Friday, January 29, 2010

My SWAEG Estimates for ARC Q4 2009 Results (as revised)

Okay, it’s “SWAEG” time –for ARC’s Q4 2009 results!
(“SWAEG” stands for “silly-wild-ass-EDUCATED-guess.”)

In November, when I posted my “guess” at ARC’s Q3 2009 Sales and EPS;

- I guessed that ARC’s Q3 2009 Sales would be $118.0 million.
And, ARC’s actual reported Q3 2009 Sales ended up being $119.4 million.

- and, in spite of the fact that the First Call” consensus estimate was for $.01 EPS, I guessed that ARC’s Q3 2009 EPS would be $.06.
And, ARC’s actual reported Q3 2009 EPS was $.06 (so I was “spot on” with that particular guess.)

In that same November post, I also guessed what ARC’s Sales and EPS would be for Q4 2009;

- I guessed that ARC’s Q4 2009 Sales would be $110.9 million.

- and, in spite of the fact that the First Call consensus EPS estimate, at that time, was that ARC’s Q4 2009 EPS would be a loss (if I’m recalling this correctly, of around -$.03, I guessed that ARC’s Q4 2009 EPS would be $.00.

ARC will not report its actual Sales and EPS for Q4 2009 until February 25, 2010 (after market-close), but ARC did, on January 27th, issue revised guidance for FY 2009 (courtesy of, that revised guidance appears immediately below):

American Reprographics Company Raises FY 2009 EPS Guidance
Wednesday, 27 Jan 2010 04:45pm EST
American Reprographics Company announced that it expects to exceed its previously announced annual earnings per share (EPS) forecast for fiscal 2009. The Company now anticipates EPS (on a fully-diluted basis) to be in the range of $0.35 to $0.38, excluding previously announced one-time charges. The Company said that its EPS performance was the result of a lesser decline in fourth quarter revenues. The Company's previously announced EPS forecast was in the range of $0.27 to $0.33. According to Reuters Estimates, analysts were expecting the Company to report EPS of $0.30 for fiscal 2009.

Now, since the analysts get to revise their estimates, it is only fair that I get to do that as well! My revised estimates – for Q4 2009 - are based partly on what ARC’s revised-FY 2009 guidance said, based partly on two recent reprographics industry surveys I’ve read, and based partly on discussions I’ve had with industry friends, and based partly on the fact that Q4 is traditionally the worst Q in the reprographics business in the U.S.

My revised estimates for ARC’s Q4 2009 results:

- Q4 2009 Sales - $113.0 million
- Q4 2009 EPS - $.03 **
(** excluding Goodwill impairment charges and any other non-recurring, one-time charges.)

ARC’s revised FY 2009 EPS guidance:
- FY 2009 EPS will be from $.35 to $.38
(excluding Goodwill impairment charges and any other non-recurring, one-time charges, such as the debt-restructuring charges ARC took for Q3)

My revised FY 2009 EPS estimate:
- FY 2009 EPS will be $.40 **
(** excluding Goodwill impairment charges and any other non-recurring, one-time charges, such as the debt-restructuring charges ARC took for Q3)

So, what I’m guessing is that there will be another small “earnings surprise” when ARC releases its actual numbers on Feb 25th.

Response to another blog visitor's comments and questions.

Another (different) blog visitor posted a comment under a post I did on January 27th, and, in addition to making comments, he asked a few questions. Since his questions were thought provoking, I’m going to respond to the questions he asked. Since I don’t work for ARC, the responses I’m going to give, below, are, with one exception, “general to the reprographics industry.” In several places below, within his commentary, you will see “Joel’s response.”


“I really appreciate the blog (there's not much out there with an insider's view on the repro industry). Like the previous questioner, I've been following ARC for some time with a view to investing.”

“There have been quite a few "roll ups" that have failed for the reasons you responded to above (ie the owner/manager who was the business driver gets bought out and leaves) and this is usually offset by the argument about size, efficiency and national scale. Along these lines, what are the key factors for a customer in deciding which repro firm they will use? How much of it is service vs. cost? Does having a national footprint really matter given most of the actual work is for local jobs? What competitive advantage would ARC bring to the table that another large local firm could not?”

Joel’s response:
As to the first two question, “Along these lines, what are the key factors for a customer in deciding which repro firm they will use? How much of it is service vs. cost?” ….. Inasmuch as I gave a 2 hour presentation in Europe on January 22nd on “The Issue of Price in the Sales Process”, the opinion I’m going to state is very fresh in my mind (the latter, a feat for someone who is nearly 63 years old!). During the presentation, we required the audience (Sales Managers from various places) to call-out the factors that they felt customers and prospects consider when trying to determine which reprographics vendor to give their business to. While I’m not going to list the factors in this post (since I am a consultant, there are issues that I won’t cover in great detail in my posts), we ended up with a list of approximately 20 different factors, price being one of those. Let me repeat, “price” being “only” one of those. There are certainly customers and prospects who consider price to be the most important factor, but, based on nearly 40 years experience in the reprographics industry, there are many, many, many customers who don’t consider price to be “the” most important factor. My opinion about this is that there is a difference, buyer mind-set-wise, between “product-based” businesses and “service-based” businesses. Price is more likely to be more of a factor in a “product-based” business, but, to the opposite, less likely to be the most important factor in a “service-based” business. The reprographics business is, most certainly, a “service-based” business. One other factor that makes “price” less of an issue, at least in the U.S., is something I’ve mentioned in a (or several) previous articles I’ve posted on my blog …. That “something” being this key word, “reimbursable”. In the U.S., many A&E firms are “reimbursed” (by Project Owners) for printing expenses they incur on projects. That, alone, makes “price” less of an issue rather than more of an issue. In addition, Architecture firms are very demanding customers; rightly so. They operate under tight deadline pressures. Their final “deliverables”, after sometimes months and months of hard, tedious work, are the “plans and specifications” they produce. I have yet to deal with an Architecture firm that would sacrifice (let us say “risk”) quality, correctness, and turnaround just for the sake of “low” price. In addition, there are some customers who work on a “cost-plus” basis with their clients. If you reduce the “cost”, then you reduce their “plus.” You also asked these questions, “Does having a national footprint really matter given most of the actual work is for local jobs? What competitive advantage would ARC bring to the table that another large local firm could not?”, so let me now respond to those two ….. a) even though “projects” are “local”, there are many large “regional” customers and quite a number of large “national” customers who find it highly appealing “to strike one deal that applies everywhere they operate”, b) more and more, A/E/C customers are moving away from “print, then distribute” and adopting “distribute, then print”; this, because time-is-always-of-the-essence and because of transportation costs. (E.G. Perkins & Will Architects designed a beautiful hi-rise condo near my office in downtown St Petersburg, FL, but Perkins & Will does not have an office in the Tampa Bay (St Pete) market area. A lot of the printing for that project was done in downtown St Petersburg.) Anyway, my opinion is that reprographics firms who have either “regional” footprints or “national” footprints have an advantage over reprographics firms who do not, especially for “larger” projects, where some of the project participants do not maintain offices where projects are actually located. Offset-printing enterprises, who’ve done roll-ups, do not, I believe, benefit from their geographic footprints as much as reprographics firms (who’ve done roll-ups) do. They are completely different businesses, and geo-scope is more important for reprographers than it is for offset printers.

“From an outsiders view I can't figure out what all these acquisitions bring to the table other than immediate size and scale. The cost saving/efficiency argument is usually more than offset by the loss of the driving force for that business (they bought out owner). Unfortunately, ARC doesn't disclose the multiples they are paying for businesses or how they perform post acquisition to prove out the strategy.”

Joel’s response:
I don’t agree with the conclusion you’ve drawn. For reasons I stated in an earlier post (my response to another blog-visitor’s questions), I do not feel that the loss of a retiring owner, if transition-planning from the former owner to a new “local” boss is done with all due care, attention, training, mentoring and support, is going to cause much harm to the business that was acquired. (Unless, of course, the acquiring company is totally stupid about “who” is selected to run lead a local operation.) And, don’t underestimate the cost-savings-power derived from size and scale (economies of scale); these (cost savings, due to size and scale) are very, very significant in the reprographics industry. As to your question about the multiples ARC pays for acquisitions, ….. even though I could provide you the numbers for some of the acquisitions ARC has completed ….. I am not going to provide any information about that. (There are a couple of reasons why I won’t do that, but I’m not going to explain those reasons.) ARC is a publicly-traded company, as you know, and publicly-traded companies have to follow “disclosure rules” regarding significant, and not-significant, acquisition transactions. If I’m recalling this correctly, ARC’s acquisition of Ridgway’s was a “significant” acquisition transaction; meaning that if you want to do the homework to figure out “the multiple” that ARC paid for Ridgway’s, you could probably figure what the multiple was, if you are willing to do the research and math. I’m not saying that ARC paid the same multiple for every company it has acquired, but, at the very least, that would give you an answer that you may not have.

Joel's further comments:
I am, as you might be able to tell from the responses I gave, an advocate of the "roll-up" methodology.

“Thanks for your thoughts on this. It's great to be able to get honest, unbiased views from an insider.”

Wednesday, January 27, 2010

Second FESPA Economy Survey Shows 70% of Printers Innovating out of Recession

There are few sources for meaningful or up-to-date information about the reprographics industry; two that come readily to mind are and

As to IRGA publications, if you are involved in the reprographics industry – especially the A/E/C services part of the industry, you should be an IRGA member, as that would give you the opportunity to read all of the IRGA’s publications.

As to Wide-Format Imaging, which, if I’m recalling this correctly, grew out of prior publications, “Modern Reprographics”, and, before that, “Plan & Print”; when it was “Plan & Print”, Plan & Print was mostly devoted to the A/E/C reprographics industry, but, later on, it morphed into a publication that covers other imaging/graphics sub-industries, including the Screen Printing Industry (that’s the industry that prints our T-shirts and Sweatshirts and other cool things!) If you’re in the reprographics business, you should be a subscriber to Wide-Format Imaging.

This afternoon, I got an automatic e-mail from Wide-Format Imaging to tell me that a new article had been posted about a recent economic survey conducted by “FESPA.” Even though reprographers may be concerned about issues that are different from the issues that “other printing industries” are concerned about, the article does speak to issues that even reprographers should think about.

FESPA = the Federation of Screen and Digital Printers Associations; and FESPA is an association of screen and digital printers in 26 European countries.

The title of the article……

Second FESPA Economy Survey Shows 70% of Printers Innovating out of Recession

Posted (on Wide-Format Imaging’s web-site) January 21st, 2010 09:31 AM

FESPA's second Economy Survey shows that the wide-format printing community is moving on from the defensive survival tactics of 2009, using innovative and proactive sales and operational strategies to improve its business fortunes moving into 2010. 70.2 percent of respondents had used new products or processes in their operations to help them through the economic downturn, with 61.5 percent adding products to their portfolio, and 60.6 percent entering new markets.

The second Economy Survey was conducted by FESPA in the fourth quarter of 2009, in partnership with InfoTrends. It shows that the community's outlook entering 2010 is broadly optimistic. More than a fifth of the respondents questioned at the end of 2009 thought the market was already recovering, and more than half expect recovery to previous levels by the end of 2010. Conversely, the Survey clearly summarizes the impact of the downturn in the wide-format market. Of the 217 respondents, 93.1 percent agree that there has been an economic downturn in the industry, with 56.4 percent viewing 2009 as the worst year they have ever seen.

The mean level of business decline reported is 15 percent; however, the community is polarized, with 20 percent experiencing no loss in business activity and another 20 percent showing a decline of 25 percent or more. Manufacturers and resellers report the same average decline as print service providers (PSPs), underscoring the industry's tightly connected supply chain.

The competitive landscape is in a state of flux, with 60 percent of those surveyed reporting that competitors had consolidated or gone out of business, 43.1 percent indicating that competitors are moving into other markets or offering new services, 33 percent experiencing new competition from other segments of the printing industry, and 22 percent seeing customers take some wide-format work in house. Price pressure is also unrelenting, with 60.6 percent being price compared more frequently by new and existing customers. This may be reflected in the fact that 33 percent have themselves been aggressive with financing and payment terms, and 23 percent have more aggressively used rebates and price promotions. Strain on the supply chain is not restricted to price, with three quarters of respondents citing intensified pressure on production speeds or turnaround times.

"The FESPA Economy Survey, first undertaken in Spring 2009, sets out to measure the impact of the economic downturn on the wide-format community, and to understand how PSPs are responding to the challenging trading conditions. These latest findings stress the need for printers to offer services that stand apart from commoditized print offerings. As our FESPA 2010 ‘Catch the Wave of Innovation' campaign highlights, in tough economic times innovation can be a key competitive advantage and survival skill. Cutting prices to match the shop across town is not the answer. Printers will thrive when they offer services and solutions that help customers execute their marketing and retail campaigns more effectively," said Marcus Timson, FESPA.

Along with service and market expansion and new sales strategies, the survey points to a gradual refocus on developing and retaining 'human capital'. 22.9 percent of respondents have expanded their sales force, and talent retention would seem to be a priority in anticipation of an eventual upturn, with respondents preferring to cut staff hours or reduce pay rather than resorting to losing valued individuals.

While survival mode has diluted the industry's environmental focus, with 59.6 percent stating that environmentally sustainable production was less important as a result of the economic downturn, a remarkable 40.4 percent of respondents reported that the economic backdrop has not made 'planet-friendly' printing any less important. A fifth of respondents use sustainability as a point of competitive differentiation, suggesting that there are opportunities to innovate in this area, which more PSPs may seize as the economic outlook continues to improve.

"The economic downturn has accelerated demand for higher service levels, so it's important for PSPs to be flexible in responding to profitable opportunities. While the requirement for faster and more capable equipment has become a given in the wide-format market, the research tells us that new markets and new application areas are what most respondents are looking for during this economic downturn," said Tim Greene, director, Wide-Format, InfoTrends. "This industry is essentially symbiotic. Innovation from suppliers can help PSPs to develop proactive growth strategies and achieve success, which in turn leads to improved business for those suppliers. In this way, innovation can create a virtuous circle, making focused events such as FESPA 2010 a vital catalyst to future growth."

Reprographics 101 (my blog) does not offer "investment advice"

Just a reminder to those manage to find and visit my blog-site, "Reprographics 101"......

My blog does not seek to, nor does it attempt to, offer investment advice! If you were to follow "my" investment advice, you would go broke. "When EF Hutton speaks, others listen." "When Joel buys, sell!"

My blog is devoted to sharing information about the "Reprographics Industry" ..... what it is, how it works, who the players are, issues the industry faces, the affect of the economy on the industry, blah, blah, blah, etc. In addition, since the reprographics industry serves the A/E/C industry, many of my blog articles pertain to what's going on in the A/E/C world.

I do believe that my blog is currently the most comprehensive blog-site on the Internet about the Reprographics Industry and about the issues reprographers face. If someone "out there" can point me to a more informative blog-site about reprographics, please don't hesitate to point me to it! One is never too old to learn!

Response to one of my blog visitor's comments and questions.

I received a long-winded comment from a young man who read my previous post. Below, you will find his comments and questions (highlighted in bold type) and my responses to his comments and questions.

“I am an individual investor (student) that has also become interested in ARC stock. Your blog has been wonderful in helping me get acquainted with the industry. My chief concern with the stock is the viability of the business model. Regarding the reprography shops that ARC has acquired, it seems that the shops have been built to success by the hustle of an enterprising manager such as yourself. Once that manager sells his shop to ARC and leaves to either retire or start another shop is ARC really left with that much value?”

Joel’s response: Since I don’t work for ARC and never have, I can’t speak directly about ARC in my response to the above comment/question, but since I, myself, have acquired businesses and many of my friends have as well, I can speak to this issue from a “generally speaking” perspective. While it is true that successful reprographics businesses (and this, of course, would apply to most all types of “service” businesses, not just to reprographics businesses) succeed, primarily, because of the drive and initiative of the owner(s) who owned the business prior to acquisition, there are usually other ‘team members” (non-owner managers) who were also responsible for the success of the business prior to acquisition. (“Team building” is essential for any business to grow beyond “small.”) Post-acquisition, most acquirers retain the services of the owner, at least for a period of time (some for longer periods of time, some for shorter periods of time – a smooth transition, from the owner to the acquirer, is highly desirable, and most acquirers are well aware of this, and practice this. In addition, since most owners sell because they want to retire or pursue “other interests”, it is certainly necessary for the acquirer to plan for the post-acquisition retirement of the owner who sold the business. To that extent, most acquirers (if not all), will identify non-owner management team members, who either worked for the acquired business or who work for other similar acquirer-owned business units, as candidates for “executive level management positions” (these candidates are intended to replace the owner, when the owner retires, and they are given significant training.) In addition, each acquired company has a certain amount of “brand-recognition”, built over a period of years, and this brand-recognition generally stays with the acquired company, even well after it has been acquired (provided that customers continue to receive attention and outstanding service.) As to larger acquired companies, the owners are often so removed from “actual customer contact” that customers don’t even know who the retiring owner is. Unless one (the acquirer) loses sight (and sense) of what must be done, transition-wise, to keep customers in the fold, post-acquisition, the value of the acquired business truly continues. Sorry for the long-winded response. Let me give you one concrete example. This one is ARC-specific. In December 2007, ARC acquired NGI (HQ’d in Tampa, FL). Post-acquisition, all of the NGI management team members, except for one, stayed on with the acquired, continuing business. Post acquisition, the owner/President of NGI (Greg Williams) stayed on to continue running NGI. While it may well be that he will retire at some point, he is, as he was even before ARC acquired NGI, spending time mentoring and educating his junior management team members. The other point I want to mention about Greg is that he had an extremely high level of passion for the business before NGI was acquired by ARC, and his passion level has not changed, even though the acquisition was completed more than two years ago. Not all owners are driven by ownership. Many “top” managers are driven simply by competitive spirit; they don’t like to lose, they like to win; they know that winning requires “team” and they continue to work on team development, even after acquisition. One other thing I should not fail to mention, this one ARC-specific as well. ARC’’s executive in charge of operations, Snr VP Dilo W (hard for anyone to type his last name) is not only highly intelligent and very business savvy, he is the type of personality who truly values and practices mentorship, education, training and leadership. So, junior management team members, those who “move up” to take over “President” positions of acquired businesses as former owners retire, have input and guidance (from Dilo, from Regional CEO’s and from retired owners as well), whenever and wherever that’s needed. The short of it, if I were you, I would not be too worried about “the loss of value issue” when former owners sell and retire. (My comments, above, would apply equally to the CEO’s of Thomas Reprographics and NRI; both of those privately-held larger reprographics enterprises have completed acquisitions over the years and have successfully dealt with former owner transition and retirement issues.)

“In addition, I agree with you that digital document management and BIM are hugely important technologies to the future of the industry. However, what is stopping a dominant software developer like Adobe from developing an Adobe Architect application that competes with ARC's? As long as ARC can compete with ReproMax and other reprography shops they should be fine but it's hard to see what will stop bigtime software developers from taking notice as the industry shifts from a printing industry to an application development industry. “

Joel’s response: Certainly, nothing prevents “the big” (or even little unknown) software application developers from introducing software and related business processes that would threaten any reprographics industry developed applications and/or threaten “prints on paper”. Several years ago, AutoDesk (which is a very big company) acquired and re-introduced “Buzzsaw”, which has some of the features that e-planroom software products developed within the reprographics industry (such as ARC’s PlanWell and ReproMax’s DFS products) have, but, in spite of that, Buzzsaw has had insignificant penetration into reprographers’ e-planroom businesses. One other factor is that, taken altogether, the “reprographics industry” is very small (compared to the much larger “small-format” world), so, typically, “the big” software application developers look at the (“large-format”) reprographics world as an after-thought, not something deserving of prime attention and focus. One of my blog-posts listed several problematic issues (I guess you could call those issues, “threats”) that reprographers now or will face, but I did not include in my list the issue you raised because I do not see that as a likely threat (…at least I don’t at this point in time.)

“Finally, you mentioned ARC's profitability advantages over offset printers like CGX, but CGX would seem to have higher barriers to entry ($20 million digital printers). From reading your materials it doesn't seem like ARC's business model is quite as defensible.”

Joel’s response: Certainly, the higher the barrier to entry, the less likely that new competition will negatively impact your business. Certainly, large offset printers have very significant equipment (and, therefore, capital) requirements than do reprographers. But, don’t underestimate the fact that the ‘barrier to entry’ in the reprographics business has risen, a great deal, over what it used to be. I can remember when you could open a reprographics shop for less than $50,000 – a couple of used production-model diazo machines, a couple of used high-speed copiers and no computers or software were required! (And, no quirky I.T. people either!) Today, the barrier to entry is higher than ever, due to much more expensive costs for high-volume digital production equipment and due to the fact that you not only need lots of computers and many different types of software application programs, you also need a higher-skill set in your people. When I was much younger, reprographics companies outperformed offset printers. And, even though I’m much older now, that situation remains the same. Breaking it down (the issue of "barrier to entry", reprographics vs. offset, there are quite a number of very large, national or semi-national offset printing companies in the U.S. At the present time, and short of someone forming an entity that rolls-up ReproMax members or RSA members, the only two reprographics enterprises that have "national" footprints are ARC and ABC Imaging. (ARC's national footprint appears to be more extensive than ABC's.) The barrier to entering the reprographics business on a national-footprint scope is huge. While not as huge, the barrier to entering the reprographics business on a regional level is also quite significant.

“Anyway those are my two cents. I'd be very interested in any thoughts you had. Thanks again for the blog!”

Joel’s response: thank you for visiting my blog-site. Good luck with your education. Based on the comments you made and on the questions you asked, you appear to be a very bright guy …. with a success-filled career ahead of you.

Tuesday, January 26, 2010

Extensive analytical analysis and commentary on ARC (NYSE: ARP)

On January 20, 2010, an article containing an extensive analytical analysis on ARC, and commentary about ARC, the reprographics industry, and the A/E/C Industry, was posted on the following web-site:

If you are reprographer and/or an investor who follows ARC, this article is definitely worth reading (as are the archived posts on that site about ARC.) The articles posted on that site (about ARC and about other companies "Please-Act-Accordingly" covers) are extensive, well-written and easy to understand.

I don't necessarily agree with the opinions expressed in the most recent article - for one, I don't see any positive news yet that would lend one to reasonably conclude that the reprographics industry has yet bottomed out - but I do feel that it is always a good idea to consider as many opinions as possible, when trying to form your own opinion as to how things are going.

Thursday, January 21, 2010

Construction still trending down, per article on AGC's web-site

One of my blog-site visitors posted a comment today - his/her comment was submitted in response to the first post I did about the Baird Q4 2009 IRGA Survey results - and I would like to now share with you the article that my blog-site-visitor shared with me.

if you visit, the AGC (Associated General Contractors) web-site - at - you will find this Press Release:

Press Release


Date: January 20, 2010

Construction Firms Predict Drop in Private-Sector Work, Fewer Equipment Purchases Amid Widespread Uncertainty About 2010 Hiring & Lay Off Plans

Nearly nine-in-ten contractors say there will be no recovery in 2010 as part of a new national construction hiring and business outlook forecast released today by the Associated General Contractors of America. As a result, fewer contractors plan to purchase construction equipment and after a year of near-record industry layoffs, many doubt they'll be able to hire new staff this year.

"Unfortunately for the industry and for our economy this year's construction outlook is far from positive," said Stephen E. Sandherr, the association's chief executive officer. "As long as the construction industry remains mired in its own depression, broader economic and employment growth will continue to lag."

The outlook, which is based in part on survey responses from nearly 700 construction firms submitted in late December and earlier this month, shows that privately-funded construction activity is likely to decline even further this year. Indeed, 64 percent of responding contractors expect demand for new manufacturing facilities will decline, while 71 percent expect demand for new retail, warehouse and lodging facilities will drop.

As a result, the number of firms expecting to buy new equipment is down to 46 percent this year from 61 percent in 2009. Meanwhile, 81 percent of firms report already having to cut profit margins in their bids just to stay competitive and another ten percent say they are now submitting bids so low they will actually lose money on the projects.

Sandherr added that many construction firms are uncertain that they'll be able to add staff following a year of record layoffs. In 2009, 73 percent of firms said they laid off employees, averaging 39 layoffs per firm. For 2010, however, 60 percent of firms say they are unsure whether they will be able to add new staff, or be forced to make further cuts. "Perhaps they can't imagine who else to let go," Sandherr noted.

One of the relatively few bright spots for the industry was the federal stimulus. Thirty-one percent of contractors say they were awarded stimulus funded projects. Of these, 46 percent say the stimulus helped them retain an average of 24 employees each. Another 15 percent say the stimulus helped them to add an average of 10 new employees per company while 12 percent cite the stimulus as driving new equipment purchases.

Sandherr added that the stimulus is driving up expectations for publicly-funded construction activity in 2010. He noted that 62 percent of contractors expect the highway market to improve or remain stable, 61 percent say water and sewer construction will improve or remain stable. And 55 percent say work on public buildings will improve or remain stable in 2010.

"The stimulus is finally beginning to have a measurable, but limited, impact on the construction industry,"" Sandherr noted. "The full impact of those investments has sadly been tempered by the inability of Congress to put a host of multi-year infrastructure funding plans in place."

In addition to stimulus-funded projects, contractors also are relatively upbeat about prospects for power and hospital/higher education construction. Fifty-two percent expect demand for power facilities to be at or above last year's levels while 57 percent of contractors expect growth or stability in demand for hospital and higher education construction.

Overall, however, the outlook points to another difficult year for contractors Sandherr said. The only truly good news, he added, is that construction costs remain at multi-year lows, providing good deals for anyone willing to begin a construction project.

Citing examples like a DC-area county that is increasing its capital budget in light of the "limited time sale," Sandherr said the association was contacting Congressional and Administration leaders to urge them to invest in new construction activity. "If they act now, they can save taxpayers millions on construction costs while immediately boosting employment and economic activity," Sandherr said.

The E-Mail I sent to the gents at Baird who conducted and published the Q4 2009 IRGA Survey

Referencing the previous post ....

..... I now want to share with you the e-mail I sent, last night, to the gents at RW Baird.
(Please note that I have eliminated, from the following, a few sentences that were in the e-mail I sent to them, as that information was simply "my personal background" information, and that information is not necessary for this post. Please also note that I did not proofread the e-mail I sent them, so there might be a few typographical errors.)

From: joel salus
Date: January 20, 2010 3:45:42 PM EST
Subject: 4Q09 Baird/IRGA Reprographer Survey Results - Comments / Questions


First, I'd like to say "thank you." Many of my friends in the U.S. repro industry are very grateful that your firm decided to "survey" the industry ... and that you are continuing to do that.

Although I am retired from the repro business in the U.S., I continue (it is my hobby) to follow what's going on in the U.S. repro industry and what's going on in the A/E/C industry. In addition, I still have lots of friends who are owners or managers of U.S. reprographics businesses, pretty much all around/across the U.S., and I keep in touch as much as my time, and their time, will permit. I used to get contacted, fairly frequently, by a couple of different Baird guys, but I don't recognize your names, so I guess they moved on or are covering a different sector. I write a blog about the reprographics business and industry, and my blog-site, if you are interested in looking at the articles I've posted, is located at this internet address: As to my background, I took my first reprographics company public (that was in 1985), and the second company I was involved in, 1997-2007, was sold to ARC (which allowed me to retire once again, thank goodness.)

I reviewed, this evening, the Q4 Survey results you published. My "quick take" on the survey is that it looks to me like my friends in the U.S. repro industry are suffering from "wishful thinking" and/or have their heads in the sand, for it appears to me that there is a pretty big disconnect between news in and around the Architecture/Engineering and Construction Industries and projections by reprographers for the next quarter and for the next year. I would like to think that the reprographics industry has hit, or is near, the bottom, but I am very afraid (and believe) that is not the case. Since I only work part-time, I devote a lot (a ton) of time to researching what's going on in the Architecture industry and in the Construction Industry, paying attention, also, to what's going on in the Real Estate Development Industry. I have been trying to find anything that looks like good news, but, unfortunately, I have not yet found anything recently (or in the past 18 to 24 months) that would be considered good (upside) news.

The ABI index continues to be terrible.
Residential is getting ready for another wave of foreclosures.
Non-residential Design/Development/Construction - office, retail, hospitality and distribution facilities - is growing worse - in terms of vacancies rising, construction activity falling off, and lack of financing (banks tightening credit to investor/developers)
Non-residential Design/Development/Construction - K-12 education - is suffering from erosion in property and other tax revenues being experienced by virtually all state and municipal government entities. (I spoke to an Architect last week - who has been in business for 30+ years - he said that "education" work pulled him through in 2009, as he expected in would - but he said that the municipality he does most of his work for has cut funding to the bone for 2010 - he said that that action is "unprecedented" and that, in his opinion, 2010 will be a very scary year for the architecture industry, even worse than 2009 was.) (Certainly, one firm does not guarantee that that will be the case; and I'm hoping it will not be the case.)
Non-residential - education, University level - I'm certainly hoping that the rise in the market, between March 2009 and the end of 2009, yielded value increases for endowments of the Universities who have endowments (most do), to the extent that they will move back to the front-burner the design/development projects they "back-burnered" after the market tanked (Lehman Brothers and forward to March 2009). That could be a positive sign for the A/E/C community and for the repro community, but I don't think anyone can make a real call like that just now.
Non-residential - healthcare - if the Healthcare reform gets quashed (due to the balance of power shifting to neutral because of the Republic Senator elected to replace Ted Kennedy), which I think will now be the case, we will probably see an uptick in spending on Healthcare projects. (The only real good sign I see.)
Non-residential - transportation and infrastructure - well, stimulus money has helped that sector the past year and stimulus money will probably "maintain" that industry this year. However, transportation projects are not like "other non-res" projects, in two aspects; one, there is a lot less printing involved (compared to the construction cost of the project) and a lot of the printing, by default, goes to reprographics firms who are "certified" (affirmative action) companies, MBE, DBE, WBE, HBE, etc.; that latter thing gives no help to the larger reprographics companies in the U.S.

On the 'developer/investor' side, most people I've read, who follow that industry, say that that industry is going to be subject to a wave of foreclosures, this year and next year, even more so than was the case the past year, as vacancy rates have risen, cap rates are adjusting, commercial property values have, and are declining drastically, lenders are making refinancing difficult at best. For developers who "portfolio" property they developed in the past (instead of building and then selling it), problems with their existing properties, rising vacancy rates, difficulties with re-financing and financing, will hold them back from going forward with new projects.

Remember that any "recovery" trend in the A/E community - for either res or non-res - will take at least 9 to 12 months to show up in reprographers' revenues (and the repro industry numbers you track.) That "lag" in recovery has ALWAYS been the case (at least it was the case during my 39 years in the industry.)

Just my S-W-A-G, but my "prediction" is that reprographics industry revenues for year 2010 will be about 10-15% under (i.e., less than) year 2009. I hope I'm wrong about that, but, until I see some positive news, rather than all of the negative news I've seen the last month, if not the last several months, with respect to lack of forward traction in the A/E or Construction communities, I'm going to stick with that. Although I do not see a lot of price-pressure on reprographers (a lot of work reprographers do - printing-wise - is "reimbursable", at least that's the case in the U.S.), I am hearing people talk about "digital-service" revenues being, or going to be impacted. (Meaning that those who finally figured out they should charge for digital services - and did do that - will "cave" on that just to get printing work.)

Which brings me to my questions, if you would be so kind to consider responding.

Your survey "reported":

Respondents indicated revenue was down -13.4% on average during the fourth quarter. Last quarter the average revenue of respondents was down -14.8%.

How could the -13.4% actually have been the case, when ARC - which is large enough to be used for industry trend comparisons - was down nearly twice that (if I'm recalling that correctly), Q3 2009 vs. Q3 2008? That's a double-digit difference, between ARC and your survey-group, and I really can't see how that could be the case. In addition to that, I do speak to a couple of people who own very large reprographics enterprises and their numbers are down much more than your survey group's numbers show.

Your survey "reported":

The average six-month revenue growth forecast of reprographers was -1.3%, up from -5.8% last quarter as comparisons finally begin to ease.

With all of the "negative" news out there, news that was out there and continues to be out there (ABI, Construction forecasts, horrible A/E activity in Q3 and Q4 2009), how in the world can any U.S. reprographer reasonably project that business will be basically flat in 1st Half 2010 vs. 1st Half 2009? (Word to the wise, reprographers are notoriously bad at predicting forward trends; most of the smaller business owners do little homework on what's going on beyond their businesses. (This is not a knock on the industry. It just is what it is.)

I am pretty familiar with European reprographers, their community, by now. It would be a good idea for you to take European and Canadian reprographers out of your survey (at least for one version of your survey), because their revenues have not declined as much as the revenues of U.S. reprographers - because a) their run-up in revenues, prior to the recession, were not nearly as robust as was the case in the U.S., and b) their customers don't print nearly the volume (for individual projects, and, collectively, as a whole) than is the case in the U.S.

Your survey also said ....
.....while the Southeast and Southwest also posted single-digit declines.

I am very, very familiar with reprographers in the Southeastern U.S. Reprographers in that region are suffering from "depression conditions in the repro industry", not "recession" conditions. There is no way that business in the Southeast (in Q4 2009), collectively, was only off by single digits. I can only conclude that you did not get response from the bigger players in the S.E.

Thank you for allowing me to submit comments and questions.


Wednesday, January 20, 2010

4Q-2009 Baird/IRGA Reprographer Survey Results

Tonight, I spent a few minutes perusing my way through the above mentioned survey, which, I think, was just published today (or maybe it was a couple of days ago.) (It may be that the Survey is only for IRGA members, so I am not going to post the full text of the Survey, nor am I going to provide an internet address for the Survey. If you want the full Survey, then my suggestion is that you visit the IRGA web-site.)

I'm finding the "results" of the survey to be weird, how about you?

Among other things, that survey says:

"Respondents indicated revenue was down -13.4% on average during the fourth quarter. Last quarter the average revenue of respondents was down -14.8%."

I'm pretty sure that the first number (-13.4%) is Q4 2009 vs. Q4 2008.
And, I'm pretty sure that the second number (-14.8%) is Q3 2009 vs. Q3 2008.

If that's so, then how in the world could the Q3 2009 vs. Q3 2008 number (which was stated to be -14.8%) be "real", when, if I'm recalling this correctly, ARC's number was over -30%, Q3 2009 vs. Q3 2008.

Can anyone shed some light on this one? Any comments about my comment or about the Baird IRGA Survey?

Based on another number the Baird Survey reported, reprographers are, apparently, optimistic, at this point, that the reprographics industry has hit bottom. Let us all hope that's the case (even though I don't think that's the case.)

Sunday, January 17, 2010

Will RICOH or Xerox or HP acquire KIP? Or, will KIP remain on its own?

As most of you know, RICOH acquired IKON in 2009. That acquisition was not particularly good news for Canon, because IKON was, prior to its acquisition by RICOH, a significant distributor of Canon equipment (at least that was the case in the U.S. market).

In my opinion, Canon's move to acquire OCE was, in part, a response to RICOH's acquisition of IKON. The merger of Canon and OCE is a particularly powerful combination, in my oh-so-humble opinion.

In the "large-format" (or wide-format) equipment market space - and, here, I'm referring to higher-production-model multifunction (scan-print-plot-copy) systems, KIP has a very strong market position in the U.S. (behind OCE, but, I think, ahead of Xerox). In my opinion, the Canon/OCE combination could negatively affect KIP's presence and market share; maybe not in the short term, but over time.

Will KIP seek shelter? What are the chances that RICOH or XEROX or hmmm, HP, will seek to acquire KIP?

Ouch! .... OCE reported horrible Q4 2009 results ....

The other day, OCE released its results for Q4 2009 and for its fiscal year 2009.

You can access the complete report by visiting this web-address:

Drawn from OCE's Q4 report:

OCE REPORTS NET LOSS OF € 23 million in the fourth quarter.

Action program on track

Highlights fourth quarter:
• Market development continued to affect printing industry strongly
• Revenues € 683 million (-11% organically)
• Normalized operating income € 16 million
• Restructuring costs € 27 million
• Net loss € 23 million

Highlights full year:
• Free cash flow € 82 million
• Cost-cutting measures delivered results (€ 154 million)

Comments by Rokus van Iperen, Chairman of the Board of Executive Directors:
‘Our revenues continued to decline in the fourth quarter as customers remained uncertain about the economic situation and sustained their efforts to reduce costs. Towards the end of the year, we saw some bottoming out in the sales of continuous feed systems in the United States.

We are on track with the implementation of our action program related to job reductions and saving out-of-pocket expenses. Although we have spent a significant amount on restructuring, we improved our cash flow by further reducing inventories and trade receivables. Our net debt developed positively for the third consecutive quarter.

In 2010, we anticipate that the markets will remain challenging. In order to further strengthen our competitive position and drive sales under difficult market conditions, we will continue to introduce innovative products.

The fourth quarter was marked by the important announcement of Canon’s intended recommended offer for Océ, which is aimed at creating the global leader in the consolidating printing industry. In the meantime, the transaction process is on track and all relevant anti-trust approvals have been obtained.’

OCE's report, as always, furnishes information by business segment, and here's what OCE's report said about.....

Wide Format Printing Systems (WFPS)

The construction and manufacturing market sectors declined.
The climate in the display graphics market deteriorated further.

Revenues in WFPS amounted to € 187 million.
Organically, revenues declined by 17%. The share
of color increased to 47% (2008: 41%).

Non-recurring revenues amounted to € 71 million.
Organically, revenues declined by 21%.

Recurring revenues amounted to € 116 million.
Organically, recurring revenues declined by 14%.
The main driver was the decline in print volumes in
market sectors served by Technical Document
Systems and Imaging Supplies.

Imaging Supplies revenue declined organically by
22% mainly due to lower print volumes.

Normalized operating income amounted to € 12
million (2008: € 21 million) and was impacted by
the strong decline in market demand.

For those of you who were wondering about this, some of the comments in OCE's Q4 report would lead one to conclude that Canon's acquisition of OCE is expected to proceed.

ABC Imaging announces two major "nationwide" FM (OnSite) deals

Most, if not all, of you who know me, know that I have long been a big proponent of FM's (OnSite Services) for A/E firms.

ARC's public (SEC) filings, as I think I've mentioned before, indicate that ARC has more than 5,000 FM sites. Due to ARC's size and geographic presence, ARC is particularly well positioned to pursue "nationwide" FM deals.

From a "nationwide" FM deal perspective, I have no idea whether ReproMAX has figured out a way to pull its members together to pursue nationwide FM deals, so I'm not sure if one should yet consider ReproMAX (or any of its members) to be a player (or players, referring to ReproMax's individual members) for nationwide FM deals. But, ABC Imaging (previously mentioned on my blog as one of the five largest A/E/C reprographers in the World) is most definitely a player in the nationwide FM space.

If I'm recalling this correctly, ABC Imaging, about four or five years ago, won a nationwide FM deal with HNTB. And, after visiting ABC Imaging's web-site a couple of weeks ago, I found these two press releases:

ABC Imaging wins Parsons Brinckerhoff FM contract for on-site print services
Washington, DC—November 25, 2009—

ABC Imaging announced today it has signed a letter of intent with Parsons Brinckerhoff (PB) to provide on-site print services at 16 PB offices in the U.S.

Parsons Brinckerhoff, based in New York, NY, is one of the world's oldest and largest engineering firms. The company specializes in the planning, design, and maintenance and operation of infrastructure world-wide.

Although many factors went into PB's decision to hire ABC Imaging for the contract, "it was our unique approach to pricing, technology, and facilities management that secured the contract," said Timothy Sachs, Senior Vice President for Business Development at ABC Imaging.

"We were part of a rigorous RFP (request for proposal) process," Mr. Sachs said. "Our experience with past projects paid off in winning this contract."

Of the 16 locations, ABC Imaging will install in the coming months, 15 will be manned locations. At least one of the company's employees serves Parsons Brinckerhoff users at the manned sites. One site will be what the company refers to as virtual FMs or VFMs. This location will be monitored remotely from ABC Imaging headquarters and serviced by technicians from headquarters or regional offices.

Installation of the FM sites will begin in December 2009. As part of the deployment of equipment, ABC Imaging will install its state-of-the-art cost tracking and recovery software at the Parsons Brinckerhoff sites. This software enables PB and ABC Imaging to integrate printing data with PB project accounts, which will enable PB to track project costs.

ABC Imaging awarded Perkins+Will firm-wide reprographics contract
Washington, DC—December 24, 2009—
ABC Imaging has been awarded the Perkins+Will firm-wide reprographics contract.

Perkins+Will, an integrated design firm, serves clients from 21 offices around the world. The firm practices "architecture, interiors, branded environments, planning + strategies and urban design. Its clients include the aviation + transit, corporate + commercial + civic, healthcare, higher education, K-12 education, and science + technology markets." Perkins+Will has chosen ABC Imaging to provide on-site in-house reprographic facilities management as well as off-site support to its architects, designers, and staff.

Rich Nitzsche, Chief Information Officer of Perkins+Will says "Perkins+Will is confident that the ABC relationship will provide an outstanding platform for integrating all of our offices with the same level of quality output, attention to detail, and the highest commitment to customer satisfaction."

ABC Imaging CEO and President, Medi Falsafi was very pleased with the award, "We are committed to providing our clients, no matter how large or small with exceptional service," he said. "Our mission is to 'Impress Every Client, Every Time.' We are very excited that Perkins+Will has given us this opportunity with their organization."

Further information about BIM .....

Last year, I posted on my blog several articles that mentioned BIM. One of those articles mentioned ARC's acquisition of RCMS Group, a BIM services provider. One of the articles I wrote about BIM was a very, very long article. Since that post, I've received inquiries, some from investor-types, about ARC's BIM strategy. Since I am not an ARC insider (nor am I Merlin), I've suggested to inquirers that they should call ARC's management team, i.e., ask ARC that question.

Recently, I discovered (something that I'm sure most of you already knew existed) 'an anyone-can-access' web-site that hosts ARC's newsletter "about document management, digital print technology and printing." Here's the web address for that site:

Here's an article about BIM from that site.... basically an article written to generate customer interest in BIM.

"BIM Without The Software, Training or Equipment

November 2009

In mid-October, our parent company, ARC, announced a corporate addition of a highly-respected technology services provider in the building information modeling (BIM) market. Atlanta-based RCMS specializes in using conventional two-dimensional construction drawings to provide three-dimensional modeling and analysis of commercial construction projects on an outsourced basis. The firm focuses on improving business processes for construction professionals in every segment of the AEC industry.

Not sure what BIM is?

It involves the use of specialized software and analytical expertise to represent buildings and building components in three dimensions on a computer screen. BIM users build their projects “virtually” in a computer model prior to actual construction to increase the accuracy and speed of bidding, plan the workflow of a job, project costs and schedules, and identifying conflicts long before they are encountered in the field.

Given the recent adoption of BIM as a requirement for GSA and other government projects, not to mention a growing number of private projects, the need for BIM is growing quickly. But purchasing the software and hardware require to run it, and learning to use the software applications and analytical packages are often major obstacles to its use.

“Using BIM is becoming a necessity in construction” said K.P. Reddy, ARC’s Vice President of BIM Services . “By offering an outsourced BIM solution, we can dramatically reduce costs, while delivering critical decision support data, risk mitigation, and building process improvement that come from using the technology. For a customers who prefer managing project-based costs as opposed to adding overhead and infrastructure to their business, it’s an ideal way to amortize the adoption of BIM.”

Curious to know more about how we might be able to bring BIM to bear on your projects? Ask your sales rep for more information, or contact us here."

Thursday, January 7, 2010

A vendor-provided FM (an OnSite Service) is not just a strategy that benefits an Architecture firm in good times, but in challenging times as well

In the post I did just previous to this post, I mentioned "ZweigWhite."

The other day, I purchased (for $5) an article from ZweigWhite's web-site, and, I'd like to share a couple of "cliff notes" from that article. (I am not going to reprint the entire article; if you want to read the entire article, then do what I did, go to and purchase it.)

The article I purchased pertained to this subject:

> Successful A/E and environmental services firm leaders share strategies that have helped them stay afloat during the current market meltdown.

One of the sub-headings in that article:

Tactical toolbox: Overhead flexibility

Quoting the CFO of a 65 person Architecture firm, the article went on to say:

Here are several examples that JS, CFO at 65-person architecture firm XXXX Associates (City, State), says his company is doing to build flexibility with its overhead:

I am only going to reprint one of the items that CFO listed:

* The firm contracts with a reprographics firm to provide general office help and reprographics equipment and supplies on a per use basis.

And, this was the CFO's further comment:

“In downtimes, these programs allow us to easily scale back costs, which is a much less disruptive fashion than staff layoffs,” JS says.

Joel's comment:
For more than 25 years, I have been a huge proponent of FM (OnSite) programs for A/E/C firms. The comment made by this firm's CFO could certainly be construed as a testimonial for vendor-provided FM (OnSite) services.

The 2010 AEC industry outlook from 30,000 feet

Ian Rusk, CEO of ZweigWhite, authored and published an interesting article reprographers should take note of.

For those reprographers who are not aware of who ZweigWhite is, I've copied into this e-mail (see below) some "about ZweigWhite" information that appears on ZW's web-site.

As to the article, "The 2010 AEC industry outlook from 30,000 feet," here's the web-address of that article:

About ZweigWhite:
At ZweigWhite, we exist in order to help leaders in the architecture, engineering and environmental consulting industries achieve their business and personal goals. Since 1988, when the firm was founded by Mark Zweig (and later joined by Fred White), we have offered an ever-increasing and improving array of publications, services, and events designed to provide firm leaders with the tools they need to succeed. What began with a simple newsletter has grown over the last two decades to become a comprehensive suite of products and services, including newsletters, market research reports, seminars and executive education offerings, business conferences, and management consulting services covering virtually every aspect of business management.

Monday, January 4, 2010


This article appeared on this morning.......


By Greg Robb
10:11 AM ET Jan 4, 2010

WASHINGTON (MarketWatch) -- Spending on U.S. construction projects fell in November, marking the seventh straight monthly decline, the government reported Monday.

Overall, spending on construction projects fell 0.6% in November, the Commerce Department said. This was close to consensus forecasts of Wall Street economists.

Adding to the sense of weakness in the report, there was another large downward revision to the prior month's data.

The government said spending fell 0.5% in October, compared with the initial
estimate of no change.

The trend of large revisions to the construction data in this recession has irked

Year over year, construction spending is down by 13.2% in November.

One area of strength in recent months -- spending on private housing -- fell 1.6% in November. The sector had been bolstered by the tax credit for first-time home buyers that sparked some home buying this fall. The tax credit has been extended until next June and broadened to include almost all home buyers.

Spending on private commercial construction projects fell slightly in November for the eighth consecutive monthly decline. Non-residential construction is down 20.6% in the past year.

Economists said that tight credit and the weak job market are two factors in a grim outlook for private nonresidential construction in 2010.

Overall private construction spending fell 0.7% in November after falling 0.8% in the previous month. Year-over-year private spending is down 20.0%.

Government public construction spending fell 0.4% after remaining flat in October. Government spending is up 2.7% over the past year as the government has been spending money trying to stimulate demand.

In a separate report, the Institute for Supply Management reported that its national manufacturing index rose to 55.9 in December from 53.6 in November.

Sunday, January 3, 2010

Fairly recent news about ABC Imaging

Since ABC Imaging is a privately held company, we don't hear a lot about ABC, even though ABC Imaging is among the five largest A/E/C reprographers in the world. I found this article on OCE's web-site:

ABC Imaging defies recession and invests in Océ

London, UK, 20 October 2009—Two hundred people turned out for a launch party for ABC Imaging, the reprographics and on-site print management company, which has rebranded and moved into a larger office and production site in Britton Street in the city of London.

More than 20% of the partygoers were new prospects for ABC Imaging, which is entering new markets as part of expansion. Guests included representatives from international banks, retail outlets, the legal sector, architects, construction and engineering companies.

ABC Imaging, formerly called Mediashore, and employing 50 people in the UK, of whom 15 are based in a separate West End office, is now on the acquisition trail as part of a growth programme to increase its £4million turnover five-fold within five years.

Mediashore, which was formed in 2001, became part of US-based ABC Imaging in June last year and rebranded a month ago. The party was a ‘thank you’ to suppliers, customers and prospects.

ABC Imaging UK Managing Director Ray Hawkins said: “These new premises have created the extra space we will require for our growth plans. We will be expanding through organic growth and through acquisitions.”

ABC Imaging President and CEO Medi Falsafi, who flew in especially for the event, said: “Whereas everybody seems to be cutting back, we are investing. I am very positive about the future and know there are terrific opportunities for us, particularly in developing countries that include Russia and those in the Middle and Far East. Clients there need to have a provider from London or elsewhere in the UK, and Mediashore is a perfect fit for us. Ray Hawkins and his team are doing a terrific job and will make things happen in a big way. The best defence is having an excellent offensive.”

The £500,000 investment in the new premises includes taking on Océ’s award-winning technology such as the Océ VarioPrint 6250 printing system and Océ ColorWave systems. These are in addition to investments in four Océ VarioPrint 2090s, two Océ VarioPrint 2165s, two Océ TCS500sytems, two Oce TDS800s and TDS600s.

Bron Curley, Managing Director of Océ UK, said: “ABC Imaging knows its markets well and has continued to invest despite the difficult marketplace. Digital is obviously a high-growth opportunity and I was delighted to see at first-hand what’s been achieved in a short space of time.”