October 17, 2005
Next: Back from the dead | Keith Van Scotter and John Wissman, president and CEO, chief financial officer, Lincoln Paper and Tissue
By Taylor Smith
When word spread in late August that a southern California firm was investing $35 million in Lincoln Paper and Tissue, it marked yet another bit of success for the northern Maine mill. Since LP&T was purchased for nearly $24 million last year, new owners Keith Van Scotter and John Wissman have bucked trends in the beleaguered paper industry by delivering a steady stream of good news. Within a few weeks of reopening the mill, LP&T had replaced roughly half of the 700 jobs lost when the mill's former owner, Amherst, Mass.-based Eastern Pulp and Paper, shuttered operations in Lincoln early last year. After just one year in business, LP&T was on solid financial footing and has rebuilt a strong base of customers for the mill's well-defined product lines, including specialized napkin tissue and business reply-card stock.
But while the early success of LP&T has been something of a feel-good tale, Van Scotter and Wissman know there's more to the story. For starters, the pair are keenly aware that continuing to deliver strong results requires deftly navigating an industry that in recent years has been plagued by problems such as oversupply, weak profits and slow growth. As a result, says Van Scotter, LP&T's CEO, he and Wissman had to be willing to change the way the mill had been run for the past few decades. And the strategy is one that heads of other old-line industries in Maine would do well to notice. Change may be difficult, but complacence can be deadly. According to Van Scotter, the Lincoln mill was shuttered and tied up in bankruptcy under the previous owner because the firm "was incapable or unwilling to make the changes that were necessary" to stay competitive and financially solvent.
The key for LP&T was to boost operating efficiency while keeping overhead low ˆ a decidedly difficult task for any manufacturing company. Van Scotter says he and Wissman were fortunate not to purchase a company with a workforce already in place. Instead, the pair were able to write new labor agreements that gave employees more latitude to pitch in throughout the manufacturing process and to evaluate what positions were critical to the mill's smooth operation. Back-office operations were tightened up and the sales staff was reduced. Meanwhile, Van Scotter, 49, and Wissman, 41, spent roughly $5 million in the first year to patch up or replace some of the mill's more inefficient infrastructure, and shut down production for 22 days to rejigger the mill's manufacturing layout to boost efficiency. "Not very many [paper companies] have gotten to the point where they're as lean as we are given the number of pieces of equipment we're running," says Van Scotter. "We're still swimming upstream to some degree, but it's all about those factors like market niche, manufacturing configuration and organizational approach. We think that long term this will work."
The recent investment from La Jolla, Calif.-based PCG Capital Partners is Exhibit A that Van Scotter and Wissman are on to something. The cash is earmarked to help pay for a $36 million paper machine that's expected to double the mill's production capacity and support 35 new jobs. And while PCG's investment didn't fall into their laps ˆ Van Scotter and Wissman spent months courting potential investors ˆ the deal represents a significant vote of confidence in LP&T. "To get a firm from southern California to invest in an old industry in northern Maine ˆ it's something you don't expect," says Wissman. "But these guys were very interested in this kind of investment, and they saw that there could be a nice return."
The deal with PCG, in which the investment firm will receive a non-controlling stake in LP&T as well as two seats on the board of directors, did more than legitimize the way that Van Scotter and Wissman have been running LP&T. The investment also represented an integral piece of LP&T's future, according to Wissman. "[The investment] was critical for the new machine, and the new machine was critical for the growth plans of Lincoln," he says.
According to Wissman, pieces of a 10-step, five-year plan will help the mill become even more efficient, from plans for an on-site sawmill to additional power generation at the mill. But what will be of utmost importance for the company, according to both Van Scotter and Wissman, is for the company's management to be ever vigilant of shifts and trends in the paper industry. That'll mean not getting complacent making the same kinds of products for the customers in LP&T's specialized niche, says Van Scotter, as well as keeping an eye out for competitors trying to edge into the mill's market. "We're looking at markets all the time," says Van Scotter. "We're always saying, are there some other products we ought to be looking to make? No niche is protected forever. You always have to be looking behind you."
But while the early success of LP&T has been something of a feel-good tale, Van Scotter and Wissman know there's more to the story. For starters, the pair are keenly aware that continuing to deliver strong results requires deftly navigating an industry that in recent years has been plagued by problems such as oversupply, weak profits and slow growth. As a result, says Van Scotter, LP&T's CEO, he and Wissman had to be willing to change the way the mill had been run for the past few decades. And the strategy is one that heads of other old-line industries in Maine would do well to notice. Change may be difficult, but complacence can be deadly. According to Van Scotter, the Lincoln mill was shuttered and tied up in bankruptcy under the previous owner because the firm "was incapable or unwilling to make the changes that were necessary" to stay competitive and financially solvent.
The key for LP&T was to boost operating efficiency while keeping overhead low ˆ a decidedly difficult task for any manufacturing company. Van Scotter says he and Wissman were fortunate not to purchase a company with a workforce already in place. Instead, the pair were able to write new labor agreements that gave employees more latitude to pitch in throughout the manufacturing process and to evaluate what positions were critical to the mill's smooth operation. Back-office operations were tightened up and the sales staff was reduced. Meanwhile, Van Scotter, 49, and Wissman, 41, spent roughly $5 million in the first year to patch up or replace some of the mill's more inefficient infrastructure, and shut down production for 22 days to rejigger the mill's manufacturing layout to boost efficiency. "Not very many [paper companies] have gotten to the point where they're as lean as we are given the number of pieces of equipment we're running," says Van Scotter. "We're still swimming upstream to some degree, but it's all about those factors like market niche, manufacturing configuration and organizational approach. We think that long term this will work."
The recent investment from La Jolla, Calif.-based PCG Capital Partners is Exhibit A that Van Scotter and Wissman are on to something. The cash is earmarked to help pay for a $36 million paper machine that's expected to double the mill's production capacity and support 35 new jobs. And while PCG's investment didn't fall into their laps ˆ Van Scotter and Wissman spent months courting potential investors ˆ the deal represents a significant vote of confidence in LP&T. "To get a firm from southern California to invest in an old industry in northern Maine ˆ it's something you don't expect," says Wissman. "But these guys were very interested in this kind of investment, and they saw that there could be a nice return."
The deal with PCG, in which the investment firm will receive a non-controlling stake in LP&T as well as two seats on the board of directors, did more than legitimize the way that Van Scotter and Wissman have been running LP&T. The investment also represented an integral piece of LP&T's future, according to Wissman. "[The investment] was critical for the new machine, and the new machine was critical for the growth plans of Lincoln," he says.
According to Wissman, pieces of a 10-step, five-year plan will help the mill become even more efficient, from plans for an on-site sawmill to additional power generation at the mill. But what will be of utmost importance for the company, according to both Van Scotter and Wissman, is for the company's management to be ever vigilant of shifts and trends in the paper industry. That'll mean not getting complacent making the same kinds of products for the customers in LP&T's specialized niche, says Van Scotter, as well as keeping an eye out for competitors trying to edge into the mill's market. "We're looking at markets all the time," says Van Scotter. "We're always saying, are there some other products we ought to be looking to make? No niche is protected forever. You always have to be looking behind you."
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