Service Point Results - Full Year 2008 - and comments and questions

Very recently (in a Press Release dated 26 Feb 2009, but which I just found posted on SP’s web-site), Service Point Solutions, S.A. issued what I would characterize, based on the comments made by SP in that press release, as a rather “rosey” report on its full year 2008 results.

However, after looking a bit closer, it doesn’t sound to me like things are as “rosey” as the report seems to indicate.

SP’s revenues for the full year 2008 – 237.7 mil Euros
SP’s revenues for the full year 2007 – 213.7 mil Euros

On the surface, SP’s full year revenues, 2008 vs. 2007, increased by 11.2%.
But, since SP was very active in acquisitions in 2007 and 2008, the real questions, I think most investors and reprographics industry people would ask and want to know, are a) how much of that revenue increase, 2008 vs. 2007, was attributable to “acquired revenues” and, more importantly, b) if you removed the acquired revenues, did SP’s “organic” revenues (meaning non-acquired revenues) actually decline, 2007 vs. 2008?

I did not see any comparison of Q4 2008 vs. Q4 2007 revenues, but, by extrapolation (difference between full year numbers and y-t-d through Q3 numbers), it looks to me, like this:

SP’s revenues for Q4 2008 - 63.3 mil Euros
SP’s revenues for Q4 2007 - 57.9 mil Euros

On the surface, SP’s Q4 revenues, 2008 vs. 2007, increased by 9.4%.
But, again, since SP was very active in acquisitions in 2007 and 2008, the real questions, I think, are a) how much of that revenue increase, Q4 2008 vs. Q4 2007, was attributable to “acquired revenues” and, more importantly, if you removed the acquired revenues, did SP’s “organic” revenues (meaning non-acquired revenues) actually decline, Q4 2007 vs. Q4 2008?

Again, if you subtract out the effect of acquired revenues, could it be that SP’s organic revenues actually declined – and declined by 10% or more - Q4 2007 vs. Q4 2008?

SP also reported:
Net Profit, full year 2008 - 2.5 mil Euros
Net Profit, through Q3 2008 - 2.6 mil Euros (this was reported in a previous Press Release)
Does this not mean that SP incurred a Q4 2008 loss, albeit minor, of .1 mil Euros?

Service Point’s most recent Press Release (the one dated 26 Feb 2009) says this:….
“the fourth quarter of 2008 was the best quarter of the year and shows, compared to the same period in 2007, a growth of 9.4% in revenues and confirmation of the effectiveness of measures implemented and the strength of recurrent revenues.”

My opinion (and question) about that statement: If Q4 2008 was the best quarter of 2008, how could that have been the best quarter of 2008 if, in fact, SP lost money in that quarter?

SP files its detailed financial reports with the SEC-like organization in Spain. I don’t read Spanish, and I have not seen SP’s detailed SEC-like reports. I have read ARC’s 10-K (for 2008), and I have read ARC’s press releases since the end of 2008. There does appear to be a difference in transparency, U.S public company reporting vs. Spanish public company reporting.

If anyone knows of an analyst’s report on SP for 2008, please direct me to that report.

SIX PHASES OF A PROJECT

The other day, while reviewing and compiling very detailed information about "the typical phases" in a design/development/construction (an A/E/C) project, I came across this description:

SIX PHASES OF A PROJECT:

* ENTHUSIASM

* DISILLUSIONMENT

* PANIC

* SEARCH FOR THE GUILTY

* PUNISHMENT OF THE INNOCENT

* PRAISE & HONORS FOR THE NON- PARTICIPANTS

How Bad Is It?

Check out “How Bad Is It” (authored by Robert A Murray) published in the March edition of the Architectural Record …… here’s the address for that article:

http://archrecord.construction.com/news/economy/archive/0903howbad-1.asp

Comments now "enabled" (and, of course, invited)

When I first started my blog-site, I did admit that I'm a bit challenged, technologically speaking.

Only because a friend (who visited my blog-site) asked me .... "hey, I wanted to post a comment about a post you did, but I was unable to post my comment" ..... did I realize that "posting comments" was a feature that I had to "turn on."

So, that's now "turned on" (at least I think it is), and, for those of you who wish to post comments, have at it.

What's Joel doing?

I created and began posting on my blog about one month ago. Since that time, I've received quite a number of e-mails (from friends and acquaintances) in the industry asking me .... "what are you doing?"

Knowing that I will likely get other e-mails asking that same question, I decided it would be appropriate for me to do a post about what I'm doing; this to avoid people from having to ask that question.

First, I guess I should tell you what I'm not doing:

I am NOT involved in the reprographics business, in any way shape or form in the U.S., at least not at the present time. On the day I retired from NGI, I agreed to a Covenant-Not-To-Compete. My CNTC lasts (a long, long time) until mid-December 2012. My CNTC covers the U.S. and Canada. With regard to the U.S., my CNTC does not cover "all" of the U.S., but it does cover most, if not all, of the medium and larger cities and market areas in the U.S.

Secondly, what I am doing:

a) being "semi-retired", I'm spending a bit less time at the office than I used to when I was working "very" full time. I maintain a small office in a high-rise office building in downtown St Petersburg - that gets me out of the house every day and that gets me into a "work mode."

b) I'm reading more than ever before; continuing my reprographics business and industry research and education (that's my hobby), and I also read books about other stuff, mostly fiction, but sometimes non-fiction.

c) I'm a consultant to - a team member of - a reprographics enterprise that operates businesses in six different Eastern/Central European countries; all of the countries were formerly under communist rule. The young man who's the Managing Director of that company is absolutely brilliant; highly passionate, aggressive, very focused, amazingly organized, definitely a strategic thinker and planner at the highest level, and he's a natural leader. [Yes, I'm in awe of someone who is that young (38) and who is already THAT accomplished.] He has assembled an outstanding, very smart, (and also young) management team. If his enterprise was based in the U.S., I have no doubt that his enterprise's sales would easily be 5 times what they are now, and they are not a small company. I'm generally in Europe two weeks out of every month. Six different countries (I haven't been to all of them), six different languages, six different currencies, and, yes, they follow the metric system. Not to mention that there are cultural differences as well.

Thirdly, as to inquiries I've received from reprographers in the U.S. (and Canada) about consulting services (mine):

Inasmuch as my time commitment to the Eastern/Central European reprographics enterprise I'm working for is quite substantial, I am, until that commitment changes, not available to provide consulting services to any other company, except for one exception. If a U.S. or Canadian reprographer is interested in considering my for an "advisory board" position, I might consider such a position, a) provided that the time commitment is not substantial and b) provided that your company's location would not violate the geographic restrictions in my CNTC.

Finally, when in the U.S., I'm mostly in the Tampa Bay Area (that's where St Petersburg is), but we also have a small condo in Boston, so I do spend time in that area. I'm always up for debates and discussions about the reprographics business and industry - and I enjoy seeing industry friends - so, if you find that you're going to be in the Tampa Bay Area or in Boston, let me know; breakfast, lunch or dinner on me.

One last item: For those of you who are located in the Boston area or who visit Boston, I recommend B&G Oysters on Tremont Street in the South End area of Boston (right adjacent to the Back Bay area.) B&G Oysters is a fabulous seafood restaurant (always lots of fresh oysters on hand), and my beautiful daughter, Cassidy, is the Chef. If you go to the restaurant, make sure to ask for Cassidy, tell her I sent you (and I should tell you that she's rather shy and that always pisses her off.)

A rant about the U.S. financial mess and a suggestion for a 5-year recapture tax to recover money from those who greedily scammed our financial system

This is a rant, unrelated to the Reprographics business and industry. So, if you don’t want to waste your time reading one of my rants, skip this one!

I don’t know why people are so fixated on the AIG bonus thing. In “the scheme of things”, the AIG bonus issue is nothing more than a tiny pimple on a very large elephant’s ass.

It seems like every time our politicians get the opportunity to bash someone for something that happened that was stupid (or greedy or an oversight), they totally jump at the opportunity to climb on the bandwagon and shout-out about it, simply to get brownie-points and notoriety for shouting-out about it, even when the issue, in the scheme of things, is very minor. Do they not have better things to do with their time? Is that what we elected them to do?

Our Representatives and Senators and the Administration should stop the bull-shit about the AIG bonuses, and get down to the serious business of going after the ‘real money’ that was scammed from the financial system. That ‘real money’ is why we are shelling out billions and billions of taxpayer dollars.

I’m far less concerned about the recent AIG bonus issue than I am about the 60 some trillion dollars in insurance coverage that AIG evidently wrote on stuff that it insured, and because of that, the hundreds of millions of dollars, if not billions and billions of dollars, that AIG officers and executives and shareholders pulled out of AIG over the past 5 (or more) years!

What a scam! Can you imagine being in the insurance business and selling insurance coverage – in return for premium payments – even though your business will never be able to cover the claims? The premiums that AIG charged (for insurance on various types of debt obligations – what do they call that type of insurance, “credit default swaps?”) were enormous, and those premiums were, of course, considered “income” to AIG. And the “income” from those premiums was used to fund huge bonuses and compensation packages handed out to AIG officers and executives. How long did this damn scam go on? Was it one month, five years, ten years? Hell, I don’t know.

Since Congress sets the law, they should get down to the business of coming up with a “recapture tax.” I’m not talking about a recapture tax on the recent AIG bonuses, but a recapture tax that goes back five, maybe even more, years. Let’s get serious about this – what our congressmen (congresspersons, to be politically correct) should be doing is going after the earnings that were distributed that, in reality, were based on fictional income.

And, while they are at it, AIG is not the only financial institution that paid out huge sums of money over the past several years based on fictional profits. Go after the other insurance companies, investment banks, banking institutions, and mortgage companies and mortgage originators as well.

The other evening, one of the Sunday evening news shows, I can’t remember whether it was DateLine or 60 Minutes, aired several stories about the mortgage lending business. One of the mortgage companies profiled was “People’s Choice”. Is it not clear to everyone that People’s Choice, and other companies like P.C., knew that they were selling mortgages to lots of people who could not afford those mortgages, to people who had insufficient income to justify the mortgages, to people who would eventually default on those mortgages? Even the mortgage company insiders referred to them as “liars loans!”) Mortgage companies (I should say their executives, officers and insider-shareholders) didn’t care who got a mortgage, because they weren’t going to hold the mortgages they sold. All they cared about was earning fees on the mortgages they put out. They earned fees from the people who got the mortgages and they earned fees when they sold the mortgages to investment banks and other financial institutions. God damn greedy SOB’s. Everyone one of us (I’m talking about every U.S. taxpayer, and eventually, all our children, once they become taxpayers) will pay dearly for that greed. Damn it, our congresspersons and the administration need to get serious about this. They should put into place a five-year (or more) recapture tax to get back the money that these greedy people scammed from the system.

Reduce your Lease and/or Loan Debt?

My ATF comedian, Lewis Black, would likely say something like this ….. holy-shit, somewhere, someone is getting fucked!

Reported in the Saint Petersburg Times on March 23, 2009:
OSI Restaurant Partners Inc. got some much-needed breathing room from its debt burden by buying back some of its high-interest junk bonds at about 33 cents on the dollar. In a tender offer managed by Miller Buckfire & Co., OSI, the Tampa parent of Outback Steakhouse, Bonefish Grill and Carrabba's Italian Grill, paid $73 million to retire $240 million in high-interest, unsecured debt due in 2010. (It is my understanding that these bonds carried an interest rate of 10% and were due in 2015.)

Gee whiz, it would be cool if the bank that holds the mortgage on my house would accept my “tender offer” to purchase my mortgage from them for 30 cents on the dollar. If I originally paid $300,000 for my house and, at that time, took out a mortgage for $300,000, I’d have no equity in my house, but I’d be on the hook for $300,000.

Then, roll the clock forward about two years. I call the bank, tell them that I’m in financial trouble, may not be able to pay my mortgage payments, and that I may be on the brink of bankruptcy. And, then, I offer to buy my mortgage from them for $100,000 cash. If they accept my offer, the cost of my house would end up being just that, $100,000, instead of the $300,000 I had originally paid. Cool beans. Great deal for me, but someone got fucked.

Back to OSI, the parent of Outback Steakhouse (and several other restaurant chains), in 2007, Outback’s original founders teamed up with Bain & Co and Catterton Partners, two private equity groups, to take OSI private. Purchase price was somewhere around $3.2 billion. Most of that purchase price was financed with bond debt. In order to finance the LBO (leveraged buyout), a bunch of bonds, unsecured debt, what people refer to as “junk bonds,” were underwritten (by guess who – Lehman Brothers) and sold. To whom those bonds were sold, I have no idea. It could very well be that Lehman Brothers held onto some of the bonds for its own portfolio, and/or that Lehman Brothers sold the bonds to investors, and/or that Lehman Brothers packaged these junk bonds with other junk bonds into one of those indecipherable “structured investment vehicles” (SIV’s) and sold those SIV’s to investors. (Perhaps even some small town in Norway or Sweden bought these bonds as a “safe” investment.)

Well, roll the clock forward to “present day”; OSI’s business is not doing well (to put it mildly), chain restaurant businesses, Outback among them, are suffering because of lower revenues, and OSI is losing a lot of money. One cure to OSI’s problem – lower its debt. Well, with the purchase of some of their bonds at 30 cents on the dollar, they just did that.

Which provokes two questions:

(1) Where did OSI get the money to buy back its bonds? Well, I would imagine that that money came from OSI’s shareholders – Bain?, Catterton?, OSI/Outback’s original founders? All of them have “deep pockets.” As to Outback’s original founders, they got very rich when they took Outback public years ago, and they got even richer when the company was taken private. With the recent buy-back of bonds, the owners of OSI, just realized a $167 million reduction in the purchase price they paid for OSI.

(2) Inasmuch as $240 million in bonds was just bought-back for $73 million in cash, who got fucked? Someone did. Who “tendered” (sold back) their OSI bonds? Could it be that the firm running the liquidation of Lehman Brothers sold back to OSI, OSI bonds that were still in Lehman Brother’s portfolio? Could it be that some of the banks and financial institutions (those we are bailing out with taxpayer money) were holding OSI bonds in their portfolios (toxic assets?) and that they are using taxpayer money to cushion the consequences of losing money on their sell-back of OSI bonds?

(By the way, I do occasionally go to OSI’s restaurants, including Outback, Carrabas, Bonefish, Leroy Selmon’s and Roy’s, and I like all of them; I think they give you a good deal for your money. I especially like the 2,400 calorie "Bloomin' Onion" at Outback, but I can only order that when my wife is not with me.)

Now, since my blog-site is supposed to focus on stuff and issues related to the reprographics industry, I think I should relate this OSI crap to the reprographics world ….. your world, your business.

We’ve talked about “right-sizing” your business during this recession. (I previously did a post on that subject.) In addition to all the other things that you can do to “right-size” your business, why not consider attempting a restructuring or buy-back of your company’s debt. Why not go to your lessors and banks and ask them if they’ll take 30, 50, 70 (or whatever) cents on the dollar for your outstanding lease debt and/or loan debt? Certainly some of you must have rich Uncles or Fathers or Grandfathers (or being politically correct, rich Aunts, Mothers or Grandmothers) who will, if asked, cough up cash to buy out or buy down your lease or loan debt? Well, that's it for my ridiculous thought of the day.

Comment about IRGA Convention Educational Breakout Sessions

Over the many years, one of the things that's always bothered me about IRGA Convention Educational Breakout Sessions is when a specific Educational Breakout session covered anything having to do with "how to streamline / improve a reprographics business and make money", but was led by someone who has never been in the reprographics business.

How in the world can any person give relevant advice as to how to operate, change, revise, update, streamline a business, or improve profit, when that person has not had (himself or herself) any direct experience operating (and, along with that, managing the top, middle and bottom lines of) a reprographics company?

Many, many years ago, after listening to a speaker at the IRGA and shaking my head "where in the world is this guy coming from? I don't agree with 80% of what he just finished talking about" ..... (I can't even remember what the topic of that particular Educational Breakout session was, but that's not the point of this post) ..... a friend of mine (one of my mentors), also in the audience, leaned over to me, and said, "Joel, consider the source."

After hearing those words from one of my mentors, I have, ever since then, told friends that, when they attend IRGA Educational Sessions and hear "experts" talk about various subjects, "you must first consider the source" (meaning, who said that, what is that person's background, and what is that person's direct experience?) if the speaker has had considerable first-hand experience, that would give me reason to think hard about what was said, and, just to the opposite, if that speaker has not had any first-hand experience, that would give me reason to wonder if I should even think, even a little bit, about what was said.

CONSIDER THE SOURCE!

Reprographics business "barometer" project ???? (Forgettaboutit!)

On March 3rd, I did a post about the idea of developing and periodically publishing a "reprographics industry" barometer.

To date, I've had not a single response about that.

What that "zero response" means to me:

a) that no one trusts that I would keep their sales numbers confidential
[Even though I pointed out in that post that I would not be the one privy to individual company sales numbers. Damn, several years ago, a poll taken by People Magazine said that CPA's were the most trusted professionals. And, I am a CPA. Well, frickin' Enron changed all that, huh?]

b) that having a barometer is of zero importance to all of you.
[One has to wonder about that one, because if I were still in the reprographics business in the U.S, I would definitely want to be able to compare my company's sales trends with a barometer compiled from the sales results of other independent reprographers. While not a genius, I do consider myself fairly smart (my wife would disagree). Therefore, if I think it is a smart idea, but none of you do, then you can probably well imagine what I'm thinking about your "smarts' at this moment.]

Okay, the "barometer" project is not going to happen.

Blog-site activity milestone!

As of March 23rd, my blog-site has been visited by 100 "unique" visitors! To me, that number is a significant milestone.

- European reprographers from Germany, France, Belgium, The Netherlands, Sweden, Switzerland, The Czech Republic and the U.K.

- U.S. reprographers from Maine to Florida, from New York to California, and from Minnesota to Texas (visitors from 24 U.S. states so far.)

Please kindly refer my blog-site to your friends and associates in the reprographics community. You never can tell when I’ll finally post something that’s good information.

To those of you who have let friends know about my blog-site, thank you, much appreciated.