General Binding Corporation

Motto

The Touch Finish (El Toque Final)

Company history

General Binding Corporation (GBC) supplies machines and material for binding documents, laminating, and displaying products. The GBC, Quartet, and Ibico brands are marketed in more than 100 countries. GBC experienced a slump following a 1990s expansion and scaled back product offerings. A merger with Fortune Brands Inc.'s ACCO World Corporation was completed in August 2005.

Founding, overseas growth

GBC was founded in 1947 by William N. Lane II and two business partners when they purchased a small trade bindery in Chicago, Illinois. First year sales totaled $250,000. GBC expanded operations in 1952, opening another domestic manufacturing plant and founding General Binding Corporation Canada, Ltd. In the 1950s GBC laid the groundwork for its international divisions, creating sales and distribution networks in Europe, Mexico, Canada, Venezuela, and Brazil. Sales were slow at first in the European market, where GBC's binding machines were readily available but supplies were not. In response to this situation, GBC established a manufacturing subsidiary in Switzerland in 1954 to produce a full range of plastic binding supplies as well as a limited number of binding machines. Wholly owned subsidiaries were then set up to market GBC machines and supplies throughout England, Germany, the Netherlands, Italy, and France.

In 1958, the European Economic Community established a 30 percent tariff on goods produced in Switzerland and sold throughout Europe. To avoid hefty tariffs, GBC built a second European manufacturing facility in Germany, just across the border from its Swiss concern. One year later, when labor shortages in Switzerland sharply curtailed production at GBC's plant there, the company built a third European manufacturing facility in England.

1960s and 1970s

In 1960, GBC introduced the Combo, its first combination punch/binding system. GBC also continued its international expansion, becoming one of the first foreign companies to set up operations in Japan. Three years later, the company established a fourth European manufacturing plant in Italy. Again, GBC's profits were threatened by high taxes, so the company built an automated plant in a newly created Italian economic development zone that had a lower tax rate. When the Australian government levied high import tariffs on GBC products in 1966, the company established an Australian manufacturing facility and purchased a Sydney-based firm to manufacture binding supplies from raw materials exported from the United States. This persistence in expanding its international sales garnered GBC a U.S. government "E" Award for excellence in exporting in 1964.

GBC also established a wholly owned subsidiary in Brazil in 1962. Due to the unstable political situation in the country at that time, however, the company refrained from doing business there until 1971, when it entered into a joint venture with a Brazilian firm to distribute its products.

Sales from 1961 to 1971 rose an average of $2.1 million a year, 30 percent of which came from foreign markets. GBC's domestic sales also expanded greatly, fueled by growth in the office market as well as a surge in the printing and graphics industry. In 1962, GBC purchased Virginia Laminating, a designer and manufacturer of lamination machines. In 1969, GBC purchased Webtron Corp., a maker of specialty presses used for printing tags and labels, and set it up as a wholly owned subsidiary. GBC went public in 1966, listing its securities on the OTC (over the counter) market. Stocks split two-for-one in 1968 and again in 1971. The company declared its first cash dividend in 1975.

Sales in 1973 surpassed $50 million for the first time, and Therm-A-Bind, a new heat-activated binding system, was introduced. In 1977 GBC purchased U.S. RingBinder Corporation. GBC founder, Chairman, and CEO William N. Lane died in 1978. The Lane family retained control of 57 percent of the company and William N. Lane III was named chairman.

Sales in 1978 hit the $100 million mark but began to slip around 1981, due to the economic recession in the United States.

Computer sales

In an attempt to boost earnings, GBC entered into an agreement with NorthStar Computers to sell its personal computers through GBC's established distribution and sales channels. The move proved to be nearly disastrous for GBC. Its sales force devoted the majority of its efforts toward selling new computers under the GBC name. IBM introduced a personal computer in 1981, and within two years cornered the market. In 1983, GBC sold fewer than 500 computers. Earnings fell to $236,000 on sales of $145.7 million, compared with 1981 earnings of $7.5 million on sales of $149.6 million.

1970s and 1980s

GBC's subsidiary U.S. RingBinder was facing competition from lower priced imports in the metal ringbinder industry. By 1983 U.S. RingBinder had resorted to selling its products at no gross margin in order to stave off its eroding market share. GBC's second subsidiary Webtron also was feeling the squeeze of competition.

In 1984, Rudolph Grua was hired to replace John Preschlack as president and CEO. Under Grua, the company began a back-to-basics marketing effort, dropping its computer line and focusing on its core binding and lamination businesses. Faced with growing threats from European and Japanese imports, Grua earmarked $1.4 million for research and development of new binding and laminating systems and shredders. GBC introduced a number of new products and instituted a combined direct-mail, catalog, and telemarketing drive for its binding and office supplies. U.S. RingBinder became competitive again by establishing a manufacturing plant in Singapore. Sales in 1984 rose 13 percent to $165 million; net earnings soared to $6.4 million.

In 1985, GBC entered into an agreement with VeloBind, Inc., of Sunnyvale, California, which had developed an innovative binding system using rigid plastic strips, paired along the spine and connected by prongs.

The company broadened its marketing efforts, introducing an expanded product catalog named Sourcebook and establishing a telemarketing center at corporate headquarters in Northbrook, Illinois. The following year, telemarketing centers were established in England, Australia, and Canada. In 1987, with sales of more than $200 million, GBC stocks split 3-for-2 and dividends increased by 20 percent. In 1988 stocks split 3-for-2 again, earnings jumped 55 percent to $14 million, and sales hit a record $250 million.

1990s

GBC continued its expansion into the 1990s, establishing a new Film Products Division in 1989 and also purchasing Loose Leaf Metals Co., Inc., that year. The company also began tapping into the growing desktop publishing and home office market. In 1991, the Film Products Division introduced a high-speed commercial laminating system, which established GBC as a complete marketer of paper finishing products. Also that year, GBC purchased VeloBind, Inc., for approximately $50 million. Research and development spending continued, resulting in the introduction of 14 new products in 1992, including binding machines, improved Therm-A-Bind systems, and shredding machines. The next year, GBC entered the office supply business with the acquisition of Bates Manufacturing Company.

As it moved toward the beginning of the 21st century, GBC planned to focus on improving its international markets, which were hurt by recessions in the overseas operations. In 1993 international sales accounted for 45 percent of unit sales but only 36 percent of dollar sales. With a focus on developing its Mexican and Australian markets, GBC looked for continued growth and profitability.

In 1994, GBC purchased Michigan-based Sickinger Co., a maker of high-volume paper punching machines. Seeking to cut manufacturing costs, the company entered into two joint ventures in China and built a plant in Costa Rica. Concurrently plants in Germany and Mexico City were shut down. Revenue for the year climbed 12 percent to $420.4 million. Earnings were up 5 percent to $15.7 million.

Govi C. Reddy, 18-year GBC veteran and head of the laminating film division, stepped up to the posts of president and CEO in January 1995. Under his leadership the division's annual revenue had grown from $6 million in the late 1980s to $63 million in 1994. Reddy's goal was to boost GBC total revenues to $1 billion by 2000, according to Crain's Chicago Business.

As a part of his quest, Reddy ventured into the digital graphics market, with the purchase of Wisconsin-based Pro-Tech in late 1995. He also restructured operations and invested $20 million in the company's information system. The company gained Australian market leadership in office supplies with the acquisition of Fordiograph Inc. The Sydney-based company had sales of $21 million in 1995.

The majority of the company stock remained with the Lane family. Lane Industries Inc. held 62 percent of the common stock with Ariel Capital Management, a mutual fund business, holding 11 percent. Lane Industries controlled all Class B voting stock. The stock had been confined to the $18 to $23 range for a number of years due to the less than stellar results from commodity product ventures such as three-ring binders, computers, and desktop supplies, according to Crain's.

GBC purchased Quartet Manufacturing, a visual communication product maker in 1997. U.S. RingBinder was divested in 1998, putting the proceeds toward debt reduction. The company was paring itself down to four core business areas of office products, document finishing, films, and emerging markets.

Record sales of $922.4 million, a 20 percent increase over 1997, were achieved in 1998. Net income dropped off due to a downturn in document finishing and digital print finishing businesses; charges related to three new manufacturing plants and the closure of two others; implementation of new distribution and information management systems in Europe; and costs related to the purchase of Ibico AG.

Losses and restructuring

April 1999 announcements of a first quarter earnings decline of 82 percent and a workforce reduction resulted in a 26 percent hit to GBC's stock price. Domestic sales of office supplies were soft and the ongoing integration problems related to the February 1998 buyout of Switzerland-based Ibico AG contributed to the fall-off. The restructuring, which also included a plant closing in Phoenix, the elimination of about 24 field sales offices, and the shuttering of warehouses in Dallas and Atlanta, was expected to save the company about $16 million annually. GBC recorded a net loss of $56.7 million for the year, and its stock fell to the $12 level, a 68 percent drop-off.

2000s

GBC returned to profitability in 2000, with $2.4 million in net earnings. In February 2001, Reddy retired. Lane also stepped down as chair in 2001, making room for new leadership. Dennis J. Martin came aboard as chairman, president, and CEO in May 2001. He planned to cut unprofitable products, reduce debt accumulated during the 1990s acquisition spree, and cut overhead. Martin had headed up the $1 billion welding products group for conglomerate Illinois Tool Works Inc.

By the summer of 2003, Martin had reduced product offerings from more than 30,000 to less than 10,000. Instead of producing a slew of models for a piece of equipment such as a paper shredder, GBC began limiting them to the ones favored by high-volume customers. With a decrease in product offerings came a corresponding reduction in sales volume, factories, major distribution centers, and workers. In addition, Martin pushed for the development of technically advanced products.

Martin's plan proceeded in a time of economic recession, taking hold in 2001. Corporate spending and hiring was off from the level that created strong demand for GBC products during the 1990s. GBC responded by outsourcing to low-cost facilities and entering the retail mass market.

Annual sales were around the $700 million mark in 2003 and red ink continued to plague GBC's bottom line despite increased efficiency. "I don't think the company is losing marketshare to competitors in most of its business lines," Walter Liptak, a KeyBank Capital Markets/McDonald Financial Group analyst told Crain's Chicago Business in May 2004. "It's just that corporate spending remains weak. And until demand rises, the company won't be able to raise its prices much, either."

GBC regained its footing in 2004, producing its most profitable year since 1998. Year-end debt was at its lowest level since 1996.

ACCO merge

In March 2005, Fortune Brands Inc. announced plans to spin off its Illinois-based ACCO World Corporation office products unit. ACCO would be merged with GBC, creating the world's largest supplier of branded office products with a combined revenue of nearly $2 billion. ACCO's Swingline brand was the North American leader in stapling and punches and ACCO was the leader in clips and fasteners.

Shareholders of both Fortune Brands and GBC were to receive shares in the newly created company. Fortune shareholders would own 66 percent and GBC shareholders 34 percent. The merger deal drove up GBC shares by 62 percent from mid-March to the beginning of June.

ACCO's profit margins had been under pressure from volume purchasers such as OfficeMax Inc. and Staples Inc. Fortune had attempted to sell ACCO in 2001, but shifted direction when no satisfactory offers were put forth. Cost-cutting and streamlining distribution and production operations produced a turnaround, but contribution to Fortune's overall sales and earnings continued to be limited, according to the Chicago Tribune.

Cosmo Films, India

Cosmo Films Ltd of New Delhi, India in January 2009 announced acquisition of GBC Commercial Print Finishing business from ACCO Brands Corporation. GBC reported $100 million in annual revenues at the time of acquisition. Cosmo Films is a manufacturer and exporter of BOPP and thermal lamination films and has own global sales of $140 million. The company chairman, Ashok Jaipuria, said that the combination of Cosmo Films and the GBC Commercial print finishing business would maximize the strengths of both organizations paving way for a vertically integrated, financially robust organization with broad management, sales and technical expertise. The acquisition is expected to close in the second quarter of 2009, and is subject to certain conditions and regulatory approvals.