Banking & Finance and Manufacturing & Technology

Firm retools after CEO exit: Norwood gives up on sale, to close 2 plants

January 30, 2006

In recent months, Norwood Promotional Products has settled a lawsuit with its distributors, lost its CEO, put itself up for sale, and then taken itself off the block. Last week, the 2,000-employee company announced plant closings in Iowa and Pennsylvania.

The swirl of activity is no cause for concern, according to Norwood officials, who say the No. 2 player in the promotional products industry is doing fine and will stay in Indianapolis.

The privately held company-known for making customized products like awards and coffee cups emblazoned with company logos-has had its headquarters downtown since then-CEO Tom Roller moved the firm here from Austin, Texas, in September 2003.

Despite Roller's sudden departure last month in what sources close to the company call a managerial disagreement with board members and investors, the company has a bright future here, Norwood spokeswoman Allison Avin said.

Ten days after announcing Roller was out, Norwood said it had taken itself off the market after exploring sale options for months. Company officials declined to comment on reasons for Roller's departure, and he could not be reached.

"The decision to conclude the sale process represents a renewed opportunity for Norwood to expand its growth strategy by increasing its focus on existing customers, new products and new markets," Frank Bellis, a Norwood board member appointed interim CEO, said in a statement.

Norwood is owned by 38 investors. The company said it began exploring ownership options in early 2005. Last summer, it hired New York-based consulting firm Alix Partners to examine structural efficiencies and New York-based investment banking firm Goldman Sachs to consider buyout offers.

Most players in the promotional products business are relatively small independents, said Joe Batic, vice president for Buztronics, an Indianapolis-based maker of promotional products and various gizmos. He said Norwood is one of the few firms that has grown through acquisition.

Those acquisitions helped swell Norwood's annual revenue to $380 million in 2004, second only to Pennsylvaniabased apparel specialist Broder Bros. Co., according to the Pennsylvania-based Advertising Specialty Institute.

Since moving to Indianapolis, Norwood has increased employment here from 80 to 200. Employment elsewhere in the United States and in three plants in China is about 1,800.

ASI officials said the promotionalproducts industry grew nearly 6 percent in 2004 and about another 8 percent in 2005. Norwood hasn't released 2005 revenue, but Avin said it posted a smaller increase than the industry. She said the company expects significant growth this year.

Court papers in a lawsuit show Norwood has struggled in recent years with frayed relations with its distributors, who contended the company was selling directly to end-users, violating standard industry practice.

After several major distributors boycotted Norwood, the company filed an antitrust lawsuit in federal court in Indianapolis in March 2004; the parties completed a settlement last June and agreed to try to get along.

Product designers and manufacturers, such as Norwood and Buztronics, usually sell en masse to distributors. The distributors then work with corporations and other customers to take orders and bring customized products to market.

"It seemed like they were playing both sides of the fence," Batic said.

Norwood officials denied they were doing an end run around distributors.

"Some of the distributors were really displeased with Norwood, but those differences got resolved," ASI President Timothy Andrews said.

Avin scoffed at suggestions Norwood is in turmoil. Roller's departure was "amicable," she said, and the plant closures in Iowa and Pennsylvania will make the company more efficient.

"We were doing operations in those plants that we can do elsewhere, and in one case we were manufacturing the exact same product we were in another plant," Avin said.

Still, some of the moves have surprised observers familiar with the company. For example, city economic developers, who ballyhooed the relocation of Norwood here in 2003, were mystified at Roller's departure.

"I was extremely surprised when [Roller] stepped down," said Jeb Conrad, executive director of the Indy Partnership. Despite Roller's position on the Indy Partnership board, Conrad said he received no warning of his departure.

"I expect to talk to him soon to discuss his future involvement with the Indy Partnership," he said.

Roller is no stranger to the central Indiana business community. After becoming CEO of Fruehauf Trailer Corp. in the early 1990s, he moved the company's headquarters here from suburban Detroit. The company later filed for bankruptcy court protection and sold its assets piecemeal. He'd been CEO of Norwood since 2002.

As Norwood searches for a new CEO, it is steaming ahead with its business plan.

At the recent ASI trade show in Orlando, Norwood unveiled 10 products, including a desktop punching bag stress reliever and a game-day survival kit that includes a fanny pack, sunglasses, poncho, disposable camera, insect repellant, bandages, moist towellette, sunblock and aloe vera.

"While they've made some surprising moves, this appears to be a strong company that's carved out a great niche," Conrad said. "We've had no indication there's anything to be concerned about regarding their operation."

Andrews isn't surprised the company has shifted gears. Finding a buyer, he said, was a tall order, given that Norwood towers over every company in its industry but one.

"Any acquisition would likely have had to come from investors outside this industry, and that can be a daunting proposition entering a field you know little about," Andrews said.
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