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Mail-Well Inc. (MWL) |
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CEOCFO Current
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This is a printer friendly page! Mail-Well
Inc. is differentiating itself through depth of visual communication services and over 85
manufacturing facilities across North America Bio of CEO, Mr. Reilly: “We started the new Mail-Well, approximately two years ago. At that time the stock was not doing very well and we had a large amount of debt. Companies similar to Mail-Well that were viewed as “strategic rollups” were falling out of favor. We searched for a better way of running our business. We embarked upon a study, which we completed over six months, and came away with several points. The first point was that we needed to integrate the company and bring the benefits of that integration to our customers. We analyzed “strategic roll-ups” that succeeded in the long run. All of those successful companies, in fact, brought the benefits of their scale to the customer. The second point was to reduce the debt. At that time, we had five different business units and we subsequently shrunk that number to three. The proceeds from the sale of those businesses helped us reduce our debt. These sales also simplified our business so that we could embark upon the path of integration. The latest step we’ve taken is to further integrate the company to facilitate bringing the benefits of our scale to our customers. We are now reorganizing around our customer base. Previously we were organized around our product lines. Now, we will have one group of businesses with sales of 1.3 billion, that we have labeled “Mail-Well Commercial”. This segment will sell directly to those customers who use our products. The other segment of the business is called “Mail-Well Resale”. This segment will focus on customers who purchase our products and resell them to people who ultimately use these products.” CEOCFOinterviews: Why do you expect this to be better? Mr. Reilly: “We expect this change to be better because our customers are telling us this is what they want. For example – previously one of our commercial printing salespeople may call upon a customer. A printed office products salesperson may call on this customer as well. Now, with our customer focus, we will streamline the interface with our customers. Today, if customers so choose they can go to one contact point to purchase any Mail-Well product or service. We have had some recent successes that support this model. We had a test going for about one year with a Fortune 50 company. We provide all of our products and services to them - we became more important to that customer. We have increased our sales with this company by over sixty-five million dollars over the last year, and we provide them with a full spectrum of visual communication services.” CEOCFOinterviews: There
is a general trend toward consolidation of vendors; do you see that helping you and is
that part of the reason you have done this? CEOCFOinterviews: Can you tell us where most of your business is coming from? Mr. Reilly: “About 85% of our business is customized, meaning it is manufactured to our customer’s design. They may use an inside designer, an external design firm, or they may come to us for that service. With that design, they essentially have a product. Today many customers will take that designed product out to bid. Printers will estimate what it will cost and decide what to charge. The customer chooses the vendor that provides the best value. Increasingly our customers are asking us to deliver product we make to their customers – internal and external. About 15% of our business is standard and produced for inventory. Our resale customer base purchases most of this stock inventory. Almost every company in North America uses a product that Mail-Well or one of our competitors manufactures. Mail-Well sells directly to most large companies in North America and through its resale channels sells to many small and medium size companies.” CEOCFOinterviews: How has the use of the Internet affected the print industry? Mr. Reilly: “The Internet is so pervasive in our lives. During the dot.com boom days, there was a significant amount of dot.com marketing dollars in printing and we enjoyed some of that business. The year 2000 was a significant time of growth. Today it continues. For example – today people will go on the Internet and start to research a project and if they want information, it will be mailed to them. Sometimes we print that information. Another example – many people today will go online to look at buying a car, and there is a button that reads, “Would like a car catalogue?” If they press that button a printed car brochure will be mailed to their home. We are likely to have printed that catalogue. The Internet has been an integral part of our business. We have harnessed this technology like everybody else to help facilitate the ordering of our products. All of our businesses provide the capability for our customers to go online and order our products directly through us. We have a program called E-Masters that is an exclusive Mail-Well product, which easily allows our customers to order from us.” CEOCFOinterviews: Is your growth from the larger companies, or are you having increasing business from small customers? Mr. Reilly: “It really depends; the larger companies today like to do business with larger companies and Mail-Well has benefited from this desire. Our new enterprise solution group will focus on servicing the broad needs of these large customers. However, it would be unfair to say that all of our growth comes from this customer group. We have had successes with many mid-sized companies. In fact, our resale segment is ultimately servicing mid-sized and small companies. We use a variety of different channels to reach different types and size of customers.” CEOCFOinterviews: What role does technology play for you in helping your business? Mr. Reilly: “Technology has enabled us. Throughout the years, printing has been at the front end in using digital technology to make our jobs easier and our customers’ jobs easier. A PDF file is new for much of America. We have had PDF files for over twenty years, which were invented for the printing industry. We are increasingly using digital machines to process printing. A good example is the process of going from computer to plate where the digital image and information to be printed are directly imaged onto the printing plate. Our entire workflow is digital. Our customers will give us a digital file; we will take that file, manipulate it and send it to a digital plate. Our printing presses increasingly use digital technology to move quickly from one job to another. We are a huge user of digital print engines. We have scores of digital print engines and we use them for short-run, highly customized, production. Each of the images that come off our digital printing machines can be different than the previous image; each image can be personalized for the ultimate reader. We will always consider ourselves a technology-driven company.” CEOCFOinterviews: Why are people coming to you instead of your competitors for their printing needs? Mr. Reilly: “We differentiate ourselves with the depth of our services and the depth of our product line. We have the ability to provide many products and services to many different locations. Today most of our competitors are one-plant, one-product line operations. If you look at Mail-Well that has over 85 manufacturing facilities across North America and many product lines, we are different.” CEOCFOinterviews: What are the challenges in managing so many different facilities and how do you make it work for you? Mr. Reilly: “It is difficult because there are many Mail-Well locations. We manage remotely through a company-wide process that we announced a few years ago. Our business strategy is communicated to all employees using the “Mail-Well Focus Document”. This document is three pages long. Within it, we outline our values, our mission, what we should and should not work on, and how we measure success. We have a highly visible internal communication program, which explains to each of our ten thousand employees, what they should do every day to make Mail-Well more successful. Communication is the way we connect remotely, which utilizes having simple communication that is clearly understood by everyone. We also have fifteen measurements assessing our progress and these measurements apply to all of our different locations. We measure different locations against each other, so they can see how they compare to their peers. Our most important measurements are customer satisfaction, employee satisfaction, productivity, employee safety and how each location meets its financial commitments.” CEOCFOinterviews: Are there any products or services that you are not offering that you plan to offer? Mr. Reilly: “At this moment we don’t have any new products or services to share, but we are seeking new possibilities. We continually ask our customers what else they would like us to do. In the past year, we have added fulfillment to our service base. We see a significant amount of interest from our customers to use this new service. We are helping our customers by taking a task off their hands that may not be their core competency, but is ours. We can provide this service from many locations. We have five hub locations with the best software and the best distribution processes, making us very competitive with any distribution company in the country. We also have a new technology that creates photographic quality images from Cad/Cam computer files. This technology shortens our customers’ new product launch cycles and saves them money for photo shoots.” CEOCFOinterviews: Is the cost of raw materials a big factor for you, or are you able to just pass that on? Mr. Reilly: “The cost of raw materials is a big factor in our businesses. It represents anywhere from 30 or 40 percent of the selling price. For most of our businesses, over time, we pass changes both positive and negative to our customers. There are some businesses where we have contracts that don’t allow immediate changes. Until that contract is up, we can’t pass costs on to our customers, but ultimately we do. Passing costs on doesn’t happen immediately, but in the long run (we have measured this for almost twenty years), the price of our raw material, which is mostly paper, gets passed to the customers.” CEOCFOinterviews: How do you stay ahead to prevent another reorganization? Mr. Reilly: “We started with buying companies and we are now in the process of integrating them and making them better. A predictable result of integration is restructuring and reorganization. We started in 1994, and we have closed over 70 facilities due part to restructuring. I would suggest that when you look at any company like Mail-Well that has grown through acquisition, reorganization and restructuring this is a way to create value for our customers and shareholders by being more efficient and consolidating our operations. We don’t have any plans for any major restructuring, but there will be a time in the not-so-distant future where we will again re-enter the acquisition market. That move will again put us in the mode where periodically, we may use restructuring programs as a way to better serve our customers.” CEOCFOinterviews: Why should potential investors be interested and what should they know that perhaps they don’t realize when they look on the surface? Mr. Reilly: “We think there are two measurements that any shareholder should look at, when predicting what is going to happen over the long run with our stock price. The first measurement is market share. Over the last seven quarters, we have demonstrated that our business model is working and Mail-Well is growing faster than our competitors. This is proof that we are bringing the benefits of our scale to our customers. Even though our top-line has been going down as our markets contract, our market share has been going up and that is a good sign. The second measurement is that ultimately we make enough money so that our return on capital is sufficient to provide our shareholder with good returns. We have set appropriate objectives for achieving an adequate return on capital. We believe that by achieving 12% after tax return on capital invested, we will provide our shareholders with substantial returns. We have three product lines today, and two of those, actually exceed the cost of capital. We are working very hard with the third product line. Our advice to investors is to look at companies with growing market share and at companies that are increasing return on capital. Mail-Well is increasing market share and return on capital and this is why you should invest in this company.” CEOCFOinterviews: In closing, what would you like readers to remember about Mail-Well? Mr. Reilly: “Today we are bringing the benefits of scale to our customers. We are offering an enterprise solution – our total package of products and services – to customers with whom we have good relationships. Relationships are a very important part of the printing business. For example – with one customer where we have employed an enterprise solution for a year, we have proven a successful model that we know works with financial services companies. In the future, we will take that same group of employees who did such a fine job at solving problems for this one company, to other financial services companies. They can use what they have learned to better service these new customers. We will be following the same process with healthcare, the auto industry, financial services, and the travel industry. We think it is an opportunity for us to bring our scale and know-how to different vertical markets. We are very excited about growing in these vertical markets – and being our customers preferred provider of visual communication services.” disclaimers |
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