KRD Newsletter - SUMMER 1999 (back to Newsletter Home Page)

  

Perhaps the biggest faux pas one can make in the corrugated box industry is to inaccurately use the word cardboard instead of the more accurate word: corrugated.

"Most people don't know the difference between cardboard and corrugated," explains Rudy Kiser, president and owner of Lombard based Addison Container, manufacturers and designers of custom corrugated packaging since 1984. "Cardboard is solid fiberboard," he explains. "Corrugated is comprised of two sheets of solid paper with one sheet in the center that has grooves or ridges on it. The three sheets are glued together."

A rather simple definition for a product that is actually quite complex and comes in hundreds of sizes ranging from as small as 2 x 2 x 2 to 40 x 40 x 40. Of course, custom specialists like Addison Container produce boxes in whatever size and quantity a customer needs. Whether it's nineteen trailerloads or just a couple of dozen boxes, Addison delivers the same quality and service to each customer.

"We did a job for Mailboxes Etc. just a couple of weeks ago for ten boxes that measured 64 x 10 x 64," says Rudy, who admits he never asks customers what they plan to put in the boxes he sells them. His job, he insists, is to deliver the product‑quickly.

"We can't compete with the 'big guys' on price, he explains. "But, no one in the industry can beat me on service and delivery time."

Greg Kiser, vice president and general manager, agrees with his father. Greg, 36, has been working in the family‑run business since the beginning. "Our average delivery time is 24 hours," says Greg. "How do we do that? We keep a large inventory of stock sheets on the floor and we have an excellent production crew."

In 1998, the company sold 49 million square feet of corrugated sheets and posted nearly $5.7 million in sales. In 1996, Addison Container had its best year.

Addison Container (Cont. from page]) in sales‑$6.8 million‑but that figure, says its president, is misleading because it includes some high‑volume orders that proved not to be profitable.

Putting Back the Profits
Sometimes just focusing on gross sales doesn't present a clear picture of what is going on in a business. In 1996, Addison Container had a record year in terms of sales, but it took their accountant, Bruce Robbins, to figure out why the owners weren't making bigger profits. "Bruce helped us quite a bit with our board percentages," says Rudy. "We were running 100,000‑sq.‑ft. orders, but that wasn't profitable for us because we were competing against the bigger integrated companies that make their own paper. Because we buy our sheets from a distributor, the high‑volume orders weren't getting us the return on the dollar that we wanted. Besides, the bigger orders ran our machinery to death."

Greg adds: "We went back to our original philosophy of smaller quantities, quick service and top quality. We may not have the lowest prices in town, but we've definitely got the best service."

What the owners learned from Bruce, who has been the company's accountant for the past 13 years, was to keep a closer eye on their margins. "Today, our biggest jobs are around 30,000 square feet. That

keeps us profitable and we don't wear out our machinery or our people," says Rudy who adds: "The secret to our success has always been this: Do what you say you can do every single day, both in terms of service and quality."

A Leap of Faith
When Rudy Kiser graduated from high school, a friend suggested he apply for a job at the Alois Box Company. I worked there for 19 years," says Rudy, who started out as a taper machine operator and through the years worked his way up to general manager. I left my job in February of 1984 and on April I of the same year I started my own company."

Although it was April Fool's Day, nothing about Rudy's decision to open his own business was foolish. In fact, just the opposite was true. It was a smart move.

Today, fifteen years later, Rudy and his son own the 30,000‑sq.‑ft. distinctive brick with blue‑trim Addison Container building. A staff of 35 highly qualified and experienced employees turn out point‑of‑purchase displays, corrugated specialties, inner packing, die cutting and shipping containers.

Asked how the business has changed in the past three decades, Rudy says, "With the new computerized design machines, it has become much simpler and easier to turn out the product. When I started in this business everything was done manually. Today, high‑speed machines do everything from counting and bundling the boxes to running them through the banding line and putting plastic straps around the bundles. All that's left is to ship them out."

Family Ties
Developing a successful business requires hard work and dedication. Rudy's wife, Nell, worked part‑time in the business for years. Daughter Jennifer handled accounts receivable, sales and service for five years from 1987 to 1991.

And while Rudy still oversees the running of the company, he delegates a lot more these days. He enjoys playing golf whenever he gets the opportunity. Then, there are the six grandchildren. "They are the real love of our life now," he says.

The Seven Habits of Highly Successful People: A Sequel
Moviegoers for years have debated whether a sequel can ever be as good as the original. Now, best‑selling authors are giving readers

an opportunity to judge their sequels as well. Inc. magazine says that "Best‑ selling authors and gurus are under real pressure to create follow‑up products that build on their franchise." On the shelves this summer are follow‑ups such as Living the Seven Habits: Stories of Courage and Inspiration from Stephen Covey, the author of The Seven Habits of Highly Effective People. For his sequel, Covey presents a collection of true‑life stories from readers of his Seven Habits book who reveal how the habits have changed their lives. On a recent radio show, Covey said that he was gratified that so many readers were willing to share their personal stories.

"My wife encouraged me to write the book," he said. Other sequels include Allan Kennedy/Terrence Deal's The New Corporate Cultures (authors of Corporate Cultures) and Peter Senge's The Dance of Change, a follow‑up to Fifth Discipline).

IRS Extends Deadline to Un‑Convert Roth
Investment News magazine in May reported that "Your friends at the kinder and gentler Internal Revenue Service have decided to officially extend the deadline until Oct. 15 for people who converted to a Roth IRA and then discovered they were ineligible." However, you must have filed your 1998 return on time. Although you have until April 15, 2002, to file an amended return, if you incorrectly converted to a Roth, the actual Roth conversion funds must be returned to their original source by the Oct. 15 date. To convert to a Roth IRA, your adjusted gross income must be under $ 100,000 and married people can't file separately.

Threshold Requirement for EFTPS Raised
The IRS has issued proposed regulations that raise the threshold requiring the use of the Electronic Federal Tax Payment System (EFTPS) to $200,000 starting Jan. 1, 2000. This means that 91% of all businesses would have a choice of how to pay their taxes. After the regulations are finalized, businesses that were previously required to use EFTPS but did not make more than $200,000 in aggregate deposits for 1998 will be relieved of the requirement to use EFTPS on Jan. 1, 2000. As a result, only about 9% of all businesses making deposits will be required to use EFTPS. Also, about 65% of the businesses that have previously been required to use EFTPS will be relieved of the requirements.

The new threshold of $200,000 applies to all types of taxes made during the year. If a business makes more than $200,000 in aggregate deposits for a calendar year, it meets the requirement based on this test and must use EFTPS starting Jan.1of the second succeeding  year. For example, if you made more than $200,000 in aggregate deposits for '98, you'd have to use EFTPS starting Jan. 1, 2000. Also, IRS will continue to waive penalties for smaller businesses required to use EFTPS that make timely paper coupon deposits. Penalty relief runs from July I through Dec. 31, 1999.

1999 Dollar Caps on Vehicle Depreciation
There are special limits on the amount of depreciation that may be claimed in any one year for a passenger vehicle that is considered listed property. If you purchased a vehicle in 1999, these limits effectively reduce the depreciation you would otherwise be allowed to claim during the normal 5‑year recovery period. The depreciation limits for vehicles first placed in service in 1999 remains the same as those in 1998, with one exception. First‑year depreciation on vehicles placed in service in 1999 is $3,060, down from $3,160 in 1998. In 1999, second‑year depreciation is $5,000; third‑year depreciation is $2,950; and each succeeding year is $1,775. Also, a new lease inclusion table applies for vehicles which are first leased in '99. It is applicable for vehicles with a fair market value (FMV) of more than $15,500.M

Selling in Cyberspace
If you have not already created a business Web page, now may be the perfect time to get started. Experts say the longer you wait to oin in this fast‑moving trend, the harder it may be. The Journal of Accountancy in its May issue reports, "Internet commerce is growing, the growth is exponential, and it's creating new ways to sell, to advertise and to communicate. In short, the Net is not only creating new business, it's creating new ways to do business."

It is anticipated that by the year 2001, 4.3 million small enterprises are expected to use the Internet for business purposes. And, network‑based business‑to‑business transactions are projected to total nearly $200 billion by then‑10 times larger than the consumer e‑commerce market.

Taxes
Members of a congressional Internet tax study panel recently were reported as saying that the government's eventual collection of its share of Internet commerce‑generated revenues is as inevitable as "death and, well, taxes."

Opening statements from 17 members of the Advisory Commission on Electronic Commerce showed that a majority believe the Internet cannot remain effectively tax‑free forever. Members agreed that the Internet must not be allowed to become a tax haven that drains the revenue governments need to provide services to citizens. They also agreed on two principles: that any Internet taxes be no different from taxes on other forms of commerce; and that any system should be as simple as possible to reduce the cost of compliance.

IRS Curtails Sending Third‑Party Notices
The IRS has said they will sharply reduce sending third‑party notices on a blanket basis to taxpayers. Third‑party contacts are often used to resolve unanswered questions about the assets, address or tax liability of a taxpayer. What this means is that the IRS will curtail sending such letters to taxpayers facing examination questions and will instead now use the letters only when the agency is unable to obtain information from the taxpayer. IRS Commissioner Charles Rossotti said in most instances when the IRS can work directly with the taxpayer, there is no reason to send out the letters. Concerns have been raised by tax practitioners that the blanket notices needlessly alarmed taxpayers.