Rock-Tenn - Company History

Company History

Rock-Tenn Company was formed in 1973, the product of a merger between Tennessee Paper Mills Inc. and Rock City Packaging, Inc. Its origins date back to 1898, when the Rock City Box Company of Nashville, Tennessee was founded. Among its customers in the mid-1940s were a local boot factory, a local candy manufacturer, a hosiery company, and several shirt manufacturers. The owners, Joe McHenry and A.E. Saxon, who also operated several other business ventures, wanted to sell out and retire. Rock City was attractive to Arthur Newth Morris, owner of the Southern Box Company, not least for its bank account of $60,000. Morris purchased the company in 1944 for $200,000, making a cash down payment of $50,000.

The 25-year-old Morris had been a printer and part-time Presbyterian minister when he went to work in 1926 for Edwin J. Schoettle, a Philadelphia industrialist who owned a group of box and printing companies that bore his name. For a monthly salary of $350 Morris was expected to manage several hundred employees, some of them more than twice his age. He also traveled along the eastern seaboard, explaining to meatpackers his discovery that they could avoid shrinkage of their hot dogs by putting them in Schoettle's boxes instead of stringing them up like bananas.

By 1935, Morris was making a salary on which he could comfortably support his wife and four children, but he wanted to go into business for himself. Armed with life savings of $5,000 and a $7,500 investment by his boss, he moved to Baltimore. There he managed the J.E. Smith Box & Printing Co. during the day, while running the Southern Box Company, a company he founded in 1936, at night. Using Smith's presses, die-cutters, and other boxmaking equipment during the evening, Morris began servicing two anchor customers who knew him from his Philadelphia days.

Only six months after Morris had left Philadelphia, Schoettle came to Baltimore to offer him a promotion and a $25,000 salary. When Morris refused, Schoettle offered to sell Morris his own majority share of Southern Box for $25,000. A bank loan to Morris made the deal possible. He moved to new quarters for $200 a month, left day-to-day management to one of his employees, and devoted himself to finding new accounts. In its first year the company made a few thousand dollars on sales of $60,000.

By 1942, Morris was doing well enough to open a corrugated box plant and to buy another Baltimore enterprise, the King Folding Box Co., where he installed a corrugated sheet cutter. Morris sold corrugated partitions to major glass companies, which needed them to separate the bottles and glasses they shipped. The following year the name of his enterprise was changed to Newth Morris Box Company. In 1944 another branch was opened in Jacksonville, Florida, where the company produced cardboard anti-radar devices for World War II American troops and popcorn boxes for movie theater owners. Following Morris's purchase of Rock City Box Co. that same year, he changed the name of Newth Morris Box Co. to Rock City Box Sales Company.

Morris's purchase of Rock City Box Co. put him in contact with one of its suppliers and his future merger partner: Tennessee Paper Mills. A.L. Tomlinson and John Stagmaier, two of Tennessee Paper's three founders, were Athens, Tennessee businessmen who already owned box factories. The company's third founder was A.M. Sheperd of Vincennes, Indiana, a boxboard manufacturer. Tennessee Paper Mills was incorporated in 1917 with Stagmaier as president, Tomlinson as vice-president, and Sheperd as general manager. With $300,000 raised from stock offerings, the three men established a paperboard factory in Chattanooga, where operation began in July 1918. By the end of the year the new company had made a handsome net profit of $23,367 on sales of $165,799.

Although the founders originally planned to make board from wheat straw, they turned instead to wastepaper as the primary raw material; thus Tennessee Paper became the first recycled paperboard mill in the South. To reduce its electric bill, the company installed its own steam generating plant in 1926. Paperboard production averaged 20 tons a day in the early years, reaching an average of 56.77 tons in 1930, the same year that the company produced a record 15,557 tons of product. This figure would not be matched for some time because of the Great Depression; production dropped to 11,995 tons in 1934. The company remained profitable, however, although only modestly so. As the nation's economy slowly recovered, Tennessee Paper's volume of business increased to meet renewed demand. During 1939 the factory operated at 85 percent capacity, compared with the industry average of 71 percent. In 1941 it operated a record 305 days. Sales volume exceeded $1.7 million in 1945. A second papermaking machine doubled the mill's capacity in 1949.

Beginning in 1954, however, Tennessee Paper began losing customers to companies manufacturing lower-cost folding cartons and corrugated and plastic containers. The trend in the business was toward vertical integration. Many paperboard companies acquired--or merged with--their customers. Typically profits were made at the mill level, by selling boxes virtually at cost. The effect on boxmakers was so severe that by 1957 Tennessee Paper was extending credit and loans to its customers in order to keep their accounts.

One of these customers was Rock City. Its consumption of Tennessee Paper's board grew from about 1,000 tons in 1944 to about 37,000 tons in 1972, when it took 44 percent of Tennessee Paper's total boxboard production. Between 1965 and 1968 Tennessee Paper bought 29.5 percent of Rock City's common stock, preparing the way for the eventual merger of the two companies. By then Rock City owed Tennessee Paper more than $4 million in loans.

Morris's burgeoning industrial empire grew both by acquisitions and by establishing new companies. Among the former was the Parks Box & Printing Co., located on a leased 11-acre tract in Norcross, Georgia. This land was purchased in 1957 and gradually became the focal point for management of all the Morris companies. A new 30,000-square-foot warehouse was added to the Norcross facility in 1960.

Each of the Morris companies operated as a separate and virtually autonomous profit center. Rock City opened not only small set-up and folding carton plants but also facilities in Livingston and Milan, Tennessee, to meet the packaging needs of shirtmakers. A set-up box division was established in 1955. Rock City Waste Paper Co. collected, sorted, and baled wastepaper for sale to paper mills. Other Morris companies and plants sprouted throughout the South. Sales grew from $8 million in 1959 to $12.9 million in 1967, when all the companies were consolidated into Rock City Packaging, Inc. Morris became chairman of the board and a son-in-law, Worley Brown, became president. Sales volume reached $23 million in 1972.

Meanwhile, in order to meet the competition, Tennessee Paper began buying customers to assure continued markets for its paperboard products. In 1964 it acquired Knoxville Paper Box Co., Inc., a manufacturer of folding and set-up boxes, for about $1 million. In 1969 Tennessee Paper acquired wastepaper factories in Knoxville and Atlanta, and in 1972 it built another wastepaper plant in Chattanooga.