Reprographics 101

Reprographers, I’d like to bring to your attention a blog-site I “discovered” this morning, as a result of a new “follower” who signed up to follow Reprographics 101.

It is important to learn from “our customers”; what they are saying, what they are doing, what they are suggesting ….. and the person – Paul Dougherty – who authors the blog was formerly the CTO of Gresham, Smith and Partners, one of the largest and most well-respected A/E firms in the U.S. For a couple of years, about 10 years ago, I worked for both NGI and Lellyett & Rogers – NGI was based in Tampa, L&R was (and still is) based in Nashville, and, during my time at L&R, L&R’s then owners, Bryan Dyer and Pat Brumfield, mentioned Paul’s name many, many times. Bryan and Pat said that Paul is one of the brightest, smartest guys they ever had the pleasure of serving, and if you know (or knew) Bryan or Pat, that kind of statement speaks miles.

Here’s his “brief” profile:

DOUGHERTY

As (former) CTO of Gresham, Smith and Partners for 12 years, I have worked to meet the demands of business and the technology needs of broad architectural/engineering practices.

According to LinkedIn, Paul is no longer with GS&P and is now the CTO of Lellyett & Rogers Services.

And, here’s the Internet address of his blog-site:

http://bimsymphony.blogspot.com/

Our Nation’s RESIDENTIAL housing industry – new homes and existing homes – is totally out of whack and something needs to be done to fix this problem in order to bring the nation into a full recovery mode. Millions of jobs are at stake.

I’d like to respectfully ask that you read this entire long-winded post. How about coming up with prospective solutions and offering them up to your Senators and Representatives … and to President Obama. Do your part, get off your ass, speak your voice.

Yesterday and the day before, three different authors wrote articles about the U.S. Housing market. Two of the articles – the first two in today’s post – were written specifically about the current situation in the “existing-homes” market. (In other words, those article are not about “new” homes but about “used” homes.) After that, I’ve placed a copy of an article that was authored by one of Morningstar Research’s analysts. Apparently, his article is the first in a series of articles he intends to write. His article, the one in this post, is titled, “How Can We Live With These Housing Blues?”

As to the third article (the one I mentioned in the last sentence of the previous paragraph), a number of different people posted “responses/ comments” to that author’s article. One of people (“Rocky2”) who posted a comment (actually, he posted 2 comments) is the Vice President of a Residential Home Builder. In my opinion, his comments are “right on.” If you are too lazy to read today’s entire post, then, at the very least, read both of the comments he posted. His comments are posted in this color ink.

If Mortgage Rates Keep Falling, Why Are Home Sales So Bad?

Published: Friday, 27 May 2011, By: Diana Olick, CNBC Real Estate Reporter

As mortgage rates continue to fall, so too are home sales. That wouldn’t make sense in a normal

housing market, but these are very unique times. Credit, or lack thereof, coupled with extremely weak

consumer confidence is keeping potential buyers on the fence.

Contracts to purchase existing homes plunged a far weaker-than-expected 11.6 percent in April, the heart of the spring housing season.

The National Association of Realtors’ Pending Home Sales Index is now 26 percent below its cyclical high in April of 2010, which was the deadline for the now-expired home buyer tax credit.

“The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” said NAR chief economist Lawrence Yun.

The drop in new contracts comes as mortgage rates continue to fall, just last week to the lowest level of the year so far. Freddie Mac reported 4.60 percent on the 30-year fixed, but analysts say even that’s not enough to move this tough housing market.

“Because mortgage rates have been so historically low for so long, the law of diminishing of returns has set in with respect to the low rates being the main influence and catalyst in purchasing a home,” says Peter Boockvar of Miller Tabak.

“Pricing, job outlook and access to credit will remain the key factors influencing the decision to buy a home, and I don’t think those reasons will superseded by another move down in mortgage rates in getting a buyer off the fence,” Tabak went on to say.

Only the Northeast saw a slight bump up in new sales contracts, barely 2 percent. The South led the drop, down 17 percent, but that was largely du to extremely bad weather. Still the Midwest and West posted drops of 10 and 9 percent respectively.

The Realtors also blame tight mortgage underwriting for the drop in sales and today called on the banks to start moving more money.

“A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves,” writes Yun in the report.

“We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings,” Yun added.

Pending Home Sales Plummet in April

By DANIEL INDIVIGLIO, MAY 27 2011

As the U.S. economy softens, real estate’s struggle worsens

The housing market just can’t seem to find its footing. After a rising for two months straight, pending home sales fell off a cliff in April. The National Association of Realtor’s Pending Home Sale Index fell by 11.6% during the month. That’s the biggest decline since the home buyer credit expired about a year ago. The index is now the lowest since September. What’s weakening Americans’ home buying demand?

At 81.9, the index is in pretty ugly territory. You can see that it was rarely lower than this — even between the time when the housing bubble had popped and the home buyer credit took effect. The already anemic demand for home buying appears to have weakened even further.

This might seem somewhat surprising. Since home prices have begun declining again, the deals out there are getting better. Of course, this same trend could be driving potential buyers to the sidelines for the time being: no one wants to buy a home only to have its value decline in the next year.

The National Association of Realtors has a different explanation. Its chief economist Lawrence Yun says: “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.”

In fact, higher inflation in general is likely squeezing many Americans’ budgets, which makes grim the prospect of buying a new home. Although unemployment hasn’t risen much, since it also hasn’t declined much, there aren’t hordes of newly employed Americans with fresh salaries to put towards a mortgage payment. Putting all these factors together means that the relatively weak pace of sales is slowing.

It will be interesting to keep an eye on home sales over the next couple of months. The summer is traditionally busy season for realtors. At this point, it looks like they’ll have farther to climb to reach even a relatively brisk pace of home sales during the warm months.

But if gas prices begin to soften, the weather improves, hiring picks up a bit, and consumers seek deals due to falling prices, then stronger sales could follow. Of course, that’s quite a few conditions that need to be satisfied. It’s pretty likely that a few will be met and a few won’t, which probably translates into somewhat higher, but still relatively few, home sales.

How Can We Live With These Housing Blues?

The persistent weakness of the housing sector continues to weigh down the recovery.

By Bearemy Glaser | 05-26-11 (from Morningstar Research)

Worrying about the housing market is nothing new. From anxious homeowners wondering about the value of their property to institutional investors holding on to securitized mortgages, the direction of housing prices has been top of mind for some time now.

And rightfully so. Housing is a crucial component of our economy, and the recovery in the sector so far has not been earth-shattering. We will need to see housing truly be nursed back to health before we can finally put the Great Recession behind us, so keeping track of the industry is important to anyone trying to track our broader economic progress.

During the next two weeks, we’ll look at how we got into this mess, where we are now, and why I’m not optimistic things are going to improve in the near term.

How We Got Here

There is no one, or right, answer to the question of how this mess got started. The truth is that it was a confluence of factors that led to the huge asset bubble and its subsequent decline. And the fact that many of these root causes have now reversed themselves, it is easier to see why the housing recovery has been slow, and why it might not speed up anytime soon.

One of the more obvious places to look at what caused the bubble is monetary policy. After the tech bubble burst, the Federal Reserve aggressively loosened the supply of money to soften the blow of a faltering stock market. This led to a scenario where we had inexpensive mortgages, lots of people with money still afraid to invest in stocks after the tech bubble, and a sense that housing prices would never go down. It isn’t that shocking then that Americans starting putting more money into houses.

This was all assisted of course by an easing of lending standards by banks. Exotic new mortgages entered the scene, and the requirements for documentation and down payments plummeted. And since banks could quickly move the loans off their books and into mortgage securities, they weren’t all that concerned with the credit quality of the borrowers. This made it all that much easier for the marginal homebuyer to jump into the market.

It also is impossible to discount the psychology of Americans who were caught up in the irrational exuberance. Watching your friends and family see huge paper gains in their homes had to be a huge inducement for getting into the market. And you had realtors out there encouraging people to reach for the biggest house they could find, even if it was more house than they needed. There really was also a palpable sense that not buying a house or not upgrading your home meant you were really missing out.

These factors helped push home prices to nose-bleed levels, but as we all know, it didn’t last for long. Home prices began their decline even before the weakness of the entire economy was evident. The huge supply glut took its toll as developers started cutting deals to fill empty units. And as the economy began to shake, things only got worse. Subprime borrowers showed signs of having trouble keeping up with their huge new mortgage payments, and even higher-credit-quality borrowers found themselves in trouble.

It turns out that housing was the canary in the coal mine for the broader economy. Almost every other sector began to shake, and soon the entire financial system was in a full-blown credit crisis. As the recession took hold and deepened, the outlook for housing only got worse. Prices kept falling year-over-year, and like much of the economy, no one quite knew when they would bottom.

Where We Are Now

But things did eventually stabilize; by 2010 housing prices had mostly settled at 2003 levels, according to the S&P Case-Shiller Housing Index which tracks housing prices across 20 major metropolitan areas. However, prices haven’t moved much since then.

Stabilization was caused by a few factors. First was the initial wave of homebuyer credit from the federal government that created a new financial incentive to get buyers into homes. These programs turned out to be very popular and got people thinking about real estate again. Support from the Federal Housing Administration and other agencies likely also played a role in stopping the free-fall and providing financing when the mortgage market was in disarray.

The Federal Reserve pitched in too by keeping rates low and allowing mortgage rates to fall even below where they were during the bubble. These cheap rates allowed adjustable-rate mortgages to reset to lower levels making homes more affordable for some and staving off more forced sales.

New supply also plummeted, helping the market reclaim the supply-and-demand balance. Housing starts are up slightly from the bottom, but they are still well below historical levels and could stay at this depressed level for some time. Demand has also come back as lower prices make buying look more attractive versus renting. In many areas, it is now cheaper to own a home versus renting which is something that was manifestly not true during the bubble.

But even though the market has stabilized, there haven’t been many signs that things are truly on the upswing. Although the foreclosure crisis has crested from its peak, there are still huge numbers of people losing their homes. Not to mention the nearly one fourth of mortgage holders who are underwater right now. The continued forced bank sales and huge inventory of unsold homes continue to weigh on prices.

This give and take in the housing market is holding back the rest of the recovery. Many construction workers remain unemployed, and banks continue to be saddled with bad real estate loans. Furthermore, consumers aren’t spending as much because they feel less wealthy with their biggest asset often worth less than what they paid for it. I’m not hopeful that this situation will turn around soon.

What do you think? What caused the housing bubble? Has housing really stabilized? What are the biggest headwinds facing the sector?

Next week, I’ll look at some reasons that the housing market could be in for an extended rough patch.

There were quite a number of comments posted in response to the article Mr. Glaser authored. Here are those comments, one by one. Please take the time to read both posts by Rocky2.

Edmund_Dantes

Worry? Why? Worrying won’t help.

Policy-makers made a conscious decision to keep GDP roaring along by encouraging a housing bubble to offset income lost during the 00-02 recession, and while millions of good jobs were offshored to ChIndia (which helped corporate profit margins, at the expense of the working class).

Many millionaires were made at AIG, Countrywide, Goldman etc., by the mass securitization of un-economic mortgages. Those millionaires (and billionaires) are keeping THEIR ill-gotten gains & their houses. Angelo Mozillo will not be renting any time soon.

No point in worrying, but remember this national fiasco, and trust no one. No one! Expect future policy makers to blow asset bubbles (which is what is happening now, in stocks and bonds). Save til it hurts. Stay “liquid”. Don’t trust Wall Street. Don’t stick around waiting for someone to tell you the bubble is about to burst. — the little guy is always the last to know.

supersaver

Housing will not stabilize until credit opens – especially jumbo borrowers. Perfect credits can borrow but after the great recession, not many exist. Lenders won’t get more liberal on underwriting until they perceive a price bottom. Most lenders and borrowers perceive another 10-15% percent decline in values. Until a price bottom concensus emerges, lenders won’t lend and buyers won’t buy.

Rocky2 (first of 2 posts by this person; see his second post at end)

Housing is no doubt at the core of this financial and economic crisis. Housing is also at the core of the solution. Unfortunately, Congress, the Fed, the President and the policy advisors have and continue to misread the significance of housing as a solution which explains the abysmal picture of this so called recovery.

The housing problem started as a simple problem of supply exceeding demand. When Wall Street began to securitize sub prime residential mortgage paper and splatter it all over the banking system, they effectively allowed the demand curve for housing to shift to the right. When sub prime ended (for good reason), the demand curve shifted back to the left leaving an excess supply of Wall Street induced housing sloshing around the economy. With supply exceeding demand, it was only a matter of time before home prices would fall leading to a severe write down of mortgage paper on the balance sheets of banks. Once the balance sheets of banks were impacted, it was only a matter of time before credit conditions would tighten crippling an economy dependent on credit.

The government was accurate in recognizing that a modern western economy needed credit to function. However, rather than deal with the problem of the excess supply of housing, they thought they could skip housing and fix the banking system directly. First the Fed responded by bringing down interest rates hoping other parts of the economy would respond and the housing problem would self-correct. The Fed also endeavored to save the banks at the expense of Main Street with a zero interest rate policy for depositors that would help banks recapitalize themselves. Then “bazooka” Paulson responded by begging Congress for TARP money that would fix Goldman Sachs and the banking system. Paulson and Bernanke never understood the significance of housing and in fact described the housing problem back in 2007 as “contained”. The housing problem was not contained and their solutions were ill-conceived.

Congress, too, misread the housing problem and enacted a series of ill-conceived policies. First, they passed a $160 billion fiscal expenditure program that had nothing to do with housing. They then began to focus on housing with a Housing Rescue Bill that provided an insufficient $7,500 tax credit for the purchase of a home. This was not a true tax credit because it had to be repaid in three years. They then converted the $7,500 credit to a true $8,000 tax credit. While their focus on housing was commendable, the credit was too little, too late, and made ineffective, as it was limited to first time homebuyers. They then saw something was working because they extended the insufficient $8,000 credit, …. but for an insufficient period of time.

The problem in housing was one of excess supply. What was needed was a substantial tax credit at the time of not less than $20,000 available to any and all homebuyers. A substantial tax credit would shift the demand curve back to the right and clear out the excess supply of homes sloshing around the economy and battering home prices. A tax credit limited to first time buyers was like a shoe store trying to clear excess inventory with a shoe sale limited to red heads that are left handed. What about the blonds and brunettes? Don’t they buy shoes too? The tax credit was too limited and did not work!

Unlike any other asset on the books of financials, we have over $12 trillion of residential mortgage debt in this country. The next largest category of debt is commercial debt at approximately $3.5 trillion. Nothing compares with the size and magnitude of residential mortgage debt. You cannot allow home prices to fall significantly and think the banking system would not be affected. Moreover, once you cripple equity in the banking system, it was only a matter of time before credit conditions would contract and the economy would deteriorate. This in turn creates a negative feedback loop whereby a deteriorating economy leads to additional foreclosures and a further fall in home prices.

Once again, we have over $12 trillion of residential mortgage debt on the books of financial institutions in this country (Fannie and Freddie hold half the debt which has created the obvious problem in those institutions). Banks are thinly capitalized on a good day with less than $1 trillion of equity capital in the entire North America banking system. Housing is simply something you cannot walk away from thinking the problem will self-correct with low interest rates and falling home prices. Our financial system cannot digest the extreme fall in home prices.

Obviously the Fed and our policy makers didn’t understand this. I don’t know what they were thinking but they clearly did not understand the significance of housing. Obama and Congress at the time had a socialist agenda that had nothing to do with housing. They passed an $800 billion stimulus program that extended unemployment benefits but never focused on housing. They developed programs for mortgage modifications, programs which were a complete failure; more than half of the modified mortgages went back into foreclosure. The Fed missed the boat completely and looked at the problem as a liquidity crisis rather than an insolvency crisis due to falling home prices.

Today, a substantial tax credit for the purchase of a home (not less than $25,000) would clear out the excess inventory of homes within six months. Many potential homebuyers have the income to make a mortgage payment but they do not have the down payment. A substantial tax credit, one that can be monetized at the time of purchase, provides the INCENTIVE AND THE DOWN PAYMENT MONEY that homebuyers today do not have. This is not the same as sub-prime lending which provided financing to anyone and everyone without effective underwriting. Today, even with a substantial tax credit, you still need to credit score and qualify for the mortgage under proper underwriting guidelines. Only then can you use the tax credit to purchase the home.

Like with any commodity, when excess inventories clear and supply and demand conditions are rebalanced, prices will firm and even begin to rise. As home prices rise, banks will no longer have to write down the value of residential debt on their balance sheets but may begin to write it back up. As home prices firm, consumers (two-thirds of the economy) may begin to feel better as the value of real equity in their homes begins to rise. Finally, as home prices on existing homes firm to the point where builders of new homes can compete, new construction will take place, which is the jobs bill everyone is looking for!

You may ask how can we afford a substantial tax credit today in the face of rising deficits and a major debt problem in this country. My answer is simply – – – how can we not afford it?

If we were starting a country today, we may not allow for a residential mortgage deduction and we may not create institutions like Fannie and Freddie to support housing. We may follow the Canadian system or the Australian’s, where the homeowners must guarantee their mortgage debt and where the 30-year mortgage is non-existent. In this country, we are too late for that. We have $12 trillion of residential mortgage debt in the system and homeowners in this country (over 100 million) have more than seventy percent of their net worth on average in their homes. We cannot today abandon the mortgage deduction or the institutions on which housing values depend. Fannie Mae was created in the 1930’s to help us climb out from the Great Depression. Now in a recession that is the second worst economic downturn since the Depression, we are talking about eliminating Fannie Mae. This is dangerously absurd. We need to restore housing values in this country and prevent Wall Street from crippling the system in the future. We restore values with a substantial tax credit that brings supply and demand conditions back into balance. Once you fix housing, the banking system and credit conditions in this country will fix themselves and with new residential construction soon taking place, the unemployment everyone is worried about will in fact begin to abate!

Roger Sherr, rsherr@sherrdev.com

BuyerBeWare

Many people relate the 1929 Great Depression to the stock market crash. What is rarely mentioned is the fact that the real estate market decline was the major factor in that depression too. Because of the market interventions that have artificially propped up the housing prices and continuing govt interference… we are in for many years of hard times. To compound the difficulties that remain, the Fed is devaluing our currency and intentionally trying to create inflation… This will not end well.

dragonpat

A substantial tax credit will not solve the housing problem as long as there is so much unemployment. People cannot afford to take on long term debt like this if their job situation is unstable. Creating this excess housing supply is what was keeping the economy afloat when other jobs were being outsourced to China. Besides the country is in a big debt hole and not collecting enough taxes as it is.

BuyerBeWare is correct that this is not the first time that houses all over the country went down in value. It happens locally also like in Detroit or Pittsburgh when the bottom falls out of the local economy and there is a big job loss.

The price of housing in the 2000s went up way faster than people’s incomes. right now that amount is at historically high levels as a percent of what people earn. Prices have to return to historical percentages. And yes as the previous poster noted this is going to be a wall of hurt and will not end well. Could take a decade to work off until all the underwater mortgages come out from underwater, or there are foreclosures, and short sales.

Feeling richer because of the equity in your house is an illusion. You have to live somewhere. You sell your overpriced house in order to buy another over-priced one somewhere else. Until you die it’s a zero sum game, unless you have to sell your house to finance moving into a a nursing home and in that case it’s a negative one.

calvinbama

Buy Low, Sell High.

I am 23, so due to my age and college I missed the housing bubble by 3 years. I have bought 2 foreclosures for under $50k total over the past 6 months. These deals won’t be around forever. Just make sure that when you buy something you keep travel distances and mobility in mind. The homes that lost value and will never come back are those built up in the exurbs and other areas that are completely dependent on the automobile for all mobility. These areas are not sustainable and known by many real estate experts as the ring of death because they show up on foreclosure maps as a huge ring that surrounds the farthest out suburbs. Buy in attractive or transitioning inner-city neighborhoods and you will hold value.

polkster0

Bearemy, concerning the cause of the housing market bubble & subsequent collapse, I believe your basic premise is incorrect. Your introductory statement reads “There is no one, or right, answer to the question of how this mess got started. The truth is that it was a confluence of factors that led to the huge asset bubble and its subsequent decline.” Actually, the entire residential mortgage market is controlled and backed by the US congress. This disaster was 100% the fault of our elected representatives in the house & senate. Yes, a lot of crooks in the mortgage business, realty business, Wall Street, etc., got rich. And, yes, a lot of them were greedy, unethical, broke laws, etc. Maybe there were some people caught up in irrational exuberance. (Most average people hurt, and some even devastated, by this were just average people buying a house to live in … not speculating). And yes, low interest rates cause house & stock prices to go up. But this bubble & crash goes way beyond any of those factors. It was caused by ever increasing foolishness & recklessness in the US congress over a period of about 12 years. Many of the representatives were involved in obviously unethical behavior (such as getting special loan rates from mortgage companies). But the point is, congress has complete control over this market, runs the two GSEs that handle all the money, and back all the risk with US taxpayer dollars. And, congress not only allowed, but mandated ever more foolish lending standards. This is actually one of those rare disasters that is not caused by a confluence of uncontrollable factors. There is a very clear cause & a very clear group of people responsible.

Nomadb

Roger, why in the world would / should we increase subsidies to home-ownership. There was a significant increase in supply as you point out. The demand for this will be met over the next 2-3 years as new households form, population increases, new immigrants come to the States and start to build homes. The market will find its equilibrium. Introducing yet another distortion, i.e. your $25,000 new home credit continues to warp the market. Furthermore, as someone who pays significant taxes, has never missed a mortgage payment and is steadily buying my house the old-fashioned way, I have zero interest in subsidizing the home construction industry. They had their fat years over-building, and now they’re having their lean years as the supply slowly gets digested. Continuing to distort the market for investments by raising the incentives to over-invest in housing is yet another example of short-sightedness. Let’s be adults and take our medicine and work through our prior mistakes.

pquilici

So long as we fail to clearly assign blame and rectify the causation of the housing market collapse, we are doomed to repeat the error and probably continue along this path of interminable fiscal malaise. We must recognize that the sole proximate cause of the housing meltdown was the federal government when it mandated credit easing for home ownership in the mid-late 90s. The rest was mere add-on from creation of sub-prime, adjustable rate, liar loans and what have you. Wall Street jumped in with loan securitization which was under rated by the government sponsored rating agencies. The flags were being thrown down on the field for years, but government did nothing.

The solution to the problem is to eliminate career politicians primarily interested in providing feel good rules and legislation to guarantee re-election. Pandering to the poor and bad credit risks by allowing them to buy property they could not afford merely hurt us all. Government inflating a housing bubble to cure the ills of a prior stock market bubble and job losses due to strangle hold unions and regulations obviously was not the answer. We need elected leaders unafraid to speak truth to the parasite class and lose re-election. Otherwise, the US is on a long, slow downward slide.

SFElSid

Good one, Polkster-zero. That’s hilarious.

Housing will continue to be a disaster for years and years.

What’s the big deal? Houses will only go down maybe another 10-15% nominal terms, and probably another 20-30% in real terms, as inflation picks up.

What if rates rise? I mean, we haven’t even had the English and Australian housing busts yet, because all of them are on adjustable loans and rates have been ultra-low (J. Grantham cited a conversation with a friend in England who was paying 0.75%!), but that also means it will be a really nice disaster when rates go up.

Think that means nothing to the U.S.? Right, like the PIIGS mean nothing to the U.S., too? Ever heard of CDSs? If British, Greek, and Irish and many other banks start seeing the pain from this, so will our TBTF banks.

Timber!!!

Maybe, Polkster0 and pquilici, the U.S. Congress started the housing bubbles in Spain, Ireland, Australia, England, China, etc. etc. etc. also?! LOL. You guys are funny.

See how quickly an argument that you have obviously never thought through, and which has no basis in fact, falls apart?

Rocky2

Nomadb, you make good points but you are missing the big picture and you do not provide a solution. First, regarding the idea that housing will correct itself over time, all problems in economics are self-correcting if you wait long enough. The problem with falling housing prices is that the financial system cannot digest the fall in home prices to the extent we are experiencing. Again, we have over $12 trillion of residential mortgage debt sitting on the books of financial institutions including Fannie and Freddie (which hold over $5 trillion of this debt). Banks in general are thinly capitalized and cannot absorb the write-downs in residential mortgage paper that falling home prices are necessitating. As banks write down their capital, they are forced to contract their lending which is crippling the economy in general and circling back to hit home prices again and again. To not effectively stimulate housing demand and restore equilibrium immediately is to accept the more costly misguided monetary and fiscal policies that are truly bankrupting the nation and killing the dollar. You may wish to wait for a self-correcting solution, but with unemployment sticking at unprecedented levels, a falling dollar with huge inflationary implications, homeowners (including yourself) who have seen the equity in their homes severely decline or wiped out (if they have not lost their home altogether), and a government continuing to search for solutions with no idea of what they are even spending money on — how much longer do you want to wait???

Regarding your second point of not benefiting the builders with a tax credit policy, you need to understand that the tax credit is not about benefiting builders and stimulating new construction. Builders of new homes cannot compete today with the reduced prices on existing homes and foreclosed homes. Given the price discrepancy, any home buying incentive in the form of a tax credit will go largely toward existing housing and not new construction. A tax credit is not about stimulating new construction. New construction would add to the supply problem the country is trying to escape from. Given the significantly more attractive pricing on existing housing, a substantial tax credit will largely go toward clearing the inventory of existing homes on the market. Moreover, unlike with sub prime lending, since underwriting of mortgages today is more restrictive and responsible these sales of existing homes will not likely come back on the market in the form of foreclosure and default. Finally, to the extent some of the credit spills into new construction, jobs will be created so let it happen!

A substantial tax credit will in fact clear inventories and fix our problem. The only negative is that it should have been done earlier before we piled on all this debt and brought the dollar to its knees. On a global basis, the problem with United States recession today is made even more threatening given that Europe is facing its own sovereign debt troubles and Asia is slowing as it fights inflation. We cannot worry about the world all the time but we can fix our economy at home. Given the costs of all other government policies and crippling impact of this economy on its citizens, I suggest we not wait for the housing problem to self-correct.

Roger

Well, that’s an abbreviation of the statement attributable to Ricoh’s President & CEO.

I think he meant to say that “we’ve gotten fat, and we’re going to trim some of our fat.” Ricoh has announced intentions to slash 10,000 jobs! I wonder how many of those jobs will be cut from Ricoh’s U.S. workforce.

Here’s the story I found on Reuters.com about this…..

_____________________________________________

(Reuters.com / May 26, 2011) – Copier and printer maker Ricoh Co will cut nearly 10 percent of its workforce to try to boost sagging profits, a move that could signal another wave of cost-cutting by underperforming Japanese companies.

Ricoh said on Thursday the restructuring included slashing 10,000 jobs from its global workforce of 109,000, cutting unprofitable products and consolidating factories.

The restructuring could help Ricoh, which has long promised but failed to deliver cost cuts, fend off competition from firms such as Xerox and Canon Inc.

Analysts said Japan’s devastating earthquake and tsunami on March 11, which tipped the country into recession, could speed up efforts by Japanese firms to stay competitive.

“The earthquake has ended any lingering complacency at Japanese companies that have been behind the curve in restructuring and in M&A,” said Macquarie strategist Peter Eadon-Clarke.

“It has reminded people of the limited opportunities at home and of the need to build successful global operations.”

Last month, Panasonic Corp said it would cut 17,000 jobs and close up to 70 factories globally. Camera and medical equipment producer Olympus has also said it would shed jobs.

Ricoh’s shares closed up 4.1 percent after surging as much as 7.4 percent on the news. Analysts said the job cuts marked a welcome change in direction for a company that has until now refrained from major restructuring, despite lagging rivals in terms of profitability.

“Ricoh has been dragging its feet on restructuring and has finally started moving. The market has been worried how it would deal with its bloated cost structure after acquisitions,” said Kazuyuki Terao, chief investment officer at RCM Japan.

“There are more companies out there that need to carry out restructuring. Some successfully engineered a recovery by restructuring after the Lehman shock. I expect those that did not restructure then will do so this time around.”

Ricoh said in a statement the job cuts were expected to boost operating profit by 140 billion yen ($1.7 billion) in the year ending March 2014.

“We have become a big company and need to re-engineer our corporate structure throughout to become more muscular,” Ricoh President and CEO Shiro Kondo told a news conference.

“We have done very little pruning of unprofitable businesses, and we need to pull out of some.”

The firm is targeting operating profit of 210 billion yen in the financial year to March 2014, more than triple the 60 billion yen it posted in the past year, ending in March, when sales fell 4 percent to 1.94 trillion yen.

Ricoh bought U.S. office equipment distributor Ikon Office Solutions for $1.6 billion in 2008 in a bid to grab market share from rival Canon, but has yet to clear its network of overlapping operations, Kondo said.

While Ricoh’s staff grew by 43 percent over five years, its operations stayed in the red in key areas such as fast-growing China, while margins in office copiers slumped amid fierce competition and a dearth of new hit products.

With an operating profit margin of 3 percent in the past business year, Ricoh is less efficient than its Japanese rivals. Konica Minolta had a margin of 5 percent while Canon managed a profit margin of 10 percent. It now targets a profit margin of 8.8 percent in the year to March 2014.

Ricoh said last month it expects its operating profit to rise 16 percent to 70 billion yen in the business year that started in April on sales of 2.09 trillion yen, up 7.6 percent.

(Additional reporting by James Topham and Taiga Uranaka in TOKYO and Maneesha Tiwari in BANGALORE; Editing by Nathan Layne and Anshuman Daga)

Thomas Reprographics Launches ConstructionVaults™ Website

Thomas Reprographics has launched ConstructionVaults as part of a continuously expanding technology product offering. ConstructionVaults is a construction project management, sourcing, bidding and procurement service powered by ReproMAX cMAX. ConstructionVaults is focused on providing a wide range of solutions to the AEC market place.

ConstructionVaults is focused on three areas of a construction project:

*Sourcing: Identify the right vendors for the right jobs with tools to qualify and update capabilities on your time frame.

*Project Management: Complete oversight of projects from start to finish with the collaboration you need to meet your goals.

*Procurement: Control purchasing and manage costs from order to invoice with all your suppliers through one easy-to-use interface.

For additional information on ConstructionVaults and cMAX visit www.constructionvaults.com.

Introducing Visualogistix

Check out how Visualogistix from Thomas Reprographics can help educational departments or universities by managing its information and marketing collateral.

With Visualogistix, you can:

*Store all materials (brochures, reading packets, posters, signs, flyers, etc.) electronically (instead of stacking them in closets all over campus)

*Have your own web page to order collateral — with 24/7 access from anywhere in the world

*Establish standards for customization — and consistency — across the college or university

*Give access to others in the school to order collateral as needed — within your established approval process

*Reduce the time and the associated costs spent managing revisions, storage, and inventory.

See how Visualogistix, a new service from Thomas Reprographics, helps the restaurant industry by managing its marketing collateral. Instead of letting signs, menus, displays and other material get outdated because it’s too hard to make changes, you can quickly and easily make changes, while ensuring high quality and brand consistency.

Visualogistix gives you:

*All your collateral — signs, displays, menus, brochures, posters, etc. — stored electronically

*Your own Web page to order your collateral — with 24/7 access from anywhere

*The ability to establish standards for customization — and consistency — which is especially important when you have multiple restaurants and a variety of locations

*Access for others in the organization (for example, managers of franchise restaurants) to update and order collateral as needed — within your established approval process

*Reduced time — and the associated costs — spent managing revisions, production details, inventory, and obsolescence.

See more at www.visualogistix.com.

Occasionally, I get the opportunity to post an article (and Press Release) about someone I know. I met Kristin, several years ago, when she was with MBC Precision Imaging. At the time, MBC Precision was owned by two of my oldest industry friends, Bill Berg, who I met in 1970, and Bob Abrams, who I had the pleasure of working with, back in the mid 1980’s, when we were both with Rowley-Scher Reprographics. After MBC Precision Imaging was purchased by ARC (2007) and was merged with ARC’s previously purchased businesses in the DC/Baltimore area (RTI, Ridgway’s and Leet-Melbrook), Kristin stayed on with MBC for a while, but, not long after, moved over to NRI’s team. Over the years, Kristin has proven to be a solid performer. I’m positive that everyone who knows her will join me in wishing her every success in her new position with LINK DSG.

As per her profile on LinkedIn, Kristin’s prior positions were:

• Enterprise Solutions at National Reprographics Inc. (NRI)

• Global Solutions Executive at American Reprographics Company (ARC)

• Vice President of Sales at MBC Precision Imaging (MBC)

• Sales Executive at Reprographics Product Group (RPG)

Until I looked at her profile on LinkedIn, I did not know that Kristin had previously been a member of RPG’s team. (Or, if I did previously know that, my mind is slipping a bit). I mention RPG because RPG is a company I founded. While I was at Rowley-Scher Reprographics back in the early 1980’s, we decided to “add” an equipment/supplies/service business to Rowley-Scher’s business, and we named that business (which was a “division” of Rowley-Scher) “Reprographics Product Group – RPG”. Not long after we sold Rowley-Scher, the RPG division was “spun-off” and was sold to the Kadanoff’s, who still own and operate RPG. Kristin joined RPG when it was owned by the Kadanoff’s.

Here’s the Press Release I received about Kristin’s new position with LINK DSG:

May 20, 2011 – LINK Document Services Group (LINK DSG) is thrilled to announce that Kristin Young has joined LINK DSG as Director of Global Services.

With LINK DSG, Ms. Young will lead the effort to provide national and international Managed Print Solutions (MPS) to architectural, design, engineering and construction firms worldwide. Ms. Young will focus on implementing technology solutions designed to meet the particular needs of large, enterprise clients.

Ms. Young, who joined NRI in 2009 as an Enterprise Solutions Executive, will also continue in this similar capacity for NRI. Prior to joining NRI, Ms. Young spent eleven years with American Reprographics as Vice President of Sales and then Enterprise Accounts Executive.

She brings to LINK DSG a wealth of experience serving On-Site Services clients as well current expertise in MPS.

About Link DSG:

LINK Document Services Group brings together four leading document companies into one Managed Print Services (MPS) provider. The LINK partners are recognized AEC and reprographic leaders and visionaries. Our comprehensive MPS offering analyzes, designs, and manages your enterprise wide copier and print fleet, providing you with predictable, controlled costs and increased flexibility while preserving precious capital, mitigating risk and streamlining workflow and compliance. There are other document providers out there, but none with our resources who is privately held, family-run, and beholden to no one but our clients. Visit http://www.linkdsg.com for more information.

About NRI:

NRI is a trusted peer and business partner to design, architecture, engineering and construction professionals, providing integrated graphic and content solutions custom tailored to their unique requisites. For the creative community, marketers and artists, NRI delivers exquisite color print and software solutions. NRI consists of four divisions providing a wide range of services:

• Reprographics

• Marketing Communications

• On-Site Services • Technology Services

As a woman business enterprise (WBE) with over 110 years experience, NRI has proven itself over and over through advanced technology and legendary service. Visit http://www.nrinet.com for more information.

Media Contact

Marc Fromowitz Marketing Director

(212) 366-7163

marc.fromowitz@linkdsg.com

ARC Southern California is the reprographer for this project, and my hunch is that ARC got this reprographics job either because the engineering firm (Black & Veatch) uses ARC or because ARC has a contract (for reprographics services) with OCWD.

“PUBLIC ADVERTISMENT FOR CONSTRUCTION OF THE

Initial Expansion of the Groundwater Replenishment System”

Pre-qualified general contractors interested in submitting bids for construction of the Initial Expansion of the Groundwater Replenishment System must purchase one complete set of bidding documents (plans and specifications). The Contract Documents including plans, specifications, contract appendices, and all reference documents are available in half size drawings for $475 per set and as full size for $575 (prices do not include shipping, tax and handling charges). Documents may also be obtained on a DVD for $200 per set. The contract documents may be purchased at ARC Reprographics, located at 345 Clinton Street, Costa Mesa, CA 92626. ARC Reprographics can be reached at (949) 660-1150 by telephone, at (949) 975-1125 by fax or on line at http://www.ocbinc.com.

The advertisement period for bidding will extend from May 5, 2011 to July 18, 2011. Sealed bids must be received by 2 p.m. local time on Monday July 18, 2011, at which time the bids will be publicly opened and read aloud for performing all work and furnishing labor, materials, and equipment for the INITIAL EXPANSION OF THE GROUNDWATER REPLENISHMENT SYSTEM CONTRACT NO. GWRS-2011-01.

ONLY THE FOLLOWING NINE PRE-QUALIFIED FIRMS ARE ALLOWED TO SUBMIT BIDS FOR THIS PROJECT:

• ARCHER WESTERN CONTRACTORS

• FLATIRON CONSTRUCTORS

• JF SHEA CONSTRUCTION, INC.

• JR FILANC CONSTRUCTION COMPANY

• KIEWIT INFRASTRUCTURE GROUP

• MCCARTHY BUILDING COMPANIES, INC.

• W.M. LYLES COMPANY

• SHIMMICK/PACIFIC MECHANICAL JOINT VENTURE

• SJ AMOROSO/RENDA JOINT VENTURE

Prebid Conference: A mandatory prebid conference will be held at the Orange County Water District office, 18700 Ward Street, Fountain Valley, CA 92708 on Tuesday May 31, 2011 at 10:00 a.m. All potential bidders from the pre-qualified list of general contractors are required to attend this conference conducted by the Orange County Water District and its design engineer Black & Veatch.

ANY BID SUBMITTED BY A BIDDER THAT IS NOT REPRESENTED AT THE PREBID CONFERENCE SHALL NOT BE CONSIDERED AND SHALL BE RETURNED TO THE BIDDER UNOPENED.

ALL QUESTIONS OR CORRESPONDENCE REGARDING THIS PROJECT SHALL BE DIRECTED TO:

Mehul Patel, P.E.

GWRS Program Manager

Orange County Water District

(714) 378-8209

mpatel@ocwd.com

Reprographers, as most of you are aware by now, all “publicly-held” companies have to provide a comprehensive, detailed list of their respective “risk factors”, so that investors who purchase stock or notes are made aware of the risk factors that the public company faces.

In coming up with a list of risk factors for public filings, securities attorneys advise their public-company clients to be very detailed ….and to be very, very comprehensive. If an investment goes bad (stock tanks or notes prove worthless), the injured party, in order to win in litigation, will have to prove that its investment tanked because of a factor (or, in the plural, factors) the company did not mention. So, the theory here is …. even if a risk factor is remote, include it in the filing. The more the merrier!

In its recent S-4 Registration Statement filing, ARC included 3 sections of risk factors:

· Risks Related to Our Business

· Risks Relating to the Exchange Offer

· Risks Related to the Notes

As to the section: “risks related to our business”, most reprographers face the same or similar risks as ARC.

As to the other two risk factor sections related to the “Exchange Offer” and “Notes”, reprographers other than ARC do not face those risk factors, except to the extent that a reprographics company does have outstanding borrowings (from banks or from whoever), its lender(s) do face some of the same risks that ARC’s lenders face.

One of the most interesting things about the process of defining risks – “risks related to your business” – is that the list you compile for your own business is an excellent exercise to undertake, since that list allows you to consider your risks in the formulation of (or update to) your company’s “strategic plan.” That’s, of course, if you even have one!

If you need assistance with the development of a strategic plan for your company (or, if you need assistance with updating your company’s strategic plan) and would like help from someone who is experienced with that sort of thing, contact me.

Okay, continue on to the next section, please.

For those of you who are too lazy to access the S-4 filling “Risk Factor” section, I’ve pulled that section and published it below:

RISK FACTORS

An investment in our notes is subject to risks and uncertainties. You should carefully consider the risks described below, in addition to the other information contained in this prospectus, before making an investment decision. Realization of these risks could materially adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business operations. In such case, you may lose all or part of your original investment.

Risks Related to Our Business

Adverse Domestic and Global Economic Conditions and Disruption of Financial Markets could have a Material Adverse Impact on Our Business and Results of Operations.

During the past several years, domestic and international financial markets have experienced extreme disruption, including, among other things, extreme volatility in stock prices and severely diminished liquidity and credit availability. These developments and the related severe domestic and international economic downturn, have continued to adversely impact our business and financial condition in a number of ways, including effects beyond those that were experienced in previous recessions in the United States and foreign economies. The current restrictions in financial markets and the severe prolonged economic downturn may adversely affect the ability of our customers and suppliers to obtain financing for operations and purchases and to perform their obligations under agreements with us. These restrictions could result in a decrease in, or cancellation of, existing business, could limit new business, and could negatively impact our ability to collect on our accounts receivable on a timely basis, if at all. Although there have been recent signs of certain areas of economic improvement, we are unable to predict the duration and severity of the current economic downturn and disruption in financial markets and their effects on our business and results of operations. These events are more severe than the effects of previous economic recessions and may, in the aggregate, have a material adverse effect on our results of operations and financial condition.

The Residential and Non-Residential Architectural, Engineering and Construction (AEC) Industry is in the Midst of a Severe Downturn. A Continuing Decline in the Residential and Non-Residential AEC Industry could Adversely Affect Our Future Revenue and Profitability.

We believe that the residential and non-residential AEC markets together accounted for approximately 76% of our net sales for the year ended December 31, 2010, of which we believe the non-residential AEC industry accounted for approximately 93% of our net sales to the AEC market and the residential AEC industry accounted for approximately 7% of our net sales to the AEC market. Our historical operating results reflect the cyclical and variable nature of the AEC industry. Both the residential and non-residential portions of the AEC industry are in the midst of a severe downturn. The effects of the recent economic downturn in the United States economy and weakness in global economic conditions have resulted in a downturn in the residential and non-residential portions of the AEC industry. We believe that the AEC industry generally experiences downturns several months after a downturn in the general economy and that there may be a similar delay in the recovery in the AEC industry following a recovery in the general economy. A prolonged downturn in the AEC industry would diminish demand for our products and services, and would therefore negatively affect our revenues and have a material adverse impact on our business, operating results and financial condition. Since we derive a majority of our revenues from reprographics products and services provided to the AEC industry, our operating results are more sensitive to this industry than other companies that serve more diversified markets.

Because a Majority of Our Overall Costs are Fixed, Changes in Economic Activity, Positive or Negative, Affect Our Results of Operations.

Because approximately 45% of our overall costs were fixed for the year ended December 31, 2010, changes in economic activity, positive or negative, affect our results of operations. As a consequence, our results of operations are subject to volatility and could deteriorate rapidly in a prolonged environment of declining revenues. Failure to maintain adequate cash reserves and to effectively manage our costs could adversely affect our ability to offset our fixed costs and may have a material adverse effect on our results of operations and financial condition.

Impairment of Goodwill may Adversely Impact Future Results of Operations.

We have intangible assets, including goodwill and other identifiable acquired intangibles on our balance sheet due to prior acquisitions. The initial identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition involve management judgments and estimates. Based on our annual goodwill impairment assessment, we recorded a $38.3 million impairment during 2010.

The results of our impairment analysis are as of a particular point in time. If our assumptions regarding future forecasted revenue or gross margins of our operating segments (or “reporting units”) are not achieved, we may be required to record additional goodwill impairment charges in future periods, if any such change constitutes a triggering event prior to the quarter in which we perform our annual goodwill impairment test.

Competition in Our Industry and Innovation by Our Competitors may Hinder Our Ability to Execute Our Business Strategy and Maintain Our Profitability.

The markets for our products and services are highly competitive, with competition primarily at local and regional levels. We compete primarily based on the level and quality of customer service, technological leadership, product performance and price. Our future success depends, in part, on our ability to continue to improve our service offerings, and develop and integrate technological advances. If we are unable to effectively develop and integrate technological advances into our service offerings and technology products in a timely manner, our operating results may be adversely affected. Technological innovation by our existing or future competitors could put us at a competitive disadvantage. In particular, our business could be adversely affected if any of our competitors develop or acquire superior technology that competes directly with or offers greater functionality than our proprietary technology, including our flagship product, PlanWell.

We also face the possibility that competition will continue to increase, particularly if copy and printing or business services companies choose to expand into the reprographics services industry. Many of these companies are substantially larger and have significantly greater financial resources than us, which could place us at a competitive disadvantage. In addition, we could encounter competition in the future from large, well-capitalized companies such as equipment dealers and system integrators that can produce their own technology and leverage their existing distribution channels. We could also encounter competition from non-traditional reprographics service providers that offer reprographics services as a component of the other services that they provide to the AEC industry, such as vendors to our industry that provide services directly to our customers, bypassing reprographers. Many of these companies are substantially larger and have significantly greater financial resources than us, which could place us at a competitive disadvantage. Any such future competition could adversely affect our business and impair our future revenue and profitability.

The Reprographics Industry has Undergone Significant Changes in Recent Years and will Continue to Evolve. Our Failure to Anticipate and Adapt to Future Changes in the Reprographics Industry could Harm Our Competitive Position and Future Revenue and Profitability.

The reprographics industry has undergone significant changes in recent years. The industry’s main production technology has migrated from analog to digital. This has prompted a number of industry trends, including a rapid shift toward decentralized production and lower labor utilization. As digital output devices become smaller, less expensive, easier to use and interconnected, end users of construction drawings are placing these devices within their offices and other locations. On-site reprographics equipment allows a customer to print documents and review hard copies without the delays or interruptions associated with sending documents out for copying, and digital document services that were once considered the domain of experts, such as ourselves, are becoming easier to accomplish in common office settings. Also, as a direct result of advancements in digital technology, labor demands have decreased. Instead of producing one print job at a time, reprographers now have the capability to produce multiple sets of documents with a single production employee. By linking output devices through a single print server, a production employee simply directs output to the device that is best suited for the job. As a result of these trends, reprographers have had to modify their operations to decentralize printing and shift costs from labor to technology.

We expect the reprographics industry to continue to evolve. Our industry is expected to continue to embrace digital technology, not only in terms of production services, but also in terms of network technology, digital document storage and management, and information distribution, all of which will require investment in, and continued development of, technological innovation. If we fail to keep pace with current changes or fail to anticipate or adapt to future changes in our industry, including changes in digital document services, our competitive position could be harmed which would have a material adverse impact on our future revenue and profitability.

If We Fail to Continue to Develop and Introduce New Services and Technologies Successfully, Our Competitive Positioning and Our Ability to Grow Our Business could be Harmed.

In order to remain competitive, we must continually invest in new technologies that will enable us to meet the evolving demands of our customers. We cannot guarantee that we will be successful in the introduction, marketing and adoption of any of our new technology services and products, or that we will develop and introduce in a timely manner innovative services and products that satisfy customer needs or achieve market acceptance. Our failure to develop new services and products and introduce them successfully could harm our competitive position and our ability to grow our business, and our revenues and operating results could suffer.

In addition, as reprographics technologies continue to develop, one or more of our current service offerings may become obsolete. In particular, digital technologies may significantly reduce the need for high-volume printing. Digital technology makes traditional reprographics equipment smaller and cheaper, which may cause certain AEC customers to discontinue outsourcing their reprographics needs. Any such developments could adversely affect our business and impair future revenue and profitability.

If We are Unable to Charge for Our Value-Added Services to Offset Potential Declines in Print Volumes, Our Long Term Revenue Could Decline.

Our customers value the ability to view and order prints over the internet and print to output devices in their own offices and other locations throughout the country and the world. In 2010, our reprographics services excluding digital revenues represented approximately 58% of our total net sales, and our facilities management services represented 20.4% of our total net sales. Both categories of revenue are generally derived from a charge per square foot of printed material. Future technological advances may further facilitate and improve our customers’ ability to print in their own offices or at a job site. As technology continues to improve, this trend toward printing on an “as needed” basis could result in decreasing printing volumes and declining revenues in the longer term. Failure to offset these potential declines in printing volumes by changing how we charge for our services and developing additional revenue sources could significantly affect our business and reduce our long term revenue, resulting in an adverse effect on our results of operations and financial condition.

We Derive a Significant Percentage of Net Sales from within the State of California and Our Business could be Disproportionately Harmed by an Economic Downturn or Natural Disaster Affecting California.

We derived approximately 32% of our net sales in 2010 from our operations in California. As a result, we are dependent to a large extent upon the AEC industry in California and, accordingly, are sensitive to economic factors affecting California, including general and local economic conditions, macroeconomic trends, and natural disasters (including earthquakes and wildfires). In recent years, the real estate development projects (both residential and non-residential) in California have significantly declined which, in turn, has resulted in a decline in sales from within the California-based AEC industry. Any adverse developments affecting California could have a disproportionately negative effect on our results of operations and financial condition.

Our Growth Strategy Depends, in Part, on Our Ability to Successfully Complete and Manage Our Acquisitions and Branch Openings. Failure to do so could Impede Our Future Growth and Adversely Affect Our Competitive Position.

As part of our growth strategy, we intend to prudently pursue strategic acquisitions within the reprographics industry. Since 1997, we have acquired more than 140 businesses, most of which were long established in the communities in which they conduct their business. Our efforts to execute our acquisition strategy may be affected by our ability to continue to identify, negotiate, close acquisitions and effectively integrate acquired businesses. In addition, any governmental review or investigation of our proposed acquisitions, such as by the Federal Trade Commission, may impede, limit or prevent us from proceeding with an acquisition. Acquisition activities have not been a significant part of our growth strategy in fiscal years 2010 and 2009 due to potential risks inherent in an economy recovering from a recent recession. As the economy improves, we currently expect to resume acquisition activity as a substantial component of our growth strategy. There can be no assurance, however, that any future acquisition activity, and any resulting growth, will equal or exceed prior levels of acquisition activity and growth.

Acquisitions involve a number of unique risks. For example, there may be difficulties integrating acquired personnel and distinct business cultures. Additional financing may be necessary and, if used, would increase our debt level, dilute our outstanding equity, or both. Acquisitions may divert management’s time and our other resources from existing operations. It is possible that there could be a negative effect on our financial statements from the impairment related to goodwill and other intangibles acquired through implementation of our acquisition strategy. We may experience the loss of key employees or customers of acquired companies. In addition, risks may include high transaction costs and expenses of integrating acquired companies, as well as exposure to unforeseen liabilities of acquired companies and failure of the acquired business to achieve expected results. These risks could hinder our future growth and adversely affect our competitive position and operating results.

In addition to acquisitions, part of our growth strategy is to expand our geographic coverage by opening additional satellite branches in regions near our established operations to capture new customers and greater market share. Although we believe that the capital investment for a new branch is generally modest, the branches that we open in the future may not ultimately produce returns that justify our investment.

If We are Unable to Successfully Monitor and Manage Operations of Our Subsidiaries and Segments, Our Business and Profitability could Suffer.

Since 1997, we have acquired more than 140 businesses and, in most cases, have delegated the responsibility for marketing, pricing, and selling practices with the local and operational managers of those businesses. During the past two years we have begun to centralize many of these functions, but if we do not successfully manage our subsidiaries and segments under this decentralized operating structure, we risk having disparate results, lost market opportunities, lack of economic synergies, and a loss of vision and planning, all of which could harm our business and profitability. In addition, there is a risk that the company-wide rebranding initiative that we commenced following the end of the third quarter of fiscal year 2010 could have a negative effect on our revenues and results of operations and financial condition.

We Depend on Certain Key Vendors for Reprographics Equipment, Maintenance Services and Supplies, Making us Vulnerable to Supply Shortages and Price Fluctuations.

We purchase reprographics equipment and maintenance services, as well as paper, toner and other supplies, from a limited number of vendors. Our three largest vendors in 2010 were Oce N.V., Azerty, and Xpedx, a division of International Paper Company. Adverse developments concerning key vendors or our relationships with them could force us to seek alternate sources for our reprographics equipment, maintenance services and supplies, or to purchase such items on unfavorable terms. An alternative source of supply of reprographics equipment, maintenance services and supplies may not be readily available. A delay in procuring reprographics equipment, maintenance services or supplies, or an increase in the cost to purchase these items could limit our ability to provide services to our customers on a timely and cost-effective basis and could harm our results of operations and financial condition.

Our Failure to Adequately Protect the Proprietary Aspects of Our Technology, Including Planwell, May Cause us to Lose Market Share.

Our success depends on our ability to protect and preserve the proprietary aspects of our technologies, including PlanWell. We rely on a combination of copyright, trademark and trade secret protection, confidentiality agreements, license agreements, non-competition agreements, reseller agreements, customer contracts, and technical measures to establish and protect our rights in our proprietary technologies. Our license agreements contain terms and conditions prohibiting the unauthorized reproduction or transfer of our products. These protections, however, may not be adequate to remedy harm we suffer due to misappropriation of our proprietary rights by third parties. In addition, United States law provides only limited protection of proprietary rights and the laws of some foreign countries may offer less protection than the laws of the United States. Third parties may unlawfully copy aspects of our technology products, unlawfully distribute them, impermissibly reverse engineer them or otherwise obtain and use information that we regard as proprietary. If competitors are able to develop such technologies and we cannot successfully enforce our rights against them, they may be able to market and sell or license products that compete with ours, and this competition could adversely affect our results of operations and financial condition. Furthermore, we may, from time to time, be subject to intellectual property litigation which can be expensive, a burden on management’s time and our Company’s resources, and the outcome of any such litigation may be uncertain.

Damage or Disruption to Our Facilities, Our Technology Center, Our Vendors or a Majority of Our Customers could Impair Our Ability to Effectively Provide Our Services and may have a Significant Impact on Our Revenues, Expenses and Financial Condition.

We currently store most of our customer data at our technology center located in Silicon Valley near known earthquake fault zones. Damage to or destruction of this technology center or a disruption of our data storage processes resulting from sustained process abnormalities, human error, acts of terrorism, violence, war or a natural disaster, such as fire, earthquake or flood, could have a material adverse effect on the markets in which we operate and on our business operations. We store and maintain critical customer data on computer servers at our technology center that our customers access remotely through the internet and/or directly through telecommunications lines. If our back-up power generators fail during any power outage, if our telecommunications lines are severed or internet access is impaired for any reason, our remote access customers would be unable to access their critical data, causing an interruption in their operations. In such event, our remote access customers and their customers could seek to hold us responsible for any losses that they may incur in this regard. We may also potentially lose these customers and our reputation could be harmed. In addition, such damage or destruction, particularly that directly impacting our technology center or our vendors or customers, could have an impact on our sales, supply chain, production capability, costs, and our ability to provide services to our customers.

Although we currently maintain general property damage insurance, if we incur losses from uninsured events, we could incur significant expenses which would adversely affect our results of operations and financial condition.

If We Lose Key Personnel or Qualified Technical Staff, Our Ability to Manage the Day-to-Day Aspects of Our Business will be Adversely Affected.

We believe that our ability to attract and retain qualified personnel is critical to our success. If we lose key personnel and/or are unable to recruit qualified personnel, our ability to manage the day-to-day aspects of our business will be adversely affected. Our operations and prospects depend in large part on the performance of our senior management team and the managers of our principal operating segments. Outside of the implementation of succession plans and executive transitions done in the normal course of business, the loss of the services of one or more members of our senior management team, in particular, the sudden loss of the services of Mr. Suriyakumar, our Chairman, President and Chief Executive Officer, would disrupt our business and impede our ability to execute our business strategy. Because the other members of our executive and divisional management team have on average more than 20 years of experience within the reprographics industry, it would be difficult to replace them.

Downgrades in Our Credit Rating may Adversely Affect Our Business, Financial Condition and Results of Operations.

From time to time, independent credit rating agencies rate our credit worthiness. Credit market deterioration and its actual or perceived effects on our business, financial condition and results of operation, along with deterioration in general economic conditions, may increase the likelihood that major independent credit agencies will downgrade our credit rating. Any downgrade in our credit rating could increase our cost of borrowing, which would adversely affect our financial condition and results of operations, perhaps materially. Any downgrade in our credit rating may also cause a decline in the market price of our common stock.

Valuation Allowances Recorded Against Our Deferred Tax Assets may Adversely Impact Our Future Results of Operations.

As of December 31, 2010, we have deferred tax assets of $156 million and deferred tax liabilities of $111 million, which amounts to net deferred tax assets of $45 million on our balance sheet. Deferred tax assets are future income tax benefits we expect to realize. The realization of deferred tax assets requires an assessment of historical financial performance in conjunction with various forecasts and assumptions of future financial performance including future flows of taxable income. Actual results of these forecasts and projections may differ significantly whether positive or negative. Significant negative results may require a valuation allowance for the amount of deferred tax assets considered not to be realized in the future.

Results of Tax Examinations may Adversely Impact Our Future Results of Operations.

We are subject to various tax examinations on an ongoing basis. Adverse results of tax examinations for income, payroll, value added, sales-based and other taxes may require future material tax payments if we are unable to sustain our position with the relevant jurisdiction. Where appropriate, we have made accruals for these matters which are reflected in our Consolidated Balance Sheets and Statements of Operations.

Our Debt Instruments Impose Operating and Financial Restrictions on us and, in the Event of a Default, would have a Material Adverse Impact on Our Business and Results of Operations.

The New Revolving Credit Facility and the notes, impose operating and other restrictions on us and many of our subsidiaries.

The Indenture contains covenants that limit, among other things, our company’s and certain of our subsidiaries’ ability to incur additional debt and issue preferred stock, make certain restricted payments, consummate specified asset sales, enter into certain transactions with affiliates, create liens, declare or pay any dividend or make any other distributions, make certain investments, and merge or consolidate with another person.

The New Revolving Credit Facility contains covenants which, subject to certain exceptions as set forth in the New Revolving Credit Facility, restrict our ability to incur additional debt, grant liens or guaranty other indebtedness, pay dividends, redeem stock, pay or redeem subordinated indebtedness, make investments or capital expenditures, dispose or acquire assets, dispose of equity interests in subsidiaries, enter into any merger, sale of assets, consolidation or liquidation transaction, or engage in transactions with stockholders and affiliates.

The New Revolving Credit Facility contains financial covenants which, among other things, requires us to not exceed a specified maximum consolidated leverage ratio, not exceed a specified maximum consolidated senior secured leverage ratio and not go below a specified minimum consolidated interest coverage ratio.

A breach of any of these covenants could result in a default under our debt instruments. If any such default occurs, our creditors under the agreements may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. The creditor under the New Revolving Credit Facility also has the right in these circumstances to terminate any commitments to provide further borrowings.

____________________________________

For the details of these “risk factors” sections ……

* Risks Relating to the Exchange Offer

* Risks Related to the Notes

…… refer to the S-4 Registration Statement filing (link to S-4 provided in previous post or accessible at e-arc.com

On January 25, 2011, ARC stock closed at $8.07.

On April 21, 2011, ARC stock closed at $8.61.

On May 24, 2011, ARC stock closed at $8.48.

On January 28, 2011, I did a post on my blog to share with my blog visitors what Mr. Jim VanMeerten said about ARC in an article he posted on January 26, 2011 on Motley Fool. “Jim Van Meerten is a professional investor with over 40 years experience in investing in stocks, mutual funds and ETFs.”

I’m a history buff of sorts, and, because of that, I have a tendency to look back at what people said, just to see how things have “panned out.”

So far, Mr. VanMeerten’s “calls” have been right on, at least for him (his account.) If he purchased ARC stock when he first wrote about it and then sold it right after he wrote about it the second time, then he earned around $.54 per share (or thereabouts.)

The one thing I did find funny is that, when he first wrote about ARC, he said that “document management services should prosper”, further indicating that “as the economy recovers, document management services will enter a new era of transmittal and retrieval” (whatever that means), and “a company servicing the infrastructure and construction industries should prosper.”

After he indicated a “sell signal” on ARC on April 23^rd, I found myself wondering, “hey, Jim, what happened to your thinking about document management services prospering; are you not letting a few minor technical signals cloud your thinking?”

Anyway, Jim’s calls, so far, proved to be good ones for investors who bought and sold ARC when he wrote about ARC. But, on the other side, RW Baird issued an “outperform” rating on ARC stock and, from the date of that outperform rating until now (now, being May 25^th), RW Baird’s call (on March 25^th, 2011, when ARC shares closed at $9.98) has not proven to be a good call, at least so far. ARC’s shares, at $8.48 yesterday, were off 15% from the time RW Baird issued its outperform rating.

(On January 28, 2011, I did a post on my blog about this)

On JANUARY 26, 2011, Mr. VanMeerten wrote:

ARC – Document management services should prosper

This afternoon I added American Reprographics (ARC) to the Barchart Van Meerten Speculative portfolio. They are one of the leading reprographics company in the United States providing business-to-business document management services to the architectural, engineering and construction industry, or AEC industry. It also provides these services to companies in non-AEC industries, such as technology, financial services, retail, entertainment, and food and hospitality that also requires sophisticated document management services.

As the economy recovers document management services will enter a new era of transmittal and retrieval. A company servicing the infrastructure and construction industries should prosper.

The stock hit 16 new highs and appreciated 11.97% in the last month earning a 100% Barchart technical buy signal. The momentum means a 66.40% Relative Strength Index that continues to increase. The stock trades around 8.26 with a 50 day moving average of 7.45.

Wall Street brokerage analyst look for small sales increases of 2.20% but they project an increase in EPS of 137.20% this year and a continued 5 year annual EPS increase of 10.00%.

The CAPS members on Motley Fool think the stock will beat the market by a vote of 587 to 35 with the All Stars in agreement 234 to 11.


(On April 24, 2011, I did a post on my blog about this)

On APRIL 23, 2011, Mr. VanMeerten wrote:

ARC – American Reprographics sell signal

Technical factors signal a sell on American Reprographics (ARC) and a deletion from the Barchart Van Meerten Speculative portfolio.

Technical Factors:

1 – 60% Barchart short term technical sell signal

2 – Trend Spotter sell signal

3 – Trading below the 20 and 50 day moving averages

4 – Off 16.57% from its recent high

5 – Relative strength Index 36.36% and falling



ARC files Form S-4 Registration Statement with the SEC to “register” its debt.

I’m going to make just a few comments about ARC’s “exchange offer”, but please note that, in order to get all the facts straight, you must rely only on the information contained in the registration statement / prospectus (the S-4 filing with the SEC).

On December 1, 2010, ARC refinanced most of its debt by issuing $200 million in “senior” unsecured “notes”. Those notes were not “registered” and, thusly, holders of those notes were “qualified” institutional investors. In conjunction with the sale of those notes, ARC agreed to later “register” new, replacement “notes” and, at the time that that’s done, to offer an “exchange” – offer new registered notes in exchange for the original unregistered notes.

So, the S-4 filling is kind of a non-event, with the exception that, after the exchange is completed, it sounds like there will be a “market” for ARC’s notes; meaning that you and I can, if we can find someone to sell them to us, purchase ARC’s notes and collect 10.5% interest. Interest will be paid semi-annually. The notes are due in 2016, but ARC has some sort of early-retirement (call) option exercisable in 2013.

Hey, 10.5% interest ain’t bad, especially if you believe in the company’s ability to continue to weather the storm and in the ability of ARC management to manage the company’s cash flow conservatively and wisely.

I encourage reprographers to read the entire registration statement, since it contains a lot of interesting (and, in some cases, updated) information about ARC’s business. One of the most interesting sections in the S-4 is the section that outlines “risk factors.” That section, by comparison, is huge. As to the “industry-specific” risk factors, see how many you agree with and how many you don’t agree with and, after you’ve read the risk factors section, are there, in your opinion, any risk factors missing?

What appears below in blue type is part of the text from Page 5 of the S-4 filing:

American Reprographics Company

Offer to Exchange

$200,000,000 10.5% Senior Notes due 2016

for

$200,000,000 10.5% Senior Notes due 2016

that have been Registered Under the Securities Act of 1933

We are offering, upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, to exchange an aggregate principal amount of up to $200,000,000 of our new 10.5% Senior Notes due 2016, which we refer to as the exchange notes, for all of our outstanding unregistered 10.5% Senior Notes due 2016, which we refer to as the initial notes, in a transaction registered under the Securities Act of 1933, as amended, or the Securities Act. We collectively refer to the initial notes and the exchange notes as the notes. We refer to the offer described in this prospectus to exchange the initial notes for the exchange notes as the exchange offer.

The notes are unconditionally guaranteed by our existing and future subsidiaries that guarantee our other existing senior notes, revolving credit facility or any other indebtedness of ours or of the subsidiary guarantors, which we refer to as the subsidiary guarantors. The guarantees of the notes are unsecured senior obligations of the subsidiary guarantors and rank equally with existing and future unsecured senior debt of the subsidiary guarantors and senior to existing and future subordinated debt of the subsidiary guarantors. The guarantees are effectively subordinated to existing and future secured debt of the subsidiary guarantors and structurally subordinated to existing and future debt of our non-guarantor subsidiaries.

Terms of the exchange offer:

* We will exchange all initial notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer.

* You may withdraw tenders of initial notes at any time prior to the expiration of the exchange offer.

* We believe that the exchange of initial notes for exchange notes will not be a taxable event for U.S. federal income tax purposes.

* The form and terms of the exchange notes are identical in all material respects to the form and terms of the initial notes.

You can access the complete document (the S-4 Registration Statement) at this link:

http://tinyurl.com/3du6aqu