Byline: JOE HARWOOD The Register-Guard

WHEN JERRY THENELL HIT 60, he started thinking about retirement. A life of leisure - boating, golfing, the works.

But there was a snag. The gruff, paternalistic Thenell wanted to sell his Eugene-based company, Shelton-Turnbull Printers,

"I've struggled for five years to sell this company to the employees," said Thenell, now 65.

It's not like there weren't other options for Thenell, who said he has received three "viable" purchase offers from other companies over the past few years.

"I chose not to accept them because I wanted to keep it locally owned," Thenell said, adding he was not interested in selling to a competitor or a conglomerate.

Shelton-Turnbull's specialty is quickly printing general business forms, ranging from snap-out forms to checks. The company also operates commercial and label divisions for newsletters, brochures, envelopes, print media inserts, financial forms and wine and industrial labels.

An attempt by company managers to buy Shelton-Turnbull four years ago didn't work out.

Then in late 1999, a group of employees started working on a complex buyout plan that appeared more feasible as the months ticked by.

"Initially, there was a lot of excitement," said John Boytz, Shelton-Turnbull's vice president of business development. "But that excitement was starting to lose some fire because it was taking so long."

Their work picked up speed last October and culminated on Jan. 25, when papers were signed, and Thenell transferred ownership to his employees.

"This would not have happened without Jerry's support," Boytz said. "He had tons of options."

After 42 years with Shelton-Turnbull, last Thursday was Thenell's last day. Just in time, too. Thenell about a month ago received his first Social Security check.

The tool Boytz and the others used to buy Shelton-Turnbull was an Employee Stock Ownership Plan, or ESOP. One of the most common uses for the federally regulated program is to buy the stock of a retiring owner in a closely held company.

"It was pretty complex," Boytz said. "We had to hire specialized attorneys because you just don't hear about this sort of thing very often."

The ESOP buyout worked like this: Thenell regularly contributed to the employee retirement program as part of a company profit-sharing plan. Once employees decided to pursue the purchase, each employee had to decide how much Shelton-Turnbull stock he or she would purchase with his or her profit-sharing money.

Under federal rules governing such transactions, workers were allowed to make penalty-free withdrawals from the company-contributed portions of their retirement plans to purchase the stock, which is held in a trust.

In future years, instead of profit-sharing contributions to the retirement plan, employees will be awarded company stock. If the business grows in value, the stock will appreciate. The ESOP essentially becomes a retirement plan in itself.

Once an employee reaches age 60, he has the one-time option to diversify 50 percent his company stock account into other investments such mutual funds, bonds and the like. Once the employee retires or leaves the company, he receives his vested portion of stock in a lump sum or in installments.

At Shelton-Turnbull, employees will become fully vested after six years of service, Boytz said.

Dave Crosby, Shelton-Turnbull's president, said employees raised a total of more than $750,000 for a down payment on the business. Using the five-acre west Eugene property, the 68,000-square-foot printing plant and equipment as security, the employees were able to obtain a bank loan to pay Thenell the full purchase price. Crosby declined to disclose the purchase price.

For Thenell's part, he admits he had some reservations about the viability of selling his beloved company to the employees.

"I always thought they could do it, but I didn't know if they had the intestinal fortitude to do it," said the straight-talking U.S. Marine Corps veteran.

"But they are very capable," he said. "I've got too many years invested in this company to turn it over to people I didn't think were capable."

Challenging times

Workers are bullish on their future as owner-employees of a thriving printing company with accounts up and down the West Coast. But they admit operating the firm in Thenell's absence will be a challenge.

"The biggest step is you leave the comfort zone of Jerry running the company," Boytz said.

"But I can't see anything but good things happening because now it's your paper, it's your ink and it's your electric bill when you leave the lights on," he said.

Adds Crosby: "We have a lot of confidence in Jerry's judgment."

Thenell joined the company in 1960 after a hitch in the Marines. In 1975, Thenell and two other employees, Bob Wilson and Don Bumgarner, bought the business. The company at the time had about 15 employees.

In 1980, Shelton-Turnbull spent $1 million building a new, 30,000-square-foot plant at its present location. Thenell eventually bought out his partners, and in 1995 embarked on an ambitious $2.8 million expansion that included upgrading equipment and adding 36,000 square feet of space.

Thenell estimates he's invested more than $5 million in state of the art equipment in the past seven years to keep Shelton-Turnbull prosperous in the highly competitive industry, made more so by the proliferation of inexpensive laser printers.

The bulk of the company's accounts are local and regional, although its national account file is growing.

"We are the only shop on the West Coast that can do, under one roof, all the things we can do," Thenell said.

The company holds the contract to print all of the state of Oregon's checks, and maintains two sales representatives in Portland, one in Salem and 12 in Eugene.

"We're the biggest check printer in Oregon," he said. "And we have the only envelope printing press between Seattle and San Francisco."

Crosby said Thenell's capital investments and foresight - adding an in-house mailing service for customers, embracing the Internet as a business tool and launching a print management program that makes and stores customer orders for quick delivery - have put the company in a strong position.

"We don't have to job anything out because we can do all those things under one roof," he said.

Crosby said Shelton-Turnbull recently won a contract from an out-of-state firm to print 1 million five-part forms - a huge order.

"Our business is increasing," Crosby said. "We have some major (national) projects in the works right now."

Though Crosby declined to provide sales figures, he said Shelton-Turnbull's average annual sales growth over the past five years is 5 percent.

Transfer of power

Thenell for several years has been grooming Crosby, Boytz and Debby Newton, vice president of human resources, to take over Shelton-Turnbull.

"My No. 1 goal was to let the employees buy this place," Thenell said.

Why?

"Because you have a lot less volatility with local ownership, and the profits stay here in the community," he said. "I think the local economy is important."

But the transition from a one-owner company to 104 owners can prove rocky without ample forethought and a clear chain of command, said Peter Sherer, an associate professor of business management at the University of Oregon's Lundquist School of Business.

"On the positive side, you have a group of people who truly have an ownership stake in the business," Sherer said. "Everyone is a proprietor so you have real dedication."

On the other side, Sherer said, is "you have a number of people who want to be involved in the ownership and management" of the business.

Boytz said years of planning went into the employee purchase. Workers were told up front that Shelton-Turnbull would not be a direct democracy.

The company's production division is unionized, covering more than half of all the workers. Boytz said relations with the union have always been amiable.

Though Crosby is clearly the boss, Shelton-Turnbull is in the process of setting up an employee advisory council that will represent every department and help managers run the company.

"The (ESOPs) that succeed are the ones that get all the employees involved," Boytz said. "And we're committed to doing that."

Sherer said the forethought Shelton-Turnbull has apparently put into managing the company after Thenell's exit "is a good sign, and it has a good chance of working."

The number of ESOP companies has been growing. In 1982, there were 1,500 such companies nationwide, according the Washington, D.C.-based ESOP Association. By 2000, that number had grown to 11,500.

Studies by the association have found that productivity generally increases with employee-owner companies and that 81 percent of those surveyed in 1998 believed the ESOP was a "good decision" that helped the company.

Crosby said over the past three years he has gradually assumed day-to-day control of the company in anticipation of the buyout.

"We wanted a seamless transition," Crosby said. "We were looking two generations ahead."

Boytz said he and others are confident Shelton-Turnbull will do well in the coming years.

"Employees here are so good, the company could almost run itself," Boytz said. "What makes this company good is not the steel back there (in the print shop), it's the people running the machines."

Crosby, who will lead the company, is equally confident.

"We think this is a win-win situation for everybody - the employees, the customers and the community," he said.

SHELTON-TURNBULL PRINTERS

Latest development: Bought by its 104 employees from owner Jerry Thenell for an undisclosed price. Employees made down payment of $750,000 from their retirement accounts, took out bank loan against building and equipment to pay balance.

Business: General business printing products

Address: 3403 W. Seventh Ave., Eugene

Founded: 1924 in Eugene

Sales: Not disclosed

New president: Dave Crosby

CAPTION(S):

Ownership Strategies