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Keller CEO hopes ‘worst is behind us’

Keller CEO hopes ‘worst is behind us’
Keller CEO hopes ‘worst is behind us’
Keller Manufacturing Co. CEO Steve Robertson says when new home builders start buying furniture, Keller will be ready. (Photo by Randy West)

Keller Manufacturing Co. CEO and president Steve Robertson said 2002 was “a very difficult year,” the worst he’s experienced in 23 years at the dining and bedroom furniture manufacturing company, but he believes “the worst is behind us” and expects the company to do better in 2003, even though the market right now doesn’t look promising.
The United States economy as a whole doesn’t look promising either as the recession lingers, companies lay off workers, the stock market continues to mystify, the prospect of war with Iraq intensifies, and Keller and other wood manufacturing companies face increasingly stiff competition from a new and very tough competitor, the Chinese.
Robertson, 46, has been president and CEO since Jan. 1, 2000, when he succeeded Robert W. Byrd, the marketing whiz who was at the helm when Keller experienced unprecedented sales while the American economy was exploding.
“Closing of the Culpeper plant was a low spot for us,” Robertson said. The plant in Virginia was closed in September and about 100 people laid off. Robertson said if there was any way they could have kept the plant open, if they had seen any signs that the economy would turn around, they would have absorbed the losses, but the signs weren’t there. “We just couldn’t sustain that overhead,” he said.
The company lost money the first three quarters of 2002, and the fourth quarter “doesn’t look too good,” Robertson said in an interview last week. Danny Utz, Keller’s vice president of finance, said Keller lost $690,000 the first quarter, $451,000 the second, and $855,000 in the third.
“Consumer confidence has been our Achilles’ heel,” he said. “That’s one of the main factors adversely affecting our business.” Interest rates are favorable, housing starts continue to be strong – those are good indicators – but consumer confidence is really low.” Furniture manufacturers are traditionally among the first to feel the brunt of a recession and the last to come out of one, he said.
The three lines of furniture made at Culpeper plant – Culpeper County, Colonial Heirloom and American Restoration – are now being made at the Corydon and New Salisbury plants.
There have been rumors in town that the Corydon plant would close, too, but Robertson laughed at the prospect and said that would not happen. “Beyond any doubt, the Corydon plant will not shut down,” he said. “Even if we had any inkling of that happening, New Salisbury couldn’t handle the volume.”
At one point the New Salisbury plant was producing $23 million of goods a year. Now it’s projected at $20 million. The projected budget for the Corydon plant is $18 million, for a projected total of $38 million in sales and shipments, Robertson said.

“The Corydon plant will stay open for a good while to come,” Robertson said. Several big pieces of machinery have been moved from Culpeper to the Harrison County plants, and new equipment has been purchased for both New Salisbury and Corydon.
Robertson says Keller has survived the crunch while other, less stable manufacturers haven’t. Keller has no major debt and plenty of cash reserves. 2003 now projects as a flat year, especially the first two quarters, but Robertson thinks there will also be some stability and no lay-offs. “We’re confident about our employment levels and cost structure,” he said, and he thinks the “corrections” management has made are the right ones.
“We hope to have a good year. Some sales are showng a little growth. We’re pumped, we’re ready, morale is good … we’re very positive about 2003.”
When the economy does rebound and all those people who are building new homes with rock-bottom low interest rates are ready to buy dining room and bedroom furniture, Keller will be ready to meet their needs, Robertson said.
“We intend to be here for a long time,” Robertson said.
John Schenkenfelder, a financial analyst and a member of the Keller board of directors since 1992, said Robertson’s relatively young management team has been given enough leeway by the board for creative, open, forward-thinking planning. He inferred that Keller, like other old companies, had been restricted in the past by an old, traditional management style, but now Robertson is free to try new things. Schenkenfelder said Robertson encourages input from the employees and is a good “top-down” manager. He also comes from a marketing background and has a different perspective on how to run the company. The focus now is on the consumer.
“The real issue here is the management team,” Schenkenfelder said, and the board of directors will be watching how that team functions.
Keller will drop its disappointing PGA Tour line and introduce a couple of new ones in 2003. (One, with an “oak country flavor,” will come out in April, Robertson said. As yet, it is unnamed. Another line, still on the drawing boards, is due out in October.)
Robertson said the furniture manufacturing business has always been highly competitive, but now there’s a new player: China.
In 1996, 25 percent of all residential furniture sold in the U.S. was imported. Very little came from China. Last year, 2001, 43 percent was imported, and 13 to 18 percent was from China. Robertson said Keller can produce a solid oak cabinet for about $1,200, while a Chinese case, made with veneer and particle board, not solid wood, sells for $899.
To compensate for that stiff competition, Robertson said, Keller must compete fiercely, become more efficient and deliver products faster – delivering goods in two to three weeks instead of three to four.