Matt Coltharp, President, Cyril Scott

Commentary & Analysis

Cyril Scott, a CGX Company, InvestsMore than $10 Million Despite EconomicDownturnBy Cary SherburnePublished: April 26, 2011

Bold Move Positions Firm Well for Growth asEconomy Recovers

As we exit an economic period of what hasseemed like doom and gloom for so many firmsin the printing industry, with declining printvolumes and many establishments closing, it isrefreshing to hear about firms that are boldlyinvesting in the future despite the economicsituation - or perhaps because of it - rather thantaking a wait-and-see approach. Cyril Scott, aCGX company, is one such firm that hasinvested more than $10 million in people,equipment and technology over the past coupleyears, including a top of the line web press, a

new finishing system, and updated inkjet heads for personalization. We spoke withPresident Matt Coltharp to find out a bit more about the company’s strategy.

The Cyril Scott Company was founded in 1959 as one of the first in-line finishing webprinters. More than 40 years ago, the company printed its first bind-in order form envelopefor famed LL Bean Company, and has built its business around innovating cost-savingmethods of print production for its customers. This company culture and approach to thebusiness is likely what attracted Consolidated Graphics to acquire the firm in December of2007.

WTT: Matt, I notice that your web site features some pretty innovative pop-up cards, aswell as gift cards and inline imaging for personalization. What else does the companyproduce and what attracted Consolidated Graphics to acquire the company?

MC: Most Consolidated companies are sheetfed, digital, with a little bit of web.Acquiring Cyril Scott allowed Consolidated to enter the inline world of specialty printing,an ability they never had before. Our products go from roll to the mailstream or into a boxfor delivery, eliminating any offline binding. That was intriguing to them. We primarilyfocus on direct mail, along with gift cards, pop-up cards and other value-addedtechniques. We can do just about any type of perfing, die cutting, kiss cutting forremovable stickers. One of the hottest commodities is loyalty products. Our customershave become experts at producing direct mail to their clientele. We have 36personalization heads, with 16 of those being the newest Kodak Prosper S10 600 dpidigital technology. Marketers understand that the more personalized a piece is, the betterdemand they will have for the product. We can include a personalized URL, customeraccount number, and any number of other pieces of personalized data on the pieces weproduce.

Goss M500 web press print stations

WTT: Is this black & white primarily?

MC: We have the ability to do any color in the PMS spectrum. If the customer wants theirlogo in traditional blue or red, we are able to do that on a daily basis. We do not offer fullcolor.

WTT: When did you become President of Cyril Scott?

MC: April 1, 2008. It was a very tough time for the economy, which only got tougher, andit affected all industries.

WTT: That being the case, what prompted you to make these significant investments?

MC: First and foremost, at Consolidated Graphics, we believe and are proud of the factthat we have good staying power in the market. Customers want to know they are doingbusiness with a company that has national staying power. Being part of CGX is a value tocustomers, with our balance sheet and ability to acquire companies that have the rightdemographics for success, the right core values, and great employees. We knew theeconomy would recover, and we didn’t want to be figuring out then how to change ourcompany. We wanted to be ahead of the game. This down economy was one of the mostdifficult times I have ever been through. But we wanted to make sure we had in place thebest resources - mechanical, equipment and a top quality management team. We also hiredexperts that are part of our daily management team, and we have continued to drivequality through G7 certification and overall operational efficiency.

WTT: What role does headquarters play in these types of decisions?

MC: We have major support from headquarters. But the investment is about the returnyou are going to get and the justification about why you make that investment. Customerstell us their market is demanding personalization, the ability to adapt to get their messageto market just in time. We can do that, and that helps them expand their markets anddifferentiate themselves among their competition.

Kodak Prosper S10 print heads mounted on web press

WTT: Did you offer personalization prior to this latest series of investments?

MC: Today we have 36 heads, and for the last seven years we have been a leader inpersonalization. The standard then was a 240 dpi resolution. We upgraded 16 of those togo to 600 dpi. Our differentiation is that in terms of anything after the presses, we arecompletely mobile from press to press. We can move 16 heads to a press if it needs that.When works comes in, we set press up for that specific job, which often requires multiple

heads for the front and back of the piece. We have our printing units and dryers, and thenafter the dryers, we have a series of turnbars. We mount a racking system with dryers andthe Kodak heads, personalize the piece, then finish with ribbon slitting, plow folding, etc.We have the ability to put the heads anywhere on the press or in the finishing line. Someapplications do require personalization before going into the first printing head, such asscratch-offs.

WTT: Why do you view this as such a differentiator in the marketplace?

MC: In most companies, especially with sheetfed presses, personalization is a completelyseparate function. You print, cut, fold, and then inkjet the name and address on top of it.The reason that what we do is so significant is that anyone can buy a digital press; but ourquantities are in the millions, many times four or five million brochures with a gift cardpersonalized to the recipient, and it needs to be in the recipient’s mailbox on the weekendfor a sale that starts the next week. Sheetfed technologies would take you weeks to getthat done. The client doesn’t give us weeks.

WTT: How do you measure ROI on such a large investment?

MC: In the end, it does come down to one thing: ROI. Most importantly, we haveinvested for the long term in technology and people We believe our sales are beingpositively impacted because of this technology. Customers want to know we can do thejob right, at the best quality. Our customer base has proven over time that as we invest,they will continue to work with us. We help them grow and meet their objectives. Ourinvestments help our customers differentiate themselves.

Multilevel pull station, the nip point between auxiliary equipment that providesconstant in-line tension

We don’t buy equipment because we think it will turn the business around. At Cyril Scott,we believe in our employees and the hard work they put forth over the years. They havethe knowledge base to support these types of equipment investments. We are fortunatefrom that perspective, in the craftsmanship and quality we have here with G7 certification,and it makes a lot of sense. Also, our central location means that we are within 24 hoursdelivery of 85% of the U.S. population. In direct mail, timing is of the essence. We haveon site postal verification to get things into the mailstream faster.

WTT: What’s next at Cyril Scott?

MC: Personalization is the key to our business, our lifeline. Our next step will befour-color variable imaging, probably this summer sometime. So the next technology wewill be perfecting will be the full-color variable fusion technology, inline on a high-speedweb, also with Kodak heads.

WTT: Anything else you would like to add before we close?

MC: I have been President here for three years, and before was at Garner Printing in DesMoines. I actually started out in the Consolidated Graphics training program in 1997, andI believe in that program more than you can ever know. We have had a wonderfulopportunity to invest in our company in what has been the toughest of economic times.The support we have gotten from Mr. (Joe) Davis and the entire corporate backing ofCGX for them to invest $10 million in our company in this economy has been amazing.We are proud of that story, our employees and our client base. We are very lucky to be inthat position today.

Cary Sherburne is a well-known author, journalist and marketing consultant whosepractice is focused on marketing communications strategies for the printing andpublishing industries.

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