Consolidated Papers, Inc.

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Consolidated Papers, Inc.

P.O. Box 8050
Wisconsin Rapids, Wisconsin 54495
U.S.A.
(715) 422-3111
Fax: (715) 422-3469

Public Company
Incorporated: 1894 as Consolidated Water Power Company
Employees: 4,937
Sales: $904.23 million
Stock Exchanges: OTC
SICs: 2671 Paper Coated & Laminated—Packaging; 2621 Paper Mills

Consolidated Papers, Inc., is a leading producer of coated printing papers for the printed communications industry that operates more than 60,000 printing and publishing establishments in the United States and Canada. Coated printing papers, also called enamel papers, are specially finished, glazed papers used for such things as magazines, brochures, and corporate annual reports, as well as catalogs, newspaper inserts, and direct mailings. Focusing on this specialty paper has insulated Consolidated from some of the factors that have impacted the paper industry in the past decade. However, the company did fall prey to the advertising recession of the late 1980s and early 1990s, which affected magazine publishing in particular. Consolidated is also a leading manufacturer of lightweight coated and specialty papers used in food packaging and labeling. Other products include custom-designed corrugated displays and containers and paperboard products.

In 1894, several small water power concerns on the Wisconsin River organized to form the Consolidated Water Power Company. Eight years later, the company expanded its operations to include the manufacturing of paper, changing its name to Consolidated Water Power & Paper Company. Consolidated started up the world’s first electrically powered paper machines in 1904. Over the next decade, the company manufactured newsprint and wallpaper, as well as power. Expansions included the acquisition of Biron Division in 1911 and Interlake Division in Appleton, Wisconsin, in 1916. By 1919, the company had constructed a hydroelectric plant and paper mill in order to manufacture tissue, waxing, and specialty papers.

With the acquisition of Newaygo Timber Company, Limited in 1920, Consolidated grew to include timberlands acreage in Ontario, Canada. The previously acquired Biron division was converted in 1929—along with the Wisconsin Rapids division—to produce book and writing papers.

Emmett Hurst launched the company’s forestry program in 1930. Five years later, Consolidated developed and introduced the Consolidated Massey coater. This revolutionized the industry by producing the first coated paper manufactured by a single high-speed operation. Over the next seven years, Consolidated converted five paper machines to the high-speed coating process and began to focus on the production of coated papers.

In addition to the coating technology, Consolidated developed an exceptionally strong plastics material in 1943. During World War II, in order to produce aircraft materials, the company formed a Plastic Division, which later became Consoweld Corporation. In 1945, the company acquired Wisconsin River Division, converting it to produce coated printing papers. The merger with Ahdawagam Paper Products Company in 1948 expanded Consolidated’s product line to include paperboard containers and cartons.

Throughout the 1950s, Consolidated concentrated on the sale and production of its coated papers, introducing a new line of coated papers and launching a major national advertising program. In 1959, a new research & development center was completed. Another groundbreaking invention in paper-coating technology came in 1961, with the Dip Roll Blade coater. At this point, the company was undergoing conversion from roll to blade coating. This same year marked the one millionth ton of enamel papers sold by Consolidated’s merchants. In 1962, the company named was changed to the one it holds today: Consolidated Papers, Inc.

Toward the end of the 1960s, construction began on a $37 million kraft pulp mill and power complex. Kraft paper is a stronger grade of pulp that replaced sulfate. Consolidated purchased Castle Rock Container Company, a corrugated container plant, in 1970. The next decade reflected increased environmental as well as market considerations as the company began pouring its capital into modifications and expansions. In 1970 and 1971, the company put more than $1 million into primary wastewater treatment plants, and in 1972 announced plans for an $8.6 million treatment plant to serve the Wisconsin Rapids, Biron, and Kraft divisions. A pollution abatement program was completed that same year. In 1973 ground was broken for a $2.7 million sheet converting plant in Wisconsin and a $5.6 million lumber/chip complex in Ontario, Canada, which closed in 1984. The following year, Consolidated began a $12.8 million modification program at its Kraft Division to increase pulp capacity by 26,000 tons a year. In 1975, the company launched a $6 million boiler plant to burn coal and bark. Consolidated then broke ground for a $4 million secondary treatment plant.

Two years later, a $64.6 million papermaking expansion project was underway to increase enamel paper capacity by 95,000 tons per year and a new thermomechanical pulp system was begun at the Biron Division. Also in 1977, Consolidated introduced another frontrunner in paper-coating technology: the short-dwell-time applicator. This applicator is considered the progenitor of the current state-of-the-art in lightweight coating. Greater automation was introduced into various production aspects in 1978, such as high-speed computerized presses and an automatic splicer.

The 1980s were volatile years in the paper industry. The explosion in the use of computers and copying machines created a boom in the paper industry early in the decade. Consolidated’s earnings benefited particularly with the increase in direct-mail advertising and color inserts in newspapers, which made use of the company’s specialized lightweight coated papers. The company at this point had enjoyed steady, above-average profit margins and had become a solid leader in specialized papers. Consolidated started the 1980s with the construction of a new office building in Wisconsin Rapids and the celebration of its forestry program’s 50th year. The company also acquired sole ownership of Consoweld Corporation that year and began a $1.5 million expansion program for that company. Consoweld was sold to LOF Plastics, Inc. in 1985.

In order to catch up with demand, Consolidated began a multimillion dollar expansion program in 1981, seeking to increase capacity of specialty coated papers by 24 percent. The following year, it began a $17 million Wisconsin Rapids Division expansion. In 1985, Consolidated celebrated its 50th year of manufacturing coated printing and specialty papers. At this point, the Wisconsin-based company was considered the world’s largest producer of enamel papers. The company was also producing lightweight, coated specialty papers for packaging and labeling, in addition to more conventional corrugated containers—used for shipping large items such as refrigerators and televisions—and paperboard products.

While the company’s manufacturing base was centralized in Wisconsin, Consolidated’s timberland base spread across 670,00 acres of Wisconsin, Michigan, Minnesota, and Ontario. By 1985, the company was generating about 23 percent of its raw material requirements, a goal it had set for itself some six years prior, when management analyzed long-term fiber requirements against softwood availability. At that point, a softwood shortage was forecast for the upper Midwest by the year 2030—about the same time demand was expected to have doubled. To circumvent this shortage, Consolidated’s timberlands division intensified all aspects of reforestation, including harvesting, site preparation, planting, seedling research, and production. A program was laid out which included the replanting of 2,000 acres annually for the first five years. By 1983, 3,500 acres were planted. The following year, 3,300 acres were planted. Most of the acreage was being converted from low-quality hardwoods to red pine—chosen for its preferred fiber and rapid growth—and the goal was to plant 50,000 acres by the year 2000. In 1985, however, some 7,000 acres were being harvested annually and that was still not meeting the growth rate.

In addition to these incentives to the timberlands division, the company was instituting a program to recycle sludge material from its Water Quality Center. Made up of natural materials used in the papermaking process, sludge was spread on commercial farmland as a combination fertilizer/soil amendment. This saved on landfill costs while improving soil fertility. The sludge—called ConsoGro—and its application was the result of a six-year research program conducted by Consolidated. Another environmentally sound breakthrough about this time was the addition of peroxide to the high-density storage stage of production in order to increase pulp brightness and output. This proved an innovative solution with the added benefit that hydrogen peroxide is environmentally safe.

In 1986, Consolidated’s Biron mill won Newsweek’s “Mill of the Year” award for the second time in four years. The Biron Division was the focal point of Consolidated’s largest capital project, an expansion investment of $215 million of internal cash flow. The result was a state-of-the-art coating plant. Company chairperson and CEO George Mead told Pulp & Paper magazine in 1987, “When I joined this industry, the general feeling was that companies our size did not have the muscle to keep up. They were thought to be inadequate in financing and in depth of skilled personnel. Many companies felt they had to become part of larger, more powerful organizations in order to survive. We have shown that this is not necessarily true.”

The following year, Consolidated announced a $96.7 million capital expense program. This included a further $46 million expansion of pulp production at the Kraft Division. To be completed in 1989, the project was intended to increase chemical pulp production. Another $22 million was slated for improvements of the production of heavier coated free-sheet papers. Some of this money was also earmarked for further computerization of inventory.

Further expansion plans were announced in 1989 to produce top quality coated paper for annual reports and high-grade brochures. That same year the Paperboard Products Division added a seven-color press to its equipment, allowing it to produce high-quality, multicolor folding cartons. Diversifications such as these helped protect Consolidated from the rumblings in the industry caused by the recession as well as the fact that papermills everywhere had been running near capacity and fear of a shortage was setting in. Coated paper had proven to be a more profitable and steady business than commodity paper. The company’s operating margin remained more than 20 percent in eight out of ten years between 1979 and 1989.

Being a largely family-run company had kept Consolidated small and disciplined. In 1992, nearly 30 percent of Consolidated’ s employees had been with the company for more than 20 years—a remarkable record of loyalty. In 1989, 41 percent of company stock was in the hands of one of its founder’s descendants, including then chairperson George Mead. In the manner of a conservative, family-run company, Consolidated had generally avoided accumulating debt, opting instead to finance capital spending out of its own cash flow. And its growth was always on par with industry demands and internal manageability. However, all of the intensive expansion projects around this time resulted in a considerable long-term debt for the first time in Consolidated’s history. As of 1992, Consolidated was generating sufficient cash to subtract from its debts, while still spending enough to keep its plants current and competitive.

Consolidated was also ahead of the landfill problems that plagued many industries in the late 1980s. The company’s solid waste management program worked closely with consultants, regulatory agencies, and the community to develop a plan that included landfills on company-owned land as near to treatment plants as possible. Water quality and water renewal center landfills are also located on land near the treatment plants, which allows Consolidated to keep a close watch on the operations. Such environmental requirements have significantly affected Consolidated’s profits in recent years. Between 1991 and 1993, the company spent $34.4 million in its Kraft Division alone for environmental improvements that brought it up to regulatory codes. Also, the increased demand for recycled fiber content in Consolidated’s papers has introduced costly variables, as contamination of recycled fiber is a problem, and producing specialty papers of different weights with recycled pulp is a technological challenge.

In 1990, the development and expansion of wetland mitigation sites around these water quality and water renewal centers began. Consolidated also joined with the Wisconsin Department of Natural Resources to enhance wildlife management and habitat development on company-owned land adjacent to the Mead Wildlife Area. Company forestlands are managed as a source of pulp wood for papermaking, as well as a source of enjoyment to the public through hiking, hunting, and other recreation.

In 1991, Consolidated filed a patent infringement complaint against two companies that sold technology based on the short-dwell coater technology, which Consolidated had developed in 1977. Also named in the suit were several companies that licensed the paper-coating technology from the firms by which Consolidated claimed to be violated. This was a rough time for the entire coated paper industry as advertising in magazines—among the largest consumers of lightweight coated papers—plunged with the sustained economic downturn. Consolidated’s sales were punished. The economy also affected the company’s heavyweight coated paper profits.

In 1992, Mead announced he would step down from the position of CEO in October of 1993 while remaining chairperson.

President Patrick Brennan is to succeed Mead as CEO. Although Business Week declared 1992 paper industry earnings “a nightmare,” Consolidated appeared to be outlasting the soft economy and maintaining its spot in the Fortune 500 list.