The legislature boosted the tax on cigarettes, used disproportionally by the working class and the poor, by another thirty-five cents per pack to help offset the income tax cut. In other words, the legislature was counting on the working class to keep smoking to balance the state budget. According to analyses by Gannett newspapers, a one-pack-a-day smoker would pay $127.75 more each year. The income tax cuts would save a family of four earning $40,000 per year $30.89, so the new tax package would cost a family with a one-pack-a-day smoker about $100 per year.
A family of four with a household income of $1 million per year, on the other hand, would save $3,075.17. The legislature refused to raise taxes on the small army of oil and gas drillers who’d been exploiting Ohio’s shale formations. Meanwhile, the state also continued to be generous with taxpayer-subsidized grants, loans, and incentives to Ohio businesses—just as it had been with Cerberus Capital Management and Monomoy when they’d owned Anchor Hocking.
* * *
The Delaware court finalized EveryWare’s bankruptcy on June 2. On June 4, the new board met by telephone. As Solomon feared, the lenders appointed a turnaround board. Other than Solomon himself, “there’s no one from the industry,” he said. “You have a banker, a couple of turnaround guys from other industries. Nobody knows food service, and nobody who really does industrial. These are not operators.”
David N. Weinstein was a business reorganization consultant and a kind of itinerant board chairman, holding seats at Pioneer Companies, York Research, and Horizon Lines. Now he could add EveryWare Global to his list of chairmanships. Before he’d become a professional board chairman, Weinstein worked as a junk finance specialist with Lehman Brothers and other banking firms.
Brian Kushner was a Dallas-based consultant with FTI, a large consulting firm with branches around the world. A specialist in restructuring telecommunications companies, Kushner had also served on numerous boards.
Christopher Jacobs worked for Western Asset Management—WAMCO—one of the EveryWare lenders. He was a portfolio manager.
Rick Heller was yet another gypsy turnaround guy. He’d once been a partner at Carl Marks, a restructuring advisory firm that specialized in middle-market companies. He was also a former CEO and a board member of Motor Coach Industries, the bus manufacturer.
On June 17, as rain poured down on Lancaster in thick sheets, most of the board convened at Pierce Avenue for two days of meetings. Reisig gave Weinstein and Jacobs a tour of Plant 1 and the DC. The following day, the board reconvened to discuss the SEC investigation that had started the month before, based on the whistle-blower letter to the agency from Kerri Cardenas Love. The good news was that the board agreed to spend $8 million to rebuild Tank 1. The bad news for Solomon was the board’s fixation on the issue of plant safety.
Solomon came away from the meetings disappointed. The thinking of the lenders was clear to him, and he didn’t like it. The board had been hired by the lenders. They were frustrated by the surprise EBITDA news of 2014 and the subsequent shutdown. Not much had happened since to soothe them—they didn’t follow the internal workings of the company closely enough to know what Solomon and the others had been doing to weld the seams back together. The new board’s brief, Solomon believed, was “It’s all fucked up—go fix it.” And the people who’d fucked it up, as far as the board understood, were still sitting in the C-suite. Monomoy and Clinton were gone, but Solomon was left standing, and he’d been hired by Monomoy.
Like a shoe salesman whose store was filled with brown shoes (so lots of brown shoes had to be sold), turnaround guys were paid to turn stuff around. That was their game. If a turnaround wasn’t needed, then why were they there? Why were they being paid the very high fees? The mere fact of their being hired signified to them that the incumbent management team had screwed up a business. So no matter what the incumbents had done, by definition it had to be wrong, and new strategies had to be implemented.
Solomon foresaw a bias toward action on the part of the new board. His earlier fear that it might hire another batch of expensive consultants to flip over all the rocks and white-glove all the company’s corners and crevices now looked more likely. The idea would be to appear busy, to be doing something, and then claim credit for any problems found and solved. Solomon believed that’s what he’d been doing already, and that the situation was now stable and primed for acceleration. But, whether he liked it or not—and he didn’t like it—the specter of Monomoy still hung over the place, shadowing him and the whole company.
If events played out the way Solomon worried they might, both hourly union workers and salaried staff might revolt. He insisted that morale at the company, including at Plant 1, was now “very high,” because EveryWare had shed so much debt and because of his pep talks. He’d told them all that they were like homeless people: They had no debt and were just beginning to move toward a safe place where they’d find profitable growth. Someday EveryWare was going to be a bigger, richer, happier place to work. Every bit of the company had to be focused on that journey. Any move away from that basic mission by way of actions from the board or any hypothetical consultants could ruin the new wave of good feeling he thought he’d instilled in the workforce.
Whether or not Solomon was right about his own strategy or his prognostications about the board, he was wrong about the current morale. Even though EveryWare was terrible at communicating with its employees, from what little they understood of the bankruptcy, workers were pleased to shake off all that debt. But both Plant 1 and the DC were still nursing bitterness over the concessions from the shutdown and the conditions of the facilities. Nobody in Lancaster had forgotten that Monaca survived the shutdown without concessions. Plant 1 employees told me over and over that they’d welcome any chance to leave Anchor Hocking—if only there were some other job that would pay as much.
“The workers feel underappreciated,” Chris Cruit said. “Especially the guys who’ve been there thirty, forty years, because they say, ‘Hey, this was a lot nicer back in the day,’ you know? And they’ve been taken from and taken from, you know? They go out on strike, and they always come back for less money.”
Anchor Hocking had a difficult time finding glassworkers. Once, that would have been like saying you couldn’t find a lobsterman in Maine. But now no young person contemplating entering the job market wanted to start at Anchor if they could help it. It wasn’t the possible danger, or even the reputedly tough working conditions, that dissuaded them. It was the instability. Though Plant 1 paid the highest hourly wages in the area for experienced workers, would-be newcomers were reluctant to invest their time learning the jobs when the place might close at any moment.
But Solomon’s larger point was that he’d been straight with employees. They’d been lied to over and over during the past twenty years, and he was trying to rebuild some trust. He’d told them the company would scrape off the PE owners, and it had. He’d promised to lower the debt, and he did. After the shutdown, he tried to stabilize sales and customer service—and, through the hard work of the staff, there were signs that the self-inflicted wounds were healing. EveryWare was making progress, but any change in direction could undermine Solomon’s credibility.
Solomon would try to help himself in the eyes of the board and the lenders by convincing them to forget about old numbers, especially the $51.1 million EBITDA reported just before the shutdown of 2014. Comparing the performance of Solomon’s team with those old metrics wasn’t just unfair but inaccurate. The benchmark ought to have been $28 million, because, among the many items tossed out by former CEO Sheppard and former CFO Peters, none of the fees paid to Monomoy for “management” or “advisory” services had been accounted for in EBITDA. Neither had any of the fees collected by the Monomoy principals who’d served as board directors. Most significantly, none of the “equity compensation”—recaps, dividends—taken by Monomoy or Clinton factored into EBITDA calculations. And money for a tank rebuild—about $10.4 million—had been applied to EBITDA to
make the number look better, even though that money was still sitting there, waiting for the rebuild.
And Solomon faced yet another problem: Bankers were not in the business of owning glass and flatware companies. At some point, sooner or later, the lenders were going to sell their various stakes. Whether one or another lender wanted out now or at some indeterminate future time was immaterial to Solomon. But he wanted an owner—whoever that might be—to offer EveryWare its “forever home” and to believe Solomon and his team were the ones to deliver the company to the promised land of profit. He hoped to convince those owners that, by taking their stake off the table now, they’d be settling for the short money. EveryWare could be worth $300 million or more in just a few years if they would let him run the show his way. If the entire group were to sell now—say, for $75 million—the management team would have to split only $7.5 million.
But he was confident that wouldn’t happen, if only because the lenders had much more than $75 million of their own money sunk into EveryWare. So he and his wife started house-shopping in the Columbus area. His daughter was about to enroll in an Ohio university. Solomon wasn’t going anywhere.
The quarter ending in June proved to be a mixed bag of progress and stasis. During the last half of 2014, the team slashed the number of items Anchor Hocking produced in order to focus on more profitable SKUs (stock-keeping units). If stores like Kmart weren’t willing to pay a little more for some of the low-margin SKUs, Plant 1 would stop making them. The sales staff had some difficult conversations with such customers, but by late June the strategy was beginning to pay off. Gross revenues were lower, but margins rose.
EveryWare was still bleeding, but it was showing signs of improvement. Ginnan would figure EBITDA at $6.6 million, as compared with negative $2.3 million during the same quarter in 2014, a period that included the shutdown. Total revenue for the quarter would drop to $85.6 million, $5.5 million less than the year before. Total assets by the end of June amounted to $237,589,000, with total liabilities at $172,445,000.
In addition to the SKU reductions, the company was massaging former customers who’d been blindsided during the past year’s turmoil. Food service revenue was down, and the candle-jar, flower-vase, and booze-bottle businesses were hit hard, down 20 percent because those customers feared they couldn’t count on Anchor Hocking to be a reliable supplier.
All the deferred maintenance of past years still plagued Plant 1. For instance, a sixty-year-old electrical transformer blew out, and while it was being fixed, some production had to cease. The incident cost the company close to $1 million.
For years, Anchor Hocking had been the old dinosaur that had been smashed by one meteor after another yet still refused to die. But if Solomon couldn’t deliver results now, either because of his own failure or because of unwelcome direction from the board, it’d be hard to imagine a future.
* * *
Four days after the EveryWare board left town, Mark Kraft was psyching himself up to appear in the courtroom of Fairfield County Common Pleas judge Richard Berens. He’d admitted to shooting up two weeks before, and now he hoped the judge would understand how hard it was to stop using. Lots of people around Lancaster didn’t understand. After Mark’s arrest in January, a lady at the gas station where he bought his cigarettes lectured him on how all addicts ought to be in jail. She said he was “trash.”
The craving wasn’t the only demon: He’d face cravings if he lived on a desert island. But triggers jumped out at him wherever he went in Lancaster. Some days it seemed that he couldn’t go a hundred yards in any direction without running into somebody he knew who was either using or had once been addicted. Almost all the people he’d formed his tightest bonds with were part of Lancaster’s drug community. Since his arrest, he’d been obsessively checking MobilePatrol, a smartphone app that listed local people charged with crimes. Every time he looked, he could pick out a couple he knew.
After his parole, Mark met with a case manager at the Recovery Center downtown, an independent agency originally founded as an alcoholism program by the Fairfield Department of Health. He was under court order to seek treatment. He paid cash for his assessment, hoping that, by not waiting for a decision from his health insurance company, he could start right away. But he still hadn’t found a place in a program. The Recovery Center was overbooked. Even his parole officer had called, but was told there’d be at least a 120-day wait. At best, Mark could attend some of the center’s open meetings, but there’d be no one-on-one therapy. They suggested that Mark attend AA meetings while he waited.
Months of AA convinced Mark that, aside from the county jail, the sessions were the best place in town to meet junkies. During breaks, some attendees would go out to their cars, crush a Perc 30, and suck it up their noses to help them get through the second half. He sometimes went to AA meetings with Nick, one of his best friends. Nick said he was trying to get clean, but he was still using both crack and dope.
Mark considered leaving town. A lot of junkies hoping to stay clear of drugs had the same idea—and so did their families. They trudged through the courtrooms looking wrung out. And when Berens, or his fellow common pleas judge David Trimmer, would talk about the future and ask what was to be done, often the defendant’s mother would say something like “I have to get her out of this town.”
But where would Mark go? He’d bought his own dope in Columbus. And it wasn’t as if Cleveland, Cincinnati, Louisville, Pittsburgh, Indianapolis, or a hundred other cities, large and small, were dope-free. He’d find it no matter where he went. His family, which loved and encouraged him, was in Lancaster—and so was all that Lancaster history he liked so much. He certainly wouldn’t be any less lonely in a strange city.
In some ways, Mark had it easier than other addicts. Not only did his parents encourage him, but since he’d become an adult, he didn’t have to steal, break into houses, forge checks.
A lot of others spent most of their time boosting from stores. You could drive up to the I-270 beltway that encircled Columbus—away from Lancaster, where you’d surely be recognized—take an exit leading to a mall or a big-box store, and shoplift. One addict, Aaron, born and raised in Lancaster like Mark, used his own “crack baby”—a baby-size doll swaddled in blankets—as a diversion.
“I’d push it through the store and fill it with baby formula, Zantac, batteries, any expensive items,” Aaron told me. “I’d pack it full and pull the blanket over it, go through the [checkout] line, and buy a couple dollars’ worth of something, you know, and the cashiers would say, ‘Ooh, that’s a baby, let me see the baby,’ and I’d say, ‘No, the baby is sick. You can’t see the baby,’ and push it on through.
“We had a chain of these A-rab stores,” he continued, referring to Columbus-area discount stores run by immigrants from the Middle East. “They’d buy anything from, like, a laptop or an unopened bottle of aspirin. I mean, I used to take trash bags full of stuff to the A-rabs, and they’d give me a third or a quarter of what it was worth.” The merchants would put the goods on the shelf to be sold at retail, and Aaron would use the cash to make a drug buy.
The hearing on June 22 didn’t last long. Berens and Trimmer both worked calendars so full of cases like Mark’s that the proceedings had long ago become boilerplate. The judges looked at reports submitted by the prosecutor and the therapists, heard arguments from the defense, listened to short statements.
Berens wanted to know if Mark thought drug usage was a factor in the commission of the crime to which Mark had pleaded guilty. Of course it was, but a simple yes wasn’t all Berens expected to hear. Before deciding if he’d grant Mark an ILC, Berens wanted to hear Mark’s version of the Aesop’s fable, laced with shame and regret and finished with an easy moral, that every junkie told. There had to be the story. Everybody had to agree on the truth of the story. The story was everything.
“Yes, I do,” Mark said. “It started after I got out of high school with pills. That was opiates. And it slowly progressed and, you
know, there were times I would get clean and have a good, clean time, and then I would fall right back into it with the same kind of people, and it was like a revolving circle.”
Berens seemed determined to settle on the boilerplate, and Mark wasn’t about to go off the script. Mark, Berens said, could see how he’d derailed, couldn’t he? He tried drinking at a young age. He smoked marijuana. Maybe he progressed to a couple of joints, then two or three bowls. The judge described an event arc shared by millions of young Americans over at least three generations (including me, several Lancaster law enforcement officers, and at least three presidents of the United States) who didn’t become heroin addicts. He told Mark to look back on his life and see that he could have behaved differently. He should, of course, have sought some help long before Eric Brown and the MCU burst through his front door. “I totally agree with that,” Mark said.
So it was the drugs. It was always the drugs. The drugs had come into Lancaster from the outside. And the weaknesses and moral failings of the drug takers led to their committing crimes. The story was neat, symmetrical, easily understood. There seemed to be an almost desperate need to preserve it as dogma. Believing in it was as necessary as believing in the rightness of America, because if you didn’t adopt the story, you might be forced to consider the idea that something had gone rotten in the heart of the all-American town—and, just maybe, in America itself.
Figuring out what that something might be, and how it might be connected to Lancaster’s drug epidemic, was a lot harder than blaming the drugs and the outsiders who brought them. So most people seemed to have settled on a tale about how the tide of drugs collided with a culture of personal irresponsibility and weakness.
Judge Trimmer spoke for many. In conversations with me, he pinned the root cause of both those pathologies on the government, by which he meant mostly the federal government. Pick any tributary that fed the river of trouble, follow it, and you’d find the government at the headwaters.
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