In January 1902, Michigan played Stanford at the Rose Bowl in Pasadena, Calif. It was the first college bowl game. In April, Leon Serpollet set a new car land-speed record of 75.06 miles-per-hour. In August, Teddy Roosevelt was the first U.S. president to ride in an automobile.

That same year, Samuel L. Hirschey founded the Climax Incubator and Brooder Company in Castorland, N.Y. Hirschey had a patent on an incubator designed for the hatching of chickens, but soon found himself manufacturing cheese drums for local dairy producers and for florists throughout the Northeast. By 1904, when he incorporated Climax Manufacturing Co., the demand for packaging products outstripped the demand for hatching chickens.

Thus began the story of a North Country business, which today is a world-class manufacturer of folding cartons and recycled paperboard. 

“Climax produces boxes for Coach, Bloomingdale’s, Eddie Bauer, and Godiva just to name a few of their retail customers … If you buy any deli products at supermarket stores such as Walmart, Kroger, Wegmans, or Stop & Shop, you’ll walk out with a Climax package … When you open a pharmaceutical container and complain about the tamper-proof device covering the bottle, Climax produced the paper base … And while you are admiring the beautiful photo in your living room, the special matte paper probably came from the Climax Paperboard company,” says Patrick J. Purdy, CEO of Climax.

Samuel Hirschey’s dream lives on but is no longer guided by the family. The third generation sold Climax Manufacturing Co. in May 2008 in a stock deal to an investor group headed by Delta Point Capital Management, LLC of Rochester, a private-equity fund manager. The buyers formed Climax, LLC. Co-investors included Hamilton Lane, headquartered near Philadelphia with approximately $23 billion in discretionary assets under management along with oversight of an additional 

$135 billion in advisory assets (March 31, 2012) and NewSpring Capital of Radnor, Pa., which provided $5 million of mezzanine financing. Hamilton Lane invested funds provided by the New York State Common Retirement Fund. Key corporate managers have also made investments in Climax.

Climax, LLC then bought the assets of the St. Joseph Packaging company in St. Joseph, Mo. in November 2009 and certain assets of the Brownville Paper Company near Watertown. 

Today, the business has three operating corporations: Climax Paperboard, Inc. in Carthage; Climax Manufacturing Company, which makes up the original packaging business, in Lowville; and Climax Packaging, Inc. in Missouri. The fourth corporation is the holding company, Climax Acquisition, Inc. The six board members of the holding company include George Yancey, Samuel Villanti, Thomas Merkel, David Waterman of Delta Point, David Helgerson of Hamilton Lane, and Pat Purdy.

Company’s growth stats

According to Purdy, “The businesses generate $100 million annually in revenue, $40 million from papermaking and 

$60 million from packaging. The paper business has three different product lines: matte board, which produces $10 million annually, cap-closure, which is approaching $10 million, and packaging board both for Climax Packaging and for outside customers, which generates $20 million in revenue. The packaging-business revenue is split approximately 55 percent from retail sales and the balance from deli and other sales.” Purdy says that “… today Climax has 350 employees. The paper mill employs 80, St. Joseph’s employs another 80, and the Lowville [packaging] operation nearly 200.”

Climax owns the real estate both at the Lowville and Carthage sites. The former facility contains about 110,000 to 115,000 square feet of a converted shopping mall, while the latter encompasses 100,000 square feet of a mill built in the 1800s. Climax also rents warehousing space in Castorland and in Oswego and rents the real estate in Missouri. Climax sold off its fleet of trucks, and its only transportation asset is a small locomotive to move rail cars along its half-mile spur.

Purdy, a veteran of decades of employment in papermaking and packaging for Fortune 500 companies, came to Climax in 2004 at the request of the Hirschey family. The paper mill was losing $5 million annually. Purdy’s first assignment was to make the plant profitable. His second was to take over the reins as CEO. And the third was to prepare the business for sale. Today, “Climax Paperboard runs 24/7, closing only for holidays and for scheduled maintenance. We are at 100 percent of capacity and very profitable,” says Purdy, who also notes that the company ships product to more than 20 countries outside the U.S.

The packaging plant, which saw revenues drop 50 percent in the most recent recession, has rebounded to its pre-recession level of sales and profitability. 

“We still have unused capacity in Climax Manufacturing,” says Purdy. “Climax [Manufacturing] sells 95 percent of our product through direct-sales with the remaining 5 percent sold through a distributor network … We offer full-service packaging from creative design to printing, laminating, die-cutting, embossing, gluing, and folding, and our two locations give us access to new customers .. We are looking to grow by entering adjacent markets, such as the quick-food and beverage industries.”

When asked about the reasons for the company’s rebound, Purdy attributes it “… first to a focus on customer needs. Climax listens to its customers and follows industry trends closely … Second, we are responsive, creative, and concerned about maintaining the best quality in the industry … Third, we have a talented and dedicated work force. Many of our employees followed in the footsteps of their fathers, grandfathers, and even great-grandfathers.” 

All three plants are represented by unions. Two locals of the United Steel Workers represent the New York operations while the Teamsters Union represents the Missouri plant.

“To say this business is capital-intensive is an understatement,” quips Purdy. A tour of the New York plants reveals major investments in both plant and equipment, including millions of dollars to make the production process environmentally friendly. 

“Climax Paperboard captures 90 percent of its waste heat which is recycled to warm the water from the river to create the slurry which begins the papermaking process. The heat is originally generated from natural gas and hydro-electricity and our recycling of water limits our discharge … Almost all of our paperboard is made from 100 percent recycled fiber,” Purdy explains.

In addition to the CEO Purdy, the key management team includes Mark Godfrey, CFO and COO of Climax. Godfrey worked for major national corporations such as Rubbermaid and GE, before joining Delta Point as a turnaround specialist. Jill Boliver is vice president of administration; Michael Lambert is vice president of paperboard sales; Pete Dawes is vice president of sales, packaging; and plant managers are Walt Hovendon (Carthage), Dave Kisker (Lowville), and Kerry Stadel (St. Joseph, Mo.). Also, Robyn Nortz joined Climax two years ago as the quality manager, a position she had held at DuPont.         

Business conditions for New York manufacturers fell apart in August, according to a monthly survey from the Federal Reserve Bank of New York.

The general business conditions index in the New York Fed’s Empire State Manufacturing Survey, which was released Aug. 15, plummeted 13.2 points to -5.9. It is the first time the index dropped below zero since last October.

The negative reading comes as more manufacturers reported worsening business conditions than improving circumstances. Although nearly 22.1 percent of polled manufacturers said business conditions improved in August, 27.9 percent indicated business got worse for them. The remaining survey respondents, about 50 percent, said conditions did not change during the month.

“The August Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated over the month,” the New York Fed said in a report on the survey.

Almost all current indicators — indicators showing how conditions changed from the previous month — fell in the August survey. New orders declined, as the index measuring them slipped 2.8 points to -5.5. The shipments index retracted by 6.2 points to 4.1, showing that growth in shipments sank.

The unfilled-orders index climbed slightly, rising by about 3 points. But it remained firmly underwater at -10.6, indicating more manufacturers saw their quantity of unfilled orders dropping than rising.

Delivery times shortened, according to the delivery-time index. It moved down 5.8 points to -7.1. And inventories thinned out, with the inventories index sliding 8.4 points below its previous reading of zero.

Manufacturers reported feeling the squeeze of prices paid rising faster than prices received in August. The prices-paid index jumped 9.1 points to 16.5, even as the prices-received index edged down 1.4 points to 2.4.

Employment levels increased, but at a slower pace than in the previous month, according to the survey’s number-of-employees index. It dipped by 2.1 points to 16.5. Meanwhile, the average employee-workweek index moved up from 0 by 3.5 points, showing that workers added hours.

Future expectations

Current business-conditions indicators weren’t the only ones to fall in the survey. Its forward-looking indicators, which measure expectations for six months in the future, were also home to nearly across-the-board drops.

“Indexes for the six-month outlook were generally positive but lower than in July, indicating that respondents expected business conditions to improve little in the months ahead,” the New York Fed said in its survey report.

The future general-business conditions index turned down 5 points to 15.2, meaning manufacturers felt less optimistic than in the New York Fed’s July survey. However, hopes for future improvements still predominated in August, with 37.3 percent of manufacturers predicting better business conditions in six months compared to 22.1 percent anticipating worse conditions. The remaining 40.6 percent of survey respondents said conditions will be the same as they are today.

Survey respondents pulled back on their hopes for new orders, as the future new-orders index skidded down 11.2 points to 2.4. Expectations for shipments in six months also bogged down, with the future-shipments index descending 6.6 points to 8.2.

Unfilled orders will be less frequent in coming months, according to the future unfilled-orders index, which slipped 4.4 points to -10.6. It was joined in negative territory by the future delivery time index and the future inventories index. The future delivery-time index ticked up 1.8 points yet remained firmly below zero at -10.6. The future-inventories index followed suit, inching 0.5 points higher to -9.4.

Jumps in both prices paid and prices received are in store, according to manufacturers. The future prices-paid index deflated by 4 points but stayed positive at 31.8. The future prices-received index trimmed 1.9 points from its reading to remain above zero at 14.1.

Manufacturers expect to add employees at a slower rate in six months, as indicated by the future number-of-employees index. It fell 2.6 points to 3.5.

They anticipate a shorter workweek as well. The future average employee-workweek index declined 3.3 points to -8.2.

Capital expenditures and technology spending are still on manufacturers’ plates, albeit less so than in recent surveys. The future capital-expenditures index dropped 6.8 points to 12.9, and the future technology-spending index plunged 12.6 points to 5.9.

“When asked about negative influences on 2012 hiring and capital-spending plans, a majority of respondents cited increased uncertainty about business prospects,” the New York Fed report said.

The New York Fed polls a set pool of about 200 manufacturing executives in the state for its monthly survey, and about 100 executives typically respond. The Fed seasonally adjusts data.  

Contact Seltzer at rseltzer@cnybj.com