Appleton Papers/BCI Group

 

“I want to give it all to Doug.”  That’s what one Appleton Papers employee wrote on the ballot form when choosing whether or not to transfer some of his retirement funds into company stock.  He was referring to Appleton Papers’ CEO, Doug Buth.

 

An extraordinary thing happened in Appleton, Wis. last year.  The employees of Appleton Papers purchased the company from its foreign owner for $810 million, using hard-earned retirement savings as the down payment.  In today’s post-Enron atmosphere, it’s hard to imagine such a deal taking place, but these employees saw their futures as being inextricably linked to the company’s well-being, and under Buth’s leadership, they decided to take control of their collective destiny.

 

For the city of roughly 70,000 nestled in the Fox River Valley, the scope of the deal was colossal, involving two home-grown companies, both national leaders in their respective markets.  Appleton Papers manufactures carbonless and thermal papers (used for things like business forms and credit card and cash receipts).  And for assistance with the buy-out, Appleton Papers enlisted the support of BCI Group, a well-respected firm that specializes in employee stock ownership plans (ESOP’s).  BCI is literally right down the street and across the Fox River from Appleton Papers, and their teams worked very closely together for months.  To round out the Wisconsin connection, the lead law firm for the international transaction, Godfrey & Kahn, is headquartered in Milwaukee.

 

The story of how the deal came together against all odds is heart-warming.  The barriers that had to be surmounted were considerable, including the attack on the World Trade Center the week Appleton Papers was in New York City to finalize negotiations.  The circumstances would have shut down most other teams, but these folks had deep willpower, mutual trust, and the unshakeable conviction that employee ownership would lead to the best possible future for the company.

 

CEO Buth is a straightforward and winsome leader, evincing integrity, a keen intellect, and modesty.  He attended Notre Dame on a full football scholarship and was a member of the 1973 national championship football team.  Playing tight end, Buth was on the receiving end of a scoring pass from Joe Montana.  “It was a great opportunity, a great experience,” he said.

 

Born and raised in Green Bay, Buth’s education is in finance and accounting, and after a stint with Price Waterhouse in Milwaukee, he went to work for BATUS in Louisville, Kentucky.  B.A.T., the parent company of BATUS, was a $20 billion British-owned firm holding several groups of companies across disparate industries such as tobacco and insurance, Appleton Papers among them.

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Buth was eventually transferred to New York City to work in the company’s retail operations.  He and his wife Gayle, from Milwaukee, had started a family, and with a two-hour commute each way from work, Buth wasn’t seeing much of his young kids.  “I’d go three and four days in a row and not see them because I’d get home at night, and they’d already be in bed,” he said.  “Both my wife and I wanted to get back to Wisconsin, and we wanted to be closer to our families.  Having been from Wisconsin, lived in Louisville, and living in New York, we knew where the quality of life was.”

 

Their two oldest children were ages two and three when Buth asked for and received a transfer to Appleton Papers in 1988.  The family grew by one more child after the move.  They haven’t regretted the choice.  “Although we had never lived in Appleton, we love it here,” Buth said with a smile.  “It’s a fabulous place to live and raise a family.  Our kids are in the school system and doing great.”

 

Buth started as the Director of Strategic Planning for Appleton Papers, and in 1991 was promoted to VP of Marketing.  “That was a big leap and was probably the key to my career,” he said.  “That CEO saw something in me, if you will, and wanted to give me another opportunity because I was a finance guy.”  Buth progressed to VP of Sales, where he was on the road in front of customers for five years, then became Executive VP and General Manager of the company’s carbonless business.  He was named CEO in November 1998.

 

B.A.T. restructured in 1990 and “demerged” Appleton Papers and a sister company in the UK, Wiggin Teape, into another entity, which ultimately evolved into French-British parent company AWA.  AWA was a publicly held company traded on the London stock exchange, whose largest shareholder is a wealthy Italian industrialist family that has ownership interest in Fiat and other enterprises.  AWA wanted to get out of the U.S. market and therefore put Appleton Papers up for sale in 1998, but the timing was poor – the market dipped – and AWA took the company off the market to wait for more favorable economic conditions.

 

Appleton Papers’ Treasurer Dick Wehrel came up with the basic ESOP idea during that time, in conjunction with the strategy of switching from a C corporation to an S corporation for tax savings.  (More about that later.)  Buth approached the chairman of the parent company as to the possibility of employee ownership but was turned down.  Early in 2000, the process started over – Appleton Papers was on the block again.  According to Buth, “It was obvious that this was going to be a leveraged sale.  They were marketing our company to venture and financial types – it was not going to be a strategic sale to another paper company.”  Such an owner might be expected to extract as much cash as possible from the company without reinvesting, a future that was not what Buth had in mind for the stable, profitable, $1 billion enterprise and its 2,500 employees.

 

This time around, however, Buth had a new boss and was able to sell the idea of employee ownership.  “That was a phone call on December 6 of 2000, I’ll never forget the day,” said Buth.  “We reached a letter of intent on February twelfth [2001], we had a definitive agreement on July fifth, and then we closed on November ninth.”

 

Hearing those simple words, it’s hard to grasp the uniqueness and complexity of the deal.  The transaction plowed new ground in many ways, and culminated in striking success, including one of the highest rates of employee participation ever for an ESOP buyout, both in percentage of employees taking part and percentage of retirement money contributed to the deal.  Over 90 percent of Appleton Papers’ 2,500 employees nationwide (two-thirds of whom are union members) allocated $107 million or nearly 75 percent from their 401(k) accounts to the purchase of company stock.

 

How on earth was this feat accomplished?  One answer is that Doug Buth had put together a highly capable management team without big egos.  From that team, Buth named Paul Karch, VP of Human Resources and Law, to lead the entire project.  Karch is a native of Baraboo, Wis. who earned both a bachelor’s degree and law degree from Harvard.  After spending twelve years with a firm in San Diego, he and his wife wanted to return to Wisconsin to raise their children.  “Family life is very important to us.  We moved back to Wisconsin because of the schools, and it’s been fabulous,” said Karch. 

 

Karch became the architect of Appleton Papers’ internal process for the transaction, coordinating the logistics, enlisting teams of advisors, and overseeing negotiations with the seller, banks, and the employees.  “This project has been the highlight of my working career,” he said.  “I never dreamed that moving to Appleton would lead to such an exciting event.”

 

Another reason for the success of the transaction was the history of enlightened leadership styles and employee cultures found at both BCI and Appleton Papers.

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“I’ll give you the nickel tour,” said BCI’s CEO and founder Dennis Long.  BCI is a privately held company housed in a newly remodeled building on the south side of the Fox River.  It’s a stately and impressive historic building, but, since BCI derives about 70 percent of its revenue from administering ESOP’s for businesses all across the nation, it’s just an office building.  What’s there to see?

 

Plenty.  The tour speaks volumes about this company and its founder.  BCI’s digs reflect a commitment to the company’s most important assets – its 92 employees.  The workout equipment in the company gym is being put to good use by a couple of sweaty employees on their lunch break.  When they’re done, they head to the locker rooms installed with showers.  There is a sizeable kitchen and a dining area that looks more like a French bistro than a company cafeteria. Lots of windows everywhere allow in natural light.  The pièce de resistance, to be sure, is the $350,000 auditorium/training room/conference center with state-of-the-art presentation, computer, and communications equipment.  The room is even equipped for the hearing-impaired.  “We show Packer games, we have Friday night movies in here, we’ve invited in the folks from the assisted living facility down the road, and we’re making the room available to community nonprofit organizations,” smiles Long.

 

At BCI, the emphasis is on the team.  “We don’t just want to rent skills from our employees,” said Long.  “We want 92 people, not 91, thinking and acting like partners, coming up with ideas.”  The company has also instituted a mentoring program, intended to prepare the next generation of senior leaders.  Those being mentored sit in on high-level meetings and meet with clients, becoming acclimated to the bigger picture at BCI.  Although it doesn’t have an official ESOP, BCI operates with a commitment to employee ownership through a stock purchase plan.  Employee-owners elect the board of directors on a one person, one vote basis, which is highly unusual.  “They could even vote Dennis off the board if they wanted to,” quipped Pete Prodoehl, Senior Consultant and principal for BCI.

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Perhaps the biggest surprise of the tour is reaching Long’s cubicle.  That’s right, the CEO of this nationally known firm works in a cube alongside other employees.  “Well, I decided I didn’t want the big corner office,” Long shrugged modestly.

 

Long was born in Appleton, raised in nearby Neenah, and graduated from Marquette University with a bachelor’s in business administration, having majored in economics.  He carved out a successful career in the benefits industry and was working with a consulting firm in sunny Palm Springs when he decided to move back to Wisconsin and start his own business.  The origin of the name, BCI, was Benefits Consulting, Inc., and that was the niche that Long targeted for BCI back in 1978.  Administering ESOP’s now comprises most of BCI’s business, and they’ve developed a reputation as the industry leader.

 

In fact, BCI recently received the President’s Award for its work privatizing a federal agency, US Investigations Services, via an ESOP.  The company has enjoyed double-digit growth over the past six years, averaging about 30 percent per year, and Long anticipates solid growth over the next five as well.  Although they deal on a national level, BCI assisted another high-profile Wisconsin company, Schreiber Foods of Green Bay, to do an ESOP in 1999.  Schrieber is a whopping $2.5 billion company with 3,200 employees, a manufacturer of processed cheese for the institutional food industry.

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Pete Prodoehl is Long’s right-hand man and has been with the company for 22 years.  Together, the two men are full of wit, ribbing each other good-naturedly but also staying highly focused.  Prodoehl grew up in Antigo, “Home of the Red Robins,” he smiled.  Educated at the University of Wisconsin-Eau Claire, he went to work for ITT in Milwaukee and was introduced to Long through a mutual friend at a Badger game.  Prodoehl was the primary point man for the Appleton Papers transaction, and his wife, Cindy, also played an integral role as a consultant for BCI’s education and communication division.  (His brother also works for BCI, but that’s another story.)

 

Long and Prodoehl explain that the Appleton Papers plan was not the typical leveraged ESOP often used in the industry; rather, it was a hybrid transaction customized specifically to accommodate the needs of the client.  Virtually all ESOP’s provide numerous tax advantages for participants.  In a typical (simplified) scenario, the business owner who is getting ready to retire can sell the company to employees through an ESOP.  The ESOP borrows the money from a bank, then pays the owner, who doesn’t have to pay any capital gains taxes as long as the proceeds from the sale are put into U.S. stocks, bonds or other qualifying investments.  The company then makes contributions to the ESOP over time using pre-tax dollars, and the ESOP uses these monies to repay the loan.  As the loan is repaid, the shares (ownership of the company) are allocated to the employees.  But, when the ESOP buys the company and pays the owner in this fashion, the value of the company’s stock generally goes down after the purchase because now the company and the ESOP (new owner) have additional debt.  The value of the business rises again as the company pays down the debt.

 

“Assume you’re buying a house worth $100,000,” said Prodoehl.  “You have to come up with a down payment of $20,000 (equity) then you go to a bank and borrow $80,000.  Well, what happens in a typical leveraged ESOP is you allocate pieces of that house to the employees over ten, fifteen, twenty years, depending upon the deal.  So the employees really don’t own that house for quite some time.”  (Anyone with a mortgage can relate.)

 

By contrast, the Appleton Papers deal was a non-leveraged ESOP.  There, the employees actually bought the whole company for the down payment of $107 million – in other words, they bought the house in the scenario above for $20,000.  Here’s how:  Through the ESOP, they put up the $107 million from their 401(k) retirement money as equity, then the company itself financed the balance of $703 million through bank debt, bonds and “seller paper,” a loan from the owner.  But the debt wasn’t made part of the ESOP, so the employees didn’t have to take it on.  Each year, as Appleton Papers pays off that debt for the employees – and they have an aggressive schedule for doing so – the company’s value will increase, and the value of employees’ stock will go up.

 

So why did they choose to structure the deal this way?  Two reasons:  First, by law, the foreign owners couldn’t enjoy the rollover tax advantages of the more traditional ESOP.  Second, Appleton Papers converted to an S Corporation immediately after the transaction.  And since Appleton Papers’ ESOP owns 100 percent of the equity right now, not 10 or 15 years from now – and since an ESOP is a tax-exempt retirement plan – and since in an S Corp, all the earnings flow through to the owners – the company will pay no taxes on its earnings.  “It will save the company millions and improve our cash flow,” according to Dale Parker, VP of Finance and CFO of Appleton Papers.  Employees will pay taxes upon withdrawal at retirement.  The plan is called a KSOP, kind of a combination of 401(k) and ESOP.  Ingenious.

 

The construction of the deal was sound, and it’s functional from many different angles.  The financial community thought so, too.  “It worked because we have a whole lot of things going for us,” said Parker.  “First of all, this is the best working management team I’ve been around in my 35 years in business.  And we have strong cash flow, we’re well-invested from a capital equipment perspective [about $300 million in the past five years], we have strong labor relations, a high quality product and customer service, and strong R & D.”

 

The tax savings from the new structure yield an ample positive cash flow, part of which will be used to pay down the debt aggressively.  It will also allow for an even stronger commitment to R & D, especially important because the demand for Appleton Papers’ primary product, carbonless paper, is steadily declining.  This R & D effort is already underway.  The company has created a new business development arm and recruits from specialized university programs around the country, including the University of Wisconsin-Stevens Point.  Appleton Papers is leveraging their current technology to apply to new markets and has several exciting new products on the horizon.  “We’ve had some patents issued recently, trying to protect this new technology,” said Buth.

 

But what about the employees?  How were they convinced to transform their retirement savings, safely invested in various Vanguard funds, into company stock?

 

The answer is three-fold.  First, CEO Doug Buth is a well-respected leader who literally brought the deal to each and every employee in person.  Second, Appleton Papers has a long history of honesty and integrity with its employees, whose average length of service is over 16 years, and third, an extensive educational campaign was planned and executed, a collaboration between Appleton Papers and BCI, with lots of help from a team of attorneys at Godfrey & Kahn led by Chris Noyes.

 

“This project was one of the career-defining events of my life,” said Noyes, a graduate of the law school at the University of Wisconsin-Madison.  “Godfrey & Kahn tries to find creative solutions addressing our clients’ needs, and these transactions required expertise in multiple practice areas such as securities, tax, environmental, finance, and employee benefits.  At any given time we had 15 – 20 people working on the deal.”  Helping to advise on the communication process was a key role for Noyes, and communication was the key that opened the door to employee participation.

                                                          

Dave Brown is the president of local 7-0469 of the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE) at Appleton Papers. “We’ve always had a good working relationship with the company.  We haven’t had a strike in 32 years,” according to Brown. “Appleton Papers has always been free with the numbers.  The company puts out a lot of information for us, and so the confidence was there to begin with.”

 

But there was a long row to hoe in terms of the learning curve, and not just for employees.  “I knew that an ESOP meant an employee stock ownership plan, but that was probably the full extent of my knowledge about an ESOP,” laughs Kerry Arent, Director of Compensation and Benefits for Appleton Papers.  “We had not had an ESOP, and I had not worked for any other company – I vaguely remembered some stuff from college, but that was years ago.”  Union leader Brown echoed Arent’s words:  “Never hearing of an ESOP before in my life, I had to get on the Internet and learn about the downfalls and upsides to it,” he said.

 

Arent is a native Wisconsinite who has been with Appleton Papers for almost 20 years.  Born in Northern Wisconsin, she lived in Waukesha, LaCrosse, and Sun Prairie growing up and earned a bachelor’s in human resources management from the University of Wisconsin-Oshkosh.  Arent got involved early on in the deal.  “When we reached the letter of intent [February 2001], we immediately announced it to employees,” she said.  Here’s where BCI got heavily involved.  “In terms of plan design, we decided to merge the 401(k) with the ESOP to create the KSOP – we had always wanted to have a stock ownership option, but since the stock was traded on a foreign exchange, we couldn’t incorporate it into the 401(k) plan before.”  According to Arent, BCI helped develop things both conceptually and in detail, but really kicked into gear on the communications side of things.

 

From Appleton Papers, Karch, Bill Van Den Brandt, Manager of Corporate Communications, and Arent got together with BCI’s team, including Cindy Prodoehl, an education and communications consultant.  Prodoehl and her team specialize in the financial education and employee communication for just such a project, although according to Pete Prodoehl, this effort was the most extensive they’d ever undertaken.  The BCI/Appleton Papers team was responsible for getting employees up to speed about the KSOP proposal, the risks, what could happen to Appleton Papers if a “financial buyer” rather than a “strategic buyer” purchased the company, and myriad other details.

 

Employees needed to be educated, but the team was required to follow SEC regulations since employees were being offered the opportunity to purchase stock. “The SEC rules are stringent with respect to disclosure, and all communications efforts had to walk a fine line between being informative, but not pre-selling the idea,” Prodoehl said.  “Chris Noyes and his team at Godfrey & Kahn were great in this area.  They reviewed all our materials and were incredibly fast and responsive.”

 

The communications team devised a multi-pronged strategy for reaching not only employees, but their spouses and financial advisors as well. The BCI/Appleton Papers team sprang into action, assisted by Godfrey & Kahn’s attorneys.  All were committed to doing whatever it would take, having corporate cultures that were conducive to that attitude, and the teams put in long hours and months of hard work.  The plan involved developing a prospectus – the disclosure document for the stock purchase, producing an in-depth video, publishing newsletters, conducting numerous meetings at every Appleton Paper facility (the company has production facilities in Ohio and Pennsylvania as well as in Wisconsin), creating a PowerPoint presentation and “road show,” and putting Buth in front of employees.  BCI even set up a hotline with operators taking questions until 10 p.m. every night, writing special software to track employee questions, and then feeding that information (no names) to Appleton Papers daily.  “Dennis [Long] even answered phones,” said Prodoehl.  Spouses and financial advisors were invited to presentations, Q & A sessions were held regularly, and employees were provided with links to Internet sites with ESOP information.

 

The newsletters are still being published today, although not as frequently, and one of the January issue’s topics covers the Enron debacle.  (As a side note, this deal may not have taken place had the Enron situation erupted earlier.  According to Long, the scandal has harmed the ESOP climate, and overanxious legislators are contemplating fixes that would actually preclude the type of transaction that Appleton Papers put together.  Long has been busy testifying on Capitol Hill – “I think that ultimately, they’ll make the right decisions,” he said.)

 

The culmination of the outreach to employees would be the “election”:  Over the span of one month last summer, employees voted on whether to allocate 401k funds for the transaction, and if so, how much.

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The actual election period was a nail-biter.  There was no way of predicting the outcome, and one of the significant concerns was the economic climate at that time.  Leading up to the election, the market was slowing.  The company knew they needed $100 million from employee retirement funds to make the deal work, and when they started, the funds were worth about $160 million.  “But when it was time to get the deal done, the value of the funds had dropped to about $150 million, and we still needed the $100 million, so it was pretty stressful,” said Buth.

 

BCI actually received and tallied the election forms.  Employees could designate anywhere from zero to 100 percent of their retirement funds to go toward the purchase.  According to Long and Prodoehl, even though every ESOP transaction is unique, the industry high water mark for this kind of deal might be around 30 percent.  “We’ve always said that getting more than 25 percent is a hard job,” said Long.  Even though Appleton Papers was optimistic, there was absolutely no way of knowing whether or not the deal would fly.

 

The ballots came in slowly, and the first three weeks yielded nowhere near the numbers they needed.  By law, the election was confidential – only the plan administrators know who contributed how much to the purchase.  “You’d like to put one of those United Way thermometers up on the wall to encourage everybody,” said Prodoehl wistfully, “but as far as the Department of Labor is concerned that’s coercion.”  The only result Appleton Papers was allowed to see was the daily aggregate, and that went only to Buth.  The ESOP’s trustee, State Street Global Advisors of Boston received the full reports.

 

“The election period was 30 days,” said Prodoehl.  “On Day 26, we didn’t even have half of what we needed. Day 27, it went from $50 million to $80 million, and we were just ecstatic.  Day 29, we were thinking it wasn’t going to happen.  About halfway through Day 30, the last day, it blew right through $100 [million], literally blew right through it.  I’ll never forget Cindy coming up to my office, she was crying, ‘It happened, we made it.’

 

“From our perspective as a company, it was very emotional,” said Prodoehl.  “It was an emotional roller coaster. There was a time that we thought the deal was dead – the parties weren’t talking, and we didn’t have a deal after so much of the communications had been done.”

 

“I remember a Sunday night in July, like one in the morning, the phone rings for about the tenth time, and Cindy’s running up to the fax to review text for the team in Chicago, furiously drafting the prospectus in yet another all-night session.  There was a lot of that stuff.”  At its peak, Prodoehl estimates that BCI had a team of about 25 people on the project.

 

In the end, over 90 percent of Appleton Papers’ 2,500 employees contributed an average of nearly 75 percent of their retirement savings to buy company stock.  Unheard of.

 

“The percentage that we needed kept going up, and the employees just stepped up in a big way,” said Buth.  What was the real driving force for the outcome?  According to Prodoehl, “The employees have so much respect for the leadership of that company.  During the road shows, people would come up to Doug and he would know them by name.  I couldn’t believe it, several thousand employees.  It’s just an example of the tremendous amount of respect he has for them and they have for him.” 

 

Another factor was the rest of Appleton Papers’ management group.  When they decided to do the ESOP, the entire executive team publicly committed 100 percent of their retirement funds to the purchase, putting their money where their mouth was.  And they had strength of will.  “You couldn’t say ‘no way’ to that group,” said Prodoehl.  “The neat thing about it for us and the other advisors was that they could do things internally – turn things around overnight, so they weren’t asking their advisors to do anything more than what they as a management team were doing themselves.”

 

Parker’s financial team in particular worked virtually around the clock for weeks, putting the rest of the components of the deal together.  Parker, Appleton Paper’s VP of Finance and CFO and the father of five children, came to Appleton from Baltimore just three years ago.  Three of his kids are out of the house, and his two youngest are still in high school.  “I came because of Doug,” said Parker.  “He’s a fine man, and Appleton Papers also has a great reputation in the United States for quality products and quality people.”

 

Parker graduated from Miami University in Oxford, Ohio, then went on to earn an MBA from Xavier University in Cincinnati.  When he came on board, the company was up for sale, and Parker was fully prepared to assist with that sale.  When the ESOP/S Corp possibility was raised, however, Parker was in his element.  He had had plenty of experience putting together financial deals in the industry, having spent over 25 years with Black Clawson, a heavily capitalized and privately held manufacturer of capital equipment for the paper and plastics industries.

 

The challenge for Parker was assembling the financing to make the transaction happen.  In conjunction with an ESOP-advising company, Houlihan Lokey Howard & Zukin of Washington, D.C., the decision was made to structure a combination of bank debt, high-yield debt (bonds), and an eight-year note from owner AWA.  Investment banker Bear Stearns then entered the picture as the lead lender, helping especially with the bond sales.  So, while BCI, Karch, Arent and communications manager Van Den Brandt were busy on the employee side of things, Buth and Parker were on the road presenting the company to interested investors who would buy bonds.  They had a good story to tell because of the stability and profitability of Appleton Papers, but there was one thing that had to be dealt with first: the three unions.

 

“We had to negotiate all three contracts at once in order to get the banks on board,” said local PACE union president Brown.  It was challenging to get everything done simultaneously, but all three new contracts passed.  “That was one busy summer,” he added.

 

Everything was lining up nicely – the down payment was secured, and lenders and investors were interested.  Early September was looking good.  Then came the conflagration in New York City.

 

“We were hurt by September eleventh, we had to pull out of the market and everything came to a halt for awhile,” said Buth.  “In fact, Paul Karch, Dick Wehrel, Chris Noyes, and his partner Jim Phillips were in New York on September eleventh.  They were in Midtown, thank God.  We were scheduled to be in the Sears Tower in Chicago that week, and that all got canceled.  Personally, I probably would not have gone, I was not going up in a big office building that week.”

 

“As we watched the buildings crumble…we decided we had two choices,” said Parker.  “We could pack our bags and say we can’t get it done, or the second choice was to not let this stop us and find a way to get it done.  We chose the latter, obviously.”  Parker added, “It was very emotional for us.  This isn’t the first financing I’ve been through in my life, and I know that you run into a lot of obstacles, but very seldom do you run into an obstacle as gigantic as the one we ran into.”

 

“To our bank’s credit, our lead bank was Bear Stearns, they stuck with us,” said Buth.  “They said this is a deal that should get done.”  Parker recalled the days immediately following September eleventh, the conference calls back and forth with the bankers, and the decision to go forward: “We knew we had something valuable to the employees, valuable to us, the managers, and we just were going to make it happen.”

 

“We were leading the market,” said Parker.  “We’d go to New York City to see Putnam, for example, and we’d be the only ones in the lobby.  There was nobody else there.  Just us…Everybody else was watching us.  If we made it, with the complexity of our structure, I think everybody was thinking there was hope.”

 

Business started picking up again, and Parker and Buth got the bonds sold.  There had to be some restructuring, though, as business conditions had changed significantly since the attacks.  And there was a fortuitous decision that forestalled further problems as a result of the terrorist attacks.

 

“The other unique thing is that we moved all of the employee money, which was generally invested in equities, and we converted it all into cash on September fourth,” according to Buth.  Had the funds been left in the equity markets, their value would have plummeted the following week.  “If we had delayed seven days, we wouldn’t have a deal,” said Buth.  “There was a lot of luck going on there, timing was everything.”  And not only was the timing right, but the interest rates on some of the bank debt turned out to be quite favorable, in the five to six percent range.

 

The day of the closing, November ninth, was a great moment for the company.  There was a ceremony in the parking lot with a flag-raising, and a large banner was installed on the side of the building that reads, “Now Employee-Owned.”  “It was an extremely emotional moment for all of us,” said Parker, whose team had been up until midnight the night before, finalizing the deal.  “I think it was one of the most emotional days of my life,” he added.  Employees and management congratulated each other, and the mood was one of exuberance and optimism.

 

That optimism persists today and is even stronger.   Employees are taking even more interest than ever in the well-being of the company, and a new program, Line of Sight, is helping everyone understand (quantitatively) exactly how their job both contributes to and subtracts from the bottom line.  According to Buth, “They’re making the connection between what they do and how it affects the value of their stock.  And the more that happens, the better the company will run.”

 

Appleton Papers anxiously awaited the results of the first independent valuation of the company since the purchase, which would confirm whether or not they got a good deal.  It just came in this month, and the valuation was significantly higher than the purchase price.  So, everyone’s stock has already risen in value, and their decisions have been validated.  As Parker put it, “The future of the company is absolutely unlimited now.”