NXTI, posted here a few weeks back while hitting all time highs has come in and been consolidating on low volume. Good interview with the CEO today for anyone still long the shares.
WILLIAM B. HENSLEY III is President and Chief Executive Officer of Next,
Inc. Mr. Hensley has been in the promotional products and imprinted
sportswear industries for 25 years. During this time, he has held
various executive level positions including being President of a public
company. In addition, he has owned and been a partner in several
businesses. Mr. Hensley began his career as an accountant for Arthur
Andersen and Company and a commercial loan officer with a major bank. He
holds a Bachelor of Science degree from Purdue University
Sector: APPAREL
TWST: We'd like to begin with a brief historical sketch of the company
and a picture of the things you're doing at the present time.
Mr. Hensley: We've been in business since 1988, in the licensed
sportswear and promotional products business. We service nine
different distribution channels across the United States. We're
primarily involved with licensed products that we've either embellished
domestically or imported. Basically, we are dealing with 200 different
college licenses as well as the licensed products for Ford, Chevy,
Dodge, Pontiac and Hummer in addition to numerous other specialty
licenses.
TWST: What is the competitive landscape like? I should think it must be
very intense.
Mr. Hensley: Our industry and our business is no different from any
industry today; it's a global and competitive economy. With that, you
have to be able to compete on a daily basis. We're competing for open to
buy dollars at all of our various customers in order to sell our wares
and products. Obviously, we're judged on the sell through of our
products compared to our competitors. Up to this point, our products
have faired very well against our competitors in terms of sell through,
and most important, increasing profitability for our customers.
TWST: Would you tell us about your own experience within this industry?
Mr. Hensley: I've been in this industry for 27 years. I was a graduate
of Purdue University in 1971, went to work for Arthur Andersen and
Company and spent some time in the banking business. I started in this
industry in 1977 and have seen a lot of structural changes, both in
terms of distribution channels as well as the method of doing business.
We've seen various boom-bust cycles in this industry and I have to say
that I see more opportunity today than I have in the last 27 years. Now,
through the use of modern technology, we're able to take advantage of
those opportunities, which we're very excited about.
TWST: Could you tell us about the changes that are going to be taking
place, and also about the ways in which you will take advantage of that?
Mr. Hensley: Every one of our customers today is electronically or
digitally driven. It's a situation where they're working on automated
sell-throughs, replenishment programs, and just in time inventories, so
the digital environment is here to stay. We're now better able to
communicate with our new sales force and our customers, thanks to
technology. We even distribute our catalogs electronically. We are also
in the process of doing away with samples, which will be a big cost
savings. We've embraced this digital age and made a lot of changes in
our shop floor, our design and product development, and our
merchandising and out-sourcing. Our competitors have not been as
proactive as we have with regard to implementing these technological
improvements and it's paying tremendous dividends for us.
TWST: What will be the single biggest opportunity in front of you?
Mr. Hensley: We think applying modern technology through all of our
channels of distribution. Your small mom and pop shops have not adapted
to this way of doing business as fast as some of the major corporations
to which we sell. Applying this technology over the next two or three
years across our vast spectrum of customers should continue to solidify
our position as an emerging industry leader. This will allow us to
provide the quickest order turn around times in the industry.
TWST: Who are some of your principal customers?
Mr. Hensley: JC Penney's, Sears, Kohl's, Kmart, Cracker Barrel, Kroger,
Walgreen's, Safeway, Galyans, Finish Line, Sam's Wholesale Clubs,
Academy Sports, Dillard's and several leading book stores across the
country. Our account base is very diverse depending on the product level
and the label that we distribute into those areas of distribution.
TWST: What are your thoughts on acquisitions and mergers?
Mr. Hensley: This industry is still very fragmented. We believe that
makes it ripe for opportunistic consolidation. We've targeted three or
four opportunities that we'd like to look at over the next 12-24 months.
We see excellent synergies in terms of distribution, expansion and
consolidation of back room functions, thereby providing more value for
our shareholders and our customers.
TWST: What problems or challenges do you foresee, if any, for the
industry and for your company in particular?
Mr. Hensley: I think we continually have to try to drive down costs and
be more efficient by embracing the digital age. We're doing it
continuously, and we're challenging our suppliers and vendors to do the
same. We are literally able to turn goods out of the orient in five to
six weeks which is unheard of in our industry. I think having those
kinds of supply chain enhancements where we're able to work on faster
inventory turns helps accomplish better mark-ups for everyone. This
improves earning power and provides better customer service.
TWST: I would guess that the barriers to entry in your business may not
be very high.
Mr. Hensley: I think that's a common misconception; it's actually a
fairly difficult business to get into. First of all, it's hard to get
licenses because licensors are looking not to license just anyone
anymore. The strategy has been applied in the NFL where they have
reduced the number of licensees and the model has worked well. There
will be fewer licensees but the licensees that are there will be very
strong and capable of product development, distribution and bringing
value to the marketplace. Today, customers are trying to cut the number
of venders versus expanding them, so a new vendor coming on stream
that's not presently in the channel of distribution will have a very
hard time getting a new vendor number. At the same time, I think you
have to apply technology as I indicated, in a platform that makes it
easier and more convenient for customers to do business with us. It's
not something that happens overnight, it's something that takes months
and years to apply consistently where it can yield a profit in your
bottom line. Fortunately, we believe we have a head start on our
competition and it's yielding positive results in the form of new
customers.
TWST: Is there anything more you'd like to say about your license
portfolio?
Mr. Hensley: We have an extremely attractive and diversified license
portfolio. We're pleased with all of our college programs, our
automotive business and our new American Biker line. I don't know if you
saw yesterday's USA Today, it talked about the whole resurgence of
Detroit and how style and innovation has reverted back to the 1950s,
1960s, 1970s era. We think this whole automotive thing with brand
management and some of the innovation like with the new Hemi concepts,
lend themselves to drive more product to the marketplace. It becomes
kind of a retro feel, if you will. We think the whole automotive
category has tremendous upside, and that's not NASCAR related, it's
strictly related to Dodge, Ford, Chevy, Pontiac and Hummer brands only.
We're obviously continuing to expand our license portfolio. We just
added the James Dean license; the 50th anniversary of his death is in
2005 and there's a tremendous amount of promotion that's been going on
by Warner Brothers and other key partners in the marketplace to honor
his legacy. We think it will be a great opportunity for us. We're also
looking at three or four other branded licensed opportunities that will
complement our present portfolio.
TWST: Is there anything else you'd like to add regarding your strategy
for the next few years?
Mr. Hensley: We have a great administrative staff and a new sales team
of over 40 individuals. We have a great team internally and have the
production capacity to expand our business 100% from where it is
currently. We're in position physically, technically, and with access to
the capital markets to better grow our business both from an organic
standpoint as well as through synergistic acquisition targets that fit
our business plan.
TWST: Could you tell us about the background, the expertise and the
responsibilities of a couple of the key members of the management team?
Mr. Hensley: First is Chuck Thompson, our CFO. He's been a CFO of
several major companies, worked on Wall Street and has worked in the
hospital/healthcare industry. Chuck has done a significant amount of
public and private financings and is great from a numbers standpoint.
He's also embraced our internal technology initiative, making the
changes appear seamless. It's also important to mention that Chuck
purchased stock in the company with his own money when he joined us.
We're very fortunate to have him. Dave Gleason, who is our Vice
President of Operations, has been in this industry for 20 years. He has
a tremendous amount of sourcing capabilities and internal operations
experience. He is skilled in driving costs down, increasing internal
efficiencies and keeping employee morale high. Dave's a real shirt-
sleeve type of operations person. Stan Howard, who is our new Vice
President of Sales, also comes to us with over 20 years of experience in
this industry. He owned his own company called Lil Fan, a business that
we acquired last year. Stan and Lil Fan complement our present team in
terms of business philosophy, goals and work ethic. He's an Indiana guy,
the same cultural type of background that we've all come from. I think
we've succeeded in building an excellent and gifted management team with
comprehensive experience in operations, sales and finance. I'm excited
about working with all of them.
TWST: Would you tell us more about yourself, particularly with regard to
your experience in Shirt Shed.
Mr. Hensley: I got involved with Shirt Shed from public accounting in
1977. I bought into the company and we sold it three years later in
1980. When I came on board, we were doing $3 million in business which
we quickly grew to $21 million in revenue and about $1.5 million in
after-tax profit. We sold the company to a NYSE company and subsequently
got it back in the mid-1980s. We restructured it and took it back to the
public market. We grew sales to in excess of $100 million, taking the
company from the pink sheets to the NASDAQ exchange and then sold it to
another NYSE listed public company for large gains for the shareholders.
We've done this before and we hope we can do it again. As I mentioned
earlier, there's more opportunity today than we've ever seen.
TWST: Do you own a fair number of shares now?
Mr. Hensley: Yes, I own 3 million shares. I think it's important to note
that I and the rest of our management team are subject to contractual
restrictions on our ability to sell our stock. I'm here to build
substantial shareholder value for the long term and that's why we made
that commitment.
TWST: Do some of the other officers in the company own a fair amount of
the company as well?
Mr. Hensley: That's correct. We all have a very vested interest in the
company's success along with our fellow shareholders.
TWST: Are you and the other inside people free to sell your stock?
Mr. Hensley: No, we're not.
TWST: And your colleagues as well?
Mr. Hensley: That's correct.
TWST: Do you see any need right now to improve the company's capital
structure?
Mr. Hensley: We just went through a recent capital raise bringing on a
very strong partner to help us fund our growth. We have another
potential $1.25 million of availability that we can draw down within the
next year. We don't want to raise any more capital at the current market
price unless absolutely necessary to fund growth or acquisitions. We
also have an equity line of credit that remains untouched as we speak.
At this point in time, the capital structure is more than adequate for
our present operation. As we look for acquisitions, obviously it could
be a potential opportunity.
TWST: You're on the Bulletin Board at the present time.
Mr. Hensley: We're obviously trying to graduate from the the over the
counter Bulletin Board exchange to another exchange just as we did with
our prior ventures. We're currently in the process of taking all the
necessary steps to facilitate the listing when we meet the listing
requirements.
TWST: Are you working fairly hard at investor relations?
Mr. Hensley: That's correct. Jason Assad is our investor relations
contact and he's done a great job helping us get our story out to the
investment community.
TWST: How many employees do you have?
Mr. Hensley: We flex our employee roles seasonally, but it runs between
120 and 140 employees.
TWST: Would you tell us how you train and develop your people?
Mr. Hensley: We test our potential applicants before hiring. Upon
hiring, we run them through formal training programs during a
probationary period to teach them procedures, proficiencies, and various
role positions. We do a lot of computer training, obviously both on site
as well as off site. We do seminar work in order to improve company
ethics, computer proficiency and customer service. As a matter of fact,
our whole customer service team is going to Indianapolis on Thursday to
learn better customer service skills and opportunities that exist in the
marketplace today. So we're constantly in a training mode in terms of
trying to enhance everybody's knowledge. This becomes a knowledge-based
business, just like everything else is today. People will always want to
do business with people they genuinely like and trust, and we don't
forget that.
TWST: What would be the two or three reasons for a long-term investors
to take a good look at the company and possibly buy in?
Mr. Hensley: We have an experienced management team with a proven record
of success. We're seasoned veterans and we've experienced the ups and
downs of this industry many times during our careers. We believe there
are tremendous organic growth opportunities in addition to numerous
excellent potential accretive acquisitions. We are clearly committed to
increasing shareholder value. From an operations point of view, we have
tremendous earnings leverage.
TWST: Do you feel that you can substantially increase revenues without
having to increase the size of your staff?
Mr. Hensley: No question. I think we have the staff and infrastructure
to be able to accommodate about $50 million in revenue versus the $20
million we did last year. The gross margins on the next $30 million in
annual revenue will largely go straight to the bottom line, so our
profits should grow dramatically as revenue increases.
TWST: As CEO, what occupies most of your own attention?
Mr. Hensley: We work pretty hard around here, so that's pretty much the
ball game. Being from Indiana, whenever I have any free time it's
usually spent enjoying Hoosiers basketball.
TWST: Is there anything you'd like to add regarding the company's long-
term objective and vision?
Mr. Hensley: We are profitable, experienced, have a track record of
success and the infrastructure in place to grow revenue 150%. The
opportunities to grow, both organically and by acquisition, are the best
I've ever seen. Let me use the Lil Fan acquisition as an example. When
we visit a customer, suddenly we can provide total service, from infant
size (12 months) all the way up to adult 3X. It gives us six or seven
departments within a single customer that we can actually sell, instead
of dealing only with the men's department. Not only did we grow in terms
of new licenses and accounts, but within those accounts, five or six new
customers. So our exponential expansion in customers is significant.
It's going to take us two or three years to maximize that opportunity,
and that's where our organic growth will come from.
TWST: Thank you. (MC)
WILLIAM B. HENSLEY III
President & COO
Next, Inc.
7625 Hamilton Park Drive
Suite 12
Chattanooga, TN 37421
(423) 269-8213
www.nextinc.net
Copyright 2004 The Wall Street Transcript Corporation
All Rights Reserved
The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs or other senior executives may include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 2003 Wall Street Transcript Corporation. All Rights Reserved.
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