Englewood, Colorado-based Mail-Well, Inc. (NYSE: MWL) prides itself as the world's largest manufacturer of envelopes and one of America's largest commercial printers. Consisting of three divisions, envelopes, printing, and printed office products, called Printexcel, Mail-Well has approximately 11,000 employees, 80 printing facilities, and reported $1.9 billion in sales in 2001.

Starting with a well-respected envelope manufacturing business, Mail-Well began acquiring printing plants and expanding into new markets in the late 1980s. The rapid growth meant taking on a large amount of debt, and some observers questioned whether such "consolidators" could be successful under corporate leadership.

The current downturn has not been kind to business, but Mail-Well is weathering the storm. Last year, the company exited the label business, consolidated its debt and closed a number of plants, including facilities located in Omaha, Allentown, Santa Fe Springs, Portland, Chicago, Phoenix, Boston and Nashville. With other changes, the company slimmed down from a high of 15,000 employees and 140 printing plants.

The moves produced a positive effect. Last March, Fortune magazine ranked Mail-Well first in the printing industry category for quality of management. The company moved up in overall rankings to fourth place from seventh place the previous year, improving on such qualities as innovation, employee talent, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment value and quality of products and services.

WTT: Could you explain the role of each segment of your company and how you see the future of the industry for these segments?

PR: We see growth in all three industries. (Envelope, printing and printed office products). About half of our business is direct mail and the DMA (Direct Marketing Association) predicts this business will grow 5% a year.

Another large portion of our business is transactional. Electronic bill payment will happen at some point, but interestingly enough, it hasn't grown as quickly as we forecast. Two years ago we assumed 25% of all consumer-to-business bills would be paid online by 2005, but today only 3 to 4% of bills are paid online. We will have some loss of market there but we expect this area to grow 1 to 2% over the next five years.

Most of our commercial printing tends to be higher end, with 6, 8, and 10 colors, which is less susceptible to technologies such as inkjet or digital printing. We see the printing business growing at GNP or slightly below. In printed office products, we have a variety of different segments that will grow at half the GNP. All our markets are growing.

When we looked at our businesses two years ago, we had just come off four years of building a network of companies with a national account value-proposition. We told large national companies that we could fulfill their needs from different locations. We got lots of traction with that value proposition in office products. National accounts represent 40% of Printexcel's business. We got little or no traction on the print side-national accounts represent only 10 to 20% of our print business. It has to do with local control. Creative people want to do business in their own marketplace, and many high-end designers want to be close to press checks. There are strong relationships between print buyers, and printers and people with national accounts have a difficult time breaking that bond.

Now we are looking at another value proposition-breath of product line. It's easier to differentiate ourselves with a broad product line than with multiple plants. Envelopes, commercial print, printed documents and labels is an easier product sell.


WTT: If you sold some of your smaller companies, what is your focus now?

PR: The size of the company was not what drove us to make decisions about which companies to sell. A variety of factors came into play. The strategic impulse was driven by two factors. The first was the ability to generate cash to pay down debt. The second was to simplify our business. At our peak, we had five different businesses. We are embarked on a process of integrating these companies, and it's easier to integrate fewer companies.


WTT: During the early growth and acquisition phase of building Mail-Well into a large company, you took on a lot of debt. Does this present special challenges for a company of your size?

PR: If you manage a printing company well, you will ultimately manage debt well. Over the last two years, we have significantly reduced the amount of debt by half a billion dollars. More importantly, we have given ourselves more flexibility. Today we have $750 million in debt, and the first payment of $100 million is due in 2005. We will generate enough cash flow to pay that off. We have $300 million due in 2008 and $350 million due in 2012. We see no problem in paying these. There is sufficient time for our markets to become healthier than they are today.


WTT: Is the acquisition phase over at Mail-Well?

PR: We said that after the integration processes we would look at relaunching an acquisitions program, using a couple of criterion. First, we don't want to leverage the company. We believe that the balance sheet of a company should be 50% equity and 50% debt. Second, we want to be much more balanced strategically. On the print side, we will look at companies to increase our local market share, and on the envelope and label side, we will look for companies to help with low-cost manufacturing.


WTT: In 2002, Fortune magazine ranked Mail-Well first in the printing industry for quality of management. What management skills are required to succeed in printing today?

PR: We have looked at skills over the past two years and they do need to be unique. The downturn in the advertising market was substantial and printing had the largest downfall. We built our companies in high-end color work-6,8, and 10 colors-which is more discretionary than other printing materials. Over the last two years, the advertising business had a dramatic impact on our sales. One challenge was to lower cost when we faced lower sales volume.

What generally makes management of a printing company unique-it's true in our commercial, envelope and our printed office products-is that they are all custom jobs: It's a job shop atmosphere. Combining the demands of a job shop with a high level of service is a unique capability needed in the printing business.


WTT: Does managing a large sales force present any special challenges?

PR: Of course it's a challenge. We have some 800 sales executives in Mail-Well and manage them through sales management. We are emphasising sales management training and our sales system. It's one of our strategic initiatives. In sales executive training we have two areas of emphasizes: the first is relationship management at the sales level; and the second, as we move to sell more product to the customer, is product training. The key is sales management.

We are fulfilling needs. Among the 80 companies we have, we are most successful when two characteristics are present: market share and a focused market strategy. Most of the time, this means selling a broad offering of products and services to a narrow customer base. We are not trying to be everything to everyone; we sell a broad product line of envelopes, printed office products and commercial print, along with services such as fulfillment and digital asset management.


WTT: Why has Mail-Well shrunk under-performing printing plants, consolidated its web operations and closed some plants?

PR: We ended up exiting one market and that was New York. In this particular case, we had two strikes against us. One was the recession and the second was a plant within a few blocks of the World Trade Center. We never recovered from 9/11. We closed the other operations for two reasons. We looked at consolidation of web plants to help manage cost but the most important reason was to service our customers better by concentrating web plants in the eastern, central and western parts of the country. We are now offering printing in all parts of the country, which we were unable to do before. By covering the whole country, our commercial operation improves customer service.


WTT: What guidelines and best practices play a role in making Mail-Well more efficient?

PR: There are a variety of measurements, both internal and external. External measurements are things like on-time deliveries, returns as a percentage of sales, and proofs delivered on time. Measurements are not focused internally or externally, but on running the business better. We identified 14 areas but are concentrating on safety, customer satisfaction, sales growth, productivity improvements, employee satisfaction, meeting financial commitments, and using our purchasing leverage.

Internally, measurements help us access our progress toward meeting our strategic initiative. We set the measurements so that every employee in the company can relate at least to one of them. When they come to work, they know at least one thing they can do to add to Mail-Well's success.


WTT: Value-added services is the new “buzz-word” in the printing industry today. How do you determine what services your customers will need?

PR: We ask our customers what they will need in the future. We aren't trying to build markets where none exists. Customers tell us they want more fulfillment, more outsourcing of their internal functions and quicker turnarounds, which to us means digital printing. None of these are new but are a continuation of current trends.


WTT: How does your company deal with endemic problems such as overcapacity, a seasonal flow of jobs, and increasingly expensive equipment?

PR: It's a big, big problem, no doubt about that. We cannot add to our capacity. We have an aggressive program to idle our surplus capacity, which includes putting some presses into warehouses until the markets become healthier.

We are only making investments in new machinery when we can justify the cost by expanding our product or service offerings to customers. We do not entertain investments based on the expansion of capacity. In many cases today, when we put in a new machine, we may remove two or three. This helps us deal with overcapacity and pricing pressures. Every one of our companies institutes a similar pricing methodology for estimating jobs. This gives us a common language, internally. In this job costing market, pricing is a very important part of success. Now, with a similar methodology and language, we can help each other deal with pricing. Also, the same pricing system and multiple plants helps us deal with large national companies.


WTT: What is your vision of Mail-Well for the future?

PR: Our vision for Mail-Well is long-term success where customers are very satisfied and employees are very satisfied, and this will make our investors very satisfied. To get there we will concentrate on the seven areas I mentioned earlier. We will get there through what we call mobilization, creating an environment that allows our 11,000 employees to come to work and do what is necessary to make those things happen. In essence, we will give our employees the tools to satisfy our customers, which will satisfy the investors.


Thank you Paul. We appreciate your time.