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The Later (Declining) Years

The Creation of Mail-Well, Inc.: 1994

The early 1990s saw many paper companies exit from the envelope business because profits in that sector had been eroded by postage increases, new technologies, and changes in the customer base.

Around this same time, Gerald F. Mahoney had entered the world of entrepreneurship by purchasing a small, one-plant manufacturer of envelopes called Pavey Envelope and Tag Corp. Mahoney had previously served as CFO and in other positions at a number of companies, including a one-time Fortune 500 firm that grew very fast through acquisitions before downsizing itself through the spinning off of a number of operations.

Mahoney joined with some partners with leveraged buyout experience to form the Houston-based Sterling Group Inc. After Georgia-Pacific decided to exit from envelope making, it reached a deal with Sterling to sell its envelope business for $155.1 million. Sterling also purchased, for $4.4 million, Pavey, which it merged with the Georgia-Pacific envelope business in February 1994 to create Mail-Well, with Mahoney serving as chairman and CEO.

Mail-Well was launched with 16 manufacturing plants that had produced about 13 billion envelopes during 1993. It also began with debt of $142 million and equity of only $17 million. Mahoney's plan for Mail-Well was clear from the start: he aimed for it to be a major consolidator within a highly fragmented industry. Envelope makers typically served customers within local or regional areas.

By growing through acquisition and gaining additional manufacturing and distribution operations, Mail-Well would still be able to serve regional customers but would benefit from economies of scale. Mahoney also reasoned that larger corporations with operations in different regions of the country might prefer dealing with a single envelope supplier that had plants located in each of those regions, rather than having to contract with several different suppliers. [see note 1 below]

Mahoney's first major acquisition came in December 1994 when Mail-Well paid $97.4 million to purchase American Envelope Company, which had annual revenues of $180 million, from CC Industries. The purchase increased the number of plants to 29 and the number of employees to 4,200, and made Mail-Well the largest envelope manufacturer in the United States. Next, Mail-Well gobbled up Supremex, Inc. for $65.5 million in July 1995. Supremex was the largest envelope maker in Canada, with revenues of $90 million and 11 manufacturing facilities.

Mail-Well's next move was to create a second leg for the company to stand on. In August 1995 it entered the field of commercial printing through the $82.6 million acquisition of Graphic Arts Center, Inc., a leading West Coast-based printer of "high-impact" documents, such as car brochures and annual reports. By this time the company's debt load had reached $370 million, while equity had increased only to $33 million, so Mahoney in September 1995 took the company public on the NASDAQ, raising $64 million. Mail-Well's debt was thus reduced to $310 million, while its equity grew to $100 million. For 1995 the company posted net income of $8 million on net sales of $596.8 million.

The acquisitions in 1996 were more modest ones, but fit into the company strategy of pursuing small commercial printers and envelope printers in geographic areas not already served by Mail-Well. In April 1996 Mail-Well spent $28 million for Quality Park Products, Inc., a Pennsylvania-based printer of envelopes for the office products market, a fast-growing segment and a new area for Mail-Well. In November of that year the company increased its share of the Canadian envelope market to more than 50 percent with the $20 million acquisition of Ontario-based Pac National Group Products, Inc. One month later, Mail-Well's high-impact commercial printing sector was bolstered through the $20 million purchase of Indianapolis-based Shepard Poorman Communications Corporation, a specialist in calendars and computer instruction books. Net sales increased by more than 30 percent in 1996, reaching $778.5 million, while net income more than doubled to $16.9 million. In December 1996 Mail-Well's stock moved from the NASDAQ to the New York Stock Exchange.

From its incorporation as Mail-Well, Inc. in February 1994 through 2000, the company bought 59 businesses, serving as a leading consolidator of what it called the "highly fragmented printing industry." Revenues grew from $260 million to $2.43 billion, but the company was saddled with more than $1 billion in debt just when the economy soured.

Mail-Well spent the next few years streamlining its operations and jettisoning underperforming lines of business, before emerging in 2004 as a slimmed-down and more focused firm with a new name, Cenveo.

Cenveo Inc. is one of the largest players in the North American printing industry, specializing in offset and digital printing, custom and stock envelopes, and business documents and labels, and positioning itself as offering one-stop services ranging from design through fulfillment. About three-quarters of the firm's revenues come from its commercial business, which operates under the Cenveo name and serves national and local commercial clients, printing such documents as annual reports, corporate brochures, marketing materials, financial documents, and custom envelopes. Cenveo's resale business, operating under the Quality Park name, accounts for the remainder and produces business forms and labels, custom and stock envelopes, and specialty packaging and mailers, most of which is sold to dealers, such as print distributors, forms suppliers, and retail office products chains. The company operates 84 production facilities and five fulfillment and distribution centers throughout North America.

Additions of Third and Fourth Legs
in the Late 1990s

During 1997 Mail-Well spent about $87 million to acquire six more companies, including envelope maker Griffin Envelopes Inc., based in Seattle, and several firms in the commercial printing field—Seattle-based Allied Printers, Atlanta-based National Color Graphics, Inc., and Western Graphics Communications, headquartered in Cambridge, Maryland. The most significant acquisition of the year, however, was that of Murray Envelope Corporation of Hattiesburg, Mississippi. The addition of Murray provided Mail-Well with a third leg, that of printing services for the distributor market. Among the items that Murray supplied to distributors were envelopes, secure documents, pressure-sensitive labels, index tabs, and mailers. Revenues stood at $897.6 million in 1997, with net income growing to $22.2 million.

In January 1998 Paul V. Reilly was named president and chief operating officer of Mail-Well, having previously served as CFO. Also in early 1998 Mail-Well improved its equity base through a secondary stock offering that raised $90 million in capital. During 1998 the company stepped up its acquisitions activity, purchasing 23 more companies for an aggregate $369.5 million in cash, stock, and assumed debt. Three of these acquisitions were particularly significant. The addition in January of Fairhope, Alabama-based Poser Business Forms, Inc., which had annual revenues of $90 million, enhanced Mail-Well's printing for distributors sector. In March Mail-Well gained a fourth leg through the purchase of the label division of Lawson Mardon Packaging Inc. This division, which was based in Toronto, had annual sales of $81 million and was the second largest supplier of glue-on labels in North America, with a special focus on the food and beverage markets. Mail-Well's new label group was bolstered in May with the acquisition of the label division of International Paper Company, which included one of the most advanced label printing facilities in the United States. The company's third major acquisition of 1998 also came in May when it acquired Los Angeles-based Anderson Lithograph, a $135 million in revenue firm with a reputation as one of the top commercial printers in the country. Additionally, Mail-Well merged with seven commercial printing companies through the exchange of common stock worth about $118 million. The largest of these companies was St. Louis-based Color Art, Inc., which had revenues of about $75 million in 1997. In June 1998 Mail-Well's stock split two for one. The host of acquisitions helped push revenues up to $1.5 billion for 1998, a 68 percent increase. Net income, however, fell to $21.7 million, reflecting a $21.8 million charge taken late in the year to restructure the envelope and commercial printing operations, including the closure of three facilities and resulting staff reductions.

Mail-Well was able to smoothly integrate this many companies within a short period mainly because of its hands-off, decentralized management style. Mahoney told the Denver Business Journal: "We let them pretty much run the business as they were before and over a period of time the culture evolves as they get to know how we operate." One key imperative eventually absorbed by the acquired companies was Mail-Well's keen attention to cost-containment, particularly through an emphasis on productivity gains.

While the acquisition pace slowed somewhat in 1999, Mail-Well made a significant move in the middle of the year when it gained a European beachhead through the $102 million acquisition of Porter Chadburn plc, a publicly traded London-based label manufacturer. Porter Chadburn had revenues of $126 million, 70 percent of which came from the United States, where ten of its 13 plants were located. But the purchase did give Mail-Well its first European operations and moved its label division into the number two position in North America. The company's workforce grew to more than 13,000, while the number of printing plants increased to 110. For the year, Mail-Well's results were its best ever: $64.5 million in net income on record revenues of $1.85 billion.

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Early 2000s: From Mail-Well
to a Slimmed-Down Cenveo

In February 2000 Mail-Well made its largest acquisition yet, snaring American Business Products, Inc. (ABP) in a deal valued at approximately $334 million. Based in Atlanta, ABP had four operating units, three of which—Curtis 1000, International Envelope, and Discount Label—produced office supplies and products. The fourth, Jen-Coat, was involved in paper extrusion coating and lamination. Although the purchase further diversified Mail-Well's product lines, it also saddled the company with additional debt. Mail-Well's debt-to-capital ratio jumped to an unhealthy 74 percent, and by mid-2000 total debt exceeded $1 billion.

The ill-timing of the ABP acquisition soon became apparent. By the middle of 2000 Mail-Well was beginning to feel the effects of a softening in its core markets, including cutbacks in both direct mail and commercial printing. To decrease its debt burden, the company announced the sale of the non-core Jen-Coat unit to a management-led buyout group for about $100 million. Later in the year a restructuring was launched involving the closure of 11 unprofitable plants and offices and the replacement of several inefficient printing presses. As a result of $28 million in charges incurred thereby—coupled with heavy debt servicing costs—Mail-Well saw its earnings drop to $27.6 million for 2000, despite a 31 percent increase in revenues, to $2.43 billion.

As these travails began to play themselves out, Mail-Well placed a moratorium on further acquisitions. A change in management leadership also occurred. Mahoney, the person who engineered the consolidation strategy, retired^[1] in January 2001. Taking the helm as president and CEO was Paul V. Reilly, who had joined the company as CFO in 1995 and later served as president and chief operating officer, and therefore played an instrumental role in the firm's acquisition spree. Reilly took on the additional post of chairman later in 2001.

When the economic recession fully kicked in during 2001, the printing industry was hit harder than the overall economy because of its reliance on the advertising market, which went into freefall. Compounding Mail-Well's difficulties were the continuing debt burden and its hands-off management style. At least on the commercial printing side, Mail-Well found that a number of the companies it had acquired suffered from poor management. Over the next three years, as the company restructured its operations, a greater degree of control and standardization among its far-flung units became a key goal.

In June 2001 the first phase of this restructuring was announced. Intending to concentrate its resources on general commercial printing and envelopes, Mail-Well said it would sell its label and printed office products units. In addition 11 envelope plants, including the original headquarters in Milwaukie (near Portland), Oregon, were slated for closure in a consolidation and streamlining initiative that involved the laying off of 1,500 workers. The poor economy and restructuring charges led to a net loss of $136.2 million for 2001, while revenues fell sharply, to $1.65 billion.

The divestiture program did not proceed entirely as planned. During 2002 Mail-Well succeeded in selling its Curtis 1000 printed office products distribution business; Mail-Well Label, its main label business; and its filing products division. But it was unable to get the price it was seeking for PrintXcel, a unit selling business forms and labels, envelopes, and related items to print distributors, forms suppliers, and office supply retailers, and the unit was withdrawn from the auction block. The divestiture program was completed in March 2003 with the sale of part of the company's digital graphics operations. As the advertising market remained in its prolonged slump, financial results for 2002 were little improved over the previous year—a net loss of $202.1 million on $1.73 billion in revenues—although the firm did manage to eke out earnings of $2 million before restructuring and impairment charges.

Through its various restructuring efforts, Mail-Well managed to reduce annual expenses by $130 million a year and both cut and restructure its debt. Equally important were further operational changes. Late in 2003 the company announced plans to combine its commercial printing and envelope businesses into a single group for direct sales to national and local accounts.

This group, responsible for about three-quarters of overall revenues, was melded together in a key way: Rather than the myriad names that the branches had been operating under over the years—which had confused customers and impeded the development of national or even regional customers—they would all begin operating under the same name, Cenveo. Likewise, in May 2004 Mail-Well itself changed its name to Cenveo Inc., the new moniker (pronounced senn-VAY-oh) derived from the syllables Cen, from "center," and Veo, relating to vision and understanding. Furthermore, the company's other unit, its resale division, comprised of PrintXcel and other units, began operating under the Quality Park name.

With the printing industry failing to reattain the heights reached in the late 1990s, paper costs increasing, and pricing pressures continuing, Cenveo suffered another net loss in 2004, albeit a more modest one than that incurred in 2001 and 2002. The company lost $19.7 million on revenues of $1.74 billion.

In January 2005, Reilly resigned as the money-losing Cenveo failed to meet its financial 'guidance' (projections) and was staring at bankruptcy.  Reilly’s friends on the Board of Directors paid him the same $2.8 million severance that would have been due if he had been fired "without cause."  Those board members were subsequently removed during a shareholder revolution led by Bob Burton.

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Cenveo Inc.

8310 South Valley Highway, Suite 400
Englewood, Colorado 80112-5806
U.S.A.
Telephone: (303) 790-8023
Fax: (303) 566-7380
Web site: http://www.cenveo.com

Public Company
Incorporated: 1994 as Mail-Well, Inc.
Employees: 10,000
Sales: $1.74 billion (2004)
Stock Exchanges: New York
Ticker Symbol: CVO
NAIC: 322232 Envelope Manufacturing; 322233 Stationery, Tablet, and Related Product Manufacturing; 323110 Commercial Lithographic Printing; 323115 Digital Printing; 323119 Other Commercial Printing; 323122 Prepress Services; 422110 Printing and Writing Paper Wholesalers; 422120 Stationery and Office Supplies Wholesalers

Principal Subsidiaries (As of 2004)

Cenveo Alberta Finance LP (Canada); Cenveo Canada Leasing Company Inc.; Cenveo Commercial Ohio, LLC; Cenveo Corporation; Cenveo Government Printing, Inc.; Cenveo International Holdings, Inc.; Cenveo McLaren Morris & Todd Company (Canada); Cenveo Resale Ohio, LLC; Cenveo Services, LLC; Cenveo Texas Finance, LP; Cenveo West, Inc.; Color-house China, Inc.; Discount Labels, Inc.; Graphic Arts Center de Mexico; Innova Envelope Inc. Enveloppe Innova Inc. (Canada); MM&T Packaging Company (Canada); MMTP Holdings, Inc.; PNG Inc. (Canada); Precision Fine Papers Inc. (Canada); Supremex, Inc. (Canada).

Principal Competitors (As of 2004)

National Envelope Corporation; R.R. Donnelley & Sons Company; National Service Industries, Inc.; UPM-Kymmene Corporation; Quebecor World Inc.

* - Back in the day (and currently at any good business organization), numbers were simply black and red numbers on the bottom line.  The goal was to make a profit, reward and keep good employees, and to grow the business where appropriate.  In modern corporate America, it seems that more importance is placed on headcount, R&D dollars per employee, etc.  It is all about keeping the shareholders happy.

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