Recession takes toll on even strongest firms

THE STRONG SURVIVE: Starkweather & Shepley employees, from left: Suzzane Chatterton, David Soforenko and Sean Cottell at a meeting with President Natale P. Calamis, standing. /
THE STRONG SURVIVE: Starkweather & Shepley employees, from left: Suzzane Chatterton, David Soforenko and Sean Cottell at a meeting with President Natale P. Calamis, standing. /

The recession has taken a sustained toll on even some of the state’s most successful companies, as Providence Business News’ 2010 Top Private and Fastest-Growing Companies lists illustrate.
Firms that enjoyed sales growth of more than 30 percent just two or three years ago are posting low single-digit growth or even slipping back.
Take Gilbane Inc., the Providence-based construction and real estate development giant, which managed to again secure the No. 2 ranking on the Top Private list. It did so despite reporting 2009 sales lower than those earned in 2008.
Gilbane, which reported nearly $4.4 billion in sales, experienced 5 percent growth in 2009 compared with 2007. That compares with a 37 percent increase in 2008 sales over 2006. A Gilbane spokesman declined to comment on the results.
Fourth-ranked Warren Equities moved down a spot on the Top Private list while also stepping back financially. Based in Providence, Warren Equities is the holding company for six diverse companies – Xtra Mart convenience stores, Convenient Graphics, Drake Petroleum Co., Warex Terminals Corp. and Xcel Environmental Inc.
Its overall sales fell from $2.17 billion in 2008 to $1.64 billion in 2009. A company representative also declined to talk about the conditions it’s facing.
While the Fastest-Growing list did have its superstars, numerous companies made the list with less than 10 percent growth last year compared with 2007. Woodmansee Insurance in Warwick and Cardi Corp. reported a mere 3 percent sales growth and Amica Mutual Insurance Company eked out a 1 percent increase.
Starkweather & Shepley Insurance Brokerage Inc. President and CEO Natale P. Calamis said it’s easy to explain his firm’s 5.4 percent revenue decline from 2008 to 2009.
“A bad economy and the continued uncertainty out of Washington, D.C., when it comes to taxes and health care, are freezing businesses,” said Calamis, whose company, despite the slide in revenue, moved up from 43rd to 35th on the Top Private list with $32.25 million in sales. He said clients’ sales and payrolls are mostly flat or shrinking, thus impacting premiums his company can charge.
And while Starkweather’s 10 percent sales growth last year compared with 2007 moved them up from No. 52 to No. 45 on the Fastest-Growing list, Calamis is happy to point to another measuring stick.
In August, Business Insurance Magazine’s Top 100 List of insurance companies placed the East Providence-based company at No. 74, a jump of 18 slots. The bottom line, says Calamis, is that all industries are affected by a poor economy; it’s whether you can rise above your competition that determines a good business.
“We’re moving forward and there’s no question that others in our industry are heading backwards, as are companies in all industries,” said Calamis.
He added that while property-and-casualty rates remain largely unchanged, his company has helped itself by adjusting focus and adopting a diversified program of group health benefits, defined-contribution retirement planning and voluntary benefit products.
Starkweather also weathered the storm, Calamis said, by investing in its sales team and streamlining overall staff through attrition. Total employment at the company is 175 people, a decrease of 18 positions during an 18-month period.
Acquisitions have also helped.
In 2009, the company acquired East Greenwich-based CO Agency Inc. and The Preston Agency. Without those additions, Calamis said his sales growth would have been around 3 to 4 percent from 2008 to 2009, compared with 15 percent.
While some companies saw the recession as their biggest challenge, others had their own internal turmoil.
It’s no surprise that Twin River, owned by UTGR Inc., a subsidiary of BLB Investors LLC, based in Connecticut, dropped abruptly to 52nd on the Fastest-Growing list. The company, which held the No. 2 spot on the 2008 list with 250 percent revenue growth, has been in bankruptcy for more than a year.
The company went into Chapter 11 after being overwhelmed by a half-billion dollars of debt, attributed partly to an overly ambitious investment in its facilities. Twin River, formerly known as Lincoln Park, added video-lottery terminals in 2005 and two years later embarked on a lavish renovation of the facility, adding an extra 130,000 square feet to the structure as well as the addition of a 160,000-square-foot gaming area.
The extensive renovation project was designed to attract patrons from Rhode Island and Massachusetts. Revenue from the gambling venue was expected to increase by 20 percent and bring additional jobs to Rhode Island.
Unfortunately, Twin River was not prepared for an economic downturn, national banking crisis and a credit crunch.
Despite spending a year in bankruptcy, Twin River did have a 7 percent gain in 2009 compared with 2007, reporting $435 million in sales.
“In some ways, all you want to do is exit Chapter 11 in one piece, and we certainly did better than that,” said Patti Doyle, spokeswoman for Twin River. She pointed out that according to an American Gaming Association survey, the gaming industry nationally saw a 5.5 percent decline in revenue in 2009.
Doyle is hopeful the reorganized company will get the final OK to climb out of bankruptcy in the fall. When they do emerge, Twin River’s future will still have its obstacles, including the prospect of competing with casino gambling in Massachusetts.
Twin River pushed unsuccessfully for Rhode Island lawmakers to override Gov. Donald L. Carcieri’s veto of a bill that would have allowed voters to decide whether to bring full casino gaming to Twin River. She fears it could be up to two years before the matter goes to the voters.
“Massachusetts will likely have a jump on us moving forward, leaving us behind the eight ball,” said Doyle.
She said the $250 million Twin River contributes to the state will be in jeopardy, considering up to 50 percent of Twin River customers come from the Bay State, as lawmakers consider legalizing casino gambling.
“Looking forward, we have to consider how to position ourselves to handle a drop in gaming due to this,” Doyle said.
Being introspective is something Twin River got good at over the last two years.
Doyle credits a streamlining of the company with helping to avoid layoffs at Twin River, but many of the company’s 900 part-time and full-time employees were asked to take fewer shifts.
Furthermore, the company put greater emphasis on live entertainment, creating new dining options and improving customer service through a more robust rewards program.
“We’re coming off a rough period, but [Twin River] grew as a company,” Doyle added. n

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