nature of our existing markets.'

Working toward its goal to increase sales, Tranzonic announced the sale of its housewares division in spring of 1996. The sale of subsidiary Design Trend, Inc., allowed Tranzonic to focus on its divisions that served the wholesale and institutional sectors, markets that had traditionally generated a higher rate of return. Buyer Whitney Corr-Pak International, Inc., paid about $10 million for Design Trend, which by 1996 ranked second in the $255 million U.S. laundry care industry.

Due to the sale of Design Trend, Tranzonic recorded a loss from discontinued operations of $7.2 million during the fourth quarter of fiscal 1996. For the full fiscal year Tranzonic reported sales of $137.2 million, up 8 percent from the prior year, and a net loss of $2.4 million, compared to a net profit of $5.3 million in fiscal 1995. Fiscal 1997 proved kinder to Tranzonic's bottom line as the company reported record sales and earnings. Sales totaled $139.7 million and earnings from continuing operations reached $7 million, up from $4.4 million in 1996. Tranzonic attributed the improved margins to lower costs of raw materials and increased operating efficiency. CEO Reitman commented on Tranzonic's goals in a prepared statement and said, 'Going forward, our emphasis continues to center on being the most efficient provider of products and services to customers, and to promote growth within our existing businesses through acquisition, product line extension, and the targeting of new market segments for current product lines.'

1996–1999

During fiscal 1997 Tranzonic demonstrated its growth strategy by acquiring First Step from Dailey's, Inc. in July of 1996. First Step, a seller and distributor of safety, first aid, and infection control products, joined subsidiary CCP Industries. Also in July Tranzonic purchased the business and assets of Supply Line, Inc., which converted and distributed nonwoven and woven textile wiping and polishing cloths. Several months later, in October, Tranzonic bought three divisions--Midwest Disposable Products Division, Chicago Sanitary Division, and Globe Cotton Mills Division--from Cook & Riley, Inc. These divisions, like Supply Line, converted and sold industrial wiping cloths and also joined CCP Industries.

Tranzonic acquired Unity Paper Tubes from Wyndeham Press Group plc in March of 1997. Unity, based in England, was a maker and distributor of spiral-wound paper tubes and cores serving clients in the United Kingdom. Unity joined subsidiary Baxter Tube Company. The acquisition significantly extended Tranzonic's reach, but Baxter remained smaller than Tranzonic desired, and in September Tranzonic sold Baxter Tube Company to Caraustar Industries, Inc. for approximately $13 million. The sale left Tranzonic with two remaining operating divisions--Hospital Specialty Company and CCP Industries.

In a significant move, Tranzonic was purchased by Linsalata Capital Partners Fund II, L.P., in early 1998 for more than $100 million. Tranzonic had been seeking a buyer beginning in the mid-1990s in order to increase shareholder value. Linsalata was known for purchasing middle-market businesses and assisting management in developing strategies to fuel growth and expansion. Linsalata planned to accelerate growth at Tranzonic through new products and new management approaches. Upon completion of the sale, Tranzonic's senior vice president and president of CCP Industries, Richard J. Sims, was appointed president of Tranzonic, and Robert Reitman stayed on the board of directors as chairman emeritus. Alayne Reitman, Reitman's daughter and chief financial officer, left Tranzonic. Linsalata's Frank Linsalata became chairman and CEO. Sims was confident that Tranzonic was a wise buy for Linsalata and explained in the Cleveland Plain Dealer, 'We have a clear strategy for growing this company's profitability. ... We are working to establish firm foundations and accelerate growth at a faster rate than in the last few years.'

In the late 1990s Tranzonic concentrated on strengthening operations and sought acquisition targets. In April of 1999 Tranzonic, through subsidiary CCP Industries, acquired Spintex, a California-based maker and distributor of cleaning chemicals, washroom supplies, work apparel, and wiping cloths. The Spintex buy significantly boosted Tranzonic's presence in the West. As Tranzonic headed into the new millennium, the company hoped to realize its long-term strategy for growth and expansion and worked to strengthen its two primary divisions.