From biotechnology to water beds, stealth technology to student loans, a dozen businesses in the greater Washington area are offering stock to the public for the first time.
The next Washington companies to sell stock to the public will be Classic Corp. of Jessup, which made $23 million worth of waterbeds last year; Global Analytics Inc., a two-year-old Washington specialist in stealth technology, and the Student Loan Marketing Association of Washington, the wholesaler of government-insured student loans.
Here are profiles of the three, whose stock is to go on sale shortly: Classic Corp.
Waterbeds used to be the subject of bad jokes and leaky nightmares, but the prospectus put out Aug. 12 by Classic Corp. shows the flotation sleep business is nothing to smirk about.
The 12-year-old company sold $23 million worth of waterbeds, heaters and accessories in the year ended June 30, and earned a profit of $1.2 million (90 cents a share). Sales were up 85 percent from the previous year's $12.6 million and earnings jumped 190 percent from $407,000 (31 cents).
In an offering underwritten by Dean Witter Reynolds Inc. and Lehman Brothers Kuhn Loeb Inc., Classic is offering 1 million shares at a projected price of $14 to $17. Two-thirds of the shares will be sold by the company, the remainder by officers and directors.
The offering will be worth between $1.6 million and $2 million for Isaac Fogel, 39, who got into waterbeds in 1971 and now is chairman, president and chief executive of Classic. Fogel is offering 120,000 shares of his own. Another 30,000 shares are being sold by his wife and children. The offering could put as much as $2.5 million under the Fogel family's mattress.
Other selling shareholders include directors Gene E. Engleman, 72, retired chairman of Texas Commerce Bank of Fort Worth and Frank L. Carney, 45, who made his fortune as founder and chairman of Pizza Hut and is on the board of Southland Corp., parent of 7-Eleven.
Along with bringing in high-powered board members, Fogel prepared to go public by hiring a pair of professional managers for key jobs. Brought in as senior vice president for sales and marketing was Charles H. Schweitzer, 39, formerly the top marketing man for Sealey Mattress Co. Richard W. Kelso, 46, was hired away from Procter & Gamble, where he ran 16 soap plants, to be senior vice president for operations.
The projected $8.8 million to $10.7 million that Classic expects to get from the offering will allow the company to expand nationwide and increase distribution through conventional furniture stores.
A new Western manufacturing plant and three distribution centers are planned by the firm, which has 469 employes. Classic has three plants now, which make water mattresses in Beltsville, liners and covers in Jessup and heaters in Portland, Me.
Proceeds of the underwriting will also be used to pay back $2.7 million in debt and to expand production of "hybrid" water matresses that can be used on conventional bed frames. Global Analytics Inc.
Headquartered in Georgetown, Global Analytics describes its specialty as "low observable technology"--commonly known as "stealth"--techniques for making airplanes, missiles, vehicles and ships invisible to radar.
Founded in September 1981, Global Analytics does stealth research and development at a facility in San Diego for the government and for prime contractors.
In its first 23 months of operations, GA booked $12 million in contract revenues and is growing rapidly, if not visibly. The firm has signed contracts for an additional $3 million of work since July 31 and expects $26 million in additional contracts by the time it goes public. Earnings in the 11 months ended July 31 totaled $1.4 million (16 cents).
Global Analytics' founders are Chairman Allan D. Simon, 50, and President Kenneth J. Perko, 42, former Defense Department officials who previously ran interconnected consulting businesses. Board member George M. Bunker is the retired chairman of Bunker Ramo Corp. and previously was chairman of Martin Marietta Corp.; Vice President Robert J. Whalen, 52, is a former president of Martin Marietta's aerospace arm.
Simon and Perko each plan to sell 240,000 shares of stock, worth between $3.3 million and $4 million at the offering range of $14 to $17 a share.
In the underwriting by Bear, Stearns & Co. and Robertson, Colman & Stephens, the company itself is offering 1 million shares that will allow it to significantly expand its research operations. The firm earlier raised $4.8 million in a private stock sale to a subsidiary of Alcoa Corp., which is its principal customer.
Unlike most initial offering statements for high tech companies, which usually spell out the firm's expertise in arcane detail, the Global Analytics prospectus is conspicuously lacking in specifics.
"According to published reports," the offering statement notes, stealth technology involves changing the shape of objects and using plastics rather than metal to make them invisible to radar, reducing engine noise and shielding exhausts so that heat cannot be detected.
"Because of the highly classified nature of stealth technology and stealth weapon systems, the company is not permitted to disclose which of such technologies and weapon systems it is participating in and the extent of such participation," the prospectus says.
The company does say, however, that it "incurs substantial expense for such items as alarms, vaults, guards, specially protected computers, special procedures and experienced security officers" and that gives it an advantage over competitors.
"Although potential new competitors in the LOT (low observable technology) field could emerge, it would take such competitors a significant amount of time to achieve the national security status currently held by the company," according to the company's prospectus. Student Loan Marketing Assn.
A couple of blocks away from the sealed doors of Global Analytics, the Student Loan Marketing Association runs a far less secretive but equally incomprehensible business.
Known as Sallie Mae, it is a government-chartered corporation that provides a secondary market in government-guaranteed student loans in the same way Fannie Mae--the Federal National Mortgage Association--runs a secondary market in mortgages.
Sallie Mae raises money for colleges and banks to make student loans. Like Fannie Mae, but on a smaller scale, Sallie sells notes and other kinds of debt securities to the public, then uses the cash to buy loans from lending institutions.
Until now, all its stock has been owned by banks and colleges that participate in its programs. Last Monday, Sallie Mae said it would sell 6 million shares of non-voting stock to the public.
Sallie Mae will sell 1.5 million shares and the student lenders, 4.5 million shares. Underwritten by Goldman, Sachs & Co. and First Boston Corp., the offering is expected to go out at $17 to $20 a share, raising between $107 million and $120 million.
Some 570 colleges and banks plan to convert their voting shares into non-voting shares and sell them as part of the offering. At present, Sallie Mae's biggest shareholders are Citibank, 5.82 percent; Brown University, 4.31 percent; First National Bank of Chicago, 4.02 percent, and Chase Manhattan Bank, 3.96 percent, and Harvard University, 2.40 percent. Princeton, MIT, Stanford and Yale each own 1.2 percent.
Sallie Mae's share of the offering will provide additional capital for the institution, which plans to use part of the money to buy a savings and loan association.
Sallie Mae reported interest income of $64.4 million in the year ended June 30 and net income of $28.4 million ($20.95). A 35-to-1 stock split is planned as part of the public offering, which would reduce per-share earnings to 60 cents for that year.