Comments/thoughts about Service Point Solutions’ Results and a few comparisons with ARC’s Results

First, let’s take a look at SPS’ Sales for 2010 vs. 2009, country-by-country:

				Using EUR/USD exch
Service Point Solutions				rate on Jan 1 (1.34)
Sales by Country	2010	2009	% change	2010	2009
Spain	12.291	14.057	-12.56%	16.470	18.836
United States	16.428	19.201	-14.44%	22.014	25.729
United Kingdom	54.113	54.538	-0.78%	72.511	73.081
Netherlands	62.841	67.927	-7.49%	84.207	91.022
France	12.744	14.336	-11.10%	17.077	19.210
Germany	10.763	12.712	-15.33%	14.422	17.034
Norway	33.566	31.017	8.22%	44.978	41.563
	202.746	213.788	-5.16%	271.680	286.476
	MIL Euros	MIL Euros		MIL USD	MIL USD

On February 28, 2011, Service Point Solutions, apparently, issued “guidance” for 2011. If my interpretation (translation) of the Spanish language document (that put forth these projections) was accurate, then here’s what SPS evidently said about 2011:

· Service Point projected Sales between € 216m and € 220m (Euros)

· EBITDA between € 18m and € 20m (Euros)

In that same document, Service Point said that the acquisition of Holmbergs (Sweden) is expected to, in 2011, contribute (I guess approximately) € 15m (Euros) to SP’s overall Sales and will contribute (I guess, approximately) € 2m (Euros) to SP’s overall EBITDA.

So, if we take into consideration what Service Point said about the incremental sales that the acquisition of Holmbergs will generate for SPS in 2011, it looks like SPS, where it projected that total SPS sales for 2011 will range from € 216m to € 220m, is projecting that its 2011 total sales, without taking Holmsberg into account, will range from a decline of 1.746m Euro (a decline of less than 1%) to an increase of 2.254m Euro (an increase of slightly more than 1%). So, continuing this wordy paragraph, SPS is, apparently, projecting that its 2011 Sales, without considering Sales added by the Holmsberg acquisition, will be pretty much flat, when compared to its 2010 Sales.

Apparently (and I say ‘apparently’ only because it is not easy to translate the Spanish to English), SPS incurred a “Net Loss” in 2010 of € 14.151m (Euros). For 2009, SPS incurred a “Net Loss” of € 8.429m (Euros).

So, comparing SPS’s results for 2010 compared to 2009, SPS’ Sales declined € 11.042m (Euros), only a 5.2% decline, but SPS’ Net Loss increased € 5.722m (Euros).

In SPS’s Income Statement, SPS does point out that certain expenses incurred in 2010 are “non-recurring” expenses. SP also said that about certain of its expenses in 2009. All I have to say about that is that ‘whatever the case’, those expenses cost SPS money, whether or not they were non-recurring or not.

Okay, let’s take just a minute to compare ARC’s results, 2010 vs. 2009 with SPS’ results, 2010 vs. 2009.

	in $USD	In $USD
	ARC	SPS
Sales -2010	441.639	271.680
Net Income (Loss) - 2010	(27.502)	(14.151)
Sales - 2009	501.549	286.476
Net Income (Loss) - 2009	(14.885)	(8.429)
Change in Sales, Y-O-Y	-11.94%	-5.16%
Change in Earnings (Loss)	$12.617	$5.722
adjusting for only
"Goodwill Impairment"
- Net Income (Loss) - 2010	($27.502)	($14.151)
Add: Goodwill Impairment	$38.263	$0.000	Note
Approx Net Income, adjusted*	$10.761	($14.151)
- Net Income (Loss) - 2009	($14.885)	($8.429)
Add: Goodwill Impairment	$37.382	$0.000	Note
Approx Net Income, adjusted*	$22.497	($8.429)
*Not giving effect to income
tax changes

Note – I did not see any “Goodwill Impairment” charges on SPS’ Income Statement, but that does not mean that SPS financial results were not impacted by “goodwill impairment” charges; it just means that I could not find any goodwill impairment charges on SPS’ Income Statement. If someone can correct me on this, I will update this post to reflect SPS’ goodwill impairment charges.

Without the substantial “Goodwill Impairment” charges ARC took in both 2010 and 2009, it looks like ARC would have earned a bottom-line (“net income”) profit in both 2010 and 2009. That does not appear to be the case for SPS. SPS, evidently, incurred a bottom-line (“net loss”) in both 2010 and 2009.

As to the Sales numbers and changes – ARC’s Sales are more reliant on reprographics services revenues from A/E/C customers. SPS is not as reliant on A/E/C business as ARC is. SPS’ operating companies’ customer bases are more diverse than is the case with ARC’s operating companies’ customer bases. This difference likely accounts for most of the reason why ARC’s Sales declined 11.94%, whereas SPS’ Sales declined only 5.16%.

However, in spite of the fact that ARC’s Sales decline (%age-wise) was more than double the Sales decline that SPS experienced, ARC, excluding the impact of the “Goodwill Impairment” charges, would have reported a bottom-line (net) profit for 2010, whereas SPS reported a fairly substantial bottom-line (net) loss for 2010. This must have something to do with operating margin differences and changes, and, considering the fact that both companies implemented “right-sizing” changes to reduce costs, the only thing I can reasonably conclude is that SPS has been more aggressive on pricing than has been the case with ARC.

It is certainly possible that I’ve made a few errors in copying and compiling the numbers I saw in both companies’ financial statements. Admittedly, it was not easy for me to understand SPS’ financial statements, since I only had Spanish-language versions to work with. Anyway, for the “real” numbers, please refer to the financial statements that both companies issued.