Parts & parcels
It wasn’t my vision to sell. It was my vision that the company operate for another generation and maybe more. But the world changed. We had an employee stock-ownership plan that owned one-third of the company and our managers and sales team owned a third. We had 9,000 shareholders, and at the end, the family only owned 35%. That’s the way we built the company. We thought the way to build a very people-intensive, service-intensive business was for the key people to own a percentage. It worked for us. We went from $600,000 of annual sales to $3 billion. We made a lot of people wealthy, and a lot of people made us wealthy. The system worked. It was a motivator to people. More than 400 millionaires came out of the company. It’s an unusual story.
The problem was that in an ESOP when someone leaves you, or a stockholder retires, you have to redeem their stock. It became a huge cash-flow issue. The redemption period used to be 15 years, but the government took it down to five years. That makes the ESOP almost unworkable, which is a shame. We had hourly employees who were going out into retirement with $300,000 or $400,000, but in the great wisdom of our government, that had to change. They monkeyed around with it to the point where it doesn’t work well anymore. Sure, there had been some abuses, but we had a different kind of ESOP. We were not a leveraged ESOP. We didn’t owe any money other than redemptions, and we always traded at book value with no mark-up on our stock. Some ESOPs created evaluation issues because they wanted to sell stock at a market price versus book value. We never used it that way. But when you’ve got somebody going into retirement with $500,000 and you have to fund that within five years, and then, all of a sudden, you have a lot of others retiring at the same time, it got to be a problem.
I’ve always believed in partnerships. I met A.E. Finley the day I moved to Raleigh, when he sold us a piece of land for our first building at 60% of what the land was worth. [Finley owned the nation’s largest heavy-equipment distributor, among many other ventures.] He said, “It’s worth $20,000, but let’s sell it at $12,000 because I want to see this boy get started.” That was a big lesson to me. That’s how we started Ready-Mix Concrete and Highwoods Properties — always involving our people in ownership. Belk was built on the same philosophy. If you go public, it’s a different game. I saw enough of that at Bank of America and Lowe’s [he was lead director of both]. We took Highwoods public because it was the kind of business that needed that access to capital.
Sure, the auto-parts industry has changed with more competition, but there was still plenty of opportunity, and we still had a future. But there were family liquidity issues, and it got to the point where the valuations were very strong. So we made our decision to sell.
Handing off a business to your son is not an easy thing to do. But a good friend told me, “Move out of the building, and you’ll get your son back and your life back.” This was in 2009. I told my son, “We own two little-bitty companies that are rounding errors for the company overall.” One was doing $15 million, and the other, $18 million. So I said, “I’ll take those two companies, and I’ll open up an office across town and build them up.” They now have 1,150 employees and $310 million of annual sales. National Coatings and Supplies distributes automotive paint to collision centers. We have 120 stores in 33 states. The second is American Welding & Gas, which is headquartered in Billings, Mont., and has about 40 stores, mostly in the upper Midwest. It’s a miniature version of Airgas, supplying industrial and specialty gases. We have a president of each company, and 4½ people in our management group: me, a lawyer, a CFO, an administrative guy and a part-time former executive who works on mergers and acquisitions. I spend two-thirds of my time on that, and I spend the rest on our charitable foundation, my ranch in Montana and traveling with my wife.
The toughest time for the business was in the 1974-75 gas crisis, when cars were wrapped around the block waiting to buy some gas. People weren’t buying a lot of parts because their cars weren’t moving. Then it was tough in 1980-81, when interest rates went through the roof. I remember wondering how to get through 1980, when interest rates were at 22%. Fortunately, we didn’t owe much money at the time. I had friends who went under — they didn’t do anything wrong, but they just got caught with too much debt at the wrong time. So there’s some luck along the way. We made a lot of mistakes, just none of them were fatal. Life is a series of crossroads, and when you pull up to an intersection, you’ve got to make a choice. I just learned when you take a wrong turn, you back up and change course.
Bank of America
When Hugh McColl asked me to be on the board, I told him I didn’t know why he wanted me because the bank was owed a lot of money by Highwoods in the early ‘90s real-estate crisis. He said, “I don’t know about all that, but I want you to be on our board.” The bank deserved to be tough on us, because there were some tough times back then. It was an incredible experience, working with Hugh and then Ken Lewis. It was nice to be part of building a heckuva company. Then the world changed. I should write a book on it. [A director from 1996 to 2009, Sloan wouldn’t discuss BofA’s travails since the financial crisis except to note that all top executives and directors, not just Lewis, were involved in the disastrous decision to buy Countrywide Financial Corp.]
In the name of the father
My father was just a great teacher. [O.T. Sloan Sr. was CEO of Mack’s Stores, a Sanford-based department-store chain he helped build from two stores to a publicly traded company with 94 locations.] His goal in life — he didn’t get to go to college because he came out of the Depression — was to see his kids graduate from college. Which we did, and it made him happy. He was loaded with common sense, and he was a great adviser — he’d give you an opinion, but he wouldn’t tell you what to do. When he retired, the company didn’t owe a penny and was profitable, but later, after being sold three times, it started going down. I don’t know the details, but it wound up in bankruptcy. Art Pope’s dad bought some of the remnants, and some of the stores are now called Maxway.
I’ve been in good health except for heart-valve problems in 2005. I’m still working hard. Our family has a cattle ranch in Montana, where we have 3,000 animals. I love to hunt and fish. My brother and I set up a family foundation, and we have 80 students on college scholarships. There are kids at Duke, Meredith, N.C. State, Peace, Queens, the University of Montana Western and others. We have our pet projects. My biggest have been the Boy Scouts and the YMCA.
The state we’re in
I’m pleased our economy turned the corner. We still have got a ways to go. I don’t agree with everything Gov. McCrory’s done, but he’s moved the needle in a big way, and hopefully we’ll continue to go forward. The state is basically broke, and the education system is almost in shambles, so we need the state to grow. Then wages are going to go up. The governor’s done a great job of recruiting industry. You’ve got to give him an A for that.