Financial Printing--Riding Out The Stocks

Financial printing experiences its highs and lows as does the stock market. A bullish stock market makes for a bullish financial printing climate. For 1999, fingers are crossed the bulls will be running.

BY MARIE RANOIA ALONSO

In 1997, the financial printing market was considered by some financial printers to be the hottest bull market in the history of mankind. Some financial printers dubbed 1997 the finest year ever for financial printing, with mergers and acquisitions in abundance and mutual funds robust.

Life was good.

Then came 1998—a year in which the bears took over and the stock market treated financial printers with a touch less kindness.

Joseph Weiss, CEO and president at Philadelphia-based Packquisition Corp., puts it this way, plain and simple: "What financial printing market in 1998? It died!"

"1998 saw a dramatic downturn of the transactional printing business, so much so that it caused us to look hard at making some labor cuts and tightening our entire financial printing effort," Weiss says. "We had to work tighter, work closer and work harder to ride out the ups and downs of the stock market this year."

Still, reporting that a strong share of Packquisition's financial printing power is bond work done for the City of Philadelphia, Weiss remains optimistic for the coming year.

"I've been through this kind of market several times before," he states. "If the stock market maintains itself moving into Q1 1999, and the Federal Reserve is aggressive, we may see a shorter cycle of the dry spell in financial printing. But, if we have a bear market, the cycle will be a little longer—it always comes back."

John Greco, senior vice president, marketing and technology, at R.R. Donnelley Financial—which reported $485 million in segment sales for 1998—offers the following perspective.

"The financial printing marketplace continued to be a highly competitive environment in 1998, challenging participants to find new ways to differentiate their services from those of competitors," Greco states. "While securities market activity was strong through the first half of the year, the environment turned all the more competitive with the onset of volatility in the third quarter.

"In turn, that volatility resulted in a softening in new issues underwriting and reduced mergers and acquisitions activity," he adds.

As for the not-so-ill-fated fourth quarter recap, Greco states the financial segment is—as Packquisition's Weiss assures—showing indications of improvement.

"Still, it is impossible at this time to extrapolate how those trends might affect the outlook for 1999," Greco cautions, while turning his thoughts to the SEC.

During 1998, he recounts, the Securities & Exchange Commission introduced a series of initiatives and proposals that, when taken together, represent the most significant changes since the Securities Acts of 1933 and 1934.

One such initiative was the SEC mandate for using plain English in prospectuses. During 1998, Donnelley sponsored seminars in more than two dozen cities in the United States and in London to advise clients how to make the transition to plain English.

The SEC also offered for public comment a series of proposals that conceivably could affect the level and methods of disclosures required for registrants. Depending upon their final outcome, these proposals could significantly impact the financial printing landscape.

"Donnelley Financial is well-prepared for market volatility scenarios because of the diversified portfolio of clients it serves," Greco reports. "The company's multiple media capabilities enable it to support potential SEC regulation changes affecting the creation and distribution of financial documents."

For example, for client Mass Mutual, Donnelley Financial is currently producing personalized quarterly performance reports for more than 300,000 individuals with 401(k) accounts. Known as Super Statements, these reports chart each investment portfolio's historical performance, including an exact rate of return, in four-color graphics, while suggesting investment alternatives and adjustments.

More recently, Donnelley has transferred this expertise to serve the growing needs of health care providers, such as HMOs.

Harnessing the Future
Drawing upon the company's experience and technology gained by servicing the mutual fund industry, Donnelley Financial offers health care providers the ability to distribute vast quantities of information quickly and efficiently to members and the flexibility to personalize communications.

For R.R. Donnelley Financial, Greco sternly reports, the tools for the future remain focused on a robust commitment to innovations that continue to harness technology and improve production efficiencies, as well as a firm cultural commitment to quality and responsive client service.

"In the end, R.R. Donnelley Financial believes that it controls its destiny by investing where it counts—its people, its processes, its facilities and its technology—while always listening to the future needs of its clients," Greco assures. "Financial markets may change for the better, or worse, but Donnelley Financial's commitment to its core values is unwavering."

What to bank on for 1999?

Turning to Cadmus, C. Stephenson Gillispie Jr., chairman, president and CEO, predicts that the downturn in capital markets activity in 1998 will tighten competition in the financial printing industry for 1999.

"Companies, like Cadmus, that are more agile and have diversified in anticipation of the downturn, will differentiate themselves and continue to profit from market segments that are not as impacted by the current economic conditions," Gillispie projects. "These companies will focus on the corporate reporting, mutual funds, commercial banking and insurance market sectors.

"Due to the exponentially increasing demand for immediate communication, companies will be challenged with distributing information via a broader array of channels—without the advantage of increased budgets to support this diversification," Gillispie continues. "Subsequently, Internet-related products such as media-based distribution, automated publishing and database management services will become increasingly important."

Joining R.R. Donnelley and Cadmus on the Top 10 list of the largest financial printers is Cunningham Graphics International, ranked No. 7. Michael Cunningham, president at Cunningham Graphics, reports that his company rode out the rough spots in the financial printing market quite well.

"While our primary focus is on the printing of time-sensitive materials for the financial services industry, such as mutual fund printing, research reports and multicolored collateral marketing materials, we do not print transaction-related products," Cunningham reports, with a casual smile.

"In fact, the only prospectus we printed in 1998 was our own and, as far as I'm concerned, that's the only prospectus that really matters."