Sunrise Medical Inc.

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Sunrise Medical Inc.

2355 Crenshaw Blvd., #150
Torrance, California 90501
U.S.A.
(310) 328-8018
Fax: (310) 328-8184

Public Company
Incorporated: 1983
Employees: 2,625
Sales: $319 million
Stock Exchanges: New York
SICs: 3842 Surgical Appliances and Supplies; 2599 Furniture
Fixtures, Nee

Sunrise Medical Inc. is the second largest supplier of home health care products in the world, next in sales only to Invacare. The company is the world’s leading manufacturer of customized lightweight wheelchairs, and is Invacare’s only significant competitor in the market for ultralight sports wheelchairs, designed to be used by disabled individuals in playing tennis, basketball, baseball, competing in marathons, and other rigorous athletic activities. Sunrise manufactures and markets an extremely wide variety of items, including customized manual and electric wheelchairs, patient-room beds, specialty mattresses, and ambulatory safety aids.

Sunrise Medical was founded in 1983 by Richard H. Chandler. Chandler had graduated magna cum laude from Princeton University in 1964, and received an MBA from the University of Chicago in 1966. After graduate school, Chandler worked his way up the management ladder to vice-president of marketing for DeVry, Inc., Bell and Howell Company’s education division. Chandler then worked in various management positions at Sara Lee Corporation from 1974 to 1979. In 1979, he became president of Abbey Medical, Inc., one of the leading chains of home health care stores in the United States. One of the original investors who purchased Abbey Medical from Sara Lee Corporation, Chandler and his investment group sold the company in 1981 to American Hospital Supply.

Chandler knew that the population within the United States was aging rapidly and that important changes were on the horizon for government health care reimbursement programs such as Medicare. He was also aware that there was a growing demand for wheelchairs and home health care products that would only grow in the future. Recognizing that no one company was dominating the health care product market, Chandler decided to start his own firm. On January 18, 1983, Chandler incorporated his company under the name Sunrise Medical Inc., with an initial capitalization of $50,000. During the spring of that year, Chandler arranged lines of credit at various banking institutions and raised supplementary venture capital. On May 1, Sunrise opened for business, and ten days later the company not only held its first meeting of the board of directors but received notification of a $5 million additional investment in venture capital.

With the new investment, Chandler purchased five medical equipment companies over a three month period: Joerns, Trans-Aid, A-BEC Mobility, BEC Mobility from the United Kingdom, and Guardian products. A management team, salesforce, and distribution network were set in motion, and the company began selling the home care products of its acquisitions. In November, Sunrise raised approximately $11 million in an initial public offering as its stock began trading on the NASDAQ exchange. In June of 1984, at the end of its first fiscal year, Sunrise reported earnings of $1.6 million on revenues of $52 million.

In the mid-1980s, Sunrise continued to expand through acquisitions. In August of 1984, the company acquired American-based Tru-Trac Therapy Products and its British affiliate, manufacturers of physical therapy equipment such as treatment tables and traction machines. In April of 1985, Sunrise bought W. R. Breen Company, a manufacturer of seat lift chairs, along with its affiliate located in Ontario, Canada. This Canadian acquisition was rechristened Sunrise Medical Canada, and a salesforce was quickly formed to market all the company’s products in the country. In August the company purchased Bio-Clinic, a hospital products company well known as a supplier of foam mattress overlays. In October, Sunrise acquired NTRON, a maker of electric therapy devices; in November, the company purchases J. E. Nolan, a producer of bath tub and swimming pool seats; and in December, it acquired a British manufacturer of motorized stair lifts, Minivator Ltd.

Other acquisitions included Walton Manufacturing, a producer of fitness products for home health care dealers; Motion Designs, a manufacturer of lightweight manual wheelchairs; MAI Inc., a maker of rowers and treadmills for disabled people; and Safety Rehab, a builder of pediatric wheelchairs. Sunrise management established a comprehensive system of bookkeeping, inventory control, and product coordination to fold these companies into its framework. Sunrise now functioned like a mini-conglomerate, with economies of scale and an expanding marketing and sales force.

Despite all the new products lines incorporated into the company, Sunrise profits began to fall precariously in 1986. Freedom Technology, a direct marketing unit previously created to sell electric scooters, suffered continuous losses and its operations were closed. When the company’s other operating divisions experienced decreasing profits on revenues of $140 million for the fiscal year of 1986, Chandler decided to do two things: establish a sales and distribution operation in Germany to take advantage of the growing European market for home health care products, and travel to Japan in order to learn about their ideas on managerial and corporate success.

While attending a trade show in Japan, Chandler devoted a large amount of time to visiting companies such as Toyota and Matsushita and studying Japanese management style. When he returned to the United States, Chandler implemented the lessons he had learned. He quickly put a halt on the company’s acquisition strategy, sold non-performing acquisitions, divisions, and product lines, and reorganized the Sunrise employees into autonomous, self-directed teams. He revised the company’s procedure on inventory control, keeping only those parts required for the day’s production and shipping the product to dealers and customers as soon as it was completed. Chandler also initiated an 18-month period of restructuring and consolidation. Nolan and Trans-Aid were subsumed under Guardian, while Sunrise Medical Ltd. incorporated Minivator. Motion Designs was renamed Quickie Designs and established its own marketing and salesforce.

The most important changes at Sunrise, however, involved the creation of a unique corporate culture. The Sunrise Pursuit of Excellence Program encouraged a relation between employer and employee that dramatically changed the company. To reduce waste, Sunrise implemented an idea known as “sharing rallies,” where employees on the factory floor are recognized for their suggestions to improve production. If an employee makes a suggestion, then management has to respond within 72 hours and let the employee know what is being done about the suggestion. Sunrise also adopted a statement of Corporate Values espousing such goals as Product Superiority, Service to Customers, Individualism, Teamwork, Performance, Citizenship, and Corporate Character. The description of Corporate Character reads: “We believe that great corporations, like great individuals, always act with integrity and character. When faced with moral choices, they do the right thing.”

The pursuit of excellence extended to sales and manufacturing as well. For example, the company discovered that when a medical-supply house phoned to order a product, they had to wait an average of 4½ minutes to place an order. During the time they were on hold, approximately 23 percent of the customers refused to wait and decided to hang up. When Sunrise pushed the hang-up rate down to a mere two percent, its growth rate boomed to 30 percent a year. To increase sales, Sunrise improved its production techniques so that expensive options on wheelchairs, for example, became standard features. The company’s most popular wheelchair is offered in a dizzying number of permutations: it is produced in one-inch increments of back height, seat depth, and seat width, just to name a few. Essentially, Sunrise created a customized wheelchair fitted to a user’s specific needs and requirements.

Sunrise’s reorganization plan continued into 1988. A-BEC Mobility was merged into Quickie Designs and relocated its operations to Fresno, California. Safety Rehab was then subsumed under Quickie as one of its operating divisions. During the summer of that year, Chandler decided to sell the company’s holdings in physical therapy and fitness products, including Tru-Trac, Akron, and NTRON. For the fiscal year of 1988, although revenues amounted to $140 million, the company recorded a loss of $10.9 million on discontinued operations.

Nonetheless, the company’s five core businesses, Bio-Clinic, Guardian, Quickie, Joerns, and Sunrise Medical Ltd., all posted over $25 million in sales for the year and were recognized as market leaders in their respective fields.

The company’s adaptation of Japanese team-building management techniques was most evident in the events of 1989. Chandler started the firm’s first “Corporate Growth Conference,” which brought together top-level management from sales, marketing, customer service, and product development. The purpose of the conference was to generate new ideas for increasing sales more rapidly. The strategy worked. By the end of fiscal 1989, Sunrise revenues had risen to just over $152 million. During the same year, Sunrise acquired Brentwood Sales, the Canadian distributor of Quickie’s wheelchairs, and combined it with Sunrise Medical Canada. The company also purchased the product line of fitness mats from Rib-Cor and subsumed it under Bio-Clinic.

During 1990 and 1991, Sunrise developed long-term strategic plans and more company team-building activities. Each division was required to draw up a plan to clarify its goals until the year 2000, and describe precisely how it would become the global market leader in recovery and rehabilitation products. Part of this long-term strategic planning included securing a $70 million multi-currency bank credit line to prepare for international acquisitions. Another part of it included combining all the company’s management, financial, and human resources information systems to assure quicker and more efficient communication for the anticipated growth over the next five years. In the area of team-building, Chandler established awards for exceptional performance and for corporate teamwork in order to encourage and reward employees for their contributions to the company’s success. Everything Chandler had done up until this time—from the acquisition strategy to the employee awards—could be described as a foundation for the future.

Sunrise had a watershed year in 1992. In the beginning of the year, Sunrise expanded into Europe with the major acquisitions of Sopur in Germany and Talleres Uribarri in Spain, both wheelchair manufacturers, and the establishment of Sunrise Medical S.A.R.L. in France, and Sunrise Medical B.V. in the Netherlands, both distribution operations. In the United States, additional acquisitions included Hoyer; Dufco Electronics, a firm already supplying Quickie with power controls; Magic in Motion, a specialty wheelchair manufacturer; and RVH, the French distributor of Sopur’s wheelchairs. Company revenues shot up to $243 million, a 72 percent rise since 1988, while earnings were reported at over $12 million. During the summer, Sunrise stock was listed on the New York Stock Exchange, and by September its shares underwent a two-for-one split. For its accomplishments, Forbes magazine included Sunrise in its list of the top 200 emerging growth companies in the United States.

Sunrise also developed social responsibility programs in 1992. With large amounts of corporate support, Sunrise created the Winners On Wheels (WOW) Foundation, a not-for-profit organization promoting personal growth and development for children in wheelchairs. Sunrise also supported numerous wheelchair marathons across the United States, and sponsored a wheelchair team for the Barcelona Paralympics. For its contributions in the field of social activism, Sunrise was profiled along with 11 other companies in a book entitled Companies with a Conscience: Intimate Profiles of Twelve Firms that Make a Difference.

Although all of Sunrise’s divisions were growing, Quickie Designs led the company. Quickie introduced its original, U.S.-made power wheelchair in 1990 and since that time has continuously produced more and more innovative wheelchairs. One of its best sellers was the Quickie 2, an aluminum model weighing 25 pounds with a highly functional rear wheel that shifted forward for greater maneuverability in sports, or shifted backward to provide the stability needed for normal wheelchair use. Quickie quickly became the leader in custom-designed wheelchairs made with the most advanced technologies and lightweight materials; with a Quickie wheelchair quadriplegics, ordinarily dependent upon others, were able to operate a power wheelchair by the movement of their head or through breath controls.

In 1991, Quickie acquired the pediatric wheelchair product line from Luconex, and in 1992, it acquired the Shadow athletic equipment product line. The addition of Shadow products gave Quickie access to a whole new market, including bikes, water skis, snow skis, and racing wheelchairs for disabled athletes. In 1992, sales of Quickie power wheelchairs jumped 84 percent, and in 1993 sales climbed 92 percent. With Quickie leading the way, Sunrise’s 1992 earnings totaled $14 million on revenues of $244 million, and in 1993 earnings increased slightly while revenues climbed to $319 million.

Sunrise acquired DeVilbiss Health Care, Inc. in 1993 for $130 million. At the time, it was the largest acquisition in the history of the home health care products industry. DeVilbiss manufactured the world’s most reliable and best selling compressor nebulizer, the most widely used oxygen concentrator, and was a leading supplier of sleep therapy products. The strategy behind the acquisition was to combine the two companies’ international marketing and distribution networks and expand the Sunrise product line in health care recovery and rehabilitation products. Chandler hoped DeVilbiss would help Sunrise become a billion dollar company by the year 2000.

With approximately 50 percent of the market for manual and customized wheelchairs and sales continuing to rise, Sunrise is well on the way to achieving its goal of becoming a billion dollar company. As long as Chandler remains head of Sunrise, cultivating a unique team-building corporate culture, the company can continue to build on its previous success.