Financial Printing--Strength In Numbers

Financial printing is benefiting from a robust M&A market, continued mutual fund surges and (surprise!) the Internet, as 2000 sets its sights on Wall Street.

In 1997, the financial printing market was considered by some financial printers to be the hottest bull market in modern history. By the end of 1998, the same financial printing insiders were less enthused, dubbing 1998 a year of difficult "highs and lows," as the financial printing market and its lifemate—Wall Street—rode out a year that, for the market's competitive printers, was burdened with a dramatic downturn of transactional business.

Then came 1999—thank goodness.

John A. Greco Jr., senior vice president of marketing and business development at Chicago-based R.R. Donnelley Financial, contends 1999 will be recorded as one of the best years in the firm's history. The business unit generated record revenues as the result of a continued boom in the global capital markets, the expansion of mutual fund and other retirement-based investment offerings, and headway in its new healthcare communications group.

Donnelley Financial was not alone. While holding the No. 1 spot on Printing Impressions' Top 10 Financial Printers list, with 10 percent (or $500 million) of Donnelley's total sales coming from financial printing, Donnelley was just one (albeit No. 1) of several leading financial printers that surpassed their segment revenues over 1998. Compared to last year, in which the firm reported $485 million in financial printing sales, segment revenues were up $15 million.

Another major player reporting a considerable increase in financial printing in 1999 was No. 3 ranked Merrill Corp. With 40 percent of its total business being financial printing, Merrill saw an increase of some $19 million in segment sales over the previous year. The St. Paul, MN-based company generated $203 million in financial printing in its most recent fiscal year, compared to $185 million the previous year.

No. 5 ranked Cunningham Graphics, with 45 percent of its business being financial printing, more than doubled its segment revenues by increasing its sales from $24 million in the previous fiscal year to $50 million in the most recent reporting period.

Interestingly enough, while most of 1999's Top 10 Financial Printers reported either an increase in segment sales, or at least maintained their previous year's figures, one printer—No. 2 ranked Bowne & Co., of New York—showed a substantial decline in financial printing revenues in its most recent fiscal year. Despite its whopping $356 million in segment sales, the firm reported generating $372.6 million in financial printing revenues the previous fiscal year—a decrease of $16.6 million.

Another note of interest on the 1999 Printing Impressions Top 10 Financial Printers list is the exclusion of Cadmus Communications, ranked No. 4 in 1998. Earlier this year, Cadmus announced that it had sold its $43 million Financial Printing division to R.R. Donnelley & Sons, claiming "the divestitures were part of an ongoing strategy to streamline the company's business units and focus its resources in select, niche markets," which Cadmus believes are poised for aggressive growth. Once a leader in financial printing, Cadmus Communications doesn't compete in that segment anymore.

From one major player (Cadmus) dropping out of the race all together to another (R.R. Donnelley Financial) maintaining its No. 1 ranking for a third consecutive year, the world of financial printing ran the gamut of possibilities in 1999.

From a bull of a year in 1997 to a bit of bear last year, 1999 was, for the most part, back to being bullish—which made it a lot more "bearable" for financial printers across the land.

A Financial Year-end "Wrap" from No. 1: R.R. Donnelley

"Donnelley Financial made significant investments in both new electronic product offerings and physical facilities in 1999," reports John A. Greco Jr., senior vice president of marketing and business development at R.R. Donnelley Financial. "Donnelley Financial acquired Cadmus Financial Communications; added new facilities in Austin, TX, and Kirkland, WA; and expanded existing service centers in locations across the country.

"Although the first three quarters of 1999 witnessed a slight decrease in the number of new securities offerings," Greco notes, "Donnelley Financial continued to increase its IPO business, and additional sources of growth came from industries such as telecommunications and cable TV, which experienced ongoing consolidation as participants jockeyed for dominance. Investment companies, managed care organizations and pharmaceutical firms—seeking to retain assets under management—continued to invest more in the customized, personalized communications."

Greco says Internet-related offerings are continuing to fuel growth in the IPO market, and the M&A market is expected to remain robust for the foreseeable future. He emphasizes that, with its vast printing capacity, Donnelley Financial is able to handle large global deals through its multiple-media and multi-site capabilities, and project management skills. As evidence of its leadership in this area, Greco notes that Donnelley

Financial was involved in the largest M&A transactions in the 1990s.

"Our company negotiated three alliances this year that will position it well to take advantage of shifting market trends," Greco says. "To satisfy the demand among mutual fund companies and plans sponsors to retain and grow assets via personalized/customized communications, Donnelley Financial teamed up with Experian, gaining access to the world's largest consumer database, and PostX, a company that enables electronic distribution of important compliance information and documents.

"Last month, Donnelley Financial entered into a strategic relationship with USWeb/CKS to strengthen its Internet-based and e-commerce offerings, and to provide financial clients with one-source, integrated solutions," Greco adds. "The company also expanded its printing and customized communications service offering for the healthcare and pharmaceutical sectors."

On a regulatory note, Greco says the biggest event of 1999 was the introduction of EDGAR II filings using HTML technology. As it did with the "plain English" initiative, Greco says Donnelley Financial took the lead in educating capital markets and investment company audiences through a series of publications and seminars explaining the transition to, and attendant benefits of, HTML filings via EDGAR.

"Just as it is affecting all commerce, the Internet continues to challenge the traditional financial printing business," Greco explains. "Donnelley Financial views this challenge as a tremendous business opportunity, in which improved service delivery and communication cost reductions eventually result in expanded volume. The company continues to explore ways of adapting existing technologies to benefit its clients, along with developing proprietary products such as Donnelley SENDD, which allow clients around the world to access a secure, on-line environment to collaborate and edit, proofread and deliver sensitive financial documents in real time."