Pacer Technology History

Address:

9420 Santa Anita Ave.
Rancho Cucamonga, California 91730
U.S.A.

Telephone: (909) 987-0550
Fax: (909) 987-0490

Public Company
Incorporated: 1984
Employees: 148
Sales: $47.7 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: PTCH
NAIC: 32552 Adhesive and Sealant Manufacturing

Company Perspectives:

Pacer is a world-class manufacturer and distributor of items we all know, use, and see in stores throughout 70 countries in the world. The quality of our products' packaging and deployment have achieved a world-class caliber reputation with our customer base. Branded products include Super Glue, Zap hobby products, Oleg Cassini, GEM, Kurlash/Diamon Deb, Elvira, and Brut personal health and beauty items. Pacer is also the 'behind the scenes' manufacturer for many major household adhesives and nail care items. Pacer's mix of products is varied. There are two components that 'tie it all together.' First, we are in total control of the basic manufacturing process. We know how to maintain quality and meet production deadlines within tight budgets. Second, we enjoy excellent relations with the top retailers in the nation and around the world.

Company History:

Pacer Technology is a leading manufacturer and supplier of high-performance glues, adhesives, and epoxies sold to consumer, hobby, automotive, and industrial customers. The company is best known as the maker of Super Glue, a classic adhesive brand acquired in 1994. The 1998 acquisition of Cook Bates Inc. nearly doubled Pacer's size. Cook Bates is a leading manufacturer of nail care products such as pumice stones, emery boards, tweezers, scissors, and nail clippers, which are sold under brand names such as Gem, Kurlash/Diamon Deb, Oleg Cassini, and Brut. Pacer covers five key areas of retailing: discounting chains, drug chains, supermarket chains, hardware and home centers, and hobby and craft outlets. Pacer also maintains licensing agreements to produce products 'behind the scenes' for other brand names. Pacer's products are sold in 75,000 U.S. retail outlets including Wal-Mart, Kmart, Target, The Home Depot, Walgreens, and Eckerd. While the company's sales have risen sharply in the late 1990s and early 2000s, its profits have declined, due in part to costs associated with the integration of its Cook Bates facilities.

Model Airplanes in the 1970s

Pacer was founded in the early 1970s as a maker of model airplane kits. The company soon realized, however, that the secret to its success was in the adhesives used to assemble the kits rather than in the kits themselves. Within a few years, Pacer reincorporated as an adhesive manufacturer and supplier and relocated from Wyoming to California.

The company put much thought into the packaging of its adhesives. It acquired plastic injection and blow-molding machinery and began to manufacture plastic packaging for its products. Producing its own packaging saved the company money, which allowed it to invest more in the development of its adhesives.

New Divisions in the 1980s

The company divided its new adhesive products into several distinct categories and marketed these products under different brand names. Its popular hobby adhesives, used to assemble crafts and models, were marketed under the Zap brand name. Pacer marketed a wide range of adhesives and sealants to industrial customers, such as manufacturers of automobile and heavy-duty equipment, subassemblies and components, medical devices, and electronic components for maintenance and repair operations. These products were sold under the Pacer Tech brand name.

Pacer also manufactured a line of automotive adhesives designed to withstand the high temperatures and heavy wear-and-tear associated with the operation of automobiles. These products included high-performance sealants and instant gaskets and were marketed mainly under the Pacer's ProSeal brand name.

Super Glue in 1994

To diversify its product line, Pacer acquired several companies in the 1990s, including the Super Glue Corporation. President and CEO James Munn arranged the 1994 takeover of Mexlonic, formerly the Super Glue Corporation of Ridgewood, New York. Super Glue products include a high-performance line of adhesives and plastic molded clips used in homes, schools, and offices. The move was considered risky at the time. 'They were doing about $12 million in sales, and we were doing close to the same,' said W. Thomas Nightingale III, a Pacer marketing executive at the time of the takeover. The acquisition caused Pacer to post a net loss that year and 'it took some time to discover which Super Glue products were going to be the most profitable for Pacer,' according to the Inland Empire Business Journal.

Pacer also acquired other companies around the time of the Super Glue takeover. It purchased Novest, Inc. in 1993, a private corporation that manufactured adhesives, sealants, and lubricants for engine and body parts, and California Specialty Chemicals, Inc., in 1997, a producer of proprietary sculptured acrylic nail liquids and powders.

Pacer soon realized that Super Glue would be its ticket to success in the future. In 1995 it redesigned Super Glue containers to make them more convenient for users. Its new tubes had smaller-but-deeper diaphragms to minimize leakage and better conserve the unused portion of the product. The new design was the first alteration to the product since its introduction in 1977.

Pacer introduced a new line of Super Glue in 1995 called Future Glue. Unlike most adhesives, Future Glue was designed to be applied to dirty surfaces and was stronger than Super Glue.

In 1997 Pacer signed exclusive agreements with Home Depot and Target that would generate millions in Super Glue sales. According to the Tribune Business News, the Home Depot agreement stipulated that Super Glue would be the only general-purpose cardboard mounted glue product on display in its 115 existing stores and in the 500 new stores it expected to open by 2000. Target agreed to put Pacer's Handi-Tak reusable putty adhesives near its 6,000 checkout counters in its 750 stores.

Cook Bates in 1998

In March 1998 Pacer acquired the massive Cook Bates, which nearly doubled Pacer's size. Headquartered in Venice, Florida, Cook Bates was a division of London International Group, Inc. The 102-year-old company had been operating since 1896 and was a leading manufacturer of nail care products such as pumice stones, emery boards, nail clippers, scissors, and tweezers. Analysts believed the Cook Bates purchase was a good move for Pacer. Cook Bates had a longstanding reputation for high-quality, innovative products sold in about 70 countries. Cook Bates had particularly high seasonal sales and marketed special holiday products such as new leopard-skin manicure sets and hot colors manicure sets.

Since Pacer already had a strong presence in retail outlets throughout the United States, the company was in a unique position; it could market Cook Bates products along its already existing channels. 'This acquisition will open up key shelf space for Pacer's existing products and offer us the opportunity to leverage our global distribution and marketing capabilities by cross-selling Cook Bates' products with ours,' said Munn. Vice-President Jim Gallagher said in an article in Chain Drug Review: 'There were tremendous synergies with Pacer's marketing, manufacturing, and distribution capabilities. Because of that we were able to combine both operations relatively quickly.'

As more women entered the workforce, Pacer saw tremendous growth for its Cook Bates products in Western Europe. 'The size, demographic mix and limited amount of competition make overseas markets particularly attractive. Demand for our nail-care products is very strong in Europe, a market that is estimated to be growing at 20 percent annually,' Munn explained.

Although the Cook Bates acquisition helped Pacer boost its sales, Pacer suffered a drop in profits. Some of Cook Bates's operations overlapped with Pacer's and forced the company to pay too much for its operations. Pacer also paid more than $3 million in charges relating to the integration of Cook Bates.

Restructuring in Early 2000

Pacer's top priority in early 2000 was to increase profits. The company was nearly delisted on the NASDAQ when its stock dropped to less than $1 per share. Pacer's board of directors terminated President and CEO James Munn and assembled a new management team to turn the company around. It appointed Nightingale president and CEO. Robert R. Vanderlaan, a former Sherwin Williams executive, was named chief operating officer (COO). In 2000 Pacer successfully rebuffed a proxy takeover attempt by Munn and some disgruntled board members.

To boost its income, Pacer concentrated on increasing its presence in Home Depot and Kmart 'by expanding its shelf space and placement in multiple sections of stores.' It closed a Memphis, Tennessee distribution center and consolidated operations in Rancho Cucamonga, the location of the company's headquarters. 'We will be focusing on reducing the number of products we make,' said Nightingale. 'We are looking at profitability and margins for each product.'

The company also obtained the exclusive rights from Pen-Tel Products to sell Bondini adhesive products, including Bondini 2 and Bondini Everything Gel. Because it bonds with nearly all surfaces, Bondini became known as 'Bondini the Magic Glue.' In 2000 Bondini was sold at Wal-Mart, Kmart, Sears, and other retail outlets. Nightingale stated in a company press release that the Bondini acquisition broadened Pacer's retail presence and that Pacer planned to increase the number of items in the Bondini product line.

1975:Pacer is founded as a maker of model airplanes.

1978:Company goes public.

1980:Pacer enters the industrial market.

1984:Company reincorporates and relocates from Wyoming to California.

1993:Pacer acquires Novest, Inc.

1994:Pacer acquires Super Glue Corporation.

1997:Pacer acquires Cook Bates Inc.

2000:Company restructures to increase profits.

2001:Company obtains exclusive rights to sell Bondini adhesive products.

Pacer also continued to develop new products. In 2001 the company was performing trials on a cyanoacrylate formulation topical skin-closure device to be sold to the medical field. The company expected to begin selling the product in 2002. It also was seeking government approvals on its Rectite adhesives. Rectite was a poultry adhesive designed to reduce the bacterial contamination of food.

As of 2001, industry experts believed that Pacer would soon be back on track and highly profitable. Although there was a trend in retailing toward consolidating operations and using fewer vendors, analysts believed the immensely popular Super Glue was probably here to stay.

During the next few years Pacer planned to further expand into overseas markets and sell its products in lesser-developed countries. In 2000 nearly 20 percent of Pacer's revenues stemmed from sales in more than 70 countries in Europe, South America, the Pacific Rim, Mexico, and Eastern Europe. Pacer's revenues rose from $46 million in 1999 to $47.7 million in 2000, but its net income dropped from $1.3 million in 1999 to $0.3 million in 2000.

Principal Competitors: Minnesota Mining & Manufacturing Company; Dow Chemical Co.; Borden, Inc.; Henkel Manco Inc.; Devcon; 3-Bond; Alteco.

Pacer Technology History

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