Forward Industries, Inc.

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Forward Industries, Inc.

1801 Green Road, Suite E
Pompano Beach, Florida 33064
U.S.A.
Telephone: (954) 419-9544
Fax: (954) 419-9735
Web site: http://www.forwardindustries.com

Public Company
Incorporated: 1961
Employees: 71
Sales: $30.6 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: FORD
NAIC: 326199 All Other Plastics Product Manufacturing

Forward Industries, Inc., is a Pompano Beach, Florida-based company that custom designs and manufactures a variety of carrying cases, bags, and accessories such as hand straps and clips. Forward products are used for encasing and transporting handheld consumer electronics, including cell phones, digital cameras, MP3 players, personal digital assistants, and laptop computers, as well as for retail bar-code scanners, medical monitoring and diagnostics kits, tools, musical instruments, and sporting goods.

The products, which are mostly sourced from Chinese suppliers, are made out of leather, vinyl, nylon, polyvinyl chloride, and other synthetic materials. Forward sells mainly to original equipment manufacturers (OEMs), including cell phone makers Motorola, Inc., Sagem S.A., and Nokia Corporation, and medical kit providers Abbott Laboratories, Bayer Healthcare LLC, and Lifescan, Inc. (a Johnson & Johnson subsidiary). Forward Industries sales offices are maintained in Florida, Switzerland, and Hong Kong. The company also provides design services to its customers, helping them to develop a suitable case or other carry solution for a product. Designers are available both in the United States and Hong Kong.

BUSINESS LAUNCHED IN 1954

Forward Industries was founded in New York City in 1954 as Progress Heat Sealing Company by a 21-year-old Polish immigrant named Theodore H. Schiffman and his brother-in-law Nathan Fenster. The two men started out with just two employees, working in a 300-square-foot space in the Cable Building at 611 Broadway at the corner of Houston Street in Manhattan, the former power plant for the Metropolitan Street Railway Co./Metropolitan Traction Co. (cable car) line on Broadway. At first the company was a heat-sealing contractor serving the handbag industry, its sole function the fastening of metal handles to the material of the bags. Paying himself just $25 a week, Schiffman slowly grew the business, so that by 1957 the company employed 12 and there was enough work to lease half a loft at 652 Broadway. Schiffman was growing disenchanted, however, with life as a contractor. “As soon as a customer becomes a $3,000 customer, he buys his own machine and he takes the business away from us,” he told the New York Times in a 1972 profile, noting “So we said, ‘Let’s make a product.’”

Progress Heat Sealing became Forward Industries. Although the date of the name change is uncertain, it likely took place in 1961 when the company was incorporated in the state of New York as Forward Industries, Inc. The niche the company pursued was vinyl advertising specialties that required heat sealing equipment. Forward also added cutting and riveting equipment in order to begin making such printed promotional items as insurance policy jackets, shirt-pocket pen and pencil protectors, key tags, zippered briefcases, shopping bags, and stadium cushions.

The change in strategy worked and business grew, requiring additional space. In 1963 Forward took over the sixth floor at 725 Broadway and over the next several years leased more space in the building as well as spreading the operation to neighboring buildings. By the early 1970s the company had generated sales of more than $5 million and was employing some 300 workers, the vast majority of which were Spanish-speaking minorities who came to Forward with limited job skills. The company went public in 1971.

OPERATIONS MOVE TO BROOKLYN: 1972

A subsidiary, Binder Craft Enterprises, Inc., was established in Brooklyn to manufacture ring binders for looseleaf materials and pocket diaries, and in 1972 all of the Forward operations relocated to Brooklyn, consolidating what had been spread among five locations on Lower Broadway into one 75,000-square-foot plant in the Flatlands Industrial Park, built on land supplied by the city. The rent was about the same as Forward had been paying for its previous sites, but the square footage was doubled and the accommodations, made to the company’s specifications, were far superior to the Lower Broadway operations.

The move to Brooklyn fueled further growth. The new facility was expected to satisfy Forward’s needs for at least the next decade, but just five years later the company had outgrown the space. Annual sales were in the $10 million range, and the company employed 400 year-round as well as about 600 during the peak season, which ran from August until the end of the year when Forward made a multitude of products that were given out as Christmas promotional items. Following the Brooklyn relocation, Forward began manufacturing products that were sold through department stores and other retail channels. A sewing department was also added to add value to some of the company’s higher-end vinyl products. To meet the demand for the 500 to 1,000 products the company now made, Forward bought a pair of nearby buildings in Brooklyn in 1977, adding another 90,000 square feet of manufacturing and office space.

Forward’s growth in the 1980s did not match the pace the company set in the 1970s, however. Annual sales settled at a level below $15 million, and by 1989 they were equally divided between subsidiaries Binder Craft and Republic Clear-Thru Corporation and the Advertising Specialty Division. It was in 1989 that Forward became involved in the manufacture of soft-sided carrying cases through the acquisition of Koszegi Products Inc., a South Bend, Indiana-based manufacturer of custom-made cases, covers, bags, and pouches that produced sales of $5.6 million in fiscal 1988.

In the early 1990s the sale of carrying cases grew steadily until it eclipsed the revenues generated by the sale of binders and advertising specialties. Starting in 1992 Forward also began turning to Asian contractors to manufacture its carrying cases in order to fend off increasing cost competition from foreign suppliers. In 1994 the company formed a Hong Kong subsidiary, Koszegi Asia Ltd., to sell into the Asian market and a year later assigned a senior officer of Forward to oversee the operation.

COMPANY PERSPECTIVES

At Forward Industries, we provide more than custom cases. We provide custom case solutions. Many of our clients are more like partners than customers, and we work with them to produce cases that bring together their unique needs for materials, functionality, design, branding, and quality. We even work with them to develop marketing collateral material to show their products and cases in the best possible light. Many of our clients don’t start out with a clear picture of what their case needs are. We work with them, through numerous consultations, multiple illustrations, 3D renderings, and samples to help them evaluate all their options. The work is demanding, but the result is consistently rewarding—a regular stream of successful cases and solid record of client satisfaction.

Forward introduced a line of notebook computer carrying cases under the Terrapin brand name in 1995. By this point just 15 percent of the company’s sales came from advertising specialties and binders. The Brooklyn facilities that manufactured these products were sold, starting in 1994, and in April 1995 the Brooklyn operations were discontinued when the last of the Republic assets were sold. Forward continued to sell vinyl advertising specialties (now essentially limited to billfolds, clipboards, correspondence folders, credit card holders, diaries, document holders, key cases, memo books, phone indexes, pocket and desk planners, and portfolios), but it was clear that the future of the company lay with carrying cases. This was true despite the company’s performance in fiscal 1995, when revenues declined from $17.2 million in fiscal 1994 to $15.5 million, due to a decrease in the sale of carrying cases resulting from diminished sales from a major customer. Advertising Specialties, on the other hand, enjoyed an 18.1 percent increase.

Nevertheless, Forward continued to emphasize its carrying case line. Sales in this category rebounded in 1996, as total revenues approached $17.9 million. In October 1997 Forward sold the Advertising Specialty Division to Amplaco Group Inc. for $1.35 million and focused all of its attention on OEM carrying cases and the Terrapin line of notebook computer cases, which would be augmented with the addition of plastic waterproof carrying cases sold under the Aquapak brand name.

The next step in the evolution of the company was to move most production to Asia. Increasingly the Indiana plant was finding it difficult to compete with overseas suppliers. As more production was sourced elsewhere the less capacity was used at the plant, making the operation even more inefficient. Finally in August 1998 Forward announced it would cease production in Indiana in February 1999 when its lease expired, and what domestic manufacturing that remained, protective covers for home medical equipment, would be transferred to Raleigh, North Carolina, where it would be done under an agreement with Medcovers, Inc. As part of the agreement, Koszegi sold its production equipment to Medcovers. Subsequently, a second domestic contract manufacturer was added.

SCHIFFMAN RESIGNS: 1998

Having dropped advertising specialty products, Forward also began to sever other ties to its origins. In October 1998, Schiffman resigned as chief executive officer and several months later resigned as chairman of the board. His successor at both posts was Jerome E. Ball. Prior to joining Forward, Ball had been the president of a textile manufacturing company, Balson-Hercules Group, and the CEO and chairman of the public relations firm of George Arzt Communications. Schiffman’s son, Michael, stayed on as president and chief operating officer. Starting out as a salesman, the young Schiffman had been with the company since 1985. Another son, Stephen Schiffman, who went to work for the company in 1990, also stayed on as a marketing executive.

With the Brooklyn manufacturing facilities closed, Forward continued to maintain its headquarters in the New York City area, in Westbury, New York. In early 2000, however, the company announced it would close the headquarters and the sales and customer service operations that remained in South Bend. In July 2000 they were consolidated in new offices in Pompano Beach, Florida. The 10,000-square-foot facility also provided warehouse space.

The start of the new century was a period of transition for the company as it struggled to find the right mix of products. The company recorded sales of $14.4 million in fiscal 2001, resulting in a net loss of $279,000. The following year, sales slipped to $13.2 million and the net loss increased to $2 million. A major disappointment was the poor performance of the Terrapin and Aquapak product lines, which were discontinued in fiscal 2001. A more promising area was covers for cell phones and other wireless consumer products. In February 2001 Forward reached an agreement with Motorola to supply cases in Europe, the Middle East, and Africa. To further its European business, which would soon account for half of all sales, Forward established Forward Innovations GmbH in Switzerland in May 2001.

With the Motorola contract in hand, Forward enjoyed a return to profitability in fiscal 2002 when sales improved 24 percent to $16.4 million and net income totaled $856,000. Another positive development was the increasing sale of covers for diabetes-related products and other medical monitoring kits. In fiscal 2003 this segment saw a 44 percent increase, or nearly $3 million, which helped offset a $527,000 dip in the sale of cases for cellular handsets. For the year, revenues improved to $18.9 million while net income increased 69 percent to $1.44 million.

KEY DATES

1954:: Business is launched in New York City as Progress Heat Sealing Company.
1961:: Company is incorporated as Forward Industries, Inc.
1971:: Forward is taken public.
1989:: Koszegi Products Inc. is acquired.
1997:: The company’s Advertising Specialties Division is sold.
2000:: Headquarters are relocated to Florida.

Business continued to grow in fiscal 2004 when the sale of cell phone carrying cases enjoyed a surge. Total revenues topped the $20 million mark and net income improved a further 34 percent, approaching $2 million. The cell phone case segment enjoyed even stronger growth in fiscal 2005. Forward did a significant amount of business supporting Motorola’s highly popular Razr phone. Also in February 2005 Forward reached a licensing agreement with the French electronics company Sagem S.A.

With the sale of cell phone cases leading the way, Forward increased sales by $31.8 million in fiscal 2005 for total revenues of $51.9 million. Net income, as a result, surged to $9.4 million. The company was not able to hold onto all of these gains, however, as demand for Motorola and Nokia cell phones dropped off with the termination of some sales programs. Hence, Forward’s balance sheet suffered. In fiscal 2006 net sales slipped to $30.6 million and net income fell to $1.5 million. Also in fiscal 2006, Ball announced that he planned to retire as CEO by the end of the calendar year. He later agreed to stay on until his term of office expired at the end of 2007.

Ed Dinger