Alaska Industrial Hardware: hardware survives hard times.

• Author: Oswald, Lori Jo

Diversification and innovative stock-option plans helped this company roll through Alaska's boom-and-bust economy.

Between the oil boom years of 1980 and 1984, Alaska Industrial Hardware (AIH) nearly tripled its sales volume to achieve $25 million in sales. Compared with the $1.5 million in sales in 1974, when Josef Boehm and four other employees purchased the company from its founder, the late James Thompson, that was a hefty increase. AIH's boom was fueled by the trans-Alaska oil pipeline project, which brought a tremendous need for hardware and industrial supplies.

But then came a tough test for AIH: the post-pipeline crash.

"The period of 1985 to 1988 was a tough time for the company because there was no residential construction, and commercial construction was almost non-existent," says Boehm, president and principal owner of the company. AIH sales reached a low of $17.5 million gross revenues in 1988.

Fortunately, several factors helped AIH stay in business when other hardware companies failed. Since AIH owns its own real estate, it was less vulnerable to banks and landlords going out of business, explains Boehm, adding, "Although we did survive our banks -- twice."

But more importantly, he says, "We just trimmed back all the way around, on inventory and labor costs, and closed two of the company's divisions, Alaska Fastener & Tool Supply and the Material Handling Center. Activities at these two subsidiaries were transferred to AIH branches and the distribution center. Even though commercial construction was non-existent from 1985 until just recently, we managed to pull through."

SURVIVING THE CRASH

"When the market crashed," Boehm adds, "we were small enough to be able to tighten our belts and trim the workforce and inventory to survive. Some of our competitors failed to do this or were not flexible enough to do this."

In addition, Boehm realized back in the late 1970s that the company should not depend solely on oil-related construction. "We decided to diversify beyond oil-industry activities to serve the needs of general construction, service industries, fishing, mining and the do-it-yourself markets," he says.

Another reason for AIH's success is that the employees own about 40 percent of the company stock through a company-sponsored stock-option plan. In place since 1976, the program operates on contributions, with AIH generally annually paying 15 percent (the maximum allowed by federal law) of each employee's gross pay to his or...