Mac-Gray's chief financial officer, Michael Shea, says it's really no mystery why the Cambridge company's shares bombed on Wall Street last year.
Stewart MacDonald is CEO of Mac-Gray Corp., which stumbled after having one of the region's fastest sales growths in 1998. (Globe File Photo)
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''We're from the old economy,'' Shea said.
A 73-year-old company, Mac-Gray's core business is placing and servicing 170,000 coin-operated and card-operated washing machines and dryers in laundry rooms at colleges, apartment buildings, and military housing in 32 states east of the Rocky Mountains.
One somewhat quirky reason Mac-Gray ended up in third place among The Globe 100 bears for 1999 was an unexpected surge in another part of its business, the distribution of Maytag and other laundry appliances to laundromats. This line has thinner profit margins, and Mac-Gray's second-quarter earnings fell 63 percent as a result.
Matters got worse when, at about the same time, it became clear that Mac-Gray's 1998 purchase of Copico Inc., which operates coin- and card-actuated copy machines in college and public libraries in New York and New England, was especially ill-timed.
The acquisition coincided with the wholesale shift of students doing research on the Internet and using laser printers to make hard copies from the Web on library-maintained laser printers - often at no charge. Mac-Gray took an $8.5 million writedown on Copico, but says copy-machine revenues this year have stabilized.
Last year's Globe 100 survey listed Mac-Gray among the Growth 50 of 1998, based on a string of earlier acquisitions, including a distributor of MicroFridges - small refrigerators with built-in microwave ovens for dorm-room use.
The acquisitions lifted revenues and investor opinion.
''The market looked at us as a growth company, a consolidator,'' Shea said. But with none under way in 1999, ''they didn't see growth - but they did see the Copico problem.''
After going public in 1997 at $11 and holding at slightly above that through 1998, Mac-Gray shares fell by the end of 1999 to $3.8125. Since the beginning of this year they have topped $5 only once and haven't gone over $3.50 since February.
Speaking in a context consistent with the laundry business, Shea maintains Mac-Gray's future is solid.
''Opportunities in this business are growing,'' Shea said, ''not shrinking.''
JERRY ACKERMAN
Company of year
