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Gibraltar Packaging Group has built a
unified, service oriented team and is concentrating on maximizing their existing
production facilities
Containers & Packaging
Basic Materials
(OTC: PACK)
Gibraltar Packaging Group,
Inc.
2000 Summit Avenue PO Box 2148
Hastings, NE 68901
Phone: 402-463-1366
Walter Rose
Chairman and
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Editor
CEOCFOinterviews.com
March 2003
Biography For:
Walter E. Rose
Chairman & Chief Executive Officer
Gibraltar Packaging Group, Inc.
Mr. Rose
received his bachelor’s degree in Mechanical Engineering from the University of
Florida and studied for his MBA at New York University.
Mr. Rose began his career with ITT Rayonier,
a forest products company, where he was involved in operations management and strategic
planning. Following this employment he worked for Thomas Tilling, Inc., a British
based holding company where he held the position of Executive Vice President and Group
Executive.
In 1982 Mr. Rose left Thomas Tilling, Inc.
and with John Strautnieks, purchased International Foils, Inc. In 1986 they also
purchased Great Plains Packaging, which is now Gibraltar Packaging Group, Inc. Mr.
Rose has held the position of Chief Executive Officer of Gibraltar since August 1995. He
is also President and Chief Executive Officer of Rostra Technologies, Inc, a private
company owned by he and Mr. Strautnieks.
Company Profile:
Gibraltar Packaging Group, Inc (OTC:PACK) designs, manufactures, and markets packaging
products nationwide for a diverse group of industries. Gibraltar has three
manufacturing facilities, Great Plains Packaging in Hastings, Nebraska; Standard Packaging
& Printing in Mount Gilead, North Carolina; and Flashfold Carton in Fort Wayne,
Indiana. Each of these facilities specializes in the manufacture of folding cartons.
In addition to folding cartons, the Great Plains Packaging facility also
specializes in litho-laminated and corrugated cartons, and the Standard Packaging &
Printing facility also specializes in flexible packaging products.
The four product lines that Gibraltar's
divisions manufacture complement each other, and enable the company to service multiple
packaging products for many of its customers. Gibraltar presently markets its products to
a variety of industries including the following: food, paper and allied, pharmaceutical
and medical instruments, textiles, automotive, household, tobacco, and industrial
products.
Gibraltar’s three facilities are ISO
9001 certified and have received other recognition for the quality packaging products they
produce. In addition to high-quality products, Gibraltar’s extensive service
capabilities include: award winning structural design, graphics support, inventory
management systems, customized reporting, and Just-In-Time delivery.
CEOCFOinterviews: Mr. Rose, what is the focus of
Gibraltar Packaging today?
Mr. Rose: Gibraltar Packaging Group manufactures folding
cartons for the packaging industry. We also manufacture flexible packaging, where we
print and make bags out of flexible films and we also manufacture litho-laminated cartons.
However our principle focus is folding cartons for consumer products.
CEOCFOinterviews:
Who uses what you make?
Mr. Rose: We sell to companies that make consumer products.
Our principal industries are food, pharmaceuticals, office supplies and a wide
variety of industrial products.
CEOCFOinterviews:
What is involved in the manufacturing process?
Mr. Rose: We purchase bleached or semi bleached paperboard.
We sheet, print, and die-cut it to form the flaps into an actual carton through our
finishing department. We then ship our products to the company that is filling the
consumer products, or to the actual customer that does their own filling and packaging.
Basically that is what we do. We have three plants; the largest is in
Hastings, Nebraska. Our second plant is in Fort Wayne, Indiana, and the third plant is in
Mt. Gilead, North Carolina. One of the advantages we have is that from these three
plants we can cover the entire country. We can serve customers that want to fold all
of their vendors together and put them with one supplier with multiple plants. The
industry has about 450 folding carton plants in the US, and the bulk of these are owner-
operated single plant operations. We have the advantage over these as we can bid on bigger
pieces of business for national companies with multiple plants. Obviously, on the
other end we are smaller than the big integrated paper companies who also have packaging
divisions, like International Paper and Jefferson Smurfit. We feel that while we can offer
national coverage, we are also smaller and more flexible and give better customer service
than the large companies can.
CEOCFOinterviews:
What sets your customer service apart from the competition?
Mr. Rose: Obviously quality is a big concern. Quality and
customer service are the two major ingredients in competing in this industry. Price
is important as it essential to be competitive with others; however you do not necessarily
need to be lower. The reason that quality and customer service are so important is
that the package is the product. When you walk in the store what you see is the package,
not the product that you buy. You buy based on what you see on the package and the
pictures. So, the quality of that package is very critical for the consumer company
who, at the end of the day, is selling that product on the shelf. The customer
service comes in, and when I say customer service I mean the ability to ship on time, to
turn product quickly when there is a problem, and when their customers, like Wal-Mart, cut
off a non-selling package quickly and we have to shift our production of cartons in a very
short time span. We are able to react quickly to the customer’s need, which is
why the customer doesn’t need to carry any inventory. Our delivery system and the
ability for us to turn product quickly and respond to customers needs is an important
ingredient in our customer service.
CEOCFOinterviews:
Do you carry an inventory of different size cartons?
Mr. Rose: No, they are all custom and made to order. We
may carry inventory for the customer, but they are things that they asked us to make per
their specifications.
CEOCFOinterviews:
Are you involved in designing and creating the box or does the customer tell you what they
want and you implement it?
Mr. Rose: It can happen either way. The minimum we
start with is the customer’s artwork. They tell us what they want their product
to look like and we will take it from there. If he wants us to we can convert it into
something that will work for a carton because there is a lot of difference between what
you want and which size and style of carton you place it in. We are very good at
doing that. Other customers come in and they have already decided what they want;
they have their own people who have designed the carton and they give it to us, we bid it,
and run with it. It can work either way.
CEOCFOinterviews:
You’ve done some upgrading with equipment lately. Tell me about that and how it
is working.
Mr. Rose: We are running at about 80% of capacity across our
plants but we’ve been upgrading equipment and adding some too. Mainly we have been
focused on upgrading our equipment by doing things to allow us to have less down time.
Changeover time is very critical in this business because we are not in the real long run
business; we are in the short to medium run business and change over time is very
important. For example we have taken advantage of some of the new processes and
computerized equipment that we can add to our printing presses to allow us to turn the
jobs faster and to reduce down time, thus increasing our total printing capacity.
CEOCFOinterviews:
How do you reach your new customers?
Mr. Rose: We do a couple of things. Customers come to
us because of our reputation of being a high-quality and high-service level supplier.
They hear about us from other people in the industry; word of mouth is very
important to us. We also do quite a bit of calling, including telephone; we do
research on people who are using packaging, and certain types of packaging, and then call
on them.
CEOCFOinterviews:
Do you have long-term relationships with your customers?
Mr. Rose: Most customers stay with us because if they are
getting good service, the only time they will go out and shop would be for price. We
usually get a chance to re-look at the business as customers often come back to us and ask
us to be competitive and, if we can be competitive, they will let us keep the business.
Most of our customers have been with us for years however we do continually add new
ones. We do, now and then, lose a customer or two; but we have also had a history
that when customers leave, they find out that the service isn’t as good as ours and
come back.
CEOCFOinterviews:
Are there industries that you are not in now where you would like to make some inroads?
Mr. Rose: The industries that we are focused on right now are
the ones we are in, food and pharmaceuticals because they are very dependable industries.
We are in the textile industry in the southeast but that has been decreasing
as a percent of our sales. It was previously about 70% of our plant in North
Carolina, but now it is down to 40% and we figure it will bottom out to about 20%.
The textile industry has been moving overseas and is not an industry we can grow
with. We are looking for industries that are growing and we are focused in the food,
particularly frozen, and pharmaceutical industries.
CEOCFOinterviews:
Is there anything new in the folding carton industry that people may not realize? Have
there been any changes?
Mr. Rose: Basically, it is just a matter of becoming more
efficient, but the process has not changed and there are no major changes on the horizon.
CEOCFOinterviews:
Tell me a little bit about the flexible poly film side of the business and where do you
see this going?
Mr. Rose: This business is not too different from folding
cartons, but it involves more colors, moving graphics, composite type bags, and
laminations and we are moving in that direction. The industry is growing faster than
the folding carton side and there are a lot of opportunities out there and again, food is
the number one industry that we are focused on. We are a bit heavy in textiles
however we are focusing heavy on food and moving away from textiles.
CEOCFOinterviews:
Do you need different equipment for the poly-fill area?
Mr. Rose: It’s a totally separate operation in our North
Carolina plant and is located in a separate building. There are different printing
presses and finishing equipment that we use to produce this product line.
CEOCFOinterviews:
What is the market in general for folding cartons and what piece of it do you have now?
Mr. Rose: Folding carton business pretty much moves with the
GNP of the country and at the same rate. This is a huge industry of 450 plants and we are
less than 1% of the whole industry. It is very fragmented, but is moving to
consolidate. Overall the consolidation is slow; we are not like the automobile industry
that gets down to three, four, or five producers. We still have 300 producers in the US.
CEOCFOinterviews:
Do you see acquisitions as part of your future?
Mr. Rose: Our total focus right now is improving and
increasing the amount of production in our existing plants. However, I am not saying
that we wouldn’t if something came along that was really synergistic with what we are
doing. Currently we are operating at about 80% of capacity and our biggest payoff to
our shareholders is to push more business through the plants that we have.
CEOCFOinterviews:
So do you have some concrete plans for doing that?
Mr. Rose: This year we are having very nice high single to
double digit increases in sales over last year, and we plan to be able to increase our
sales over the next year or so until we are operating at a higher level of capacity. We
will then add more equipment or look at possible acquisitions or other expansions.
CEOCFOinterviews:
Tell me a little bit about the cash and credit position of the company.
Mr. Rose: The company went through some troubled times a few
years ago where we were over leveraged, but we have done a very good job paying off debt
and today the debt levels of the company are two times EBITDA which we and our lenders are
very comfortable with. We are continuing to pay between two and four million dollars of
this debt each year, so we’re in a very good position now cash and credit wise.
CEOCFOinterviews:
What are the challenges in the growth area?
Mr. Rose: I think this is a service driven business and it is
no better than the people that we have. Our biggest concerns are having good people
at the senior management level, hiring and training good people at the lower levels, and
creating an atmosphere where people are very much customer driven and very conscience of
the customer service and quality we are delivering to our customers. That is our real
focus. Building the company is to build that kind of a unified team, and I think
we’ve made good strides in the last few years getting that team built. Our
Chief Operating Officer, Dick Hinrichs, is a veteran of the industry. He has been in this
business his whole life and knows it inside and out. He has very effectively built a team
of people under him that think like he does, which is customer service and quality.
CEOCFOinterviews:
What should shareholders and potential investors about Gibraltar?
Mr. Rose: I think there are a couple of things. Number
one they should look at us and look at our current trading price. We have reeled off
three straight quarters that are in the .13 to .15 cent EPS area and expect to continue to
operate at this level. We do not make forecasts, but we want to tell the public that
we are optimistic and see ourselves continuing along this line. I think at the current
trading price of $2.50 to $2.80 the shares are tremendously undervalued. The other thing I
would say is we are continuing to pay our debt down and that alone is increasing
shareholder value and increasing our earnings per share. In addition, we are
increasing sales without adding new plant capacity, only relatively minor amount of
equipment additions, so the leveraging of existing plants will all allow us to continue to
increase earnings as we move into the future. I think you have a combination
of an undervalued stock and an opportunity to increase earnings, which I think is a
tremendous opportunity for investors.
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