Reprographics 101

This, to me is a really sad story.

Manistique Papers is located in Manistique, a small city in Michigan; population is probably less than 5,000. If this company stays closed, it’ll have a major economic impact on that small town.

Costs for raw materials up, demand for paper down. To printers and reprographers, that’s not surprising.

Lender pulled the plug on the company. To printers and reprographers, and virtually all small and medium size companies, who have bank debt, this is also not surprising.

Anyone want to pull a group together to invest into a small paper company?

Manistique Papers closes

End of business leaves 150 workers jobless

August 6, 2011

By Ashley Hoholik – Staff Writer , Daily Press

MANISTIQUE – One of Manistique’s largest employers is ceasing production, filing for bankruptcy and seeking a buyer – citing a financial impasse with their lender. After 90 years in the small waterfront community, Manistique Papers, Inc. (MPI) announced Friday that they would be unable to continue their struggle with declining demand and increasing material costs.

MPI employed approximately 150 people and produced 100 percent recycled fiber content specialty offset papers used for printers and converters.

According to a press release issued by MPI, necessary funding needed to continue operations was denied Thursday, despite the paper company’s good financial history, stock holder guaranty payments and support collateral value.

“In light of the lender’s decision, we examined our few options with legal counsel and we regret having to make the decision to file bankruptcy,” MPI director and general manager Jon Johnson explained in the release. “The business circumstances leading to this decision were unforeseen – we are as shocked by this as everyone else. We had thought and hoped that the lender would allow us to continue operations while we searched for alternative financing.”

A volatile market also played a role in the company’s decision to close its doors.

“While our values and service have not changed since 1920, the American economy has changed,” said Johnson. “Due to the current economic situation and the inability to obtain our working capital needs, we are left with no choice at this time but to close this chapter of Manistique and Michigan history.”

According to the release, the cost of raw material has increased $1 million per month since January 2011 – severely impacting the company’s bottom line. Market conditions also resulted in a significant decrease in demand, creating excess inventory and falling revenues.

Upon hearing of MPI’s closure, members of the community expressed concern about the future of the city, which relied heavily on the financial impact of the paper company.

“Hopefully they find a buyer. It’s just a trickle down effect; all of those people spend their money here in Manistique,” said Debra Rumrill. “It effects the school system, too…it’s tough.”

Many were taken aback by the news, noting that, while the paper company’s operations were often the subject of rumors, Friday’s announcement came as a surprise.

“I heard rumors, but that’s about it,” said Sandy Patrick, owner of the Aunt Sandy’s Health and Gourmet Foods in Manistique. “I mean, you always hear stuff, but you never really know for sure.”

MPI’s influence outside of the commercial market would be missed, Patrick explained, as they frequently contributed to events throughout the city.

“It’s sad, you know,” she said. “The paper mill is a big part of Manistique. They contribute a lot – they’re a very philanthropic organization.”

In a press release, Manistique City Manager Sheila Aldrich expressed sadness and optimism about the company’s announcement and future.

“Out hearts go out to Jon, the employees and this community …. Manistique (Papers) is and has been an icon to Manistique and Schoolcraft County,” she wrote. “The city of Manistique will continue to work with Manistique Papers and find a resolution. As a community, we will weather this storm,” she said.

In regard to the numerous employees now left without employment, Aldrich noted the local Michigan Works! office would be there to help.

“Michigan Works! has called and wants the community and employees to know that … (they) are here for them with counseling and training.”

Despite a cessation in production and the intention to file for Chapter 11 bankruptcy by Monday, MPI is keeping limited personnel on hand to maintain equipment and operations while they look for a buyer.

“We are hopeful that a new owner will re-open MPI and that its skilled workforce will continue to thrive in the current market and banking conditions,” Johnson said. “I want to thank all of the employees and their families for the dedication, hard work and sacrifice they have given the company. We will work diligently to find new owners and to bring the noise of a successful paper mill back to Manistique.”

Proponents of “smaller” government would, I think, suggest that the GPO be done away with. As to the GPO and its mission, I have mixed emotions about this. But, I think that’s simply because I’ve only been directly exposed to a few “reprographics” RFP’s and ITB’s from the GPO, and, in my opinion (and this is based on the “reprographics” RFP’s and ITB’s I saw from the GPO), the GPO’s print-purchasing experts may be expert at buying “printing” services, but they are not experts at buying “reprographics” services. So, perhaps my view is tainted?

WHAT DO YOU THINK ABOUT WHAT RICHARD SAYS….???

Found in the “Federal Times” (A Gannett Company)

The case for preserving GPO

By Richard Gilbert | Last Updated:August 7, 2011

Certain members of Congress seem to think that the demise of the Government Printing Office would be a good thing for the government. They are wrong, and here is why: GPO is an invaluable asset to the government.

I have read that some people believe that too many copies of the Congressional Record are printed, and that it is a waste of resources. OK, don’t print so many copies. That’s easily remedied. But keep in mind that printing the Record is just a small part of what GPO does.

Do you really want to save millions of dollars a year, and at the same time support thousands of small businesses?

Then make it mandatory that all government printing go through GPO. If all print jobs went through one agency — the one agency that is composed of printing specialists — the government would realize significant savings.

One plan is to have the General Services Administration handle government printing. GSA has its core competencies, and they do not include buying print. GSA does not have printing specialists, and that cannot be stressed strongly enough. GSA orders manufactured goods from schedules of products already produced. That is not what printing is about.

As a printing specialist at one of GPO’s regional offices, I am essentially a print buyer. So what does that entail?

Any agency can come to GPO with a print job. Each of these thousands of jobs is assigned to a printing specialist. Most of the customers we deal with have a limited understanding of what it takes to get something printed. That is where my 30 years of printing industry experience comes into play.

I am that customer’s personal printing consultant. I evaluate that job to determine what is going to be the most cost-efficient method to get it produced. I make determinations on paper, binding, distribution, what type of press is needed, who will be invited to submit bids, and so on. With that information, I create a set of detailed specifications that allows all vendors to bid on the same product.

Printing is unlike any other product purchased on a daily basis by the government. Every job is a custom job, and printing specialists create specifications for hundreds of these custom jobs every week.

The majority of jobs I handle require offset printing, and that cannot be accomplished at a document copy center. This is not a cookie-cutter operation, such as FedEx Kinko’s. There is a myriad of technical details to be aware of when writing the specifications. And I must always ensure that I am complying with federal laws and regulations.

As one of the best stewards of taxpayer money, our responsibility does not end with the award. GPO handles any problems that may arise: We grant delivery extensions where applicable, help with file problems, write contract modifications, issue cure notices and “show cause” letters, and terminate contracts. We are the buffer between the agency and the contractor. That allows the agency to focus on its own job, and we can deal with its printing jobs.

Plus, we support small businesses across the country. I would wager that 90 percent or more of the thousands of printing companies that we deal with are small businesses, and that a large portion of their revenue comes from doing business with GPO. That contributes to job growth.

So instead of doing away with GPO, we should do away with allowing agencies to go out on their own to buy print. Funnel those print requests through a central location manned by printing experts who eat, drink and breathe printing. That is GPO, and that is why we are an asset to the government.

Richard Gilbert is a printing specialist at the Government Printing Office’s Hampton Regional Printing Procurement Office. The views expressed are his own and do not represent the GPO.

Well, I found this one too late to do anyone any good, but reprographers located in the Detroit, MI market area might want to “calendar” this one – for next time (meaning, find out when the next RFP will be issued.)

DETROIT REGIONAL CONVENTION FACILITY AUTHORITY

RFP-RM-Reprographic Services (Printing Services).

Bids due on July 28, 2011

at Cobo Center Administrative Offices, 2nd Floor, One Washington Blvd. Detroit, MI 48226

Well, actually, in this post I’m going to talk about two issues; a) ARC’s stock price and b) ARC’s Q2 2011 results.

ARC reported its Q2 2011 results yesterday, and, for a company reporting what can only be characterized as mediocre (if not disappointing) results, the timing was horrible – just before ARC’s results were released, the Dow Jones Index plunged over 500 points!

This morning (August 5^th), ARC’s shares plunged below $5.00 per share and, at the end of the day, closed at $4.58 per share!

At the end of the day, ARC’s “market cap” (O/S shares x price-per share) ended up being $211.5 million (per Google Finance.)

(Just a brief reminder from the past … ARC paid around $100 mil just to purchase Ridgway’s, several years ago. At today’s market cap, if you buy ARC at $4.58, you get the rest of ARC’s acquisitions and the core Ford Graphics operations that preceded the formation of ARC for only $111.5 million “extra.”)

On March 25^th, I did an extensive post on this blog about RW Baird & Co’s then-just-announced upgrade action on ARC’s stock. Here’s a link to that post, if you care to read what I said back then before going on with the rest of today’s post.

http://reprographics.blogspot.com/2011/03/rw-baird-upgrades-american.html

And, on June 17th, I did another, rather extensive post on this blog about ARC’s stock. Here’s a link to that post, if you care to read what I said back then before going on with the rest of today’s post.

http://reprographics.blogspot.com/2011/06/shares-of-american-reprographics.html

At the end of that post, I said this….

“What goes up can come down,…. and vice versa.”

I don’t think that anyone can accurately predict where ARC’s stock price is going from here; up, down or sideways. So far this year, there’s been little, if any, positive news about the residential construction industry or about the non-residential construction industry, and, trend-wise, the AIA ABI Index readings have been mixed of late. Even thought ARC has initiatives that are not bound by what’s going on in the A/E/C industry, ARC is still “mostly” a reprographer heavily tied to the A/E/C industry.

I think we’re going to have to see some positive news about a recovery in the A/E/C industry before we’re going to see positive action in ARC’s shares.

Okay, I hope you re-read the March 25^th and June 17^th posts.

Here’s the rest of today’s post.

I don’t think that it is surprising to anyone (at least to anyone who really follows the A/E/C Industry and the Reprographics Industry) that ARC’s Q2 2011 Sales were less than ARC’s Sales for the same period last year. A/E/C Industry activity is somewhat down this year compared to last year, and, in spite of the fact that ARC has tried to generate more non-A/E/C sales (its Riot Color initiatives, its MPS Initiatives, its iShipDocs initiatives, etc), ARC’s revenues, and fortunes, are still very much tied to A/E/C Industry activity.

Note that during the first half of 2011, ARC completed at least three acquisitions of reprographics companies. We published an article about that on this blog. Even though those acquisitions were “small”, they still added to ARC’s revenues for Q2 2011. And, what I’m pointing out, here, is that ARC’s Q2 2011 sales would have been less than the $109.59 mil ARC just reported, if ARC had not acquired those companies.

Curiously, though, not a single analyst asked any questions about the effect of those acquisitions on ARC’s Q2 2011 sales! Do the analysts even know about those acquisitions?

Revenues from “reprographics services” off a solid 10%, Q2 2011 vs. Q2 2010. I totally expected that.

What I did not expect to see was revenues from “reprographics services” at virtually the same amount in Q2 2011 as in Q1 2011, and I say that for two reasons: a) I continue to expect to see meaningful increases in ARC’s color business, but I’m not seeing that, and b) throughout the history of the U.S. reprographics industry, “reprographics services” revenues in Q2 normally (almost always) outpace Q1 “reprographics services” revenues. Q2’s reprographics services revenues normally set the tone for the rest of the year…… and, based on Q2’s results, I can’t see a rosy outlook.

ARC’s management teams (national and local) continue to a good job keeping operating costs in line with sales. It is not fun to close stores, especially if store closings mean layoffs/terminations. But, when sales are declining, costs have to be kept in line, like it or not. That’s the pressure a public company faces.

Very brief comments about the Q2 2011 Consolidated Statement of Operations:

a) if ARC had not had to take a Goodwill Impairment charge, ARC would have reported income, rather than a loss, on the Income (Loss) from Operations line.

b) If ARC had not had to take a Goodwill Impairment charge and if ARC’s charge for interest expense was only the amount of interest expense ARC actually incurred for Q2, it looks like ARC would have come very close to break-even on the Income (Loss) Before Income Tax line.

c) I’ve got no further comment, at all, about the HUGE Income Tax provision ARC made in Q2. (A couple of days ago, I did a separate post about that.)

So, summing it up, if ARC had not had to take this charge, if ARC had not had to take that charge, if ARC had not had to take….. well, you know where I’m going with this …… if ARC had not been impacted by “those other expenses”, then ARC might have reported a profit. But, ARC reported an $84.6 MILLION DOLLAR LOSS FOR Q2. THAT’S STUNNING!

As to ARC’s Balance Sheet, it looks to me like ARC’s “tangible” assets now add up to around $177 million. Compare that to $329 mil in total liabilities.

I wasn’t able to listen in on the “earnings call,” but I did read the transcript published by SeekingAlpha.com. (Unlike previous transcripts there were a lot of obvious transcription errors this time around.) I often find the Q&A session amusing, and this time was no different. The amusement I’m speaking of is generated by some of the questions analysts ask. Some of those questions are naïve and just plain _____. I keep thinking about this (borrowing on religion) …. “the simple son is the one who knows not what questions to ask.”

One of my industry friends also reads the earnings transcripts, and, in a back and forth discussion, today via e-mail, he commented about the earnings transcript that was released yesterday evening, after ARC held the earnings call – – – here are his comments:

“I always read the transcripts too, for whatever they are worth…mostly for their comedy, as you note. They are always highly authored marketing pitches that try to put a positive light on mediocre at best results.”

Personally, I think Andrew Steinerman of JPMorganChase, is struggling to grasp what “digital services” are and how and why they can be much more profitable than printing (reprographics) services. Perhaps Andrew should commit to spending a few days in an ARC shop in NYC to observe what “digital services” really are and what costs go into generating “digital” vs. “reprographics” services. I think he also needs to better understand the tie-in, the relationship, if you will, between “digital services” and “reprographics” (printing) services. Some digital services don’t get done if printing isn’t going to be done.

Ryan Davis of Oppenheimer asked a few questions; priceless exchange with Suri; here we go….

Ryan: Okay I guess another question more qualitative you know kind of one of the people in the store front – your people in the store front on the street saying I mean is ABI right, can you get – kind of get some color there?

Suri’s response: You are referring to the Architectural Billing Index, ABI?

Ryan: Yeah, I mean, where is everyone – what’s your – the end markets, the customers saying kind of to your people in the storefront, are you kind of hearing much in them?

Suri’s response: If you want to see how Suri responded, go to SeekingAlpha.com and read the transcript.

After I read Ryan’s questions, I laughed so hard I nearly fell of my chair. I’m doubtful that Suri was amused.

– – – – – – – – –

So, at what point might Suri (and maybe a couple or a few of ARC’s largest institutional investors) consider taking ARC private?

Just out on AECBYTES.COM ….. a review of …..

Inaugural Revit Technology Conference 2011 in the US


AECbytes Feature
August 4, 2011

Article Summary

The inaugural US Revit Technology Conference, known as RTC for short, was held in the Huntington Beach area of Los Angeles a few weeks ago. The RTC actually originated in Australia in 2005 as an expanded Revit user group meeting, and has grown into a full-fledged conference that continues to be held annually in Australia. The RTC 2011 event in Los Angeles attracted about 300 attendees and several exhibitors. I found it refreshingly different from the events I typically attend—since it is organized by users rather than vendors, you get a chance to listen to some candid, unvarnished comments about applications that you typically do not hear at more conventional industry events. Also, many of the sessions were engaging and informative.

This article provides an overview of the RTC and describes in detail some of the key sessions that were presented, including the keynote address by Autodesk CEO Carl Bass and an inside look at Revit by one of its earliest developers. A summary of the other sessions I was able to attend is also included. An overview of the different technologies that were being exhibited at the RTC will be covered separately in a dedicated article later this month.

Article Link

http://www.aecbytes.com/feature/2011/RTC2011_US.html

Guesses at ARC’s Q2 2011 Sales revenues ranged from high of $113.40 mil to a low of $99.9 million.

ARC’s Sales for Q2 2011 came in at $109.59 million.

The closest guess was $110.0 million, submitted by “anonymous”.

The winner of the contest e-mailed me to ask me keep his name anonymous. He has also asked that his contest winnings – $50 bucks – be donated to the Make A Wish Foundation, Tampa, FL Chapter, which I will be doing, as requested.

Thank you to those of you who took the time to submit entries.