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May 21, 2001 02:00 AM

Heafner sells Winston

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    CHARLOTTE, N.C.-Heafner Tire Group Inc. has shed struggling Winston Tire Co., selling the West Coast retail unit to a management company that specializes in corporate turnarounds.

    After four months of discussions with Lafayette, La.-based Performance Management Inc. (PMI), the 132-store Winston chain officially changed hands May 15. Bryant Kountz, 52, is president of the privately held firm that also operates Allied Discount Tire Inc., which has 12 retail outlets in Louisiana.

    According to Heafner's 10-Q report for first quarter 2001, the Winston chain's purchase price was $11.3 million. Heafner received $8.5 million cash and a $2.8 million note due May 15, 2002.

    Overall, PMI's core business is salvaging floundering businesses as well as putting in place management programs for a number of companies across the country.

    The firm, begun in 1979 by Mr. Kountz, also is involved in real estate development in several western states and in Florida. Although in 1996 it divested its ownership in restaurants, PMI still does management programs and turnarounds for the hotel and restaurant industry, though he said most of his company's recent focus has been ``on the retail end of the market,'' including the operation of factory outlet malls.

    In a prepared statement announcing the Winston sale, Heafner President and CEO Dick Johnson said the ``decision was made to give Heafner the opportunity to place an increased focus on our core business. Over the past several years, Heafner has grown very rapidly through mergers and acquisitions.

    ``We feel it is time to concentrate our strategic initiatives and resources on the integration of our distribution business.''

    The sale comes in the wake of several moves Heafner has made in recent months as it watched its financial results take the brunt of what the firm described, at one point, as a ``significant'' decline in the operating results of its retail division last year. In March, the company found buyers for 10 Winston-affiliated retail stores it operated in the Phoenix metropolitan area-a highly competitive market that's home to more than 100 tire retailers, led by industry heavyweight Discount Tire Co. It also has sold Winston stores to TBC Corp.'s Big O Tires Inc. subsidiary.

    As spelled out in Heafner's 10-Q, , Winston stores had revenue last year of approximately $178 million. But the company projected a loss of nearly $10 million on sales of $136 million in 2001. Overall, Charlotte-based Heafner's wholesale/distribution operations account for about 85 percent of its total revenues.

    Mr. Johnson said the Winston sale ``was made after a great deal of thought. Heafner wasn't necessarily looking for the quickest sale. We were looking for an organization that was firmly committed to the retail business.''

    In PMI, Heafner found that commitment.

    Wasting no time waiting for the ink to dry on the purchase agreement, Mr. Kountz appointed two tire industry veterans to run Winston, which will retain its headquarters in Burbank, Calif. Ron Vines has been named president and chief operating officer. Most recently, he ran his own consulting business but previously was Heafner's marketing director when it bought the Winston chain in 1997. He also had been national sales and marketing director for Sears, Roebuck and Co.'s Tire Group as well as an officer with the mass merchandiser's National Tire Warehouse and Tire America units.

    ``Ron's had double-digit sales increases with just about any company he's worked for,'' Mr. Kountz said, ``and we expect the same to happen'' with Winston.

    Winston's senior vice president will be John Kamlowsky, who held positions with the Sears Tire Group, Western Auto and Tire Kingdom Inc.

    ``I wouldn't tackle an opportunity like (Winston) without a good team,'' Mr. Kountz told Tire Business, ``and I think I have two of the best.

    ``My job is simply to help them focus on growing the business and turning it around.

    ``I don't think it's any secret that Winston was in trouble. But it's such a phenomenal name out West and in California, with a great group of employees.''

    Mr. Kountz, who will be Winston's chairman and CEO, said he's planning to keep ``practically all'' of the 1,000 employees now working for Winston, which will be operated separately as a PMI subsidiary. ``Once we upright the business, we plan to start growing it again''-with a goal of again hitting 200 or more outlets as the chain had at one point under Heafner's management.

    In February, Mr. Kountz got a call from Heafner's Mr. Johnson exploring the possibility of a sale. One reason the deal was finalized so quickly, he said, is that Goodyear, Winston's longtime supplier, ``reacted faster than any manufacturer I've ever seen in my life. They flew down to meet with us two days after the call from Heafner.''

    While he would not say if the tire maker is helping in any way to bankroll PMI's acquisition, Mr. Kountz said ``basically, ours is a supply agreement with Goodyear,'' and the Akron-based company also will help PMI with some marketing programs. He added that if it weren't for Heafner executives Mr. Johnson and Mike Gaither, executive vice president, general counselor and treasurer, along with Goodyear, ``this deal wouldn't have happened.''

    Goodyear will continue to supply the Goodyear, Dunlop and Kelly brands, as well as make the Winston private label-``a lineup we feel we need to do the job here,'' Mr. Kountz said.

    As part of the sales agreement, Heafner will remain one of Winston's biggest suppliers.

    Although some 20 percent of Winston's business has consisted of sales of brands from Michelin North America's Michelin Americas Small Tires (MAST) unit, ``that's up in the air for now,'' he said. ``But we plan to talk to MAST about (continuing) that.''

    Dave Phillips, Heafner's senior vice president of human resources, said that despite the Winston sale, Heafner is not entirely out of retail. It still operates 30 stores via its buyout last year of the T.O. Haas Tire Co. retail/commercial dealership in Lincoln, Neb., which he noted ``has been performing well.''

    ``At this point, we're still integrating all our recent acquisitions'' after a rapid period of growth, Mr. Phillips said, while beginning to concentrate more on getting back to Heafner's core distribution business.

    He acknowledged that Winston has been ``struggling, but is now on an uphill swing'' after Heafner closed or sold a number of ``non-performing and redundant'' stores and began a campaign to remodel many of its locations.

    The Winston name is a brand with a lot of cachet, hearkening back to its founding in 1962 by Sam Winston, who was killed in a car accident in 1995 at the age of 54.

    When Mr. Kountz first looked at the opportunity to acquire the chain, he saw potential, but a lot of problems, as well. ``Of course we are a turnaround company, but also being in the tire business, it was a classic example of where either a manufacturer or a wholesale distributor attempted to get into the retail tire business.

    ``I think Heafner got away from the basics. You still have one of the greatest markets in North America here in California, and a great base from which to operate. The problems Winston had were inflicted upon it and were not inherent to the business.''

    Heafner ``admittedly didn't know a whole lot about the retail business and evidently chose the wrong business plan,'' continued Mr. Kountz. ``I think they did the best they could, but it's not an easy task operating a retail business. It would be no different than a retailer trying to get into the wholesale business, or manufacturing.

    ``There are several instances in recent history where companies without a proven track record as a retailer have tried to get into it, and made a mess of it.''

    However, he noted that ``Heafner does an outstanding job as a wholesale distributer, better than anybody I know. I think they just realized that retailing is not their forte.''

    PMI, while not a billion-dollar-a-year company like Heafner, produces ``substantial'' revenue annually, Mr. Kountz said without being more specific. ``Evidently, we're big enough to buy Winston and to convince Heafner and Goodyear that we're capable of handling this.'' Most of PMI's assets are in the form of real estate and other cash instruments.

    The company's Allied Discount Tire unit ``has been a profitable, successful tire dealership since 1984,'' when Mr. Kountz started it after learning the business ropes as a store manager at the side of Stanley Hanin, a retired industry veteran who ran the Florida retail chain Allied Discounts Tires. Calling Mr. Hanin his mentor, Mr. Kountz said he modeled his dealership after ``Stan's concept,'' then ``borrowed'' an almost identical name when he launched his Louisiana operation.

    That dealership is operated on a day-to-day basis by Lanny Mach, vice president of operations, and CFO Ken Sillavan. About 75 percent of Allied's sales are tires vs. automotive service. According to recent statistics compiled by the Chamber of Commerce in Lafayette, La., Allied rang up revenue of $14.9 million in 2000.

    Mr. Kountz said once Winston's turnaround is complete, he plans to consider other tire dealership acquisitions, possibly after the next 12 months.

    Just how does he plan to ``upright'' Winston?

    California is a highly competitive market, he admitted. ``But I think a lot of retailers try to complicate things.'' Consequently, Winston Tire needs ``to get back to a simple plan: Offer major brands at the best prices, and back it up with good service.

    ``Sam Winston did that for many years, and we plan to bring back many of the marketing and sales techniques he used that were successful. The Winston brand still is famous here.''

    And although Sam's been gone for six years, Winston's new owner may resurrect at least some of the many TV commercials in which Mr. Winston appeared.

    ``The Winston name is a very valuable commodity,'' Mr. Kountz said. ``Sam's picture is still up on the wall in the headquarters. He's a hero around here.

    ``We're going to honor what Sam built.''

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