Gaylord Container Corporation

Few firms which operate in existing industries can claim to have become a top ten competitor practically overnight after entering the industry. Constraints from established customer relationships, intensive capital requirements, little experience, and the like all conspire to keep a firm's growth regulated. With time and luck come customer loyalty, economies of scale, and an established product line which will allow a firm to compete at the top of their industry. Against the odds, Gaylord Container Corporation became a top ten packaging company in less than ten years. This paper will examine Gaylord's rapid growth but also problems and issues it has encountered, especially over the last five years. A comprehensive analysis of Gaylord Container itself and how it relates to both its competitors and the packaging industry will be provided. Gaylord's financial statements will be analyzed based on financial ratios and statements by professional financial analysts. This in tum will be compared with the financial condition of both the industry and several competitors. In addition, the impact of several accounting standards on Gaylord's operations will be examined. These will combine to present a picture showing Gaylord's meteoric rise yet highlight the nagging questions that surround its future and its very survival. Although, currently ranked as the tenth largest producer of corrugated containers in the United States, many analysts question the solvency and future of the firm. Gaylord achieved its rapid growth through extensive financing arrangements. With a slow market in the early 1990's, Gaylord was unable to pay its debts and went bankrupt. Recently, the market has been on the upswing and Gaylord posted record sales in 1995 of $1.05 billion. Despite these recent positives,Gaylord's position is still deemed precarious especially in view of the condition of its competitors. In a short time Gaylord has reached the goal of its founders of becoming a major player in the packaging industry with sales in excess of $1 billion. At the same time, Gaylord has become a paradox due to its financial condition in the face of such success. Whether its successes continue or its debt overwhelms it remains to be seen. In reviewing the past and present, Gaylord Container Corporation presents a dual case study of a company with rapid success and a company struggling to survive in the face of market and competitive pressure.