Lason, Inc.

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Lason, Inc.

1305 Stephenson Highway
Troy, Michigan 48083
U.S.A.
Telephone: (248) 597-5800
Fax: (248) 597-5761
Web site: http://www.lason.com

Public Company
Incorporated: 1985 as Lason Systems Inc.
Employees: 13,000
Sales: $279.8 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: LSON
NAIC: 514191 On-Line Information Services; 541513 Computer Facilities Management Services

Lason, Inc.’s core business is the provision of information management services, including document and data capture, data management through electronic storage and retrieval, and output of information digitally or in print. After operating as a private company for about ten years, Lason went public in 1996. From 1997 to 1999 it pursued an aggressive acquisitions program that transformed the company into one of the leading international providers of information management services. As of late 1999 the company had more than 85 multifunctional imaging and data capture centers—all linked via satellite—and was operating more than 100 facility management sites located on customers’ premises. It had operations in 30 states, and in the United Kingdom, Canada, Mexico, India, Mauritius, and the Caribbean.

A Private, Regional Company: 1985–96

Lason Systems, Inc., a Michigan corporation and the predecessor to Lason, Inc., was formed in 1985 through a management buyout of the direct mail division of McKesson Corporation’s 3PM subsidiary. The company operated for the next decade primarily as a regional direct mail services firm.

In January 1995 the firm was recapitalized. It became a Delaware corporation, and the name was changed to Lason, Inc. in August 1996. In October 1996 the company went public. The 3.45 million-share initial public offering resulted in net proceeds to the company of $53 million, which were used primarily to repay outstanding credit debts and to redeem shares held by the company’s largest shareholder. After the company went public, Chairman, Chief Executive Officer, and President Gary L. Monroe led Lason on an acquisitions spree designed to transform the company from a small regional firm in Michigan into a national electronic document force positioned to go global. These acquisitions, which began in June 1995 before the company went public, were accelerated to expand the company geographically into the Northeast, West, and Midwest. Monroe formerly ran Eastman Kodak Co.’s $300-million-a-year imaging business before joining Lason.

Expansion Through Acquisitions: 1997–99

Lason accelerated its acquisition program in 1997. An August 1997 stock offering of 2.5 million shares raised $58 million, which was used primarily to repay long-term debt the company had incurred to finance its previous acquisitions. Among the major acquisitions for 1997 were Churchill Communications Corporation for $9 million in cash and stock; Automated Enterprises Inc. for about $6.5 million in cash and stock; Image Conversion Systems Inc. for $20 million in cash and stock; Spectrum Document Services, Inc., for about $3.5 million; and VIP Imaging Inc. for $18.5 million in cash and stock. Lason also made several other acquisitions during the year for another $13 million.

Net revenues for 1997 increased 72 percent to $120.3 million, up from $69.9 million in 1996. Approximately $39.3 million of the increase in revenues was due to acquisitions and about $11.1 million from internal growth. Output processing accounted for $8.5 million of the firm’s internal growth in 1997, with print on demand services contributing an additional $3 million in revenue and computer-output-to-laser-disk services adding some $2 million. These increases were offset by decreases in revenues from discontinued services. For 1997 gross profit increased to $39.5 million, up from $22.4 million in 1996, while net income increased from $3.7 million in 1996 to $9.1 million in 1997.

In 1998 another stock offering of 2.9 million shares raised nearly $130 million. Lason completed 16 acquisitions in 1998, expanding the company’s operations to 27 states and five countries. The large number of acquisitions reflected the consolidation that was taking place in the information management and direct marketing services industries.

In early 1998 Lason acquired Racom Information Technologies and API Systems, which were its two largest acquisitions to date and included its first international acquisition. It paid $26 million in cash and stock for Racom’s parent company, Southern Microfilm Associates, Inc., and $25.3 million in cash and stock for API Systems. Another major acquisition was Consolidated Reprographics for $41.7 million in cash and stock. Other significant acquisitions included Lonestar Southwest Mailing Services, Inc. for $7 million, and City Microfilm, Inc. for $11.9 million.

During the year Lason acquired Quality Mailing & Fulfillment Services, Inc. of Detroit, Michigan. Quality had $4.6 million in 1997 sales. The acquisition gave Lason new fulfillment services capabilities, involving the assembly of multiple documents in a packet for mailing. Lason had outsourced its fulfillment services previously.

Lason added more international capabilities when it acquired Digital Imaging & Technologies Inc of Anaheim, California, a provider of image and data management services with operations in Mexico, Barbados, and Grenada. Lason paid $12.2 million for the company, which had 1997 revenues of $16 million.

Revenues for 1998 increased 132 percent to $279.8 million, and net income rose 101 percent to $18.2 million. The firm had an internal growth rate of 18 percent for the year and estimated that about 80 percent of 1998 revenues were from existing businesses.

In January 1999 Lason strengthened its management team by appointing John Messinger as president and chief operating officer (COO). Gary Monroe remained as chairman of the board and chief executive officer (CEO) after giving up his presidency. Messinger had joined Lason in 1997 after his company was acquired by Lason.

Lason’s acquisition of Vetri Systems, Inc., a leading provider of electronic media services such as media-to-media conversions, HTML conversions for the Internet, and forms processing, also was completed in January 1999.

In March 1999 Lason acquired the London, England-based M-R Group plc, a firm that specialized in document and data management, in a deal valued at $145 million. For fiscal 1998 M-R had revenues of $76 million and had been increasing its revenues by 18 to 20 percent a year. It was Lason’s largest acquisition to date. M-R’s clients included the British government, major banks in Germany and England, and international oil companies. According to one analyst, the M-R acquisition made Lason the largest information management company in the world.

The M-R acquisition also added another 1,000 employees to Lason’s work force of 8,000 and gave it additional offices in New York, Atlanta, Washington, and San Francisco. About 20 percent of M-R’s business was in the United States and 80 percent in the United Kingdom.

In March 1999 Lason acquired Cover-All Computer Holdings, Inc., which had four operating locations in the greater Toronto, Ontario area and annual revenues of $13 million. The acquisition doubled Lason’s revenue base in Canada. With 120 employees, Cover-All was a leading independent provider of data management and output processing services for the insurance, financial, utilities, and commercial markets.

In April 1999 Lason announced that it would acquire Redmond Technologies Inc., based in Richmond, Virginia. Redmond was a small information technology consulting firm that specialized in network and systems integration consulting services. It had about 20 employees. The acquisition strengthened Lason’s capabilities in systems integration. In May Lason acquired another firm specializing in systems integration, MSCI Inc., that also offered imaging and scanning services. Based in Illinois, MSCI had 1998 revenues of $12 million. It was a leading provider of imaging services and systems integration for financial and commercial customers in the greater Chicago and St. Louis markets.

From March 25 to April 16, Lason’s stock dropped from $55.37 a share to a low of $32 before rebounding to around $40 a share. With the pending M-R acquisition dependent on Lason’s stock price, Lason revised the terms of its offer and increased the number of Lason shares that M-R stockholders would receive. M-R stockholders were to vote on the acquisition at M-R’s June 7 annual meeting, where they overwhelmingly approved the merger. The merger was approved subsequently by the High Court of England and Wales.

During the year Lason introduced a new service, Lason Statement Express, which would allow customers to electronically distribute statements and process the subsequent electronic payments. The new service was linked to Visions, Lason’s electronic document storage and retrieval service that allowed customers to maintain an interactive database of past statements for archive and customer service applications. Electronic bill presentment services were seen as expanding dramatically in the future.

Company Perspectives:

It takes more than new technology to manage the explosion in document growth. Lason specialists focus on providing customers with strategic information solutions that translate into improved productivity and a better bottom line. It’s a value proposition that makes Lason and its employees a valuable part of their customer’s team.

In May 1999 Lason acquired Crest Information Technologies Inc., with headquarters in Cedar Rapids, Iowa and operations in Des Moines, Iowa, and Sioux Falls, South Dakota. With $15 million in annual revenues, Crest became the centerpiece of Lason’s Midwest region. Crest president Jay Johnson was also named president of Lason’s Midwest region. Crest provided imaging services along with data storage and retrieval.

That month Lason also acquired Marketing Associates, Inc., based in Bloomfield Hills, Michigan. With $11 million in annual revenues, Marketing Associates specialized in database management services primarily for commercial customers.

In August Lason acquired Addressing Services Co. Inc. (ASCO), based in East Hartford, Connecticut. The independent provider of business communications and output processing services had $15 million in annual revenues. The acquisition strengthened Lason’s presence in the Northeast and New York metropolitan region.

Lason clearly was committed to its acquisition strategy, which was built on providing, on a regional basis, integrated information management services in three core areas: image and data capture, data management, and output processing. To finance its acquisition program, Lason in 1998 raised nearly $131 million through a stock offering and expanded its credit facility to $200 million.

After three solid years characterized by numerous acquisitions and revenue growth, Lason was perceived as a medium-sized player in its industry in early 1999. Some analysts felt that Lason had to become even bigger and dominate its market sector. That level of dominance was reached with the 1999 acquisition of the London, England-based M-R Group plc, which gave the company its first European operation and added substantially to its revenue base. Combined with other acquisitions made during 1999, Lason’s revenues were expected to surpass the $500 million mark in 1999. For the year 2000, Lason was positioned to become a worldwide leading information management company.

Principal Subsidiaries

Lason Canada Co.

Principal Competitors

First Data Corp.; FYI Inc.; IKON Office Solutions Inc.; Pitney Bowes Inc.; Xerox Corp; IBM Corp.; EDS.

Key Dates:

1985:: Lason is founded in Michigan as a direct mail operation.
1996:: Lason goes public and positions itself to become a national presence in information management.
1998:: Sales reach almost $280 million.