Reprographics 101

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  • Outlook Positive for Office Imaging Industry in 2011

    (Source: Business Wire)

    Growth expected in sales and service

    Mar. 31, 2011 (Business Wire) — Office imaging veterans have a largely positive outlook for their industry in 2011, according to survey results released today by GE Capital’s office imaging business. Growth will be driven by both sales and service in 2011, says the survey, despite hurdles such as upcoming changes in lease accounting requirements and pressure on profit margins.

    “GE Capital has been involved in office equipment leasing for 20+ years and we believe the business cycle has now shifted. We’re expecting modest growth in the industry this year as companies replace and upgrade their existing equipment,” said Glen Clark, vice president of GE Capital’s office imaging business.

    Forty-one percent of survey respondents expect sales to increase 5%-10% in 2011, and 30% expect growth greater than 10%. They’re primarily looking forward to end-user customers upgrading or replacing their existing equipment (36%). Participants pointed to two other positive trends: Servicing all printing devices for end-user customers and software sales attributed to document management, both of which were mentioned by 28% of respondents.

    Most people in the industry see managed print services (MPS) as an important advantage; 97% of respondents said they are pursuing MPS in their business. More than half (51%) of respondents said the most important advantage of MPS is the ability to create longer-lasting relationships with customers. Others (31%) cited the opportunity to provide a single-vendor solution to customers while 15% appreciated the chance to add software to sales of equipment and supplies.

    The biggest hurdle the industry must overcome in 2011 is expected to be margin pressure on equipment sales, cited by 33% of survey respondents.

    Participants are aware that the Financial Accounting Standards Board (FASB) is likely to mandate changes in the way businesses account for equipment leases. More than two-thirds (69%) of survey respondents said they were still gathering information to determine the impact of the changes, which are expected to be finalized later this year.

    The survey polled 65 dealers, resellers, distributors, vendors, manufacturers and other industry professionals who attended the ITEX trade conference in Washington, D.C., last week.

    About GE Capital, Office Imaging

    GE Capital, Office Imaging is a leading provider of innovative financing solutions including leases and loans to manufacturers, dealers and end-user businesses to help drive cost efficiencies and top-line growth. Its customizable financing solutions and full-service support help dealers and customers take advantage of their managed print services opportunities and “think beyond the copier.”

    GE Capital offers consumers and businesses around the globe an array of financial products and services. For more information, visit http://www.gecapital.com or follow company news via Twitter (@GECapital).

    GE (NYSE: GE) is an advanced technology, services and finance company taking on the world’s toughest challenges. Dedicated to innovation in energy, health, transportation and infrastructure, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company’s Web site at http://www.ge.com.

    GE Capital, Americas
Lisa Tibbitts, 203-956-4582 
lisa.tibbitts@ge.com

    (Source: Business Wire)

  • Reed Construction Data's Chief Economist reveals latest outlook on Non-Residential Construction market

    On April 1st, Jim Haughey, Chief Economist at Reed Construction Data, released his latest outlook on the non-residential construction market. Below, you will find a few of his comments, and, below those comments, you’ll find a link to the full article:

    Nonresidential: Commercial Environment Continues Mixed

    04/01/2011 by Jim Haughey, RCD Chief Economist

    Commercial (built to lease) market drivers are balanced among positive, negative and neutral. Office, retail and hotel markets each have one or more positive drivers along with negative and neutral drivers largely due to lingering space surpluses. However, the negative drivers are steadily moving toward neutral. The commercial market remains on a path to a sustained recovery early in 2011. Several long lead indicators have been positive since last fall. The AIA index of design work underway is above 50, which indicates expansion at the pre-start project phase.

    There have been some spot rises in commercial starts since last spring but they have not been sustained.

    The build vs. buy indicator still points at buy for real estate investors in most markets.

    The market drivers for institutional construction are rapidly deteriorating. Federal stimulus funding is ebbing quickly.

    Higher education, hospitals, nursing homes and cultural facilities have access to non-taxpayer money and will fare better than K-12 education and public buildings.

    Here’s the link to the full article:

    http://www.reedconstructiondata.com/construction-forecast/news/2011/04/nonresidential-commercial-environment-continues-mixed/

    I encourage you to read the full article; the article contains a number of interesting statistics and trends.

  • Comparing STAPLES and AMERICAN REPROGRAPHICS CO (ARC)

    I thought it would be an interesting exercise to compare “the numbers” of two public companies who are both considered companies who operate in the “business services” market sector (from a market/industry “classification” perspective, is what I’m referring to.)

    First one up; STAPLES, my very favorite “office supply” enterprise. I think (but am not 100% positive) that Staples is the largest office supply company in the U.S. (and in the world.)

    Second one up; AMERICAN REPROGRAPHICS CO (ARC), the largest reprographics company in the U.S. (and in the world.)

    Staples’ numbers and ARC’s numbers “courtesy” of “Google Finance”

    STAPLES

    52 wks ended

    52 wks ended

    52 wks ended

    52 wks ended

    1/29/11

    1/30/10

    1/31/09

    2/2/08

    Total Revenue

    $24,545

    $24,275

    $23,084

    $19,373

    Cost of Revenue, Total

    $17,939

    $17,802

    $16,837

    $13,822

    Gross Profit

    $6,606

    $6,474

    $6,247

    $5,551

    Operating Income

    $1,574

    $1,382

    $1,372

    $1,548

    Interest Income(Expense), Net Non-Operating

    –

    –

    –

    –

    Income Before Tax

    $1,357

    $1,156

    $1,243

    $1,554

    ARC

    Year-end

    Year-ended

    Year-ended

    Year-ended

    12/31/10

    12/31/09

    12/31/08

    12/31/07

    Total Revenue

    $442

    $502

    $701

    $688

    Cost of Revenue, Total

    $299

    $323

    $416

    $401

    Gross Profit

    $142

    $178

    $285

    $287

    Operating Income

    $(18)

    $14

    $83

    $136

    Interest Income(Expense), Net Non-Operating

    $(24)

    $(26)

    $(26)

    $(24)

    Income Before Tax

    $(42)

    $(12)

    $58

    $111

    Comparisons:

    % to Sales

    % to Sales

    % to Sales

    % to Sales

    Gross Margin:

    Staples

    26.9%

    26.7%

    27.1%

    28.7%

    ARC

    32.2%

    35.5%

    40.7%

    41.7%

    Operating Income:

    Staples

    6.4%

    5.7%

    5.9%

    8.0%

    ARC

    -4.0%

    2.7%

    11.9%

    19.7%

    Pre-Tax Income:

    Staples

    5.5%

    4.8%

    5.4%

    8.0%

    ARC

    -9.5%

    -2.4%

    8.3%

    16.2%

    Comparisons:

    share price

    share price

    share price

    3/31/10

    3/6/09

    12/1/07

    Staples

    $19.42

    $14.81

    $23.65

    ARC

    $10.35

    $2.86

    $15.91

    Many years ago, when it was early in my career in the reprographics business, one of the local “independent”, single-store “office supply” companies, right on our block, was rumored to be for sale. That particular company, Moffitt Office Supplies, had been in business for at least 30 years, by that point in time. I remember (at least somewhat) weighing the “pro’s and con’s” of being in the office supply business and how that business differed from the reprographics business we were already in. If the reprographics business, at least back then, lacked ‘sexiness” and ‘pizazz’, well, what about an office supply company? Boring. Boring. Boring. No technology. Inventory intensive. Lots of space required for inventory storage. Anyway, the office supply company that was rumored to be for sale did actually get sold. But, it closed just a few years later. The new owners weren’t able to do much with it.

    Staples took the office supply business not just to a new level, but to a different stratosphere. In the office supply business, as Staples has clearly shown, “size” (scale) matters”. Because of its size, Staples benefits from economies of scale that other smaller office supply companies don’t have. But, even the Staples of today is, I think, kind of a boring business.

    But, “boring can be safe”. And, “boring” can prove to be very profitable, as Staples has shown. So, when you get right down to it, would you rather be “boring” and safe and profitable, or would you rather be “exciting” and less safe and less profitable.

    Although ARC and Staples have primarily grown by different methods; ARC mostly by acquisition-growth and Staples mostly by organic-growth, both Staples and ARC have amassed significant “scale” within their respective industries.

    As you can see in the financial results tables, ARC and Staples have fared quite differently, 2007 – 2010. From 2007 to 2010, Staples grew. During that same time frame, ARC went downhill. When ARC was busy and bustling with robust sales activity, ARC’s gross margin was much greater than Staple’s. But, as ARC’s sales declined, the difference between ARC’s gross margin and Staples’ gross margin narrowed, quite a bit I might add. Also note that, on a pound for pound basis (operating profit, %age to %age), ARC was much more profitable than Staples, but as ARC’s sales plummeted, ARC’s operating profit percentage went down under Staples’ operating profit, and, in fact, by 2010, vanished (turned into a loss.)

    I’m of the opinion that ARC’s business is much sexier than Staple’s business. ARC is involved in “technology”. Staples may be somewhat involved in technology, but certainly not as involved (pound for pound) as ARC is. And, I think it’s just that – sexiness and pizazz – that gets investors excited about ARC’s stock. Note RW Baird & Co’s recent upgrade of ARC to “outperform.”

    On March 31, 2011, Staples was trading at a P/E multiple of 16.05x trailing twelve month earnings (of $1.21).

    ARC lost money last year, so its P/E multiple can’t be computed. But, had ARC earned $.05 per share last year (2010), ARC’s P/E multiple (twelve month trailing basis, if we gave ARC $.05 per share) would have been, on March 31, 2011, a whopping 207.0x trailing twelve month earnings!

    I just checked the “analyst estimates” of EPS for both companies for 2011.

    The “mean” estimate for Staples is $1.54 EPS for 2011.

    The “mean” estimate for ARC is $.13 EPS for 2011.

    So, based on “forward twelve month earnings” and on the price per share that both companies were trading at on March 31, 2011:

    – – – Staples was trading at a P/E ratio of 12.6x times estimated forward twelve month earnings.

    – – – ARC was trading at a P/E ratio of 79.6x estimated forward twelve month earnings.

    Maybe Staples should purchase ARC. Perhaps that would generate some P/E multiple pizazz for Staple’s stock. I’m positive that the shareholders of Staples would be very pleased to see Staples’ stock trading at 40x estimated forward earnings! That would generate stock price of $48.00 per share!

  • ARC announces major new release of its AbacusPCR "print cost recovery" software

    TUESDAY, MARCH 29, 2011

    A Major New Release of AbacusPCR “Print Cost Recovery and Print Tracking Software” is Announced

    Today PlanWell Technologies is pleased to announce a major upgrade to its Abacus PCR print cost recovery software. Used for keeping track of printing costs and reimbursable print jobs in both an office or professional print production environment, the Company highlighted the software’s new features and functionality while maintaining the easy-to-use interface that has been a hallmark of the application since its general release in 2008.

    “Once users see how much money they can recover by tracking reimbursable print costs, demand for expanded tracking capabilities spikes quickly,” said Jonathan Styrlund, product manager for Abacus PCR. “While simplicity is the key to Abacus’s popularity, once users see the potential for greater profitability, they want to capture more and different kinds of data and greater interactivity with other systems. Our new functions go a long way toward addressing those needs.”

    New features in the latest release include:

    • Print Retrieval – allows administrators to hold print jobs in a printer’s queue until the recipient is physically at the printer to retrieve them in order to avoid forgotten or wasted printing, and to increase security for confidential documents.

    • Rules-Based Printing – sets permissions and parameters for jobs to be printed on higher-cost devices.

    • Color Recognition – detects color print jobs even when sent to [multi-function] printing equipment.

    • Cisco Call Manager Integration – allows the ability to track job-related phone calls and other non-printing functions such as laser cutters [and other finishing equipment].

    • Third-Party Integration – includes the ability to assign project information from applications such as Newforma and PlanWell EWO to reduce redundant data entry and enhance the level of detail assigned to a print job. Printing equipment from Konica/Minolta and Sharp have also been added to the equipment Abacus can track.

    For a complete list of the features and capabilities of Abacus PCR, visithttp://www.abacuspcr.com/.

  • Construction Spending for February falls to worst rate in more than 11 years

    And, here’s another one, from a different source ….

    By Steve Goldstein, MarketWatch, April 1, 2011, 11:04 a.m. EDT

    WASHINGTON (MarketWatch) — Construction spending tumbled in February to the worst rate in more than 11 years, reflecting the dire state of the housing market.

    Construction spending fell 1.4% on the month and 6.8% from 12 months ago to a seasonally-adjusted annual rate of $760.6 billion, the Commerce Department said. January’s data also was revised lower, to a drop of 1.8% vs. the original estimate of a 0.7% fall

    Economists polled by MarketWatch had forecast a 0.1% rise in spending.

    The housing market is at best bouncing along the bottom, with both existing- and new-home sales falling sharply in February.

    Private construction fell 1.4%, with residential construction slumping 3.7% on the month, though nonresidential construction improved 0.9%.

    New private single-family construction dropped 1.7% and multi-family construction edged 1.5% lower.

    Public construction fell 1.3%, with residential skidding 6.4% and water supply construction down 6.1%.

    “The past few months have been calamitous for new-build activity, which has dropped at a 28% annualized rate in the three months to February compared to the previous three months,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “It can’t go much lower and should start to rebound as surging payrolls lift sales activity.”

    Other economic reports released Friday were positive, with the unemployment rate falling to 8.8% and a manufacturing gauge showing strong growth in March.

  • Construction Spending falls in February

    From Reuters.com ……… April 1, 2011

    Construction Spending at Lowest Level Since ’99

    U.S. construction spending fell more than expected in February to its lowest level since October 1999, a government report showed on Friday, pulled down by weakness in both public and private construction.

    The U.S. Department of Commerce said construction spending fell 1.4 percent to an annual rate of $760.6 billion, underscoring renewed weakness in the housing sector. January’s spending was revised to show a larger 1.8 percent drop than the previously reported 0.7 percent decline.

    Economists polled by Reuters had forecast construction spending falling 0.1 percent in February.

    Joel’s comments:

    As Wendy’s would put it, “where’s the beef?”

    As Joel would put it, “where’s the rebound?”

    This is the kind of news that does not bode well for the “collective, sum-total” of Q1 2011 revenues generated by reprographers from the A/E/C market segment. If construction spending is down, then how can “Sales” be up? It will be very, very interesting to see if ARC’s Q1 2011 revenues exceed the Q1 2010 revenues that ARC reported for Q1 2010. Unfortunately, we will have to wait until May to see what ARC did in Q1 2011.

    It would certainly be “very cool” if ReproMAX and RSA would publish their collective “group” revenues, quarter by quarter, so that the entire reprographics industry could see what’s really happening. Alas, I don’t see that happening. Maybe RW Baird’s next IRgA Survey (for Q1 2011) will shed some light on what’s going on, revenue-trend-wise.

  • OCE's OBS Division (OCE Business Services)

    So, this morning, while visiting OCE’s U.S. web-site, I saw a press release that said this:

    Océ Business Services Highlights Records Management, Document Imaging and Managed Print Services Solutions at AIIM Conference (was held Mar 21-24 in Washington, DC)

    About Océ

    Océ is one of the leading providers of document management and printing for professionals. The Océ offering includes office printing and copying systems, high speed digital production printers and wide format printing systems for both technical documentation and color display graphics. Océ is also a foremost supplier of document management outsourcing. Many of the Fortune Global 500 companies and leading commercial printers are Océ customers. The company was founded in 1877. With headquarters in Venlo, The Netherlands, Océ is active in over 100 countries and employs more than 20,000 people worldwide. Total revenues in fiscal 2010 amounted to approximately €2.7 billion. Océ is listed on Euronext in Amsterdam. For more information visit http://www.oce.com.

    Océ Business Services provides high quality managed services and technology to manage, monitor and optimize document intensive processes so companies can improve operating efficiency and performance. Océ Business Services solutions span the document lifecycle and include records management, imaging, managed print services, mail and eDiscovery. Proprietary methodologies apply Six Sigma®. North American headquarters are in New York City and employment is about 5,000 (at OCE Business Services). Learn more at http://www.obs-innovation.com or follow us on Twitter.

    Joel’s comments:

    What “caught my eye” was the number that said that OCE Business Services employs 5,000 people. I would imagine that that’s a “worldwide-employment” number, not a U.S.-employment number. Still, that’s a very impressive number; I had no idea OCE Business Services had grown that large. As most people (but certainly not all) know, OCE entered the “FM” (print and mailroom management) business by acquiring Archer Management Services (in late 1997.) (*OCE may have already been in the “FM” business before acquiring Archer, but, if so, OCE’s FM operations in the U.S. were quite small, comparatively speaking.) OCE Business Services in the U.S. is, today, a lot larger business than was the case when Stan Katz owned Archer. (Archer actually began life as a “courier services” business.)

    In previous posts on this blog, we’ve pointed out that OCE’s OBS division serves the non-A/E/C market segment in the U.S., but, apparently, does not serve the A/E/C market segment in the U.S., but that is not the case in Europe, where OCE’s OBS division serves both the A/E/C and non-A/E/C market segments.

    I still think the “big question” is …. will OCE’s OBS division, in its quest for further growth in the U.S., begin actively pursuing the A/E/C market segment at some point down the road, or will that not be the case? We’ve opined before that OCE’s OBS division is not active it the A/E/C market in the U.S. because the A/E/C “reprographics industry” is not highly fragmented, like is the case with the reprographics industry in Europe. OCE’s wide-format division in the U.S. serves several very large A/E/C reprographics companies, ARC, Thomas, ABC Imaging, NRI and others, and OCE’s wide-format division in the U.S. has extensive dealings with members who are part of ReproMAX, RSA and The PEiR Group. Given the nature, and especially the scope, of OCE’s wide-format division customers in the U.S., any push by OCE’s OBS division into the A/E/C market segment would probably not make U.S. reprographers very happy campers and might, in the longer-term, cause OCE’s wide-format division to lose some of its customers. However, two factors have to be considered. Factor #1 – OCE is now controlled by Canon. Canon may not view the situation the same way that OCE viewed the situation. Factor #2 – Xerox’s recent decision to stop selling wide-format in the U.S. will give a boost in market share to OCE’s wide-format division and reprographers who acquire high-volume plain-paper, toner-based imaging systems now have only two real choices, OCE and KIP. In other words, OCE is now in a stronger position to push its OBS division into the A/E/C market than was previously the case when OCE was independent of Canon and when Xerox was still a player in the wide-format equipment market. In spite of that, I still don’t see that happening, for I do feel that OCE will not want to do anything to displease its U.S. A/E/C reprographer-customers.

    Disclosure: I own a small position in Canon (NYSE: CAJ)

  • Washington Reprographics Changes Name to Printscape

    Washington Reprographics is changing its name to Printscape.

    John Dziak, owner and CEO of Printscape, said the new identity reflects the company’s growing scope of capabilities. Founded in Washington, PA, in 1977, as a local reprographic services and supply company, the company now known as Printscape serves the architectural, engineering and construction industries, as well as universities, retailers, pharmaceutical and public service companies throughout the United States.

    “The new Printscape identity reflects our ability to be a total imaging, packaging and graphics solutions provider for organizations across the country,” explained Dziak. “It is designed to tell our existing customers and future prospects that we’re moving aggressively to diversify our services so we can meet the expanding needs of their businesses.”

    In addition to its popular digital, on-line construction document management system and print-on-demand finishing services, Printscape has produced high-end monumental graphics for the new Consol Energy Center in Pittsburgh, in-store signage for TREK bike stores nationwide and other high-visibility projects.

    Printscape is headquartered in Robinson Township, PA, and operates stores in downtown Pittsburgh, Monroeville, PA, Canonsburg (Southpointe), PA, and Morgantown, WV. The company also serves dozens of national customers through a sophisticated and fully integrated web site that delivers cost-effective services customized to their specific needs.

  • Associated General Contractors – AGC- released new national plan detailing measures to stimulate demand for construction

    AGC (Associated General Contractors) released a new national plan on March 15, 2011, detailing measures to stimulate demand for construction.

    Titled, “Building a Stronger Future: A New Blueprint for Economic Growth,” AGC says that “the plan is necessary to reverse construction employment declines that have taken place in 317 out of 337 metro areas since January 2007, according to new data.” AGC goes on to say, “the industry continues to shed jobs because demand for construction remains weak. While $884 billion was invested in construction in 2009, that amount shrank $100 billion in 2010 to a ten year low. That decline in construction activity has largely been driven by a collapse in private sector demand.”

    That $100 billion decline in construction investment, 2009 vs. 2010, represented an 11.3% decline, year over year.

    On March 10, 2011, we did a post about ARC’s “U.S.” Sales, 2010 vs. 2009. In one of the paragraphs in that post we said this …..

    “ARC’s U.S. Sales, 2010 vs. 2009, declined 14.55% – compared to Service Point Solutions’ U.S. Sales decline of 14.44%. In other words, the U.S. Sales of both companies were off nearly the same percentage.”

    When you consider that ARC’s U.S. Sales decline was an “overall” decline, meaning that, in spite of possible increases in ARC’s U.S. Sales due to ARC’s Riot Color initiatives in 2010, ARC’s “overall” Sales declined by 14.55%, it “looks like” ARC’s revenues from the A/E/C sector declined more than the 3.25% difference between the construction-investment decline and ARC’s “overall” U.S. Sales decline. In other words, if we subtracted out “color” sales from ARC’s revenues, year over year, 2009 vs. 2010, and then compared just ARC’s A/E/C Sales, year over year, 2009 vs. 2010, is it possible that ARCs A/E/C Sales decline was even worse than the 14.55% “overall” decline? Could that be attributable to A/E/C customers printing less hard-copy prints per project? Since ARC does not break out it’s A/E/C Sales, we really don’t, and won’t, know the answer to that question.

    Okay, back to the original reason for today’s post.

    On March 15, 2011, AGC released a new national plan detailing measures to stimulate demand for construction.

    Here are “links” to the different items presented by AGC:

    Full press release.

    Conference Call Remarks.

    Building a Stronger Future: A New Blueprint for Economic Growth.

    The Plan’s Fact Sheet.

    Metro construction employment changes since January 2007.

    Metro construction employment changes since January 2010.

    Listen to the media conference call.

  • Article about MemJet

    Very recent, interesting article – in the “Irish Times” – about MemJet. Article quotes “CEO” on Memjet’s strategy. Article mentions the billionaire (i.e., the “money”) behind Memjet.

    The title of the article:

    “Radical printer’s road to market is a marathon, not a sprint”

    Click on this link to access the full article:

    https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B81al4kFAU9JZDVhNzlkZDUtM2VhNy00YTVlLThlMjUtZGRjYTc4NmI2YzA3&hl=en&authkey=CK2Rk7AK