After near bankruptcy, Parsons back on fast track

STITCH IN TIME: Jennifer Vamos, an employee at ParsonsKellogg, works an embroidery machine at the company. / PBN PHOTO/ STEPHANIE  ALVAREZ EWENS
STITCH IN TIME: Jennifer Vamos, an employee at ParsonsKellogg, works an embroidery machine at the company. / PBN PHOTO/ STEPHANIE ALVAREZ EWENS

A ringing bell echoes loudly in the foyer of ParsonsKellogg LLC.

The sound interrupts Director of Business Development Bryan McWilliams midsentence. He’s explaining how the East Providence company represents Rhode Island as a top player in the nationwide multibillion dollar promotional-products industry.

A smile crosses his face; the bell signals that one of his colleagues has secured a new account, moving the company a small step closer to its goal of $20 million in sales for the year.

“It drives some people nuts, but I always remind them that it means job security,” McWilliams explained. “And it’s not as loud as the hockey horn, which [sounds] for any order over $10,000.”

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The quirky ritual is one of several ways Thomas Kellogg, founder and president of ParsonsKellogg, tries to keep things light around the office. The dress code is casual, work hours are flexible (as long as the work gets done), pizza is for lunch, and it’s not unusual for colleagues to meet for drinks at the nearby Red Bridge Tavern after-hours.

Creating a comfortable work environment is important to Kellogg, partly because it reflects his easygoing attitude, but also because he remembers grimmer days not too long ago when one of his largest clients – General Motors Co. LLC – owed ParsonsKellogg $1.2 million.

Dependent on the account, Parsons-Kellogg spiraled on a harrowing journey to the brink of insolvency. Cash stopped flowing, jobs got cut and the federal government put a lien on Kellogg’s home, which he shared with his wife, Leslie, and their three children.

It was an all-too-common story for Rhode Island businesses during the financial crisis of 2008. ParsonsKellogg, however, beat the odds. Today it ranks as the seventh-fastest-growing company in Rhode Island, among companies with revenue of $5 million to $25 million, according to PBN research.


ParsonsKellogg’s roots are in golf. Kellogg, an avid golfer, worked with Oregon-based Nike Inc. for 10 years. He held various positions in sales, including a stint as regional sales manager. Having risen through the Nike ranks, Kellogg’s next logical move up the corporate ladder would require moving to headquarters outside Portland, Ore.

But the idea of moving across the country didn’t sit well with Kellogg, who’s originally from Connecticut. Leslie grew up in Massachusetts.

“We’re a New England family, and Oregon is a long way to go,” Kellogg said. “And at one point, when I was spending a lot of time out there, I realized it rained a lot.”

Kellogg left Nike in 1999 unsure about his future, but quickly got swept up by the dot-com bubble. He joined a nationwide tee-time reservation company called, which ended up “in dot-com cemetery, buried under a pile of bills,” according to a May 2001 Denver Post article.

By then, Kellogg had left and reconnected with a former Nike colleague, who suggested he could help with some leads if Kellogg wanted to try out the promotional-products business.

Unsure where it would lead him, Kellogg in 2001 purchased a six-color golf-logo printing machine and began emblazoning golf balls for corporate clients, mostly sponsors of professional golf star Tiger Woods, who would then hand them out at golf outings.

Once the business grew, Kellogg in 2002 brought on two other people – both still work for him today – to help take orders, run the ball machine, package the material and send it out. It was a busy time that conjures fond memories for the entrepreneur. In a frame on the wall of his office is an ink-covered shirt he wore often while printing in those early days.

“We would divide up all the sales, figure our profit and then split it three ways,” Kellogg said.

The business turned its first profit in 2003, recording $1 million in sales.

From there, ParsonsKellogg grew quickly.

By 2007, the business had moved beyond emblazoning golf balls to printing corporate logos on products from 60 different brands, including Apple, Polo, Ralph Lauren, Kate Spade and others.

“This is pre-2008, so people were spending money left and right on promotional items,” said McWilliams.

The company ended 2007 with $9.5 million in sales, representing a 187.8 percent increase from 2005.

But the optimism those numbers engendered internally would not last long.

“It slowly dawned upon us when the summer ended in 2008 that [General Motors] wasn’t paying and that’s when everything came crashing down,” Kellogg said.


The 2009 bankruptcy and subsequent government bailout of Detroit-based General Motors – then known as General Motors Corp. – was a body blow to an already slumping U.S. economy suffering through what would come to be called the Great Recession.

GM had been struggling for years beforehand. Indeed, the automotive manufacturer posted substantial losses beginning in 2005. By 2008 it projected it would run out of money the following year without a bailout, merger or asset sale, according to a 2008 third-quarter federal filing.

But at the start of 2008 there were no signs of scaling back on marketing, including promotional products through ParsonsKellogg.

The company, through its hired marketing divisions GMR*Works and Momentum – which were both Interpublic Group of Companies Inc. subsidiaries that worked exclusively for GM – collectively owed ParsonsKellogg $1.2 million, according to an invoice dated April 30, 2008, for promotional hats, shirts, golf balls, golf bags and other accessories.

“[GM] placed a lot of orders in 2008 and then they stopped paying for them,” Kellogg said. “We were in a really bad spot.”

Dave Cagianello, senior vice president of consulting at Lagardère Sports and Entertainment, worked at GMR*Works at the time and remembers ParsonsKellogg clearly. The Rhode Island company, he recalled, was “a major vendor and reliable in the business.”

GMR*Works had trouble paying its vendors because the money stopped coming from GM, he said.

Interpublic Group in June 2009 figured potential debts of $50 million, without accounting for its international units, according to a federal filing.

“It was tough on everybody,” Cagianello said. “There were layoffs that had to happen because of the unfortunate situation [GM] found itself in.”

At ParsonsKellogg, vendors were “getting really itchy about us paying them,” Kellogg said.

Joe Urzetta, then-senior vice president at Callaway Golf Co., was one of ParsonsKellogg’s largest vendors. Urzetta ran the North American business for Callaway and he remembers ParsonsKellogg and many others struggling during that time.

“There were a ton of people who owed us money,” said Urzetta, who’s now senior vice president of sales at Arizona-based The Glukos Co., which sells energy food for athletes. “The last thing we wanted to do was to have more accounts go out of business.”

The debt put ParsonsKellogg in a Catch-22: Vendors were unwilling to provide more materials without getting paid on back orders, so the company couldn’t create new revenue to pay them back.

Kellogg, a self-professed salesman without any formal training on how to run a business, suddenly found himself in the business equivalent of a perfect storm.

American Express Corp. put a limit on his corporate credit cards, asking him to start paying his debt down, at the same time ParsonsKellogg exhausted a line of credit with Bank Rhode Island.

“Tom was swimming like a duck,” recalled his wife, Leslie. “He spent a lot of time wondering what was going to happen tomorrow, but there was no other choice but to move forward.”


Vistage International is a peer-to-peer membership organization comprising business owners, CEOs and other executives of small- to midsized companies throughout the world.

Kellogg, a member, turned to his peers for advice and was quickly told his first action plan would call for firing at least 10 employees.

“The hardest things about running a business are getting new sales and letting people go,” Kellogg said. “I think those two things are what keep business owners up at night more than anything else.”

At its peak, ParsonsKellogg comprised about 40 employees, according to Kellogg, a workforce eventually cut in half to 20. Beyond the layoffs, Kellogg had to put his sales team on straight commission, which resulted in some natural attrition.

“I think what happened to us – and it happened to a lot of the country in 2008 – is that we were no longer able to turn a blind eye in the business that [we] might have been able to do before,” McWilliams said.

Kellogg applied for an emergency loan through The Business Development Co., a Providence-based nonbank lender that provides funding to undercapitalized companies, but without having much equity the loan was risky and subsequently denied.

Peter C. Dorsey Jr., president of The Business Development Co., said a lot of Rhode Island companies during the height of the recession were in similar situations and forced to make difficult decisions with their companies in order to survive.

“In the short run, as painful as it was, many of those companies made those changes and became more efficient,” he added.

Kellogg tried to apply for “accounts receivable insurance,” to protect ParsonsKellogg against bankruptcy. But the effort was a little too late, as there was too much potential dead weight on his books.

He acknowledges now that it was a longshot at the time.

“You don’t buy fire insurance when your house is on fire,” he said.

What Kellogg did next became a defining moment for the company: He decided to prepay a vendor on a major order instead of paying his taxes.

“I was told there was a 90 percent chance the government would notice and a 10 percent chance they would do something,” before he could get the funds to pay the taxes, Kellogg said.

“But, of course, they did notice and they put a lien on our house,” he added.

“Call Immediately To Prevent Property Loss,” was printed at the top of the Nov. 10, 2008, letter Kellogg and his wife received from the IRS. The letter threatened to take away their home unless the taxes were paid.

Leslie Kellogg remembers there being a “point of panic.”

“You open up a letter that says you have a lien on your house and you owe a big chunk of change, so you really wonder what’s going to happen,” she said. “There were lots of moments that we were thinking, ‘What are we going to do?’ ”

When asked whether there was ever a moment when he thought the company might go bankrupt, Kellogg said: “Yeah. I think so. I don’t know what would have happened at that point.”


As it turned out, the decision to prepay on that order in lieu of paying his taxes gave the company just the amount of breathing room it needed. Kellogg also borrowed $100,000 from family members, and the combined amount allowed the company to extend its line of credit with Bank Rhode Island.

“We had enough to hit payroll and pay down some vendors,” Kellogg said.

Concurrently, ParsonsKellogg won a contract to run a gift-card program with an automobile company, which Kellogg declined to name. The company paid for the program upfront and the funds acted as a bridge loan, while its sales team scrambled for new accounts and the finance team continued to press GM for money.

McWilliams approached professional baseball teams with promotional giveaways. He landed a deal with the New York Mets, which held free T-shirt giveaways for Friday home games. That line of the business has grown and become lucrative.

“We turned it into a multimillion dollar business line,” McWilliams said.

Back at Callaway, Urzetta said their decision to stay patient with ParsonsKellogg paid off, and they were paid back in full.

“You had two paths. You could either go after [those that owed money] and take them to collections, or you could say, ‘We want these people to stay in business.’ Tom had been a great partner, so we kind of analyzed and assessed who we thought was going to be successful, and he was one of them,” Urzetta said.

Finally, in the beginning of 2009 when the U.S. government announced it would bail out GM, the ParsonsKellogg team felt like it would survive. The company received sporadic payments throughout the beginning of the year. Bank records show a May 5, 2009 deposit from GM for $674,000.

The Kelloggs did not lose their home.

Within a month, the company had pulled in a couple of big sales, including a shipment of two tractor-trailers filled with rice cookers for a banking client that opened in New York City’s Chinatown. The Kelloggs were able to settle their tax debts in full.

By 2010 the company’s finances began to firm up and ParsonsKellogg turned a profit again.

Looking back, Kellogg feels he received an education from all the things that went wrong during the recession.

Edward M. Mazze, distinguished professor of business administration at the University of Rhode Island, says this is a sentiment felt by many business owners who made it through the recession, especially in Rhode Island, which was among the hardest hit states in the nation.

“The weaker businesses have weeded themselves out,” Mazze said. “The strong have survived.”

Dorsey agrees.

“The companies that survived are a lot better off now because they are better managed,” Dorsey said.

ParsonsKellogg is presently the seventh-fastest-growing company in Rhode Island among companies with revenue of $5 million to $25 million, according to PBN research. The company has a 27 percent growth rate from 2012-2014, when annual revenue grew $3.7 million.

“The recession really shook our company to the core,” said McWilliams. “But it’s also the best thing that could have happened to this company.”

Kellogg has hired more employees, now totaling 30, including a new director of finance, Joy Cook, who started in 2011. She’s helped shorten the length of time from invoice to payment.

“I think it’s gotten quicker. … I don’t know if that’s because [clients] don’t want me to hound them, or if it’s just the economy, but probably a combination of both,” Cook said.

ParsonsKellogg last year outgrew its former space and bought a new building at 2290 Pawtucket Ave., in East Providence. The 21,000-square-foot building is filling up fast, with rows and rows of boxes filled with blank merchandise, readily available for smaller orders with quick turnarounds. The company has also added a showroom, so visitors can come in and see what products are available.

ParsonsKellogg is focusing on pulling in $20 million in sales for 2015, compared with $17.1 million in 2014.

“As much as you or I can say it was tough, it was one of the best things that happened,” Kellogg said of the firm’s financial crisis. “We’ve learned collectively how to be a better company because of it all.” •

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