From file "066_PSs" entitled "PSPFbrwn.qxd" page 01
From file "066_PSs" entitled "PSPFbrwn.qxd" page 01

Like virtually everywhere else in the country, the home building markets in Oregon and California over the past two years have been a gold mine for many dealers, and Keith Brown Building Materials, with 12 yards straddling Interstate 5 as it courses through the adjoining states, is eager to grab its share of the sales. To keep one up on national and regional competitors, the company is reinvesting in facilities, scouring territories for seasoned sales reps, and providing superior customer service as it shoots for an aggressive goal of growing to $1 million per month per yard by 2007.

Though it may look like Salem, Ore.–based Keith Brown has had an easy ride that has been bolstered over the past few years by the housing market on the West Coast, that's far from what really happened. The company almost didn't make it through an aggressive expansion plan, but thanks to a reorganization that saw tough cuts in unit count, overhead, and, unfortunately, personnel, Keith Brown has made an amazing rebound and is back in the West Coast pro dealer winner's circle.

In the summer of 2000, before ESPN and the World Series of Poker made going “all in” a household phrase, Keith Brown president and CEO Brad Pence was practicing the move that made card players like Chris Moneymaker and Greg “Fossilman” Raymer famous. As regional heavyweights like Redmond, Wash.– based Lanoga, San Francisco–based BMHC, and Hillsboro, Ore.–based Parr Lumber began grabbing pieces of the once 65-yard strong Copeland Lumber, which was selling off its business, Pence bet his hole cards on one of the more notable acquisition bonanzas in recent pro dealer history, purchasing 21 Copeland yards and vaulting Keith Brown from a local, four-unit player to a multi-state, 25-yard powerhouse doing business throughout Oregon and Central California's San Joaquin Valley.

On paper, the match looked pretty good. Keith Brown and Copeland both employed a decentralized, manager-empowered sales culture. Apart from some increasing production builder business in California, the customer bases of the merging companies were similar as well, dominated heavily by custom home builders and residential remodelers with some retail thrown into the mix. After the deal was done, temporary Keith Brown signs were quickly put up over the old Copeland black cat logos, and it was business as usual with a relatively seamless transition expected. Within two years, however, Keith Brown was teetering at the edge of insolvency.

“I thought we would be able to pull it off,” Pence says, “but it was a stretch for us to go from four to 25 overnight. We were simply not prepared for it.”

With Keith Brown's cash flow spread thin and the company in debt to major suppliers, many expected Pence to cash in the chips and declare bankruptcy. Instead, the pro dealer orchestrated an extraordinary comeback: By winnowing expenses, eliminating overhead, consolidating yards, and opening itself up financially to its vendors, Keith Brown climbed back into the limelight. The debts have been paid off, profitability is back in the millions, and the company enjoyed a gross sales increase last year of 21.6 percent.

Poised to hit $70 million in sales this year and with targets of $100 million and $136 million in 2006 and 2007, respectively, the dealer is finally making some overdue reinvestments in facilities, fleet, and technology, and is aggressively recruiting outside salespeople.

Just don't call it a turnaround. “I've always disliked that word,” Pence says. “It seems to have such a negative connotation to it—but I guess turnaround is better than turned down.”

Lean and Mean Pence's choice of words is no accident—being turned down by its vendors was precisely one of the possibilities facing Keith Brown during the company's darker hours, but thankfully it was an event that never came to pass. “My business philosophy is really about openness and honesty, and I think that served us well as we navigated through those times to deal with the banks and our vendors,” Pence says. “I think it was how we presented ourselves during that time—both financially and strategically—that allowed them to stick with us. For a lumber company, if you get cut off from your supply, you're pretty much done.”

By 2002, the national economy had softened, the cash strain of taking on so many Copeland yards was at its peak, and Keith Brown had fallen behind on payments to most of its major suppliers, including an overdue bill from Georgia-Pacific's building products distribution group (now Atlanta-based BlueLinx) for approximately $850,000. To make matters worse, Portland, Ore.–based pro dealer Tualatin Valley Builders Supply (TVBS) had just gone under, and according to Mark Bechel, a former GP controller who chaired creditor committees for both TVBS and Keith Brown, vendors were getting tired of hearing the same old “the check is in the mail” story.