TAB Products Co.

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TAB Products Co.

1400 Page Mill Road
Palo Alto, California 94304
U.S.A.
(415) 852-2400

Public Company
Incorporated: 1954
Employees: 1, 070
Sales: $152.69 million (1996)
Stock Exchanges: American
SICs: 5021 Furniture; 5112 Stationery & Office Supplies

TAB Products Co. is a leading records management company which manufactures and markets office filing and furniture systems that are sold worldwide. The company provides information storage and retrieval solutions to office environments where efficient access to information is critical to success.

1950s Founding

The company was founded and incorporated in Delaware in 1954 by two former IBM salesmen. Its initial purpose was to market desktop, punch card, and other computer-related file boxes and containers. In these early years, TAB was known for its role as a pioneer in lateral filing systems. An early example of the company’s client service process is provided by the total records management system created for Montgomery Ward in the 1970s. TAB’s work team studied and recommended systems for Montgomery Ward’s departments, including personnel, purchasing, legal, corporate files, credit, accounting, traffic, claims, and corporate systems. The resulting recommendation, implemented throughout Montgomery Ward’s 27-story headquarters, was TAB’s Spacefinder System, a combination of equipment and color-coded software.

Similarly, in 1977 TAB provided records management systems to two New Jersey State government agencies: the Division of Gaming Enforcement of the New Jersey Department of Law and Public Safety and the Division of Taxation. When gambling began in Atlantic City, the Division of Gaming Enforcement was responsible for instituting a massive system to monitor and fight corruption. Such a system included the processing of prospective employee disclosure statements, with a minimum of seven police checks as well as individual credit checks for each employee. TAB designed a dual filing system, facilitating the dispersal of results of individual investigations to separate investigate units and different filing cabinets.

Also in 1977, the initiation of personal income tax in New Jersey brought TAB together with the Division of Taxation. To manage massive quantities of returns, TAB designed a records management system calling for returns to be batched in groups of 100, and stored in Open Unit Spacefinder storage boxes, which were then placed on TAB mobile file trucks. Other New Jersey government departments—including the Department of Agriculture, the Housing Finance Agency, the Department of Environmental Protection and Transportation, and the State Tax Court—took advantage of TAB’s tailored records-handling systems in this epoch.

During the decade from the early 1970s to the early 1980s, TAB’s financial status was less than desirable. The company could not seem to sustain earnings momentum; only once in the decade did TAB see two successive years of increased earnings. However, with the advent of computer technology, and TAB’s decision to enter that market, the financial picture improved considerably, if slowly. In the early 1980s, TAB changed its direction to adjust to technological changes in the office environment. Having previously specialized in manual filing storage equipment, the company directed significant resources toward its emergence as a supplier of electronic data entry and storage devices. When computer terminal technology began to move forward, for example, TAB made its move into hardware electronics. Fifteen-inch, 132-unit screens became the wave of the future, but compatibility with previous systems led to usage problems. TAB’s Electronic Office Products (EOP) Division entered the market with a terminal demonstrating the new measurement specifications, as well as brilliance and clarity features.

As a result of expenses associated with Tab’s entry into the computer market, the company initially absorbed heavy losses.

In 1981, the Electronic Office Products Division incurred a deficit of about $1.2 million, and the next year its deficit almost doubled. The deficits reflected major outputs in marketing due to the buildup of a sales force to supplement independent distributors and promote the new computer terminal. Through direct sales, TAB could provide large quantity discounts which would be impossible through the mediation of distributors. In early January of 1982, orders for the computer terminals leapt about 50 percent to 500 or 600 a month, and the company’s finances continued to improve during the year.

As a result of the financial upswing, the EOP Division increased its sales force and began to introduce new products. Despite its losses during the development period, by 1982 TAB had reduced its debt-to-equity ratio from over 60 percent to 40 percent, and 1982 cash flow exceeded $5 million after interest expense and dividends. The move into computers was also reflected in the company’s revenue and net income figures in the late 1970s and early 1980s; revenue jumped from $50.3 million in 1977 to $89 million in 1981, with a relatively small increase in net income from $2.3 million to $3.2 million, due to marketing outlays. During this same period, stock increases were proportionally high, increasing from a range of two and one-half to four and five-eighths in 1977, to a range of ten and one-eighth to 29 and three-quarters in 1981.

What computers were to the late 1970s, color-coding became in the mid-1980s. According to The Office, studies showed that color-coding systems read faster than letters or numbers. In fact, a 1980 study by TAB Products estimated that the average cost of each misfile was $80, and that most firms misfiled between one and five percent of their records regularly. Having introduced color-coding in the early 1970s, TAB became an outspoken advocate of color-coding as a source for saving thousands of company dollars each year. Large and diversified filing systems could more easily be managed with color-coded file folders, increasing worker productivity and minimizing the losses created by file misplacement and search time.

One of TAB’s most successful color-coding solutions was presented to the California State Automobile Association in 1984. This San Francisco-based Inter-Insurance Bureau insured over 1.2 million members. With such broad service, the agency’s work routine entailed daily charging of 10, 000 files to various departments. To manage the quantity, the Auto Association turned to TAB Products’ color-coded filing system and Unit Spacefinders, resulting in a dramatic 25 to 30 percent improvement in productivity. A five percent staff reduction was made possible, resulting in more efficient utilization of personnel.

Another color-coding solution was presented to the Sacramento, California, law firm of Wintraub Genshlea Hardy Erich & Brown. In 1982, this firm became one of the city’s largest, through the merger of two practices. TAB designed a system for the speedy combination of two filing systems, seeking to avoid misfiling errors and incompatibility issues. The system provided for the usage of TAB Unit Spacefinders, ’’unit boxes” suspended from framework, and an alphabetical, color-coded filing system. Through TAB’s design, 9500 filing inches were made available where there had previously been only 7000. In April of 1985, the law firm moved to a spacious new building, where it continued to utilize TAB equipment systems.

Supplementing its production of computer products and forms-handling equipment, TAB began to tap the rapidly growing market for computer furniture, work stations, and clustered work centers for open office arrangements. In 1985, TAB began a relationship with Wurlitzer, the maker of keyboard instruments. Having suffered dramatic losses, Wurlitzer began making a line of wood office furniture, which in turn was purchased and marketed by TAB. In the same year, Dennis Searles was promoted to president and chief operating officer, with Harry Le Claire continuing as chairman and chief executive officer. The mid-1980s were also characterized by a number of stock buybacks.

Reorganization in the 1980s

In 1986, TAB was reorganized as a corporation in Delaware. The company began to look outward to expand its offerings, acquiring a 20 percent interest in Acctex Information Systems. Together, the two companies developed a PC-based laser optic filing system. Competition in this market was fierce—with approximately 40 companies developing products—but TAB was seen as a leading contender due to its focus on price, its outsourcing policy, and its partnership with Acctex.

By the close of fiscal year 1987, revenues had more than doubled during a decade of diversification and growth. The company now earned $124 million, as compared to $56 million in 1978. Office-filing systems and supplies were responsible for $71.5 million, or almost 60 percent of 1987 revenues. This category of TAB products now included products from individual file cabinets to enormous mobile filing systems, as well as folders, tabs, and accessories. W. B. Brooksby told Barron’s that the open furniture market was the fastest growing segment of the furniture market, comprising approximately $7 billion, as compared with about $250 million for office files and supplies. To profit from the new trend, TAB started to focus increasingly on clustered work centers, interchangeable panels, bases, and tops. To generate continued interest in its products, TAB introduced the Designer Series of cabinets, with a wide range of interchangeable components such as drawers, shelves, racks, and hanging frames.

Company Perspectives:

TAB provides information storage and retrieval solutions in office environments where efficient access to information is critical to success TAB not only provides good ideas based on 45 years’ experience, but also provides the products, services, installation, and training that improve the way work flows as the result of those good ideas. Comprising systems from forms to electronic technologies, the common value of all TAB solutions —and a business goal since day one —is their ability to help people do business better.

Success was short-lived. By 1989, net earnings fell 43 percent over the previous fiscal year, and revenue decreased by 1 percent. TAB officials told the Wall Street Journal that sales declined primarily due to a delay in the renewal of government contracts with the General Service Administration (TAB had been supplying office furniture to the government for over 20 years). However, by 1991, TAB was awarded two federal contracts worth over $20 million.

Shortly before his death, founder Harry Le Claire began a process of reorganization, cost-cutting, and management changes which caused Steven Wilson, of Reich & Tang, to tell Barron’s that the company was a favored investment pick. In addition, in 1991, the company downsized its stock significantly, repurchasing about one-third of its shares, including 31 percent from Le Claire’s estate. Repurchased shares were to be used for employee benefit plans and other corporate purposes. Having spent the majority of its existence moving forward with direct sales but with no particular success, TAB seemed poised for a change.

The 1990s and Beyond

By 1996, TAB was ready to strengthen its board again, electing three new officers to bring the total up to eight members. Fiscal 1996 results showed a dramatic 126 percent increase over the previous year, with net earnings of $2.76 million. Revenues for fiscal 1996 were $152.69 million, a 2 percent increase over fiscal 1995. President and CEO Michael Dering attributed the improvements to increased revenues, improved gross margins, and lower operating expenses.

In July 1996, President and CEO Michael Dering announced his immediate resignation, further heralding a new era in management at TAB Products. Dering had demonstrated leadership during the years immediately following Le Claire’s death, and would now take the office of president and chief executive officer at Publications Systems Company, a wholly owned subsidiary of Bell and Howell, Inc. John W. Peth, executive vice-president and chief operating officer, became acting president and chief executive officer, and an external and internal search for Dering’s permanent replacement commenced. With no successor named in late summer of 1996, TAB’s future direction remains in the balance. It is likely that the company will continue to do what it has done for over 40 years—solve office problems with management systems and materials—with varying levels of success, but continued perseverance.

Principal Subsidiaries

TAB Sales Corp. International (St. Thomas, Virgin Islands); TAB Products of Canada, Limited (Toronto, Ontario); TAB Products Pty Ltd (St. Leonards, Australia); TAB Products (Europa) B.V. (Amsterdam, Netherlands).