Multi-Color Corporation

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Multi-Color Corporation

425 Walnut Street, Suite 1300
Cincinnati, Ohio 45202
U.S.A.
Telephone: (513) 381-1480
Fax: (513) 381-2813
Web site: http://www.multicolorcorp.com

Public Company
Incorporated: 1916 as Franklin Development Company
Employees: 347
Sales: $72.6 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: LABL
NAIC: 323111 Commercial Gravure Printing; 322221 Coated and Laminated Packaging Paper and Plastics Film Manufacturing

Multi-Color Corporation is a leading U.S. manufacturer of printed labels for consumer goods. Multi-Color prints labels for products such as liquid detergents, laundry-care products, beverages, health and beauty aids, motor oil, chewing gum, and food products. The company’s customers are some of the largest consumer products companies in the world, including multinational conglomerates such as The Coca-Cola Company, General Foods Corporation, The Procter & Gamble Company, Tropicana, Colgate-Palmolive Company, and The Clorox Company. Multi-Color uses several different technologies to print its specialty labels, most notably the in-mold label process it helped developed. In-mold labels are applied to plastic containers as the containers are being formed in the mold. Multi-Color serves more than 100 customers in the United States, South America, and Latin America.

Origins

Multi-Color, destined to be one of the largest printers of labels for consumer products in the world, began operating in 1916. The company was founded as the Franklin Development Company, whose executives invested in the latest in print technology at the time, the sheet-fed, three-color press. The company’s management was impressed by the innovation, forming a separate company incorporated as the Printing Machinery Co. to manufacture and sell the new presses. Shortly after its founding, Printing Machinery changed its name to MulticolorType and changed its business focus to printing rather than press manufacturing. The company began producing paper labels in 1918, marking the beginning of Multi-Color’s involvement in lending identity and shelf appeal to consumer products.

As Multi-Color matured, it developed a client roster comprising some of the largest, most widely recognized consumer products companies in the world. The company served as an integral facet of the marketing programs for ubiquitous brands, allying itself with stalwart concerns such as The Coca-Cola Company, Colgate-Palmolive Company, The Procter & Gamble Company, General Foods Corporation, and The Clorox Company. Multi-Color established its relationship with the world’s most prestigious firms early in its history, gaining The Campbell Soup Company and chewing-gum producer Wm. Wrigley, Jr. as customers early in the 1920s.

Over the decades, Multi-Color’s customer base expanded, as did the marketing programs developed by its customers. To keep pace with the increasingly sophisticated demands of its customers, the company embraced technological innovations as they came, and, in one important instance, assumed the role of pioneer. During the 1950s, rotogravure printing technology was developed, which would serve as Multi-Color’s primary printing technology throughout the 20th century and into the next century. During the 1960s and 1970s, as greater diversity in label design and presentation were required, eight-color presses emerged, forcing Multi-Color to invest in the new technology.

In-Mold Label Technology Is Developed in 1980

On the technology front, no event was bigger than the company’s pioneering efforts in 1980. As the decade began, Multi-Color developed the in-mold label. In-mold labels were labels applied to plastic containers as the containers were being formed in the mold. The in-mold label was a plastic with the same chemical characteristics as the container, making the labels more resistant to moisture and easier to recycle. Multi-Color’ s innovation became the industry standard for those products packaged in plastic bottles such as orange juice jugs, and its importance to Multi-Color’s vitality cannot be ignored. Without the company’s creation of and entry into the in-mold market, the years ahead, particularly the 1990s, arguably could have been disastrous. The development of in-mold technology in 1980 stabilized the company, providing a crutch upon which the company would lean heavily.

Multi-Color did not begin to stumble noticeably until roughly a decade after the development of in-mold label technology. During the intervening years, the company expanded modestly. In 1985, the company acquired the assets of the label divisions of Georgia-Pacific. Two years later, the 71-year-old company completed its initial public offering of stock. The same year the company completed its entry into the public spotlight, it also established the Multi-Color Graphic Services division, which supplied color separations of labels and engraved cylinders for the company’s facilities. In 1990, the company increased its printing capacity by constructing a rotogravure printing plant in Scottsburg, Indiana. The Scottsburg facility served as the site for the company’s in-mold label production. Several months after opening the Scottsburg facility, Multi-Color’s management began searching for a way to increase the speed of its rotogravure printing process. In 1991, after investigating the prevailing cylinder manufacturing technologies, the company invested in a Japanese-developed technology. Subsequent to this investment, the company established Laser Graphic Systems in Erlanger, Kentucky. From Erlanger, Multi-Color supplied cylinders to the Scottsburg plant and outside customers, achieving vertical integration in its operations.

Problems Surface in the 1990s

By the early 1990s, nearly 80 years of printing labels had shaped Multi-Color into one of the largest concerns of its kind. Despite the company’s entrenched position in the industry, particularly its regard in the in-mold label business, there were indications of disturbing financial problems. On the bright side, the company controlled more than 50 percent of the in-mold market, its leadership translating to exponential financial gains. Between 1989 and 1994, Multi-Color’s in-mold sales doubled, helping the company to record $65.4 million in annual sales as it entered the mid-1990s. The problem, however, was that the company’s annual revenue volume had plateaued by 1994, failing to rise meaningfully from the amount recorded at the beginning of the decade. A decline in conventional label sales was to blame, negating the impressive increases posted by the company’s in-mold business. In one market niche—cigarette wrappers—the decline was drastic, indicative of the financial anemia affecting virtually everything outside in-mold printing. At the beginning of the 1990s, Multi-Color collected nearly $9 million annually from its cigarette wrapper activities. By 1994, the business had been virtually wiped out. To exacerbate the situation, Multi-Color’s ability to post a profit was of grave concern. In 1994, the company failed to earn any income, recording a numbing $4.3 million loss.

By the time Multi-Color reported its depressed financial totals for 1994, it already had begun to take action. The company derived half its sales from conventional label sales and the other half from in-mold label sales, a balance Multi-Color’s management wanted to maintain in the future. Although Multi-Color was performing admirably in the in-mold market, this market was not big enough to support the company at its extant size. Accordingly, the company’s management needed to repair its conventional label business to restore profitability and to enliven revenue growth. As part of its restructuring efforts, the company closed its plant in Lockport, Illinois, selling the facility in the summer of 1993 to Precise Data, a company that printed mail inserts.

Between 1995 and 1996, the company consolidated certain operations, exited some market segments, reduced payroll, and improved efficiency. By the end of 1996, there was tangible evidence of improvement. After two years of losses, the company recorded $2.6 million in operating profit, a nearly $10 million improvement from the loss reported in 1995. Importantly, the company’s focus on rejuvenating its conventional label business had not occurred at the expense of its other operations. In Scottsburg, where the company conducted its in-mold activities, production capacity doubled in 1996. Capacity was expected to increase by another 50 percent once a new printing press was delivered in early 1997.

Although there were signs of recovery, Multi-Color continued to struggle as it entered the late 1990s. The company recorded $1.4 million in net income in 1997, but its sales, rather than stagnating, had begun to erode markedly. From the plateau of $65 million in 1994, revenue had slipped to $55.4 million by 1996 before dropping to $48.1 million in 1997. In 1998, the pattern of decline continued. Sales dropped by $500,000, while the nagging problem of profitability resurfaced. During the year, the company eclipsed the disaster of 1994 by posting a $4.4 million loss. Genuine, lasting recovery did not arrive until the last year of the decade, when the company gained a new leader and a new vision for the future.

Company Perspectives:

Since we began working with our very first customer in 1918, Multi-Color has recognized that the single most important ingredient to the success of our business is our customers. We are devoted to working closely with our customers in a spirit of mutual benefit—satisfying the needs of our customers—helping you, our customer, present the most appealing product image possible to customers.

New Management and Expanded Markets: Late 1990s and Beyond

Francis D. Gerace, the individual who would lead Multi-Color toward vibrant financial growth, joined the company in April 1998. Gerace joined the company as vice-president of operations one month after the $4.4 million loss was announced. He was appointed president and chief executive officer roughly one year later, in May 1999. Gerace implemented a waste elimination program that reduced waste by 30 percent and increased productivity by 40 percent, helping the company reverse its worrisome financial trend. In 1999, Multi-Color registered $1.2 million in net income and generated $49.8 million in revenue, the first time the company’s revenue had increased since 1994.

Gerace’s greatest contribution to Multi-Color’s well being was his decision to enter new markets. He did so through acquisitions, beginning his buying spree roughly six months after he was given command over the company. In December 1999, Gerace acquired Buriot International, Inc., a pressure-sensitive label manufacturer that had been formed in 1996 by France-based Pierre Buriot S.A. The acquisition, which included a two-year-old manufacturing facility, gave Multi-Color access to the pressure-sensitive market for the first time, a vast, $2-billion market that provided ample room for the company’s growth. In June 2000, Gerace engineered the acquisition of Uniflex Corporation, a manufacturer of heat-shrink labels and tamper-evident bands with a production facility in Las Vegas and offices in Anaheim Hills, California. The acquisition provided Multi-Color with access to the $300-million heat-shrink market, which, in conjunction with the acquisition of Buriot, added greatly to the company’s potential for growth. The in-mold market, by contrast, was estimated to be a $100 million market.

Diversification through acquisition continued under Gerace’s rule. For the first time in more than a decade, Multi-Color was recording substantial increases in its annual revenue volume, gains that were attributable to Gerace’s desire to enter new markets. At the end of 2001, Multi-Color acquired Premiere Labels Inc., which increased the company’s involvement in the pressure-sensitive label market. In June 2002, the company entered another new market by acquiring Quick Pak Inc., a manufacturer of specialty packaging products such as gift packs and special displays for major health and beauty companies, consumer products manufacturers, and national retailers. The acquisition added $10 million in revenue to Multi-Color’s annual volume and provided entry into packaging services, estimated to be a $1 billion market. Gerace hailed the completion of the acquisition, placing great hopes on the contribution Quick Pak could make toward Multi-Color’s fortunes. ‘I wouldn’t be surprised if some day it isn’t the largest division in the company,” Gerace remarked in an August 16, 2002 interview with The Cincinnati Enquirer.

As Multi-Color prepared for the future, the company anticipated completing further acquisitions. Annual sales slipped past $70 million by the end of the company’s fiscal 2002 year, providing encouragement that Gerace’s diversification program was delivering the desired results. With new growth opportunities raising expectations for progress in the 21st century, the venerable printing firm prepared for a future that promised to take the company in business directions it had not explored in its nearly 90-year history.

Principal Subsidiaries

Uniflex Corporation; Buriot International, Inc.; Quick Pak Inc.

Principal Competitors

Fort Dearborn Company; Schawk, Inc.; Seven Worldwide, Inc.

Key Dates:

1916:: Franklin Development Company is formed.
1918:: The company’s business focus changes from manufacturing printing presses to printing labels.
1980:: Multi-Color develops in-mold label technology.
1999:: Buriot International, Inc. is acquired.
2000:: Uniflex Corporation is acquired.
2002:: Quick Pak Inc. is acquired.