The Peak Technologies Group, Inc.

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The Peak Technologies Group, Inc.

600 Madison Avenue
26th Floor
New York, New York 10022
U.S.A.
(212) 832-2833
Fax: (212) 832-3151

Public Company
Incorporated: 1989 as Logon Holdings, Inc.
Employees: 553
Revenues: $114.1 million (1994)
Stock Exchanges: NASDAQ
SICs: 5065 Electronic Parts & Equipment, Not Elsewhere
Classified

The Peak Technologies Group, Inc., is the major international full-service distributor and systems integrator of bar-code data-collection and wireless data-communications equipment and systems, focusing primarily on industrial applications and certain niche retail applications. The company’s distribution and system integration operations also include information systems printing equipment, consumable supplies, and related accessories. Peak markets the systems and products of over 50 manufacturers, including those of the most advanced bar-code products, in addition to its own proprietary systems and products, and also designs, manufactures, and distributes several lines of miniprinters, principally for original equipment manufacturers. The company also offers maintenance, technical support and consulting services covering the products and systems it sells. Peak entered 1995 providing services to more than 18,000 customers—principally end-users in the form of large companies and government agencies as well as resellers— through 74 sales and maintenance sites in 33 states across the United States, the Canadian providence of Ontario, the United Kingdom, and France.

Peak’s core businesses are largely involved in the distribution of high-performance computer peripheral equipment and systems, primarily automatic-identification data-collection equipment and systems based on bar-code labeling and scanning technologies. Automatic identification involves data entry into a computer without key strokes and is the predominate automatic-identification technology. This technology utilizes a series of bars and spaces of specific width groups that represent specific numeric or alphanumeric characters that can be affixed to a product to allow for rapid and accurate product identification for management and tracking purposes. Bar-code labeling and scanning systems comprise labeling systems that create and affix labels, reading devices such as laser scanners or light pens that transfer scanned data to decoders, and data collection instruments that store, process and forward scanned information to a host computer. The company’s remaining major product lines include office automation equipment (primarily printers), electronic publishing products, and other related equipment and supplies. The products Peak distributes are integrated to provide specific applications for manufacturing, warehousing, specialized retailing, hazardous waste tracking, health care uses, office automation, and other industrial and business uses.

Peak Technologies Group, originated in the late 1980s through the efforts of the investment partnership of Edwardstone Partners, whose principals included Nicholas R. H. Toms, a practicing attorney with the firm of Skadden, Arps, Slate, Meagher & Flom. Peak’s foundation was set in May 1988 when an investor group led by Toms, along with two other Edwardstone affiliates, Hugo H. Biermann and Julian C. Askin, acquired Logon, Inc., a distributor of computer peripheral equipment and systems. In February 1989 Logon, Inc., was reorganized to create a newly incorporated holding company, Logon Holdings, Inc. (the predecessor of Peak), to facilitate future acquisitions and serve as the parent of an operating subsidiary, Logon, Inc., created at the same time. Toms (then chief executive of Edward-stone) became chairman, president, and chief executive of Logon Holdings, Biermann (president of Edwardstone) became vice-chairman, and Donald W. Rowley (Edwardstone’s vice-president and chief financial officer) became vice-president and chief financial officer of Logon Holdings. Logon Holdings headquarters were established in New York City, in office space subleased from Edwardstone.

Peak Technologies Group was built through a combination of acquisitions (14 companies between May 1988 and October 1995) by Edwardstone (its founding stockholder), Logon Holdings (later renamed Peak Technologies Group), and affiliates of Edwardstone. The company’s early strategic acquisitions, like that of Logon, Inc., focused on companies that had roots in microwave and radio frequency (RF) technologies, which led these Peak predecessor companies to become distributors of Printronix, an early leading manufacturer of high-performance matrix printers. (Printronix was one of the first peripheral manufacturers that sold its products mainly through a limited number of specialized regional distributors.) With a goal of becoming a national company, Peak targeted in the late 1980s and early 1990s companies that were early distributors of peripheral equipment in given territories; as a result it had an established customer base of other peripherals manufacturers and suppliers in respective regions.

In January 1990 Logon Holdings acquired, for $5.1 million, Peak Technologies, Inc. (PTI). Jack A. Bowser, president of PTI since its 1981 inception, retained his post and also became a member of the Logon Holdings board, bringing with him a decade’s worth of experience in the development of printers and electronic systems and his 20 years in distribution operations. In May 1990 Logon Holdings and its affiliates acquired Texas-based Telpar, Inc., for $15.8 million. Telpar had initially been acquired by Edwardstone principals in 1986 before being sold in 1988 and then reacquired. Telpar, unlike other Peak acquisitions, was exclusively involved with the design, assembly, and distribution of miniprinters, including proprietary printer control boards made for customer-specific applications and sold principally to original equipment manufacturers (OEMs); additionally, it was a distributor of Epson and NCR miniprinter lines and Fujitsu thermal miniprinters. Logon Holdings sales climbed to $33.2 million in 1990 (compared to $11.8 million in 1989 and $7 million for eight months in 1988), lifting earnings to $4 million (compared to a loss of $314,000 in 1989 and earnings of $25,000 in 1988).

In May 1991 Logon Holdings changed its name to The Peak Technologies Group, Inc. In October of that year the operating subsidiary, Logon, Inc., was merged into the operating subsidiary, PTI, and that same month PTI acquired, for $3.1 million, the Distribution and Service Division of MESA Technology Corp. The acquired operations, offering a family of disc storage systems, became Peak’s Mass Storage Division. Despite sales that climbed to $43.9 million in 1991, Peak Technologies Group lost $51,000 on the year, largely as a result of interest expenses stemming from the company’s leveraged financial structure.

Peak’s early acquisitions strategy was to develop a national distribution and service network for its products, thereby giving the company a more efficient organizational structure and the ability to service large customers on a broad geographic basis and the opportunity to obtain the most favorable prices from its own suppliers. Peak entered 1992 with operations in a dozen states, principally in the Northeast. In April 1992 the company expanded into the Southeast with the $4.9 million acquisition (with loans worth $2.5 million and the issuance of 507,000 shares of new common stock) of Gentry Associates, Inc., a Florida-based distributor of computer peripherals operating in ten southeastern states. Robert J. Theodore, Gentry’s president since 1979, retained his position and also joined the Peak board and took control of Peak’s marketing division. Gentry, a full-service distributor of Peak’s core product lines, added 165 employees and sales of $24.8 million to Peak’s operations and boosted Peak’s distribution reach to 22 states, primarily east of the Mississippi River.

Concentrating on a nonretail customer base where bar-coding was just beginning to gain momentum, by mid-1992 Peak’s customer base had grown to about 11,000, approximately two-thirds of which were large end-users such as major corporations utilizing bar-coding to track inventory and shipments; the remainder was made up of OEMs and systems integrators. By mid-1992 Peak had also completed the initial phase of integrating its first three acquisitions—Logon, PTI, and MESA—with inventory purchasing and control, maintenance dispatch and logistics, and data-processing and accounting operations, all centralized in Columbia, Maryland; maintenance operations management were headquartered in Arlington Heights, Illinois. The company also consolidated warehouse and office facilities in Teterboro, New Jersey, and Arlington Heights.

Following three years of geographic expansion through strategic acquisitions, in August 1992 Peak went public with an initial offering of 2.2 million shares of common stock, designed to raise more than $16 million. Proceeds were used to repay long-term and other acquisition-associated debt, and all preferred stock was either converted to common status or surrendered for cancellation. The timing of Peak’s public offering took advantage of an increasing acceptance of automatic-identification and bar-code data-collection systems aimed at increasing productivity and quality; additionally, a growing number of industries were requiring suppliers to use specific bar-code labels and looking to full-service distributors such as Peak to provide installation and maintenance services.

In November 1992 Donald Rowley, a principal in Edwardstone, resigned as chief financial officer to pursue other interests through Edwardstone. Rowley was replaced by Edward A. Stevens, who had previously served as Peak’s investor relations officer and vice-president as well as a director and vice-president of MESA’s former parent (in 1995 Stevens joined the Peak board).

In December 1992 Peak gained the right to distribute the mass storage products of Hewlett-Packard Company (HP) throughout its service territory. As a result, Peak began distributing HP magnetic disk drives, magnetic tape drives, and optical disk drives in three midwestern and most southeastern states in order to supplement Peak’s distribution of those products in New England, New Jersey, New York, and the mid-Atlantic states. By the end of the year Peak had become one of the fastest growing distributors of HP products.

Near the end of 1992 Peak expanded its distribution of bar-code products into Texas, utilizing the existing operations of Telpar, based in Dallas. During 1992 Peak also bolstered its status in a number of ways, becoming a leading distributor of industrial bar-coding and data-collection systems, the largest distributor of products made by such industry leaders as Zebra Technologies and Printronix, and one of the largest North American customers of products made by Dataproducts, Norand, Symbol Technologies, and Welch Allyn products. In 1992 Peak additionally began distributing Tektronix color page printers. By the end of 1992 Peak was providing services through more than 60 locations throughout the United States, and for the year its revenues rose 87 percent to $82 million, pushing earnings to $1.8 million.

In April 1993 Peak enhanced its geographic reach west of the Mississippi River by acquiring, for $1.5 million, Group Three Electronics, Inc., a distributor of bar-code and data-storage equipment and peripherals with operations in Seattle, Washington, and Torrance and Sunnyvale, California (this move complemented Peak’s offices in Irvine and San Jose, California, which were opened in early 1993). In July 1993 Peak acquired through merger New England-based Concord Technologies, Inc., for 86,000 common shares valued at approximately $900,000. Concord, bringing with it service experience in high-end wireless data-collection and bar-code systems, provided Peak with additional service opportunities in New England and New York.

During the late 1980s and early 1990s Peak implemented one of its earliest proprietary bar-code scanning systems in New York City schools in response to truancy and building security concerns. In conjunction with the firm Vertex, Inc., Peak developed bar-coded student identification cards as part of its CLAS-SPORT Time and Attendance Security System, which was implemented in more than 40 New York schools and one Chicago-area school by the early 1990s. In 1993 Peak introduced several new proprietary bar-coding products: Wireless Warehouse, a comprehensive warehouse-management system to manage a variety of shipping, receiving, storing, and inventory functions; QRBar, a low-end system for gathering data to in turn generate advance shipping notices; Peak Link II, a high-end, Unix-based wireless system designed to provide compliance labeling, online ship verification, and advance ship notices for manufacturing and distribution applications; TAG, a user-friendly (terminal-resident application generator) system allowing for easy change of applications on a 16-bit handheld data-collection device without interfacing with a host computer; and IncrediBar, a Windows-based bar-code label-generation package compatible with all Peak-distributed bar-code printers.

In 1993 Peak was named the exclusive national sales and service center for Zebra Technologies. The company also opened up service centers in Kentucky, California, Oregon, and Georgia, and it reorganized its service and maintenance department, regionalizing service operations. Peak also improved revenue possibilities by instituting a trade-in policy, which allowed printer customers to trade in obsolete or low-performance printers and receive a reduced price on new printers. This policy also allowed the company to sell restored printers as a low-cost option and utilize spare parts salvaged from unrestorable trade-ins.

In 1993 a new management team took over Telpar, which that year introduced a new proprietary panel-mount printer useful for various sensitive applications such as automobile emissions inspections, breathalyzer tests, environmental control information, and medical printouts. In 1993 Telpar also expanded its sales force and geographic coverage into the Northeast and West Coast and increasingly began to move its miniprinter business into the bar-code market, principally through portable printers.

In December 1993 Peak, having decided to focus on the industrial bar-code market, discontinued the operations of what it saw as the volatile and less-than-completely compatible Mass Storage Division, acquired in 1991. The decision was designed to improve the company’s focus and productivity and reduce its ongoing overhead. In connection with that decision, Peak restructured its remaining operations to focus on the automatic-identification market and around the core areas of bar-code systems, information systems printing, miniprinters, consumable replacement and spare products, and maintenance services.

Between Peak’s initial public offering and the end of 1993 its workforce grew from 256 to 428 while its established installed base of wireless/RF systems grew to more than 1,700 terminals at over 185 customer locations. For 1993 Peak lost $7.4 million on increased sales of $86.3 million. Without restructuring charges and write-offs associated with the discontinuation of mass storage operations, Peak would have earned $3.7 million from continuing operations.

In 1994 Peak established what it believed was the industry’s first wireless testing laboratory at its new centralized operations headquarters in Columbia, Maryland. During the same year, the company also reduced the square footage it occupied by 30 percent, placing all domestic distribution operations under one roof. The company also released a specialized retail application software package, Nucleus Stock Audit, designed to run on Symbol Technologies handheld terminals and allow retailers to generate quick and accurate inventory counts with little disruption to sales operations. In 1994 Telpar also rolled out a new series of kiosk miniprinters used for gaming, information kiosk, and other specialized applications.

In July 1994 Peak acquired NACO Electronics Corp., an established distributor of bar-code and information-systems printing equipment with operations in New York, New Jersey, and New England. VisionData, a NACO division, provided Peak with a distribution business serving resellers and system integrators and thereby providing Peak with additional opportunities to market Peak’s hardware systems to end-users. The purchase price for NACO was $850,000 and 167,000 shares of common stock.

In November 1994 Peak made its first European acquisition, ENDATA Group Ltd. (renamed Peak Technologies UK Limited), a leading U. K. integrator of bar-code data capture and wireless data-transmission products. END ATA brought to Peak six U.K. offices and made Peak the only systems integrator of its type offering full-service operations in both North American and European territories. As a result, END AT A provided Peak with another way to differentiate itself from competitors: the ability to serve multinational companies seeking a standardized, global approach to data collection.

By the end of 1994 Peak had an installed base of wireless systems comprising 4,000 terminals at about 400 separate customer sites, making it the largest system integrator in the data-collection industry. During 1994 the company had opened eight new service centers as its maintenance operations increased revenues by 17 percent. Additionally, revenues from consumable products had risen, after the earlier introduction of a series of proprietary products, by 42 percent. For 1994, Peak earned $4 million on sales that increased 32 percent to $114 million.

In January 1995 Peak completed its goal of becoming a national concern when it acquired Innovative Products & Peripherals Corporation (IPPC), a Denver-based integrator of bar-code data-collection products with $12 million in annual sales. The acquisition placed Peak in every region of the country with active operations in 33 states.

Capitalizing on increased interest in bar-coding in industrial and international markets, in May 1995 Peak issued a secondary public offering of 1.38 million common shares of stock, generating $25.5 million that was used to pay off all of the company’s then long-term debt and generate additional funds for general purposes and future acquisitions. Beginning in May 1995 Peak also continued its European expansion with a series of acquisitions: ISF, a French software company; Datapen Systems Ltd., based in Ascot, England; and BPC Numeric Arts Ltd., a Marow, England-based data-collection software developer and European-market reseller of Symbol Technologies and Zebra Technologies products. In 1995 Peak also debuted a new proprietary software product, HazTrack, a waste-management tracking system using wireless data-communications and bar-code technologies.

For the first half of 1995, Peak’s six-month revenues climbed by 30 percent to $76.8 million while net income increased 64 percent to $2.3 million, with gains attributed to new products of key manufacturers supplying the company, including Prin-tronix, and increased service contracts and sales of consumable supplies. Wall Street was not oblivious to Peak’s gains; between October 1994 and July 1995 the company’s stock value rose from $11 to $27.

In October 1995 Peak acquired Accuscan, Inc., an Atlanta-based software supplier of integrated bar-code and data-capture programs with operations in California, Florida, Georgia, Illinois, Maryland, New Jersey, North Carolina, and Texas. An integrator of Symbol Technologies products and a developer of its own proprietary software utilizing Symbol terminals, Accuscan provided Peak with a broader suite of products and opportunities to consolidate operations in overlapping geographical regions and improve its purchase-power relationship with Symbol. At the time of the acquisition the firm Brean Murray, Foster Securities Inc. estimated that the acquisition would boost Peak’s annual revenues to $207 million and its earnings by more than 50 percent to $11.7 million by 1996.

Peak moved toward the close of 1995 with the goal of becoming the dominant distributor of bar code-based data-collection and wireless data communications systems worldwide, providing a single source for national and multinational customers’ data-capture requirements. In the process of moving toward this goal, Peak was banking on snatching a bigger share of what was estimated to be a $5.8 billion global industry by 1998, an industry expected to grow by 18 percent annually through the end of the decade. Peak additionally anticipated benefiting from the burgeoning industrial segment of the bar-code market, which, compared to the retail segment, was far less penetrated.

In looking to its future, Peak expected growth to come through internal growth and through complementary acquisitions, and it expected to benefit from four continuing trends: the increasing use of bar-code automatic-identification and data-collection systems geared toward improving productivity and quality; the expanding use of mobile and wireless computing to handle data communications; the expanding number of industries requiring specific bar-code labels on products supplied to them; and the increasing preference for distributors like Peak capable of offering design, supply, installation, and maintenance services through North American and portions of Europe. Given these trends, Peak’s prospects for future sales and earnings gains seemed favorable.