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PVC Container Corporation manufactures plastic bottles and containers from a variety of resins, including polyvinyl chloride (PVC), high-density polyethylene (HDPE), polypropylene (PP), and polyethylene terephthalate (PET). The Eatontown, New Jersey-based company does business through four subsidiaries. Novapak Corporation produces specialty bottles and containers for the automotive, beverage, chemical, food, household, and personal care sectors. Airopak Corporation uses a fluorine mixture rather than air in its blow molded technology to make a line of containers suitable for the lawn and garden and industrial chemical markets. Marpac Industries Inc. designs and produces containers with complex shapes such as automotive fluid reservoirs, toner copier containers, and medical diagnostic equipment. The fourth PVC subsidiary, Novatec Plastics Corporation, manufactures the compounds used by the other subsidiaries and also sells its selection of 500 rigid vinyl compounds to outside customers. PVC's manufacturing and warehousing facilities are located in Hazleton, Pennsylvania; Paris, Illinois; Manchester, Pennsylvania; Walterboro, South Carolina; Philmont, New York; and Kingston, New York. Traded over the counter, PVC is majority owned by Kirtland Capital.
Forming the Company in the Late 1960s
PVC was formed as a public corporation in June 1968 by three men: a blow molder involved in making packaging for Eli Lilly Pharmaceuticals, a lawyer, and a financial advisor. The plan was to concentrate exclusively on using PVC and blow mold technology to make plastic containers. PVC had been a commercially used polymer for 40 years, although it was discovered by accident as early as 1838 by Henri Victor Regnault. The substance had been formed when vinyl chloride in a flask had been exposed to sunlight, resulting in a solid white substance. In the early 1900s attempts were made to use it to make commercial products, but PVC proved unpredictable and difficult to work with. It was not until 1936 when Waldo Semon, working for B.F. Goodrich, discovered the proper additives needed to plasticize PVC that the polymer became a viable material. It soon found a wide range of commercial applications, such as building materials, plumbing and piping, record albums, clothing, upholstery, and plastic containers.
PVC Container Corporation became operational in 1969 with the opening of a 30,000-square-foot, Eatontown, New Jersey plant. Using extrusion blow mold technology, the company initially produced PVC bottles ranging in size from four to 16 ounces. In 1972, after the company had established itself in the marketplace, it expanded the maximum size of the bottle it could produce to 48 ounces. As the business grew the Eatontown plant expanded, adding an additional 20,000 square feet in 1975, and another 20,000 square feet five years later. In 1978 Rimer Anstalt, a Lichtenstein-based private investment firm, acquired a controlling interest in the company, but Rimer was content to remain in the background as a passive investor and allow the company's management team to run the business.
Moving Beyond PVC Material in the 1980s
After a dozen years in operation, PVC began to broaden its reach during the 1980s. In 1981 it began producing HDPE bottles. The year also was marked by the arrival of Phillip L. Friedman, who would lead the company for the next quarter-century. Friedman was in his early 30s when he became president and chief executive and financial officer. During the previous 12 years he worked for Hooker Chemical Corporation, which would become Occidental Chemical Corporation, an important provider of PVC resins and compounds. After seven years at Hooker, Friedman rose to the rank of manager of business development and director of commercial development for the polyvinyl chloride plastics division. With Friedman at the helm, PVC in 1982 reached a major turning point when it established its own source of raw materials by forming Novatec Plastics & Chemicals Division to produce PVC compound and PVC alloys used in blow molding, profile/sheet/film extrusion, and injection molding. The decision to form Novatec was also shrewd because there was little competition in the compound supply market. In short order, Novatec became the third largest supplier of PVC bottle compounds. In 1985 PVC once again increased its maximum bottle size, this time to 64 ounces. At the close of the decade business was strong enough that the company moved into a new plant in Eatontown, 106,000 square feet in size. Moreover, the new facility featured its own decorating capabilities. Also of note during the late 1980s, in the final months of 1988, PVC came close to being sold to an unnamed third party for approximately $14 million. By mid-December 1988 the discussions were terminated, however.
In 1992 PVC took initial steps to move into the PET bottle sector by forging an alliance with a Canadian company, Kantrail Plastics. Kantrail had several years of experience producing PET containers for the Canadian market. Not only did PVC gain access to Kantrail's PET expertise, it also gained the exclusive rights to market Kantrail bottles in the United States. Although PVC remained devoted to the use of polyvinyl chloride, the material had come under increasing criticism in recent years because of safety and ecological concerns, making it a prudent step to branch into the PET market. Initially, PVC marketed a handful of oval bottles, water bottles, and a one-liter vegetable bottle. The company made a major commitment to the PET injection stretch blow molding business in 1996. Not only did it add 35,000 square feet of space to its Eatontown plant for PET production, it also built a $5.5 million, 60,000-square-foot factory in Walterboro, South Carolina, capable of making all of the company's product lines in addition to PET bottles. The South Carolina site was chosen because it was close to a major longtime PVC customer and also supported a company effort to grow the business regionally. Earlier, in 1993, PVC opened a 62,000-square-foot plant in Paris, Illinois, with the capability of producing the entire company product line for the Midwest markets. A year later that company line would expand to include containers as large as 21/2 gallons.
During the first half of the 1990s PVC added other capabilities in addition to PET production. In 1992 the company added tri-layer blow molding to make use of polycarbonate. PVC achieved some diversity in 1994 when it paid $15.7 million to acquire Airopak Corporation, a Manchester, Pennsylvania-based company that used blow molding technology to produce in-line fluorinated HDPE containers, suited for ultra-clean and solvent-based products. Finally, in 1995 PVC added PP bottles to its product line. In a short period of time PVC had expanded well beyond polyvinyl chloride, but because the company used PVC as part of its name, it lost some potential customers who looked elsewhere when they needed products made from PET, PP, HDPE, or other materials. There was talk of changing the company's name to something less restrictive, such as PVCC Corp., drawing on the stock's NASDAQ ticker symbol, but nothing ever came of the idea.
Revenues grew from $29.5 million in fiscal 1991 to $53.9 million in fiscal 1995. During this period net income also increased from $1.1 million to $1.6 million. Although PVC had enjoyed steady growth, it possessed a great deal of untapped potential that was not being realized under the ownership of Anstalt Rimer. In December 1996 a new majority owner took over, Kirtland Capital Partners, a Cleveland area private investment group originally formed in 1977 as Chagrin Valley Company Ltd. to do leveraged buyouts of companies. It was recapitalized in 1981 and took the Kirtland name in 1984 after a number of investors were added. Kirtland believed in long-term investments, making sure that companies were adequately capitalized, and working with management teams to help grow the businesses. Kirtland paid $17.5 million for a 63 percent interest in PVC and left in place the company's management team, which the new owner believed was "high caliber." Kirtland's managing partner, Raymond A. Lancaster, told the press at the time of the closing, "We see a lot of growth opportunities for this company."
In 1997 Novapak was created to produce high-margin specialty products, provide more diversity, and better position the company for steady growth. A balanced slate of product offerings helped PVC to achieve stability despite changing conditions. In fiscal 1997, for instance, demand was softer than expected for the company's general line of plastic bottles, but the difference was made up by increased demand for Airopak's specialty containers and Novatec's plastic compounds. As a result, the company was able to show improvement over the previous year, with sales totaling $58.4 million and net income $2.25 million, a slight decrease over the previous year.
With Kirtland's backing, PVC completed a pair of acquisitions in 1998 as part of an effort to expand the company's plastic bottle business by both internal and external means. In March of that year it bought the plastic container assets of McKechnie Investments Inc., picking up a 100,000-square-foot plant in Philmont, New York. McKechnie used extrusion blow mold technology to produce narrow-neck and wide-mouth bottles in a range of sizes using PVC, PP, HDPE, and low-density polyethylene, serving the toiletry, cosmetic, and specialty and household chemical markets. The acquisition also brought with it about $17 million in sales. Later in 1998 PVC exchanged $12 million in stock to acquire Marpac Industries Inc., a specialty container maker with plants in Ardmore, Oklahoma, and Kingston, New York. Generating some $10 million in annual sales, Marpac used lower-cavitation technical blow molding to serve the office machinery market with PP and PET bottles, containers, cartridges, double-wall cases, flexible spouts, and dis- pensers. The Marpac assets were folded into the Airopak division. PVC also grew internally in 1998. It opened a new 160,000-square-foot plant in Hazleton, Pennsylvania, to produce PVC and PET bottles. The Paris, Illinois facility more than doubled in size to 130,000 square feet and added stretch blow molded capabilities. In addition, Airopak introduced dual-layer, co-extrusion in-line fluorination of bottles. As a result of expansion on a number of fronts, sales grew to $69.7 million in fiscal 1998 and $89.9 million in 1999. Net income, however, trailed off, dropping to $1.9 million in 1998 and $1.7 million in 1999.
New Century Bringing Challenging Conditions
Changing business conditions hindered PVC's growth at the start of the new century. The price of resins rose quickly, adversely impacting margins. In addition, the company faced increased competition. Although revenues grew to $94.8 million in fiscal 2000, the company lost nearly $1.2 million. To help in overcoming these challenges, PVC closed the Ardmore plant and cut employment by 7 percent, eliminating 50 out of 650 positions. It also instituted a "Challenge 2000" program, which encouraged employees to offer ideas on ways to reduce waste, lower costs, and improve quality.
Although the company did a better job in controlling costs and the price of resins fell, business continued to slide in fiscal 2001 as weak demand in both containers and compounds resulted from an economy lapsing into recession. Sales dipped below $90 million and the company lost another $1.1 million. Sales continued to fall in 2002, reaching $84 million, but PVC was able to squeeze out a net profit of $261,445.
PVC initiated a comprehensive strategic plan in 2002, part of which included the integration of the Airopak, Marpac, and Novapak sales and marketing operations. As the close of fiscal 2003 approached, when the company would see sales rebound somewhat to $90.4 million and net income to $872,552, more drastic measures were contemplated. PVC hired Minneapolis-based U.S. Bancorp Piper Jaffray Inc. to help it explore alternatives, including the possible sale of the company. Although PVC was regarded as a well-run business, it suffered from a lack of size. After weighing the options, in February 2004 Friedman announced that it would not pursue any of the proposals that resulted from the process and elected to stay the course. One significant change took place several months later in September 2004 when Friedman announced that he was stepping down as the company's president and CEO, although he would stay on as chairman of the board. He was replaced by William J. Bergen, a former vice-president and general manager for the Plastics Americas Business Unit of Alcan Inc.
Principal Subsidiaries: Novatec Plastics Corporation; Novapak Corporation; Airopak Corporation; Marpac Industries Inc.
Principal Competitors: Owens-Illinois, Inc.; Silgan Holdings Inc.; PolyOne Corporation; Georgia Gulf Corporation.