American Paper Industry’s Decline Forces Appleton-Based Papermaker into Bankruptcy
America’s paper industry is facing a decline. The rise of digital media and smart devices is rendering print media almost obsolete. Bearing the brunt of declining paper sales are the paper manufacturers, who are now finding it hard to make both ends meet.
Appleton, Wisconsin-based Appvion, Inc.’s bankruptcy this week is just one of many examples of paper companies struggling in the new market environment. CEO Kevin Gilligan justified the move toward bankruptcy, saying, “Chapter 11 is the best path forward for Appvion and our stakeholders.”
The century-old paper manufacturer has filed for bankruptcy in a Delaware court as it seeks to restructure its huge debt pile. The company, which produces various kinds of coated and uncoated paper, has been facing declining sales and a mounting debt burden.
Appvion is a 100% employee-owned company, with about 1,400 employees, of which 800 are based in Appleton. The remaining are employed at two other facilities—one in Ohio and the other in Pennsylvania.
The ongoing restructuring initiative is expected to hurt employees on two levels. Not only do workers face the risk of losing their jobs through layoffs; they stand to lose their ownership stakes in the company.
Appvion Bankruptcy Follows Declining Second-Quarter Sales in 2017
Appvion’s bankruptcy filing comes on the heels of a disappointing second quarter this year. Less than two months ago, the company reported a significant drop in sales, with a modest outlook for future sales.
Net sales at Appvion were $9.6 million lower in second-quarter 2017 than in the same quarter a year ago. The year-to-date net sales in 2017 showed a drop of 6.6%, which was down by $23.4 million.
Appvion’s carbonless and thermal paper lines saw significant drops in net sales, due to lower market prices. These types of papers are typically used in cash registers. It wouldn’t be altogether far-fetched to partly tie the drop in thermal paper demand to declining sales in the brick-and-mortar retail industry.
Paper Companies Struggle with Debt as American Paper Industry Faces Decline
Appvion is not the only paper company struggling with a revenue slump. Another Appleton-based paper manufacturing company, Appleton Coated, has been dying a slow death amid plummeting sales and growing debt. The company has already laid off more than 600 employees at its mill and is seeking a potential buyer to save it from closing its doors permanently.
The employees remaining at the Appleton Coated paper mill have been left in the lurch. They are waiting to find out whether they’ll be keeping their jobs in the event of a sale, or losing them if the mill shuts down instead. The company, which has been losing about $2.0 million a month, went into receivership in August.
There have also been other paper mill shutdowns and layoffs by paper manufacturers earlier this year. Paper manufacturers are facing a drop in demand for their products on various fronts, all of which are contributing to their shrinking revenues.
The decline in the print media industry has been contributing to the downfall of paper manufacturers, whose primary cash cow remains coated paper—a key input for newspaper and magazine publishers.
“Appvion Initiates Process to Restructure Debt and Position Business for Long-Term Success,” Appvion, October 1, 2017.
“Appvion files for bankruptcy protection, looks to reorganize,” Post-Crescent, October 2, 2017.
“Appvion Reports Improved Second Quarter 2017 Results,” Business Insider, August 7, 2017.
“Questions go unanswered Monday on Appleton Coated’s fate,” Appleton Post-Crescent, October 2, 2017.
“Appleton Coated paper mill to stay open as potential buyer is sought,” WBAY.com, September 25, 2017.