Reprographics 101

(more than you ever wanted to know about the reprographics industry)

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  • American Reprographics Still Waiting For The Commercial Recovery

    The article below, which carries the title you see above, was authored by Stephen Simpson and appeared on Investopedia. One of our blog-readers brought this article to our attention.

    April 06, 2012

    Here and there, investors are already seeing certain stocks recovering on the expectation of improving commercial construction activity. To a certain extent, American Reprographics (NYSE:ARC) has been one of them, as the stock has rebounded significantly (on a percentage basis) from its lows in the fall of 2011. That said, there looks to be plenty of opportunity left in these shares if recent signs and portents really do mean that better commercial building activity is on the way.

    The Basics

    American Reprographics is the largest company in the reprographic services industry, with somewhere in the neighborhood of 15% market share. In fact, because there are so few competitors of any size (ARC is about 10 times the size of its largest competitor), it’s actually a little difficult to calculate how much share they have – particularly since the multi-year downturn in commercial building activity has pushed many small companies out of business entirely.

    For those who’ve let their subscriptions to Reprographics Daily expire, reprographics is the business of producing and reproducing documents related to construction – blueprints, mostly. When large commercial buildings are planned, drawn up and built, numerous copies of blueprints are needed, as the building process is farmed out to what amount to specialty teams. Moreover, if there are any changes in the plans (as there usually are), new plans are printed up and distributed.

    Not surprisingly, commercial construction is a huge part of ARC’s business – a little more than three-quarters, in fact. With one of the worst commercial real estate building markets in decades, ARC has seen steady erosion in revenue and free cash flow over the past few years.

    Experience, Scale and Flexibility

    That said, ARC is still standing and is in fact still cash flow positive. At least some of this has to be credited to management and the company’s diversified business mix. For starters, the company operates a nationwide hub-and-spoke structure, but has closed branches in response to the deteriorating conditions in many markets.

    At the same time, ARC has gotten more active in digital technologies and outsourced operations. About one-quarter of the company’s revenue comes from “facilities management services” where ARC helps and supports clients who want to handle their reprographic needs in-house. Not only do these services offer good margins, but it helps the company keep business it would otherwise lose to companies like Xerox (NYSE:XRX), Canon (NYSE:CAJ) or Ricoh (OTCBB:RICOY).

    Is the Recovery Coming?

    ARC management was relatively cautious when they realized fourth quarter earnings, but there are signs of optimism in the commercial building space. For starters, the American Institute of Architects’ Architecture Billings Index (ABI), a popular leading indicator of building activity, has been getting better. Not only has that index been positive for four straight months now, but new project inquiries are at five-year highs.

    Moreover, a variety of companies including Johnson Controls (NYSE:JCI), Honeywell (NYSE:HON) and RPM (NYSE:RPM) have been seeing relatively encouraging trends in commercial activity. Plenty can still go wrong and it is hardly a robust market, but it does look like the worst is over.

    The Bottom Line

    The difficulty with American Reprographics is that there is no blueprint for the recovery from one of the worst markets in living memory. Is building going to suddenly accelerate in a year or two, or will there be a more gradual improvement?

    At this point, I’m modeling “gradual.” I look for roughly 2% revenue growth in 2012, accelerating to 4% and then 8%, before settling back down to mid-single-digit growth. At the same time, I do believe free cash flow conversion has bottomed and incremental revenue growth should boost cash flow.

    If American Reprographics can achieve $70 million in free cash flow in 2016 (well below the $118 million in 2008), I believe fair value on these shares is north of $9. The company’s hefty debt load is a worry if the commercial building market stays down, but this looks like an interesting (albeit risky) building recovery play.

    At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

  • General Electric Company: Office Imaging Industry Shipments Getting Stronger, Says GE Capital

    04/13/2012 | 08:05am (from a story on www.4-traders.com)

    Improving U.S. economy spurs new and replacement purchases

    In remarks leading up to next week’s ITEX Expo & Conference in Las Vegas, GE Capital’s Office Imaging team noted that total OI industry unit shipments are expected to grow 3% this year, with the fastest-growing industry segment being value-added devices paired with services and supplies. Sales of color office imaging devices are showing more modest growth, while sales of black-and-white ones are declining.

    The two major types of value-added programs, basic print services (BPS) and managed print services (MPS), are expected to grow strongly through 2015. BPS refers to basic print services plus usage assessment, reporting and optimization. MPS encompasses multi-function devices, service and supplies, which are typically packaged together as multi-year contacts with consolidated fleet billing and remote monitoring.

    “The improving economic environment in the U.S. is likely to spur businesses to make new and replacement equipment purchases,” said Glen Clark, vice president and general manager of GE Capital’s Office Imaging business. “As MPS in particular continues to grow strongly, vendors are also expanding into adjacent IT services to offer end-users a one-stop shop.”

    Clark will be speaking at the MPS Strategy Forum during next week’s ITEX event. On April 19, 1 PM-1:50 PM, Clark will share strategies to help dealers evaluate revenue opportunities, including cost allocation and the impact of servicing the product. He will also provide best practices for developing an annual business operating rhythm that maximizes growth while minimizing risk.

  • Phil Maggenheim, President & COO of Contex Americas, Inc. until March 2012, departs Contex and forms new company, PGM Strategic Business Consulting

    Our best wishes for success to Phil on his new endeavor.


    Phil Maggenheim

    Managing Partner

    PGM Strategic Business Consulting

    April 2012 – Present (1 month)


    Phil’s Prior Experience:

    President and COO

    Contex Americas, Inc.

    July 2008 – March 2012 (3 years 9 months)

    Vice President

    IDEAL Scanner & Systems

    February 1984 – June 2008 (24 years 5 months)

    Phil Maggeheim’s experience and capabilities:

    •General Management & Strategic Planning 


    •Sales & Marketing – North and South America


    •Product planning and regional strategy development


    •Channel, distribution and OEM business development


    •P&L responsibility – International profit center management


    •Hands-on manager 


    •Government sales strategies


    •Pricing and product planning


    •Team transition and development

Industry and Business Type Engagements


    •Wide format scanners and solutions


    •Equipment and software distribution


    •Document and content management 


    •CAD conversion 


    •BIM and 3D CAD w/emphasis on 3DP and rapid prototyping


    •Reprographics sales and management

  • Autodesk’s 2013 Product Launch and AEC Portfolio

    from AECbytes Newsletter #56
, April 11, 2012

    Article Summary

    It is that time of the year that Autodesk typically launches its next release of products, and this year was no exception—Autodesk has just released its 2013 product portfolio. This includes new releases of applications across all the three main industries it serves, including AEC (which includes buildings as well as infrastructure), manufacturing, and M&E (media and entertainment). This AECbytes newsletter provides an overview of the overall 2013 release and then takes a deeper dive into the more AEC industry-specific details that were shared.

    Needless to say, with the commanding lead that Autodesk has over competing products, at least in the AEC industry, interest in every new release is always very high, and Autodesk users are eager to know what to expect. Let’s see if the 2013 release holds any surprises, or is comprised more of routine enhancements rather than dramatic changes.

    Article Link

    http://www.aecbytes.com/newsletter/2012/issue_56.html

    To provide comments and feedback on this article, or see what others have to say, please visit its AECbytes blog posting at:

    http://aecbytes.com/blog/2012/04/11/autodesk-2013-product-launch-and-aec-portfolio/

  • Investor interested in acquiring traditional and digital printing companies in the U.S.

    These two paragraphs were (very recently) posted in one of the LinkedIn groups:

    “I’m looking to acquire printing companies (traditional and digital) in the US with >$1M of EBITDA.

    If you are aware of any potential opportunities, then please contact me at crane@palomar-group.com. Thanks.”

    That post was posted by:

    Justin Crane

    Private Equity Investor & Entrepreneur

    Greater San Diego Area

  • The Future of Large-format Printing is Here (???)

    HP announces press conference and luncheon at the AIA Convention in Washington DC on May 17th, 2012

    Link to announcement:

    http://tinyurl.com/6otkana

  • Interesting “perfect storm” article ….

    Here’s the beginning of the article, followed by a link to the complete article:

    Commentary & Analysis

    Surviving “the Printing Industry’s Perfect Storm”—and Its Aftermath

    By Thomas J. Williams
Published: April 9, 2012

    The graphic communications industry has been under unprecedented pressure for the last decade, with the stage set during the 1990s as consolidators, fueled by easy money from an aggressive lending community, rolled up scores of commercial printing operations nationwide. Beginning in the early 2000s, many of these roll-ups came unglued as the synergies the consolidators pitched to lenders and the stockholders of the firms they acquired failed to materialize.

    As many consolidators defaulted on the considerable debt they carried, these roll-ups began to fail as they were forced to file for bankruptcy protection and in many cases liquidation. As a result, many firms that took a bite of the consolidator’s apple often were shut down, liquidated or sold, or returned to former owners, many unable to survive in the long term.

    The stage was set and the first clouds were formed for what would become the printing industry’s perfect storm. At the same time alternative electronic media were beginning to compete with ink on paper, new digital printing systems based on toner and inkjet were competing with traditional offset processes. As these trends accelerated and a dramatic transformation of the printing industry became inevitable, the economy contracted significantly, and the perfect storm gained momentum.

    Here’s a link to the complete article:

    http://whattheythink.com/articles/57160-surviving-printing-industrys-perfect-storm-aftermath/

  • Very interesting “niche business” – printing company focuses on the “racing” business

    Electric City Printing Installs an HP4600

    Friday, April 06, 2012

    Press release from the issuing company

    Electric City Printing, a Consolidated Graphics, Inc. company based in Williamston, SC, recently installed an HP4600 digital press in order to facilitate a growing demand for the company’s printed race number capabilities. The new HP4600 will supplement output from the printer’s existing HP4050, which serves a similar function. Electric City is the world’s largest printer for competition media, providing entry packets, racing numbers, brochures, signage, and integrated technology to help facilitate major races and competitions throughout the world. 

“

    We had to look for additional equipment to service our growing clientele,” said Electric City President Mike Schmitz. “Electric City has been servicing the racing business for over 30 years, and we’ve committed ourselves to bringing our customers the newest technology, highest-quality equipment, and best-in-class service to meet their needs.” 



    Schmitz possesses a solid understanding of the racing business, as he himself is a marathon runner, and is therefore able to ensure that his business provides top of the line capabilities to its race business clients. “The racing business is a highly-customized segment,” adds Schmitz. “By running in the events, I’m able to personally experience the result of the services we provide, and to bring better, more innovative solutions to our customers. The HP4600 is just one of the ways we’re doing that.” 



    The new press will supplement the company’s existing HP4050 press, enabling Electric City to output nearly six million impressions per month in order to keep up with growing demand. The two presses will be used primarily to print race numbers on DuPont Tyvek, which requires specialized equipment to avoid melting the substrate. The digital press also helps service a growing demand for customization at events like the Disney Princess Race in Orlando, Florida, where runners can select a Disney princess, color, and name, all of which are printed onto the race number. Additional benefits of the new press include faster turnaround times and reduced cleanup and maintenance. 



    Other races serviced by Electric City Printing include the Boston Marathon, New York Marathon, Chicago Marathon, Rock & Roll Marathon series, Houston Marathon, and the 2012 Olympic Marathon qualifier held in Houston, TX.

  • Reprographers – how’d your first quarter end up?

    Today, I received an e-mail from the President of a 35+ year old reprographics company (and they are a market leader in their market), and, given what the reprographics industry has been going through the past few years, he had some outstanding news to share. (I’ve intentionally deleted his name and the company’s name. He indicated that it would be okay for me to post his comments.)

    Joel-

    Just thought I would send you an email about our first quarter. We have yet to get the final numbers for March, but we expect the 1st quarter to be the second most profitable 1stquarter in the history of our company. Sales were not the highest, but bottom-line was very good. I contribute this to cutting expenses and a pick-up in business. Like I said, sales were not the highest, but the sales were much better than the previous three 1st quarters.

  • Full-service reprographics operation in Memphis, TN – Memphis Reprographics, LLC – two of the owners were formerly with Plan Express

    I visited this company’s web-site, this morning, and noticed that two of the owners are ex-of Plan Express. I also noticed that they use “ReproConnect” as the software for their e-planroom service.

    Gary Pind, President and Owner

    Gary has over 30 years of experience in all aspects of reprographics, document management and logistics, with particular emphasis in large format scanning and printing and color reproduction (HP plotter System and Vidar Color scanning). He has extensive knowledge in multi-facility management and executive leadership with a strong emphasis on service quality. Prior to co-founding Memphis Reprographics, LLC, Gary was the Director of Production and Plan Room Processing for Plan Express, a national reprographics Company. In his duties he over saw the implementation of new facilities around the country and was on the cutting edge of digital document management. Before Plan Express he was the acting President of Campbell Blueprint and a prominent member of the Board of Directors for Campbell Blueprint & Aero Blueprint. He was instrumental in acquiring the first scan to print system in the Memphis area, beginning a new direction in the local printing industry. Gary has overseen the largest printing jobs undertaken in the Memphis and surrounding areas including FedEx World Headquarters, Gold Strike Casino, Horseshoe Casino, Isle of Capri, The Grand Casino, Memphis IRS and the new FedEx Forum.

    Chris McNally, Vice President and Owner

    A graduate of Rhodes College here in Memphis, TN , Chris has an extensive background in Business Management, Logistics, Facility Management and Print Production. Chris has received extensive training on Oce Print Systems, attending Training school at Oce’s Itasca facility in Illinois. Prior to co-founding Memphis Reprographics, LLC Chris ran a print facility program for one of the largest multi-phased Resort Developments in the country. As a past employee of Plan Express, Inc, Chris has worked with National Retailers, multi-national Developers, General Contractors, Architects and Engineers, in both document management applications and print fulfillment services.

    Greg McNally, Owner

    Greg has over 30 years of experience in logistics and distribution working for the Federal Government. In addition to his years as a civil servant, he also built from the ground up his own licensed and bonded General Contracting Company. Greg knows the importance of reliable service, and understands the demands and pressures of the modern day.

    http://www.memphisreprographics.com/