Rayovac Corporation History

Address:
601 Rayovac Drive
Madison, Wisconsin 53711-2497
U.S.A.

Telephone: (608) 275-3340
Fax: (608) 275-4577

Website:
Public Company
Incorporated: 1906 as the French Battery Company
Employees: 3,380
Sales: $703.9 million (2000)
Stock Exchanges: New York
Ticker Symbol: ROV
NAIC: 335911 Storage Battery Manufacturing

Company Perspectives:

Rayovac has a mission to create and maintain a working environment that is safe for our employees, the communities in which we work, and the earth on which we live. The individual parts we play in our neighborhoods and on our jobs are critical to preserving these resources for our future and that of our children. It is the responsibility of every employee to incorporate the practices of informed stewardship in daily life. Waste, whether produced in the manufacturing plant, office, or home, represent environmental and economic inefficiency. Accordingly, we should reduce our consumption of resources to levels reasonably needed, and we should reuse those assets where practicable. Finally, we should dispose of resources intelligently, recycling those that can be utilized economically in a different form. We must recognize, however, that recycling is not costless, and that some 'recycling' processes consume more resources than they save. We all deserve to have clean air, safe water, and adequate resources. As environmental stewards, we support this mission. Key Dates:

Key Dates:

1906:
French Battery Company incorporated in Wisconsin.
1930:
Company changes name to Rayovac.
1939:
Company introduces leak-proof dry cell battery.
1949:
Company introduces stainless steel Sportsman flashlight.
1982:
Thomas and Judith Pyle purchase company.
1996:
Thomas H. Lee Group acquires company.
1997:
Rayovac makes initial public offering of stock.

Company History:

Rayovac Corporation is the third leading U.S. manufacturer of alkaline storage batteries and the market leader in other battery categories such as hearing aid, computer backup, heavy duty, lantern, and keyless entry. It also manufactures flashlights and other miscellaneous items. The company has played a leadership role in the U.S. battery industry since the early 1900s. After lagging behind Gillette's Duracell, Rayovac enjoyed a rebirth in 1996 when the Thomas H. Lee Group purchased the company and changed management. The company has been publicly traded since 1997.

Company Origins

Rayovac's roots reach back to 1906, when entrepreneurs James B. Ramsay, P.W. Strong, and Alfred Landau joined forces to create the French Battery Company. Ramsay, the leader of the operation, was 35 years old at the time and had already established himself as a successful businessman. His gumption, in fact, was evident early; he convinced the University of Wisconsin to admit him when he was a junior in high school, and subsequently became the only person to graduate from the institution who did not have a high school diploma. After college, Ramsay moved to Medford, Wisconsin, where he started a lumber company and later was elected mayor of the town. He sold the thriving business when he was 35 years old and returned to Madison in search of a new challenge.

After Ramsay returned to Madison, Strong, an old friend, approached him about a business opportunity. The dry cell battery had been invented in the 1800s in France and demand for the technology was beginning to grow in the United States by the early 1900s. Strong was aware of a man in Chicago named Alfred Landau who was manufacturing batteries in his attic and selling them locally. Cursory research convinced Ramsay that it was a good investment. So, in 1906 the three men initiated the French Battery Company. They started with $30,000 working out of Landau's Chicago attic. 'The company just happened,' Ramsay noted in company annals, 'as did the history of the fellow who grabbed such a hold of the bull's tail that he couldn't let go.'

Landau's crude manufacturing operation soon outgrew his attic so the men moved the company to a small building in Madison in March 1906. But orders continued to pour in, many of them unsolicited, and the entrepreneurs were overwhelmed with new accounts. Just three months after they had started the company, sales had far surpassed even their most ambitious projections. In the summer, they moved the operation into a two-story brick building with the help of 12 more investors who supplied about $60,000 in new capital. By that time the company was employing 24 workers. During its first year, the French Battery Company churned out 37,000 battery cells, most of which sold for about 13 cents apiece. To boost revenues, Ramsay hired L.H. Dodge as the company's first salesman in January 1907. He added three more salesmen in the summer of that year.

Ramsay and his cohorts were operating a bare bones operation: They owned one roll-top desk, a typewriter, and about $314 worth of lab equipment going into 1907. But they had invested heavily in inventory in anticipation of growing demand. Unfortunately, some of the materials were found to be unreliable after many batteries had been shipped. Disappointed buyers demanded refunds and the struggling upstart began losing money. Infuriated investors demanded that Landau, who was serving as the official head of the company, resign. Landau returned to France, and Ramsay kept the operation going, although another investor was appointed president. By the end of 1907, the company's books showed a total deficit of $50,000 for the two years of operation. Nevertheless, Ramsay remained committed to the company's success.

To replace Landau's technical expertise, Ramsay called on Dr. Charles F. Burgess, the founder of the chemical engineering department at Ramsay's alma mater. Burgess was intelligent and a perfectionist. He was immediately intrigued by Ramsay's enthusiasm about the operation, despite his belief that the French Battery Company was producing the worst battery on the market. Burgess invested in the company and helped it to upgrade its products. Within a year he believed that the company was offering the best dry cell available in the United States. The company struggled for a few more years, narrowly escaping bankruptcy, before posting its first profit in 1910. Enthusiasm about the surplus was negated, however, by a fire that wiped out French's factory. Significantly, though, French began selling a pivotal new flashlight battery that eventually would bring big profits.

French recovered from the fire and achieved steady profits between 1913 and 1920, despite another fire that virtually leveled the company's new factory in 1915. Burgess became increasingly involved in, and vital to, the company during those years and was elected vice-president in 1915. After the 1915 fire, however, relations between Burgess and the company deteriorated. Burgess departed in 1916 to start his own enterprise, although he allowed French to continue manufacturing products under his patents. Burgess was succeeded by his top assistant, Otto E. Ruhoff. Despite management turbulence, French recorded record profits in 1916 of $62,410 from sales of $889,880. That year, moreover, marked the last one in which the company would generate less than one million in sales. Ramsay was elected president of the company in 1918.

Company Survival Through Two World Wars and the Great Depression

Battery sales boomed during World War I because of huge orders from the United States and allied governments. By 1919, the company had established sales branches throughout much of the nation and as far west as Kansas City. An economic downturn in 1920 stalled growth, and wary executives shuttered the company's recently constructed New Jersey manufacturing plant. But the downturn was short-lived. Spurred by new applications for batteries, particularly the radio, demand spiraled during the 1920s and French prospered. French's line of successful batteries was expanded to include Ray-O-Vac (radio batteries), Ray-O-Lite (flashlight cells), and Ray-O-Spark (ignition batteries). Sales topped $3 million in 1923 and production facilities were expanded to meet demand for French's patented batteries. At the peak of activity in the 1920s, when unsolicited orders poured in from around the globe, the company was employing 1,300.

Explosive demand growth during the mid-1920s was driven primarily by the radio, the use of which necessitated batteries. Battery manufacturers were stunned, therefore, when Dr. Samuel Rubin invented technology that made the plug-in electric radio possible. The discovery capped French's growth spurt and even pummeled sales and profits during the late 1920s and early 1930s. Revenues plunged from $4.1 million in 1928 to just $2.1 million in 1933. The industry shakeout left only a dozen beleaguered battery manufacturers intact, one of which was French. Ramsay resigned in 1929, deciding 'to make way for a younger man.' He remained on the company's board until his death in 1952 at 83 years of age. Ramsay was succeeded by Bill Cargill, an aggressive, flamboyant general manager described by others as larger than life.

In part as a result of Cargill's sheer energy and charisma, the French Battery Company survived the Great Depression relatively unscathed. Because of the name recognition of its Ray-O-Vac battery, the company officially adopted that name in the early 1930s. Ray-O-Vac's fortunes began to turn in the middle and late 1930s, in part as a result of new innovations that boosted sales. Interestingly, in 1933, Ray-O-Vac's research team, led by the talented Art Wengel, developed the first portable radio with high fidelity reception. The radio was so small that it could be carried around in a suitcase-style box. In 1937, moreover, Ray-O-Vac patented the first wearable vacuum tube hearing aid. Despite global economic malaise, Ray-O-Vac's sales steadily surged to an impressive $5 million annually by 1936 and continued to grow to more than $8 million by 1941.

In 1939, Ray-O-Vac's Herman R.C. Anthony invented the leak-proof 'sealed in steel' dry cell battery, which played an important role during World War II, as Allied troops used the batteries to power flashlights, radios, walkie-talkies, mine detectors, signal lights, bazookas, and other gear. The company's workforce soared from about 1,500 to more than 14,000, including many women and elderly men. Ray-O-Vac's manufacturing facilities, considered war plants, were patrolled by armed military guards. In some of its plants, battery making was discontinued in favor of production of parts for military gear and weaponry. The government purchased an astounding 23 million units of just one type of leak-proof battery during the war, and Ray-O-Vac operated the largest battery plant in the world--the ten-building Signal Battery complex in Milwaukee.

Batteries were rationed to the public during the war, so the loss of government orders following the war was partially replaced by increased consumer demand. After a brief period of reorganization, the company began growing in the wake of the postwar population and economic boom. In an effort to bring some order to the sprawling organization, Cargill realigned Ray-O-Vac in 1946 into six divisions: Lighting Division; Manufacturers Battery Company, which produced radio batteries and related items; Canadian Division; Specialty Battery Division; Export Division; and Research and Development Division. Although sales and profits swelled throughout the late 1940s and into the 1950s, the reorganization eventually proved inefficient. Nevertheless, Ray-O-Vac continued to innovate and set new records. It sold more than 100 million leak-proof batteries in 1946, for example, and in 1949 Ray-O-Vac's Dr. W. Stanley Herbert introduced the breakthrough 'crown cell' alkaline battery for hearing aids. Also in 1949, the company introduced its hugely popular Sportsman flashlight.

International Expansion and Diversification: 1950s-70s

Ray-O-Vac shipped its billionth leak-proof battery in 1950. Two years later, Cargill, in ill health, retired and was replaced by Don Tyrrell. Just a few days after the transfer of power, the company's founder, Ramsay, died. Ray-O-Vac was already operating on several continents going into the 1950s. But Tyrrell stepped up international efforts. Notably, he helped to engineer an agreement with a Japanese company to import and distribute Ray-O-Vac products. Ray-O-Vac soon was producing and distributing batteries throughout the Orient. Sales in that region augmented increased efforts in Europe and South America, among other regions. At the same time, Tyrrell spearheaded a diversification effort. Ray-O-Vac's first purchase was Wilson, a safety products company that it bought in 1955. Other acquisitions followed.

The battery industry was transformed during the late 1950s and 1960s by the introduction of the transistor in 1956. The transistor replaced energy-consuming vacuum tubes, thereby making devices smaller and more energy-efficient. The invention created a plethora of new market opportunities for companies that were willing to take risks. Elmer Ott succeeded Tyrrell as president in 1957. He continued to diversify the company and to prepare for growth in the popularity of the transistor. Also in 1957, Ray-O-Vac merged with the Electric Storage Battery Co. (ESB), a leading manufacturer of industrial and automotive 'wet' batteries. At the time, ESB's sales were $102 million annually--roughly two and a half times as great as Ray-O-Vac's. Ray-O-Vac effectively became a division of ESB. ESB was particularly interested in tapping into Ray-O-Vac's international network, which by the late 1950s spanned 100 different nations and accounted for nearly 25 percent of profits. The Ray-O-Vac name became so well known overseas, in fact, that it was often exploited (illegally) by foreign companies--a humorous example was 'Ray-O-Vac Leak Proof Fish Sauce' in China.

In an attempt to adapt to a world increasingly dominated by transistors, Ray-O-Vac introduced a number of low-voltage, miniature battery products during the 1960s, including penlight batteries and super small button batteries. In addition, Ray-O-Vac became a leader in battery-powered lighting systems and devices, including fluorescent camping lanterns, miniature disposable flashlights, and long-lasting boat lamps. Meanwhile, international expansion continued with the development of manufacturing facilities in Iran, for example, and expanded operations in Latin America. Ray-O-Vac was generating annual revenues of about $55 million by 1965, for the first time surpassing World War II sales figures. The company also made national headlines in 1965 because of one of its employees, Doc Swenson. Doc turned 100 in 1965. He had worked for Ray-O-Vac since 1916 and continued to work 40-hour weeks until the age of 90, after which he cut back to 20 hours weekly. Doc, who missed only one-and-one-half days of work during his career, died shortly after his 100th birthday.

After 44 years of service to Ray-O-Vac, Ott passed the torch in 1967 to Owen Slauson. Under Slauson's direction, Ray-O-Vac aggressively automated its manufacturing operations and continued to pursue global diversity with new factories in the Dominican Republic, Mexico, Africa, Peru, Korea, and other places. In the United States, Ray-O-Vac built a $2 million Engineering and Development Center in Madison, Wisconsin. Innovations stemming from research in the facility included the first heavy-duty all zinc-chloride battery, which was introduced in 1972 and doubled the life of existing general purpose batteries. The company also continued to diversify by acquiring, among other ventures, fishing tackle companies, plastic and rubber manufacturers, and mining operations. Unfortunately, most of the acquisitions languished and became a drag on Ray-O-Vac's bottom line. In 1979, ESB, which was purchased by INCO Ltd. in 1974, reunited Ray-O-Vac's domestic and international operations and selected Benno A. Bernt as president of the group.

New Leadership in the 1980s and 1990s

By the early 1980s, Ray-O-Vac was generating about $175 million in annual sales. Ray-O-Vac's attempts at geographic diversity and product innovation, however, belied serious structural problems that plagued the company during the 1970s and early 1980s. Indeed, Ray-O-Vac was the undisputed leader of the U.S. battery industry during the 1950s. During the 1960s and 1970s, though, it lost its edge and gradually succumbed to the challenge of competitors like Everready Battery Co. and Duracell Inc. Ray-O-Vac's share of the battery market plunged during the period from 35 percent to a measly six percent. Some critics blamed Ray-O-Vac's parent companies for the slide. Others pointed to internal problems that resulted in outdated packaging and stale product offerings in comparison with other battery producers. Most important, Ray-O-Vac executives failed to aggressively pursue the emerging market for alkaline batteries, which quickly became the industry standard. Going into the 1980s, sales were falling, Ray-O-Vac was laying off workers, and major long-term customers were dropping the Ray-O-Vac line.

Enter Thomas and Judith Pyle, a husband-and-wife team with experience selling toiletries, sewing patterns, makeup, and wigs to personal care and consumer products companies. The Pyles, with two other investors, purchased Ray-O-Vac (they changed the name to Rayovac Corporation) from INCO in 1982. The 44-year-old Pyle and his wife became chairman and co-chairwoman and Pyle named himself president and chief executive. They eventually bought out the other two investors and virtually owned the company. The Pyles combined their consumer marketing savvy with Rayovac's untapped manufacturing potential and were able to bring the company back from the edge of disaster. Under their direction, Rayovac introduced a steady stream of innovative products and marketing initiatives. In 1984, for example, the company unveiled its successful WORKHORSE premium flashlight with its ultrabright bulb and lifetime warranty. Likewise, they started selling 'Smart Packs' of six to eight batteries instead of the usual two.

The Pyles' strategy was based on experience gleaned from their previous work with consumer products. Judith Pyle called their tactics 'nichemanship,' meaning that every product, particularly new ones, had to incorporate features, designs, and prices focused tightly on a specifically targeted group of customers. Second, new products had to be truly innovative, as opposed to 'me-too' entries into the crowded marketplace. To that end, Rayovac introduced products like the successful Luma 2, the first flashlight with its own emergency backup system; if the batteries failed, a separate lithium-powered system could be activated. Similarly, the Loud 'n Clear hearing aid, unveiled in 1987, represented a breakthrough in hearing-aid zinc battery technology. In the late 1980s, moreover, Rayovac began using the Checkout Pack Merchandising System. That system featured shrink-wrapped battery packages that could be stacked rather than hung on conventional pegboard displays and a new gravity-fed display rack designed for use at checkout counters.

In addition to introducing new products, the Pyles also updated Rayovac's packaging and aggressively sought to recover customers who had dropped their lines. They barraged lost customers in Wisconsin, for example, with letters asking them to start selling Rayovac products again. The effort boosted market penetration in the state from 20 percent to 70 percent within a few years. Meanwhile, Rayovac shuttered some nonperforming operations and expanded through acquisition. During the 1980s, the company's acquisitions included, in 1983, certain Timex battery operations in the United Kingdom; in 1988, Raystone Corp., a manufacturer of battery cells; in 1989, Crompton Vidor, a U.K. producer of consumer batteries and flashlights; and the Tekna line of high-tech flashlights. The Pyles also initiated an aggressive quality improvement program designed to improve operations at every organizational level.

The net result of the Pyles' efforts was that Rayovac's sales rose to $270 million in 1987, reflecting growth of nearly 15 percent in 1985 and 1986. Furthermore, the company's share of the U.S. retail battery market reached 12 percent. Between 1987 and the early 1990s, Rayovac's revenues topped $450 million. Innovations in the early 1990s included: a new alkaline computer clock battery; a line of ultra-tough flashlights; a WORKHORSE fluorescent lantern; and the Renewal battery, the first reusable, long-life alkaline battery that could be used 25 times or more and was environmentally safe. Nevertheless, Rayovac realized only sluggish growth in the early 1990s, growing at a rate of only one to two percent. Rayovac signed sports megastar Michael Jordan to support the rechargeable product in a long-term endorsement contract in April 1995, a move that the company hoped would have a major impact on its market share.

Even Jordan's charisma, however, could not reverse the company's fortunes overnight. For too many years the company's competitors, Duracell and Energizer, had been more aggressive in advertising and marketing their products on a global scale. In September 1996 a Boston-based buyout firm, Thomas H. Lee Group, purchased 80 percent of Rayovac with the intent of taking the company public. Brought in to run the business and serve as chairman and chief executive was David A. Jones, who had significant management experience with Electrolux Corporation, The Regina Company, and Thermoscan, Inc.

Jones's goal was to revitalize the Rayovac brand by updating the company's marketing, advertising, and distribution strategies, as well as expanding product lines and growing through strategic acquisitions. The first major order of business, however, was to take the company public. In November 1997 Rayovac sold 6.7 million common shares of stock at $14 each, raising nearly $94 million, the net proceeds of which were earmarked to repay debt. Also in 1997 Jones introduced the first major product launch under his watch: the Maximum alkaline line of batteries. Aklaline accounted for $2.5 billion of a $4.6 billion U.S. battery market. Jones opted to position Maximum as a value-based alternative to the premium-priced Duracell and Energizer batteries, standing out from the competition by selling at ten to 15 percent less while offering the same performance. Other new products launched under Jones included keyless entry batteries and medical batteries for the home health care market. At the same time, Rayovac increased it efforts to improve its U.S. distribution. When Jones took control, Rayovac batteries were found in 36,000 stores. Within 18 months 50 major chains were added, boosting distribution by 40 percent. An additional 100,000 stores that did not carry Rayovac were identified and targeted. Jones also hired a new advertising agency, fattened the advertising budget, and launched a national campaign that utilized Michael Jordan for the entire company, not just the rechargeable line. The results would be immediate, as alkaline sales jumped dramatically.

Late in 1997 Rayovac added to its overseas presence when it acquired BRISCO GMBH in Germany and BRISCO B.V. in Holland, assemblers and distributors of hearing aid batteries in Europe. Rayovac would take an additional step to increase its world market share with the acquisition of ROV Limited, a move that allowed penetration into Mexico, Latin America, and much of South America. In 1998 Rayovac bolstered its position in the rechargeable battery market by acquiring Direct Power Plus, a New York company that offered a full line of rechargeable batteries and accessories for cellular phone and video camcorders. Early in 2001 Rayovac reinforced its image as a leading innovator in the industry when it announced a major new product launch: the first one-hour Nickel Metal Hydride battery charger for the batteries used by such high-drain devices as digital cameras.

All of the changes that Jones instituted, including ongoing cost-cutting measures, would result in 16 consecutive quarters of record sales. Sales for 2000 were $703.9 million, an increase of 25 percent over 1999's record $564.3 million; net income of $38.4 million was up 59 percent compared with $24.1 million in 1999. As the company neared its centennial, Rayovac was poised to realize an even more successful future.

Principal Subsidiaries: ROV Holding Inc.; Rayovac Europe B.V.; Rayovac (U.K.) Limited; Rayovac Latin America Ltd; Rayovac Canada Inc.

Principal Competitors: Energizer Holdings Inc.; Duracell; Ultralife Batteries Inc.

Further Reading:

  • Gribble, Roger A., 'Workers Essential to Rayovac Quality,' Wisconsin State Journal, February 14, 1993, Bus. Sec.
  • Kueny, Barbara, 'Flashlights of Innovation Illuminate Rayovac's Bottom Line,' Business Journal-Milwaukee, May 27, 1991, p. 13S.
  • McDonald, Martha, 'CEO David Jones Steering Rayovac into New Century,' Twice, June 29, 1998, p. 38.
  • Millard, Pete, 'Look at the Source: Wisconsin Companies Are Developing Technologies to Solve Environmental Problems,' Corporate Report Wisconsin, March 1994, p. 23.
  • Phillips, Sharon, 'Market Leading Technology--Unique Niche Strategy,' Wall Street Corporate Reporter, June 22-28, 1998.
  • 'Reviving Primary Cells,' Machine Design, March 9, 1995, p. 131.
  • Ruble, Kenneth D., The Rayovac Story, Madison, Wisc.: North Central Publishing Company, 1981.
  • Tracewell, Nancy, 'Enterprising Companies Build for Future During Recessions,' Business Journal-Milwaukee, December 28, 1987, p. B4.
  • Weiner, Steve, 'Electrifying,' Forbes, November 30, 1987, p. 196.

    Deriving a Business from a Family Project in the Mid-1980s

    Judith Paul came up with the idea for Renaissance Learning's key software product as a result of her dissatisfaction with the way her children were being motivated to read in school. Paul had a degree in education from the University of Illinois and was actively engaged with the educational careers of her four children in the mid-1980s. Her children's school offered prizes such as pizza to students who read a lot of books. But the school program did not differentiate between students who read difficult, lengthy books and students who read as many easy books as they could simply to win the prize. Teachers also did not have an accurate means to keep track of reading comprehension. Students could claim that they had read a book, and the teacher would not know if they actually had, or if they had understood it. Paul also was alarmed that many classic books that she had read in her own childhood were not being read at school, perhaps because they were too challenging. So she made up a program for her own children, which included a recommended reading list containing many classics of children's literature and a point system based on difficulty and length of each book. Her children earned points for books read, scoring higher for reading the more challenging ones. In addition, they did not receive their points until they passed a multiple choice test about the book, which Paul designed.

    Word of Paul's program got to a nearby Catholic school, and teachers there offered to pay Judith Paul to let them adopt her system. Paul's husband Terrance, then president of Best Power Company in Necedah, Wisconsin, helped formalize his wife's reading program by translating it into computer software. In 1986, the Pauls founded a company they called Advantage Learning Systems to develop and market their reading software. The software eventually was named Accelerated Reader, and they marketed directly to teachers by mailing brochures to names on mailing lists they procured. The company's marketing material was heavy with testimonials from teachers who had liked the software. Sales also grew as word-of-mouth spread the virtues of Accelerated Reader. The company first operated out of the Pauls' home in Port Edwards, Wisconsin. Later Judith Paul ran it out of a building that had formerly housed a supermarket.

    Advantage Learning operated differently from many other educational software companies by marketing directly to teachers. Most other firms sold to entire school districts, but Advantage Learning aimed at individual teachers, convincing them that they could keep track of individual students' needs and spend their teaching time more wisely by using the reading software. The basic Accelerated Reader program sold for less than $400 and included testing and comprehension software for a list of 150 to 200 books. Teachers pleased with the success of the program convinced other teachers to buy Accelerated Reader, and teachers with the basic package often moved on to buy software for more or different books. Buoyed by raves from satisfied teachers, Accelerated Reader found its way into classrooms all across the country. By 1992, Advantage Learning had annual sales of $3.2 million.

    That year, Terrance Paul joined Advantage Learning full time. He had been involved in a difficult struggle with Best Power, a family-run company, over whether to take the firm public. Paul wanted to keep Best private, and he was finally let go with a $1 million settlement. He turned his energies to Advantage Learning and helped the company manage its rapid growth in the 1990s.

    Quick Rise in the 1990s

    Advantage Learning quickly became a leading force in the educational software market as Accelerated Reader gained popularity. The number of computers in classrooms across the country grew, and pressure on schools and teachers to raise reading levels remained strong, so Accelerated Reader had a naturally expanding market. In the early 1990s, there were few other products that competed with it. Sales and income for the company increased decidedly, year by year. By 1993, Advantage Learning decided it needed to find a way to train teachers better in how to use its products. It launched a subsidiary company in Madison, Wisconsin that year, called the Institute for Academic Excellence. (When the parent company's name changed in 2000 to Renaissance Learning, the subsidiary changed its name to School Renaissance Institute) The subsidiary began with only three employees, whose job was to study the effectiveness of Renaissance Learning's products. The Institute staff conducted research on Accelerated Reader and other software programs and contributed articles to education periodicals like the School Library Journal. The Institute recruited former teachers and school administrators and trained them to lead workshops in the use of Renaissance Learning's software programs. Within four years, the Institute had around 85 employees, and it had trained tens of thousands of teachers at seminars across the United States. The seminars ran from one to three days, and the price ranged from slightly more than $100 to about $550. By 1996, the Institute for Academic Excellence accounted for more than 20 percent of the parent company's revenue.

    Renaissance Learning also grew through acquisition. In 1996, it purchased a small publisher of math software in Vancouver, Washington, called IPS Publishing. The firm specialized in math assessment software. Renaissance Learning planned to mimic its success with Accelerated Reader by putting out a math assessment package, so this acquisition fit in with its goals. The deal was estimated to have cost the company around $6 million.

    Sales for 1996 rose to $22.4 million, up from $3.2 million just four years earlier. Net income in 1996 was $4.2 million, and the company's market still seemed to be expanding. By 1996, Accelerated Reader had found its way into approximately 26,000 schools, which represented 21 percent of all the Kindergarten through 12th grade schools in the United States. Accelerated Reader still accounted for almost 70 percent of Renaissance Learning's sales. Satisfied customers continued to come back for more software, as in 1996 alone nearly 80 percent of Renaissance's new customers made subsequent purchases from the company. Spending by schools on educational software continued to grow nationally, with estimates projecting 15 percent growth annually in the market in the years leading into the new millennium. So Accelerated Reader seemed a secure mainstay for its makers. Renaissance also brought out new software. A new product, debuted in September 1996, was a reading assessment software program called S.T.A.R. This software allowed a teacher to assess a student's reading level in as little as ten minutes. Teachers found this useful and time-saving, especially in cases where a new student arrived at school long before transcripts and past reading achievement scores showed up.

    In 1997 the company decided to launch a public offering. It had a formidable track record, with sales and net income rising in double-digit increments yearly, and predictions of 40 percent annual growth over the next three to five years. Judith and Terrance Paul were still the only stock holders, and they planned the public offering in part to be able to pay themselves back money they had loaned the company. The company also had incurred debt for construction. Renaissance also wanted cash in order to bring out new products. It planned to bring out its new Accelerated Math software in 1998, and it also considered putting out versions of its reading software in other languages and marketing its English language products overseas. Being a public company was seen as an advantage when dealing with overseas markets, where education spending was likely to come under the purview of government ministries. The Pauls sold 20 percent of their company in the September 1997 public offering. The shares quickly rose from $16 to more than $26 a few weeks later.

    By 1998, the company seemed to have convinced the stock market that it was a good bet. Renaissance had revenues of $50 million, but market capitalization of more than 17 times that, or $862 million by the end of 1998. Investors perhaps understood that education software had a growing customer base as the use of computers in schools increased. Accelerated Reader boasted a market share of 30 percent of Kindergarten through 12th grade schools in the United States and Canada by 1998, and it was clearly a strong product. But being the leader in software was always a risky business, as computer products were easy to imitate. Scholastic Corporation began marketing a similar reading software tool, called Electronic Bookshelf, which threatened Accelerated Reader. Scholastic already held ten percent of the total educational software market, and it reached students and teachers directly through its book clubs. Fear of Scholastic's encroaching apparently spooked investors, and Renaissance's stock went through rapid swings in 1999. However, the company continued to exhibit a fantastic growth rate of more than 60 percent. In addition, Accelerated Reader and Accelerated Math fit in with many people's ideas of the way to ensure that kids became academically proficient: the software offered a form of quality control through its continuous testing. The need for more testing and more feedback seemed a given of mainstream educational debate. So the market for Renaissance's products did not look like it would wither any time soon. The company continued to reap the benefit of word-of-mouth endorsements of its products, too. The principal of a troubled school in Chicago was quoted in Forbes (March 22, 1999) explaining how she promised her students she would kiss a pig if they racked up a certain point total on Accelerated Reader by the end of a year. Her students surpassed the goal she had set, she kissed the pig, and the school went off probation. Stories like this were great publicity for Renaissance.

    Renaissance introduced nine new software products in 1999 and acquired three new software firms. Sales in 1999 reached $83.6 million, with earnings of more than $17 million. By the end of 1999, the company had firmed up plans to use the internet to sell its products. It began selling its quizzes over the Web in November 1999 and began working on on-line versions of some of its educator training courses. In 2000, the company began offering software designed to help teachers prepare students for standardized tests. The software, called Surpass, first focused on the Texas Assessment of Academic Skills, and then expanded to cover major assessment tests in other states. Surpass was somewhat different from other test preparation software, in that it had students take tests on paper, just as they would for an actual statewide assessment test. The program was meant to tutor students in test-taking skills, not the math and reading skills the standardized tests assessed.

    By 2000, the company found its various software programs in more than 50,000 schools. It had developed beyond its core product, Accelerated Reader, to offer a panoply of reading, math, and test-taking programs. Through its teacher training subsidiary, the company had trained more than 200,000 people since its inception. Growth had been strong ever since the firm began in Judith Paul's home, and market conditions seemed favorable to the company for some time to come. According to Kiplinger's Personal Finance (November 2000), industry analysts who followed Renaissance's stock predicted the company would see long-term profit growth of 35 percent a year. Education was a major theme in the 2000 presidential election, and it seemed probable that education spending on technology and software would continue to grow during the new Bush administration.

    Principal Subsidiaries: Humanities Software; IPS Publishing; School Renaissance Institute.

    Principal Competitors: Scholastic Corporation; Sylvan Learning Systems, Inc.

  • 'ALS Enters Test-Prep Market,' Heller Report on Educational Technology Markets, July 2000, p. 7.
  • Bergquist, Lee, 'Educational Software Maker Advantage Learning Systems Inc. Plans IPO,' Knight-Ridder/Tribune Business News, March 4, 1997.
  • ------, 'Software Makes Mark in Classroom,' Milwaukee Journal, November 16, 1997, pp. 1,5.
  • Fitch, Stephane, 'Back of the Class,' Forbes, November 30, 1998, pp. 364-65.
  • Newman, Judy, 'Shareholders to Assess Wisconsin Educational-Software Firm's Performance,' Knight-Ridder/Tribune Business News, April 18, 2000.
  • ------, 'Wisconsin Entrepreneur Motivates Students to Improve Reading Skills,' Knight-Ridder/Tribune Business News, October 9, 1997.
  • ------, 'Wisconsin Rapids, Wis.-Based Educational Software Firm's Stock Recovers,' Knight-Ridder/Tribune Business News, July 2, 1999.
  • ------, 'Wisconsin Rapids, Wis.-Based Software Maker Acquires Canadian Firm,' Knight-Ridder/Tribune Business News, January 3, 2000.
  • Upbin, Bruce, 'Instant Feedback in the Classroom,' Forbes, March 22, 1999, pp. 68-72.
  • Wiser, Justin, 'Investing 101: It's Academic,' Kiplinger's Personal Finance Magazine, November 2000, p. 82.

Source: International Directory of Company Histories, Vol. 39. St. James Press, 2001.

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