3 East 54th Street
Big Flower Press Holdings, Inc. is the holding company for an advertising- and marketing-services firm whose Treasure Chest Advertising subsidiary was, in the 1990s, the largest single producer of newspaper Sunday comics and television-listing guides in the United States. It also believed itself to be the largest producer in the nation of advertising circulars: printed advertisements inserted in newspapers, mailed to consumers, or distributed to stores. Another subsidiary, Webcraft Technologies, was producing highly customized direct mail, fragrance samplers, promotional stamps, and commercial games, nonspecialized products such as enhanced envelopes and government forms, and specialty chemicals, adhesives, and coatings in 1996. Big Flower Press also was providing a full line of digital premedia services for the advertising, retail-catalogue, and packaging industries in 1996 through its Laser Tech Color subsidiary.
Treasure Chest Advertising, 1967--93
The company was founded in 1967 as Treasure Chest Advertising by Paul and Robert Milhous, brothers who bought a used printing press in order to publish a weekly shopping newspaper called the Treasure Chest of Values. Within five years the company had six plants in order to print advertising circulars for a variety of clients. They expanded their operation with the purchase of a new printing press in 1974 and had sales of $20 million that year. Sales reached the $100-million level in 1980. Treasure Chest Advertising began printing color comics and TV-program listings in 1982.
Treasure Chest had 14 percent of the nation's $3.5-billion printing business in 1988. Retailers using its services included Kmart, Sears Roebuck, and Circuit City. The following year the firm, based in Glendora, California, was the largest printing company based in Los Angeles County. Total sales came to $550.2 million. While national in scope, with 25 sales offices and 3,400 employees, the western United States was Treasure Chest's main focus, with a market share in excess of 20 percent. In 1988 the company formed a joint venture with Dutch partners to remanufacture and market used graphic-arts equipment worldwide.
Advertising circulars, flyers, inserts, and other preprints for newspapers accounted for 85 percent of Treasure Chest's sales in 1990, with publications and periodicals making up the remainder. Its Sunday supplements included Sunday comics and television magazines for publications like the Los Angeles Times and Baltimore Sun. The company had 15 printing facilities and was the largest printer of retail advertising circulars in the United States. It was consuming 500,000 tons of paper a day.
Treasure Chest executives pointed to the use of electronics, automated printing presses, and computer-controlled inking systems as a major factor in the company's success. Interviewed for a 1990 issue of the Los Angeles Business Journal, president and chief executive officer Sanford Scheller said, "In the early days of the advertising circular, newsprint was the dominant material used and with not a lot of color. Now it has evolved into an emphasis on shiny paper with the four-color process.... We have been good at anticipating changing markets."
Big Flower Press, 1993--95
In the early 1990s the Milhouses decided to sell out and asked Scheller to find a buyer. Treasure Chest's annual sales had grown to $555 million and its net income to $4.7 million in fiscal 1993 (the year ended June 30, 1993). It was acquired later in the year by BFP Holdings Corp., a firm based in New York City. BFP Holdings was created specifically to become a power in the printing industry by its founder and chairman, Theodore Ammon, who gave up a partnership in the investment firm Kohlberg Kravis Roberts & Co. to strike out on his own. Ammon previously had overseen the acquisition of World Color Press, which subsequently became the nation's second-largest printer. BFP paid $235 million for the firm and financed most of it with junk bonds.
Soon after acquiring Treasure Chest, BFP signed agreements to acquire Dallas-based Retail Graphics Holding Co., paying $39.9 million, and KTB Associates, Inc. of Saugerties, New York, for which it paid $34.6 million. The name of the former was changed to Treasure Chest Advertising Holding Co. of Texas, Inc., and the name of the latter to Treasure Chest Advertising Co. of New York, Inc.
These additions made the consolidated company--Big Flower Press, Inc.--the fourth-largest printer in the United States, with combined annual sales of $761 million and 17 printing plants. Its customers included 700 retailers and 270 newspapers. The Retail Graphics acquisition gave the company's Treasure Chest Advertising subsidiary a Lenaxa, Kansas, newspaper-insert printing plant to go with its existing Kansas City facility. Industry observers speculated that the owners of Retail Graphic probably were eager to exit an increasingly competitive environment that favored larger operators, while Treasure Chest--which moved its headquarters to Baltimore in 1995--saw an opportunity to expand its capacity and take advantage of economies of scale.
During fiscal 1994 Big Flower Press lost $3.4 million on sales of $647.2 million and ended the year with a long-term debt of $331.9 million, most of it assumed in acquisition costs. In fiscal 1995 revenues swelled to $920.1 million. The company lost $1.6 million but reduced its long-term debt by $30 million. During the second half of the calendar year Big Flower Press had net sales of $546.8 million. Its extraordinary charge of $19.2 million for early extinguishment of debt accounted for a net loss of $12.8 million during this period. Big Flower Press made its initial public offering of stock in November 1995, raising about $100 million by selling 6.7 million shares of common stock at $16 per share. Ammon retained about 19 percent of the shares in the public company--renamed Big Flower Press Holdings--and a limited partnership related to Leon Black's Apollo Advisors held about 40 percent.
Further Acquisitions, 1995--96
In late 1995 Big Flower Press completed the acquisition of Laser Tech Color, Inc., a Texas-based firm with 11 U.S. production facilities in the United States offering a full line of digital premedia services for the advertising, retail-catalogue, and packaging industries. Founded in 1988 by Brian Mason, Laser Tech Color specialized in jobs other color separators said were too difficult or impossible. Its demanding clients included advertising agencies, cosmetics firms, and jewelry retailers. Laser Tech Color had revenues of about $23 million in fiscal 1995.
In February 1996 Big Flower Press agreed to acquire Webcraft Technologies Inc., a direct-mail marketing company with sales of $293 million in 1995, for about $111 million in cash and the assumption of $90 million in debt. Based in Horsham, Pennsylvania, Webcraft had been focusing on specialty-printing markets, including fragrance samplers, rub-off promotional games, and lottery tickets. Founded in Metuchen, New Jersey, by Robert Katz, Ira Strauss, and Frank Schachter in 1969, it started out making direct-response envelopes for a single customer but soon developed a system allowing it to print pamphlets and envelopes simultaneously instead of in three steps. Later it developed a waterproof coating and another technique that allowed the coating to be rubbed off after being printed, a combination that enabled it to start producing instant-lottery tickets. In the mid-1980s it developed scratch-and-sniff promotions. Big Flower Press sold the lottery-production unit later in 1996.
Big Flower Press made several other acquisitions in 1996. In October it purchased Scanforms, Inc., a full-service direct-mail advertising company based in Bristol, Pennsylvania, for about $26.5 million in stock and the assumption of debt. Scanforms' revenues in fiscal 1996 came to about $27 million. By this acquisition BFP expanded its customer base among leading financial-services and publishing companies. Also in October, Big Flower Press purchased Pacific Color Connection, Inc., a company offering Internet production services and producing large-format direct digital printing for the outdoor advertising industry, and Printco, Inc., a Michigan-based producer of newspaper-insert advertising circulars and newspaper TV-listing guides. Two months later BFP acquired Designer Color Systems, Ltd. and Digital Dimensions, Inc., thereby increasing its premedia presence in the Midwest and enhancing its online digital-imaging services.
Big Flower Press's net sales for 1996 reached $1.2 billion, of which Treasure Advertising accounted for $918 million and Webcraft Technologies for $293 million. Its long-term debt reached $430.8 million and it lost $5.4 million because of expenses that included $38 million in debt payments. Ammon, however--the holding company's chairman and chief executive officer--expressed confidence that the recent acquisitions had made it a player in the much bigger and more lucrative $170-billion-a-year advertising industry. "We're in the advertising-solutions business," he said. "Unlike other printers, we can compete against television, radio, and newspapers." And the company's printing acquisitions had expanded its presence in the field's fastest-growing specialties, prepress and direct mail.
Big Flower Press in 1996
During 1996 Big Flower Press served 700 leading retailers and over 300 daily newspapers, producing more than 22 billion advertising inserts, 1.6 billion Sunday comics, 140 million locally edited Sunday magazines, and 620 million TV-listing guides. It estimated that this represented 19 percent, 49 percent, 18 percent, and 20 percent of the totals produced in the United States in these respective areas during the year. Treasure Chest Advertising, the company's operating unit in this industry sector, had a national network of 18 production facilities. It was the only advertising-circular printer offering a national network of both heat-set and cold-web offset-printing locations, thereby offering significant cost and distribution advantages.
The advertising inserts&mdash+aced in newspapers, mailed to consumers, or distributed in stores--were being produced for leading U.S. retailers such as American Drug Stores, Circuit City, The Home Depot, J.C. Penney, Kmart, Montgomery Ward, Wal-Mart, and Sears, Roebuck. The TV listings, Sunday comics and magazines, and special supplements for newspapers and other publications were going to about two-thirds of the 50 most widely circulated newspapers in the United States. In association with this production, the company offered a number of premedia services, including composition, digital photography, image management, film output, digital file transfer, and facilities management. Of Treasure Chest Advertising's sales in 1996, advertising inserts accounted for 84 percent; Sunday comics and newspaper television-listing guides, 6 percent each; and other newspaper products and other publications, 4 percent. PrintCo., a 1996 acquisition, was placed under Treasure Chest Advertising.
The company's Webcraft subsidiary had five production facilities in Pennsylvania, New Jersey, and Maryland. It was providing personalized advertisement mailings for customers such as Chrysler, Dean Witter, Publishers Clearing House, Reader's Digest, and RJR Nabisco and fragrance samplers for customers that included Calvin Klein, Elizabeth Arden, and Estée Lauder. The company was producing commercial games typically used to increase traffic to retail establishments, such as scratch-off tickets for fast-food restaurants. Customers for its stamp booklets and sheets included the National Wildlife Federation, American Lung Association, Publishers Clearing House, and Reader's Digest. Nonspecialty items produced by Webcraft included such printed items as catalogue order forms, film mailers, airline-ticket jackets and specialty chemicals, adhesives, and coatings. Scanforms was placed under the Webcraft subsidiary after its acquisition in 1996.
The company's premedia services were being offered through Laser Tech Color, with headquarters in Irving, Texas, and 11 production facilities in the United States. A full line of digital premedia services were being offered for the advertising, retail-catalogue, and packaging industries, including digital-photography studios, leading-edge desktop publishing and client/server software and hardware, turnkey catalogue and advertising-insert production, electronic retouching systems, large-film output, Cyrel photopolymer platemaking, and digital-image management systems for high-speed image retrieval. Laser Tech was designing an interactive image-management system linking advertisers and graphic designers with a database of images to help customers plan their advertising programs more effectively. The company's DCS, Digital Dimensions, and Pacific Color Connection 1996 acquisitions were placed under this subsidiary.
In January 1996 Treasure Chest Advertising and Laser Tech Color formed an advertising-services electronic prepress division, with Laser Tech assuming responsibility for Treasure Chest's TC Color, San Antonio Graphics, and TC Photo units. Among the benefits anticipated was the reduction of press lead time for advertising circulars, enabling the company's customers to react more quickly to marketplace needs, changing their print advertisements through online connections from their offices.
Principal Subsidiaries: BFP Receivables Corporation; DCS, Incorporated; Digital Dimensions, Inc.; Laser Tech Color, Inc.; PrintCo., Inc.; Scanforms, Inc.; Treasure Chest Advertising Company, Inc.; Treasure Chest Advertising Company of New York, Inc.; Treasure Chest Advertising Holding Company of Texas, Inc.; Webcraft Technologies, Inc.