Besides its equity holders, court documents show Norwood is indebted to an extensive list of companies. Its unsecured creditors include UPS ($800,000 debt), Titleist ($668,000), Callaway Golf ($259,000), 3M Promotional Markets (asi/91240) ($190,000) and Nike ($188,000).
Within the ad specialty industry, the filing did not come as a major surprise, especially to the supplier's frequent customers. "Clearly, Norwood had too much debt to survive as an organization," says Greg Muzzillo, CEO of Proforma (asi/300094). "This filing will create a healthier balance sheet for Norwood overnight." Said Terry McGuire, senior vice president of marketing for Halo/Lee Wayne (asi/356000): "Norwood is our largest trading partner and has kept us in the loop on their financing situation for several months. It is important to understand that their problems were caused by their legacy capital structure, not their ability to generate profits from operations."
According to court papers, Norwood's vulnerability was enhanced by the forced closure of its highly profitable Cedar Rapids, IA, facility in 2008. The plant was damaged in severe flooding. Doug Miskimen, the former general manager of Norwood Souvenir in Cedar Rapids, expressed support for Norwood's management team. "It's a disappointment and sign of the times," says Miskimen, now president of start-up Cedar Crest Manufacturing (asi/44368). "Paul Lage is part of a great leadership team. If anybody can bring them back, he can."
Noted in the Norwood filing as the stalking horse bidder, Aurora Resurgence did not respond to an inquiry by Counselor for comment. In similar cases, a stalking horse makes the initial bid in bankruptcy auctions and is generally protected by break-up fees if the sale is not finalized. Rich Hynes, a bankruptcy expert and law professor at the University of Virginia, says it's common for companies to succeed after Chapter 11 re-organization if the business model is stable. "Just because a company is in financial distress doesn't mean it's in economic distress," says Hynes. "Companies may be able to pay expenses out of its earnings."
Potentially fitting that profile, Lage says Norwood continues to make money. The company's 2008 sales, however, were down about $32 million compared to 2007 ($347.4 million in 2007 to $314.5 million in 2008). Founded in 1989, Norwood employs 1,800 people. According to Lage, no layoffs are associated with the company's Chapter 11 filing.
Distributors Offer Views OnNorwood Bankruptcy
Contacted by Counselor within the last 24 hours, several distributors shared their opinions of Norwood's bankruptcy filing. Distributors were asked for their initial reaction and what effect they believe the bankruptcy will have within the ad specialty industry. Here are some responses:
"There is a great deal of stress on the industry and companies with a lot of debt are always vulnerable. Fortunately, Paul Lage and his management team are very experienced operators, and have done a great job with Norwood's business. In the long run, the industry will be fine, but I expect a few more bumps in the road before it smoothes out."
-David Woods, Adventures In Advertising (asi/109480)
"I am surprised. Anytime you have one of the leading companies in any industry dealing with financial challenges it has a ripple effect."
-Pat Cavanaugh, Cavanaugh Marketing Network (asi/159262)
"We were a bit surprised but also realized that Norwood has carried a substantial debt load and anticipated that their private equity ownership partners would change in next year or two. We don't think this situation will have a lasting effect on the industry unless something happens during the next 90 days that fouls up the business sale."
-Chris Vernon, The Vernon Company (asi/351700)
"I had not heard anything suggesting that this was likely to occur. I don't think this means much for the industry. From what I understand, there will no impact whatsoever on any orders already in process at Norwood prior to the filing, or on any new orders submitted to Norwood after the filing."
-Ross Silverstein, iPROMOTEu (asi/323119)
"Prior management teams and owners built the company through acquisitions when prices were very high. It's tough to support heavy interest and principal payments when sales decline 25%. The strength of the industry has always come from entrepreneurs. If you look back on the significant business failures of the last 15 years, you find companies that were funded by investors such as the original Ha-Lo, Cyrk, Corplogoware and now Norwood, just to name a few."
-Bill Smith, Jr., Brown & Bigelow Inc. (asi/148500)
"I think any time a larger player in the industry declares bankruptcy, it is a surprise. However, in this environment it is clear that over-leveraged companies, whether suppliers or distributors, will be the most inclined to seek such protection. Paul is clearly a smart and engaged leader. He's been more open with those that rely on a healthy Norwood and has helped create a trust factor that did not exist a few years ago."
-Robert Fiveash, Brand Fuel (asi/145025)
"In any other times, it could be the beginning of some serious realignments in the supplier base. But I think Norwood picked the perfect time to do this, as virtually every company has struggled and filings and debt restructuring is a daily event. It's a sign of the times." -Dan Welborne, WorkflowOne (asi/333647)
Broder Severs Ties WithColumbia
Broder Bros. Co. (asi/42090), a Counselor Top 40 supplier, announced yesterday that its relationship with Columbia Sportswear has been terminated, effective immediately. The decision was arrived at mutually "due to business and economic pressures faced in 2009," according to a press release that was issued yesterday. Broder had carried Columbia apparel for 10 years and offered 30 active styles. The Trevose, PA-based supplier plans to sell off its remaining Columbia inventory.
"We are extremely disappointed to be ending our relationship with Columbia," says Girisha Chandraraj, senior vice president of marketing at Broder Bros. "It's a great brand and we've shared a mutually beneficial relationship. That said, we are committed to serving our customers and their needs with our extensive portfolio of branded items such as Rossignol, Devon & Jones, Weatherproof and Chestnut Hill."
Broder has made a number of notable moves in the past few months. In April the supplier warned it would file for Chapter 11 bankruptcy unless it can restructure $225 million in current debt by the middle of May. Before that it had hired New York-based Miller Buckfire as its financial advisor and investor bank to explore financing alternatives. In December, Broder laid off 140 employees, and net sales were down to $219.5 million in the fourth quarter of 2008 compared to $232.7 million for the 2007 4Q.
Podcast: Cinco de Mayo And Mother’s Day Promos On this week's ASI Internet Radio's Tuesday Morning Show, the hosts asked the audience to call in with their favorite promos they've run around the Mother's Day or Cinco de Mayo holidays.
Click hereto listen to the fun seasonal promotions call-in segment from Tuesday's show.
If you'd like to check out a recording of the whole online radio show, go to www.asicentral.com/radio. And, don't forget to join us next Tuesday morning, May 12, at 10:30 am eastern time. Of course, we'll also be taking calls from the audience, so please do give us a ring at 215-953-4979 to hear your voice on the air and be eligible to win a Visa gift card.
ASICentral:Ad Specialties Across America
In this month's issue, Counselor magazine sought to prove just how versatile promotional products can be with their Ad Specialties Across America feature. They reported on events that occurred over the past six months in each of the 50 states and showed exactly how ad specialty items were used at all of the events. It's an awesome read that we highly recommend.
But we here at ASICentral wondered, how can we make the electronic version even better? The answer: An interactive online map. We've got all 50 states represented in one cool, easy-to-use map. Just mouse over or click on a state to find out how promotional products are being used. Check it out now.
Got questions, comments or any type of feedback regarding anything ASICentral, don't hesitate to contact us at firstname.lastname@example.org. Also, follow ASICentral at:
Screen Printing Equipment Company Closes
Arizona-based equipment company U.S. Screen Print and Inkjet Technology is no longer in business and its assets are in liquidation, according to financial reports. Its main phone numbers have been disconnected and no one at the company, including CEO Scott Fresener, has responded to recent calls or e-mails. Customers say the company does not have active support, service or parts departments. "All of us in the screen printing industry have benefited from Scott Fresener's contributions," says Brian Greul, president of Texas Shirt Co. (asi/343253). "This will change the landscape of the direct-to-garment market."
According to a Yahoo Finance report, U.S. Screen Print recently failed to make significant payments that were due to its primary creditor, Hirsch International Corporation. In response, Hirsh subsidiary Graphics Arts Acquisition Corporation has begun the process of seeking collateral. U.S. Screen Print's loan had been secured by assets that included machinery, equipment, inventory and intellectual property.
Founded in 1979, U.S. Screen Print offered a variety of educational materials and software, as well as a complete line of inkjet-to-garment printers.
Get On Counselor's Hot List
Are you doing something unique, hip, fun or trendy in the industry right now? Do you know somebody who is? Counselor is looking for nominations of people for its second annual Hot List, which will be published in August – our Hot Issue. We're on the lookout for anyone in the industry who is taking an interesting approach to business, shaking up the status quo or simply networking like a maniac at all hours of the night. We're in search of those people who are making the industry a unique marketplace that's fun and energetic.
Send an e-mail by Friday, May 8 to Andy Cohen at email@example.com explaining in 50 words or less why your nomination should be recognized on Counselor's Hot List in August. And, please make sure to include a picture of the person you're nominating. Thanks!
Enroll in ASI Education Online Learning brought to you by ASI Education. Online Learning is the newest and most convenient way for distributors to get educated.
On-demand, self-paced courses are the perfect way for distributors to learn more about the advertising specialty industry and hone their skills as top ad specialty salespeople and brand consultants. We've launched an online campus that provides educational courses and information for the promotional products professional.
Check out our first course, "Getting Started in the Advertising Specialty Industry," Lesson One: "Researching Products and Suppliers." Click here to register for FREE as a student in ASI Education's Online Learning campus. Be one of the first ASI members to experience ASI Education's virtual learning community. And, look for Lesson Two, "Decipher Pricing Codes," next week, on Tuesday, May 12.
Course Track: New Distributor Education
"Getting Started in the Advertising Specialty Industry"
APRIL 21– LIVE: Lesson 1: Researching Products and Suppliers
MAY 12 – Lesson 2: Decipher Pricing Codes
MAY 26 – Lesson 3: How to Write a Foolproof Purchase Order
JUNE 9 – Lesson 4: Artwork and Decorating Lingo
In The News
3M/Promotional Markets Dept. (asi/91240) has announced that its Post-it Brand has achieved the Sustainable Forestry Initiative (SFI) Chain-of-Custody Certification for all Post-it Note and Post-it Easel products that ship out of 3M facilities in the U.S.
Howard Miller Company (asi/61943) has announced that Incentives West (Mark Shinn and Jodi Spangrud) will provide representation in CA, OR, WA, AZ, HI and AK.
Pacific Coast Golf (asi/75649), headed up by Hugh and Mark Hobbs, has been established as a new company in the ad specialty industry, based in Los Angeles, CA, with a sales office in Nashville, TN. The company will supply golf brands including Titleist, Pinnacle, Cobra, FootJoy, Wilson, Callaway, Top-Flite, Nike, Bridgestone and Precept.
Towel Specialties (asi/91605) is now the exclusive supplier of the CMC golf line in the ad specialty industry.
WorkflowOne (asi/333647) has launched a new technology application, called The Promotional Products Profiler, to help healthcare providers manage their promotional product expenditures and save between 10%-20% annually.
People On The Move
Americo Manufacturing (asi/35750) has named Lynn Cuellar-Cofield to the position of sales manager of the PromoMatting division.
EnduraPack (asi/52484) has hired Ed Manbeck as senior account executive.
Touchstone Merchandise Group LLC (asi/345631) has announced the additions of Maureen Woodward, Diane Mayer and Robyn Champlain as senior account executives in its Irvine, CA, office.
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