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For the week of June 28 through July 4, 2000

Major expansion for Smith Sports Optics


Bob Smith "was a frustrated powder skier because in powder you work hard, you work up heat, and your goggles fog up. There wasn’t a goggle on the market which corrected the fogging, so he pulled out his dentistry tools and cut and snipped and created the first thermal goggle."

Ken Frederick, company historian and vice president of sunglass operations.


By PETER BOLTZ
Express Staff Writer

About 35 years ago, the size of Smith Sports Optics fit all in the head of a San Rafael, Calif., dentist, Bob Smith.

Today, the company has outgrown its 13,500 square foot headquarters in Ketchum’s industrial park and is completing a much larger building nearby to accommodate an increase in sales, storage space and employees. The new 21,000-plus square foot building is located across from Sun Valley Garden Center on Northwood Way.

Smith’s president, Ned Post, said in an interview, "If we could’ve continued in our current building, we would’ve done it, but we needed 3,000 to 4,000 square feet to accommodate growth over the next three to five years.

"The addition of about 15 people comes in the customer service area, the marketing area and some of the support groups like one or two people in finance and one or two computer people."

Smith will use this space the same way it uses its current space—taking international and domestic orders for eyeglasses and goggles; designing new styles of eyeglasses and goggles; researching competitors; and distributing two other brand name sunglasses, Carrera and Action Optics.

Raw materials and manufacturing of components for goggles and sunglasses are contracted out to various companies in the United States, Europe and the Far East, according to a Smith financial summary. DFG Manufacturing in Clearfield, Utah, is the exclusive assembler of all Smith goggles. DFG also assembles, warehouses and ships Smith eyeglasses.

The increase in square footage is a modest reflection of Smith’s growth in sales. In the financial summary, Chief Financial Officer Ron Hayes reports that sales have increased from $18.2 million in 1994 to $40.1 million in 1999. Over 80 percent of the 1999 growth came from Smith’s diversification into the sunglasses business.

With the non-prescription sunglass market worth over $2.8 billion, according to the financial summary, Smith has room to expand.

Ken Frederick and Joe McNeal are two of Smith’s informal historians. Frederick is the company’s vice president of sunglass operations and McNeal is the director of product development. Frederick says he is "noted for trivia or what some people around here call worthless trivia, but I know a lot about Smith’s history." McNeal is a historical source because his ski goggle tenure, first with Scott USA and now with Smith, adds up to over 30 years.

Bob Smith "was a frustrated powder skier," said Frederick, "because in powder you work hard, you work up heat, and your goggles fog up. There wasn’t a goggle on the market which corrected the fogging, so he pulled out his dentistry tools and cut and snipped and created the first thermal goggle."

According to a timeline written by McNeal, Smith started hand building goggles in his garage in 1966, and selling them on ski trips to Utah. In 1967, he struck a deal with Klaus Obermeyer (maker of Obermeyer ski clothing) of Aspen to sell goggles through Obermeyer’s sales force."

In 1969, according to the timeline, Smith started producing the ‘Original’ Smith goggle in Rifle, Colo., with a contract manufacturer.

Around 1971, Smith and Scott USA joined to develop and sell a Scott/Smith goggle, but the deal fell apart sometime in 1974. By 1978, Scott USA closed its Ketchum operation; and in March 1981, Scott went into bankruptcy, according to the timeline.

Smith and Chuck Ferries, the owner of PRE skis at the time, bought Scott USA in 1981 from the bankruptcy court. "Then Smith and Scott were separate again and competition heated up," according to Frederick. "The two companies together probably controlled 70 percent of the U.S. goggle market.

"This," said Frederick, "takes us into the mid-‘80s." Subsequently, he said, "Bob [Smith] sold controlling interest in 1991 to John Melin who ran a chain of fitness centers in California."

Frederick said that Melin’s contribution was to "initiate the next phase of growth and look for diversification since Smith dominated the goggle market which was flat. He was the one who came up with the concept of expanding the sunglass from a ski accessory to a stand-alone sports accessory.

"His first five models made up the Smith Speed Collection: the Roval, the Eddy, the Sliver, the Ambush and the Otis. Otis and Ambush are still with us.

"In 1993, Melin purchased Action Optics, which targets the 40- to 45-year-old customer and dominates the fly-fishing sunglass market," Frederick said.

Then, in 1996, according to Frederick, Melin sold Smith to the Italian company Safilo S.p.A. (S.p.A. is the Italian equivalent of "incorporated").

"What Safilo offered us," he said, "was independence. They allowed us to create our own product lines and the financial wherewithal to develop them."

Safilo S.p.A., was founded in 1934 by the Tabacchi family, and is located in Padova, Italy, a little over 20 miles east of Venice.

Safilo bought 87 percent of Smith for approximately $22 million in March of 1996. In 1997, it bought an additional block of Smith stock to bring its equity interest to 95 percent.

Seventy percent of Safilo is privately owned by the Tabacchi family, while 30 percent of the company is publicly traded on the Milan stock exchange. The decision not to sell on a U.S. stock exchange was a "management decision of Safilo," said Post.

According to the company’s 1999 annual report, net sales were nearly $474 million, a 17 percent increase from 1998. Its Website reports that its well-known collections such as Smith, Carrera, Gucci, Pierre Cardin and Christian Dior are distributed through more than 120,000 outlets throughout the world.

As an offshoot of Smith’s and Safilo’s vigorous growth is a dispute with the dominant sunglass company in the United States, Oakley, Inc. based in Foothill Ranch, Calif.

Business Wire reported on Nov. 15, 1999, that on the same date, Oakley filed a lawsuit in U.S. District Court in California against Safilo America, Inc. and Smith Sport Optics, Inc. alleging that certain sunglass models marketed under the Smith brand name infringed on Oakley’s XYZ Optics patents.

According to the Business Wire story, XYZ Optics technology "ensures the optimal relationship between the lens geometry and the as-worn orientation to the wearer’s eye. The result is reduced optical distortion at all angles of vision, maximum peripheral vision" and protection from hazards.

Smith President Post says, "We’re on the Oakley radar screen, but we’re working to resolve our differences quite actively. I’m the point guard on this, and I think it’s fair to say we’re making progress. We’ve settled our differences before, and I think we will do so again."

As far as the future of Smith Sport Optics, Post says, "Clearly our objective is to pursue a significant position in the global eyewear market and to continue that management from Ketchum."

 

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