To the casual observer, it looked like the end of the road for Card Pak. On Nov. 11, 1996, co-owners Rick and Lisa Thomas stood amidst the smoldering ashes of the company's Warrensville Heights facility, surveying the damage from a massive fire. There wasn't much of a business left.
Earlier that evening, while the Thomases were on their way home from Las Vegas, 17 inches of heavy snow collapsed the roof of Card Pak's building, bringing down live power lines. One of the wires sparked, igniting the cardboard inside. By the time firefighters extinguished the flames, more than 75 percent of the 70,000-square-foot building was destroyed.
"Luckily, no one was hurt," says Lisa, company president. "But the company burned to the ground."
This wasn't the first tragedy to strike Card Pak-or the last. In 1994, a flood washed away much of the company's lower levels. Four months after the fire that left the company's future in doubt, one of the co-owners decided he'd had enough. He filed a lawsuit demanding the insurance money from the fire be divided 50-50 and that Card Pak's doors be shut for good.
Today, the company is still alive. In fact, it's thriving. Sales are up 33 percent since the fire-from $12 million to $16 million-and Lisa says the $20 million mark is right around the corner. What's more, Card Pak is putting the finishing touches on a new printing plant in Solon and plans to move in later this month.
The company's story isn't simply one of survival, it's about determination and perseverance-of the owners-and of the employees who stuck with them through the company's darkest days. But mostly, its a story about preparing a safety net to survive some of the most debilitating problems a business can face.
Learning from the past
In the middle of a parking lot that separates Card Pak's main offices from its manufacturing plant stand three concrete pads. Those-along with some scattered char marks on the back of the office building-are all that remain from the structure that once connected the two facets of Card Pak's operations.
The pads were the bases of Card Pak's original printing presses, explains Rick Thomas, CEO. "It (the fire) melted the aluminum side parts off the presses."
The fire could have been worse, Rick says. By the time it hit, Card Pak was well insured. That wasn't the case in 1994 when the flood hit. Seven inches of rain fell in an hour, causing a nearby creek to spill over its banks and race down a hill into the gully where Card Pak's building stands. Nearly three feet of water poured into the building, damaging most of the company's equipment.
"That almost put us out of business," recalls Lisa. "At that time, we were severely uninsured." Lisa says they lacked business interruption insurance and adequate flood insurance and the owners had to pony up enough dough out of their pockets to keep the business alive. "It was a bare bones policy," she says. The close call caused Card Pak's owners to rewrite their insurance policy and increase their coverage across the board.
In November 1996, after the fire, the Thomases told the insurance company they intended to rebuild. They quickly settled the contents portion of the policy with an $8 million claim and ordered new equipment. They also collected business interruption insurance, which paid their vendors and employees. The die shop was moved to Wadsworth. Other work was outsourced to competitors. With the exception of one customer who dropped Card Pak, the company's customer base remained intact.
Within six weeks, the company was up and running-albeit with a makeshift facility. "We retrofitted our warehouse space in the back to create a mini print shop," explains Lisa. "Our employees worked around the clock. They're the reason we survived. In fact, when Rick and I arrived to see the fire damage, there were several employees sweeping up what they could salvage inside the building."
Surviving the unexpected
In March 1997, while the Thomases were still negotiating the rest of the settlement with the insurance company and formalizing rebuilding plans, disaster number three struck: the lawsuit.
"After the fire hit, Bob Blake didn't want to rebuild," recalls Lisa. Blake was Card Pak's co-owner and Rick's partner. "He wanted to take the money and retire. But Rick wanted the business to go on. We had 100 employees and figured a viable business was better than the insurance money. So a line was drawn in the sand."
That dispute made it difficult for the insurance company to determine what to base its settlement on, which held up the building portion of the insurance policy. "When the lawsuit was filed, that changed the concept for the insurance company," explains Lisa. "They had to decide whether they would give us cash value for the destroyed equipment or replacement value for new equipment. We intended to rebuild, but it was hard to demonstrate that to the insurance company with a lawsuit pending."
Finally, in late October 1997, the lawsuit was settled. The Thomases bought out Blake's 50 percent stake in Card Pak for $6 million. "That unified ownership and provided a clear vision for where the company was going."
Back to the basics
After the lawsuit was settled, the insurance company paid out its final settlement. The company replaced the destroyed printing presses with two state-of-the-art presses and two cutters, upgrading its operations significantly.
The new equipment has helped slash the company's turnaround time-from about a month to two-and-a-half weeks. "On any given day, we can fill 20 customers' orders and print one million cards," says Rick. "We can feasibly expand to $30 million a year in sales with the equipment we have."
For the rest of 1997 and throughout 1998, most of Card Pak's 88 full-time employees and 12 temporary workers toiled out of two disconnected buildings. "Our long-time employees didn't want to see this business fail," says Lisa. "They told us they'd do whatever it took to get through."
The rest, mainly craftsmen, were employed by several of the company's outside vendors and partners while the company outsourced their work. When all was said and done, none of Card Pak's 100 employees was laid off. Says Rick, "Not one person missed an hour's worth of work."
Finally, in June 1998, the Thomases purchased a 90,000-square-foot former stamping plant in Solon and began extensive renovations so they could reconnect Card Pak's operations under one roof. Among the improvements is a redesigned work flow plan to make operations more efficient.
"All this has been a psychological boost for our employees, and us," says Rick. "Everyone's seeing us get all this work done, and they're looking forward to a new beginning. We were made whole through the insurance process. Not many people can say that."