FiberMark, Inc.

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FiberMark, Inc.

161 Wellington Road
Brattleboro, Vermont 05302
U.S.A.
Telephone: (802) 257-9365
Fax: (802) 257-5900
Web site: http://www.fibermark.com

Public Company
Incorporated: 1989 as Specialty Paperboard, Inc.
Employees: 1,562
Sales: $325.3 million (1999)
Stock Exchanges: New York
Ticker Symbol: FMK
NAIC: 32213 Paperboard Mills

FiberMark, Inc. is a leading producer of specialty fiber-based materials (paper, synthetic, and composite) serving industrial and consumer needs worldwide. With ten production facilities in the United States and Europe, the company’s three divisions focus on niche markets where components or finished products for indus-trial and consumer applications are manufactured. FiberMark’s customers usually purchase the company’s products in roll or sheet form, converting it later into finished products.

Materials manufactured by FiberMark are grouped into four product families: filter media, tape base and label material, technical specialties, and cover materials for home, school, and office use. A few of the end uses of FiberMark’s wide variety of products include: fuel filters in automobiles or air filters in air-plane passenger cabins; vacuum cleaner bags; backing materials for masking tapes or tapes used for checkbook and memo pads; self-adhesive and garment labels; base materials for sandpaper, photographic, printing and graphic arts, wallpaper, and flooring overlay; electrical/electronic applications, such as printed circuit boards; and disposable medical drapes, garments and linens.

Early Years: 1861–1961

FiberMark adopted its present name in 1997, but the company traces its history to 1861, when two young brothers, Alfred Wells Case and Albert Willard Case, began making paper as Case Brothers, Inc. in South Manchester, Connecticut. This area of Connecticut was one of the important paper producing centers of 19th century America, and a second paper mill was subsequently built in East Hartford. The brothers had learned the papennaking trade while employed by Charles Bunce, one of the first paper manufacturers in the area. Until the Civil War, paper was not made from wood pulp, but from linen or cotton rags or a mixture of those fibers. With capital of just $135, Alfred and Albert Case set up a mill that produced washed cotton waste needed for the manufacture of gun cotton (similar to gunpowder) used by the Union Army during the Civil War.

At the end of the war, the Case brothers began a specialized papermaking operation and soon became a leader in the manufacture of pressboard, or paperboard, a strong, highly glazed paper product, used at the time as album board, shoe board, and binder board. The brothers invented several methods for laminating paperboard and increasing its density. They also developed a new type of cylinder machine that produced paperboard in a continuous process. True Connecticut Yankees, they ran an efficient, innovative, highly skilled operation. When a fire severely damaged their three-story frame factory in 1875, they put the mill back into operation within 40 days.

For the next century, Case Brothers continued to flourish in Connecticut as the New England paper industry reached its peak. In 1878 the company won first prize for its pressed paper at the International Paris Exposition, competing with paper manufacturers from throughout Europe, and achieved another success at the Melbourne, Australia, Exhibition of 1880. Specialty paperboard products continued to be refined and developed, and the company, which remained in the family, became very successful.

Brattleboro and Boise Cascade: 1961–89

Exactly a century after its founding, Case Brothers expanded its operations to Brattleboro, Vermont. The company’s new, modern manufacturing facility was built to meet the growing demand for Case Brothers’ product lines, particularly press-board. The 200,000 square-foot plant was the first new multi-cylinder paper mill built in New England in 50 years and the only plant that had ever been designed exclusively for making pressboard products. In addition to pressboard, the new Brattleboro plant manufactured specialty industrial materials such electrical insulation.

Leading figures in the company at the time of its expansion to Brattleboro were Wells Case Dennison, president, and vice-president Robert Case Dennison, both direct descendants of Albert Willard Case. As the successful Brattleboro operation became the core business of Case Brothers, the decision was made to close the company’s older mills in Connecticut. In 1973, ground was broken in Brattleboro for construction of a new administrative building as the company began to consoli-date its entire business there.

Meanwhile, in 1967, the paper industry giant Boise Cascade Corporation purchased Case Brothers. Case offered a strategic fit with Boise’s existing office materials business since press-board was primarily a cover material for office supplies used in filing and binding. For Case Brothers, Boise offered capital and people resources that the company needed in order to expand. Case management hoped to find a company with a similar management philosophy, and they found it with Boise.

The company, now Boise’s Specialty Paperboard Division, entered an aggressive expansion period. Over two decades, Boise made several acquisitions and sales aimed at consolidating its paperboard activities. In 1977, Latex Fiber Industries and Payne-Jones, Inc. were acquired from Uniroyal. This major purchase consisted of two paperboard mills in Beaver Falls, New York, (Lewis and Latex), one in Brownville, New York, and the Payne-Jones specialized coating and finishing facility in Lowville, New York. In 1983, Boise acquired the Mississquoi Mill in Sheldon Springs, Vermont. (Boise sold Payne-Jones, Inc. in 1987 and, after shutting down the Brown ville mill in 1988, sold it in 1989.)

Under Boise’s auspices, the company enjoyed continued market growth and undertook major facility upgrades. Through acquisition of complementary manufacturing companies and continued facility enhancements, the division developed new capabilities, including coating, embossing, and saturating, that allowed its manufactured materials to be substituted for other materials such as textiles, leathers, rubber, and plastics. By 1972, Specialty Paperboard was reputed to be the largest producer in the world of paper pressboard and employed some 300 persons.

The division also took a leadership role in environmental matters when, in December 1972, it became one of the first manufacturers in Vermont to comply with government water treatment regulations. After investing in an $850,000 water treatment facility, Specialty Paperboard was able to completely recycle water from the Connecticut River, which supplied the firm with about one million to 1.75 million gallons of water each day. The purpose of the system was to make possible the reuse of water solids left over from the manufacturing process. The state’s water resources commissioner regarded the company’s cooperation in meeting environmental standards “fantastic,” according to the Brattleboro Reformer (December 14, 1972).

Emerging as Specialty Paperboard: 1989–97

In June 1989, in a leveraged buyout by management that included K. Peter Nome, a former executive vice-president of Boise Cascade’s Paper Group; A. Ben Groce, general manager of the Specialty Paperboard Division; and Jack Sherman, who became chief financial officer (CFO). With the help of private investment firm McCown, De Leeuw & Co., the company became a private, independently held company, headquartered in Brattleboro, with the name Specialty Paperboard, Inc. When it was incorporated in 1989, Specialty Paperboard had revenues of $120 million. Boise Cascade, which had decided to divest itself of its non-core businesses, retained a 30 percent share in the company.

Specialty Paperboard then entered the most challenging period in its history. The United States was in the midst of an economic recession, and the company’s assets were heavily leveraged. Management consolidated Specialty Paperboard’s operations into a few facilities in order to reduce debt and focus on the company’s most profitable manufacturing and marketing segments. In 1991, the Mississquoi Mill was sold.

The company went public in 1993 on the NASDAQ Ex-change, trading under the symbol SPBI, simultaneously buying out Boise Cascade’s remaining shares. By this time, Specialty Paperboard was concentrating almost exclusively on paper products using recycled fiber and office waste products, primarily (60 percent) for sale to the office products industry. The remainder of its business was evenly divided between the sale of gaskets, principally to the automobile industry, and latex-reinforced materials for albums and book covers. During the early 1990s, widespread market interest in recycled materials peaked as new government standards went into effect, and the company responded by developing even more materials with significant recovered material content.

The year 1993 was a particularly momentous one for Specialty Paperboard. In addition to launching its initial public offering, the company, according to the Keene (N.H.) Sentinel, was forced to shut down briefly during the summer when its major customers, under pressure from office supply superstores, cut back on orders. By December of that year, however, Specialty Paperboard was up and running seven days a week, 24-hours a day, and shipping 100 tons of product each day. The company, with revenues of $80 million, was now employing some 250 persons.

Company Perspectives:

With its versatile manufacturing and technical capabilities and strong service orientation, FiberMark holds leadership positions in its core markets. Using a wide range of fibers and raw materials, including glass, rayon and other synthetic fibers, cotton denim, wood pulp, and recovered paper, the company’s manufacturing capabilities comprise paper-making, nonwoven production, including synthetic web technology (meltblown) and wet-laid nonwoven; saturating; coating; embossing; and other converting processes.

The management team that had led the 1989 leveraged buyout underwent some important changes during the early 1990s. Both A. Ben Groce and Jack Sherman left the company, but K. Peter Norrie remained as chairman. Bruce Moore, who had served as general manager of the Latex Fiber Products Division, became vice-president and CFO in December 1990. Alex Kwader, who had been a senior vice-president of the company, serving as general manager of the Pressboard Products Division, became president and CEO in 1991. Moore and Kwader continued to serve in those roles through the 1990s.

Beginning in 1994, Specialty Paperboard initiated a targeted acquisitions strategy that significantly expanded the company’s product offerings. In July 1994, the company acquired Endura Products Division from W.R. Grace & Co. for $24.5 million. Seeking also to concentrate its focus on specific profitable niche markets, the company sold the assets of its Lewis Mill, as well as its gasket business, to Armstrong World Industries, Inc. in 1995 for approximately $14 million.

By 1996, the company had become a leading manufacturer of specialty fiber-based materials for a number of industrial and consumer applications. Key products included: pressboard used in filing products and report covers for office and school use, filtration materials for car and truck engines, insulation materials for power transformers and printed circuit boards, and satu-rated base materials for masking tapes and book covers.

On November 1, 1996, Specialty Paperboard announced its most ambitious purchase to date: the acquisition of Custom Papers Group, Inc. (CPG) and Arcon Coating Mills, both manufacturers of specialty paper products. CPG operated five paper mills and manufactured a diverse group of specialty papers for industrial and technical markets, including filtration products for internal combustion engines, electrical insulating paper used in the manufacture of power distribution transformers, mat boards for picture mounting applications, base paper for indus-trial abrasive/sanding products, and photographic packaging materials. Arcon manufactured colored binding and stripping tapes and edge cover materials sold primarily to the office products, checkbook, and book binding markets. Since many of Arcon’s products were already being combined with Specialty Paperboard’s pressboard cover materials for book and report covers and other office supplies, this purchase was a particularly complementary one.

The two acquisitions, which totaled some $130 million, were financed through a $100 million offering of ten-year non-amortizing senior notes. In a company announcement of these purchases, Kwader predicted they would “effectively double the revenues of our company and provide synergies that will add to our overall profitability.”

His confidence proved justified. Sales shot up from $124 million in 1996 to $325.3 million in 1999. From 1993, when Specialty Paperboard went public, through December 1999, sales had increased 306 percent. Over the same period, the company achieved a 25 percent compound annual growth rate, excluding extraordinary events. Moreover, 1999 marked the seventh consecutive year of record earnings as well as sales growth for FiberMark. According to Better Investing (March 1998), the company’s success during this period could be attributed “primarily to management’s ability to consolidate acquisitions and deliver greater profitability.”

FiberMark: A New Look, A Broader Vision

In April 1997, the company changed its name. Announcing the new corporate identity, Kwader remarked, ‘ The name FiberMark more accurately reflects our consolidated businesses and the fact that we are leaders in the manufacture and conversion of specialty fiber-based materials.” By the late 1990s, as its product line expanded, the company was indeed using a wide array of raw materials to formulate its products, including virgin hardwood and softwood pulp, secondary wood fiber from preand post-consumer waste, secondary cotton fiber from the apparel industry, synthetic fibers (nylon, polyester and fiberglass), and synthetic latex. Significantly, as FiberMark continued to acquire businesses in other markets with very demanding technical requirements, the use of recovered material content in its products began to decline.

As the new century began, management continued to pursue a focused strategy of making selective acquisitions in niche markets, rationalizing production capacity, and building a global customer base. According to its strategic plan, FiberMark expected to realize revenues exceeding $1 billion by 2005-2007. The company was also poised to extend its leadership in specialty fiber-based materials by diversifying geographically and operationally, while focusing on value-added opportunities within specialty fiber-based materials markets.

Key Dates:

1861:: Case Brothers, Inc. is founded in South Manchester, Connecticut; another mill added later in East Hart-ford.
1961:: Case Brothers builds Brattleboro mill.
1967:: Boise Cascade purchases Case Brothers.
1989:: Leveraged buyout by management; company becomes Specialty Paperboard, Inc.
1993:: Specialty Paperboard, Inc. goes public on NASDAQ.
1997:: Name of company changed to FiberMark, Inc.; company moves to New York Stock Exchange.

For FiberMark to meet its ambitious strategic objectives, major acquisitions would have to continue to play a critical role. Beginning in 1994, the company completed five significant acquisitions, all of which soon added to the bottom line. A key move was the purchase of a German company, Steinbeis Gessner GmbH & Co., in 1997, for $43 million. Renamed FiberMark Gessner, the division made filter media for automotive applications, vacuum bag filter materials, abrasives and masking tape base materials for pressure sensitive tapes and carrier tapes for electronic components. FiberMark Gessner immediately began to play a significant role in the company as a whole. In May 1999, all worldwide filter-media business, accounting for almost 45 percent of FiberMark’s sales, was consolidated under Gessner’s leadership. Gessner’s strategic and marketing-planning process, using a combination of market and customer-specific objectives, provided a model that FiberMark adapted for company-wide use.

In August 1999, FiberMark acquired a second major German company: Papierfabriek Lahnstein GmbH, another leader in complementary niche markets for specialty fiber-based materials, including security papers and base materials for wall coverings and self-adhesive labels. Purchased from its publicly-held Swiss parent company Sihl AG, Lahnstein was acquired for approximately $22 million. It had net revenues in 1998 of approximately $31.8 million and in 1999, of $39 million. Re-named FiberMark Lahnstein, the company, headquartered near Frankfurt, brought new markets to FiberMark as well as new technologies and products. One such product was a weather-resistant synthetic-content material for labels used in outdoor settings that prints well and can be bar-coded.

Meanwhile, in order to streamline operations, FiberMark’s management closed the Owensboro, Kentucky, facility in January 1998, the Beaver Falls, New York, plant in January 1999, and expected to cease manufacturing operations at the Hughesville, New Jersey, mill by December 31, 2000. Production at each of these plants was consolidated in other domestic FiberMark facilities. With the closing of the Hughesville mill, the company would operate nine facilities in the United States and Europe.

New fiber-based products continued to be developed as FiberMark moved into the 21st century. Among them were, lighter-weight and embossed cover stocks; food board for containers used by fast-food outlets; a synthetic sheet to replace cloth in certain tape applications; new media that enables auto filters to provide higher performance; and a new nonwoven base for wall coverings that, among other attributes, is dry-strippable and will not shrink.