Lawter International Inc.
Lawter International Inc.
990 Skokie Boulevard
Northbrook, Illinois 60062
Fax: (708) 498-0066
Stock Exchanges: New York
Sales: $191 million in 1994
SICs: 2893 Printing Ink; 2821 Plastics Materials& Resins;
2816 Inorganic Pigments
Lawter International Inc. manufactures and markets specialty chemicals for the printing ink industry. Its founder, William J. Terra, is credited with developing a printing process that revolutionized the magazine industry and made weekly publications such as Life and Time possible. In addition to its printing ink vehicles and slip additives (which give printing inks their ability to carry color onto a variety of surfaces), Lawter’s core products include fluorescent pigments and coatings, thermographic compounds (used to produce raised lettering on stationery), and synthetic and hydrocarbon resin (used for printing inks, varnishes, and lining beverage cans).
Lawter sells to both large and small ink manufacturers such as BASF, Dianippon Ink and Chemicals, Coates/Lorilleux, and Toyo. The company devotes a good portion of revenues to research and development and operates according to a customer-driven marketing strategy, which strives to anticipate customer needs. Headquartered in Northbrook, Illinois, Lawter operates 18 plants located in the United States, Canada, China, Denmark, England, Ireland, Italy, Singapore, and Spain. The company reported record earnings in 1994 of $29.9 million on sales of $191 million.
The success of Lawter International can be traced to the inquisitive and ambitious mind of founder William J. Terra. Terra was the son of an Italian lithographer who had emigrated to the United States at a young age. In 1934, Terra was a researcher with the Columbian Carbon Corp. of Philadelphia, Pennsylvania. Always interested in printing and the chemical properties of ink, Terra persuaded the company’s chief to permit him to lead a research team to investigate an idea he had toyed while studying chemical engineering at Pennsylvania State University. He believed that a specific formulation of ink compounds might speed up the process of printing and drying ink. Within a year, Terra’s team had developed an ink compound that would allow high-speed presses to print color magazines in 24 hours— remarkably shorter than the 25 days previously required. The discovery was a major development for the printing industry— in fact, it was one of the first major changes for nearly a century—and immediately revolutionized certain segments of the industry. The first magazine to adopt the new process was the Saturday Evening Post.
In 1936, R. R. Donnelley& Sons of Chicago won an important contract to print a new weekly photo magazine called Life using Terra’s ink compounds; Columbian Carbon sent Terra to Chicago to supervise the printing. The magazine was successful and Terra was promoted to head up the company’s Chicago plant. But Terra was ambitious and wanted to set off on his own. In 1940, he borrowed $2,500 from a friend named John Lawson and founded Lawter Chemicals to develop and market new technologies for the printing industry.
The company manufactured printing ink vehicles and flores-cents at its new plant in Skokie, Illinois. Despite Terra’s success at developing new products, the company’s early years were difficult, and when World War II erupted Terra closed shop and served in the U.S. Navy. Upon his return in 1945, he reopened the company, but again business was sluggish. For ten years, Lawter grew slowly. A second plant was opened in Newark, New Jersey in 1954, yet Terra struggled. Then in 1955 Terra was asked to join the executive management team of a major chemical firm. The company offered him a salary of $27,000 per year—more than four times what Terra was then making.
Terra considered closing his company and accepting the post. But after speaking with his wife, Adeline, he decided to engage a management consulting firm to investigate whether Lawter had a chance of success. “I still have the report,” Terra said in the Chicago Tribune. “In the final analysis, it said the product line was good, the industry was excellent and the potential was much better than average in every way. There was really only one thing wrong, and that was the management. They went on and outlined what entrepreneurs did wrong, that entrepreneurs think they’re so much better at every phase of a business than everyone else, that they make the mistake of trying to do everything themselves.”
Terra took the consultant’s advice and borrowed money to hire a top research director as well as experienced marketing, financial, and advertising executives. Sales improved under the new management team and by 1958, Lawter’s cash reserves and equity were strong enough to purchase Krumbhaar Chemical Inc., a well-respected manufacturer of synthetic resins. A third plant was quickly built in San Leandro, California. In 1959, the company purchased a raw-materials supplier and established Lawter Chemicals (Canada) Ltd., as a wholly owned subsidiary to produce and market printing ink vehicles in Canada. By 1960 the company had a stong enough balance sheet to make its first public offering.
By 1961, Lawter’s printing ink vehicles, resins, and florescents were being sold to manufacturers throughout the United States and Canada as well as in Central and South America, Europe, Australia, the Philippines, Japan, and South Africa. Sales had grown from $1.7 million in 1967 to $3.7 million in 1961; earnings grew from $57,000 to $242,000. In 1962, the company opened its fifth production plant in Ontario, Canada, and one year later it established a European subsidiary to producing synthetic resins and printing ink vehicles in Belgium.
By 1965 net sales of $7.4 million were more than double 1961 figures, and earnings had tripled to $994,000. That year, the company made its third acquisition, American Lithographic Varnish Co., a manufacturer of printing ink vehicles that provided Lawter with an expanded product line, improved distribution, and stronger research and development capabilities. Research and development continued to play a strong role in the company’s growth. By 1970, 65 percent of company sales were generated by proprietary goods created in Lawter’s laboratories.
Lawter acquired two more companies in the early 1970s, Virko-type Corp., a thermographic printing business, and Stresen-Reuter International, the Illinois-based ink vehicles and synthetic resin division of International Minerals and Chemical Corp. During this time, Lawter’s profits were affected by raw materials shortages that raised the cost of goods produced, but by 1974 Lawter was able to institute a significant price increase that began to cover the higher materials prices. The company achieved record sales of $40 million in 1974, with earnings of $5.6 million. The following year, sales dropped by 9.8 percent to $36 million, but earnings rose to $5.7 million, fueled in part by a stabilized market for raw materials.
Lawter continued its expansion in Europe, and by 1976 it operated six subsidiary plants in Canada, Belgium, Great Britain, The Netherlands, and Germany. In 1977, the company reported record earnings for the 20th consecutive year. Sales, too, reached a record level of $47.9 million. The following year, Lawter acquired Dyall Products Inc., a producer of ink additives and related products, for an undisclosed amount of stock and other securities.
Lawter’s growth was—and continues to be—fueled by a combination of careful acquisitions and aggressive new product development. The company was quick to respond to changing conditions in the printing industry, introducing in 1979 the LO-CAL line of printing inks, which were formulated to reduce the amount of energy required for drying ink. The LO-CAL inks were also noteworthy because they were not photochemically reactive and thus did not convert to smog when exposed to sunlight.
Expansion through Europe continued into the 1980s, as subsidiaries were established in Spain, Denmark, and France. Sales reached $81.5 million, with earnings of $11.9 million. However, the decade was marked by uncertainties and difficulties. In 1981, an explosion at Lawter’s Bensonville, Illinois, plant injured six workmen and destroyed a wing of the plant, causing a work stoppage often days and more than $150,000 in damage. Although sales in Europe grew briskly, profits gains were undercut by the strength of the U.S. dollar on overseas markets and a sharp increase in the European prices of raw materials in 1984. Despite this, Lawter remained optimistic, noting that 65 to 70 percent of the demand at its new European plants were from new customers.
In 1987, Lawter surprised the investment community by putting itself on the auction block, looking for a possible sale or merger. Analysts assumed the reason was because Terra, at age 76, wanted to sell out. Indeed, Lawter’s founder had accepted the post of ambassador-at-large for cultural affairs in the Ronald Reagan administration and had moved to Washington, D.C., to fulfill his duties. Terra had also grown into an avid collector of American art, and in April 1987 he oversaw the construction of the Terra Museum of Modern Art, a $35 million facility in downtown Chicago that held the family’s extensive collection of 20th-century American paintings.
By February 1988 Lawter had taken itself off the auction block, allegedly because of the October 1987 stock market crash, which cut the company’s share price by almost 50 percent to $11.75 per share. Company officials also predicted “excellent prospects for 1988 and beyond” and set about to prove their predictions.
In 1991, the Chicago Tribune declared, “Lawter has become a hot performer in the past five years, raising sales and earnings by aggressive selling of new products.” Earnings nearly doubled between 1985 and 1990, to $23.4 million on sales of $150 million. New products included Ultrex, an environment-friendly line of fast-drying ink vehicles using soybean oil in place of petroleum products, and Luminex, an easy-formulating vehicle that adds gloss to inks. In 1991 the company also acquired Ampac Powders& Wax Compounds. Lawter continued to outsell its competition in 1992, launching at least 11 new products and capturing record sales of $167.6 million.
The company seemed in excellent shape as it entered 1993. Although the printing trade in the United States was in a slump (magazines and direct-mail catalogs decreased circulation after years of strong growth), Lawter had been able to weather the downturn on the strength of its overseas sales—nearly 50 percent of overall sales. The company’s balance sheet was strong, with sizeable cash reserves, and Lawter began shopping for another acquisition.
In August 1993 Lawter launched a hostile bid, offering $172.5 million for Hach Co., which was based in Loveland, Colorado; Hach was a manufacturer of laboratory instruments and kits used to analyze the chemical content of water. Lawter already owned 28 percent of Hach and, as Terra told the Chicago Tribune that year, hoped to take control of the company in order to “expand into a new dynamic market [on] a direct basis.” The deal fell through, however, when the Hach family, which held a 47 percent interest in the company, refused to cede their shares. Cram’s Chicago Business hypothesized that the proposed merger “may well have failed over a clash of executives personalities,” noting that both Terra and Hach chairman Kathryn Hach-Darrow retained firm control of the companies they founded, despite their respective ages of 83 and 72. But the reason may simply have been that Hach management did not feel comfortable with the alliance. “From a technological standpoint, there are no synergies between the two companies,” Hach’s chief financial officer told Crain’s. “And I don’t think there would be marketing synergies, either. The two companies make very different products.”
Revenues rose to $172.2 million in 1993, but costs rose at an even quicker pace and net income dropped a whopping 81 percent to $5 million. The sharp decline in earnings was caused by volatile European currencies and low interest rates on the company’s large investment portfolio. Lawter was well prepared to weather the earnings drop, however, and by 1994 sales had increased 10.9 percent to $191 million and earnings jumped to a record $29.4 million. In addition, in June 1994 Lawter acquired Cremona Resine, S.A., an Italian manufacturer of synthetic resins, and began construction of a state-of-the-art resin manufacturing plant in Pleasant Prairie, Wisconsin.
The Pleasant Prairie plant was to produce environment-friendly, water-based acrylic resin and would double the company’s output of resins in the United States while replacing outdated plants in Bensonville and Addison, Illinois. Shortly after the new plant opened, an explosion occurred in one wing of the facility, causing minor injuries to two employees and extensive damage. By 1995 the Pleasant Prairie plant was in full operation, although restart costs impaired profits for the year. In 1995 Lawter commenced construction of a plant in Antwerp, Belgium, intended to produce printing ink vehicles, synthetic resins, and specialty additives for the European market; it was scheduled to go on line in late 1996.
Lawter seems to be in a strong position as it nears its sixth decade of operation. Company President Richard D. Nordman “continues to develop his own management strategy and style” as Terra begins to assume a less active role in the daily operation of the business. Although fluctuations in the price of raw materials (soybeans, resin oils, linseed, rosin, and dimer) have the potential to greatly affect the company’s profit margins, Lawter has for the most part avoided great losses by diversifying its market base and by taking a buyer-oriented approach to selling its products. Lawter has always been a technology driven company that tries to anticipate customer needs. Its sales force interacts with customers on a one-to-one level, which allows the company to customize products for individual customers and to more easily pass on increases and discounts in the price of raw goods used to manufacture its products.
In the future, the company plans to grow by improving efficiency, offering new product lines, and international expansion. As for acquisitions outside its line of business, such as the failed Hach merger, “We have an open mind,” Nordman told Crains Chicago Business in 1994. “We are prepared to step outside of graphic arts and resins. But we will do it carefully.”
Ecovar, Inc.; Virkotype Corp.; Lawter International FSC, Ltd.; Lawter International (Australasia) Pty. Ltd.; Lawter International, N.V.; Lawter International (Canada) Inc.; Lawter International, Ltd., (Tanjin), P.R.C.; Lawter International, A.p.S.; Lawter Interntional, Sari.; Lawter International, GmbH.; Lawter International, Ltd.; Lawter International (Italia), Sri; Lawter International, B.V.; Lawter Antilles, N.V.; Lawter International Products, Pte., Ltd.; Lawter International (Proprietary), Ltd.; Lawter International, S.A.
“A Look at Lawter International,” American Ink Maker, June 1993, pp. 90-101.
Killian, Michael, “The Collector Daniel Terra Loves American Art So Much, He Spent a Fortune to Build a New Chicago Museum in Its Honor,” Chicago Tribune, April 19, 1987, p. F4.
“Lawter Improves Resin Production with Conveyor Pilot Plant Testing,” American Ink Maker, July 1981, p. 18.
O’Connor, Matt, “Lawter Folds Up Its For-Sale Sign,” Chicago Tribune, February 18, 1988, Bus. Sec.
O’Connor, Matt, “Lawter International Hangs Out For Sale Sign,” Chicago Tribune, September 29, 1987, Bus. Sec.